##### 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 September 27, 2008
 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
    
    (I.R.S. Employerorganization)
    
    Identification No.)
 (Address of principal executive offices)
   þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ




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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 Factors.Item 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
    
    
    Nine Months EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    259,450
    
    
    $
    357,698
    
    
    $
    845,332
    
    
    $
    947,855Cost of sales
    
    
    228,373
    
    
    
    296,802
    
    
    
    735,225
    
    
    
    803,074Gross margin
    
    
    31,077
    
    
    
    60,896
    
    
    
    110,107
    
    
    
    144,781Selling, general and administrative expenses
    
    
    32,635
    
    
    
    40,082
    
    
    
    104,953
    
    
    
    112,608Restructuring charges
    
    
    
    
    
    
    
    
    
    
    9,471
    
    
    
    1,121Foreign currency transaction losses
    
    
    76
    
    
    
    
    
    
    
    1,851
    
    
    
    Amortization of intangible assets
    
    
    2,346
    
    
    
    1,454
    
    
    
    7,197
    
    
    
    4,273Operating (loss) income
    
    
    (3,980
    )
    
    
    19,360
    
    
    
    (13,365
    )
    
    
    26,779Interest income
    
    
    751
    
    
    
    1,298
    
    
    
    3,115
    
    
    
    3,345Interest expense
    
    
    (4,848
    )
    
    
    (5,151
    )
    
    
    (15,174
    )
    
    
    (14,961
    )(Loss) income before income taxes
    
    
    (8,077
    )
    
    
    15,507
    
    
    
    (25,424
    )
    
    
    15,163Income tax expense
    
    
    153,444
    
    
    
    2,582
    
    
    
    153,231
    
    
    
    2,019Net (loss) income
    
    $
    (161,521
    )
    
    $
    12,925
    
    
    $
    (178,655
    )
    
    $
    13,144Basic (loss) income per share
    
    $
    (2.08
    )
    
    $
    0.17
    
    
    $
    (2.30
    )
    
    $
    0.17Weighted shares for basic EPS
    
    
    77,794
    
    
    
    77,062
    
    
    
    77,668
    
    
    
    76,804Diluted (loss) income per share
    
    $
    (2.08
    )
    
    $
    0.17
    
    
    $
    (2.30
    )
    
    $
    0.17Weighted shares for diluted EPS
    
    
    77,794
    
    
    
    77,848
    
    
    
    77,668
    
    
    
    77,616
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##### Table of Contents



CHAMPION ENTERPRISES, INC.
 UnauditedSeptember 27,
    
    
    December 29,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    92,760
    
    
    $
    135,408Short-term investments
    
    
    6,950
    
    
    
    Accounts receivable, trade
    
    
    71,537
    
    
    
    89,646Inventories
    
    
    71,059
    
    
    
    90,782Deferred tax assets
    
    
    654
    
    
    
    29,746Other current assets
    
    
    7,166
    
    
    
    14,827Total current assets
    
    
    250,126
    
    
    
    360,409Property, plant and equipmentLand and improvements
    
    
    30,710
    
    
    
    30,970Buildings and improvements
    
    
    118,812
    
    
    
    129,002Machinery and equipment
    
    
    90,152
    
    
    
    89,742239,674
    
    
    
    249,714Less-accumulated depreciation
    
    
    133,889
    
    
    
    132,730105,785
    
    
    
    116,984Goodwill
    
    
    337,249
    
    
    
    360,610Amortizable intangible assets, net of accumulated
amortization
    
    
    81,473
    
    
    
    72,541Deferred tax assets
    
    
    
    
    
    
    87,983Other non-current assets
    
    
    21,118
    
    
    
    23,696$
    795,751
    
    
    $
    1,022,223LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesShort-term portion of debt
    
    $
    43,716
    
    
    $
    25,884Accounts payable
    
    
    111,707
    
    
    
    119,390Accrued volume rebates
    
    
    20,631
    
    
    
    29,404Accrued warranty obligations
    
    
    23,223
    
    
    
    29,246Accrued compensation and payroll taxes
    
    
    18,038
    
    
    
    25,168Accrued self-insurance
    
    
    24,583
    
    
    
    27,539Other current liabilities
    
    
    30,907
    
    
    
    61,695Total current liabilities
    
    
    272,805
    
    
    
    318,326Long-term liabilitiesLong-term debt
    
    
    319,364
    
    
    
    342,897Deferred tax liabilities
    
    
    37,852
    
    
    
    7,065Other long-term liabilities
    
    
    33,868
    
    
    
    34,089391,084
    
    
    
    384,051Contingent liabilities (Note 7)Shareholders equityCommon stock, $1 par value, 120,000 shares authorized,
77,794 and 77,346 shares issued and outstanding, respectively
    
    
    77,794
    
    
    
    77,346Capital in excess of par value
    
    
    202,505
    
    
    
    203,708Accumulated other comprehensive income
    
    
    6,581
    
    
    
    15,155Retained earnings (accumulated deficit)
    
    
    (155,018
    )
    
    
    23,637Total shareholders equity
    
    
    131,862
    
    
    
    319,846$
    795,751
    
    
    $
    1,022,223
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CHAMPION ENTERPRISES, INC.
 UnauditedNine Months EndedSeptember 27,
    
    
    September 29,2008
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (178,655
    )
    
    $
    13,144Adjustments to reconcile net (loss) income to net cash (used for) provided by operating activities:Depreciation and amortization
    
    
    17,540
    
    
    
    15,036Stock-based compensation
    
    
    346
    
    
    
    2,235Change in deferred taxes
    
    
    144,526
    
    
    
    (4,420
    )Fixed asset impairment charges
    
    
    7,000
    
    
    
    245Insurance proceeds
    
    
    5,791
    
    
    
    Compensation portion of earn-out payment
    
    
    (5,884
    )
    
    
    Gain on disposal of fixed assets
    
    
    (235
    )
    
    
    (633
    )Foreign currency transaction losses
    
    
    1,851
    
    
    
    Increase/decrease:Accounts receivable
    
    
    14,587
    
    
    
    (53,107
    )Inventories
    
    
    19,861
    
    
    
    20,979Accounts payable
    
    
    (2,649
    )
    
    
    53,114Accrued liabilities
    
    
    (37,428
    )
    
    
    (9,047
    )Other, net
    
    
    768
    
    
    
    (2,407
    )Net cash (used for) provided by operating activities
    
    
    (12,581
    )
    
    
    35,139Cash flows from investing activities:Proceeds on disposal of fixed assets
    
    
    2,850
    
    
    
    3,640Purchase of short-term investments
    
    
    (10,000
    )
    
    
    Redemption of short-term investments
    
    
    3,050
    
    
    
    Additions to property, plant and equipment
    
    
    (11,421
    )
    
    
    (5,494
    )Distributions from unconsolidated affiliates
    
    
    
    
    
    
    884Acquisitions and related payments
    
    
    (8,892
    )
    
    
    Net cash used for investing activities
    
    
    (24,413
    )
    
    
    (970
    )Cash flows from financing activities:Payments on debt
    
    
    (27,107
    )
    
    
    (1,577
    )Proceeds from revolver debt
    
    
    25,000
    
    
    
    Decrease in restricted cash
    
    
    
    
    
    
    15Common stock issued, net
    
    
    437
    
    
    
    2,294Net cash (used for) provided by financing activities
    
    
    (1,670
    )
    
    
    732Cash provided by discontinued operations
    
    
    93
    
    
    
    285Effect of exchange rate changes on cash and cash equivalents
    
    
    (4,077
    )
    
    
    5,888Net (decrease) increase in cash and cash equivalents
    
    
    (42,648
    )
    
    
    41,074Cash and cash equivalents at beginning of period
    
    
    135,408
    
    
    
    70,208Cash and cash equivalents at end of period
    
    $
    92,760
    
    
    $
    111,282
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Retained
    
    AccumulatedCapital in
    
    earnings
    
    otherCommon stock
    
    excess of
    
    (Accumulated
    
    comprehensiveShares
    
    Amount
    
    par value
    
    deficit)
    
    income (loss)
    
    TotalBalance at December 29, 2007
    
    
    77,346
    
    
    $
    77,346
    
    
    $
    203,708
    
    
    $
    23,637
    
    
    $
    15,155
    
    
    $
    319,846Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (178,655
    )
    
    
    
    
    
    
    (178,655
    )Stock compensation plans
    
    
    448
    
    
    
    448
    
    
    
    (1,203
    )
    
    
    
    
    
    
    
    
    
    
    (755
    )Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,872
    )
    
    
    (12,872
    )Net investment hedge, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,298
    
    
    
    4,298Balance at September 27, 2008
    
    
    77,794
    
    
    $
    77,794
    
    
    $
    202,505
    
    
    $
    (155,018
    )
    
    $
    6,581
    
    
    $
    131,862
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CHAMPION ENTERPRISES, INC.  Notes to Condensed Consolidated Financial Statements
 NOTE 1  Summary of Significant Accounting Policies
    NOTE 2  Acquisitions
    InitialExpected
    
    
    annualCost
    
    
    useful life
    
    
    amortization(In thousands)
    
    
    (In years)
    
    
    (In thousands)Goodwill
    
    $
    47,607Amortizable intangible assets:Customer relationships
    
    $
    42,330
    
    
    
    14
    
    
    $
    3,024Trade names
    
    
    6,955
    
    
    
    15
    
    
    
    464Employee agreements
    
    
    302
    
    
    
    3
    
    
    
    101Favorable leases
    
    
    493
    
    
    
    1
    
    
    
    493$
    50,080
    
    
    
    
    
    
    $
    4,082
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Three Months Ended
    
    Nine Months EndedSeptember 29,
    
    September 29,2007
    
    2007Unaudited
    
    UnauditedNet sales (in thousands)
    
    $
    383,567
    
    
    $
    1,022,427Net income (in thousands)
    
    
    15,333
    
    
    
    19,331Diluted income per share
    
    $
    0.20
    
    
    $
    0.25
  NOTE 3  Income Taxes
        NOTE 4  Inventories, Long-Term Construction Contracts and Other Current Liabilities
 Page 6 of 27




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September 27,
    
    
    December 29,2008
    
    
    2007(In thousands)New manufactured homes
    
    $
    18,102
    
    
    $
    20,235Raw materials
    
    
    32,084
    
    
    
    38,725Work-in-process
    
    
    8,040
    
    
    
    8,617Other inventory
    
    
    12,833
    
    
    
    23,205Total inventory
    
    $
    71,059
    
    
    $
    90,782
   NOTE 5  Product Warranty
  Nine Months EndedSeptember 27,
    
    
    September 29,2008
    
    
    2007(In thousands)Reserves at beginning of period
    
    $
    35,746
    
    
    $
    36,923Warranty expense provided
    
    
    22,603
    
    
    
    30,926Reserve adjustment for closed plants
    
    
    
    
    
    
    (600
    )Cash warranty payments
    
    
    (28,626
    )
    
    
    (33,010
    )Reserves at end of period
    
    
    29,723
    
    
    
    34,239Less non-current portion
    
    
    (6,500
    )
    
    
    (6,500
    )Total
    
    $
    23,223
    
    
    $
    27,739
 NOTE 6  Debt
  September 27,
    
    
    December 29,2008
    
    
    2007(In thousands)Convertible Senior Notes due 2037
    
    $
    180,000
    
    
    $
    180,000Sterling Term Loan due 2012
    
    
    80,946
    
    
    
    88,386Term Loan due 2012
    
    
    55,750
    
    
    
    55,750Revolving line of credit
    
    
    25,000
    
    
    
    Obligations under industrial revenue bonds
    
    
    12,430
    
    
    
    12,4307.625% Senior Notes due May 2009
    
    
    6,716
    
    
    
    6,716Other debt
    
    
    2,238
    
    
    
    971Total
    
    
    363,080
    
    
    
    344,253Less: current portion of long-term debt
    
    
    (43,716
    )
    
    
    (1,356
    )Long-term debt
    
    $
    319,364
    
    
    $
    342,897
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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 8 of 27




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NOTE 7  Contingent Liabilities
    Page 9 of 27




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NOTE 8  Earnings Per Share, Stock Options and Stock-Based Incentive Plans
  Three Months Ended
    
    
    Nine Months EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Numerator:(Loss) income available to common
shareholders for basic and diluted EPS
    
    $
    (161,521
    )
    
    $
    12,925
    
    
    $
    (178,655
    )
    
    $
    13,144Denominator:Shares for basic EPSweighted average
shares outstanding
    
    
    77,794
    
    
    
    77,062
    
    
    
    77,668
    
    
    
    76,804Plus dilutive securities:Stock options and awards
    
    
    
    
    
    
    786
    
    
    
    
    
    
    
    812Shares for diluted EPS
    
    
    77,794
    
    
    
    77,848
    
    
    
    77,668
    
    
    
    77,616
   Weighted
    
    Intrinsic valueNumber
    
    average exercise
    
    of optionsof shares
    
    price per share
    
    exercised(In thousands)
    
    
    
    
    
    (In thousands)Outstanding at December 29, 2007
    
    
    668
    
    
    $
    10.81Exercised
    
    
    (8
    )
    
    
    8.43
    
    
    $
    4Forfeited
    
    
    (1
    )
    
    
    8.43Expired
    
    
    (37
    )
    
    
    15.05Outstanding at March 29, 2008
    
    
    622
    
    
    $
    10.59Exercised
    
    
    (150
    )
    
    
    2.48
    
    
    $
    1,173Forfeited
    
    
    (36
    )
    
    
    24.56Expired
    
    
    (4
    )
    
    
    25.00Outstanding at June 28, 2008 and
September 27, 2008
    
    
    432
    
    
    $
    12.11
    
    
    $
    
  Page 10 of 27




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Numberof shares(In thousands)Outstanding at December 29, 2007
    
    
    1,448Granted
    
    
    1,015Vested
    
    
    (425
    )Forfeited
    
    
    (198
    )Outstanding at March 29, 2008
    
    
    1,840Granted
    
    
    59Vested
    
    
    (30
    )Forfeited
    
    
    (25
    )Outstanding at June 28, 2008
    
    
    1,844Forfeited
    
    
    (5
    )Outstanding at September 27, 2008
    
    
    1,839Summary of outstanding awards at
September 27, 2008Performance shares
    
    
    1,693Restricted stock awards
    
    
    1461,839
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NOTE 9  Segment Information
  Three Months Ended
    
    
    Nine Months EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Net sales:Manufacturing segment
    
    $
    195,062
    
    
    $
    260,379
    
    
    $
    587,820
    
    
    $
    717,994International segment
    
    
    56,876
    
    
    
    85,286
    
    
    
    237,755
    
    
    
    188,704Retail segment
    
    
    10,612
    
    
    
    18,233
    
    
    
    29,057
    
    
    
    57,657Less: intercompany
    
    
    (3,100
    )
    
    
    (6,200
    )
    
    
    (9,300
    )
    
    
    (16,500
    )Consolidated net sales
    
    $
    259,450
    
    
    $
    357,698
    
    
    $
    845,332
    
    
    $
    947,855(Loss) income before income taxes:Manufacturing segment income
    
    $
    8,753
    
    
    $
    20,228
    
    
    $
    13,325
    
    
    $
    37,541International segment income
    
    
    2,673
    
    
    
    6,362
    
    
    
    14,951
    
    
    
    13,944Retail segment (loss) income
    
    
    (7,184
    )
    
    
    689
    
    
    
    (10,991
    )
    
    
    2,227General corporate expenses
    
    
    (6,100
    )
    
    
    (6,665
    )
    
    
    (21,802
    )
    
    
    (23,360
    )Amortization of intangible assets
    
    
    (2,346
    )
    
    
    (1,454
    )
    
    
    (7,197
    )
    
    
    (4,273
    )Foreign currency transaction losses
    
    
    (76
    )
    
    
    
    
    
    
    (1,851
    )
    
    
    Interest expense, net
    
    
    (4,097
    )
    
    
    (3,853
    )
    
    
    (12,059
    )
    
    
    (11,616
    )Intercompany profit eliminations
    
    
    300
    
    
    
    200
    
    
    
    200
    
    
    
    700(Loss) income before income taxes
    
    $
    (8,077
    )
    
    $
    15,507
    
    
    $
    (25,424
    )
    
    $
    15,163
 NOTE 10  Fair Value Measurements
 Fair Value Measurements,
  NOTE 11  Restructuring Charges
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Nine Months EndedSeptember 27,2008(In thousands)Balance at beginning of year
    
    $
    942Additions:Severance
    
    
    2,471Cash payments:Warranty
    
    
    (306
    )Severance
    
    
    (2,076
    )Balance September 27, 2008
    
    $
    1,031Period end balance comprised of:Warranty costs
    
    $
    194Severance
    
    
    837$
    1,031
    NOTE 12  Total Comprehensive (Loss) Income
  Three Months Ended
    
    
    Nine Months EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Net (loss) income
    
    $
    (161,521
    )
    
    $
    12,925
    
    
    $
    (178,655
    )
    
    $
    13,144Other comprehensive (loss) income:Foreign currency translation adjustments
    
    
    (11,161
    )
    
    
    4,124
    
    
    
    (12,872
    )
    
    
    8,268Net investment hedge, net of income taxes
    
    
    4,047
    
    
    
    (791
    )
    
    
    4,298
    
    
    
    (1,551
    )Total comprehensive (loss) income
    
    $
    (168,635
    )
    
    $
    16,258
    
    
    $
    (187,229
    )
    
    $
    19,861
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CHAMPION ENTERPRISES, INC.
 Results of Operations
Three and nine Months Ended September 27, 2008
versus the Three and nine Months Ended September 29, 2007
 Overview
        Page 14 of 27




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Consolidated Results of Operations
 Three Months Ended
    
    
    
    
    
    
    Nine Months EndedSeptember 27,
    
    
    September 29,
    
    
    %
    
    
    September 27,
    
    
    September 29,
    
    
    %2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change(Dollars in thousands)Net salesManufacturing segment
    
    $
    195,062
    
    
    $
    260,379
    
    
    
    (25
    %)
    
    $
    587,820
    
    
    $
    717,994
    
    
    
    (18
    %)International segment
    
    
    56,876
    
    
    
    85,286
    
    
    
    (33
    %)
    
    
    237,755
    
    
    
    188,704
    
    
    
    26
    %Retail segment
    
    
    10,612
    
    
    
    18,233
    
    
    
    (42
    %)
    
    
    29,057
    
    
    
    57,657
    
    
    
    (50
    %)Less: intercompany
    
    
    (3,100
    )
    
    
    (6,200
    )
    
    
    (50
    %)
    
    
    (9,300
    )
    
    
    (16,500
    )
    
    
    (44
    %)Total net sales
    
    $
    259,450
    
    
    $
    357,698
    
    
    
    (27
    %)
    
    $
    845,332
    
    
    $
    947,855
    
    
    
    (11
    %)Gross margin
    
    $
    31,077
    
    
    $
    60,896
    
    
    
    (49
    %)
    
    $
    110,107
    
    
    $
    144,781
    
    
    
    (24
    %)Selling, general and administrative
expenses (SG&A)
    
    
    32,635
    
    
    
    40,082
    
    
    
    (19
    %)
    
    
    104,953
    
    
    
    112,608
    
    
    
    (7
    %)Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,471
    
    
    
    1,121
    
    
    
    745
    %Foreign currency transaction
losses
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    1,851
    
    
    
    
    
    
    
    Amortization of intangible assets
    
    
    2,346
    
    
    
    1,454
    
    
    
    61
    %
    
    
    7,197
    
    
    
    4,273
    
    
    
    68
    %Operating (loss) income
    
    
    (3,980
    )
    
    
    19,360
    
    
    
    (121
    %)
    
    
    (13,365
    )
    
    
    26,779
    
    
    
    (150
    %)Interest expense, net
    
    
    4,097
    
    
    
    3,853
    
    
    
    6
    %
    
    
    12,059
    
    
    
    11,616
    
    
    
    4
    %(Loss) income before income taxes
    
    $
    (8,077
    )
    
    $
    15,507
    
    
    
    (152
    %)
    
    $
    (25,424
    )
    
    $
    15,163
    
    
    
    (268
    %)As a percent of net salesGross margin
    
    
    12.0
    %
    
    
    17.0
    %
    
    
    
    
    
    
    13.0
    %
    
    
    15.3
    %SG&A
    
    
    12.6
    %
    
    
    11.2
    %
    
    
    
    
    
    
    12.4
    %
    
    
    11.9
    %Operating (loss) income
    
    
    (1.5
    %)
    
    
    5.4
    %
    
    
    
    
    
    
    (1.6
    %)
    
    
    2.8
    %(Loss) income before income taxes
    
    
    (3.1
    %)
    
    
    4.3
    %
    
    
    
    
    
    
    (3.0
    %)
    
    
    1.6
    %
   Page 15 of 27




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Manufacturing Segment
  Three Months Ended
    
    
    
    
    
    
    Nine Months EndedSeptember 27,
    
    
    September 29,
    
    
    %
    
    
    September 27,
    
    
    September 29,
    
    
    %2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeManufacturing segment net
sales 
(in thousands)
    
    $
    195,062
    
    
    $
    260,379
    
    
    
    (25
    %)
    
    $
    587,820
    
    
    $
    717,994
    
    
    
    (18
    %)Manufacturing segment
income 
(in thousands)
    
    
    8,753
    
    
    
    20,228
    
    
    
    (57
    %)
    
    
    13,325
    
    
    
    37,541
    
    
    
    (65
    %)Manufacturing segment
margin %
    
    
    4.5
    %
    
    
    7.8
    %
    
    
    
    
    
    
    2.3
    %
    
    
    5.2
    %Homes and units sold:HUD code homes
    
    
    1,730
    
    
    
    2,808
    
    
    
    (38
    %)
    
    
    4,988
    
    
    
    7,720
    
    
    
    (35
    %)Modular homes and units
    
    
    684
    
    
    
    980
    
    
    
    (30
    %)
    
    
    2,005
    
    
    
    2,749
    
    
    
    (27
    %)Canadian homes
    
    
    621
    
    
    
    441
    
    
    
    41
    %
    
    
    1,918
    
    
    
    1,215
    
    
    
    58
    %Other units
    
    
    31
    
    
    
    29
    
    
    
    7
    %
    
    
    130
    
    
    
    51
    
    
    
    155
    %Total homes and units sold
    
    
    3,066
    
    
    
    4,258
    
    
    
    (28
    %)
    
    
    9,041
    
    
    
    11,735
    
    
    
    (23
    %)Floors sold
    
    
    5,414
    
    
    
    8,073
    
    
    
    (33
    %)
    
    
    16,051
    
    
    
    22,536
    
    
    
    (29
    %)Multi-section mix
    
    
    69
    %
    
    
    77
    %
    
    
    
    
    
    
    68
    %
    
    
    78
    %Average unit selling price,
excluding delivery
    
    $
    55,500
    
    
    $
    54,800
    
    
    
    1
    %
    
    $
    56,600
    
    
    $
    55,000
    
    
    
    3
    %Manufacturing facilities at
end of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    28
  Page 16 of 27




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International Segment
  Three Months Ended
    
    
    
    
    
    Nine Months EndedSeptember 27,
    
    September 29,
    
    %
    
    September 27,
    
    September 29,
    
    %2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    Change(Dollars in thousands)International segment
net sales
    
    $
    56,876
    
    
    $
    85,286
    
    
    
    (33
    %)
    
    $
    237,755
    
    
    $
    188,704
    
    
    
    26
    %International segment
income
    
    $
    2,673
    
    
    $
    6,362
    
    
    
    (58
    %)
    
    $
    14,951
    
    
    $
    13,944
    
    
    
    7
    %International segment
margin %
    
    
    4.7
    %
    
    
    7.5
    %
    
    
    
    
    
    
    6.3
    %
    
    
    7.4
    %
 Page 17 of 27




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Retail Segment
  Three Months Ended
    
    
    
    
    
    Nine Months EndedSeptember 27,
    
    September 29,
    
    %
    
    September 27,
    
    September 29,
    
    %2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeRetail segment net
sales 
(in thousands)
    
    $
    10,612
    
    
    $
    18,233
    
    
    
    (42
    %)
    
    $
    29,057
    
    
    $
    57,657
    
    
    
    (50
    %)Retail segment (loss)
income 
(in thousands)
    
    $
    (7,184
    )
    
    $
    689
    
    
    
    (1143
    %)
    
    $
    (10,991
    )
    
    $
    2,227
    
    
    
    (594
    %)Retail segment margin %
    
    
    (67.7
    %)
    
    
    3.8
    %
    
    
    
    
    
    
    (37.8
    %)
    
    
    3.9
    %New homes sold
    
    
    60
    
    
    
    100
    
    
    
    (40
    %)
    
    
    168
    
    
    
    295
    
    
    
    (43
    %)% Champion produced new
homes sold
    
    
    92
    %
    
    
    84
    %
    
    
    
    
    
    
    90
    %
    
    
    87
    %New home multi-section mix
    
    
    93
    %
    
    
    99
    %
    
    
    
    
    
    
    96
    %
    
    
    99
    %Average new home retail price
    
    $
    165,900
    
    
    $
    179,600
    
    
    
    (8
    %)
    
    $
    166,900
    
    
    $
    190,900
    
    
    
    (13
    %)Sales centers at end of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    16
   Page 18 of 27




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Restructuring Charges
     General Corporate Expenses
  Interest Income and Interest Expense
   Income Taxes
   Page 19 of 27




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##### Table of Contents



Liquidity and Capital Resources
      Page 20 of 27




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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
     Contingent liabilities and obligations
   Page 21 of 27




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Summary of liquidity and capital resources
    Critical Accounting Policies
  Impact of Recently Issued Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial
Liabilities  including an amendment of FASB Statement No. 115,
 Page 22 of 27




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Business Combinations Accounting and Reporting of Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51
  Forward-Looking Statements
  Page 23 of 27




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Page 24 of 27




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PART II. OTHER INFORMATION
 
   The credit crisisThe credit crisis has
significantly affected the financial markets and the economies in the U.S., Canada and the U.K., the countries in which we operate.
   Page 25 of 27




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##### Table of Contents



Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer dated November 5, 2008,
relating to the Registrants Quarterly Report on Form 10-Q for the
quarter ended September 27, 2008.31.2
    
    Certification of Chief Financial Officer dated November 5, 2008,
relating to the Registrants Quarterly Report on Form 10-Q for the
quarter ended September 27, 2008.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer
of the Registrant, dated November 5, 2008, 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 September 27, 2008.
 Page 26 of 27




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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 27 of 27