**UNITEDSTATES**

**SECURITIESAND 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, 2005**                                       |
|                                                                                                                                                                                                                          |       |                                                                                          |
|                                                                                                                                                                                                                          |       | **OR**                                                                                        |
|                                                                                                                                                                                                                          |       |                                                                                          |
| **o**                                                                                                                                                                                                                         | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                                    |
| **For the transition period from                   to                ** |
| ** **                                                                                                                                                                                                                    |
| **Commission  File No. 0-28582**                                                                                                                                                                                              |

 

**CHANNELL COMMERCIAL CORPORATION**

(Exact name of Registrant asspecified in its charter)

 

**DELAWARE**

(State or other jurisdiction ofincorporation or organization)

 

**95-2453261**

(I.R.S. Employer IdentificationNo.)

 

**26040 YnezRoad, Temecula, California**

(Address of principal executiveoffices)

 

**92591**

(Zip Code)

 

**(951) 719-2600**

(Registrant’s telephone number,including area code)

 

Indicate bycheck mark whether the Registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the Registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes   ý   No  o

 

Indicate bycheck mark whether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act).

Yes   o   No  ý

 

9,394,242 shares of commonstock of the Registrant were outstanding at May 10, 2005.

 

 

----

 
| **PART 1 –** | **FINANCIAL  INFORMATION** |
|-------------------|----------------------------|
|              |                       |
| **ITEM 1.**       | **FINANCIAL  STATEMENTS**  |
|                   |                            |  |

 

**CHANNELL COMMERCIAL CORPORATION**

**CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME**

**(UNAUDITED)**

*(amounts in thousands, except per share data)*

 
| ** **                                                                              | ** ** | **Three months ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                              | ** ** | **2005**                          | ** ** | **2004** | ** ** |
|                                                                                    |       |                              |       |   |   |
| Net sales                                                                               |       | $                                 | 31,378     |   | $ | 17,720 |   |
| Cost of goods sold                                                                      |       | 22,144                            |       | 12,376 |   |
|                                                                                    |       |                              |       |   |   |
| Gross profit                                                                            |       | 9,234                             |       | 5,344 |   |
| Operating expenses                                                                      |       |                              |       |   |   |
| Selling                                                                                 |       | 4,843                             |       | 2,603 |   |
| General and administrative                                                              |       | 2,889                             |       | 2,088 |   |
| Research and development                                                                |       | 673                               |       | 502 |   |
|                                                                                    |       | 8,405                             |       | 5,193 |   |
| Income from operations                                                                  |       | 829                               |       | 151 |   |
|                                                                                    |       |                              |       |   |   |
| Interest expense, net                                                                   |       | 107                               |       | 61 |   |
|                                                                                    |       |                              |       |   |   |
| Income before income taxes                                                              |       | 722                               |       | 90 |   |
|                                                                                    |       |                              |       |   |   |
| Income taxes                                                                            |       | 215                               |       | 76 |   |
|                                                                                    |       |                              |       |   |   |
| Net income before minority interest                                                     |       | 507                               |       | 14 |   |
|                                                                                    |       |                              |       |   |   |
| Minority interest                                                                       |       | 81                                |       | — |   |
|                                                                                    |       |                              |       |   |   |
| Net income                                                                              |       | $                                 | 426        |   | $ | 14 |   |
|                                                                                    |       |                              |       |   |   |
| Net income per share                                                                    |       |                              |       |   |   |
| Basic                                                                                   |       | $                                 | 0.05       |   | $ | 0.00 |   |
|                                                                                    |       |                              |       |   |   |
| Diluted                                                                                 |       | $                                 | 0.04       |   | $ | 0.00 |   |
|                                                                                    |       |                              |       |   |   |
| Net income                                                                              |       | $                                 | 426        |   | $ | 14 |   |
|                                                                                    |       |                              |       |   |   |
| Other comprehensive (loss) income, net of  tax  Foreign currency translation adjustment |       | (265                              | )          | 49 |   |
|                                                                                    |       |                              |       |   |   |
| Comprehensive net income                                                                |       | $                                 | 161        |   | $ | 63 |   |

 

Theaccompanying notes are an integral part of these financial statements.

 

1

----

 

**CHANNELL COMMERCIAL CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

*(amounts in thousands)*

 

 
| ** **                                                                                                                                                                                                                                     | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                                                                     | ** ** | **(Unaudited)**          | ** ** | ** **                  | ** ** |
| ** **                                                                                                                                                                                                                                     | ** ** | ** **               | ** ** | ** **                  | ** ** |
| **ASSETS**                                                                                                                                                                                                                                     |       |                     |       |                        |       |
| **Current assets**                                                                                                                                                                                                                             |       |                     |       |                        |       |
| Cash and cash equivalents                                                                                                                                                                                                                      |       | $                        | 2,997      |                        | $          | 5,453 |   |
| Accounts receivable, net                                                                                                                                                                                                                       |       | 13,476                   |       | 13,936                      |       |
| Inventories                                                                                                                                                                                                                                    |       | 13,421                   |       | 14,164                      |       |
| Deferred income taxes                                                                                                                                                                                                                          |       | 1,989                    |       | 1,951                       |       |
| Prepaid expenses and misc. receivables                                                                                                                                                                                                         |       | 1,165                    |       | 859                         |       |
| Income taxes receivable                                                                                                                                                                                                                        |       | 1,135                    |       | 1,323                       |       |
| Total current assets                                                                                                                                                                                                                           |       | 34,183                   |       | 37,686                      |       |
|                                                                                                                                                                                                                                           |       |                     |       |                        |       |
| **Property and equipment at cost, net**                                                                                                                                                                                                        |       | 18,909                   |       | 19,301                      |       |
| **Deferred income taxes**                                                                                                                                                                                                                      |       | 4,467                    |       | 4,460                       |       |
| **Goodwill**                                                                                                                                                                                                                                   |       | 14,533                   |       | 14,724                      |       |
| **Intangible assets, net**                                                                                                                                                                                                                     |       | 1,696                    |       | 1,763                       |       |
| **Other assets**                                                                                                                                                                                                                               |       | 875                      |       | 964                         |       |
|                                                                                                                                                                                                                                           |       |                     |       |                        |       |
|                                                                                                                                                                                                                                           |       | $                        | 74,663     |                        | $          | 78,898 |   |
|                                                                                                                                                                                                                                           |       |                     |       |                        |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                  |       |                     |       |                        |       |
| **Current liabilities**                                                                                                                                                                                                                        |       |                     |       |                        |       |
| Accounts payable                                                                                                                                                                                                                               |       | $                        | 11,646     |                        | $          | 16,111 |   |
| Short term debt (including current  maturities of long term debt)                                                                                                                                                                              |       | 4,814                    |       | 4,332                       |       |
| Current maturities of capital lease  obligations                                                                                                                                                                                               |       | 27                       |       | 36                          |       |
| Accrued restructuring liability                                                                                                                                                                                                                |       | 135                      |       | 150                         |       |
| Accrued expenses                                                                                                                                                                                                                               |       | 7,428                    |       | 7,619                       |       |
| Total current liabilities                                                                                                                                                                                                                      |       | 24,050                   |       | 28,248                      |       |
|                                                                                                                                                                                                                                           |       |                     |       |                        |       |
| **Long term debt, less current maturities**                                                                                                                                                                                                    |       | 4,004                    |       | 4,368                       |       |
| **Capital lease obligations, less current  maturities**                                                                                                                                                                                        |       | 102                      |       | 104                         |       |
| **Deferred gain on sale leaseback transaction**                                                                                                                                                                                                |       | 438                      |       | 453                         |       |
| **Commitments and contingencies**                                                                                                                                                                                                              |       | —                   |       | —                      |       |
| **Minority Interest**                                                                                                                                                                                                                          |       | 2,877                    |       | 2,824                       |       |
|                                                                                                                                                                                                                                           |       |                     |       |                        |       |
| **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 - 9,608 shares at December 31, 2004 and  9,638 at March 31, 2005; outstanding - 9,364 shares at December 31,  2004 and 9,394 at March 31, 2005 |       | 96                       |       | 96                          |       |
| Additional paid-in capital                                                                                                                                                                                                                     |       | 29,801                   |       | 29,671                      |       |
| Treasury stock - 244 shares in 2004 and  2005                                                                                                                                                                                                  |       | (1,871                   | )          | (1,871                      | )          |
| Retained earnings                                                                                                                                                                                                                              |       | 14,392                   |       | 13,966                      |       |
| Accumulated other comprehensive income -                                                                                                                                                                                                       |       |                     |       |                        |       |
| Foreign currency translation                                                                                                                                                                                                                   |       | 774                      |       | 1,039                       |       |
|                                                                                                                                                                                                                                           |       |                     |       |                        |       |
| **Total stockholders’ equity**                                                                                                                                                                                                            |       | 43,192                   |       | 42,901                      |       |
|                                                                                                                                                                                                                                           |       |                     |       |                        |       |
| **Total liabilities and stockholders’ equity**                                                                                                                                                                                            |       | $                        | 74,663     |                        | $          | 78,898 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

2

----

 

**CHANNELL COMMERCIAL CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

*(amounts in thousands)*

 
| ** **                                           | ** ** | **Three months ended  March 31,** | ** ** |
|------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                           | ** ** | **2005**                          | ** ** | **2004** | ** ** |
| **Cash flows from operating activities:**            |       |                              |       |   |   |
| Net income                                           |       | $                                 | 426        |   | $ | 14 |   |
| Depreciation and amortization                        |       | 1,185                             |       | 1,220 |   |
| Deferred income taxes                                |       | (52                               | )          | 222 |   |
| Gain on disposal of fixed asset                      |       | (6                                | )          | (1 | ) |
| Amortization of deferred gain on sale  leaseback     |       | (15                               | )          | (15 | ) |
| Minority interest                                    |       | 81                                |       | — |   |
| Change in assets and liabilities:                    |       |                              |       |   |   |
| (Increase) decrease in assets:                       |       |                              |       |   |   |
| Accounts receivable                                  |       | 356                               |       | 938 |   |
| Inventories                                          |       | 661                               |       | (76 | ) |
| Prepaid expenses                                     |       | (312                              | )          | (232 | ) |
| Other                                                |       | 91                                |       | (24 | ) |
| Income taxes receivable                              |       | 194                               |       | (583 | ) |
| Increase (decrease) in liabilities:                  |       |                              |       |   |   |
| Accounts payable                                     |       | (4,367                            | )          | (480 | ) |
| Accrued expenses                                     |       | (157                              | )          | 359 |   |
| Restructuring liability                              |       | (12                               | )          | (679 | ) |
|                                                 |       |                              |       |   |   |
| Net cash (used in) provided by operating  activities |       | (1,927                            | )          | 663 |   |
|                                                 |       |                              |       |   |   |
| **Cash flows from investing activities:**            |       |                              |       |   |   |
| Acquisition of property and equipment                |       | (827                              | )          | (450 | ) |
| Proceeds from the sales of property and  equipment   |       | 24                                |       | 24 |   |
|                                                 |       |                              |       |   |   |
| Net cash used in investing activities                |       | (803                              | )          | (426 | ) |
|                                                 |       |                              |       |   |   |
| **Cash flows from financing activities:**            |       |                              |       |   |   |
| Repayment of debt                                    |       | (783                              | )          | (238 | ) |
| Proceeds from issuance of debt                       |       | 981                               |       | — |   |
| Repayment of obligations under capital  lease        |       | (9                                | )          | (39 | ) |
| Exercise of employee stock options                   |       | 130                               |       | — |   |
|                                                 |       |                              |       |   |   |
| Net cash provided by (used in) financing  activities |       | 319                               |       | (277 | ) |
|                                                 |       |                              |       |   |   |
| Effect of exchange rates on cash                     |       | (45                               | )          | 48 |   |
|                                                 |       |                              |       |   |   |
| (Decrease) increase in cash and cash  equivalents    |       | (2,456                            | )          | 8 |   |
|                                                 |       |                              |       |   |   |
| Cash and cash equivalents, beginning of  period      |       | 5,453                             |       | 9,527 |   |
|                                                 |       |                              |       |   |   |
| Cash and cash equivalents, end of period             |       | $                                 | 2,997      |   | $ | 9,535 |   |
|                                                 |       |                              |       |   |   |
| **Cash paid during the period for:**                 |       |                              |       |   |   |
| Interest                                             |       | $                                 | 135        |   | $ | 54 |   |
|                                                 |       |                              |       |   |   |
| Income taxes                                         |       | $                                 | 106        |   | $ | 601 |   |

 

The accompanying notes are an integral part of theses financialstatements.

 

3

----

 

**CHANNELL COMMERCIAL CORPORATION**

**CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY**

**Three months ended March 31, 2005**

*(amounts in thousands)*

 
| ** **                         | ** ** | ** **       | ** ** | ** **  | ** ** | ** **         | ** ** | ** **   | ** ** | ** **        | ** ** | ** **             | ** ** | **Accumulated**   | ** ** | ** ** | ** ** |
|------------------------------------|------------|------------------|------------|-------------|------------|--------------------|------------|--------------|------------|-------------------|------------|------------------------|------------|-------------------|------------|------------|------------|
| ** **                         | ** ** | ** **       | ** ** | ** **  | ** ** | **Additional**     | ** ** | ** **   | ** ** | ** **        | ** ** | ** **             | ** ** | **other**         | ** ** | **Total**  | ** ** |
| ** **                         | ** ** | **Common stock** | ** ** | **paid-in** | ** ** | **Treasury stock** | ** ** | **Retained** | ** ** | **comprehensive** | ** ** | **stockholders’** | ** ** |
| ** **                         | ** ** | **Shares**       | ** ** | **Amount**  | ** ** | **capital**        | ** ** | **Shares**   | ** ** | **Amount**        | ** ** | **earnings**           | ** ** | **Income (loss)** | ** ** | **equity** | ** ** |
|                               |       |             |       |        |       |               |       |         |       |              |       |                   |       |              |       |       |       |
| Balance, January 1, 2005      |       | 9,608            |       | $           | 96         |               | $          | 29,671       |       | 244               |       | $                      | (1,871     | )                 | $          | 13,966     |       | $ | 1,039 |   | $ | 42,901 |   |
|                               |       |             |       |        |       |               |       |         |       |              |       |                   |       |              |       |       |       |
| Exercise of employee stock options |       | 30               |       | —      |       | 130                |       | —       |       | —            |       | —                 |       | —            |       | 130        |       |
| Foreign currency translation       |       | —           |       | —      |       | —             |       | —       |       | —            |       | —                 |       | (265              | )          | (265       | )          |
| Net income for the period          |       | —           |       | —      |       | —             |       | —       |       | —            |       | 426                    |       | —            |       | 426        |       |
| Balance, March 31, 2005       |       | 9,638            |       | $           | 96         |               | $          | 29,801       |       | 244               |       | $                      | (1,871     | )                 | $          | 14,392     |       | $ | 774 |   | $ | 43,192 |   |

 

The accompanying notes are an integral part of this financialstatement.

 

4

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**CHANNELL COMMERCIALCORPORATION**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)**

**March 31,2005 and 2004**

*(amounts inthousands, except per share 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, 2005 andthe results of its operations and cashflows for the three months ended March 31,2005 and March 31, 2004.  Theresults of operations and cash flows for the three months ended March 31,2005 are not necessarily indicative of the results to be expected for any otherinterim period or the full year.  Theseconsolidated financial statements should be read in combination with theaudited consolidated financial statements and notes thereto for the year ended December 31,2004.

 

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

 
| ** **      | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-----------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **      | ** ** | **(Unaudited)**          | ** ** | ** **                  | ** ** |
| Raw Materials   |       | $                        | 5,245      |                        | $          | 4,777 |   |
| Work-in-Process |       | 3,097                    |       | 3,050                       |       |
| Finished Goods  |       | 5,079                    |       | 6,337                       |       |
|            |       | $                        | 13,421     |                        | $          | 14,164 |   |

 

3.             *Income**per share.*  Basic income per share excludes dilution andis computed by dividing net income available to common stockholders by theweighted average number of common shares outstanding for the three month periodended March 31, 2005 and 2004. 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, 2005 and 2004(shares in thousands):

 
| ** **                       | ** ** | **Three months ended March 31,** | ** ** |
|----------------------------------|------------|---------------------------------------|------------|
| ** **                       | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| ** **                       | ** ** | **Shares**                            | ** ** | **Per Share  Amount** | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** |
| Basic income per share           |       | 9,378                                 |       | $ | 0.05 |   | 9,128 |   | $ | — |   |
| Effect of dilutive stock options |       | 491                                   |       | 0.01 |   | 23 |   | — |   |
| Diluted income per share         |       | 9,869                                 |       | $ | 0.04 |   | 9,151 |   | $ | — |   |

 

The followingoptions were not included in the computation of diluted income per share due totheir antidilutive effect.

 
| ** **                                 | ** ** | **March 31, 2005**         | ** ** | **March 31, 2004**              | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|--------------------------------------|------------|
|                                       |       |                            |       |                                 |       |
| Options to purchase shares of common stock |       | 68                              |       | 1,423                                |       |
| Exercise prices                            |       | $10.063 - $13.75                |       | $4.84 - $13.75                       |       |
| Expiration dates                           |       | July 2006 - July 2010 |       | July 2006 - September 2013 |       |

 

In February 2003, the Company offered current employees andnon-employee directors an opportunity to exchange their outstanding optionsgranted under the 1996 Stock Plan.  Pursuantto the offer, a total of 1,326,890 options were cancelled on March 20,2003 with a range of exercise prices between $3.25 and $13.75.  On September 24, 2003, a total of1,324,090 new options with an exercise price of $4.84 were granted for optionscancelled in March 2003.  Nocompensation expense was recognized on the re-granting of options in accordancewith FIN 44.

 

5

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4.             *Stock Based Compensation.* Statement of Financial Accounting Standards (“SFAS”)No. 148, “*Accounting for Stock Based Compensation –Transition and Disclosure on Amendment of SFAS 123”*, encourages, butdoes not require, companies to record compensation cost for stock-basedemployee compensation plans at fair value. The Company has chosen to continue to account for stock-basedcompensation using the intrinsic value method prescribed in previously issuedstandards.  Accordingly, compensationcost for stock options is measured as the excess, if any, of the quoted marketprice of the Company’s stock at the date of grant over the amount an employeemust pay to acquire the stock.

 

Pursuant to the exchange offer describedin Note 3 above, participating eligible option holders were granted a newoption for each old cancelled option. For each new option granted, the vesting status and vesting schedule ofthe old option was preserved.  Theweighted average fair value of the options issued in September 2003 was$1.91.  The weighted average exerciseprice was $4.84.

 

Hadcompensation cost for the plan been determined based on the fair value of theoptions at the grant dates based on the disclosure requirements of SFAS 123,the Company’s net income and income per share would have been:

 
| ** **                                                                                       | ** ** | **Three months ended March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                       | ** ** | **2005**                              | ** ** | **2004** | ** ** |
|                                                                                             |       |                                  |       |   |   |
| Reported net income                                                                              |       | $                                     | 426        |   | $ | 14 |   |
| Add stock-based compensation expense  reported in net income                                     |       | —                                |       | — |   |
| Less total stock-based compesation expense,  determined under the fair value method, net of tax  |       | (111                                  | )          | (111 | ) |
| Proforma net income (loss)                                                                       |       | $                                     | 315        |   | $ | (97 | ) |
|                                                                                             |       |                                  |       |   |   |
| Reported basic net income per share                                                              |       | $                                     | 0.05       |   | $ | — |   |
| Add stock-based compensation expense  reported in net income                                     |       | —                                |       | — |   |
| Less total stock-based compesation expense,  determined under the fair value method, net of tax  |       | (0.02                                 | )          | (0.01 | ) |
| Proforma net income (loss)                                                                       |       | $                                     | 0.03       |   | $ | (0.01 | ) |
|                                                                                             |       |                                  |       |   |   |
| Reported diluted net income per share                                                            |       | $                                     | 0.04       |   | $ | — |   |
| Add stock-based compensation expense  reported in net income                                     |       | —                                |       | — |   |
| Less total stock-based compensation  expense, determined under the fair value method, net of tax |       | (0.01                                 | )          | (0.01 | ) |
| Proforma net income (loss)                                                                       |       | $                                     | 0.03       |   | $ | (0.01 | ) |

 

The fair valueof options at date of grant was estimated using the Black-Scholes model withthe following weighted average assumptions:

 
| ** **              | ** ** | **Three months ended March 31,** | ** ** |
|-------------------------|------------|---------------------------------------|------------|
| ** **              | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Expected life (years)   |       | 5 years                               |       | 5 years |   |
| Risk-free interest rate |       | 3.90                                  | %          | 3.00 | % |
| Expected volatility     |       | 50                                    | %          | 40 | % |
| Expected dividend yield |       | —                                |       | — |   |

 

There were no optionsgranted in the three month period ended March 31, 2005.

 

6

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5.             *Segments*. There are two segments:  Americasand International.  Americas includes theUnited States, Central and South America and Canada.  International includes Europe, Africa, MiddleEast, Australia and Asia.  The followingtable summarizes segment information for the three months ended March 31,2005 and 2004:

 
| ** **                             | ** ** | **Three months ended March 31,** | ** ** |
|----------------------------------------|------------|---------------------------------------|------------|
| ** **                             | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Revenues from unrelated entities  (1): |       |                                  |       |   |   |
| Americas                               |       | $                                     | 19,540     |   | $ | 15,010 |   |
| International                          |       | 11,838                                |       | 2,710 |   |
|                                   |       | $                                     | 31,378     |   | $ | 17,720 |   |
| Income (loss) from operations:         |       |                                  |       |   |   |
| Americas                               |       | $                                     | 389        |   | $ | 781 |   |
| International                          |       | 440                                   |       | (630 | ) |
|                                   |       | $                                     | 829        |   | $ | 151 |   |
|                                   |       |                                  |       |   |   |
| Interest expense, net:                 |       |                                  |       |   |   |
| Americas                               |       | $                                     | 48         |   | $ | (3 | ) |
| International                          |       | 59                                    |       | 64 |   |
|                                   |       | $                                     | 107        |   | $ | 61 |   |

 

----

(1)  Note:  Revenuesfrom Australia exceeded 10% of total revenues for the three month period ended March 31,2005.  Revenues from Australia totaled$9,844  for the three month period. Revenuesfrom individual foreign countries did not exceed 10% of total revenues duringthe corresponding period in 2004.  (SeeNote 16).

 

The Companyhas revenues from external customers from the following product lines:

 
| ** **             | ** ** | **Three months ended March 31,** | ** ** |
|------------------------|------------|---------------------------------------|------------|
| ** **             | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Product lines          |       |                                  |       |   |   |
| Enclosures             |       | $                                     | 13,736     |   | $ | 14,822 |   |
| Water related products |       | 15,496                                |       | 1,056 |   |
| Connectivity           |       | 2,032                                 |       | 1,632 |   |
| Other                  |       | 114                                   |       | 210 |   |
|                   |       | $                                     | 31,378     |   | $ | 17,720 |   |

 

The Companyhas identifiable assets in the following geographic regions:

 
| ** **           | ** ** | **March 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|----------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **           | ** ** | **(Unaudited)**          | ** ** | ** **                  | ** ** |
| Identifiable Assets: |       |                     |       |                        |       |
| Americas             |       | $                        | 41,549     |                        | $          | 43,335 |   |
| International        |       | 33,114                   |       | 35,563                      |       |
|                 |       | $                        | 74,663     |                        | $          | 78,898 |   |

 

6.***            ****Recent AccountingPronouncements. *OnMarch 3, 2005, the Financial Accounting Standards Board (“FASB”) issuedFASB 

StaffPosition (“FSP”) FIN 46(R)-5, “Implicit Variable Interests under FASBInterpretation No. 46 (revised December 2003), *Consolidationof Variable Interest Entities.”* FSP FIN 46(R)-5 provides guidance on whether a reporting enterpriseshould consider if it holds an implicit variable interest in a variableinterest entity (“VIE”) or potential VIE. FSP FIN 46(R)-5 requires that if an entity has a controlling financialinterest in a VIE, the assets and liabilities and results of activities of theVIE should be included in the consolidated financial statements of theentity.  FSP FIN 46(R)-5 is effective inthe first reporting period beginning after March 3, 2005****in accordance with the transition provisions ofFIN46(R).  The Company does not expectthat the provisions of FSP FIN 46(R)-5 will have a material impact on theCompany’s results of operations or financial position.

 

7

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In November 2004,the FASB issued Statement of Financial Accounting Standards  (“SFAS”) No. 151, “Inventory Costs, anAmendment of ARB No. 43, Chapter 4.” SFAS No. 151 retains the general principle of ARB No.43, Chapter 4,“Inventory Pricing,” that inventories are presumed to be stated at cost;however, it amends ARB No. 43 to clarify that abnormal amounts of idle facilities,freight, handling costs and spoilage should be recognized as current periodexpenses.  Also, SFAS No. 151requires fixed overhead costs be allocated to inventories based on normalproduction capacity.  The guidance inSFAS No. 151 is effective for inventory costs incurred during fiscal yearsbeginning after June 15, 2005.  TheCompany believes that implementing SFAS No. 151 will not have a materialimpact on its financial condition or results of operations.

 

In December 2004,the FASB issued SFAS 123 (revised 2004), Share-Based Payment (SFAS123(R)).  This Statement is a revision toSFAS 123, Accounting for Stock-Based Compensation, and supersedes Opinion 25,Accounting for Stock Issued to Employees. SFAS 123(R) requires the measurement of the cost of employee servicesreceived in exchange for an award of equity instruments based on the grant-datefair value of the award.  The cost willbe recognized over the period during which an employee is required to provideservice in exchange for the award.  Nocompensation cost is recognized for equity instruments for which employees donot render service.  The Company willadopt SFAS 123(R) on January 1, 2006, requiring compensation cost to berecognized as expense for the portion of outstanding unvested awards, based onthe grant-date fair value of those awards calculated using the Black-Scholesoption pricing model under SFAS 123 for pro forma disclosures.  Management has not yet determined the effectof adopting SFAS 123(R) but estimates a potential impact of approximately $200net of tax in 2006.

 

7.             *RestructuringCharges*.  In the fourth quarter of 2003, the Companyevaluated International operations to improve 

profitability.  A plan was developed to close a manufacturingfacility in International operations by June 2004.  As part of the plan, there was a reduction ofapproximately 39 employees in the International operations.  The restructuring charge totaled $1,565.  The principal components of the 2003restructuring charge involved the closure of facilities and a reduction in headcount.

 

A credit torestructuring charge of $690 was recorded in the third quarter of 2004primarily due to the assignment of the lease of a vacated facility in theUnited Kingdom at a cost less than previously estimated by management.  Due to difficulties in negotiating a leasetermination or subletting of the facility, the estimate for the facilityclosure costs was subsequently increased in the fourth quarter of 2002 andfurther increased in the fourth quarter of 2003.  In July 2004, the lease on the facilitywas assigned for the remaining lease term on more favorable terms thanmanagement had estimated.

 

The restructuring charges were determinedbased on formal plans approved by the Company’s management using the bestinformation available to it at the time. The amounts the Company may ultimately incur could differ materially asthe restructuring initiative is executed.  The Company anticipates that the restructuringwill be completed by December 31, 2005. The changes in the accrual for restructuring charges during the threemonth period ended March 31, 2005 are summarized in the table below:

 
| ** **                                                    | ** ** | **Facilities** | ** ** | **Workforce  Reduction** | ** ** | **Total** | ** ** |
|---------------------------------------------------------------|------------|----------------|------------|--------------------------|------------|-----------|------------|
|                                                          |       |           |       |                     |       |      |       |
| Restructuring accrual balance at  December 31, 2004      |       | $              | 147        |                     | $          | 3         |       | $ | 150 |   |
| Costs incurred in the three months ended  March 31, 2005 |       | 15             |       | —                   |       | 15        |       |
| Restructuring accrual balance at  March 31, 2005         |       | $              | 132        |                     | $          | 3         |       | $ | 135 |   |

 

8.             *Sale Leaseback Agreement*.  In June, 2002, the Company entered into a sale and leaseback agreementfor a 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 for asan operating lease.  The lease base termis ten years with two five-year options at rental amounts to be adjusted to thefair 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, 2005, the unamortizedbalance of the deferred gain is $438 and is being amortized over the ten-yearlease base term.

 

9.             *Income Taxes. * The effective tax rate of 29.8% for the threemonths ended March 31, 2005 differed from the statutory rate of 

34.0% primarily due to alarger percentage of consolidated income generated by an International segmentwith a tax rate lower than the statutory rate. In addition, another International segment generated $141 income in thequarter with no related tax expense due to existing operating losscarryforwards.

 

8

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TheFederal income taxes of the Company for the years ended December 31, 2000,2001 and 2002 are currently under examination by the Internal Revenue Service (“IRS”).  Included in the examination of the 2001 taxyear is a credit for research and development (“R&D”).  The IRS is also examining an R&D creditincluded in the December 31, 2002 tax year.  The IRS has denied the R&D credit forboth the 2001 and 2002 tax years.  Thecumulative amount of R&D credit denied by the IRS is $409.  The Company believes that it has meritoriousdefenses for the R&D credits and intends to vigorously defend its positionupon appeal.  The Company has recorded anaccrual for a portion of the R&D credit that is in dispute.  Management believes that the ultimate outcomeof IRS audits for the years ended 2000, 2001 and 2002 will not have a materialadverse impact on the Company’s consolidated results of operations or financialposition.

 

10.           *Commitments andContingencies.   *In 2001, the State of Texas issued areport assessing the Company additional sales and use 

tax of $1,600, includinginterest for the period of January 1, 1996 through December 31,1999.  The Company appealed theassessment and provided the State of Texas with documentation to support theCompany’s contention that the transactions did not require the Company to remitadditional sales and use tax to the State of Texas.  The State of Texas agreed to a reduction ofthe amount tax owed to $587 plus interest of $281.  The Company has paid the State of Texas$400.  The Company is currently in theprocess of negotiating with the State of Texas to reduce the amount of interestowed.  The Company has accruedsubstantially all of the assessment and believes the ultimate outcome will nothave a material impact on the Company’s consolidated results of operations orfinancial position.

 

Asof March 31, 2005 the Company has placed purchase orders totaling $10,441 withits suppliers for deliveries through March 31, 2006.

 

11.           *Related Party Transactions. *In May 2002, the Company sold its RFline of passive electronic devices to RMS 

Communications, Inc.,which is owned by Gary Napolitano, a former officer of the Company.  A sale in the amount of $800 was recorded.  RMS Communications, Inc. paid theCompany $125 in cash at the time of sale, and the remaining $675 is payable inmonthly installments through June 30, 2003, bearing interest at 7% perannum.  The account is currently inarrears.  The amount due from RMSCommunications, Inc. included in accounts receivable at March 31,2005 is $251.  The Company has a securityinterest in the inventory and a personal guarantee from Mr. Napolitano andbelieves the amount will be paid in full. No reserve has been recorded against the receivable at March 31,2005.  The Company purchases RF devicesfrom Mr. Napolitano and from other sources depending on price and supplyof product.  The RF devices purchasedfrom Mr. Napolitano’s firm in 2004 approximated $87 and were used ascomponents in the Company’s product lines. The purchases in 2004 did not result in a cash payment to Mr. Napolitanoas the amounts owed were used to offset the accounts receivable.  There were no purchases from Mr. Napolitano’scompany in the three months ended March 31, 2005.

 

TheCompany has two leases for approximately 261,000 square feet of manufacturing,warehouse and office space in Temecula, California, with William H. Channell, Sr.,a principal stockholder and Chairman of the Board of the Company. The term ofboth leases is through December 31, 2005, with two five-year renewaloptions.  Both leases provide forpayments of insurance, repairs, maintenance and property taxes.  Rent expense paid under the leases was $321and $334 for the three months ended March 31, 2004, and 2005respectively.  The Company believes thatat the time the leases were consummated, the terms of these leases were no lessfavorable to the Company than could have been obtained from an independent thirdparty.

 

TheCompany’s facilities in Orange, Dalby, Terang and Adelaide Australia are leasedfrom shareholders of the Company.  Theseshareholders are former owners of Bushman Tanks.  The facilities comprise 94,000 square feet ofmanufacturing, warehouse and office space. The lease term on all four facilities is through February 28, 2010with a five-year renewal option.  Therent expense paid under the leases in the three months ended March 31,2005 was $86.  The Company hired anindependent firm to appraise the market lease rates for these facilities and itwas determined that the existing leases are in excess of fair market value byapproximately $27 per year.  Included inliabilities is $237 related to these unfavorable leases.

 

12.           *Concentrations.*     Sales to Verizon of $9,482 in the firstthree months of 2005 represented 30.2% of the Company’s sales in 

the period. Sales to Verizon of $1,642 in the first three months of 2004 represented9.3% of the Company’s sales.  The secondlargest customer in the first three months of 2005 was Comcast with sales of$1,958 representing 6.2% of the Company sales. Sales to Comcast of $3,702 in the first three months of 2004 represented20.9% of the Company’s sales for the period.

 

Accountsreceivable with Verizon of $3,744 and with Comcast of $879 represented 27.8%and 6.5%, respectively, of Company accounts receivable at March 31,2005.  Accounts receivable with Comcastof $1,821 and with Verizon of $811 represented 13.1% and 5.8%, respectively, ofCompany accounts receivable at March 31, 2004.

 

9

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13.           *Guarantees.*  In 1997, the Company guaranteed debt of theCompany’s principal stockholder and Chairman of the Board of 

approximately $754.  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 practicable to estimate the fair value of the guarantee;however, the Company does not anticipate that it will incur losses as a resultof this guarantee.  The Company has notrecorded a liability for this guarantee. If the principal stockholder were to default on the outstanding loanbalance, the Company may be required to repay the remaining principalbalance.  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, 2005, the outstanding loanbalance subject to the guarantee totaled $576.

 

14.           *Goodwill and Other**Intangible Assets.*  The balance of the intangible assets on theCompany’s balance sheet fluctuates from 

period to period due to the application offoreign currency translation to United States dollars in calculating thebalance of goodwill and other intangible assets of our foreignsubsidiaries.  Effective January 1,2002, the Company adopted SFAS No. 142, “Goodwill and Other IntangibleAssets”.  SFAS 142 requires that goodwilland certain intangibles no longer be amortized, but instead are to be reviewedat least annually for impairment.  TheCompany tests the value of goodwill for impairment annually (December 31for the Canadian reporting unit and June 30 for the Bushman’s reportingunit) or whenever events or changes in circumstance indicate that expectedfuture discounted cashflows may be insufficient to support the carrying amountof the asset.  The test involvessignificant judgment in estimating projections of fair value generated throughfuture performance of the operating segment. In calculating the fair value, the Company relies on factors such asoperating results, business plans, economic projections, and anticipated cashflows used in discounting the cash flows. Inherent uncertainties exist in determining and applying such factors.

 

In August 2004,the Company, through a majority-owned subsidiary, acquired a controllinginterest in Bushman Tanks, a manufacturer and distributor of rotational moldedplastic (polyethylene) water storage tanks. The Share and Asset Purchase Agreement provides for contingentconsideration of $2,800.  If paid, thecontingent consideration shall result in additional goodwill.  In the event that the Bushman Tanks businessachieves specified sales targets in 2005 and 2006, $1,400 is payable to thesellers. In addition, $1,400 may be paid to the sellers if certain costreduction targets are achieved.  Thesellers will receive one-half of the amounts of the cost reductions in thespecified cost items that are achieved between 2005 through 2009.  In the event that the cost incurred for theseitems exceeded a predetermined threshold, the seller would be liable to theCompany for the amount of the cost exceeding the threshold.  Management is unable to assess, as of March 31,2005, whether any contingent consideration will be required.  The changes in the net carrying amounts ofgoodwill for the three months ended March 31, 2005 are as follows:

 
| ** **                                    | ** ** | **Goodwill** | ** ** |
|-----------------------------------------------|------------|--------------|------------|
| Intangible balance at December 31,  2004 |       | $            | 14,724     |   |
|                                          |       |         |       |
| Effect of foreign currency translation        |       | (191         | )          |
| Intangible balance at March 31, 2005     |       | $            | 14,533     |   |

 

Included inthe Share and Asset Purchase Agreement, the sellers of Bushman Tanks agreed toa “non-compete” clause where by the sellers of Bushman Tanks would not directly or indirectly carry on or be engagedor involved in any trade, business or undertaking that is in competition withthe Bushman Tanks business.  The Companyperformed an evaluation of the non-compete agreement and determined the fairvalue to be $1,600.  The non-competeagreement is recorded in the reporting unit of Bushman Tanks, which is part ofthe International segment, as a separately identifiable intangible asset and isbeing amortized over the ten-year contractual term on a straight linebasis.  As of March 31, 2005, theCompany had the following acquired intangible asset recorded:

 
| ** **               | ** ** | **Non-Compete  Agreement** | ** ** |
|--------------------------|------------|----------------------------|------------|
|                     |       | ** **                 |       |
| Gross carrying amount    |       | $                          | 1,784      |   |
|                     |       |                       |       |
| Accumulated amortization |       | (88                        | )          |
| Net carrying amount      |       | $                          | 1,696      |   |

 

10

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The following tablesummarizes the estimated annual pretax amortization expense for the non-competeintangible asset:

 
| **Fiscal Year**          | ** ** | ** ** | ** ** |
|--------------------------|------------|------------|------------|
| 2005 (remainder of year) |       | $          | 134        |   |
| 2006                     |       | 179        |       |
| 2007                     |       | 179        |       |
| 2008                     |       | 179        |       |
| 2009                     |       | 179        |       |
| Thereafter               |       | 846        |       |
| Total                    |       | $          | 1,696      |   |

 

15.           *Loan and Security Agreements*.  The Company entered into a three-year Loanand Security Agreement with an asset-based 

lender in the United States in September 2002.  Maximum borrowings available under thisfacility total $25,000.  The Agreementhas a $1,000 sub-limit for letters of credit. As of March 31, 2005, outstanding letters of credit totaled$986.  The Agreement contains variousfinancial and operating covenants that impose limitations on the Company’sability, among other things, to incur additional indebtedness, merge orconsolidate, sell assets except in the ordinary course of business, makecertain investments, enter into leases and pay dividends.  The Company is also required to comply with afixed charge coverage ratio and other financial covenants.  The Agreement requires the Company tomaintain a lockbox on the revolving credit facility.  The lockbox receipts automatically reduce theoutstanding balance of the revolving credit balance, if any.  The Agreement also contains a subjectiveacceleration clause should the Company come into a default which allows theasset-based lender to terminate the facility and require that any outstandingobligation to be repaid.  There was nobalance outstanding under the revolving line of credit at March 31,2005.  The Loan and Security Agreementalso contains a three-year term loan and is repayable in equal quarterlypayments based on a five-year amortization schedule with a balloon paymentat maturity.  Amounts borrowed under thisfacility bear interest at a variable rate based on either the lender’s BaseRate or LIBOR.  At March 31, 2005,the outstanding balance of the term loan was $2.6 million.  The weighted average interest rate under theterm loan was 4.79% at March 31, 2005. The Company was in compliance as of March 31, 2005 with thecovenants of the Loan and Security Agreement.

 

Channell PtyLtd., a subsidiary of the Company, entered into a one-year Loan and SecurityAgreement with a commercial bank in Australia in July 2004.  The loan contains a revolving line of creditfor working capital needs with a maximum available borrowing of Australiadollars $1,200, which translated at March  31, 2005 exchange rates isapproximately $925 US dollars.  ChannellPty Ltd. is required to comply with an interest coverage ratio.  The Agreement contains various financial andoperating covenants that impose limitations on Channell Pty Ltd.’s ability,among other things, to incur additional indebtedness, merge or consolidate, andsell assets except in the ordinary course of business.  The agreement is reviewed annually with thebank for renewals.  The Agreementcontractually obligates Channell Pty Ltd. to repay the revolving creditfacility as Channell Pty Ltd. receives payments from its customers.  The Agreement also contains a subjectiveacceleration clause should Channell Pty Ltd. come into a default which allowsthe bank to terminate the facility and require any outstanding obligation to berepaid.  There was no balance outstandingunder the revolving line of credit at March 31, 2005.  Channell Pty Ltd. was in compliance as of March 31,2005 with the covenants of the Loan and Security Agreement.

 

ChannellBushman Pty Ltd., a subsidiary of the Company, entered into a five-year Loanand Security Agreement with a commercial bank in Australia in August 2004.  The loan contains a five-year term loan withmaximum borrowings of Australia dollars $8,000 that expires in July 2009,a revolving credit facility with maximum borrowings of Australia dollars$2,000, a facility to fund future “earn-out” payments to the sellers of BushmanTanks with maximum borrowings of Australia dollars $1,800, and a capitalexpenditure facility with maximum borrowings of Australia dollars $6,000.  Translated into US dollars at March 31,2005 exchange rates, the maximum borrowings are approximately:  five-year term loan $6,200, revolving creditfacility $1,500, “earn-out” facility $1,400, and capital expenditure facility$4,700 million.  The Agreement containsvarious financial and operating covenants that impose limitations on ChannellBushman Pty Ltd.’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.  Channell Bushman Pty Ltd. isrequired to comply with an interest coverage ratio, debt service ratio,Debt/EBIT ratio and capital adequacy ratio. The Agreement contractually obligates Channell Bushman Pty Ltd. to repaythe revolving credit facility as Channell Bushman Pty Ltd. receives paymentsfrom its customers.  The Agreement alsocontains a subjective acceleration clause should the Company come into adefault which allows the bank to terminate the facility and require anyoutstanding obligation to be repaid. Channell Bushman Pty Ltd. had an outstanding balance of US $991 on therevolving credit facility at March 31, 2005.  The weighted average interest rate

 

11

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was 6.9%. There were no balances outstandingunder the “earn-out” facility, or capital expenditure facility as of March 31,2005.  At March 31, 2005, theoutstanding balance on the term loan was US $5,236.  The weighted average interest rate was 5.65%.  Channell Bushman Pty Ltd. was in complianceas of March 31, 2005 with the covenants of the Loan and SecurityAgreement.

 

16.           *Acquistion.*   In August 2004,the Company, through a majority-owned subsidiary, acquired a controllinginterest in Bushman 

Tanks, a manufacturer of rotational moldedplastic (polyethylene) water storage tanks. The following unaudited pro forma financial information reflects theconsolidated results of operations of the Company as if the acquisition hadtaken place on January 1, 2004.  Thepro forma information includes the historical operations of the Company andBushman Tanks (translated at the average currency exchange rate for theapplicable period) and gives effect to the acquisition as if it had occurred atthe beginning the applicable period.  Thepro forma financial information is based upon available information andassumptions and adjustment that the Company believes are reasonable.  The pro forma financial information does notpurport to represent what our results of operations actually would have beenhad the transaction been effect on the assumed date.

 

*Amounts in thousands, except per share data*

 

| ** **                  | ** ** | **Three months ended  March 31, 2004  Pro Forma** | ** ** |
|-----------------------------|------------|--------------------------------------------------------|------------|
| ** **                  |       | ** **                                             |       |
| Net sales                   |       | $                                                      | 25,276     |   |
|                        |       |                                                   |       |
| Net income (loss)           |       | (163                                                   | )          |
|                        |       |                                                   |       |
| Net income (loss) per share |       |                                                   |       |
|                        |       |                                                   |       |
| Basic                       |       | $                                                      | (0.02      | ) |
|                        |       |                                                   |       |
| Diluted                     |       | $                                                      | (0.02      | ) |

 
| **ITEM 2.** | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION** |
|-------------|-----------------------------------------------------------------------|
|        | **AND RESULTS OF OPERATIONS**                                         |

 

### **Results of Operations**

 

In August of 2004 the Company acquired75% of the Bushman Tanks business (the “acquired company”).  Bushman Tanks is Australia’s largestmanufacturer of plastic water storage tanks. The Bushman Tanks’ financial results have been consolidated in theCompany’s financial statements for the three months ended March 31,2005.  A minority interest has beenrecorded for the 25% equity owned by ANZ Private Equity, a unit of Australiaand New Zealand Banking Group Ltd.

 

**Comparison of the Three Months Ended March 31,2005 with the Three Months Ended March 31, 2004**

 

*Net Sales*.  Net sales in the first three months of 2005were $31.4 million, an increase of $13.7 million or 77% compared to the firstthree months of 2004.  The increase isdue to the addition of the acquired company and growth in both the coreAmericas and International segments.

 

Americas net sales were $19.5 million in thefirst three months of 2005, an increase of $4.6 million or 30% over the sameperiod in 2004. The increase was due primarily to higher sales to Verizon.  The major telephone customer purchased plasticenclosures for a construction project to install fiber communication lines tocustomer premises.

 

International net sales were $11.8 million,an increase of $9.1 million or 337%.  Theincrease is primarily due to sales of the acquired company.  In addition, higher sales to telephonecustomers in the Asian market contributed to the sales growth.

 

Sales to Verizon of $9.5 million in the firstthree months of 2005 represented 30.2% of Company sales in the period.  Sales to Verizon of $1.6 million in the firstthree months of 2004 represented 9.3% of the Company’s sales.  The second largest customer in the firstthree months of 2005 was Comcast with sales of $2.0 million representing 6.2%of the Company’s sales.  Sales to Comcastof $3.7 million in the first three months of 2004 represented 20.9% of theCompany’s sales for the period.

 

12

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* *

*Gross Profit*.  Gross profit in the first three months of2005 was $9.2 million, an increase of $3.9 million or 73% over the first threemonths of 2004. The increase was primarily due to the addition of gross profitearned by the acquired company.  Grossprofit dollars in the Americas segment was unchanged at $4.8 million in boththe 2005 and 2004 period.  The productmix in the Americas changed in the 2005 period to a higher percentage ofproducts purchased for resale that the Company sells as a package with coreproduct lines.  The resale products havelower gross margins than products produced internally.  A secondary factor is increased raw materialcosts for plastic and steel in the Americas. Gross profit of $4.4 million in the International segment, a $3.9million increase over the 2004 period, was due to the addition of the acquiredcompany and the closure of a manufacturing facility in the United Kingdom.  The closure of the United Kingdom facilitylowered the overhead cost structure of International operations primarily dueto the elimination of facility lease costs, middle management and indirectsupport costs.

 

As a percentage of net sales, gross profitdecreased from 30.2% in the first three months of 2004 to 29.4% in the firstthree months of 2005.  The decline is dueprimarily to the unfavorable product mix and increased raw material costs forplastic and steel in the Americas segment, largely offset by higher margins inthe International segment as noted above.

 

*Selling*.  Selling expenses were $4.8 million in thefirst three months of 2005, an increase of $2.2 million or 86% from the firstthree months of 2004.  The increase isdue primarily to the addition of selling expenses of the acquired company.

 

As a percentage of net sales, selling expenseincreased from 14.7% in the 2004 period to 15.4% in the 2005 period.  The higher percentage is primarily due to theincrease in freight costs and the addition of selling expenses for the acquiredcompany.  The acquired company has ahigher percentage of selling expense to net sales than the other Channellbusinesses primarily due to freight costs incurred to transport water storagetanks to customers.

 

*General and Administrative*.  General and administrative expenses were $2.9million in the first three months of 2005, an increase of $0.8 million or38.4%.  The increase is due primarily tothe addition of the general and administrative expenses of the acquiredcompany.  In addition, the Companyincurred costs associated with a project to review its internal controlstructure in relation to the requirements of the Sarbanes Oxley Act of approximately$0.2 million.

 

As a percentage of net sales, general andadministrative expense decreased from 11.8% in the 2004 period to 9.2% in the2005 period.  The decrease is due to theincreased sales level without a corresponding increase in general andadministrative costs.

* *

*Research and Development*.  Research and development expenses were $0.7million in the first three months of 2005, an increase of $0.2 million or 34.1%from the first three months of 2004.  Theincrease is due to spending on new product development programs, primarily fortelephone connectivity products and thermoplastic enclosures for cablecustomers.

 

As a percentage of net sales, research anddevelopment expenses decreased from 2.8% in the first three months of 2004 to2.1% in the first three months of 2005.

 

*Income from Operations*.  As a result of the items discussed above,income from operations increased $0.7 million or 449% over the first threemonths of 2004 to $0.8 million in the first three months of 2005.  Operating margin as a percent of salesincreased from 0.9% to 2.6%.

 

*Interest Expense, Net*.  Net interest expense was $0.1 million in thefirst three months of 2004 and 2005.

 

*Income Taxes*.  Income tax expense was $0.1 million in thefirst three months of 2004 and $0.2 million in the first three months of 2005.  The effective tax rate was 29.8% in the firstthree months of 2005 and 84.4% for the same period in 2004.  In 2004, the Company reported a profit beforetax on a consolidated basis, which consisted of a profit in the Americas and aloss in International.  There was no taxbenefit associated with the International loss.

 

**Liquidity and Capital Resources**

 

Net cash used in operating activities was($1.9) million for the three months ended March 31, 2005, compared to netcash provided by operating activities of $0.7 million in same period ended2004, a decrease of $2.6 million.  Thecash used in operating activities in 2005 is primarily due to the reduction inaccounts payable of $4.4 million.  TheCompany had extended vendor payment terms in the fourth quarter of 2004.  Cash used in the reduction in accountspayable in 2005 is partially offset by cash provided by lower accountsreceivable and inventory balances.

 

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Net cash used in investing activities was($0.8) million for the three months ended March 31, 2005, compared to($0.4) million in the 2004 period.  Theincrease in 2005 is due to an increase in acquisition of property andequipment.

 

Net cash provided by financing activities was$0.3 million for the three months ended March 31, 2005, compared to netcash used in financing activities of ($0.3) million in the same period of 2004.

 

Cash and cash equivalents on March 31,2005 were $3.0 million, a decrease of $2.5 million from December 2004.  The decrease in cash was due primarily to thereduction in accounts payable noted above.

 

Net accounts receivable decreased to $13.5million at March 31, 2005 from $13.9 million at December 31,2004.  Days sales outstanding increasedslightly from 37 days at December 31, 2004 to 39 days at March 31,2005.

 

Inventories decreased to $13.4 million at March 31,2005 from $14.2 million at December 31, 2004.  Days inventory increased from 52 days at December 31,2004 to 55 days at March 31, 2005.

 

Accounts payable decreased from $16.1 millionat December 31, 2004 to $11.6 million at March 31, 2005.  The decrease is due primarily to thereduction of vendor payment terms in the first quarter of 2005.  Payment terms were extended in the fourthquarter of 2004.  Days payables were 59days at December 31, 2004 and 47 days at March 31, 2005.

 

The Company believes that cash flow fromoperations coupled with available borrowings under the credit facilitiesdescribed in Note 15 will be sufficient to fund the Company’s capitalexpenditure and working capital requirements through 2005. The Company’s termloan under the three-year Loan and Security Agreement with an asset-basedlender comes due in September 2005. The Company is currently considering various financing options.

 

**Contractual Obligations and Other Commitments**

 

The followingtable summarizes the Company’s contractual obligations and other commitments asof March 31, 2005:

 
| ***(amounts in thousands)***   | ** ** | **April 1, 2005 -  March 31, 2006** | ** ** | **April 1, 2006 -  March 31, 2008** | ** ** | **April 1, 2008 -March 31, 2010** | ** ** | **April 1, 2010  and Beyond** | ** ** | **Total**  | ** ** |
|--------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------------|------------|------------------------------------|------------|------------|------------|
|                           |       | ** **                                    | ** ** | ** **                                    | ** ** | ** **                                  | ** ** | ** **                         | ** ** | ** ** |       |
| Contractual Obligations        |       |                                          |       |                                          |       |                                        |       |                               |       |       |       |
| Debt (1)                       |       | $4,814                                        |       | $2,464                                        |       | $1,540                                      |       | $—                            |       | $8,818     |       |
| Capital Lease Obligations (2)  |       | 35                                            |       | 111                                           |       | —                                      |       | —                             |       | 146        |       |
| Operating Lease Obligations(3) |       | 2,244                                         |       | 2,140                                         |       | 2,094                                       |       | 1,667                              |       | 8,145      |       |
| Employment Contracts (4)       |       | 796                                           |       | 1,500                                         |       | 497                                         |       | —                             |       | 2,793      |       |
| Purchase Obligations (5)       |       | 10,441                                        |       | —                                        |       | —                                      |       | —                             |       | 10,441     |       |
|                           |       | $18,330                                       |       | $6,215                                        |       | $4,131                                      |       | $1,667                             |       | $30,343    |       |

 

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(1)   The Company entered into a three-year Loan andSecurity Agreement which includes a term loan and revolving line of credit withan asset-based lender in the United States on September 25, 2002.  A subsidiary of the Company entered into aone-year Loan and Security Agreement which includes a revolving line of creditwith a commercial bank in Australia in July 2004.  Another subsidiary of the Company enteredinto a five-year Loan and Security Agreement which includes a term loan,revolving line of credit, an “earn-out” facility, and a capital expenditurefacility with a commercial bank in Australia in August 2004.  The three financing agreements listed abovebear interest at variable rates.  Onlythe outstanding principal amounts are included in the Contractual Obligationtable.

(2)   Includes both principal and interest.

(3)   The Company leases manufacturing and officespace and machinery & equipment under several operating leasesexpiring through 2012.

(4)   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 5years.  The Chairman of the Board’ssalary is set at $50,000 per annum for the remainder of the term.  The President and Chief Executive Officer’sbase salary is $745,616 per year effective July 2004, and is subject to anannual cost of living increase based on the consumer price index.  Base salary may also be increased based onthe discretion of the Board of Directors. In the event the President and Chief Executive Officer is terminated theCompany will be obligated to make a lump sum severance payment equal to threetimes his then current base salary.

(5)   The Company believes it has adequate sourcesof supply for the raw materials used in its manufacturing processes and itattempts to develop and maintain multiple sources of supply in order to extendthe availability and encourage competitive pricing of these materials.  Most plastic resins are purchased underannual or multi-year pricing agreements to stabilize costs and improve supplierdelivery performance.  The Company is notcontractually obligated to purchase product over the life of these agreements.

 

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**Off-BalanceSheet Arrangements**

 

The Company’s off-balance sheet arrangementsconsist of operating leases, employment contracts and purchase obligations asdescribed above.  In addition, theCompany guaranteed the debt of the Company’s principal stockholder and Chairmanof the Board of approximately $754,000 in 1997. 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 practicable to estimate the fairvalue of the guarantee; however, the Company does not anticipate that it willincur losses as a result of this guarantee. The Company has not recorded a liability for this guarantee.  If the principal stockholder were to defaulton the outstanding loan balance, the Company may be required to repay theremaining principal balance.  The maximumpotential amount the Company would be required to pay is equal to theoutstanding principal and interest balance of the loan to the stockholder.  At March 31, 2005, the outstanding loanbalance subject to the guarantee totaled $576,000.

 

**CriticalAccounting Policies**

 

The Company’s discussion and analysis of itsfinancial condition and results of operations are based upon its consolidatedfinancial statements, which have been prepared in accordance with accountingprinciples generally accepted in the United States of America. The preparationof these financial statements requires the Company to make estimates andjudgments that affect the reported amounts of assets, liabilities, revenues andexpenses, and related disclosure of contingent assets and liabilities.

 

The Company believes that the estimates,assumptions and judgments involved in the accounting policies described in the “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” section ofits most recent Annual Report on Form 10-K have the greatest potentialimpact on our financial statements, so it considers these to be our criticalaccounting policies. Because of the uncertainty inherent in these matters,actual results could differ from the estimates the Company uses in applying thecritical accounting policies. Certain of these critical accounting policiesaffect working capital account balances, including the policies for revenuerecognition, the reserve for uncollectible accounts receivable and inventoryreserves. These policies require that the Company make estimates in thepreparation of its financial statements as of a given date.

 

Within the context of these criticalaccounting policies, the Company is not currently aware of any reasonablylikely events or circumstances that would result in materially differentamounts being reported.

 

**Forward-LookingStatements**

 

Certain statements contained herein are “forward-looking”statements within the meaning of the Private Securities Litigation Reform Actof 1995 (the “Act”), which provides certain “safe harbor” provisions forforward-looking statements.  Allforward-looking statements made herein are made pursuant to the Act.  Forward-looking statements include statementswhich are predictive in nature; which depend upon or refer to future events orconditions; or which include words such as “expects”, “anticipates”, “intends”,“plans”, “believes”, “estimates”, or variations or negatives thereof or bysimilar or comparable words or phrases. In addition, any statement concerning future financial performance,ongoing business strategies or prospects, and possible future Company actionsthat may be provided by management are also forward-looking statements asdefined by the Act.  Forward-lookingstatements are based on current expectations and projections about futureevents and are subject to risks, uncertainties, and assumptions about theCompany; and economic and market factors in the countries in which the Companydoes business, among other things.  Thesestatements are not guarantees of future performance, and the Company has nospecific intentions to update these statements. Actual events and results may differ materially from those expressed orforecasted in forward-looking statements due to a number of factors including,among others: (1) the communications industry is in a state of rapidtechnological change which can render the Company’s products obsolete orunmarketable; (2) any failure by the Company to anticipate or respond totechnological developments or changes in industry standards or customerrequirements, or any significant delays in product development or introduction,could have a material adverse effect on the Company’s business, operatingresults and financial condition; (3) a relatively small number oftelecommunications customers account for a large percentage of the Company’savailable market; (4) the Company expects that sales to thetelecommunications industry will continue to represent a substantial portion ofits total sales and the demand for products within this industry dependsprimarily on capital spending by service providers; (5) the Company’s costof sales may be materially affected by increases in the market prices of theraw materials used in the Company’s manufacturing processes; (6) theCompany’s water related sales could be materially affected by weatherconditions and government regulation; (7) the Company is subject to therisks of conducting business internationally; and (8) the industries inwhich the Company operates are highly competitive.  Additional risks and uncertainties areoutlined in the Company’s filings with the Securities and Exchange Commission,including its most recent Annual Report on Form 10-K.

 

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| **ITEM 3.** | **QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK** |
|-------------|-----------------------------------------------------------------|

 

The risk inherent in the Company’s marketsensitive instruments is the potential loss arising from adverse changes ininterest rates and foreign currency exchange rates.  All financial instruments held by the Companydescribed below are held for purposes other than trading.

 

The Company and its subsidiaries have enteredinto three financing agreements.  In September 2002,the Company entered into a three-year Loan and Security Agreement with an assetbased lender in the United States.  Theagreement contains a term loan and a revolving line of credit.  In July 2004, a subsidiary of theCompany entered into a one-year Loan and Security Agreement which contains arevolving line of credit with a commercial bank in Australia.  In August 2004, another subsidiary ofthe Company entered into a five-year Loan and Security Agreement which containsa term loan, revolving line of credit, an “earn-out” facility, and a capitalexpenditure facility with a commercial bank in Australia.  The loan and security agreements allow forthe outstanding balance to bear interest at a variable rate based on the lender’sbase rate.  The credit facilities exposethe Company to changes in short-term interest rates since the interest rates onthe credit facility are variable.

 

A hypothetical change of 1% in the interestrate for these borrowings, assuming debt levels at March 31, 2005 ofapproximately $8.8 million, would have changed interest expense byapproximately $0.02 million for the three months ended March 31,2005.  This analysis does not considerthe effects of economic activity on the Company’s sales and profitability insuch an environment.

 

The Company has assets and liabilitiesoutside the United States that are subject to fluctuations in foreign currencyexchange rates.  Assets and liabilitiesoutside the United States are primarily located in the United Kingdom, Australia,and Canada.  The Company’s investment inforeign subsidiaries with a functional currency other than the U.S. dollar isgenerally considered long-term. Accordingly, the Company does not hedge these investments.  The Company also purchases a limited portionof its raw materials from foreign countries. These purchases are generally denominated in U.S. dollars and areaccordingly not subject to exchange rate fluctuations.  The Company has minimal foreign currencytransaction gains or losses.  The Companyhas not engaged in forward purchases of foreign currency and other similarcontracts to reduce its economic exposure to changes in exchange rates becausethe associated risk is not considered significant.

 
| **ITEM 4.** | **CONTROLS AND PROCEDURES** |
|-------------|-----------------------------|

 

Based on their evaluation as of March 31,2005 (the “Evaluation Date”), the Company’s principal executive officer andprincipal financial officer have concluded that, as of the Evaluation Date, theCompany’s disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended) areeffective to ensure that material information relating to the Company and itsconsolidated subsidiaries is recorded, processed, summarized, reported and madeknown to the Company’s management, including the Company’s principal executiveand financial officers, on a timely basis by others within the Company and itsconsolidated subsidiaries.

 

To satisfy their responsibility for financialreporting, the Company’s Chief Executive Officer “CEO” and Chief FinancialOfficer “CFO” have established internal controls for financial reporting whichthey believe are adequate to provide reasonable assurance that the Company’sassets are protected from loss. These internal controls are reviewed by theCompany’s management in order to ensure compliance.  In addition, the Company’s Audit Committeemeets regularly with management and the independent accountants to reviewaccounting, auditing and financial matters. The Audit Committee and the independent accountants have free access toeach other, with or without management being present.

 

The Bushman Tanks business was acquired in August of2004.  The Company has implemented anumber of actions to ensure the accuracy of financial reporting and adequacy ofinternal controls.  These actions includea review of the Bushman Tanks accounting operations and systems during theacquisition due diligence, an audit of the Bushman Tanks financial records forthe twelve months ended June 30, 2004, the hiring of a Finance Directorfor the Australia/Asia region of Channell which includes Bushman Tanks and themonthly review of Bushman Tanks financial statements by the Company’s CFO. TheCompany initiated a project in December of 2004 to implement in BushmanTanks the Oracle information system used in all of Channell operations and totransfer the accounting operations to its Sydney finance and accountingstaff.  In February 2005, Oraclegeneral ledger, accounts payable and fixed assets were implemented in BushmanTanks.

 

There has been no change in the Company’sinternal control over financial reporting during the three months ended March 31,2005 that has materially affected, or is reasonably likely to materiallyaffect, internal control over financial reporting.

 

The Company initiated a project in December 2004to review its internal control structure in relation to the requirements of theSarbanes Oxley Act.   The Company hiredan independent consulting firm experienced in these requirements to assist inits

 

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efforts. The Company has identified a number of areas where segregationof duties and evidence of review procedures will need to be changed.  In addition, the procedures of Bushman Tanksare mostly manual.  The Company’s Oracleinformation system is being implemented in Bushman Tanks in 2005, with thefinancial modules being the initial task. It is anticipated that several remediation steps will be implemented toimprove Bushman Tanks’ internal controls.

 

**PART II- OTHER INFORMATION**

 

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

 

The Company is from time to time involved inordinary routine litigation incidental to the conduct of its business.  The Company regularly reviews all pendinglitigation matters in which it is involved and establishes reserves deemedappropriate for such litigation matters. Management believes that no presently pending litigation matters arelikely to have a material adverse effect on the Company’s financial statementsor results of operations, taken as a whole.

 

**ITEM 2.****                  UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

Not applicable.

 

**ITEM 3.****                  DEFAULTSUPON SENIOR SECURITIES**

Not applicable.

 

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

Not applicable

 

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

Not applicable.

 

**ITEM 6.****                  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  forms of Stock Option Agreements and Restricted Stock Agreement)(1) |
|                | 10.2.2*    |            | Channell Commercial Corporation 2003 Incentive Stock Plan (including  forms of Stock Option Agreement and Restricted Stock Agreement)(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) |
|                | 10.3.1     |            | Loan and Security Agreement dated October 24, 2003 by and among  Channell Pty Ltd and National Australia Bank Ltd (10) |
|                | 10.3.2     |            | Loan and Security Agreement dated August 2, 2004 by and among  Channell Bushman Pty Ltd and National Australia Bank Ltd (10) |
|                | 10.3.3     |            | Loan and Security Agreement dated August 2, 2004 by and among Channell  Pty Ltd and National Australia Bank Ltd (10) |
|                | 10.3.4     |            | Investment and Shareholders Agreement dated August 2, 2004 by and  among Channell Bushman Pty Ltd and Australia and New Zealand Banking Group  Ltd (10) |
|                | 10.4*      |            | Employment Agreement between the Company and William H.  Channell, Sr., dated July 8, 1996 (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) |
|                | 10.11      |            | 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) |
|                | 10.17      |            | Lease dated June 27, 2002 between the Company and Ynez Street,  Ltd (5) |
|                | 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) |
|                | 10.21      |            | Share and Asset Purchase Agreement dated as of July 14, 2004 by  and among Australia’s Bushman Tanks Pty Ltd., Douglas Robin Young, Richard  James Young, Lokan Nominees Pty Ltd and Lenbridge Grange Pty Ltd, Belsiasun  Pty Ltd and Elcarva Pty Ltd, the holders of all the outstanding shares of  Bushmans Group Pty Ltd, Hold-On Industries Australia Pty Ltd, Australian  Bushman Tanks Pty Ltd., and Polyrib |

 

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|   |   |   | Tanks Pty Ltd, on the one hand, and Channell Commercial Corporation  and Channell Bushman Pty Limited, on the other hand.(11)                                                                                 |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 14     |   | Channell Commercial Corporation Code of Business Conduct and Ethics  (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 (12)                                                         |
|   | 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 (12)                                                         |
|   | 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 Scott Kiefer, Interim CFO. (12) |

 

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* Management contract or,compensatory plan or arrangement.

 

(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 by reference to the indicatedexhibits filed in connection with the Company’s Form 8-K on May 18,1998.

(3)       Incorporated by reference to the indicatedexhibits filed in connection with the Company’s Form 10-K on March 31,1999.

(4)       Incorporated by reference to the indicatedexhibits filed in connection with the Company’s Form 10-K on April 2,2001.

(5)       Incorporated by reference to the indicatedexhibits filed in connection with the Company’s Form 10-Q on August 12,2002.

(6)       Incorporated by reference to the indicatedexhibits filed in connection with the Company’s Form 8-K on September 25,2002.

(7)       Incorporated by reference to the indicatedexhibits filed in connection with the Company’s Form 10-Q on November 12,2002.

(8)       Incorporated by reference to Appendix B filedin connection with the Company’s Definitive Proxy Statement on March 26,2003.

(9)       Incorporated by reference to the indicatedexhibits filed in connection with the Company’s Form 10-K on March 5,2004.

(10)     Incorporated by reference to the indicatedexhibits filed in connection with the Company’s Form 10-Q on November 15,2004.

(11)     Incorporated by reference to the indicatedexhibits filed in connection with the Company’s Form 8-K on August 6,2004.

(12)     Filed herewith.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 
| Dated: May 10,  2005 |   | CHANNELL  COMMERCIAL CORPORATION         |
|---------------------------|--------|------------------------------------------|
|                      |   | (Registrant)                             |   |
|                      |   |                                     |
|                      |   |                                     |
|                      | By:    |    /s/ SCOTT  KIEFER |   |
|                      |   |                                     | Scott Kiefer |
|                      |   |                                     | Corporate  Controller and Interim Chief Financial Officer  (Duly authorized officer and principal financial  officer of the Registrant) |
|                           |        |                                          |  |  |  |

 

####

 

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