UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549  FORM
10-Q xQUARTERLY
REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2001 Commission File No. 0-25390 SMC
CORPORATION(Exact name of
Registrant as specified in its charter) Oregon
  93-0939076(State
  or other jurisdiction of
  incorporation or organization)
  (IRS
  Employer
  Identification No.)20545 Murray RoadBend, Oregon
  97701(Address
  of principal executive offices)
  (Zip
  Code)
 (541) 389-1144 (Registrant's telephone number, including
area code) 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 report), and (2) has been subject to such filing
requirements for the past 90 days. Yesx         No ̈ The
number of outstanding shares of Common Stock at May 1, 2001:  5,745,599   SMC CORPORATION
INDEX TO FORM 10-Q



Part I - Financial
  InformationItem 1.
  Financial StatementsConsolidated Balance Sheet -
  December 31, 2000 and March 31, 2001Consolidated
  Statement of Operations - Three Months Ended March 31, 2000 and March 31,
  2001Consolidated
  Statement of Changes in Shareholders' Equity - Year Ended December 31,
  2000 and Three Months Ended March 31, 2001Consolidated
  Statement of Cash Flows - Three Months Ended March 31, 2000 and March 31,
  2001Notes to
  Consolidated Financial StatementsItem
  2.
  Management's
  Discussion and Analysis of Financial Condition and Results of OperationsPart II - Other InformationItem 1.
  Legal ProceedingsItem 6.
  Exhibits
  and Reports on Form 8-KSignaturesExhibit
  Index

Part I - Financial Information

Item 1.Financial Statements

SMC
  CorporationConsolidated Balance Sheet
  (in thousands)December
  31,
  2000
  March
  31,
  2001(unaudited)AssetsCurrent assets:Cash and cash equivalents
  $119
  $234Accounts receivable, net
  7,832
  7,333Tax refund receivable
  1,169
  1,169Inventories (Note 2)
  35,151
  28,114Prepaid expenses and other
  666
  521Deferred tax asset
  4,734
  4,734Total current assets
  49,671
  42,105Property, plant and
  equipment, net
  12,827
  12,455Intangible assets, net
  1,569
  1,523Deferred tax asset
  405
  1,518Other assets
  169
  165Total
  assets
  $64,641
  $57,766Liabilities and
  Shareholders EquityCurrent liabilities:Notes payable
  $6,511
  $4,332Current portion of long-term debt
  407
  382Accounts payable
  22,253
  20,807Product warranty liabilities
  4,026
  4,036Current portion of capital lease
  obligation
  17
  11Accrued liabilities
  5,417
  5,099Total
  current liabilities
  38,631
  34,667Long-term debt, net of
  current portion
  8,613
  7,597Total
  liabilities
  47,244
  42,264Shareholders equity:Preferred stock, 5,000 shares authorized,
  none issued or outstanding
  -
  -Common stock, 30,000 shares authorized,
  5,745 shares issued and outstanding
  8,914
  8,914Additional paid-in capital
  1,472
  1,472Retained earnings
  7,011
  5,116Total
  shareholders equity
  17,397
  15,502Total liabilities and
  shareholders equity
  $64,641
  $57,766The
accompanying notes are an integral part of this financial statement.



SMC
  CorporationConsolidated Statement of Operations
  (in thousands, except per share amounts)Three
  Months EndedMarch
  31,
  2000
  March
  31,
  2001(unaudited)Sales
  $53,052
  $45,073Cost of sales
  47,596
  42,573Gross profit
  5,456
  2,500Selling, general and
  administrative expenses
  4,948
  4,077Legal and settlement
  costs
  452
  843Income (loss) from
  operations
  56
  (2,420)Interest expense
  482
  413Other expense, net
  8
  175Loss before provision
  for taxes
  (434)
  (3,008)Benefit for income
  taxes
  (174)
  (1,113)Net
  loss
  $(260)
  $(1,895)Net loss per share -
  basic
  $(.05)
  $(.33)Net loss per share -
  diluted
  $(.05)
  $(.33)Weighted average
  number of shares - basic
  5,780
  5,745Weighted average
  number of shares - diluted
  5,780
  5,745The
accompanying notes are an integral part of this financial statement.



SMC
  CorporationConsolidated Statement of
  Changes in Shareholders Equity(unaudited)
  (in thousands)Common
  Stock
  Additionalpaid-in
  RetainedShares
  Amount
  capital
  earnings
  TotalBalance, December 31,
  1999
  5,780
  $9,033
  $1,472
  $12,374
  $22,879Net loss
  -
  -
  -
  (5,363)
  (5,363)Stock repurchase
  (35)
  (119)
  -
  -
  (119)Balance, December 31,
  2000
  5,745
  8,914
  1,472
  7,011
  17,397Net loss
  -
  -
  -
  (1,895)
  (1,895)Balance, March 31,
  2001
  5,745
  $8,914
  $1,472
  $5,116
  $15,502The
accompanying notes are an integral part of this financial statement.



SMC
  CorporationConsolidated Statement of Cash
  Flows
  (in thousands)Three
  Months EndedMarch
  31,
  2000
  March
  31,
  2001(unaudited)Cash flows from
  operating activities:Net loss
  $(260)
  $(1,895)Adjustments to reconcile net loss to net
  cash provided by operating activities:Loss on asset disposition
  -
  1Depreciation and amortization
  517
  463Deferred taxes
  -
  (1,113)Changes in current assets and
  liabilities:Accounts receivable
  6,353
  499Inventories
  2,905
  7,037Prepaid expenses and other
  21
  145Other assets
  4
  4Accounts payable
  (3,654)
  (1,446)Income taxes payable
  (608)
  -Accrued liabilities and
  other obligations
  (516)
  (308)Net cash provided by
  operating activities
  4,762
  3,387Cash flows from
  investing activities:Capital expenditures
  (240)
  (46)Net cash used in
  investing activities
  (240)
  (46)Cash flows from
  financing activities:Net repayments on notes payable
  (4,265)
  (2,179)Repayments of long-term debt
  (225)
  (1,041)Principal payments on capital lease
  obligation
  (5)
  (6)Net cash used in
  financing activities
  (4,495)
  (3,226)Net increase in cash
  and cash equivalents
  27
  115Cash and cash
  equivalents, beginning of period
  26
  119Cash and cash
  equivalents, end of period
  $53
  $234The
accompanying notes are an integral part of this financial statement.

SMC Corporation
  Form 10-Q
  For the First Quarter Ended March 31, 2001 (unaudited)Notes to Consolidated
  Financial Statements1.Basis of Presentation of Interim Period Statements

The
accompanying financial statements are unaudited and have been prepared by SMC
Corporation (the Company) pursuant to the rules and regulations of the
Securities and Exchange Commission. 
Certain information and footnote disclosures typically included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.  In the opinion of
management, the financial statements include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
results for the interim periods reported. 
The financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the 2000 Form 10-K filed
with the Securities and Exchange Commission. 
The results of operations for an interim period are not necessarily indicative
of the results of operations for a full year.2.Inventories

Inventories
by major classification are as follows (in thousands):December
  31,
  2000
  March
  31
  2001Raw materials
  $11,916
  $9,964Work-in-progress
  9,984
  7,596Finished goods
  13,251
  10,554Total
  $35,151
  $28,1143.Earnings Per Share

Basic
EPS is computed by dividing the net income by the weighted average actual
shares outstanding for each period presented with no consideration as to the
dilutive impact of the Companys outstanding stock options or warrants.  Diluted EPS includes additional dilution
from the effect of potential issuance of common stock, such as stock issuance
to the exercise of stock options, warrants outstanding and the conversion of
debt.Due
to the Companys net loss, stock options accounted for using the treasury stock
method would be antidilutive. 
Accordingly, 1,105,500 stock option plan shares have been excluded from
the diluted net loss per share calculation for the three months ended March 31,
2001.4.Related Party Transactions

During
the three month period ending March 31, 2001 and 2000, the Company purchased
electronic parts for a total amount of $191,518 and $234,000, respectively,
from a supplier company that is owned by a principal related to an officer.Item 2.Management's Discussion and Analysis of Financial             Condition
and Results of Operations

Results of Operations

The
following table sets forth, for the periods indicated, selected consolidated
statement of operations data, expressed as a percentage of sales, and the
percentage change in such data from the comparable prior period.

Three
  months endedMarch
  31,
  2000
  March
  31,
  2001
  Percentage
  change
  in dollar amountsSales
  100.0%
  100.0%
  (15.0)%Cost of sales
  89.7
  94.5
  (10.6)Gross profit
  10.3
  5.5
  (54.2)Selling, general and
  administrative expenses
  9.3
  9.0
  (17.6)Legal and settlement
  costs
  .9
  1.9
  86.5Income (loss) from
  operations
  .1
  (5.4)
  (4,421.4)Interest expense
  .9
  .9
  (14.3)Other income
  -
  .4
  (2,087.5)Pretax loss
  (.8)
  (6.7)
  593.1Benefit for income
  taxes
  (.3)
  (2.5)
  539.7Net loss
  (.5)%
  (4.2)%
  628.8Sales
decreased 15.0% to $45.1 million for the first quarter of 2001 from
$53.1 million for the comparable period in 2000.  Sales decreased primarily in the high end Safari lines.  Beaver sales increased by approximately 20%
primarily in the recently redesigned Monterey and Contessa models.  Harney sales decreased as lower Riata
revenues were partially offset by higher revenues of the Renegade.

Retail
sales for class A units decreased by 7.2%in the first quarter of 2001 while the
industry as a whole experienced a 25.1% decline.  During the same period, according to data published be
Statistical Survey, Inc., market share of SMC increased by 24.0%.

Gross
profits were lower in the first quarter of 2001 when compared to the first
quarter of 2000 primarily as the result of lower sales volumes.  Lower productions volumes at the plants
accounted for decreased efficiencies. 
Warranty costs, however, were lower in the first quarter of 2001 by over
$400,000.

Administrative
and finance costs declined during the period by almost $900,000 due to
decreases in accounting and administrative costs of $444,000 and lower sales
and marketing costs of $429,000.  Legal
costs rose by approximately $400,000 in recognition of the Companys commitment
to resolve product disputes in a more expeditious manner.

Interest
expense decreased as a result of lower debt levels, however, other nonoperating
expenses were higher.

Given
the factors affecting gross margin and selling, general and administrative
expenses, operating income decreased to a loss of $2.4 million for the first
quarter of 2001 from income of $56,000 in the comparable period of 2000.

The
effective tax rate of 37.0% in the first quarter of 2001 is a decrease from the
effective tax rate of 40.0% in the first quarter of 2000.  Net loss after tax for the first quarter of
2001 was $1.9 million, down from first quarter 2000 net loss of $260,000.

The
Company's revenues historically have been subject to some seasonal
fluctuation.  Demand for high-line motor
coaches tends to increase with the beginning of the new model year, which
occurs during the Company's third quarter that begins July 1.

Liquidity and Capital Resources

During
the first quarter of 2001, SMC generated cash flow from operations of $3.4
million.  This compares to cash flow
from operations of $4.8 million from the first quarter of 2000.  The reduction in cash flow is attributable
to the increase in net loss of approximately $1.6 million.  Inventories were reduced by over $7 million
from year end levels with relatively equal reductions in raw material, work in
process, and finished goods inventory.

The
Company used $3.2 million to pay down long term and notes payable debt in the
first quarter of 2001.  This compares to
a $4.5 million decrease in net borrowing during the first quarter of 2000.

Capital
expenditures decreased $194,000 in the first quarter of 2001 compared to the
first quarter of 2000.

The
Company anticipates that its aggregate capital expenditures for 2001 will be
approximately $500,000.  The Company
plans to use cash generated from operations, borrowings under its credit
arrangements and long term lease obligations to fund these expenditures.

The
Company has an operating line of credit of $10 million and a real estate term
facility of $8 million.  As of March 31,
2001, $5.7 million was available on the operating line of credit and $837,000
was available on the real estate term facility.  The amount outstanding on the operating line is at an interest
rate of 10.00%and the amount outstanding on the real estate term facility is
based on the prime rate of 8.0%.  These
amounts are collateralized by all assets not specifically identified in other
financing obligations.  The terms of the
revolving credit and real estate financing agreements required compliance with
certain financial covenants and other covenants.  As of May 1, 2001, the Company has a continuing commitment from
its bank.  New covenants are presently
being negotiated with a final agreement anticipated by May 15, 2001, and no
debt covenants were in effect at March 31, 2001.

Most dealer purchases of motor
coaches from the Company are financed under flooring financing arrangements
between the dealer and a bank or finance company.  Under these flooring arrangements, the financing institution
lends the dealer all or substantially all of the wholesale purchase price of a
motor coach and retains a security interest in the coach purchased.  These financing arrangements provide that,
for a period of time after a coach is financed (generally 12 to 18 months), if
the dealer defaults on its payment or other obligations to the lender, the
Company is obligated to repurchase the dealers inventory for the amount then
due from the dealer plus, in certain circumstances, costs incurred by the
lender in connection with repossession of the inventory.  The repurchase price may be more than the
resale value of the coach.  The Companys
contingent liability under its repurchase obligations varies from time to
time.  As of March 31, 2001, the
Company estimates its total contingent liability under repurchase obligations
was approximately $82.7 million.  The
Company cannot predict with certainty its future losses, if any, pursuant to
repurchase obligations, and these amounts may vary materially from the
expenditures historically made by the Company. 
Furthermore, even in circumstances where losses in connection with
repurchase obligations are not material, a repurchase obligation can represent
a significant cash requirement for the Company.

Other Items

On April 20, 2001, Michael R.
Jacque, President, Chief Operating Officer and a director of the Company,
resigned all positions.  On April 27,
2001, the Board of Directors requested that the Chairman of the Board of
Directors, Mathew M. Perlot, defer his retirement and return to active
management to direct the Sales, Marketing, and Design functions.  Mr. Perlot agreed.

In addition to the above, the
Company has suspended most manufacturing activities at its Harney Coach Works
operations due to a decrease in factory orders for the Renegade and Riata
products.  Production for orders in
house are being completed with a greatly reduced staff and any future
production is expected to require only a fraction of the personnel.  The Company is continuing the operations at
its Composite Technology, Inc. subsidiary that occupies the same facility as
Harney Coach Works and is not expected to be significantly impacted by the
suspension of activities at Harney. 
Harney Coach Works employees will be given top priority as positions
become available at Composite Technologies, Inc.

Forward Looking Statements:The
statements in this report concerning anticipated expenditures, the status of
negotiations with the Companys lenders, and the likely conclusion of pending
litigation constitute forward looking statements. Factors that could materially
affect the above items include, but are not limited to, competitive market
pressures (including increased competition, new product offerings by competitors
and price pressures), and unfavorable business conditions in the RV industry
and general economy.

Part II
- Other Information

Item 1Legal Proceedings

In the case involving certain employment
practices referenced in the 2000 Form 10K, the judge has set aside the original
verdict of $1.0 million and has ordered a new trial for the punitive damage
assessment.  The Company can not
determine at this time to what extent punitive damages could be assessed.  For further information, refer to the 2000
Form 10K.

Item 6. Exhibits and Reports on Form 8-K

(a)         Exhibits

11         Statement of Calculation of Average
Common Shares Outstanding

(b)        Reports on Form 8-K

A Form 8–K was filed by the
Registrant on January 10, 2001.

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.

SMC
  CORPORATIONDate:  May 9, 2001
  By:   WILLIAM L. RICHWilliam L. RichChief Financial Officer(Principal Financial Officer)Exhibit Index

ExhibitNo.
  Description11
  
  Statement
  of Calculation of Average Common Shares Outstanding