<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 10-Q

(Mark One)

[X]      Quarterly report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

                For the quarterly period ended October 3, 2003 or

[ ]      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: 0-21204


                           SOUTHERN ENERGY HOMES, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                             63-1083246
          --------                                             ----------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)


   144 Corporate Way, P.O. Box 390, Addison, Alabama               35540
   -------------------------------------------------               -----
         (Address of principal executive offices)                (Zip Code)

                                 (256) 747-8589
                                 --------------
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


  12,143,865 shares of Common Stock, $.0001 par value, as of November 11, 2003
  ----------------------------------------------------------------------------



<PAGE>


                  SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES


                                      INDEX

<TABLE>
<CAPTION>
                                                                                          Page
<S>      <C>                                                                              <C>
PART I   FINANCIAL INFORMATION:

Item 1   Financial Statements

         Consolidated Condensed Balance Sheets (unaudited),
           October 3, 2003 and January 3, 2003                                             3

         Consolidated Condensed Statements of Operations (unaudited) - Thirteen
           Weeks Ended October 3, 2003 and September 27, 2002 and Thirty-nine Weeks
           Ended October 3, 2003 and September 27, 2002                                    4

         Consolidated Condensed Statements of Cash Flows (unaudited) - Thirty-nine
           Weeks Ended October 3, 2003 and September 27, 2002                              5

         Notes to Consolidated Condensed Financial Statements (unaudited)                  6

Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                              14

Item 3   Quantitative and Qualitative Disclosure of Market Risk                           20

Item 4   Controls and Procedures                                                          20

PART II  OTHER INFORMATION:

Item 1   Legal Proceedings                                                                21

Item 6   Exhibits and Reports on Form 8-K                                                 21

         SIGNATURES                                                                       22
</TABLE>




The Management's Discussion and Analysis included in this Form 10-Q contains
statements that are forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are based upon the current
beliefs and expectations of Southern Energy Homes, Inc.'s management and are
subject to significant risks and uncertainties. These risks and uncertainties
could cause the Company's results to differ materially from those set forth in
such forward-looking statements. Such risks and uncertainties are described
herein and in the Company's Quarterly Report on Form 10-Q for the quarters ended
April 4 and July 4, 2003, and the Annual Report on Form 10-K for the year ended
January 3, 2003, filed with the Securities and Exchange Commission and available
at the Securities and Exchange Commission's internet site (www.sec.gov), to
which reference is hereby made.


                                       2
<PAGE>

I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                  SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                           October 3,         January 3,
                                                                              2003              2003
                                                                          ------------       ------------
<S>                                                                       <C>                <C>
                                     ASSETS
                                     ------
                                                                            (Unaudited)
CURRENT ASSETS:
   Cash and cash equivalents                                              $ 11,923,000       $  6,960,000
   Accounts receivable (less allowance for doubtful accounts of
     $337,000 and $323,000, respectively)                                    7,799,000          6,740,000
   Inventories                                                              10,845,000          7,280,000
   Refundable income taxes                                                          --          4,191,000
   Prepayments and other                                                       491,000            483,000
   Current assets of discontinued operations                                    70,000            800,000
                                                                          ------------       ------------
                                                                            31,128,000         26,454,000

PROPERTY AND EQUIPMENT:
   Property and equipment, at cost                                          32,177,000         31,636,000
   Less accumulated depreciation                                           (16,770,000)       (15,613,000)
                                                                          ------------       ------------
                                                                            15,407,000         16,023,000

INTANGIBLES AND OTHER ASSETS:
   Goodwill                                                                  3,305,000          3,305,000
   Investments                                                               4,383,000          4,300,000
   Other assets                                                                791,000            958,000
   Non-current assets of discontinued operations                                83,000            688,000
                                                                          ------------       ------------
                                                                             8,562,000          9,251,000
                                                                          ------------       ------------
                                                                          $ 55,097,000       $ 51,728,000
                                                                          ============       ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES:
   Accounts payable                                                       $  4,995,000       $  1,694,000
   Accrued liabilities                                                      11,574,000         10,754,000
   Current liabilities of discontinued operations                               19,000            320,000
                                                                          ------------       ------------
                                                                            16,588,000         12,768,000

STOCKHOLDERS' EQUITY:
   Preferred stock, $.0001 par value, 1,000,000 shares authorized,
      none outstanding                                                              --                 --
   Common stock, $.0001 par value, 40,000,000 shares authorized,
      12,143,865 and 12,133,865 issued and outstanding at October 3,
      2003 and at January 3, 2003, respectively                                  1,000              1,000
      Capital in excess of par                                               8,341,000          8,330,000
   Retained earnings                                                        30,167,000         30,629,000
                                                                          ------------       ------------
                                                                            38,509,000         38,960,000
                                                                          ------------       ------------
                                                                          $ 55,097,000       $ 51,728,000
                                                                          ============       ============
</TABLE>


The accompanying notes are an integral part of these consolidated condensed
financial statements.


                                       3
<PAGE>


                  SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                         Thirteen Weeks Ended                Thirty-nine Weeks ended
                                                  ---------------------------------       ---------------------------------
                                                   October 3,         September 27,        October 3,         September 27,
                                                      2003                2002                2003                 2002
                                                  -------------       -------------       -------------       -------------
                                                                       (Restated -                             (Restated -
                                                                        see Note 2)                            see Note 2)

<S>                                               <C>                 <C>                 <C>                 <C>
Net revenues                                      $  33,993,000       $  34,522,000       $  93,139,000       $ 105,283,000

Cost of sales                                        27,939,000          27,553,000          77,787,000          84,841,000
                                                  -------------       -------------       -------------       -------------

    Gross profit                                      6,054,000           6,969,000          15,352,000          20,442,000

Operating expenses:
  Selling, general and administrative                 5,399,000           6,208,000          15,775,000          17,960,000
                                                  -------------       -------------       -------------       -------------

Operating income (loss)                                 655,000             761,000            (423,000)          2,482,000

Interest expense                                       (116,000)           (125,000)           (377,000)           (485,000)
Interest income                                          30,000              11,000              67,000              28,000
                                                  -------------       -------------       -------------       -------------

Income (loss) from continuing operations
  before income taxes                                   569,000             647,000            (733,000)          2,025,000

Income tax benefit                                       87,000                  --             417,000                  --
                                                  -------------       -------------       -------------       -------------

Income (loss) from continuing operations                656,000             647,000            (316,000)          2,025,000


Income (loss) from discontinued operations              (53,000)         (3,514,000)           (146,000)         (5,435,000)
                                                  -------------       -------------       -------------       -------------

     Net income (loss)                            $     603,000       $  (2,867,000)      $    (462,000)      $  (3,410,000)
                                                  =============       =============       =============       =============

Basic and diluted earnings per share:
  Income (loss) from continuing operations        $        0.05       $        0.05       $       (0.03)      $        0.17
  Income (loss) from discontinued operations
                                                          (0.00)              (0.29)              (0.01)              (0.45)
                                                  -------------       -------------       -------------       -------------
     Net income (loss)                            $        0.05       $       (0.24)      $       (0.04)      $       (0.28)
                                                  =============       =============       =============       =============

Weighted average number of common shares:
     Basic                                           12,143,865          12,133,865          12,139,433          12,133,865
     Diluted                                         12,425,955          12,301,516          12,139,433          12,386,841
</TABLE>


The accompanying notes are an integral part of these consolidated condensed
financial statements.


                                       4
<PAGE>


                  SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                    Thirty-nine Weeks Ended
                                                                               --------------------------------
                                                                                October 3,        September 27,
                                                                                   2003               2002
                                                                               ------------       ------------
CASH FLOWS FROM OPERATING ACTIVITIES:                                                              (Restated -
                                                                                                    see Note 2)
<S>                                                                            <C>                <C>
   Income (loss) from continuing operations                                    $   (316,000)      $  2,025,000
   Adjustments to reconcile income (loss) from continuing operations
     to net cash provided by operating activities:
       Equity in income of joint ventures                                          (129,000)          (309,000)
       Depreciation of property and equipment                                     1,617,000          1,699,000
       Amortization of intangibles                                                   37,000             40,000
       Gain on sale of property and equipment                                      (151,000)           (43,000)
       Amortization of debt issuance costs                                          277,000            249,000
       Provision for doubtful accounts receivable                                   (14,000)           183,000
       Change in operating assets and liabilities:
         Inventories                                                             (3,565,000)          (215,000)
         Accounts receivable                                                     (1,159,000)        (2,132,000)
         Refundable income taxes                                                  4,191,000            646,000
         Prepayments and other                                                      (42,000)          (663,000)
         Accounts payable                                                         3,301,000          1,120,000
         Accrued liabilities                                                        820,000         (1,948,000)
                                                                               ------------       ------------
           Net cash provided by operating activities                              4,867,000            652,000

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                          (1,026,000)          (579,000)
   Investments in joint ventures                                                   (128,000)          (379,000)
   Distribution from joint ventures                                                 175,000            185,000
   Proceeds from sale of joint venture                                                   --          1,250,000
   Proceeds from sale of property and equipment                                     176,000            990,000
                                                                               ------------       ------------
           Net cash (used in) provided by investing activities                     (803,000)         1,467,000

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net repayments on notes payable                                                     --         (6,549,000)
     Payment of debt issuance costs                                                      --            (31,000)
     Proceeds from exercise of stock options                                         11,000                 --
                                                                               ------------       ------------
           Net cash provided by (used in) financing activities                       11,000         (6,580,000)

Net cash and cash equivalents provided by (used in) continuing operations         4,075,000         (4,461,000)

Net cash and cash equivalents provided by discontinued operations                   888,000          4,133,000
                                                                               ------------       ------------

Net increase (decrease) in cash and cash equivalents                              4,963,000           (328,000)

Cash and cash equivalents at the beginning of period                              6,960,000            328,000
                                                                               ------------       ------------

Cash and cash equivalents at the end of period                                 $ 11,923,000       $         --
                                                                               ============       ============
</TABLE>


         The accompanying notes are an integral part of these consolidated
condensed financial statements.


                                       5
<PAGE>



                  SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:

The consolidated condensed balance sheet as of October 3, 2003, and the
consolidated condensed statements of operations for the thirteen and thirty-nine
week periods ended October 3, 2003 and September 27, 2002, have been prepared by
the Company without audit, but in the opinion of management reflect the
adjustments necessary (which include only normal recurring adjustments) for the
fair presentation of the information set forth therein. The consolidated
condensed balance sheet as of January 3, 2003 has been derived from audited
financial statements. Results of operations for the interim 2003 periods are not
necessarily indicative of results expected for the full year. While certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission, the Company believes that
the disclosures herein are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 3, 2003, as filed
with the Securities and Exchange Commission.

STOCK-BASED COMPENSATION

Under fixed stock option plans, stock options may be granted to employees and
directors at exercise prices that are equal to, less than, or greater than the
fair market value of the Company's stock on the date of grant. Compensation
expense, equal to the difference in exercise price and fair market value on the
date of grant, is recognized over the vesting period for options granted at less
than fair market value.

In accordance with the disclosure provisions of SFAS No. 123, Accounting for
Stock-Based Compensation, as amended, the Company has elected to apply
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations in accounting for its stock based plans.
Accordingly, the Company has recognized no compensation expense for these plans
during the interim periods ended October 3, 2003 and September 27, 2002. Had the
Company accounted for its stock-based compensation plans based on the fair value
of awards granted consistent with the methodology of SFAS 123, the Company's
results of operations and related per share amounts for the interim periods
ended October 3, 2003 and September 27, 2002 would have been affected as
indicated below. The effects of applying SFAS 123 on a pro forma basis for the
thirteen and thirty-nine weeks ended October 3, 2003 and September 27, 2002 are
not likely to be representative of the effects on reported pro forma net income
for future years as options vest over several years and as it is anticipated
that additional grants will be made in future years.

<TABLE>
<CAPTION>
                                                      Thirteen Weeks Ended               Thirty-nine Weeks Ended
                                                 ------------------------------      ------------------------------
                                                 October 3,      September 27,      October 3,         September 27,
                                                     2003              2002             2003               2002
                                                 -----------     -------------      -----------        -----------
<S>                                              <C>             <C>                <C>                <C>
Net income (loss) - as reported                  $   603,000       $(2,867,000)      $  (462,000)      $(3,410,000)
Deduct: Total stock-based employee
   compensation expense
   determined under fair value
   based method for all awards                       (61,000)          (45,000)         (167,000)         (119,000)
                                                 -----------       -----------       -----------       -----------
Net income (loss) -pro forma                     $   542,000       $(2,912,000)      $  (629,000)      $(3,529,000)
                                                 ===========       ===========       ===========       ===========

As reported  - net  income (loss) per share      $      0.05       $     (0.24)      $     (0.04)      $     (0.28)
Pro forma  - net income (loss)  per share               0.04             (0.24)            (0.05)            (0.29)
</TABLE>


PRODUCT WARRANTIES

The Company warrants its products against certain manufacturing defects for a
period of one year commencing at the time of retail sale. The estimated cost of
such warranties is accrued at the time of sale to the independent dealer based
on historical warranty costs incurred. Periodic adjustments to the accrual are
made when events occur that indicate changes are necessary. The following table
summarizes the changes in accrued product warranty obligations during the
thirteen and thirty-nine weeks ended October 3, 2003. The accrued product
warranty obligation is classified as accrued liabilities in the condensed
consolidated balance sheets.


                                       6
<PAGE>
<TABLE>
<CAPTION>
                                         Thirteen Weeks           Thirty-nine
                                             Ended                Weeks Ended
                                        ---------------         ---------------
Description                             October 3, 2003         October 3, 2003
-----------                             ---------------         ---------------

<S>                                     <C>                     <C>
Balance at beginning of period            $ 1,928,000             $ 2,143,000
Provision for warranty costs                1,578,000               4,663,000
Payments                                   (1,545,000)             (4,845,000)
                                          -----------             -----------
Balance, end of period                    $ 1,961,000             $ 1,961,000
                                          ===========             ===========
</TABLE>


2.       DISCONTINUED OPERATIONS:

The Company closed a retail center in South Carolina in the second quarter of
2003. The closure of this retail center was not material to the financial
results of the Company.

In 2002, the Company closed eleven retail centers that were formerly part of
the retail segment. These retail centers had been negatively affected by weak
market conditions and restrictive retail financing conditions, principally as a
result of the withdrawal of several lenders from the market. The decision to
close the retail centers was based primarily on management's evaluation of
recent operating results and future prospects. These centers were sold or
closed by the end of December 2002.

The Company also sold its consumer financing segment, principally consisting of
its Wenco loan portfolio, in December 2002. The Wenco loan portfolio had a book
value of approximately $11.8 million. The loan portfolio was sold for $6.1
million in a cash transaction. The decision to sell the loan portfolio was
prompted by management's strategic plan to eliminate unprofitable business
lines and thereby allow the Company to focus on its core manufacturing
business.

Accordingly, as required by FASB Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144), the operating results
and disposal of the eleven retail centers discontinued in 2002 and the Wenco
loan portfolio, which were previously reported in the retail and consumer
financing segments, have been classified in discontinued operations for all
prior periods presented herein. Accordingly, the operating results for the
interim periods ended September 27, 2002 reported herein differ from those
previously reflected in Forms 10-Q filed in 2002. As required by SFAS 144, any
further operating income or losses, as well as adjustments to exit costs
accruals (if any), will be reported in discontinued operations as incurred, or
when circumstances warrant revisions of the related accounts.

Operating results of the discontinued operations were as follows:


<TABLE>
<CAPTION>
                                  Thirteen Weeks Ended                          Thirty-nine Weeks Ended
                            ----------------------------------            -----------------------------------
                            October 3,           September 27,            October 3,            September 27,
                               2003                  2002                    2003                    2002
                            ----------           -------------            ----------            -------------

<S>                         <C>                  <C>                      <C>                   <C>
Net revenues                 $ 28,000             $ 3,812,000             $1,819,000             $12,484,000
Net income (loss)             (53,000)             (3,514,000)              (146,000)             (5,435,000)
</TABLE>

Assets and liabilities of the discontinued operations have been reflected in
the consolidated balance sheets as current or non-current based on the original
classification of these accounts, net of any necessary valuation allowances.
Although the Company believes it has appropriately reduced the carrying value
of the assets to their estimated recoverable amounts, net of disposal cost
where appropriate, actual results could be different and the difference will be
reported in discontinued operations in future periods.

                                       7
<PAGE>
Net assets of the discontinued operations are as follows:


<TABLE>
<CAPTION>
                                                  October 3,              January 3,
                                                    2003                    2003
                                                 -----------             -----------

<S>                                              <C>                     <C>
CURRENT ASSETS:
Inventories                                      $    66,000             $   675,000
Prepayments and other                                  4,000                 125,000
                                                 -----------             -----------
    Total current assets:                             70,000                 800,000
NON-CURRENT ASSETS:
Installment contracts receivable                          --                 342,000
Property, plant and equipment                         82,000                 344,000
Other assets                                           1,000                   2,000
                                                 -----------             -----------
    Total non - current assets:                       83,000                 688,000
Current liabilities                                  (19,000)               (320,000)
                                                 -----------             -----------
Net assets of discontinued operations            $   134,000             $ 1,168,000
                                                 ===========             ===========
</TABLE>

There are no material contingent liabilities, including environmental
liabilities or litigation, related to the closed retail centers or the consumer
finance business discontinued in 2002.

3.       INVENTORIES:

Inventories are valued at first-in, first-out ("FIFO") cost, which is not in
excess of market. An analysis of inventories follows:


<TABLE>
<CAPTION>
                             October 3,             January 3,
                               2003                   2003
                            -----------            -----------

<S>                         <C>                    <C>
Raw materials               $ 4,595,000            $ 3,725,000
Work-in-progress                678,000                570,000
Finished goods                5,572,000              2,985,000
                            -----------            -----------
                            $10,845,000            $ 7,280,000
                            ===========            ===========
</TABLE>

4.       EARNINGS PER SHARE:

Basic earnings per share (EPS) excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of
shares outstanding during the subject period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock are exercised or converted into common stock or result in the
issuance of common stock that will share in the earnings of the Company.

The following reconciliation details the numerators and denominators used to
calculate basic and diluted earnings per share for the respective periods:


<TABLE>
<CAPTION>
                                                       Thirteen Weeks Ended                      Thirty-nine Weeks Ended
                                                 ----------------------------------        ----------------------------------
                                                  October 3,          September 27,          October 3,         September 27,
                                                    2003                  2002                 2003                 2002
                                                 ------------         -------------        ------------         -------------

<S>                                              <C>                  <C>                  <C>                  <C>
Income (loss) from continuing
    operations                                   $    656,000         $    647,000         $   (316,000)        $  2,025,000
Loss from discontinued
    operations                                        (53,000)          (3,514,000)            (146,000)          (5,435,000)
                                                 ------------         ------------         ------------         ------------
Net income (loss)                                $    603,000         $ (2,867,000)        $   (462,000)        $ (3,410,000)
                                                 ============         ============         ============         ============

Average shares outstanding:
Basic                                              12,143,865           12,133,865           12,139,433           12,133,865
   Add: dilutive effect of options issued             282,090              167,651                   --              252,976
                                                 ------------         ------------         ------------         ------------
Diluted                                            12,425,955           12,301,516           12,139,433           12,386,841
                                                 ============         ============         ============         ============

Earnings per share - basic and diluted:
Income (loss) from continuing
    operations                                   $       0.05         $       0.05         $      (0.03)        $       0.17
Loss from discontinued
    operations                                          (0.00)               (0.29)               (0.01)               (0.45)
                                                 ------------         ------------         ------------         ------------
Net income (loss)                                $       0.05         $      (0.24)        $      (0.04)        $      (0.28)
                                                 ============         ============         ============         ============
</TABLE>


                                       8
<PAGE>
5.       INVESTMENTS IN JOINT VENTURES

The Company owns interests in four joint ventures all of which are accounted
for using the equity method. The Company owns a 39% interest in WoodPerfect,
Ltd., a manufacturing joint venture, which produces rafters used in the
production of homes manufactured by the Company and others. The Company also
owns 33% of WoodPerfect of Texas, Inc., which manufactures rafters used in the
production of manufactured homes. The Company owns a 33% interest in Hillsboro
Manufacturing, Inc., which manufactures laminate wallboard. The Company owns
33% of Lamraft LLP which is a real estate holding company that leases
facilities to a third party. The Company formerly owned 33% of Ridge Pointe
Mfg., LLC, which manufactures cabinet doors for sale to participants in the
joint venture as well as third-party customers. The Ridge Pointe Mfg., LLC
interest was sold in May 2002. The Company also formerly owned a 50% interest
in Wenco 21, LLC, an entity that originates installment loans for the purchase
of homes manufactured by the Company and others. Wenco 21, LLC was liquidated
August 31, 2003 and the Company received, in exchange for its pro rata
liquidating distribution in the net assets of Wenco 21, LLC, an interest in
specified assets and liabilities that were transferred to the other joint
venture partner, 21st Mortgage Corporation.

The Company's investments in and advances to unconsolidated joint ventures
amounted to $3.4 million and $4.3 million at October 3, 2003 and January 3,
2003. The Company's equity in the net earnings of these ventures was $129,000
and $309,000 for the thirty-nine weeks ended October 3, 2003 and September 27,
2002, respectively. The Company received cash distributions from joint venture
investments of $175,000 and $185,000 for the thirty-nine weeks ended October 3,
2003 and September 27, 2002, respectively, Retained earnings at October 3, 2003
and September 27, 2002, included undistributed earnings of joint ventures of
$0.2 million and $0.5 million, respectively.

Since the liquidation of Wenco 21, LLC, the Company's only remaining
significant joint venture is WoodPerfect, Ltd., which is accounted for by the
equity method of accounting.

A summary of financial information relating to the joint ventures is as
follows:


<TABLE>
<CAPTION>
                                               As of
                                 ----------------------------------
                                 October 3, 2003    January 3, 2003
                                 ---------------    ---------------

<S>                              <C>                <C>
Current assets                     $ 5,034,000        $ 5,855,000
Non-current assets                   3,041,000         24,787,000
                                   -----------        -----------
Total assets                         8,075,000         30,642,000

Current liabilities                  2,725,000          2,470,000
Non-current liabilities                     --         20,674,000
                                   -----------        -----------
Total liabilities                    2,725,000         23,144,000
                                   -----------        -----------
Stockholders' equity               $ 5,350,000        $ 7,498,000
                                   ===========        ===========
Company's equity investment        $ 3,370,000        $ 4,419,000
                                   ===========        ===========
</TABLE>

The October 3, 2003 summary balance sheet data reflect WoodPerfect, Ltd. only
and the January 3, 2003 summary balance sheet data include WoodPerfect, Ltd and
Wenco 21, LLC.


<TABLE>
<CAPTION>
                              Thirteen Weeks Ended                Thirty-nine Weeks Ended
                        -------------------------------       -------------------------------
                         October 3,       September 27,        October 3,       September 27,
                           2003                2002               2003              2002
                        -----------       -------------       -----------       -------------

<S>                     <C>               <C>                 <C>               <C>
Revenues                $ 8,971,000        $10,136,000        $22,916,000        $29,069,000
Cost of sales             7,851,000          8,797,000         20,316,000         25,064,000
                        -----------        -----------        -----------        -----------
Gross profit              1,120,000          1,339,000          2,600,000          4,005,000

Operating income            244,000            211,000            355,000            920,000
Net income                  233,000            199,000            362,000            897,000
</TABLE>

The October 3, 2003 summary income statement information for the thirteen and
thirty-nine weeks then ended reflects WoodPerfect, Ltd. only and the September
27, 2002 summary income statement information for the thirteen and thirty-nine
weeks then ended includes WoodPerfect, Ltd and Wenco 21, LLC.


                                       9
<PAGE>
6.       RECENT ACCOUNTING PRONOUNCEMENTS:

In June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations, SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. It applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The adoption of SFAS 143 did not have any impact in the first and
second quarters of 2003 on the Company's financial position, results of
operations or cash flows.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51" (FIN 46). FIN 46
addresses whether business enterprises must consolidate the financial
statements of entities known as "variable interest entities". A variable
interest entity is defined by FIN 46 to be a business entity that has one or
both of the following characteristics: (1) the equity investment at risk is not
sufficient to permit the entity to finance its activities without additional
support from other parties, which is provided through other interests that will
absorb some or all of the expected losses of the entity; and (2) the equity
investors lack one or more of the following essential characteristics of a
controlling financial interest: (a) direct or indirect ability to make
decisions about the entity's activities through voting rights or similar
rights, (b) the obligation to absorb the expected losses of the entity if they
occur, which makes it possible for the entity to finance its activities, or (c)
the right to receive the expected residual returns of the entity if they occur,
which is the compensation for risk of absorbing expected losses. FIN 46 does
not require consolidation by transferors to qualifying special purpose
entities. The effective date for FIN 46 was delayed until periods ending after
December 15, 2003 for interests in variable interest entities acquired prior to
February 1, 2003. Adoption of FIN 46 is not expected to have an impact on the
Company's financial position, results of operations or cash flows.


In July 2002, the FASB issued SFAS 146, Accounting for Costs Associated with
Exit or Disposal Activities. SFAS 146 addresses the recognition, measurement
and reporting of costs that are associated with exit and disposal activities,
including restructuring activities that are currently accounted for pursuant to
the guidance set forth in EITF No 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity. SFAS 146
revises the accounting for certain lease termination costs and employee
termination benefits, which are generally recognized in connection with
restructuring activities. Adoption of this standard as of January 4, 2003 had
no impact on the Company's financial position, results of operations or cash
flows for the thirty-nine weeks ended October 3, 2003.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57, and 107
and Rescission of FASB Interpretation No. 32 ("FIN 45"). FIN 45 clarifies the
requirements of FASB Statement No. 5, Accounting for Contingencies, relating to
a guarantor's accounting for, and disclosure of, specified types of guarantees.
FIN 45 requires that upon issuance of a guarantee, the entity (i.e., the
guarantor) must recognize a liability for the fair value of the obligation it
assumes under that guarantee. The disclosure provisions of FIN 45 were
effective for financial statements of interim or annual periods that end after
December 15, 2002. FIN 45's provisions for initial recognition and measurement
must be applied on a prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantor's fiscal year end. The
guarantor's previous accounting for guarantees that were issued before the date
of FIN 45's initial application may not be revised or restated to reflect the
effect of the recognition and measurement provisions of FIN 45. The Company has
guarantees that are subject to the disclosure provisions of FIN 45. See Note 7
"Repurchase Agreements". The adoption of the prospective recognition and
measurement aspects of FIN 45 did not have a material effect on the Company's
financial position, results of operations or cash flows.

7.       REPURCHASE AGREEMENTS:

Substantially all of the Company's independent dealers finance their purchases
through "floor plan" arrangements under which a financial institution provides
the dealer with a loan for the purchase price of the home and maintains a
security interest in the home as collateral. In connection with a floor plan
arrangement, the financial institution that provides the independent dealer
financing customarily requires the Company to enter into a separate repurchase
agreement with the financial institution, under which the Company is obligated,
upon default by the independent dealer, to repurchase the homes at the
Company's original invoice price less cost of all damaged/missing items and
less certain curtailments, plus certain administrative and shipping expenses.
Repurchases were $159,000 and $383,000 for the thirteen weeks


                                      10
<PAGE>
ended October 3, 2003 and September 27, 2002 and $1.1 million and $1.7 million
for the thirty-nine week periods then ended, respectively. Losses on homes
repurchased under these agreements were $34,000 and $91,000 for the thirteen
weeks ended October 3, 2003 and September 27, 2002 and $244,000 and $483,000
for the thirty-nine week periods then ended, respectively. At October 3, 2003,
the Company had a reserve of $250,000 for future repurchase losses. At October
3, 2003, the Company's contingent repurchase liability under floor plan
financing arrangements through independent dealers was approximately $37
million. While homes that have been repurchased by the Company under floor-plan
financing arrangements are usually sold to other dealers, no assurance can be
given that the Company will be able to sell to other dealers homes that it may
be obligated to repurchase in the future under such floor-plan financing
arrangements, or that the Company will not suffer losses with respect to, and
as a consequence of, those arrangements.

Effective August 31, 2003, Wenco 21, LLC was liquidated with the assets and
liabilities of Wenco 21, LLC being transferred into a book entry reserve
account to be held by 21st Mortgage Corporation. In exchange for its pro rata
distribution of the liquidated assets and liabilities, the Company received an
interest (in the form of a revenue sharing agreement) in specified assets and
liabilities that were transferred to 21st Mortgage Corporation. Under the terms
of the revenue sharing agreement, the Company and 21st Mortgage Corporation
will share equally in the profits and losses derived from the loans that
comprised the Wenco 21, LLC portfolio. The Company is also obligated under the
revenue sharing agreement to repurchase homes that were financed by Wenco 21
LLC, upon repossession, for 50% to 65% of the outstanding loan balance. The
Company's contingent repurchase obligation under this commitment is
approximately $12.4 million. At October 3, 2003, the Company has included
approximately $1.0 million classified in investments in the consolidated
balance sheet associated with this interest (in the form of a revenue sharing
agreement) in specified assets and liabilities. At October 3, 2003, the
carrying amount of loans in the Wenco 21 portfolio included in the reserve
account was approximately $21.4 million. These loans collateralize
approximately $19.4 million of the reserve account's obligations. The Company
currently adjusts the carrying value of this investment for any income or
losses incurred by the portfolio through earnings and its maximum exposure to
loss as a result of its continuing involvement with the loan portfolio,
assuming that 100% of the loans and underlying collateral becomes worthless, is
approximately $13.4 million.

8.       LEGAL PROCEEDINGS:

The Company is a party to various legal proceedings incidental to its business.
The Company typically issues a one-year warranty on new manufactured homes. The
Company provides for warranty costs at the time of sale in the ordinary course
based on historical warranty experience. The majority of the Company's
outstanding legal proceedings are claims related to warranty on manufactured
homes or employment issues such as workers' compensation claims. Management
believes that adequate reserves are maintained for such claims. In the opinion
of management, after consultation with legal counsel, the ultimate liability,
if any, with respect to these proceedings, will not materially affect the
financial position or results of operations of the Company. However, the
ultimate resolution of these matters, which could occur within one year, could
result in losses in excess of the amounts reserved. For the quarters ended
October 3, 2003 and September 27, 2002, accrued litigation reserves, (in
addition to normal warranty and workmen's compensation claims reserves) were
$0.9 million and $0.8 million, respectively.

9.       SEGMENT AND RELATED INFORMATION:

The Company has three reportable segments: manufacturing, retail operations and
component supply. The manufacturing segment produces manufactured homes for
sale to independent and company-owned retail centers. Although each
manufacturing facility is an operating segment, they are aggregated into one
segment for reporting purposes because they produce similar products using
similar production techniques and they sell their products to the same class of
customer. In addition, they are subject to the same regulatory environment and
their economic characteristics (measured on terms of profitability) are
similar. The retail operations segment sells homes, which have been produced by
the Company's manufacturing segment and to a lesser extent, by various other
manufacturers, to retail customers. The component supply segment sells various
supply products to the Company's manufacturing segment and to third party
customers.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on total (external and intersegment) revenues, gross profit and segment
operating income. The Company accounts for intersegment sales and transfers as
if the sales or transfers were to third parties, at current market prices. The
Company does not allocate income taxes to its segments. The Company's
reportable segments are strategic business units that offer different products
and services. They are managed separately because each business requires
different operating and marketing strategies.


                                      11
<PAGE>
Revenue from segments included in "all other" in the accompanying segment
disclosures is primarily attributable to a small insurance business. This
segment has never met the quantitative thresholds for determining reportable
segments. Certain corporate administrative expenses are not allocated to
reportable segments.

The financial information for the thirteen and thirty-nine week periods ended
September 27, 2002 concerning reportable segments has been restated to reflect
the reclassification of the eleven retail centers closed in 2002 and the
consumer financing business as discontinued operations (see Note 2).

The following tables present information about the Company's reporting segments


<TABLE>
<CAPTION>
                                               Thirteen Weeks Ended                         Thirty-nine Weeks Ended
                                        -----------------------------------         -----------------------------------
                                          October 3,          September 27,          October 3,           September 27,
                                            2003                   2002                 2003                   2002
                                        -------------         -------------         -------------         -------------

<S>                                     <C>                   <C>                   <C>                   <C>
Net revenues:
   Manufacturing                        $  32,726,000         $  33,734,000         $  89,201,000         $ 101,516,000
   Retail operations                          901,000             2,032,000             3,342,000             6,739,000
   Component supply                         7,187,000             6,664,000            18,629,000            18,825,000
   All other                                   41,000                69,000                42,000               207,000
   Eliminations for intersegment
        revenues:
        Manufacturing                        (695,000)           (2,182,000)           (1,772,000)           (5,362,000)
        Component supply                   (6,167,000)           (5,795,000)          (16,303,000)          (16,642,000)
                                        -------------         -------------         -------------         -------------
Total net revenues                      $  33,993,000         $  34,522,000         $  93,139,000         $ 105,283,000
                                        =============         =============         =============         =============

Gross profit:
   Manufacturing                        $   5,514,000         $   5,927,000         $  13,914,000         $  17,198,000
   Retail operations                          247,000               496,000               947,000             1,468,000
   Component supply                           542,000               584,000             1,114,000             1,665,000
   All other                                 (178,000)             (103,000)             (704,000)             (467,000)
   Eliminations                               (71,000)               65,000                81,000               578,000
                                        -------------         -------------         -------------         -------------
Gross profit                            $   6,054,000         $   6,969,000         $  15,352,000         $  20,442,000
                                        =============         =============         =============         =============

Segment operating income
   (loss):
   Manufacturing                        $   1,535,000         $   1,540,000         $   2,307,000         $   4,380,000
   Retail operations                         (164,000)             (483,000)             (356,000)           (1,281,000)
   Component supply                           337,000               352,000               465,000             1,085,000
   All other                                   20,000                17,000                91,000                72,000
   Eliminations                               (71,000)               65,000                81,000               578,000
                                        -------------         -------------         -------------         -------------
Segment operating income                    1,657,000             1,491,000             2,588,000             4,834,000

Corporate expenses not
    allocated to segments                  (1,088,000)             (844,000)           (3,321,000)           (2,809,000)
Tax benefit                                    87,000                    --               417,000                    --
                                        -------------         -------------         -------------         -------------
Income (loss) from continuing
    operations                          $     656,000         $     647,000         $    (316,000)        $   2,025,000
                                        =============         =============         =============         =============
</TABLE>


                                      12
<PAGE>
Summary of segment assets:


<TABLE>
<CAPTION>
                                          October 3,              January 3,
                                            2003                     2003
                                        ------------             ------------

<S>                                     <C>                      <C>
Segment assets:
    Manufacturing                       $ 21,308,000             $ 16,561,000
    Retail operations                      3,695,000                4,368,000
    Component supply                       4,680,000                3,583,000
    Corporate                             26,735,000               26,725,000
    Other operating segments                 200,000                    9,000
    Eliminations                          (1,674,000)              (1,006,000)
    Discontinued operations                  153,000                1,488,000
                                        ------------             ------------
    Consolidated                        $ 55,097,000             $ 51,728,000
                                        ============             ============
</TABLE>

10.      SUBSEQUENT EVENT: SHAREHOLDER RIGHTS PLAN.

After the close of the third quarter, on October 10, 2003, the Company adopted
a shareholder rights plan and designated 40,000 of its 1,000,000 authorized
shares of preferred stock as Series A Junior Participating Preferred Stock (the
"Preferred Stock"). In connection with this rights plan, the Company declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of common stock, payable to the stockholders of record as of November 3,
2003. Each Right entitles the holder to purchase one one-thousandth (1/1000) of
a share of the Preferred Stock, which has economic terms similar to that of one
share of the Company's common stock, for $25.00, subject to adjustment.

In the event that any person or group acquires 15% or more of the Company's
outstanding common stock, each holder of a Right (other than the acquiring
person or group) will be entitled to receive, upon payment of the exercise
price, shares of common stock (or other equivalent security such as the
Preferred Stock) having a market value equal to twice the exercise price ,
unless the Board redeems the Rights for $.001 per right or exchanges the Rights
for one common share or one one-thousandth of a share of Preferred Stock.

Existing holdings of 15% or more of the Company's common shares by persons
directly or indirectly will not cause the rights to be exercisable, nor entitle
the holders of rights to purchase additional shares of the Company, unless such
holder acquires additional shares or converts such holdings from indirect to
direct beneficial ownership.

The purchase price payable and number of shares of preferred stock issuable
upon exercise of the rights are subject to customary adjustments to prevent
dilution. Rights do not have voting rights and the holder has no rights as a
stockholder until rights are exercised. The terms of the rights may be amended
by the Board in its discretion, without the consent of the holders of the
rights. The rights expire on October 10, 2013 unless earlier redeemed or
exchanged.

Each one-thousandth share of preferred stock purchased upon exercise of the
rights has rights and preferences substantially equivalent to those of one
common share and shares are not redeemable. Each share of preferred stock will
be entitled to a minimum preferential quarterly dividend payment of $1 per
share and an aggregate dividend of 1,000 times the dividend declared per common
share. In the event of liquidation, the holders of the Preferred Stock will be
entitled to a minimum preferential liquidation payment of $1,000 per share and
an aggregate payment of 1,000 times the payment made per common share. Each
share of preferred stock will have 1,000 votes, voting together with the common
shares. In the event of any merger or exchange transaction, holders of the
preferred stock will be entitled to receive 1,000 times the amount received per
common share.

In connection with the rights plan, the board of directors also announced that
it plans to enter into change of control severance agreements with certain of
its key executives, and plans to amend outstanding stock option agreements to
provide that participants will be fully and immediately vested in the event of
a change in control.


                                      13
<PAGE>
Item 2.
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS. Forward-looking statements in this Quarterly Report
on Form 10-Q, including without limitation, statements relating to the adequacy
of the Company's resources are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that such forward-looking statements involve risks and uncertainties, which
could cause actual results to differ materially from those in any forward
looking statements, including without limitation: availability of financing for
prospective purchasers of the Company's homes and availability of floor plan
financing for dealers; general economic conditions; the cyclical and seasonal
nature of housing markets; competitive pricing pressures at both the wholesale
and retail levels; changes in market demand; the impact of cost reduction
programs and other management initiatives; the Company's contingent repurchase
liabilities with respect to dealer financing and retail buyer financing; the
adequacy of accruals for workers' compensation claims and insurance costs;
availability and pricing of raw materials; concentration of the Company's
business in certain regional markets; adverse weather conditions that reduce
retail sales; the possibility of plant shutdowns from weather or other causes;
availability of labor for the Company to meet operating requirements; the
highly competitive nature of the manufactured housing industry; federal, state
and local regulation of the Company's business; the Company's reliance on
independent dealers; and other risks indicated from time to time in the
Company's filings with the Securities and Exchange Commission.

GENERAL

During the third quarter of fiscal 2003, difficult industry conditions
persisted, as negative economic factors that have influenced financial
performance of the entire manufactured housing industry since approximately
1998 continued. The most notable of these conditions currently are more
restrictive retail financing conditions for consumers and slow retail sales,
together with reduced financing alternatives for dealers.

The Company has taken a number of steps since 2000 to decrease costs and
improve efficiency and quality. These steps included closing less efficient
manufacturing facilities, consolidating divisions, and disposing of
unprofitable business lines. In light of this continued difficult market
conditions, the Company reduced its salary workforce approximately 12% during
the second quarter of 2003 by consolidating and eliminating several
administrative functions in an effort to reduce costs in the coming quarters to
more closely match sales volume.

During the third quarter this year, the Company launched a new housing
division, Southern Estates, which produced its first home in August, 2003. The
Southern Estates homes are intended to fill a product gap by including the most
popular options with less customization. To provide manufacturing space for the
new product line, the Company reconfigured certain of its manufacturing
operations by combining production of its Lifestyle line into its Southern
Energy plant. In addition, the Company will invest $1.5 million to expand the
Southern Energy plant into adjacent facilities currently used by its Windmar
Supply division. The expanded space will be used for improving efficiencies in
finishing operations on the Company's higher end homes. Windmar will move into
a new facility that will be added to the distribution warehouse.

The Company sells the majority of the homes it produces through its network of
independent home dealers in 22 states.

DISCONTINUED OPERATIONS

The Company closed a retail center in South Carolina in the second quarter of
2003. The closure of this retail center was not material to the financial
results of the Company.

In 2002, the Company closed eleven retail centers that were formerly part of
the retail segment. These retail centers had been negatively affected by weak
market conditions and restrictive retail financing conditions, principally as a
result of the withdrawal of several lenders from the market. The decision to
close the retail centers was based primarily on management's evaluation of
recent operating results and future prospects. These centers were sold or
closed by the end of December 2002.

The Company also sold its consumer financing segment, principally consisting of
the Wenco loan portfolio, in December 2002. The Wenco loan portfolio had a book
value of approximately $11.8 million. The loan


                                      14
<PAGE>
portfolio was sold for $6.1 million in a cash transaction. The decision to sell
the loan portfolio was prompted by management's strategic plan to eliminate
unprofitable business lines and thereby allow the Company to focus on its core
manufacturing business.

Accordingly, as required by FASB Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets ("SFAS 144"), the operating results
and disposal of the eleven retail centers and the Wenco loan portfolio, which
were previously reported in the retail and consumer financing segments, have
been classified in discontinued operations for all prior periods presented
herein. The Company recognized a loss of $53,000 from discontinued operations
in the quarter ended October 3, 2003, as compared to a loss of $3.5 million for
the quarter ended September 27, 2002. As required by SFAS 144, any further
operating losses, as well as adjustments to exit costs accruals (if any), will
be reported in discontinued operations as incurred, or when circumstances
warrant revisions of the related accounts.

CRITICAL ACCOUNTING POLICIES

The Company uses accounting policies that it believes are appropriate to
accurately and fairly report its results of operations and financial position,
and it applies those accounting policies in a consistent manner. The
preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires that the Company's management make
estimates and assumptions that may affect the reported amounts of assets,
liabilities, revenues and expenses. These estimates and assumptions are based
on historical and other factors believed to be reasonable under the
circumstances. The Company evaluates these estimates and assumptions on an
ongoing basis. Actual results can and frequently will differ from these
estimates. It is possible that materially different amounts would be reported
under different conditions or using different methods or assumptions.

The Company believes that the following accounting policies are the most
critical ones used in the preparation of its financial statements, because
these are the ones that involve the most significant judgments and estimates
about the effect of matters that are inherently uncertain.

PRODUCT WARRANTIES

The Company warrants its products against certain manufacturing defects for a
period of one year commencing at the time of retail sale. The estimated cost of
such warranties is accrued at the time of sale to the independent dealer based
on historical warranty costs incurred. Periodic adjustments to the accrual are
made when events occur that indicate changes are necessary.

LITIGATION

The Company is a party to various legal proceedings incidental to its business.
The Company typically issues a one-year warranty on new manufactured homes. The
majority of these legal proceedings are claims related to warranty on
manufactured homes or employment issues such as workers' compensation claims.
Management believes that adequate reserves are maintained for such claims. In
the opinion of management, after consultation with legal counsel, the ultimate
liability, if any, with respect to these proceedings will not materially affect
the financial position or results of operations of the Company; however, the
ultimate resolution of these matters, which could occur within one year, could
result in losses in excess of the amounts reserved.

INSURANCE ARRANGEMENTS

The Company is partially self-insured for workers compensation and health
insurance claims. The Company purchases insurance coverage for all workers
compensation claims in excess of $350,000 per occurrence, and for all health
care claims in excess of $75,000 per occurrence, with an annual aggregate
stop-loss limit of approximately $5.3 million for all claims. Amounts are
accrued currently for the estimated costs of claims incurred, including related
expenses. Management considers accrued liabilities for unsettled claims to be
adequate. However, there is no assurance that the amounts accrued will not vary
from the ultimate amounts incurred upon final disposition of all outstanding
claims. As a result, periodic adjustments to the reserves will be made as
events occur that indicate changes are necessary.

REPURCHASE AGREEMENTS

Substantially all of the Company's independent dealers finance their purchases
through "floor plan" arrangements under which a financial institution provides
the dealer with a loan for the purchase price of the home and maintains a
security interest in the home as collateral. In connection with a floor plan
arrangement, the financial institution that provides the independent dealer
financing customarily requires the Company to enter into a separate repurchase
agreement with the financial institution, under which the


                                      15
<PAGE>
Company is obligated, upon default by the independent dealer, to repurchase the
homes at the Company's original invoice price less cost of all damaged/missing
items and less certain curtailments, plus certain administrative and shipping
expenses. Repurchases were $159,000 and $383,000 for the thirteen weeks ended
October 3, 2003 and September 27, 2002 and $1.1 million and $1.7 million for
the thirty-nine week periods then ended, respectively. Losses on homes
repurchased under these agreements were $34,000 and $91,000 for the thirteen
weeks ended October 3, 2003 and September 27, 2002 and $244,000 and $483,000
for the thirty-nine week periods then ended, respectively. At October 3, 2003,
the Company had a reserve of $250,000 for future repurchase losses. At October
3, 2003, the Company's contingent repurchase liability under floor plan
financing arrangements through independent dealers was approximately $37
million. While homes that have been repurchased by the Company under floor-plan
financing arrangements are usually sold to other dealers, no assurance can be
given that the Company will be able to sell to other dealers homes that it may
be obligated to repurchase in the future under such floor-plan financing
arrangements, or that the Company will not suffer losses with respect to, and
as a consequence of, those arrangements.

Effective August 31, 2003, Wenco 21, LLC was liquidated with the assets and
liabilities of Wenco 21, LLC being transferred into a book entry reserve
account to be held by 21st Mortgage Corporation. In exchange for its pro rata
distribution of the liquidated assets and liabilities, the Company received an
interest (in the form of a revenue sharing agreement) in specified assets and
liabilities that were transferred to 21st Mortgage Corporation. Under the terms
of the revenue sharing agreement, the Company and 21st Mortgage Corporation
will share equally in the profits and losses derived from the loans that
comprised the Wenco 21, LLC portfolio. The Company is also obligated under the
revenue sharing agreement to repurchase homes that were financed by Wenco 21
LLC, upon repossession, for 50% to 65% of the outstanding loan balance. The
Company's contingent repurchase obligation under this commitment is
approximately $12.4 million. At October 3, 2003, the Company has included
approximately $1.0 million classified in investments in the consolidated
balance sheet associated with this interest (in the form of a revenue sharing
agreement) in specified assets and liabilities. At October 3, 2003, the
carrying amount of loans in the Wenco 21 portfolio included in the reserve
account was approximately $21.4 million. These loans collateralize
approximately $19.4 million of the reserve account's obligations. The Company
currently adjusts the carrying value of this investment for any income or
losses incurred by the portfolio through earnings and its maximum exposure to
loss as a result of its continuing involvement with the loan portfolio,
assuming that 100% of the loans and underlying collateral becomes worthless, is
approximately $13.4 million.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company records impairment losses on long-lived assets used in operations
when events and circumstances indicate that the assets might be impaired and
the undiscounted cash flows estimated to be generated by those assets are less
than the carrying amount of those items. The Company's cash flow estimates are
based on historical results adjusted to reflect the Company's best estimate of
future market and operating conditions. Any material change affecting the
assumptions used to project the estimated undiscounted cash flows or our
expectation of future market conditions could result in a different conclusion.
Assets for which the carrying value is not fully recoverable are reduced to
fair value.

RECOVERABILITY OF INVESTMENTS

Management assesses the recoverability of the Company's investments in joint
ventures when impairment indicators are present. The significant judgment
required in management's recoverability assessment is the determination of the
fair value of the investment. Since the investments are non-publicly traded
investments, management's assessment of fair value is based on the Company's
analysis of the investee's estimates of future operating results and the
resulting cash flows. Management's ability to accurately predict future cash
flows is critical to the determination of fair value.

In the event a decline in fair value of an investment occurs, management may be
required to make a determination as to whether the decline in market value is
other than temporary. Management's assessment as to the nature of a decline in
fair value is largely based on the Company's estimates of future operating
results, the resulting cash flows and intent to hold the investment. If an
investment is considered to be impaired and the decline in value is considered
to be other than temporary, an appropriate write-down is recorded.

VOLUME INCENTIVES PAYABLE

Volume incentives are common practice in the industry in which the Company
operates and are accounted for as a reduction to gross sales. The volume
incentives payable is estimated and recorded when sales of


                                      16
<PAGE>
products are made. The payable is adjusted, if necessary, when information
becomes available that indicate revisions are needed.

RESULTS OF OPERATIONS

Thirty-nine weeks and thirteen weeks ended October 3, 2003 are compared with
thirty-nine weeks and thirteen weeks ended September 27, 2002.

Net Revenues

Total net revenues (consisting of gross sales less volume discounts, returns
and allowances) for the thirty-nine weeks ended October 3, 2003 were $93.1
million, as compared with $105.3 million in the prior year period. Net revenues
from wholesale sales of manufactured homes were $89.2 million (including
intersegment revenues of $1.8 million) for the thirty-nine weeks ended October
3, 2003, as compared with $101.5 million (including intersegment revenues of
$5.4 million) for the prior year period, a decline of 12.1%. Total homes
shipped for the thirty-nine weeks ended October 3, 2003 was 2,702, down from
the 3,272 homes shipped in the prior year period. The average wholesale price
per home for the thirty-nine weeks ended October 3, 2003 was $31,325, as
compared with $29,432 in the prior year period, an increase of 6.4%.

For the thirteen weeks ended October 3, 2003, total net revenues were $34.0
million, as compared with $34.5 million for the comparable period a year ago.
For the thirteen weeks ended October 3, 2003, net revenues from the wholesale
sale of manufactured homes were $32.7 million (including intersegment revenues
of $0.7 million), as compared with $33.7 million (including intersegment
revenues of $2.2 million) for the prior year period, a decline of 3.0%. Total
homes shipped for the thirteen weeks ended October 3, 2003 was 960, down 11.3%
from the number of homes shipped in the prior year period. The unit decline in
sales to dealers was largely the result of the continuing soft economy and
reduced availability of financing options for the independent dealers and for
consumers. The average wholesale price per home for the thirteen weeks ended
October 3, 2003 was $32,367, as compared with $29,545 in the prior year period,
an increase of 9.6%. The increase in average wholesale price per home sold for
both the thirteen and thirty-nine week periods was primarily a function of
dealers' choices of various options and custom home features, though it also
includes some modest price increases mostly in the form of surcharges
reflecting recent increased material costs, primarily lumber.

Net revenues from retail sales of manufactured homes were $3.3 million for the
thirty-nine weeks ended October 3, 2003, as compared with $6.7 million for the
prior year period, a decrease of 50.4%. The decline in retail sales was
primarily attributable to competitive pressures and reflects the fact that the
Company operated one less retail center during the thirty-nine weeks ended
October 3, 2003 compared to the retail centers that were open during all or
part of the same period in the prior year. The decline in retail revenues was
offset slightly by an increase in the average retail price per home sold. The
average retail price per new homes sold during the thirty-nine weeks ended
October 3, 2003 was $56,572, as compared with $52,639 in the prior year period,
an increase of 7.5%. As with wholesale pricing, the increase in average retail
price per home sold for the thirty-nine week period was primarily a function of
customers' choices of various options and custom home features, but also
includes some modest price increases in certain instances due to increased
wholesale prices from the manufacturer.

For the thirteen weeks ended October 3, 2003, net revenues from the retail sale
of manufactured homes were $0.9 million, as compared with $2.0 million for the
prior year period, a decrease of 55.7%. The decline in retail sales was
primarily attributable to increased competition and the Company's operation of
one fewer retail center during the quarter ended October 3, 2003 compared to
the prior year period. The decline in retail revenues also resulted from a
decline in the average retail price per home sold during the quarter. The
average retail price per new homes sold during the thirteen weeks ended October
3, 2003 was $47,706, as compared with $57,481 in the prior year period, a
decline of 17.0%. The decline in average retail price per home sold for the
thirteen week period was primarily a function of fluctuation in the sales
"mix", with a greater percentage of single section units being sold than multi
section units during the third quarter 2003 compared to the third quarter of
2002.

Net revenues from the component supply segment were $18.6 million (including
intersegment revenues of $16.3 million) for the thirty-nine weeks ended October
3, 2003, as compared with $18.8 million (including


                                      17
<PAGE>
intersegment revenues of $16.6 million) for the prior year period, a decline of
1.0%. The decline in supply sales was primarily attributable to the decline in
intersegment sales to the manufacturing segment.

For the thirteen weeks ended October 3, 2003, net revenues from the component
supply segment were $7.2 million (including intersegment revenues of $6.2
million), as compared with $6.7 million (including intersegment revenues of
$5.8 million) for the prior year period, an increase of 7.8%. The increase in
supply sales for the thirteen weeks ended October 3, 2003 was primarily
attributable to the increase in intersegment sales to the manufacturing
segment, additional third party customers added during the third quarter of
2003 and an increase in sales to contractors for use in residential
applications.

Following are summary operating data for the thirteen and thirty-nine weeks
ended for October 3, 2003, and September 27, 2002 respectively:

OPERATING FACTS


<TABLE>
<CAPTION>
                                                    Thirteen Weeks Ended                  Thirty-nine Weeks Ended
                                               ------------------------------        ---------------------------------
                                               October 3,       September 27,        October 3,          September 27,
                                                  2003               2002               2003                  2002
                                               ----------       -------------        ----------          -------------

<S>                                            <C>              <C>                  <C>                 <C>
Company owned retail centers
(continuing operations)                              2                  2                  2                  2
Retail units sold:
      New single-section                             4                  2                  5                 10
      New multi-section                              9                 16                 34                 57
      Used homes                                     2                 10                 18                 28
                                               -------            -------            -------            -------
          Total                                     15                 28                 57                 95
Wholesale units sold:
     External customers                            942              1,031              2,653              3,135
     Intercompany                                   18                 51                 49                137
                                               -------            -------            -------            -------
                                                   960              1,082              2,702              3,272
                                               -------            -------            -------            -------

Total homes sold                                   975              1,110              2,759              3,367

Average sales prices - retail (new)            $47,706            $57,481            $56,572            $52,639
Average sales price - wholesale                $32,367            $29,545            $31,325            $29,432
Floor sections produced                          1,695              1,842              4,748              5,667
</TABLE>

GROSS PROFIT

Gross profit consists of net revenues less the cost of sales, which includes
labor, materials, and overhead. Gross profit for the thirty-nine weeks ended
October 3, 2003 was $15.4 million, or 16.5% of net revenues, as compared with
$20.4 million, or 19.4% of net revenues, in the prior year period. This decline
in the gross profit percentage was attributable primarily to lower sales volume
that resulted in an unfavorable variance on fixed overhead, higher material
prices and higher labor costs, due to increased customization.

For the thirteen weeks ended October 3, 2003, gross profit was $6.1 million, or
17.8% of net revenues, as compared with $7.0 million, or 20.3% of net revenues,
in the prior year period. Higher material prices and the start up of Southern
Estates caused the lower gross profit in the thirteen week period compared to
the same period in fiscal 2002, and the decline in the gross profit percentage
continued to show the effect of lower sales volume and unfavorable variances on
fixed overhead, higher material prices, and higher labor costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include primarily sales
commissions, advertising expenses, freight costs, salaries for support
personnel, administrative compensation, executive and management bonuses,
insurance costs, and professional fees. Selling, general and administrative
expenses were $15.8 million, or 16.9% of net revenues, during the thirty-nine
weeks ended October 3, 2003, as compared with $18.0 million, or 17.1% of net
revenues, for the same period of the prior year.


                                      18
<PAGE>
For the thirteen weeks ended October 3, 2003, selling, general and
administrative expenses were $5.4 million, or 15.9% of net revenues, as
compared with $6.2 million, or 18.0% of net revenues, for the same period of
the prior year. The decline in selling, general and administrative expenses was
attributable primarily to lower sales volume and freight expenses, together
with decreases in legal expenses. Administrative salaries also declined due to
the cost reduction measures taken during the second quarter of 2003.

INTEREST EXPENSE

Interest expense, which primarily consists of amortization of debt issuance
costs and facility commitment fees, for the thirty-nine weeks ended October 3,
2003, was $377,000, as compared with $485,000 in the prior year period. For the
thirteen weeks ended October 3, 2003, interest expense was $116,000, as
compared with $125,000 in the prior year period. The decrease in interest
expense in the current quarter was a result of lower average borrowings, $0 in
the third quarter of 2003 compared to $4.5 million on the credit line for the
same period of the prior year. Facility commitment fees and bank availability
fees are lower due to the Company renegotiating the fees and lowering its line
of credit from $40 million to $10 million at the end of the first quarter of
2003. As part of the negotiations, in July, 2003 the Company extended its $10
million line of credit from March, 2004 to March, 2005.

PROVISION FOR INCOME TAXES

Income taxes are provided for based on the tax effect of revenue and expense
transactions included in the determination of pre-tax book income. Because the
Company has operated at a loss in recent fiscal years, management believes that
under the provisions of SFAS 109, it is not appropriate to record income tax
benefits on current losses in excess of anticipated refunds of taxes previously
paid. As a result, the Company has established valuation allowances against the
net deferred tax benefits related to net operating loss carry forwards and
other net deductible temporary differences between financial and taxable
income. The valuation allowance may be reversed in future years if the Company
returns to profitability.

At January 3, 2003, the Company had no federal net operating loss carry
forward. State net operating loss carryforwards amounting to $39.9 million are
available to offset future taxable income in a number of states, and they
expire at various dates in 2006 through 2022. The tax losses generated in 2002
and 2001 for federal income tax purposes have been carried back under the
temporary 5 year net operating loss carry back rules applicable to 2002 and
2001. Accordingly, the Company filed a carryback refund claim in 2003 and
received income tax refunds of $5.3 million with respect to the 2002 net
operating loss. This income tax refund (net of separate Company state income
tax liabilities) was approximately $417,000 higher than expected due to more
favorable timing differences (primarily related to depreciation) than
originally calculated, resulting in an additional tax benefit of $330,000 in
the second quarter ending July 4, 2003 and $87,000 in the third quarter ended
October 3, 2003.

LIQUIDITY AND CAPITAL RESOURCES

During the thirty-nine weeks ended October 3, 2003, cash provided by operations
was approximately $4.8 million. Net loss from continuing operations for the
thirty-nine weeks was $0.3 million. Included in the net loss were non-cash
charges of amortization and depreciation expense of $1.6 million. Cash provided
by operating activities reflected tax refunds of $5.3 million, an increased
accounts payable of $3.3 million, and an increase in accrued liabilities of
$0.8 million partially offset by an increase in accounts receivable of $1.2
million and increased inventories of $3.6 million. In addition to cash provided
by operating activities, other significant items affecting cash flows from
continuing operations included capital expenditures of $1.0 million which were
partially offset by proceeds from sale of property and equipment of $0.2
million.

At October 3, 2003, the balance of the revolving credit facility was $0 and the
Company's net working capital from continuing operations was $14.5 million,
including $11.9 million in cash and cash equivalents, as compared with working
capital of $13.2 million at January 3, 2003, including $7.0 million in cash and
cash equivalents. The increase in net working capital was primarily
attributable to increases in cash and cash equivalents of $5.0 million
(primarily from the receipt of the federal income tax refunds described above)
and increases in accounts payable of $3.3 million and in accrued liabilities of
$0.8 million, partially offset by increases in accounts receivable of $1.2
million and inventories of $3.6 million.


                                      19
<PAGE>
During the thirty-nine weeks ended September 27, 2002, cash provided by
operations was approximately $0.7 million Net income from continuing operations
for the thirty-nine weeks was $2.0 million. Included in net income were
non-cash charges of amortization and depreciation expense of $1.7 million. Cash
provided by operating activities also reflected increased accounts receivable
of $2.1 million, inventories $0.2 million and prepayments and other of $0.7
million and a decrease of accrued liabilities of $1.9 million, partially offset
by an increase in accounts payable of $1.1 million. In addition to cash
provided by operating activities, other significant items affecting cash flows
from continuing operations included proceeds from the sale of a joint venture
of $1.3 million, proceeds from the sale of property and equipment of $1.0
million partially offset by capital expenditures of $0.6 million.

At October 3, 2003, outstanding borrowings under the $10 million secured bank
line were $0 and availability on the line, which is dependent upon meeting
certain financial ratios and covenants, was $9.4 million, $0.6 million of the
credit line used to secure three letters of credit. Management believes that
operating cash flows, together with borrowing capacity under the line, will
provide the Company with adequate liquidity and capital resources through the
remaining term of the bank line.

The Company presently has plans to make capital expenditures of $1.5 million
during the next twelve months to expand the Southern Energy plant to increase
operating efficiencies. In conjunction with this expansion the Company will
combine the Windmar Supply Company into a new expansion of its existing
distribution warehouse.

Inflation

The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on its sales or profitability.
The Company has in the past been able to pass on most of the increases in its
costs by increasing selling prices, although there can be no assurance that the
Company will be able to do so in the future.

Item 3.

Quantitative and Qualitative Disclosures of Market Risk.

         Historically the Company has not entered into derivatives contracts to
either hedge existing risk or for speculative purposes. The Company also does
not and has not entered into contracts involving derivative financial
instruments or derivative commodity instruments. Although the Company's
principal credit agreement bears a floating interest rate of 1.0% over prime at
October 3, 2003, nothing was outstanding under the credit agreement.
Accordingly, the Company presently has no significant exposure to interest rate
risks.


Item 4.  CONTROLS AND PROCEDURES

During the 90-day period prior to the filing of this quarterly report, an
evaluation was performed under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-4(c) under the Securities Exchange Act of 1934, as
amended). Following that evaluation, the Company's management, including the
CEO and CFO, concluded that the Company's disclosure controls and procedures
were effective at that time. There have been no significant changes in the
Company's internal controls, other factors that could significantly affect
internal controls, or significant or material weaknesses with regard to the
Company's internal controls identified by the Company subsequent to that
evaluation.


                                      20
<PAGE>
PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is a party to various legal proceedings incidental to its business.
The Company typically issues a one-year warranty on new manufactured homes. The
majority of these legal proceedings are claims related to warranty on
manufactured homes or employment issues such as workers' compensation claims.
Management believes that adequate reserves are maintained for such claims. In
the opinion of management, after consultation with legal counsel, the ultimate
liability, if any, with respect to these proceedings will not materially affect
the financial position or results of operations of the Company; however, the
ultimate resolution of these matters, which could occur within one year, could
result in losses in excess of the amounts reserved.

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

         The following exhibits are filed as a part of or furnished with this
         report.

                  31.1     Certification

                  31.2     Certification

                  32.1     Certification of chief executive officer and chief
                           financial officer pursuant to 18 U.S.C. Section
                           1350, as adopted pursuant to ss.906 of the
                           Sarbanes-Oxley Act of 2002

         (b)      Reports on Form 8-K

         The following reports on Form 8-K were filed during the quarter ended
         October 3, 2003:

         On July 25, 2003, Southern Energy Homes, Inc. filed a Form 8-K
         reporting the issuance of a press release announcing financial results
         for the quarter ended July 4, 2003.


                                      21
<PAGE>
                                   SIGNATURES

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


                                SOUTHERN ENERGY HOMES, INC.



Date: November 14, 2003         By: /s/ Keith O. Holdbrooks
      -----------------            --------------------------------------------
                                   Keith O. Holdbrooks, Chief Executive Officer


Date: November 14, 2003         By: /s/ James L. Stariha
      -----------------            --------------------------------------------
                                   James L. Stariha, Chief Financial Officer


                                      22