---

FORM 10-Q

SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

|x                                                              | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|                                                               |                                                                                         
|                                                               | For the quarterly period ended September 30, 2002                                       
|                                                               |                                                                                         
|                                                               | 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 as specified in its charter)        
|                                                              
|DELAWARE                                                      
|(State or other jurisdiction of incorporation or organization)
|                                                              
|95-2453261                                                    
|(I.R.S. Employer Identification No.)                          
|                                                              
|26040 Ynez Road, Temecula, California                         
|(Address of principal executive offices)                      
|                                                              
|92591                                                         
|(Zip Code)                                                    
|                                                              
|(909) 719-2600                                                
|(Registrants telephone number, including area code)          
|                                                               |                                                                                         

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

|Yes | x | No | o
|--- | - | -- | -

9,124,993  shares of common stock of the Registrant
were outstanding at November 8, 2002.

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PART 1  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CHANNELL COMMERCIAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(amounts in thousands, except per share data)

|                                              |                                          | Nine months ended September 30, |        | Three months ended September 30, |  
|--------------------------------------------- | ---------------------------------------- | ------------------------------- | ------ | -------------------------------- | -
|                                              |                                          |                                 |        |                                  |  
|                                              |                                          | 2002                            |        | 2001                             |  
|                                              |                                          |                                 |        |                                  |  
|Net sales                                     |                                          | $                               | 65,065 |                                  | $
|Cost of goods sold                            |                                          |                                 | 43,160 |                                  |  
|                                              |                                          |                                 |        |                                  |  
|                                              | Gross profit (loss)                      |                                 |        | 21,905                           |  
|                                              |                                          |                                 |        |                                  |  
|Operating expenses                            |                                          |                                 |        |                                  |  
|                                              | Selling                                  |                                 |        | 6,973                            |  
|                                              | General and administrative               |                                 |        | 8,799                            |  
|                                              | Research and development                 |                                 |        | 1,215                            |  
|                                              | Impairment of goodwill                   |                                 |        |                                 |  
|                                              | Impairment of fixed assets               |                                 |        |                                 |  
|                                              | Restructuring charges                    |                                 |        |                                 |  
|                                              |                                          |                                 |        |                                  |  
|                                              |                                          |                                 |        | 16,987                           |  
|                                              |                                          |                                 |        |                                  |  
|                                              | Income (loss) from operations            |                                 |        | 4,918                            |  
|Interest expense, net                         |                                          |                                 | (1,812 | )                                |  
|                                              |                                          |                                 |        |                                  |  
|                                              | Income (loss) before income taxes        |                                 |        | 3,106                            |  
|Income taxes (benefit)                        |                                          |                                 | 1,640  |                                  |  
|                                              |                                          |                                 |        |                                  |  
|                                              | Net income (loss)                        |                                 | $      | 1,466                            |  
|                                              |                                          |                                 |        |                                  |  
|                                              | Net income (loss) per share              |                                 |        |                                  |  
|                                              | Basic                                    |                                 | $      | 0.16                             |  
|                                              |                                          |                                 |        |                                  |  
|                                              | Diluted                                  |                                 | $      | 0.16                             |  
|                                              |                                          |                                 |        |                                  |  
|Net income (loss)                             |                                          | $                               | 1,466  |                                  | $
|Other comprehensive income (loss), net of tax |                                          |                                 |        |                                  |  
|                                              | Foreign currency translation adjustments |                                 |        | 635                              |  
|                                              |                                          |                                 |        |                                  |  
|Comprehensive net income (loss)               |                                          | $                               | 2,101  |                                  | $
|                                              |                                          |                                 |        |                                  |  
|                                              |                                          |                                 |        |                                  |  

Page 1 of 22



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CHANNELL COMMERCIAL CORPORATION CONSOLIDATED BALANCE SHEETS(amounts in thousands)

|                                     |                                                                                                                                                                                  | September 30,  2002 |        | Dec. 31,  2001 |  
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------ | -------------- | -
|                                     |                                                                                                                                                                                  |                     |        |                |  
|                                     |                                                                                                                                                                                  | (unaudited)         |        |                |  
|ASSETS                               |                                                                                                                                                                                  |                     |        |                |  
|                                     | Current assets                                                                                                                                                                   |                     |        |                |  
|                                     | Cash and cash equivalents                                                                                                                                                        |                     | $      | 2,910          |  
|                                     | Accounts receivable, net                                                                                                                                                         |                     |        | 10,190         |  
|                                     | Inventories                                                                                                                                                                      |                     |        | 7,312          |  
|                                     | Deferred income taxes                                                                                                                                                            |                     |        | 803            |  
|                                     | Prepaid expenses and misc. receivables                                                                                                                                           |                     |        | 1,229          |  
|                                     | Income taxes receivable                                                                                                                                                          |                     |        |               |  
|                                     |                                                                                                                                                                                  |                     |        |                |  
|                                     | Total current assets                                                                                                                                                             |                     |        | 22,444         |  
|                                     | Property and equipment at cost, net                                                                                                                                              |                     |        | 29,611         |  
|                                     | Deferred income taxes                                                                                                                                                            |                     |        | 5,479          |  
|                                     | Intangible assets, net                                                                                                                                                           |                     |        | 1,463          |  
|                                     | Other assets                                                                                                                                                                     |                     |        | 422            |  
|                                     |                                                                                                                                                                                  |                     |        |                |  
|                                     |                                                                                                                                                                                  | $                   | 59,419 |                | $
|                                     |                                                                                                                                                                                  |                     |        |                |  
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                                                                  |                     |        |                |  
|                                     | Current liabilities                                                                                                                                                              |                     |        |                |  
|                                     | Accounts payable                                                                                                                                                                 |                     | $      | 5,493          |  
|                                     | Income taxes payable                                                                                                                                                             |                     |        | 479            |  
|                                     | Short term debt (including current maturities of long term debt)                                                                                                                 |                     |        | 716            |  
|                                     | Current maturities of capital lease obligations                                                                                                                                  |                     |        | 814            |  
|                                     | Accrued restructuring liability                                                                                                                                                  |                     |        | 1,122          |  
|                                     | Accrued expenses                                                                                                                                                                 |                     |        | 4,434          |  
|                                     |                                                                                                                                                                                  |                     |        |                |  
|                                     | Total current liabilities                                                                                                                                                        |                     |        | 13,058         |  
|                                     |                                                                                                                                                                                  |                     |        |                |  
|                                     | Long term debt, less current maturities                                                                                                                                          |                     |        | 6,094          |  
|                                     | Deferred gain on sale leaseback transaction                                                                                                                                      |                     |        | 589            |  
|                                     | Capital lease obligations, less current maturities                                                                                                                               |                     |        | 73             |  
|                                     | Commitments and contingencies                                                                                                                                                    |                     |        |               |  
|                                     | Stockholders equity                                                                                                                                                             |                     |        |                |  
|                                     | Preferred stock                                                                                                                                                                  |                     |        |               |  
|                                     | Common stock, par value $.01 per share, authorized 19,000 shares; issued  9,269 shares; outstanding  9,027 shares at September 30,
2002 and 9,025 shares at December 31, 2001 |                     |        | 93             |  
|                                     | Additional paid-in capital                                                                                                                                                       |                     |        | 28,341         |  
|                                     | Treasury stock - 244 shares                                                                                                                                                      |                     |        | (1,871         | )
|                                     | Retained earnings                                                                                                                                                                |                     |        | 15,088         |  
|                                     | Accumulated other comprehensive income (loss) - Foreign currency translation                                                                                                     |                     |        | (2,046         | )
|                                     |                                                                                                                                                                                  |                     |        |                |  
|                                     | Total stockholders equity                                                                                                                                                       |                     |        | 39,605         |  
|                                     |                                                                                                                                                                                  |                     |        |                |  
|                                     | Total liabilities and stockholders equity                                                                                                                                       |                     | $      | 59,419         |  
|                                     |                                                                                                                                                                                  |                     |        |                |  
|                                     |                                                                                                                                                                                  |                     |        |                |  

Page 2 of 22



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CHANNELL COMMERCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)(amounts in thousands)

|                                                    |                                              | Nine months ended September 30, |        
|--------------------------------------------------- | -------------------------------------------- | ------------------------------- | -------
|                                                    |                                              |                                 |        
|                                                    |                                              | 2002                            |        
|                                                    |                                              |                                 |        
|Cash flows from operating activities:               |                                              |                                 |        
|                                                    | Net income (loss)                            |                                 | $      
|                                                    | Depreciation and amortization                |                                 |        
|                                                    | Impairment of fixed assets                   |                                 |        
|                                                    | Impairment of goodwill                       |                                 |        
|                                                    | Deferred income taxes                        |                                 |        
|                                                    | Loss on disposal of fixed assets             |                                 |        
|                                                    | Foreign currency transaction (loss)          |                                 |        
|                                                    | Change in assets and liabilities:            |                                 |        
|                                                    | (Increase) decrease in assets:               |                                 |        
|                                                    | Accounts receivable                          |                                 |        
|                                                    | Inventories                                  |                                 |        
|                                                    | Income taxes receivable                      |                                 |        
|                                                    | Prepaid expenses                             |                                 |        
|                                                    | Other assets                                 |                                 |        
|                                                    | Increase (decrease) in liabilities:          |                                 |        
|                                                    | Accounts payable                             |                                 |        
|                                                    | Accrued expenses                             |                                 |        
|                                                    | Accrued restructuring                        |                                 |        
|                                                    | Income taxes payable                         |                                 |        
|                                                    |                                              |                                 |        
|Net cash provided by operating activities           |                                              |                                 | 18,399 
|                                                    |                                              |                                 |        
|Cash flows from investing activities:               |                                              |                                 |        
|                                                    | Acquisition of property and equipment        |                                 |        
|                                                    | Proceeds from the sale of a building         |                                 |        
|                                                    |                                              |                                 |        
|Net cash provided by (used in) investing activities |                                              |                                 | 5,194  
|                                                    |                                              |                                 |        
|Cash flows from financing activities:               |                                              |                                 |        
|                                                    | Repayment of debt                            |                                 |        
|                                                    | Proceeds from issuance of long term debt     |                                 |        
|                                                    | Repayment of obligations under capital lease |                                 |        
|                                                    | Purchase of treasury stock                   |                                 |        
|                                                    |                                              |                                 |        
|Net cash used in financing activities               |                                              |                                 | (29,511
|                                                    |                                              |                                 |        
|Effect of exchange rates on cash                    |                                              |                                 | 66     
|                                                    |                                              |                                 |        
|Increase in cash and cash equivalents               |                                              |                                 | (5,852 
|Cash and cash equivalents, beginning of period      |                                              |                                 | 8,762  
|                                                    |                                              |                                 |        
|Cash and cash equivalents, end of period            |                                              | $                               | 2,910  
|                                                    |                                              |                                 |        
|Cash paid during the period for:                    |                                              |                                 |        
|                                                    | Interest                                     |                                 | $      
|                                                    |                                              |                                 |        
|                                                    | Income taxes                                 |                                 | $      
|                                                    |                                              |                                 |        
|                                                    |                                              |                                 |        

Page 3 of 22



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CHANNELL COMMERCIAL CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited) September 30, 2002 and 2001(amounts in
thousands, except per share data)

|1. | Unaudited financial statements:  In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present
fairly the consolidated financial position of Channell Commercial Corporation (the Company) as of September 30, 2002 and the results of its operations for the three months and nine months ended September 30, 2002 and September 30, 2001
and its cash flows for the nine months ended September 30, 2002 and 2001.  The results of operations and cash flows for the nine months ended September 30, 2002, are not necessarily indicative of the results to be expected for any other interim
period or the full year.  These consolidated financial statements should be read in combination with the audited consolidated financial statements and notes thereto for the year ended December 31, 2001.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2. | Inventories:  Inventories stated at the lower of cost (first-in, first-out method) or market are summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                |  | September 30, 2002 |       | December 31, 2001 |  
|--------------- |  | ------------------ | ----- | ----------------- | -
|                |  |                    |       |                   |  
|Raw Materials   |  | $                  | 3,196 |                   | $
|Work-in-Process |  |                    | 2,072 |                   |  
|Finished Goods  |  |                    | 2,044 |                   |  
|                |  |                    |       |                   |  
|                |  | $                  | 7,312 |                   | $
|                |  |                    |       |                   |  

|3. | Income (loss) per share:  Basic income (loss) per share excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted
average number of common shares outstanding for the nine month period and the three month period ended September 30, 2002.  Diluted income per share reflects the potential dilution that could occur if dilutive options to acquire common stock
were exercised.  Options to acquire the Companys common stock were not included in the computation of diluted loss per share for the nine months ended September 30, 2001 because they are anti-dilutive.  The following is a
reconciliation of the number of shares (denominator) used in the basic and diluted income (loss) per share computations for the nine months ended September 30 and the three months ended September 30  (shares in thousands):
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 |  | Nine months ended September 30, |      
|-------------------------------- |  | ------------------------------- | -----
|                                 |  |                                 |      
|                                 |  | 2002                            |      
|                                 |  |                                 |      
|                                 |  | Shares                          |      
|                                 |  |                                 |      
|Basic income (loss) per  Share   |  |                                 | 9,026
|Effect of dilutive Stock options |  |                                 | 49   
|                                 |  |                                 |      
|Diluted income (loss) per Share  |  |                                 | 9,075
|                                 |  |                                 |      

Page 4 of 22



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|                                 |  | Three months ended September 30, |      
|-------------------------------- |  | -------------------------------- | -----
|                                 |  |                                  |      
|                                 |  | 2002                             |      
|                                 |  |                                  |      
|                                 |  | Shares                           |      
|                                 |  |                                  |      
|Basic income (loss) per Share    |  |                                  | 9,026
|Effect of dilutive Stock options |  |                                  | 11   
|                                 |  |                                  |      
|Diluted income (loss) per Share  |  |                                  | 9,037
|                                 |  |                                  |      

| | The following options were not included in the computation of diluted income (loss) per share due to their anti-dilutive effect:
| | --------------------------------------------------------------------------------------------------------------------------------

|                                           |  |                    |                       |                    |  |                       | 
|------------------------------------------ |  | ------------------ | --------------------- | ------------------ |  | --------------------- | 
|                                           |  | September 30, 2002 |                       | September 30, 2001 | 
|                                           |  |                    |                       |                    |  |                       | 
|Options to purchase shares of common stock |  |                    | 866                   |                    |  | 931                   | 
|Exercise prices                            |  |                    | $6.50 - $13.75        |                    |  | $6.50 - $13.75        | 
|Expiration dates                           |  |                    | July 2006 -  May 2012 |                    |  | July 2006 -  May 2011 | 



|4. | Segments:  The Companys predominant business is the manufacturing and distribution of telecommunications equipment.  Currently, the Company is organized into
four geographic regions:  the United States, Europe / Middle East, Canada and Australia / Asia.  The following tables summarize segment information for the nine months ended September 30, 2002 and 2001 and the three months ended September
30, 2002 and 2001 (in thousands):
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      |                    | Nine Months Ended  September 30, |       
|------------------------------------- | ------------------ | -------------------------------- | ------
|                                      |                    |                                  |       
|                                      |                    | 2002                             |       
|                                      |                    |                                  |       
|Revenues from unrelated entities (1): |                    |                                  |       
|                                      | United States      |                                  | $     
|                                      | Europe/Middle East |                                  |       
|                                      | Canada             |                                  |       
|                                      | Australia/Asia     |                                  |       
|                                      |                    |                                  |       
|                                      |                    | $                                | 65,065
|                                      |                    |                                  |       

Page 5 of 22



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|                               |                    | Nine Months Ended September 30, |      
|------------------------------ | ------------------ | ------------------------------- | -----
|                               |                    |                                 |      
|                               |                    | 2002                            |      
|                               |                    |                                 |      
|Income (loss) from operations: |                    |                                 |      
|                               | United States      |                                 | $    
|                               | Europe/Middle East |                                 |      
|                               | Canada             |                                 |      
|                               | Australia/Asia     |                                 |      
|                               |                    |                                 |      
|                               |                    | $                               | 4,918
|                               |                    |                                 |      
|Interest expense, net:         |                    |                                 |      
|                               | United States      |                                 | $    
|                               | Europe/Middle East |                                 |      
|                               | Canada             |                                 |      
|                               | Australia/Asia     |                                 |      
|                               |                    |                                 |      
|                               |                    |                                 | $    
|                               |                    |                                 |      

|                                      |                    | Three Months Ended September 30, |       
|------------------------------------- | ------------------ | -------------------------------- | ------
|                                      |                    |                                  |       
|                                      |                    | 2002                             |       
|                                      |                    |                                  |       
|Revenues from unrelated entities (1): |                    |                                  |       
|                                      | United States      |                                  | $     
|                                      | Europe/Middle East |                                  |       
|                                      | Canada             |                                  |       
|                                      | Australia/Asia     |                                  |       
|                                      |                    |                                  |       
|                                      |                    | $                                | 19,401
|                                      |                    |                                  |       
|Income (loss) from operations:        |                    |                                  |       
|                                      | United States      |                                  | $     
|                                      | Europe/Middle East |                                  |       
|                                      | Canada             |                                  |       
|                                      | Australia/Asia     |                                  |       
|                                      |                    |                                  |       
|                                      |                    | $                                | 902   
|                                      |                    |                                  |       
|Interest expense, net:                |                    |                                  |       
|                                      | United States      |                                  | $     
|                                      | Europe/Middle East |                                  |       
|                                      | Canada             |                                  |       
|                                      | Australia/Asia     |                                  |       
|                                      |                    |                                  |       
|                                      |                    | $                                | 491   
|                                      |                    |                                  |       

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

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| | The Company has revenues from external customers from the following product lines:
| | ----------------------------------------------------------------------------------

|             |  | Nine Months Ended September 30,  |       
|------------ |  | -------------------------------- | ------
|             |  |                                  |       
|             |  | 2002                             |       
|             |  |                                  |       
|Enclosures   |  | $                                | 50,524
|Connectivity |  |                                  | 8,981 
|Other        |  |                                  | 5,560 
|             |  |                                  |       
|             |  | $                                | 65,065
|             |  |                                  |       
|             |  |                                  |       
|             |  | Three Months Ended September 30, |       
|             |  |                                  |       
|             |  | 2002                             |       
|             |  |                                  |       
|Enclosures   |  | $                                | 14,836
|Connectivity |  |                                  | 2,669 
|Other        |  |                                  | 1,896 
|             |  |                                  |       
|             |  | $                                | 19,401
|             |  |                                  |       

| | Included in the Connectivity revenues for the nine months ended September 30, 2002 and 2001 are revenues from the RF product line of $1,956 and $5,946, respectively.  The RF
product line was sold in the second quarter of 2002 (see Note 13).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                 
| | Included in the Connectivity revenues for the three months ended September 30, 2002 and 2001 are revenues from the RF product line of $0 and $2,461, respectively.                                                                              
| |                                                                                                                                                                                                                                                 
| | The Company has identifiable assets in the following geographic regions:                                                                                                                                                                        

|                     |                    | September 30, 2002 |        | December 31, 2001 |  
|-------------------- | ------------------ | ------------------ | ------ | ----------------- | -
|                     |                    |                    |        |                   |  
|                     |                    | (Unaudited)        |        |                   |  
|Identifiable Assets: |                    |                    |        |                   |  
|                     | United States      |                    | $      | 39,206            |  
|                     | Europe/Middle East |                    |        | 11,360            |  
|                     | Canada             |                    |        | 1,780             |  
|                     | Australia/Asia     |                    |        | 7,073             |  
|                     |                    |                    |        |                   |  
|                     |                    | $                  | 59,419 |                   | $
|                     |                    |                    |        |                   |  

|5. | Loan and Security Agreement:  The Company entered into a three year Loan and Security Agreement with an asset-based lender on September 25, 2002. The Loan and Security
Agreements term loan of $4,712 and initial revolver balance of $2,076 as well as $9,592 in cash were used to repay in full the prior Credit Agreement. Total debt of $16,380 under the prior Credit Agreement was extinguished.  The term loan
is repayable in quarterly payments based on a five-year amortization schedule, with a balloon due at the end of three years.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 7 of 22



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|   | Under the prior Credit Agreement, the outstanding balance bore interest payable monthly based on the banks base rate.  The weighted average interest rate was 7.25% for the
first nine months of 2002.  Under the Loan and Security Agreement, the outstanding balance bears interest payable monthly at a variable rate based on either LIBOR or the lenders base rate. The interest rate under the Loan and Security
Agreement at September 30, 2002 was 5%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Loan and Security Agreement contains various financial and operating covenants that impose limitations on the Companys ability, among other things, to incur additional
indebtedness, merge or consolidate, sell assets except in the ordinary course of business, make certain investments, enter into leases and pay dividends.  The Company is also required to comply with a fixed charge coverage ratio financial
covenant among others.  The Company was in compliance as of September 30, 2002 with the covenants of the Loan and Security Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|6. | Recent Accounting Pronouncements:  In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS 143), which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and associated asset retirement costs. The new rules apply to legal obligations associated
with the retirement of long-lived assets that result from the acquisition, construction, development and (or) normal operation of a long-lived asset. SFAS 143 is effective for the Company at the beginning of fiscal 2003. The Company believes the
adoption of SFAS 143 will not have a material impact on its consolidated financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146 Accounting for Costs Associated with Exit or Disposal Activities (SFAS
146), which provides financial accounting and reporting guidance for costs associated with exit or disposal activities, including one-time termination benefits, contract termination costs other than for a capital lease, and costs to consolidate
facilities or relocate employees. SFAS 146 nullifies EITF Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Under SFAS 146, a liability for a cost associated with an exit or disposal activity should be recognized and measured initially at its fair value in the period in
which the liability is incurred, except for a liability for one-time termination benefits that is incurred over time. Accounting for one-time benefits depends on whether the employee will be providing future services. In addition, a liability for
costs to terminate a contract before the end of its term should be recognized and measured at its fair value at the time the entity terminates the contract in accordance with its terms. A liability for costs that will continue to be incurred under
the contract for its remaining term without economic benefit to the entity should be recognized and measured at its fair value when the entity ceases to use the right conveyed by the contract. SFAS 146 is effective for exit or disposal activities
initiated after December 31, 2002. The Company has not determined the impact the adoption of SFAS 146 will have on its consolidated financial position or results of operations.                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|7. | Goodwill:  In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Intangible Assets, which supersedes APB Opinion No. 17, Intangible Assets. SFAS 142 eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a
defined life and addresses the impairment testing and recognition for goodwill and intangible assets.  The Company has adopted this Standard as of January 1, 2002.  In applying SFAS 142, the Company has performed the transitional
reassessment and impairment tests required as of January 1, 2002, and determined that there is no impairment of goodwill.  The Company discontinued amortizing goodwill on January 1, 2002.  At the time of adoption, the Company had
accumulated amortization pertaining to goodwill of $3,057.  Below are the calculations of reported net income (loss) and reported basic and diluted net income (loss) per share adjusted for the effect of amortization expense for the September
30, 2001 period:

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|                                           |                                            | Nine Months Ended September 30, |      
|------------------------------------------ | ------------------------------------------ | ------------------------------- | -----
|                                           |                                            |                                 |      
|                                           |                                            | 2002                            |      
|                                           |                                            |                                 |      
|Reported net income (loss)                 |                                            | $                               | 1,466
|Effect of amortization expense of goodwill |                                            |                                 |     
|                                           |                                            |                                 |      
|Adjusted net income (loss)                 |                                            | $                               | 1,466
|                                           |                                            |                                 |      
|Basic income (loss) per share:             |                                            |                                 |      
|                                           | Reported net income (loss) per share       |                                 | $    
|                                           | Effect of amortization expense of goodwill |                                 |      
|                                           |                                            |                                 |      
|                                           | Adjusted net income (loss)                 |                                 | $    
|                                           |                                            |                                 |      
|Diluted income (loss) per share:           |                                            |                                 |      
|                                           | Reported net income (loss) per share       |                                 | $    
|                                           | Effect of amortization expense of goodwill |                                 |      
|                                           |                                            |                                 |      
|                                           | Adjusted net income (loss)                 |                                 | $    
|                                           |                                            |                                 |      

|                                           |                                            | Three Months Ended September 30, |    
|------------------------------------------ | ------------------------------------------ | -------------------------------- | ---
|                                           |                                            |                                  |    
|                                           |                                            | 2002                             |    
|                                           |                                            |                                  |    
|Reported net income (loss)                 |                                            | $                                | 150
|Effect of amortization expense of goodwill |                                            |                                  |   
|                                           |                                            |                                  |    
|Adjusted net income (loss)                 |                                            | $                                | 150
|                                           |                                            |                                  |    
|Basic income (loss) per share:             |                                            |                                  |    
|                                           | Reported net income (loss) per share       |                                  | $  
|                                           | Effect of amortization expense of goodwill |                                  |    
|                                           |                                            |                                  |    
|                                           | Adjusted net income (loss)                 |                                  | $  
|                                           |                                            |                                  |    
|Diluted income (loss) per share:           |                                            |                                  |    
|                                           | Reported net income (loss) per share       |                                  | $  
|                                           | Effect of amortization expense of goodwill |                                  |    
|                                           |                                            |                                  |    
|                                           | Adjusted net income (loss)                 |                                  | $  
|                                           |                                            |                                  |    

|8. | Restructuring Charge:  In the fourth quarter of 2000, in connection with managements plan to reduce costs and improve operating efficiencies, the Company recorded a
restructuring charge of $1,513.  The principal actions of the restructuring plan involved the closure of facilities and consolidation of support infrastructure.  Most of the reductions occurred in the Companys international
operations.                               
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | In the third quarter of 2001, due to a continued slowdown in the telecommunications industry, the Company announced an additional restructuring plan in an effort to further reduce
costs and align headcount and facilities with expected business levels in all regions.  The additional restructuring charge totaled $2,999.  The principal actions in the restructuring plan involved the closure of facilities and a reduction
of headcount.

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| | The restructuring charges were determined based on formal plans approved by the Companys management using the best information available to it at the time.  The amounts
the Company may ultimately incur could differ materially as the restructuring initiative is executed.  The changes in the accrual for restructuring charges during 2002 are summarized in the table below:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                           |  | Facilities |        | Workforce  Reduction |   | Total | 
|---------------------------------------------------------- |  | ---------- | ------ | -------------------- | - | ----- | 
|                                                           |  |            |        |                      |   |       | 
|Restructuring accrual balance at January 1, 2002           |  | $          | 2,344  |                      | $ | 76    | 
|Costs incurred in the nine months ended September 30, 2002 |  |            | (1,298 | )                    |   |      | 
|                                                           |  |            |        |                      |   |       | 
|Restructuring accrual balance at  September 30, 2002       |  | $          | 1,046  |                      | $ | 76    | 
|                                                           |  |            |        |                      |   |       | 

|9.  | Sale Leaseback Arrangement:  In June 2002, the Company entered into a sale and leaseback agreement for a warehouse facility located in Temecula, California.  The
proceeds from the sale totaled $6,614 and resulted in a pretax deferred gain of $604.  The resulting lease is being accounted for as an operating lease. The lease base term is ten years with two five-year options at rental amounts to be
adjusted to the fair market rental value at the end of the base term.  A portion of the proceeds from the sale was used to pay the outstanding mortgage balance on the facility of $4,036.                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10. | Allowance for Doubtful Accounts:A $2,000 reserve was recorded in the allowance for doubtful accounts in June 2002.  A major customer of the Company, Adelphia
Communications, filed for Chapter 11 bankruptcy protection.  The Company has subsequently written off all of the open receivables with Adelphia as of the bankruptcy date.                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|11. | Income Taxes:The effective tax rate of 53% for the nine month period ended September 30, 2002 differed from the statutory rate of 37% primarily due to certain foreign
operating losses incurred without a tax benefit recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Federal income taxes of the Company for the year ended December 31, 1997 and 1998 are currently under examination by the Internal Revenue Service (IRS).  In July 2002, the
IRS issued the proposed result of their examination for the year ended December 31, 1997 and 1998, which increases the 1997 income tax amount due by $315 related to transfer pricing for sales to the Companys Canadian subsidiary. 
Management believes that the Company will prevail in its appeal of the proposed adjustment or that income re-allocated from Canada to the United States will result in a refund of Canadian income taxes which is substantially equal to the additional
taxes due to the US.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12. | Commitments and Contingencies:In 2001, the State of Texas issued a report assessing the Company additional sales and use tax of $1,600, including interest.  The Company
has appealed the assessment and is currently providing the State of                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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|    | Texas with documentation to support the Companys contention that the transactions did not require the Company to remit sales and use tax to the State of Texas. The State of
Texas has agreed to a reduction of the amount owed to $644.  The Company believes that they have meritorious defenses to the remaining claim of $644 and intends to vigorously defend its position.  The Company is also under examination by
the State of Floridas Department of Revenue for sales and use taxes.  The Company does not believe that the ultimate outcome of these examinations will result in a material impact on the Companys consolidated results of operations
or financial position.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|13. | Related Party Transactions:In May 2002 the Company sold its RF line 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.  Mr. Napolitano paid the Company $125 in cash at the time of sale, and the remaining $675 is payable in monthly installments through June 30, 2003, bearing
interest at 7% per annum.  The amount due from the former officer included in accounts receivable at September 30, 2002 is $600.                                                                                                                                                

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

Results of
Operations

Comparison of the Nine Months Ended September 30, 2002 With the Nine Months Ended September 30, 2001

The Company earned net income of $1.5 million in the first nine months of 2002 compared to a net loss of $(24.8) million in the first nine months of 2001. The first
nine months of 2001 included $33.1 million of special charges associated with the Companys restructuring.  Excluding these special charges, the Company had a net loss of $(1.1) million in the first nine months of 2001. The improvement in
earnings from 2001 to 2002 is primarily the result of the restructuring and debt reduction program that began in the third quarter of 2001.

The restructuring program included a significant reduction in head count, a reduction in the square footage of facilities utilized and the exiting of certain product
lines with the objective of reducing costs in line with anticipated levels of business.  The Companys restructuring and debt reduction program benefited from the sale and leaseback of a building, receipt of a tax refund, the sale of
excess inventory, improved receivables management and improved cash flow from operations.  The reduction in debt reduced interest expense.  The actions included in the restructuring and debt reduction plan have been substantially completed
as of September 30, 2002.

The effects of the restructuring and debt reduction plan on each line item in the Consolidated
Statement of Operations are included in the following analysis.

Net Sales.  Net sales in the first nine months of 2002 were
$65.1 million, a decrease of $5.0 million or 7.1% compared with the first nine months of 2001.  The decrease resulted from a slowdown in equipment purchases by telecommunications service providers in Europe / Middle East, Australia / Asia and
domestic markets, as well as lower sales of the RF product line.  The RF product line was sold in the second quarter of 2002 as it was not generating sufficient profit and cash flow (see Note 13 to the Companys Consolidated Financial
Statements).  Sales of RF product declined $3.9 million or 66.1% from $5.9 million in the first nine months of 2001 to $2.0 million in the first nine months of 2002.  Sales to AT&T of $13.8 million in the first nine months of 2002
represented 21.2% of the Companys sales in the period.

Domestic net sales were $49.3 million in the first nine months of 2002, a
decrease of $2.3 million or 4.5% compared with the first nine months of 2001.  The decrease resulted from a slowdown in equipment purchases by domestic telecommunications service providers.

International net sales were $15.8 million in the first nine months of 2002, a decrease of $2.7 million or 14.6% compared with the first nine months of 2001. 
Sales in Europe / Middle East decreased 37.8% to $6.1 million.  Approximately one half of the decline in Europe / Middle East was related to discontinuance of the RF product line and the remainder due to a continued slow down in the
telecommunications industry.  Australia/Asia

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sales declined 1.8% to $5.6 million due to lower equipment purchases in Asian markets.  Sales in Canada increased 36.7% to $4.1 million due to a strong housing market,
which stimulated network building by CATV customers, and to favorable weather conditions which allowed outside plant construction during winter months.

Gross Profit.  Gross profit in the first nine months of 2002 was $21.9 million, an increase of $8.7 million compared to the first nine months of
2001.  The first nine months of 2001 included charges for an additional $8.3 million of inventory reserves and $0.2 million of costs to exit certain product lines, both of which were associated with the Companys restructuring. 
Excluding these costs, gross profit increased by $0.2 million to $21.9 million in the first nine months of 2002, from $21.7 million in the first nine months of 2001.

Although sales declined, gross profit dollars increased due to manufacturing cost reductions that were implemented as part of the Companys restructuring program
announced in the third quarter of 2001.  The cost reductions were predominately in head count and facilities costs.

The gross profit
margin increased from 18.8% of net sales in the first nine months of 2001 to 33.6% in the first nine months of 2002.  Excluding the $8.3 million inventory reserve and $0.2 million costs to exit certain product lines in the first nine months of
2001, the gross profit margin increased from 31.0% in the 2001 period to 33.6% in the 2002 period.  The improvement is due to the head count and facility cost reductions.

Selling.  Selling expenses were $7.0 million in the first nine months of 2002, a decrease of $3.2 million or 31.4% from the first nine months of
2001.  The decrease is due to head count reductions in selling administrative functions and lower spending on marketing programs.

As a percentage of net sales, selling expense decreased from 14.6% in the 2001 period to 10.8% in the 2002 period due to the cost reductions noted above.

General and Administrative.  General and administrative expenses decreased $3.4 million or 27.9% from $12.2 million in the first nine
months of 2001 to $8.8 million in the first nine months of 2002.

The first nine months of 2001 included $3.5 million of nonrecurring
charges for an increase in the trade accounts receivable reserve, costs to exit certain product lines and the write down of prepaid expenses, all of which were related to the Companys restructuring program.  The first nine months of 2002
included a $2.0 million charge to increase the allowance for bad debts as a result of the Chapter 11 bankruptcy filing of Adelphia Communications, a major customer of the Company.  Goodwill amortization of $0.6 million is included in general
and administrative expenses for the first nine months of 2001 and is no longer amortized in 2002 due to a change in accounting standards.

Excluding the $3.5 million of nonrecurring costs and $0.6 million of goodwill amortization in the 2001 period, and the $2.0 million increase in accounts receivable
reserve in the 2002 period, general and administrative expenses decreased $1.3 million or 16.0% from $8.1 million in the 2001 period to $6.8 million in the 2002 period.

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22



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The primary reasons for the $1.3 million decrease are reduced head count in administrative functions in all
regions, lower facilities costs as a result of buildings vacated, and spending reductions implemented in the Companys restructuring program.

As a percentage of net sales, general and administrative expenses decreased from 17.4% in the 2001 period to 13.5% in the 2002 period.  Excluding the
nonrecurring charges,  receivables reserves and goodwill amortization in both periods, general and administrative expenses as a percent of net sales decreased from 11.6% in the 2001 period to 10.4% in the 2002 period.

Research and Development.  Research and development expenses decreased $0.7 million or 36.8% from $1.9 million in the first nine months of 2001 to
$1.2 million in the same period of 2002.  The decrease is the result of moving and consolidating some of the international research and development functions into U.S. operations, which reduced head count and facilities costs.  New product
development programs were not affected by the change.   As a percentage of net sales, research and development expenses decreased from 2.7% in the first nine months of 2001 to 1.8% in 2002.

Impairment of Goodwill.  In the third quarter of 2001, an impairment of goodwill was recorded for $11.8 million as a result of restructuring activities
that reduced the level of foreign operations and the decision to exit certain product lines.

Impairment of Fixed Assets.  The
Company recorded an asset impairment charge of $4.3 million in the third quarter of 2001 as a result of restructuring activities intended to reduce manufacturing costs.  Certain production equipment, tooling and leasehold improvements were
idled or sold as a result of these measures.

Income from Operations.  As a result of the items discussed above, income from
operations increased from a loss of $(30.2) million in the first nine months of 2001 to a profit of $4.9 million in the first nine months of 2002.  Income from operations as a percentage of sales increased from (43.1)% to 7.5%.

Interest Expense, Net.  Net interest expense in the first nine months of 2002 was $1.8 million, a decrease of $1.0 million from the first
nine months of 2001.  The decrease was primarily attributable to a lower average debt level.  The Company reduced debt by $29.1 million in the first nine months of 2002 and ended September 30, 2002 with a debt balance of $7.7
million.  This compares to the September 30, 2001 debt balance of $38.9 million.

Income Taxes.  Income tax expense was
$1.6 million in the first nine months of 2002 compared to a tax credit of $8.2 million in the first nine months of 2001.  The effective tax rate of 52.8% in the first nine months of 2002 differed from the statutory rate of 37% primarily due to
foreign operating losses with no benefit provided.

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Comparison of the Three Months Ended September 30, 2002 With the Three Months Ended September 30, 2001

Net Sales.  Net sales in the third quarter of 2002 were $19.4 million, a decrease of $2.9 million or 13.0% compared to the third quarter of 2001. 
The decrease resulted from a slow down in equipment purchases by telecommunications service providers in Europe / Middle East, Australia / Asia and domestic markets as well as the discontinuation of the RF product line.  The RF product line was
sold in the second quarter of 2002, as it was not generating sufficient profit and cash flow (see Note 13 to the Companys Consolidated Financial Statements).

Domestic net sales were $14.2 million in the third quarter of 2002, a decrease of $2.0 million or 12.3% compared with the third quarter of 2001.  The decrease
resulted from a continued slowdown in equipment purchases by domestic telecommunications service providers.

International net sales were
$5.2 million in the third quarter of 2002, a decrease of $0.9 million or 14.8% compared to the third quarter of 2001.  Sales in Europe / Middle East decreased $1.1 million or 37.9% to $1.8 million primarily due to a general industry slowdown in
the region and lower sales of the RF product line which was sold in the second quarter of 2002 (see Note 13 to the Companys Consolidated Financial Statements).  Australia / Asia sales increased $0.3 million or 15.0% from the third quarter
of 2001 to $2.3 million in the third quarter of 2002 primarily as a result of increased sales to the largest customer in the region.  Sales in Canada decreased from $1.2 million in the third quarter of 2001 to $1.1 million in the same period of
2002 due to completion of a network upgrade project by a major customer.

Sales to AT&T of $4.7 million in the third quarter of 2002
represented 24.2% of Company sales in the period.

Gross Profit.  Gross profit in the third quarter of 2002 was $5.4 million, an
increase of $7.1 million compared to $(1.7) million in the third quarter of 2001.  The third quarter of 2001 included $8.3 million of additional inventory reserves and $0.2 million of costs to exit certain product lines, both associated with
the Companys restructuring.  Excluding these costs, gross profit declined from $6.8 million in the third quarter of 2001 to $5.4 million in the current quarter.  The decrease is due to the lower sales volume, unabsorbed manufacturing
overhead due to lower production volumes, and a change in product mix.

As a percentage of net sales, gross profit increased from
(7.6)% in the third quarter of 2001 to 27.8% in the third quarter of 2002.   Excluding the additional inventory reserves and costs to exit certain product lines recorded in the third quarter of 2001, gross profit as a percentage of sales
decreased from 30.5% to 27.8%.  The decrease is due to unabsorbed manufacturing overhead due to lower production volumes and a change in product mix with connectivity products being a larger percentage of total sales.  The gross profit
percentage of connectivity products is historically lower than that of enclosures.

Selling.  Selling expenses were $2.0 million
in the third quarter of 2002, a decrease of $1.1 million or 35.5% from the third quarter of 2001.  The decrease is the result of head count reductions in selling administration and marketing functions, lower variable expenses

Page 15 of 22



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such as commissions due to the lower sales, and a decrease in spending on marketing programs.

As a percentage of net sales, selling expense decreased from 13.9% in the 2001 period to 10.3% in the 2002 period due to the cost reductions noted above.

General and Administrative.  General and administrative expenses decreased $4.2 million or 66.7% from $6.3 million in the third quarter of
2001 to $2.1 million in the third quarter of 2002. The third quarter of 2001 included $3.5 million of nonrecurring charges for an increase in the trade accounts receivables reserve, costs to exit certain product lines and the write down of prepaid
expenses, all related to the Companys restructuring program.  Excluding the $3.5 million of nonrecurring costs, general and administrative expenses decreased $0.7 million or 25.0% to $2.1 million.  The decrease is due to reduced head
count in administrative functions, lower facilities costs as a result of buildings vacated and spending reductions implemented in the Companys restructuring program.

As a percentage of net sales, general and administrative expenses decreased from 28.3% in the 2001 period to 10.8% in the 2002 period.  Excluding the $3.5
million of nonrecurring costs in the third quarter of 2001, general and administrative expenses decreased, as a percent of net sales, from 12.6% in the third quarter of 2001 to 10.8% in the 2002 period.

Research and Development.  Research and development expenses of $0.4 million in the third quarter of 2002 compare to $0.6 million in the third quarter of
2001.  The decrease is the result of moving and consolidating some of the international research and development functions into U.S. operations, which reduced head count and facilities cost.   As a percentage of net sales, research
and development expenses decreased from 2.7% in the third quarter of 2001 to 2.1% in the third quarter of 2002.

Impairment of
Goodwill.  As a result of restructuring activities that reduced the level of foreign operations and the decision to exit certain product lines, an impairment of goodwill was recorded for $11.8 million in the third quarter of
2001.

Impairment of Fixed Assets.  The Company recorded an asset impairment charge of $4.3 million in the third quarter of 2001
as a result of restructuring activities intended to reduce manufacturing costs.  Certain production equipment, tooling and leasehold improvements were idled or sold as a result of these measures.

Income from Operations.  As a result of the items discussed above, income from operations increased from a loss of $(30.8) million in the third quarter of
2001 to $0.9 million in the third quarter of 2002.  Income from operations as a percent of sales increased from (138.1)% to 4.6%.

Interest Expense, Net.  Net interest expense in the third quarter of 2002 was $0.5 million, a decrease of $0.6 million or 54.5% from the third quarter of
2001.  The decrease was primarily attributable to a lower average debt level.  The debt balance was $38.9 million at September 30, 2001, and $7.7 million at September 30, 2002.

Income Taxes.  Income tax expense was $0.3 million in the third quarter of 2002 compared to a tax credit of $8.0 million in the third quarter of
2001.  The effective tax rate of

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63.5% in the third quarter of 2002 differed from the statutory rate of 37% primarily due to foreign operating losses with no benefit provided.

Liquidity and Capital Resources

Net cash provided by operating activities was $18.4 million for the nine
months ended September 30, 2002, an increase from $7.0 million in the same period last year. The increase is due primarily to a federal tax refund of $5.1 million and net income of $1.5 million in the first nine months of 2002 compared to a net loss
of ($24.8) million in the same period of 2001.

Net cash provided by investing activities was $5.2 million in the first nine months of 2002
while net cash used in investing activities was $2.6 million in the same period of 2001. The Company completed a real estate sale/leaseback of $6.6 million in the first nine months of 2002.

Net cash used in financing activities was $29.5 million in the first nine months of 2002 compared to $1.3 million in the first nine months of 2001.  In the first
nine months of 2002, cash used in bank debt reduction was $27.8 million.

The cash and cash equivalents balance decreased from $8.8 million
at December 31, 2001 to $2.9 million at September 30, 2002.

Accounts receivable decreased from $13.3 million at December 31, 2001 to $10.2
million at September 30, 2002.  Days sales outstanding decreased from 64 days at December 31, 2001 to 47 days at September 30, 2002.

Inventories decreased from $9.8 million at December 31, 2001 to $7.3 million at September 30, 2002.  Days inventory declined from 68 days at December 31, 2001 to
47 days at September 30, 2002.  The sale of excess inventory contributed to the decline.

Accounts payable increased from $5.1 million
at December 31, 2001 to $5.5 million at September 30, 2002.  Days payables was 35 days at December 31, 2001 and at September 30, 2002.

The Company entered into a three year Loan and Security Agreement with an asset-based lender on September 25, 2002. The Loan and Security Agreements term loan
of $4,712 and initial revolver balance of $2,076 as well as $9,592 in cash were used to repay in full the prior Credit Agreement. Total debt of $16,380 under the prior Credit Agreement was extinguished.  The term loan is repayable in quarterly
payments based on a five-year amortization schedule, with a balloon due at the end of three years.

Under the prior Credit
Agreement, the outstanding balance bore interest payable monthly based on the banks base rate.  The weighted average interest rate was 7.25% for the first nine months of 2002.  Under the Loan and Security Agreement, the outstanding
balance bears interest payable monthly at a variable rate based on either LIBOR or the lenders base rate. The interest rate under the Loan and Security Agreement at September 30, 2002 was 5%.

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The Loan and Security Agreement contains various financial and operating covenants that impose limitations on the
Companys ability, among other things, to incur additional indebtedness, merge or consolidate, sell assets except in the ordinary course of business, make certain investments, enter into leases and pay dividends.  The Company is also
required to comply with a fixed charge coverage ratio financial covenant among others.  The Company was in compliance as of September 30, 2002 with the covenants of the Loan and Security Agreement.

The Company believes that cash flow from operations coupled with borrowings under the Loan and Security Agreement will be sufficient to fund the Companys
capital expenditure and working capital requirements through 2003.

Forward-Looking Statements

All statements contained in this quarterly report on Form 10-Q that are not statements of historical facts constitute forward-looking statements and are
made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any one or more of the expectations expressed in these forward-looking statements may not be realized.  Although management believes that the
expectations reflected in these statements are reasonable, such statements involve certain risks, uncertainties and other factors that could cause the actual results of Channell Commercial Corporation to be materially different from the historical
results or from any future results expressed or implied by such forward-looking statements.  These risks, uncertainties and other factors include customer demand for Channells products, material costs that may be incurred, Channells
ability to integrate acquired businesses, the effectiveness of the restructuring and debt reduction program commenced by Channell during the third quarter of 2001, the effectiveness of any additional restructuring programs that may be undertaken by
Channell in the future, the mix of products that may be sold by Channell (i.e., whether the mix is dominated by higher margin enclosure products or lower margin connectivity products), economic trends within the telecommunications industry and
worldwide economic conditions generally.  Additional risks and uncertainties are outlined in the Companys filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and Proxy Statement and
its Registration Statement on Form S-1 under the heading Risk Factors.  Channell Commercial Corporation undertakes no obligation to publicly release the results of any revisions to such forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in the Companys market risk sensitivity instruments is the potential loss arising from adverse changes in interest and
foreign currency exchange rates.  All financial instruments held by the Company described below are held for purposes other than trading.

The Companys credit facility allows for the outstanding balance to bear interest at a variable rate based on the lenders base rate or LIBOR.  The
credit facility exposes the operations to changes in short-term interest rates since the interest rates on the credit facility are variable.

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A hypothetical change of 1% in the interest rate for these borrowings, assuming debt levels at September 30,
2002, would change interest expense by approximately $0.05 million for the nine months ended September 30, 2002.  This analysis does not consider the effects of economic activity on the Companys sales and profitability in such an
environment.

The Company has assets and liabilities outside the United States that are subject to fluctuations in foreign currency exchange
rates.  Assets and liabilities outside the United States are primarily located in the United Kingdom, Australia, and Canada.  The Companys investment in foreign subsidiaries with a functional currency other than the U.S. dollar are
generally considered long-term.  Accordingly, the Company does not hedge these investments.  The Company also purchases a limited portion of its raw materials from foreign countries.  These purchases are generally denominated in U.S.
dollars and are accordingly not subject to exchange rate fluctuations.  The Company has not engaged in forward foreign and other similar contracts to reduce its economic exposure to changes in exchange rates because the associated risk is not
considered significant.

ITEM 4.  CONTROLS AND PROCEDURES

Based on their evaluation
as of a date within 90 days of the filing of this quarterly report (the Evaluation Date), the Companys principal executive officer and principal financial officer have concluded that, as of the Evaluation Date, the Companys
disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended) are effective to ensure that material information relating to the Company and its consolidated subsidiaries is recorded,
processed, summarized, reported and made known to the Companys management, including the Companys principal executive and financial officers, on a timely basis by others within the Company and its consolidated subsidiaries.

Subsequent to the Evaluation Date, there were no significant changes in the Companys internal controls or in other factors that
could significantly affect the Companys disclosure controls and procedures.

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PART II - OTHER INFORMATION

ITEM 1.          LEGAL PROCEEDINGS

The Company is from time to time involved in ordinary routine litigation incidental to the conduct of its business.  The Company regularly
reviews all pending litigation matters in which it is involved and establishes reserves deemed appropriate for such litigation matters.  Management believes that no presently pending litigation matters are likely to have a material adverse
effect on the Companys financial statements or results of operations, taken as a whole.

ITEM 2.           CHANGES IN SECURITIES AND USE OF
PROCEEDS                          Not applicable.

ITEM 3.
          DEFAULTS UPON SENIOR SECURITIES                          Not
applicable.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                         Not applicable.

ITEM 5.
          OTHER INFORMATION                          Not
applicable.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a)       Exhibits

|                |       |            
|--------------- | ----- | -----------
|Exhibit  Number |       | Description
|                |       |            
|                | 3.1   |            
|                | 3.2   |            
|                | 4     |            
|                | 10.1  |            
|                | 10.2  |            
|                | 10.3  |            
|                | 10.4  |            
|                | 10.5  |            
|                | 10.6  |            
|                | 10.7  |            
|                | 10.8  |            
|                | 10.9  |            
|                | 10.10 |            
|                | 10.11 |            
|                | 10.12 |            
|                | 10.13 |            
|                | 10.14 |            

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| | 10.15 |  | Amendment to Employment Agreement, William H. Channell Jr., dated December 31, 1998 (5)                                                                     
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.16 |  | Further Amendment to Employment  Agreement between the Company and William H. Channell, Jr., dated July 15, 2002 (10)                                       
| | 10.17 |  | Lease dated June 27, 2002 between the Company and Ynez Street, Ltd (10)                                                                                     
| | 10.18 |  | Mutual Specific and General Release between the Company and Richard A. Cude, dated August 2, 2002 (12)                                                      
| | 99.1  |  | 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, Sr., CEO. (12)
| | 99.2  |  | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Thomas Liguori, CFO. (12)          

| | (b) | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Form 8-K dated September 25, 2002 pertaining to the 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 in the Loan and Security Agreement, Fleet National Bank, London U.K. Branch, trading as Fleet Boston Financial, and the UK Borrowers (as defined therein, if
any).

|(1)  | Incorporated by reference to the indicated exhibits filed in connection with the Companys Registration  Statement on Form S-1 (File No. 333-3621).
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 10-K on March 31, 1997.                            
|(3)  | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 8-K on May 18, 1998.                               
|(4)  | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 10-Q on May 6, 1998.                               
|(5)  | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 10-K on March 31, 1999.                            
|(6)  | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 10-K on April 2, 2001.                             
|(7)  | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 10-Q on August 14, 2001.                           
|(8)  | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 10-Q on November 14, 2001.                         
|(9)  | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 10-K on March 26, 2002.                            
|(10) | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 10-Q On August 9, 2002.                            
|(11) | Incorporated by reference to the indicated exhibits filed in connection with the Companys Form 8-K dated September 25, 2002.                      
|(12) | Filed herewith.                                                                                                                                    

Page 21 of 22



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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 the undersigned thereunto duly authorized.

|                          | CHANNELL COMMERCIAL CORPORATION(Registrant)
|------------------------- | -------------------------------------------
|                          |                                            
|Dated:  November 12, 2002 | By:                                        
|                          |                                            
|                          |                                            

Page 22 of 22





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# 

CERTIFICATION

|I, William H. Channell, Sr., certify that:
|------------------------------------------
|                                          
|1.                                        
|                                          
|2.                                        
|                                          
|3.                                        
|                                          
|4.                                        
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|5.                                        
|                                          
|                                          
|                                          
|                                          
|                                          
|6.                                        

|Date: | November 12, 2002                                | 
|----- | ------------------------------------------------ | 
|      |                                                  | 
|      |                                                  | 
|      |                                                  | 
|      | /s/ WILLIAM H. CHANNELL, SR.                     | 
|      |                                                  | 
|      | William H. Channell, Sr. Chief Executive Officer | 

23



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CERTIFICATION

|I, Thomas Liguori, certify that:
|--------------------------------
|                                
|1.                              
|                                
|2.                              
|                                
|3.                              
|                                
|4.                              
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|5.                              
|                                
|                                
|                                
|                                
|                                
|6.                              

|Date: | November 12, 2002                       | 
|----- | --------------------------------------- | 
|      |                                         | 
|      |                                         | 
|      |                                         | 
|      | /s/ THOMAS LIGUORI                      | 
|      |                                         | 
|      | Thomas Liguori, Chief Financial Officer | 

24