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**SECURITIESAND EXCHANGE COMMISSION****Washington, D.C. 20549**

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**FORM10-Q**

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

**For the quarterly period ended July 1, 2001**

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

**For the transition period from______ to _______**

**Commission file number:333-82713**

**CHEROKEEINTERNATIONAL, LLC******(Exact name of registrant as specified inits charter)
| **CALIFORNIA**                                                   | ** 33-0696451**                  |
|------------------------------------------------------------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) | (I.R.S. Employer  Identification No.) |

**2841 DOW AVENUETUSTIN, CALIFORNIA 92780**(Address of principal executive offices)

**(714) 544-6665**(Registrant's telephone number, includingarea code)
| **N/A**                                                                              |
|--------------------------------------------------------------------------------------|
| ****                                                                                 |
| (Former name, former  address and former fiscal year,  if changed since last report) |

             Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepast 12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes ý             o

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CHEROKEE INTERNATIONAL, LLC
TABLEOF CONTENTS
PART I—FINANCIAL  INFORMATION Item 1. Consolidated  Financial Statements: Condensed Consolidated  Balance Sheets—June 30, 2001 and December 31, 2000  Condensed  Consolidated Statements of Operations—For the Three and Six Months Ended June  30, 2001 and 2000  Condensed  Consolidated Statements of Cash Flows—For the Six Months Ended June 30, 2001  and 2000  Notes to  Condensed Consolidated Financial Statements Item  2.  Management's Discussion and  Analysis of Financial Condition and Results of Operations Item  3.  Quantitative and Qualitative Disclosures  About Market Risk PART  II—OTHER INFORMATION Item 1.  Legal Proceedings Item  6.  Exhibits and Reports on Form 8-K SIGNATURES
PART I.  FINANCIAL INFORMATIONItem1.  Financial Statements

CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)
 JUNE  30, DECEMBER  31,     2001 2000    ASSETS    CURRENT ASSETS:    Cash and cash  equivalents$7,597,527 $1,752,826 Accounts receivable,  net of allowance for doubtful accounts of $250,722 and $259,886 as of June  30, 2001 and December 31, 2000, respectively21,809,796 32,819,473 Inventories, net28,179,725 36,275,745 Prepaid expenses and  other current assets715,197 628,512          Total current assets58,302,245 71,476,556 PROPERTY AND  EQUIPMENT, net of accumulated depreciation and amortization of $11,331,390  and $9,574,286 as of June 30, 2001 and December 31, 2000, respectively15,118,801 17,062,279 DEPOSITS335,194 306,046 DEFERRED FINANCING  COSTS, net of accumulated amortization of $1,996,006 and $1,510,504 as of  June 30, 2001 and December 31, 2000, respectively3,733,682 4,219,184 GOODWILL, net of  accumulated amortization of $3,166,000 and $1,648,000 as of June 30, 2001 and  December 31, 2000, respectively42,438,000 43,956,000          $119,927,922 $137,020,065         LIABILITIES AND  MEMBERS' EQUITY (DEFICIT)    CURRENT LIABILITIES:    Accounts payable$9,501,968 $19,616,135 Accrued liabilities4,088,043 4,818,026 Accrued compensation  and benefits5,502,905 7,688,487 Accrued interest  payable2,307,103 2,707,091 Accrued distribution  payable0 2,118,000 Current portion of  long-term debt26,874,634 23,418,841 Current portion of  capital lease obligations801,605 773,446          Total current  liabilities49,076,258 61,140,026 LONG-TERM DEBT, net of  current portion139,132,863 142,900,265 CAPITAL LEASE  OBLIGATIONS, net of current portion1,632,844 2,040,813 MEMBERS' EQUITY  (DEFICIT)    Class A units: 347,671  units issued and outstanding in 2001 and 2000354,371 354,371 Class B units:  36,035,065 units issued and outstanding in 2001 and 200037,037,827 37,037,827 Paid-in capital5,330,000 5,330,000 Retained earnings  (deficit)(111,540,410)(111,570,983)Accumulated other  comprehensive loss(1,095,831)(212,254)         Total members' deficit(69,914,043)(69,061,039)         $119,927,922 $137,020,065    
Seenotes to consolidated financial statements.
CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
 THREE  MONTHS ENDED SIX  MONTHS ENDED  JUNE  30, JUNE  30, JUNE  30, JUNE  30,       2001 2000 2001 2000      NET SALES$32,863,293 $28,664,226 $72,283,090 $54,095,589 COST OF SALES23,849,205 18,495,011 51,190,128 35,127,762               GROSS PROFIT9,014,088 10,169,215 21,092,962 18,967,827 OPERATING EXPENSES:        Engineering and  development1,604,947 1,232,232 3,491,202 2,369,853 Selling and marketing828,274 794,308 1,888,691 1,409,784 General and  administrative2,576,730 1,478,641 5,546,806 2,506,765 Amortization of  goodwill and other related intangibles761,000 117,000 1,520,000 117,000                         Total operating  expenses5,770,951 3,622,181 12,446,699 6,403,402               OPERATING INCOME3,243,137 6,547,034 8,646,263 12,564,425 OTHER INCOME  (EXPENSE):        Interest expense(4,171,064)(4,073,838)(8,541,572)(7,994,941)Other income (expense)55,903 67,515 80,486 109,776                Total other income  (expense)(4,115,161)(4,006,323)(8,461,086)(7,885,165)              Income (loss) before income  taxes(872,024)2,540,711 185,177 4,679,260  Provision for income  taxes59,604 0 154,604 0               NET INCOME  (LOSS)$(931,628)$2,540,711 $30,573 $4,679,260               NET INCOME (LOSS) PER  UNIT:         Basic$(.03)$.08 $.00 $0.15                Diluted$(.03)$.08 $.00 $0.15               WEIGHTED AVERAGE UNITS  OUTSTANDING:         Basic36,382,736 31,606,075 36,382,736 30,954,037                Diluted36,382,736 31,951,211 36,552,922 31,209,895      
Seenotes to consolidated financial statements
CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS(Unaudited)
 SIX  MONTHS ENDED  JUNE  30, JUNE  30,     2001 2000    CASH FLOWS FROM  OPERATING ACTIVITIES:    Net income$30,573 $4,679,260 Adjustments to  reconcile net income to net cash   provided by operating activities:    Depreciation and  amortization3,387,064 1,475,488 Amortization of  deferred financing costs485,502 468,863 Net change in  operating assets and liabilities:     Accounts receivable,  net9,710,677 (3,119,911) Inventories, net6,748,020 630,006  Prepaid expenses and  other current assets(109,685)(307,946) Deposits(29,148)(20,508) Accounts payable(9,239,744)(562,495) Accrued liabilities(388,983)1,494,632  Accrued compensation  and benefits(1,697,582)(946,829) Accrued interest  payable(396,988)97,479         Net cash provided by  operating activities8,499,706 3,888,039         CASH FLOWS FROM  INVESTING ACTIVITIES:    Additions to property  and equipment(668,586)(825,583)Investment in ITS, net  of cash acquired0 (51,355,224)    Net cash used in  investing activities(668,586)(52,180,807)   CASH FLOWS FROM  FINANCING ACTIVITIES:    Borrowings on  revolving line of credit11,770,693 5,000,000 Payments on revolving  line of credit(8,500,000)(2,477,974)Payments on  obligations under capital leases(379,810)(466,583)Borrowings on  long-term debt0 8,000,000 Payments on long-term  debt(2,900,302)(1,184,558)Deferred financing costs0 (346,984)Proceeds from sale of  units0 34,299,998 Equity distribution(2,118,000)(1,730,000)   Net cash provided by  (used in) financing activities(2,127,419)41,093,899 Cash effect of  exchange rate changes141,000 0    NET INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS5,844,701 (7,198,869)CASH AND CASH  EQUIVALENTS, beginning of period1,752,826 7,968,576    CASH AND CASH  EQUIVALENTS, end of period$7,597,527 $769,707    
Seenotes to consolidated financial statements.
CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(Unaudited)
1.Basis  of Presentation
The information set forth in theaccompanying consolidated financial statements is unaudited and, in the opinionof management, reflects all adjustments, consisting only of normal recurringadjustments, necessary to present fairly the financial position, results ofoperations and cash flows of Cherokee International, LLC (the "Company")for the periods indicated.

Results of operations for the interim sixmonths ended June 30, 2001 and 2000 are not necessarily indicative of theresults of operations for the full fiscal year. The Company's second quarterrepresented the 13-week periods ended on July 1 in 2001 and July 2 in 2000. Forpresentation purposes, these fiscal quarters have been referred to as ending onJune 30.

The consolidated financial statementsinclude the financial statements of the Company and its wholly-ownedsubsidiaries. One such subsidiary, Cherokee International Finance, Inc., wasformed in April 1999 as a wholly-owned finance subsidiary to act as aco-obligor of the 10 1/2% senior subordinated notes and has no independentassets or operations. All significant intercompany accounts and transactionshave been eliminated.

Certain information normally included infootnote disclosure to the financial statements has been condensed or omittedin accordance with the rules and regulations of the Securities and ExchangeCommission, and the financial statements do not include all the information andnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America. These unaudited consolidated financial statements should be read inconjunction with the other disclosures contained herein and with the Company'saudited consolidated financial statements and notes thereto contained in theCompany's Form 10-K for the year ended December 31, 2000.

The preparation of financial statementsin conformity with generally accepted accounting principles necessarilyrequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting periods. Actual results could differfrom these estimates.
2.Inventories
Inventoriesare valued at the lower of cost (first-in, first-out) or market. Inventorycosts include the cost of material, labor and manufacturing overhead andconsist of the following:
 June  30, 2001 December  31, 2000    Raw Material$19,213,030 $26,593,294 Work-in-process5,581,255 6,495,045 Finished goods3,385,440 3,187,406     $28,179,725 $36,275,745    
 
3.Income  Taxes
TheCompany is a limited liability company under the provisions of the federal andstate tax codes. Under federal laws, taxes based  on income of a limited liability company are payable by theCompany’s  individual members.Accordingly, no provision for federal income taxes  has been provided in the accompanying financial statements.Provisions for California franchise tax and fees are not significant for anyperiod presented. The Company’s operations in Mexico and Belgium aresubject  to income taxes on earningsgenerated in those countries.
4.Comprehensive  Income (Loss)
Comprehensiveincome (loss) is defined as all changes in a company's net assets exceptchanges resulting from transactions with shareholders. It differs from netincome in that certain items currently recorded through equity are included incomprehensive income. Comprehensive loss for the six months ended June 30, 2001was $(853,004), which included net income of $30,573 and a loss from foreigncurrency translation adjustments of $(883,577). The Company's net income wasthe same as comprehensive income for the six months ended June 30, 2000.
5.Net  Income (Loss) Per Unit
Thefollowing table sets forth the computation of basic and diluted income (loss)per unit:
 Three  Months Ended Six  Months Ended  June  30,  2001 June  30,  2000 June  30,  2001 June  30,  2000               Net Income (Loss)$(931,628)$2,540,711 $30,573 $4,679,260               Units:        Weighted-average units  outstanding – basic36,382,736 31,606,075 36,382,736 30,954,037 Effect of dilutive  options0 345,136 170,186 255,858               Weighted-average units  outstanding – diluted36,382,736 31,951,211 36,552,922 31,209,895               Net income (loss) per  unit:        Basic$(.03)$.08 $.00 $.15               Diluted$(.03)$.08 $.00 $.15               
             Incalculating net loss per unit for the three months ended June 30, 2001, theeffect of dilutive options is excluded because it is antidilutive.

 
6.New  Accounting Pronouncements
Statement of Financial AccountingStandards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGINGACTIVITIES, is effective for all fiscal years beginning after June 15, 2000.SFAS 133, as amended, establishes accounting and reporting standards forderivative instruments, including certain derivative instruments embedded inother contracts and for hedging activities. Under SFAS 133, certain contractsthat were not formerly considered derivatives may now meet the definition of aderivative and all derivatives are to be reported on the balance sheet at fairmarket value. The Company adopted SFAS 133 effective January 1, 2001. Theadoption of SFAS 133 did not have a significant impact on the financialposition, results of operations, or cash flows of the Company.

In June 2001, the Financial AccountingStandards Board (“FASB”) issued two new pronouncements: SFAS No. 141, “BusinessCombinations”, and SFAS No. 142, “Goodwill and Other Intangible Assets”.  SFAS 141 prohibits the use of thepooling-of-interest method for business combinations initiated after June 30,2001 and also applies to all business combinations accounted for by thepurchase method that are completed after June 30, 2001.  There are also transition provisions thatapply to business combinations completed before July 1, 2001, that were accounted for by the purchase method.  SFAS 142 is effective for fiscal yearsbeginning after December 15, 2001 to all goodwill and other intangible assetsrecognized in an entity’s statement of financial position at that date,regardless of when those assets were initially recognized.  The Company is currently evaluating theprovisions of SFAS 141 and SFAS 142 and has not adopted such provisions in itsJune 30, 2001 financial statements.

 
7.Long-Term  Debt
             TheCompany’s credit agreement, which covers its revolving credit facility and termloans, contains financial covenants that are required to be met eachquarter.  As of June 30, 2001, theCompany was not in compliance with some of these financial covenants.  On August 13, 2001, the Company and itslenders entered into an agreement whereby the lenders waived the financialcovenant defaults as of June 30, 2001, and the parties agreed to modificationsto the terms of the existing credit agreement, subject to various conditionsand final documentation.  Modificationsto the existing credit agreement will include, among other things, (1) theguarantee by some of the Company's unit holders, or their equity members, of$10.5 million of the Company's senior debt principal until specific financialratios are attained, (2) the Company will be restricted from making cashdistributions to its equity members until specific financial ratios areattained, (3) the Company will be permitted to make its interest payment due inNovember 2002 relating to its $100 million of subordinated notes so long asspecific financial ratios are attained, (4) the maximum availability under therevolving line of credit will be reduced until approximately April 30, 2002,and (5) LIBOR and base rate margins will be increased for revolver borrowingsand term loans.   Until the finaldocumentation of an amendment to the credit agreement is completed, the Companywill not have access to additional borrowings under its revolving line ofcredit.  If final documentation of anamendment is not completed by September 14, 2001, the lenders' waiver of theCompany's financial covenant defaults will expire and the Company will besubject to remedies provided for in the Company's credit agreement.  Management believes final documentation ofan amendment to the Company's credit agreement will be completed with respectto the terms outlined above, prior to September 14, 2001, and that the Companyhas adequate liquidity to meet its anticipated cash needs for the foreseeablefuture.

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM  2.Management's  Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW

             Cherokeeis a leading designer and manufacturer of a broad range of switch mode powersupplies for original equipment manufacturers (OEM's) primarily in thetelecommunications, networking and high-end workstation industries. The Companyproduces its products and related components in sophisticated manufacturingfacilities located in Tustin and Irvine, California; Wavre, Belgium; Guadalajara,Mexico; and Bombay, India.

              The principal elements comprising cost ofsales are raw materials, labor and manufacturing overhead. Raw materialsaccount for a majority of cost of sales. Raw materials include magneticsubassemblies, sheet metal, electronic and other components, mechanical partsand electrical wires. Labor costs include employee costs of salaried and hourlyemployees. Manufacturing overhead includes lease costs, depreciation onproperty, plant and equipment, utilities, property taxes and repairs andmaintenance.

              Operating expenses include engineering costs,selling and marketing costs and administrative expenses. Engineering costsprimarily include salaries and benefits of engineering personnel, safetyapproval and quality certification fees, depreciation on equipment andsubcontract costs for third party contracting services. Selling and marketingexpenses primarily include salaries and benefits to account managers andcommissions to independent sales representatives. Administrative expensesprimarily include salaries and benefits for certain management andadministrative personnel, professional fees and information system costs.

              On June 15, 2000, the Company acquiredIndustrial and Telecommunication Systems and related entities ("ITS")for approximately $55 million, including assumption of debt. The acquisitionwas accounted for using the purchase method of accounting.

             Duringthe first half of 2001, the Company continued to generate the majority of itssales from the communications market segment, particularly the networking andtelecommunications sectors.  As a resultof recent unfavorable economic conditions and reduced capital spending bycommunication service providers that purchase our customers’ products, theCompany’s sales decreased in the first quarter of 2001 compared to the fourthquarter of 2000, and decreased again in the second quarter of 2001 compared tothe first quarter of 2001.  The Companybelieves that unstable and unpredictable economic conditions will continue,likely resulting in a further decline in revenues in the third quarter of2001.  If these unfavorable economicconditions persist, the Company’s operating results and financial conditionwould be adversely affected.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2001 COMPAREDTO THREE MONTHS ENDED JUNE 30, 2000

NET SALES

             Netsales increased by approximately 14.6% or $4.2 million to $32.9 million for thethree months ended June 30, 2001 from last year's $28.7 million for the threemonths ended June 30, 2000.

              The higher sales were primarily attributableto the acquisition of ITS, which contributed $14.6 million of sales for thethree months ended June 30, 2001, compared to $3.3 million of sales contributedfor the period June 15 to June 30, 2000. Sales of our North American operations decreased by approximately 28.0%or $7.1 million compared to the prior year, due to lower customer demand as aresult of unfavorable economic conditions and reduced capital spending bycommunication service providers.

GROSS PROFIT

              Gross profit decreased by approximately 11.4%or $1.2 million to $9.0 million for the three months ended June 30, 2001 from$10.2 million for the three months ended June 30, 2000. Gross margin for thequarter decreased to 27.4% from 35.5% in the prior year.

             The decrease in gross profit wasprimarily due to significantly lower gross profit contributed by the NorthAmerican operations which was attributable to the lower sales.  This was partially offset by gross profit contributedby ITS of  $3.1 million for the threemonths ended June 30, 2001 compared to $0.8 million for the period June 15 toJune 30, 2000.  The decrease in grossmargin compared to the prior year was primarily due to the inclusion in 2001 ofthe ITS operations, which had a lower gross margin than the North Americanoperations.  In addition, the grossmargin for the North American operations decreased primarily as a result of achange in product mix.

OPERATING EXPENSES

              Operating expenses for the three months endedJune 30, 2001 increased by approximately 59.3% or $2.1 million to $5.8 millionfrom $3.6 million for the three months ended June 30, 2000. As a percentage ofsales, operating expenses increased to 17.6% from 12.6% in the second quarterof the prior year.

             Theincrease in operating expenses, as expressed in dollars as well as a percentageof net sales, was primarily attributable to the inclusion in 2001 of the ITSoperations and amortization of goodwill and other related intangiblesassociated with the ITS acquisition. Partially offsetting the increase in dollars relating to the ITSoperations was a decrease in operating expenses for the North Americanoperations.

OPERATING INCOME

             Operatingincome decreased by approximately 50.5% or $3.3 million to $3.2 million for thethree months ended June 30, 2001 from $6.5 million for the three months endedJune 30, 2000. Operating margin decreased to 9.9% for the second quarter from22.8% in the prior year.

             Thedecrease in operating income was primarily attributable to a decrease in theoperating income of the North American operations  which decreased in the second quarter primarily due to the lowersales and decreased gross margin. Operating income contributed by ITS in the second quarter was offset byamortization of goodwill and other related intangibles associated with the ITSacquisition. The decrease in operating margin was primarily attributable to thedecrease in gross margin combined with higher operating expenses as apercentage of sales discussed above.

INTEREST EXPENSE

             Interestexpense for the three months ended June 30, 2001 was $4.2 million compared to$4.1 million for the three months ended June 30, 2000. The effect of increaseddebt during the three months ended June 30, 2001 compared to the prior year'squarter was offset by lower interest rates on the Company's revolver borrowingsand term loans in the current year compared to the prior year.

NET INCOME (LOSS)

             Asa result of the items discussed above, the Company recorded a net loss of$(0.9) million for the three months ended June 30, 2001 compared to net incomeof $2.5 million for the three months ended June 30, 2000.SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
NET SALES

             Netsales increased by approximately 33.6% or $18.2 million to $72.3 million forthe six months ended June 30, 2001 from last year's $54.1 million for the sixmonths ended June 30, 2000.

             Thehigher sales were primarily attributable to the acquisition of ITS, whichcontributed $28.5 million of sales for the six months ended June 30, 2001,compared to $3.3 million of sales contributed for the period June 15 to June30, 2000.  Sales of our North Americanoperations decreased by approximately 13.8% or $7.0 million compared to theprior year, due to lower customer demand as a result of unfavorable economicconditions and reduced capital spending by communication service providers.

GROSS PROFIT

             Grossprofit increased by approximately 11.2% or $2.1 million to $21.1 million forthe six months ended June 30, 2001 from $19.0 million for the six months endedJune 30, 2000.  Gross margin for the sixmonths ended June 30, 2001 decreased to 29.2% from 35.1% in the prior year.

             Theincrease in gross profit was primarily due to the gross profit contributed byITS, partially offset by a decrease in gross profit contributed by the NorthAmerican operations resulting  primarilyfrom lower sales. The decrease in gross margin compared to the prior year wasprimarily due to the inclusion in 2001 of the ITS operations, which had a lowergross margin than the North American operations. In addition, the gross marginfor the North American operations decreased primarily as a result of a changein product mix.

OPERATING EXPENSES

             Operatingexpenses for the six months ended June 30, 2001 increased by approximately94.4% or $6.0 million to $12.4 million from $6.4 million for the six monthsended June 30, 2000. As a percentage of sales, operating expenses increased to17.2% from 11.8% in the prior year.

             Theincrease in operating expenses, as expressed in dollars as well as a percentageof net sales, was primarily attributable to the inclusion in 2001 of the ITSoperations and amortization of goodwill and other related intangiblesassociated with the ITS acquisition. Partially offsetting the increase in dollars relating to the ITSoperations was a decrease in operating expenses for the North Americanoperations.

OPERATING INCOME

             Operatingincome decreased by approximately 31.2% or $3.9 million to $8.6 million for thesix months ended June 30, 2001 from $12.6 million for the six months ended June30, 2000. Operating margin decreased to 12.0% for the current year's periodfrom 23.2% in the prior year.

             Thedecrease in operating income was primarily attributable to a decrease in theoperating income of the North American operations resulting primarily fromlower sales and decreased gross margin. Operating income contributed by ITS inthe current year's period was offset by amortization of goodwill and otherrelated intangibles associated with the ITS acquisition. The decrease inoperating margin was primarily attributable to the decrease in gross margincombined with higher operating expenses as a percentage of sales discussedabove.INTEREST EXPENSE
             Interestexpense for the six months ended June 30, 2001 was $8.5 million compared to$8.0 million for the six months ended June 30, 2000. This increase wasprimarily due to the additional debt incurred in June 2000 in connection withthe ITS acquisition.

NET INCOME

             Asa result of the items discussed above, net income decreased to approximatelybreakeven for the six months ended June 30, 2001 from $4.7 million for the sixmonths ended June 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2001 COMPAREDTO SIX MONTHS ENDED JUNE 30, 2000

             Netcash provided by operating activities was $8.5 million for the six months endedJune 30, 2001 compared to $3.9 million for the six months ended June 30, 2000.Cash provided by operating activities for 2001 reflects net income ofapproximately zero, depreciation and amortization of $3.4 million and decreasesof $9.7 million in accounts receivable and $6.7 million in inventory, partiallyoffset by decreases of $9.2 million in accounts payable and $1.7 million inaccrued compensation and benefits. Cash provided by operating activities for2000 reflects net income of $4.7 million, depreciation and amortization of  $1.5 million, and a $1.5 million increase inaccrued liabilities, partially offset by an increase of $3.1 million inaccounts receivable.

             Netcash used in investing activities for the six months ended June 30, 2000primarily consists of $51.4  million forthe purchase of ITS, net of acquired cash.

             Netcash used in financing activities of $2.1 million for the six months ended June30, 2001 primarily reflects $2.9 million of payments on long-term debt and anequity distribution of $2.1 million, partially offset by a $3.3 million netincrease in revolving credit borrowings. Net cash provided by financingactivities of  $41.1 million for the sixmonths ended June 30, 2000 primarily reflects proceeds from bank borrowingsaggregating $13.0 million and $34.3 million from the sale of units, which wereused to finance the purchase of ITS.

LIQUIDITY

             Historically,the Company has financed its operations with cash from operations supplementedby borrowings from credit facilities. The Company's current and futureliquidity needs primarily arise from debt service on indebtedness, workingcapital requirements, capital expenditures and distributions to pay taxes.

             TheCompany's historical capital expenditures have substantially resulted frominvestments in equipment to increase manufacturing capacity and improvemanufacturing efficiencies. For fiscal 2001, the Company expects capitalexpenditures to be approximately $2 million to $3 million.

             Asof June 30, 2001, the Company's borrowings consisted of $100 million of seniorsubordinated notes and $66.0 million of borrowings under its various creditfacilities, including $15.1 million drawn under its $25 million domesticrevolving credit facility. The Company is not subject to any amortizationrequirements under the subordinated notes prior to maturity in 2009, but it isrequired to make scheduled repayments under certain term loans.

             TheCompany’s credit agreement, which covers its revolving credit facility and termloans, contains financial covenants that are required to be met eachquarter.  As of June 30, 2001, theCompany was not in compliance with some of these financial covenants.  On August 13, 2001, the Company and itslenders entered into an agreement whereby the lenders waived the financialcovenant defaults as of June 30, 2001, and the parties agreed to modificationsto the terms of the existing credit agreement, subject to various conditionsand final documentation.  Modificationsto the existing credit agreement will include, among other things, (1) theguarantee by some of the Company's unit holders, or their equity members, of$10.5 million of the Company's senior debt principal until specific financialratios are attained, (2) the Company will be restricted from making cashdistributions to its equity members until specific financial ratios areattained, (3) the Company will be permitted to make its interest payment due inNovember 2002 relating to its $100 million of subordinated notes so long asspecific financial ratios are attained, (4) the maximum availability under therevolving line of credit will be reduced until approximately April 30, 2002,and (5) LIBOR and base rate margins will be increased for revolver borrowingsand term loans.   Until the finaldocumentation of an amendment to the credit agreement is completed, the Companywill not have access to additional borrowings under its revolving line ofcredit.  If final documentation of an amendmentis not completed by September 14, 2001, the lenders' waiver of the Company'sfinancial covenant defaults will expire and the Company will be subject toremedies provided for in the Company's credit agreement.  Management believes final documentation ofan amendment to the Company's credit agreement will be completed with respectto the terms outlined above, prior to September 14, 2001, and that the Companyhas adequate liquidity to meet its anticipated cash needs for the foreseeablefuture.

NEW ACCOUNTING PRONOUNCEMENTS

             Statementof Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVEINSTRUMENTS AND HEDGING ACTIVITIES, is effective for all fiscal years beginningafter June 15, 2000.  SFAS 133, asamended, establishes accounting and reporting standards for derivativeinstruments, including certain derivative instruments embedded in othercontracts and for hedging activities. Under SFAS 133, certain contracts thatwere not formerly considered derivatives may now meet the definition of aderivative and all derivatives are to be reported on the balance sheet at fairmarket value. The Company adopted SFAS 133 effective January 1, 2001. Theadoption of SFAS 133 did not have a significant impact on the financialposition, results of operations, or cash flows of the Company.

             InJune 2001, the Financial Accounting Standards Board ("FASB") issuedtwo new pronouncements: SFAS No. 141, "Business Combinations", andSFAS No. 142, "Goodwill and Other Intangible Assets".  SFAS 141 prohibits the use of thepooling-of-interest method for business combinations initiated after June 30,2001 and also applies to all business combinations accounted for by thepurchase method that are completed after June 30, 2001.  There are also transition provisions thatapply to business combinations completed before July 1, 2001, that wereaccounted for by the purchase method. SFAS 142 is effective for fiscal yearsbeginning after December 15, 2001 to all goodwill and other intangible assetsrecognized in an entity's statement of financial position at that date,regardless of when those assets were intially recognized.  The Company is currently evaluating theprovisions of SFAS 141 and SFAS 142 and has not adopted such provisions in itsJune 30, 2001 financial statements.

             FORWARD-LOOKINGSTATEMENTS

             Statementsin this report containing the words "believes,""anticipates,", "expects," and words of similar meaning,and any other statements which may be construed as a prediction of futureperformance or events, constitute "forward-looking statements" withinthe meaning of the Private Securities Litigation Reform Act of 1995. Suchforward-looking statements involve known and unknown risks, uncertainties, andother factors that may cause the actual results, performance, or achievementsof the Company, or industry results, to be materially different from any futureresults, performance, or achievements expressed or implied by suchforward-looking statements. Such factors include, among others, (1)restrictions imposed by the Company's substantial leverage and restrictivecovenants in its debt agreements, (2) reductions in sales to any of theCompany's significant customers or in customer capacity generally, (3) changesin the Company's sales mix to lower margin products, (4) increased competition,(5) disruptions of the Company's established supply channels, and (6) theadditional risk factors identified in the Company's Annual Report on Form 10-Kdated December 31, 2000 and those described from time to time in the Company's otherfilings with the SEC, press releases and other communications. The Companydisclaims any obligations to update any such factors or to announce publiclythe result of any revisions to any of the forward-looking statements containedor incorporated by reference herein to reflect future events or developments.
ITEM  3.QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 

             Marketrisks relating to our operations result primarily from changes in short-terminterest rates. The Company did not have any derivative financial instrumentsat June 30, 2001.

             TheCompany's exposure to market risk for changes in interest rates relatesprimarily to its current domestic credit facility. In accordance with thecredit facility, the Company enters into variable rate debt obligations tosupport general corporate purposes, including capital expenditures and workingcapital needs. The Company continuously evaluates its level of variable ratedebt with respect to total debt and other factors, including assessment of thecurrent and future economic environment.

             TheCompany had approximately $66 million in variable rate debt outstanding at June30, 2001. Based upon these variable rate debt levels, a hypothetical 10%adverse change in interest rates would increase interest expense byapproximately $0.5 million on an annual basis, and likewise decrease ourearnings and cash flows. The Company cannot predict market fluctuations ininterest rates and their impact on its variable rate debt, nor can there be anyassurance that fixed rate long-term debt will be available to the Company atfavorable rates, if at all. Consequently, future results may differ materiallyfrom the estimated adverse changes discussed above.

             As a result of the ITS acquisitionin June 2000, the Company has European operations and is, therefore, subject toa certain degree of market risk associated with changes in foreign currencyexchange rates. The Company has not actively engaged in exchange rate hedgingactivities.

 
PART II.OTHER  INFORMATION  ITEM 1.LEGAL  PROCEEDINGS
             TheCompany is subject to disputes and potential claims by third parties that areincidental to the conduct of its business. The Company does not believe thatthe outcome of any such matters, pending at June 30, 2001 will have a materialadverse effect on its financial condition or results of operations.
ITEM  6.EXHIBITS  AND REPORTS ON FORM 8-K (a)EXHIBITS:  3.1*Second  Amended and Restated Operating Agreement of Cherokee International, LLC,  dated as of April 30, 1999.  3.2*Amendment  No. 1 to the Second Amended and Restated Operating Agreement of Cherokee  International, LLC, dated as of June  28, 1999.  3.3*Amendment  No. 2 to the Second Amended and Restated Operating Agreement of Cherokee  International, LLC, dated as of June  28, 1999.  3.4**Amendment  No. 3 to the Second Amended and Restated Operating Agreement of Cherokee  International, LLC, dated as of June  12, 2000.  3.5**Amendment  No. 4 to the Second Amended and Restated Operating Agreement of Cherokee International,  LLC, dated as of June  14, 2000.  (b)REPORTS  ON FORM 8-K
The Company did not file any reports onForm 8-K during the 13-week period ended July 1, 2001.

*Incorporated by reference to designatedexhibit to the Company's Registration Statement on Form S-4 (File No. 333-82713).

**Incorporated by reference to designated exhibit to the Company's Quarterly  Report on Form 10-Q, dated July 2, 2000.

SIGNATURES

             Pursuantto the requirements of the Securities Exchange Act of 1934, as amended, the registranthas duly caused this report to be signed on its behalf by the undersignedthereunto duly authorized.
  Cherokee  International, LLC   Date:  August 15, 2001 /s/  R. Van Ness Holland, Jr.    R.  Van Ness Holland, Jr.  Chief  Financial Officer