SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

           (mark
(mark one)
           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended OctoberJuly 1, 2000
                                       2001
OR
           [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

           
oTRANSITION 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
CHEROKEE INTERNATIONAL, LLC
             (Exact
(Exact name of registrant as specified in its charter)


         CALIFORNIA                                            33-0696451
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)

                                
CALIFORNIA 33-0696451
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
2841 DOW AVENUE
TUSTIN, CALIFORNIA 92780
                    (Address
(Address of principal executive offices)
(714) 544-6665
              (Registrant's
(Registrant's telephone number, including area code)

                                       N/A
- -------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          
N/A
(Former name, former address and former fiscal year,
if changed since last report)
             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 past 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
    ---      ---


ýo

CHEROKEE INTERNATIONAL, LLC
TABLE OF CONTENTS


                                                                                PAGE

PART I--FINANCIALI—FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Condensed Consolidated Balance Sheets--
            SeptemberSheets—June 30, 20002001 and December 31, 1999. . . . . . . . . . . . . . . 32000
Condensed Consolidated Statements of Income--
            Operations—For the Three and NineSix Months Ended SeptemberJune 30, 20002001 and 1999 . . . 42000
Condensed Consolidated Statements of Cash Flows--
            Flows—For the NineSix Months Ended SeptemberJune 30, 20002001 and 1999. . . . . . . . .5

       2000
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . 6


Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . 8

Operations
Item 3.  Quantitative and Qualitative Disclosures About Market Risk . . . . .. . 10



PART II--OTHERII—OTHER INFORMATION
Item 1.  Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Proceedings
Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . .11

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

SIGNATURES



                                       2


PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

                                                                    SEPTEMBER 30,          DECEMBER 31,
                                                                    -------------         -------------
                                                                        2000                  1999
                                                                    -------------         -------------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................................    $     136,802         $   7,968,576
Accounts receivable, net of allowance for doubtful accounts
   of $165,640 and $175,000 as of September 30, 2000 and
   December 31, 1999, respectively..............................       31,073,722            14,108,596
Inventories, net ...............................................       37,396,743            18,911,652
Prepaid expenses and other current assets ......................          781,535                50,475
                                                                    -------------         -------------
   Total current assets ........................................       69,388,802            41,039,299

PROPERTY AND EQUIPMENT, net of accumulated depreciation
   and amortization of $8,601,259 and $6,374,122 as of
   September 30, 2000 and December 31, 1999, respectively ......       14,280,828             8,761,516
DEPOSITS .......................................................          303,508               274,697
DEFERRED FINANCING COSTS, net of accumulated amortization
   of $1,266,219 and $555,919 as of September 30, 2000 and
   December 31, 1999, respectively .............................        4,437,188             4,800,504
GOODWILL, net of accumulated amortization of $840,000...........       42,315,000                     0
                                                                    -------------         -------------
                                                                    $ 130,725,326         $  54,876,016
                                                                    =============         =============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ...............................................    $  18,747,842         $   5,468,043
Accrued liabilities ............................................        4,850,124             1,085,686
Accrued compensation and benefits ..............................        8,130,078             2,211,193
Accrued interest payable .......................................        5,208,353             2,406,054
Accrued distribution payable ...................................        3,298,000             1,730,000
Current portion of long-term debt ..............................       15,776,583             4,545,004
Current portion of capital lease obligations ...................          759,741               835,947
                                                                    -------------         -------------
   Total current liabilities ...................................       56,770,721            18,281,927
LONG-TERM DEBT, net of current portion .........................      143,631,465           141,458,228
CAPITAL LEASE OBLIGATIONS, net of current portion ..............        2,239,391             2,811,367

MEMBERS' EQUITY (DEFICIT)
Class A units: 347,671 and 300,000 units issued and
   outstanding in 2000 and 1999, respectively ..................          354,371                14,000
Class B units: 35,950,264 and 30,002,000 units issued and
   outstanding in 2000 and 1999, respectively ..................       36,553,627             2,594,000
Paid-in capital ................................................        5,330,000             5,330,000
Retained earnings (deficit)  ...................................     (113,326,698)         (115,613,506)
Accumulated other comprehensive loss............................         (827,551)                    0
                                                                    -------------         -------------
   Total members' equity (deficit) .............................      (71,916,251)         (107,675,506)
                                                                    -------------         -------------
                                                                    $ 130,725,326         $  54,876,016
                                                                    =============         =============

 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 
 
 
 
See notes to consolidated financial statements.


                                        3


CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   OPERATIONS
(Unaudited)


                                                            THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                      SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,
                                                      ------------      ------------     ------------      ------------
                                                          2000             1999              2000               1999
                                                      ------------      ------------     ------------      ------------

NET SALES ......................................      $ 43,205,357      $ 27,601,575       $ 97,300,946    $ 94,097,923
COST OF SALES ..................................        28,385,364        18,070,263         63,513,126      59,569,445
                                                      ------------      ------------       ------------    ------------
GROSS PROFIT ...................................        14,819,993         9,531,312         33,787,820      34,528,478
OPERATING EXPENSES:
Engineering and development ....................         1,855,283         1,009,742          4,225,136       3,071,371
Selling and marketing ..........................         1,667,600           687,540          3,077,384       1,981,647
General and administrative .....................         3,235,008           954,834          5,741,773       2,837,863
Amortization of goodwill .......................           723,000                 0            840,000               0
Special bonus distribution .....................                 0                 0                  0       5,330,000
                                                      ------------      ------------       ------------    ------------
   Total operating expenses ....................         7,480,891         2,652,116         13,884,293      13,220,881
                                                      ------------      ------------       ------------    ------------
OPERATING INCOME ...............................         7,339,102         6,879,196         19,903,527      21,307,597

OTHER INCOME (EXPENSE):
Interest expense ...............................        (4,363,326)       (3,938,596)       (12,358,267)     (6,849,719)
Other income (expense) .........................            42,772          (196,222)           152,548        (715,087)
                                                      ------------      ------------       ------------    ------------
  Total other (expense) income .................        (4,320,554)       (4,134,818)       (12,205,719)     (7,564,806)
                                                      ------------      ------------       ------------    ------------
NET INCOME .....................................      $  3,018,548      $  2,744,378       $  7,697,808    $ 13,742,791
                                                      ============      ============       ============    ============

NET INCOME PER UNIT:

  Basic ........................................      $       0.08      $       0.09       $       0.24    $       0.46
                                                      ============      ============       ============    ============
  Diluted ......................................      $       0.08      $       0.09       $       0.23    $       0.46
                                                      ============      ============       ============    ============
WEIGHTED AVERAGE UNITS OUTSTANDING:

  Basic ........................................        36,297,935        30,195,143         32,735,337      30,065,047
                                                      ============      ============       ============    ============
  Diluted ......................................        36,643,071        30,195,143         33,020,954      30,065,047
                                                      ============      ============       ============    ============

 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 
 
 
 
 
 
See notes to consolidated financial statements


                                       4


CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


                                                                            NINE MONTHS ENDED
                                                                    ---------------------------------
                                                                    SEPTEMBER 30,       SEPTEMBER 30,
                                                                    -------------       -------------
                                                                        2000                 1999
                                                                    -------------       -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................      $   7,697,808       $  13,742,791
Adjustments to reconcile net income to net cash
   provided by operating activities:
Depreciation and amortization ................................          3,067,137           1,746,284
Amortization of deferred financing costs .....................            710,300             338,774
Net change in operating assets and liabilities,
   net of effects of acquisition:
   Accounts receivable, net ..................................         (6,022,126)         (3,078,323)
   Inventories, net ..........................................         (2,896,091)         (3,604,548)
   Prepaid expenses and other current assets .................           (463,060)            (37,592)
   Deposits ..................................................            (77,587)            (73,977)
   Accounts payable ..........................................            253,799          (2,112,714)
   Accrued liabilities .......................................            384,438             607,334
   Accrued compensation and benefits .........................           (137,115)           (130,696)
   Accrued interest payable ..................................          2,592,299           5,106,986
                                                                    -------------       -------------
      Net cash provided by operating activities ..............          5,109,802          12,504,319
                                                                    -------------       -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ..........................         (1,558,449)           (971,937)
Investment in ITS, net of cash acquired ......................        (51,895,775)                  0
                                                                    -------------       -------------
         Net cash used in investing activities ...............        (53,454,224)           (971,937)
                                                                    -------------       -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit .......................         15,585,894           4,699,935
Payments on revolving line of credit .........................         (8,477,974)         (4,699,935)
Payments on obligations under capital leases .................           (648,182)           (588,564)
Borrowings on long-term debt .................................          8,000,000         150,000,000
Payments on long-term debt ...................................         (3,823,104)         (2,022,188)
Deferred financing costs .....................................           (346,984)         (5,188,345)
Proceeds from sale of units ..................................         34,299,998                   0
Capital contribution to fund special bonus distribution ......                  0           5,330,000
Equity distribution ..........................................         (3,843,000)       (157,856,000)
                                                                    -------------       -------------
        Net cash provided by (used in) financing activities ..         40,746,648         (10,325,097)
Cash effect of exchange rate .................................           (234,000)                  0
                                                                    -------------       -------------
NET (DECREASE) INCREASE IN CASH ..............................         (7,831,774)          1,207,285

CASH AND CASH EQUIVALENTS, beginning of period ...............          7,968,576           2,784,828
                                                                    -------------       -------------
CASH AND CASH EQUIVALENTS, end of period .....................      $     136,802       $   3,992,113
                                                                    =============       =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest                                              $   8,845,668       $   1,382,749
                                                                    =============       =============




SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITY: During the
nine months ended September 30, 1999, the company financed the purchase of
$2,310,314 of fixed assets through a capital equipment lease.

As of September 30, 2000, the Company had accrued equity distributions payable
of $3,298,000.

On June 15, 2000, the Company acquired Industrial and Telecommunication Systems
and related entities ("ITS") for approximately $43.2 million in cash, plus $1.0
million in acquisition costs, and paid off $9.7 million of ITS's debt. In
conjunction with the acquisition, liabilities were assumed as follows:


Fair value of tangible assets acquired ............. $ 37,186,000
Fair value of goodwill .............................   43,155,000
Cash paid for ITS's stock ..........................  (43,150,000)
Repayment of certain assumed debt at closing .......   (9,722,000)
                                                     ------------
Liabilities assumed ................................ $ 27,469,000
                                                     ============

 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 
 
 
 
See notes to consolidated financial statements.

                                       5


CHEROKEE INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO INTERIMCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                September 30, 2000
                                   
(Unaudited)

1.    Basis of Presentation

      
1.Basis of Presentation
The information set forth in the accompanying consolidated financial statements is unaudited and, may be subject to normal year-end adjustments.
      Inin the opinion of management, the unaudited financial statements reflectreflects all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows of Cherokee International, LLC (the "Company") for the periods indicated.
Results of operations for the interim three and ninesix months ended SeptemberJune 30, 20002001 and 19992000 are not necessarily indicative of the results of operations for the full fiscal year. The Company's thirdsecond quarter represented the 13-week periodperiods ended on OctoberJuly 1 in 20002001 and October 3July 2 in 1999.2000. For presentation purposes, these fiscal quarters have been referred to as Septemberending on June 30.
The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. One such subsidiary, Cherokee International Finance, Inc., was formed in April 1999 as a wholly-owned finance subsidiary to act as a co-obligor of the 10 1/2% Senior Subordinated Notessenior subordinated notes and has no independent assets or operations. All materialsignificant intercompany accounts and transactions have been eliminated.
Certain information normally included in footnote disclosure to the financial statements has been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission.
      Accordingly, theseCommission, and the financial statements do not include all the information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These unaudited consolidated financial statements should be read in conjunction with the other disclosures contained herein and with the Company's audited consolidated financial statements and notes thereto contained in the Company's Form 10-K for the year ended December 31, 1999.

      2000.
The preparation of financial statements in conformity with generally accepted accounting principles necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

2.    Inventories

      
2.Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market. Inventory costs include the cost of material, labor and manufacturing overhead and consist 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 
 
 
 

                                  September 30, 2000    December 31, 1999
                                  ------------------    -----------------

          Raw Material                  $ 24,702,231         $ 15,633,994
          Work-in-process                  8,619,669            2,699,689
          Finished goods                   4,074,843              577,969
                                       -------------         ------------
                                        $ 37,396,743         $ 18,911,652
                                       =============         ============

3.Income Taxes


3.    Income Taxes

      
The Company is taxed as a limited liability company under the provisions of the United States federal and state tax codes. Under U.S.
      federal law,laws, taxes based  on U.S. income of a limited liability company are payable by the Company's members individually.Company’s  individual members. Accordingly, no provision for U.S. federal income taxes or for California franchise taxes  has been provided in the accompanying financial statements. Provisions for California franchise tax and fees are not significant for any period presented. The Company'sCompany’s operations in Mexico and Belgium are subject  to various
      income taxes on earnings generated in those countries, which are
      accounted for in accordance with SFAS No. 109, ACCOUNTING FOR INCOME
      TAXES.

                                     6


4.    Long-term debt

      In June 2000, the Company amended its credit agreement to provide for
      additional term loan borrowings of $8 million, the proceeds of which were
      used to finance a portion of the purchase price of an acquisition (see
      Note 7).


5.    countries.
4.Comprehensive Income (Loss)
Comprehensive income (loss) is defined as all changes in a company's net assets except changes resulting from transactions with shareholders. It differs from net income in that certain items currently recorded through equity are included in comprehensive income. Comprehensive income, includingloss for the six months ended June 30, 2001 was $(853,004), which included net income of $30,573 and a loss from foreign currency exchangetranslation adjustments was
      $2,190,997 for the three months ended September 30, 2000 and $6,870,257
      for the nine months ended September 30, 2000. Comprehensiveof $(883,577). The Company's net income for
      the three and nine months ended September 30, 1999 was the same as netcomprehensive income for those periods of $2,744,378 and $13,742,791, respectively.


6.    Income Per Unit

      the six months ended June 30, 2000.
5.Net Income (Loss) Per Unit
The following table sets forth the computation of basic and diluted income (loss) per unit:

                                                                 Three Months Ended                     Nine Months Ended
                                                                    September 30,                         September 30,
                                                            --------------------------------      --------------------------------
                                                                2000                1999              2000               1999
                                                            -------------      -------------      -------------      -------------

       Net Income...........................                 $ 3,018,548        $  2,744,378       $  7,697,808       $ 13,742,791
                                                            =============      =============      =============      =============

       Units:
       Weighted-average units outstanding - basic......       36,297,935          30,195,143         32,735,337         30,065,047
       Effect of dilutive options......................          345,136                   0            285,617                  0
                                                            -------------      -------------      -------------      -------------
       Weighted-average units outstanding - diluted....       36,643,071          30,195,143         33,020,954         30,065,047
                                                            =============      =============      =============      =============

       Net income per unit:
       Basic..........................................   .  $       0.08       $        0.09       $       0.24       $       0.46
                                                            =============      =============      =============      =============
       Diluted.........................................     $       0.08       $        0.09       $       0.23       $       0.46
                                                            =============      =============      =============      =============




7.    Acquisition

            On June 15, 2000,
 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 
 
 
 
 
 
         
             In calculating net loss per unit for the Company completed its acquisition of
      Industrial and Telecommunication Systems and related entities ("ITS"), one
      of Europe's leading designers and manufacturers of custom power supplies
      for OEM's primarily in the telecommunications industry. The Company paid
      approximately $43 million in cash, acquired net assets (excluding debt) at
      fair value of approximately $12 million, assumed debt of approximately $12
      million, of which approximately $10 million was repaid at closing, and
      incurred transaction costs of approximately $1 million. The company
      recorded goodwill of approximately $43 million in the transaction, which
      is being amortized over 15 years.

            The acquisition, including the repayment of certain assumed debt at
      closing, was financed with approximately $34 million of cash proceeds from
      the issuance and sale of new members' equity units, approximately $13
      million of borrowings under the Company's existing bank credit agreement,
      as amended, and utilization of available cash.

            The Company's unaudited pro forma net sales, net income, and diluted
      income per share as if the acquisition of ITS had occurred as of the
      beginning of the ninethree months ended SeptemberJune 30, 2000 and 1999, are as
      follows:



                                                                    Nine Months Ended
                                                                       September 30,
                                                             -------------------------------
            Dollars in millions, except per share amounts         2000              1999
            --------------------------------------------------------------------------------

            Net sales                                         $122,096,000     $131,050,000
                                                              ==============================
            Net income                                        $  7,596,000     $  7,323,000
                                                              ==============================
            Diluted income per share                          $       0.21     $       0.20
                                                              ==============================




            The pro forma operating results above include2001, the resultseffect of operations for ITS for the nine months ended September 30, 2000 and 1999
      with goodwill amortization along with other relevant adjustments to
      reflect fair valuedilutive options is excluded because it is antidilutive.
6.New Accounting Pronouncements
Statement of the acquired assets. Additionally, the pro forma
      operating results include pro forma interest expense on the assumed
      acquisition borrowings and pro forma issuance of the Company's membership
      units reflected in the weighted average number of units outstanding for
      the computations of pro forma diluted income per share.

            The results of operations reflected in the pro forma information
      above are not necessarily indicative of the results which would have been
      reported if the acquisition had been effected at the beginning of the
      respective nine month periods.

            The amounts recorded for the ITS acquisition, which has been
      accounted for as a purchase for financial reporting purposes, are subject
      to change after final valuation information is obtained.

8.    New Accounting Pronouncements

      In June 1998, the Financial Accounting Standards Board issued SFAS(SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, whichis effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the Company is requireddefinition of a derivative and all derivatives are to adopt effective in its fiscal year
      2001. SFAS No. 133 will require the Company to record all derivativesbe reported on the balance sheet at fair market value. The Company expects that theadopted SFAS 133 effective January 1, 2001. The adoption of SFAS No. 133 willdid not have a material effectsignificant impact on itsthe financial statements.

      In December 1999, the Securities and Exchange Committee issued Staff
      Accounting Bulletin 101, Revenue Recognition ("SAB 101"). SAB 101
      summarizes certainposition, results of operations, or cash flows of the SEC staff's views in applying generally accepted
      accounting principlesCompany.
In June 2001, the Financial Accounting Standards Board (“FASB”) issued two new pronouncements: SFAS No. 141, “Business Combinations”, and SFAS No. 142, “Goodwill and Other Intangible Assets”.  SFAS 141 prohibits the use of the pooling-of-interest method for business combinations initiated after June 30, 2001 and also applies to selected revenue recognition issues in financial
      statements. Implementation of SAB 101, which was delayedall business combinations accounted for by the issuance
      of SAB 101A on March 27, 2000 and SAB 101B onpurchase method that are completed after June 26, 2000, is required30, 2001.  There are also transition provisions that apply to business combinations completed  before July 1, 2001, that were accounted for by the fourth quarterpurchase method.  SFAS 142 is effective for fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized in an entity’s statement of 2000.financial position at that date, regardless of when those assets were initially recognized.  The Company is currently evaluating the provisions of SFAS 141 and SFAS 142 and has not adopted such provisions in its June 30, 2001 financial statements.
7.Long-Term Debt
             The Company’s credit agreement, which covers its revolving credit facility and term loans, contains financial covenants that are required to be met each quarter.  As of June 30, 2001, the Company was not in compliance with some of these financial covenants.  On August 13, 2001, the Company and its lenders entered into an agreement whereby the lenders waived the financial covenant defaults as of June 30, 2001, and the parties agreed to modifications to the terms of the existing credit agreement, subject to various conditions and final documentation.  Modifications to the existing credit agreement will include, among other things, (1) the guarantee 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 financial ratios are attained, (2) the Company will be restricted from making cash distributions to its equity members until specific financial ratios are attained, (3) the Company will be permitted to make its interest payment due in November 2002 relating to its $100 million of subordinated notes so long as specific financial ratios are attained, (4) the maximum availability under the revolving line of credit will be reduced until approximately April 30, 2002, and (5) LIBOR and base rate margins will be increased for revolver borrowings and term loans.   Until the final documentation of an amendment to the credit agreement is completed, the Company will not have access to additional borrowings under its revolving line of credit.  If final documentation of an amendment is not completed by September 14, 2001, the lenders' waiver of the Company's financial covenant defaults will expire and the Company will be subject to remedies provided for in the processCompany's credit agreement.  Management believes final documentation of evaluatingan amendment to the impact, if any, SAB 101Company's credit agreement will have onbe completed with respect to the terms outlined above, prior to September 14, 2001, and that the Company has adequate liquidity to meet its consolidated
      financial position or results of operations.

                                       7
anticipated cash needs for the foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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


ITEM 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
             Cherokee is a leading designer and manufacturer of a broad range of switch mode power supplies for original equipment manufacturers (OEM's)primarily in the high growth telecommunications, networking and high-end workstation industries. The Company produces its products and related components in sophisticated manufacturing facilities located in Tustin and Irvine, California; Wavre, Belgium; Guadalajara, Mexico; and Bombay, India; and its recently acquired operation in
Wavre, Belgium.

         The Company's net sales are principally driven by growth in its
customers' industries, including the telecommunications, networking and high-end
workstation segments, which are benefiting from the proliferation of
internet/intranet, wireless and other communications.India.
              The principal elements comprising cost of sales are raw materials, labor and manufacturing overhead. During 2000 and 1999, rawRaw materials accountedaccount for a large majority of cost of sales. Raw materials include magnetic subassemblies, sheet metal, electronic and other components, mechanical parts and electrical wires. Labor costs include employee costs of salaried and hourly employees. Manufacturing overhead includes lease costs, depreciation on property, plant and equipment, utilities, property taxes and repairs and maintenance.
              Operating expenses include engineering costs, selling and marketing costs and administrative expenses. Engineering costs primarily include salaries and benefits of engineering personnel, safety approval and quality certification fees, depreciation on equipment and subcontract costs for third party contracting services. Selling and marketing expenses primarily include salaries and benefits to account managers and commissions to independent sales representatives. Administrative expenses primarily include salaries and benefits for certain management and administrative personnel, professional fees and information system costs.
              On June 15, 2000, the Company acquired Industrial and Telecommunication Systems and related entities ("ITS") for approximately $55 million, including assumption of debt. ITS, based in Belgium, is one of
Europe's leading designers and manufacturers of custom power supplies for
OEM's primarily in the telecommunications industry. The acquisition was accounted for using the purchase method of accounting,accounting.
             During the first half of 2001, the Company continued to generate the majority of its sales from the communications market segment, particularly the networking and telecommunications sectors.  As a result of recent unfavorable economic conditions and reduced capital spending by communication service providers that purchase our customers’ products, the fair market
value of ITS's assets and liabilities were includedCompany’s sales decreased in the Company's
balance sheet asfirst quarter of 2001 compared to the acquisition date. For the three and nine month periods
ended September 30, 2000, the Company's statementsfourth quarter of income are consolidated
to include ITS's operations from July 1, 2000 to September 30, 2000, and from
June 16, 2000decreased again in the second quarter of 2001 compared to September 30, 2000, respectively.

the first quarter of 2001.  The Company believes that unstable and unpredictable economic conditions will continue, likely resulting in a further decline in revenues in the third quarter of 2001.  If these unfavorable economic conditions persist, the Company’s operating results and financial condition would be adversely affected.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBERJUNE 30, 20002001 COMPARED TO THREE MONTHS ENDED SEPTEMBERJUNE 30, 1999

2000
NET SALES
             Net sales increased by approximately 56.5%14.6% or $15.6$4.2 million to $43.2$32.9 million for the three months ended SeptemberJune 30, 20002001 from last year's $27.6$28.7 million for the three months ended SeptemberJune 30, 1999.2000.
              The higher sales were primarily attributable to the inclusionacquisition of ITS's operations,ITS, which contributed $13.8$14.6 million of sales for the three months ended SeptemberJune 30, 2001, compared to $3.3 million of sales contributed for 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 a result of unfavorable economic conditions and reduced capital spending by communication service providers.

GROSS PROFIT
              Gross profit increaseddecreased by approximately 55.5%11.4% or $1.2 million to $14.8$9.0 million for the three months ended SeptemberJune 30, 20002001 from $9.5$10.2 million for the three months ended SeptemberJune 30, 1999.2000. Gross margin for the quarter decreased slightly to 34.3%27.4% from 34.5%35.5% in the prior year.
             The increasedecrease in gross profit was primarily due to the increase in
sales. Increasedsignificantly lower gross margins forprofit contributed by the North American operations which was attributable to the lower sales.  This was partially offset by gross profit contributed by ITS of  $3.1 million for the three months ended June 30, 2001 compared to last$0.8 million for the period June 15 to June 30, 2000.  The decrease in gross margin compared to the prior year were offset bywas primarily due to the inclusion in the current year2001 of the ITS operations, which had a lower gross marginsmargin than the North American operations.  In addition, the gross margin for the North American operations decreased primarily as a result of a change in product mix.
OPERATING EXPENSES
              Operating expenses for the three months ended SeptemberJune 30, 20002001 increased by approximately 59.3% or $2.1 million to $7.5$5.8 million from $2.7$3.6 million for the three months ended SeptemberJune 30, 1999.2000. As a percentage of sales, operating expenses increased to 17.3%17.6% from 9.6%12.6% in the thirdsecond quarter of the prior year.
             The increase in operating expenses, as expressed in dollars as well as a percentage of net sales, was primarily attributable to the inclusion in 2001 of ITS'sthe ITS operations for the three months ended September 30, 2000, along with theand amortization of goodwill duringand other related intangibles associated with the current quarter relatedITS acquisition.  Partially offsetting the increase in dollars relating to the ITS acquisition.

                                      8

operations was a decrease in operating expenses for the North American operations.
OPERATING INCOME
             Operating income increaseddecreased by approximately 6.7%50.5% or $3.3 million to $7.3$3.2 million for the three months ended SeptemberJune 30, 20002001 from $6.9$6.5 million for the three months ended SeptemberJune 30, 1999.2000. Operating margin decreased to 17.0%9.9% for the currentsecond quarter from 24.9%22.8% in the prior year.
             The increasedecrease in operating income was primarily dueattributable to increaseda decrease in the operating income contributed byof the North American operations  partiallywhich decreased in the second quarter primarily due to the lower sales and decreased gross margin.  Operating income contributed by ITS in the second quarter was offset by the amortization of goodwill in the current quarterand other related tointangibles associated with the ITS acquisition. The decrease in operating margin was primarily attributable to the decrease in gross margin combined with higher operating expenses as a percentage of sales discussed above.
INTEREST EXPENSE
             Interest expense for the three months ended SeptemberJune 30, 20002001 was $4.4$4.2 million compared to $3.9$4.1 million for the three months ended SeptemberJune 30, 1999. This increase was primarily due2000. The effect of increased debt during the three months ended June 30, 2001 compared to the additional debt incurredprior year's quarter was offset by lower interest rates on the Company's revolver borrowings and term loans in June 2000 in connection with the ITS acquisition.

current year compared to the prior year.
NET INCOME (LOSS)
             As a result of the items discussed above, the Company recorded a net income increased to
$3.0loss of $(0.9) million for the three months ended SeptemberJune 30, 2000 from approximately
$2.72001 compared to net income of $2.5 million for the three months ended SeptemberJune 30, 1999. Net income margin
for the current quarter was 7.0% compared to 9.9% in the prior period.

NINE2000.
SIX MONTHS ENDED SEPTEMBERJUNE 30, 20002001 COMPARED TO NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 1999

2000
NET SALES
             Net sales increased by approximately 3.4%33.6% or $3.2$18.2 million to $97.3$72.3 million for the ninesix months ended SeptemberJune 30, 20002001 from last year's $94.1$54.1 million for the ninesix months ended SeptemberJune 30, 1999.2000.
             The inclusionhigher sales were primarily attributable to the acquisition of ITS's operations from June 16, 2000 to September
30, 2000ITS, which contributed approximately $17.1$28.5 million of sales for the current
year's period. This was partially offset by lowersix months ended June 30, 2001, compared to $3.3 million of sales contributed for the period June 15 to June 30, 2000.  Sales of our North American operations primarily due to decreased demand for certain major
customers in the current year's nine month period compared with particularly
strong demand from those same customers in the prior year. A decline in sales
to IBM, one of the Company's largest customers, accounted for the majority of
the North American sales decrease from last year's nine-month period.

GROSS PROFIT

         Gross profit decreased by approximately 2.1%13.8% or $741,000$7.0 million compared to $33.8the prior year, due to lower customer demand as a result of unfavorable economic conditions and reduced capital spending by communication service providers.
GROSS PROFIT
             Gross profit increased by approximately 11.2% or $2.1 million to $21.1 million for the ninesix months ended SeptemberJune 30, 20002001 from $34.5$19.0 million for the ninesix months ended SeptemberJune 30, 1999.2000.  Gross margin for the ninesix months ended SeptemberJune 30, 20002001 decreased to 34.7%29.2% from 36.7%35.1% in the prior year.
             The decreaseincrease in gross profit was primarily due to lowerthe gross profit fromcontributed by ITS, partially offset by a decrease in gross profit contributed by the North American operations due to decreased sales as discussed above,
partially offset by gross profit contributedresulting  primarily from inclusion of ITS in the
current year.lower sales. The decrease in gross margin compared to the prior year was primarily due to the inclusion in the current year2001 of the ITS operations, which had a lower gross marginsmargin than the North American operations. 9

In addition, the gross margin for the North American operations decreased primarily as a result of a change in product mix.
OPERATING EXPENSES
             Operating expenses in last year's nine-month period included a $5.3
million special bonus distribution. Excludingfor the effect of this special bonus
distribution in the prior year, operating expensessix months ended June 30, 2001 increased by approximately 76.0%94.4% or $6.0 million to $13.9$12.4 million from $6.4 million for the ninesix months ended SeptemberJune 30, 2000 from $7.9 million for the nine months ended September 30, 1999.2000. As a percentage of sales, operating expenses increased to 14.3%17.2% from 8.4%11.8% in the prior year.
             The increase in operating expenses, as expressed in dollars as well as a percentage of net sales, was primarily attributable to the inclusion in 2001 of ITS'sthe ITS operations from June 16, 2000 to September 30, 2000 in the current
period,and amortization of goodwill and other related intangibles associated with the ITS acquisition.  Partially offsetting the increase in dollars relating to the ITS acquisition, and having
the resourcesoperations was a decrease in place atoperating expenses for the North American operations to support sales
levels commensurate with those achieved in the prior year.

operations.
OPERATING INCOME
             Operating income decreased by approximately 6.6%31.2% or $3.9 million to $19.9$8.6 million for the ninesix months ended SeptemberJune 30, 20002001 from $21.3$12.6 million for the ninesix months ended SeptemberJune 30, 1999. Excluding the effect of the special bonus distribution
in the prior year, operating income decreased by approximately 25.3% or $6.7
million.2000. Operating margin decreased to 20.5%12.0% for the current yearyear's period from 28.3%23.2% in the prior year, before the special bonus distribution.year.
             The decrease in operating income was primarily dueattributable to thea decrease in the operating income of the North American operations resulting primarily from lower sales and decreased gross profitmargin. Operating income contributed by ITS in the current year's period was offset by amortization of goodwill and other related intangibles associated with the higher operating expenses discussed above.ITS acquisition. The decrease in operating margin was primarily attributable to the decrease in gross margin combined with higher operating expenses as a percentage of sales discussed above.
INTEREST EXPENSE
             Interest expense for the ninesix months ended SeptemberJune 30, 20002001 was $12.4$8.5 million compared to $6.8$8.0 million for the ninesix months ended SeptemberJune 30, 1999.2000. This substantial increase was primarily due to the issuance of $100
million of 10 1/2% senior subordinated notes and a $50 million term loan, all
of which occurred on April 30, 1999, resulting in only five months of
interest expense reflected in the prior year's period. The current year's
period also reflects interest expense relating to additional debt incurred in June 2000 in connection with the ITS acquisition.
NET INCOME
             As a result of the items discussed above, net income decreased to $7.7approximately breakeven for the six months ended June 30, 2001 from $4.7 million for the ninesix months ended SeptemberJune 30, 2000 from $13.7 million
for the nine months ended September 30, 1999. Excluding the effect of the
special bonus distribution last year, net income decreased 59.6% or $11.4
million. Net income margin for the current year was 7.9% compared to 20.3% in
the prior period, before the special bonus distribution.

2000.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS

Nine months ended September
SIX MONTHS ENDED JUNE 30, 2000 Compared to nine months ended September2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 19992000
             Net cash provided by operating activities was $5.1$8.5 million for the ninesix months ended SeptemberJune 30, 20002001 compared to $12.5$3.9 million for the ninesix months ended SeptemberJune 30, 1999.2000. Cash provided by operating activities for 2001 reflects net income of approximately zero, depreciation and amortization of $3.4 million and decreases of $9.7 million in accounts receivable and $6.7 million in inventory, partially offset by decreases of $9.2 million in accounts payable and $1.7 million in accrued compensation and benefits. Cash provided by operating activities for 2000 reflects net income of $7.7$4.7 million, depreciation and amortization of  $3.1$1.5 million, and a $2.6$1.5 million increase in accrued interest payable,liabilities, partially offset by increases of $6.0 million in accounts receivable and $2.9 million in
inventory. Cash provided by operating activities for 1999 reflects net income
of $13.7 million, depreciation and amortization of $1.7 million, and a $5.1
millionan increase in accrued interest payable, offset by increases of $3.1 million in accounts receivable and $3.6 million in inventory. Net income for
1999 includes the negative cash flow effect of a $5.3 million special bonus
distribution, which was funded by capital contributions from the existing
members.receivable.
             Net cash used in investing activities for the ninesix months ended SeptemberJune 30, 2000 primarily consists of $51.9$51.4  million for the purchase of ITS, net of acquired cash.
             Net cash used in financing activities of $2.1 million for the six months ended June 30, 2001 primarily reflects $2.9 million of payments on long-term debt and an equity distribution of $2.1 million, partially offset by a $3.3 million net increase in revolving credit borrowings. Net cash provided by financing activities of  $40.7$41.1 million for the ninesix months ended SeptemberJune 30, 2000 primarily reflects proceeds from bank borrowings and the sale of units aggregating $13.0 million and $34.3 million respectively,from the sale of units, which waswere used to finance the purchase of ITS. This was
partially offset by payments on long-term debt of $3.8 million and equity
distributions of $3.8 million.

         Net cash used in financing activities was $10.3 million for the nine
months ended September 30, 1999. Equity distributions of $157.9 million and
deferred financing costs of $5.2 million were partially offset by proceeds
from borrowings on long-term debt of $150 million and capital contributions
of $5.3 million.


LIQUIDITY
             Historically, the Company has financed its operations with cash from operations supplemented by borrowings from credit facilities. As a result of
certain transactions in 1999, theThe Company's current and future liquidity needs primarily arise from debt service on indebtedness, working capital requirements, capital expenditures and distributions to pay taxes. In connection with the
acquisition of ITS in June 2000, the Company sold equity units for $34.3 million
in cash proceeds, borrowed $13.0 million under its credit agreement, as amended,
and utilized available cash to finance the purchase price and the repayment of
certain assumed debt at closing of the transaction.

      As of September 30, 2000, the Company's borrowings consisted of $100
million of senior subordinated notes, $49.6 million of term loan borrowings
under its credit facility, $3.0 million under capital leases, and $9.8
million of other bank debt, which includes $6.0 million of borrowings
outstanding under its $25 million revolving credit facility. The Company is
not subject to any amortization requirements under the notes prior to
maturity in 2009, but it is required to make scheduled repayments under the
term loan facility.

      Management believes that cash flow from operations and available borrowing
capacity will be adequate to meet the Company's anticipated cash requirements,
including operating requirements, planned capital expenditures, debt service and
distributions to pay taxes, for the next twelve months.
             The Company's historical capital expenditures have substantially resulted from investments in equipment to increase manufacturing capacity and improve manufacturing efficiencies. For fiscal 2000,2001, the Company expects capital expenditures to be between $4-5approximately $2 million to $3 million.
             As of June 30, 2001, the Company's borrowings consisted of $100 million of senior subordinated notes and $66.0 million of borrowings under its various credit facilities, including $15.1 million drawn under its $25 million domestic revolving credit facility. The Company is not subject to any amortization requirements under the subordinated notes prior to maturity in 2009, but it is required to make scheduled repayments under certain term loans.
             The Company’s credit agreement, which covers its revolving credit facility and term loans, contains financial covenants that are required to be met each quarter.  As of June 30, 2001, the Company was not in compliance with some of these financial covenants.  On August 13, 2001, the Company and its lenders entered into an agreement whereby the lenders waived the financial covenant defaults as of June 30, 2001, and the parties agreed to modifications to the terms of the existing credit agreement, subject to various conditions and final documentation.  Modifications to the existing credit agreement will include, among other things, (1) the guarantee 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 financial ratios are attained, (2) the Company will be restricted from making cash distributions to its equity members until specific financial ratios are attained, (3) the Company will be permitted to make its interest payment due in November 2002 relating to its $100 million of subordinated notes so long as specific financial ratios are attained, (4) the maximum availability under the revolving line of credit will be reduced until approximately April 30, 2002, and (5) LIBOR and base rate margins will be increased for revolver borrowings and term loans.   Until the final documentation of an amendment to the credit agreement is completed, the Company will not have access to additional borrowings under its revolving line of credit.  If final documentation of an amendment is not completed by September 14, 2001, the lenders' waiver of the Company's financial covenant defaults will expire and the Company will be subject to remedies provided for in the Company's credit agreement.  Management believes final documentation of an amendment to the Company's credit agreement will be completed with respect to the terms outlined above, prior to September 14, 2001, and that the Company has adequate liquidity to meet its anticipated cash needs for the foreseeable future.
NEW ACCOUNTING PRONOUNCEMENTS
             Statement of Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, is effective for all fiscal years beginning after June 15, 2000.  SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative and all derivatives are to be reported on the balance sheet at fair market value. The Company adopted SFAS 133 effective January 1, 2001. The adoption of SFAS 133 did not have a significant impact on the financial position, results of operations, or cash flows of the Company.
             In June 2001, the Financial Accounting Standards Board ("FASB") issued two new pronouncements: SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets".  SFAS 141 prohibits the use of the pooling-of-interest method for business combinations initiated after June 30, 2001 and also applies to all business combinations accounted for by the purchase method that are completed after June 30, 2001.  There are also transition provisions that apply to business combinations completed before July 1, 2001, that were accounted for by the purchase method. SFAS 142 is effective for fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized in an entity's statement of financial position at that date, regardless of when those assets were intially recognized.  The Company is currently evaluating the provisions of SFAS 141 and SFAS 142 and has not adopted such provisions in its June 30, 2001 financial statements.
             FORWARD-LOOKING STATEMENTS
             Statements in 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 future performance or events, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the Company, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others, (1) restrictions imposed by the Company's substantial leverage and restrictive covenants in its debt agreements, (2) reductions in sales to any of the Company's significant customers or in customer capacity generally, (3) changes in the Company's sales mix to lower margin products, (4) increased competition, (5) disruptions of the Company's established supply channels, and (6) the additional risk factors identified in the Company's Registration StatementAnnual Report on Form S-4 (No. 333-82713)10-K dated December 31, 2000 and those described from time to time in the Company's other filings with the SEC, press releases and other communications. The Company disclaims any obligations to update any such factors or to announce publicly the result of any revisions to any of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.

ITEM 3. 
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
             Market risks relating to our operations result primarily from changes in short-term interest rates. The Company did not have any derivative financial instruments at SeptemberJune 30, 2000.2001.
             The Company's exposure to market risk for changes in interest rates relates primarily to its current domestic credit facility. In accordance with the credit facility, the Company enters into variable rate debt obligations to support general corporate purposes, including capital expenditures and working capital needs. The Company continuously evaluates its level of variable rate debt with respect to total debt and other factors, including assessment of the current and future economic environment.
             The Company had approximately $55.6 million and $46.0$66 million in variable rate debt outstanding at SeptemberJune 30, 2000 and December 31, 1999,
respectively.2001. Based upon these variable rate debt levels, a hypothetical 10% adverse change in interest rates would increase interest expense by approximately $0.5 million on an annual basis, and likewise decrease our earnings and cash flows. The Company cannot predict market fluctuations in interest rates and their impact on its variable rate debt, nor can there be any assurance that fixed rate long-term debt will be available to the Company at favorable rates, if at all. Consequently, future results may differ materially from the estimated adverse changes discussed above.
             As a result of the ITS acquisition in June 2000, the Company has European operations and is, therefore, subject to a certain degree of market risk associated with changes in foreign currency exchange rates. The Company has not actively engaged in exchange rate hedging activities.

                                      10




PART II.  OTHER INFORMATION

ITEM 1.  
PART II.OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
             The Company is subject to disputes and potential claims by third parties that are incidental to the conduct of its business. The Company does not believe that the outcome of any such matters, pending at SeptemberJune 30, 2000,2001 will have a material adverse 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*     
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.

         27.1     Financial Data Schedule.

(b)      REPORTS ON FORM 8-K

         On August 29, 2000, 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 filed a Current Reportdid not file any reports on Form 8-K/A
         providing8-K during the financial statements of Industrial and
         Telecommunication Systems and related entities ("ITS") and the
         unaudited proforma financial information required in accordance with
         Item 7 of the General Instructions for the Current Report on Form
         8-K.

- ----------------------

13-week period  ended July 1, 2001.
*Incorporated by reference to designated exhibit 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.


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

                                          Cherokee International, LLC

Date: November 15, 2000                   /s/ R. Van Ness Holland, Jr.
                                          -------------------------------------
                                          R. Van Ness Holland, Jr.
                                          Chief Financial Officer


                                       12

Cherokee International, LLC
Date: August 15, 2001/s/ R. Van Ness Holland, Jr.
R. Van Ness Holland, Jr.
Chief Financial Officer