<PAGE>
                                   FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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

                  For the fiscal year ended December 28, 2001

                                       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)

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

          Securities registered pursuant to Section 12(b) of the Act:

Title of each class                   Name of each exchange on which registered
       N/A

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

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

          Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, par value $.0001
                                 Title of class

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to
this Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, computed by reference to the closing price of such stock on the
Nasdaq Stock Market as of March 20, 2002, was $15,789,254. The number of shares
of common stock outstanding at that date was 12,133,865 shares, $.0001 par
value.

Documents Incorporated By Reference

<TABLE>
<CAPTION>
                                                                                               Part         Item
<S>                                                                                            <C>       <C>
1.       Southern Energy Homes, Inc. Definitive Proxy Statement with respect to its
         May 21, 2002 Annual Meeting of Stockholders                                            III      10,11,12,13
</TABLE>


<PAGE>

                                     PART I


SOUTHERN ENERGY HOMES, INC.
ITEM 1.  BUSINESS

GENERAL

         Southern Energy Homes, Inc. (the "Company") is engaged in the
production and retail sale of manufactured homes, the retail financing of
manufactured homes and the operation of three component supply divisions. The
Company produces manufactured homes sold primarily in the southeastern and
southcentral United States. The Company operates five home manufacturing
facilities (four in Alabama and one in Texas) to produce homes sold in 22
states. The Company's homes are currently marketed under four brand names by
263 independent dealers at 478 independent dealer locations and 15
company-owned retail centers.

         The Company manufactures homes, that are designed as primary
residences ready for immediate occupancy. The homes, most of which are
customized at the Company's factories to the home buyer's specifications, are
constructed by the Company in one or more sections which are transported by
independent trucking companies to dealer locations.

         The Company's homes range in size from 672 to 2,855 square feet and
sell at retail prices ranging from $20,000 to $93,000, excluding land. The
Company believes that its willingness to customize floor plans and design
features to match homebuyer preferences is the principal factor which
differentiates it from most of its competitors.

         The Company entered the retail sector of the industry through an
acquisition in 1996. Retail allows the Company to enhance its growth potential
by allowing the Company to market directly to individual homebuyers in
strategically targeted areas. The component supply segment sells various supply
products to the Company's manufacturing segment and to third party customers.

         The Company provides home buyers with a source of financing for homes
sold by the Company. This financing is provided primarily through a retail
financing joint venture. However, in limited cases, the Company finances homes
through its wholly-owned finance subsidiary.

         The manufactured housing market is highly cyclical and seasonal and is
affected by the same economic factors which have an impact on the broader
housing market. Historically, most sectors of the home building industry have
been affected by, among other things, changes in general economic conditions,
levels of consumer confidence, employment and income, housing demand,
availability of financing and interest rate levels.

MANUFACTURED HOMES

         The Company produces a variety of single- and multi-section homes
under four brand names. The Company's homes are manufactured in sections, which
individually are transported to their destination. The finished homes may
consist of one or more sections. Multi-section products are joined at their
destination by the dealer or its contractor. The Company initially concentrated
on the medium to higher priced segments of the manufactured housing market.
Over the past several years, the Company has broadened its product line with
lower priced homes that sell at retail for less than $25,000. The four
divisions of the Company at which its homes were manufactured in 2001 and
certain characteristics of the homes are as follows:


<TABLE>
<CAPTION>
Division                                Type                       Square Feet             Retail Price Range
------------------            ------------------------            -------------            ------------------
<S>                           <C>                                 <C>                      <C>
Southern Energy               Multi-section                       1,421 - 2,855             $38,900 -$93,000
Southern Lifestyle            Single and multi-section              728 - 2,432              22,500 - 69,900
Southern Homes                Single and multi-section              672 - 2,450              20,000 - 60,000
Southern Texas                Single and multi-section            1,088 - 2,432              20,000 - 57,500
</TABLE>

         For the fiscal year ended December 28, 2001, the net revenues
contributed by each of the Company's four home manufacturing divisions were as
follows: Southern Energy - $27 million; Southern Life/Style - $26 million;
Southern Homes - $65 million; and Southern Energy Homes of Texas - $17 million.

The Company's product development and engineering personnel design homes in
consultation with divisional management, sales representatives and dealers.
They also evaluate new materials and construction techniques in a continuous
program of product development and enhancement. With the use of computer aided
design technology, the Company has developed engineering systems which permit
customization of homes to meet the individual needs of prospective buyers.
These systems allow the Company to make modifications such as increasing the
length of a living room, moving a partition, changing the size and location of
a window or


<PAGE>


installing custom cabinets without significant impact upon manufacturing
productivity.

         Each home contains two to five bedrooms, a living room, dining room,
kitchen and one to three bathrooms, and features a heating system, a stove and
oven, refrigerator, carpeting and draperies. The Company has traditionally
focused on designing manufactured homes with features that make them comparable
to site-built homes, including stone fireplaces and vaulted ceilings, thus
broadening the base of potential customers. In addition to offering the
consumer optional features such as dishwashers, oak cabinets and furniture
packages as well as a wide range of colors, moldings and finishes, the Company
generally permits extensive customization of floor plan designs to meet
specific customer preferences.

RETAIL OPERATIONS

         The Company began its retail operations in November 1996 by acquiring
a group of retail companies operating in Alabama and Mississippi. In December
1997, the Company expanded its retail operations by acquiring another retail
company with seven locations in South Carolina. During 1998, the Company added
another 15 retail centers through acquisitions. However, beginning in fiscal
1999, the industry began to weaken. During 2000, the Company closed eleven
unprofitable retail sales centers; three in Alabama, three in Kentucky, two in
South Carolina, two in Georgia and one in Mississippi. During 2001, the Company
closed two unprofitable retail sales centers both located in Kentucky. The
Company continues to evaluate its unprofitable retail centers and future retail
center closings could happen which could result in further impairment charges.
As there is now no remaining goodwill associated with the Company's retail
operations such impairment charges would not be material. At December 28, 2001,
the Company had 15 retail sales centers; seven in Alabama, four in South
Carolina, one in Kentucky, two in Tennessee, and one in Mississippi. Each of
the 15 sales centers maintains a separate sales force. For the fiscal year
ended December 28, 2001, 24% of the Company's net revenues were attributable to
sales at the Company's own retail centers.

COMPONENT SUPPLY

         The Company currently operates three component supply divisions.
Classic Panel Designs supplies laminated and other interior wall panels.
Wind-Mar Supply provides windows, doors and countertops. Trimmasters produces
wood molding and trim finishing, and is a provider of wood components and
dining furniture. These divisions sell products both to the Company's own
manufactured housing segment and to third-party customers. For the fiscal year
period ended December 28, 2001, 6% of the Company's net revenues were
attributable to sales of these ancillary products to third parties.

CONSUMER FINANCING

         Home buyers normally secure financing from third-party lenders such as
banks or independent finance companies. The availability and cost of financing
is important to the Company's sales. Starting in late 1999, financing started
to become more restrictive and some lenders have exited the market. In order to
provide home buyers with an additional source of financing, the Company's
wholly-owned subsidiary, Wenco Finance, Inc. ("Wenco Finance"), originated and
serviced consumer loans for homes manufactured by the Company during the period
January 1996 through February 1997. In February 1997, the Company formed a
joint venture with 21st Mortgage Corporation. The joint venture, Wenco 21,
offers consumer financing for homes manufactured by the Company as well as for
other homes sold through its retail centers and independent dealers. Wenco
Finance continues to originate loans in addition to Wenco 21. At December 28,
2001, Wenco Finance had $13.5 million of installment contract receivables
outstanding as compared with $10.5 million at December 29, 2000.

HOME MANUFACTURING OPERATIONS

         The Company's homes are currently manufactured by four operating
divisions using assembly line techniques at five facilities; two manufacturing
facilities are located in Addison, Alabama, and one is located in each of
Double Springs, Alabama, Lynn, Alabama and Fort Worth, Texas.

         The Company's manufacturing facilities operate on a one shift per day,
five days per week basis. The Company believes that these facilities have the
capacity to produce a total of approximately 165 floor sections per week with
minimal labor additions. The Company plans to continue operating, as do most of
its competitors, on a single shift per day basis. During the fiscal year ended
December 28, 2001, the Company produced an average of 147 floor sections per
week. This represented a 16% decrease in floor section production from an
average of 174 floor sections per week in the fiscal year ended December 29,
2000. In the fiscal year ended December 31, 1999, the Company produced an
average of 229 floor sections per week. The following table sets forth the
total floor sections and homes sold as well as the number of home manufacturing
facilities operated by the Company for the periods indicated:


                                       2
<PAGE>


<TABLE>
<CAPTION>
                                                                    Year Ended
                                             -----------------------------------------------------------
                                             December 28, 2001    December 29, 2000    December 31, 1999
                                             -----------------    -----------------    -----------------
<S>                                          <C>                  <C>                  <C>
Homes                                             4,411                 5,504                 7,641
Floor sections                                    7,620                 9,041                11,914
Home Manufacturing facilities(1)                      5                     5                     7
</TABLE>

(1)      The Company closed one of its Addison, Alabama facilities in December
2000 and one of its Double Springs, Alabama facilities in February 2000.

         Each division operates as a separate strategic unit that is directed
by a general manager and has its own sales force. The general manager,
production managers and supervisory personnel of each division have an
incentive compensation system which is directly tied to the operating profit of
the division. In addition, production personnel of each division have a
productivity, turnover, and injury incentive compensation system. The Company
believes that these compensation systems help to focus efforts on curtailing
waste and inefficiencies in the production process, keep qualified associates
and maintain a safe workplace, and represent a divergence from standard
industry practices, which are typically designed to reward personnel on
production volume criteria.

         The extent of customization of the home performed by the Company
varies to a significant degree with the price of the home. In the higher price
range of the market, the home buyer is often less sensitive to the price
increase that is associated with significant design modifications that might be
desired. However, the Company's experience in producing a customized home on a
cost-effective basis has allowed the Company to offer customized homes in all
price ranges.

         The principal materials used in the production of the Company's homes
include steel, aluminum, wood products, gypsum wallboard, fiberglass,
insulation, carpet, vinyl floor covering, fasteners and hardware items,
appliances, electrical items, windows and doors. These materials and components
are readily available and are purchased by the Company from numerous sources.
No supplier accounted for more than 5.1% of the Company's purchases during each
of the past three fiscal years. The Company believes that the size of its
purchases allows it to obtain favorable volume discounts. The Company's
expenses can be significantly affected by the availability and pricing of raw
materials. Sudden increases in demand for construction materials can greatly
increase the costs of materials. While in the past, the Company has been able
to pass along a significant portion of increased material costs, more recently
the Company has had difficulties in passing on the increased costs due to
competitive conditions.

         Because the cost of transporting a manufactured home is significant,
substantially all of the Company's homes are sold to dealers within a 600 mile
radius of a manufacturing facility. The Company arranges, at the dealer's
expense, for the transportation of finished homes to dealer locations using
independent trucking companies. Customary sales terms are cash-on-delivery or
guaranteed payment from a floor plan financing source. Dealers or other
independent installers are responsible for placing the home on site, making
utility hook-ups and providing and installing certain trim items.

         Substantially all production is initiated against specific orders. The
Company's backlog of orders for manufactured homes as of March 1, 2002 was $1.0
million as compared with $1.7 million at March 1, 2001. Dealer orders are
subject to cancellation prior to commencement of production for a variety of
reasons, and the Company does not consider its backlog to be firm orders.

SALES NETWORK

         At December 28, 2001, the Company sold manufactured homes through
approximately 263 independent dealers at approximately 478 independent dealer
locations and through 15 company-owned retail centers in 22 states principally
in the southeastern and south central United States.

         Each of the Company's four home manufacturing divisions maintains a
separate sales force. At December 28, 2001, a total of 26 salespersons
maintained personal contact with the Company's independent dealers. The Company
markets its homes through product promotions tailored to specific dealer needs.
In addition, the Company advertises in local media and participates in regional
manufactured housing shows.

         The Company works to achieve the close working relationship between its
division management and the independent dealers they service, because it
considers this an important factor in the effective distribution of the
Company's products. In order to promote dealer loyalty and to enable dealers to
penetrate retail markets, only one independent dealer within a given local
market may distribute homes manufactured by a division of the Company. The
Company does not have formal marketing agreements with its independent dealers
and substantially all of the Company's independent dealers also sell homes of
other manufacturers. The Company believes its relations with its independent
dealers are good and the Company has experienced relatively low turnover in its
established independent

                                       3
<PAGE>


dealers in the past three years. In the fiscal year ended December 28, 2001, the
Company's largest dealer accounted for 5.3% of net revenues and the ten largest
dealers accounted for 26.8% of net revenues. In the fiscal year ended December
29, 2000, the Company's largest dealer accounted for 6.2% of net revenues, and
the Company's ten largest dealers accounted for 27.0% of net revenues. In the
fiscal year ended Dec. 31, 1999, the Company's largest dealer accounted for 2.4%
of net revenues and the Company's ten largest dealers accounted for 19.2% of net
revenues.

         Buyers of manufactured homes typically shop at a number of locations
prior to purchasing a home. The Company believes that it provides most of its
dealers with a marketing advantage because of the dealer's ability to represent
that the Company's homes can be customized to meet the individual preferences
of the customer.

WARRANTY, QUALITY CONTROL AND SERVICE

         The Company endeavors to adhere to strict quality standards and
continuously refines its production procedures. In addition, in accordance with
the construction codes promulgated by the Department of Housing and Urban
Development ("HUD"), an independent HUD-approved, third-party inspector
inspects each of the Company's manufactured homes for compliance during
construction at the Company's manufacturing facilities. See "-Regulation."

         The Company provides the initial home buyer with a HUD-mandated,
one-year limited warranty against manufacturing defects in the home's
construction. In addition, there are often direct warranties that are provided
by the manufacturer of components and appliances.

         The Company has experienced quality assurance personnel at each of its
manufacturing facilities to provide on-site service to dealers and home buyers.
In order to respond more quickly to customer service requests and to maintain a
high level of customer satisfaction, the Company has increased its customer
service staff. The Company continuously works to enhance its quality assurance
systems, placing high emphasis on improving the value and appeal of the
Company's homes and reducing consumer warranty claims.

INDEPENDENT DEALER FINANCING

         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 which 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 plus certain administrative and
shipping expenses. Repurchases were $4.2 million, $8.7 million, and $4.9
million for the years ended 2001, 2000, and 1999 respectively. At December 28,
2001, the Company's contingent repurchase liability under floor plan financing
arrangements through independent dealers was approximately $44 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 which 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. No dealer accounted for more than 6.2% of
the Company's net revenues in each of the past three fiscal years. See "-Sales
Network." The Company does not view any single independent dealer as being a
material customer. The Company also finances substantially its entire retail
inventory through floor plan arrangements and a line of credit.

COMPETITION

         The manufactured housing industry is highly competitive at both the
manufacturing and retail levels, with competition based upon numerous factors,
including total price to the dealer, customization to homeowners' preferences,
product features, quality, warranty repair service and the terms of dealer and
retail customer financing. The Company does not view any of its competitors as
being dominant in the industry. However, a number of these firms are larger
than the Company and possess greater manufacturing and financial resources. In
addition, there are numerous firms producing manufactured homes in the
southeastern and south-central United States, many of which are in direct
competition with the Company in the states where its homes are sold. Certain of
the Company's competitors provide retail customers with financing from captive
finance subsidiaries. While the Company's Wenco 21 joint venture provides
consumer financing to customers, a contraction in consumer credit could provide
an advantage to those competitors with more established internal financing
capabilities.

         The capital requirements for entry as a producer in the manufactured
housing industry are relatively small. However, the Company believes that the
qualifications for obtaining inventory financing, which are based upon the
financial strength of the manufacturer and each of its dealers, have recently
become more difficult to meet due to the departure of financial institutions
from the market and dealers requiring principal and curtailment payments from
the manufacturers.


                                       4
<PAGE>


         Manufactured homes compete with new site-built homes, as well as
apartments, townhouses, condominiums and existing site-built and manufactured
homes.

         The Company believes that its willingness to customize floor plans and
design features to match customer preferences is the principal factor which
differentiates it from most of its competitors in the manufactured housing
industry.

REGULATION

         The Company's manufactured homes are subject to a number of federal,
state and local laws. Construction of manufactured housing is governed by the
National Manufactured Housing Construction and Safety Standards Act of 1974
("1974 Act"). In 1976, HUD issued regulations under this Act establishing
comprehensive national construction standards. The HUD regulations cover all
aspects of manufactured home construction, including structural integrity, fire
safety, wind loads, thermal protection, plumbing and electrical. Such
regulations preempt conflicting state and local regulations. The Company's
manufacturing facilities and the plans and specifications of its manufactured
homes have been approved by a HUD-designated inspection agency. An independent,
HUD-approved third-party inspector checks each of the Company's manufactured
homes for compliance during at least one phase of construction. In 1994, HUD
amended manufactured home construction safety standards to improve the wind
force resistance of manufactured homes sold for occupancy in coastal areas
prone to hurricanes. Failure to comply with the HUD regulations could expose
the Company to a wide variety of sanctions, including closing the Company's
plants. The Company believes its manufactured homes meet or surpass all present
HUD requirements.

         Manufactured, modular and site-built homes are all built with
particleboard, paneling and other products that contain formaldehyde resins.
Since February 1985, HUD has regulated the allowable concentration of
formaldehyde in certain products used in manufactured homes and required
manufacturers to warn purchasers concerning formaldehyde associated risks. The
Company currently uses materials in its manufactured homes that meet HUD
standards for formaldehyde emissions and that otherwise comply with HUD
regulations in this regard. In addition, certain components of manufactured
homes are subject to regulation by the Consumer Product Safety Commission
("CPSC") which is empowered to ban the use of component materials believed to
be hazardous to health and to require the manufacturer to repair defects in
components of its homes. The CPSC, the Environmental Protection Agency and
other governmental agencies are evaluating the effects of formaldehyde. In
February 1983, the Federal Trade Commission adopted regulations requiring
disclosure of manufactured home's insulation specifications.

         The Company's manufactured homes are also subject to local zoning and
housing regulations. A number of states require manufactured home producers to
post bonds to ensure the satisfaction of consumer warranty claims. A number of
states have adopted procedures governing the installation of manufactured
homes. Utility connections are subject to state and local regulation, and must
be complied with by the dealer or other person installing the home.

         The Company is subject to the Magnuson-Moss Warranty Federal Trade
Commission Improvement Act, which regulates the descriptions of warranties on
products. The description and substance of the Company's warranties are also
subject to a variety of state laws and regulations.

          Wenco Finance, the Company's finance subsidiary, is subject to a
number of state and local licensing requirements which are applicable to
businesses engaged in the origination and servicing of consumer loans. In
addition, both Wenco Finance and Wenco 21, the Company's finance joint venture,
are also subject to a variety of federal and state laws and regulations
regulating consumer finance, including the Truth in Lending Act, which
regulates lending procedures and mandates certain loan disclosures with respect
to financing offered to consumers. Failure by Wenco Finance or Wenco 21 to
comply with any of these laws and regulations could have a material adverse
effect on the Company's business and results of operation.

EMPLOYEES

         As of December 28, 2001, the Company employed 1,304 full-time
employees involved in the following functional areas: manufacturing, 1,006;
sales, 69; field service, 84; administration and clerical, 107; and management,
38. The Company's manufacturing operations require primarily semi-skilled labor
and personnel levels fluctuate with seasonal changes in production volume.

         None of the Company's employees are represented by a collective
bargaining agreement. The Company believes that it has a good relationship with
its employees, and it has never experienced any work stoppage.


                                       5
<PAGE>


EXECUTIVE OFFICERS

         Information concerning the Executive Officers of the Company is as
follows. Executive Officers are elected annually by and serve at the pleasure
of the Board of Directors.

         Wendell L. Batchelor (age 59) is the Founder and Chairman of the
Company and has been the Company's Chief Executive Officer and a Director since
the Company's incorporation in 1982. Mr. Batchelor was President of the Company
from 1982 to 1999. From 1971 to 1982, Mr. Batchelor was General Manager of
Shiloh Homes, a division of Winston Industries. Mr. Batchelor was Sales Manager
of Marietta Homes, a division of Winston Industries, from 1968 to 1971. From
1966 to 1968, Mr. Batchelor was a Sales Representative for Madrid Homes. Mr.
Batchelor has served in the past as Chairman of the Alabama Manufacturer's
Housing Institute.

         Keith O. Holdbrooks (age 41) was elected as the Company's President in
June 1999 by the Company's Board of Directors and has served as the Company's
Chief Operating Officer since August 1996. From 1991 to 1996, Mr. Holdbrooks
served as General Manager for Southern Homes, a division of the Company, and
from 1989 to 1991 served as Sales Manager for Southern Homes. From 1985 to 1989
Mr. Holdbrooks served as salesman for Southern Lifestyle, a division of the
Company.

         Keith W. Brown (age 45) has served as the Company's Chief Financial
Officer since the Company's incorporation in 1982 and as a Director since 1989.
Mr. Brown served as the Company's Secretary from 1982 to January 1993 and
resumed that office in September 1993. He was elected Treasurer in January
1993. From 1980 to 1982, Mr. Brown served as Controller for Shiloh Homes, a
division of Winston Industries.

         Dan Batchelor (age 49) serves as the Company's General Counsel and
Vice President. Mr. Batchelor practiced commercial and tort litigation and
business law for almost twenty years before joining the Company in 1998. Mr.
Batchelor received his B.A. from the University of Virginia, 1974; J.D. from
Cumberland School of Law of Samford University, 1978; and LL.M. from the
University of Miami School of Law, 1979. He is admitted to practice in Alabama,
Georgia and Florida and various Federal jurisdictions.


                                       6
<PAGE>


ITEM 2.  PROPERTIES

         The Company's manufactured home segment currently operates five home
manufacturing facilities (four in Alabama, and one in Texas) and three
component supply facilities (all in Alabama). The facilities used by the
Company's manufactured home segment are as follows:


<TABLE>
<CAPTION>
                                                 Building                                      Leased or
Unit                                             Location                 Square Feet            Owned
------------------------------             -------------------            -----------          ---------
<S>                                        <C>                            <C>                  <C>
Manufacturing

Southern Energy                                Addison, AL                  72,000               Owned
Southern Lifestyle                             Addison, AL                  62,500               Owned
Southern Homes
Plant #1                                    Double Springs, AL              60,000               Owned
Plant #4                                         Lynn, AL                   90,000               Owned
Southern Energy Homes of Texas                Fort Worth, TX                98,300               Owned

Component Supply

Classic Panel                                 Hartselle, AL                 24,000               Owned
Wind-Mar Supply                                Addison, AL                  22,000               Owned
Trimmasters                                   Haleyville, AL                50,000              Leased
</TABLE>

         The Company considers its manufacturing facilities to be adequate for
its present needs. Additional information concerning productive capacity and
extent of utilization is discussed under "Home Manufacturing Operations" in
Item 1 of this Report.

         The Company currently operates 15 retail sales centers, seven of which
are in Alabama, four of which are in South Carolina, one in Kentucky, two in
Tennessee, and one in Mississippi. Each of the retail centers are currently
leased for terms ranging from one to five years.

         The Company owns its corporate headquarters building located in
Addison, Alabama consisting of approximately 15,400 square feet of office
space.

         Also see "Management's Discussion and Analysis of Financial Condition
and Results of Operations".

ITEM 3.  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 4.  SUBMISSION TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of the Stockholders of the Company
during the fourth quarter of fiscal year 2001.


                                       7
<PAGE>


                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

RECORD HOLDERS

         As of March 20, 2002, there were approximately 110 record holders of
the Company's Common Stock. This number does not include those stockholders
holding stock in "nominee" or "street" name.

STOCK PRICE PERFORMANCE

         The Company's Common Stock is publicly traded on the Nasdaq Stock
Market National Market System. The following table represents the high and low
bid price for each quarter of the last two fiscal years.


<TABLE>
<CAPTION>
                                   2001                              2000
                              Bid Price Range                   Bid Price Range
                          ----------------------            ----------------------
                           High             Low              High             Low
                          -----            -----            -----            -----
<S>                       <C>              <C>              <C>              <C>
First Quarter             $1.69            $ .81            $2.44            $1.13
Second Quarter             2.85             1.28             1.44             1.00
Third Quarter              3.15             1.26             2.25              .84
Fourth Quarter             2.70             1.18             2.13              .44
</TABLE>

DIVIDENDS

         It is the Company's current policy to retain any future earnings to
finance the continuing development of its business and not to pay dividends.
The company has not paid any dividends since the initial public offering of its
stock.

ITEM 6.  SELECTED FINANCIAL DATA

Five-Year Selected Financial Data
Southern Energy Homes, Inc. and subsidiaries (Dollars in thousands, except per
share data)

<TABLE>
<CAPTION>
                                                                              Year Ended
                                    ---------------------------------------------------------------------------------------------
                                    December 28,         December 29,         December 31,         January 1,         January 2,
                                       2001                  2000                 1999                1999               1998
                                    ------------         ------------         ------------         -----------        -----------
<S>                                 <C>                  <C>                  <C>                  <C>                <C>
OPERATING DATA
Net revenues                        $    157,947         $    185,388         $    263,898         $   319,595        $   309,324
Gross Profit                              34,594               34,297               52,069              67,925             58,604
Selling, general and
administrative                            34,612               41,428               44,760              47,730             36,009
Provision for credit losses                  854                1,719                  524                 300                187
Amortization of intangibles                  305                  436                  671                 792                853
Start-up costs (2)                            --                   --                   --                 739                 --
Impairment charges (1)                     2,240                6,039                7,073                 934              2,146
Operating income (loss)                   (3,417)             (15,325)                (959)             17,430             19,409
Interest expense                           1,957                2,538                1,994               2,392              1,412
Interest income                              302                  425                  340                 854                470
Income taxes (benefit)                        --                 (326)              (1,020)              6,089              7,092
Cumulative effect of
accounting change (2)                         --                   --                   --                 507                 --
Net income (loss)                         (5,072)             (17,112)              (1,593)              9,296             11,375
Net income (loss) per share:
  Basic                             $      (0.42)        $      (1.41)        $       (.13)        $      0.69        $      0.76
  Diluted                           $      (0.42)        $      (1.41)        $       (.13)        $      0.68        $      0.75
Weighted average shares
outstanding:
  Basic                               12,133,298           12,132,990           12,176,705          13,440,607         15,002,006
  Diluted                             12,133,298           12,132,990           12,176,705          13,647,216         15,129,530

BALANCE SHEET DATA
Total assets                        $     72,551         $     96,571         $    122,014         $   121,656        $   123,253
Long-term debt                                --                   --                2,464               3,569              4,720
Stockholders' equity                $     46,601         $     51,672         $     68,784         $    73,449        $    79,767
</TABLE>


                                       8
<PAGE>


(1) During 2001, the Company recorded a pre-tax charge of $1.6 million
associated with the impairment of intangible assets related to certain of the
Company's retail centers and a pre-tax charge of $603,000 related to impairment
of a joint venture. During 2000, the Company recorded a pre-tax charge of $6.0
million associated with the impairment of intangible assets and exit costs
related to certain of the Company's retail centers. During 1999, the Company
recorded pre-tax charges of $7.1 million associated with closing of its
manufacturing facility in North Carolina and three retail centers, one in
Kentucky and two in South Carolina. During 1998, the Company recorded an
additional pre-tax charge of $934,000 due to additional warranty, workmen's
compensation, and other costs incurred related to the closing of our
Pennsylvania facility in 1997. During 1997, the Company recorded a $2.1 million
pre-tax charge in connection with its decision to close its manufactured housing
facility located in Pennsylvania.

(2) During 1998, the Company recorded pre-tax charges of $739,000 for the year
and $825,000 for the cumulative effect of accounting change due to the Company
adopting a change in accounting principle requiring the expensing of start-up
costs in accordance with AICPA Statement of Position 98-5, "Reporting on the
Cost of Start-Up Activities."

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

         In December 2001, the U.S. Securities and Exchange Commission (the
"SEC") requested that all registrants list their three to five most "critical
accounting policies" in the Managements' Discussion and Analysis. The SEC
indicated that a "critical accounting policy" is one which is both important to
the portrayal of the company's financial condition and results and requires
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. The Company believes that its accounting policies described below
fit this definition:

INSTALLMENT CONTRACTS RECEIVABLE

         The majority of the installment contracts receivable is from borrowers
in the southern portion of the United States and is collateralized by
manufactured homes and real estate. Foreclosed installment contracts receivable
that are not liquidated are written down to an estimated recoverable amount and
reclassified as collateral held for resale and included in inventories.

         The allowance for credit losses is established to provide for losses
inherent in the installment contracts receivable portfolio. The allowance for
credit losses is determined based on the Company's historical loss experience
after adjusting for current economic conditions. Management, after assessing
the loss experience and economic conditions, adjusts the allowance account
through periodic provisions. Actual credit losses are charged to the allowance
when realized.

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 will be made as 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 $300,000 per occurrence, and for all
health care claims in excess of $75,000 per occurrence, with an annual
aggregate stop-loss limit of approximately $5.7 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 which 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 which provides the
independent dealer financing customarily requires the Company to enter into a
separate repurchase agreement with the financial institution, under which


                                       9
<PAGE>

the Company is obligated, upon default by the independent dealer, to repurchase
the homes at the Company's original invoice price plus certain administrative
and shipping expenses. Repurchases were $4.2 million, $8.7 million, and $4.9
million, for the years ended 2001, 2000, and 1999, respectively. At December
28, 2001, the Company's contingent repurchase liability under floor plan
financing arrangements through independent dealers was approximately $44
million. While homes that have been repurchased by the Company under floor-plan
financing arrangements are usually sold to other dealers, there can be no
assurance 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.

RESULTS OF OPERATIONS

GENERAL

The manufactured housing industry as a whole has been adversely affected by
various economic factors, and has struggled during most of the past three
years. Rapid industry growth over the 10 years preceding this three year period
resulted in an increase in the overall number of dealers, an increase in
manufacturing output and an increase in the number of homes available at the
retail level. These larger inventories and the generally slower reduction of
those inventories has led to increased price competition and reduced profits.
Tightening credit has compounded the situation and negatively affected the
industry's overall financial performance, with virtually all manufacturers and
retailers being negatively affected. While the Company is still experiencing
the negative economic factors influencing financial performance of the entire
manufactured housing industry, it has taken a number of steps that have been
effective in implementing its plans to decrease costs and improve efficiency.
In 2000 and 2001, these steps included closing less efficient manufacturing
facilities, consolidating divisions, and selling unprofitable retail centers,
as well as improving efficiency in the remaining manufacturing plants, lowering
labor costs and turnover, decreasing plant injuries, and lowering warranty
expenses by improved quality. The Company's modest gain in net revenues during
the last quarter of fiscal 2001 as compared to the fourth quarter in the prior
year is considered by management to be an encouraging sign of improvement. Weak
market conditions still persist, however, including industry-wide excess retail
inventory and more restrictive retail financing conditions for consumers, and
management plans to remain attentive to its focus on being responsive to
changing industry conditions and believes that it is positioned to implement
further measures as necessary to respond to those changes.

YEAR ENDED DECEMBER 28, 2001 AS COMPARED WITH YEAR ENDED DECEMBER 29, 2000

NET REVENUES

Total net revenues (gross revenues less volume discounts, returns, and
allowances) for the year ended December 28, 2001 were $157.9 million, which
represented a decline of 14.8% from 2000 revenues of $185.4 million.

Net revenues from the manufactured home segment were $134.6 million (including
intersegment revenues of $19.8 million) for the year ended December 28, 2001 as
compared with $152.0 million (including intersegment revenues of $32.2 million)
for the prior year period, a decrease of $17.4 million, or 11.4%. The decline
in sales to dealers was primarily attributable to decreased demand and the
closure of one Alabama manufacturing plant in December 2000 and one in February
2000. Total homes shipped in the year ended December 28, 2001 were 4,411, down
19.9% from the number of homes shipped in the prior year period. The decrease
in homes sold was attributable to an overall industry decline in the Company's
core market areas and increased competition within these market areas. The
average wholesale price per home in 2001 was $28,826, as compared with $26,055
in 2000, a increase of 10.6%.

Net revenues from the retail sales segment were $37.2 million for the year
ended December 28, 2001 as compared with $49.6 million for the prior year
period, a decrease of $12.4 million, or 25%. The decline in retail revenue
reflects both tighter consumer financing and other general economic factors, as
well as the fact that the Company now operates two fewer retail centers than it
did in the prior year. The number of total homes (new and used) sold by the
retail segment in the year ended December 28, 2001 was 1,006, down 34.6% from
the number of homes sold in the prior year period. The average retail price per
new home in 2001 was $45,290 as compared with $42,174 in 2000, a increase of
7.4%.

Net revenues from the component supply segment were $23.3 million (including
intersegment revenues of $20.3 million) for the year ended December 28, 2001,
as compared with $30.1 million (including intersegment revenues of $25.6
million) for the prior year period, a decline of $6.8 million, or 22.4%. The
decline in supply sales was mainly due to the decline in sales volume in the
manufactured home segment.

Revenues from the Company's retail consumer financing activities were $1.2
million for the year ended December 28, 2001, as compared with $1.1 million for
the prior year period. Wenco Finance originated and serviced consumer loans
primarily for homes manufactured by the Company, until February 1997, at which
time the Company formed a joint venture with 21st Mortgage Corporation ("21st
Mortgage"). The joint venture, Wenco 21, offers consumer financing for homes
manufactured by the Company as well as for other homes sold through its retail
centers and independent dealers. However, Wenco Finance continues to generate
certain loans to consumers for the purchase of retail homes.


                                       10
<PAGE>


GROSS PROFIT

Gross profit consists of net revenues less the cost of sales, which includes
labor, materials, and overhead. Gross profit for the year ended December 28,
2001 was $34.6 million, or 21.9% of net revenues, as compared with $34.3
million, or 18.5% of net revenues, in the prior year period. This increase in
the gross profit percentage was attributable primarily to increased sales
prices, lower labor costs, lower warranty expenses and lower material prices.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include primarily sales
commissions, advertising expenses, freight costs, salaries for support
personnel, administrative compensation, insurance costs, and professional fees.
Selling, general and administrative expenses were $34.6 million, or 21.9% of
net revenues, during the year ended December 28, 2001, as compared with $41.4
million, or 22.3% of net revenues, for the same period of the prior year. The
decrease in selling, general and administrative expenses as a percentage of
sales was attributable to the following factors: decreased dealer interest
payments, lower commissions, lower administrative salaries, lower advertising
and promotions.

PROVISION FOR CREDIT LOSSES

The Company provides for estimated credit losses based on industry experience,
historical loss experience, current repossession trends and costs, and
management's assessment of the current credit quality of the loan portfolio.
The provision for credit losses for the year ended December 28, 2001 was
$854,000 as compared with $1.7 million for the year ended December 29, 2000.

IMPAIRMENT AND OTHER CHARGES

During 2001, the Company recorded an impairment charge of $1.6 million for the
remaining goodwill related to its retail operations segment. The decision was
based primarily on continued losses at the two retail centers where the
goodwill was recorded. Fair value was determined by management based on the
best information available such as the value received in connection with the
closure of other retail centers. Although these amounts represent management's
best estimate of total costs to close these centers, the actual cost could
ultimately differ from these amounts. The Company continues to evaluate its
unprofitable retail centers and future retail center closings could happen
which would result in further impairment charges. However, such charges would
not be material to the Company's results of operations. The Company also
recorded a charge related to its investment in one of the Company's
manufacturing joint ventures of $603,000 due to losses of this joint venture.

INTEREST EXPENSE

Interest expense for the year ended December 28, 2001 was $2.0 million as
compared with $2.5 million for the year ended December 29, 2000. The decline in
interest expense in the current year was a result of lower interest rates
through the Company's line of credit and lower loan balances.

INTEREST INCOME

Interest income for the year ended December 28, 2001 was $302,000 as compared
with $425,000 for the year ended December 29, 2000. The decrease in interest
income reflects lower average cash and cash equivalent balances during the year
ended December 28, 2001.

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. No income
tax benefits were recorded for the year-end December 28, 2001 compared to an
income tax benefit for the year ended December 29, 2000 of $326,000. During
fiscal 2000, the Company recorded a valuation allowance of $4.4 million related
to deferred income tax assets in accordance with the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109. During 2001, the valuation
allowance was increased by $701,000. Because the Company has operated at a loss
in recent fiscal years and because management believes difficult competitive
conditions will continue for the foreseeable future, management believes that
under the provisions of SFAS No. 109, it is no longer appropriate to record
income tax benefits on current losses in excess of anticipated refunds of taxes
previously paid. The Company has established valuation allowances against the
tax benefits of substantially all its net operating loss carry forwards and
deductible temporary differences between financial and taxable income.


                                      11
<PAGE>


YEAR ENDED DECEMBER 29, 2000 AS COMPARED WITH YEAR ENDED DECEMBER 31, 1999

NET REVENUES

Total net revenues (gross revenues less volume discounts, returns, and
allowances) for the year ended December 29, 2000 were $185.4 million, which
represented a decline of 29.8% over 1999 revenues of $263.9 million.

Net revenues of the manufactured home segment were $152.0 million (including
intersegment revenues of $32.2 million) for the year ended December 29, 2000 as
compared with $215.7 million (including intersegment revenues of $39.4 million)
for the prior year period, a decrease of $63.7 million, or 29.6%. The decline
in sales to dealers was primarily attributable to decreased demand and closure
of an Alabama manufacturing plant in February 2000. Total homes shipped in the
year ended December 29, 2000 were 5,504, down 28% from the number of homes
shipped in the prior year period. The decrease in homes sold was attributable
to an overall industry decline in the Company's core market areas and increased
competition within these market areas. The average wholesale price per home in
2000 was $26,055, as compared with $26,807 in 1999, a decrease of 2.8%.

On February 11, 2000, an electrical fire at the Company's frame shop forced the
Company to suspend operations at two of its manufacturing plants located in
Double Springs, Alabama. On February 15, 2000, the Company reopened one of the
plants. With the reopening of this plant and the shifting of some of the
production to another plant in Lynn, Alabama, production returned to 90% of
pre-fire levels. The Company has business interruption insurance and while the
temporary plant shutdown may have an impact on the Company's revenues, the
Company does not anticipate that these shutdowns will have a material impact on
the Company's financial position or results of operations.

Net revenues from the retail sales segment were $49.6 million for the year
ended December 29, 2000 as compared with $64.0 million for the prior year
period, a decrease of $14.4 million, or 22.5%. The decline in retail sales was
primarily attributable to increased competition and the Company operating 11
fewer retail centers, during the fiscal year ended December 29, 2000, compared
to the prior period. The number of total homes (new and used) sold by the
retail segment in the year ended December 29, 2000 was 1,539, down 14.7% from
the number of homes shipped in the prior year period. The average retail price
per new home in 2000 was $42,174, as compared with $45,402 in 1999, a decrease
of 7.1%.

Net revenues from the supply segment were $30.1 million (including intersegment
revenues of $25.6 million) for the year ended December 29, 2000, as compared
with $46.9 million (including intersegment revenues of $37.4 million) for the
prior year period, a decline of $16.8 million, or 35.8%. The decline in supply
sales was primarily attributable to the decline in sales volume in the
manufactured home segment.

Revenues from the Company's retail consumer financing activities were $1.1
million for the year ended December 29, 2000, as compared with $1.3 million for
the prior year period. Wenco Finance originated and serviced consumer loans
primarily for homes manufactured by the Company, until February 1997, at which
time the Company formed a joint venture with 21st Mortgage Corporation ("21st
Mortgage"). The joint venture, Wenco 21, offers consumer financing for homes
manufactured by the Company as well as for other homes sold through its retail
centers and independent dealers. However, Wenco Finance continues to generate
certain loans to consumers for the purchase of retail homes.

GROSS PROFIT

Gross profit consists of net revenues less the cost of sales, which includes
labor, materials, and overhead. Gross profit for the year ended December 29,
2000 was $34.3 million, or 18.5% of net revenues, as compared with $52.1
million, or 19.7% of net revenues, in the prior year period. This decline in
the gross profit percentage was attributable primarily to increased competitive
pricing at wholesale, and labor inefficiencies in operating at lower
capacities.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include primarily sales
commissions, advertising expenses, freight costs, salaries for support
personnel, administrative compensation, insurance costs, and professional fees.
Selling, general and administrative expenses were $41.4 million, or 22.3% of
net revenues, during the year ended December 29, 2000, as compared with $44.8
million, or 17.0% of net revenues, for the same period of the prior year. The
increase in selling, general and administrative expenses as a percentage of
sales was attributable to the following factors: increased dealer interest
payments to remain competitive in market areas, increased freight expenses due
to fuel increases, and increased legal fees.


                                      12
<PAGE>


PROVISION FOR CREDIT LOSSES

The Company provides for estimated credit losses based on industry experience,
historical loss experience, current repossession trends and costs, and
management's assessment of the current credit quality of the loan portfolio.
The provision for credit losses for the year ended December 29, 2000 was $1.7
million as compared with $524,000 for the year ended December 31, 1999. The
increase in the provision was due to deterioration of the loan portfolio and to
increased losses incurred on the loan portfolio, which amounted to $1.2 million
in fiscal 2000 compared to $.5 million in fiscal 1999.

IMPAIRMENT AND OTHER CHARGES

During 2000, the Company decided to close eleven of its 28 retail centers. The
decision was based primarily on losses incurred at these centers over the last
several months. Three retail centers were closed in each of the first three
quarters of fiscal 2000 and two retail centers were closed in the fourth
quarter of fiscal 2000. In connection with the decision to close these retail
centers, the Company recorded a pre-tax charge of $4.4 million during the
second quarter consisting of the impairment of the intangible assets of $3.8
million and exit costs of $0.6 million associated with rental commitments and
leasehold improvements on retail centers which the Company has committed to
close. During the fourth quarter of 2000, the Company recorded an additional
pre-tax charge of $1.6 million associated with the impairment of intangible
assets and exit costs related to certain of its retail centers. Although these
amounts represent management's best estimate of total costs to close these
centers, the actual cost could ultimately differ from these amounts. The
Company has recorded these amounts as an impairment charge in the accompanying
statement of operations for the fiscal year ended December 29, 2000. During the
fiscal year ended December 29, 2000 and December 31, 1999, these eleven centers
generated 6.0% and 7.3%, respectively, of the total revenues of the Company.
The impact of these centers on the operating income of the Company, excluding
the impairment charges, was a pre-tax loss of $3.1 million and a pre-tax loss
of $2.1 million during the fiscal year ended December 29, 2000 and December 31,
1999, respectively. The Company continues to evaluate its unprofitable retail
centers and future retail center closings could happen which would result in
further impairment charges.

INTEREST EXPENSE

Interest expense for the year ended December 29, 2000 was $2.5 million as
compared with $2.0 million for the year ended December 31, 1999. The increase
in interest expense in the current year was a result of higher interest rates
associated with the Company financing its retail inventory through the
Company's line of credit and higher loan balances.

INTEREST INCOME

Interest income for the year ended December 29, 2000 was $425,000 as compared
with $340,000 for the year ended December 31, 1999. The increase in interest
income reflects higher average cash and cash equivalent balances during the
year ended December 29, 2000.

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. Income tax
benefit for the year ended December 29, 2000 was $326,000, compared with income
tax benefit of $1.0 million, or an effective tax rate of 39%, for the year
ended December 31, 1999. During fiscal 2000, the Company recorded a valuation
allowance of $4.4 million related to deferred income tax assets in accordance
with the provisions of Statement of Financial Accounting Standards ("SFAS") No.
109. Because the Company has operated at a loss in recent fiscal years and
because management believes difficult competitive conditions will continue for
the foreseeable future, management believes that under the provisions of SFAS
No. 109, it is no longer appropriate to record income tax benefits on current
losses in excess of anticipated refunds of taxes previously paid. The Company
has established valuation allowances against the tax benefits of substantially
all its net operating loss carry forwards and deductible temporary differences
between financial and taxable income.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

 The Company has various contractual obligations and/or commercial commitments
arising from operations. These obligations and commitments are fully described
in this Annual Report on Form 10-K under various headings in MD&A as well as in
the notes to the audited consolidated financial statements. The following table
lists the aggregate maturities of various classes of obligations and expiration
amounts of various classes of commitments related to our continuing operations
at December 28, 2001 (in millions):


                                      13
<PAGE>


<TABLE>
<CAPTION>
Contractual Obligations        Total           Less than 1 Year          1-3 Years          4-5 Years        After 5 Years
-----------------------        -----           ----------------          ---------          ---------        -------------
<S>                            <C>             <C>                       <C>                <C>              <C>
Operating Leases                $1.4                 $0.6                   $0.5               $0.2               $0.1
</TABLE>


<TABLE>
<CAPTION>
                                     Total Amounts     Less Than 1
Other Commercial Commitments           Committed          Year          1-3 Years        4-5 Years        Over 5 Years
                                     -------------     -----------      ---------        ---------        ------------
<S>                                  <C>               <C>              <C>              <C>              <C>
Lines of Credit                          $10.6            $ --            $10.6            $   --            $  --
-Other Commercial Commitments              0.4             0.4               --                --               --
                                         -----            ----            -----            ------            -----
Total Commercial Commitments             $11.0            $ .4            $10.6            $   --            $  --
                                         =====            ====            =====            ======            =====
</TABLE>

JOINT VENTURES

The Company owns interests in five joint ventures. The Company owns a 39%
interest in, WoodPerfect, Inc., a manufacturing joint venture, which produces
rafters used in the production of the Company's homes. The Company owns a 50%
interest in Wenco 21, LLC, an entity that originates installment contracts. The
Company owns 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 Company also owns 25% of WoodPerfect of Texas, Inc., which manufactures
rafters used in the production of manufactured homes. The Company owns 25%
interest in Hillsboro Manufacturing, Inc., which manufactures laminate
wallboard.

LIQUIDITY AND CAPITAL RESOURCES

Since its organization, the Company has financed its operations primarily with
cash generated from a combination of operations, stock offerings, and
borrowings. The Company lowered its outstanding balance on its line of credit
from $20.0 million to $10.6 million during 2001.

During the year ended December 28, 2001, the Company's net cash provided by
operating activities was approximately $11.2 million. Although net loss for the
year was $5.1 million, this loss included the following non-cash charges:
impairment charges of $2.2 million and depreciation expense of $2.5 million.
Cash provided by operating activities also included decreased accounts
receivable of $6.3 million, decreased inventories of $4.5 million, decreased
prepayments and other of $1.1 million and income tax refunds of $4.7 million,
partially offset by decreased accounts payable and accrued liabilities of $1.9
million. The Company also originated $7.3 million in installment contracts and
collected $2.5 million on originated installment contracts. In addition to cash
provided by operating activities, other significant items affecting cash flows
included capital expenditures of $1.1 million, proceeds from the sale of
property, plant and equipment of $1.2 million, net repayments of notes payable
of $17.1 million, and payments of debt issuance costs of $1.1 million.

In accordance with the Company's new revolving credit facility, the Company
applies all cash receipts to reduce the line of credit. At December 28, 2001,
the Company's net working capital was $2.4 million, including $0.3 million in
cash and cash equivalents, as compared with $5.1 million at December 29, 2000,
including $6.1 million in cash and cash equivalents. The decrease in net
working capital was primarily attributable to a decrease in cash and cash
equivalent of $5.7 million, a decrease in accounts receivable of $6.5 million,
a decrease in inventories of $4.5 million, and a decrease in refundable income
taxes of $4.7 million, partially offset by a decrease in notes payable of $17.1
million and a decrease in other accrued liabilities of $1.0 million.

During the year ended December 29, 2000, the Company's cash provided by
operations was approximately $3.1 million. Although net loss for the year was
$17.1 million, this loss included the following non-cash charges: impairment
charges of $6.0 million, depreciation expense of $2.6 million, provision for
deferred income taxes of $4.0 million, and provision for credit losses of $1.7
million. Cash provided by operations also included decreased accounts
receivable of $3.3 million and decreased inventories of $11.2 million,
partially offset by increased refundable income taxes of $2.5 million and
increased accounts payable and accrued liabilities of $5.5 million. In addition
to cash provided by operating activities, other significant items affecting
cash flows included capital expenditures of $1.8 million, net repayments of
notes payable of $1.1 million and repayments of long-term debt of $3.6 million.

At December 29, 2000, the Company's net working capital was $5.1 million,
including $6.1 million in cash and cash equivalents, as compared with $18.7
million at December 31, 1999, including $9.3 million in cash and cash
equivalents. The decrease in net working capital was primarily attributable to
a decrease in inventories of $11.2 million, a decrease in accounts receivable
of $3.3 million and a decrease in cash and cash equivalent of $3.3 million,
partially offset by a decrease in notes payable of $1.1 million, a decrease in
current maturities of long-term debt of $1.1 million, a decrease in accounts
payable of $2.2 million, and a decrease in volume incentives payable of $1.9
million.

At December 28, 2001 the Company had a $40 million secured line of credit,
which matures on March 8, 2004 and bears interest at the prime rate plus 1%,
which amounted to 5.75% at December 28, 2001. At December 28, 2001 the
Company's availability on the line of


                                      14
<PAGE>


credit was $12.1 million. The Company's ability to draw upon this line of
credit is dependent upon its continued compliance with certain financial ratios
and covenants. The Company had outstanding borrowings of $10.6 million and $20
million at December 28, 2001 and December 29, 2000, respectively.

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 which 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 plus certain administrative and shipping
expenses. Repurchases were $4.2 million, $8.7 million, and $4.9 million for the
years ended 2001, 2000, and 1999 respectively. At December 28, 2001, the
Company's contingent repurchase liability under floor plan financing
arrangements through independent dealers was approximately $44 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 which 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.

CAPITAL EXPENDITURES

The Company does not currently plan to make any material capital expenditures
during the next twelve months.

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. Increased competition in the
industry has generally prevented the Company from passing on such increases.

The following discussion about the Company's interest rate risk includes
"forward looking statements" that involve risks and uncertainties. Actual
results could differ materially from those projected in the forward looking
statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING 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. Pertinent provisions of Regulation S-K call
for disclosures to clarify exposures to market risk associated with activities
in derivative financial instruments, other financials instruments and
derivative commodity instruments. The Regulation defines "other financial
instruments" to include trade accounts receivable, loans and structured notes.
The Company does not utilize derivative instruments to manage such risks. The
Company's principal credit agreement bears a floating interest rate of 1.0%
over PRIME. Accordingly, the Company is subject to market risk associated with
changes in interest rates. At December 28, 2001, $10.6 million was outstanding
under the credit agreement. As of December 29, 2000, the principal amount
outstanding under the credit agreement was $20.0 million. Assuming that amount
outstanding, a 1% increase in the applicable interest rate during 2001 would
result in additional interest expense of approximately $106,000, which would
reduce cash flow and pre-tax earnings dollar for dollar. Accounts receivable:
Most of the Company's sales of manufactured homes are pre-sold, such that
orders exist before construction begins. When manufactured homes are sold to
dealers as inventory, such homes are paid for by dealer's floor plan financing,
such that funds ordinarily transfer to the Company from the dealer's floor plan
lender within 21 days. Management thus does not perceive that the Company is
subject to a material market risk with respect to its accounts receivable.



 "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 Forward-looking statements in this Annual Report on Form 10-K, 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: 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; availability of
financing for prospective purchasers of the Company's homes; the amount of
capital that the Company may commit to its Wenco 21 joint venture to make
available consumer loans; performance of the loans held by the Company's
finance subsidiary; 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


                                      15
<PAGE>


the manufactured housing industry; Federal, state and local regulation of the
Company's business; the Company's contingent repurchase liabilities with
respect to dealer financing; 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.

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO CONSOLIDATED FINANCIAL
         STATEMENTS

Consolidated Balance Sheets
Southern Energy Homes, Inc. and subsidiaries


<TABLE>
<CAPTION>
                                                                                            DECEMBER 28,           DECEMBER 29,
                                                                                               2001                   2000
                                                                                            ------------           ------------
<S>                                                                                         <C>                    <C>
ASSETS
CURRENT ASSETS:
 Cash and cash equivalents                                                                  $    354,000           $  6,054,000
 Accounts receivable, less allowance for doubtful accounts of
        $160,000 and $168,000, respectively                                                    7,089,000             13,560,000
 Inventories                                                                                  19,639,000             24,161,000
 Refundable income taxes                                                                         349,000              5,055,000
 Deferred tax benefits                                                                                --                349,000
 Prepayments and other                                                                           903,000                770,000
                                                                                            ------------           ------------
                                                                                              28,334,000             49,949,000
                                                                                            ------------           ------------
PROPERTY, PLANT, AND EQUIPMENT:
   Property, plant and equipment, at cost                                                     34,765,000             36,188,000
   Less accumulated depreciation and amortization                                            (15,496,000)           (13,994,000)
                                                                                            ------------           ------------
                                                                                              19,269,000             22,194,000
                                                                                            ------------           ------------

INTANGIBLES AND OTHER NON-CURRENT ASSETS:
   Installment contracts receivable, less allowance for credit losses of
           $1,150,000 and $850,000, respectively                                              13,543,000             10,505,000
   Goodwill, net                                                                               3,305,000              5,190,000
   Investment in joint ventures                                                                4,908,000              5,371,000
   Other assets                                                                                3,192,000              3,362,000
                                                                                            ------------           ------------
                                                                                              24,948,000             24,428,000
                                                                                            ------------           ------------
                                                                                            $ 72,551,000           $ 96,571,000
                                                                                            ============           ============


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Notes payable                                                                             $ 10,964,000           $ 28,049,000
  Accounts payable                                                                             1,369,000              1,963,000
  Volume incentive payable                                                                     3,760,000              4,545,000
  Accrued payroll related expenses                                                             1,966,000              1,901,000
  Accrued workers' compensation                                                                2,277,000              1,668,000
  Accrued warranty                                                                             2,440,000              2,590,000
  Accrued other                                                                                3,174,000              4,183,000
                                                                                            ------------           ------------
                                                                                              25,950,000             44,899,000
                                                                                            ------------           ------------

COMMITMENTS AND CONTINGENCIES (NOTE 7)

STOCKHOLDERS' EQUITY:
  Preferred stock, $.0001 par value, 1,000,000 shares authorized, none outstanding                    --                     --
  Common stock, $.0001 par value, 40,000,000 shares authorized, 12,133,865 and
  12,132,990 shares issued and outstanding at December 28, 2001 and December
  29, 2000, respectively                                                                           1,000                  1,000
  Capital in excess of par                                                                     8,330,000              8,329,000
  Retained earnings                                                                           38,270,000             43,342,000
                                                                                            ------------           ------------
                                                                                              46,601,000             51,672,000
                                                                                            ------------           ------------
                                                                                            $ 72,551,000           $ 96,571,000
                                                                                            ============           ============
</TABLE>

The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.


                                      16

<PAGE>


Consolidated Statements of Operations
Southern Energy Homes, Inc. and subsidiaries


<TABLE>
<CAPTION>
                                                                                  Year Ended
                                                       -----------------------------------------------------------------
                                                        December 28,              December 29,              December 31,
                                                           2001                       2000                     1999
                                                       -------------             -------------             -------------
                                                        (52 Weeks)                (52 Weeks)                 (52 Weeks)
                                                       -------------             -------------             -------------
<S>                                                    <C>                       <C>                       <C>
Net revenues                                           $ 157,947,000             $ 185,388,000             $ 263,898,000
Cost of sales                                            123,353,000               151,091,000               211,829,000
                                                       -------------             -------------             -------------
     Gross profit                                         34,594,000                34,297,000                52,069,000
                                                       -------------             -------------             -------------
Operating expenses:
     Selling, general and administrative                  34,612,000                41,428,000                44,760,000
     Provision for credit losses                             854,000                 1,719,000                   524,000
     Amortization of intangibles                             305,000                   436,000                   671,000
     Impairment charges                                    2,240,000                 6,039,000                 7,073,000
                                                       -------------             -------------             -------------
                                                          38,011,000                49,622,000                53,028,000
                                                       -------------             -------------             -------------
     Operating loss                                       (3,417,000)              (15,325,000)                 (959,000)
Interest expense                                           1,957,000                 2,538,000                 1,994,000
Interest income                                              302,000                   425,000                   340,000
                                                       -------------             -------------             -------------
     Loss before provision for income taxes               (5,072,000)              (17,438,000)               (2,613,000)
Benefit for income taxes                                          --                   326,000                 1,020,000
                                                       -------------             -------------             -------------
     Net loss                                          $  (5,072,000)            $ (17,112,000)            $  (1,593,000)
                                                       =============             =============             =============

PER SHARE DATA:
Net loss per share:
      Basic                                            $       (0.42)            $       (1.41)            $       (0.13)
                                                       =============             =============             =============
      Diluted                                          $       (0.42)            $       (1.41)            $       (0.13)
                                                       =============             =============             =============
Weighted average number of common shares:
      Basic                                               12,133,298                12,132,990                12,176,705
                                                       =============             =============             =============
      Diluted                                             12,133,298                12,132,990                12,176,705
                                                       =============             =============             =============
</TABLE>

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


                                      17
<PAGE>


Consolidated Statements of Stockholders' Equity
Southern Energy Homes, Inc. and subsidiaries


<TABLE>
<CAPTION>
                                     Common Stock            Treasury Stock           Capital
                                 --------------------   -------------------------     in Excess     Retained
                                   Shares      Amount     Shares        Amount         of Par        Earnings        Total
                                 ----------   -------   ----------   ------------   ------------   ------------   ------------
<S>                              <C>          <C>        <C>         <C>            <C>            <C>            <C>
BALANCE, JANUARY 1, 1999         15,638,890   $ 2,000    3,000,300   $(26,282,000)  $ 37,682,000   $ 62,047,000   $ 73,449,000

  Treasury stock repurchases             --        --      505,600     (3,072,000)            --             --     (3,072,000)
  Retirement of treasury stock   (3,505,900)   (1,000)  (3,505,900)    29,354,000    (29,353,000)            --             --
  Net loss                               --        --           --             --             --     (1,593,000)    (1,593,000)
                                -----------   -------   ----------   ------------   ------------   ------------   ------------
BALANCE, DECEMBER 31, 1999       12,132,990     1,000           --             --      8,329,000     60,454,000     68,784,000

  Net loss                               --        --           --             --             --    (17,112,000)   (17,112,000)
                                -----------   -------   ----------   ------------   ------------   ------------   ------------
BALANCE, DECEMBER 29, 2000       12,132,990     1,000           --             --      8,329,000     43,342,000     51,672,000

  Exercise of stock options             875        --           --             --          1,000             --          1,000
  Net loss                               --        --           --             --             --     (5,072,000)    (5,072,000)
                                -----------   -------   ----------   ------------   ------------   ------------   ------------
BALANCE, DECEMBER 28, 2001       12,133,865   $ 1,000           --   $         --   $  8,330,000   $ 38,270,000   $ 46,601,000
                                ===========   =======   ==========   ============   ============   ============   ============
</TABLE>

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


                                      18
<PAGE>


Consolidated Statements of Cash Flows
Southern Energy Homes, Inc. and subsidiaries


<TABLE>
<CAPTION>
                                                                                          Year Ended
                                                                     -----------------------------------------------------
                                                                     December 28,         December 29,         December 31,
                                                                         2001                2000                 1999
                                                                     ------------         ------------         -----------
                                                                      (52 Weeks)           (52 Weeks)           (52 Weeks)
                                                                     ------------         ------------         -----------
<S>                                                                  <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                             $ (5,072,000)        $(17,112,000)        $(1,593,000)
                                                                     ------------         ------------         -----------
Adjustments to reconcile net loss to net cash provided
  by operating activities:
      Equity (income) loss of joint ventures                             (365,000)             293,000          (1,317,000)
      Impairment charges                                                2,240,000            6,039,000           7,073,000
      Depreciation of property, plant and equipment                     2,504,000            2,551,000           2,743,000
      Provision (credit) for deferred income taxes                        349,000            3,962,000          (2,392,000)
      (Gain) loss on sale of property, plant and equipment                394,000              255,000             (26,000)
      Loss on sale of retail centers                                           --                   --               9,000
      Amortization of intangibles                                         305,000              436,000             671,000
      Provision for doubtful accounts receivable                          156,000               63,000             313,000
      Provision for credit losses on installment contracts                854,000            1,719,000             524,000
      Origination of installment contracts                             (7,300,000)          (2,541,000)         (1,197,000)
      Principal collected on originated installment contracts           2,479,000            1,914,000             206,000
   Change in assets and liabilities:
      Accounts receivable                                               6,252,000            3,274,000           4,749,000
      Inventories                                                       4,522,000           11,215,000             164,000
      Prepayments and other                                             1,086,000             (953,000)             56,000
      Refundable income taxes                                           4,706,000           (2,476,000)         (2,579,000)
      Accounts payable                                                   (594,000)          (2,205,000)           (225,000)
      Accrued liabilities                                              (1,270,000)          (3,306,000)         (4,544,000)
                                                                     ------------         ------------         -----------
            Total adjustments                                          16,318,000           20,240,000           4,228,000
                                                                     ------------         ------------         -----------
            Net cash provided by operating activities                  11,246,000            3,128,000           2,635,000
                                                                     ------------         ------------         -----------
  CASH FLOWS FROM INVESTING ACTIVITIES:
      Capital expenditures                                             (1,064,000)          (1,803,000)         (3,255,000)
      Investments in joint ventures                                      (146,000)            (445,000)            (88,000)
      Distributions from joint ventures                                   371,000              442,000             640,000
      Proceeds from sale of property, plant and equipment               1,154,000               88,000             104,000
      Proceeds from sale of retail centers                                     --                   --             594,000
                                                                     ------------         ------------         -----------
             Net cash provided by (used in) investing
               activities                                                 315,000           (1,718,000)         (2,005,000)
                                                                     ------------         ------------         -----------
   CASH FLOWS FROM FINANCING ACTIVITIES:
      Repurchase of treasury stock                                             --                   --          (3,072,000)
      Net borrowings (repayments) on notes payable                    (17,085,000)          (1,133,000)          8,626,000
      Repayments of long-term debt                                             --           (3,565,000)         (1,103,000)
      Proceeds from sale of installment contracts                         929,000                   --                  --
      Payment of debt issuance costs                                   (1,106,000)                  --                  --
      Proceeds from exercise of stock options                               1,000                   --                  --
                                                                     ------------         ------------         -----------
             Net cash provided by (used in) financing
               activities                                             (17,261,000)          (4,698,000)          4,451,000
                                                                     ------------         ------------         -----------
   Net increase (decrease) in cash and cash equivalents                (5,700,000)          (3,288,000)          5,081,000
   Cash and cash equivalents at beginning of period                     6,054,000            9,342,000           4,261,000
                                                                     ------------         ------------         -----------
   Cash and cash equivalents at end of period                        $    354,000         $  6,054,000         $ 9,342,000
                                                                     ============         ============         ===========
   SUPPLEMENTAL CASH FLOW INFORMATION:
      Cash paid for interest                                         $  1,947,000         $  1,993,000         $ 2,071,000
      Cash paid (refunded) for income taxes                          $ (5,124,000)        $ (2,197,000)        $ 4,210,000
   NON-CASH TRANSACTION:
       Receivable settled with property                              $     63,000         $         --         $        --
</TABLE>

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


                                      19
<PAGE>


                   Notes to Consolidated Financial Statements


Southern Energy Homes, Inc. and subsidiaries

1.       THE COMPANY AND BASIS OF PRESENTATION:

         Southern Energy Homes, Inc. (the "Company") has four reportable
segments: manufacturing, retail, component supply and consumer financing. The
Company produces manufactured homes, primarily on a custom basis, for wholesale
to dealers located primarily in the southeastern and south central regions of
the United States. Retail sales are concentrated in the southeastern United
States. The component supply segment sells various supply products to the
Company's manufacturing segment and to third party customers. The Company
offers consumer financing for homes manufactured by the Company as well as
other homes sold through its retail centers and independent dealers through a
joint venture, Wenco 21 (see Note 4).

         The Company is on a 52/53-week year with the fiscal year ending on the
Friday closest to the last day of December. The 2001, 2000, and 1999 fiscal
years included 52 weeks.

         The Company's business is seasonal and cyclical with the potential for
significant fluctuations in earnings being affected by factors impacting the
broader housing market, including the availability and cost of customer
financing and changes in the cost of construction materials.

         The manufactured housing industry as a whole, has been adversely
affected by various economic factors, and has struggled during most of the past
three years. Rapid industry growth over the 10 years preceding this three year
period resulted in an increase in the overall number of dealers, an increase in
manufacturing output and an increase in the number of homes available at the
retail level. These larger inventories and the generally slower reduction of
those inventories has led to increased price competition and reduced profits.
Tightening credit has compounded the situation and negatively affected the
industry's overall financial performance with virtually all manufacturers and
retailers being negatively affected. While the Company is still experiencing
the negative economic factors influencing financial performance of the entire
manufactured housing industry, it has taken a number of steps to decrease costs
and improve efficiency. Weak markets still persist, however, including
industry-wide excess retail inventory and more restrictive retail financing
conditions for consumers. Although management plans to remain attentive to its
focus on being responsive to changing industry conditions and believes that it
is positioned to implement further measures necessary to respond to these
changes, there can be no assurance that these conditions will not result in
future declines in wholesale and retail revenues and related net profit
margins, which could have a material adverse effect on the company's future
operating results and liquidity.

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

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CONSOLIDATION

         The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated in the consolidated financial statements.

INVESTMENTS IN JOINT VENTURES

         The Company accounts for its investments of 50% or less in joint
ventures, where it does not have the ability to control, on the equity basis of
accounting. Therefore, the Company's share of income/loss is recorded as equity
income/loss from its ventures in the accompanying consolidated statements of
operations (see Note 4).

CASH AND CASH EQUIVALENTS

         For purposes of reporting cash flows, the Company considers cash and
cash equivalents to include cash on hand and highly liquid debt instruments and
investments purchased with an original maturity of three months or less.

ADVERTISING COSTS

         Advertising costs are expensed as incurred and totaled $1,493,000,
$1,916,000 and $2,473,000 for 2001, 2000 and 1999, respectively.


                                      20
<PAGE>


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>
                            December 28,           December 29,
                               2001                   2000
                            -----------            -----------
<S>                         <C>                    <C>
Raw Materials               $ 4,657,000            $ 5,569,000
Work In Progress                592,000                551,000
Finished Goods               14,390,000             18,041,000
                            -----------            -----------
                            $19,639,000            $24,161,000
                            ===========            ===========
</TABLE>

PROPERTY, PLANT, AND EQUIPMENT

         Property, plant, and equipment are recorded at cost. Depreciation is
computed on the straight-line, accelerated cost recovery system or modified
accelerated cost recovery system methods over the estimated service lives of
depreciable assets (5-39 years for buildings and improvements, 3-10 years for
machinery and equipment, 5-10 years for office and computer equipment, and 7-10
years for leasehold improvements, which is the lesser of the lease term or the
asset's useful life). Cost of property, plant, and equipment is as follows:


<TABLE>
<CAPTION>
                                         December 28,           December 29,
                                            2001                    2000
                                         -----------            -----------
<S>                                      <C>                    <C>
Land                                     $   411,000            $   501,000
Buildings and improvements                15,380,000             16,749,000
Machinery and equipment                   10,803,000             10,757,000
Office and computer equipment              4,827,000              4,782,000
Leasehold improvements                     1,942,000              1,842,000
Construction in progress                   1,402,000              1,557,000
                                         -----------            -----------
                                         $34,765,000            $36,188,000
                                         ===========            ===========
</TABLE>

         Maintenance and repairs are charged to expense as incurred;
expenditures for renewals and betterments are capitalized. When assets are
retired or otherwise disposed of, the property, plant and equipment accounts
are relieved of cost and accumulated depreciation and any resulting gain or
loss is credited or charged to income.

INTANGIBLE ASSETS

         The intangible assets recorded by the Company in connection with
various acquisitions primarily consist of goodwill which is being amortized on
a straight-line basis over 30 years. As of December 28, 2001 and December 29,
2000, accumulated amortization of intangibles amounted to $2,681,000 and
$3,990,000, respectively (see Note 9).

LONG-LIVED ASSETS

         The Company continually evaluates whether events and circumstances
have occurred that indicate that the remaining balance of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used in the operations of the Company may be impaired and not be
recoverable. In performing this evaluation, the Company uses an estimate of the
related cash flows expected to result from the use of the asset and its
eventual disposition. When this evaluation indicates the asset has been
impaired, the Company will measure such impairment based on the asset's fair
value and the amount of such impairment is charged to earnings (see Note 9).

COMPUTER SOFTWARE COSTS

         The Company capitalizes external direct costs of materials and
services; payroll and payroll-related costs for employees directly associated
with developing or obtaining computer software. Capitalized costs of computer
software developed or obtained for internal use are amortized on a
straight-line basis.

INSTALLMENT CONTRACTS RECEIVABLE

         The majority of the installment contracts receivable is from borrowers
in the southern portion of the United States and is collateralized by
manufactured homes and real estate. Foreclosed installment contracts receivable
that are not liquidated are written down to an estimated recoverable amount and
reclassified as collateral held for resale and included in inventories.

         The allowance for credit losses is established to provide for losses
inherent in the installment contracts receivable portfolio. The allowance for
credit losses is determined based on the Company's historical loss experience
and consideration of current economic




                                      21
<PAGE>


conditions. Management, after assessing the loss experience and economic
conditions, adjusts the allowance account through periodic provisions. Actual
credit losses are charged to the allowance when realized.

         An analysis of the allowance for losses on installment contracts
receivable is as follows:


<TABLE>
<CAPTION>
                                       December 28,            December 29,            December 31,
                                          2001                    2000                    1999
                                       -----------             -----------             -----------
<S>                                    <C>                     <C>                     <C>
Balance, beginning of year             $   850,000             $   357,000             $ 295,000
Provision for credit losses                854,000               1,719,000               524,000
Charge-offs                               (554,000)             (1,226,000)             (462,000)
                                       -----------             -----------             ---------
Balance, end of year                   $ 1,150,000             $   850,000             $ 357,000
                                       ===========             ===========             =========
</TABLE>

RETAINED INTERESTS IN INSTALLMENT CONTRACTS RECEIVABLE SOLD

         In September 2000, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, which replaced SFAS No. 125. SFAS No. 140 revises the standards
for accounting for securitization and other transfers of financial assets and
collateral and requires certain disclosures. The adoption of this statement by
the Company did not have any impact on the Company's reported results of
operations, financial position or cash flows. SFAS 140 requires that the
carrying amount of the receivables sold be allocated between the assets sold
and the assets (liabilities) created, if any, based upon their estimated fair
value at the date of sale. The assets (liabilities) created by the Company
include an interest-only strip valued as the discounted present value of the
estimated excess interest due the Company during the expected life of the
contracts over: 1) the stated investor yield, 2) the contractual servicing fee,
and 3) the estimated credit losses. Profit (loss) recorded at the time of the
sale is computed as the difference between the allocated carrying amount of the
receivables sold and the proceeds realized from the sale.

         Interest-only securities represent the right to receive future cash
flows from securitization transactions. Such cash flows generally are equal to
the value of the principal and interest to be collected on the underlying
financial contracts of each securitization in excess of the sum of the
principal and interest to be paid on the securities sold and contractual
servicing fee, less estimated credit losses. The Company carries interest-only
securities at estimated fair value. As market quotes are generally not
available, fair value is determined by discounting the projected cash flows
over the expected life of the receivables sold using current prepayment,
default, loss, and interest rate assumptions. Estimates for prepayments,
defaults, and losses are determined based on a model developed by the Company
and refined to reflect Company-specific experience and trends.

The residual interests in the installment receivables sold are classified as
available-for-sale securities, as defined by SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Changes in the fair value of
these residual interests are not material to the Company's consolidated
financial statements.

VOLUME INCENTIVE PAYABLE

         The Company provides rebates to dealers based upon a predetermined
formula applied to the volume of homes sold to the dealer during the year. Such
rebates (reflected as a reduction of gross revenues) are recorded at the time
sales to independent dealers are recognized.

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 will be made as events occur which indicate changes
are necessary.

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 $300,000 per occurrence, and for all
health-care claims in excess of $75,000 per occurrence (with an annual
aggregate stop-loss limit of approximately $5.7 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 which indicate changes are necessary.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying value of the Company's cash equivalents, accounts
receivable, accounts payable, accrued expenses, and notes payable approximates
fair value because of the short-term nature of these instruments. At December
28, 2001 and December 29, 2000,


                                      22
<PAGE>


the estimated fair value of installment contracts receivable approximated
carrying value. These fair values were estimated using discounted cash flows
and interest rates offered by Wenco on similar contracts at such times.

REVENUE RECOGNITION

         With respect to its manufacturing segment the Company recognizes
revenue upon delivery of the home to the dealers lot.

         Effective with the beginning of the fourth quarter of 2001 the Company
revised its criteria for recognizing revenue from retail operations to require
that the buyers' purchases be fully funded, in addition to meeting all other
purchase criteria previously required by the Company. The effect of the change
in the Company's procedures is not material to the year. Accordingly, with
respect to its retail operations, the Company now recognizes revenue on retail
sales when: cash payment is received, or in the case of credit sales, which
represent the majority of retail sales, when a down payment is received and the
home buyer enters into an installment sales contract; construction of the home
is complete; the home buyer has inspected and accepted the home; and the retail
sale is funded.

         Interest income from installment contract receivables is recognized
using the interest method. Accrual of interest income on installment contract
receivables is suspended when a loan is contractually delinquent for 90 days or
more. Interest accrual resumes when the loan becomes contractually current, and
past-due interest income is recognized at that time. Income on residual
interests held related to loans that have been previously sold represents cash
collected adjusted for amortization.

STOCK-BASED COMPENSATION

         The Company accounts for its stock options under the intrinsic value
method and, accordingly, no compensation cost is recognized for options granted
where the option exercise price is equal to or greater than the market value of
the Company's common stock at the date of grant.

SHIPPING FEES AND COSTS

         Shipping revenues are included as a component of net revenues. Total
shipping costs, which were included in selling, general and administrative
expenses were $7,224,000, $9,575,000, and $11,637,000, during 2001, 2000, and
1999, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the FASB issued SFAS No. 141, Business Combinations,
which establishes new accounting and reporting standards for business
combinations and supersedes Accounting Principles Board ("APB") Opinion No.16.
All business combinations initiated after June 30, 2001 must now be accounted
for using the purchase method of accounting.

         Also in June 2001, the FASB issued Statement No. 142, Goodwill and
Other Intangible Asset, which establishes new accounting and reporting
standards for acquired goodwill and other intangible assets and supersedes APB
Opinion No. 17. It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for upon acquisition and on an
ongoing basis. Goodwill and intangible assets that have indefinite useful lives
will not be amortized but rather will be tested at least annually for
impairment. Intangible assets that have finite useful lives will continue to be
amortized over their useful lives, which are no longer limited to 40 years. The
provisions of SFAS No. 142 are effective beginning in fiscal 2002. Amortization
of goodwill during fiscal 2001 amounted to approximately $248,000. Aside from
the impact of discontinuing amortization the Company is in the process of
evaluating whether there would be any potential impairment under the new
standard.

         In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-lived Assets, which superseded both SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, and the accounting and reporting provisions for the
disposal of a segment of a business contained in APB Opinion No. 30, Reporting
the Results of Operations--Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. SFAS No. 144 establishes a single accounting model for long-lived
assets to be disposed of by sale and broadens the presentation for discontinued
operations. The provisions of the SFAS No. 144 are effective beginning in 2002
and are not expected to have a material impact on the Company's financial
statements.

PRIOR YEAR RECLASSIFICATIONS

         Certain prior year amounts have been reclassified to conform to the
current year presentation.

3.       EARNINGS PER SHARE:

         At December 28, 2001, December 29, 2000 and December 31, 1999,
1,222,871, 928,871 and 604,708 outstanding options were excluded from the
weighted average number of common shares, on a diluted basis, as they were
antidilutive.


                                      23
<PAGE>


4.       INVESTMENTS IN JOINT VENTURES:

         The Company owns interests in five joint ventures. The Company owns a
39% interest in, WoodPerfect, Inc., a manufacturing joint venture, which
produces rafters used in the production of the Company's homes. The Company
owns a 50% interest in Wenco 21, LLC, an entity that originates installment
contracts. The Company owns 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 Company also owns 25% of WoodPerfect of Texas, Inc., which
manufactures rafters used in the production of manufactured homes. The Company
owns 25% interest in Hillsboro Manufacturing, Inc., which manufactures laminate
wallboard (see Note 9). An analysis of these joint ventures follows:


<TABLE>
<CAPTION>
                                                              2001                   2000                    1999
                                                            ---------             -----------             -----------
<S>                                                         <C>                   <C>                     <C>
Equity in income (loss) of joint venture:
     WoodPerfect, Inc.                                      $ 399,000             $    88,000             $   686,000
     Wenco 21, LLC                                            (20,000)                 78,000                 214,000
     Ridge Pointe Mfg., LLC                                   174,000                  64,000                 417,000
     WoodPerfect of Texas, Inc.                              (131,000)               (478,000)                     --
     Hillsboro Manufacturing, Inc.                            (57,000)                (45,000)                     --
                                                            ---------             -----------             -----------
                                                            $ 365,000             $  (293,000)            $ 1,317,000
                                                            =========             ===========             ===========

(Investment in) distribution from joint venture:
     WoodPerfect, Inc.                                      $  38,000             $   260,000             $   240,000
     Wenco 21, LLC                                                 --                      --                      --
     Ridge Pointe Mfg., LLC                                   333,000                      --                 400,000
     WoodPerfect of Texas, Inc.                              (131,000)               (445,000)                (88,000)
     Hillsboro Manufacturing, Inc.                            (15,000)                182,000                      --
                                                            ---------             -----------             -----------
                                                            $ 225,000             $    (3,000)            $   552,000
                                                            =========             ===========             ===========
</TABLE>


5.       INCOME TAXES:

         The provision (benefit) for income taxes for the respective periods
ended was as follows:


<TABLE>
<CAPTION>
                                  December 28,            December 29,            December 31,
                                      2001                    2000                   1999
                                  -----------             -----------             -----------
<S>                               <C>                     <C>                     <C>
Current:
    Federal                       $  (304,000)            $(3,738,000)            $ 1,196,000
    State                             (45,000)               (550,000)                176,000
                                  -----------             -----------             -----------
                                     (349,000)             (4,288,000)              1,372,000
                                  -----------             -----------             -----------
Deferred:
    Federal                          (307,000)               (393,000)             (2,085,000)
    State                             (45,000)                (57,000)               (307,000)
                                  -----------             -----------             -----------
                                     (352,000)               (450,000)             (2,392,000)
                                  -----------             -----------             -----------
   Valuation Allowance                701,000               4,412,000                      --
                                  -----------             -----------             -----------
                                  $        --             $  (326,000)            $(1,020,000)
                                  ===========             ===========             ===========
</TABLE>


                                      24
<PAGE>


         The provision (benefit) for income taxes differed from the amounts
computed by applying the federal statutory rate of 34% in fiscal year 2001,
2000, and 1999 due to the following:


<TABLE>
<CAPTION>
                                                                 December 28,            December 29,            December 31,
                                                                    2001                     2000                    1999
                                                                 -----------             -----------             -----------
<S>                                                              <C>                     <C>                     <C>
Tax provision (benefit) at the federal statutory rate            $(1,724,000)            $(5,929,000)            $  (888,000)
Change in valuation allowance                                        701,000               4,412,000                      --
State income taxes (benefit), net of federal benefit                 (59,000)               (401,000)                (86,000)
Goodwill amortization and impairment charges                         637,000               1,157,000                 117,000
Other                                                                445,000                 435,000                (163,000)
                                                                 -----------             -----------             -----------
                                                                 $        --             $  (326,000)            $(1,020,000)
                                                                 ===========             ===========             ===========
</TABLE>


Temporary differences which created net deferred tax benefits at December 28,
2001 and December 29, 2000 are as follows:


<TABLE>
<CAPTION>
                                                                December 28,            December 29,
                                                                   2001                    2000
                                                                -----------             -----------
<S>                                                             <C>                     <C>
Deferred tax benefits:
     Warranty accrual                                           $   903,000             $   960,000
     Workers' compensation accrual                                  843,000                 605,000
     Accrued expenses                                             1,271,000                 978,000
     Organization and pre-operating costs                                --                 373,000
     Federal and State operating loss carry forwards              2,244,000               2,018,000
     Other                                                          560,000                 546,000
                                                                -----------             -----------
                                                                  5,821,000               5,480,000
                                                                -----------             -----------
Deferred tax liabilities:
     Depreciation                                                   467,000                 327,000
     Other                                                          241,000                 392,000
                                                                -----------             -----------
                                                                    708,000                 719,000
                                                                -----------             -----------
                                                                  5,113,000               4,761,000
Valuation allowance                                              (5,113,000)             (4,412,000)
                                                                -----------             -----------
     Net deferred taxes                                         $        --             $   349,000
                                                                ===========             ===========
</TABLE>

         During fiscal 2000, the Company recorded a valuation allowance of $4.4
million related to deferred income tax assets in accordance with the provisions
of SFAS No. 109. During 2001, the valuation allowance was increased by
$701,000. Because the Company has operated at a loss in recent fiscal years and
because management believes difficult competitive conditions will continue for
the foreseeable future, management believes that under the provisions of SFAS
No. 109, it is no longer appropriate to record income tax benefits on current
losses in excess of anticipated refunds of taxes previously paid. The Company
has established valuation allowances against the tax benefits of all its net
operating loss carry forwards and deductible temporary differences between
financial and taxable income as realization of the assets was not considered
more likely than not. The elimination of the valuation allowance will be
determined based on events indicating the Company's return to profitability.
The Company's federal operating loss carry forwards amounted to approximately
$664,000 and expires in 2021.

6.       NOTES PAYABLE:

         The Company routinely finances inventory of homes held by its retail
centers through floor-plan notes payable with various financial institutions.
The notes normally require periodic payments of principal and interest, and
full payments when the home is sold to a customer. The weighted average
interest rates on these borrowings during 2001 and 2000 were 7.75% and 10.0%,
respectively. These notes payable at December 28, 2001 and December 29, 2000
amounted to $401,000 and $8,049,000, respectively.

          During fiscal 2001, the Company financed a portion of its retail
inventory with a $40 million secured bank line of credit, which matures on
March 8, 2004 and bears interest at the Prime Rate plus 1% (5.75% at December
28, 2001). The weighted average interest rates on these borrowings during 2001
and 2000 were 7.62% and 7.85%, respectively. The line of credit is secured by
substantially all of the Company's assets. At December 28, 2001 the Company's
availability on the line of credit was $12,097,000. The Company's ability to
draw upon this line of credit is dependent upon its continued compliance with
certain financial ratios and covenants. The Company had outstanding borrowings
of $10.6 million and $20 million at December 28, 2001 and December 29, 2000,
respectively.


                                      25
<PAGE>


7.       COMMITMENTS AND CONTINGENCIES:

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 which 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 plus certain administrative and
shipping expenses. Repurchases were $4.2 million, $8.7 million, and $4.9
million, for the years ended 2001, 2000, and 1999, respectively. At December
28, 2001, the Company's contingent repurchase liability under floor plan
financing arrangements through independent dealers was approximately $44
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 which 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. The Company is also obligated to
repurchase homes financed by Wenco 21, LLC upon a third payment default for 50%
of the outstanding loan balance. The Company's potential exposure under this
commitment is approximately $5.9 million.

INTEREST REIMBURSEMENT

         The Company has agreements with certain dealers to reimburse them for
their interest costs incurred in connection with floor-plan financing. Interest
expense related to these agreements is classified as a selling expense in the
accompanying consolidated statements of operations. For the years ended
December 28, 2001, December 29, 2000, and December 31, 1999, interest expense
related to these agreements amounted to $954,000, $1,238,000, and $979,000,
respectively.

OPERATING LEASES

         The Company leases certain manufacturing facilities and retail sales
centers under operating leases. Rent expense under all leases was $1.1 million
for the year ended December 28, 2001, $1.5 million for the year ended December
29, 2000, and $1.6 million for the year ended December 31, 1999. Future minimum
lease payments for each of the next five years at December 28, 2001, are $0.6
million, $0.3 million, $0.2 million, $0.1 million and $0.1 million,
respectively.

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.

8.       EMPLOYEE BENEFIT PLANS:

         The Company maintains a stock option plan, which authorizes a total of
1,500,000 shares of Company common stock for issuance to key employees and
advisors. The Company granted options to acquire 319,250, 330,250, and 96,330
shares of common stock in 2001, 2000, and 1999, respectively. The exercise
prices of the options approximated the fair market value of the Company's
common stock at the date of grant. At December 28, 2001, options under the plan
described above to purchase 997,934 shares were exercisable. Total options
outstanding under the plan described above were 1,129,121 at December 28, 2001.

         The Company also maintains a stock option plan, which authorizes a
total of 100,000 shares of Company common stock for issuance to the Company's
outside directors. In 2001, 2000, and 1999, the Company granted options to
acquire 22,500, 22,500, and 11,250, respectively, shares of common stock each
year to certain outside directors. The exercise prices of the options
approximated the fair market value of the Company's common stock at the date of
grant. At December 28, 2001, options to purchase 93,750 shares were
exercisable. Total options outstanding were 93,750 at December 28, 2001.

         The Company accounts for these plans under APB Opinion No. 25, under
which no compensation cost is recognized for options that are issued with
exercise prices that approximate the fair market value of the Company's common
stock on the date of grant. Had compensation expense for the Company's stock
option plans for awards in 2001, 2000, and 1999, been determined under SFAS No.
123, Accounting for Stock-Based Compensation, based on the fair market value of
the options at the grant date, the Company's net income and income per share
would have been reduced to the pro forma amounts indicated below:


                                      26
<PAGE>


<TABLE>
<CAPTION>
                                                           2001                      2000                       1999
                                                       -------------             --------------             -------------
<S>                                                    <C>                       <C>                        <C>
Net income (loss) - as reported                        $  (5,072,000)            $  (17,112,000)            $  (1,593,000)
Net income (loss) - pro forma                          $  (5,422,000)            $  (17,437,000)            $  (1,707,000)
As reported - net  income (loss) per share:
                      Basic                            $       (0.42)            $        (1.41)            $       (0.13)
                      Diluted                          $       (0.42)            $        (1.41)            $       (0.13)
Pro forma - net income (loss) per share:
                      Basic                            $       (0.45)            $        (1.44)            $       (0.14)
                      Diluted                          $       (0.45)            $        (1.44)            $       (0.14)
</TABLE>


The following table summarizes the changes in the number of shares under option
pursuant to the plans described above:


<TABLE>
<CAPTION>
                                                         Weighted                      Weighted                     Weighted
                                                         Average                       Average                      Average
                                       December 28,      Exercise      December 29,    Exercise     December 31,    Exercise
                                          2001             Price           2000          Price          1999          Price
                                       -----------       --------      -----------     --------     ------------    --------
<S>                                    <C>               <C>           <C>             <C>          <C>             <C>
Outstanding at beginning of year           928,871         $3.83         604,708         $5.19         598,964         $5.83
Granted                                    341,750          1.61         352,750          1.06         107,580          2.66
Exercised                                     (875)         1.65              --            --              --            --
Forfeited                                  (46,875)         3.18         (28,587)         4.08        (101,836)         6.26
                                        ----------         -----        --------         -----        --------         -----
Outstanding at end of year               1,222,871         $3.24         928,871         $3.83         604,708         $5.19
                                        ==========         =====        ========         =====        ========         =====
Exercisable at end of year               1,091,684         $3.44         789,144         $4.17         525,328         $5.45
Weighted average fair value of
options granted                                            $1.03                         $0.75                         $1.63
</TABLE>

The following table summarizes information about stock options outstanding at
December 28, 2001:


<TABLE>
<CAPTION>
                                       Options Outstanding                            Options Exercisable
                        --------------------------------------------------      --------------------------------
                            Number          Weighted-                             Number
                        Outstanding at       Average          Weighted-         Exercisable         Weighted-
  Range of               December 28,       Remaining          Average          December 28,         Average
Exercise Prices              2001        Contractual Life   Exercise Price         2001           Exercise Price
---------------         --------------   ----------------   --------------      ------------      --------------
<S>                     <C>              <C>                <C>                 <C>               <C>
    Under 2.44              636,750            8.91            $ 1.31              510,500            $ 1.28
   2.44 - 2.57               94,030            8.39              2.46               94,030              2.46
   2.58 - 4.53               11,250            7.43              4.53               11,250              4.53
   4.54 - 5.50              443,341            5.61              5.50              438,404              5.50
5.51 and above               37,500            5.47             10.80               37,500             10.80
                          ---------            ----            ------            ---------            ------

                          1,222,871            7.31            $ 3.24            1,091,684            $ 3.44
                          =========            ====            ======            =========            ======
</TABLE>


         The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 2001, 2000, and 1999:


<TABLE>
<CAPTION>
                                    2001              2000              1999
                                    ----              ----              ----
<S>                                 <C>               <C>               <C>
Dividend yield                      0.00%             0.00%             0.00%
Expected volatility                   74%               50%               67%
Risk-free interest rate             5.09%             6.47%             6.08%
Expected life (years)                  5                10                 5
</TABLE>

         Of the options granted in 2001, 247,500 options are exercisable
immediately and the remainder become exercisable equally over two years.
Vesting of the 2000 grants is 247,500 options vesting immediately and the
remainder vesting equally over two years. Vesting of the 1999 grants is 56,250
options vesting immediately and the remainder vesting equally over two years.

         The Company offers a 401(k) retirement plan to employees having
completed one year of service, whereby eligible employees may contribute up to
20% of their annual compensation subject to limitations by the Internal Revenue
Service. The


                                      27
<PAGE>


Company may match up to 100% of the employee contributions as limited by the
Internal Revenue Service. For the years ended December 28, 2001, December 29,
2000, and December 31, 1999, the Company expensed $84,000, $98,000, and
$101,000, respectively, related to the plan.

9.       IMPAIRMENT AND OTHER CHARGES:

         During 2001, the Company recorded an impairment charge of $1.6 million
for the remaining goodwill related to its retail operations segment. The
decision was based primarily on continued losses at the two retail centers
where the goodwill was recorded. Fair value was determined by management based
on the best information available such as the value received in connection with
the closure of other retail centers. Although these amounts represent
management's best estimate of total costs to close these centers, the actual
cost could ultimately differ from these amounts. The Company continues to
evaluate its unprofitable retail centers and future retail center closings
could happen which would result in further impairment charges. However, such
charges would not be material to the Company's results of operations. The
Company also recorded a charge related to its investment in one of the
Company's manufacturing joint ventures of $603,000 due to losses of this joint
venture.

         During 2000, the Company decided to close eleven retail centers. The
decision was based primarily on losses incurred at these centers. In connection
with the decision to close these retail centers, the Company recorded a pre-tax
charge of $6.0 million consisting of the impairment of the intangible assets
and exit costs associated with rental commitments and leasehold improvements on
retail centers which the Company had committed to close. The Company recorded
these amounts as an impairment charge in the accompanying statement of
operations for the fiscal year ended December 29, 2000.

         During 1999, the Company recorded a pre-tax charge of $6.4 million
associated with the closing of its manufacturing facility in North Carolina.
During 2001, the Company sold the North Carolina facility for proceeds of
$1,017,000 and recorded a loss on the sale of $209,000. During 1999, the
Company also recorded a pre-tax charge of $686,000 associated with the closing
of three retail centers, one in Kentucky and two in South Carolina.

         Although these amounts represent management's best estimate of total
costs to close these centers, the actual cost could ultimately differ from
these amounts. The Company continues to evaluate its unprofitable retail
centers and future retail center closings could happen which would result in
further impairment charges. However, such charges would not be material to the
Company's results of operation.

10.      SEGMENT AND RELATED INFORMATION:

         The Company has four reportable segments: manufacturing, retail
operations, component supply and consumer financing. The manufacturing segment
produces manufactured homes for sale to independent and company-owned retail
centers. The retail operations segment sells homes to retail customers which
have been produced by the Company's manufacturing segment and various other
manufacturers. The component supply segment sells various supply products to
the Company's manufacturing segment and to third party customers. The consumer
financing segment originated and serviced consumer loans primarily for homes
manufactured by the Company through February 1997. Wenco Finance has now
restricted its loan origination activities and engaged 21st Mortgage to service
its existing loan portfolio. Wenco 21, the Company's joint venture, continues
to offer consumer financing for homes manufactured by the Company, as well as
for other homes sold through its retail centers and independent dealers.

         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.


                                      28
<PAGE>


         The following table presents information about segment profit or loss
(dollars in thousands):


<TABLE>
<CAPTION>
                                                           2001                 2000                  1999
                                                        --------              --------              --------
<S>                                                     <C>                   <C>                   <C>
REVENUES:
    Manufacturing                                       $134,594              $151,963              $215,721
    Retail Operations                                     37,222                49,565                63,996
    Component Supply                                      23,342                30,097                46,892
    Consumer Financing                                     1,153                 1,138                 1,266
    Other Operating Segments                               3,439                 8,091                 9,655
    Eliminations                                         (41,803)              (55,466)              (73,632)
                                                        --------              --------              --------
Total Revenues                                          $157,947              $185,388              $263,898
                                                        ========              ========              ========

GROSS PROFIT:
    Manufacturing                                       $ 22,278              $ 21,113              $ 30,682
    Retail Operations                                     10,370                11,822                18,127
    Component Supply                                       2,064                 2,376                 3,858
    Consumer Financing                                       530                   230                   441
    Other Operating Segments                               2,673                 5,713                 7,607
    Eliminations                                          (3,321)               (6,957)               (8,646)
                                                        --------              --------              --------
Gross Profit                                              34,594                34,297                52,069
                                                        ========              ========              ========

SEGMENT NET INCOME (LOSS) BEFORE TAX:
    Manufacturing                                          5,027                 2,253                   (34)
    Retail Operations                                     (7,532)              (16,048)               (4,818)
    Component Supply                                       1,114                 1,064                 2,297
    Consumer Financing                                      (134)               (1,298)                   37
    Corporate                                             (3,444)               (3,894)                 (888)
    Other operating segments                                (103)                  485                   793
                                                        --------              --------              --------
Segment net loss before tax                               (5,072)              (17,438)               (2,613)

Income / expenses not allocated to segments:
    Benefit (provision) for income taxes                      --                   326                 1,020
                                                        --------              --------              --------
Net Loss                                                $ (5,072)             $(17,112)             $ (1,593)
                                                        ========              ========              ========
</TABLE>


Revenue from segments below the quantitative thresholds are attributable to two
other operating segments of the Company which include a trucking business
(closed in July 2001) and a small insurance business. These segments have never
met the quantitative thresholds for determining reportable segments. The
Corporate segment does not generate any revenues, but does incur certain
administrative expenses.


                                      29
<PAGE>


A summary of identifiable assets, depreciation and amortization, and capital
additions for the years ended 2001, 2000, and 1999, is as follows:


<TABLE>
<CAPTION>
                                         Identifiable          Depreciation and          Capital
                                            Assets               Amortization           Additions
                                         ------------          ----------------         ----------
<S>                                      <C>                      <C>                   <C>
2001:
    Manufacturing                        $ 19,252,000             $  925,000            $  608,000
    Retail Operations                      22,603,000                421,000                60,000
    Component Supply                        3,601,000                234,000                 2,000
    Consumer Financing                     12,495,000                 40,000                    --
    Corporate                              17,654,000              1,517,000               394,000
    Other Operating Segments                   48,000                  2,000                    --
    Eliminations                           (3,102,000)                    --                    --
                                         ------------             ----------            ----------
    Consolidated                         $ 72,551,000             $3,139,000            $1,064,000
                                         ============             ==========            ==========

2000:
    Manufacturing                        $ 23,624,000             $1,141,000            $  244,000
    Retail Operations                      30,645,000                616,000               677,000
    Component Supply                        4,147,000                246,000               109,000
    Consumer Financing                     12,596,000                     --                    --
    Corporate                              27,906,000                976,000               773,000
    Other Operating Segments                  336,000                  8,000                    --
    Eliminations                           (2,683,000)                    --                    --
                                         ------------             ----------            ----------
    Consolidated                         $ 96,571,000             $2,987,000            $1,803,000
                                         ============             ==========            ==========


1999:
    Manufacturing                        $ 27,699,000             $1,522,000            $  679,000
    Retail Operations                      44,686,000                763,000               812,000
    Component Supply                        5,939,000                248,000                95,000
    Consumer Financing                     14,225,000                     --                    --
    Corporate                              33,385,000                874,000             1,669,000
    Other Operating Segments                1,091,000                  7,000                    --
    Eliminations                           (5,011,000)                    --                    --
                                         ------------             ----------            ----------
    Consolidated                         $122,014,000             $3,414,000            $3,255,000
                                         ============             ==========            ==========
</TABLE>

11.      RELATED PARTY TRANSACTIONS:

         The Company had sales to a development company affiliated with certain
stockholders who were also executive officers of the Company during the years
ended December 28, 2001, December 29, 2000, and December 31, 1999, which
amounted to $52,000, $44,000, and $203,000, respectively.

12.      SUBSEQUENT EVENT (UNAUDITED):

         In March 2002, Congress passed an economic stimulus bill containing
certain temporary business tax incentives. The tax provisions in the stimulus
bill will extend the net operating loss ("NOL") carryback period to five years
for NOLs arising in tax years ending in 2001 and 2002, and allow use of NOL
carrybacks and carryforwards to offset 100 percent of alternative minimum
taxable income (AMTI). These NOL carryback provisions will allow the Company to
carry its loss back to 1996 and the years following. With this change, there is
sufficient taxable income to offset all of the NOL generated in 2001.

         The bill also allows an additional first-year depreciation deduction
equal to 30 percent of the adjusted basis of qualified property acquired after
September 10, 2001, and before September 11, 2004, and placed in service before
2005 (2006 for certain property with recovery period of 10 years or longer and
certain transportation property). Qualified property includes MACRS property
with a recovery period of 20 years or less, computer software, water utility
property and leasehold improvement property. This "bonus" depreciation will
allow the company to increase its NOL carry back by approximately $175,000.


                                      30
<PAGE>


         The result of the benefit of such changes, which will be recorded as a
reduction of income tax expense and will be reflected in the statement of
operations in the first quarter of fiscal 2002, amounts to approximately
$285,000.

13.      SUMMARY OF UNAUDITED QUARTERLY FINANCIAL DATA:

         Unaudited quarterly financial information is as follows:


<TABLE>
<CAPTION>
                                                                   Quarter Ended                                 Year Ended
                                       ------------------------------------------------------------------       -------------
                                         March 30,         June 29,        September 28,      December 28,      December 28,
                                           2001              2001              2001               2001              2001
                                       ------------       -----------      ------------       ------------      -------------
<S>                                    <C>                <C>              <C>                <C>               <C>
Net revenues(1)                        $ 37,501,000       $42,448,000      $ 41,168,000        36,830,000       $ 157,947,000
Gross profit                              8,170,000         9,553,000         9,461,000         7,410,000          34,594,000
Income taxes (benefit)                           --                --                --                --                  --
Net income (loss)                        (1,462,000)          125,000          (271,000)       (3,464,000)         (5,072,000)
Income (loss) per share:
      Basic and Diluted                $      (0.12)      $      0.01      $      (0.02)      $     (0.29)      $       (0.42)
Weighted average number of common
shares:
      Basic                              12,132,990        12,132,990        12,133,350        12,133,865          12,133,298
      Diluted                            12,132,990        12,132,990        12,453,378        12,133,865          12,133,298
</TABLE>


<TABLE>
<CAPTION>
                                                            Quarter Ended                                    Year Ended
                                ---------------------------------------------------------------------       -------------
                                  March 31,           June 30,        September 29,      December 29,        December 29,
                                    2000               2000               2000               2000               2000
                                ------------       ------------       ------------       ------------       -------------
<S>                             <C>                <C>                <C>                <C>                <C>
Net revenues                    $ 48,278,000       $ 54,192,000       $ 46,517,000       $ 36,401,000       $ 185,388,000
Gross profit                       9,252,000         10,964,000         10,074,000          4,007,000          34,297,000
Income taxes (benefit)              (210,000)        (1,240,000)          (395,000)         1,519,000            (326,000)
Net loss                            (898,000)        (3,396,000)        (1,406,000)       (11,412,000)        (17,112,000)
Loss per share:
      Basic and Diluted         $      (0.07)      $      (0.28)      $      (0.12)      $      (0.94)      $       (1.41)

Weighted average number of
  common shares:
   Basic and Diluted              12,132,990         12,132,990         12,132,990         12,132,990          12,132,990
</TABLE>

(1)      Effective with the beginning of the fourth quarter of 2001 the Company
revised its criteria for recognizing revenue from retail operations to require
that the buyers' purchases be fully funded, in addition to meeting all other
purchase criteria previously required by the Company. The effect of the change
in the Company's procedures is not material to the year. For the fourth
quarter, however, the revenue amount reported above would have been $3.4
million greater under the previous procedures.


                                      31
<PAGE>


Report of Independent Public Accountants
Southern Energy Homes, Inc. and subsidiaries

To Southern Energy Homes, Inc.:

         We have audited the accompanying consolidated balance sheets of
Southern Energy Homes, Inc. (a Delaware Corporation) and subsidiaries as of
December 28, 2001 and December 29, 2000 and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the three
fiscal years in the period ended December 28, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

         We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Southern Energy
Homes, Inc. and subsidiaries as of December 28, 2001 and December 29, 2000, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended December 28, 2001 in conformity with
accounting principles generally accepted in the United States.


                                             ARTHUR ANDERSEN LLP


Birmingham, Alabama
February 8, 2002



Statement of Management's Responsibility
Southern Energy Homes, Inc. and subsidiaries

         The consolidated financial statements and related information herein
were prepared by the Company and were based on accounting principles generally
accepted in the United States, appropriate in the circumstances to reflect in
all material respects the consolidated financial position of the Company as of
December 28, 2001 and December 29, 2000, and the consolidated results of
operations and cash flows for each of the years ended December 28, 2001 and
December 29, 2000 and December 31, 1999. The financial information presented
elsewhere in this report has been prepared in a manner consistent with the
financial statement disclosures.

         Management is responsible for the reliability and integrity of these
statements. In meeting this responsibility, management maintains an accounting
system and related internal controls to provide reasonable assurance that the
financial records are reliable for preparing financial statements and
maintaining accountability for assets. The Company's systems and controls are
also designed to provide reasonable assurance that assets are safeguarded and
those transactions are executed in accordance with management's authorizations
and recorded properly.

         The Board of Directors has appointed an Audit Committee that meets
periodically with management and the independent public accountants.

         Arthur Andersen LLP has audited the consolidated financial statements
in accordance with auditing standards generally accepted in the United States
and their report appears herein.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.


                                      32
<PAGE>


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

         Information concerning the Company's directors and executive officers
required by this Item is incorporated by reference to the text appearing under
Part I, Item 1 -- Business under the caption "Executive Officers". Information
regarding compliance with Section 16(a) of the securities Exchange Act of 1934
is incorporated by reference from the Company's Definitive Proxy Statement for
the Annual Meeting of Stockholders to be held May 21, 2002.

ITEM 11. EXECUTIVE COMPENSATION

         Information required by this Item is incorporated by reference from
the Company's Definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on May 21, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information required by this Item is incorporated by reference from
the Company's Definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on May 21, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information required by this Item is incorporated by reference from
the Company's Definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on May 21, 2002.


                                    PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K

(a)      The following documents are filed as part of this report:

         (1)  Financial Statements

         Consolidated Balance Sheets as of December 28, 2001 and December 29,
         2000.

         Consolidated Statements of Operations for each of the three fiscal
         years in the period ended December 28, 2001.

         Consolidated Statements of Stockholders' Equity for each of the three
         fiscal years in the period ended December 28, 2001.

         Consolidated Statements of Cash Flows for each of the three fiscal
         years in the period ended December 28, 2001.

         Notes to Consolidated Financial Statements

         Report of Independent Public Accountants

         Statement of Management's Responsibility

         (2)  Financial Statement Schedules

         No financial statement schedules are included since the information is
         not applicable, not required, or is included in the financial
         statements or notes thereto.

         (3)  Listing of Exhibits

         The following exhibits are hereby incorporated by reference:


              2.1  Asset Purchase Agreement, dated as of July 31, 1994, by and
                   among the Registrant, Imperial Manufactured Homes of N.C.,
                   Inc. ("Imperial") and the stockholders of Imperial. (Filed as
                   Exhibit 2.1 to the Current Report on Form 8-K dated August
                   14, 1994, File No. 0-21204.)


                                      33
<PAGE>


<TABLE>
                  <S>      <C>
                  2.2      Real Estate Purchase Agreement, dated as of July 31, 1994, between Imperial N.C. Associates and Lawyer's
                           Title of North Carolina, Inc. and Assignment of such Agreement to Southern Energy Homes of North
                           Carolina, Inc. (Filed as Exhibit 2.2 to the Current Report on Form 8-K dated August 14, 1994, File No.
                           0-21204.)

                  2.3      Asset Purchase Agreement, dated April, 1998, by and between the Registrant, Rainbow Homes, Inc., and the
                           sole stockholder of Rainbow Homes, Inc. (filed as Exhibit 2.3 to the Company's Annual report on Form
                           10K for the year ended January 1, 1999.)

                  3.1      Certificate of Incorporation of the Company. (Filed as Exhibit 3.1 to the Registration Statement on Form
                           S-1, Registration No. 33-57420.)

                  3.2      By-Laws of the Company. (Filed as Exhibit 3.2 to the Registration Statement on Form S-1, Registration
                           No. 33-57420.)

                  4.1      Specimen of Stock Certificate. (Filed as Exhibit 4.1 to the Registration Statement on Form S-1,
                           Registration No. 33-57420.)

                  4.7      Southern Development Council, Inc. Promissory Note. (Filed as Exhibit 4.10 to the Registration
                           Statement on form S-1, Registration No. 33-57420.)

                  4.8      Stockholders' Agreement, dated as of June 8, 1989. (Filed as Exhibit 4.12 to the Registration Statement
                           on Form S-1, Registration No. 33-57420.)

                  4.9      Form of First Amendment to Stockholders' Agreement, dated as of January 13, 1993. (Filed as Exhibit
                           4.13 to the Registration Statement on Form S-1, Registration No. 33-57420.)

                  *10.1    Employment Agreement with Wendell L. Batchelor, dated as of June 8, 1989. (Filed as Exhibit 10.1 to
                           the Registration Statement on Form S-1, Registration No. 33-57420.)

                  *10.2    Employment Agreement with Keith Brown, dated June 8, 1989. (Filed as Exhibit 10.2 to the Registration
                           Statement on Form S-1, Registration No. 33-57420.)

                  *10.3    Employment Agreement with Johnny R. Long, dated June 8, 1989. (Filed as Exhibit 10.3 to the
                           Registration Statement on Form S-1, Registration No. 33-57420.)

                  *10.4    Southern Energy Homes, Inc. 1993 Stock Option Plan. (Filed as Exhibit 10.4 to the Registration
                           Statement on Form S-1, Registration No. 33-57420.)

                  *10.5    Form of Southern Energy Homes, Inc. 401(k) Retirement Plan. (Filed as Exhibit 10.5 to the
                           Registration Statement on Form S-1, Registration No. 33-57420.)

                  *10.6    Management Agreement, effective as of June 8, 1989, by and between Lee Capital Holdings and Southern
                           Energy Homes, Inc. (Filed as Exhibit 10.14 to the Registration Statement on Form S-1, Registration No.
                           33-57420.)

                  10.7     Southern Development Council, Inc. Loan Commitment Agreement. (Filed as Exhibit 10.15 to the
                           Registration Statement on Form S-1, Registration No. 33-57420.)

                  10.8     Lease Agreement by and between Hillard Brannon and Southern Energy Homes, Inc., dated July 30, 1992.
                           (Filed as Exhibit 10.16 to the Registration Statement on Form S-1, Registration No. 33-57420.)

                  10.9     Lease Agreement by and between Hillard Brannon and Southern Energy Homes, Inc., dated November 16,
                           1989. (Filed as Exhibit 10.17 to the Registration Statement on Form S-1, Registration No. 33-57420.)

                  10.10    Lease Agreement by and between Robert Lowell Burdick, Nina Burdick Vono, Carolyn Burdick Hunsaker,
                           Jean Burdick Hall, Mildred Burdick Marmont and Lane Burdick Adams, as Landlord, and Southern
                           Energy Homes, Inc. dated as of November 20, 1985, as amended. (Filed as Exhibit 10.23 to the
                           Registration Statement on Form S-1, Registration No. 33-57420.)

                  10.11    Agreement and Plan of Merger of Southern Energy Homes, Inc., a Delaware corporation, and Southern
                           Energy Homes, Inc., an Alabama corporation, dated as of January 15, 1993. (Filed as Exhibit 10.25
                           to the Registration Statement on Form S-1, Registration No.
                           33-57420.)

                  10.12    Certificate of Merger Merging Southern Energy Homes, Inc., an Alabama corporation, with and into
                           Southern Energy Homes, Inc., a Delaware corporation, dated as of January 19, 1993. (Filed as
                           Exhibit 10.26 to the Registration Statement on Form S-1, Registration No. 33-57420.)

                  10.13    Assignment of Lease and Rights dated June 29, 1993 between B.B.H.L.P. Partnership and
                           Southern Energy Homes, Inc. (Filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q
                           for the quarter ended July 2, 1993, File No. 0-21204.)

                  10.14    Lease Agreement dated as of June 1, 1984 between The Industrial Development Board of the
                           Town of Addison, Alabama and B.B.H.L.P. Partnership. (Filed as Exhibit 10.2 to the
                           Quarterly Report on form 10-Q for the quarter ended July 2, 1993, File No. 0-21204.)

                  10.15    Assignment of Lease and Rights dated June 19, 1993 between B.B.H.L.P. and Southern Energy Homes, Inc.
                           (Filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended July 2, 1993, File
                           No. 2-21204.)
</TABLE>


                                      34
<PAGE>

<TABLE>
                  <S>      <C>
                  10.16    Lease Agreement dated as of December 1, 1986 between The Industrial Development Board of the Town of
                           Addison, Alabama and B.B.H.L.P. Partnership. (Filed as Exhibit 10.4 to the Quarterly Report on
                           Form 10-Q for the quarter ended July 2, 1993, File No. 0-21204.)

                  10.17    Letter Agreement dated May 18, 1993 and Master Note dated May 19, 1993 between the Company and
                           AmSouth Bank, N.A. (Filed as Exhibit 10.27 to the Registration Statement on Form S-1,
                           Registration No. 33-68954.)

                  10.18    Deed of Real Estate dated August 5, 1993 relating to the Company's Plant No. 2 in Addison, Alabama.
                           (Filed as Exhibit 10.27 to the Registration Statement on Form S-1, Registration No. 33-68954.)

                  10.19    Deed of Real Estate dated July 30, 1993 relating to the Company's manufacturing facility in
                           Fort Worth, Texas. (Filed as Exhibit 10.27 to the Registration Statement on Form S-1, Registration
                           No. 33-68954.)

                  *10.20   Southern Energy Homes, Inc. 1996 Option Plan for Non-employee Directors. (Filed as Exhibit 10.20 to
                           the Company's Annual Report of Form 10-K for the year ended December 29, 1995).

                  10.21    Agreement and Plan of Reorganization of Southern Energy Homes, Inc., a Delaware Corporation, and SE
                           Management, Inc., an Alabama Corporation, dated November 22, 1996 (filed as Exhibit 10.21 to the
                           Company's Annual Report on Form 10K for the year ended January 3, 1997).

                  *10.22   Amended and Restated Employment Agreement with Wendell L. Batchelor, dated as of June 14, 1996
                           (filed as Exhibit 10.22 to the Company's Annual Report on Form 10K for the year ended January 3, 1997).

                  *10.23   Amended and Restated Employment Agreement with Keith W. Brown, dated as of June 14, 1996 (filed as
                           Exhibit 10.23 to the Company's Annual Report on Form 10K for the year ended January 3, 1997).

                  10.24    Asset Purchase Agreement, dated as of December 3, 1997, by and among the Registrant, A&G, Inc. and the
                           sole stockholder of A&G, Inc. (filed as Exhibit 10.24 to the Company's Annual Report on Form 10K for
                           the year ended January 2, 1998).
</TABLE>

         The following Exhibits are filed herewith:

<TABLE>
                  <S>      <C>
                  18       Letter of independent accountants regarding method change.

                  21       List of Subsidiaries of the Registrant.

                  23       Consent of Arthur Andersen LLP.

                  99       Arthur Andersen LLP representations.
</TABLE>

         *        Management contract or compensatory plan or arrangement.

(b)      The Company did not file a current report on form 8-K during the 4th
         Quarter of fiscal 2001.


                                      35
<PAGE>


         Pursuant to the requirements of Section 13 or 15 (d) 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.
                                    Registrant


                                    By: /S/ Wendell L. Batchelor
                                       ----------------------------------------
                                    Wendell L. Batchelor
                                    Chairman and Chief Executive Officer


Date:  March 22, 2002

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
SIGNATURE                                            TITLE                              DATE
---------                                            -----                              ----

<S>                                                  <C>                                <C>
/S/ Wendell L. Batchelor                             Chairman,                          March 22, 2002
------------------------------------                 Chief Executive Officer
Wendell L. Batchelor                                 and Director

/S/ Keith O. Holdbrooks                              President,                         March 22, 2002
------------------------------------                 Chief Operating Officer
Keith O. Holdbrooks                                  and Director

/S/ Keith W. Brown                                   Executive Vice President,          March 22, 2002
------------------------------------                 Chief Financial Officer,
Keith W. Brown                                       Treasurer, Secretary
                                                     and Director

/S/ James A. Hasty                                   Corporate Controller               March 22, 2002
------------------------------------
James A. Hasty

/S/ Johnny R. Long                                   Director                           March 22, 2002
------------------------------------
Johnny R. Long

/S/ Louis C. Henderson Jr.                           Director                           March 22, 2002
------------------------------------
Louis C. Henderson, Jr.


/S/ Clinton O. Holdbrooks                            Director                           March 22, 2002
------------------------------------
Clinton O. Holdbrooks

/S/ A.C. (Del) Marsh                                 Director                           March 22, 2002
------------------------------------
A.C. (Del) Marsh

/S/  James A. Taylor                                 Director                           March 22, 2002
------------------------------------
James A. Taylor
</TABLE>


                                      36
<PAGE>


                                 EXHIBIT INDEX


<TABLE>
<S>      <C>
2.1      Asset Purchase Agreement, dated as of July 31, 1994, by and among the Registrant, Imperial Manufactured Homes of N.C.,
         Inc. ("Imperial") and the stockholders of Imperial. (Filed as Exhibit 2.1 to the Current Report on Form 8-K dated
         August 14, 1994, File No. 0-21204.)

2.2      Real Estate Purchase Agreement, dated as of July 31, 1994, between Imperial N.C. Associates and Lawyer's Title of
         North Carolina, Inc. and Assignment of such Agreement to Southern Energy Homes of North Carolina, Inc.
         (Filed as Exhibit 2.2 to the Current Report on Form 8-K dated August 14, 1994, File No. 0-21204.)

2.3      Asset Purchase Agreement, dated April, 1998, by and between the Registrant, Rainbow Homes, Inc., and the sole
         stockholder of Rainbow Homes, Inc. (filed as Exhibit 2.3 to the Company's Annual report on Form 10K for the year ended
         January 1, 1999.)

3.1      Certificate of Incorporation of the Company. (Filed as Exhibit 3.1 to the Registration Statement on Form S-1,
         Registration No. 33-57420.)

3.2      By-Laws of the Company. (Filed as Exhibit 3.2 to the Registration Statement on Form S-1, Registration No. 33-57420.)

4.1      Specimen of Stock Certificate. (Filed as Exhibit 4.1 to the Registration Statement on Form S-1, Registration No.
         33-57420.)

4.7      Southern Development Council, Inc. Promissory Note. (Filed as Exhibit 4.10 to the Registration Statement on form S-1,
         Registration No. 33-57420.)

4.8      Stockholders' Agreement, dated as of June 8, 1989. (Filed as Exhibit 4.12 to the Registration Statement on Form S-1,
         Registration No. 33-57420.)

4.9      Form of First Amendment to Stockholders' Agreement, dated as of January 13, 1993. (Filed as Exhibit 4.13 to the
         Registration Statement on Form S-1, Registration No. 33-57420.)

*10.1    Employment Agreement with Wendell L. Batchelor, dated as of June 8, 1989. (Filed as Exhibit 10.1 to the Registration
         Statement on Form S-1, Registration No. 33-57420.)

*10.2    Employment Agreement with Keith Brown, dated June 8, 1989. (Filed as Exhibit 10.2 to the Registration Statement on
         Form S-1, Registration No. 33-57420.)

*10.3    Employment Agreement with Johnny R. Long, dated June 8, 1989. (Filed as Exhibit 10.3 to the Registration Statement on
         Form S-1, Registration No. 33-57420.)

*10.4    Southern Energy Homes, Inc. 1993 Stock Option Plan. (Filed as Exhibit 10.4 to the Registration Statement on Form S-1,
         Registration No. 33-57420.)

*10.5    Form of Southern Energy Homes, Inc. 401(k) Retirement Plan. (Filed as Exhibit 10.5 to the Registration Statement on
         Form S-1, Registration No. 33-57420.)

*10.6    Management Agreement, effective as of June 8, 1989, by and between Lee Capital Holdings and Southern Energy Homes, Inc.
         (Filed as Exhibit 10.14 to the Registration Statement on Form S-1, Registration No. 33-57420.)

10.7     Southern Development Council, Inc. Loan Commitment Agreement. (Filed as Exhibit 10.15 to the Registration Statement on
         Form S-1, Registration No. 33-57420.)

10.8     Lease Agreement by and between Hillard Brannon and Southern Energy Homes, Inc., dated July 30, 1992. (Filed as
         Exhibit 10.16 to the Registration Statement on Form S-1, Registration No. 33-57420.)

10.9     Lease Agreement by and between Hillard Brannon and Southern Energy Homes, Inc., dated November 16, 1989.
         (Filed as Exhibit 10.17 to the Registration Statement on Form S-1, Registration No. 33-57420.)

10.10    Lease Agreement by and between Robert Lowell Burdick, Nina Burdick Vono, Carolyn Burdick Hunsaker, Jean Burdick Hall,
         Mildred Burdick Marmont and Lane Burdick Adams, as Landlord, and Southern Energy Homes, Inc. dated as of
         November 20, 1985, as amended. (Filed as Exhibit 10.23 to the Registration Statement on Form S-1, Registration
         No. 33-57420.)

10.11    Agreement and Plan of Merger of Southern Energy Homes, Inc., a Delaware corporation, and Southern Energy Homes, Inc.,
         an Alabama corporation, dated as of January 15, 1993. (Filed as Exhibit 10.25 to the Registration Statement on
         Form S-1, Registration No. 33-57420.)

10.12    Certificate of Merger Merging Southern Energy Homes, Inc., an Alabama corporation, with and into Southern Energy Homes,
         Inc., a Delaware corporation, dated as of January 19, 1993. (Filed as Exhibit 10.26 to the Registration Statement on
         Form S-1, Registration No. 33-57420.)

10.13    Assignment of Lease and Rights dated June 29, 1993 between B.B.H.L.P. Partnership and Southern energy Homes, Inc.
         (Filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended July 2, 1993, File No. 0-21204.)
</TABLE>


                                      37

<PAGE>

<TABLE>
<S>      <C>
10.14    Lease Agreement dated as of June 1, 1984 between The Industrial Development Board of the Town of Addison, Alabama and
         B.B.H.L.P. Partnership. (Filed as Exhibit 10.2 to the Quarterly Report on form 10-Q for the quarter ended
         July 2, 1993, File No. 0-21204.)

10.15    Assignment of Lease and Rights dated June 19, 1993 between B.B.H.L.P. and Southern Energy Homes, Inc. (Filed as
         Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended July 2, 1993, File No. 2-21204.)

10.16    Lease Agreement dated as of December 1, 1986 between The Industrial Development Board of the Town of Addison,
         Alabama and B.B.H.L.P. Partnership. (Filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarter ended
         July 2, 1993, File No. 0-21204.)

10.17    Letter Agreement dated May 18, 1993 and Master Note dated May 19, 1993 between the Company and AmSouth Bank, N.A.
         (Filed as Exhibit 10.27 to the Registration Statement on Form S-1, Registration No. 33-68954.)

10.18    Deed of Real Estate dated August 5, 1993 relating to the Company's Plant No. 2 in Addison, Alabama. (Filed as
         Exhibit 10.27 to the Registration Statement on Form S-1, Registration No. 33-68954.)

10.19    Deed of Real Estate dated July 30, 1993 relating to the Company's manufacturing facility in Fort Worth, Texas.
         (Filed as Exhibit 10.27 to the Registration Statement on Form S-1, Registration No. 33-68954.)

*10.20   Southern Energy Homes, Inc. 1996 Option Plan for Non-employee Directors. (Filed as Exhibit 10.20 to the Company's
         Annual Report of Form 10-K for the year ended December 29, 1995).

10.21    Agreement and Plan of Reorganization of Southern Energy Homes, Inc., a Delaware Corporation, and SE Management, Inc.,
         an Alabama Corporation, dated November 22, 1996 (filed as Exhibit 10.21 to the Company's Annual Report on Form 10K for
         the year ended January 3, 1997).

*10.22   Amended and Restated Employment Agreement with Wendell L. Batchelor, dated as of June 14, 1996 (filed as
         Exhibit 10.22 to the Company's Annual Report on Form 10K for the year ended January 3, 1997).

*10.23   Amended and Restated Employment Agreement with Keith W. Brown, dated as of June 14, 1996 (filed as Exhibit 10.23 to
         the Company's Annual Report on Form 10K for the year ended January 3, 1997).

10.24    Asset Purchase Agreement, dated as of December 3, 1997, by and among the Registrant, A&G, Inc. and the sole
         stockholder of A&G, Inc. (filed as Exhibit 10.24 to the Company's Annual Report on Form 10K for the year ended
         January 2, 1998).
</TABLE>

         The following Exhibits are filed herewith:

18       Letter of independent accountants regarding method change.

21       List of Subsidiaries of the Registrant.

23       Consent of Arthur Andersen LLP.

99       Arthur Andersen LLP representations.

*        Management contract or compensatory plan or arrangement.


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