CHAMPION ENTERPRISES INC
10-Q, 1999-05-06
MOBILE HOMES
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<PAGE>   1
                                    FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark one)

     X         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934.


For Quarter Ended April 3, 1999

                                       OR

              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.
             (Exact name of registrant as specified in its charter)


            MICHIGAN                                             38-2743168
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


2701 University Drive, Suite 300, Auburn Hills, MI                  48326
(Address of principal executive offices)                          (Zip Code)


Registrant's telephone number, including area code: (248) 340-9090


      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

               Yes   X        NO

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

      48,586,450 shares of the registrant's $1.00 par value Common Stock were
      outstanding as of April 23, 1999.
<PAGE>   2
                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements.

                           CHAMPION ENTERPRISES, INC.
                         Consolidated Income Statements
                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                        April 3,       April 4,
                                                          1999           1998
<S>                                                    <C>            <C>
Net sales                                              $ 624,630      $ 463,025

Cost of sales                                            513,603        389,364

Gross margin                                             111,027         73,661

Selling, general and administrative expenses              70,293         43,288

Operating income                                          40,734         30,373

Other income (expense):
    Interest income                                          509            376
    Interest expense                                      (6,488)        (1,332)

Income before income taxes                                34,755         29,417

Income taxes                                              13,600         11,800

Net income                                             $  21,155      $  17,617



Basic earnings per share                               $    0.44      $    0.37

Weighted shares for basic EPS                             48,437         47,087



Diluted earnings per share                             $    0.43      $    0.36

Weighted shares for diluted EPS                           49,520         48,645
</TABLE>

See accompanying Notes to Consolidated Financial Statements.
<PAGE>   3
                           CHAMPION ENTERPRISES, INC.
                           Consolidated Balance Sheets
                    (In thousands, except par value amount)

<TABLE>
<CAPTION>
                                                      April 3,       January 2,
                                                        1999            1999
<S>                                                 <C>             <C>
                ASSETS

CURRENT ASSETS
  Cash and cash equivalents                         $    24,639     $    23,828
  Accounts receivable, trade                            112,057          61,043
  Inventories                                           275,853         244,142
  Deferred taxes and other current assets                63,118          56,627
    Total current assets                                475,667         385,640

PROPERTY AND EQUIPMENT
  Cost                                                  282,520         265,844
  Less-accumulated depreciation                          77,776          74,881
                                                        204,744         190,963

GOODWILL
  Cost                                                  496,086         449,821
  Less-accumulated amortization                          27,414          24,071
                                                        468,672         425,750

OTHER ASSETS                                             26,928          19,319
     Total assets                                   $ 1,176,011     $ 1,021,672

     LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Floor plan payable                                $   147,300     $   135,332
  Accounts payable                                       70,034          47,762
  Accrued dealer discounts                               43,451          52,225
  Accrued warranty obligations                           49,964          46,032
  Accrued compensation and payroll taxes                 33,128          45,007
  Other current liabilities                              99,578          67,347
    Total current liabilities                           443,455         393,705

LONG-TERM LIABILITIES
  Long-term bank debt                                   200,000         118,000
  Deferred portion of purchase price                     34,700          47,200
  Other long-term liabilities                            67,878          57,521
                                                        302,578         222,721

SHAREHOLDERS' EQUITY
  Preferred stock, no par value, 5,000 shares
    authorized, none issued                                  --              --
  Common stock, $1 par value, 120,000 shares
    authorized, 48,523 and 48,270 shares issued
    and outstanding, respectively                        48,523          48,270
  Capital in excess of par value                         46,827          43,649
  Retained earnings                                     336,095         314,940
  Foreign currency translation adjustments               (1,467)         (1,613)
    Total shareholders' equity                          429,978         405,246

    Total liabilities and shareholders' equity      $ 1,176,011     $ 1,021,672
</TABLE>

See accompanying Notes to Consolidated Financial Statements.
<PAGE>   4
                           CHAMPION ENTERPRISES, INC.
                      Consolidated Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                         April 3,     April 4,
                                                           1999         1998
<S>                                                      <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                               $  21,155    $  17,617
Adjustments to reconcile net income to net cash
  provided by (used for) operating activities:
  Depreciation and amortization                              9,034        5,647
  Increase/decrease, net of acquisitions
    Accounts receivable                                    (47,068)     (46,563)
    Inventories                                            (22,203)     (24,161)
    Accounts payable                                        20,317       44,484
    Accrued liabilities                                     (4,060)       2,095
    Other, net                                              (2,628)       4,688
Total adjustments                                          (46,608)     (13,810)
Net cash provided by (used for) operating activities       (25,453)       3,807

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Proceeds on disposal, net                                       --        9,152
Net cash provided by discontinued operations                    --        9,152

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions                                               (47,242)    (143,694)
Additions to property and equipment                        (13,737)      (8,720)
Net cash used for investing activities                     (60,979)    (152,414)

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable to bank                           82,000      102,000
Increase in floor plan payable                               6,222        1,489
Repayment of long-term debt                                 (1,227)      (2,588)
Common stock issued, net                                     2,687        2,958
Common stock repurchased                                    (2,939)          --
Tax benefit of stock options exercised                         500        1,200
Net cash provided by financing activities                   87,243      105,059

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           811      (34,396)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD            23,828       60,280

CASH AND CASH EQUIVALENTS AT END OF PERIOD               $  24,639    $  25,884

ADDITIONAL CASH FLOW INFORMATION:
Cash paid for interest                                   $   5,230    $     991
Cash paid for income taxes                               $   1,900    $     270

SCHEDULE OF CASH FLOWS FROM ACQUISITIONS:
Guaranteed purchase price                                $  63,846    $ 184,450
Less:  Deferred portion of guaranteed purchase price        (3,246)     (26,040)
       Cash acquired                                       (18,325)     (15,626)
Plus:  Payments of deferred portion of purchase price        4,842           --
       Acquisition costs                                       125          910
                                                         $  47,242    $ 143,694
</TABLE>

See accompanying Notes to Consolidated Financial Statements.
<PAGE>   5
                           CHAMPION ENTERPRISES, INC.

                   Notes to Consolidated Financial Statements

1.    For each of the dates indicated, inventories consisted of the following
      (in thousands):

<TABLE>
<CAPTION>
                                                        April 3,      January 2,
                                                          1999          1999
      <S>                                               <C>           <C>
      Raw materials and work-in-process                 $ 67,842      $ 60,259
      Manufactured homes                                 208,011       183,883
                                                        $275,853      $244,142
</TABLE>


2.    The difference between income taxes provided for financial reporting
      purposes and expected charges at the U.S. federal statutory rate is due
      primarily to state tax charges.

      The components of the income tax provisions for the three months ended
      April 3, 1999 and April 4, 1998 follow (in thousands):

<TABLE>
<CAPTION>
                                                        April 3,        April 4,
                                                         1999             1998
<S>                                                     <C>             <C>
      Statutory U.S. tax rate                           $12,200         $10,300
      Increase in rate resulting from:
         State taxes                                      1,100           1,100
         Other                                              300             400
      Total provision                                   $13,600         $11,800

      Effective tax rate                                     39%             40%
</TABLE>

3.    The per share amounts are calculated under Statement of Financial
      Accounting Standards No. 128, "Earnings Per Share."


4.    In January 1999 the registrant acquired Homes of Merit, Inc. and Heartland
      Homes Group. Homes of Merit is the largest producer of manufactured
      housing in Florida and Heartland Homes is a Texas retailer of manufactured
      homes. During the first quarter of 1999, net cash of $41 million was paid
      for these acquisitions, financed from additional bank borrowings.
      Guaranteed purchase price for these companies totaled $62 million, with
      additional purchase price payments of up to $61.5 million over the next
      four years depending on the future performance of the acquired businesses.
      The acquisitions were accounted for using the purchase method and resulted
      in the recording of $45 million of goodwill.

      Throughout 1998 the registrant acquired 14 manufactured housing retail
      organizations and one manufactured home building facility. The aggregate
      purchase price for these 1998 acquisitions consisted of guaranteed
      purchase price of $295 million and contingent purchase price of up to $160
      million, potentially payable over the next five years based upon the
      future performance of the acquired businesses.

      Goodwill associated with acquisitions is generally amortized using the
      straight-line method over 40 years. Recognition of additional purchase
      price related to contingent amounts will result in the recording of a
      corresponding amount of goodwill. The results of operations of
      acquisitions are included with those of the registrant from the respective
      acquisition dates.

      Following are pro forma results of operations for the three month period
      ended April 4, 1998 assuming all 1998 and 1999 acquisitions had taken
<PAGE>   6
      place at the beginning of the fiscal period. The additional 1998 pro forma
      sales and income reflect 1998 results of the acquired companies prior to
      their respective acquisition dates. The pro forma results are not
      necessarily indicative of future earnings or earnings that would have been
      reported had the acquisitions been completed when assumed. The pro forma
      results should not be taken as indicative of results for a full year.

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                April 4, 1998
<S>                                                           <C>
      Net sales                                                    $587,575

      Income before income taxes                                   $ 32,400
      Income taxes                                                   13,000
      Net income                                                   $ 19,400

      Income per diluted share                                     $   0.40
</TABLE>

5.    Floor plan liabilities are borrowings from various financial institutions
      secured principally by retail inventories of manufactured homes. Interest
      on these liabilities generally ranges from the prime rate minus 0.5% to
      the prime rate plus 1.5%.


6.    The sale of the commercial vehicles business for approximately $10 million
      was completed in February 1998. Related amounts are classified as
      discontinued operations.


7.    In May 1998 the registrant entered into a five-year revolving credit
      agreement which provides a $325 million unsecured line of credit,
      including letters of credit. Beginning in 1999 the credit agreement
      provides for annual reductions in the line of credit for three years,
      until the line is reduced to $175 million in September 2001. At the
      registrant's option borrowings are subject to interest either at the
      bank's prime rate or the bank's Eurodollar rate plus from 0.575% to 1.0%.
      In addition, the registrant pays a facility fee ranging from 0.15% to
      0.25% of the entire line of credit and a letter of credit fee. The
      agreement also contains convenants which, among other things, require
      maintenance of certain financial ratios and minimum net worth and limit
      additional indebtedness.

8.    On May 3, 1999 the registrant completed an offering for $200 million of
      unsecured Senior Notes due May 15, 2009 with interest payable
      semi-annually at an annual rate of 7.625%. The net proceeds from the
      offering will be used to reduce bank debt and for general corporate
      purposes, including possible acquisitions of other companies or assets.


9.    Reconciliations of segment sales to consolidated sales and segment EBITA
      (earnings before interest, taxes, goodwill amortization and corporate
      office costs) to consolidated operating income follow:

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                       April 3,       April 4,
      (in thousands)                                    1999            1998
<S>                                                   <C>             <C>
      Net sales
        Manufacturing                                 $ 506,476       $ 424,426
        Retail                                          185,154          66,599
        Less: intercompany                              (67,000)        (28,000)
        Consolidated net sales                        $ 624,630       $ 463,025

      Operating income
        Manufacturing EBITA                           $  41,332       $  35,367
        Retail EBITA                                     13,177           5,545
        General corporate expenses                       (6,032)         (5,468)
        Intercompany profit elimination                  (4,400)         (3,300)
        Goodwill amortization                            (3,343)         (1,771)
        Consolidated operating income                 $  40,734       $  30,373
</TABLE>
<PAGE>   7
10.   The Consolidated Financial Statements are unaudited, but in the opinion of
      management include all adjustments necessary for a fair presentation of
      the results of the interim period. Financial results of the interim period
      are not necessarily indicative of results that may be expected for any
      other interim period or for the fiscal year.


                 Item 2. Management's Discussion and Analysis of
                 Financial Condition and Results of Operations.

                           CHAMPION ENTERPRISES, INC.

Three months ended April 3, 1999 versus three months ended April 4, 1998

Overview

In the quarter ended April 3, 1999, Champion achieved record first quarter sales
and earnings. Consolidated revenues grew 35% due to higher wholesale volume,
internal expansions and acquisitions completed in 1998 and early-1999.
Throughout 1998 the registrant acquired 14 manufactured housing retail
organizations and a home building facility. In January 1999 the registrant
completed the acquisitions of Homes of Merit, Florida's largest producer of
manufactured homes, and Heartland Homes, a Texas housing retailer.

Total gross margin and selling, general and administrative expenses ("SG&A")
rose in 1999 due to higher wholesale volume, acquisitions and expanded retail
operations. As a percent of revenues, gross margin and SG&A increased due to
expanded retail operations. Quarterly operating margins were 6.5% of
sales, comparable to a year ago. Net income for the quarter increased 20% to
$21.2 million, compared to $17.6 million in the prior year's first quarter.
Income per diluted share rose 19% to $0.43 in 1999, compared to $0.36 per
diluted share in 1998.

Consolidated
(Dollars in millions)

<TABLE>
<CAPTION>
                                             Three Months Ended
                                            April 3,       April 4,          %
                                             1999            1998         Change
<S>                                         <C>            <C>            <C>
Net sales:
  Manufacturing                             $506.5          $424.4           19%
  Retail                                     185.1            66.6          178%
  Less:  intercompany                        (67.0)          (28.0)
Total net sales                             $624.6          $463.0           35%

Gross margin                                $111.0          $ 73.7           51%
SG&A                                          70.3            43.3           62%
Operating income                            $ 40.7          $ 30.4           34%

As a percent of sales
  Gross margin                                17.8%           15.9%
  SG&A                                        11.3%            9.3%
  Operating income                             6.5%            6.6%
</TABLE>
<PAGE>   8

Manufacturing Operations

<TABLE>
<CAPTION>
                                                Three Months Ended
                                                April 3,    April 4,         %
                                                 1999        1998         Change
<S>                                             <C>         <C>           <C>
Net sales (in millions)                         $ 506.5     $ 424.4          19%
Segment income (in millions)                    $  41.3     $  35.4          17%
Segment margin                                      8.2%        8.3%
Homes sold                                       18,830      16,175          16%
Floors sold                                      31,291      26,130          20%
Multi-section mix                                    65%         60%
Average home price                              $26,900     $26,200           3%
Manufacturing facilities-end of period               65          56          16%
</TABLE>

Manufacturing revenues increased 19% in the first quarter due to the Homes of
Merit acquisition and higher volume. Wholesale home shipments and floors sold
were up 16% and 20%, respectively, from a year ago. A floor is a section of a
home. A single-section home is comprised of one floor, while a multi-section
home is comprised of two or more floors. Of the total wholesale shipments, 87%
were to independent retailers and the remaining 13% were to company-operated
sales centers. The wholesale multi-section mix was 65%, compared to 60% in the
first quarter of 1998.

Excluding Homes of Merit from both periods, the registrant's wholesale shipments
of homes and floors sold rose 9.4% and 11.2%, respectively, from a year earlier.
According to data reported by the National Conference of States on Building
Codes and Standards ("NCSBCS"), U.S. industry wholesale shipments for January
and February of 1999 increased 3.0% in homes and 6.2% in floors from the
comparable 1998 period.

Although dealer orders can be cancelled at anytime without penalty, and unfilled
orders are not necessarily an indication of future business, the registrant's
unfilled orders for wholesale housing at April 3, 1999 totaled approximately $62
million, compared to $75 million a year ago, excluding Homes of Merit from both
periods. Including six Homes of Merit plants, the registrant now has 65 home
building facilities, compared to 56 one year earlier.


Retail Operations

<TABLE>
<CAPTION>
                                               Three Months Ended
                                              April 3,     April 4,          %
                                                1999         1998         Change
<S>                                           <C>          <C>            <C>
Net sales (in millions)                       $ 185.1      $  66.6          178%
Segment income (in millions)                  $  13.2      $   5.6          138%
Segment margin                                    7.1%         8.3%
New homes sold                                  3,833        1,484          158%
Pre-owned homes sold                              996          346          188%
Total homes sold                                4,829        1,830          164%
% Champion produced-new homes sold                 57%          42%
Average new home price                        $44,900      $43,500            3%
Sales centers-end of period                       268          143
</TABLE>
<PAGE>   9
Retail sales substantially increased in 1999 due to expanded retail operations
resulting from acquisitions and internal expansions. At April 3, 1999 retail
sales centers totaled 268 locations in 28 states, compared to 143 locations a
year ago and 246 at December 1998. During the first quarter of 1999, nine retail
locations were acquired upon the Heartland Homes acquisition and 13 net
locations were added through internal expansions and minor acquisitions of other
retail companies.

Segment income, before inventory financing charges, was $13.2 million, or 7.1%
of related sales. Margins in the quarter were affected by start-up and expansion
costs for new sales locations. In the first quarter of 1999, 57% of new retail
homes sold were produced by Champion facilities. 


Other Matters

During the quarter a non-cash accounting charge of approximately $4.4 million
was recorded to eliminate the manufacturing profits in inventories of Champion
produced homes at company-operated sales centers.Interest expense was higher in
1999 due to increased amounts outstanding on the registrant's line of credit and
floor plan payable. Income tax expense in 1999 increased due to higher pretax
income. The effective tax rate was 39% in 1999, compared to 40% in 1998, as a
result of lower state tax rates due to certain acquisitions.


                                 Year 2000 Issue

The company began assessments in prior years to identify the work required to
assure that its computer systems successfully operate after January 1, 2000.
This review included analyzing software internally developed, software licensed
from third parties and related issues of significant suppliers, including
wholesale and retail financing companies. It has been determined that a small
portion of the registrant's computer systems could be affected by the Year 2000
Issue. The process of replacing or modifying such software and hardware was
started in 1997 and remaining changes are expected to be completed by mid-1999.
Costs incurred to date by the company related to the Year 2000 Issue have been
immaterial and were charged to expense as incurred. Remaining costs to make the
registrant's computer systems year 2000 compliant are not expected to have a
material effect on results of operations, liquidity or capital resources.

The registrant is dependent upon licensed software for a significant portion of
its computer applications. It has been represented by these suppliers that such
third-party software is year 2000 compliant. The registrant's operations are
also dependent on an adequate supply of raw materials, energy and utilities,
delivery services, and wholesale and retail financing. The company uses a
variety of vendors for these products and services, and is reviewing its major
vendors to determine the potential impact of the Year 2000 Issue. Management is
not aware of any significant problems with these vendors relating to this issue.
In the event that certain suppliers are not year 2000 compliant, the company
could be adversely affected.


                         Liquidity and Capital Resources

Cash balances totaled $25 million at April 3, 1999. During the quarter, $25
million of cash was used for operations, primarily for working capital needs.
<PAGE>   10
Bank borrowings increased $82 million, generally due to the Homes of Merit and
Heartland Homes acquisitions and for working capital needs. Net cash totaling
$47 million was used for these acquisitions and other acquisition related
payments. Expenditures for the quarter included $14 million for capital
improvements and $3 million for common stock repurchases. These buybacks,
totaling 151,000 shares during the quarter, were pursuant to a Board of
Directors authorization for up to 3.0 million shares. Through May 5, 1999 a
total of 217,000 shares at a cost of $4 million were repurchased under this
program. During first quarter cash of $3 million was generated from stock option
exercises and related tax benefits and $6 million from increased floor plan
payables.

Assets and liabilities increased during the quarter due to acquisitions and
higher wholesale revenues in March 1999 as compared to December 1998. Accrued
compensation and dealer discounts decreased during first quarter due to payments
made under annual programs. At quarter end debt was 45% of total capital.
Earnings before interest, taxes, depreciation and amortization totaled $50
million for the quarter, up from $36 million a year ago.

The Company has a five-year $325 million unsecured bank line of credit, which
was completed in May 1998 and includes letters of credit. At quarter end the
registrant had $14 million of letters of credit outstanding, generally to
support insurance obligations and licensing and service bonding required by
various states.

On May 3, 1999 the registrant completed an offering for $200 million of
unsecured Senior Notes due May 15, 2009 with interest payable semi-annually at
an annual rate of 7.625%. The net proceeds from the offering will be used to
reduce bank debt and for general corporate purposes, including possible
acquisitions of other companies or assets.

Additional borrowings may be necessary during 1999 to fund acquisitions, common
stock repurchases, and capital expenditures. Total expenditures of up to $50
million are planned for new construction and expansions of manufacturing
facilities and internal retail expansions.

The Company believes that existing cash balances, cash flow from operations and
additional availability under its line of credit are adequate to meet its
anticipated financing needs, operating requirements, capital expenditures,
common stock repurchases, and acquisitions in the foreseeable future. However,
management may explore other opportunities to raise capital to finance growth.
The registrant's long-term goals are to increase earnings per share at a minimum
compound annual growth rate of 15% and to reach $1 billion in retail revenues by
the year 2000. Consistent with its plan to improve shareholder value through
investments in sound operating businesses and common stock repurchases, the
registrant does not plan to pay cash dividends in the near term.


                           Forward Looking Statements

Certain statements contained in this report, including the registrant's plans
for retail expansion, capital expenditures and planned facilities, and its
earnings growth goal and retail sales goal, could be construed as forward
looking statements within the meaning of the Securities Exchange Act of 1934. In
addition, Champion or persons acting on its behalf may from time to time publish
or communicate other items which could also be construed to be forward looking
statements. Statements of this sort are or will be based on the registrant's
estimates, assumptions and projections, and are subject to risks and
uncertainties, including those specifically listed below and those contained in
Champion's reports previously filed with the SEC, that could cause actual
results to differ materially from those included in the forward looking
statements.
<PAGE>   11
Long-term growth in the manufactured housing industry (wholesale and retail) may
be affected by: (1) the relative cost of manufactured housing versus other forms
of housing; (2) general economic trends, including inflation and unemployment
rates, consumer confidence, job growth and interest rates; (3) changes in
demographics, including new household formations and the number of Americans on
fixed income; (4) the availability and cost of financing for manufactured homes;
(5) changes in government regulations and policies, including HUD regulations,
local building codes and zoning regulations; and (6) changes in regional markets
and the U.S. economy as a whole. Short-term sales could be affected by inclement
weather and inventory levels of manufactured housing retailers. Fluctuations in
interest rates may affect the demand for manufactured housing to the extent that
those changes reduce job growth, slow the U.S. economy, or cause a loss in
consumer confidence.

The profitability of the registrant may also be affected by: (1) its ability to
efficiently expand operations and to utilize production capacity; (2) its
ability to pass increased raw material costs, particularly lumber, insulation
and drywall costs, on to its customers; (3) market share position; (4) growth in
the manufactured housing industry as a whole; (5) the results of its
acquisitions; and (6) strength of retail distribution.

If one or more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect, actual results may vary materially from those
expected, estimated or projected. The registrant does not undertake to update
its forward looking statements or risk factors to reflect future events or
circumstances.

      Item 3. Quantitative and Qualitative Disclosures About Market Risk.

      Not applicable.


                           PART II. OTHER INFORMATION

                    Item 6. Exhibits and Reports on Form 8-K.


      (a) The following exhibits are filed as part of this report:

Exhibit No.                        Description

   10.1           Second Amendment dated March 31, 1999 to the Credit Agreement
                  dated May 5, 1998 by and among Champion Enterprises, Inc.; the
                  guarantors party; the banks party; NBD Bank, as Syndication
                  Agent; Comerica Bank, as Documentation Agent; National City
                  Bank, Harris Trust and Savings Bank, Keybank National
                  Association, Nationsbank, N.A., and Wachovia Bank, N.A., as
                  Co- Agents; and PNC Bank, National Association, as
                  Administrative Agent.

   10.2           Fourth Amendment dated April 27, 1999 to the Champion
                  Enterprises, Inc. 1995 Stock Option and Incentive Plan.

   11             Computation of EPS.

   27             Financial Data Schedule.


   (b)            No reports on Form 8-K were filed by the registrant during the
                  quarter ended April 3, 1999.
<PAGE>   12
                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                        CHAMPION ENTERPRISES, INC.

                                    By: /s/ JOSEPH H. STEGMAYER
                                        Joseph H. Stegmayer
                                        Executive Vice President, Chief
                                        Strategic and Financial Officer
                                        (Principal Financial Officer)


                                    And: /s/ RICHARD HEVELHORST
                                         Richard Hevelhorst
                                         Vice President and Controller
                                         (Principal Accounting Officer)




Dated: May 6, 1999
<PAGE>   13
                               INDEX TO EXHIBITS


EXHIBIT NO.                        DESCRIPTION
- -----------                        -----------
   10.1           Second Amendment dated March 31, 1999 to the Credit Agreement
                  dated May 5, 1998 by and among Champion Enterprises, Inc.; the
                  guarantors party; the banks party; NBD Bank, as Syndication
                  Agent; Comerica Bank, as Documentation Agent; National City
                  Bank, Harris Trust and Savings Bank, Keybank National
                  Association, Nationsbank, N.A., and Wachovia Bank, N.A., as
                  Co-Agents; and PNC Bank, National Association, as
                  Administrative Agent.

   10.2           Fourth Amendment dated April 27, 1999 to the Champion
                  Enterprises, Inc. 1995 Stock Option and Incentive Plan.

   11             Computation of EPS.

   27             Financial Data Schedule.


<PAGE>   1
                                                                    EXHIBIT 10.1


                       AMENDMENT NO. 2 TO CREDIT AGREEMENT


            THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT (the "Amendment No. 2")
dated as of March 31, 1999 by and among CHAMPION ENTERPRISES, INC., a Michigan
corporation (the "Borrower"), the Guarantors set forth herein, the Banks set
forth herein, NBD BANK, as Syndication Agent, COMERICA BANK, as Documentation
Agent and NATIONAL CITY BANK, HARRIS TRUST AND SAVINGS BANK, KEYBANK NATIONAL
ASSOCIATION, NATIONSBANK, N.A. and WACHOVIA BANK, N.A., as Co-Agents, and PNC
BANK, NATIONAL ASSOCIATION, in its capacity as Administrative Agent for the
Banks (the "Agent").

                              W I T N E S S E T H:

            WHEREAS, the Borrower, the Guarantors, the Banks, the Syndication
Agent, the Documentation Agent, the Co-Agents and the Agent are parties to that
certain Credit Agreement dated as of May 5, 1998, as amended by Amendment No. 1
dated as of December 18, 1998 (the "Credit Agreement"); and

            WHEREAS, the parties hereto desire to further amend the Credit
Agreement as hereinafter provided.

            NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:

      1.    Definitions.

      Defined terms used herein unless otherwise defined herein shall have the
meanings ascribed to them in the Credit Agreement as amended by this Amendment
No. 2.

      2.    Amendment of Credit Agreement.

            A. Section 1.1 [Definitions] of the Credit Agreement is hereby
amended by deleting the definitions of "Consolidated Debt," "Earn Out
Obligations," "Retail Finance Companies," "Significant Subsidiary," "Swing Loan
Commitment," "Swing Loan Note" and "Swing Loans" in their entirety and inserting
in lieu thereof the following:

            Consolidated Debt shall mean, as of any date of determination, the
      Indebtedness of the Borrower and its Subsidiaries (other than Champion
      Development) minus Earn Out Obligations and Repurchase Obligations,
      determined and consolidated in accordance with GAAP.

            Earn Out Obligations shall mean, as of any date of determination,
      the contingent portion of acquisition-related liabilities which are not
      paid by the Borrower or its Subsidiaries at the time of the closing of the
      acquisitions, as set forth in the purchase agreements entered into at the
      time of the closing of such acquisitions.
<PAGE>   2
            Retail Finance Companies shall mean collectively, and Retail Finance
      Company shall mean separately, a Person, other than an individual,
      primarily engaged in the business of making loans, in each case subject to
      industry underwriting standards, to retail purchasers of manufactured
      housing products, provided no such loans shall be held by such Retail
      Finance Company in excess of one hundred eighty (180) days.

            Significant Subsidiary shall mean any Subsidiary of the Borrower
      (other than Champion Development) which at the time (i) has gross revenues
      equal to or in excess of ten percent (10%) of the consolidated gross
      revenues of the Borrower and its Subsidiaries, (ii) has total assets equal
      to or in excess of five percent (5%) of the consolidated total assets of
      the Borrower and its Subsidiaries, as determined and consolidated in
      accordance with GAAP, (iii) has any material trademarks or other
      intellectual property related to the business of the Borrower and its
      Subsidiaries, or (iv) has commitments to lend or Guaranties from the
      Borrower or any other Significant Subsidiary equal to or in excess of five
      percent (5%) of the consolidated total assets of the Borrower and its
      Subsidiaries, as determined and consolidated in accordance with GAAP.

            Swing Loan Commitment shall mean, as to any Swing Loan Bank at any
      time, the amount initially set forth opposite its name on Schedule 1.1(B)
      in the column labeled "Swing Loan Commitment," and thereafter on Schedule
      1 to the most recent Assignment and Assumption Agreement, and Swing Loan
      Commitments shall mean the aggregate Swing Loan Commitments of all of the
      Swing Loan Banks.

            Swing Loan Note shall mean any Swing Loan Note of the Borrower in
      the form of Exhibit 1.1(S) issued by the Borrower at the request of a
      Swing Loan Bank evidencing the Swing Loans to such Swing Loan Bank,
      together with all amendments, extensions, renewals, replacements,
      refinancings or refundings thereof in whole or in part.

            Swing Loans shall mean collectively and Swing Loan shall mean
      separately all Swing Loans or any Swing Loan made by the Swing Loan Banks
      or one of the Swing Loan Banks to the Borrower pursuant to Section 2.1.2
      hereof.

            B. Section 1.1 [Definitions] of the Credit Agreement is hereby
amended by inserting the following definitions of "Champion Development,"
"Permitted Unsecured Debt," "Swing Loan Bank," "Swing Loan Bid," "Swing Loan
Interest Period," "Swing Loan Interest Rate," "Swing Loan Offered Amount" and
"Swing Loan Requested Amount" in alphabetical order:

            Champion Development shall mean Champion Development Corporation, a
      Michigan corporation, which at all times since its formation:

                  (i) identified itself, and will continue to identify itself,
      in all dealings with the public, under its own 


                                       -2-
<PAGE>   3
      name and as a separate and distinct entity; has not and will not identify
      itself as being a division or a part of any other entity; has not and will
      not fail to correct any known misunderstanding regarding the separate
      identity of such entity; and has conducted and will conduct its business
      in its own name (and not in the name of any other Person, including any
      Loan Party);

                  (ii) has maintained and will maintain its accounts, books and
      records separate from any other Person (including any Loan Party); has
      allocated and will allocate fairly and reasonably any overhead for shared
      office space; and has used and will use separate stationery, invoices and
      checks;

                  (iii) will not commingle its funds or assets with those of any
      other Person (including any Loan Party);

                  (iv) will hold its assets in its own name (and not in the name
      of any Loan Party);

                  (v) has maintained and will maintain its financial statements,
      accounting records and other entity documents separate from any other
      Person (including any Loan Party);

                  (vi) has ensured and will continue to ensure that any payment
      of its liabilities will be out of its own funds and assets;

                  (vii) has observed and will observe all corporate formalities;
      and

                  (viii) has maintained and currently intends to continue to
      maintain adequate capital in light of its contemplated business
      operations.

            Permitted Unsecured Debt shall mean Indebtedness incurred by the
      Borrower or any of its Subsidiaries provided that each of the following
      requirements is met:

                  (i) The Borrower shall permanently reduce the Revolving Credit
      Commitments in a minimum amount equal to the amount of such Indebtedness
      in excess of $200,000,000;

                  (ii) The amount of such Indebtedness shall not exceed
      $225,000,000;

                  (iii) Neither the Borrower, nor any of the Borrower's
      Subsidiaries shall grant, or agree to grant, whether conditionally or
      unconditionally, any Liens in its assets securing such Indebtedness;

                  (iv) The warranties and covenants governing such Indebtedness
      shall not be less favorable to the Borrower and its Subsidiaries than the
      warranties and covenants hereunder as determined by the Required Banks in
      their reasonable discretion;


                                       -3-
<PAGE>   4
                  (v) (A) The Borrower shall deliver to the Agent for the
      benefit of the Banks drafts of the agreements governing such Indebtedness
      at least seven (7) days prior to the effective date of such agreements;
      and (B) the warranties and covenants shall not be modified after the Banks
      have made the determination described in clause (iv) above without the
      approval of the Required Banks;

                  (vi) No principal payments on such Indebtedness shall be due
      or may be paid until after the Expiration Date hereunder; and

                  (vii) No Subsidiary shall provide a Guaranty with respect to
      such Indebtedness unless it has previously become a Guarantor.

            Swing Loan Bank hall mean any of the following Banks, any of which
      may from time to time make a Swing Loan to the Borrower in accordance with
      Section 2.1.2, and Swing Loan Banks shall mean collectively each and every
      Swing Loan Bank: PNC Bank, National Association and NBD Bank.

            Swing Loan Bid shall have the meaning assigned to such term in
      Section 2.5.2.2.

            Swing Loan Interest Period shall have the meaning assigned to such
      term in Section 2.5.2.1.

            Swing Loan Interest Rate shall have the meaning assigned to such
      term in Section 2.5.2.2.

            Swing Loan Offered Amount shall have the meaning assigned to that
      term in Section 2.5.2.2.

            Swing Loan Requested Amount shall have the meaning assigned to that
      term in Section 2.5.2.1.

            C. Section 2.1.2 [Swing Loan Commitment] of the Credit Agreement is
hereby amended by deleting the first sentence thereof in its entirety and
inserting in lieu thereof the following:

            2.1.2 Swing Loan Commitment.

            Subject to the terms and conditions hereof and relying upon the
      representations and warranties herein set forth, and in order to
      facilitate loans and repayments between Settlement Dates, the Swing Loan
      Banks agree to make Swing Loans to the Borrower, at any time or from time
      to time after the date hereof to, but not including, the Expiration Date,
      in an aggregate principal amount up to but not in excess of the Swing Loan
      Commitment of such Swing Loan Bank, provided that the aggregate principal
      amount of all Swing Loans outstanding and the Revolving Credit Loans
      outstanding, at any time, shall not exceed the Revolving Credit
      Commitments of all the Banks.


                                       -4-
<PAGE>   5
            D. Section 2.5.2 [Swing Loan Requests] of the Credit Agreement is
hereby deleted in its entirety and the following is inserted in lieu thereof:

            2.5.2 Swing Loan Requests and Bidding.

                  2.5.2.1 Swing Loan Requests. Except as otherwise provided
      herein, the Borrower may from time to time prior to the Expiration Date
      request any one or more Swing Loan Banks, as the Borrower in its sole
      discretion may select, to make a Swing Loan by delivery to the Agent and
      each Swing Loan Bank selected by the Borrower not later than 10:00 a.m.,
      Pittsburgh time, on the proposed Borrowing Date of a duly completed
      request therefor substantially in the form of Exhibit 2.5.2 hereto or a
      request by telephone immediately confirmed in writing by letter, facsimile
      or telex (each, a "Swing Loan Request"), it being understood that the
      Agent and each Swing Loan Bank may rely on the authority of any individual
      making such a telephonic request without the necessity of receipt of such
      written confirmation. Each Swing Loan Request shall be irrevocable and
      shall specify (i) the proposed Borrowing Date, (ii) the term of the
      proposed Swing Loan, which shall be no less than one (1) day and no longer
      than seven (7) days (the "Swing Loan Interest Period") and (iii) the
      principal amount of such Swing Loan, which shall be not less than
      $1,000,000 (the "Swing Loan Requested Amount"). After giving effect to
      each Swing Loan and any other Loan made on or before the Swing Loan
      Borrowing Date for such Swing Loan, (i) the aggregate amount of the Swing
      Loans of all Swing Loan Banks outstanding shall not exceed $20,000,000,
      and (ii) the aggregate amount of the Swing Loans of any one Swing Loan
      Bank outstanding shall not exceed the Swing Loan Commitment of such Swing
      Loan Bank.

                  2.5.2.2 Swing Loan Bidding. Promptly after receipt by each
      Swing Loan Bank of a Swing Loan Request pursuant to Section 2.5.2.1, each
      Swing Loan Bank may submit a bid (a "Swing Loan Bid") to the Agent and the
      Borrower no later than 11:00 a.m., Pittsburgh time (subject to the last
      sentence of this Section), on the Borrowing Date by telephone (immediately
      confirmed in writing by letter, facsimile or telex). Each Swing Loan Bid
      shall specify: (A) the principal amount of proposed Swing Loans offered by
      such Swing Loan Bank (the "Swing Loan Offered Amount") which (i) may be
      less than, but shall not exceed, the Swing Loan Requested Amount, (ii)
      shall be at least $1,000,000 and (iii) may not exceed such Swing Loan
      Bank's Swing Loan Commitment, and (B) the rate of interest (the "Swing
      Loan Interest Rate") which shall apply to such proposed Swing Loan and the
      applicable Swing Loan Interest Period, provided in no event shall the
      Swing Loan Interest Rate be greater than the Base Rate and provided
      further if a Swing Loan Bank does not submit a Swing Loan Bid, it shall be
      deemed to have submitted a bid for a Swing Loan in the amount of the
      lesser of (i) the Swing Loan Requested Amount or (ii) such portion of the
      Swing Loan Requested Amount that will not cause such Swing Loan Bank's
      Swing Loan Commitment to be exceeded, with a Swing Loan Interest Rate
      equal to the Base Rate; provided, further, if the Borrower does not wish
      to go 


                                       -5-
<PAGE>   6
      through the bidding process for a Swing Loan, it can request PNC Bank,
      National Association to make such a Swing Loan at the Base Rate. If any
      Swing Loan Bid omits information required hereunder, the Agent may in its
      sole discretion attempt to notify the Swing Loan Bank submitting such
      Swing Loan Bid. If the Agent so notifies a Swing Loan Bank, such Swing
      Loan Bank may resubmit its Swing Loan Bid, provided that it does so prior
      to time set forth in this Section 2.5.2.2 above by which such Swing Loan
      Bank is required to submit its Swing Loan Bid to the Agent. The Agent
      shall promptly notify the Borrower of the Swing Loan Bids which it timely
      received from the Swing Loan Banks. If the Agent in its capacity as a
      Swing Loan Bank shall, in its sole discretion, make a Swing Loan Bid, it
      shall notify the Borrower of such Swing Loan Bid before the later of 10:30
      a.m., Pittsburgh time, on the proposed Swing Loan Borrowing Date or the
      time that any other Swing Loan Bank submits its Swing Loan Bid to the
      Agent, but in no event after 11:00 a.m. on the proposed Swing Loan
      Borrowing Date.

                  2.5.2.3 Accepting Swing Loan Bids. The Borrower shall
      irrevocably accept or reject Swing Loan Bids by notifying the Agent of
      such acceptance or rejection by telephone (immediately confirmed in
      writing by letter, facsimile or telex) not later than 1:00 p.m.,
      Pittsburgh time, on the proposed Swing Loan Borrowing Date. If the
      Borrower elects to accept any Swing Loan Bids, its acceptance must meet
      the following conditions: (1) the total amount which Borrower accepts from
      all Swing Loan Banks must exceed $1,000,000 and may not exceed the Swing
      Loan Requested Amount; (2) the Borrower must accept Swing Loan Bids based
      solely on the amount of the Swing Loan Interest Rate which each of the
      Swing Loan Banks quoted in their Swing Loan Bids in ascending order of the
      amount of the Swing Loan Interest Rate; (3) the Borrower may not borrow
      Swing Loans from any Swing Loan Bank on the Borrowing Date in an amount
      exceeding such Swing Loan Bank's Swing Loan Offered Amount; and (4) if two
      or more Swing Loan Banks make Swing Loan Bids at the same Swing Loan
      Interest Rate and the Borrower desires to accept a portion but not all of
      the aggregate amount of all such Swing Loan Bids made at such Swing Loan
      Interest Rate (such portion of the aggregate amount of all such Swing Loan
      Bids being referred to in this Section as the "Desired Same-Rate Amount"),
      the Borrower shall accept a portion of each such Swing Loan Bid of any
      Swing Loan Bank equal to the product of the Desired Same-Rate Amount times
      the fraction obtained by dividing the amount of the Swing Loan Bid of such
      Bank at such Swing Loan Interest Rate, by the sum of the Swing Loan
      Offered Amounts of the Swing Loan Bids at such Swing Loan Interest Rate of
      all such Swing Loan Banks, provided that the Borrower shall round the
      Swing Loans allocated to each such Swing Loan Bank upward or downward as
      the Borrower may select to integral multiples of $500,000. The Agent shall
      (i) no later than 2:00 p.m., Pittsburgh time, notify a Swing Loan Bank
      that has made a Swing Loan Bid of the amount of its Swing Loan Bid that
      was accepted or rejected by the Borrower and (ii) as promptly as
      practical, notify all of the Swing Loan Banks of all Swing Loan Bids
      submitted and those which have been accepted.


                                       -6-
<PAGE>   7
            E. Section 2.6.1 [Making Swing Loans] of the Credit Agreement is
hereby deleted in its entirety and the following is inserted in lieu thereof:

            2.6.1 Making Swing Loans.

            Each Swing Loan Bank whose Swing Loan Bid or portion thereof is
      accepted shall remit the principal amount of its Swing Loan to the Agent
      by 3:00 p.m., Pittsburgh time, on the Borrowing Date. The Agent shall make
      such funds available to the Borrower on or before 3:30 p.m., Pittsburgh
      time, on the Borrowing Date provided that the conditions precedent to the
      making of such Swing Loan set forth in Section 6.2 [Each Additional Loan
      or Letter of Credit] have been satisfied not later than 3:30 p.m.,
      Pittsburgh time, on the proposed Borrowing Date. If such conditions
      precedent have not been satisfied prior to such time, then (i) the Agent
      shall not make such funds available to the Borrower, (ii) the Swing Loan
      Request shall be deemed to be canceled and (iii) the Agent shall return
      the amount previously funded to the Agent by each applicable Swing Loan
      Bank no later than the next following Business Day. The Borrower shall
      immediately notify the Agent of any failure to satisfy the conditions
      precedent to the making of Swing Loans under Section 6.2. The Agent may
      assume that Borrower has satisfied such conditions precedent so long as
      (i) the Borrower has not notified the Agent that the Loan Parties have not
      satisfied any other conditions precedent, and (ii) the Agent has no actual
      notice of such a failure. The obligations of the Swing Loan Banks to make
      Swing Loans after their Swing Loan Bids have been accepted are several. No
      Swing Loan Bank shall be responsible for the failure of any other Swing
      Loan Bank to make any Swing Loan which another Swing Loan Bank has agreed
      to make. Notwithstanding any provision herein to the contrary, in no event
      shall there be more than four (4) Swing Loans outstanding at any one time.

            F. Section 2.8 [Borrowings to Repay Swing Loans] of the Credit
Agreement shall be deleted in its entirety and the following shall be inserted
in lieu thereof:

            2.8 Borrowings to Repay Swing Loans.

            Any Swing Loan Bank may, at its option, exercisable at any time for
      any reason whatsoever, demand repayment of the Swing Loans, and each Bank
      shall make a Revolving Credit Loan in an amount equal to such Bank's
      Ratable Share of the aggregate principal amount of the outstanding Swing
      Loans, plus, if such Swing Loan Bank so requests, accrued interest
      thereon, provided that no Bank shall be obligated in any event to make
      Revolving Credit Loans in excess of its Revolving Credit Commitment.
      Revolving Credit Loans made pursuant to the preceding sentence shall bear
      interest at the Base Rate Option and shall be deemed to have been properly
      requested in accordance with Section 2.5.1 without regard to any of the
      requirements of that provision. The Swing Loan Bank so requesting
      repayment shall provide notice to the Agent and all the Banks (which may
      be telephonic or written 


                                       -7-
<PAGE>   8
      notice by letter, facsimile or telex) that such Revolving Credit Loans are
      to be made under this Section 2.8. The Agent shall promptly provide to
      each Bank notice of the apportionment among the Banks, and the Banks shall
      be unconditionally obligated to fund such Revolving Credit Loans (whether
      or not the conditions specified in Section 2.5.1 are then satisfied) by
      the time the Swing Loan Bank so requests, which shall not be earlier than
      3:00 p.m., Pittsburgh time, on the Business Day next after the date the
      Banks receive notice of such apportionment from the Agent.

            G. Section 2.9.1 [Issuance of Letters of Credit] of the Credit
agreement is hereby amended by deleting the third sentence of such Section and
inserting in lieu thereof the following:

                  Subject to the terms and conditions hereof and in reliance on
      the agreements of the other Banks set forth in this Section 2.9, the
      Issuing Bank will issue a Letter of Credit provided that each Letter of
      Credit shall (A) have a maximum maturity of eighteen (18) months from the
      date of issuance and (B) in no event expire later than ten (10) Business
      Days prior to the Expiration Date and providing that in no event shall (i)
      the Letters of Credit Outstanding exceed, at any one time, $75,000,000 or
      (ii) the Revolving Facility Usage exceed, at any one time, the Revolving
      Credit Commitments.

            H. Section 3.1 [Interest Rate Options] of the Credit Agreement is
hereby amended by deleting the second proviso of the first sentence thereof and
inserting in lieu thereof the following:

            3.1 Interest Rate Options.

            , and provided further that, notwithstanding the foregoing, the
      Borrower shall pay interest in respect of the outstanding unpaid principal
      amount of each Swing Loan at the rate specified in the related Swing Loan
      Bid accepted by the Borrower with respect to which a Swing Loan is made
      (or at the Base Rate if a Swing Loan is made by PNC Bank, National
      Association and not subject to the bid process).

            I. Section 4.3 [Interest Payment Dates] of the Credit Agreement is
hereby amended by inserting the following immediately after the second sentence
thereof:

            Interest on Swing Loans shall be due and payable on the date a Swing
      Loan becomes due and payable (whether on the stated maturity date, upon
      demand, upon acceleration or otherwise).

            J. Section 4.7 [Settlement Date Procedures] of the Credit Agreement
is hereby amended by deleting "PNC Bank" in the first sentence thereof and
inserting in lieu thereof "any Swing Loan Bank."

            K. Section 4.7 [Settlement Date Procedures] of the Credit Agreement
is hereby amended by deleting the last sentence of such sentence in its entirety
and inserting in lieu thereof the following:


                                       -8-
<PAGE>   9
            The Agent (or any Swing Loan Bank, with respect to its outstanding
      Swing Loans, upon notice to the Agent and each Bank) may at any time at
      its option for any reason whatsoever require each Bank to pay immediately
      to the Agent such bank's Ratable Share of the outstanding Revolving Credit
      Loans, and each Bank may at any time require the Agent to pay immediately
      to such Bank its Ratable Share of all payments made by the Borrower to the
      Agent with respect to the Revolving Credit Loans.

            L. Section 7.1.2 [Payment of Liabilities, Including Taxes, Etc.] is
hereby revised by inserting the following proviso immediately before the end of
such section:

            provided, further, that the failure of Champion Development to
      comply with this Section 7.1.2 shall not result in a default hereunder
      unless such failure could reasonably be expected to result in a Material
      Adverse Change.

            M. The Credit Agreement is hereby amended by inserting a new Section
7.1.12 Champion Development as follows:

            7.1.12 Champion Development.

            Notwithstanding any other provision of this Agreement, Champion
      Development shall not be considered a "Subsidiary" of the Borrower or any
      Loan Party for the purpose of Sections 7.2.1 - 7.2.8, 8.1.5, 8.1.8 and
      8.1.9. Further, the Borrower agrees to cause Champion Development to, at
      all times, comply with all the requirements set forth in the definition of
      Champion Development in Section 1.1 hereof.

            N. Section 7.2.1 [Indebtedness] of the Credit Agreement is hereby
amended by deleting clause (v) in its entirety and inserting in lieu thereof the
following:

                  (v) Unsecured Indebtedness of a Loan Party or a Subsidiary of
      a Loan Party comprising Earn Out Obligations not in excess of $375,000,000
      in the aggregate at any one time outstanding;

            O. Section 7.2.1 [Indebtedness] of the Credit Agreement is hereby
amended by deleting clause (ix) in its entirety and inserting in lieu thereof
the following:

            (ix) Indebtedness (other than as set forth above or below in this
      Section 7.2.1) of the Borrower and its Subsidiaries in an amount not to
      exceed twelve and one-half percent (12-1/2%) of Consolidated Net Worth in
      the aggregate at any one time outstanding; and

            P. Section 7.2.1 [Indebtedness] of the Credit Agreement is hereby
amended by inserting the following clauses (x) and (xi) immediately following
clause (ix):


                                       -9-
<PAGE>   10
            (x) Permitted Unsecured Debt; and

            (xi) Surety or performance bonds given by a Loan Party or Subsidiary
      thereof in the ordinary course of business in an amount not to exceed
      $50,000,000 in the aggregate.

            Q. Section 7.2.3 [Guaranties] of the Credit Agreement is hereby
amended by inserting the following immediately before the end of such Section:

            or (iv) Guaranties of Permitted Unsecured Debt provided that any
      Significant Subsidiary or Subsidiary providing such Guaranty has
      previously, or simultaneously with the execution of any such Guaranty,
      become a Guarantor under this Agreement.

            R. Section 7.2.4 [Loans and Investments] of the Credit Agreement is
hereby amended by deleting clauses (iv) - (vii) in their entirety and inserting
in lieu thereof the following:

            (iv) loans, advances and investments in wholly-owned Subsidiaries of
      the Borrower; provided, however, that loans, advances or investments in
      Subsidiaries which constitute Retail Finance Companies shall not exceed
      10% of Consolidated Net Worth in the aggregate at any one time
      outstanding;

            (v) loans, advances and investments in Subsidiaries of the Borrower
      which are not wholly-owned Subsidiaries; provided, however, that the
      aggregate of all such loans, advances and investments at any one time
      outstanding shall not exceed fifteen percent (15%) of Consolidated Net
      Worth; provided, further, that all loans, advances and investments
      pursuant to this clause (v) when added together with all loans, advances
      and investments pursuant to clause (vi) of this Section 7.2.4 shall not
      exceed, in the aggregate, twenty percent (20%) of Consolidated Net Worth;

            (vi) loans, advances and investments in Affiliates which are not
      Subsidiaries and which are permitted under Section 7.2.8; provided,
      however, that the aggregate of all such loans, advances and investments at
      any one time outstanding shall not exceed fifteen percent (15%) of
      Consolidated Net Worth; provided, further, that all loans, advances and
      investments pursuant to this clause (vi) when added together with all
      loans, advances and investments pursuant to clause (v) of this Section
      7.2.4 shall not exceed, in the aggregate, twenty percent (20%) of
      Consolidated Net Worth;

            (vii) loans (including without limitation commitments to lend),
      advances and investments in Champion Development; provided, however, that
      the aggregate of all such loans (including without limitation commitments
      to lend), advances and investments, together with any disposition of
      assets to Champion Development pursuant to Section 7.2.6(iv), shall not
      exceed, in the aggregate, fifteen percent (15%) of Consolidated Net Worth;
      and


                                      -10-
<PAGE>   11
            (viii) loans, advances and investments in retail dealers of
      manufactured homes or other Persons doing business with any Loan Party or
      Subsidiary of any Loan Party not to exceed $10,000,000 in the aggregate at
      any one time.

            S. Section 7.2.7 [Affiliate Transactions] of the Credit Agreement is
hereby amended by retaining the existing provisions thereof and designating such
provisions as Clause (i) of such Section 7.2.7 and by adding the following
Clause (ii) to such Section 7.2.7:

            (ii) Without limiting the generality of the foregoing Clause (i) of
      this Section 7.2.7, each of the Loan Parties shall not, and shall not
      permit any of its Subsidiaries to, at any time, enter into or carry out
      any transaction or the like of any nature with Champion Development or any
      of its Subsidiaries (including purchasing property or services from or
      selling property or services to Champion Development or any of its
      Subsidiaries or otherwise transferring, leasing, disposing, or the like of
      any property or assets to or otherwise acquiring, receiving, or leasing
      any property or assets from Champion Development or any of its
      Subsidiaries or otherwise providing management, administrative,
      consulting, or other services to or receiving management, administrative,
      consulting, or other services from Champion Development or any of its
      Subsidiaries (but not including the provision of those services rendered
      in the ordinary course of business by or on behalf of a holding company
      for its organization as a whole, such as accounting and legal services
      provided by in-house professionals and staff)) unless such transaction is
      not otherwise prohibited by this Agreement, is entered into in the
      ordinary course of business upon fair and reasonable arm's-length terms
      and conditions and is in accordance with all applicable Law.

            T. Section 7.2.8 [Subsidiaries, Partnerships and Joint Ventures] of
the Credit Agreement is hereby amended by deleting the last sentence thereof in
its entirety and inserting in lieu thereof the following:

            7.2.8 Subsidiaries, Partnerships and Joint Ventures.

            Neither the Borrower nor any Subsidiary of the Borrower shall become
      or agree to become a general or limited partner in any general or limited
      partnership or become a member or manager of, or hold a limited liability
      company interest in, a limited liability company, except that (i) the
      Borrower or any Subsidiary may become a general or limited partner or
      member or manager of, or hold a limited liability company interest in,
      other Loan Parties, and (ii) the Borrower or any Subsidiary may become a
      limited partner or a member or manager of, or hold a limited liability
      company interest in an Affiliate, provided that the liability of the
      Borrower or such Subsidiary is limited to its investment in such Affiliate
      and the aggregate of all such investments does not violate Section
      7.2.4(vi).


                                      -11-
<PAGE>   12
            U. A new Section 8.1.16 [Other Subsidiaries] to the Credit Agreement
is inserted immediately following Section 8.1.15 as follows:

            8.1.16 Other Subsidiaries.

            It is not the intent that an involuntary proceeding as described in
      Section 8.1.14 or a voluntary proceeding as described in Section 8.1.15
      with respect to a Subsidiary of the Borrower other than a Guarantor shall
      constitute an Event of Default.

            V. Exhibit 2.5.2 [Swing Loan Request] of the Credit Agreement is
hereby deleted in its entirety and Exhibit 2.5.2 attached hereto is inserted in
lieu thereof:

            W. Exhibit 1.1(S) [Swing Loan Note] of the Credit Agreement is
hereby deleted in its entirety and Exhibit 1.1(S) attached hereto is inserted in
lieu thereof.

            X. Exhibit 7.2.5 [Acquisition Compliance Certificate] of the Credit
Agreement is hereby deleted in its entirety and Exhibit 7.2.5 attached hereto is
inserted in lieu thereof.

            Y. Exhibit 7.3.3 [Quarterly Compliance Certificate] of the Credit
Agreement is hereby deleted in its entirety and Exhibit 7.3.3 attached hereto is
inserted in lieu thereof.

      3. Conditions of Effectiveness of this Agreement.

      The effectiveness of this Amendment No. 2 is expressly conditioned upon
satisfaction of each of the following conditions precedent:

      (a) Representations and Warranties; No Defaults. The representations and
warranties of the Loan Parties contained in Section 5 of the Credit Agreement
shall be true and accurate on the date hereof with the same effect as though
such representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein); the Loan Parties shall have
performed and complied with all covenants and conditions of the Credit
Agreement; and no Event of Default or Potential Default under the Credit
Agreement shall have occurred and be continuing or shall exist.

      (b) Counterparts. The Agent shall have received counterparts of this
Amendment No. 2 duly executed by the Borrower and the Banks, and the Agent shall
have received all such other counterpart originals or certified or other copies
of such documents and proceedings in connection with such transactions, in form
and substance satisfactory to the Agent. This Amendment No. 2 may be executed by
the parties hereto in any number of separate counterparts, each of which when
taken together and duly executed and delivered shall together constitute one and
the same instrument.


                                      -12-
<PAGE>   13
      (c) Fees and Expenses. The Borrower shall have paid to the Agent the fees
and expenses set forth in that certain letter agreement dated March 29, 1999
between the Agent and the Borrower.

      4. Force and Effect. Except as expressly modified by this Amendment, the
Credit Agreement and the other Loan Documents are hereby ratified and confirmed
and shall remain in full force and effect on and after the date hereof.

      5. Governing Law. This Amendment No. 2 shall be deemed to be a contract
under the laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed and enforced in accordance with the internal laws of
the Commonwealth of Pennsylvania without regard to its conflict of laws
principles.

      6. Effective Date. This Amendment No. 2 shall be dated as of and shall be
effective as of the date and year first above written.

                            [SIGNATURE PAGE FOLLOWS]


                                      -13-
<PAGE>   14
         [SIGNATURE PAGE 1 OF 6 OF AMENDMENT NO. 2 TO CREDIT AGREEMENT]


      IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.

                                   [BORROWER]

ATTEST:                                 CHAMPION ENTERPRISES, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

                                  [GUARANTORS]

ATTEST:                                 CHAMPION HOME BUILDERS CO.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 REDMAN HOMES, INC.



                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 DUTCH HOUSING, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 ACCENT MOBILE HOMES, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]
<PAGE>   15
         [SIGNATURE PAGE 2 OF 6 OF AMENDMENT NO. 2 TO CREDIT AGREEMENT]

ATTEST:                                 SOUTHERN SHOWCASE HOUSING, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 AUBURN CHAMP, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 REDMAN BUSINESS TRUST


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 CHANDELEUR HOMES, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 HOMES OF LEGEND, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 GRAND MANOR, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]
<PAGE>   16
         [SIGNATURE PAGE 3 OF 6 OF AMENDMENT NO. 2 TO CREDIT AGREEMENT]


ATTEST:                                 CREST RIDGE HOMES, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 LAMPLIGHTER HOMES, INC., a 
                                        Washington corporation


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 LAMPLIGHTER HOMES, INC., an Oregon 
                                        corporation


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 HOMES OF MERIT, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 HEARTLAND HOMES, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]

ATTEST:                                 A-1 HOMES GROUP, INC.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
[Seal]
<PAGE>   17
         [SIGNATURE PAGE 4 OF 6 OF AMENDMENT NO. 2 TO CREDIT AGREEMENT]

                               [BANKS AND AGENTS]

                                        PNC BANK, NATIONAL ASSOCIATION,
                                        individually and as Administrative Agent


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        NBD BANK, individually and as
                                        Syndication Agent


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        COMERICA BANK, individually and as
                                        Documentation Agent


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        NATIONAL CITY BANK, individually and as
                                        Co-Agent


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        HARRIS TRUST AND SAVINGS BANK,
                                        individually and as Co-Agent


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
<PAGE>   18
         [SIGNATURE PAGE 5 OF 6 OF AMENDMENT NO. 2 TO CREDIT AGREEMENT]


                                        KEYBANK NATIONAL ASSOCIATION,
                                        individually and as Co-Agent


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        NATIONSBANK, N.A., individually and as
                                        Co-Agent


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        WACHOVIA BANK, N.A., individually and as
                                        Co-Agent


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        STANDARD FEDERAL BANK


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        THE BANK OF TOKYO-MITSUBISHI, LTD.,
                                        CHICAGO BRANCH


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________
<PAGE>   19
         [SIGNATURE PAGE 6 OF 6 OF AMENDMENT NO. 2 TO CREDIT AGREEMENT]


                                        MICHIGAN NATIONAL BANK


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        THE BANK OF NOVA SCOTIA


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        HIBERNIA NATIONAL BANK


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        BANK ONE, N.A.


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        CREDIT SUISSE FIRST BOSTON


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________


                                        By: ___________________________
                                        Name: _________________________
                                        Title: ________________________

<PAGE>   1
                                                                    EXHIBIT 10.2


                    FOURTH AMENDMENT TO THE 1995 STOCK OPTION
                               AND INCENTIVE PLAN

           (As previously amended and restated as of August 11, 1995)

      This FOURTH AMENDMENT TO THE 1995 STOCK OPTION AND INCENTIVE PLAN is made
and approved as of this 27th day of April, 1999, by the Shareholders of Champion
Enterprises, Inc.

                                   WITNESSETH:

      WHEREAS the Shareholders of Champion Enterprises, Inc. desire to amend the
1995 Stock Option and Incentive Plan (as previously amended and restated as of
August 11, 1995) as set forth below.

      NOW, THEREFORE, the 1995 Stock Option and Incentive Plan is amended as
follows:

      1. Section 1.6 is hereby amended by replacing the figure "4,650,000" with
"6,400,000".

      2. Each reference in the 1995 Stock Option and Incentive Plan to the
"Plan," "hereunder," or "hereof" or words of the like import shall hereafter
mean and be a reference to the 1995 Stock Option and Incentive Plan (as amended
and restated as of August 11, 1995) as amended hereby.

      Except as specifically amended hereby, the 1995 Stock Option and Incentive
Plan as amended and restated as of August 11, 1995, and each provision hereof,
remains in full force and effect.

                                        CHAMPION ENTERPRISES, INC.


                                        By: _____________________________
                                            Walter R. Young
                                            Chairman, President and Chief
                                            Executive Officer




Attest:

_____________________________
John J. Collins, Jr.
Secretary

<PAGE>   1
Exhibit 11




Statement Regarding Computation of Earnings Per Share

(in 000's, except per share amounts)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                         April 3,       April 4,
                                                           1999           1998
<S>                                                      <C>            <C>   
Weighted average shares outstanding                       48,437         47,087

Effect of dilutive securities                              1,083          1,558

Shares for diluted EPS                                    49,520         48,645


Net income                                               $21,155        $17,617


Per share amounts:

  Basic                                                  $  0.44        $  0.37

  Diluted                                                $  0.43        $  0.36
</TABLE>

<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDING APRIL
3, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          JAN-01-2000
<PERIOD-END>                               APR-03-1999
<CASH>                                          24,639
<SECURITIES>                                         0
<RECEIVABLES>                                  112,559
<ALLOWANCES>                                       502
<INVENTORY>                                    275,853
<CURRENT-ASSETS>                               475,667
<PP&E>                                         282,520
<DEPRECIATION>                                  77,776
<TOTAL-ASSETS>                               1,176,011
<CURRENT-LIABILITIES>                          443,455
<BONDS>                                        205,303
                                0
                                          0
<COMMON>                                        48,523
<OTHER-SE>                                     381,455
<TOTAL-LIABILITY-AND-EQUITY>                 1,176,011
<SALES>                                        624,630
<TOTAL-REVENUES>                               624,630
<CGS>                                          513,603
<TOTAL-COSTS>                                  513,603
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               6,488
<INCOME-PRETAX>                                 34,755
<INCOME-TAX>                                    13,600
<INCOME-CONTINUING>                             21,155
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    21,155
<EPS-PRIMARY>                                     0.44
<EPS-DILUTED>                                     0.43
        

</TABLE>


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