Southern Energy Homes, Inc. Reports Increased Second Quarter 2002 Results

Business Wire, July 19, 2002

Business Editors

ADDISON, Ala.--(BUSINESS WIRE)--July 19, 2002

Southern Energy Homes, Inc. (Nasdaq: SEHI) today reported increased total net revenues and net income for the second quarter ended June 28, 2002. Total net revenues were $43.7 million, an increase of 9% from $40.0 million in the same quarter of 2001. Income from continuing operations for the second quarter of 2002 was $885,000, or $0.07 per diluted share, compared with $396,000, or $0.03 per diluted share, in the second quarter of 2001. Net income was $255,000, or $0.02 per diluted share, for the quarter compared with $125,000, or $0.01 per diluted share, in the second quarter of 2001, and includes the loss of discontinued operations resulting from the closing of three retail centers in the second quarter of 2002 of $630,000 ($0.05 per share) in 2002 and $271,000 ($0.02 per share) in the second quarter of 2001.

Commenting on the results, Keith O. Holdbrooks, chief executive officer, said, "We are very pleased to report the increases in total net revenues and net income for the second quarter of 2002. The increase in net income reflects reduced interest expense due to lower average borrowings and lower interest rates; lower warranty costs due to improved quality control processes; and lower selling, general and administrative expenses due to cost control initiatives."

Total wholesale homes shipped in the second quarter of 2002 were 1,233, an increase of 6% from 1,161 sold during the same period of 2001. Average sales price for wholesale homes in the second quarter of 2002 was $29,931, an increase of 2% from $29,452 during the same period of 2001. The increase in average wholesale sales price was offset by higher material costs. Total retail homes sold in the second quarter of 2002 were 145, down 48% from 278 homes sold during the same period of 2001. Average sales price for new retail homes in the second quarter of 2002 was $50,413, an increase of 13% from $44,423 during the same period of 2001.

Holdbrooks went on to say, "For the quarter ended June 28, 2002, total net revenues in manufacturing and component supply increased, while retail revenues declined. The decline in retail revenue reflects the closure of seven company-owned retail centers in the last 12 months and increasing difficulty for buyers to qualify for financing of manufactured homes as a result of the withdrawal of several lenders from our markets, which made it more difficult for customers to make purchases. Our financial position continues to improve during 2002. Inventories are down 29% from $21.8 million at the end of the second quarter of 2001 to $15.5 million at the end of the second quarter of 2002 and notes payable have declined from $16.9 million to $6.3 million, which is a 63% decline. We continue to focus on quality, customization, customer service, cost reduction and improving our balance sheet and believe that these efforts position us well regardless of industry conditions. We remain optimistic about the long-term prospects for our company."

For the six months ended June 28, 2002, total net revenues were $78.4 million, an increase of 5% from $74.6 million in the same period of 2001. Net income from continuing operations was $363,000, or $0.03 per diluted share, compared with a net loss from continuing operations of $1.0 million, or $0.08 per diluted share, for the six months ended June 29, 2001. The net loss for the period was $543,000, or $0.04 per diluted share, compared with a loss of $1.3 million, or $0.11 per diluted share, in the first six months of 2001.

Southern Energy Homes, Inc. operates five home manufacturing facilities in Alabama and Texas, 10 retail sales centers in four states, and three supply companies in Alabama. Currently marketed under four brand names, the Company's homes are sold in 22 states. In addition to its manufacturing, retail sales and component supply operations, the Company's operations also include finance and a small insurance segment.

Forward-looking statements in this news release, 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 and availability of floor plan financing for dealers; 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 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.