x

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _____________

CHANNELL COMMERCIAL CORPORATION

(Exact name of Registrant as specified in its charter)

DELAWARE

(State or other jurisdiction of incorporation or organization)

95-2453261

(I.R.S. Employer Identification No.)

26040 Ynez Road, Temecula, California

(Address of principal executive offices)

92591

(Zip Code)

(909) 719-2600

(Registrant’s telephone number, including area code)

Yes   x

No   o

Yes   o

No   x

ITEM 1.

FINANCIAL STATEMENTS

Three months ended
March 31,

2003

2002

Net sales

$

16,218

$

19,841

Cost of goods sold

11,736

13,359

Gross profit

4,482

6,482

Operating expenses

Selling

2,302

2,169

General and administrative

1,852

2,001

Research and development

395

392

4,549

4,562

(Loss) income from operations

(67

)

1,920

Interest expense, net

121

770

(Loss) income before income taxes

(188

)

1,150

Income taxes

100

654

Net (loss) income

$

(288

)

$

496

Net  (loss) income per share

Basic

$

(0.03

)

$

0.05

Diluted

$

(0.03

)

$

0.05

Net (loss) income

$

(288

)

$

496

Other comprehensive income (loss), net of tax Foreign currency translation adjustments

470

(66

)

Comprehensive net income

$

182

$

430

March 31,
2003

December 31,
2002

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$

4,061

$

3,162

Accounts receivable, net

9,695

10,156

Inventories

8,036

7,757

Deferred income taxes

1,037

1,037

Prepaid expenses and misc. receivables

1,315

1,090

Income taxes receivable

406

247

Total current assets

24,550

23,449

Property and equipment at cost, net

21,353

25,431

Deferred income taxes

4,467

4,367

Intangible assets, net

504

504

Other assets

424

412

$

51,298

$

54,163

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$

4,487

$

5,820

Short term debt (including current maturities of long term debt)

952

952

Current maturities of capital lease obligations

474

694

Accrued restructuring liability

1,941

2,155

Accrued expenses

3,638

3,625

Total current liabilities

11,492

13,246

Long term debt, less current maturities

3,597

4,877

Capital lease obligations, less current maturities

27

25

Deferred gain on sale leaseback transaction

559

574

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 - 9,369 shares in December 31, 2002 and March 31, 2003; outstanding - 9,125 shares in December 31, 2002 and March 31, 2003

94

94

Additional paid-in capital

28,655

28,655

Treasury stock - 244 shares in 2002 and 2003

(1,871

)

(1,871

)

Retained earnings

10,268

10,556

Accumulated other comprehensive income (loss) - Foreign currency translation

(1,523

)

(1,993

)

Total stockholders’ equity

35,623

35,441

Total liabilities and stockholders’ equity

$

51,298

$

54,163

Three months ended
March 31,

2003

2002

Cash flows from operating activities:

Net (loss) income

$

(288

)

$

496

Depreciation and amortization

1,633

1,693

Deferred income taxes

(100

)

667

Loss on disposal of fixed assets

95

—  

Foreign currency transaction gain

38

—  

Change in assets and liabilities:

(Increase) decrease in assets:

Accounts receivable

416

315

Inventories

(202

)

460

Prepaid expenses

(10

)

314

Other

(13

)

35

Income taxes receivable

(215

)

—  

Increase (decrease) in liabilities:

Accounts payable

(983

)

421

Accrued expenses

43

(131

)

Restructuring liability

(196

)

(220

)

Income taxes payable

—  

100

Net cash provided by operating activities

218

4,150

Cash flows from investing activities:

Acquisition of property and equipment

(126

)

(296

)

Proceeds from the sales of property and equipment

2,277

—  

Net cash provided by (used in) investing activities

2,151

(296

)

Cash flows from financing activities:

Repayment of debt

(1,280

)

(7,283

)

Repayment of obligations under capital lease

(223

)

(604

)

Net cash used in financing activities

(1,503

)

(7,887

)

Effect of exchange rates on cash

33

6

Increase (decrease) in cash and cash equivalents

899

(4,027

)

Cash and cash equivalents, beginning of period

3,162

8,762

Cash and cash equivalents, end of period

$

4,061

$

4,735

Cash paid during the period for:

Interest

$

88

$

658

Income taxes

$

282

$

36

1.

Unaudited financial statements:  In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of Channell Commercial Corporation (the “Company”) as of March 31, 2003 and the results of its operations for the three months ended March 31, 2003 and March 31, 2002 and its cash flows for the three months ended March 31, 2003 and 2002.  The results of operations and cash flows for the three months ended March 31, 2003, are not necessarily indicative of the results to be expected for any other interim period or the full year.  These consolidated financial statements should be read in combination with the audited consolidated financial statements and notes thereto for the year ended December 31, 2002.

2.

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

March 31,
2003

December 31,
2002

Raw Materials

$

3,142

$

3,324

Work-in-Process

2,283

2,374

Finished Goods

2,611

2,059

$

8,036

$

7,757

3.

(Loss) income per share:  Basic (loss) income per share excludes dilution and is computed by dividing net (loss) income available to common stockholders by the weighted average number of common shares outstanding for the three month periods ended March 31, 2003 and 2002.  Diluted income per share reflects the potential dilution that could occur if dilutive options to acquire common stock were exercised.  Options to acquire the Company’s common stock were not included in the computation of diluted loss per share for the three months ended March 31, 2003 because they are anti-dilutive.  The following is a reconciliation of the number of shares (denominator) used in the basic and diluted (loss) income per share computations for the three months ended March 31 (shares in thousands):

Three months ended March 31,

2003

2002

Shares

Per
Share
Amount

Shares

Per
Share
Amount

Basic (loss) income per share

9,125

$

(0.03

)

9,025

$

0.05

Effect of dilutive stock options

—  

—  

41

—  

Diluted (loss) income per share

9,125

$

(0.03

)

9,066

$

0.05

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

March 31,
2003

March 31,
2002

Options to purchase shares of common stock

233

882

Exercise prices

$

3.05 - $13.75

$

6.50 - $13.75

Expiration dates

July 2006 -
January 2013

July 2006 -
December 2011

4.

Stock Based Compensation:  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 related to option grants has not been significant for 2002 and 2003.

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 (loss) income and (loss) income per share would have been:

Three Months Ended March 31,

2003

2002

Reported net (loss) income  (in thousands)

$

(288

)

$

496

Proforma net (loss) income  (in thousands)

$

(289

)

$

477

Reported basic net (loss) income per share

$

(0.03

)

$

0.05

Proforma basic net (loss) income per share

$

(0.03

)

$

0.05

Reported diluted net (loss) income per share

$

(0.03

)

$

0.05

Proforma diluted net (loss) income per share

$

(0.03

)

$

0.05

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

Three Months Ended March 31,

2003

2002

Expected life (years)

5 years

5 years

Risk-free interest rate

3.0

%

3.0

%

Expected volatility

40

%

40

%

Expected dividend yield

—  

—  

In February 2003, the Company offered current employees and non-employee directors an opportunity to exchange their outstanding options granted under the 1996 Stock Plan.  The tender offer expired on March 20, 2003.  Pursuant to the offer, a total of 1,326,890 options were cancelled on March 20, 2003.

5.

Segments: The Company’s predominant business is the manufacturing and distribution of telecommunications equipment.  As a result of rationalizing and streamlining international operations, the Company has changed its segment reporting in the first quarter of 2003.  There are now two segments:  Americas and International.  Americas includes businesses in the United States, Central and South America and Canada.  International includes businesses in Europe, Africa, Middle East, Australia and Asia.  Some of the previous reporting segments have been combined due to their reduced size as a result of the general downturn in the telecommunications industry, the rationalization of various product lines within the former segments and changes in the management structure of the Company.  The new reporting segments reflect the current management structure and the reporting used internally by executive management to manage the businesses.  The following tables summarize segment information for the three months ended March 31, 2003 and 2002 (in thousands):

Three Months Ended
March 31,

2003

2002

Revenues from unrelated entities (1):

Americas

$

13,069

$

16,499

International

3,149

3,342

$

16,218

$

19,841

Three Months Ended
March 31,

2003

2002

(Loss) income from operations:

Americas

$

495

$

2,507

International

(562

)

(587

)

$

(67

)

$

1,920

Interest expense, net:

$

(7

)

$

650

Americas

128

120

International

$

121

$

770

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

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

Three Months Ended March 31,

2003

2002

Enclosures

$

12,982

$

15,672

Connectivity

1,794

2,597

Other

1,442

1,572

$

16,218

$

19,841

Included in the Connectivity revenues for the three months ended March 31, 2003 and 2002 are revenues from the RF product line of $0 and $803, respectively.  The RF product line was sold in the second quarter of 2002 (see Note 11).

The Company has identifiable assets in the following geographic regions:

March 31,
2002

December 31,
2003

(Unaudited)

Identifiable Assets:

Americas

$

37,681

$

40,060

International

13,617

14,103

$

51,298

$

54,163

6.

Recent Accounting Pronouncements:  In January 2003, the FASB issued Interpretation “Consolidation of Variable Interest Entities - an interpretation of ARB No. 51” (“FIN 46”). FIN 46 requires that if an entity has a controlling financial interest in a variable interest entity, the assets, liabilities and results of activities of the variable interest entity should be included in the consolidated financial statements of the entity. FIN 46 requires that its provisions are effective immediately for all arrangements entered into after January 31, 2003. For those arrangements entered into prior to January 31, 2003, the FIN 46 provisions are required to be adopted at the beginning of the first interim or annual period beginning after June 15, 2003. The Company does not expect that the provisions of FIN 46 will have a material impact on the Company’s results of operations or financial position.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of SFAS 123.”  This statement amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based

method of accounting for stock-based employee compensation.  In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in APB Opinion No. 25 and related interpretations.  Accordingly, compensation expense for stock options is measured as the excess, if any, of the estimate of the market value of the Company’s stock at the date of the grant over the amount an employee must pay to acquire the stock.  The Company has adopted the annual disclosure provisions of SFAS No. 148 in its financial reports for the year ended December 31, 2002 and the interim disclosure provisions for its financial reports for the quarter ended March 31, 2003.  As the adoption of this standard involves disclosures only, SFAS No. 148 did not have a material impact on the results of operations, financial position or liquidity.

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires a guarantor to recognize a liability, at the inception of the guarantee, for the fair value of obligations it has undertaken in issuing the guarantee and also include more detailed disclosures with respect to guarantees. FIN 45 is effective for guarantees issued or modified after December 31, 2002 and requires the additional disclosures for interim or annual periods ended after December 15, 2002. The disclosure requirements have been adopted in the Company’s financial statements for the year ended December 31, 2002.  The adoption of FIN 45 did not have a material impact on the Company’s results of operations or financial position.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.”  This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).”  SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred, not when it is “planned.”  The Company is required to adopt the provisions of SFAS No. 146 for exit or disposal activities that are initiated after December 31, 2002.  The adoption of SFAS No. 146 did not have a material impact on the Company’s results of operations or financial position.

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (SFAS No. 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 No. 143 is effective for the Company at the beginning of fiscal 2003.  The adoption of SFAS No. 143 did not have a material impact on its consolidated financial position or results of operations.

7.

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 involved the closure of facilities and consolidation of support infrastructure.  Most of the reductions occurred in the Company’s international operations.

In the third quarter of 2001, due to a continued slowdown in the telecommunications industry, the Company announced an additional restructuring plan in an effort to further reduce costs and align headcount and facilities with expected business levels in all regions.  The additional restructuring charge totaled $2,999.  The principal actions in the restructuring plan involved the closure of facilities and a reduction of headcount.

In the fourth quarter of 2002, the Company announced a restructuring plan to further rationalize international manufacturing operations.  As part of the plan, various manufacturing operations previously performed in the U.K. were either transferred to Australia or outsourced.  The management of Australia/Asia and Europe was consolidated under the Managing Director, International.  The restructuring charge totaled $1,228.  The principal actions in the restructuring plan involved the closure of facilities and a reduction in head count.

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 2003 are summarized in the table below:

Facilities

Workforce
Reduction

Total

Restructuring accrual balance at January 1, 2003

$

2,095

$

60

$

2,155

Costs incurred in the three months ended March 31, 2003

196

18

214

Restructuring accrual balance at March 31, 2003

$

1,899

$

42

$

1,941

8.

Sale Leaseback Arrangement:  In January 2003, the Company entered into a sale of a facility located in Orpington Kent, United Kingdom.  The proceeds from the sale totaled $2,441 and resulted in a pretax loss of $110 which is included in general and administrative expense.  Terms of the sale included a provision for the Company to lease back the facility for one year at no charge. Included in the proceeds was prepaid rent for one year which totaled $213.  The resulting lease is being accounted for as an operating lease.

9.

Income Taxes: The effective tax rate of (53%) for the three month period ended March 31, 2003 differed from the statutory rate of 37% primarily due to certain foreign operating losses incurred without a tax benefit recorded.

The Federal income taxes of the Company for the years ended December 31, 1997, 1998, 2000, and 2001 are currently under examination by the Internal Revenue Service (IRS).  In July 2002, the IRS issued the proposed result of their examination for the years ended December 31, 1997 and 1998, which increases the 1997 income tax amount due by $315 related to transfer pricing for sales to the Company’s Canadian subsidiary.  Management believes that the Company will prevail in its appeal of the proposed adjustment or that income re-allocated from Canada to the United States will result in a refund of Canadian income taxes which is substantially equal to the additional taxes due to the US.

10.

Commitments and Contingencies: In 2001, the State of Texas issued a report assessing the Company additional sales and use tax of $1,600, including interest.  The Company has appealed the assessment and is currently providing the State of Texas with documentation to support the Company’s contention that the transactions did not require the Company to remit sales and use tax to the State of Texas. The State of Texas has agreed to a reduction of the amount owed to $644.  The Company believes that they have meritorious defenses to the remaining claim of $644 and intends to vigorously defend its position.  The Company is also under examination by the State of Washington for sales and use tax and business and occupation tax.  The Company believes that the ultimate outcome of these examinations will not result in a material impact on the Company’s consolidated results of operations or financial position.

11.

Related Party Transactions:  In May 2002, the Company sold its RF line of passive electronic devices to RMS Communications, Inc., which is owned by, Gary Napolitano, a former officer of the Company.  A sale in the amount of $800 was recorded.  RMS Communications, Inc. paid the Company $125 in cash at the time of sale, and the remaining $675 is payable in monthly installments through June 30, 2003, bearing interest at 7% per annum.  The amount due from RMS Communications, Inc., included in accounts receivable at March 31, 2003 is $531.

12.

Concentrations:  Sales to Comcast of $4.1 million in the first quarter of 2003 represented 25.4% of Company sales in the period.  Comcast acquired AT&T’s broadband business in the fourth quarter of 2002 thereby increasing its purchases from the Company.  Sales to AOL/Time Warner of $2.7 million in the first quarter of 2003 represented 16.9% of the Company sales.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4.

CONTROLS AND PROCEDURES

ITEM 1.

LEGAL PROCEEDINGS

ITEM 2.

CHANGES IN SECURITIES AND USE OF PROCEEDS

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5.

OTHER INFORMATION

ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K

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

Loan and Security Agreement dated as of September 25, 2002 by and among the Company, Channell Commercial Canada Inc., Fleet Capital Corporation, Fleet Capital Canada Corporation and, under the circumstances set forth therein, Fleet National Bank, London U.K. Branch, trading as Fleet Boston Financial, and the U.K. Borrowers (as defined therein, if any) (6)

10.4

Employment Agreement between the Company and William H. Channell, Sr. (1)

10.5

Employment Agreement between the Company and William H. Channell, Jr. (1)

10.6

Channell Commercial Corporation 1996 Performance-Based Annual Incentive Compensation Plan (1)

10.7

Lease dated December 22, 1989 between the Company and William H. Channell, Sr., as amended (1)

10.8

Lease dated May 29, 1996 between the Company and the Channell Family Trust (1)

10.9

Lease dated October 26, 2000 between the Company and Belston Developments Inc. (4)

10.10

Lease Agreement dated as of March 1, 1996 between Winthrop Resources Corp. and the Company (1)

10.11

Form of Indemnity Agreement (1)

10.12

Form of Agreement Regarding Intellectual Property (1)

10.13

401(k) Plan of the Company (3)

10.14

A.C. Egerton (Holdings) PLC Share Purchase Agreement (2)

10.15

Amendment to Employment Agreement between the Company and William H. Channell, Jr., dated December 31, 1998 (3)

10.16

Further Amendment to Employment  Agreement between the Company and William H. Channell, Jr., dated July 15, 2002 (5)

10.17

Lease dated June 27, 2002 between the Company and Ynez Street, Ltd (5)

10.18

Mutual Specific and General Release between the Company and Richard A. Cude, dated August 2, 2002 (7)

99.1

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by William H. Channell, Sr., CEO. (8)

99.2

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Thomas Liguori, CFO. (8)

(b)

No Reports were filed on Form 8-K in the first quarter of 2003.

(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 8-K on May 18, 1998.

(3)

Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-K on March 31, 1999.

(4)

Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-K on April 2, 2001.

(5) 

Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-Q on August 9, 2002.

(6)

Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 8-K dated September 25, 2002.

(7) 

Incorporated by reference to the indicated exhibits filed in connection with the Company’s Form 10-Q on November 12, 2002.

(8) 

Filed herewith.

CHANNELL COMMERCIAL CORPORATION

(Registrant)

By:

/s/ THOMAS LIGUORI

Thomas Liguori
Chief Financial Officer
(Duly authorized officer and principal financial
officer of the Registrant)

1.

I have reviewed this quarterly report on Form 10-Q of Channell Commercial Corporation;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

          b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

          c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

          a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

          b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

William H. Channell, Sr.
Chairman and Chief Executive Officer

1.

I have reviewed this quarterly report on Form 10-Q of Channell Commercial Corporation;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

          b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

          c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

          a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

          b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Thomas Liguori
Chief Financial Officer