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