SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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Section 240.14a-12
SOUTHERN ENERGY HOMES, INC.
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[LOGO OF SEHOMES]
SOUTHERN ENERGY HOMES, INC.
Notice of 2003 Annual Meeting of Stockholders
May 20, 2003
To the Stockholders:
The 2003 Annual Meeting of the Stockholders of SOUTHERN ENERGY HOMES,
INC. will be held on Tuesday, May 20, 2003, at 10:00 A.M. at the offices of the
Company, located at 144 Corporate Way, Addison, Alabama 35540, for the following
purposes:
1. To elect a Board of seven Directors, to serve until the next
annual meeting of stockholders and until their successors
shall be elected and qualified, as more fully described in the
accompanying Proxy Statement.
2. To consider and act upon any other business that may properly
come before the meeting.
The Board of Directors has fixed the close of business on April 11,
2003, as the record date for the meeting. All stockholders of record on that
date are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the Annual Meeting.
By order of the Board of Directors
/s/ Keith O. Holdbrooks
Keith O. Holdbrooks
President and Chief Executive Officer
Addison, Alabama
April 21, 2003
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHETHER
OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON.
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SOUTHERN ENERGY HOMES, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Southern Energy Homes, Inc. (the "Corporation") for
use at the 2003 Annual Meeting of Stockholders to be held on Tuesday, May 20,
2003, at 10:00 A.M., at the offices of the Company located at 144 Corporate Way,
Addison, Alabama 35540, and at any adjournments thereof. The approximate date on
which this Proxy Statement and form of proxy are first being sent to
stockholders is on or about April 21, 2003.
If the enclosed proxy is properly executed and returned, it will be
voted in the manner directed by the stockholder. If no instructions are
specified with respect to any particular matter to be acted upon, proxies will
be voted in favor thereof. Any person giving the enclosed form of proxy has the
power to revoke it by voting in person at the meeting, or by giving written
notice of revocation to the Secretary of the Corporation at any time before the
proxy is exercised.
The holders of a majority in interest of all Common Stock issued,
outstanding and entitled to vote are required to be present in person or to be
represented by proxy at the meeting in order to constitute a quorum for
transaction of business. Abstentions and broker non-votes are counted as present
in determining whether the quorum requirement is satisfied, but they will not be
counted as votes cast on any proposal that requires the vote of stockholders. A
"broker non-vote" will occur if shares are held by a broker or nominee and are
deemed to be present at the annual meeting but the stockholder has not
instructed the broker or nominee how to vote the shares. Brokerage firms that
hold shares in street name may not vote a client's shares with respect to any
"non-discretionary" item unless the client has furnished voting instructions to
the brokerage firm. Questions about this should be referred to stockholders'
brokers. Abstentions and broker non-votes will have no effect in connection with
the election of Directors because the Directors are elected by a majority of the
shares present or represented and entitled to be voted at the annual meeting. No
other matters are expected to be voted on at the annual meeting.
The Corporation will bear the cost of the solicitation. It is expected
that the solicitation will be made primarily by mail, but regular employees or
representatives of the Corporation (none of whom will receive any extra
compensation for their activities) may also solicit proxies by telephone,
telegraph and in person and arrange for brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy materials to their principals
at the expense of the Corporation.
The Corporation's principal executive offices are located at 144
Corporate Way, Addison, Alabama 35540 and its telephone number is (256)
747-8589.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on April 11, 2003
are entitled to notice of and to vote at the meeting. On that date the
Corporation had outstanding and entitled to vote 12,133,865 shares of Common
Stock, par value $.0001 per share. Each outstanding share of the Corporation's
Common Stock entitles the record holder to one vote.
PROPOSAL ONE
ELECTION OF DIRECTORS
Seven Directors of the Corporation are to be elected to hold office
until the next annual meeting and until their successors shall be duly elected
and qualified. The persons named in the accompanying proxy will vote, unless
authority is withheld, for the election of the seven nominees named below. If
any of such nominees should become unavailable for election, which is not
anticipated, the persons named in the accompanying proxy will vote for such
substitutes as management may recommend. No nominee is related to any other
nominee or to any executive officer of the Corporation or its subsidiaries,
except for
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Wendell L. Batchelor and Clinton O. Holdbrooks, who are the uncle and father,
respectively, of Keith O. Holdbrooks, Chief Executive Officer and President and
Director of the Corporation, and Wendell L. Batchelor and Keith O. Holdbrooks,
who are cousins of Dan E. Batchelor, Executive Vice President, Secretary and
General Counsel of the Corporation.
Year First
Elected a Position With the Corporation or Principal
Name of Nominee Age Director Occupation During the Past Five Years
--------------- --- -------- -------------------------------------
Wendell L. Batchelor 60 1982 Chairman of the Corporation's Board since 1996. Chief Executive Officer 1982
to 2002, and President of the Corporation 1982 to 1999.
Johnny R. Long 56 1982 Executive Vice President of the Corporation 1996 - 1999. Vice President of
the Corporation from 1982 to 1996.
Keith O. Holdbrooks 42 1998 Chief Executive of the Corporation since 2002, President since 1999, and
Chief Operating Officer of the Corporation since 1996. General Manager of the
Corporation's Southern Homes division from 1991 to 1996.
Louis C. Henderson, Jr. 65 2000 Management consultant with Henderson & Associates, a business consulting
firm, since 1999. From February, 1997 until June, 1998, President and Chief
Executive Officer of Wall Street Deli, Inc.,* an operator and franchiser of
upscale delicatessen style restaurants, and a director of that company from
1977 to 1998. From 1989 until 1996, President of The Hackney Group, a
privately owned company managing a diversified group of manufacturing,
distribution and service companies. Senior Vice President Operations of
Protective Life Corporation from 1981 until 1989 and Chief Financial Officer
from 1986 to 1989.
Clinton O. Holdbrooks 64 2000 Chairman of the Board of Directors Colonial Bank, Central Alabama Region,
headquartered in Birmingham, Alabama, since 2000. Chairman of the Board of
Directors Colonial Bank, East Central Region, headquartered in Anniston,
Alabama, from 1990 to 2000. Director of Colonial BancGroup,* Montgomery,
Alabama since 1986.
A.C. (Del) Marsh 46 2000 Chairman of the Board of Directors and CEO of IPC Aerospace since 1988.
Headquartered in Anniston, Alabama, IPC Aerospace is one of the world's
leading providers in the business of piece part repair of pneumatic and
hydraulic components. Alabama state senator since 1998.
James A. Taylor 61 2000 Chairman of the Board and CEO of The Banc Corporation*, a bank holding
company headquartered in Birmingham, Alabama, with locations throughout
Alabama and Florida, since 1997. Chairman of the Board of Directors and CEO
of Alabama National BanCorporation* from 1986 to 1996. President of DISCO
Aluminum Products, Inc. from 1977 to 1979.
* Companies with a class of securities registered under section 12 of the
Securities Exchange Act of 1934.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During fiscal 2002, there were four meetings of the Board of Directors
of the Corporation. All of the Directors attended at least 75% of the aggregate
of (i) the total number of meetings of the Board of Directors and (ii) the total
number of meetings held by Committees of the Board of Directors on which
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they served. The Board of Directors does not have a Nominating Committee; the
functions of a Nominating Committee are filled by the Board of Directors.
The Corporation pays each of the Directors who is not an employee of
the Corporation (Louis C. Henderson, Jr., Clinton O. Holdbrooks, Johnny R. Long,
Del Marsh, and James A. Taylor) $12,000 per year, in quarterly installments, for
their attendance at and participation in meetings of the Board of Directors and
its Committees. The Corporation also pays the Chairman of the Audit Committee an
additional $6000 per year, in quarterly installments. The Corporation does not
compensate its employees who are also Directors for their services on the
Corporation's Board of Directors or participation in Committees of the Board of
Directors. The Corporation does reimburse all Directors for any expenses they
may incur in attending meetings of the Board of Directors or its Committees.
The Compensation Committee of the Board of Directors consists of Louis
C. Henderson, Jr., Johnny R. Long, Del Marsh and James A. Taylor. The
Compensation Committee recommends to the Board of Directors compensation for the
Corporation's key employees and is responsible for administration of the
Corporation's 1993 Stock Option Plan and 2002 Incentive Award Plan. The
Compensation Committee met once during fiscal 2002.
The Audit Committee of the Board of Directors consists of Louis C.
Henderson, Jr. (Chairman), Del Marsh and James A. Taylor. The Audit Committee
reviews with the Corporation's independent accountants the scope of the audit
for the year, the results of the audit when completed and the independent
accountants' fee for services performed. The Audit Committee also recommends
independent accountants to the Board of Directors and reviews with the
independent accountants the Corporation's internal accounting controls and
financial management practices. During fiscal 2002, the Audit Committee held
four meetings. The Audit Committee's Report is included later in this Proxy
Statement.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 11, 2003 certain information
with respect to beneficial ownership of the Corporation's Common Stock by: (i)
each person known by the Corporation to own beneficially more than 5% of the
Corporation's Common Stock; (ii) each of the Corporation's directors, (iii) each
of the executive officers named in the Summary Compensation Table elsewhere in
this Proxy Statement; and (iv) all directors and executive officers as a group.
This information is based upon information received from or on behalf of the
named stockholder or from public records. Unless otherwise noted, each person
identified possesses sole voting and investment power over the shares listed.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1) Percent of Class
------------------------ ------------------------ ----------------
Wendell L. Batchelor 1,250,646 10.0%
Johnny R. Long 791,253 6.5%
Keith O. Holdbrooks 550,033 4.4%
Dan E. Batchelor 64,900 *
Louis C. Henderson, Jr. 17,250 *
Clinton O. Holdbrooks 516,450 4.3%
A.C. (Del) Marsh 131,250 1.1%
James A. Taylor 129,720 1.1%
FMR 1,525,100 12.6%
82 Devon Shire Street
Boston, MA 02109
Dimensional Fund Advisors 819,325 6.8%
1299 Ocean Ave. 11th Floor
Santa Monica, CA 90401
Fuller & Thaler Asset Management, Inc. 871,435 7.2%
411 Borel Ave. Suite 402
San Mateo, CA 94402
All executive officers and directors as a group 3,451,502 26.5%
(8 persons)
* Less than one percent
(1) Includes currently exercisable options to purchase 333,779, 30,000,
439,999, 41,000, 11,250, 11,250, 11,250 and 11,250 shares of common
stock held by Messrs. Wendell Batchelor, Long, Keith Holdbrooks, Dan
Batchelor, Henderson, Clinton Holdbrooks, Marsh and Taylor,
respectively.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Corporation's Compensation Committee currently consists of Messrs.
Long, Marsh, Taylor and Henderson. None of the members of the Compensation
Committee is an officer or employee of the Corporation or any of its
subsidiaries. Mr. Long was Executive Vice President of the Corporation prior to
his retirement in 1999.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by
or paid to the Corporation's Chief Executive Officer, and each of the
Corporation's Executive Officers (other than the Chief Executive Officer)
serving as such at the end of fiscal 2002 whose total annual salary and bonus
exceeded $100,000 for all services rendered in all capacities to the Corporation
and its subsidiaries for the Corporation's three fiscal years ended January 3,
2003.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------- Other Securities All Other
Name and Year Salary Bonus Annual underlying Compensation(3)
Principal Position Ended ($) ($) Compensation options (#)(2) ($)
------------------ ----- --- --- ------------ -------------- ---
Wendell L. Batchelor 01/03/03 138,006 0 (1) None 3,103
Chairman 12/28/01 150,000 25 (1) 100,000 2,541
12/29/00 150,000 0 (1) 100,000 2,553
Keith O. Holdbrooks 01/03/03 311,371 4,042 (1) 100,000 1,224
Chief Executive Officer & 12/28/01 208,077 60,025 (1) 100,000 957
President 12/29/00 150,000 90,706 (1) 100,000 858
Dan E. Batchelor 01/03/03 225,025 0 (1) 25,000 1,224
Executive Vice-President & 12/28/01 225,000 25 (1) 10,000 957
General Counsel 12/29/00 225,000 0 (1) 4,000 0
---------------
(1) The aggregate amount of perquisites and other personal benefits,
securities or property did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus for the named executive officer.
(2) Options granted to executive officers during the periods were granted
pursuant to the Corporation's 1993 Stock Option Plan and 2002 Incentive
Award Plan.
(3) Includes the following for 2002: (i) matching contributions made by the
Corporation to its 401(k) plan in the amount of $1,224 on behalf of
each named executive officer, except for Mr. Wendell Batchelor, in
whose case the matching contribution was $996; (ii) $2,107, which
represents the portion of the premium payment that is attributable to
term insurance coverage for Messrs. Wendell Batchelor, as determined by
tables supplied by the Internal Revenue Service.
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Stock Options
The following tables set forth certain information with respect to the
stock options granted to the named executive officers during the fiscal year
ended January 3, 2003 and the aggregate number and value of options exercisable
and unexercisable held by the named executive officers at the end of such fiscal
year.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants Potential
----------------- Realizable Value
Number of % of Total at Assumed
Securities Options Annual Rates of
Underlying Granted to Stock Price
Options Employees Exercise Appreciation For
Granted in Price Expiration Option Term (2)
Name (#) Fiscal Year $/Share Date 5% ($) 10%($)
---- --- ----------- ------- ---- ------ ------
Wendell L. Batchelor None 0% 0 0 0
Keith O. Holdbrooks 100,000(1) 45% 2.11 5/20/12 132,697 336,280
Dan E. Batchelor 25,000(1) 11% 2.11 5/20/12 33,174 84,070
(1) Options are 20% fully exercisable upon grant and the remaining 80% vest
in increments of 20% each year for the four years following the date of
grant. Option exercise prices are equal to fair market value on the
date of grant.
(2) The 5% and 10% assumed rates of annual compounded stock price
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Corporation's estimate or
projection of future common stock prices.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-the-Money Options at
Acquired on Realized Options at 01/03/03(#) 01/03/03($)(2)
Name Exercise (#) ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ------ ------------------------- -------------------------
Wendell L. Batchelor -0- -0- 333,779/ -0- 45,700 / -0-
Keith O. Holdbrooks -0- -0- 359,999/80,000 45,700 / -0-
Dan E. Batchelor -0- -0- 16,000 / 25,000 1,828 /-0-
(1) The "value realized" reflects the appreciation on the date of exercise
(based on the excess of the fair market value of the shares on the date
of exercise over the exercise price). However, because the executive
officers may keep the shares they acquired upon the exercise of the
options (or sell them at a different price), these amounts do not
necessarily reflect cash realized upon the sale of those shares.
(2) Based on the closing price of the Corporation's Common Stock on January
3, 2003 on the Nasdaq National Market of $1.52, minus the respective
option exercise prices.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's executive compensation program has been administered
by the Compensation Committee of the Board of Directors (the "Committee") since
the Corporation became a public company in 1993. None of the members of the
Committee is an employee of the Corporation or its subsidiaries; Mr. Long was
formerly Executive Vice President, prior to his retirement in 1999.
In its deliberations, the Committee considered the past performance of
the officers, their level of responsibilities, and the Committee's view of the
level of compensation necessary to attract and retain talented individuals in
the competitive environment in which the Corporation operates. The Committee
assigned no particular weight to any one factor, and viewed the deliberations as
an exercise of subjective judgment on the part of the Committee.
The Committee considers it appropriate that the Corporation's
compensation policies for its executive officers should continue to reward the
executive officers for improvements in the Corporation's financial results. A
significant component of the executive officers' compensation should continue to
be bonuses directly related to the financial performance of the Corporation as
measured by its net income. Accordingly, the Committee confirmed that annual
salary and cash and stock bonus and incentive awards would continue to be the
principal components of compensation for executive officers. The Committee also
expects that it will continue to take into consideration, in addition to the
Corporation's performance, each executive officer's individual responsibilities
and performance. The Committee also intends to take into consideration
compensation levels for other companies engaged in the manufactured housing
business and compensation levels for executive officers of public companies
generally.
Compensation of Keith O. Holdbrooks, Chief Executive Officer
The Committee established the compensation of Keith O. Holdbrooks,
Chief Executive Officer of the Corporation for the fiscal year ended January 3,
2003, using the same general criteria that were used to determine the
compensation of other executive officers, as described above. Mr. Keith
Holdbrooks received a salary of $311,371, for the fiscal year ended January 3,
2003. Mr. Holdbrooks received a bonus of $4,042 the year ended January 3, 2003.
The Stock Option Committee granted options for 100,000 shares to Mr. Holdbrooks
during fiscal 2002, and in setting the cash portion of his compensation, the
Compensation Committee took this significant long-term incentive into
consideration.
The foregoing report has been approved by all members of the Committee.
COMPENSATION COMMITTEE
Louis C. Henderson, Jr.
Johnny R. Long
A.C. (Del) Marsh
James A. Taylor
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COMPARATIVE PERFORMANCE GRAPH
The following performance graph and table compare the cumulative total
return to shareholders on the Corporation's Common Stock with the cumulative
total return of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500
Index") and a peer group (the "Peer Group") of companies selected by the
Corporation whose primary business is manufactured housing. The Peer Group
consists of the following companies: Cavalier Homes, Inc., Champion Enterprises,
Inc., Clayton Homes, Inc., Fleetwood Enterprises, Kit Manufacturing, Liberty
Homes - Class A, Nobility Homes, Inc., Oakwood Homes Corporation, Palm Harbor
Homes, Inc., and Skyline Corporation. It should be noted that the companies in
the Peer Group are not perfectly comparable to the Corporation. Certain of the
companies are either much larger or much smaller than the Corporation; some are
involved in the production of manufactured housing and recreational vehicles;
and some are vertically integrated to a much greater extent than the Corporation
and engage, for instance, in more significant retail sales and local development
activities.
The graph and the table assume $100.00 was invested in December, 1997
in each of the Corporation's Common Stock, the S&P 500 Index and in the Peer
Group and also assumes reinvestment of dividends. The 2002 cumulative returns
were such that $100.00 invested in December 1997 had the following values at
December 2002: Southern Energy Homes, Inc., $19.31; S&P 500 Index, $101.13 and
Peer Group, $42.24.
[LINE GRAPH]
COMPARISON OF CUMULATIVE RETURNS
Measurement Period
Base Period
December December December December December December
Company Name/Index 1997 1998 1999 2000 2001 2002
Southern Energy Homes, Inc. 100 76.56 29.30 11.72 33.75 19.31
S&P 500 Index 100 128.58 155.63 141.46 127.12 101.13
Peer Group 100 90.53 47.05 38.69 62.91 42.24
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CERTAIN TRANSACTIONS
In January 1993, the Corporation reincorporated as a Delaware
corporation by merging its predecessor, an Alabama corporation also known as
Southern Energy Homes, Inc. ("SEH Alabama"), into the Corporation. As the
surviving corporation, the Corporation assumed all of the obligations of SEH
Alabama.
On June 8, 1989, Lee Capital Holdings, then a Massachusetts general
partnership (now Lee Capital Holdings, LLC), and two of its employees (the "Lee
Group"), acquired 60% of the outstanding capital stock of SEH Alabama in a
leveraged buyout (the "Acquisition"). The Acquisition was effected through the
purchase of the stock of SEH Alabama by a newly formed corporation, SEH
Acquisition Corp., 60% of which was owned by the Lee Group and 40% of which was
owned by certain stockholders and members of SEH Alabama's management group.
Since March 30, 1991, the Corporation has sold homes to a development
company which has developed a residential subdivision in Gardendale, Alabama.
This development company was until December, 1995 controlled by Wendell L.
Batchelor and his brother-in-law, Clinton O. Holdbrooks. In December of 1995,
Wendell L. Batchelor transferred his one-third interest in the development
company to his two children, and Clinton O. Holdbrooks transferred his one-third
interest in the development company to his two children, one of whom is Keith O.
Holdbrooks, Chief Executive Officer, President and Director of the Corporation.
For the fiscal year ended December 28, 2001 and January 3, 2003, sales to this
development company were approximately $52,000 and $42,000, respectively.
Transactions with the development company have been at prices and on terms no
less favorable to the Corporation than transactions with independent third
parties.
AUDIT COMMITTEE REPORT
During fiscal 2002, the Audit Committee of the Board of Directors
consisted of three of the Corporation's directors: Messrs. Henderson, Marsh and
Taylor. All members of the Corporation's Audit Committee are independent as
defined under the rules of The Nasdaq Stock Market, Inc. currently in effect.
The Audit Committee operates pursuant to a written charter (the "Audit Committee
Charter"), that was approved and adopted by the Board of Directors on May 22,
2000, and is reviewed and reassessed for adequacy on an annual basis. The Audit
Committee Charter is included as Appendix A to this Proxy Statement. Under the
provisions of the Audit Committee Charter, the Audit Committee is responsible,
among other things, for: recommending the engagement and overseeing the
performance of the Corporation's independent auditors; reviewing the
Corporation's financial disclosure documents; monitoring the Corporation's
financial reporting process and internal control systems; monitoring potential
conflicts of interest among the Corporation and its executive officers and
directors; and providing a liaison between the independent auditors and the
Board of Directors.
The Audit Committee has reviewed and discussed with management the
Corporation's audited consolidated financial statements for the fiscal year
ended January 3, 2003. The Audit Committee has also discussed with Ernst & Young
LLP, the Corporation's independent auditors, the matters required to be
discussed by the Auditing Standards Board Statement on Auditing Standards No.
61, as amended. As required by Independence Standards Board Standard No. 1, as
amended, "Independence Discussion with Audit Committees," the Audit Committee
has received and reviewed the required written disclosures and a confirming
letter from Ernst & Young LLP regarding their independence, and has discussed
the matter with the auditors.
Based on its review and discussions of the foregoing, the Audit
Committee has recommended to the Board of Directors that the Corporation's
audited consolidated financial statements for the fiscal year 2002 be included
in the Corporation's Annual Report on Form 10-K for the fiscal year ended
January 3, 2003. The Audit committee's recommendation considered its review of
Ernst & Young's qualifications as independent accountants for the Corporation,
and also included matters required to be considered under U.S. Securities and
Exchange Commission Rules on Auditor Independence, including the nature and
extent
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of non-audit services. In the Audit Committee's business judgment the nature and
extent of non-audit services performed by Ernst & Young LLP during the year did
not impair the firm's independence. It should be noted that management is
responsible for the Corporation's financial reporting process including its
system of internal control, and of the preparation of financial statements in
accordance with generally accepted accounting principles. The Corporation's
independent auditors are responsible for auditing those financial statements.
The responsibility of the Audit Committee is to monitor and review these
processes; it is not within the scope of the Audit Committee's duty or our
responsibility to conduct auditing or accounting reviews or procedures.
Audit Committee
Louis C. Henderson, Jr., Chairman
Del Marsh
James Taylor
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee,
has engaged Ernst & Young LLP to serve as the Corporations independent public
accountants for the fiscal year ended January 2, 2004.
For fiscal 2001 and prior years, Arthur Andersen LLP served as the
Corporation's independent auditors. On April 16, 2002, the Company determined
not to renew the engagement of Arthur Anderson, and on April 17, 2002 appointed
Ernst & Young LLP (Ernst & Young) following the Corporation's decision to seek
proposals for the audit of its financial statements for fiscal 2002. The
decision not to renew the engagement of Arthur Andersen and to retain Ernst &
Young was approved by the Corporation's Board of Directors upon the
recommendation of its Audit Committee. Arthur Andersen's report on the
Corporation's financial statements for 2001 did not contain an adverse opinion
or disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles. There were no disagreements with Arthur
Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which if not resolved to
Arthur Andersen's satisfaction would have caused it to make reference to the
subject matter in connection with its report. Ernst & Young has advised that
neither the firm nor any member of the firm has any direct financial interest or
any material indirect interest in Southern Energy Homes, Inc. Also, during at
least the past three years, neither the firm nor any member of the firm has had
any connection with the Corporation in the capacity of promoter, underwriter,
voting trustee, director, officer or employee.
Representatives of Ernst & Young will be in attendance at the Annual
Meeting and will be available to respond to appropriate questions from
stockholders and will have the opportunity to make a statement if they so
desire.
AUDITOR INFORMATION
Audit Fees. Ernst & Young billed the Corporation an aggregate of
$279,850 for professional services rendered in connection with its audit of the
Corporation's financial statements for the fiscal years ended January 3, 2003,
December 28, 2001 and December 29, 2000 and its review of the Corporation's
quarterly reports on Form 10-Q during fiscal 2002.
Audit Related Fees. Ernst & Young billed the Corporation an additional
$9,500 during fiscal 2002 for audit related services related to their audit of
the Company's 401k plan.
Financial Information Systems Design and Implementation. During fiscal
2002, Ernst & Young did not render any professional services to (i) directly or
indirectly, operate, or supervise the operation of,
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the Corporation's information systems or manage the Corporation's local area
network and (ii) design or implement a hardware or software system that
aggregates source data underlying the financial statements of the Corporation or
generates information that is significant to the Corporation's financial
statements taken as a whole.
Tax Fees. Aggregate fees billed by Ernst & Young for professional
services rendered for tax compliance, tax advice and tax planning during fiscal
2002 were $12,532. The services comprising these fees consisted of research and
consultation for state sales and use tax compliance, other tax planning
methodologies and various other tax issues.
The Corporation's Audit Committee considered the non-audit services
rendered by Ernst & Young during fiscal 2002 and determined that such services
were compatible with Ernst & Young's independence.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and Directors and persons owning more than 10% of the
outstanding Common Stock of the Corporation to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
Directors and greater than 10% holders of Common Stock are required by SEC
regulation to furnish the Corporation with copies of all Section 16(a) forms
they file.
Based solely on copies of such forms furnished as provided above, or
written representations that no Forms 5 were required, the Corporation believes
that during the year ended January 3, 2003, all Section 16(a) filing
requirements applicable to its officers, Directors and owners of greater than
10% of its Common Stock were complied with, except for one late report of one
stock purchase transaction by Mr. Taylor.
DEADLINES FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Under regulations adopted by the Securities and Exchange Commission,
any proposal submitted for inclusion in the Corporation's Proxy Statement
relating to the Annual Meeting of Stockholders to be held in 2004 must be
received at the Corporation's principal executive offices in Addison, Alabama on
or before January 2, 2004. Receipt by the Corporation of any such proposal from
a qualified stockholder in a timely manner will not ensure its inclusion in the
proxy material because there are other requirements in the proxy rules for such
inclusion.
OTHER MATTERS
Management knows of no matters which may properly be and are likely to
be brought before the meeting other than the matters discussed herein. However,
if any other matters properly come before the meeting, the persons named in the
enclosed proxy will vote in accordance with their best judgment.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be
specifically incorporated by reference into any filing by the Corporation under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, the sections of the Proxy Statement entitled "Compensation Committee
Report on Executive Compensation," "Audit Committee Report" and "Comparative
Performance Graph" shall not be deemed to be so incorporated, unless
specifically otherwise provided in any such filing.
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10-K REPORT
THE CORPORATION WILL PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES
WITH A COPY OF AN ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE CORPORATION'S MOST RECENT FISCAL YEAR, WITHOUT CHARGE, UPON
RECEIPT OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE SENT TO
JAMES L. STARIHA, SOUTHERN ENERGY HOMES, INC., 144 CORPORATE WAY, ADDISON,
ALABAMA 35540.
VOTING PROXIES
The Board of Directors recommends an affirmative vote on all proposals
specified. Proxies will be voted as specified. If signed proxies are returned
without specifying an affirmative or negative vote on any proposal, the shares
represented by such proxies will be voted in favor of the Board of Directors'
recommendations.
By order of the Board of Directors
Dan E. Batchelor, Secretary
Addison, Alabama
April 21, 2003
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APPENDIX
SOUTHERN ENERGY HOMES, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
PURPOSE
The primary purpose of the Audit Committee (the "Committee") of the Board of
Directors of Southern Energy Homes, Inc. (the "Company") is to provide
independent and objective oversight of the financial reporting process, the
accounting functions and internal controls of the Company and its subsidiaries.
The Committee and the Board of Directors have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
independent auditors (or to nominate an outside independent auditor to be
approved by the Company's shareholders in any proxy statement). The Committee
shall also review and advise the Board of Directors with respect to the
Company's risk management and tax policies.
FUNCTIONS
The Committee shall perform the following functions:
1. Independent Auditors. Recommend to the Board of Directors the
accounting firm to be engaged by the Company as its independent auditors, which
firm shall be ultimately accountable to the Board of Directors and the Committee
as representatives of the Company's shareholders.
2. Plan of Audit. Review with the independent auditors the plan
and scope of their audit, its status during the year, the results when
completed, the required communications under Statements of Auditing Standards
Nos. 61 and 89, their report or opinion and any recommendations they may have
for improving or changing the audit and the control environment, as well as
management's letter in response thereto, and the fees for audit services.
3. Accounting Principles and Disclosure. Review significant
developments in accounting rules. The Committee shall review with management
recommended changes in the Company's methods of accounting or financial
statements. The Committee also shall review with the independent auditors any
significant proposed changes in accounting principles and financial statements.
4. Internal Accounting Controls. Consult with the independent
auditors regarding the adequacy of internal accounting controls. Where
appropriate, consultation with the independent auditors regarding internal
controls shall be conducted out of management's presence.
5. Internal Control Systems. Review with management the Company's
internal control systems intended to ensure the reliability of financial
reporting and compliance with applicable codes of conduct, laws, and
regulations. The review shall include any significant problems and regulatory
concerns.
6. Financial Disclosure Documents. Prior to publication, the
Committee shall review and discuss with management and the independent auditors
the Company's audited financial statements, such review and discussions to
include the matters to be discussed by Statement of Auditing Standards No. 61,
the written disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, and the independent auditor's
independence. Following the satisfactory completion of the year-end review and
discussions, the Committee shall recommend to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the last fiscal year for filing with the Securities and Exchange
Commission. The review shall include any significant problems and material
disputes between management and the independent auditors and a discussion with
the independent auditors out of management's presence of the quality of the
Company's accounting principles as applied in its financial reporting, the
clarity of the Company's financial disclosures and degree
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of aggressiveness or conservatism of the Company's accounting principles and
underlying estimates, and a frank and open discussion of other significant
decisions made by management in preparing the financial disclosure and reviewed
by the independent auditors. The Committee shall also require that the Company's
interim financial statements are reviewed by the Company's independent auditors
prior to filing with the Securities and Exchange Commission, such review to
follow professional standards and procedures for conducting such reviews, as
established by generally accepted auditing standards, as may be modified or
supplemented by the Securities and Exchange Commission.
7. Oversight of Executive Officers and Directors and Conflicts of
Interest. Review significant conflicts of interest involving directors or
executive officers. The Committee shall review compliance with Company policies
and procedures with respect to officers' expense accounts and perquisites,
including their use of corporate assets, and consider the results of any review
of these areas by the independent auditor. The Committee also shall review
significant questionable or illegal payments.
8. Oversight of Independent Auditors. Evaluate the independent
auditors on an annual basis and, where appropriate, recommend a replacement for
the independent auditors. In such evaluation, the Committee shall require that
the independent auditors deliver to the Committee a formal written statement
delineating all relationships between the auditors and the Company, as required
by Independence Standards Board Standard No. 1. On an annual basis, the
Committee also shall actively engage in a dialogue with the auditors with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditors and in response to the
independent auditor's report take, or recommend that the Board take, appropriate
action to oversee the independent auditor's independence.
9. Adequacy of Personnel. Review periodically the adequacy of the
Company's accounting, financial, and auditing personnel resources.
10. Risk Management. Review and evaluate risk management policies
in light of the Company's business strategy, capital strength, and overall risk
tolerance. The Committee also shall evaluate on a periodic basis the Company's
investment and derivatives risk management policies, including the internal
system to review operational risks, procedures for derivatives investment and
trading, and safeguards to ensure compliance with procedures.
11. Tax Policies. Review periodically the Company's tax policies
and any pending audits or assessments.
12. Charter Amendments. Review this Charter annually, assess its
adequacy and propose appropriate amendments to the Board of Directors.
13. Miscellaneous. Such other matters in relation to the financial
affairs of the Company, and in relation to the audit of the Company, as the
Committee may, in its discretion, deem advisable.
The Committee's function is one of oversight and review, and it is not expected
to audit the Company, to define the scope of the audit, to control the Company's
accounting practices, or to define the standards to be used in preparation of
the Company's financial statements.
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===========================
SOUTHERN ENERGY HOMES, INC. 1. Election of Directors
===========================
For All With- For All
Nominees hold Except
[ ] [ ] [ ]
WENDELL L. BATCHELOR JOHNNY R. LONG
LOUIS C. HENDERSON, JR. A.C. (DEL) MARSH
KEITH O. HOLDBROOKS JAMES A. TAYLOR
CLINTON O. HOLDBROOKS
CONTROL NUMBER:
RECORD DATE SHARES: Note: If you do not wish your shares voted "For" a
particular nominee(s), mark the "For All Except" box
and strike a line through the name(s) of such
nominee(s). Your shares will be voted for the
remaining nominee(s).
2. In their discretion, the proxies are authorized
to vote upon such other business as may properly
come before the meeting.
Mark box at right if you plan to attend the Meeting
in person. [ ]
Please be sure to ----
sign and date Date
this Proxy.
- --------------------------
Mark box at right if an address change or comment[ ]
has been noted on the reverse side of this card.
Stockholder Co-owner
sign here sign here
- --------------------------
SOUTHERN ENERGY HOMES, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, May 20,
2003.
Thank you in advance for your prompt consideration of these matters.
Yours very truly,
Southern Energy Homes, Inc.
SOUTHERN ENERGY HOMES, INC.
The undersigned hereby appoints Keith O. Holdbrooks with full power of
substitution, proxies to represent the undersigned at the 2003 Annual Meeting of
Stockholders of SOUTHERN ENERGY HOMES, INC. to be held May 20, 2003 at 10:00
a.m. at the offices of the Company, located at 144 Corporate Way, Addison,
Alabama 35540, and at any adjournment or adjournments thereof, to vote in the
name and place of the undersigned, with all powers which the undersigned would
possess if personally present, all the shares of SOUTHERN ENERGY HOMES, INC.
standing in the name of the undersigned upon the matters set forth in the Notice
and Proxy Statement for the Meeting in accordance with the instructions on the
reverse side and upon such other business as may properly come before the
Meeting.
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES FOR THE ELECTION OF DIRECTORS.
SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES
REPRESENTED WILL BE VOTED FOR ALL NOMINEES FOR THE ELECTION OF DIRECTORS.
PLEASE DATE AND SIGN THIS PROXY IN THE SPACE PROVIDED AND RETURN IT IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as your name(s) appear(s) on the books of the Corporation.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_____________________________ _______________________________
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