** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

** **
| **ý** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                         |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                                                                                                                      |
|       | **For  the quarterly period ended March 31, 2004**                                                                                                                                                                                                                                   |
|       |                                                                                                                                                                                                                                                                                      |
|       | **OR**                                                                                                                                                                                                                                                                                    |
|       |                                                                                                                                                                                                                                                                                      |
| **o**      | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                        |
|       |                                                                                                                                                                                                                                                                                      |
|       | **For  the transition period from                      to                      ** |

 

**CommissionFile No. 0-28582**

 

| **CHANNELL COMMERCIAL CORPORATION**                             |
|-----------------------------------------------------------------|
| (Exact name of  Registrant as specified in its charter)         |
|                                                            |
| **DELAWARE**                                                    |
| (State or other  jurisdiction of incorporation or organization) |
|                                                            |
| **95-2453261**                                                  |
| (I.R.S. Employer  Identification No.)                           |
|                                                            |
| **26040  Ynez Road, Temecula, California**                      |
| (Address of  principal executive offices)                       |
|                                                            |
| **92591**                                                       |
| (Zip Code)                                                      |
|                                                            |
| **(909)  719-2600**                                             |
| (Registrant’s  telephone number, including area code)      |

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

Yes   ý    No   o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).

 

Yes   o    No   ý

 

**9,127,661 shares of common stock ofthe Registrant were outstanding at April 30, 2004.**

** **

** **

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**PART 1 – FINANCIALINFORMATION**

** **

**ITEM 1.**     FINANCIAL STATEMENTS

** **

**CHANNELL COMMERCIAL CORPORATION**

**CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)**

*(amounts in thousands, except pershare data)*

 
|                                                                             |   | **Three  months ended  March 31,** |   |
|----------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                             |   | **2004**                                |   | **2003** |   |
|                                                                             |   |                                    |   |   |   |
| Net  sales                                                                       |   | $                                       | 17,720 |   | $ | 16,218 |   |
| Cost  of goods sold                                                              |   | 12,376                                  |   | 11,736 |   |
| Gross  profit                                                                    |   | 5,344                                   |   | 4,482 |   |
| Operating  expenses                                                              |   |                                    |   |   |   |
| Selling                                                                          |   | 2,603                                   |   | 2,302 |   |
| General  and administrative                                                      |   | 2,088                                   |   | 1,852 |   |
| Research  and development                                                        |   | 502                                     |   | 395 |   |
|                                                                             |   | 5,193                                   |   | 4,549 |   |
| Income  (loss) from operations                                                   |   | 151                                     |   | (67 | ) |
|                                                                             |   |                                    |   |   |   |
| Interest  expense, net                                                           |   | 61                                      |   | 121 |   |
|                                                                             |   |                                    |   |   |   |
| Income  (loss) before income taxes                                               |   | 90                                      |   | (188 | ) |
|                                                                             |   |                                    |   |   |   |
| Income  taxes                                                                    |   | 76                                      |   | 100 |   |
|                                                                             |   |                                    |   |   |   |
| Net  income (loss)                                                               |   | $                                       | 14     |   | $ | (288 | ) |
|                                                                             |   |                                    |   |   |   |
| Net  income (loss) per share                                                     |   |                                    |   |   |   |
| Basic                                                                            |   | $                                       | 0.00   |   | $ | (0.03 | ) |
|                                                                             |   |                                    |   |   |   |
| Diluted                                                                          |   | $                                       | 0.00   |   | $ | (0.03 | ) |
|                                                                             |   |                                    |   |   |   |
| Net  income (loss)                                                               |   | $                                       | 14     |   | $ | (288 | ) |
|                                                                             |   |                                    |   |   |   |
| Other  comprehensive income, net of tax Foreign currency translation adjustments |   | 49                                      |   | 470 |   |
|                                                                             |   |                                    |   |   |   |
| Comprehensive  net income                                                        |   | $                                       | 63     |   | $ | 182 |   |

** **

**The accompanying notes are anintegral part of these financial statements.**

** **

**1**

----

 

**CHANNELL COMMERCIAL CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

*(amounts in thousands)*

 
|                                                                                                                                                                                                                         |   | **March 31,  2004** |   | **December 31,  2003** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|-----------------------------|--------|
|                                                                                                                                                                                                                         |   | **(Unaudited)**          |   |                        |   |
| **ASSETS**                                                                                                                                                                                                                   |   |                     |   |                        |   |
| **Current assets**                                                                                                                                                                                                           |   |                     |   |                        |   |
| Cash  and cash equivalents                                                                                                                                                                                                   |   | $                        | 9,535  |                        | $      | 9,527 |   |
| Accounts  receivable, net                                                                                                                                                                                                    |   | 9,136                    |   | 10,051                      |   |
| Inventories                                                                                                                                                                                                                  |   | 8,962                    |   | 8,855                       |   |
| Deferred  income taxes                                                                                                                                                                                                       |   | 953                      |   | 876                         |   |
| Prepaid  expenses and misc. receivables                                                                                                                                                                                      |   | 1,230                    |   | 996                         |   |
| Income  taxes receivable                                                                                                                                                                                                     |   | 682                      |   | 102                         |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| Total  current assets                                                                                                                                                                                                        |   | 30,498                   |   | 30,407                      |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| **Property and equipment at cost, net**                                                                                                                                                                                      |   | 16,446                   |   | 17,164                      |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| **Deferred income taxes**                                                                                                                                                                                                    |   | 4,978                    |   | 5,277                       |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| **Intangible assets, net**                                                                                                                                                                                                   |   | 607                      |   | 613                         |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| **Other assets**                                                                                                                                                                                                             |   | 529                      |   | 504                         |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
|                                                                                                                                                                                                                         |   | $                        | 53,058 |                        | $      | 53,965 |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                |   |                     |   |                        |   |
| **Current liabilities**                                                                                                                                                                                                      |   |                     |   |                        |   |
| Accounts  payable                                                                                                                                                                                                            |   | $                        | 4,648  |                        | $      | 5,103 |   |
| Short  term debt (including current maturities of long term debt)                                                                                                                                                            |   | 952                      |   | 952                         |   |
| Current  maturities of capital lease obligations                                                                                                                                                                             |   | 18                       |   | 57                          |   |
| Accrued  restructuring liability                                                                                                                                                                                             |   | 2,265                    |   | 2,857                       |   |
| Accrued  expenses                                                                                                                                                                                                            |   | 4,609                    |   | 4,240                       |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| Total  current liabilities                                                                                                                                                                                                   |   | 12,492                   |   | 13,209                      |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| **Long term debt, less current maturities**                                                                                                                                                                                  |   | 2,592                    |   | 2,830                       |   |
| **Capital lease obligations, less current maturities**                                                                                                                                                                       |   | 67                       |   | 67                          |   |
| **Deferred gain on sale leaseback transaction**                                                                                                                                                                              |   | 498                      |   | 513                         |   |
| **Commitments and contingencies**                                                                                                                                                                                            |   | —                   |   | —                      |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| **Stockholders’ equity**                                                                                                                                                                                                |   |                     |   |                        |   |
| Preferred  stock, par value $.01 per share, authorized - 1,000 shares, none issued and  outstanding                                                                                                                          |   | —                   |   | —                      |   |
| Common  stock, par value $.01 per share, authorized - 19,000 shares; issued - 9,372  shares in December 31, 2003 and March 31, 2004; outstanding - 9,128  shares in December 31, 2003 and March 31, 2004 |   | 94                       |   | 94                          |   |
| Additional  paid-in capital                                                                                                                                                                                                  |   | 28,664                   |   | 28,664                      |   |
| Treasury  stock - 244 shares in 2003 and 2004                                                                                                                                                                                |   | (1,871                   | )      | (1,871                      | )      |
| Retained  earnings                                                                                                                                                                                                           |   | 10,484                   |   | 10,470                      |   |
| Accumulated  other comprehensive income (loss) - Foreign currency translation                                                                                                                                                |   | 38                       |   | (11                         | )      |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| **Total stockholders’ equity**                                                                                                                                                                                          |   | 37,409                   |   | 37,346                      |   |
|                                                                                                                                                                                                                         |   |                     |   |                        |   |
| **Total liabilities and stockholders’ equity**                                                                                                                                                                          |   | $                        | 53,058 |                        | $      | 53,965 |   |

** **

**The accompanying notes are anintegral part of these financial statements.**

** **

**2**

----

 

**CHANNELLCOMMERCIAL CORPORATION**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (Unaudited)**

*(amountsin thousands)*

 

 
|                                                 |   | **Three  months ended  March 31,** |   |
|------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                 |   | **2004**                                |   | **2003** |   |
| **Cash flows from operating activities:**            |   |                                    |   |   |   |
| Net  income (loss)                                   |   | $                                       | 14     |   | $ | (288 | ) |
| Depreciation  and amortization                       |   | 1,220                                   |   | 1,633 |   |
| Deferred  income taxes                               |   | 222                                     |   | (100 | ) |
| (Gain)  Loss on disposal of fixed asset              |   | (1                                      | )      | 110 |   |
| Amortization  of deferred gain on sale leaseback     |   | (15                                     | )      | (15 | ) |
| Change  in assets and liabilities:                   |   |                                    |   |   |   |
| (Increase)  decrease in assets:                      |   |                                    |   |   |   |
| Accounts  receivable                                 |   | 938                                     |   | 454 |   |
| Inventories                                          |   | (76                                     | )      | (202 | ) |
| Prepaid  expenses                                    |   | (232                                    | )      | (10 | ) |
| Other                                                |   | (24                                     | )      | (13 | ) |
| Income  taxes receivable                             |   | (583                                    | )      | (215 | ) |
| Increase  (decrease) in liabilities:                 |   |                                    |   |   |   |
| Accounts  payable                                    |   | (480                                    | )      | (983 | ) |
| Accrued  expenses                                    |   | 359                                     |   | 43 |   |
| Restructuring  liability                             |   | (679                                    | )      | (196 | ) |
|                                                 |   |                                    |   |   |   |
| Net  cash provided by operating activities           |   | 663                                     |   | 218 |   |
|                                                 |   |                                    |   |   |   |
| **Cash flows from investing activities:**            |   |                                    |   |   |   |
| Acquisition  of property and equipment               |   | (450                                    | )      | (126 | ) |
| Proceeds  from the sales of property and equipment   |   | 24                                      |   | 2,277 |   |
|                                                 |   |                                    |   |   |   |
| Net  cash (used in) provided by investing activities |   | (426                                    | )      | 2,151 |   |
|                                                 |   |                                    |   |   |   |
| **Cash flows from financing activities:**            |   |                                    |   |   |   |
| Repayment  of debt                                   |   | (238                                    | )      | (1,280 | ) |
| Repayment  of obligations under capital lease        |   | (39                                     | )      | (223 | ) |
|                                                 |   |                                    |   |   |   |
| Net  cash used in financing activities               |   | (277                                    | )      | (1,503 | ) |
|                                                 |   |                                    |   |   |   |
| Effect  of exchange rates on cash                    |   | 48                                      |   | 33 |   |
|                                                 |   |                                    |   |   |   |
| Increase  in cash and cash equivalents               |   | 8                                       |   | 899 |   |
|                                                 |   |                                    |   |   |   |
| Cash  and cash equivalents, beginning of period      |   | 9,527                                   |   | 3,162 |   |
|                                                 |   |                                    |   |   |   |
| Cash  and cash equivalents, end of period            |   | $                                       | 9,535  |   | $ | 4,061 |   |
|                                                 |   |                                    |   |   |   |
| **Cash paid during the period for:**                 |   |                                    |   |   |   |
| Interest                                             |   | $                                       | 54     |   | $ | 88 |   |
|                                                 |   |                                    |   |   |   |
| Income  taxes                                        |   | $                                       | 601    |   | $ | 282 |   |

** **

**The accompanying notes are anintegral part of these financial statements.**

** **

**3**

----

 

**CHANNELLCOMMERCIAL CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)March 31, 2004 and 2003**

*(amounts in thousands, except pershare data)*

 

1.                                       *   Unaudited financial statements.*  In the opinion of management, theaccompanying unaudited consolidated financial statements contain alladjustments necessary to present fairly the consolidated financial position ofChannell Commercial Corporation (the “Company”) as of March 31, 2004 andthe results of its operations for the three months ended March 31, 2004and March 31, 2003 and its cash flows for the three months endedMarch 31, 2004 and March 31, 2003. The results of operations and cash flows for the three months endedMarch 31, 2004 are not necessarily indicative of the results to beexpected for any other interim period or the full year.  These consolidated financial statementsshould be read in combination with the audited consolidated financialstatements and notes thereto for the year ended December 31, 2003.

 

2.                                       *   Inventories.*  Inventories stated at the lower of cost(first-in, first-out method) or market are summarized as follows:

 

 
|            |   | **March 31,  2004** |   | **December 31,  2003** |   |
|-----------------|--------|--------------------------|--------|-----------------------------|--------|
|            |   |                     |   |                        |   |
| Raw  Materials  |   | $                        | 2,746  |                        | $      | 2,895 |   |
| Work-in-Process |   | 2,747                    |   | 2,468                       |   |
| Finished  Goods |   | 3,469                    |   | 3,492                       |   |
|            |   | $                        | 8,962  |                        | $      | 8,855 |   |

 

3.                                          *Intangible Assets. *The balance of the intangible assets on the Company’s balancesheet fluctuates from period to period due to the application of foreigncurrency translation to United States dollars in calculating the balance ofgoodwill of our foreign subsidiaries.

 

4.                                          *Income(Loss)**per share.*  Basic income per share excludes dilution andis computed by dividing net income (loss) available to common stockholders bythe weighted average number of common shares outstanding for the three monthperiod ended March 31, 2004 and 2003. Diluted income per share reflects the potential dilution that couldoccur if dilutive options to acquire common stock were exercised.  The following is a reconciliation of thenumber of shares (denominator) used in the basic and diluted income per sharecomputations for the three month periods ended March 31, 2004 and 2003(shares in thousands):

 
|                              |   | **Three  months ended March 31,** |   |
|-----------------------------------|--------|----------------------------------------|--------|
|                              |   | **2004**                               |   | **2003** |   |
|                              |   | **Shares**                             |   | **Per Share  Amount** |   | **Shares** |   | **Per Share  Amount** |   |
|                              |   |                                   |   |   |   |   |   |   |   |
| Basic  income (loss) per share    |   | 9,128                                  |   | $ | 0.00 |   | 9,125 |   | $ | (0.03 | ) |
| Effect  of dilutive stock options |   | 23                                     |   | — |   | — |   | — |   |
| Diluted  income (loss) per share  |   | 9,151                                  |   | $ | 0.00 |   | 9,125 |   | $ | (0.03 | ) |

 

The following optionswere not included in the computation of diluted income per share due to theirantidilutive effect.

 
|                                        |   | **March 31,  2004**              |   | **March 31,  2003**            |   |
|---------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|
|                                        |   |                                  |   |                                |   |
| Options  to purchase shares of common stock |   | 1,423                                 |   | 233                                 |   |
| Exercise  prices                            |   | $4.84 - $13.75                        |   | $3.05 - $13.75                      |   |
| Expiration  dates                           |   | July 2006 -  September 2013 |   | July 2006 -  January 2013 |   |

 

4

----

 

In February 2003, the Company offered current employees andnon-employee directors an opportunity to exchange their outstanding optionsgranted under the 1996 Stock Plan.  Thetender offer expired on March 20, 2003. Pursuant to the offer, a total of 1,326,890 options were cancelled onMarch 20, 2003.  OnSeptember 24, 2003, a total of 1,324,090 new options were exchanged foroptions cancelled in March 2003.

 

5.                                       *   Stock Based Compensation.* Statement of Financial Accounting StandardsNo. 148, “*Accountingfor Stock Based Compensation – Transition and Disclosure on Amendment of SFAS123*“, encourages, but does not require, companies to recordcompensation cost for stock-based employee compensation plans at fairvalue.  The Company has chosen tocontinue to account for stock-based compensation using the intrinsic valuemethod prescribed in previously issued standards.  Accordingly, compensation cost for stock options is measured asthe excess, if any, of the quoted market price of the Company’s stock at thedate of grant over the amount an employee must pay to acquire the stock.

 

In February 2003, the Company offered current employees andnon-employee directors an opportunity to exchange their outstanding optionsgranted under the 1996 Stock Plan.  Thetender offer expired on March 20, 2003. Pursuant to the offer, a total of 1,326,890 options were cancelled onMarch 20, 2003.  OnSeptember 24, 2003, a total of 1,324,090 new options were exchanged forthose cancelled in March 2003. Eligible option holders who participated in the “Offer to Exchange” weregranted a new option for each old cancelled option.  For each new option granted, the vesting status and vestingschedule of the old option was preserved. The weighted average fair value of the options issued inSeptember 2003 was $1.91.  Theweighted average exercise price was $4.84.

 

Had compensation cost for the plan been determined based on the fairvalue of the options at the grant dates based on the above method, theCompany’s net income and income per share would have been:

 
|                                                                             |   | **Three  months ended March 31,** |   |
|----------------------------------------------------------------------------------|--------|----------------------------------------|--------|
|                                                                             |   | **2004**                               |   | **2003** |   |
|                                                                             |   |                                   |   |   |   |
| Reported  net income (loss) (in thousands)                                       |   | $                                      | 14     |   | $ | (288 | ) |
| Total  expense determined under fair value accounting for all awards, net of tax |   | (111                                   | )      | (1 | ) |
| Proforma  net income (loss) (in thousands)                                       |   | $                                      | (97    | ) | $ | (289 | ) |
|                                                                             |   |                                   |   |   |   |
| Reported  basic and diluted net income (loss) per share                          |   | $                                      | 0.00   |   | $ | (0.03 | ) |
| Proforma  basic and diluted net loss per share                                   |   | $                                      | (0.01  | ) | $ | (0.03 | ) |

 

Thefair value of options at date of grant was estimated using the Black-Scholesmodel with the following weighted average assumptions:

 
|                     |   | **Three  months ended March 31,** |   |
|--------------------------|--------|----------------------------------------|--------|
|                     |   | **2004**                               |   | **2003** |   |
|                     |   |                                   |   |   |   |
| Expected  life (years)   |   | 5 years                                |   | 5 years |   |
| Risk-free  interest rate |   | 3.00                                   | %      | 3.00 | % |
| Expected  volatility     |   | 40                                     | %      | 40 | % |
| Expected  dividend yield |   | —                                 |   | — |   |

 

*6.**                                      Segments*.  The Company’s predominant business is themanufacturing and distribution of telecommunications equipment.  There are two segments:  Americas and International.  Americas includes the United States, Centraland South America and Canada. International includes Europe, Africa, Middle East, Australia and Asia.  The following table summarizes segmentinformation for the three months ended March 31, 2004 and 2003 (inthousands):

 

5

----

 
|                                  |   | **Three  Months ended March 31,** |   |
|---------------------------------------|--------|----------------------------------------|--------|
|                                  |   | **2004**                               |   | **2003** |   |
|                                  |   |                                   |   |   |   |
| Revenues  from unrelated entities(1): |   |                                   |   |   |   |
| Americas                              |   | $                                      | 15,010 |   | $ | 13,069 |   |
| International                         |   | 2,710                                  |   | 3,149 |   |
|                                  |   | $                                      | 17,720 |   | $ | 16,218 |   |
|                                  |   |                                   |   |   |   |
| Income  (loss) from operations:       |   |                                   |   |   |   |
| Americas                              |   | $                                      | 781    |   | $ | 495 |   |
| International                         |   | (630                                   | )      | (562 | ) |
|                                  |   | $                                      | 151    |   | $ | (67 | ) |
|                                  |   |                                   |   |   |   |
| Interest  expense, net:               |   |                                   |   |   |   |
| Americas                              |   | $                                      | (3     | ) | $ | (7 | ) |
| International                         |   | 64                                     |   | 128 |   |
|                                  |   | $                                      | 61     |   | $ | 121 |   |

 

----

(1) Note:  Revenues from any individual foreign countrydid not exceed 10% of total revenues for the period.

 

The Company has revenuesfrom external customers from the following product lines:

 
|           |   | **Three  months ended March 31,** |   |
|----------------|--------|----------------------------------------|--------|
|           |   | **2004**                               |   | **2003** |   |
|           |   |                                   |   |   |   |
| Product  lines |   |                                   |   |   |   |
| Enclosures     |   | $                                      | 14,822 |   | $ | 12,982 |   |
| Connectivity   |   | 1,632                                  |   | 1,794 |   |
| Other          |   | 1,266                                  |   | 1,442 |   |
|           |   | $                                      | 17,720 |   | $ | 16,218 |   |

 

The Company hasidentifiable assets in the following geographic regions:

 
|                  |   | **March 31,  2004** |   | **December 31,  2003** |   |
|-----------------------|--------|--------------------------|--------|-----------------------------|--------|
|                  |   | **(Unaudited)**          |   |                        |   |
| Identifiable  Assets: |   |                     |   |                        |   |
| Americas              |   | $                        | 40,960 |                        | $      | 40,949 |   |
| International         |   | 12,098                   |   | 13,016                      |   |
|                  |   | $                        | 53,058 |                        | $      | 53,965 |   |

 

7.*                                         Recent Accounting Pronouncements*.  In January 2003, the FinancialAccounting Standards Board (“FASB”) issued Interpretation No. 46,“Consolidation of Variable Interest Entities - an interpretation of ARB 51”(“FIN 46”), which subsequently has been revised by FIN 46-R. The primaryobjectives of FIN 46-R are to provide guidance on the identification ofentities for which control is achieved through means other than through votingrights (variable interest entities or VIEs) and how to determine when and whichbusiness enterprises should consolidate the VIE (as the primary beneficiary).This new model for consolidation applies to an entity in which either (1) theequity investors (if any) do not have a controlling financial interest or (2)the equity investment at risk is insufficient to finance that entity’sactivities without receiving additional subordinated financial support from otherparties. In addition, FIN 46-R requires that both the primary beneficiary andall other enterprises with a significant variable interest in a VIE makeadditional disclosures. FIN 46-R is effective for VIEs created afterJanuary 31, 2003 and is effective for all VIEs created beforeFebruary 1, 2003 that are Special Purpose Entities (SPEs) in the firstreporting period ending after December 15, 2003 and for all other VIEscreated before February 1, 2003 in the first reporting period ending afterMarch 15, 2004. The Company believes there are no entities qualifying asVIEs and the adoption of FIN 46-R to date has not had any effect on theCompany’s financial position, cash flows or results of operations.

 

6

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In March 2004, The Securities and ExchangeCommission (“SEC”) issued Staff Accounting Bulletin 104 “Revenue Recognition”(“SAB 104”), an update to the guidance in SAB 101 “Revenue Recognition inFinancial Statements” 101 (codified in Topic 13: “Revenue Recognition”).  The primary objectives of SAB 104 are toreflect the issuance of EITF Issue 00-21, “Revenue Arrangements with MultipleDeliverables”, to delete the guidance on reporting revenues gross as aprincipal or net as an agent because EITF Issue 99-19, “Reporting Revenue Grossas a Principal versus Net as an Agent”, and to rescind SAB 101 “RevenueRecognition in Financial Statements - Frequently Asked Questions and Answers(FAQ)” and incorporate selected portions of the FAQ into Topic 13.  TheFAQ permitted registrants to elect a policy of not recognizing any revenue onequipment sold on an installed basis until installation is complete. Because EITF Issue 00-21 requires revenue arrangements with multipledeliverables to be divided into separate units of accounting if certaincriteria are met, this election is no longer available to registrants uponadoption of EITF Issue 00-21. The Company believes that SAB 104 has not had anyeffect on Company’s financial position, cash flows, or results of operations,

 

8.*                                          Restructuring Charges*.  In the fourth quarter of 2002, the Companyannounced a restructuring plan to rationalize international manufacturingoperations.  As part of the plan,various manufacturing operations in the International segment were either consolidatedor outsourced.  The management of allInternational operations was consolidated under the Managing Director,International.  The restructuring chargetotaled $1,228.  The principal actionsin the restructuring plan involved the closure of facilities and a reduction inhead count.

 

In the fourth quarter of 2003, the Company further evaluatedInternational operations to improve profitability.   A plan was developed to close a manufacturing facility inInternational operations by mid-year 2004. As part of the plan, there is a reduction of approximately 31 employeesin the International operations.  Therewere no employees severed in the first quarter of 2004, and no severancepayments were made. The restructuring charge totaled $1,565.  The principal components of the 2003restructuring charge involved the closure of facilities and a reduction in headcount.

 

The restructuring charges were determined based on formal plansapproved by the Company’s management using the best information available to itat the time.  The amounts the Companymay ultimately incur could differ materially as the restructuring initiative isexecuted.   The changes in the accrualfor restructuring charges during 2004 are summarized in the table below:

 
|                                                          |   | **Facilities** |   | **Workforce  Reduction** |   | **Total** |   |
|---------------------------------------------------------------|--------|----------------|--------|--------------------------|--------|-----------|--------|
|                                                          |   |           |   |                     |   |      |   |
| Restructuring  accrual balance at January 1, 2004        |   | $              | 2,641  |                     | 216    |      | $      | 2,857 |   |
|                                                          |   |           |   |                     |   |      |   |
| Costs  incurred in the three months ended March 31, 2004 |   | 592            |   | 0                        |   | 592       |   |
|                                                          |   |           |   |                     |   |      |   |
| Restructuring  accrual balance at March 31, 2004         |   | $              | 2,049  |                     | $      | 216       |   | $ | 2,265 |   |
|                                                               |        |                |        |                          |        |           |        |  |  |  |

 

9.                                          *Sale Leaseback Arrangement.*  In January, 2003, the Company sold afacility located in Orpington Kent, United Kingdom.  The proceeds from the sale totaled $2,441 and resulted in apretax loss of $110 which is included in general and administrative expense in2003.  Terms of the sale included aprovision for the Company to lease back the facility. Included in the proceedswas prepaid rent for one year which totaled $213.  The resulting lease is being accounted for as an operating lease.

 

In June, 2002, the Company entered into a sale and leaseback agreementfor a warehouse facility located in Temecula, California.  The proceeds from the sale totaledapproximately $6,200 and resulted in a pretax deferred gain of $604.  The resulting lease is being accounted foras an operating lease.  The lease baseterm is ten years with two five-year options at rental amounts to be adjustedto the fair market rental value at the end of the base term.  A portion of the proceeds from the sale wasused to pay the outstanding mortgage balance on the facility of $4,036.  As of March 31, 2004 the unamortizedbalance of the deferred gain is $498.

 

10.                                    *Income Taxes.*  The effective tax rate of 83.5% for the three month period endedMarch 31, 2004 differed from the statutory rate of 34.0% primarily due tostate taxes and certain foreign operating losses incurred without a tax benefitrecorded.

 

7

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The Federal income taxes of the Company for the years endedDecember 31, 1997, 1998, 2000, and 2001 are currently under examination bythe Internal Revenue Service (IRS).  InJuly 2002, the IRS issued the proposed result of their examination for theyears ended December 31, 1997 and 1998, which increases the 1997 incometax amount due by $315 related to transfer pricing for sales to the Company’sCanadian subsidiary.  InNovember 2003, The IRS agreed to reduce the transfer pricing assessmentfor the 1997 and 1998 tax years to $19 which was accrued at December 31,2003.  Management believes that theultimate outcome of IRS audits for the years ended 2000 and 2001 will not havea material adverse impact on the Company’s consolidated results of operationsor financial position.

 

11.                                    *Commitments and Contingencies. *In 2001, the State of Texasissued a report assessing the Company additional sales and use tax of $1,600,including interest.  The Company hasappealed the assessment and is currently providing the State of Texas withdocumentation to support the Company’s contention that the transactions did notrequire the Company to remit sales and use tax to the State of Texas. The Stateof Texas has agreed to a reduction of the amount owed to $600.  The Company has paid the State of Texas$400.  The Company believes that it hasmeritorious defenses to the remaining claim of $200 and intends to vigorouslydefend its position.  The Companybelieves that the ultimate outcome of this examination will not result in amaterial impact on the Company’s consolidated results of operations orfinancial position.

 

12.                                    *Related Party Transactions. *In May 2002, the Company sold its RF line of passiveelectronic devices to RMS Communications, Inc., which is owned by GaryNapolitano, a former officer of the Company. A sale in the amount of $800 was recorded.  RMS Communications, Inc. paid the Company $125 in cash at thetime of sale, and the remaining $675 is payable in monthly installments throughJune 30, 2003, bearing interest at 7% per annum.  The amount due from RMS Communications, Inc. included in accountsreceivable at March 31, 2004 is $321. The account is currently in arrears. The Company has a security interest in the inventory and a personalguarantee from Mr. Napolitano and believes the amount will be paid in full.

 

13.                                    *Concentrations. * Sales to Comcast of$3.7 million in the first three months of 2004 represented 20.9 % of Companysales in the period.  Sales to Comcastof $4.1 million in the first three months of 2003 represented 25.4% of Companysales for the period.  The secondlargest customer in the first three months of 2004 was Verizon with sales of$1.6 million representing 9.3% of the total. Sales to Verizon of $1.5 million in the first three months of 2003represented 9.4% of Company sales. Sales to Time Warner of $1.5 million and $2.7 million the first threemonths of 2004 and 2003 represented 8.2% and 16.9%, respectively of Companysales.

 

14.                                    *Guarantees. *In1997, the Company guaranteed debt of the Company’s principal stockholder andChairman of the Board of approximately $754. The guaranteed debt was incurred in connection with construction of thefacilities leased to the Company and is collateralized by said facilities.  The loan amount subject to the unsecuredguarantee is expected to decline before expiring in 2017. It is not practicableto estimate the fair value of the guarantee; however, the Company does notanticipate that it will incur losses as a result of this guarantee.  The Company has not recorded a liability forthis guarantee.  If the principalstockholder were to default on the outstanding loan balance, the Company may berequired to repay the remaining principal balance. The maximum potential amountthe Company would be required to pay is equal to the outstanding principal andinterest balance of the loan to the stockholder.  At March 31, 2004, the outstanding loan balance subject tothe guarantee totaled $604.

 

8

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**ITEM2.****                  MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION****AND RESULTS OF OPERATIONS**

 

### **Results ofOperations**

### ** **

**Comparison of the Three Months Ended March 31, 2004 withthe Three Months Ended March 31, 2003**

 

*Net Sales*.  Net sales in the first three months of 2004were $17.7 million, an increase of $1.5 million or 9.3% compared to the firstthree months of 2003.

 

Americas net sales were$15.0 million, an increase of $1.9 million or 14.9%.  The increase was primarily due to higher sales to two majorbroadband customers, growth in connectivity OEM sales and improved weatherconditions compared to the first quarter of 2003.

 

International net saleswere $2.7 million, a decrease of $0.4 million or 13.9%.  The decrease is due to reduced sales to twomajor telephone customers.

 

Sales to Comcast of $3.7million in the first three months of 2004 represented 20.9% of Company sales inthe period.  Sales to Comcast of $4.1million in the first three months of 2003 represented 25.4% of Company salesfor the period.  The second largestcustomer in the first three months of 2004 was Verizon with sales of $1.6million representing 9.3% of the total. Sales to Verizon of $1.5 million in the first three months of 2003represented 9.4% of Company sales. Sales to Time Warner of $2.7 million thefirst three months of 2003 represented 16.9% of Company sales.

 

*Gross Profit*.  Gross profit in the first three months of2004 was $5.3 million, an increase of $0.8 million or 19.2%. The improvementwas due to the higher sales volume in the Americas, which resulted in highermanufacturing production rates and higher overhead absorption.

 

As a percentage of netsales, gross profit increased from 27.6% in the first three months of 2003 to30.2% in the first three months of 2004. The reason for the increase is the same as that noted above for gross profitdollars.

 

*Selling*.  Selling expenses were $2.6 million in thefirst three months of 2004, an increase of $0.3 million or 13.1% from the firstthree months of 2003.  The increase isdue to higher freight, commission and bonus expense as a result of the increasedsales revenue.  The freight costincrease is also due to an increase in full truckload shipments to customers inwhich the Company pays the freight cost.

 

As a percentage of netsales, selling expense increased from 14.2% in the 2003 period to 14.7% in the2004 period.  The higher percentage isprimarily due to the increase in freight costs.

 

*General and Administrative*.  General and administrative expenses were$2.1 million in the first three months of 2004, an increase of $0.2 million or12.7%.  The increase is primarily due tocosts incurred by the Company to evaluate opportunities to grow and diversifythe Company’s business operations.

 

As a percentage of netsales, general and administrative expense increased from 11.4% in the 2003period to 11.8% in the 2004 period.

 

*Research and Development*.  Research and development expenses were $0.5million in the first three months of 2004, an increase of $0.1 million or 27.1%from the first three months of 2003. The increase is due to spending on new product development programs,primarily for telephone connectivity products.

 

As a percentage of netsales, research and development expenses increased from 2.4% in the first threemonths of 2003 to 2.8% in the first three months of 2004.

 

*Income from Operations*. Income from operations increased from aloss of $(0.1) million in the first three months of 2003 to a profit of $0.2million in the first three months of 2004. The improvement is due to the increased sales revenue in the Americassegment.  Income from operations as apercentage of sales improved from (0.4%) to 0.9%.

 

*Interest Expense, Net*.  Net interest expense was $0.1 million in thefirst three months of both 2003 and 2004.

 

*Income Taxes*.  Income tax expense was $0.1 million in thefirst three months of both 2003 and 2004. The effective tax rate was 83.5% in the first three months of 2004 and(53.2) % for the same period in 2003. In the first quarter of 2003 the Company reported a loss before tax on aconsolidated basis. The consolidated loss was comprised of a profit in theAmericas and a loss in

 

9

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International.  In the first quarter of 2004, the Companyreported a profit before tax on a consolidated basis.  The consolidated profit was comprised of a profit in the Americasand a loss in International.  In thefirst quarters of 2004 and 2003, there was an income tax expense associatedprimarily with America profit and there was no tax benefit in connection with theInternational loss.

 

**Liquidity and Capital Resources**

 

Net cash provided byoperating activities was $0.7 million for the three months ended March 31,2004, an increase of $0.4 million compared to the same period of lastyear.  The increase in net cash providedby operating activities of $0.4 million is due primarily to improved operatingincome and working capital position in 2004.

 

Net accounts receivabledecreased to $9.1 million at March 31, 2004 from $10.1 million atDecember 31, 2003.  Days salesoutstanding decreased from 50 days at December 31, 2003 to 48 days atMarch 31, 2004.

 

Inventories increased to$9.0 million at March 31, 2004, from $8.9 million at December 31,2003.  Days inventory was 59 days atDecember 31, 2003 and 60 days at March 31, 2004.

 

Accounts payable declinedfrom $5.1 million at December 31, 2003 to $4.6 million at March 31,2004.  Days payables were 35 days atDecember 31, 2003 and 35 days at March 31, 2004.

 

Net cash used byinvesting activities was $0.4 million in the first quarter of 2004 compared tonet cash provided by investing activities of $2.2 million in the same period of2003.  The Company sold a building inthe U.K. for $2.2 million in January of 2003.

 

Net cash used infinancing activities was $0.3 million in the first three months of 2004compared to $1.5 million in the first three months of 2003.  The Company repaid debt in both periods.

 

The cash and cashequivalents balance was $9.5 million at March 31, 2004, unchanged fromDecember 31, 2003.

 

The Board of Directors,on April 1, 1998, having determined such action to be in the best interestof the Company, authorized a stock repurchase plan of up to $2.0 million worthof Company stock. The plan was subsequently increased to $2.75 million by theBoard on December 1, 2000.  TheCompany repurchased 22,985 shares at a cost of approximately $0.2 million in1999; 30,900 shares of its common stock at a cost of approximately $0.2 millionin 2000; and 52,300 shares of its common stock at a cost of $0.3 million in2001. The Company did not repurchase stock in 2002 or 2003, or in the firstquarter of 2004.

 

The Company entered intoa three year Loan and Security Agreement with an asset-based lender onSeptember 25, 2002. The Loan and Security Agreement’s initial term loanbalance of $4.7 million and initial revolver balance of $2.1 million as well as$9.6 million in cash were used to repay in full the prior CreditAgreement.  The three year term loan is repayable in quarterly paymentsbased on a five-year amortization schedule with a balloon repayment at maturity.  At March 31, 2004, the outstandingbalance of the term loan was $3.5 million, with no outstanding balance in therevolver.

 

Under the Loan andSecurity Agreement, the outstanding balance bears interest payable monthly at avariable rate based on either LIBOR or the lender’s base rate.  The weighted average interest rate under theLoan and Security Agreement at March 31, 2004 was 4.0 %.

 

The Loan and SecurityAgreement contains various financial and operating covenants that imposelimitations on the Company’s ability, among other things, to incur additionalindebtedness, merge or consolidate, sell assets except in the ordinary courseof business, make certain investments, enter into leases and paydividends.  The Company is also required to comply with a fixed chargecoverage ratio financial covenant among others.  The Company was incompliance as of March 31, 2004 with the covenants of the Loan andSecurity Agreement.

 

The Company believes thatcash flow from operations coupled with borrowings under the Loan and SecurityAgreement will be sufficient to fund the Company’s capital expenditure andworking capital requirements through 2004.

 

10

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**Contractual Obligations and OtherCommitments**

 

The following table summarizesthe Company’s contractual obligations and other commitments as ofMarch 31, 2004:

 
| **Contractual Obligations**      |   | **Less than  1 Year** |   | **1 - 3  Years** |   | **3 - 5  Years** |   | **More than  5 Years** |   | **Total** |   |
|----------------------------------|--------|-----------------------|--------|------------------|--------|------------------|--------|------------------------|--------|-----------|--------|
|                             |   |                  |   |             |   |             |   |                   |   |      |   |
| Long  Term Debt (1)              |   | $                     | 952    |             | $      | 2,592            |   | $                      | — |      | $      | — |   | $ | 3,544 |   |
|                             |   |                  |   |             |   |             |   |                   |   |      |   |
| Capital  Lease Obligations       |   | 27                    |   | 72               |   | —           |   | —                 |   | 99        |   |
|                             |   |                  |   |             |   |             |   |                   |   |      |   |
| Operating  Lease Obligations (2) |   | 2,762                 |   | 3,329            |   | 2,196            |   | 2,776                  |   | 11,063    |   |
|                             |   |                  |   |             |   |             |   |                   |   |      |   |
| Employment  Contracts (3)        |   | 768                   |   | 1,495            |   | 1,197            |   | —                 |   | 3,460     |   |
|                             |   |                  |   |             |   |             |   |                   |   |      |   |
| Purchase  Obligations (4)        |   | 7,811                 |   | —           |   | —           |   | —                 |   | 7,811     |   |
|                             |   |                  |   |             |   |             |   |                   |   |      |   |
|                             |   | $                     | 12,320 |             | $      | 7,488            |   | $                      | 3,393  |      | $      | 2,776 |   | $ | 25,977 |   |

 

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(1)          The Company entered into a three year Loan andSecurity Agreement with an asset-based lender on September 25, 2002.

(2)          The Company leases manufacturing and officespace and machinery and equipment under several operating leases expiringthrough 2012.

(3)          The Company has employment agreements with itsChairman of the Board expiring July 7, 2006 and its President and ChiefExecutive Officer expiring December 8, 2008.  Both contracts are renewable every 5 years.  The Chairman of the Board’s salary is set at$50,000 per annum for the remainder of the term.  The President and Chief Executive Officer’s base year salary is$718,320 per year, and is subject to an annual cost of living increase based onthe consumer price index.  Base salarymay also be increased based on the discretion of the Board of Directors.  In the event the President and ChiefExecutive Officer is terminated the Company will be obligated to make a lumpsum severance payment equal to three times his then current base salary.

(4)          The Company has adequate sources of supply forthe raw materials used in its manufacturing processes and attempts to develop andmaintain multiple sources of supply in order to extend the availability andencourage competitive pricing of these materials.  Most plastic resins are purchased under annual or multi-yearpricing agreements to stabilize costs and improve supplier deliveryperformance.  The Company is notcontractually obligated to purchase product over the life of these agreements.

 

**Off-Balance Sheet Arrangements**

 

Our off-balance sheetarrangements consist of operating leases, employment contracts and purchaseobligations as described above.  Inaddition, the Company guaranteed debt of the Company’s principal stockholderand Chairman of the Board of approximately $754 in 1997.  The guaranteed debt was incurred inconnection with construction of the facilities leased to the Company and iscollateralized by said facilities.  Theloan amount subject to the unsecured guarantee is expected to decline beforeexpiring in 2017.  It is not practicableto estimate the fair value of the guarantee; however, the Company does notanticipate that it will incur losses as a result of this guarantee.  The Company has not recorded a liability forthis guarantee.  If the principalstockholder were to default on the outstanding loan balance, the Company may berequired to repay the remaining principal balance.  The maximum potential amount the Company would be required to payis equal to the outstanding principal and interest balance of the loan to thestockholder.  At March 31, 2004,the outstanding loan balance subject to the guarantee totaled $604.

 

**CriticalAccounting Policies**

 

Our discussion andanalysis of our financial condition and results of operations are based uponour consolidated financial statements, which have been prepared in accordancewith accounting principles generally accepted in the United States of America.The preparation of these financial statements requires us to make estimates andjudgments that affect the reported amounts of assets, liabilities, revenues andexpenses, and related disclosure of contingent assets and liabilities.

 

We believe that theestimates, assumptions and judgments involved in the accounting policiesdescribed in the “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” section of our most recent Annual Report on Form10-K have the greatest potential impact on our financial statements, so weconsider these to be our critical accounting policies. Because of theuncertainty inherent in these matters, actual results could differ from theestimates we use in applying the critical accounting policies. Certain of thesecritical accounting policies affect working capital account balances, includingthe policies for revenue recognition, the reserve for uncollectible accountsreceivable and inventory reserves. These policies require that we makeestimates in the preparation of our financial statements as of a given date.

 

Within the context ofthese critical accounting policies, we are not currently aware of anyreasonably likely events or circumstances that would result in materiallydifferent amounts being reported.

 

11

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**Forward-LookingStatements**

 

Certain statementscontained herein are “forward-looking” statements within the meaning of thePrivate Securities Litigation Reform Act of 1995 (the “Act”), which providescertain “safe harbor” provisions for forward-looking statements.  All forward-looking statements made hereinare made pursuant to the Act. Forward-looking statements include statements which are predictive innature; which depend upon or refer to future events or conditions; or whichinclude words such as “expects,” “anticipates,” “intends,” “plans,” “believes,”“estimates,” or variations or negatives thereof or by similar or comparablewords or phrases.  In addition, anystatement concerning future financial performance, ongoing business strategiesor prospects, and possible future Company actions that may be provided bymanagement are also forward-looking statements as defined by the Act.  Forward-looking statements are based oncurrent expectations and projections about future events and are subject torisks, uncertainties, and assumptions about the Company; and economic andmarket factors in the countries in which the Company does business, among otherthings.  These statements are notguarantees of future performance, and the Company has no specific intentions toupdate these statements.  Actual eventsand results may differ materially from those expressed or forecasted in forward-lookingstatements due to a number of factors. Additional risks and uncertainties are outlined in the Company’s filingswith the Securities and Exchange Commission, including its most recent AnnualReport on Form 10-K.

 

**ITEM 3.****     QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

The market risk inherentin the Company’s market risk sensitive instruments is the potential lossarising from adverse changes in interest rates and foreign currency exchangerates.  All financial instruments heldby the Company described below are held for purposes other than trading.

 

The Company’s Loan andSecurity Agreement allows for the outstanding balance to bear interest at avariable rate based on the lender’s base rate or LIBOR.  The credit facility exposes the operationsto changes in short-term interest rates since the interest rates on the creditfacility are variable.

 

A hypothetical change of1% in the interest rate for these borrowings, assuming debt levels atMarch 31, 2004, would change interest expense by approximately $0.01million for the three months ended March 31, 2004.  This analysis does not consider the effectsof economic activity on the Company’s sales and profitability in such anenvironment.

 

The Company has assetsand liabilities outside the United States that are subject to fluctuations inforeign currency exchange rates.  Assetsand liabilities outside the United States are primarily located in the UnitedKingdom, Australia, and Canada.  TheCompany’s investment in foreign subsidiaries with a functional currency otherthan the U.S. dollar is generally considered long-term.  Accordingly, the Company does not hedgethese investments.  The Company alsopurchases a limited portion of its raw materials from foreign countries.  These purchases are generally denominated inU.S. dollars and are accordingly not subject to exchange ratefluctuations.  The Company has notengaged in forward foreign and other similar contracts to reduce its economicexposure to changes in exchange rates because the associated risk is notconsidered significant.

 

**ITEM 4.****     CONTROLS AND PROCEDURES**

 

Based on their evaluationas of the end of the fiscal quarter covered by this report (the “EvaluationDate”), the Company’s principal executive officer and principal financialofficer have concluded that, as of the Evaluation Date, the Company’sdisclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)under the Securities Exchange Act of 1934, as amended) are effective to ensurethat material information relating to the Company and its consolidatedsubsidiaries is recorded, processed, summarized, reported and made known to theCompany’s management, including the Company’s principal executive and financialofficers, on a timely basis by others within the Company and its consolidatedsubsidiaries.

 

To satisfy theirresponsibility for financial reporting, the Company’s CEO and CFO haveestablished internal controls for financial reporting which they believe areadequate to provide reasonable assurance that the Company’s assets areprotected from loss. These internal controls are reviewed by the Company’smanagement in order to ensure compliance. In addition, the Company’s Audit Committee meets regularly withmanagement and the independent accountants to review accounting, auditing andfinancial matters.  The Audit Committeeand the independent accountants have free access to each other, with or withoutmanagement being present.

 

There has been no changein the Company’s internal control over financial reporting during the threemonths ended March 31, 2004 that has materially affected, or is reasonablylikely to materially affect, internal control over financial reporting.

 

12

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**PART II - OTHER INFORMATION**

 

**ITEM 1.****     LEGALPROCEEDINGS**

 

The Company is from timeto time involved in ordinary routine litigation incidental to the conduct ofits business.  The Company regularlyreviews all pending litigation matters in which it is involved and establishesreserves deemed appropriate for such litigation matters.  Management believes that no presentlypending litigation matters are likely to have a material adverse effect on theCompany’s financial statements or results of operations, taken as a whole.

 

**ITEM 2.****     CHANGESIN SECURITIES AND USE OF PROCEEDS**

 

Not applicable.

 

# **ITEM3.****     DEFAULTS UPON SENIORSECURITIES**

#  

Not applicable.

 

**ITEM 4.****     SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

Not applicable.

 

**ITEM 5.****     OTHERINFORMATION**

 

Not applicable.

 

**ITEM 6.****     EXHIBITSAND REPORTS ON FORM 8-K**

 

(a)               Exhibits

 

 
| **Exhibit  Number** |   | **Description**                                                                                                                                                                                                                                                                                                                                                                 |
|---------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                 |   | Restated Certificate of  Incorporation of the Company (1)                                                                                                                                                                                                                                                                                                                       |
| 3.2                 |   | Bylaws of the Company  (1)                                                                                                                                                                                                                                                                                                                                                      |
| 4                   |   | Form of Common Stock  Certificate (1)                                                                                                                                                                                                                                                                                                                                           |
| 10.1                |   | Tax Agreement between  the Company and the Existing Stockholders (1)                                                                                                                                                                                                                                                                                                            |
| 10.2.1              |   | Channell Commercial  Corporation 1996 Incentive Stock Plan (including form of Stock Option  Agreements and Restricted Stock Agreement) (1)                                                                                                                                                                                                                                      |
| 10.2.2              |   | Channell Commercial  Corporation 2003 Incentive Stock Plan (8)                                                                                                                                                                                                                                                                                                                  |
| 10.3                |   | Loan and Security  Agreement dated as of September 25, 2002 by and among the Company,  Channell Commercial Canada Inc., Fleet Capital Corporation, Fleet Capital  Canada Corporation and, under the circumstances set forth therein, Fleet  National Bank, London U.K. Branch, trading as Fleet Boston Financial, and the  U.K. Borrowers (as defined therein, if any) (6) |
| 10.4                |   | Employment Agreement  between the Company and William H. Channell, Sr. (1)                                                                                                                                                                                                                                                                                                      |
| 10.5                |   | Employment Agreement  between the Company and William H. Channell, Jr. (1)                                                                                                                                                                                                                                                                                                      |
| 10.6                |   | Channell Commercial  Corporation 1996 Performance-Based Annual Incentive Compensation Plan (1)                                                                                                                                                                                                                                                                                  |
| 10.7                |   | Lease dated  December 22, 1989 between the Company and William H. Channell, Sr., as  amended (1)                                                                                                                                                                                                                                                                           |
| 10.8                |   | Lease dated May 29,  1996 between the Company and the Channell Family Trust (1)                                                                                                                                                                                                                                                                                                 |
| 10.9                |   | Lease dated October 26,  2000 between the Company and Belston Developments Inc. (4)                                                                                                                                                                                                                                                                                        |
| 10.10               |   | Lease Agreement dated  as of March 1, 1996 between Winthrop Resources Corp. and the Company (1)                                                                                                                                                                                                                                                                            |
| 10.11               |   | Form of Indemnity  Agreement (1)                                                                                                                                                                                                                                                                                                                                                |
| 10.12               |   | Form of Agreement  Regarding Intellectual Property (1)                                                                                                                                                                                                                                                                                                                          |
| 10.13               |   | 401(k) Plan of the  Company (3)                                                                                                                                                                                                                                                                                                                                                 |
| 10.14               |   | A.C. Egerton (Holdings)  PLC Share Purchase Agreement (2)                                                                                                                                                                                                                                                                                                                       |
| 10.15               |   | Amendment to Employment  Agreement between the Company and William H. Channell, Jr., dated  December 31, 1998 (3)                                                                                                                                                                                                                                                          |
| 10.16               |   | Further Amendment to  Employment Agreement between the Company and William H. Channell, Jr., dated  July 15, 2002 (5)                                                                                                                                                                                                                                                      |
| 10.17               |   | Lease dated  June 27, 2002 between the Company and Ynez Street, Ltd (5)                                                                                                                                                                                                                                                                                                    |
| 10.18               |   | Mutual Specific and  General Release between the Company and Richard A. Cude, dated August 2,  2002 (7)                                                                                                                                                                                                                                                                    |

 

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| 10.19 |   | Amendment to Employment  Agreement between the Company and William H. Channell, Sr., dated  December 9, 2003 (9)                                                                               |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.20 |   | Employment Agreement  between the Company and William H. Channell, Jr., dated December 9, 2003  (9)                                                                                            |
| 31.1  |   | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the  Securities and Exchange Act of 1934. (10)                                                            |
| 31.2  |   | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the  Securities and Exchange Act of 1934. (10)                                                            |
| 32.1  |   | Certification pursuant  to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the  Sarbanes- Oxley Act of 2002 by William H. Channell, Jr., CEO; and Thomas  Liguori, CFO. (10) |

 

(b)             Reports filed on Form 8-K in the first quarter of 2004.

 

On February 12, 2004, the Company filed a Form 8-K issuing a press release announcementof its financial results for the quarter ended December 31, 2003.

 

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(1)          Incorporated byreference to the indicated exhibits filed in connection with the Company’sRegistration Statement on Form S-1 (File No. 333-3621).

(2)          Incorporated byreference to the indicated exhibits filed in connection with the Company’s Form8-K on May 18, 1998.

(3)          Incorporated byreference to the indicated exhibits filed in connection with the Company’s Form10-K on March 31, 1999.

(4)          Incorporated byreference to the indicated exhibits filed in connection with the Company’s Form10-K on April 2, 2001.

(5)          Incorporated byreference to the indicated exhibits filed in connection with the Company’s Form10-Q on August 9, 2002.

(6)          Incorporated byreference to the indicated exhibits filed in connection with the Company’s Form8-K dated September 25, 2002.

(7)          Incorporated byreference to the indicated exhibits filed in connection with the Company’s Form10-Q on November 12, 2002.

(8)          Incorporated byreference to Appendix B filed in connection with the Company’s Definitive ProxyStatement on March 26, 2003.

(9)          Incorporated byreference to the indicated exhibits filed in connection with the Company’s Form10-K on March 5, 2004.

(10)    Filed herewith.

 

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SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

Dated:  April 29, 2004

 
|   | CHANNELL  COMMERCIAL CORPORATION |
|--------|----------------------------------|
|   | (Registrant)                     |
|   |                             |
|   |                             |
|   | By:                              |   /s/ THOMAS LIGUORI |   |
|   |                             | Thomas Liguori |
|   |                             | Chief Financial Officer |
|   |                             | (Duly authorized  officer and principal financial  officer of the Registrant) |

 

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