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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended June 30, 2000

OR

|/ / | 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

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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)

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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 / /

The
number of shares outstanding of the Registrant's common stock, par value $.10 per share, at August 4, 2000 was 5,815,572 shares.

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THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES       INDEX

|           |  |                                                                                       |  | Page
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I.    |  | FINANCIAL INFORMATION                                                                 |  |     
|Item 1.    |  | Financial Statements                                                                  |  |     
|           |  | Consolidated balance sheetsJune 30, 2000 and March 31, 2000                          |  | 3   
|           |  | Consolidated statements of operationsThree months ended June 30, 2000 and 1999       |  | 4   
|           |  | Consolidated statements of cash flowsThree months ended June 30, 2000 and 1999       |  | 5   
|           |  | Notes to consolidated financial statements                                            |  | 6   
|Item 2.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 7   
|PART II.   |  | OTHER INFORMATION                                                                     |  | 10  
|SIGNATURES |  | 11                                                                                   
|           |  |                                                                                       |  |     

2

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## 

Part I.  Financial Information

Item 1.  Financial Statements

THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

Consolidated Balance SheetsUnaudited

As of

|                                                     |                                                                                                                         | June 30, 2000              |             | March 31, 2000
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | -------------------------- | ----------- | --------------
|ASSETS                                              
|Cash and cash equivalents                            |                                                                                                                         | $                          | 1,307,730   |               
|Escrow and other receivables                         |                                                                                                                         |                            | 2,643,427   |               
|Land, development costs and finished lots            |                                                                                                                         |                            | 45,623,714  |               
|Residential housing completed and under construction |                                                                                                                         |                            | 40,574,784  |               
|Property and equipment, net                          |                                                                                                                         |                            | 814,993     |               
|Deferred financing costs and other assets            |                                                                                                                         |                            | 12,117,447  |               
|                                                     |                                                                                                                         |                            |             |               
|                                                     |                                                                                                                         | $                          | 103,082,095 |               
|                                                     |                                                                                                                         |                            |             |               
|LIABILITIES AND SHAREHOLDERS' EQUITY                
|Liabilities:                                         |                                                                                                                         |                            |             |               
|                                                     | Revolving credit facility                                                                                               |                            | $           | 47,460,000    
|                                                     | Senior notes payable                                                                                                    |                            |             | 0             
|                                                     | Mortgage notes payable                                                                                                  |                            |             | 965,000       
|                                                     | Accounts payable                                                                                                        |                            |             | 11,706,513    
|                                                     | Accrued liabilities                                                                                                     |                            |             | 5,410,291     
|                                                     | Income taxes payable                                                                                                    |                            |             | 127,210       
|                                                     |                                                                                                                         |                            |             |               
|                                                     |                                                                                                                         | Total liabilities          |             |               
|                                                     |                                                                                                                         |                            |             |               
|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 5,815,572 and 5,804,444 respectively |                            |             | 151,157       
|                                                     | Paid-in capital                                                                                                         |                            |             | 11,946,115    
|                                                     | Retained earnings                                                                                                       |                            |             | 25,315,808    
|                                                     |                                                                                                                         |                            |             |               
|                                                     |                                                                                                                         | Total shareholders' equity |             |               
|                                                     |                                                                                                                         |                            |             |               
|                                                     |                                                                                                                         | $                          | 103,082,095 |               
|                                                     |                                                                                                                         |                            |             |               

See
accompanying notes to consolidated financial statements

3

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THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

Consolidated Statements of OperationsUnaudited

|                                                                  |                  | For the Three Months
Ended June 30, |           
|----------------------------------------------------------------- | ---------------- | ----------------------------------- | ----------
|
|Net sales                                                         |                  | $                                   | 49,605,068
|Cost of sales                                                     |                  |                                     | 42,092,645
|                                                                  |                  |                                     |           
|                                                                  |                  |                                     | 7,512,422 
|Selling, general and administrative expense                       |                  |                                     | 5,720,201 
|                                                                  |                  |                                     |           
|Operating income                                                  |                  |                                     | 1,792,221 
|Other (income) expense:                                           |                  |                                     |           
|                                                                  | Interest expense |                                     |           
|                                                                  | Other income     |                                     |           
|                                                                  |                  |                                     |           
|Income before provision for income taxes and extraordinary charge |                  |                                     | 1,442,346 
|Extraordinary loss, net of tax                                    |                  |                                     | 612,085   
|                                                                  |                  |                                     |           
|Provision for income taxes                                        |                  |                                     | 577,000   
|                                                                  |                  |                                     |           
|Net income                                                        |                  | $                                   | 253,261   
|                                                                  |                  |                                     |           
|Diluted earnings per share                                        |                  | $                                   | 0.04      
|                                                                  |                  |                                     |           
|Weighted average shares outstanding                               |                  |                                     | 5,815,572 
|                                                                  |                  |                                     |           

See
accompanying notes to consolidated financial statements

4

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THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

Consolidated Statements of Cash FlowsUnaudited

|                                                    |                                                                                   | For the Three Months
Ended June 30,       |                                                     
|--------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------- | ----------------------------------------------------
|
|OPERATING ACTIVITIES:                               |                                                                                   |                                           |                                                     
|                                                    | Net income before extraordinary charge                                            |                                           | $                                                   
|                                                    | Extraordinary charge                                                              |                                           |                                                     
|                                                    | Adjustments to reconcile net income to net cash provided by operating activities: |                                           |                                                     
|                                                    |                                                                                   | Depreciation                              |                                                     
|                                                    |                                                                                   | Changes in operating items:               |                                                     
|                                                    |                                                                                   |                                           | Escrow and other receivables                        
|                                                    |                                                                                   |                                           | Land, development costs and finished lots           
|                                                    |                                                                                   |                                           | Residential housing completed and under construction
|                                                    |                                                                                   |                                           | Deferred financing costs and other assets           
|                                                    |                                                                                   |                                           | Accounts payable                                    
|                                                    |                                                                                   |                                           | Accrued liabilities                                 
|                                                    |                                                                                   |                                           | Income taxes payable                                
|                                                    |                                                                                   |                                           |                                                     
|                                                    |                                                                                   |                                           |                                                     
|                                                    |                                                                                   |                                           |                                                     
|INVESTING ACTIVITIES:                               |                                                                                   |                                           |                                                     
|                                                    | Purchase of property and equipment, net                                           |                                           |                                                     
|                                                    |                                                                                   |                                           |                                                     
|FINANCING ACTIVITIES:                               |                                                                                   |                                           |                                                     
|                                                    | Proceeds from mortgage notes payable                                              |                                           |                                                     
|                                                    | Repayments of mortgage notes payable                                              |                                           |                                                     
|                                                    | Proceeds from revolving credit facility, net                                      |                                           |                                                     
|                                                    | Repayment of Senior Notes Payable                                                 |                                           |                                                     
|                                                    |                                                                                   |                                           |                                                     
|                                                    |                                                                                   | Net cash provided by financing activities |                                                     
|                                                    |                                                                                   |                                           |                                                     
|NET DECREASE IN CASH AND CASH EQUIVALENTS           |                                                                                   |                                           | (6,779,031                                          
|CASH AND CASH EQUIVALENTS:                          |                                                                                   |                                           |                                                     
|                                                    | Beginning of period                                                               |                                           |                                                     
|                                                    |                                                                                   |                                           |                                                     
|                                                    | End of period                                                                     |                                           | $                                                   
|                                                    |                                                                                   |                                           |                                                     
|SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: |                                                                                   |                                           |                                                     
|                                                    | Cash paid for interest, net of amounts capitalized                                |                                           | $                                                   
|                                                    |                                                                                   |                                           |                                                     
|                                                    | Cash paid for income taxes                                                        |                                           |                                                     
|                                                    |                                                                                   |                                           |                                                     

See
accompanying notes to consolidated financial statements

5

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THE ROTTLUND COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1.  General

The consolifated financial 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 for the year ended March 31, 2000 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
Company has experienced, and expects to continue to experience significant variability in quarterly net sales and net income. Operating results for the three month period ending
June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending March 31, 2001.

Note 2.  Revolving Credit Facility to Bank

As of June 30, 2000, the Company had a line-of-credit arrangement with a bank totaling $55,000,000, with interest at the bank's
prime rate plus .25% (as of June 30, 2000 that rate was 9.75%). Borrowings outstanding at June 30, 2000 were $47,460,000 under this arrangement. In addition, there were $1,967,000
letters of credit outstanding under this arrangement at June 30, 2000. As of June 30, 2000 the Company was in compliance with debt covenants under this revolving facility.

6

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Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following table sets forth certain information regarding the Company's operations for the periods indicated.

Percentage of
Net SalesFor The Three Months Ended June 302000

1999Net sales

100.0
%
100.0
%Cost of sales

84.9

85.6Gross profit

15.1

14.4Selling, general and administrative expense

11.5

12.6Operating income

3.6

1.8Other (income) expense:Interest expense

1.0

1.0Other income

(.3
)
(.2
)Income before provision for income taxes and extraordinary charge

2.9

1.0Extraordinary loss, net of tax

1.2

0.0Provision for income taxes

1.2

.4Net income

.5
%
.6
%Number of homes closed

297

302


Backlog

The following table sets forth the Company's backlog as of the dates indicated:

June 30,

Number of
Homes

Sales Value2000

616

$
123,318,0001999

698

$
118,692,000


As
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. Such matters involve risks and uncertainties, including changes in economic conditions and interest rates, increases in raw material and labor costs, weather conditions, and
general competitive factors that may cause actual results to differ materially.

Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999

Revenues for the three months ended June 30, 2000, were nearly the same at $49.6 million for the comparable period of 1999. The number of homes
closed by the Company decreased by 1.7% to 297 units for the three months ended June 30, 2000, from 302 units during the same period in 1999. The average selling price of a home increased 1.7%
to $167,000, during the three months ended June 30,

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2000 from $164,200 for the comparable period in 1999. This increase was due to an overall increase in prices for homes sold by the Company.

Gross
profit increased by 5.6%, to $7.5 million for the three months ended June 30, 2000, from $7.1 million for the comparable period of 1999. Gross profit as a
percentage of net sales increased to 15.1% from 14.4% primarily due to higher margin homes closing during the current quarter compared to those closing in the comparable period of 1999.

Selling,
general and administrative expenses decreased by 8.1% to $5.7 million in the three months ended June 30, 2000, from $6.2 million for the comparable
period of 1999. This decrease is due to substantially exiting from the Ft Myers and Orlando markets. As a percentage of net sales, selling, general and administrative expense decreased to 11.5% for
the three month period ended June 30, 2000, from 12.6% for the same period in 1999.

Interest
expense increased to $506,000 for the three months ended June 30, 2000, from $488,000 for the comparable period in 1999. The increase in interest expense is primarily
due to the Company's higher borrowing needs for the three months ended June 30, 2000 compared to the three months ended June 30, 1999. 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.

The
Company's effective tax rate for the period ending June 30, 2000 was approximately 40%, compared to 41% for the same period ending June 30, 1999 which reflects the
federal statutory rate plus state taxes, net of federal income tax benefit.

Liquidity and Capital Resources

At June 30, 2000, the Company had available cash and cash equivalents of approximately $1,308,000.

The
Company's financing needs depend primarily upon sales volume, asset turnover, land acquisition and inventory balances. In December 1994, the Company issued
$25 million of 12.11% Senior Notes payable and in February 1996, the Company issued an additional $10 million of 9.42% Senior Notes payable (collectively referred to as the
"Senior Notes"). Proceeds were used to retire certain mortgage notes payable and for working capital purposes. The Senior Notes were paid, in full, on April 21, 2000, including $900,000 in
early extinguishment payments.

The
Company has an unsecured revolving credit agreement that provides borrowings of up to $55 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,
2000, borrowings under this facility's line of credit totaled $47.5 million, and $5.5 million was available for borrowing under the calculation described above. The Company believes that
amounts available under its existing borrowing arrangements (assuming extensions and renewals of debt in the ordinary course of business) and amounts generated from operations will provide funds
adequate for its home building activities and debt service.

As
of June 30, 2000 the Company is in compliance with covenants under its revolving credit facility.

The
Company has generally been able to secure financing for its acquisition, 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.

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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. In addition, 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.

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Part IIOther Information

Items 1 through 5.

Not applicable.

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



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SIGNATURES

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

|                      |  | THE ROTTLUND COMPANY, INC.
|--------------------- |  | --------------------------
|Date:  August 8, 2000 |  | By:                       
|Date:  August 8, 2000 |  | By:                       
|                      |  |                           

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