##### 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 29, 2007
 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
  þ o 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 FactorsItem 6. Exhibits and Reports on Form 8-KSIGNATURESCertification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Chief Executive Officer and Chief Financial Officer    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
  CHAMPION ENTERPRISES, INC.
 Unaudited
    
    
    UnauditedThree Months Ended
    
    
    Nine Months EndedSeptember 29,
    
    
    September 30,
    
    
    September 29,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Restated)Net sales
    
    $
    357,698
    
    
    $
    346,454
    
    
    $
    947,855
    
    
    $
    1,063,700Cost of sales
    
    
    296,802
    
    
    
    289,563
    
    
    
    803,074
    
    
    
    895,677Gross margin
    
    
    60,896
    
    
    
    56,891
    
    
    
    144,781
    
    
    
    168,023Selling, general and administrative expenses
    
    
    40,082
    
    
    
    38,738
    
    
    
    112,629
    
    
    
    115,996Restructuring charges
    
    
    
    
    
    
    1,200
    
    
    
    1,100
    
    
    
    1,200Amortization of intangible assets
    
    
    1,454
    
    
    
    1,122
    
    
    
    4,273
    
    
    
    2,513Operating income
    
    
    19,360
    
    
    
    15,831
    
    
    
    26,779
    
    
    
    48,314Interest income
    
    
    1,298
    
    
    
    1,159
    
    
    
    3,345
    
    
    
    3,889Interest expense
    
    
    (5,151
    )
    
    
    (5,373
    )
    
    
    (14,961
    )
    
    
    (14,184
    )Income from continuing operations before income taxes
    
    
    15,507
    
    
    
    11,617
    
    
    
    15,163
    
    
    
    38,019Income tax expense (benefit)
    
    
    2,582
    
    
    
    2,589
    
    
    
    2,019
    
    
    
    (96,714
    )Income from continuing operations
    
    
    12,925
    
    
    
    9,028
    
    
    
    13,144
    
    
    
    134,733(Loss) income from discontinued operations, net of taxes
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    11Net income
    
    $
    12,925
    
    
    $
    9,015
    
    
    $
    13,144
    
    
    $
    134,744Basic income per share:Income from continuing operations
    
    $
    0.17
    
    
    $
    0.12
    
    
    $
    0.17
    
    
    $
    1.77(Loss) income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Basic income per share
    
    $
    0.17
    
    
    $
    0.12
    
    
    $
    0.17
    
    
    $
    1.77Weighted shares for basic EPS
    
    
    77,062
    
    
    
    76,456
    
    
    
    76,804
    
    
    
    76,304Diluted income per share:Income from continuing operations
    
    $
    0.17
    
    
    $
    0.12
    
    
    $
    0.17
    
    
    $
    1.74(Loss) income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted income per share
    
    $
    0.17
    
    
    $
    0.12
    
    
    $
    0.17
    
    
    $
    1.74Weighted shares for diluted EPS
    
    
    77,848
    
    
    
    77,486
    
    
    
    77,616
    
    
    
    77,512
  2




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CHAMPION ENTERPRISES, INC.
 UnauditedSeptember 29,
    
    
    December 30,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    111,282
    
    
    $
    70,208Accounts receivable, trade
    
    
    102,456
    
    
    
    47,645Inventories
    
    
    81,961
    
    
    
    102,350Deferred tax assets
    
    
    29,145
    
    
    
    32,303Other current assets
    
    
    10,735
    
    
    
    10,677Total current assets
    
    
    335,579
    
    
    
    263,183Property, plant and equipmentLand and improvements
    
    
    28,367
    
    
    
    25,805Buildings and improvements
    
    
    119,722
    
    
    
    123,483Machinery and equipment
    
    
    88,702
    
    
    
    89,037236,791
    
    
    
    238,325Less-accumulated depreciation
    
    
    131,609
    
    
    
    125,798105,182
    
    
    
    112,527Goodwill
    
    
    291,698
    
    
    
    287,789Amortizable intangible assets, net of
accumulated amortization
    
    
    44,483
    
    
    
    47,675Deferred tax assets
    
    
    80,586
    
    
    
    71,600Other non-current assets
    
    
    15,967
    
    
    
    17,841$
    873,495
    
    
    $
    800,615LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    110,380
    
    
    $
    54,607Accrued warranty obligations
    
    
    27,739
    
    
    
    30,423Accrued volume rebates
    
    
    25,602
    
    
    
    30,891Accrued compensation and payroll taxes
    
    
    20,131
    
    
    
    13,933Accrued self-insurance
    
    
    23,829
    
    
    
    29,219Other current liabilities
    
    
    45,082
    
    
    
    44,130Total current liabilities
    
    
    252,763
    
    
    
    203,203Long-term liabilitiesLong-term debt
    
    
    254,090
    
    
    
    252,449Deferred tax liabilities
    
    
    9,621
    
    
    
    10,600Other long-term liabilities
    
    
    32,581
    
    
    
    32,601296,292
    
    
    
    295,650Contingent liabilities (Note 7)Shareholders equityCommon stock, $1 par value, 120,000 shares authorized, 77,147 and 76,450 shares issued and outstanding, respectively
    
    
    77,147
    
    
    
    76,450Capital in excess of par value
    
    
    201,717
    
    
    
    199,597Retained earnings
    
    
    29,589
    
    
    
    16,445Accumulated other comprehensive income
    
    
    15,987
    
    
    
    9,270Total shareholders equity
    
    
    324,440
    
    
    
    301,762$
    873,495
    
    
    $
    800,615
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CHAMPION ENTERPRISES, INC.
 UnauditedNine Months EndedSeptember 29,
    
    
    September 30,2007
    
    
    2006(Restated)Cash flows from operating activitiesNet income
    
    $
    13,144
    
    
    $
    134,744Income from discontinued operations
    
    
    
    
    
    
    (11
    )Adjustments to reconcile net income to net cash provided by
continuing operating activities:Depreciation and amortization
    
    
    15,036
    
    
    
    12,932Stock-based compensation
    
    
    2,235
    
    
    
    3,717Change in deferred taxes
    
    
    (4,420
    )
    
    
    (99,600
    )Fixed asset impairment charges
    
    
    245
    
    
    
    1,200Gain on disposal of fixed assets
    
    
    (633
    )
    
    
    (4,470
    )Increase/decrease:Accounts receivable
    
    
    (53,107
    )
    
    
    11,844Inventories
    
    
    20,979
    
    
    
    3,269Accounts payable
    
    
    53,114
    
    
    
    4,270Accrued liabilities
    
    
    (9,047
    )
    
    
    (11,814
    )Other, net
    
    
    (2,407
    )
    
    
    3,321Net cash provided by continuing operating activities
    
    
    35,139
    
    
    
    59,402Cash flows from investing activitiesAdditions to property, plant and equipment
    
    
    (5,494
    )
    
    
    (14,279
    )Acquisitions
    
    
    
    
    
    
    (153,290
    )Proceeds from disposal of fixed assets
    
    
    3,640
    
    
    
    5,730Distributions from unconsolidated affiliates
    
    
    884
    
    
    
    Net cash used for investing activities
    
    
    (970
    )
    
    
    (161,839
    )Cash flows from financing activitiesPayments on long-term debt
    
    
    (1,577
    )
    
    
    (1,376
    )Proceeds from Term Loan
    
    
    
    
    
    
    78,561Increase in deferred financing costs
    
    
    
    
    
    
    (1,076
    )Decrease in restricted cash
    
    
    15
    
    
    
    698Common stock issued, net
    
    
    2,294
    
    
    
    1,955Net cash provided by financing activities
    
    
    732
    
    
    
    78,762Net cash provided by operating activities
of discontinued operations
    
    
    285
    
    
    
    600Net cash provided by investing activities
of discontinued operations
    
    
    
    
    
    
    568Net cash provided by discontinued operations
    
    
    285
    
    
    
    1,168Effect of exchange rate changes on cash and cash equivalents
    
    
    5,888
    
    
    
    1,967Net increase (decrease) in cash and cash equivalents
    
    
    41,074
    
    
    
    (20,540
    )Cash and cash equivalents at beginning of period
    
    
    70,208
    
    
    
    126,979Cash and cash equivalents at end of period
    
    $
    111,282
    
    
    $
    106,439
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CHAMPION ENTERPRISES, INC.
 AccumulatedCapital in
    
    
    
    
    
    
    otherCommon stock
    
    
    excess of
    
    
    Retained
    
    
    comprehensiveShares
    
    
    Amount
    
    
    par value
    
    
    earnings
    
    
    income
    
    
    TotalBalance at December 30, 2006
    
    
    76,450
    
    
    $
    76,450
    
    
    $
    199,597
    
    
    $
    16,445
    
    
    $
    9,270
    
    
    $
    301,762Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,144
    
    
    
    
    
    
    
    13,144Stock compensation plans
    
    
    697
    
    
    
    697
    
    
    
    2,120
    
    
    
    
    
    
    
    
    
    
    
    2,817Foreign currency translation adjustments, including tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,717
    
    
    
    6,717Balance at September 29, 2007
    
    
    77,147
    
    
    $
    77,147
    
    
    $
    201,717
    
    
    $
    29,589
    
    
    $
    15,987
    
    
    $
    324,440
  5




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CHAMPION ENTERPRISES, INC.  Notes to Condensed Consolidated Financial Statements
 NOTE 1  Summary of Significant Accounting Policies
     Fair
Value Measurements.
 The Fair Value Option for Financial Assets and Financial Liabilities -
including an amendment of FASB Statement No. 115
 NOTE 2  Acquisitions
    6




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Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2006Unaudited
    
    Unaudited(Restated)Net sales (in thousands)
    
    $
    348,769
    
    
    $
    1,128,607Net income (in thousands)
    
    
    9,296
    
    
    
    140,321Diluted income per share
    
    $
    0.12
    
    
    $
    1.81
  NOTE 3  Income Taxes
 Accounting for Uncertainty in Income Taxesan interpretation of
FASB Statement No. 109
      7




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NOTE 4    Inventories, Long-Term Construction Contracts and Other Current Liabilities
  September 29,
    
    
    December 30,2007
    
    
    2006(In thousands)New manufactured homes
    
    $
    18,495
    
    
    $
    27,579Raw materials
    
    
    30,361
    
    
    
    35,737Work-in-process
    
    
    10,473
    
    
    
    14,284Other inventory
    
    
    22,632
    
    
    
    24,750$
    81,961
    
    
    $
    102,350
    NOTE 5    Product Warranty
  Nine Months EndedSeptember 29,
    
    
    September 30,2007
    
    
    2006(In thousands)Reserves at beginning of period
    
    $
    36,923
    
    
    $
    40,009Warranty expense provided
    
    
    30,926
    
    
    
    38,094Reserve adjustment for closed plants
    
    
    (600
    )
    
    
    Warranty reserves from acquisitions
    
    
    
    
    
    
    513Cash warranty payments
    
    
    (33,010
    )
    
    
    (39,850
    )Reserves at end of period
    
    $
    34,239
    
    
    $
    38,766
 NOTE 6  Debt
  8




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September 29,
    
    
    December 30,2007
    
    
    2006(In thousands)7.625% Senior Notes due 2009
    
    $
    82,298
    
    
    $
    82,298Term Loan due 2012
    
    
    70,250
    
    
    
    71,000Sterling Term Loan due 2012
    
    
    90,210
    
    
    
    87,623Obligations under industrial revenue bonds
    
    
    12,430
    
    
    
    12,430Other debt
    
    
    1,027
    
    
    
    1,266Total debt
    
    
    256,215
    
    
    
    254,617Less: current portion of long-term debt
    
    
    (2,125
    )
    
    
    (2,168
    )Long-term debt
    
    $
    254,090
    
    
    $
    252,449
      9




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NOTE 7  Contingent Liabilities
       NOTE 8  Earnings Per Share, Stock Options and Stock-Based Incentive Plans
  10




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Three Months Ended
    
    
    Nine Months EndedSeptember 29,
    
    
    September 30,
    
    
    September 29,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)
    
    
    (In thousands)(Restated)Numerator:Net income
    
    $
    12,925
    
    
    $
    9,015
    
    
    $
    13,144
    
    
    $
    134,744Loss (income) from discontinued operations
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    (11
    )Income from continuing operations
available to common shareholders for
basic and diluted EPS
    
    
    12,925
    
    
    
    9,028
    
    
    
    13,144
    
    
    
    134,733(Loss) income from discontinued
operations available to common
shareholders for basic and diluted EPS
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    11Income available to common shareholders
for basic and diluted EPS
    
    $
    12,925
    
    
    $
    9,015
    
    
    $
    13,144
    
    
    $
    134,744Denominator:Shares for basic EPSweighted average
shares outstanding
    
    
    77,062
    
    
    
    76,456
    
    
    
    76,804
    
    
    
    76,304Plus dilutive securities:Stock options and awards
    
    
    786
    
    
    
    1,030
    
    
    
    812
    
    
    
    1,208Shares for diluted EPS
    
    
    77,848
    
    
    
    77,486
    
    
    
    77,616
    
    
    
    77,512
   Weighted
    
    
    Intrinsic valueNumber
    
    
    average exercise
    
    
    of optionsof shares
    
    
    price per share
    
    
    exercised(In thousands)
    
    
    
    
    
    
    (In thousands)Outstanding at December 30, 2006
    
    
    1,732
    
    
    $
    9.84Exercised
    
    
    (163
    )
    
    
    2.85
    
    
    $
    976Forfeited
    
    
    (98
    )
    
    
    17.18Expired
    
    
    (28
    )
    
    
    17.18Outstanding at March 31, 2007
    
    
    1,443
    
    
    
    9.99Exercised
    
    
    (98
    )
    
    
    9.75
    
    
    $
    99Forfeited
    
    
    (22
    )
    
    
    20.39Expired
    
    
    (49
    )
    
    
    20.12Outstanding at June 30, 2007
    
    
    1,274
    
    
    
    9.46Exercised
    
    
    (230
    )
    
    
    3.75
    
    
    $
    1,970Forfeited
    
    
    (10
    )
    
    
    19.75Expired
    
    
    (151
    )
    
    
    14.00Outstanding at September 29,
2007
    
    
    883
    
    
    $
    10.06
 11




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NOTE 9  Segment Information
  12




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Three Months EndedSeptember 29,
    
    
    September 30,2007
    
    
    2006(In thousands)Net sales:Manufacturing segment
    
    $
    260,379
    
    
    $
    293,417International segment
    
    
    85,286
    
    
    
    30,946Retail segment
    
    
    18,233
    
    
    
    31,391Less: intercompany
    
    
    (6,200
    )
    
    
    (9,300
    )Consolidated net sales
    
    $
    357,698
    
    
    $
    346,454Income from continuing operations
before income taxes:Manufacturing segment income
    
    $
    20,228
    
    
    $
    19,553International segment income
    
    
    6,362
    
    
    
    1,959Retail segment income
    
    
    689
    
    
    
    2,425General corporate expenses
    
    
    (6,665
    )
    
    
    (7,184
    )Amortization of intangible assets
    
    
    (1,454
    )
    
    
    (1,122
    )Interest expense, net
    
    
    (3,853
    )
    
    
    (4,214
    )Intercompany profit eliminations
    
    
    200
    
    
    
    200Consolidated income from continuing
operations before income taxes
    
    $
    15,507
    
    
    $
    11,617
 Nine Months EndedSeptember 29,
    
    
    September 30,2007
    
    
    2006In thousands)Net sales:Manufacturing segment
    
    $
    717,994
    
    
    $
    945,011International segment
    
    
    188,704
    
    
    
    58,077Retail segment
    
    
    57,657
    
    
    
    93,712Less: intercompany
    
    
    (16,500
    )
    
    
    (33,100
    )Consolidated net sales
    
    $
    947,855
    
    
    $
    1,063,700Income from continuing operations
before income taxes:Manufacturing segment income
    
    $
    37,541
    
    
    $
    66,558International segment income
    
    
    13,944
    
    
    
    3,158Retail segment income
    
    
    2,227
    
    
    
    6,317General corporate expenses
    
    
    (23,360
    )
    
    
    (24,406
    )Amortization of intangible assets
    
    
    (4,273
    )
    
    
    (2,513
    )Interest expense, net
    
    
    (11,616
    )
    
    
    (10,295
    )Intercompany profit eliminations
    
    
    700
    
    
    
    (800
    )Consolidated income from continuing
operations before income taxes
    
    $
    15,163
    
    
    $
    38,019
 NOTE 10  Discontinued Operations
  NOTE 11  Restructuring Charges
  13




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Nine Months EndedSeptember 29,2007(In thousands)Balance at beginning of year
    
    $
    1,018Additions:Severance
    
    
    873Cash payments:Warranty
    
    
    (707
    )Severance and other costs
    
    
    (873
    )Reversalswarranty
    
    
    (225
    )Reversalsother costs
    
    
    (86
    )Balance September 29, 2007
    
    $
    
 NOTE 12  Total Comprehensive Income
  Three Months Ended
    
    
    Nine Months EndedSeptember 29,
    
    
    September 30,
    
    
    September 29,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)
    
    
    (In thousands)(Restated)Net income
    
    $
    12,925
    
    
    $
    9,015
    
    
    $
    13,144
    
    
    $
    134,744Other comprehensive income:Foreign currency
translation adjustments,
net of income taxes
    
    
    3,333
    
    
    
    1,160
    
    
    
    6,717
    
    
    
    3,661Total comprehensive income
    
    $
    16,258
    
    
    $
    10,175
    
    
    $
    19,861
    
    
    $
    138,405
 14




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CHAMPION ENTERPRISES, INC.
 Results of Operations
Three and Nine Months Ended September 29, 2007
versus the Three and Nine Months Ended September 30, 2006
 Overview
        15




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Consolidated Results of Operations
 Three Months EndedSeptember 29,
    
    
    September 30,
    
    
    %2007
    
    
    2006
    
    
    Change(Dollars in thousands)Net salesManufacturing segment
    
    $
    260,379
    
    
    $
    293,417
    
    
    
    (11
    %)International segment
    
    
    85,286
    
    
    
    30,946
    
    
    
    176
    %Retail segment
    
    
    18,233
    
    
    
    31,391
    
    
    
    (42
    %)Less: intercompany
    
    
    (6,200
    )
    
    
    (9,300
    )
    
    
    (33
    %)Total net sales
    
    $
    357,698
    
    
    $
    346,454
    
    
    
    3
    %Gross margin
    
    $
    60,896
    
    
    $
    56,891
    
    
    
    7
    %Selling, general and administrative
expenses (SG&A)
    
    
    40,082
    
    
    
    38,738
    
    
    
    3
    %Restructuring charges
    
    
    
    
    
    
    1,200
    
    
    
    (100
    %)Amortization of intangible assets
    
    
    1,454
    
    
    
    1,122
    
    
    
    30
    %Operating income
    
    
    19,360
    
    
    
    15,831
    
    
    
    22
    %Interest expense, net
    
    
    3,853
    
    
    
    4,214
    
    
    
    (9
    %)Income from continuing
operations before income taxes
    
    $
    15,507
    
    
    $
    11,617
    
    
    
    33
    %As a percent of net salesGross margin
    
    
    17.0
    %
    
    
    16.4
    %SG&A
    
    
    11.2
    %
    
    
    11.2
    %Operating income
    
    
    5.4
    %
    
    
    4.6
    %Income from continuing
operations before income taxes
    
    
    4.3
    %
    
    
    3.4
    %
 Nine Months EndedSeptember 29,
    
    
    September 30,
    
    
    %2007
    
    
    2006
    
    
    Change(Dollars in thousands)Net salesManufacturing segment
    
    $
    717,994
    
    
    $
    945,011
    
    
    
    (24
    %)International segment
    
    
    188,704
    
    
    
    58,077
    
    
    
    225
    %Retail segment
    
    
    57,657
    
    
    
    93,712
    
    
    
    (38
    %)Less: intercompany
    
    
    (16,500
    )
    
    
    (33,100
    )
    
    
    (50
    %)Total net sales
    
    $
    947,855
    
    
    $
    1,063,700
    
    
    
    (11
    %)Gross margin
    
    $
    144,781
    
    
    $
    168,023
    
    
    
    (14
    %)Selling, general and administrative
expenses (SG&A)
    
    
    112,629
    
    
    
    115,996
    
    
    
    (3
    %)Restructuring charges
    
    
    1,100
    
    
    
    1,200
    
    
    
    (8
    %)Amortization of intangible assets
    
    
    4,273
    
    
    
    2,513
    
    
    
    70
    %Operating income
    
    
    26,779
    
    
    
    48,314
    
    
    
    (45
    %)Interest expense, net
    
    
    11,616
    
    
    
    10,295
    
    
    
    13
    %Income from continuing
operations before income taxes
    
    $
    15,163
    
    
    $
    38,019
    
    
    
    (60
    %)As a percent of net salesGross margin
    
    
    15.3
    %
    
    
    15.8
    %SG&A
    
    
    11.9
    %
    
    
    10.9
    %Operating income
    
    
    2.8
    %
    
    
    4.5
    %Income from continuing
operations before income taxes
    
    
    1.6
    %
    
    
    3.6
    %
 17




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Manufacturing Segment
  18




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##### Table of Contents



Three Months EndedSeptember 29,
    
    
    September 30,
    
    
    %2007
    
    
    2006
    
    
    ChangeManufacturing segment net sales (in thousands)
    
    $
    260,379
    
    
    $
    293,417
    
    
    
    (11
    %)Manufacturing segment income (in thousands)
    
    $
    20,228
    
    
    $
    19,553
    
    
    
    3
    %Manufacturing segment margin %
    
    
    7.8
    %
    
    
    6.7
    %Homes and units sold:HUD code homes
    
    
    2,808
    
    
    
    3,587
    
    
    
    (22
    %)Modular homes and units
    
    
    980
    
    
    
    1,215
    
    
    
    (19
    %)Canadian homes
    
    
    441
    
    
    
    319
    
    
    
    38
    %Other units
    
    
    29
    
    
    
    15
    
    
    
    93
    %Total homes and units sold
    
    
    4,258
    
    
    
    5,136
    
    
    
    (17
    %)Floors sold
    
    
    8,073
    
    
    
    9,917
    
    
    
    (19
    %)Multi-section mix
    
    
    77
    %
    
    
    82
    %Average unit selling price, excluding delivery
    
    $
    54,800
    
    
    $
    52,400
    
    
    
    5
    %
 Nine Months EndedSeptember 29,
    
    
    September 30,
    
    
    %2007
    
    
    2006
    
    
    ChangeManufacturing segment net sales (in thousands)
    
    $
    717,994
    
    
    $
    945,011
    
    
    
    (24
    %)Manufacturing segment income (in thousands)
    
    $
    37,541
    
    
    $
    66,558
    
    
    
    (44
    %)Manufacturing segment margin %
    
    
    5.2
    %
    
    
    7.0
    %Homes and units sold:HUD code homes
    
    
    7,720
    
    
    
    12,537
    
    
    
    (38
    %)Modular homes and units
    
    
    2,749
    
    
    
    3,455
    
    
    
    (20
    %)Canadian homes
    
    
    1,215
    
    
    
    857
    
    
    
    42
    %Other units
    
    
    51
    
    
    
    58
    
    
    
    (12
    %)Total homes and units sold
    
    
    11,735
    
    
    
    16,907
    
    
    
    (31
    %)Floors sold
    
    
    22,536
    
    
    
    32,279
    
    
    
    (30
    %)Multi-section mix
    
    
    78
    %
    
    
    80
    %Average unit selling price, excluding delivery
    
    $
    55,000
    
    
    $
    51,100
    
    
    
    8
    %Manufacturing facilities at end of period
    
    
    28
    
    
    
    31
    19




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International Segment
  20




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##### Table of Contents



Three Months EndedSeptember 29,
    
    September 30,
    
    %2007
    
    2006
    

    Change(Dollars in thousands)International segment net sales
    
    $
    85,286
    
    
    $
    30,946
    
    
    
    176
    %International segment income
    
    $
    6,362
    
    
    $
    1,959
    
    
    
    225
    %International segment margin %
    
    
    7.5
    %
    
    
    6.3
    %
 Nine Months EndedSeptember 29,
    
    September 30,2007
    
    2006(Dollars in thousands)International segment net sales
    
    $
    188,704
    
    
    $
    58,077
    
    
    
    225
    %International segment income
    
    $
    13,944
    
    
    $
    3,158
    
    
    
    342
    %International segment margin %
    
    
    7.4
    %
    
    
    5.4
    %
     Retail Segment
  21




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##### Table of Contents



Three Months EndedSeptember 29,
    
    September 30,
    
    %2007
    
    2006
    
    ChangeRetail segment net sales (in thousands)
    
    $
    18,233
    
    
    $
    31,391
    
    
    
    (42
    %)Retail segment income (in thousands)
    
    $
    689
    
    
    $
    2,425
    
    
    
    (72
    %)Retail segment margin %
    
    
    3.8
    %
    
    
    7.7
    %New homes sold
    
    
    100
    
    
    
    167
    
    
    
    (40
    %)% Champion produced new homes sold
    
    
    84
    %
    
    
    87
    %New home multi-section mix
    
    
    99
    %
    
    
    99
    %Average new home retail price
    
    $
    179,600
    
    
    $
    186,900
    
    
    
    (4
    %)
 Nine Months EndedSeptember 29,
    
    September 30,
    
    %2007
    
    2006
    
    ChangeRetail segment net sales (in thousands)
    
    $
    57,657
    
    
    $
    93,712
    
    
    
    (38
    %)Retail segment income (in thousands)
    
    $
    2,227
    
    
    $
    6,317
    
    
    
    (65
    %)Retail segment margin %
    
    
    3.9
    %
    
    
    6.7
    %New homes sold
    
    
    295
    
    
    
    495
    
    
    
    (40
    %)% Champion produced new homes sold
    
    
    87
    %
    
    
    87
    %New home multi-section mix
    
    
    98
    %
    
    
    97
    %Average new home retail price
    
    $
    190,900
    
    
    $
    188,500
    
    
    
    1
    %Sales centers at end of period
    
    
    16
    
    
    
    19
   Discontinued Operations
  General Corporate Expenses
  Interest Income and Interest Expense
  22




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Income Taxes
    Liquidity and Capital Resources
    23




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##### Table of Contents



Contingent liabilities and obligations
   24




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##### Table of Contents



Summary of liquidity and capital resources
   Critical Accounting Policies
  Impact of Recently Issued Accounting Pronouncements
 Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109
 Fair Value Measurements
 25




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##### Table of Contents



The Fair Value Option for Financial Assets and Financial
Liabilities  including an amendment of FASB Statement No. 115
 Forward-Looking Statements
  26




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27




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PART II. OTHER INFORMATION
 
   28




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Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer dated October 26,
2007, relating to the Registrants Quarterly Report on Form
10-Q for the quarter ended September 29, 2007.31.2
    
    Certification of Chief Financial Officer dated October 26,
2007, relating to the Registrants Quarterly Report on Form
10-Q for the quarter ended September 29, 2007.32.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer of the Registrant, dated October 26, 2007, 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
29, 2007.
 29




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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)  30