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 June 28, 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 
organization)
    
    (I.R.S. Employer
Identification No.)
 (Address of principal executive offices)
   þ o
  Large accelerated filer
þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company
o(Do not check if a smaller reporting company)
  o þ




---



##### 



PART I. FINANCIAL INFORMATION
  CHAMPION ENTERPRISES, INC.
 Unaudited
    
    
    UnauditedThree Months Ended
    
    
    Six Months EndedJune 28,
 2008
    
    
    June 30, 
2007
    
    
    June 28, 
2008
    
    
    June 30, 
2007Net sales
    
    $
    289,184
    
    
    $
    330,360
    
    
    $
    585,882
    
    
    $
    590,157Cost of sales
    
    
    246,722
    
    
    
    278,488
    
    
    
    506,852
    
    
    
    506,272Gross margin
    
    
    42,462
    
    
    
    51,872
    
    
    
    79,030
    
    
    
    83,885Selling, general and administrative expenses
    
    
    33,015
    
    
    
    36,740
    
    
    
    72,318
    
    
    
    72,526Restructuring charges
    
    
    
    
    
    
    
    
    
    
    9,471
    
    
    
    1,121Foreign currency transaction (gains) losses
    
    
    (576
    )
    
    
    
    
    
    
    1,775
    
    
    
    Amortization of intangible assets
    
    
    2,382
    
    
    
    1,417
    
    
    
    4,851
    
    
    
    2,819Operating income (loss)
    
    
    7,641
    
    
    
    13,715
    
    
    
    (9,385
    )
    
    
    7,419Interest income
    
    
    1,061
    
    
    
    1,209
    
    
    
    2,364
    
    
    
    2,047Interest expense
    
    
    (5,150
    )
    
    
    (4,932
    )
    
    
    (10,326
    )
    
    
    (9,810
    )Income (loss) before income taxes
    
    
    3,552
    
    
    
    9,992
    
    
    
    (17,347
    )
    
    
    (344
    )Income tax expense (benefit)
    
    
    202
    
    
    
    2,527
    
    
    
    (213
    )
    
    
    (563
    )Net income (loss)
    
    $
    3,350
    
    
    $
    7,465
    
    
    $
    (17,134
    )
    
    $
    219Basic income (loss) per share
    
    $
    0.04
    
    
    $
    0.10
    
    
    $
    (0.22
    )
    
    $
    0.00Weighted shares for basic EPS
    
    
    77,738
    
    
    
    76,796
    
    
    
    77,605
    
    
    
    76,676Diluted income (loss) per share
    
    $
    0.04
    
    
    $
    0.10
    
    
    $
    (0.22
    )
    
    $
    0.00Weighted shares for diluted EPS
    
    
    77,929
    
    
    
    77,658
    
    
    
    77,605
    
    
    
    77,506
  Page 1 of 25




---



##### 



CHAMPION ENTERPRISES, INC.
 UnauditedJune 28,
    
    
    December 29,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    84,370
    
    
    $
    135,408Short-term investments
    
    
    6,950
    
    
    
    Accounts receivable, trade
    
    
    95,365
    
    
    
    89,646Inventories
    
    
    82,703
    
    
    
    90,782Deferred tax assets
    
    
    28,369
    
    
    
    29,746Other current assets
    
    
    9,334
    
    
    
    14,827Total current assets
    
    
    307,091
    
    
    
    360,409Property, plant and equipmentLand and improvements
    
    
    30,928
    
    
    
    30,970Buildings and improvements
    
    
    117,743
    
    
    
    129,002Machinery and equipment
    
    
    88,843
    
    
    
    89,742237,514
    
    
    
    249,714Less-accumulated depreciation
    
    
    132,161
    
    
    
    132,730105,353
    
    
    
    116,984Goodwill
    
    
    346,934
    
    
    
    360,610Amortizable intangible assets, net of accumulated
amortization
    
    
    86,733
    
    
    
    72,541Deferred tax assets
    
    
    97,298
    
    
    
    87,983Other non-current assets
    
    
    22,313
    
    
    
    23,696$
    965,722
    
    
    $
    1,022,223LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesShort-term portion of debt
    
    $
    8,406
    
    
    $
    25,884Accounts payable
    
    
    125,482
    
    
    
    119,390Accrued volume rebates
    
    
    19,071
    
    
    
    29,404Accrued warranty obligations
    
    
    26,230
    
    
    
    29,246Accrued compensation and payroll taxes
    
    
    19,723
    
    
    
    25,168Accrued self-insurance
    
    
    27,328
    
    
    
    27,539Other current liabilities
    
    
    56,904
    
    
    
    61,695Total current liabilities
    
    
    283,144
    
    
    
    318,326Long-term liabilitiesLong-term debt
    
    
    336,804
    
    
    
    342,897Deferred tax liabilities
    
    
    10,272
    
    
    
    7,065Other long-term liabilities
    
    
    34,611
    
    
    
    34,089381,687
    
    
    
    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
    
    
    202,899
    
    
    
    203,708Accumulated other comprehensive income
    
    
    13,695
    
    
    
    15,155Retained earnings
    
    
    6,503
    
    
    
    23,637Total shareholders equity
    
    
    300,891
    
    
    
    319,846$
    965,722
    
    
    $
    1,022,223
  Page 2 of 25




---



##### 



CHAMPION ENTERPRISES, INC.
 UnauditedSix Months EndedJune 28, 
2008
    
    
    June 30, 
2007Cash flows from operating activities:Net (loss) income
    
    $
    (17,134
    )
    
    $
    219Adjustments to reconcile net (loss) income to net cash
(used for) provided by operating activities:Depreciation and amortization
    
    
    11,812
    
    
    
    10,032Stock-based compensation
    
    
    857
    
    
    
    1,556Change in deferred taxes
    
    
    (8,608
    )
    
    
    (4,492
    )Fixed asset impairment charges
    
    
    7,000
    
    
    
    Insurance proceeds
    
    
    2,500
    
    
    
    Gain on disposal of fixed assets
    
    
    (139
    )
    
    
    (593
    )Foreign currency transaction losses
    
    
    1,775
    
    
    
    Increase/decrease:Accounts receivable
    
    
    (1,325
    )
    
    
    (25,159
    )Inventories
    
    
    8,711
    
    
    
    19,705Accounts payable
    
    
    4,376
    
    
    
    32,285Accrued liabilities
    
    
    (21,587
    )
    
    
    (2,352
    )Other, net
    
    
    (452
    )
    
    
    (743
    )Net cash (used for) provided by operating activities
    
    
    (12,214
    )
    
    
    30,458Cash flows from investing activities:Proceeds on disposal of fixed assets
    
    
    1,200
    
    
    
    3,404Purchase of short-term investments
    
    
    (10,000
    )
    
    
    Redemption of short-term investments
    
    
    3,050
    
    
    
    Additions to property, plant and equipment
    
    
    (5,716
    )
    
    
    (3,647
    )Distributions from unconsolidated affiliates
    
    
    
    
    
    
    884Acquisitions
    
    
    (2,500
    )
    
    
    Net cash (used for) provided by investing activities
    
    
    (13,966
    )
    
    
    641Cash flows from financing activities:Payments on debt
    
    
    (25,657
    )
    
    
    (1,036
    )Decrease in restricted cash
    
    
    
    
    
    
    15Common stock issued, net
    
    
    437
    
    
    
    1,421Net cash (used for) provided by financing activities
    
    
    (25,220
    )
    
    
    400Cash (used for) provided by discontinued operations
    
    
    (87
    )
    
    
    92Effect of exchange rate changes on cash and cash equivalents
    
    
    449
    
    
    
    2,956Net (decrease) increase in cash and cash equivalents
    
    
    (51,038
    )
    
    
    34,547Cash and cash equivalents at beginning of period
    
    
    135,408
    
    
    
    70,208Cash and cash equivalents at end of period
    
    $
    84,370
    
    
    $
    104,755
  Page 3 of 25




---



##### 



AccumulatedCapital in
    
    
    
    
    
    otherCommon stock
    
    excess of
    
    Retained
    
    comprehensiveShares
    
    Amount
    
    par value
    
    earnings
    
    income (loss)
    
    TotalBalance at December 29, 2007
    
    
    77,346
    
    
    $
    77,346
    
    
    $
    203,708
    
    
    $
    23,637
    
    
    $
    15,155
    
    
    $
    319,846Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,134
    )
    
    
    
    
    
    
    (17,134
    )Stock compensation plans
    
    
    448
    
    
    
    448
    
    
    
    (809
    )
    
    
    
    
    
    
    
    
    
    
    (361
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,711
    )
    
    
    (1,711
    )Net investment hedge, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    251
    
    
    
    251Balance at June 28, 2008
    
    
    77,794
    
    
    $
    77,794
    
    
    $
    202,899
    
    
    $
    6,503
    
    
    $
    13,695
    
    
    $
    300,891
  Page 4 of 25




---



##### 



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
  Page 5 of 25




---



##### 



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2007Unaudited
    
    UnauditedNet sales (in thousands)
    
    $
    355,811
    
    
    $
    638,860Net income (in thousands)
    
    
    9,566
    
    
    
    3,998Diluted income per share
    
    $
    0.12
    
    
    $
    0.05
  NOTE 3  Income Taxes
      NOTE 4  Inventories, Long-Term Construction Contracts and Other Current Liabilities
  June 28,
    
    
    December 29,2008
    
    
    2007(In thousands)New manufactured homes
    
    $
    22,555
    
    
    $
    20,235Raw materials
    
    
    31,350
    
    
    
    38,725Work-in-process
    
    
    7,637
    
    
    
    8,617Other inventory
    
    
    21,161
    
    
    
    23,205Total inventory
    
    $
    82,703
    
    
    $
    90,782
 Page 6 of 25




---



##### 



NOTE 5  Product Warranty
  Six Months EndedJune 28,
    
    
    June 30,2008
    
    
    2007(In thousands)Reserves at beginning of period
    
    $
    35,746
    
    
    $
    36,923Warranty expense provided
    
    
    15,844
    
    
    
    21,454Cash warranty payments
    
    
    (18,860
    )
    
    
    (22,643
    )Reserves at end of period
    
    
    32,730
    
    
    
    35,734Less non-current portion
    
    
    (6,500
    )
    
    
    (6,500
    )Total
    
    $
    26,230
    
    
    $
    29,234
 NOTE 6  Debt
  June 28,
    
    
    December 29,2008
    
    
    2007(In thousands)Convertible Senior Notes due 2037
    
    $
    180,000
    
    
    $
    180,000Sterling Term Loan due 2012
    
    
    87,777
    
    
    
    88,386Term Loan due 2012
    
    
    55,750
    
    
    
    55,750Obligations under industrial revenue bonds
    
    
    12,430
    
    
    
    12,4307.625% Senior Notes due May 2009
    
    
    6,716
    
    
    
    6,716Other debt
    
    
    2,537
    
    
    
    971Total
    
    
    345,210
    
    
    
    344,253Less: current portion of long-term debt
    
    
    (8,406
    )
    
    
    (1,356
    )Long-term debt
    
    $
    336,804
    
    
    $
    342,897
   Page 7 of 25




---



##### 



Maximum
    
    Minimum
    
    MinimumSenior
    
    Interest
    
    FixedLeverage
    
    Coverage
    
    ChargeFiscal Quarter
    
    Ratio
    
    Ratio
    
    RatioSecond quarter of 2008 - Third quarter of 2009
    
    
    3.00:1
    
    
    
    2.25:1
    
    
    
    1.25:1Fourth quarter of 2009 - 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
   NOTE 7  Contingent Liabilities
    Page 8 of 25




---



##### 



NOTE 8  Earnings Per Share, Stock Options and Stock-Based Incentive Plans
  Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Numerator:Income (loss) available to common shareholders for basic
and diluted EPS
    
    $
    3,350
    
    
    $
    7,465
    
    
    $
    (17,134
    )
    
    $
    219Denominator:Shares for basic EPSweighted average shares outstanding
    
    
    77,738
    
    
    
    76,796
    
    
    
    77,605
    
    
    
    76,676Plus dilutive securities:Stock options and awards
    
    
    191
    
    
    
    862
    
    
    
    
    
    
    
    830Shares for diluted EPS
    
    
    77,929
    
    
    
    77,658
    
    
    
    77,605
    
    
    
    77,506
   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
    
    
    432
    
    
    $
    12.11
 Page 9 of 25




---



##### 



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
    
    
    1,844Summary of outstanding awards at
June 28, 2008Performance shares
    
    
    1,698Restricted stock awards
    
    
    1461,844
   NOTE 9  Segment Information
  Page 10 of 25




---



##### 



Three Months Ended
    
    
    Six Months EndedJune 28, 
2008
    
    
    June 30, 
2007
    
    
    June 28, 
2008
    
    
    June 30, 
2007(In thousands)Net sales:Manufacturing segment
    
    $
    211,273
    
    
    $
    258,319
    
    
    $
    392,758
    
    
    $
    457,615International segment
    
    
    70,513
    
    
    
    56,887
    
    
    
    180,879
    
    
    
    103,418Retail segment
    
    
    9,398
    
    
    
    21,354
    
    
    
    18,445
    
    
    
    39,424Less: intercompany
    
    
    (2,000
    )
    
    
    (6,200
    )
    
    
    (6,200
    )
    
    
    (10,300
    )Consolidated net sales
    
    $
    289,184
    
    
    $
    330,360
    
    
    $
    585,882
    
    
    $
    590,157Income (loss) before income taxes:Manufacturing segment income
    
    $
    13,595
    
    
    $
    17,217
    
    
    $
    4,572
    
    
    $
    17,313International segment income
    
    
    3,889
    
    
    
    4,458
    
    
    
    12,278
    
    
    
    7,582Retail segment (loss) income
    
    
    (1,043
    )
    
    
    666
    
    
    
    (3,807
    )
    
    
    1,538General corporate expenses
    
    
    (7,094
    )
    
    
    (7,409
    )
    
    
    (15,702
    )
    
    
    (16,695
    )Amortization of intangible assets
    
    
    (2,382
    )
    
    
    (1,417
    )
    
    
    (4,851
    )
    
    
    (2,819
    )Foreign currency transaction gains (losses)
    
    
    576
    
    
    
    
    
    
    
    (1,775
    )
    
    
    Interest expense, net
    
    
    (4,089
    )
    
    
    (3,723
    )
    
    
    (7,962
    )
    
    
    (7,763
    )Intercompany profit (loss) eliminations
    
    
    100
    
    
    
    200
    
    
    
    (100
    )
    
    
    500Income (loss) before income taxes
    
    $
    3,552
    
    
    $
    9,992
    
    
    $
    (17,347
    )
    
    $
    (344
    )
 NOTE 10  Fair Value Measurements
 Fair Value Measurements,
  Level 1:
    
    Observable inputs such as quoted prices in active markets;
 Level 2:
    
    Inputs, other than quoted prices in active markets, that are observable
either directly or indirectly; and
 Level 3:
    
    Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own assumptions.
  (A) Market approach
 (B) Cost approach :
 (C) Income approach :
  Description
    
    Frequency
    
    
    Asset / (Liability)
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Valuation Technique(In thousands)Auction Rate
Preferred Securities
    
    Recurring
    
    $
    6,950
    
    
    $
    
    
    
    $
    6,950
    
    
    $
    
    
    
    
    A & B
  Page 11 of 25




---



##### 



NOTE 11  Restructuring Charges
    Six Months EndedJune 28, 
2008(In thousands)Balance at beginning of year
    
    $
    942Additions:Severance
    
    
    2,471Cash payments:Warranty
    
    
    (243
    )Severance
    
    
    (1,749
    )Balance June 28, 2008
    
    $
    1,421Period end balance comprised of:Warranty costs
    
    $
    257Severance
    
    
    1,164$
    1,421
  NOTE 12  Total Comprehensive Income (Loss)
  Three Months Ended
    
    
    Six Months EndedJune 28, 
2008
    
    
    June 30, 
2007
    
    
    June 28, 
2008
    
    
    June 30,
 2007(In thousands)Net income (loss)
    
    $
    3,350
    
    
    $
    7,465
    
    
    $
    (17,134
    )
    
    $
    219Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    210
    
    
    
    3,891
    
    
    
    (1,711
    )
    
    
    4,145Net investment hedge, net of income taxes
    
    
    151
    
    
    
    (756
    )
    
    
    251
    
    
    
    (761
    )Total comprehensive income (loss)
    
    $
    3,711
    
    
    $
    10,600
    
    
    $
    (18,594
    )
    
    $
    3,603
 Page 12 of 25




---



##### 



CHAMPION ENTERPRISES, INC.
 Results of Operations
Three and Six Months Ended June 28, 2008
versus the Three and Six Months Ended June 30, 2007
 Overview
          Page 13 of 25




---



##### 



Consolidated Results of Operations
 Three Months Ended
    
    
    
    
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    %
    
    
    June 28,
    
    
    June 30,
    
    
    %2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change(Dollars in thousands)Net salesManufacturing segment
    
    $
    211,273
    
    
    $
    258,319
    
    
    
    (18
    %)
    
    $
    392,758
    
    
    $
    457,615
    
    
    
    (14
    %)International segment
    
    
    70,513
    
    
    
    56,887
    
    
    
    24
    %
    
    
    180,879
    
    
    
    103,418
    
    
    
    75
    %Retail segment
    
    
    9,398
    
    
    
    21,354
    
    
    
    (56
    %)
    
    
    18,445
    
    
    
    39,424
    
    
    
    (53
    %)Less: intercompany
    
    
    (2,000
    )
    
    
    (6,200
    )
    
    
    (68
    %)
    
    
    (6,200
    )
    
    
    (10,300
    )
    
    
    (40
    %)Total net sales
    
    $
    289,184
    
    
    $
    330,360
    
    
    
    (12
    %)
    
    $
    585,882
    
    
    $
    590,157
    
    
    
    (1
    %)Gross margin
    
    $
    42,462
    
    
    $
    51,872
    
    
    
    (18
    %)
    
    $
    79,030
    
    
    $
    83,885
    
    
    
    (6
    %)Selling, general and administrative
expenses (SG&A)
    
    
    33,015
    
    
    
    36,740
    
    
    
    (10
    %)
    
    
    72,318
    
    
    
    72,526
    
    
    
    Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,471
    
    
    
    1,121
    
    
    
    745
    %Foreign currency transaction
(gains) losses
    
    
    (576
    )
    
    
    
    
    
    
    
    
    
    
    1,775
    
    
    
    
    
    
    
    Amortization of intangible assets
    
    
    2,382
    
    
    
    1,417
    
    
    
    68
    %
    
    
    4,851
    
    
    
    2,819
    
    
    
    72
    %Operating income (loss)
    
    
    7,641
    
    
    
    13,715
    
    
    
    (44
    %)
    
    
    (9,385
    )
    
    
    7,419
    
    
    
    (226
    %)Interest expense, net
    
    
    4,089
    
    
    
    3,723
    
    
    
    10
    %
    
    
    7,962
    
    
    
    7,763
    
    
    
    3
    %Income (loss) before income taxes
    
    $
    3,552
    
    
    $
    9,992
    
    
    
    (64
    %)
    
    $
    (17,347
    )
    
    $
    (344
    )
    
    
    4943
    %As a percent of net salesGross margin
    
    
    14.7
    %
    
    
    15.7
    %
    
    
    
    
    
    
    13.5
    %
    
    
    14.2
    %SG&A
    
    
    11.4
    %
    
    
    11.1
    %
    
    
    
    
    
    
    12.3
    %
    
    
    12.3
    %Operating income (loss)
    
    
    2.6
    %
    
    
    4.2
    %
    
    
    
    
    
    
    (1.6
    %)
    
    
    1.3
    %Income (loss) before income taxes
    
    
    1.2
    %
    
    
    3.0
    %
    
    
    
    
    
    
    (6.0
    %)
    
    
    (0.1
    %)
        Page 14 of 25




---



##### 



Manufacturing Segment
  Three Months Ended
    
    
    
    
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    %
    
    
    June 28,
    
    
    June 30,
    
    
    %2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeManufacturing segment net
sales (in thousands)
    
    $
    211,273
    
    
    $
    258,319
    
    
    
    (18
    %)
    
    $
    392,758
    
    
    $
    457,615
    
    
    
    (14
    %)Manufacturing segment
income (in thousands)
    
    
    13,595
    
    
    
    17,217
    
    
    
    (21
    %)
    
    
    4,572
    
    
    
    17,313
    
    
    
    (74
    %)Manufacturing segment margin %
    
    
    6.4
    %
    
    
    6.7
    %
    
    
    
    
    
    
    1.2
    %
    
    
    3.8
    %Homes and units sold:HUD code homes
    
    
    1,697
    
    
    
    2,752
    
    
    
    (38
    %)
    
    
    3,258
    
    
    
    4,912
    
    
    
    (34
    %)Modular homes and units
    
    
    652
    
    
    
    1,002
    
    
    
    (35
    %)
    
    
    1,321
    
    
    
    1,769
    
    
    
    (25
    %)Canadian homes
    
    
    733
    
    
    
    430
    
    
    
    70
    %
    
    
    1,297
    
    
    
    774
    
    
    
    68
    %Other units
    
    
    72
    
    
    
    10
    
    
    
    620
    %
    
    
    99
    
    
    
    22
    
    
    
    350
    %Total homes and units sold
    
    
    3,154
    
    
    
    4,194
    
    
    
    (25
    %)
    
    
    5,975
    
    
    
    7,477
    
    
    
    (20
    %)Floors sold
    
    
    5,649
    
    
    
    8,098
    
    
    
    (30
    %)
    
    
    10,637
    
    
    
    14,463
    
    
    
    (26
    %)Multi-section mix
    
    
    69
    %
    
    
    79
    %
    
    
    
    
    
    
    67
    %
    
    
    79
    %Average unit selling price, excluding delivery
    
    $
    57,800
    
    
    $
    55,100
    
    
    
    5
    %
    
    $
    57,200
    
    
    $
    55,000
    
    
    
    4
    %Manufacturing facilities at end of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    28
    Page 15 of 25




---



##### 



International Segment
  Three Months Ended
    
    
    
    
    
    Six Months EndedJune 28,
    
    June 30,
    
    %
    
    June 28,
    
    June 30,
    
    %2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    Change(Dollars in thousands)International segment net sales
    
    $
    70,513
    
    
    $
    56,887
    
    
    
    24
    %
    
    $
    180,879
    
    
    $
    103,418
    
    
    
    75
    %International segment income
    
    $
    3,889
    
    
    $
    4,458
    
    
    
    (13
    %)
    
    $
    12,278
    
    
    $
    7,582
    
    
    
    62
    %International segment margin %
    
    
    5.5
    %
    
    
    7.8
    %
    
    
    
    
    
    
    6.8
    %
    
    
    7.3
    %
      Page 16 of 25




---



##### 



Retail Segment
  Three Months Ended
    
    
    
    
    
    Six Months EndedJune 28,
    
    June 30,
    
    %
    
    June 28,
    
    June 30,
    
    %2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeRetail segment net
sales (in thousands)
    
    $
    9,398
    
    
    $
    21,354
    
    
    
    (56
    %)
    
    $
    18,445
    
    
    $
    39,424
    
    
    
    (53
    %)Retail segment (loss)
income (in thousands)
    
    $
    (1,043
    )
    
    $
    666
    
    
    
    (257
    %)
    
    $
    (3,807
    )
    
    $
    1,538
    
    
    
    (348
    %)Retail segment margin %
    
    
    (11.1
    %)
    
    
    3.1
    %
    
    
    
    
    
    
    (20.6
    %)
    
    
    3.9
    %New homes sold
    
    
    56
    
    
    
    99
    
    
    
    (43
    %)
    
    
    108
    
    
    
    195
    
    
    
    (45
    %)% Champion produced new homes sold
    
    
    75
    %
    
    
    94
    %
    
    
    
    
    
    
    89
    %
    
    
    88
    %New home multi-section mix
    
    
    98
    %
    
    
    99
    %
    
    
    
    
    
    
    98
    %
    
    
    98
    %Average new home retail price
    
    $
    164,100
    
    
    $
    212,500
    
    
    
    (23
    %)
    
    $
    167,500
    
    
    $
    202,000
    
    
    
    (17
    %)Sales centers at end of period
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    17
   Restructuring Charges
    Page 17 of 25




---



##### 



General Corporate Expenses
  Interest Income and Interest Expense
   Income Taxes
    Liquidity and Capital Resources
    Page 18 of 25




---



##### 



Maximum
    
    Minimum
    
    MinimumSenior
    
    Interest
    
    FixedLeverage
    
    Coverage
    
    ChargeFiscal Quarter
    
    Ratio
    
    Ratio
    
    RatioSecond quarter of 2008 - Third quarter of 2009
    
    
    3.00:1
    
    
    
    2.25:1
    
    
    
    1.25:1Fourth quarter of 2009 - 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 19 of 25




---



##### 



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 20 of 25




---



##### 



Business Combinations Accounting and Reporting of Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51
 Forward-Looking Statements
  Page 21 of 25




---



##### 



Page 22 of 25




---



##### 



PART
II. OTHER INFORMATION
      Nominee
    
    Votes For
    
    Votes WithheldRobert W. Anestis
    
    
    71,922,103
    
    
    
    162,374Eric S. Belsky
    
    
    71,936,436
    
    
    
    148,041William C. Griffiths
    
    
    71,924,172
    
    
    
    160,305Selwyn Isakow
    
    
    71,354,163
    
    
    
    730,314Brian D. Jellison
    
    
    71,361,024
    
    
    
    723,453G. Michael Lynch
    
    
    71,299,554
    
    
    
    784,923Thomas A. Madden
    
    
    70,159,107
    
    
    
    1,925,370Shirley D. Peterson
    
    
    72,008,116
    
    
    
    76,361
 Page 23 of 25




---



##### 



(a)
    
    The following exhibits are filed as part of this report:
 Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer dated July 28, 2008,
relating to the Registrants Quarterly Report on Form 10-Q for the
quarter ended June 28, 2008.31.2
    
    Certification of Chief Financial Officer dated July 28, 2008,
relating to the Registrants Quarterly Report on Form 10-Q for the
quarter ended June 28, 2008.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer
of the Registrant, dated July 28, 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 June 28, 2008.
 Page 24 of 25




---



##### 



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 25 of 25