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

FORM 10-Q
(Mark One)

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

For the quarterly period ended June 30, 2000 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.)


Highway 41 North, P.O. Box 390, Addison, Alabama 35540
(Address of principal executive offices) (Zip Code)

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


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

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

12,132,990 shares of Common Stock, $.0001 par value, as of August 14, 2000

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

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

SOUTHERN ENERGY HOMES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION:

The consolidated condensed balance sheet as of December 31, 1999, which has been derived from audited financial statements, and the unaudited interim consolidated condensed financial statements as of June 30, 2000, have been prepared by the Company without audit, but in the opinion of management reflect the adjustments necessary (which include only normal recurring adjustments) for the fair presentation of the information set forth therein. Results of operations for the interim 2000 period are not necessarily indicative of results expected for the full year. While certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, the Company believes that the disclosures herein are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1999.

2. INVENTORIES:

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

3. EARNINGS PER SHARE:

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

Outstanding options of 604,708 and 533,281 for the twenty-six weeks and thirteen weeks ended June 30, 2000 and July 2, 1999, respectively, were not included in the computation of diluted shares available to common shareholders, as they were antidilutive. The majority of common options outstanding were at prices, which exceed the common stock market price.

4. REPURCHASE AGREEMENTS:

Substantially all of the Company's 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 agreement, the financial institution which provides the 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 dealer, to repurchase the homes at the Company's original invoice price plus certain administrative and shipping expenses less any principal payments made by the dealer. At June 30, 2000, the Company's contingent repurchase liability under floor plan financing arrangements was approximately $79 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. As a result of dealer failures, the Company incurred expenses during the second quarter of 2000 totaling $593,000 related to its inventory repurchase obligations.

5. LEGAL PROCEEDINGS:

On March 1, 1999, the Company, without admitting any liability, entered into a settlement with HUD which required the Company to correct construction and safety violations in homes manufactured at a North Carolina manufacturing facility which the Company has since closed. HUD claimed that the Company failed to comply with the consumer notification and defect correction requirements of the National Manufactured Housing Construction and Safety Standards Act of 1974. The settlement required the Company to inspect 600 additional homes for possible violations. The Company agreed to an extension for one year of the warranty period for certain homes. The Company was assessed a civil penalty by HUD of up to $300,000 in connection with the settlement. The settlement provided that the monetary penalty could be reduced by HUD depending on Company actions and its performance under the settlement. As of March 31, 2000 the Company had completed all repairs and inspections required by the settlement and had paid a penalty of $150,000.

The Company was named, along with several other manufactured housing companies, as a defendant in a class action lawsuit filed in state court in Kentucky in September 1998, claiming wrongful conduct, fraudulent misrepresentation and that manufactured housing units are unsafe and/or dangerous for residential use. The amount of the damages was not specified. The Company believes the claims are without merit and has vigorously defended itself against them. The Defendants, including the Company, filed a motion to dismiss the case in December, 1998. During 1999 the motion was granted and the case was dismissed. It is currently being appealed by the Plaintiffs in the Kentucky Court of Appeals. Nevertheless, the outcome of the litigation can not be predicted and an adverse outcome could have a material adverse effect on the Company.

The Company is a party to various other 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 that warranty on manufactured homes, or employment issues such as worker's 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.

6. IMPAIRMENT AND OTHER CHARGES

During the second quarter of 2000, the Company decided to close eight of its 29 retail centers. The decision was based primarily on losses incurred at these centers over the last several months. Three retail centers were closed in the second quarter of 2000 and the remaining five retail centers are expected to be closed within ninety days. In connection with the decision to close these retail centers, the Company recorded a charge of $4.4 million ($3.2 million after tax) 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. Although this amount represents management's best estimate of total costs to close these centers, the actual cost could ultimately differ from this amount. The Company has recorded the exit costs as an impairment charge in the accompanying statement of operations. During the twenty-six weeks ended June 30, 2000 and July 2, 1999, these eight centers generated 4.2% and 3.9%, respectively, of the total revenues of the Company. The impact of these centers on the operating income of the Company was a pre-tax loss of $1.0 million ($730,000 after-tax) and a pre-tax loss of $660,000 ($480,000 after-tax) during the twenty-six weeks ended June 30, 2000 and July 2, 1999, respectively.

7. segment and related information

The Company has four primary 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 various manufacturers including the Company's manufacturing segment. The component supply segment sells various supply products to the Company's manufacturing segment and to third party customers. The consumer financing segment has now restricted its loan origination activities and engaged 21st Century to service its existing loan portfolio.

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, interest income, interest expense and unusual items to all segments. In addition, not all segments have significant non-cash items other than depreciation and amortization in reported segment operating profit or loss.

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.

During the fourth quarter of 1999, the Company made certain changes to the composition of its internal segments. The corresponding information for the twenty-six and thirteen weeks ended July 2, 1999 have been restated to conform to these changes.

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

Thirteen Weeks Ended Twenty-six Weeks Ended

Revenue from segments below the quantitative thresholds are attributable to two other operating segments of the Company. Those segments include a trucking business and a small insurance business. None of those segments has ever met any of the quantitative thresholds for determining reportable segments. The Corporate segment does not generate any revenues, but does incur certain administrative elements.

8. IMPACT OF RECENTLY ISSUED ACCOUNT PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulleting ("SAB") no. 101, "Revenue Recognition in financial Statements," and its effective date was amended in March 2000 by SAB No. 101A. SAB 101 draws on existing accounting rules and provides specific guidance on how those accounting rules should be applied to revenue recognition. The Company expects to adopt the provisions of SAB 101 in the third quarter of 2000 and is currently determining the impact, if any, on the Company's financial statements.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

GENERAL

As a whole, the manufactured housing industry has been adversely affected by many uncontrollable economic factors, and has struggled in the past few quarters and will likely continue to struggle for the next few quarters as well. The current situation in the manufactured housing industry is the result of many factors. Rapid industry growth over the past 10 years resulted in an increase in the overall number of dealers, in manufacturing output and in the number of homes available at the retail level. These larger inventories and a generally slower reduction of those inventories has led to increased price competition and reduced profits. Tightening credit and increasing interest rates have compounded the situation and negatively affected the industry's overall financial performance, with virtually all manufacturers and retailers being impacted. Southern Energy Homes has not been excluded from this group, however we have taken carefully planned steps designed to decrease costs and improve efficiency. In 1999 this included closing manufacturing facilities, consolidating divisions, reducing workforce and selling unprofitable retail centers. We will continue to carefully monitor the situation and remain prepared to take whatever additional measures become necessary to emerge from this industry downturn financially sound and prepared to take advantage of future opportunities presented by an increase in the demand for affordable housing. We are confident in the long-term future for the manufactured housing industry and Southern Energy Homes, Inc.

RESULTS OF OPERATIONS

Twenty-six weeks and thirteen weeks ended June 30, 2000 as compared with twenty-six weeks and thirteen weeks ended July 2, 1999.

Net Revenues

Total net revenues (gross sales less volume discounts, returns and allowances) for the twenty-six weeks ended June 30, 2000 were $97.8 million, as compared with $143.3 million in the prior year period. For the thirteen weeks ended June 30, 2000, total net revenues were $51.7 million, as compared with $69.8 million for the comparable period a year ago.

Net revenues from the wholesale sale of manufactured homes were $80.8 million (including intersegment revenues of $14.2 million) for the twenty-six weeks ended June 30, 2000, as compared with $119.5 million (including intersegment revenues of $17.9 million) for the prior year period, a decrease of 32.4%. The decline in sales to dealers was primarily attributable to decreased demand and the closure of the North Carolina manufacturing facility in July 1999, the closure of a manufacturing facility in Alabama in August 1999, a fire which damaged and temporarily closed two Alabama plants in February 2000 and a decline in the average wholesale price per home shipped . Total homes shipped for the twenty-six weeks ended June 30, 2000 was 3,117, down 30.2% from the number of homes shipped in the prior year period. The average wholesale price per home for the twenty-six weeks ended June 30, 2000 was $25,932, as compared with $26,765 in the prior year period, a decline of 3.1%. For the thirteen weeks ended June 30, 2000, net revenues from the wholesale sale of manufactured homes were $42.1 million (including intersegment revenues of $6.4 million), as compared with $57.9 million (including intersegment revenues of $8.7 million) for the prior year period, a decrease of 27.3%. The decline in sales to dealers was primarily attributable to decreased demand and the closure of the North Carolina manufacturing facility in July 1999, the closure of a manufacturing facility in Alabama in August 1999, a fire which damaged and temporarily closed two Alabama plants in February 2000 and a decline in the average wholesale price per home shipped. Total homes shipped for the thirteen weeks ended June 30, 2000 was 1,618, down 25.9% from the number of homes shipped in the prior year period. The average wholesale price per home for the thirteen weeks ended June 30, 2000 was $26,035, as compared with $26, 521 in the prior year period, a decline of 1.8%.

Net revenues from the retail sale of manufactured homes were $26.8 million for the twenty-six weeks ended June 30, 2000, as compared with $33.6 million for the prior year period, a decrease of 20.5%. Total retail homes sold for the twenty-six weeks ended June 30, 2000 was 794, down 14.4% from the number of homes sold in the prior year period. The decline in retail sales was primarily attributable to increased competition and the Company operating eight fewer retail centers, during the twenty-six weeks ended June 30, 2000, compared to the prior year period. The decline in retail revenues was also attributable to a decline in the average retail price per home sold. The average retail price per home sold in the quarter ended June 30, 2000 was $42,841, as compared with $44,736 in the prior year period, a decline of 4.2%.. For the thirteen weeks ended June 30, 2000, net revenues from the retail sale of manufactured homes were $13.7 million, as compared with $16.4 million for the prior year period, a decrease of 16.5%. Total retail homes sold for the thirteen weeks ended June 30, 2000 was 414, down 10.4% from the number of homes sold in the prior year period. The decline in retail sales was primarily attributable to increased competition and the Company operating eight fewer retail centers, during the quarter ended June 30, 2000, compared to the prior year period. The decline in retail revenues was also attributable to a decline in the average retail price per home sold. The average retail price per home sold in the quarter ended June 30, 2000 was $43,252, as compared with $44,669 in the prior year period, a decline of 3.2%.

Net revenues from the component supply segment were $17.7 million (including intersegment revenues of $15.0 million) for the twenty-six weeks ended July 2, 1999, as compared with $28.7 million (including intersegment revenues of $22.7 million) for the prior year period, a decrease of 38.3%. The decline in supply sales was primarily attributable to a decline in intersegment sales to the manufacturing segment. For the thirteen weeks ended June 30, 2000, net revenues from the component supply segment were $9.2 million (including intersegment revenues of $7.8 million), as compared with $14.6 million (including intersegment revenues of $11.3 million) for the prior year period, a decrease of 37.0%. The decline in supply sales was primarily attributable to a decline in intersegment sales to the manufacturing segment.

Revenues from the consumer finance subsidiary were $585,000 and $277,000, respectively, for the twenty-six weeks and thirteen weeks ended June 30, 2000, as compared with revenues of $636,000 and $305,000 for the comparable prior year periods.

Gross Profit

Gross profit consists of net revenues less the cost of sales, which includes labor, materials, and overhead. Gross profit for the twenty-six weeks ended June 30, 2000 was $15.5 million, or 15.9% of net revenues, as compared with $24.6 million, or 17.2% of net revenues, in the prior year period. The decline in the gross profit percentage was attributable primarily to increased competitive pricing at wholesale, the inability to pass on increased material prices due to competitive conditions in the industry, labor and fixed costs inefficiencies brought on by having to operate at lower capacities and increased warranty expenses as a percent of net sales. For the thirteen weeks ended June 30, 2000, gross profit was $8.4 million, or16.3% of net revenues, as compared with $11.8 million, or 16.9% of net revenues, in the prior year period. The decline in the gross profit percentage was attributable primarily to increased competitive pricing at wholesale, and labor and fixed costs inefficiencies brought on by having to operate 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 salaries, executive and management bonuses, insurance costs, and professional fees. Selling, general and administrative expenses were $15.7 million, or 16.0% of net revenues, during the twenty-six weeks ended June 30, 2000, as compared with $17.6 million, or 12.3% of net revenues, for the same period of the prior year. For the thirteen weeks ended June 30, 2000, selling, general and administrative expenses were $8.0 million, or 15.5% of net revenues, as compared with $8.5 million, or 12.2% 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 primarily to increased dealer interest payments to remain competitive in market areas, increased freight expenses due to fuel increases and increased legal fees. The percentage of net revenues consumed by these expense items also increased because net revenue decreased. Thus, though the dollar amounts of these expense items actually decreased from $8.5 million to $8.0 million, the percentage of net revenue consumed nevertheless increased.

Interest Expense

Interest expense for the twenty-six weeks ended June 30, 2000 was $1.2 million, as compared with $1.0 million in the prior year period. For the thirteen weeks ended June 30, 2000, interest expense was $647,000, as compared with $515,000 in the prior year period. . The increase in interest expense in the current quarter was a result of increased notes payable associated with the floor plan financing of the Company's retail inventory and an increase in the interest rates.

Interest Income

Interest income for the twenty-six weeks ended June 30, 2000 was $208,000, as compared with $172,000 in the comparable prior year period. For the thirteen weeks ended June 30, 2000, interest income was $75,000, as compared with $70,000 in the prior year period. The increase in interest income reflects higher average cash and cash equivalent balances during the quarter ended June 30, 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. Credit provision for income tax expense for the twenty-six weeks ended June 30, 2000 was $1.5 million, or an effective tax rate of 25.2%, as compared with an income tax expense of $2.3 million, or an effective tax rate 37.9% in the prior year period. For the thirteen weeks ended June 30, 2000, credit provision for income tax expense was $1.2 million, or an effective tax rate of 26.7%, as compared with an income tax expense of $1.0 million, or an effective tax rate of 38.5% in the prior year periods.

Impairment and Other Charges

During the second quarter of 2000, the Company decided to close eight of its 29 retail centers. The decision was based primarily on losses incurred at these centers over the last several months. Three retail centers were closed in the second quarter of 2000 and the remaining five retail centers are expected to be closed within ninety days. In connection with the decision to close these retail centers, the Company recorded a charge of $4.4 million ($3.2 million after tax) 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. Although this amount represents management's best estimate of total costs to close these centers, the actual cost could ultimately differ from this amount. The Company has recorded the exit costs as an impairment charge in the accompanying statement of operations. During the twenty-six weeks ended June 30, 2000 and July 2, 1999, these eight centers generated 4.2% and 3.9%, respectively, of the total revenues of the Company. The impact of these centers on the operating income of the Company was a pre-tax loss of $1.0 million ($730,000 after-tax) and a pre-tax loss of $660,000 ($480,000 after-tax) during the twenty-six weeks ended June 30, 2000 and July 2, 1999, respectively.

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 is continuing to monitor its cash position in light of present trends. The Company recently paid off all of its long term debt and lowered its outstanding balance on its line of credit from $24.4 million to $21 million, while negotiating a new $8.0 million line of credit with a wholesale lender to floorplan a portion of the homes sold to Company retail centers.

Cash Flows

During the twenty-six weeks ended July 30, 2000, the Company's cash used by operations was approximately $3.6 million. Cash used by operations included a net loss of $4.3 million, origination of installment contracts of $1.9 million, increased accounts receivable and prepayments of $8.2 million and decreased accrued liabilities of $3.3 million. These amounts were partially offset by decreased inventories of $4.1 million and principal collected on originated installment contracts of $2.3 million.. In addition to cash used by operating activities, other significant uses of cash included capital expenditures of $1.3 million, and repayments of long-term debt of $3.6 million. Other significant sources of cash included increased borrowings on notes payable of $2.9 million.

During the twenty-six weeks ended July 2, 1999, the Company's cash used by operations was approximately $3.7 million. Cash used by operations included origination of installment contracts of $1.5 million and increased accounts receivable, inventories and prepayments of $12.5 million. These amounts were partially offset by net income of $3.7 million and increased accounts payable of $5.3 million. In addition to cash used by operating activities, other significant uses of cash included capital expenditures of $2.9 million, purchase of treasury stock of $3.1 million, and repayments of long-term debt of $0.6 million. Other significant sources of cash included increased borrowings on notes payable of $6.8 million.

At June 30, 2000, the Company's net working capital was $17.1 million, compared with $18.7 million at December 31, 1999. The decrease in net working capital was primarily a result of a decrease in cash and cash equivalents of $5.9 million, an increase in notes payable of $2.9 million, and a $4.1 million decrease in inventories, partially offset by a $7.1 million increase in accounts receivable, and a 2.9 million decrease in accrued liabilities. . On February 28, 2000 the Company's primary lender renewed the Company's bank line of credit. To provide additional working capital, the maximum line was increased to $28.5 million. The line is secured by the Company's accounts receivable. Security for the line was extended to include the Company's raw material inventories. The Company's ability to draw upon this line of credit is dependent upon meeting certain financial ratios and covenants. At the time of the renewal, certain other modifications were made in the Loan Agreement governing the line. The Debt Service Coverage Ratio was reduced substantially and a negative pledge covenant was deleted by agreement to exclude any application to the Company's real property. As noted in the Company's most recent Form 10-K, the Company owns substantially all of the real property on which it conducts its manufacturing operations. The Lender further agreed that any one time non recurring loss, as determined by generally accepted accounting principles, would not be taken into account in any financial covenant other than the tangible net worth covenant, which was also reduced. The renewed line of credit matures on May 31, 2001 and bears interest at the London Interbank Offered Rate ("LIBOR") plus 1.5%. The Company has $21.0 million in outstanding borrowings under this line at June 30, 2000.

Substantially all of the Company's 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 agreement, the financial institution which provides the 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 dealer, to repurchase the homes at the Company's original invoice price plus certain administrative and shipping expenses less any principal payments made by the dealer. At June 30, 2000, the Company's contingent repurchase liability under floor plan financing arrangements was approximately $79 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. As a result of dealer failures, the Company incurred expenses during the second quarter of 2000 totaling $593,000 related to its inventory repurchase obligations.

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.

Year 2000 Compliance

The Company uses a wide range of software and related technologies throughout its business that were affected by the date change in the Year 2000. This date change required modification of portions of the Company's software so that its computer systems would probably recognize dates beyond December 31, 1999. The Company believes that with the upgrades or modifications made to existing software and conversion to new software, the impact of the Year 2000 issue was mitigated. The Company has completed validating of all systems that have customer impact or financial impact on the Company and no Year 2000 problems have been encountered. The Company does not expect any problems or issues related to Year 2000 going forward .

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.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Forward-looking statements in this report, 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: the cyclical and seasonal nature of housing markets; the 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; the performance of the loans held by the Company's finance subsidiary; the availability and pricing of raw materials; the concentration of the Company's business in certain regional markets; the Company's ability to execute and manage its expansion plans; the availability of labor to implement those plans; the highly competitive nature of 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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On March 1, 1999, the Company, without admitting any liability, entered into a settlement with HUD which required the Company to correct construction and safety violations in homes manufactured at a North Carolina manufacturing facility which the Company has since closed. HUD claimed that the Company failed to comply with the consumer notification and defect correction requirements of the National Manufactured Housing Construction and Safety Standards Act of 1974. The settlement required the Company to inspect 600 additional homes for possible violations. The Company agreed to an extension for one year of the warranty period for certain homes. The Company was assessed a civil penalty by HUD of up to $300,000 in connection with the settlement. The settlement provided that the monetary penalty could be reduced by HUD depending on Company actions and its performance under the settlement. As of March 31, 2000 the Company had completed all repairs and inspections required by the settlement and had paid a penalty of $150,000.

The Company was named, along with several other manufactured housing companies, as a defendant in a class action lawsuit filed in state court in Kentucky in September 1998, claiming wrongful conduct, fraudulent misrepresentation and that manufactured housing units are unsafe and/or dangerous for residential use. The amount of the damages was not specified. The Company believes the claims are without merit and has vigorously defended itself against them. The Defendants, including the Company, filed a motion to dismiss the case in December, 1998. During 1999 the motion was granted and the case was dismissed. It is currently being appealed by the Plaintiffs in the Kentucky Court of Appeals. Nevertheless, the outcome of the litigation can not be predicted and an adverse outcome could have a material adverse effect on the Company.

The Company is a party to various other 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 that warranty on manufactured homes, or employment issues such as worker's 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 2. Changes in Securities and Use of Proceeds

"Not applicable"

Item 3. Defaults upon Senior Securities

"Not applicable"

Item 4. Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Stockholders on May 23, 2000. At the meeting, the stockholders elected to serve as members of the Board of Directors of the Company the persons whose names are below. The votes were as follows:

Election of Directors:

For Against Withheld No Votes

Wendell L. Batchelor 10,816,503 0 220,438 1,096,049

Keith W. Brown 10,841,203 0 195,738 1,096,049

Louis C. Henderson, Jr. 10,836,853 0 200,088 1,096,049

Keith O. Holdbrooks 10,834,703 0 202,238 1,096,049

Joseph J. Incandela 10,831,703 0 205,238 1,096,049

Jonathan O. Lee 10,834,703 0 202,238 1,096,049

Johnny R. Long 10,837,203 0 199,738 1,096,049

** - Jonathan O. Lee and Joseph J. Inacandela notified the Company in a letter dated June 12, 2000 of their resignations as directors. The Board subsequently elected James A. Taylor and A. C. (Del) Marsh to the Company's Board of Directors replacing Jonathan O. Lee and Joseph J. Incandela. Clinton O. Holdbrooks was also elected to the Board of Directors.

Item 5. Other Information

"Not applicable"

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

The following Exhibits are incorporated herein by reference

(except as otherwise noted).

4.1 Certificate of incorporation of the Company, as amended

(filed as Exhibit 3.1 to the Registration Statement on Form

S-3, Registration No. 333-32933.)

4.2 By-Laws of the Company. (Filed as Exhibit 3.2 to the

Registration Statement on Form S-1, Registration No. 33-

57420.)

1. Specimen of Stock Certificate. (Filed as Exhibit 4.1 to the Registration Statement on Form S-1, Registration No. 33-57420.)
2. Southern Development Council, Inc. Promissory Note. (Filed as Exhibit 4.10 to the Registration Statement on Form S-1, Registration No. 33-57420.)

3. 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. 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.)

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.)
2. Employment Agreement with Keith Brown, dated as of June 8, 1989. (Filed as Exhibit 10.2 to the Registration Statement on Form S-1, Registration No. 33-57420.)
3. Employment Agreement with Johnny R. Long, dated as of June 8, 1989. (Filed as Exhibit 10.3 to the Registration Statement on Form S-1, Registration No. 33-57420.)
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.)
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.)
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.)
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.)
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.)
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. (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 of 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 Agreement 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. 0-21204.)

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 on 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.

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 10-K for the year ended January 2, 1998.)

10.25 Asset Purchase Agreement, dated as of April 3, 1998, by and

among Southern Energy S. C. Retail Corp., Rainbow Homes,

Inc. and the sole stockholder of Rainbow Homes, Inc.

(filed as Exhibit 10.25 to the Company's quarterly Report on

Form 10-Q for the quarter ended October 2, 1998)

(b) Reports on Form 8-K None

** Filed herewith

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

SOUTHERN ENERGY HOMES, INC.

Date: August 14, 2000 By: /s/ Wendell L. Batchelor Wendell L. Batchelor, Chairman

and Chief Executive Officer

Date: August 14, 2000 By: /s/ Keith W. Brown Keith W. Brown, Executive Vice

President, Chief Financial

Officer, Treasurer and

Secretary