FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION ~~Washington, D.C. 20549~~

Washington, D.C. 20549

(Mark One)

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

For the Quarterly Period Ended ~~June~~September 30, 2001

orOR

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

For the Transition Period From To

Commission file number 0-20614

THE ROTTLUND COMPANY, INC. ~~(Exact name of registrants as specified in its charter)~~

MINNESOTA	41-1228259
(State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)
3065 Centre Pointe Drive, Roseville, MN	55113
(Address of principal executive offices)	(Zip Code)
(651) 638-0500
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

(Exact name of registrants as specified in its charter)

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.

MINNESOTA		41-1228259
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization		Identification No.)


3065 Centre Pointe Drive, Roseville, MN		55113
(Address of principal executive offices)		(Zip Code)

~~Yes ý No o~~(651) 638-0500

~~The number of shares outstanding of the~~ (Registrant’s ~~common~~telephone ~~stock~~number, ~~par value $.10 per share, at July 31, 2001 was~~including ~~5,852,572~~ area ~~shares.~~code)

~~THE ROTTLUND~~Not ~~COMPANY, INC. AND SUBSIDIARIES~~Applicable

~~INDEX~~(Former name, former address and former fiscal year, if changed since last report)

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated balance sheets – June 30, 2001 and March 31, 2001
	Consolidated statements of operations – Three months ended June 30, 2001 and 2000
	Consolidated statements of cash flows – Three months ended June 30, 2001 and 2000
	Notes to consolidated financial statements
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II.	OTHER INFORMATION
SIGNATURES

~~Part I. Financial~~Yes ~~Information~~ ~~Item~~ý No ~~1. Financial Statements~~o

~~Consolidated Balance~~The ~~Sheets~~number –of ~~Unaudited As~~shares outstanding of the ~~(In~~ Registrant’s ~~thousands~~common stock, ~~except~~par value $.10 per share, ~~data)~~at November 2, 2001, was 5,852,572 shares.

			June 30, 2001			March 31, 2001
	ASSETS
Cash and cash equivalents			$	792		$	7,079
Escrow and other receivables			2,073			2,444
Land, development costs and finished lots			65,699			55,254
Residential housing completed and under construction			37,132			29,421
Property and equipment, net			628			634
Deferred taxes			3,499			3,499
Other assets			5,397			5,416
			$	115,220		$	103,747
	LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
	Revolving credit facility		$	41,000		$	29,950
	Mortgage notes payable		4,395			–
	Accounts payable		14,239			15,823
	Accrued expenses		8,103			9,535
	Income taxes payable		1,250			3,493
		Total liabilities	68,987			58,801
Shareholders' equity:
	Preferred stock, $.10 par value, 10,000 shares authorized; none issued		–			–
	Common stock, $.10 par value, 40,000 shares authorized; issued and outstanding 5,852 and 5,852 respectively		585			585
	Paid-in capital		11,512			11,512
	Other comprehensive income		(275		)	–
	Retained earnings		34,411			32,849
		Total shareholders' equity	46,233			44,946
			$	115,220		$	103,747

THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

~~See accompanying notes to consolidated financial statements~~INDEX

Consolidated Statements of Operations – Unaudited (in thousands, except per share data)



PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated balance sheets - September 30, 2001 and March 31, 2001

	Consolidated statements of operations – Three and six months ended September 30, 2001 and 2000

	Consolidated statements of cash flows – Six months ended September 30, 2001 and 2000

	Notes to consolidated financial statements

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations


PART II.	OTHER INFORMATION


SIGNATURES

		For the Three Months Ended June 30,
		2001			2000
Net sales		$	48,439		$	49,605
Cost of sales		39,955			42,093
		8,484			7,512
Selling, general and administrative expense		6,063			5,720
Operating income		2,421			1,792
Other income (expense):
	Interest expense	(1		)	(506		)
	Other income	184			156
Income before provision for income taxes and extraordinary charge		2,604			1,442
Extraordinary charge, net of tax		–			612
Provision for income taxes		1,042			577
Net income		$	1,562		$	253
Basic and diluted earnings per share:
	Income before extraordinary charge	$	0.27		$	0.14
	Extraordinary charge	–			(0.10		)
	Net earnings per share	$	0.27		$	0.04
	Weighted average shares outstanding	5,853			5,852

Part I. Financial Information

~~See accompanying~~Item ~~notes~~1. Financial ~~to consolidated financial statements~~Statements

ConsolidatedTHE StatementsROTTLUND ofCOMPANY, CashINC. FlowsAND – Unaudited (In thousands)SUBSIDIARIES

					For the Three Months Ended June 30,
					2001			2000
OPERATING ACTIVITIES:
	Net income before extraordinary charge				$	1,562		$	865
	Extraordinary charge				–			(612		)
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation			97			127
		Changes in operating items:
			Escrow and other receivables		371			(97		)
			Land, development costs and finished lots		(10,445		)	1,600
			Residential housing completed and under construction		(7,711		)	(10,344		)
			Deferred financing costs and other assets		19			(2,307		)
			Accounts payable		(2,042		)	922
			Accrued liabilities		(1,432		)	(1,048		)
			Income taxes payable		(2,060		)	(31		)
				Net cash (used for) operating activities	(21,641		)	(10,925		)
INVESTING ACTIVITIES:
	Purchase of property and equipment, net				(91		)	(75		)
FINANCING ACTIVITIES:
	Proceeds (Repayments) from mortgage notes payable				4,395			(259		)
	Proceeds from revolving credit facility, net				11,050			26,325
	Repayment of Senior Notes Payable				–			(21,846		)
		Net cash provided by financing activities			15,445			4,220
NET DECREASE IN CASH AND CASH EQUIVALENTS					(6,287		)	(6,780		)
CASH AND CASH EQUIVALENTS:
	Beginning of period				7,079			8,087
	End of period				$	792		$	1,307
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
	Cash paid for interest, net of $713 and $600 capitalized, respectively				$	1		$	506
	Cash paid for income taxes				$	3,100		$	193

Consolidated Balance Sheets

~~See accompanying~~As ~~notes to consolidated financial statements~~of

~~NOTES~~(In TOthousands, ~~CONSOLIDATED~~except ~~FINANCIAL STATEMENTS~~per ~~(UNAUDITED~~share data)

1. General

	(Unaudited)
	September 30, 2001			March 31, 2001



ASSETS

Cash and cash equivalents	$	2,528		$	7,079
Escrow and other receivables	2,255			2,444
Notes receivable	6,352			-
Land, development costs and finished lots	62,768			55,254
Residential housing completed and under construction	35,540			29,421
Property and equipment, net	628			634
Deferred income taxes	3,499			3,499
Land deposits and other assets	5,376			5,416
	$	118,946		$	103,747


LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
Revolving credit facility	$	41,425		$	29,950
Mortgage notes payable	4,395			-
Accounts payable	13,704			15,823
Accrued expenses	8,642			9,535
Income taxes payable	1,510			3,493
Total liabilities	69,676			58,801

Shareholders' equity:
Preferred stock, $.10 par value, 10,000,000 shares authorized; none issued	-			-
Common stock, $.10 par value, 40,000,000 shares authorized; issued and outstanding 5,852,572 and 5,851,572 respectively	585			585
Paid-in capital	11,516			11,512
Other comprehensive income (loss)	(312		)	-
Retained earnings	37,481			32,848
Total shareholders' equity	49,270			44,946
	$	118,946		$	103,747

~~The~~See ~~consolidated~~accompanying ~~financial~~notes ~~statements included herein have been prepared by the Company without audit, in accordance with generally accepted accounting principles, and pursuant~~ to ~~the rules and~~ ~~regulations of the Securities and Exchange Commission. These interim financial statements should be~~ ~~read in conjunction with the~~ consolidated financial statements and notes in the Company's annual report on form 10-K for the year ended March 31, 2001 as filed with the Securities and Exchange Commission. In the opinion of management of the Company, these financial statements contain all adjustments of a normal recurring nature necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.

~~The~~THE ~~Company~~ROTTLUND ~~has experienced~~COMPANY, ~~and expects to continue to experience significant variability in quarterly net sales and net income~~INC. ~~Operating~~ ~~results~~AND ~~for the three month period ending June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending March 31, 2002.~~SUBSIDIARIES

~~2. Revolving~~ Consolidated ~~Credit~~ Statements ~~Facility~~of toOperations ~~Bank~~– Unaudited

~~As of June 30, 2001, the Company had a line-of-credit arrangement with a bank totaling $50,000,000, with interest at the bank’s prime rate~~ (~~as of June 30, 2001 that rate was 6.75%). Borrowings outstanding at June 30, 2001 were $41,000,000 under this arrangement.~~ In ~~addition,~~ ~~there were $1~~thousands,~~794,000~~ ~~letters~~except ofper ~~credit outstanding under this~~share ~~arrangement at June 30, 2001. As of~~ ~~June 30, 2001 the Company was in compliance with debt covenants under this revolving facility.~~data)

3 Derivatives

	For the Three Months Ended September 30,						For the Six Months Ended September 30,
	2001			2000			2001			2000

Net sales – home sales	$	64,921		$	72,355		$	113,360		$	121,961
Net sales – land/lot sales	13,105			3,410			13,365			3,410
	78,026			75,765			126,725			125,371

Cost of sales – home sales	52,340			59,850			92,295			101,943
Cost of sales – land/lot sales	13,274			3,244			13,524			3,244
	65,614			63,094			105,819			105,187

Gross profit – home sales	12,581			12,505			21,065			20,018
Gross profit (loss) – land/lot sales	(169		)	166			(159		)	166
	12,412			12,671			20,906			20,184

Selling, general and administrative expense	7,544			7,323			13,606			13,043
Operating income	4,868			5,348			7,300			7,141

Other (income) expense:
Interest expense	1			385			2			891
Other income	(250		)	(99		)	(423		)	(255		)

Income before income taxes & extraordinary charge	5,117			5,062			7,721			6,505

Provision for income taxes	2,046			2,025			3,088			2,602
Net income before extraordinary charge	3,071			3,037			4,633			3,903
Extraordinary charge, net of tax	-			-			-			612

Net income	$	3,071		$	3,037		$	4,633		$	3,291

Basic and diluted earnings per share:
Net income per share before extraordinary charge	$	0.52		$	0.52		$	0.79		$	.67
Extraordinary charge	-			-			-			(.11		)
Net income per share	$	0.52		$	0.52		$	0.79		$	0.56

Weighted average shares outstanding	5,893			5,852			5,881			5,852

~~The~~See ~~company~~accompanying ~~adopted~~notes ~~SFAS No. 133,~~to ~~“Accounting for Derivative Instruments and Hedging Activities,” as of April 1,~~ ~~2001. SFAS~~consolidated ~~No.~~financial 133 establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge criteria are met and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting.statements

~~The~~THE ~~Company’s revolving credit agreement~~ROTTLUND ~~has variable rate borrowings based on the prime rate. To minimize the Company’s~~ ~~exposure to the risk of changes in its interest payments attributable to changes in interest rates~~COMPANY, ~~the Company entered into an interest rate swap in July 2000~~INC. ~~Company~~AND ~~has designated this interest rate swap as a hedge.~~SUBSIDIARIES

~~As a result of the adoption of SFAS No.~~Consolidated ~~133, the Company recorded in the first quarter of fiscal 2002, the cumulative~~ ~~effect~~Statements of aCash ~~change~~Flows in– accounting principle to other comprehensive income (loss) of $(458,000), net of $(183,000) tax benefit, which will be reclassified to earnings through the expiration of the interest rate swap in July, 2002.Unaudited

~~Item~~(In 2. thousands)

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

	For the Six Months Ended September 30,
	2001			2000

OPERATING ACTIVITIES:

Net income	$	4,633		$	3,291
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation	11			193
Changes in operating items:
Escrow and other receivables	189			614
Land, development costs and finished lots	(7,515		)	1,296
Residential housing completed and under construction	(6,119		)	(2,950		)
Other assets	40			(1,228		)
Accounts payable	(2,431		)	1,259
Accrued expenses	(893		)	1,449
Income taxes payable	(1,983		)	1,994
Net cash provided by (used for) operating activities	(14,068		)	5,918

INVESTING ACTIVITIES:
Increase in notes receivable	(6,352		)	-
Purchase of property and equipment, net	(5		)	(98		)
	(6,357		)	(98		)
FINANCING ACTIVITIES:
Proceeds from (repayments of) notes payable, net	4,395			(648		)
Proceeds from revolving credit facility, net	11,475			13,990
Proceeds from stocks exercised	4			-
Repayment of senior notes payable	-			(21,845		)
Net cash provided by (used for) financing activities	15,874			(8,503		)

NET DECREASE IN CASH AND CASH EQUIVALENTS	(4,551		)	(2,683		)

CASH AND CASH EQUIVALENTS:
Beginning of period	7,079			8,087

End of period	$	2,528		$	5,404

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest, net of $1,561 and $1,229 capitalized, respectively	$	2		$	891
Cash paid for income taxes	$	5,070		$	199

~~General~~See accompanying notes to consolidated financial statements

~~The~~THE ~~following~~ROTTLUND ~~table~~COMPANY, ~~sets~~INC. ~~forth~~AND ~~certain information regarding the Company's operations for the periods indicated.~~SUBSIDIARIES

		Percentage of Net Sales
		For The Three Months Ended June 30
		2001		2000
Net sales		100.0	%	100.0	%
Cost of sales		82.5		84.9
	Gross profit	17.5		15.1
	Selling, general and administrative expense	12.5		11.5
Operating income		5.0		3.6
Other income (expense):
	Interest expense	–		(1.0	)
	Other income	0.4		0.3
	Income before provision for income taxes and extraordinary charge	5.4		2.9
	Extraordinary loss, net of tax	–		1.2
	Provision for income taxes	2.2		1.2
	Net income	3.2	%	0.5	%
	Number of homes closed	228		297

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Backlog~~Note 1. General

The financial statements included herein ~~following~~ have ~~table~~been ~~sets~~prepared ~~forth~~by the Company without audit, in accordance with generally accepted accounting principles, and pursuant to the rules and regulations of the Securities and Exchange Commission. These interim financial statements should be read in conjunction with the consolidated financial statements and notes in the Company's ~~backlog~~annual report on Form 10-K for the year ended March 31, 2001 as filed with the Securities and Exchange Commission. In the opinion of management of the ~~dates~~Company, ~~indicated:~~these financial statements contain all adjustments of a normal recurring nature necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.

June 30,	Number of Homes	Sales Value
2001	648	$135,500,000
2000	616	$123,318,000

The Company has experienced, and expects to continue to experience, significant variability in quarterly net sales and net income. Operating results for the three and six months ending September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending March 31, 2002.

AsNote ~~a cautionary note to investors, certain matters discussed in this management discussion and analysis are forward looking statements within the meaning of the Private Securities Litigation Act of 1995~~2. ~~Such matters~~ Revolving ~~involve risks and uncertainties, including changes in economic conditions and~~ ~~interest~~Credit ~~rates,~~Facility ~~increases in raw material and labor costs, weather conditions, and general competitive factors that may cause actual results~~ to ~~differ materially.~~Bank

~~Results~~As of September 30, 2001, the Company had a line-of-credit ~~Operations~~arrangement with a bank totaling $60,000,000, with interest at the bank’s prime rate (as of September 30, 2001 that rate was 6.00%). In October, 2001, the Company amended its interest rate swap, which fixes the first $15 million of debt at 8.34% through December 31, 2003, from the previous swap, which was at 9.96% and expired July, 2002. Borrowings outstanding at September 30, 2001 were $41,425,000 under this arrangement. In addition, letters of credit totaling approximately $4,519,000 were outstanding under this arrangement at September 30, 2001.

~~Three Months~~Note ~~Ended June 30, 2001 Compared to Three Months Ended~~3. ~~June 30, 2000~~ Derivatives

~~Net~~The ~~sales~~ Company ~~were~~adopted ~~$48.4~~SFAS ~~million for the three months ended June 30, 2001 as compared to $49~~No.6 ~~million~~133, a“Accounting ~~decrease~~for ofDerivative ~~$1.2~~Instruments ~~million or 2.4%. The decrease was the~~and ~~result~~ Hedging ofActivities,” aas ~~23.2% decline in the number~~ of ~~homes~~April ~~closed by the Company to 228 units for the three months ended June 30~~1, 2001~~, from 297 units during the same period in 2000~~. ~~The decrease in the~~ ~~number of homes sold is directly related to the Company's exiting the Orlando,~~ FtSFAS ~~Myers~~No. ~~and~~133 ~~Indianapolis~~establishes ~~markets~~accounting and ~~weather~~reporting ~~delays~~standards ~~experienced in spring 2001~~requiring ~~construction. On~~ that aevery ~~remaining~~derivative ~~market basis,~~instrument ~~primarily~~be ~~due~~recorded toin the ~~weather~~balance ~~delays,~~sheet ~~homes~~as ~~closed~~either ~~decreased 10.6%. The~~an ~~backlog~~ asset ator ~~June~~liability ~~30,~~measured ~~2001~~at isits ~~648~~fair ~~homes representing $135~~value.~~5 million in revenue~~ ~~compared~~ SFAS toNo. ~~616~~133 ~~homes~~requires ~~and~~that ~~$123.3~~changes ~~million~~ in ~~revenue~~the ~~last~~derivative’s ~~year. The~~fair ~~average~~value ~~selling price of a home~~be ~~increased~~ recognized ~~27.2%~~currently toin ~~$212,500,~~earnings ~~during~~unless ~~the~~specific ~~three~~hedge ~~months~~criteria ~~ended~~are ~~June~~met ~~30, 2001 from~~and ~~$167,000 for the comparable period in 2000.~~ ~~This~~requires ~~increase~~that ~~was the result of higher selling prices as well as~~ a ~~higher~~ ~~percentage~~company ofmust ~~single~~formally ~~family homes~~document, ~~which~~designate ~~have~~and ~~higher~~assess ~~selling prices than multi-family homes, closing in~~ the ~~current year compared to last year. Single family homes represented 43%~~ effectiveness of ~~the~~transactions ~~homes~~that ~~closed~~receive inhedge ~~the quarter compared to 26% last year~~accounting.

~~Gross~~The ~~profit~~ Company’s ~~increased~~revolving bycredit ~~13.3%,~~agreement tohas ~~$8.5~~variable ~~million~~rate ~~for~~borrowings ~~the~~based ~~three~~on ~~months~~the prime ~~ended~~rate. ~~June~~To ~~30, 2001,~~minimize ~~from~~the ~~$7.5~~Company’s ~~million~~exposure ~~for~~to the ~~comparable~~risk ~~period~~ of ~~2000. The~~changes ~~gross~~in ~~profit~~its interest ~~margin~~payments ~~increased~~attributable to ~~17.5% for~~changes ~~the~~in ~~three~~interest ~~months~~rates, ~~ended~~the ~~June~~Company entered ~~30,~~into ~~2001~~an ~~from~~interest ~~15.1%~~rate ~~for~~swap ~~the~~in ~~comparable~~July ~~period of~~ 2000. ~~The~~ ~~increased~~This ~~gross~~interest ~~profit margin~~rate swap was amended ~~primarily~~in ~~due~~October to2001. The ~~higher~~Company has ~~average~~designated ~~selling~~this ~~prices~~interest ~~and~~rate ~~decreased~~swap ~~direct costs~~ as a ~~percentage of sales~~hedge.

~~Selling,~~As ~~general~~ a ~~and~~result ~~administrative~~of ~~expenses~~the ~~increased~~adoption byof 7SFAS No.0% to133, ~~$6.1~~the ~~million~~Company recorded in the ~~three~~ first six months ~~ended~~of ~~June~~fiscal 302002, ~~2001, from $5.7 million for~~ the ~~comparable~~cumulative ~~period~~ effect of ~~2000. As~~ a ~~percentage~~change ofin ~~net sales,~~accounting ~~selling,~~ principle ~~general and administrative expense increased~~ to ~~12.5%~~other ~~for~~comprehensive ~~the~~loss ~~three month~~of ~~period ended June 30~~$546, ~~2001~~000, ~~from~~net ~~11.5%~~of ~~for~~$234,000 ~~the~~tax ~~same period in 2000. Insurance~~benefit, which ~~real~~will ~~estate~~be ~~taxes~~reclassified ~~and~~to ~~model~~earnings ~~home lease~~through ~~costs were~~ the ~~items~~expiration ~~with~~of ~~significant increases in~~ the ~~quarter compared~~interest to rate ~~last~~swap ~~year~~in July, 2002.

~~Interest~~Note ~~expense before capitalization, decreased to $714,000 for the three months ended~~ ~~June 30, 2001, from $1,106,000 for the comparable period in 2000~~4. ~~The~~Sale decrease in interest expense is primarily due to the Company’s lower borrowing needs and lower interest rates for the three months ended June 30, 2001 compared to the three months ended June 30, 2000. The Company capitalizes certain interest costs for land development and includes such capitalized interest in cost of ~~home~~Subsidiary sales when the related homes are delivered to purchasers. Interest expense, net of interest capitalization, was $1,000 in the quarter ended June 30, 2001, as compared to $506,000 in the same period in 2000.Assets

~~The~~On August 24, 2001, the Company ~~had~~sold ~~$23~~substantially all of the assets of its subsidiary,~~069,000~~ inRottlund ~~senior~~Homes ~~notes~~of New Jersey, Inc. ~~which~~ The ~~were~~purchase ~~retired~~price inapproximated ~~April~~$14.7 ~~2000~~million, of which $8.4 million was cash and ~~replaced~~$6.3 ~~with~~million ~~the~~was ~~revolving~~in ~~credit line~~notes, due within one year. In connection with the ~~retirement of~~sale ~~the~~and ~~senior~~related closure ~~debt~~expenses, the Company ~~incurred~~recorded an ~~extraordinary~~after ~~charge~~tax loss of approximately $~~612~~360,000~~, net~~ of($0.06 ~~tax~~per ofshare) ~~$410,000~~ in the ~~three~~fiscal ~~months~~second quarter ending ~~June~~September 30, ~~2000~~ 2001.

~~The Company’s~~Item ~~effective tax rate for both periods was approximately 40%, which reflects the federal statutory rate plus state taxes, net of federal income tax benefit~~2.

~~As a~~MANAGEMENT'S ~~result~~DISCUSSION ~~of the above, net income increased to $1,562,000 ($0.27 per share~~AND ~~basic and diluted) in fiscal 2001 from $253,000 ($0.04 per share basic and~~ ~~diluted)~~ANALYSIS ~~in fiscal 2000.~~OF

~~Liquidity~~FINANCIAL ~~and~~ CONDITION ~~Capital~~AND ~~Resources~~RESULTS OF OPERATIONS

Funding for the Company’s operations has been principally provided by cash flows from operations, sale and leaseback of model homes, seller financing of land and bank borrowings. In addition the Company has utilized and will continue to utilize land options as a method of controlling and subsequently acquiring land. The Company’s financing needs depend primarily upon sales volume, asset turnover, land acquisition and inventory balances.General

AtThe ~~June~~ following ~~30,~~table ~~2001,~~sets ~~the~~forth ~~Company~~certain ~~had~~information ~~available~~regarding ~~cash~~the ~~and cash equivalents of~~Company's ~~approximately~~ operations ~~$0.8~~for ~~million~~the ~~compared~~periods ~~to $7~~indicated.~~1 million at March 31, 2001.~~

For the three months ended June 30, 2001, $21.6 million in cash was used by operations. Financing activities included a $11.0 million increase in the amounts borrowed under the revolving line of credit and $4.4 million in mortgages assumed.

	Percentage of Net Sales

	For the Three Months Ended September 30,				For the Six Months Ended September 30,
	2001		2000		2001		2000

Net sales – home sales	83.2	%	95.5	%	89.5	%	97.3	%
Net sales – land/lot sales	16.8		4.5		10.5		2.7
	100.0		100.0		100.0		100.0

Cost of sales – home sales	67.1		79.0		72.8		81.3
Cost of sales – land/lot sales	17.0		4.3		10.7		2.6
	84.1		83.3		83.5		83.9

Gross profit – home sales	16.1		16.5		16.6		16.0
Gross profit (loss) – land/lot sales	(0.2	)	0.2		(0.1	)	0.1
	12,412		16.7		16.5		16.1

Selling, general and administrative expense	9.7		9.7		10.7		10.4
Operating income	6.2		7.0		5.8		5.7

Other (income) expense:
Interest	-		.5		-		0.7
Other	(.3	)	(.1	)	(.3	)	(.2	)

Income before income taxes & extraordinary charge	6.5		6.6		6.1		5.2

Provision for income taxes	2.6		2.6		2.4		2.1
Net income before extraordinary charge	3.9		4.0		3.7		3.1
Extraordinary charge, net of tax	-		-		-		612

Net income	3.9	%	4.0	%	3.7	%	2.6	%

Number of homes closes	295		392		523		689

The Company has an unsecured revolving credit agreement, which expires December 31, 2003 and provides borrowings of up to $50 million, of which $5 million may be used for letters of credit. Borrowings under this agreement are subject to a borrowing base calculation based on a defined percentage of land, development costs, finished lots and the working capital of the Company. As of June 30, 2001, borrowings under this facility’s line of credit totaled $41.0 million, and $7.2 million was available for borrowing under the calculation described above. On July 7, 2000, the Company entered into an interest swap on $15 million of the above credit arrangement which fixes the interest rate at 9.96% for a period of two years. The Company believes the amounts available under its existing borrowing arrangements and amounts generated from operations will provide funds adequate for its home building activities and debt service for the foreseeable future.Backlog

The ~~revolving credit facility contains various restrictive covenants including,~~ ~~among~~following ~~others,~~table ~~certain~~sets ~~financial~~forth ~~covenants~~the ~~relating to minimum consolidated tangible net worth and earnings levels, as well as funding, borrowing base requirements, payment of dividends and maximum land and construction limitations. The~~ Company's ~~was~~backlog ~~in compliance with all financial covenants~~ as of ~~June~~the ~~30,~~dates ~~2001.~~indicated:

The Company’s land purchase agreements are typically subject to numerous conditions including, but not limited to, the Company’s ability to obtain necessary zoning and other governmental approvals for the proposed developments. The Company believes it has been successful in obtaining local governmental approvals through proactive interaction with neighborhood and citizen groups. The Company maintains a policy of holding neighborhood meetings to gain support for its development activities. During the initial municipal approval process, the Company confirms the availability of utilities, conducts environmental reviews, arranges acquisition development and financing, and completes its marketing construction feasibility studies. As a result, the Company is generally able to begin marketing immediately after closing the land purchase. This results in reduced carrying costs and increased liquidity for future development opportunities.

	Number of
September 30,	Homes	Sales Value

2001	602	$112,000,000
2000	580	$120,000,000

ToAs ~~minimize~~ a ~~the~~cautionary ~~business~~note ~~risk~~to ~~associated~~investors, ~~with~~certain ~~developing~~matters ~~land~~discussed ~~and~~in tothis ~~maximize the use of the Company~~management’s discussion ~~available~~and ~~capital,~~analysis ~~the~~are ~~Company~~forward ~~has~~looking ~~been~~statements ~~able~~within tothe ~~acquire~~meaning aof ~~substantial~~ the ~~amount~~Private ofSecurities ~~its~~Litigation ~~developments~~Act ~~and lots by means~~ of ~~option contracts~~1995. ~~Option contracts generally~~ ~~require~~ Such ~~the~~matters ~~payment~~involve ofrisks ~~cash~~and ~~deposit~~uncertainties, orincluding ~~issuance~~changes ~~of a letter of credit for the~~in ~~right~~ economic toconditions ~~acquire~~and ~~lots~~interest ~~during~~rates, aincreases ~~specified~~in ~~period~~raw ofmaterial ~~time~~and atlabor costs, aweather ~~certain~~conditions, ~~price. Our~~and ~~option~~general ~~contracts~~competitive ~~have~~factors ~~expiration~~that ~~periods~~may cause ~~ranging~~ actual ~~from~~results 30 to 60differ ~~months~~materially.

~~The~~Three ~~Company has generally been able to secure financing for its acquisition,~~ ~~development~~Months ~~and~~Ended ~~construction~~September ~~activities~~30, ~~and~~2001 ~~management~~Compared ~~believes such arrangements will continue~~ to beThree ~~available~~Months onEnded ~~terms~~September ~~satisfactory to the Company. There can be no assurance~~30, ~~however, that continued financing for land acquisitions will be available or,~~ ~~if available, will be on terms satisfactory to the Company.~~2000

~~Inflationary~~Net ~~Factors~~ sales were $78.0 million for the three months ended September 30, 2001 as compared to $75.8 million for the comparable period of 2000, an increase of $2.2 million or 2.9%. Sales of homes were $64.9 million compared to $72.4 million in the previous year, a decrease of $7.5 million. The prior year included a $6.4 million sale and leaseback of model homes. During the past twelve months the Company has exited the Indianapolis and New Jersey markets. Home sales comparisons for the remaining markets were $62.4 million in 2001 versus $63.4 million in 2000, a decrease of $1.0 million or 1.6% . Included in the current quarter was revenue from land sales of $13.1 million versus $3.4 million in the prior year ended. During the current quarter the Company sold substanially all of the assets of Rottlund Homes of New Jersey, Inc. for $14.7 million, of which approximately $8.4 million was in cash and $6.3 milllion was in notes receivable. Included in the land sales in the quarter are $12.6 million related to the land sold in New Jersey. The number of homes closed by the Company decreased by 24.6% to 295 homes for the three months ended September 30, 2001, from 392 homes during the same period in 2000. During the quarter ended September 30, 2000, 38 of the homes closed were model home sale lease backs. The average selling price of homes closed increased 19.2% to $220,100, during the three months ended September 30, 2001 from $184,600 for the comparable period in 2000. This increase was due to an overall increase in prices as well as a higher percentage of single family homes, which have higher selling prices than multi-family homes, closing in the current quarter compared to last year.

~~The~~Gross ~~Company,~~ profit aswas ~~well~~$12.4 asmillion for the ~~home~~three ~~building~~months ~~industry~~ended inSeptember ~~general~~30, ~~may~~2001, compared beto ~~adversely affected~~$12.7 ~~during~~million ~~periods~~for ofthe ~~high~~comparable ~~inflation~~period of 2000, ~~primarily~~a ~~because~~decrease of 2.4%. Gross ~~higher~~profit ~~land,~~as a percentage of ~~material~~ net ~~and~~sales ~~labor~~decreased ~~costs~~to 15. In9% ~~addition, higher~~from ~~mortgage~~16.7% ~~interest~~primarily ~~rates~~as ~~may~~a ~~significantly~~result ~~affect~~of the ~~affordability~~higher percentage of ~~permanent~~ ~~mortgage~~land ~~financing~~sales toin ~~prospective~~the ~~purchasers. The~~current ~~Company~~quarter ~~attempts~~which tohas ~~pass~~a ~~through~~gross toprofit ~~its~~loss ~~customers~~ of ~~any~~$169,000 ~~increase~~ in ~~its~~2001 ~~costs~~versus ~~through~~a ~~increased~~gross ~~selling~~profit ~~prices~~of $166,000 ~~and~~in ~~to date,~~2000. The ~~inflation~~loss ~~has~~relates ~~not~~to ~~had~~the aland ~~material~~sold ~~adverse~~in ~~effect~~New Jersey. Gross profit on ~~the~~home ~~Company's~~sales ~~results~~was of $12.6 ~~operations~~million (19.4%) in 2001 compared to $12.5 million (16.5%) in 2000. ~~However,~~The ~~there~~increase iswas ~~no assurance~~the ~~that~~result ~~inflation~~of ~~will~~higher selling ~~not~~prices ~~have~~and aimprovement ~~material~~in ~~adverse~~direct ~~impact~~construction costs on ~~the~~homes closing in ~~Company's~~ the ~~future~~current ~~results~~quarter ofcompared ~~operations~~to last year.

~~Part~~Selling, general IIand –administrative ~~Other~~expenses ~~Information~~increased by 2.7% to $7.5 million in the three months ended September 30, 2001, from $7.3 million for the comparable period of 2000. As a percentage of net sales, selling, general and administrative expense remained at 9.7% for the three month period ended September 30, 2001, compared to the the same period in 2000.

Items 1 through 5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
	(a)	Exhibits. Not applicable.
	(b)	Reports on Form 8-K.
		The registrant filed no reports on Form 8-K during the three months ended June 30, 2001

In connection with the sale and related closure expenses of Rottlund Homes of New Jersey, Inc., the Company recorded an after tax loss of approximately $360,000 ($0.06) per share in the quarter ending September 30, 2001.

~~SIGNATURES~~Interest expense before capitalization, decreased to $823,000 for the three months ended September 30, 2001, from $1,007,000 for the comparable period in 2000. The decrease in interest expense is primarily due to a lower interest rate, compared to the three months ended September 30, 2000. The Company capitalizes certain interest costs for land development and includes such capitalized interest in the cost of home sales when the related homes are delivered to purchasers and in land development costs and finished lots prior to delivery of the home. Interest expense, net of interest capitalization, was $1,000 in the quarter ended September 30, 2001, as compared to $385,000 in the same period in 2000.

~~Pursuant~~The to Company’s ~~the~~effective ~~requirements~~tax ofrate ~~the~~for ~~Securities~~both ~~Exchange~~periods ~~Act~~was ofapproximately ~~1934~~40%, ~~the registrant has~~which ~~duly~~ reflects ~~caused~~the ~~this~~federal ~~report~~statutory torate beplus ~~signed~~state ontaxes, ~~its~~net ~~behalf~~federal byincome ~~the undersigned thereunto~~tax ~~duly authorized~~ benefit.

		THE ROTTLUND COMPANY, INC.
Date:	August 3, 2001	By: /s/ David H. Rotter
		David H. Rotter
		President and
		Chief Executive Officer
Date:	August 3, 2001	By: /s/ Steven A. Kahn
		Steven A Kahn
		Chief Financial Officer
		(Principal Financial and
		Accounting Officer)

As a result of the above, net income was $3,071,000 ($0.52 per share basic and diluted) in fiscal 2001, compared to $3,037,000 ($.52 per share basic and diluted) in fiscal 2000.

Six Months Ended September 30, 2001 Compared to Six Months Ended September 30, 2000

Net sales were $126.7 million for the six months ended September 30, 2001 as compared to $125.4 million for the comparable period of 2000, an increase of $1.3 million or 1.0%. Sales of homes were $113.4 million compared to $122.0 million in the previous year, a decrease of $8.6 million. The prior year included a $6.4 million sale and leaseback of model homes. During the past twelve months the Company exited the Indianapolis and New Jersey markets. Home sale comparisons for the remaining markets were $107.6 million in 2001 versus $100.9 million in 2000, an increase of $6.7 million or 6.7%. Included in the current quarter was revenue from land sales of $13.4 million versus $3.4 million in the prior year ended. During the current quarter the Company sold substantially all of the assets of Rottlund Homes of New Jersey, Inc. for $14.7 million, of which approximately $8.4 million was in cash and $6.3 million was in notes receivable. Included in the land sales in the quarter are $12.6 million related to the land sold in New Jersey. The number of homes closed by the Company decreased by 24.1% to 523 homes for the six months ended September 30, 2001, from 689 homes during the same period in 2000. The average selling price of a home increased 22.4% to $216,700, during the six months ended September 30, 2001 from $177,000 for the comparable period in 2000. This increase was due to an overall increase in prices as well as a higher percentage of single family homes, which have higher selling prices than multi-family homes, closing in the current period compared to last year.

Gross profit was $20.9 million for the six months ended September 30, 2001, compared to $20.2 million for the comparable period of 2000, a decrease of 3.5%. Gross profit as a percentage of net sales increased to 16.5% from 16.1% primarily due to higher average selling prices and decreased direct costs as a percentage of sales. Included in the current period was a gross profit loss on land sales of $159,000 in 2001 versus a gross profit on land sales of $166,000 in 2000. The loss relates to the land sold in New Jersey. Gross profit on home sales was $21.1 million (18.6%) in 2001 compared to $20.0 million (16.0%) in 2000. The increase was the result of higher selling prices and improvement in direct construction costs on homes closing in the current period compared to last year.

Selling, general and administrative expenses increased by 4.6% to $13.6 million in the six months ended September 30, 2001, from $13.0 million for the comparable period of 2000. As a percentage of net sales, selling, general and administrative expense increased to10.7% for the six month period ended September 30, 2001, from 10.4% for the same period in 2000.

In connection with the sale and related closure expenses of Rottlund Homes of New Jersey, Inc., the Company recorded an after tax loss of approximately $360,000 ($.06) per share in the period ending September 30, 2001.

Interest expense before capitalization, decreased to $1,537,000 for the six months ended September 30, 2001, from $2,124,000 for the comparable period in 2000. The decrease in interest expense is primarily due to a lower interest rate, compared to the six months ended September 30, 2000. The Company capitalizes certain interest costs for land development and includes such capitalized interest in cost of home sales when the related homes are delivered to purchasers and in land development costs and finished lots on the balance sheet prior to delivery of the home. Interest expense, net of interest capitalization, was $2,000 in the period ended September 30, 2001, as compared to $891,000 in the same period in 2000.

The Company’s effective tax rate for both periods was approximately 40%, which reflects the federal statutory rate plus state taxes, net federal income tax benefit.

As a result of the above, net income was $4,633,000 ($0.79 per share basic and diluted) in fiscal 2001 from $3,291,000 ($.56 per share basic and diluted) in fiscal 2000.

Liquidity and Capital Resources

At September 30, 2001, the Company had available cash and cash equivalents of approximately $2.5 million compared to $7.1 million at March 31, 2001.

For the six months ended September 30, 2001, $14.1 million in cash was used by operations. Financing activities included a $11.5 million increase in the amounts borrowed under the revolving line of credit and $4.4 million in mortgages assumed related to land purchases. Investing activities included an increase of $6.4 million related to notes receivable from the sale of the the assets in New Jersey.

The Company has an unsecured revolving credit agreement, which expires December 31, 2003 and provides borrowings of up to $60 million, of which $8 million may be used for letters of credit. Borrowings under this agreement are subject to a borrowing base calculation based on a defined percentage of land, development costs, finished lots and the working capital of the Company. As of September 30, 2001, borrowings under this facility’s line of credit totaled $41.4 million, and $14 million was available for borrowing under the calculation described above. On July 7, 2000, the Company entered into an interest swap on $15 million of the above credit arrangement which fixed the interest rate at 9.96% for a period of two years. On October 4, 2001, the Company entered into a new interest rate swap which suprerceded the July 2000 interest rate swap. The new swap is for $15 million and expires on December 31, 2003 and has a fixed interest rate of 8.34%. The Company believes the amounts available under its existing borrowing arrangements and amounts generated from operations will provide funds adequate for its home building activities and debt service for the foreseeable future.

The revolving credit facility contains various restrictive covenants including, among others, certain financial covenants relating to minimum consolidated tangible net worth and earnings levels, as well as funding, borrowing base requirements, payment of dividends and maximum land and construction limitations. The Company was in compliance with all financial covenants as of September 30, 2001.

To minimize the business risk associated with developing land and to maximize the use of the Company’s available capital, the Company has been able to acquire a substantial amount of its developments and lots by means of option contracts. Option contracts generally require the payment of cash deposit or issuance of a letter of credit for the right to acquire lots during a specified period of time at a certain price. The Company’s option contracts have expiration periods ranging from 30 to 60 months.

The Company has generally been able to secure financing for its land acquisitions, model homes, development and construction activities, and management believes such arrangements will continue to be available on terms satisfactory to the Company. There can be no assurance, however, that continued financing for land acquisitions will be available or, if available, will be on terms satisfactory to the Company.

Inflation

The Company, as well as the homebuilding industry in general, may be adversely affected during periods of high inflation, primarily because of higher land, material and labor costs. While mortgage rates are currently favorable for buyers, higher mortgage interest rates may significantly affect the affordability of permanent mortgage financing to prospective purchasers. The Company attempts to pass through to its customers any increase in its costs through increased selling prices, and to date, inflation has not had a material adverse effect on the Company's results of operations. However, there is no assurance that inflation will not have a material adverse impact on the Company's future results of operations.

Part II - Other Information

Items 1 through 3. Not applicable.

Item 4. Submission of matters to a vote of security holders.

The Company held its annual meeting of shareholders on September 20, 2001. Each of the directors of the Company, Messrs. Bernard J. Rotter, David H. Rotter, Todd M. Stutz, Dennis J. Doyle and Scott D. Rued were elected by a majority of the votes cast for a one-year term. In addition, by a majority of the votes cast, the shareholders ratified Arthur Andersen LLP as the Company’s independent public accountants for the fiscal year ending March 31, 2002.

Item 5. Not applicable.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits. Not applicable.

(b) Reports on Form 8-K.

The Company filed a report on Form 8-K dated August 24, 2001 related to the sale of assets of the company’s subsidiary, Rottlund Homes of New Jersey, Inc.

SIGNATURES

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

THE ROTTLUND COMPANY, INC.

Date:	November 7, 2001	By:	/s/ David H. Rotter
		David H. Rotter
		President and
		Chief Executive Officer

Date:	November 7, 2001	By:	/s/ Steven A. Kahn
		Steven A. Kahn
		Chief Financial Officer
		(Principal Financial and
		Accounting Officer)

For the Transition Period From __________ To __________

MINNESOTA

3065 Centre Pointe Drive, Roseville, MN

ConsolidatedTHE StatementsROTTLUND ofCOMPANY, CashINC. FlowsAND – Unaudited (In thousands)SUBSIDIARIES

For the Transition Period From To

Filing Compare · ROTTLUND CO INC