Manufacturing segment $ 77,677 $ 181,485 (57%) International segment 21,743 110,366 (80%) Retail segment 7,406 9,047 (18%) Less: intercompany (1,600 ) (4,200 ) (62%)

Total net sales $ 105,226 $ 296,698 (65%)

Gross margin $ 5,531 $ 36,568 (85%) Selling, general and administrative expenses ("SG&A") 21,295 39,303 (46%) Insurance gain (4,295 ) - - Restructuring charges 138 9,471 (99%) Foreign currency transaction losses 642 2,351 (73%) Amortization of intangible assets 1,859 2,469 (25%)

Operating loss (14,108 ) (17,026 ) (17%) Interest expense, net 4,519 3,873 17%

Loss before income taxes $ (18,627 ) $ (20,899 ) (11%)

As a percent of net sales
Gross margin 5.3 % 12.3 % SG&A 20.2 % 13.2 % Operating loss (13.4 %) (5.7 %) Loss before income taxes (17.7 %) (7.0 %)

Consolidated net sales for the quarter ended April 4, 2009 decreased 65% from the comparable period of 2008 primarily due to economic, credit and housing market conditions in North America that affected our manufacturing segment and a significant decrease in prison sales in the international segment.
Gross margin for the three months ended April 4, 2009 decreased 85% from the comparable period of 2008 primarily due to reduced sales in the manufacturing and international segments and a lower gross margin rate in the manufacturing segment due to effects of low levels of production and sales on production efficiencies and coverage of fixed costs. In the quarter ended March 29, 2008 gross margin was impacted by a $1.8 million charge to write down inventory at the retail segment.
SG&A for the quarter ended April 4, 2009 decreased by 46% from the comparable period of 2008 primarily due to the impact of lower sales and profits on sales commissions, incentives and discretionary spending and decreased headcounts across the Company.
The insurance gain resulted from the final settlement of insurance claims related to the February 2008 fire that destroyed our manufacturing plant in Henry, TN.
Restructuring charges are discussed below in the section titled "Restructuring Charges".
Foreign currency transaction losses are related to intercompany loans between certain of our U.S., Canadian and U.K. subsidiaries that are expected to be repaid. The foreign currency transaction losses are due to fluctuations in the relative exchange rates between the U.S. dollar, Canadian dollar and British pound.
Amortization expense in the quarter ended April 4, 2009 decreased versus the quarter ended March 29, 2008 due to the reduction of foreign exchange rates at our U.K. and Canadian subsidiaries by 27.4% and 19.4%, respectively.
Manufacturing Segment
We evaluate the performance of our manufacturing segment based on income before interest, income taxes, amortization of intangible assets, foreign currency transaction gains and losses on intercompany indebtedness and general corporate expenses.

Homes and units sold:
HUD code homes 674 1,561 (57%) Modular homes and units 302 669 (55%) Canadian homes 202 564 (64%) Other units 5 27 (81%)

Total homes and units sold 1,183 2,821 (58%)

Floors sold 2,209 4,988 (56%)

Average unit selling price, excluding delivery $ 56,700 $ 56,600 -

Manufacturing facilities at end of period 25 26

Manufacturing segment net sales for the quarter ended April 4, 2009 decreased $103.8 million from the first quarter of 2008 due to the impact of the global credit crisis, including limited financing available to homebuyers and housing retailers. As a result, retailers were reducing inventories of homes and incoming order rates suffered. These ongoing housing market difficulties during the first quarter of 2009 contributed to low levels of unfilled production orders and low sales volumes at most of our plants in North America. Average manufacturing selling prices in the first quarter of 2009 increased slightly from the first quarter of 2008, as a higher proportion of multi-section units and an increase in the number of larger modular units for a multi-family project and a military project offset a trend toward lower cost homes.
Manufacturing segment loss for the three months ended April 4, 2009 decreased $2.9 million from the comparable period of 2008. The first quarter of 2009 included a $4.3 million gain resulting from settling the insurance claim for the February 2008 Henry, TN plant fire while the first quarter of 2008 included charges totaling $9.3 million for the closure of two manufacturing facilities and the elimination of two regional offices. Lower sales volumes across North America resulted in production inefficiencies caused by under utilized factory capacity. As a result, our gross margin rate decreased, the impact of which was partially offset by lower SG&A due to cost and headcount reductions and lower incentive and sales commission expenses. Our plants operated at 21% of capacity for the first quarter of 2009 compared to 40% a year ago. These conditions resulted in the idling of one of the two manufacturing plants at our Indiana complex in the first quarter of 2009 and a 20% reduction in headcount in the segment.
The plant closures announced in the first quarter of 2008 included one in Oregon and one in Indiana. The operations at the closed Indiana plant were consolidated at our other Indiana homebuilding complex. The Indiana closure was the final of four plants at a complex where the other three plants had been previously idled. Therefore, impairment charges in the quarter related to the four plant Indiana complex and the Oregon plant. Charges in the first quarter of 2008 totaling $9.3 million consisted of fixed asset impairment charges of $7.0 million, severance costs totaling $2.0 million and an inventory write-down of $0.3 million. Severance costs included certain payments required under the Worker Adjustment and Retraining Notification Act and were related to the termination of approximately 330 employees consisting of substantially all employees at the Oregon plant and those terminated as a result of the Indiana plant closure and consolidation of operations.
Although it is possible that retailers could cancel orders, and unfilled orders are not necessarily an indication of future business, our unfilled manufacturing orders for homes at April 4, 2009 totaled approximately $10 million for the 25 plants in operation, compared to $25 million at March 29, 2008 for the 26 plants in operation. The majority of our plants are currently operating with one week or less of unfilled orders.
During the first quarter of 2009 and the fourth quarter of 2008, floor plan financing availability was reduced by the three national lenders that provided financing for approximately 42% of our total sales to independent retailers in our 2008 fiscal year. One national lender announced that it was exiting the business and stopped funding new loans and the other two national lenders curtailed their lending activity and tightened loan terms. We have encouraged our independent retailers to seek inventory financing from local banks and other sources. However, it is not known

whether sufficient sources of inventory financing can be found to replace the financing previously provided by these three national lenders. The inability of our independent retailers to find sufficient inventory financing could result in lower levels of retailer inventory and cause reduced sales and profitability in our manufacturing segment.
International Segment
We evaluate the performance of our international segment based on income before interest, income taxes, amortization of intangible assets, foreign currency transaction gains and losses on intercompany indebtedness and general corporate expenses.

                                                Three Months Ended
                                              April 4,       March 29,       %
                                                2009           2008        Change
                                              (Dollars in thousands)
         International segment net sales    $   21,743      $ 110,366       (80 %)
         International segment income       $       64      $   8,389       (99 %)
         International segment margin %            0.3 %          7.6 %

The global credit crisis impacted the economy and availability of financing in the U.K., which slowed construction activity. International segment net sales for the quarter ended April 4, 2009 decreased from the comparable quarter of 2008 due primarily to a significant reduction in custodial (prison) revenues and the slowdown in construction activity in the U.K. caused by difficult economic conditions. Additionally, $8.3 million of the reduction in sales was caused by a lower exchange rate versus the rate in the first quarter of 2008. In the first quarter of 2008, a large number of prison contracts were in process that involved a significant amount of site-work revenue. These contracts were completed during 2008.
The decrease in segment income in the first quarter of 2009 compared to the first quarter of 2008 was primarily driven by the significant reduction in sales and gross margin, but was partially offset by reduced SG&A. Firm contracts and orders pending contracts under framework agreements totaled approximately $155 million at the end of the quarter, compared to approximately $150 million at the end of 2008.
Retail Segment
We evaluate the performance of our retail segment based on income before interest, income taxes, amortization of intangible assets and general corporate expenses.

                                                    Three Months Ended
                                                  April 4,      March 29,        %
                                                    2009           2008        Change
      Retail segment net sales (in thousands)   $   7,406      $   9,047        (18 %)
      Retail segment loss (in thousands)        $    (158 )    $  (2,764 )      (94 %)
      Retail segment margin %                        (2.1 %)       (30.6 %)

      New homes sold                                   54             52          4 %

      % Champion produced new homes sold               85 %           88 %

      New home multi-section mix                       93 %           98 %

      Average new home retail price             $ 134,300      $ 171,100        (22 %)

      Sales centers at end of period                   14             17

Retail sales for the quarter ended April 4, 2009 decreased versus the comparable period of 2008 primarily due to difficult housing market conditions in California and limited availability of financing, which resulted in selling slightly more homes but at a lower average selling price per home. The average home selling price declined due to competitive conditions in California and the liquidation of aged inventory.
Retail segment loss for the quarter ended April 4, 2009 improved compared to the quarter ended March 29, 2008 as the 2008 quarter included an inventory write-down of $1.8 million, primarily related to park spaces in southern California.

Restructuring Charges
During the quarter ended April 4, 2009, we incurred restructuring charges totaling $0.1 million for severance costs from reducing corporate office headcount by an additional nine positions. These charges were included in general corporate expenses.
During the quarter ended March 29, 2008, we incurred charges totaling $9.8 million from the closure of two U.S. manufacturing plants and the restructuring of the manufacturing segment that included the elimination of two regional offices. Restructuring charges in the quarter totaling $9.5 million consisted of fixed asset impairment charges of $7.0 million and severance costs of $2.5 million. Other plant closing charges in the quarter, which are included in cost of sales, consisted of $0.3 million for the write down of closed plant inventories. Of the total charges, $0.5 million of the severance costs are included in general corporate expenses and $9.3 million of the costs and charges are included in the results of the manufacturing segment.
All charges related to these restructuring activities were recorded in the stated periods and no related charges are expected to be incurred in subsequent periods.
As of April 4, 2009, accrued but unpaid restructuring costs totaled $0.6 million compared to $1.0 million at January 3, 2009. These unpaid costs consisted solely of severance costs at April 4, 2009. General Corporate Expenses
General corporate expenses in the quarter ended April 4, 2009, declined approximately $2.8 million, or 33%, as compared to the comparable quarter of 2008 as a result of reduced compensation and benefits due to headcount reductions, lower professional fees and other cost cuts implemented in the fourth quarter of 2008, partially offset by higher financing costs that resulted from the amended senior credit agreement. Interest Income and Interest Expense
For the three months ended April 4, 2009, interest expense was lower than the comparable period in 2008 as a result of lower average debt balances but slightly higher average interest rates. Interest income in 2009 was lower than in 2008 due to lower average invested cash balances and lower interest rates. Income Taxes
The primary difference between the effective tax rate for the quarter ended April 4, 2009 and the 35% U.S. federal statutory rate was due to a valuation allowance for 100% of our U.S. deferred tax assets, that resulted in no tax benefit being recognized for U.S. losses. U.S. deferred tax assets will continue to require a 100% valuation allowance until we have demonstrated their realizability through sustained profitability and/or from other factors. The tax benefit for the quarter ended April 4, 2009, consisted primarily of foreign tax benefits totaling $1.6 million and U.S. deferred tax expense of $0.6 million.
The primary difference between the effective tax rate for the quarter ended March 29, 2008 and the 35% U.S. federal statutory rate was due to the use of an annual estimated effective global tax rate of 5.6% to provide income taxes for the quarter, exclusive of discreet tax adjustments. The income tax benefit for the quarter ended March 29, 2008 also included an adjustment for $0.6 million of tax expense from the excess of cumulative book expense over the tax deduction amount related to the vesting of stock compensation during the quarter. The annual estimated effective global tax rate was determined after consideration of the estimated annual pretax results, estimated permanent differences and the statutory tax rates for the three countries and the various states in which the Company operates.
As of January 3, 2009, we had available federal net operating loss carryforwards of approximately $346 million for tax purposes to offset certain future federal taxable income. These loss carryforwards expire in 2023 through 2028.
Liquidity and Capital Resources
Unrestricted cash balances totaled $47.8 million at April 4, 2009. During the first three months of 2009, continuing operating activities used $18.5 million of net cash, investing activities provided net cash of $4.3 million primarily from $4.1 million of insurance proceeds and financing activities provided $9.3 million of net cash, primarily from a $10.0 million borrowing on the Revolver. During the quarter ended April 4, 2009, working capital used net cash of $7.5 million primarily due to reduced accounts payable and accruals relating to the slow down in business in the international segment, partially offset by decreased inventories in the manufacturing and retail segments.

We have a senior secured credit agreement, as amended, (the "Credit Agreement") with various financial institutions under which the Term Loan and the Sterling Term Loan were issued. Under the Credit Agreement, at April 4, 2009, we also have a $40 million revolving line of credit ("Revolver") and a $43.5 million letter of credit facility. The Credit Agreement is secured by a first security interest in substantially all of the assets of our domestic operating subsidiaries. As of April 4, 2009, letters of credit issued under the facility totaled $57.0 million, including $13.5 million under the Revolver. The maturity date for the Revolver is October 31, 2010. The maturity date for each of the Term Loan, the Sterling Term Loan and the letter of credit facility is October 31, 2012.
During October 2008, an amendment to the Credit Agreement (the "Amendment") was completed. The Amendment covers the period from September 27, 2008 through January 2, 2010 (our 2009 fiscal year end) and eliminated the maximum senior leverage ratio, minimum interest coverage ratio and minimum fixed charge ratio covenants in exchange for new covenants requiring minimum liquidity and minimum twelve-month adjusted EBITDA measured quarterly and as defined by the Credit Agreement. The minimum liquidity requirement is measured each quarter end and is computed by adding "cash and cash equivalents" as reported on the consolidated balance sheet to unused Revolver availability. The minimum twelve-month adjusted EBITDA requirement is also measured at the end of each quarter. Adjusted EBITDA is calculated as defined in the Credit Agreement, where adjustments to reported earnings before interest, taxes, depreciation and amortization ("EBITDA") include, among other things, items such as (i) removing the effects of non-cash gains and losses, non-cash restructuring charges and non-cash impairment charges; (ii) adding back non-cash stock compensation expenses; (iii) adding back deferred financing cost amortization; (iv) removing the effects of any gains or losses related to debt retirement; (v) excluding the impact of certain closed or discontinued operations; (vi) during the period of the October 2008 Amendment (the fourth fiscal quarter of 2008 and the four fiscal quarters of 2009), excluding the effects of cash severance costs and the impact of costs related to the amendment; and (vii) giving proforma effect to similarly computed adjusted EBITDA from acquisitions.
The minimum liquidity and minimum twelve-months adjusted EBITDA levels, as set forth in the Amendment, for the four fiscal quarters of 2009 are as follows:

                                                           Minimum
                                                           12-month
                                              Minimum      Adjusted
                   Fiscal Quarter            Liquidity      EBITDA
                                                 (In thousands)
                   First quarter of 2009     $ 45,000     $ 10,800
                   Second quarter of 2009    $ 35,000     $  6,400
                   Third quarter of 2009     $ 39,000     $  7,500
                   Fourth quarter of 2009    $ 42,000     $ 15,100

Pursuant to the terms of the Amendment, the minimum required twelve-month adjusted EBITDA will be revised to reflect the impact of any sales of operating assets.
We were in compliance with the minimum liquidity and minimum adjusted EBITDA covenants for the quarter ended April 4, 2009. Our actual twelve-month adjusted EBITDA was $13.8 million and actual liquidity was $49.2 million. Management believes these required minimum levels of liquidity and adjusted EBITDA for the last three quarters of 2009 are achievable based upon the Company's current operating plan. Management has also identified other actions within their control that could be implemented, if necessary, to help the Company meet these quarterly requirements. However, there can be no assurance that these actions will be successful.
During the Amendment period, the interest rates for borrowings under the Credit Agreement were increased to LIBOR plus 6.5%, with a LIBOR floor of 3.25% for the Term Loans and prime plus 5.5%, with a prime rate floor of 4.25% for the Revolver. Interest of LIBOR plus 5.0% is payable in cash and the remaining interest of 1.5% may be paid in kind (deferred and added to the respective loan balances). In addition, the Amendment revised the letter of credit facility annual fee to 6.6%.
The Amendment provides for interest rate reductions on all remaining borrowings under the Credit Agreement and the fees for the letter of credit facility if we make additional Term Loan prepayments during the effected period. For cumulative prepayments between $10 and $20 million, the interest rate will be reduced to LIBOR plus 5.5% (of which 0.5% may be paid in kind); for cumulative prepayments between $20 and $30 million, the interest rate will be reduced to LIBOR plus 5.0%; and for cumulative prepayments of $30 million or more, the interest rate will be reset to LIBOR plus 4.5%. Those respective aggregate prepayments will result in reducing the letter of credit annual fee to 5.6%, 5.1% and 4.6%, respectively.

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