##### Table of Contents



FORM 10-Q
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For Quarterly period ended July 4, 2009
 OR
 o
    
    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 1-9751
 CHAMPION ENTERPRISES, INC.
  Michigan
    
    38-2743168(State or other jurisdiction of incorporation or 
organization)
    
    (I.R.S. Employer
Identification No.)
 (Address of principal executive offices)
  þ o
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II. OTHER INFORMATIONItem 1A. Risk FactorsItem 4. Submission of Matters to a Vote of Security HoldersItem 6. Exhibits and Reports on Form 8-KSIGNATURESEX-31.1EX-31.2EX-32.1    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
  CHAMPION ENTERPRISES, INC.
 Unaudited
    
    
    UnauditedThree Months Ended
    
    
    Six Months EndedJuly 4,
    
    
    June 28,
    
    
    July 4,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    129,538
    
    
    $
    289,184
    
    
    $
    234,764
    
    
    $
    585,882Cost of sales
    
    
    113,961
    
    
    
    246,722
    
    
    
    213,656
    
    
    
    506,852Gross margin
    
    
    15,577
    
    
    
    42,462
    
    
    
    21,108
    
    
    
    79,030Selling, general and administrative expenses
    
    
    21,858
    
    
    
    33,015
    
    
    
    43,153
    
    
    
    72,318Insurance gain
    
    
    
    
    
    
    
    
    
    
    (4,295
    )
    
    
    Restructuring charges
    
    
    2,220
    
    
    
    
    
    
    
    2,358
    
    
    
    9,471Foreign currency transaction (gains) losses
    
    
    (1,963
    )
    
    
    (576
    )
    
    
    (1,321
    )
    
    
    1,775Amortization of intangible assets
    
    
    1,953
    
    
    
    2,382
    
    
    
    3,812
    
    
    
    4,851Operating (loss) income
    
    
    (8,491
    )
    
    
    7,641
    
    
    
    (22,599
    )
    
    
    (9,385
    )Interest income
    
    
    43
    
    
    
    1,061
    
    
    
    220
    
    
    
    2,364Interest expense
    
    
    (4,857
    )
    
    
    (5,150
    )
    
    
    (9,553
    )
    
    
    (10,326
    )(Loss) income before income taxes
    
    
    (13,305
    )
    
    
    3,552
    
    
    
    (31,932
    )
    
    
    (17,347
    )Income tax expense (benefit)
    
    
    8
    
    
    
    202
    
    
    
    (981
    )
    
    
    (213
    )Net (loss) income
    
    $
    (13,313
    )
    
    $
    3,350
    
    
    $
    (30,951
    )
    
    $
    (17,134
    )Basic (loss) income per share
    
    $
    (0.17
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    (0.22
    )Weighted shares for basic EPS
    
    
    77,762
    
    
    
    77,738
    
    
    
    77,730
    
    
    
    77,605Diluted (loss) income per share
    
    $
    (0.17
    )
    
    $
    0.04
    
    
    $
    (0.40
    )
    
    $
    (0.22
    )Weighted shares for diluted EPS
    
    
    77,762
    
    
    
    77,929
    
    
    
    77,730
    
    
    
    77,605
  Page 1 of 30




---



##### Table of Contents



CHAMPION ENTERPRISES, INC.
 UnauditedJuly 4,
    
    
    January 3,2009
    
    
    2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    26,479
    
    
    $
    52,787Accounts receivable, trade
    
    
    26,775
    
    
    
    33,935Inventories
    
    
    37,394
    
    
    
    52,960Deferred tax assets
    
    
    653
    
    
    
    673Other current assets
    
    
    6,493
    
    
    
    9,839Total current assets
    
    
    97,794
    
    
    
    150,194Property, plant and equipmentLand and improvements
    
    
    28,749
    
    
    
    29,039Buildings and improvements
    
    
    117,523
    
    
    
    115,447Machinery and equipment
    
    
    77,182
    
    
    
    81,497223,454
    
    
    
    225,983Less-accumulated depreciation
    
    
    132,007
    
    
    
    129,12091,447
    
    
    
    96,863Goodwill
    
    
    320,154
    
    
    
    307,760Amortizable intangible assets, net of
accumulated amortization
    
    
    67,820
    
    
    
    67,932Other non-current assets
    
    
    19,212
    
    
    
    22,260$
    596,427
    
    
    $
    645,009LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesShort-term portion of debt
    
    $
    130,378
    
    
    $
    12,229Accounts payable
    
    
    57,641
    
    
    
    70,050Accrued volume rebates
    
    
    10,488
    
    
    
    19,120Accrued warranty obligations
    
    
    16,866
    
    
    
    20,925Accrued compensation and payroll taxes
    
    
    11,754
    
    
    
    15,372Accrued self-insurance
    
    
    19,447
    
    
    
    22,537Other current liabilities
    
    
    23,088
    
    
    
    27,399Total current liabilities
    
    
    269,662
    
    
    
    187,632Long-term liabilitiesLong-term debt
    
    
    193,579
    
    
    
    300,851Deferred tax liabilities
    
    
    38,106
    
    
    
    36,592Other long-term liabilities
    
    
    31,415
    
    
    
    33,111263,100
    
    
    
    370,554Contingent liabilities (Note 7)Shareholders equityCommon stock, $1 par value, 120,000 shares authorized,
77,782 and 77,780 shares issued and outstanding, respectively
    
    
    77,782
    
    
    
    77,780Capital in excess of par value
    
    
    202,271
    
    
    
    201,919Accumulated deficit
    
    
    (206,774
    )
    
    
    (175,823
    )Accumulated other comprehensive loss
    
    
    (9,614
    )
    
    
    (17,053
    )Total shareholders equity
    
    
    63,665
    
    
    
    86,823$
    596,427
    
    
    $
    645,009
  Page 2 of 30




---



##### Table of Contents



CHAMPION ENTERPRISES, INC.
 UnauditedSix Months EndedJuly 4,
    
    
    June 28,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (30,951
    )
    
    $
    (17,134
    )Adjustments to reconcile net loss to net cash used for operating activities:Depreciation and amortization
    
    
    9,275
    
    
    
    11,812Stock-based compensation
    
    
    335
    
    
    
    857Change in deferred taxes
    
    
    943
    
    
    
    (8,608
    )Inventory LCM charges
    
    
    515
    
    
    
    2,100Non-cash financing expenses
    
    
    2,637
    
    
    
    447Fixed asset impairment charges
    
    
    1,525
    
    
    
    7,000Insurance proceeds
    
    
    3,161
    
    
    
    2,500Gain on disposal of fixed assets
    
    
    (179
    )
    
    
    (139
    )Gain on insurance settlement
    
    
    (4,295
    )
    
    
    Foreign currency transaction (gains) losses
    
    
    (1,321
    )
    
    
    1,775Increase/decrease:Accounts receivable
    
    
    6,323
    
    
    
    (2,653
    )Inventories
    
    
    15,614
    
    
    
    6,611Accounts payable
    
    
    (17,020
    )
    
    
    4,376Accrued liabilities
    
    
    (23,289
    )
    
    
    (21,587
    )Other assets, net
    
    
    2,310
    
    
    
    (899
    )Net cash used for operating activities
    
    
    (34,417
    )
    
    
    (13,542
    )Cash flows from investing activities:Proceeds on disposal of fixed assets
    
    
    1,188
    
    
    
    2,528Insurance proceeds
    
    
    4,052
    
    
    
    Purchase of short-term investments
    
    
    
    
    
    
    (10,000
    )Redemption of short-term investments
    
    
    
    
    
    
    3,050Additions to property, plant and equipment
    
    
    (406
    )
    
    
    (5,716
    )Acquisitions
    
    
    
    
    
    
    (2,500
    )Net cash provided by (used for) investing activities
    
    
    4,834
    
    
    
    (12,638
    )Cash flows from financing activities:Payments on debt
    
    
    (7,839
    )
    
    
    (25,657
    )Proceeds from Revolver borrowings
    
    
    11,284
    
    
    
    Payments for deferred financing costs
    
    
    (245
    )
    
    
    Common stock issued, net
    
    
    
    
    
    
    437Net cash provided by (used for) financing activities
    
    
    3,200
    
    
    
    (25,220
    )Cash used for discontinued operations
    
    
    (135
    )
    
    
    (87
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    210
    
    
    
    449Net decrease in cash and cash equivalents
    
    
    (26,308
    )
    
    
    (51,038
    )Cash and cash equivalents at beginning of period
    
    
    52,787
    
    
    
    135,408Cash and cash equivalents at end of period
    
    $
    26,479
    
    
    $
    84,370
  Page 3 of 30




---



##### Table of Contents



CHAMPION ENTERPRISES, INC.
  AccumulatedCapital in
    
    
    
    
    
    otherCommon stock
    
    excess of
    
    Accumulated
    
    comprehensiveShares
    
    Amount
    
    par value
    
    deficit
    
    (loss) income
    
    TotalBalance at January 3, 2009
    
    
    77,780
    
    
    $
    77,780
    
    
    $
    201,919
    
    
    $
    (175,823
    )
    
    $
    (17,053
    )
    
    $
    86,823Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,951
    )
    
    
    
    
    
    
    (30,951
    )Stock compensation plans
    
    
    2
    
    
    
    2
    
    
    
    352
    
    
    
    
    
    
    
    
    
    
    
    354Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,909
    
    
    
    13,909Net investment hedge, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,470
    )
    
    
    (6,470
    )Balance at July 4, 2009
    
    
    77,782
    
    
    $
    77,782
    
    
    $
    202,271
    
    
    $
    (206,774
    )
    
    $
    (9,614
    )
    
    $
    63,665
  Foreign currency translation adjustments
    
    $
    (10,773
    )Pension actuarial gain, net of income taxes
    
    
    441Net investment hedge, net of income taxes
    
    
    718$
    (9,614
    )
 
 Three Months Ended
    
    
    Six Months EndedJuly 4,
    
    
    June 28,
    
    
    July 4,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) income
    
    $
    (13,313
    )
    
    $
    3,350
    
    
    $
    (30,951
    )
    
    $
    (17,134
    )Other comprehensive (loss) income:Foreign currency translation adjustments
    
    
    12,704
    
    
    
    210
    
    
    
    13,909
    
    
    
    (1,711
    )Net investment hedge, net of income taxes
    
    
    (5,512
    )
    
    
    151
    
    
    
    (6,470
    )
    
    
    251Total comprehensive (loss) income
    
    $
    (6,121
    )
    
    $
    3,711
    
    
    $
    (23,512
    )
    
    $
    (18,594
    )
  Page 4 of 30




---



##### Table of Contents



CHAMPION ENTERPRISES, INC.  Notes to Condensed Consolidated Financial Statements
 NOTE 1  Summary of Significant Accounting Policies
        New Accounting Policies:
 The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles  a replacement of FASB Statement No. 162 The Hierarchy of Generally
Accepted Accounting Principles
 Page 5 of 30




---



##### Table of Contents



Subsequent Events.
 Determining Fair Value When the Volume and Level of Activity for the Asset or Liability
Have Significantly Decreased and Identifying Transactions That Are Not Orderly
 Interim Disclosures about Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments Interim Financial Reporting
 Disclosures about Derivative Instruments and Hedging Activities  an Amendment
of FASB Statement No. 133 Accounting for Derivative
Instruments and Hedging Activities
 Fair Value Measurements
 NOTE 2  Acquisitions
  NOTE 3  Income Taxes
 Accounting
for Income Taxes
  Page 6 of 30




---



##### Table of Contents



NOTE 4  Inventories, Long-Term Construction Contracts and Other Current Liabilities
  July 4,
    
    
    January 3,2009
    
    
    2009(In thousands)Raw materials
    
    $
    17,712
    
    
    $
    27,994Work-in-process
    
    
    6,841
    
    
    
    4,875New manufactured homes
    
    
    9,334
    
    
    
    14,352Other inventory
    
    
    8,864
    
    
    
    18,403Inventory reserves
    
    
    (5,357
    )
    
    
    (12,664
    )Total inventory
    
    $
    37,394
    
    
    $
    52,960
   NOTE 5  Product Warranty
  Page 7 of 30




---



##### Table of Contents



Six Months EndedJuly 4,
    
    
    June 28,2009
    
    
    2008(In thousands)Reserves at beginning of period
    
    $
    27,425
    
    
    $
    35,746Warranty expense provided
    
    
    7,002
    
    
    
    15,844Cash warranty payments
    
    
    (11,561
    )
    
    
    (18,860
    )Reserves at end of period
    
    
    22,866
    
    
    
    32,730Less non-current portion
    
    
    (6,000
    )
    
    
    (6,500
    )Total current portion
    
    $
    16,866
    
    
    $
    26,230
 NOTE 6  Debt
  July 4,
    
    
    January 3,2009
    
    
    2009(In thousands)Convertible Senior Notes due 2037
    
    $
    180,000
    
    
    $
    180,0007.625% Senior Notes due May 2009
    
    
    
    
    
    
    6,716Revolving Line of Credit
    
    
    26,505
    
    
    
    15,040Term Loan due 2012
    
    
    45,161
    
    
    
    45,273Sterling Term Loan due 2012
    
    
    58,162
    
    
    
    51,790Obligations under industrial revenue bonds due 2029
    
    
    12,430
    
    
    
    12,430Other debt
    
    
    1,699
    
    
    
    1,831Total long-term debt
    
    
    323,957
    
    
    
    313,080Less: current portion of long-term debt
    
    
    (130,378
    )
    
    
    (12,229
    )Long-term debt
    
    $
    193,579
    
    
    $
    300,851
    Page 8 of 30




---



##### Table of Contents



Minimum12-monthMinimum
    
    AdjustedFiscal Quarter
    
    Liquidity
    
    EBITDA(In thousands)Second quarter of 2009
    
    $
    35,000
    
    
    $
    6,400Third quarter of 2009
    
    $
    39,000
    
    
    $
    7,500Fourth quarter of 2009
    
    $
    42,000
    
    
    $
    15,100
          Page 9 of 30




---



##### Table of Contents



Maximum
    
    Minimum
    
    MinimumSenior
    
    Interest
    
    FixedLeverage
    
    Coverage
    
    ChargeFiscal Quarter
    
    Ratio
    
    Ratio
    
    RatioFirst quarter of 2010  Third quarter of 2010
    
    
    2.75:1
    
    
    
    2.50:1
    
    
    
    1.25:1Fourth quarter of 2010  Third quarter of 2011
    
    
    2.50:1
    
    
    
    2.75:1
    
    
    
    1.25:1Fourth quarter of 2011  Second quarter of 2012
    
    
    2.25:1
    
    
    
    3.00:1
    
    
    
    1.25:1Third quarter of 2012
    
    
    2.00:1
    
    
    
    3.00:1
    
    
    
    1.25:1
     (In thousands)Term Loan due 2012
    
    $
    45,161Sterling Term Loan due 2012
    
    
    58,162Revolving Line of Credit
    
    
    26,505Other current maturities
    
    
    550Total short-term debt
    
    $
    130,378
  NOTE 7  Contingent Liabilities
   Page 10 of 30




---



##### Table of Contents



NOTE 8  Earnings Per Share and Stock-Based Compensation Plans
  Three Months Ended
    
    
    Six Months EndedJuly 4,
    
    
    June 28,
    
    
    July 4,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Numerator:(Loss) income available to common
shareholders for basic and diluted EPS
    
    $
    (13,313
    )
    
    $
    3,350
    
    
    $
    (30,951
    )
    
    $
    (17,134
    )Denominator:Shares for basic and diluted EPSweighted average
shares outstanding
    
    
    77,762
    
    
    
    77,738
    
    
    
    77,730
    
    
    
    77,605Plus dilutive securities:Stock options
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    Performance awards
    
    
    
    
    
    
    180
    
    
    
    
    
    
    
    77,762
    
    
    
    77,929
    
    
    
    77,730
    
    
    
    77,605
  Convertible debt
    
    
    8,585
    
    
    
    8,585
    
    
    
    8,585
    
    
    
    8,585Performance awards
    
    
    69
    
    
    
    
    
    
    
    69
    
    
    
    180Stock options
    
    
    251
    
    
    
    
    
    
    
    125
    
    
    
    43Total anti-dilutive shares excluded from EPS
    
    
    8,905
    
    
    
    8,585
    
    
    
    8,779
    
    
    
    8,808
    Page 11 of 30




---



##### Table of Contents



WeightedNumber
    
    average exerciseof shares
    
    price per share(In thousands)Outstanding at January 3, 2009
    
    
    419
    
    
    $
    11.83Granted
    
    
    800
    
    
    
    0.20Expired
    
    
    (30
    )
    
    
    21.06Outstanding at April 4, 2009
    
    
    1,189
    
    
    $
    3.77Expired
    
    
    (57
    )
    
    
    23.35Outstanding at July 4, 2009
    
    
    1,132
    
    
    $
    2.74
   Numberof shares(In thousands)Outstanding at January 3, 2009
    
    
    1,631Granted
    
    
    592Vested
    
    
    (139
    )Forfeited
    
    
    (741
    )Outstanding at July 4, 2009
    
    
    1,343Summary of outstanding awards at
July 4, 2009Performance shares
    
    
    1,250Restricted stock awards
    
    
    931,343
   NOTE 9  Segment Information
   Page 12 of 30




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJuly 4,
    
    
    June 28,
    
    
    July 4,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Net sales:Manufacturing segment
    
    $
    101,307
    
    
    $
    211,273
    
    
    $
    178,984
    
    
    $
    392,758International segment
    
    
    21,161
    
    
    
    70,513
    
    
    
    42,904
    
    
    
    180,879Retail segment
    
    
    7,470
    
    
    
    9,398
    
    
    
    14,876
    
    
    
    18,445Less: intercompany
    
    
    (400
    )
    
    
    (2,000
    )
    
    
    (2,000
    )
    
    
    (6,200
    )Consolidated net sales
    
    $
    129,538
    
    
    $
    289,184
    
    
    $
    234,764
    
    
    $
    585,882(Loss) income before income taxes:Manufacturing segment (loss) income
    
    $
    (3,672
    )
    
    $
    13,595
    
    
    $
    (9,778
    )
    
    $
    4,572International segment income
    
    
    1,061
    
    
    
    3,889
    
    
    
    1,125
    
    
    
    12,278Retail segment loss
    
    
    (644
    )
    
    
    (1,043
    )
    
    
    (802
    )
    
    
    (3,807
    )General corporate expenses
    
    
    (5,546
    )
    
    
    (7,094
    )
    
    
    (11,353
    )
    
    
    (15,702
    )Amortization of intangible assets
    
    
    (1,953
    )
    
    
    (2,382
    )
    
    
    (3,812
    )
    
    
    (4,851
    )Foreign currency transaction gains (losses)
    
    
    1,963
    
    
    
    576
    
    
    
    1,321
    
    
    
    (1,775
    )Interest expense, net
    
    
    (4,814
    )
    
    
    (4,089
    )
    
    
    (9,333
    )
    
    
    (7,962
    )Intercompany (loss) profit eliminations
    
    
    300
    
    
    
    100
    
    
    
    700
    
    
    
    (100
    )(Loss) income before income taxes
    
    $
    (13,305
    )
    
    $
    3,552
    
    
    $
    (31,932
    )
    
    $
    (17,347
    )
 NOTE 10  Fair Value Measurements
 Disclosure About Fair Value of Financial Instruments,
  July 4, 2009
    
    January 3, 2009Book
    
    Estimated
    
    Book
    
    EstimatedValue
    
    Fair Value
    
    Value
    
    Fair Value(In thousands)Cash and cash equivalents
    
    $
    26,479
    
    
    $
    26,479
    
    
    $
    52,787
    
    
    $
    52,787Convertible Notes due 2037
    
    
    180,000
    
    
    
    27,000
    
    
    
    180,000
    
    
    
    27,000Revolving Line of Credit
    
    
    26,505
    
    
    
    11,927
    
    
    
    15,040
    
    
    
    6,768Term Loan due 2012
    
    
    45,161
    
    
    
    20,322
    
    
    
    45,273
    
    
    
    20,373Sterling Term Loan due 2012
    
    
    58,162
    
    
    
    26,173
    
    
    
    51,790
    
    
    
    23,306Senior Notes due 2009
    
    
    
    
    
    
    
    
    
    
    6,716
    
    
    
    6,716Other long-term debt
    
    
    14,129
    
    
    
    14,129
    
    
    
    14,261
    
    
    
    14,261
  Page 13 of 30




---



##### Table of Contents



NOTE 11  Restructuring Charges
      2009
    
    
    Prior YearRestructurings
    
    
    Restructurings
    
    
    Total(In thousands)Balance at beginning of year
    
    $
    
    
    
    $
    981
    
    
    $
    981Additions:Severance
    
    
    833
    
    
    
    
    
    
    
    833Cash payments:Warranty
    
    
    
    
    
    
    (84
    )
    
    
    (84
    )Severance
    
    
    (223
    )
    
    
    (566
    )
    
    
    (789
    )Balance July 4, 2009
    
    $
    610
    
    
    $
    331
    
    
    $
    941
  Page 14 of 30




---



##### Table of Contents



CHAMPION ENTERPRISES, INC.
 Results of Operations
Three and Six Months Ended July 4, 2009
versus the Three and Six Months Ended June 28, 2008
 Overview
       Page 15 of 30




---



##### Table of Contents



Consolidated Results of Operations
 Three Months Ended
    
    
    
    
    
    
    Six Months EndedJuly 4,
    
    
    June 28,
    
    
    %
    
    
    July 4,
    
    
    June 28,
    
    
    %2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(Dollars in thousands)Net salesManufacturing segment
    
    $
    101,307
    
    
    $
    211,273
    
    
    
    (52
    %)
    
    $
    178,984
    
    
    $
    392,758
    
    
    
    (54
    %)International segment
    
    
    21,161
    
    
    
    70,513
    
    
    
    (70
    %)
    
    
    42,904
    
    
    
    180,879
    
    
    
    (76
    %)Retail segment
    
    
    7,470
    
    
    
    9,398
    
    
    
    (21
    %)
    
    
    14,876
    
    
    
    18,445
    
    
    
    (19
    %)Less: intercompany
    
    
    (400
    )
    
    
    (2,000
    )
    
    
    (80
    %)
    
    
    (2,000
    )
    
    
    (6,200
    )
    
    
    (68
    %)Total net sales
    
    $
    129,538
    
    
    $
    289,184
    
    
    
    (55
    %)
    
    $
    234,764
    
    
    $
    585,882
    
    
    
    (60
    %)Gross margin
    
    $
    15,577
    
    
    $
    42,462
    
    
    
    (63
    %)
    
    $
    21,108
    
    
    $
    79,030
    
    
    
    (73
    %)Selling, general and
administrative expenses
(SG&A)
    
    
    21,858
    
    
    
    33,015
    
    
    
    (34
    %)
    
    
    43,153
    
    
    
    72,318
    
    
    
    (40
    %)Insurance gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,295
    )
    
    
    
    
    
    
    Restructuring charges
    
    
    2,220
    
    
    
    
    
    
    
    
    
    
    
    2,358
    
    
    
    9,471
    
    
    
    (75
    %)Foreign currency transaction
(gains) losses
    
    
    (1,963
    )
    
    
    (576
    )
    
    
    241
    %
    
    
    (1,321
    )
    
    
    1,775
    
    
    
    (174
    %)Amortization of intangible
assets
    
    
    1,953
    
    
    
    2,382
    
    
    
    (18
    %)
    
    
    3,812
    
    
    
    4,851
    
    
    
    (21
    %)Operating (loss) income
    
    
    (8,491
    )
    
    
    7,641
    
    
    
    (211
    %)
    
    
    (22,599
    )
    
    
    (9,385
    )
    
    
    141
    %Interest expense, net
    
    
    4,814
    
    
    
    4,089
    
    
    
    18
    %
    
    
    9,333
    
    
    
    7,962
    
    
    
    17
    %(Loss) income before
income taxes
    
    $
    (13,305
    )
    
    $
    3,552
    
    
    
    (475
    %)
    
    $
    (31,932
    )
    
    $
    (17,347
    )
    
    
    84
    %As a percent of net salesGross margin
    
    
    12.0
    %
    
    
    14.7
    %
    
    
    
    
    
    
    9.0
    %
    
    
    13.5
    %SG&A
    
    
    16.9
    %
    
    
    11.4
    %
    
    
    
    
    
    
    18.4
    %
    
    
    12.3
    %Operating (loss) income
    
    
    (6.6
    %)
    
    
    2.6
    %
    
    
    
    
    
    
    (9.6
    %)
    
    
    (1.6
    %)(Loss) income before
income taxes
    
    
    (10.3
    %)
    
    
    1.2
    %
    
    
    
    
    
    
    (13.6
    %)
    
    
    (3.0
    %)
    Page 16 of 30




---



##### Table of Contents



Manufacturing Segment
  Three Months Ended
    
    
    
    
    
    
    Six Months EndedJuly 4,
    
    
    June 28,
    
    
    %
    
    
    July 4,
    
    
    June 28,
    
    
    %2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    ChangeManufacturing segment net
sales (in thousands)
    
    $
    101,307
    
    
    $
    211,273
    
    
    
    (52
    %)
    
    $
    178,984
    
    
    $
    392,758
    
    
    
    (54
    %)Manufacturing segment
(loss) income (in thousands)
    
    $
    (3,672
    )
    
    $
    13,595
    
    
    
    (127
    %)
    
    $
    (9,778
    )
    
    $
    4,572
    
    
    
    (314
    %)Manufacturing segment
margin %
    
    
    (3.6
    %)
    
    
    6.4
    %
    
    
    
    
    
    
    (5.5
    %)
    
    
    1.2
    %Homes and units sold:HUD code homes
    
    
    1,035
    
    
    
    1,697
    
    
    
    (39
    %)
    
    
    1,709
    
    
    
    3,258
    
    
    
    (48
    %)Modular homes and units
    
    
    397
    
    
    
    652
    
    
    
    (39
    %)
    
    
    699
    
    
    
    1,321
    
    
    
    (47
    %)Canadian homes
    
    
    271
    
    
    
    733
    
    
    
    (63
    %)
    
    
    473
    
    
    
    1,297
    
    
    
    (64
    %)Other units
    
    
    6
    
    
    
    72
    
    
    
    (92
    %)
    
    
    11
    
    
    
    99
    
    
    
    (89
    %)Total homes and units sold
    
    
    1,709
    
    
    
    3,154
    
    
    
    (46
    %)
    
    
    2,892
    
    
    
    5,975
    
    
    
    (52
    %)Floors sold
    
    
    3,025
    
    
    
    5,649
    
    
    
    (46
    %)
    
    
    5,234
    
    
    
    10,637
    
    
    
    (51
    %)Multi-section mix
    
    
    65
    %
    
    
    69
    %
    
    
    
    
    
    
    67
    %
    
    
    67
    %Average unit selling price,
excluding delivery
    
    $
    51,800
    
    
    $
    57,800
    
    
    
    (10
    %)
    
    $
    53,800
    
    
    $
    57,200
    
    
    
    (6
    %)Manufacturing facilities at
end of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    26
    Page 17 of 30




---



##### Table of Contents



International Segment
  Three Months Ended
    
    
    
    
    
    Six Months EndedJuly 4,
    
    June 28,
    
    %
    
    July 4,
    
    June 28,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(Dollars in thousands)International segment
net sales
    
    $
    21,161
    
    
    $
    70,513
    
    
    
    (70
    %)
    
    $
    42,904
    
    
    $
    180,879
    
    
    
    (76
    %)International segment
income
    
    $
    1,061
    
    
    $
    3,889
    
    
    
    (73
    %)
    
    $
    1,125
    
    
    $
    12,278
    
    
    
    (91
    %)International segment
margin %
    
    
    5.0
    %
    
    
    5.5
    %
    
    
    
    
    
    
    2.6
    %
    
    
    6.8
    %
   Page 18 of 30




---



##### Table of Contents



Retail Segment
  Three Months Ended
    
    
    
    
    
    Six Months EndedJuly 4,
    
    June 28,
    
    %
    
    July 4,
    
    June 28,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    ChangeRetail segment net
sales (in thousands)
    
    $
    7,470
    
    
    $
    9,398
    
    
    
    (21
    %)
    
    $
    14,876
    
    
    $
    18,445
    
    
    
    (19
    %)Retail segment
loss (in thousands)
    
    $
    (644
    )
    
    $
    (1,043
    )
    
    
    (38
    %)
    
    $
    (802
    )
    
    $
    (3,807
    )
    
    
    (79
    %)Retail segment margin %
    
    
    (8.6
    %)
    
    
    (11.1
    %)
    
    
    
    
    
    
    (5.4
    %)
    
    
    (20.6
    %)New homes sold
    
    
    55
    
    
    
    56
    
    
    
    (2
    %)
    
    
    109
    
    
    
    108
    
    
    
    1
    %% Champion produced
new homes sold
    
    
    91
    %
    
    
    75
    %
    
    
    
    
    
    
    88
    %
    
    
    89
    %New home multi-section mix
    
    
    96
    %
    
    
    98
    %
    
    
    
    
    
    
    94
    %
    
    
    98
    %Average new home retail price
    
    $
    126,800
    
    
    $
    164,100
    
    
    
    (23
    %)
    
    $
    130,500
    
    
    $
    167,500
    
    
    
    (22
    %)Sales centers at end of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15
   Restructuring Charges
   Page 19 of 30




---



##### Table of Contents



General Corporate Expenses
  Interest Income and Interest Expense
  Income Taxes
    Goodwill
  Liquidity and Capital Resources
  Page 20 of 30




---



##### Table of Contents



Minimum12-monthMinimum
    
    AdjustedFiscal Quarter
    
    Liquidity
    
    EBITDA(In thousands)Second quarter of 2009
    
    $
    35,000
    
    
    $
    6,400Third quarter of 2009
    
    $
    39,000
    
    
    $
    7,500Fourth quarter of 2009
    
    $
    42,000
    
    
    $
    15,100
    Page 21 of 30




---



##### Table of Contents



Maximum
    
    Minimum
    
    MinimumSenior
    
    Interest
    
    FixedLeverage
    
    Coverage
    
    ChargeFiscal Quarter
    
    Ratio
    
    Ratio
    
    RatioFirst quarter of 2010  Third quarter of 2010
    
    
    2.75:1
    
    
    
    2.50:1
    
    
    
    1.25:1Fourth quarter of 2010  Third quarter of 2011
    
    
    2.50:1
    
    
    
    2.75:1
    
    
    
    1.25:1Fourth quarter of 2011  Second quarter of 2012
    
    
    2.25:1
    
    
    
    3.00:1
    
    
    
    1.25:1Third quarter of 2012
    
    
    2.00:1
    
    
    
    3.00:1
    
    
    
    1.25:1
     Page 22 of 30




---



##### Table of Contents



Contingent liabilities and obligations
     Summary of liquidity and capital resources
      Critical Accounting Policies
  Page 23 of 30




---



##### Table of Contents



,
 Impact of Recently Issued Accounting Pronouncements
 The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles  a replacement of FASB Statement No. 162 The Hierarchy of Generally
Accepted Accounting Principles
 Subsequent Events.
 Determining Fair Value When the Volume and Level of Activity for the Asset or Liability
Have Significantly Decreased and Identifying Transactions That Are Not Orderly
 Interim Disclosures about Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments Interim Financial Reporting
 Disclosures about Derivative Instruments and Hedging Activities  an Amendment
of FASB Statement No. 133 Accounting for Derivative
Instruments and Hedging Activities
 Page 24 of 30




---



##### Table of Contents



Fair Value Measurements
 Forward-Looking Statements
  Page 25 of 30




---



##### Table of Contents



Page 26 of 30




---



##### Table of Contents



PART II. OTHER INFORMATION
 
   New York Stock Exchange  We may not continue to qualify for the listing of our common stock
on the New York Stock Exchange.
       Restrictive Covenants  Absent substantial strengthening of the markets and our financial
results, or significant modifications to the covenants in our senior secured debt and/or changes to
our capital structure, it is doubtful we will remain in compliance with our existing debt covenants
over the long term.
  Page 27 of 30




---



##### Table of Contents



Debt Reduction  Capital-raising initiatives may be insufficient to retire the secured debt
and avoid default.
   Potential goodwill impairment charges  We have a significant amount of goodwill that is
subject to periodic review and testing for impairment.
  
    Nominee
    
    Votes For
    
    Votes Withheld(Number of shares)Robert W. Anestis
    
    
    65,731,339
    
    
    
    4,724,237Eric S. Belsky
    
    
    65,823,504
    
    
    
    4,632,072William C. Griffiths
    
    
    68,823,193
    
    
    
    1,632,383Selwyn Isakow
    
    
    69,200,568
    
    
    
    1,255,008G. Michael Lynch
    
    
    69,315,574
    
    
    
    1,140,002Thomas A. Madden
    
    
    69,284,457
    
    
    
    1,171,119Shirley D. Peterson
    
    
    65,641,321
    
    
    
    4,814,255
   Number ofsharesVotes for
    
    
    69,783,423Votes against
    
    
    200,577Abstentions
    
    
    471,576
 Page 28 of 30




---



##### Table of Contents



Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer dated August 13,
2009, relating to the Registrants Quarterly Report on
Form 10-Q for the quarter ended July 4, 2009.31.2
    
    Certification of Chief Financial Officer dated August 13,
2009, relating to the Registrants Quarterly Report on
Form 10-Q for the quarter ended July 4, 2009.32.1
    
    Certification of Chief Executive Officer and Chief
Financial Officer of the Registrant, dated August 13,
2009, pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, relating to the Registrants Quarterly Report on
Form 10-Q for the quarter ended July 4, 2009.
 Page 29 of 30




---



##### Table of Contents



SIGNATURES
  CHAMPION ENTERPRISES, INC.By:
    /s/  PHYLLIS A. KNIGHTPhyllis A. KnightExecutive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer) And:
    /s/  RICHARD HEVELHORSTRichard HevelhorstVice President and Controller
(Principal Accounting Officer)  Page 30 of 30