| Champion Enterprises Inc. | ||||
| Phyllis A. Knight | 2701 Cambridge Court | |||
| Executive Vice President | Suite 300 | |||
| and Chief Financial Officer | Auburn Hills, MI 48326 | |||
| pknight@championhomes.net | 248.340.0880 |
September 7, 2007
U.S. Securities and Exchange Commission
100 F Street, N.E., Stop 7010
Washington, D.C. 20549-7010
100 F Street, N.E., Stop 7010
Washington, D.C. 20549-7010
| Attention: | Rufus Decker | |
| Accounting Branch Chief |
RE: | Champion Enterprises, Inc. | |
| Form 10-K for Fiscal Year Ended December 30, 2006 | ||
| Forms 10-Q for Fiscal Quarters Ended March 31, 2007 and June 30, 2007 | ||
| File No. 1-9751 |
Dear Mr. Decker:
The following is our response to written comments received from the staff of the Securities and Exchange Commission in a letter dated August 31, 2007.
FORM 10-K FOR THE YEAR ENDED DECEMBER 30, 2006
General
| 1. | Where a comment below requests additional disclosures or other revisions, please show us what the revisions will look like in your supplemental response. All revisions should be included in your future filings, including your interim filings where appropriate. | ||
| Drafts of additional disclosures or other revisions resulting from our responses to the written comments are included in our responses below. All such revisions will be included in our future filings, including interim filings, as appropriate. |
Selected Financial Information, page 19
| 2. | We have read your response to comment two from our letter dated July 31,2007. We continue to believe that loss (gain) on debt retirement should not be included as a component of operating income (loss). Please include your loss (gain) on debt retirement around interest expense in your income statements. | ||
| In future filings loss (gain) on debt retirement will be reported below operating income and will be included around net interest expense. A draft of such revised income statement, as contained in Selected Financial Information, follows: |
| Five-Year Highlights | ||||||||||||||||||||
| 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| Net sales | ||||||||||||||||||||
| Manufacturing | $ | 1,195,834 | $ | 1,190,819 | $ | 1,002,164 | $ | 981,254 | $ | 1,150,638 | ||||||||||
| International | 90,717 | — | — | — | — | |||||||||||||||
| Retail | 117,397 | 135,371 | 110,024 | 130,366 | 250,277 | |||||||||||||||
| Less: Intercompany | (39,300 | ) | (53,600 | ) | (97,900 | ) | (109,686 | ) | (156,704 | ) | ||||||||||
| Total net sales | 1,364,648 | 1,272,590 | 1,014,288 | 1,001,934 | 1,244,211 | |||||||||||||||
| Cost of sales | 1,147,032 | 1,055,749 | 843,261 | 866,020 | 1,077,045 | |||||||||||||||
Gross margin | 217,616 | 216,841 | 171,027 | 135,914 | 167,166 | |||||||||||||||
| Selling, general and administrative expenses | 154,518 | 151,810 | 129,096 | 146,513 | 197,317 | |||||||||||||||
| Goodwill impairment charges | — | — | — | 34,183 | 97,000 | |||||||||||||||
| Restructuring charges | 1,200 | — | 3,300 | 21,100 | 40,000 | |||||||||||||||
| Amortization of intangible assets | 3,941 | — | — | — | — | |||||||||||||||
| Mark-to-market (credit) charge for common stock warrant | — | (4,300 | ) | 5,500 | 3,300 | — | ||||||||||||||
Operating income (loss) | 57,957 | 69,331 | 33,131 | (69,182 | ) | (167,151 | ) | |||||||||||||
| Loss (gain) on debt retirement | 398 | 9,857 | 2,776 | (10,639 | ) | (7,385 | ) | |||||||||||||
| Net interest expense | 14,446 | 13,986 | 17,219 | 26,399 | 26,430 | |||||||||||||||
Income (loss) from continuing operations before income taxes | 43,113 | 45,488 | 13,136 | (84,942 | ) | (186,196 | ) | |||||||||||||
| Income tax (benefit) expense | (95,211 | ) | 3,300 | (10,000 | ) | (5,500 | ) | 53,500 | ||||||||||||
Income (loss) from continuing operations | 138,324 | 42,188 | 23,136 | (79,442 | ) | (239,696 | ) | |||||||||||||
| Loss from discontinued operations | (16 | ) | (4,383 | ) | (6,125 | ) | (23,642 | ) | (15,859 | ) | ||||||||||
Net income (loss) | $ | 138,308 | $ | 37,805 | $ | 17,011 | $ | (103,084 | ) | $ | (255,555 | ) | ||||||||
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2007
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Consolidated Results of Operations, page 16
| 3. | We have read your response to comment five from our letter dated July 31,2007. We continue to believe that you should discuss the business reasons for the changes in general corporate expenses line item between periods in the MD&A, where applicable. Please discuss the business reasons for the changes in this line item for all periods presented in MD&A wherever you discuss segment results. Please also attempt to quantify the impact of each factor you identify when multiple and offsetting factors contribute to fluctuations. | ||
| In future filings we will discuss the reasons for the changes in general corporate expenses between periods in the MD&A, wherever we discuss segment results. We will also attempt to quantify the impact of each factor we identify when multiple and offsetting factors contribute to fluctuations. In our response letter dated August 23, 2007, we provided a draft of such explanation for changes in general corporate expenses for the three and six months ended June 30, 2007 versus the comparable periods of the prior year. |
* * * * * *
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In connection with our response to your comments, we acknowledge that the we are responsible for the adequacy and accuracy of the disclosures in our filings; staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and we may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
If you have any questions relating to these responses, please feel free to contact me at (248) 340-0880.
| Very truly yours, | ||||
| /s/ Phyllis A. Knight | ||||
| Phyllis A. Knight | ||||
| Executive Vice President and Chief Financial Officer | ||||
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