<PAGE>

                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                    Form 10-K

[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the fiscal year ended December 31, 2001; or

[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934.

                         Commission File Number 0-28582
                                                -------

                         Channell Commercial Corporation
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                              <C>
              Delaware                                       95-2453261
----------------------------------------------   --------------------------------
(State or other jurisdiction of incorporation)   (IRS Employer Identification No.)
</TABLE>

                                26040 Ynez Road
                              Temecula, CA 92591
          -----------------------------------------------------------
          (Address of principal executive offices, including zip code)

       Registrant's telephone number, including area code: (909) 719-2600

           Securities registered pursuant to Section 12(b) of the Act:

                                      None
                                      ----

           Securities registered pursuant to Section 12(g) of the Act:

                                 Title of Class
                                 --------------
                          Common Stock, $0.01 Par Value

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

     On March 26, 2002, the Registrant had 9,024,993 shares of Common Stock
outstanding with a par value of $.01 per share. The aggregate market value of
the 3,927,916 shares held by non-affiliates of the Registrant was $20,032,371.
Shares of Common Stock held by each officer and director and by each person who
may be deemed to be an affiliate have been excluded.
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>          <C>                                                                                      <C>
PART I

Item 1.      Business .................................................................................1
             --------

Item 2.      Properties ...............................................................................7
             ----------

Item 3.      Legal Proceedings ........................................................................7
             -----------------

Item 4.      Submission of Matters to a Vote of Security Holders ......................................7
             ---------------------------------------------------

PART II

Item 5.      Market for Registrant's Common Equity and Related Shareholder Matters ....................8
             ---------------------------------------------------------------------

Item 6.      Selected Financial Data ..................................................................9
             -----------------------

Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations ...10
             -------------------------------------------------------------------------------------

Item 7a.     Quantitative and Qualitative Disclosures about Market Risk ..............................20
             ----------------------------------------------------------

Item 8.      Financial Statements and Supplementary Data .............................................21
             -------------------------------------------

Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....21
             ------------------------------------------------------------------------------------

PART III

Item 10.     Executive Officers and Directors of the Registrant ......................................22
             --------------------------------------------------

Item 11.     Executive Compensation ..................................................................24
             ----------------------

Item 12.     Security Ownership of Certain Beneficial Owners and Management ..........................28
             --------------------------------------------------------------

Item 13.     Certain Relationships and Related Transactions ..........................................30
             ----------------------------------------------

PART IV

Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K .........................31
             ---------------------------------------------------------------

FINANCIAL STATEMENTS ................................................................................F-1

GLOSSARY OF TERMS ...................................................................................G-1
</TABLE>

                                        i
<PAGE>

                                     PART I

Item 1. Business
        --------

Background

     Channell Commercial Corporation (the "Company") was incorporated in
Delaware on April 23, 1996, as the successor to Channell Commercial Corporation,
a California corporation. The Company's executive offices are located at 26040
Ynez Road, Temecula, California 92591, and its telephone number at that address
is (909) 719-2600.

General

     The Company is a designer and manufacturer of telecommunications equipment
supplied to telephone, cable television and power utility network providers
worldwide. Major product lines include a complete line of thermoplastic and
metal fabricated enclosures, advanced copper termination and connectorization
products, fiber optic cable management systems, coaxial-based passive RF
electronics and heat shrink products. The Company believes it was the first to
design, manufacture and market thermoplastic enclosure products for use in the
telecommunications industry on a wide scale, and the Company believes it
currently supplies a substantial portion of the enclosure product requirements
of a number of major community antenna television ("CATV") and telephone service
providers. The Company's enclosure products house, protect and provide access to
advanced telecommunications hardware, including both radio frequency ("RF")
electronics and photonics, and transmission media, including coaxial cable,
copper wire and optical fibers, used in the delivery of voice, video and data
services. The enclosure products are deployed within the portion of the local
signal delivery network, commonly known as the "outside plant", "local loop" or
"last mile", that connects the network provider's signal origination point or
local office with its residential and business customers.

     As a result of the acquisitions of RMS Electronics, Inc. ("RMS") and
Standby Electronics Corp. ("Standby Electronics") in 1997, and A.C. Egerton
(Holdings) PLC ("Egerton") in 1998, the Company is also a supplier of passive RF
electronics and a manufacturer of metal fabricated enclosures in addition to
designing and manufacturing a full range of copper and fiber optic connectivity
products. The Company also supplies enclosures for the power utility industry
and markets a complete line of grade level boxes for buried and underground
network applications, thus offering network operators a full system solution to
their outside plant requirements.

Industry

     CATV, local telephone operators and power utilities are building,
rebuilding or upgrading signal delivery networks around the world. These
networks are designed to deliver video, voice, data or power transmissions and
provide Internet connectivity to individual residences and businesses. Operators
deploy a variety of network technologies and architectures, such as HFC, FTTC,
DLC and ADSL (see "Glossary of Terms") to carry broadband and narrowband
signals. These architectures are constructed of electronic hardware connected
via coaxial cables, copper wires and/or optical fibers, including various access
devices, amplifiers, nodes, hubs and other signal transmission and powering
electronics. Many of these devices in the outside plant require housing in
secure, protective enclosures and cable management connectivity systems, such as
those manufactured by the Company.

     As critical components of the outside plant, enclosure products provide
protection against weather and vandalism, ready access to devices for
technicians who maintain and manage the outside plant and, in some cases,
provide dissipation of heat generated by the active electronic hardware. CATV
and local telephone network operators place great reliance on manufacturers of
protective enclosures because any material damage to the signal delivery
networks is likely to disrupt communications services.

     The primary drivers of demand for enclosures in the communications industry
is the construction, rebuilding, upgrading and maintenance of signal delivery
networks by CATV operators and local telephone companies. Particular
technological developments in the communications industry are resulting in
significant increases in system upgrades. For example, CATV networks are being
upgraded and prepared for advanced two-way services such as high-speed Internet
access via cable modems, telephony and PCS transport.

     Within the local telephone company segment of the industry, local telephone
operators are employing new advanced technologies, such as a variety of digital
subscriber line ("DSL") technologies, which utilize installed copper wires for
broadband services. These "local loop" copper wire systems often require
significant upgrading and maintenance to

                                       1
<PAGE>

provide the optimal throughput necessary to carry high-speed broadband signals,
increasing the need for fully sealed outside plant facilities in order to
sustain network reliability and longevity. In addition, as local telephone
companies build broadband networks for the delivery of integrated voice, video
and data services competitive with CATV, they are expected to require new
enclosure products designed for optical fiber-based networks.

Business Strategy

     The Company's strategy is to capitalize on opportunities in the global
communications industry by providing enclosures, connectivity products and other
complementary components to meet the evolving needs of its customers'
communications networks. The Company's wide range of products, manufacturing
expertise, application-based sales and marketing approach and reputation for
high quality products address key requirements of its customers. Principal
elements of the Company's strategy include the following:

     Focus on Core Telecommunications Business. The Company will continue to
seek to capitalize on its position as a leading designer, manufacturer and
marketer of enclosures for the CATV and local telephone industries in the United
States and Canada through new product development for both domestic and
international market applications. The Company believes it currently supplies a
substantial portion of the enclosure product requirements of a number of major
CATV and telephone company operators.

     In addition to its core thermoplastic enclosure products for the CATV and
telephone industries, the Company has positioned itself to increase its
participation in the large scale broadband network construction and upgrade
programs anticipated over the next several years. The Company is able to offer a
complete package of products used by all telecommunications network operators as
they upgrade their networks in order to provide additional services and expand
network capacity. These expansions and upgrades are expected to enable
telecommunications network operators to increase network bandwidth to
accommodate increased demand for faster and larger throughput of signal
transmissions and greater reliability of network performance.

     The Company has invested in the development of a broad range of products
designed specifically for telephone market applications. The Company has
achieved significant success in marketing its traditional CATV/broadband
products to local telephone companies that have been designing and deploying
broadband networks to deliver competitive video and data services. The Company
will continue to target this market for growth, both with telephone network
operators and with major system OEMs.

     Expand International Presence. Management believes international markets
offer significant opportunities for increased sales in both the CATV and
telephone segments. The Company's principal international markets currently
consist of Canada, Mexico, Asia, the Pacific Rim, the Middle East and Europe.
Trends expected to result in international growth opportunities include the
on-going deregulation and privatization of telecommunications in many nations
around the world, the focus of numerous countries on building, expanding and
enhancing their communications systems in order to participate fully in the
information-based global economy, and multinational expansion by many U.S. based
network carriers. The Company currently operates overseas manufacturing
operations in Australia, Malaysia and the UK. The Company will concentrate on
expansion in international markets that are characterized by deregulation or
privatization of telecommunications and by the availability of capital for the
construction of signal delivery networks.

     Develop New Products and Enter New Business Segments. The Company continues
to leverage its core capabilities in developing innovative products that meet
the evolving needs of its customers. Innovative products offered by the Company
include its new DSLink(TM) modular terminal block, its FlexPed(TM) free
breathing telephony enclosures, the Mini-Rocker(TM) insulation displacement
copper connectivity products, and a range of Rhino(TM) metal fabricated
enclosures. The Company continually invests in ongoing improvement and
enhancement projects for the existing products developed by the Company, several
of which have received U.S. patent protection. The Company's products are
designed to improve the performance of its customers' outside plant systems. The
Company has a proven record in designing, developing and manufacturing "next
generation" products that provide solutions for its customers and offer
advantages over those offered by other suppliers to the industry.

Products

     The Company currently markets over 50 product families, with several
thousand optional product configurations. The primary functions of the Company's
products designed for the telecommunications industry are cable routing and

                                       2
<PAGE>

management, equipment access, heat dissipation and security. The Company
believes that it offers one of the most complete lines of outside plant
infrastructure products in the telecommunications industry.

     Enclosures. The Company manufactures precision-molded, highly engineered
and application-specific thermoplastic and metal fabricated enclosures that are
considered state-of-the-industry for many applications, having been field tested
and received approvals and standardization certifications from major CATV and
telephone company operators. Most of the Company's products are designed for
buried and underground network applications. The Company's enclosure products
provide technicians access to these networks and equipment for maintenance,
upgrades and installation of new services. Buried and underground networks and
enclosures are generally preferred by CATV operators for increased network
reliability, lower maintenance, improved security, reduced utility right-of-way
conflicts, and aesthetic appeal. The enclosure products, particularly the
thermoplastic versions, must provide advanced heat dissipation characteristics
increasingly required for the protection of active electronics in many network
installations. The Company is also a designer and manufacturer of metal
fabricated enclosures that house advanced electronics, fiber optic cable and
power systems for broadband telecommunications networks (branded as "Rhino
Enclosures(TM)"). The Company designs and manufactures a series of termination
blocks, brackets and cable management devices for mounting inside its enclosure
products. To position itself as a full-line product supplier, the Company also
offers a variety of complementary products, including thermoplastic and concrete
grade level boxes. These products are typically purchased by customers as part
of a system package and are marketed by the Company through its direct sales
force to its customer base. The Company is recognized in the industry for its
differentiated product designs and the functionality, field performance and
service life of its products.

     RF Electronics. The Company is a designer and supplier of high performance
RF passive electronic devices, such as outdoor and indoor taps, signal
splitters/combiners and power inserters, all standard components deployed in
CATV systems and broadband telecommunications networks. The Company's electronic
devices and metal enclosures are complementary with the Company's core broadband
enclosure products and are important components of the Company's complete
systems approach to the outside plant requirements of CATV and telephone service
providers. New network applications, such as cable modem deployment for Internet
access, have created new technical challenges for service providers. Several new
products, including the DigiTap(TM) low intermodulation line of passive RF
devices, provide solutions to such challenges.

     Copper Connectivity. The Company is a designer and manufacturer of
innovative telephone connectivity devices. The Company's Insulation Displacement
Connector ("IDC") technology provides advanced "tool-less" termination systems
for copper wires, the predominant medium used in the "Last Mile" for telephone
services worldwide. These proprietary IDC products environmentally seal network
termination points with a high level of reliability. The Company's DSLink
modular terminal block offers telephone service providers a CAT5 solution to the
rising costs of DSL deployment in the local loop. The Company's Mini-Rocker(TM)
line of copper connectivity modules, blocks and accessories offer tool-less
installation, hinged wire-entry parts and transparent wire receivers.

     Fiber Optic Products. The Company offers a range of fiber optic cable
management products designed for use in telephone, broadband and power utility
telecommunications networks. The Company's fiber optic splice cases are used for
organizing, managing and protecting the connection points between separate
lengths of fiber optic cable in the outside plant network. Fiber optic cable
assemblies and interconnect hardware are used to connect fiber optic electronics
and fiber optic cables primarily for in-building applications. Fiber optic
electronic enclosures house optical electronics, power supplies and cables. All
of these products are designed and manufactured by the Company and marketed
worldwide.

     Sealing Systems. The Company also specializes in the manufacture of high
performance products designed to meet or exceed the requirements of local
telephone company networks, including sealed plant products. These products are
designed with environmentally sealed specifications to provide exceptional
long-term protection for copper wires, coaxial cable and optical fibers exposed
for the purposes of splicing and termination. The sealing systems of the
Company's sealed plant products are available in several styles and
specifications which can be configured to individual customer requirements. This
provides significant value to customers in terms of faster installations,
re-entry and access, and cost management.

     OEM Programs. Over the past several years, the Company has developed OEM
marketing programs through which other manufacturers incorporate the Company's
products as components of their telecommunications systems. These OEM programs
generally include exchanges of technical information that the Company can use in
developing new products and improvements and enhancements to existing designs.
The Company has established additional relationships with systems integrators
and innovative end users that provide valuable product improvement information.

                                       3
<PAGE>

     The Company continues to develop new product innovations to complement its
existing product line and marketing strengths. The Company anticipates the
demand for its product line to be sustained by the continued construction of
broadband networks, both CATV and telephone, and upgrades of both existing CATV
and telephone networks to accommodate expanded video services, high-speed
Internet access and wireless PCS transport.

Marketing and Sales

     The Company markets its products primarily through a direct sales force of
technically trained salespeople. The Company's sales force is deployed worldwide
and divided into major market groups as follows: US; Canada; South/Central
America; Australia; Asia; and Europe/Middle East. The Company employs an
application-specific, systems approach to marketing its products, offering the
customer, where appropriate, a complete, cost-effective system solution to meet
its enclosure and other outside plant requirements. All sales personnel have
technical expertise in the products they market and are supported by the
Company's engineering and technical marketing staff.

     The Company's technical and product marketing department provides its sales
force with extensive support. The field technical service personnel within this
department work closely with the outside sales staff and customers to develop
system solutions and provide a full range of technical support and certification
for users of the Company's products. Product marketing personnel perform a
variety of functions, including product line management and general marketing
services. These individuals also provide strategic plans for product
development, new market entry, acquisitions and strategic alliances, and work
closely with the Company's sales, engineering and manufacturing departments to
implement such strategic plans.

     An internal sales/customer service department that administers and
schedules incoming orders, handles requests for product enhancements and service
inquiries also supports the Company's direct sales force. With locations in
California, Canada, the United Kingdom and Australia, this department maintains
direct communications with customers and the Company's field sales and
operations personnel.

     By engaging in public relations activities, product literature development,
market research and advertising, the marketing department also promotes and
positions the Company within both domestic and international markets. The
Company regularly attends, participates and exhibits its products at industry
trade shows and conferences within domestic and international telecommunications
markets throughout the year.

Manufacturing Operations

     The Company's vertically integrated manufacturing operations enables the
Company to control each step in the manufacturing process, including product
design and engineering; design and development of its own dies, tools and molds;
and wiring, assembly and packaging.

     The Company's manufacturing expertise enables it to modify its product
lines to meet changing market demands, rapidly and efficiently produce large
volumes of products, control expenses and ensure product quality. Management
considers the Company's manufacturing expertise a distinct and significant
competitive advantage, providing it with the ability to satisfy the requirements
of major customers with relatively short lead-times by promptly booking and
shipping orders.

     The Company owns a majority of its manufacturing equipment, which is
generally state-of-the-art, and manufacturing processes are performed by trained
Company personnel. These manufacturing processes include injection molding,
structural foam molding, rotational molding, metal fabrication, rubber
injection, transfer and compression molding, and termination block fabrication.
The Company has implemented several comprehensive process and quality assurance
programs, including continuous monitoring of key processes, regular product
inspections and comprehensive testing. The Company's Temecula, California
manufacturing facility has received ISO-9001 certification, a worldwide industry
standards certification.

     The Company's manufacturing and distribution facilities include
approximately 364,000 square feet in Temecula, California; 7,000 square feet in
Mississauga, Ontario, Canada; 117,000 square feet in Orpington and Warrington,
United Kingdom; 99,000 square feet in Sydney, Australia; and 16,000 square feet
in Selangor Darul Ehsan, Malaysia. In November, 2001, the Company announced a
restructuring plan (see Financial Statement Footnote H, Restructuring Charge)
that would, among other things, reduce its facilities utilization in the U.S.,
U.K. and Australia operations to improve operating efficiencies and reduce
facilities expense. In connection with the Company's restructuring plan, the
Company

                                       4
<PAGE>

expects to reduce the amount of leased manufacturing, warehouse and office space
by approximately 200,000 square feet.

Product Development and Engineering

     The Company believes it was the first to design, manufacture and market
thermoplastic enclosure products for use in the telecommunications industry on a
wide scale. The Company's product development and engineering staff has designed
and tested the Company's products and has developed core competencies in product
development and engineering.

     As a direct result, the Company has been able to develop a broad series of
superior products. Distinguishing characteristics of the Company's products
include:

          .    Effective heat dissipation qualities;
          .    Advanced copper IDC connectivity products;
          .    A superior environmental sealing and protection system that,
               unlike many competitors' products, does not require gels,
               compounds or other methods to maintain the required seal;
          .    Sub-surface network access systems;
          .    Product designs allowing technicians easy access through circular
               covers that can be removed to fully expose the enclosed
               electronics;
          .    Compatibility with a variety of signal delivery network
               architectures;
          .    Modular metal fabricated enclosure product line covering multiple
               network applications;
          .    Versatility of design to accommodate network growth through
               custom hardware and universal mounting systems that adapt to a
               variety of new electronic hardware;
          .    Excellent protection and management of optical fibers and cables;
               and
          .    Thermoplastic Laminated Coating (TLC(R)) bonds directly to metal
               hardware and protects against rust and deterioration.

     The Company's product development and engineering processes enable the
Company to respond to demands of the communications industry for increasingly
sophisticated enclosure products. Many of the Company's thermoplastic enclosure
products are now considered state-of-the-industry, having been field tested and
received approvals and standardization certifications from major CATV and
telephone company operators.

     The Company's product development approach is applications-based and
customer driven. A team comprised of engineering, marketing, manufacturing and
direct sales personnel work together to define, develop and deliver
comprehensive systems solutions to customers, focusing on the complete design
cycle from product concept through tooling and high-volume manufacturing. The
Company is equipped to conduct many of its own product testing requirements for
performance qualification purposes, enabling it to accelerate the product
development process. The Company spent $1.0 million in 1997, $1.9 million in
1998, $2.6 million in 1999, $2.8 million in 2000 and $2.3 million in 2001 on
research and development.

Customers

     The Company sells its products directly to CATV operators and telephone
companies throughout the United States, Canada and certain other international
markets, principally within developed nations. The Company also sells its
products to OEMs in the United States and international markets. During 2001,
the Company's five largest customers accounted for 44.1% of total net sales. In
2001, the Company's five largest customers by sales in the United States were
Adelphia, AOL/Time Warner, Comcast, Cox and Verizon. One customer, AOL/Time
Warner, accounted for 11.2% of the Company's net sales in 2001. In international
markets, the Company's five largest customers in 2001 by sales were Rogers
(Canada), Telstra (Australia), Nexans Iberica (Spain), Unitelco (Malaysia) and
Alcatel Italia (Italy).

     The Company has historically operated with a relatively small backlog, and
sales and operating results in any quarter are principally dependent upon orders
booked and products shipped in that quarter. The Company's customers generally
do not enter into long-term supply contracts providing for future purchase
commitments of the Company's products. Rather, the Company believes that many of
its customers periodically review their supply relationships and adjust buying
patterns based upon their current assessment of the products and pricing
available in the marketplace. From fiscal period to fiscal period, significant
changes in the level of purchases of the Company's products by specific
customers can and do result from this periodic assessment.

                                       5
<PAGE>

Intellectual Property

     Upon the consummation of its initial public offering (the "Initial Public
Offering") in 1996, the Company became the owner of all of the patents and other
technology employed by it in the manufacture and design of its products. The
Company's patents, which expire through the year 2010, cover various aspects of
the Company's products. In addition, the Company has certain trade secrets,
know-how and trademarks related to its technology and products.

     Management does not believe any single patent or other intellectual
property right is material to the Company's success as a whole. The Company
intends to maintain an intellectual property protection program designed to
preserve its intellectual property assets.

Competition

     The industries in which the Company operates are highly competitive. The
Company believes, however, that several factors, including its ability to
service national and multi-national customers, its direct sales force, its
specialized engineering resources and its vertically integrated manufacturing
operations provide the Company with significant competitive advantages.

     Management believes the principal competitive factors in the
telecommunications equipment market are customer service, new product
capabilities, price, product availability, and product performance.

     Competitive price pressures are common in the industry. In the past, the
Company has responded effectively to competition with cost controls through
vertical integration utilizing advanced manufacturing techniques, cost-effective
product designs and material selection, and an aggressive procurement approach.

     In the past, certain of the Company's telecommunications customers have
required relatively lengthy field testing of new products prior to purchasing
such products in quantity. While field testing can delay the introduction of new
products, it can also act as a competitive advantage for those products tested
and approved because to a certain extent it creates a barrier to new product
introduction and sales by competitors.

Raw Materials; Availability of Complementary Products

     The principal raw materials used by the Company are thermoplastic resins,
neoprene rubbers, hot and cold rolled steel, stainless steel and copper. The
Company also uses certain other raw materials, such as fasteners, packaging
materials and communications cable. Management believes the Company has adequate
sources of supply for the raw materials used in its manufacturing processes and
it attempts to develop and maintain multiple sources of supply in order to
extend the availability and encourage competitive pricing of these materials.

     Most plastic resins are purchased under annual and multi-year contracts to
stabilize costs and improve supplier delivery performance. Neoprene rubbers are
manufactured by multiple custom compounders using the Company's proprietary
formulas. Metal products are supplied in standard stock shapes, coils and custom
rollforms.

     Positioning itself as a full-line product supplier, the Company also relies
on certain other manufacturers to supply products that complement the Company's
own product line, such as grade level boxes and cable-in-conduit. The Company
believes there are multiple sources of supply for these products.

Employees

     As of December 31, 2001, the Company employed 473 people, of whom 48 were
in sales, 354 were in manufacturing operations, 32 were in research and
development and 39 were in finance and administration. The Company considers its
employee relations to be good, and it recognizes that its ability to attract and
retain qualified employees is an important factor in its growth and development.
None of the Company's employees is subject to a collective bargaining agreement,
and the Company has not experienced any business interruption as a result of
labor disputes within the past five years.

                                       6
<PAGE>

Regulation

     The telecommunications industry is subject to regulations in the United
States and other countries. Federal and state regulatory agencies regulate most
of the Company's domestic customers. On February 1, 1996, the United States
Congress passed the Telecommunications Act of 1996 that the President signed
into law on February 8, 1996. The Telecommunications Act lifted certain
restrictions on the ability of companies, including RBOCs and other customers of
the Company, to compete with one another and generally reduced the regulation of
the communications industry.

     The Company is also subject to a wide variety of federal, state and local
environmental laws and regulations. The Company utilizes, principally in
connection with its thermoplastic manufacturing processes, a limited number of
chemicals or similar substances that are classified as hazardous. It is
difficult to predict what impact these environmental laws and regulations may
have on the Company in the future. Restrictions on chemical uses or certain
manufacturing processes could restrict the ability of the Company to operate in
the manner that it currently operates or is permitted to operate. Management
believes that the Company's operations are in compliance in all material
respects with current environmental laws and regulations. Nevertheless, it is
possible that the Company may experience releases of certain chemicals to
environmental media which could constitute violations of environmental law (and
have an impact on its operations) or which could cause the Company to incur
material cleanup costs or other damages. For these reasons, the Company might
become involved in legal proceedings involving exposure to chemicals or the
remediation of environmental contamination from past or present operations.
Because certain environmental laws impose joint and several, strict and
retrospective liability upon current owners or operators of facilities from
which there have been releases of hazardous substances, the Company could be
held liable for remedial measures or other damages (such as liability in
personal injury actions) at properties it owns or utilizes in its operations,
even if the contamination was not caused by the Company's operations.

Item 2. Properties
        ----------

     The Company's facilities approximate 603,000 square feet, of which
approximately 55%, 30% and 15% was used for manufacturing, warehouse and office
space, respectively. In Temecula, California, 261,000 square feet of the total
364,000 square feet are leased from William H. Channell, Sr., the Company's
Chairman of the Board. (See "Certain Relationships and Related Transactions",
Item 13.) The Company also leases an aggregate of approximately 217,000 square
feet of manufacturing, warehouse and office space in Canada, Australia,
Malaysia, United Kingdom and North Carolina. In November, 2001, the Company
announced a restructuring plan (see Financial Statement Footnote H,
Restructuring Charge) that would, among other things, reduce its facilities
utilization in the U.S., U.K. and Australia operations to improve operating
efficiencies and reduce facilities expense The Company expects to reduce the
amount of leased manufacturing, warehouse and office space by approximately
200,000 square feet. The Company owns approximately 103,000 square feet of
manufacturing, warehouse and office space in Temecula, California and
approximately 53,000 square feet of manufacturing, warehouse and office space in
the United Kingdom. The Company intends to sell and leaseback the Temecula,
California property in 2002. The Company considers its current facilities to be
adequate for its operations.

Item 3. 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 will have a material adverse effect on its
business or on its results of operations.

Item 4. Submission of Matters to a Vote of Security Holders
        ---------------------------------------------------

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

                                       7
<PAGE>

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
        ---------------------------------------------------------------------

     The Company's Common Stock began trading on July 2, 1996 on the National
Market System maintained by the National Association of Securities Dealers (now
the NASDAQ National Market) upon completion of the Company's initial public
offering. The following table sets forth, for the periods indicated, the high
and low sale prices for the Company's Common Stock, as reported on the NASDAQ
National Market.

Year Ended December 31, 2000:
   First Quarter                        $ 20.25            $ 10.50
   Second Quarter                         15.00              10.50
   Third Quarter                          14.94              12.00
   Fourth Quarter                         12.63               6.50

                                          High               Low
                                        -------            -------
Year Ended December 31, 2001:
   First Quarter                        $  8.50            $  6.75
   Second Quarter                          7.25               5.44
   Third Quarter                           6.65               3.10
   Fourth Quarter                          3.80               2.80

     The Company has not declared any dividends subsequent to its initial public
offering in July 1996.

     The Company currently anticipates it will retain all available funds to
finance its business. The Company does not intend to pay cash dividends in the
foreseeable future. Under the terms of the Company's credit agreement, the
Company has agreed not to pay any dividends during the term of this agreement.

     As of December 31, 2001, the Company had 9,024,993 shares of its Common
Stock outstanding, held by approximately 1,049 shareholders of record.

                                       8
<PAGE>

Item 6. Selected Financial Data
        -----------------------

     The selected consolidated financial data presented below for each of the
five years in the period ended December 31, 2001, have been derived from audited
consolidated financial statements which for the most recent three years appear
elsewhere herein. The data should be read in conjunction with the financial
statements, related notes and other financial information included therein
(amounts in thousands, except per share data).

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                         --------------------------------------------------------------
                                                           1997         1998          1999          2000         2001
                                                         --------     --------     ---------     ---------     --------
<S>                                                      <C>          <C>          <C>           <C>           <C>
OPERATING DATA:
Net sales ..........................................     $ 60,549     $ 93,002     $ 120,688     $ 128,179     $ 88,698
Cost of goods sold .................................       35,032       56,578        76,115        81,108       69,892
                                                         --------     --------     ---------     ---------     --------
Gross profit .......................................       25,517       36,424        44,573        47,071       18,806

Operating expenses
            Selling ................................        7,251       11,570        14,716        15,484       12,789
            General and administrative .............        4,077        8,057         9,023        14,231       14,124
            Research and development ...............        1,009        1,863         2,629         2,771        2,331
            Restructuring charge ...................           --           --            --         1,513        2,999
            Asset impairment charge ................           --           --            --         4,569        4,322
            Goodwill impairment charge .............           --           --            --            --       11,772
                                                         --------     --------     ---------     ---------     --------
                                                           12,337       21,490        26,368        38,568       48,337
                                                         --------     --------     ---------     ---------     --------
Income (loss) from operations ......................       13,180       14,934        18,205         8,503      (29,531)
Interest income (expense), net .....................          879       (1,076)       (2,650)       (2,859)      (3,874)
                                                         --------     --------     ---------     ---------     --------
Income (loss) before income tax expense (benefit) ..       14,059       13,858        15,555         5,644      (33,405)
Income tax expense (benefit) .......................        5,589        5,749         6,221         2,076       (8,207)
                                                         --------     --------     ---------     ---------     --------
Net income (loss) ..................................     $  8,470     $  8,109     $   9,334     $   3,568     $(25,198)
                                                         ========     ========     =========     =========     ========

NET INCOME (LOSS) PER SHARE:
Basic ..............................................     $   0.92     $   0.88     $    1.03     $    0.39     $  (2.78)
Diluted ............................................     $   0.91     $   0.88     $    1.02     $    0.39     $  (2.78)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic ..............................................        9,237        9,199         9,094         9,091        9,050
Diluted ............................................        9,291        9,230         9,111         9,126        9,050

BALANCE SHEET DATA:
Current assets .....................................     $ 33,252     $ 40,505     $  48,807     $  51,531     $ 39,626
Total assets .......................................       50,625       98,442       114,540       116,748       85,762
Long-term obligations
   (including current maturities) ..................          946       35,911        38,061        40,364       36,816
Stockholders' equity ...............................       45,892       52,580        62,339        63,927       37,497

OTHER DATA:
Gross margin (1) ...................................         41.6%        39.0%         36.9%         36.7%        21.2%
Operating margin (2) ...............................         22.0         16.1          15.1           6.6        (33.3)
EBITDA (3) .........................................     $ 15,224     $ 18,994     $  24,743     $  16,671     $(20,974)
Capital expenditures (excluding
           capital leases) .........................        5,966       10,579         9,148        11,606        3,153
Cash provided by (used in):
           Operating activities ....................        3,730        6,606         8,073         8,352       13,964
           Investing activities ....................       (8,958)     (22,308)       (9,361)      (11,857)      (3,153)
           Financing activities ....................         (122)      17,919        (1,728)        1,876       (2,927)
</TABLE>

                                       9
<PAGE>

                        Notes to Selected Financial Data
                 (amounts in thousands, except per share data)

(1)  Gross margin is gross profit as a percentage of net sales.

(2)  Operating margin is income (loss) from operations as a percentage of net
     sales.

(3)  EBITDA represents income (loss) from operations before interest and income
     taxes, plus depreciation and amortization expense. EBITDA is not intended
     to represent cash flow, operating income or any other measure of
     performance in accordance with generally accepted accounting principles,
     but is included here because management believes that certain investors
     find it to be a useful tool for measuring a company's ability to service
     its debt.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        ------------------------------------------------------------------------
        of Operations
        -------------

General

     The Company is a designer and manufacturer of telecommunications equipment
supplied to telephone, cable television and power utility network providers
worldwide. In addition to Company manufactured products, the Company markets
complementary products manufactured by third parties. The Company sells products
directly to CATV operators and telephone companies throughout the United States,
Canada, Australia, United Kingdom and certain other international markets,
principally within developed nations. The Company believes that many of its
customers periodically review their supply relationships, and the Company can
experience significant changes in buying patterns from specific customers
between fiscal periods. The Company has historically operated with a relatively
small backlog, and sales and operating results in any quarter are principally
dependent upon orders booked and products shipped in that quarter. Further, the
Company's customers generally do not enter into long-term supply contracts
providing for future purchase commitments for the Company's products. These
factors, when combined with the Company's operating leverage and the need to
incur certain capital expenditures and expenses in part based upon the
expectation of future sales, causes the Company's operating results to be at
risk to changing customer buying patterns. If sales levels in a particular
period do not meet the Company's expectations, operating results for that period
may be materially and adversely affected.

     The Company uses numerous raw materials in its manufacturing processes.
Although management believes that the Company has adequate sources of supply for
such raw materials, increases in the market prices of the Company's raw
materials could significantly increase the Company's cost of goods sold and
materially adversely affect the Company's profitability. The Company's
profitability may also be materially adversely affected by decreases in its
sales volume because many of the costs associated with the Company's facilities,
product development, engineering, tooling and other manufacturing processes are
essentially fixed in nature and must be spread over its sales base in order to
maintain historic levels of profitability.

                                       10
<PAGE>

Results of Operations

     The following table sets forth the Company's operating results for the
periods indicated expressed as a percentage of sales.

                                                   Year Ended December 31,
                                               -------------------------------
                                                1999         2000         2001
                                               -----        -----        -----

Net Sales ..............................       100.0%       100.0%       100.0%
Cost of Sales ..........................        63.1         63.3         78.8
                                               -----        -----        -----
Gross Profit ...........................        36.9         36.7         21.2

Selling ................................        12.2         12.1         14.4
General and administrative .............         7.5         11.1         15.9
Research and development ...............         2.1          2.2          2.6
Restructuring charge ...................          --          1.2          3.4
Asset impairment charge ................          --          3.5          4.9
Goodwill impairment charge .............          --           --         13.3
                                               -----        -----        -----
Income (loss) from operations ..........        15.1          6.6        (33.3)

Interest income (expense), net .........        (2.2)        (2.2)        (4.4)
                                               -----        -----        -----
Income (loss) before income
    tax expense (benefit) ..............        12.9          4.4        (37.7)
Income tax expense (benefit) ...........         5.2          1.6         (9.3)
                                               -----        -----        -----
Net income (loss) ......................         7.7%         2.8%       (28.4)%
                                               =====        =====        =====

New Accounting Pronouncements

     On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for the Company are as follows:

     .    All business combinations initiated after June 30, 2001 must use the
          purchase method of accounting.

     .    Intangible assets acquired in a business combination must be recorded
          separately from goodwill if they arise from contractual or other legal
          rights or are separable from the acquired entity and can be sold,
          transferred, licensed, rented or changed, either individually or as
          part of a related contract, asset or liability.

     .    Goodwill, as well as intangible assets with indefinite lives, acquired
          after June 30, 2001, will not be amortized. Effective January 1, 2002,
          all previously recognized goodwill and intangible assets with
          indefinite lives will no longer be subject to amortization.

     .    Effective January 1, 2002, goodwill and intangible assets with
          indefinite lives will be tested for impairment annually and whenever
          there is an impairment indicator.

     .    All acquired goodwill must be assigned to reporting units for purposes
          of impairment testing and segment reporting.

                                       11
<PAGE>

     The Company will continue to amortize goodwill under its current method
until January 1, 2002, at which time annual and quarterly goodwill amortization
of $135 and $34 will no longer be recognized. By June 30, 2002 the Company will
have completed a transitional fair value based impairment test of goodwill as of
January 1, 2002. Impairment losses, if any, resulting from the transitional
testing will be recognized in the quarter ending March 31, 2002, as a cumulative
effect of a change in accounting principle. The Company believes the adoption of
SFAS 142 will not have a material impact on its consolidated financial position
or results of operations.

     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 August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS
144). SFAS 144 establishes a single accounting model for the Impairment or
disposal of long-lived assets, including discontinued operations. SFAS 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS 121), and APB Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The
provisions of SFAS 144 are effective in fiscal years beginning after December
15, 2001, with early adoption permitted, and in general are to be applied
prospectively. The Company believes the adoption of SFAS 144 will not have a
material impact on its consolidated financial position or results of operations.

Comparison of Year Ended December 31, 2001 with Year Ended December 31, 2000

     As a result of the prolonged downturn in the telecommunications industry,
the Company developed and began the implementation of a restructuring plan in
the third quarter of 2001. The objectives of the restructuring plan were to: 1)
downsize the Company's cost structure to anticipated levels of business
activity, 2) reduce debt to lower interest expense and afford greater
flexibility in capital management, and, 3) realign asset valuations based on
current economic conditions.

     Cost reductions include reducing head count to a level 42% below December
31, 2000 and facilities square footage to a level 31% lower. The reductions
affected all geographic segments although more significantly impacted
international operations. Cost reduction measures were substantially completed
by December 31, 2001.

     The debt reduction plan includes the selling of obsolete inventory, the
sale/leaseback of a building as well as reductions in working capital. These
activities occurred in the fourth quarter and are expected to continue through
the first half of 2002.

     The review of asset valuations addressed the collectibility of receivables
given the industry downturn, slow moving or obsolete inventory in light of
reduced customer demand and the impairment of goodwill given the reduced level
of foreign operations going forward. These measures resulted in the recording of
$33.1 million of special charges in the third quarter of 2001 for restructuring
costs, impairment of assets, impairment of goodwill and other non-recurring
charges. The effects of these charges on each line item in the Consolidated
Statement of Operations are included in the following analysis.

     Net Sales. Net sales decreased $39.5 million or 30.8% from $128.2 million
in 2000 to $88.7 million in 2001. The decrease resulted from a slowdown in
equipment purchases by telecommunications service providers in the U.S., Europe,
Australia and Canada.

     Domestic net sales decreased $22.7 million or 25.6% from $88.5 million to
$65.8 million. The decrease is due to customer efforts to reduce inventories of
outside plant equipment, as well as a slowdown in the pace of telecommunications
network upgrades. One customer accounted for approximately $10.7 million of the
$22.7 million decrease in sales. This customer informed its suppliers in the
fourth quarter of 2000 that it was curtailing equipment purchases in order to
reduce its investment in fixed assets.

                                       12
<PAGE>

     International net sales decreased $16.8 million or 42.3% from $39.7 million
to $22.9 million. Sales in Europe / Middle East decreased 49.3% to $11.0 million
due to the industry slow down and the exiting of unprofitable product lines.
Australia / Asia sales declined 29.2% to $7.5 million due to lower equipment
purchases from a major telecommunications customer. Sales in Canada decreased
39.7% to $4.4 million due to reduced sales primarily in thermoplastic and metal
enclosures.

     Gross Profit. Gross profit decreased $28.3 million from $47.1 million in
2000 to $18.8 million in 2001. Of the $28.3 million decrease, $8.5 million was
due to special charges recorded in the third quarter consisting of: 1)
write-offs and additions to inventory reserves of $8.3 million to reflect the
accumulation of excess inventory levels brought about by the industry slowdown
and the decision to exit certain product lines, and 2) $0.2 million of costs to
exit certain product lines. The remainder of the decline is due to the lower
level of sales and unfavorable manufacturing cost variances that resulted from
unabsorbed labor and overhead costs due to lower production build rates.

     As a percentage of net sales, gross profits decreased from 36.7% in 2000 to
21.2% in 2001. The reasons given above for the changes in gross margin dollars
also apply to these percentage changes. The 2001 gross profit percentage
excluding the inventory write-offs, additional reserves and costs to exit
certain product lines was 30.8%.

     Selling. Selling expenses decreased $2.7 million or 17.4% from $15.5
million in 2000 to $12.8 million in 2001. The decrease is the result of cost
reductions in selling administration functions as well as due to a lower sales
volume.

     As a percentage of net sales, selling expense increased from 12.1% in 2000
to 14.4% in 2001.

     General and Administrative. General and administrative expenses decreased
$0.1 million or 0.7% from $14.2 million in 2000 to $14.1 million in 2001. The
2001 expense includes non-recurring charges of $3.5 million recorded in the
third quarter for additions to trade accounts receivable reserves and the
write-off of delinquent accounts, costs to exit certain product lines and the
write down of prepaid expenses to reflect the shorter life of the assets during
a continuing industry downturn. The receivables related charge is $1.4 million
and is primarily for customers in Central America and Eastern Europe that were
affected by telecommunications projects that were either being scaled back or
delayed.

     Excluding the non-recurring charges, general and administrative expenses
declined $3.6 million or 25.3%. The decrease is due mainly to reductions in
administrative head count and spending levels.

     As a percentage of net sales, general and administrative expenses increased
from 11.1% in 2000 to 15.9% in 2001. Excluding the nonrecurring charges
mentioned above, the percentage increased from 11.1% in 2000 to 12.0% in 2001.

     Research and Development. Research and development expenses decreased $0.5
million or 17.9% from $2.8 million in of 2000 to $2.3 million in 2001. As a
percentage of net sales, research and development expenses increased from 2.2%
in 2000 to 2.6% in 2001.

     Restructuring charge. In the fourth quarter of 2000, the Company recorded a
restructuring charge of $1.5 million associated with activities to improve
efficiency, align production costs with anticipated revenues and reduce selling,
general and administrative costs. As a result of these actions, global head
count was reduced by approximately 90 positions and several facilities
consolidated. The Charlotte, North Carolina distribution facility was integrated
into the Temecula, California operations. Leased manufacturing space in Europe
was reduced and the Hong Kong sales office was closed with the selling functions
integrated into the Asian sales operations in Malaysia

     Due to the prolonged slowdown in the telecommunications industry, the
Company further reduced head count and closed additional facilities in the third
quarter of 2001 and recorded a restructuring charge of $3.0 million. The
restructuring plan resulted in the elimination of approximately 116 management,
administrative, sales and manufacturing positions. Facilities vacated include:
1) a manufacturing and distribution facility in Warrington, United Kingdom, 2)
one half of the manufacturing and distribution facility in Sydney, Australia
and, 3) leased warehouse space in the U.S.

     Impairment of Fixed Assets. In the fourth quarter of 2000, the Company
recorded an impairment of asset charge of $4.6 million. The charge related to
certain production equipment in the European operations. Utilization of this
production equipment declined as newer, more automated equipment was purchased
as part of the company's capital expenditure program to automate production and
reduce costs. As a result, the equipment was written down by $4.6 million to
reflect a reduction in the fair value of this equipment.

                                       13
<PAGE>

     In the third quarter of 2001, the Company recorded an asset impairment
charge of $4.3 million as a result of restructuring activities intended to
reduce manufacturing costs worldwide. Certain production equipment, tooling and
leasehold improvements were idled or sold as a result of these measures. This
included production equipment in the European operations that was idled as
several products previously manufactured in the region were either transferred
to other facilities, outsourced or discontinued. In both the U.S. and Australia,
an impairment charge was recorded for production equipment and tooling no longer
productive as a result of the restructuring.

     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 reduce the level of foreign operations and the decision to exit certain
product lines in 2001.

     Income (Loss) from Operations. As a result of the items discussed above,
income from operations decreased $38.0 million from $8.5 million in 2000 to a
loss of ($29.5) million in 2001. Operating margin as a percent of sales
decreased from 6.6% to (33.3%).

     Interest Expense, Net. Net interest expense increased from $2.9 million in
2000 to $3.9 million in 2001. The increase was attributable primarily to: 1) a
higher average debt level, 2) a higher interest rate on the Company's bank debt
and 3) accrued fees associated with revisions to the Credit Agreement.

     Income Taxes. Income tax expense decreased from $2.1 million in 2000 to a
tax benefit of ($8.2) million in 2001. The effective tax rates were 36.8% in
2000 and 24.6% in 2001. The decrease in effective tax rates was due to foreign
operating losses in 2001 with no benefit provided and an increase in the
valuation allowance on the deferred tax asset of $2.8 million associated with
tax loss carry forwards in international operations. The ability to use the tax
loss carry forward was reduced due to restructuring activities which
significantly decreased the level of international business activities.

Comparison of the Year Ended December 31, 2000 with Year Ended December 31, 1999

     Net Sales. Net sales increased $7.5 million or 6.2% from $120.7 million in
1999 to $128.2 million in 2000. The increase resulted from higher sales volume
in the U.S., Europe / Middle East and Canada, partially offset by a decline in
sales in Australia / Asia and an unfavorable foreign exchange rate caused by a
strengthening U.S. dollar compared to currencies in Europe and Australia.

     Domestic sales increased $8.5 million or 10.6% from $80.0 million to $88.5
million as a result of continued growth in both network upgrade and rebuild
construction in the first half of the year. International sales decreased $1.1
million or 2.5% from $40.7 million to $39.6 million. An unfavorable change in
currency exchange rates decreased international sales reported in U.S. dollars
by $2.8 million for the year 2000. Sales in Europe/Middle East increased 14.3%
to $21.7 million due to growth in sales of fiber optic products in the U.K. and
continental Europe and growth in RF electronic products sold in Spain, Eastern
Europe and Israel. Sales in Canada increased 41.2% to $7.3 million due to growth
in sales of metal enclosures. These international sales increases were offset by
decreased sales in Australia / Asia which declined 35.5% to $10.6 million. The
decline in Australia / Asia is due to lower spending on telecommunications
network upgrades and maintenance in Australia. Sales increased in the Asian
operations of this region.

     Gross Profit. Gross profit increased $2.5 million from $44.6 million in
1999 to $47.1 million in 2000 due to the increased sales level. As a percentage
of sales, gross profit was 36.9% in 1999 and 36.7% in 2000.

     Selling. Selling expense increased $0.8 million or 5.2% from $14.7 million
in 1999 to $15.5 million in 2000. The increase is due to additional sales
personnel hired for eastern and southern Europe, Asia and domestic telco
products. As a percentage of net sales, selling expense decreased from 12.2% in
1999 to 12.1% in 2000.

     General and Administrative. General and administrative expenses increased
$5.2 million or 57.7% from $9.0 million in 1999 to $14.2 million in 2000. The
increase is due to: 1) depreciation, telecommunications, computer equipment and
staffing costs associated with implementing the Oracle global systems platform
of approximately $2.6 million, 2) in 1999, approximately $1.1 million of
internal costs were capitalized as part of implementing Oracle which lowered
general and administrative costs reported in 1999, 3) higher administrative
costs in Canada of $0.4 million to process the higher sales volume, 4) salary,
recruiting and relocation costs of approximately $0.3 million to implement
global Finance and Human

                                       14
<PAGE>

Resource functions, and, 5) higher travel costs of $0.1 million to integrate
global operations. As a percentage of net sales, general and administrative
expenses increased from 7.5% in 1999 to 11.1% in 2000.

     Research and Development. Research and development expenses increased $0.2
million or 5.4% from $2.6 million in 1999 to $2.8 million in 2000 due to
increased development spending for new connector products. As a percentage of
net sales, research and development expenses increased from 2.1% in 1999 to 2.2%
in 2000.

     Restructuring Charge. In the fourth quarter of 2000, the Company recorded a
restructuring charge of $1.5 million associated with activities to improve
efficiency, align production costs with anticipated revenues and reduce selling,
general and administrative costs. As a result of these actions, global head
count was reduced by approximately 10% and several facilities were consolidated.
The Charlotte, North Carolina distribution facility was integrated into the
Temecula, California operations, leased manufacturing space in Europe was
reduced and the Hong Kong sales office was closed with the selling functions
integrated into the Asian sales operations in Malaysia.

     Asset Impairment Charge. In the fourth quarter of 2000, the Company
recorded an impairment of asset charge of $4.6 million. The charge is related to
certain production equipment in the European operations. Utilization of this
production equipment declined as newer, more automated equipment was purchased
as part of the company's capital expenditure program. As a result, the equipment
was written down by $4.6 million to reflect a reduction in the fair value of
this equipment.

     Income from Operations. As a result of the items discussed above, income
from operations decreased $9.7 million or 53.3% from $18.2 million in 1999 to
$8.5 million in 2000. As a percentage of sales, income from operations decreased
from 15.1% in 1999 to 6.6% in 2000.

     Interest Income (Expense). Net interest expense increased from $2.7 million
in 1999 to $2.9 million in 2000. The increase is due to a higher debt level to
fund working capital and capital expenditures and a higher interest rate in
2000.

     Income Taxes. Income taxes were $6.2 million in 1999 and $2.1 million in
2000, with effective tax rates of 40.0% and 36.8% respectively. The decrease in
the effective tax rate is due to tax planning strategies associated with
international operations that were implemented in 2000.

Liquidity and Capital Resources

     Cash and cash equivalents on December 31, 2001 was $8.8 million, an
increase of $7.9 million from the December 31, 2000 balance of $0.9 million.
Although the Company operated in an industry downturn during 2001 and
experienced significant restructuring costs during the year, most of the charges
were non-cash and the Company implemented measures to reduce the level of
working capital required to operate the business. Of the $33.1 million of
special charges recorded in the third quarter of 2001, $28.9 million were
non-cash charges. As a result, cash generated from operating activities was
$14.0 million in 2001 compared to $8.4 million in 2000.

     Net cash used in investing activities was $3.2 million in 2001, a reduction
of $8.7 million or 73.1% from the $11.9 million used in 2000. The decline is
primarily attributable to Company's actions to reduce capital expenditure
projects. Capital expenditures in 1999 and 2000 included major projects for
business information systems and factory equipment to automate manual processes
and reduce costs. The Company believes it can operate at a substantially lower
level of capital expenditures in the near term as these major projects are now
essentially complete.

     Net cash used in financing activities in 2001 was ($2.9) million primarily
due to the repayment of debt. Net cash used in financing activities in 2000 was
$1.9 million reflecting drawdowns under the bank Credit Agreement.

     The Company anticipates receiving a tax refund in excess of $4.0 million
during 2002 as a result of applying 2001 losses to prior years' tax filings.

     Accounts receivable decreased from $24.0 million at December 31, 2000 to
$13.3 million at December 31, 2001 as a result of lower sales volume, improved
collection activity and write offs of delinquent accounts of $1.4 million. In
terms of days sales outstanding, receivables decreased from 80 days at December
31, 2000 to 64 days as of December 31, 2001.

     Inventories decreased from $21.6 million at December 31, 2000, to $9.8
million at December 31, 2001. An inventory write-off and additional reserves
accounted for $8.3 million of the decline. Excluding the inventory write off and
additional

                                       15
<PAGE>

reserves, inventory decreased $3.5 million during the period. The reduction was
due to efforts to reduce stock levels of finished goods, minimize purchases of
raw materials and sell slow moving items.

     Accounts payable decreased from $8.0 million at December 31, 2000 to $5.1
million at December 31, 2001 primarily due to lower raw material purchases
resulting from lower sales volume.

     The Board of Directors, on April 1, 1998, having determined such action to
be in the best interest of the Company, authorized a stock repurchase plan of up
to $2.0 million worth of Company stock. The plan was subsequently increased to
$2.75 million by the Board on December 1, 2000. The Company repurchased 22,985
shares at a cost of approximately $0.2 million in 1999; 30,900 shares of its
common stock at a cost of approximately $0.2 million in 2000; and 52,300 shares
of its common stock at a cost of $0.3 million in 2001.

     The Company has a Credit Agreement with two banks. The outstanding balance
bears interest, payable quarterly, at a variable rate based on the
Administrative Agent bank's base rate. At December 31, 2001, the Credit
Agreement's weighted average interest rate was 7.25%, the outstanding balance
was $30.1 million and there was no unused availability under the Credit
Agreement. The outstanding balance under the Credit Agreement is due and payable
in full on December 31, 2002. In the fourth quarter of 2001 the banks extended
the maturity of the Credit Agreement to June 30, 2002. In the first quarter of
2002 the banks extended the maturity of the Credit Agreement to December 31,
2002. The Company will pay an extension fee to the banks on each of June 30,
2002 and September 30, 2002 in the event there is an outstanding balance under
the Credit Agreement. The Company is involved in discussions with several
financial institutions and believes it should be able to obtain financing to
repay in full the outstanding balance under the Credit Agreement on or before
December 31, 2002. In the event the Company obtains financing to repay the
outstanding balance under the Credit Agreement, it expects to incur refinancing
closing costs of no less than $250,000 but does not expect at this time any
material increase in the interest rate. In the event the Company does not obtain
refinancing of the Credit Agreement by December 31, 2002, and if the banks were
to agree to extend the maturity date of the Credit Agreement, the Company would
expect the banks to impose requirements such as an extension fee and additional
principal payments.

     The Credit Agreement contains various financial and operating covenants
which, among other things, imposes limitations on the Company's ability 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 covenants related to
minimum net worth and other financial ratios. The Company was in compliance as
of December 31, 2001 with the covenants of the Credit Agreement.

     The Company believes that cash flow from operations should be sufficient to
fund the Company's capital expenditure and working capital requirements through
2002.

Forward-Looking Statement

     This Report on Form 10-K contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are being provided pursuant to that legislation. In addition to the
other information contained in this Form 10-K, the following risk factors should
be carefully considered in evaluating the Company and its business. The
following is not intended as, and should not be considered, an exhaustive list
of relevant factors.

                                       16
<PAGE>

Obsolescence and Technological Change

     The communications industry is in a state of rapid technological change.
The introduction of new technologies, network architectures or changes in
industry standards can render the Company's existing products or products under
development obsolete or unmarketable. For example, satellite, wireless and other
communication technologies under development or currently being deployed may
represent a threat to copper, coaxial and fiber optic-based systems by reducing
the need for wire-line networks. Further, management anticipates that a number
of factors, including network capacity requirements, existing investments in
wire-line networks, security and long-term cost effectiveness, will result in
growth of wire-line networks. However, there can be no assurance that future
advances or further development of these or other new technologies will not have
a material adverse effect on the Company's business. The Company's growth
strategies are designed, in part, to take advantage of opportunities that the
Company believes are emerging as a result of the development of enhanced voice,
video, data and other transmission networks, and high-speed Internet access in
the telecommunications industry. There can be no assurance that demand resulting
from these emerging trends will continue or that the Company's products will be
met with market acceptance.

Importance of New Product Development to Growth

     A significant factor in the Company's ability to grow and remain
competitive will be its ability to anticipate changes in technology and industry
standards, and to successfully develop and introduce new products on a timely
basis. New product development often requires long-term forecasting of market
trends, development and implementation of new designs and processes, and
substantial capital commitment. Trends toward consolidation of the
communications industry and convergence of technologies may require the Company
to quickly adapt to rapidly changing market conditions and customer
requirements.

     The Company's manufacturing and marketing expertise has enabled it to
successfully develop and market new products in the past. However, any failure
by the Company to anticipate or respond in a cost-effective and timely manner to
technological developments or changes in industry standards or customer
requirements, or any significant delays in product development or introduction,
could have a material adverse effect on the Company's business, operating
results and financial condition.

Concentration of Customers; Limited Backlog

     The telecommunications industry is concentrated, with a relatively small
number of service providers accounting for a large percentage of the Company's
available market. Consequently, the Company's five largest customers accounted
for 40.4% and 44.1% of the Company's total net sales in 2000 and 2001,
respectively. Two customers, AT&T Broadband and AOL/Time Warner, accounted for
11.2% and 10.4%, respectively, of the Company's total net sales in 2000. One
customer, AOL/Time Warner, accounted for 11.2% of the Company's total net sales
in 2001. Mergers and acquisitions in the telecommunications industry, which are
expected to continue, not only increase the concentration of the industry and of
the Company's customer base, but also from time to time delay customers' capital
expenditures as newly merged service providers consolidate their operations.

     The Company's customers typically require prompt shipment of the Company's
products within a narrow timeframe. As a result, the Company has historically
operated with a relatively small backlog. Sales and operating results in any
quarter are principally dependent upon orders booked and products shipped in
that quarter. Further, the Company's customers generally do not enter into
long-term supply contracts providing for future purchase commitments for the
Company's products. These factors, when combined with the Company's operating
leverage (see "Operating Leverage" below) and the need to incur certain capital
expenditures and expenses in part based upon the expectation of future sales,
may place the Company's operating results at risk to changing customer buying
patterns. If sales levels in a particular period do not coincide with the
Company's expectations, operating results for that period may be materially and
adversely affected.

Dependence on the Telecommunications Industry

     The Company expects that sales to the telecommunications industry will
continue to represent a substantial portion of its total sales. Demand for
products within this industry depends primarily on capital spending by service
providers for constructing, rebuilding, maintaining or upgrading their systems.
The amount of capital spending and, therefore, the Company's sales and
profitability, are affected by a variety of factors, including general economic
conditions, access by service providers to financing, government regulation of
service providers, demand for services and technological

                                       17
<PAGE>

developments in the telecommunications technology. While the industry generally
experienced above average growth in the late 1990's, in 2000 and 2001 the
industry was adversely affected by service providers' reductions of their
capital expenditures.

     The Company's success is dependent upon continued demand for products used
in signal transmission systems from the communications industry generally,
including both CATV and telephone, which may be affected by factors beyond the
Company's control, including the convergence of video, voice, and data
transmission systems occurring within the CATV and telephone markets, continuing
consolidation of companies within those markets and the provision of Internet
access by cable operators and local telephone companies.

Price Fluctuations of Raw Materials; Availability of Complementary Products

     The Company's cost of sales may be materially affected by increases in the
market prices of the raw materials, including resins, used in the Company's
manufacturing processes. The Company does not engage in hedging transactions for
such materials, although it periodically enters into contracts for certain raw
materials for as much as one year or more. There can be no assurance that price
increases in raw materials can be passed on to the Company's customers through
increases in product prices. In addition, in order to position itself as a full-
line product supplier, the Company relies on certain manufacturers to supply
products, including grade level boxes, that complement the Company's own product
line. Although the Company believes there are multiple sources of supply for
these products, disruptions or delays in the supply of such products could have
a material adverse effect on sales of the Company's own products.

Energy Costs and Availability

     The Company's cost of sales may be materially affected by increases in the
market prices of electricity, natural gas and water used in the Company's
manufacturing processes. Recent developments in the State of California, the
site of the Company's largest manufacturing operation, not only suggest the
energy costs of California manufacturing firms are likely to increase, but also
raise the possibility of interruptions in the supply of energy to California's
manufacturing firms. There can be no assurance that the Company's energy costs
can be passed on to the Company's customers through increases in product prices.
Further, disruptions or delays in the supply of electricity, natural gas and
water to the Company could have a material adverse effect on sales of the
Company's products.

Acquisitions and Failure to Integrate Acquired Businesses

     There can be no assurance that the Company will be able to identify and
acquire attractive acquisition candidates, profitably manage any such acquired
businesses or successfully integrate such acquired businesses into the Company
without substantial costs, delays or other problems. Acquisitions involve a
number of special risks, including, but not limited to, adverse short-term
effects on the Company's reported financial condition or results of operations,
diversion of management's attention, dependence on retention, hiring and
training of key personnel, risks associated with unanticipated problems or
liabilities and amortization of acquired intangible assets, some or all of which
could have a material adverse effect on the Company's business, financial
condition or results of operations.

     In addition, there can be no assurance that any businesses acquired in the
future will be profitable at the time of acquisition or will achieve sales and
profitability justifying the Company's investment therein or that the Company
will realize the synergies expected from such acquisitions.

     The failure to obtain any or all of the desired results from acquisitions
could have a material adverse effect on the Company's business, financial
condition or results of operations.

Operating Leverage

     Because the related fixed costs for facilities, product development,
engineering, tooling and manufacturing are a relatively high percentage of total
costs, the Company's ability to operate profitably is dependent on generating a
sufficient volume of product sales, thereby spreading fixed costs over the sales
base. Due to this "operating leverage", a reduction in sales or the rate of
sales growth has had in the past and could have in the future a
disproportionately adverse effect on the Company's financial results.

                                       18
<PAGE>

Seasonality and Fluctuations in Operating Results

     The Company's business is seasonal in nature, with the first and fourth
quarters generally reflecting lower sales due to the impact of adverse weather
conditions on construction projects that may alter or postpone the needs of
customers for delivery of the Company's products. In addition, first quarter
sales also typically reflect customer delays in implementation of their annual
capital expenditure plans. The Company's operating results may also fluctuate
significantly from quarter to quarter due to several other factors, including
the volume and timing of orders from, and shipments to, major customers, the
timing of new product introductions and deployment as well as the availability
of products by the Company or its competitors, the overall level of capital
expenditures by CATV operators and telephone companies, market acceptance of new
and enhanced versions of the Company's products, variations in the mix of
products the Company sells, and the availability and costs of raw materials.

Risks Associated with International Operations

     International sales, including export sales from U.S. operations, accounted
for 34.5%, 32.5% and 27.2% of the Company's net sales in 1999, 2000 and 2001
respectively, and the Company expects that international sales may increase as a
percentage of sales in the future. Due to its international sales, the Company
is subject to the risks of conducting business internationally, including
unexpected changes in or impositions of legislative or regulatory requirements,
fluctuations in the U.S. dollar which could materially adversely affect U.S.
dollar revenues or operating expenses, tariffs and other barriers and
restrictions, longer collection cycles, greater difficulty in accounts
receivable collection, potentially adverse taxes and the burdens of complying
with a variety of international laws and communications standards. The Company
is also subject to general geopolitical risks, such as political and economic
instability and changes in diplomatic and trade relationships, in connection
with its international operations. There can be no assurance that these risks of
conducting business internationally will not have a material adverse effect on
the Company's business.

Competition

     The industries in which the Company operates are highly competitive. The
level and intensity of competition may increase in the future. The Company's
competition includes a company that has a significant market share in telephone
connectivity. The Company's business strategy includes continued focus on
telephone connectivity. There can be no assurance that the Company will be able
to compete successfully against its competitors, many of whom have access to
greater financial resources than the Company.

Disruptions at the Company's Manufacturing Facility; Lease with Related Party

     The majority of the Company's manufacturing operations are currently
located at the Company's facilities in Temecula, California, which also includes
the Company's principal warehouse and corporate office operations. The Company's
success depends in large part on the orderly operation of these facilities.
Because the Company's manufacturing operations and administrative departments
are concentrated at this facility, a fire, earthquake, power interruption or
other disaster at this facility could materially and adversely affect its
business and results of operations. The Company maintains standard property and
earthquake insurance on this facility as well as business interruption insurance
and back-up data systems.

     The Company currently leases a portion of its Temecula facilities from
William H. Channell, Sr., a principal stockholder and Chairman of the Board of
the Company. The Company believes the terms of these leases are no less
favorable than would be available from an unrelated third party after arm's
length negotiations. Although the Company has renewal options through the year
2015 under these leases, there can be no assurance that the Company and Mr.
Channell, Sr. will be able to agree on additional renewal terms for the
properties currently leased by the Company. The failure of the Company to renew
the leases would require the Company to relocate its existing facilities, which
could have a material adverse affect on the Company's business, financial
condition or results of operations.

Dependence on Key Personnel

     The future success of the Company depends in part on its ability to attract
and retain key executive, engineering, marketing and sales personnel. Key
personnel of the Company include Richard A. Cude, Chief Executive Officer,
William H. Channell, Jr., the President and Chief Operating Officer, and the
other executive officers of the Company. The market for qualified personnel in
the communications industry is competitive, and the loss of certain key
personnel could have a material adverse affect on the Company. The Company has
entered into employment contracts with Mr. Cude and Mr. Channell, Jr.

                                       19
<PAGE>

Changing Regulatory Environment

     The communications industry is subject to regulation in the United States
and other countries. Federal and state agencies regulate most of the Company's
domestic customers. Changes in current or future laws or regulations, in the
United States or elsewhere, could materially adversely affect the Company's
business.

Uncertain Ability to Manage Industry Volatility

     The Company's business has required, and is expected to continue to
require, significant Company resources in terms of personnel, management and
other infrastructure. The Company's ability to manage effectively the volatility
of the telecommunications industry requires it to attract, train, motivate and
manage new employees successfully, to integrate new employees into its overall
operations and to continue to improve its operational, financial and management
information systems.

Environmental Matters

     The Company is subject to a wide variety of federal, state and local
environmental laws and regulations and uses a limited number of chemicals that
are classified or could be classified as hazardous or similar substances.
Although management believes that the Company's operations are in compliance in
all material respects with current environmental laws and regulations, the
Company's failure to comply with such laws and regulations could have a material
adverse effect on the Company.

Selected Quarterly Financial Data

     Set forth below is certain unaudited quarterly financial information. (See
also Footnote Q to the Financial Statements included elsewhere herein.) The
Company believes that all necessary adjustments, consisting only of normal
recurring adjustments, have been included in the amounts stated below to present
fairly, and in accordance with generally accepted accounting principles, the
selected quarterly information when read in conjunction with the Financial
Statements.

<TABLE>
<CAPTION>
                                  December 31, 2000                         December 31, 2001
                        -------------------------------------   --------------------------------------
                                (amounts in thousands)                  (amounts in thousands)
                          1st       2nd       3rd       4th       1st       2nd        3rd       4th
                        Quarter   Quarter   Quarter   Quarter   Quarter   Quarter    Quarter   Quarter
                        -------   -------   -------   -------   -------   -------   --------   -------
<S>                     <C>       <C>       <C>       <C>       <C>       <C>       <C>        <C>
Net sales............   $32,250   $35,722   $33,182   $27,025   $21,967   $25,762   $ 22,336   $18,633
Gross profit (loss)..    11,241    13,884    12,525     9,421     6,512     8,383     (1,700)    5,611
Income (loss) from
   operations........     3,490     6,053     4,058    (5,098)     (902)    1,475    (30,802)      698
Income (loss) before
   income taxes......     2,887     5,310     3,541    (6,094)   (1,719)      579    (31,895)     (370)
</TABLE>

Item 7a. 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 rates
and foreign currency exchange rates. All financial instruments held by the
Company and described below are held for purposes other than trading.

Market Risk

     The Company's credit facility allows the outstanding balance to bear
interest at a variable rate based on the Administrative Agent bank's base rate.
The credit facility exposes operations to changes in short-term interest rates
since the interest rates on the credit facility are variable.

                                       20
<PAGE>

     If the variable rates on the Company's credit facility were to increase by
1% from the rate at December 31, 2001, and if the Company had borrowed during
all of fiscal 2001 the maximum amount ($40.0 million) available at any time in
2001 under its credit facility at the increased interest rate, the Company's
interest expense would have increased, and net loss would have increased by $0.2
million. A marginal income tax rate of 38.0% was used. This analysis does not
consider the effects of economic activity on the Company's sales and
profitability in such an environment.

Foreign Exchange Risk

     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 net 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 exchange and other similar contracts to reduce its
economic exposure to changes in exchange rates because the associated risk is
not considered significant.

Item 8. Financial Statements and Supplementary Data
        -------------------------------------------

Consolidated Financial Statements of Channell Commercial Corporation are as
follows:

<TABLE>
<S>                                                                                                   <C>
Report of Independent Certified Public Accountants ................................................   F-1
Consolidated Balance Sheets as of December 31, 2000 and December 31, 2001 .........................   F-2
Consolidated Statements of Operations and Comprehensive Income for the years ended
   December 31, 1999, December 31, 2000, and December 31, 2001 ....................................   F-4
Consolidated Statement of Stockholders' Equity for the years ended December 31, 1999,
   December 31, 2000 and  December 31, 2001 .......................................................   F-5
Consolidated Statement of Cash Flows for the years ended December 31, 1999, December 31, 2000,
   and December 31, 2001 ..........................................................................   F-6
Notes to Consolidated Financial Statements ........................................................   F-8
</TABLE>

Financial statement schedules are as follows:

     Schedule II - Valuation and Qualifying Accounts

     All remaining schedules are omitted because they are not applicable, or the
     required information is included in the financial statements or the notes
     thereto.

Item 9. Changes in and Disagreements with Accountants on Accounting and
        ---------------------------------------------------------------
        Financial Disclosure
        --------------------

     There has been no Form 8-K filed reporting a change of accountants or
reporting disagreements on any matter of accounting principle, practice,
financial statement disclosure or auditing scope or procedure.

                                       21
<PAGE>

                                    PART III

Item 10. Executive Officers and Directors
         --------------------------------

     The following table sets forth information with respect to the Company's
executive officers and directors and their ages as of December 31, 2001.

<TABLE>
<CAPTION>
             Name                       Age                       Positions
             ----                       ----                      ---------
<S>                                      <C>       <C>
William H. Channell, Sr. .........       73        Chairman of the Board

Richard A. Cude ..................       68        Chief Executive Officer and Director

William H. Channell, Jr. .........       44        President, Chief Operating Officer
                                                      and Director

Jacqueline M. Channell............       70        Director

Eugene R. Schutt, Jr. ............       48        Director

Peter J. Hicks....................       52        Secretary and Director

Edward J. Burke...................       46        Vice President, Corporate Engineering

Graham Gardner....................       53        Managing Director, Europe

Timothy Hankinson.................       49        Managing Director, Australia and Asia

John B. Kaiser....................       46        Vice President, North American Sales

Thomas Liguori....................       43        Chief Financial Officer

Gary M. Napolitano................       46        Vice President, RF Products

Andrew M. Zogby...................       41        Vice President, Corporate Marketing
</TABLE>

     The Company's Board of Directors was comprised of six members at December
31, 2001. The directors of the Company are staggered into three classes, with
the directors in a single class elected at each annual meeting of stockholders
to serve for a term of three years or until their successors have been elected
and qualified. The authorized number of members of the Board of Directors is
currently seven. The executive officers of the Company serve at the pleasure of
the Board of Directors.

     William H. Channell, Sr., the son of the Company's founder, James W.
Channell, has been the Chairman of the Board since July, 1996. From 1966 to
November, 2001, Mr. Channell, Sr. was Chief Executive Officer. Mr. Channell, Sr.
is a co-trustee of the Channell Family Trust, which is a principal stockholder
of the Company, and is the husband of Jacqueline M. Channell and the father of
William H. Channell, Jr. His term as a Director expires in 2002.

     Richard A. Cude became a Director of the Company during 1996 and became
Chief Executive Officer in November, 2001. Mr. Cude was the General Manager of
the Los Angeles Support Center for Courtaulds PLC London, England and served in
various capacities with Courtaulds from 1988 until his retirement in 1998. Prior
to 1998, Mr. Cude had been with various companies involved in the manufacturing
and marketing of products to the aerospace and telecommunications industries.
Mr. Cude's term as a Director expires in 2003.

                                       22
<PAGE>

     William H. Channell, Jr. has been President and Chief Operating Officer of
the Company since 1996. He has been a Director of the Company since 1984. Since
joining the Company in 1979, Mr. Channell, Jr. has held the positions of
Executive Vice President, Director of Marketing and National Sales Manager. Mr.
Channell, Jr. is a principal stockholder of the Company and is the son of
William H. Channell, Sr. and Jacqueline M. Channell. His term as a Director
expires in 2003.

     Jacqueline M. Channell has been a Director since 1966. She is a co-trustee
of the Channell Family Trust, which is a principal stockholder of the Company,
and is the wife of William H. Channell, Sr. and the mother of William H.
Channell, Jr. Mrs. Channell's term as a Director expires in 2004.

     Eugene R. Schutt, Jr. has been a Director of the Company since 1996. Mr.
Schutt is the President and CEO of FirstDoor.com, Inc. Prior to joining
FirstDoor.com, he served as CEO of CD1Financial.com, an automotive finance and
leasing company owned by CarsDirect.com. Mr. Schutt has also served as President
of Avco Financial Services and Pratt Industries, Inc. Mr. Schutt has over 26
years of experience in executive management positions and has served on the
board of directors of numerous companies. Mr. Schutt's term as a Director
expires in 2002.

     Peter J. Hicks became a Director of the Company in March, 2000 and became
Secretary in November of 2001. Mr. Hicks is a managing director of Linx
Partners, an investment firm specializing in private industrial equity
investments. From 1987 to 1999, Mr. Hicks was a managing director of Schroder
and Company. Mr. Hicks has more than 23 years of investment banking and
corporate finance experience and has served on the board of directors of
numerous companies. Mr. Hicks' term as a Director expires in 2004.

     Edward J. Burke has been the Company's Vice President, Corporate
Engineering since May 1996 and has served in various similar capacities with the
Company since 1984. Mr. Burke has held various technical positions in the
thermoplastic product engineering and tooling design field since 1978.

     Graham Gardner joined the Company in 1998 as Managing Director, Europe as a
result of the acquisition of Egerton. Mr. Gardner had been Managing Director of
Egerton since 1986. Mr. Gardner has been in the telecommunications equipment
industry since 1971.

     Timothy Hankinson joined the Company in 1998 as Managing Director,
Australia and Asia as a result of the acquisition of Egerton. Mr. Hankinson had
been Managing Director of Egerton since 1991. Prior to 1991, Mr. Hankinson had
served as General Manager of an Australian aircraft manufacturer.

     John B. Kaiser has been the Company's Vice President, North American Sales
since 1999. He held the position of Director of Marketing for the Company from
1987 to 1991 and he was Vice President, Broadband Division from 1995 through
1998. Between 1991 and 1995, Mr. Kaiser held the position of District Manager,
Southern California, for the General Polymers Division of Ashland Chemical, a
thermoplastics distributor, where his responsibilities included general
management of district operations, including sales, warehousing, procurement and
logistics.

     Thomas Liguori has been the Company's Chief Financial Officer since April
2000. Mr. Liguori joined the Company from Dole Food Company, where he served as
Chief Financial Officer of Dole Europe in Paris, France. From 1992 to 1996 he
held various financial positions with Teledyne Inc., including Vice President,
Finance for a manufacturer of consumer and industrial products. From 1986 to
1992 Mr. Liguori was a management consultant with Deloitte & Touche. He has 20
years of financial, accounting and management experience.

     Gary M. Napolitano joined the Company in January 1997 as Vice President and
General Manager of RF Products as a result of the acquisition of RMS. Mr.
Napolitano had been President of RMS since 1992 and was the Vice President,
Finance prior to becoming President.

     Andrew M. Zogby has been the Company's Vice President, Corporate Marketing
since March 1996. Prior to joining the Company, Mr. Zogby was Director of
Strategic Marketing, Broadband Connectivity Group for ADC Telecommunications, a
publicly traded, telecommunications equipment supplier to both telephone and
CATV network providers worldwide. He had been with ADC Telecommunications since
1990. Mr. Zogby has held various technical marketing positions in the
telecommunications equipment industry since 1984.

                                       23
<PAGE>

Compensation of Directors

     Directors who are also officers of the Company (except as indicated below)
receive no additional compensation for their services as directors. The
Company's non-management directors receive compensation consisting of an annual
retainer fee of $15,000 plus $1,000 for attendance at any meeting of the Board
of Directors or any committee thereof, plus direct out-of-pocket costs related
to such attendance. Mrs. Channell also receives non-management director retainer
and attendance fees. Upon the retirement of William H. Channell, Sr. as Chief
Executive Officer, Mr. Channell, Sr. also receives a non-management retainer and
attendance fee. In addition, pursuant to the Company's 1996 Incentive Stock Plan
(as described below), each non-management director (including Mrs. Channell)
received options to acquire 1,000 shares of the Company's Common Stock with an
exercise price equal to the Initial Public Offering price, and on the date of
each of the Company's annual stockholder meetings after the Initial Public
Offering, each non-management director (including non-executive officers who
serve as directors) serving on the Board of Directors immediately following such
meeting are to receive options to acquire an additional 1,000 shares of the
Company's Common Stock with an exercise price equal to the market value of the
Common Stock on the date such options are granted. These options will become
exercisable at a rate of 33 1/3% per year commencing on the first anniversary of
the date of issuance and will have a term of 10 years.

Section 16(a) Beneficial Ownership Reporting Compliance

     Information required by Item 405 of Regulation S-K is incorporated by
reference to the Company's Proxy Statement relating to its 2002 annual meeting
of stockholders.

Item 11. Executive Compensation
         ----------------------

Summary Compensation Table

     The following table sets forth the annual and long-term compensation of the
Company's Chief Executive Officer and the five additional most highly
compensated executive officers for the years ended December 31, 1999, 2000 and
2001 (collectively, the "Named Officers").

<TABLE>
<CAPTION>
                                          Annual Compensation     Other Annual    Restricted    Underlying     LTIP      All Other
Name and Positions                      ----------------------    Compensation   Stock Awards    Options/    Payouts   Compensation
Held with the Company           Years   Salary ($)   Bonus ($)       ($)(1)          ($)          SARs(#)      ($)       ($)(2)
---------------------           -----   ----------   ---------    ------------   ------------   ----------   -------   ------------
<S>                              <C>      <C>        <C>            <C>              <C>         <C>           <C>          <C>
William H. Channell, Sr .....    2001     239,455         --            --           --               --       --              --
    Chairman of the Board        2000     420,000    166,667            --           --               --       --              --
                                 1999     420,000         --            --           --               --       --              --

Richard A. Cude  (3) ........    2001      19,231         --        35,000(4)        --          101,000       --              --
    Chief Executive Officer      2000          --         --        26,000           --            1,000       --              --
                                 1999          --         --        22,000           --            1,000       --              --

William H. Channell, Jr .....    2001     598,000     67,260(5)         --           --           50,000       --           1,620
    President and Chief          2000     598,000    605,000(6)         --           --               --       --           3,588
    Operating Officer            1999     520,000         --            --           --           50,000       --           3,120

Thomas Liguori ..............    2001     188,200         --            --           --           44,140       --           2,212
    Chief Financial Officer      2000     150,000     78,000            --           --           25,000       --             900

Edward J. Burke .............    2001     142,057         --            --           --            7,050       --           2,193
    Vice President,              2000     145,509     88,405            --           --           10,000       --           4,365
    Corporate Engineering        1999     141,505     87,141            --           --            5,500       --           4,245

John B. Kaiser ..............    2001     150,589         --            --           --            7,470       --           2,325
    Vice President,              2000     149,056    117,397            --           --            5,800       --           3,953
    North American Sales         1999     139,572     31,697            --           --            6,000       --           3,780

Andrew M. Zogby .............    2001     168,030         --            --           --            8,310       --           2,594
    Vice President,              2000     172,113    114,983            --           --            6,750       --           5,163
    Corporate Marketing          1999     167,205     24,335            --           --            6,000       --           5,000
</TABLE>

(1)  For each individual named, compensation excludes perquisites and other
     personal benefits that did not exceed the lesser of $50,000 or 10% of the
     total annual salary and bonus reported for such individual.

                                       24
<PAGE>

(2)  Payments to the Company's 401K plan.
(3)  Richard A. Cude became Chief Executive Officer in November, 2001.
(4)  Richard A. Cude's Other Annual Compensation in 1999, 2000 and 2001 was for
     his services as a Company Director.
(5)  The bonus of William H. Channell, Jr. shown in 2001 is based on Company
     performance in 2000. (See "Incentive Compensation Plan".)
(6)  The bonus of William H. Channell, Jr. shown in 2000 is based on Company
     performance in 1999. (See "Incentive Compensation Plan".)

1996 Incentive Stock Plan

     The Company's 1996 Incentive Stock Plan (the "Stock Plan") currently
permits the granting to the Company's key employees, directors and other service
providers of (i) options to purchase shares of the Company's Common Stock and
(ii) shares of the Company's Common Stock that are subject to certain vesting
and other restrictions ("Restricted Stock"). Initially, a maximum of 750,000
shares of Common Stock were reserved for issuance under the Stock Plan. In 1999,
the Stock Plan was amended to allow a maximum of 1,500,000 shares to be issued
under the Plan.

     During 2001, the Company granted 274,330 "non-qualified" options to 18
employees and directors. After cancellation of options previously issued to
terminated employees, there were options to acquire 1,090,383 shares of Common
Stock outstanding at December 31, 2001. These options vest at a rate of 33 1/3%
per year beginning on the first anniversary of the date of issuance and have a
term of 10 years.

     The Stock Plan is administered by the Compensation Committee of the Board
of Directors. The aggregate number of stock options or shares of Restricted
Stock that may be granted to any single participant under the Stock Plan during
any fiscal year of the Company is 100,000. The purpose of the Stock Plan is to
secure for the Company and its stockholders the benefits arising from stock
ownership by key employees, directors and other service providers selected by
the Compensation Committee.

     All options granted under the Stock Plan are non-transferable and
exercisable in installments determined by the Compensation Committee, except
that each option is to be exercisable in minimum annual installments of 20%
commencing with the first anniversary of the option's grant date. Each option
granted has a term specified in the option agreement, but all options expire no
later than ten years from the date of grant. Options under the Stock Plan may be
designated as "incentive stock options" for federal income tax purposes or as
options which are not qualified for such treatment, or "non-qualified stock
options". In the case of incentive stock options, the exercise price must be at
least equal to the fair market value of the stock on the date the option is
granted. The exercise price of a non-qualified option need not be equal to the
fair market value of the stock at the date of grant, but may be granted with any
exercise price which is not less than 85% of the fair market value at the time
the option is granted, as the Compensation Committee may determine. The
aggregate fair market value (determined at the time the options are granted) of
the shares covered by incentive stock options granted to any employee under the
Stock Plan (or any other plan of the Company) which may become exercisable for
the first time in any one calendar year may not exceed $100,000.

     Upon exercise of any option, the purchase price must generally be paid in
full either in cash or by certified or cashier's check. However, in the
discretion of the Compensation Committee, the terms of a stock option grant may
permit payment of the purchase price by means of (i) cancellation of
indebtedness owed by the Company, (ii) delivery of shares of Common Stock
already owned by the optionee (valued at fair market value as of the date of
exercise), (iii) delivery of a promissory note secured by the shares issued,
(iv) delivery of a portion of the shares issuable upon exercise (i.e., exercise
for the "spread" on the option payable in shares), or (v) any combination of the
foregoing or any other means permitted by the Compensation Committee.

     Any grants of restricted stock will be made pursuant to Restricted Stock
Agreements, which will provide for vesting of shares at a rate to be determined
by the Compensation Committee with respect to each grant of restricted stock.
Until vested, shares of restricted stock are generally non-transferable and are
forfeited upon termination of employment. The Company has not made any grants of
restricted stock.

                                       25
<PAGE>

Options/SAR Grants Table

     The following table sets forth the stock options granted to the named
officers for the year ended December 31, 2001.

<TABLE>
<CAPTION>
                                                                                      Potential
                                         % of Total                                    Realized
                             Number of    Options/                                     Value at
                            Securities      SARs                                    Assumed Annual
                            Underlying   Granted to   Exercise                   Rates of Stock Price
                             Options/     Employees    on Base                      Appreciation of
                               SARs       in Fiscal    Price      Expiration      Option     Term
         Name                Granted     Year 2001     ($/Sh)        Date           5%        10%
         ----               ----------   ----------   --------   -------------   --------   ---------
<S>                         <C>             <C>        <C>       <C>              <C>        <C>
William H. Channell, Sr.         --           --           --           --        $    --    $     --

Richard A. Cude               1,000          0.4%       6.800      May 2011         4,276      10,837
                            100,000         36.5%       3.220    November 2011    202,504     513,185

William H. Channell, Jr.     50,000         18.2%      11.875    February 2011    373,406     946,285

Thomas Liguori               10,000          3.6%       6.500      May 2011        40,878     103.593
                             25,000          9.1%       3.160    October 2011      49,683     125,906
                              9,140          3.3%       3.250    December 2011     18,681      47,342

Edward J. Burke                 200          0.1%       7.125    February 2011        896       2,271
                              6,850          2.5%       3.250    December 2011     14,001      35,481

John B. Kaiser                  200          0.1%       7.125    February 2011        896       2,271
                              7,270          2.7%       3.250    December 2011     14,859      37,656

Andrew Zogby                    200          0.1%       7.125    February 2011        896       2,271
                              8,110          3.0%       3.250    December 2011     16,576      42,007
</TABLE>

Aggregated Option/SAR Exercises in Last Fiscal Year and December 31, 2001
Option/SAR Values

     The following table sets forth the number and value of outstanding stock
options at December 31, 2001. No options have been exercised in 2001.

<TABLE>
<CAPTION>
                                                    Number of Shares
                            Shares                Underlying Unexercised     Value of Unexercised In-
                           Acquired                     Options/SARs             the-Money Options/SARs
                              on        Value      at December 31, 2001         at December 31, 2001
    Name                   Exercise   Realized   Exercisable/Unexercisable   Exercisable/Unexercisable
  ---------                --------   --------   -------------------------   --------------------------
<S>                           <C>      <C>            <C>                          <C>
William H. Channell, Sr.      --       $ --                         --             $   -- /$ --

Richard A. Cude               --         --            4,001 / 101,999               -- /$3,000

William H. Channell, Jr.      --         --           208,334 / 66,666                  -- / --

Thomas Liguori                --         --             8,334 / 60,806               -- /$2,250

Edward J. Burke               --         --            33,001 / 15,549                  -- / --

John B. Kaiser                --         --            31,934 / 13,336                  -- / --

Andrew Zogby                  --         --            35,250 / 50,060                  -- / --
</TABLE>

                                       26
<PAGE>

Profit Sharing and Savings Plans

     The Company maintains a plan, established in 1993, in accordance with
Section 401(K) of the Internal Revenue Code. Under the terms of this plan,
eligible employees may make voluntary contributions to the extent allowable by
law. Employees of the Company are eligible to participate in the plan after 90
days of employment. Matching contributions by the Company to this plan are
discretionary and will not exceed that allowable for Federal income tax
purposes. The Company's contributions are vested over five years in annual
increments.

Employment Contracts

     The Company entered into a one-year employment agreement, renewable
annually, with Richard A. Cude in November, 2001, when he became Chief Executive
Officer. Mr. Cude's annual salary is $250,000. Mr. Cude is entitled to
participate in the Incentive Stock Plan, the 401(k) Plan and the Incentive
Compensation Plan. Mr. Cude is also entitled to certain other benefits paid for
by the Company, including an automobile allowance, health insurance and sick
leave, in accordance with the Company's customary practices for senior executive
officers.

     The Company entered in July, 1996 into a five year employment agreement,
renewable every five years, with William H. Channell, Jr. Mr. Channell, Jr.'s
annual salary is $598,000. Mr. Channell, Jr. is entitled to participate in the
Incentive Stock Plan, the 401(k) Plan and the Incentive Compensation Plan. Mr.
Channell, Jr. is also entitled to certain other benefits paid for by the
Company, including an automobile allowance, health insurance and sick leave, in
accordance with the Company's customary practices for senior executive officers.

     The Company had an employment agreement with Mr. William H. Channell, Sr.
when he served as Chief Executive Officer, the position he held at the time of
his retirement as an employee in November, 2001. His initial salary under the
agreement was $520,000. Mr. Channell, Sr.'s salary was subject to annual cost of
living increases. In 1999, Mr. Channell, Sr. reduced his hours of contribution
to the Company. He agreed to reduce his compensation proportionally by $100,000
to $420,000. In 2001, Mr. Channell, Sr. further reduced his hours with the
Company and agreed to reduce his compensation to $250,000. In November 2001, Mr.
Channell, Sr. resigned as an employee of the Company. Mr. Channell, Sr.'s
benefits included (i) during the term of the agreement, the payment of premiums
for a term disability policy providing for $250,000 in annual benefits in the
case of his temporary or permanent disability, (ii) during the lifetime of Mr.
Channell, Sr. and his wife, Jacqueline M. Channell, medical insurance for each
of Mr. and Mrs. Channell comparable to that provided to the Company's senior
executive officers, subject to a premium reimbursement obligation in the case of
the medical insurance provided to Mrs. Channell, and (iii) during Mr. Channell,
Sr.'s lifetime, a portion of the premiums on a life insurance policy owned by
Mr. Channell, Sr., under which Mrs. Channell is the beneficiary.

Incentive Compensation Plan

     Effective beginning in the Company's 1996 fiscal year, the Board of
Directors adopted the Company's 1996 Performance-Based Annual Incentive
Compensation Plan (the "Incentive Plan"). Eligible participants consist of key
employees of the Company. The Incentive Plan is administered by the Compensation
Committee of the Board of Directors. The amount of awards granted under the
Incentive Plan are determined based on an objective computation of the actual
performance of the Company relative to pre-established performance goals.
Measures of performance may include level of sales, EBITDA, net income, income
from operations, earnings per share, return on sales, expense reductions, return
on capital, stock appreciation, return on equity, invention, design or
development of proprietary products or improvements thereto (patented or
otherwise), or sales of such proprietary products or improvements or
profitability achieved from sales of proprietary products or improvements.
Awards under the Incentive Plan are payable in cash or, at the election of the
Compensation Committee, Common Stock of the Company. Mr. William H. Channell,
Jr., the Company's President, receives a bonus calculated using the factors
above, but such bonus is earned and payable based on continued service in
subsequent years. The Compensation Committee may establish a bonus pool from
which all awards under the Incentive Plan may be granted as well as individual,
non-bonus pool awards. No participant in the Incentive Plan may receive awards
under such plan during any fiscal year of the Company in excess of $1,000,000 or
100,000 shares of Common Stock.

     The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. During 2001, this Committee
was composed of Mr. Richard A. Cude, Mr. Eugene R. Schutt, Jr. and Mr. Peter J.
Hicks. It is the responsibility of the Committee to review and approve the
Company's executive compensation plans and policies and to monitor these
compensation programs in relation to the performance of the particular executive
and the overall performance of the Company.

                                       27
<PAGE>

     The following is a line graph presentation comparing the Company's
cumulative total return since the Initial Public Offering in July 1996 to
December 31, 2001 with the performance of the NASDAQ market, the S & P
Industrials and a similar Industry Index for the same period.

                                    [CHART]

                                   Line Chart

                  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
                     AMONG CHANNELL COMMERCIAL CORPORATION,
        THE NASDAQ STOCK MARKET (U.S.) INDEX,THE S & P INDUSTRIALS INDEX
                  AND THE S & P COMMUNICATIONS EQUIPMENT INDEX

<TABLE>
<CAPTION>
                                                Cumulative Total Return
                                  ---------------------------------------------------
                                   12/96    12/97    12/98    12/99    12/00    12/01
<S>                               <C>      <C>       <C>      <C>      <C>      <C>
CHANNELL COMMERCIAL CORPORATION   100.00   101.01    67.68    92.43    52.53    26.26
NASDAQ STOCK MARKET (U.S.)        100.00   122.48   172.68   320.89   193.01   153.15
S & P INDUSTRIALS                 100.00   131.02   175.18   220.51   184.67   163.12
S & P COMMUNICATIONS EQUIPMENT    100.00   130.29   229.50   503.98   220.37    80.98
</TABLE>

*$100 invested on 12/31/96 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.

Item 12. Security Ownership of Certain Beneficial Owners and Management
         --------------------------------------------------------------

     The following table sets forth certain information concerning those persons
who are known by management of the Company to be beneficial owners of more than
5% of the Company's outstanding common stock (as provided to the Company by such
persons or the record holder of such shares).

<TABLE>
<CAPTION>
                                         Amount and Nature of Beneficial Ownership
                                         -----------------------------------------
      Name and Address                     No. of Shares   Exercisable                Percent
    of Beneficial Owner                        Owned       Options (1)     Total     of Class
------------------------------           ---------------   -----------   ---------   --------
<S>                                         <C>              <C>         <C>          <C>
William H. Channell Sr. and                 3,250,830          4,334     3,255,164    36.1%
Jacqueline M. Channell, as co-trustees
of the Channell Family Trust
26040 Ynez Road
Temecula, CA 92591

William H. Channell, Jr.                      915,250        225,001     1,140,251    12.6%
26040 Ynez Road
Temecula, CA 92591
</TABLE>

                                       28
<PAGE>

<TABLE>
<S>                                            <C>                <C>      <C>           <C>
Royce & Associates, Inc.                       714,200            --       714,200       7.9%
1414 Avenue of the Americas
New York, NY 10019

State of Wisconsin Investment Board            701,300            --       701,300       7.8%
P.O. Box 7842
Madison, WI 53707

Wellington Management Company, LLP             672,900            --       672,900       7.5%
75 State Street
Boston, MA 02109

Rutabaga Capital Management, LLC               600,500            --       600,500       6.7%
64 Broad Street
Boston, MA 02109

The Taylor Family Trust                        469,960            --       469,960       5.2%
1450 Ravenswood Lane
Riverside, CA 2506

Carrie S. Channell                             450,000            --       450,000       5.0%
2429 Cahuilla Hills Drive
Palm Springs, CA 92264
</TABLE>

(1)  Refers to the number of shares covered by options exercisable within 60
     days of March 15, 2002.

Security Ownership of Management

     The following table sets forth certain information, as of March 15, 2002,
concerning the beneficial ownership of common stock by the Company's directors
and named executive officers, and all directors and executive officers of the
Company as a group.

<TABLE>
<CAPTION>
                                        Amount and Nature of Beneficial Ownership
                                       ------------------------------------------
                                       No. of Shares    Exercisable                  Percent
    Name of Beneficial Owner               Owned         Options (1)       Total     of Class
--------------------------------       -------------    ------------    ---------    --------

<S>                                      <C>              <C>           <C>           <C>
 William H. Channell Sr.                 3,250,830             --       3,250,830     36.0%

 Richard A. Cude                             1,347          4,334           5,681      0.1%

 Jacqueline M. Channell                         --          4,334           4,334      0.0%

 Peter J. Hicks                                 --            667             667      0.0%

 Eugene R. Schutt, Jr.                       2,000          4,334           6,334      0.1%

 William H. Channell, Jr.                  915,250        225,001       1,140,251     12.3%

 Thomas Liguori                             15,400         20,001          25,501      0.3%

 Edward J. Burke                             1,000         33,068          34,068      0.4%

 John B. Kaiser                                890         32,001          32,891      0.4%

 Andrew Zogby                                  300         35,317          35,617      0.4%

 All present directors and executive
  officers as a group (13 in number)     4,177,117        401,292       4,578,409     48.6%
</TABLE>

                                       29
<PAGE>

(1)  Refers to the number of shares covered by options exercisable within 60
     days of March 15, 2002.

Item 13. Certain Relationships and Related Transactions
         ----------------------------------------------

     The Company has two leases for approximately 261,000 square feet of
manufacturing, warehouse and office space in Temecula, California, with William
H. Channell, Sr., a principal stockholder and the Chairman of the Board of the
Company. The term of the first lease is through December 31, 2005, with two
five-year renewal options. Additionally, an adjacent 100,000 square foot
building was constructed and completed in 1996. Subsequent to December 31, 1996,
the Company guaranteed debt of Mr. Channell, Sr. of approximately $2.7 million
incurred in connection with construction of the building. The loan amount
subject to the guarantee is expected to decline before expiring in 2016. At
December 31, 2001, the outstanding loan balance subject to the guarantee totaled
$1.9 million. It is not practicable to estimate the fair value of the guarantee;
however, the Company does not anticipate that it will incur losses as a result
of this guarantee. This building is also being leased from Mr. Channell, Sr.
through 2005, with two five-year renewal options. Both leases provide for
payments of insurance, repairs, maintenance and property taxes. Rent expense
paid under the leases was $1.1 million, $1.2 million and $1.1 million for the
years ended December 31, 1999, 2000 and 2001, respectively. The Company believes
that the terms of these leases are no less favorable to the Company than could
be obtained from an independent third party. As part of the restructuring plan
announced in the third quarter of 2001, the Company has vacated warehouse space
in one of the facilities. The Company intends to sublease the vacated warehouse
space.

     In January 2001, the Company guaranteed personal debt of the Company's
President and Chief Operating Officer of $0.6 million. The guarantee was
canceled by the lender in March 2002. In connection with this guarantee, the
Company's President and Chief Operating Officer paid the Company a fee equal to
1% of the loan balance and provided as collateral to the Company 300,000 shares
of Company stock. It is not practicable to estimate the fair value of the
guarantee.

     During 2001 the Company paid certain personal expenses on behalf of the
President and Chief Operating Officer (in part through a corporate credit card
which is reimbursed pursuant to an agreement between the Company and the
President). These amounts are non-interest bearing. The maximum balance
outstanding was $105,116 and the balance at December 31, 2001 was $48,166.

     The Company purchased insurance through Talbot Agency Inc. in 1999, 2000
and 2001. Roy H. Taylor, President of Talbot Agency Inc. is a co-trustee of the
Taylor Family Trust, a beneficial owner of more than 5% of the Company's
outstanding stock. The total premiums and fees paid for insurance obtained
through Talbot Agency Inc. for the years ended December 31, 1999, 2000 and 2001
was $1.6 million, $1.4 million and $1.3 million respectively, which included
commissions earned.

                                       30
<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
         ---------------------------------------------------------------
(a)  The following financial statements and schedules are filed as a part of
     this report:
     (1)  Consolidated Financial Statements See index included in Part II, Item
          8.
     (2)  Consolidated Financial Statement Schedules Schedule II - Valuation and
          Qualifying Accounts All remaining schedules are omitted because they
          are not applicable, or the required information is included in the
          financial statements or notes thereto.
     (a)(3) and (c).  The following exhibits are filed herewith:
(5)  Filed herewith.

Exhibit
Number            Description
-------           -----------
3.1       Restated Certificate of Incorporation of the Company (1)
3.2       Bylaws of the Company (1)
4         Form of Common Stock Certificate (1)
10.1      Tax Agreement between the Company and the Existing Stockholders (1)
10.2      Channell Commercial Corporation 1996 Incentive Stock Plan (including
          form of Stock Option Agreements and Restricted Stock Agreement) (1)
10.3      Senior Revolving Loan Agreement dated as of May 1, 1998, between the
          Company and Fleet National Bank (3)
10.4      Second Amendment to Credit Agreement and Consent dated December 29,
          1999, between the Company and Fleet National Bank (6)
10.5      Second Amendment to Security Agreement dated February 1, 2000, between
          the Company and Fleet National Bank (6)
10.6      Third Amendment to Credit Agreement and accompanying Notes dated July
          20, 2000, between the Company and Fleet National Bank (6)
10.7      Fourth Amendment to Credit Agreement dated May 31, 2001, between the
          Company and Fleet National Bank (7)
10.8      Employment Agreement between the Company and William H. Channell, Sr.
          (1)
10.9      Employment Agreement between the Company and William H. Channell, Jr.
          (1)
10.10     Channell Commercial Corporation 1996 Performance-Based Annual
          Incentive Compensation Plan (1)
10.11     Lease dated December 22, 1989 between the Company and William H.
          Channell, Sr., as amended (1)
10.12     Lease dated May 29, 1996 between the Company and the Channell Family
          Trust (1)
10.14     Lease dated September 24, 1997 between the Company and SCI North
          Carolina Limited Partnership (4)
10.15     Lease dated October 26, 2000 between the Company and Belston
          Developments Inc. (6)
10.16     Lease Agreement dated as of March 1, 1996 between Winthrop Resources
          Corp. and the Company (1)
10.17     Form of Indemnity Agreement (1)
10.18     Form of Agreement Regarding Intellectual Property (1)
10.19     401(k) Plan of the Company (5)
10.22     A.C. Egerton (Holdings) PLC Share Purchase Agreement (3)
10.23     Amendment to Employment Agreement, William H. Channell Jr., dated
          December 31, 1998 (5)
10.24     Agreement dated November 7, 2001 between the Company and Fleet Bank,
          as Administrative Agent (8)
10.25     Employment Agreement between the Company and Richard A. Cude. (9)
10.26     Fifth Amendment, dated December 17, 2001, to the Credit Agreement
          between the Company and Fleet National Bank, as Administrative Agent
          for the lenders. (9)
10.27     Sixth Amendment, dated March 21, 2002, to the Credit Agreement
          between the Company and Fleet National Bank, as Administrative Agent
          for the lenders. (9)

                                       31
<PAGE>

11        Computation of Proforma Income per Share (2)
23        Consent of Independent Certified Public Accountants (9)
(b)  Reports on Form 8-K No reports on Form 8-K were filed during the quarter
     ended September 30, 2001.

(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)  Filed herewith

                                       32
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Channell Commercial Corporation

We have audited the consolidated balance sheets of Channell Commercial
Corporation as of December 31, 2000 and 2001, and the related consolidated
statements of operations and comprehensive income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Channell
Commercial Corporation as of December 31, 2000 and 2001, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.

We have also audited Schedule II of Channell Commercial Corporation for each of
the three years ended December 31, 2001. In our opinion, this schedule presents
fairly, in all material respects, the information required to be set forth
therein.

/s/ Grant Thornton LLP
Los Angeles, California
February 8, 2002, except for Note F as to which
the date is March 1, 2002

                                      F-1
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,
                             (amounts in thousands)

                                                              2000         2001
                                                            --------     -------

                               ASSETS
CURRENT ASSETS
    Cash and cash equivalents                               $    913     $ 8,762
    Accounts receivable, net                                  24,007      13,301
    Inventories                                               21,620       9,776
    Deferred income taxes                                      1,171       1,473
    Prepaid expenses and miscellaneous receivables             1,966       1,238
    Income taxes receivable                                    1,854       5,076
                                                            --------     -------

                           Total current assets               51,531      39,626

PROPERTY AND EQUIPMENT, net                                   48,669      38,718

DEFERRED INCOME TAXES                                          2,102       5,509

INTANGIBLE ASSETS, net of amortization of $2,361
    and $3,057 in 2000 and 2001                               13,931       1,463

OTHER ASSETS                                                     515         446
                                                            --------     -------

                                                            $116,748     $85,762
                                                            ========     =======

     The accompanying notes are an integral part of these statements.

                                      F-2
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

                     CONSOLIDATED BALANCE SHEETS - CONTINUED

                                  December 31,
                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                                      2000         2001
                                                                    ---------    --------
<S>                                                                 <C>          <C>
                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                $   7,998    $  5,090
    Short term debt (including current maturities of
       long term debt)                                                 31,086      30,228
    Current maturities of capital lease obligations                     2,726       1,983
    Accrued restructuring liability                                     1,323       2,420
    Accrued expenses                                                    3,136       3,939
                                                                    ---------    --------

                  Total current liabilities                            46,269      43,660

LONG-TERM DEBT, less current maturities                                 4,092       3,991

CAPITAL LEASE OBLIGATIONS, less current maturities                      2,460         614

COMMITMENTS AND CONTINGENCIES                                              --          --

STOCKHOLDERS' EQUITY
    Preferred stock, par value $.01 per share, authorized--1,000
       shares, none issued and outstanding                                 --          --
    Common stock, par value $.01 per share, authorized--19,000
       shares; issued - 9,269 in 2000 and 2001; outstanding -
       9,077 shares in 2000 and 9,025 shares in 2001                       93          93
    Additional paid-in capital                                         28,334      28,334
    Treasury stock - 192 and 244 shares in 2000 and 2001               (1,576)     (1,871)
    Retained earnings                                                  38,820      13,622
    Accumulated other comprehensive income (loss) -
       Foreign currency translation                                    (1,744)     (2,681)
                                                                    ---------    --------

                  Total stockholders' equity                           63,927      37,497
                                                                    ---------    --------

                                                                    $ 116,748    $ 85,762
                                                                    =========    ========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                     F-3
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                             Year ended December 31,
                  (amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                               1999         2000        2001
                                                            ---------    ---------    --------
<S>                                                         <C>          <C>          <C>
Net sales                                                   $ 120,688    $ 128,179    $ 88,698
Cost of goods sold                                             76,115       81,108      69,892
                                                            ---------    ---------    --------

          Gross profit                                         44,573       47,071      18,806
                                                            ---------    ---------    --------

Operating expenses
    Selling                                                    14,716       15,484      12,789
    General and administrative                                  9,023       14,231      14,124
    Research and development                                    2,629        2,771       2,331
    Restructuring charge                                           --        1,513       2,999
    Asset impairment charge                                        --        4,569       4,322
    Goodwill impairment charge                                     --           --      11,772
                                                            ---------    ---------    --------
                                                               26,368       38,568      48,337
                                                            ---------    ---------    --------

       Income (loss) from operations                           18,205        8,503     (29,531)
Interest income                                                    46          222          72
Interest expense                                               (2,696)      (3,081)     (3,946)
                                                            ---------    ---------    --------

       Income (loss) before income tax expense (benefit)       15,555        5,644     (33,405)

Income tax expense (benefit)                                    6,221        2,076      (8,207)
                                                            ---------    ---------    --------

       Net income (loss)                                    $   9,334    $   3,568    $(25,198)
                                                            =========    =========    ========

       Net income (loss) per share
           Basic                                            $    1.03    $    0.39    $  (2.78)
                                                            =========    =========    ========

           Diluted                                          $    1.02    $    0.39    $  (2.78)
                                                            =========    =========    ========

Net income (loss)                                           $   9,334    $   3,568    $(25,198)

Other comprehensive income (loss), net of tax
    Foreign currency translation adjustments                      602       (2,100)       (937)
                                                            ---------    ---------    --------

Comprehensive net income (loss)                             $   9,936    $   1,468    $(26,135)
                                                            =========    =========    ========
</TABLE>

         The accompanying notes are an integral part of this statement.

                                      F-4
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                  Years ended December 31, 1999, 2000 and 2001
                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                                                            Accumulated
                                Common stock    Additional    Treasury stock                   other           Total
                               --------------    paid-in     ----------------   Retained   comprehensive   stockholders'
                               Shares  Amount    capital     Shares    Amount   earnings   Income (loss)      equity
                               ------  ------   ----------   ------   -------   --------   -------------   -------------
<S>                             <C>     <C>      <C>           <C>    <C>       <C>           <C>            <C>
Balance, January 1, 1999        9,237   $  92    $27,991       138    $(1,175)  $ 25,918      $  (246)       $ 52,580

Treasury stock acquired            --      --         --        23       (177)        --           --            (177)

Foreign currency translation       --      --         --        --         --         --          602             602

Net income for the year            --      --         --        --         --      9,334           --           9,334
                                -----   -----    -------       ---    -------   --------      -------        --------

Balance, December 31, 1999      9,237      92     27,991       161     (1,352)    35,252          356          62,339

Exercise of employee stock
    options, including tax
    benefit of $35                 32       1        343        --         --         --           --             344
Treasury stock acquired            --      --         --        31       (224)        --           --            (224)
Foreign currency translation       --      --         --        --         --         --       (2,100)         (2,100)
Net income for the year            --      --         --        --         --      3,568           --           3,568
                                -----   -----    -------       ---    -------   --------      -------        --------

Balance, December 31, 2000      9,269   $  93    $28,334       192    $(1,576)  $ 38,820      $(1,744)       $ 63,927

Treasury stock acquired            --      --         --        52       (295)        --           --            (295)
Foreign currency translation       --      --         --        --         --         --         (937)           (937)
Net loss for the year              --      --         --        --         --    (25,198)          --         (25,198)
                                -----   -----    -------       ---    -------   --------      -------        --------

Balance, December 31, 2001      9,269   $  93    $28,334       244    $(1,871)  $ 13,622      $(2,681)       $ 37,497
                                =====   =====    =======       ===    =======   ========      =======        ========
</TABLE>

         The accompanying notes are an integral part of this statement.

                                      F-5
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended December 31,
                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                                 1999       2000        2001
                                                               -------    --------    --------
<S>                                                            <C>        <C>         <C>
Cash flows from operating activities:
    Net income (loss)                                          $ 9,334    $  3,568    $(25,198)
    Adjustments to reconcile net income (loss) to
       net cash provided by operating activities:
          Depreciation and amortization                          6,538       8,168       8,557
          Asset impairment charge                                   --       4,569       4,322
          Goodwill impairment charge                                --          --      11,772
          Loss on disposal of fixed assets                          --          --         353
          Deferred income taxes                                   (486)     (2,442)     (3,709)
          Changes in assets and liabilities:
             Accounts receivable                                (5,167)       (931)     10,157
             Inventories                                        (4,174)     (1,904)     11,330
             Prepaid expenses and miscellaneous receivables     (1,029)        538         304
             Income taxes receivable                            (1,014)     (2,022)     (2,889)
             Other assets                                         (951)      1,191          69
             Accounts payable                                    5,062      (4,654)     (3,348)
             Restructuring liability                                --       1,323       1,408
             Accrued expenses                                      (40)        948         836
                                                               -------    --------    --------

                Net cash provided by operating activities        8,073       8,352      13,964
                                                               -------    --------    --------

Cash flows from investing activities:
    Purchase of property and equipment                          (9,148)    (11,606)     (3,153)
    Proceeds from sale of property and equipment                    --         110          --
    Contingent purchase payments related to the
       acquisition of Standby Electronics Corp.                   (213)         --          --
    Contingent purchase payments related to the
       acquisition of A.C. Egerton (Holdings) PLC                   --        (361)         --
                                                               -------    --------    --------

                Net cash used in investing activities           (9,361)    (11,857)     (3,153)
                                                               -------    --------    --------
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-6
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                             Year ended December 31,
                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                               1999        2000        2001
                                                              -------    --------    -------
<S>                                                           <C>        <C>         <C>
Cash flows from financing activities:
   Repayment of debt                                          $(5,744)   $(11,025)   $(2,553)
   Proceeds from issuance of long-term debt                     6,600      15,284      2,500
   Payment of capital lease obligations                        (2,407)     (2,503)    (2,579)
   Purchase of treasury stock                                    (177)       (224)      (295)
   Exercise of employee stock options                              --         344         --
                                                              -------    --------    -------

       Net cash (used in) provided by financing activities     (1,728)      1,876     (2,927)
                                                              -------    --------    -------

Effect of exchange rates on cash                                  (79)       (191)       (35)
                                                              -------    --------    -------

       Increase (decrease) in cash and cash equivalents        (3,095)     (1,820)     7,849

Cash and cash equivalents, beginning of year                    5,828       2,733        913
                                                              -------    --------    -------

Cash and cash equivalents, end of year                        $ 2,733    $    913    $ 8,762
                                                              =======    ========    =======

Cash paid during the year for:
   Interest                                                   $ 2,654    $  3,081    $ 3,801
                                                              =======    ========    =======

   Income taxes                                               $ 6,840    $  6,956    $   752
                                                              =======    ========    =======

Noncash investing and financing activities:
   Assets acquired under capital lease                        $ 3,898    $     --    $    --
                                                              =======    ========    =======
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-7
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE A--DESCRIPTION OF BUSINESS

The Company is a designer and manufacturer of telecommunications equipment
supplied to telephone, cable television and power utility network providers
worldwide. Major product lines include a complete line of thermoplastic and
metal fabricated enclosures, advanced copper termination and connectorization
products, fiber optic cable management systems, coaxial-based passive RF
electronics and heat shrink products. The Company's enclosure products house,
protect and provide access to advanced telecommunications hardware, including
both radio frequency electronics and photonics, and transmission media,
including coaxial cable, copper wire and optical fibers, used in the delivery of
voice, video and data services. The enclosure products are deployed within the
portion of a local signal delivery network, commonly known as the "outside
plant" or "local loop", that connects the network provider's signal origination
office with residences and businesses.

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Estimates--In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include the inventory valuation reserve,
restructuring accruals associated with vacated facilities and the deferred tax
asset valuation allowance. Actual results could differ from those estimates and
the differences could be material.

Basis of Consolidation--The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
transactions and balances have been eliminated.

Foreign Currency Translation--Assets and liabilities of foreign operations are
translated into U.S. dollars at current exchange rates. Income and expenses are
translated into U.S. dollars at average rates of exchange prevailing during the
period. Adjustments resulting from translating foreign functional currency
financial statements into U.S. dollars are included in other comprehensive
income. Foreign currency transaction gains and losses are included in general
and administrative expenses. In 2000, foreign currency transaction gains totaled
$328, resulting primarily from borrowings payable in foreign currencies.
Transactions gains and losses were not significant in 1999 or 2001.

Cash and Cash Equivalents--For purposes of reporting cash flows, cash and its
equivalents include cash on hand, cash in banks and short-term investments with
original maturities of 90 days or less.

                                      F-8
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

Inventories--Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method of accounting.

Property and Equipment--Property and equipment are stated at cost. Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets. Capital lease assets are amortized using the straight-line method
over the useful lives of the assets. Expenditures for all maintenance and
repairs are charged against income. Additions, major renewals and replacements
that increase the useful lives of assets are capitalized. Amortization of
leasehold improvements is computed using the straight-line method over the
shorter of the lease term or the estimated useful life of the leasehold
improvements.

Intangible Assets--The excess of cost over net assets acquired (goodwill) is
being amortized on a straight-line basis over periods ranging from 15 to 20
years. Other acquired intangibles were being amortized on a straight-line basis
over their estimated useful lives of 3 years and were fully amortized by
December 31, 1999. The Company reviews the carrying value of intangible assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset would be
compared to the asset's carrying amount to determine if a write-down to market
value or discounted cash flow is required. Amortization expense charged to
income amounted to $863, $876 and $696 in 1999, 2000 and 2001, respectively.

Revenue Recognition--The Company recognizes revenue from product sales at the
time of shipment.

Shipping Costs--Shipping and handling costs are charged to expense as incurred.
Total shipping costs of $499, $1,839 and $1,752 are included in general and
administrative expenses for 1999, 2000 and 2001, respectively.

Income taxes--Deferred income taxes reflect the impact of temporary differences
between the amounts of assets and liabilities recognized for financial reporting
purposes and the amounts recognized for income tax purposes. These deferred
income taxes are measured by applying currently enacted income tax rates. A
valuation allowance reduces deferred income tax assets when it is more likely
than not that some portion or all of the deferred income tax assets will not be
realized.

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 period. Diluted
income per share reflects the potential dilution that could occur if options to
acquire common stock were exercised.

                                      F-9
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

The following is a reconciliation of the number of shares (denominator) used in
the basic and diluted income per share computations:

                             1999              2000               2001
                       ---------------   ---------------   ----------------
                                 Per               Per                Per
                                Share             Share              Share
                       Shares   Amount   Shares   Amount   Shares   Amount
                       ------   ------   ------   ------   ------   -------

Basic income per
   share                9,094   $ 1.03   9,091    $ 0.39    9,050   $ (2.78)
Effect of dilutive
   stock options           17     (.01)     35        --       --        --
                        -----   ------   -----    ------    -----   -------
Diluted income per
   share                9,111   $ 1.02   9,126    $ 0.39    9,050   $ (2.78)
                        =====   ======   =====    ======    =====   =======

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

<TABLE>
<CAPTION>
                                           1999             2000             2001
                                       -------------   --------------   -------------
<S>                                     <C>              <C>            <C>
Options to purchase shares of common
    stock                                     678              204             805
Exercise prices                           $ 10.06 --       $ 12.00 --       $ 3.05 --
                                          $ 13.25          $ 13.75          $13.75
Expiration dates                        July 2007 --     July 2007 --    July 2007 --
                                        October 2009     July 2010      December 2011
</TABLE>

Fair value of financial instruments--The carrying amount of cash, accounts
receivable, accounts payable, accrued expenses and short-term borrowings
approximates fair value because of the short maturity of these financial
instruments. Long-term obligations are carried at amounts that approximate fair
value. The estimated fair value of the long-term obligations is based on
borrowing rates currently available to the Company for loans with similar terms
and maturities.

                                      F-10
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

Reclassifications--Certain reclassifications have been made to the 1999 and 2000
financial statements to conform with the 2001 presentation, including the
reclassification of the 2000 accrued restructuring liability from accrued
expenses on the consolidated balance sheet.

Recent Accounting Pronouncements--On July 20, 2001, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
141, Business Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS
141 is effective for all business combinations completed after June 30, 2001.
SFAS 142 is effective for fiscal years beginning after December 15, 2001;
however, certain provisions of this Statement apply to goodwill and other
intangible assets acquired between July 1, 2001 and the effective date of SFAS
142. Major provisions of these Statements and their effective dates for the
Company are as follows:

     .    All business combinations initiated after June 30, 2001 must use the
          purchase method of accounting.

     .    Intangible assets acquired in a business combination must be recorded
          separately from goodwill if they arise from contractual or other legal
          rights or are separable from the acquired entity and can be sold,
          transferred, licensed, rented or changed, either individually or as
          part of a related contract, asset or liability.

     .    Goodwill, as well as intangible assets with indefinite lives, acquired
          after June 30, 2001, will not be amortized. Effective January 1, 2002,
          all previously recognized goodwill and intangible assets with
          indefinite lives will no longer be subject to amortization.

     .    Effective January 1, 2002, goodwill and intangible assets with
          indefinite lives will be tested for impairment annually and whenever
          there is an impairment indicator.

     .    All acquired goodwill must be assigned to reporting units for purposes
          of impairment testing and segment reporting.

The Company will continue to amortize goodwill under its current method until
January 1, 2002, at which time annual and quarterly goodwill amortization of
$135 and $34 will no longer be recognized. By June 30, 2002 the Company will
have completed a transitional fair value based impairment test of goodwill as of
January 1, 2002. Impairment losses, if any, resulting from the transitional
testing will be recognized in the quarter ending March 31, 2002, as a cumulative
effect of a change in accounting principle. The Company believes the adoption of
SFAS 142 will not have a material impact on its consolidated financial position
or results of operations.

                                      F-11
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

Recent Accounting Pronouncements (continued)--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 August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS
144). SFAS 144 establishes a single accounting model for the Impairment or
disposal of long-lived assets, including discontinued operations. SFAS 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS 121), and APB Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The
provisions of SFAS 144 are effective in fiscal years beginning after December
15, 2001, with early adoption permitted, and in general are to be applied
prospectively. The Company believes the adoption of SFAS 144 will not have a
material impact on its consolidated financial position or results of operations.

NOTE C--INVENTORIES

     Inventories are summarized as follows:

                                          2000        2001
                                        --------    --------

Raw materials                           $  6,429    $  4,738
Work-in-process                            3,575       2,605
Finished goods                            11,616       2,433
                                        --------    --------

                                        $ 21,620    $  9,776
                                        ========    ========

                                      F-12
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE D--PROPERTY AND EQUIPMENT

     Property and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                        Estimated
                                                                          useful
                                                    2000      2001         lives
                                                  -------   --------   -----------
<S>                                               <C>       <C>        <C>
Machinery and equipment                           $61,297   $ 53,262    3-10 years
Office furniture and equipment                      3,525      3,573    3 -7 years
Leasehold improvements                              3,642      3,707   15-20 years
Building and building improvements                  7,025      6,045      30 years
Land                                                1,574      1,574            --
                                                  -------   --------
                                                   77,063     68,161
Less accumulated depreciation and amortization    (28,394)   (29,443)
                                                  -------   --------
                                                  $48,669   $ 38,718
                                                  =======   ========
</TABLE>

Included in machinery and equipment is $10,052 of equipment under capital lease
at December 31, 2000 and 2001. Accumulated amortization of assets under capital
lease totaled $3,985 and $5,973 at December 31, 2000 and 2001, respectively. See
Note G.

Pursuant to its policy, the Company reviews the carrying value of property,
plant and equipment for impairment whenever events and circumstances indicate
that the carrying value of an asset may not be recoverable from the estimated
future cash flows expected to result from its use and eventual disposition. As a
result of lower utilization of certain production equipment in the European
operations, an impairment review was conducted on these assets in the fourth
quarter of 2000. A projection of future cash flows was developed as a basis of
measurement of the asset impairment charge. In the fourth quarter of 2000, the
Company adjusted the carrying value of this machinery and equipment resulting in
a non-cash impairment charge of $4,569.

As a result of the restructuring activities in the third quarter of 2001 to
reduce manufacturing costs, headcount and facilities, certain production
equipment, tooling and leasehold improvements have been idled or sold. An
impairment review of these assets was conducted. In the third quarter of 2001,
the Company adjusted the carrying value of this production equipment, tooling
and leasehold improvements resulting in a non-cash impairment charge of $4,322.
The 2001 impairment charge includes approximately $1,303 for equipment in the
European operations, $1,019 for production tooling and leasehold improvements in
Sydney, Australia and $2,000 for production equipment and building improvements
in the United States.

                                      F-13
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE E-- ACCRUED EXPENSES

Accrued expenses consist of the following:

                                    2000     2001
                                   ------   ------
Accrued vacation                   $  784   $  626
Accrued bonus                         508       --
Other                               1,844    3,313
                                   ------   ------
                                   $3,136   $3,939
                                   ======   ======

NOTE F-- LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                2000     2001
                                                                              -------   -------
<S>                                                                           <C>       <C>
Senior credit facility with two banks. The outstanding balance bears
interest, payable quarterly, at a variable rate of 2.5% over the
administrative agent bank's base rate. At December 31, 2000 and 2001, the
weighted average interest rate on outstanding borrowings was 7% and 7.25%.
The loan is collateralized by substantially all of the Company's assets and
up to 65% of the capital stock of the Company's subsidiaries. There was no
unused availability under the senior credit facility at December 31, 2001.
In March 2002, the Company made a $3,000 principal payment. In addition,
scheduled principal payments of $4,250 are due by March 31, 2002, with the
remaining principal balance due on December 31,2002.                          $30,997   $30,131

Note payable to financial institution payable in monthly principal and
interest installments of $30 with the unpaid principal and interest due on
November 1, 2008. The note bears interest at 6.85% and is collateralized
by certain land and buildings.                                                  4,148     4,070

Automobile loan payable in monthly principal and interest installments of
$1 through March 2003. The note bears interest at 8.5% and is
collateralized by the automobile acquired.                                         33        18
                                                                              -------   -------
                                                                               35,178    34,219
Less current maturities                                                        31,086    30,228
                                                                              -------   -------
                                                                              $ 4,092   $ 3,991
                                                                              =======   =======
</TABLE>

                                      F-14
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE F-- LONG-TERM DEBT - Continued

The senior credit facility contains various financial and operating covenants
which, among other things, impose limitations on the Company's ability to incur
additional indebtedness, merge or consolidate, acquire fixed assets, 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 covenants
related to minimum net worth and other financial ratios. The Company exceeded
the allowable ratio of debt to EBITDA and fixed charge coverage ratio of the
senior credit facility as of March 31, 2001, June 30, 2001 and September 30,
2001. In December 2001, the Company received waivers of these covenants for all
three measurement periods and paid $100 in extension fees. The banks also
amended the financial covenants. The Company was in compliance with the
financial and operating covenants as of December 31, 2001.

The outstanding balance under the senior credit facility is due and payable in
full on December 31, 2002. The maturity of the senior credit facility represents
an extension of an earlier credit agreement maturity. The Company was unable to
obtain refinancing for a full repayment of the outstanding balance of the senior
credit facility in the third quarter of 2001 and in the fourth quarter of 2001
the banks extended the maturity of the senior credit facility to June 30, 2002.
In March 2002, the banks extended the maturity of the senior credit facility to
December 31, 2002. The Company will pay an extension fee to the banks on each of
June 30, 2002 and September 30, 2002 in the event there is an outstanding
balance under the Credit Agreement. The Company is involved in discussions with
several financial institutions and believes it should be able to obtain
financing to repay in full the outstanding balance under the Credit Agreement on
or before December 31, 2002. In the event the Company obtains financing for the
senior credit facility, it expects to incur costs of no less than $250 but does
not expect at this time any material increase in the interest rate. In the event
the Company does not obtain refinancing of the senior credit facility by
December 31, 2002, and if the current banks were to agree to extend the maturity
date of the senior credit facility, the Company would expect the banks to impose
requirements such as an extension fee and additional principal repayments.

Long-term debt at December 31, 2001 is schedule to mature as follows:

   Year                                  Amount
----------                              -------
   2002                                 $30,228
   2003                                      93
   2004                                      95
   2005                                     102
   2006                                     109
Thereafter                                3,592
                                        -------
                                        $34,219
                                        =======

                                      F-15
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE G--CAPITAL LEASE OBLIGATIONS

The Company leases certain machinery and equipment under various agreements
which are classified as capital leases. The leases expire on various dates
through August 2003. Future minimum payments, by year, are as follows:

Year
----
2002                                    $ 2,035
2003                                        748
                                        -------
                                          2,783
Less amount representing interest           186
                                        -------
                                          2,597
Less current maturities                   1,983
                                        -------
                                        $   614
                                        =======

                                      F-16
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE H--RESTRUCTURING CHARGES

2000 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 in the restructuring plan involve the
closure of facilities and consolidation of support infrastructure. This
restructuring resulted in the elimination of approximately 90 administration
staff and manufacturing positions and was substantially completed by December
31, 2001. The major components of the 2000 restructuring charges are as follows:

Employee severance and related benefit costs    $   621
Costs associated with vacated facilities            819
Legal and professional services                      73
                                                -------
                                                $ 1,513
                                                =======

     Severance
     ---------

     The Company had a total reduction of approximately 90 employees,
     approximately 10% of the total force. The reductions are 55 employees in
     the European operations, consisting of factory direct labor, factory
     support and administrative positions, and 35 people in North America,
     consisting of factory direct labor, factory support and administrative
     positions.

     Costs Associated with Vacated Facilities
     ----------------------------------------

     The Company accrued $819 as the costs of the remaining payments on leased
     facilities to be vacated less anticipated future income from subleases. In
     the European operations, two smaller facilities have been vacated as of
     December 31, 2000, and a third larger facility was vacated in September
     2001. The Charlotte, North Carolina distribution facility was vacated April
     30, 2001. The Hong Kong sales office was vacated on February 28th, 2001.
     The majority of accrued lease expenses related to the European facilities.

     Legal and Professional Services
     -------------------------------

     The Company incurred legal and professional fees in the fourth quarter of
     2000 associated with the implementation of the above restructuring
     activities in the international operations. These services primarily relate
     to labor issues.

                                      F-17
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE H--RESTRUCTURING CHARGES - Continued

2001 Restructuring Charge
-------------------------

In the third quarter of 2001, the Company announced an additional restructuring
plan in an effort to further reduce costs and align headcount and facilities
with expected business levels. The additional restructuring charge totaled
$2,999. The principal actions in the restructuring plan involve the closure of
facilities and a reduction of headcount. The restructuring plan resulted in the
elimination of 116 management, administrative, sales and manufacturing positions
and was substantially completed by December 31, 2001. The major components of
the 2001 restructuring charge are as follows:

Employee severance and related benefit costs           $   935
Costs associated with vacated and sold facilities        1,959
Lease cancellations and other asset sales                  105
                                                       -------
                                                       $ 2,999
                                                       =======

     Severance
     ---------

     The Company had a total reduction of 116 employees, approximately 20% of
     the total force. The reductions are 83 employees in the European
     operations, consisting of factory direct labor, factory support,
     management, administrative and sales positions, 28 people in the United
     States, consisting of management administrative, and sales positions, two
     employees in Australia and three employees in Canada.

     Costs Associated with Vacated and Sold Facilities
     -------------------------------------------------

     The Company has accrued $1,959, consisting principally of the costs of the
     remaining payments on leased facilities to be vacated less anticipated
     future income from subleases. In the European operations, the manufacturing
     and distribution facility in Warrington, U.K. has been closed. One half of
     the manufacturing and distribution facility in Sydney, Australia has been
     vacated. In the United States, warehouse space in a leased facility has
     been vacated and a separate facility that the Company owns has been offered
     for sale. The Company expects the sale of the owned facility to be
     completed in 2002.

     Lease Cancellations and Other Asset Sales
     -----------------------------------------

     The Company terminated various auto leases, office equipment leases, and
     software maintenance contracts, and sold vehicles that were no longer
     needed. The lease cancellations and vehicle sales resulted in costs of
     approximately $105.

                                      F-18
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE H--RESTRUCTURING CHARGES - Continued

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 2000 and 2001 are summarized in the table below:

<TABLE>
<CAPTION>
                                                                               Professional
                                                                               Services and
                                                                   Workforce       Other
                                                      Facilities   Reduction      Charges       Total
                                                      ----------   ---------   ------------   ---------
<S>                                                    <C>          <C>           <C>         <C>
Charges to operations in three months ended
    December 31, 2000                                  $    819     $    621      $    73     $   1,513

Costs incurred in three months ended
    December 31, 2000                                       (31)         (86)         (73)         (190)
                                                       --------     --------      -------     ---------
Restructuring accrual balance at December 31, 2000          788          535           --         1,323

Costs incurred in three months ended
    March 31, 2001                                          (53)        (196)          --          (249)
                                                       --------     --------      -------     ---------
Restructuring accrual balance at March 31, 2001             735          339           --         1,074

Costs incurred in three months ended
    June 30, 2001                                           (16)         (16)          --           (32)
                                                       --------     --------      -------     ---------
Restructuring accrual balance at June 30, 2001              719          323           --         1,042

Charges to operations in three months ended
    September 30, 2001                                    1,959          935          105         2,999

Costs incurred in three months ended
    September 30, 2001                                        -         (385)          --          (385)
                                                       --------     --------      -------     ---------
Restructuring accrual balance at September 30, 2001       2,678          873          105         3,656

Costs incurred in three months ended
    December 31, 2001                                      (334)        (797)        (105)       (1,236)
                                                       --------     --------      -------     ---------
Restructuring accrual balance at December 31, 2001     $  2,344     $     76      $    --     $   2,420
                                                       ========     ========      =======     =========
</TABLE>

                                      F-19
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands, except per share data)

NOTE I--GOODWILL IMPAIRMENT CHARGE

Pursuant to its policy, the Company reviews the carrying value of goodwill
whenever events and circumstances indicate that the carrying value of a business
may not be recoverable from the estimated future cash flow expected to result
from its use and eventual disposition. As a result of the restructuring
activities that reduce the level of foreign operations and the decision to exit
certain product lines, an impairment review of goodwill was conducted. The
goodwill impairment review included a valuation analysis of the relevant
operations as a basis of measurement of the goodwill impairment charge. In the
third quarter of 2001, the Company adjusted the carrying value of goodwill
resulting in a non-cash impairment charge of $11,772.

NOTE J--INCOME TAXES

The components of income tax expense (benefit) are as follows:

                                                1999        2000        2001
                                              --------    --------    ---------
Current
  Federal                                     $  5,011    $  3,247    $  (4,941)
  State                                            712         863           50
  Foreign                                          984         408          393
                                              --------    --------    ---------
                                                 6,707       4,518       (4,498)
                                              --------    --------    ---------
Deferred
  Federal                                          369        (992)      (2,172)
  State                                             (6)       (483)      (1,316)
  Foreign                                         (849)       (967)        (221)
                                              --------    --------    ---------
                                                  (486)     (2,442)      (3,709)
                                              --------    --------    ---------
    Total income tax expense (benefit)        $  6,221    $  2,076    $  (8,207)
                                              ========    ========    =========

                                      F-20
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE J--INCOME TAXES - Continued

A reconciliation from the U.S. Federal statutory income tax rate to the
effective income tax rate for the years ended December 31, is as follows:

                                                         1999    2000   2001
                                                         ----    ----   ----

U.S. Federal statutory rate                                34%     34%   (34)%
State income taxes, net of
   federal tax benefit                                      5       5     (5)
Amortization of intangibles                                 1      --     --
Nondeductible meals and entertainment                       2       1      1
Change in valuation allowance                              --      --     11
Effect of subsidiaries taxes at other than the
   U.S. statutory rate                                     (2)     (3)     2
                                                          ---     ---    ---

                                                           40%     37%   (25)%
                                                          ===     ===    ===

Significant components of the Company's deferred tax assets and liabilities are
as follows:

                                                             2000      2001
                                                            ------   -------
Assets
    Patents                                                 $  830   $   719
    Allowance for bad debts                                     25        18
    Inventory capitalization                                   353       204
    Vacation pay                                               336       261
    Accrued liabilities and reserves                            --       703
    Restructuring charge                                       524     1,235
    Impairment charge                                        1,957     4,682
    State tax credits and loss carryforwards                    --       325
    Foreign tax credit and loss carryforwards                1,773     4,100
    Valuation allowance                                         --    (2,823)
                                                            ------   -------

                                                             5,798     9,424
                                                            ------   -------

                                     F-21
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE J--INCOME TAXES - Continued

                                                             2000     2001
                                                            ------   ------
Liabilities
    State taxes                                             $   67   $  699
    Amortization of goodwill                                    46      198
    Accelerated depreciation                                 2,412    1,545
                                                            ------   ------

                                                             2,525    2,442
                                                            ------   ------

           Net deferred tax asset                           $3,273   $6,982
                                                            ======   ======

The classification of the net deferred tax asset between current and non-current
is as follows:

                                                             2000     2001
                                                            ------   ------

Net current asset                                           $1,171   $1,473
Net long-term asset                                          2,102    5,509
                                                            ------   ------

           Net deferred tax asset                           $3,273   $6,982
                                                            ======   ======

At December 31, 2001, the Company had approximately $14,200 of international
operating loss carryforwards (primarily in the United Kingdom and Australia)
with a potential tax benefit of $4,100. These loss carryforwards do not expire.
The Company has recorded a valuation allowance in 2001 on the deferred tax asset
relating to the foreign net operating loss carryforwards because of uncertainty
regarding its realization. The ultimate realization of the remaining deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers projected future taxable income and tax planning strategies in making
this assessment. Based on the historical domestic taxable income and projections
for future taxable income over periods that the deferred assets are deductible,
management believes it is more likely than not that the Company will realize the
benefits of these deductible differences, net of valuation allowances as of
December 31, 2001. The amount of the deferred tax assets considered realizable,
however, could materially change in the near future if estimates of future
taxable income during the carryforward period are changed.

                                     F-22
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE K--STOCKHOLDERS' EQUITY

In July 1996, the Company adopted the 1996 Incentive Stock Plan (the Plan),
under which it was authorized to issue non-qualified stock options and incentive
stock options to key employees, directors and consultants to purchase up to an
aggregate of 750 shares of the Company's common stock. The options have a term
of ten years and generally become fully vested by the end of the third year. In
May 1999, the Plan was amended to increase the authorized number of shares
issued to 1,500.

Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation", encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in previously issued standards. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of grant over the amount
an employee must pay to acquire the stock. Compensation cost has not been
significant for 1999, 2000 and 2001.

Plan transactions are as follows:

<TABLE>
<CAPTION>
                                   1999                   2000                2001
                             ------------------   -------------------   -------------------
                                      Weighted              Weighted              Weighted
                                       average               average               average
                                       exercise              exercise              exercise
                             Shares     price      Shares     price      Shares     price
                             ------   ---------   -------   ---------   -------   ---------
<S>                           <C>     <C>           <C>     <C>         <C>       <C>
Options outstanding
 January 1,                   703     $   11.22     768     $   10.86     849     $   11.30
Granted                        98         10.17     140         13.29     274          5.20
Exercised                      --            --     (32)        10.81      --            --
Canceled                      (33)        11.52     (27)        10.26     (31)        11.86
                              ----                  ---                 -----
Options outstanding
 December 31,                 768     $   10.86     849     $   11.30   1,092     $    9.78
                              ===                   ===                 =====

Options available for
  grant  at  December 31,     732                   619                   376
</TABLE>

                                     F-23
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE K--STOCKHOLDERS' EQUITY--Continued

<TABLE>
<CAPTION>
Weighted average fair value of options granted during the year are as follows:

                                                             1999      2000        2001
                                                           --------   --------   --------
<S>                                                        <C>        <C>        <C>
Exercise price is below market price at date of grant            --         --         --
Exercise price equals market price at date of grant        $   4.07   $   5.88   $   2.30
</TABLE>

The range of exercise prices of options outstanding at December 31, 2001 is
$3.05 to $13.75 and the options have a weighted average remaining contractual
life of 7 years. At December 31, 2001, 714 of the 1,092 options outstanding are
exercisable by the optionee.

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

                                                 1999      2000      2001
                                               -------   -------   -------

Expected life (years)                          5 years   5 years   5 years
Risk-free interest rate                            5.5%      6.0%      5.5%
Expected volatility                                 35%       40%       40%
Expected dividend yield                             --        --        --

Had compensation cost for the plan been determined based on the fair value of
the options at the grant dates based on the above method, the Company's net
income (loss) and income (loss) per share would have been:

                                              Net income (loss) per share
                                      Net     ---------------------------
                                    income         Basic     Diluted
                                   --------       -------    -------
1999
  As reported                      $  9,334       $  1.03    $  1.02
  Pro forma                        $  9,001       $  0.99    $  0.98

2000
  As reported                      $  3,568       $  0.39    $  0.39
  Pro forma                        $  3,210       $  0.35    $  0.35

2001
  As reported                      $(25,198)      $ (2.78)   $ (2.78)
  Pro forma                        $(25,536)      $ (2.82)   $ (2.82)

                                     F-24
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE L--RETIREMENT PLAN

The Company established a retirement plan in accordance with section 401(k) of
the Internal Revenue Code. Under the terms of this plan, eligible employees may
make voluntary contributions to the extent allowable by law. Employees of the
Company are eligible after 90 days of employment. Matching contributions by the
Company to this plan are discretionary and will not exceed that allowable for
Federal income tax purposes. The Company's contributions are vested over five
years in equal increments. The accompanying statements of operations include
contribution expense of $193, $212 and $125 for the years ended December 31,
1999, 2000 and 2001, respectively.

NOTE M--RELATED PARTY TRANSACTIONS

The Company leases two of its three facilities in Temecula, California from the
Company's principal stockholder and Chairman of the Board. The leases provide
for payments of insurance, repairs, maintenance and property taxes, and extend
through 2005. The Company has two five-year renewal options to extend the terms
of both leases to 2015. Rent expense paid under the leases was $1,127, $1,158
and $1,169 for the years ended December 31, 1999, 2000 and 2001, respectively.
As a part of the restructuring plan announced in the third quarter of 2001, the
Company has vacated warehouse space in one of the facilities. The Company
intends to sublease the vacated warehouse space.

In 1997, the Company guaranteed debt of the Company's principal stockholder and
Chairman of the Board of approximately $2,700. The guaranteed debt was incurred
in connection with construction of the facilities leased to the Company and is
collateralized by said facilities. The loan amount subject to the guarantee is
expected to decline before expiring in 2016. At December 31, 2001, the
outstanding loan balance subject to the guarantee totaled $1,914. It is not
practicable to estimate the fair value of the guarantee; however, the Company
does not anticipate that it will incur losses as a result of this guarantee.

In January 2001, the Company guaranteed personal debt of the Company's President
and Chief Operating Officer of $650. The guarantee was terminated in March 2002.
In connection with this guarantee, the Company's President and Chief Operating
Officer paid the Company a fee equal to 1% of the loan balance and provided as
collateral to the Company 300,000 shares of Company stock.

The Company purchased insurance through Talbot Agency Inc. in 1999, 2000 and
2001. Roy H. Taylor, President of Talbot Agency Inc. is a co-trustee of the
Taylor Family Trust, a beneficial owner of more than 5% of the Company's
outstanding stock. The total premiums and fees paid for insurance obtained
through the Talbot Agency for the years ended December 31, 1999, 2000 and 2001
was $1,604, $1,396 and $1,265, respectively, which included commissions earned.

                                     F-25
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE N--COMMITMENTS AND CONTINGENCIES

The Company leases equipment and manufacturing and office space under several
operating leases expiring through 2010. Rent expense under all operating leases
amounted to $1,942, $2,032 and $2,188 for the years ended December 31, 1999,
2000 and 2001, respectively. Total future minimum rental payments under
noncancellable operating leases as of December 31, 2001, including the operating
leases with the related party discussed in Note M, are as follows:

Year                          Amount
----------                   -------

2002                         $ 1,945
2003                           1,825
2004                           1,735
2005                           1,747
2006                             433
Thereafter                     2,471
                             -------
                             $10,156
                             =======

In addition to these minimum rental commitments, certain of these operating
leases provide for payments of insurance, repairs and maintenance and property
taxes.

The Federal income taxes of the Company for the years ended December 31, 1998
and 1999 are currently under examination by the Internal Revenue Service (IRS).
On November 5, 2001, the IRS issued a report assessing penalties of $240 for
failure to file certain information with the 1998 and 1999 income tax returns
with respect to its foreign subsidiaries. In December 2001, the Company reached
a settlement in which the IRS agreed to reduce the penalty assessment to $40.
The Company recorded a charge in the fourth quarter of 2001 for the settlement
amount and the amount was paid in February 2002. The Company believes that any
amount in excess of its recorded liability, if any, will not be significant.

On September 18, 2001, the State of Texas issued a report assessing the Company
for additional sales and use tax of $1,600, including interest. The Company has
appealed the assessment and is currently providing the State of Texas with
documentation to support that the transactions did not require the Company to
remit sales and use tax to the State of Texas. Through February 8, 2002, the
State of Texas has agreed to a reduction of the amount owed to $1,300. The
Company believes that they have meritorious defenses to the remaining claim of
$1,300 and intends to vigorously defend its position. The Company does not
believe that the ultimate outcome of this examination will result in a material
impact on the Company's consolidated results of operations or financial
position.

                                     F-26
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE O--CREDIT CONCENTRATIONS AND MAJOR CUSTOMERS

The Company maintains cash balances in financial institutions located in the
United States, Canada, Australia and the United Kingdom. Cash balances held in
financial institutions outside of the United States was not significant at
December 31, 2000 and 2001. Cash balances held in financial institutions located
in the United States may, at times, exceed federally insured limits. The Company
has not experienced any losses in such accounts and believes it is not exposed
to any significant credit risk on cash and cash equivalents.

The telecommunications industry is concentrated, with relatively few operators
accounting for a large percentage of the Company's available market.
Consequently, the Company's five largest customers (by sales volume) accounted
for 40.4% and 44.1% of the Company's total net sales in 2000 and 2001. Two
customers, AT&T Broadband and AOL Time Warner, accounted for 11.2% and 10.4%
respectively, of the Company's net sales in 2000. One customer, AOL Time Warner,
accounted for 11.2% of the Company's total net sales in 2001. Mergers and
acquisitions in the telecommunications industry are not only increasing the
concentration of the industry and of the Company's customer base, but also from
time to time delay customers' capital expenditures as newly merged services
providers consolidate their operations. The Company generally extends credit to
these customers. Its exposure to credit risk is affected by conditions in the
telecommunications industry. The Company controls credit risk through credit
approvals, credit limits and monitoring procedures but does not generally
require collateral. The Company has not experienced significant credit losses.

                                     F-27
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE P--SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates in four geographic segments as a manufacturer and supplier
of telecommunications equipment. The four geographic regions are: the United
States, Europe/Middle East, Canada and Australia/Asia. The following tables
summarize segment information:

                                            1999        2000        2001
                                         ---------   ---------   ---------
Revenues from unrelated entities/(1)/:
     United States/(2)/                  $  80,028   $  88,531   $  65,762
     Europe/Middle East                     19,030      21,746      11,036
     Canada                                  5,148       7,270       4,405
     Australia/Asia                         16,482      10,632       7,495
                                         ---------   ---------   ---------
                                         $ 120,688   $ 128,179   $  88,698
                                         =========   =========   =========
Income (loss) from operations:
     United States                       $  18,382   $  16,212   $  (4,407)
     Europe/Middle East                     (2,780)     (7,878)    (19,160)
     Canada                                    413       1,286         405
     Australia/Asia                          2,190      (1,117)     (6,369)
                                         ---------   ---------   ---------
                                         $  18,205   $   8,503   $ (29,531)
                                         =========   =========   =========
Interest income:
     United States                       $      38   $     207   $      61
     Canada                                      8          15          11
                                         ---------   ---------   ---------
                                         $      46   $     222   $      72
                                         =========   =========   =========

Interest expense:
     United States                       $   2,348   $   2,630   $   3,639
     Europe/Middle East                        338         447         307
     Canada                                     --           4          --
     Australia/Asia                             10          --          --
                                         ---------   ---------   ---------
                                         $   2,696   $   3,081   $   3,946
                                         =========   =========   =========

/(1)/Inter-geographic revenues were not significant. Revenues from external
     customers from any individual foreign country did not exceed 10% of total
     revenue.

/(2)/ Includes export sales of approximately $1,043, $1,971 and $1,175 in 1999,
     2000 and 2001, respectively.

                                     F-28
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE P--SEGMENT AND GEOGRAPHIC INFORMATION--Continued

                                            1999         2000        2001
                                         ---------    ---------    ---------
Income tax expense (benefit):
     United States                       $   6,086    $   2,635    $ (7,009)
     Europe/Middle East                       (904)        (783)     (1,567)
     Canada                                    193          474         229
     Australia/Asia                            846         (250)        140
                                         ---------    ---------    --------

                                         $   6,221    $   2,076    $ (8,207)
                                         =========    =========    ========

Identifiable assets:
     United States                       $  60,860    $  64,868    $ 60,211
     Europe/Middle East/(3)/                35,009       34,827      15,489
     Canada                                  3,508        2,525       2,123
     Australia/Asia/(4)/                    15,163       14,528       7,939
                                         ---------    ---------    --------

                                         $ 114,540    $ 116,748    $ 85,762
                                         =========    =========    ========

Depreciation and amortization
     United States                       $   4,090    $   5,296    $  6,643
     Europe/Middle East                      1,455        1,932       1,263
     Canada                                    100          117         140
     Australia/Asia                            893          823         511
                                         ---------    ---------    --------

                                         $   6,538    $   8,168    $  8,557
                                         =========    =========    ========

Capital expenditures:
     United States/(5)/                  $   5,392    $   5,815    $  1,847
     Europe/Middle East                      3,650        4,996         643
     Canada                                    106           41          15
     Australia/Asia                             --          754         648
                                         ---------    ---------    --------

                                         $   9,148    $  11,606    $  3,153
                                         =========    =========    ========

/(3)/Includes long-lived assets in the United Kingdom of $21,421, $18,980 and
     $7,703 in 1999, 2000 and 2001, respectively.

/(4)/Includes long-lived assets in Australia of $7,488, $8,194 and $4,231 in
     1999, 2000 and 2001, respectively.

/(5)/Excludes assets acquired under capital leases of $3,898 in 1999.

                                     F-29
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE P--SEGMENT AND GEOGRAPHIC INFORMATION--Continued

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

                                            1999        2000         2001
                                          --------    --------     -------

Enclosures                                $ 91,111    $ 96,861     $68,994
Connectivity                                21,258      23,351      13,499
Other                                        8,319       7,967       6,205
                                          --------    --------     -------
Total                                     $120,688    $128,179     $88,698
                                          ========    ========     =======

NOTE Q--QUARTERLY FINANCIAL DATA (Unaudited)

Summarized quarterly financial data for 1999, 2000 and 2001 follows:

                                       First     Second      Third      Fourth
                                      Quarter    Quarter    Quarter     Quarter
                                      -------    -------    -------    --------

1999
    Net sales                         $24,698    $31,315    $32,938    $ 31,729
    Gross profit                        9,594     12,341     12,375      10,255
    Net income                          1,710      2,718      2,823       2,083
    Income per share
        Basic                            0.19       0.30       0.31        0.23
        Diluted                          0.19       0.30       0.31        0.22

2000
    Net sales                          32,250     35,722     33,182      27,025
    Gross profit                       11,241     13,884     12,525       9,421
    Net income (loss)/(1)/              1,611      3,132      2,048      (3,223)
    Income (loss) per share/(1)/
        Basic                            0.18       0.34       0.23       (0.35)
        Diluted                          0.17       0.34       0.22       (0.35)

                                     F-30
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)

                        December 31, 1999, 2000 and 2001
                  (amounts in thousands,except per share data)

NOTE Q--QUARTERLY FINANCIAL DATA (Unaudited) - Continued

                                       First      Second      Third      Fourth
      2001                            Quarter    Quarter     Quarter    Quarter
                                      -------    -------    --------   ---------

Net sales                             $21,967    $25,762    $ 22,336   $ 18,633
Gross profit (loss)                     6,512      8,383      (1,700)     5,611
Net income (loss)/(2)/                 (1,271)       352     (23,909)      (370)
Income (loss) per share/(2)/
    Basic                               (0.14)      0.04       (2.64)     (0.04)
    Diluted                             (0.14)      0.04       (2.64)     (0.04)

/(1)/ In the fourth quarter of 2000, the Company recorded a restructuring charge
     of $1,513 ($923 after tax, or $0.10 per share). See Note H. During the
     fourth quarter of 2000, the Company also recorded a charge for the
     impairment of long-lived assets of $4,569 ($2,787 after tax, or $0.31 per
     share). See Note D.

/(2)/ In the third quarter of 2001, the Company recorded a restructuring charge
     of $2,999 (see Note H). During the third quarter of 2001, the Company also
     recorded a charge for the impairment of goodwill of $11,772 (see Note I)
     and a charge for impairment of fixed assets of $4,322 (see Note D).

                                     F-31-
<PAGE>

                         CHANNELL COMMERCIAL CORPORATION

                                   SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS

                             (Amounts in thousands)

<TABLE>
<CAPTION>
         Column A             Column B              Column C              Column D       Column E
-------------------------   -------------   -----------------------   ---------------   ----------
                                                   Additions
                                            -----------------------
                              Balance at    Charged to   Charged to                     Balance at
                             Beginning of    Cost and      Other      Write-offs and      End of
                               Period        Expenses     Accounts    Deductions, Net     Period
                            -------------   ----------   ----------   ---------------   ----------
<S>                         <C>     <C>       <C>           <C>          <C>               <C>
Allowance for bad debts     (2001)  $ 104     $1,751        $ --         $(1,753)          $102
                            (2000)     98         61          --             (55)           104
                            (1999)     46         72          --             (20)            98

Allowance for inventories   (2001)  $  20     $8,500        $ --         $(8,482)          $ 38
                            (2000)    124         --          --            (104)            20
                            (1999)     --        124          --              --            124
</TABLE>
<PAGE>

                                GLOSSARY OF TERMS

     ADSL (Asymmetric Digital Subscriber Line): A standard allowing digital
broadband signals and standard telephone service to be transmitted up to 12,000
feet over a twisted copper pair.

     Broadband: Transmission rates in excess of 1.544 mega bits per second
typically deployed for delivery of high-speed data, video and voice services.

     Cable Modem: Electronic transmission device placed on the CATV network,
located at end user locations, providing two-way, high-speed data service
capability, including internet access for subscribers.

     CATV (Community Antenna TV, commonly called cable television): A system for
distributing television programming by a cable network rather than by
broadcasting electromagnetic radiation.

     Coaxial Cable: The most commonly used means of transmitting cable
television signals. It consists of a cylindrical outer conductor (shield)
surrounding a center conductor held concentrically in place by an insulating
material.

     DLC (Digital Loop Carrier): Telecommunications transmission technology
which multiplexes multiple individual voice circuits onto copper or fiber
cables.

     DSL (Digital Subscriber Line): Generic descriptor covering various versions
of DSL services delivered over copper wires. Included are HDSL and ADSL
services.

     Fiber Node: Refers to the equipment that terminates the fiber cables
originating from the host digital terminal. This network element converts the
optical signals to their coax electrical, RF equivalents. Synonymous with
optical network interface (ONI).

     Fiber Optics: The process of transmitting infrared and visible light
frequencies through a low-loss glass fiber with a transmitting laser or LED and
a photo diode receiver.

     FTTC (Fiber-To-The-Curb): In a long distance network consisting of fiber
optics, fiber-to-the-curb refers to the fiber optics running from the
distribution plant to the curb, at which point copper is used for the
curb-to-home connection.

     HDSL (High bit rate Digital Subscriber Line): By using sophisticated coding
techniques, a large amount of information may be transmitted over copper. The
HDSL scheme uses such coding over four copper wires and is primarily intended
for high capacity bi-directional business services.

     Headend: The primary transmission point in a cable system supplying the
hubs and trunk cables.

     HFC (Hybrid Fiber Coax): A type of distribution plant that utilizes fiber
optics to carry service from a CO to the carrier serving area, then coaxial
cable within the CSA to or close to the individual residences.

     ONU (Optical Network Unit): The curb mounted electronics device which
converts fiber optic signals to electrical for service delivery or copper wires.

     PCS (Personal Communications Services): Any service offered on a personal
communications network. These include basic telephone, voice mail, paging and
others. Personal communications networks operate in the 1800-2000 mHz range,
utilizing low power cells compared to traditional cellular technology.

     RBOC (Regional Bell Operating Company): A term for the seven regional
holding companies created when AT&T divested the Bell operating companies.

     RF (Radio Frequency): An electromagnetic wave frequency intermediate
between audio frequencies and infrared frequencies used especially in wireless
telecommunications and CATV transmission.

                                       G-1
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-K Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Temecula,
State of California, on March 26, 2002.

                                            CHANNELL COMMERCIAL CORPORATION
                                            a Delaware corporation


                                            By  /s/ William H. Channell, Sr.
                                               ---------------------------------
                                                 William H. Channell, Sr.
                                                 Chairman of the Board

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K Annual Report has been signed by the following persons in the
capacities indicated below as of March 26, 2002.

               Signature                    Capacity in Which Signed
               ---------                    ------------------------


/s/ William H. Channell, Sr.                Chairman of the Board
---------------------------------------
William H. Channell, Sr.


/s/ Richard A. Cude                         Chief Executive Officer and Director
---------------------------------------
Richard A. Cude


/s/ William H. Channell, Jr.                President, Chief Operating Officer
---------------------------------------     and Director
William H. Channell, Jr.


/s/ Jacqueline M. Channell                  Director
---------------------------------------
Jacqueline M. Channell


/s/ Eugene R. Schutt, Jr.                   Director
---------------------------------------
Eugene R. Schutt, Jr.


/s/ Peter J. Hicks                          Secretary and Director
---------------------------------------
Peter J. Hicks


/s/ Thomas Liguori                          Chief Financial Officer
---------------------------------------
Thomas Liguori