**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

###### **Washington, D.C.  20549**

 

**FORM 10-Q**

** **

**Quarterly Report Under Section 13 or 15 (d)ofThe Securities Exchange Act of 1934**

 
| **For Quarter Ended:** | ** ** | **Commission  File Number** |
|------------------------|------------|-----------------------------|
| **June 30, 2005** | ** ** | **333-124109**              |

 

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**AFFINITY GROUP HOLDING, INC.**

(Exact name of registrant asspecified in its charter)

 
| **Delaware**                              | ** ** | **20-2428068**                        |
|-------------------------------------------|------------|---------------------------------------|
| (State of  incorporation or organization) |       | (I.R.S.  Employer Identification No.) |
|                                      |       |                                  |
| **2575  Vista Del Mar Drive**             | ** ** | **(805)  667-4100**                   |
| **Ventura,  CA 93001**                    |       | (Registrant’s  telephone         |
| (Address of  principal executive offices) |       | number,  including area code)         |

 

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SECURITIES REGISTERED PURSUANTTO SECTION 12 (b) OF THE ACT:  **NONE**

 

SECURITIES REGISTERED PURSUANTTO SECTION 12 (g) OF THE ACT:

**10-7/8%Senior Notes Due 2012**

 

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

 

YES  ý                                                        NO  o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Act)

 

YES  o                                                        NO  ý

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date.

 
| ** **                    | ** ** | **Outstanding as of**   |
|-------------------------------|------------|-------------------------|
| **Class**                     | ** ** | **August 3, 2005** |
| Common  Stock, $.01 par value |       | 100                     |

 

**DOCUMENTSINCORPORATED BY REFERENCE:  None**

 

 

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**AFFINITYGROUP HOLDING, INC. AND SUBSIDIARIES**

 

**INDEX**

 
| **Part I.**Financial  Information                                                                       |   |   |
|---------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                    |   |   |
| **Item 1:  Financial Statements**                                                                       |   |   |
|                                                                                                    |   |   |
| Unaudited Consolidated Balance Sheets                                                                   |   |   |
| As of June 30, 2005 and December 31,  2004                                                    |   |   |
|                                                                                                    |   |   |
| Unaudited Consolidated Statements of  Operations                                                        |   |   |
| For the three months ended June 30,  2005 and 2004                                                 |   |   |
|                                                                                                    |   |   |
| Unaudited  Consolidated Statements of Operations                                                        |   |   |
| for the six  months ended June 30, 2005 and 2004                                                   |   |   |
|                                                                                                    |   |   |
| Unaudited Consolidated Statements of Cash  Flows                                                        |   |   |
| For the six months ended June 30, 2005  and 2004                                                   |   |   |
|                                                                                                    |   |   |
| Notes to Unaudited Consolidated Financial  Statements                                                   |   |   |
|                                                                                                    |   |   |
| **Item 2: Management’s Discussion and Analysis of Financial Condition  and Results of Operations** |   |   |
|                                                                                                    |   |   |
| **Item 3: Quantitative and Qualitative Disclosures about Market Risk**                                  |   |   |
|                                                                                                    |   |   |
| **Item 4: Control and Procedures**                                                                      |   |   |
|                                                                                                    |   |   |
| **Part  II. Other  Information**                                                                        |   |   |
|                                                                                                    |   |   |
| **Signatures**                                                                                          |   |   |

 

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AFFINITY GROUPHOLDING, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSJune 30, 2005 and December 31, 2004(In Thousands)

 
| ** **                                                                                                                                                                                  | ** ** | **6/30/2005**   | ** ** | **12/31/2004** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|------------|----------------|------------|
| ** **                                                                                                                                                                                  | ** ** | **(Unaudited)** | ** ** | **(Note 1)**   | ** ** |
| **ASSETS**                                                                                                                                                                                  |       |            |       |           |       |
| CURRENT  ASSETS:                                                                                                                                                                            |       |            |       |           |       |
| Cash and  cash equivalents                                                                                                                                                                  |       | $               | 37,202     |           | $          | 24,564 |   |
| Accounts  receivable, less allowance for doubtful accounts of $1,189 in 2005 and $810  in 2004                                                                                              |       | 20,926          |       | 24,228         |       |
| Inventories                                                                                                                                                                                 |       | 52,194          |       | 42,463         |       |
| Prepaid  expenses and other assets                                                                                                                                                          |       | 15,279          |       | 11,383         |       |
| Deferred tax  assets, net                                                                                                                                                                   |       | 6,615           |       | 6,615          |       |
| Total  current assets                                                                                                                                                                       |       | 132,216         |       | 109,253        |       |
|                                                                                                                                                                                        |       |            |       |           |       |
| PROPERTY AND  EQUIPMENT, net                                                                                                                                                                |       | 27,924          |       | 27,642         |       |
| AFFILIATE  NOTES AND INVESTMENTS                                                                                                                                                            |       | 85,742          |       | 4,752          |       |
| INTANGIBLE  ASSETS, net                                                                                                                                                                     |       | 32,621          |       | 27,716         |       |
| GOODWILL                                                                                                                                                                                    |       | 148,773         |       | 148,773        |       |
| DEFERRED TAX  ASSETS, net                                                                                                                                                                   |       | 2,311           |       | 323            |       |
| OTHER ASSETS                                                                                                                                                                                |       | 1,677           |       | 1,763          |       |
| Total assets                                                                                                                                                                                |       | $               | 431,264    |           | $          | 320,222 |   |
|                                                                                                                                                                                        |       |            |       |           |       |
| **LIABILITIES  AND STOCKHOLDER’S DEFICIT**                                                                                                                                             |       |            |       |           |       |
| CURRENT  LIABILITIES:                                                                                                                                                                       |       |            |       |           |       |
| Accounts  payable                                                                                                                                                                           |       | $               | 26,799     |           | $          | 16,511 |   |
| Accrued  interest                                                                                                                                                                           |       | 7,021           |       | 6,857          |       |
| Accrued  income taxes                                                                                                                                                                       |       | 2,892           |       | 3,131          |       |
| Accrued  liabilities                                                                                                                                                                        |       | 35,144          |       | 34,230         |       |
| Deferred  revenues and gains                                                                                                                                                                |       | 64,028          |       | 57,661         |       |
| Current  portion of long-term debt                                                                                                                                                          |       | 1,911           |       | 1,676          |       |
| Total  current liabilities                                                                                                                                                                  |       | 137,795         |       | 120,066        |       |
|                                                                                                                                                                                        |       |            |       |           |       |
| DEFERRED  REVENUES AND GAINS                                                                                                                                                                |       | 40,157          |       | 41,469         |       |
| LONG-TERM  DEBT, net of current portion                                                                                                                                                     |       | 400,835         |       | 312,660        |       |
| OTHER  LONG-TERM LIABILITIES                                                                                                                                                                |       | 5,374           |       | 4,135          |       |
|                                                                                                                                                                                        |       | 584,161         |       | 478,330        |       |
|                                                                                                                                                                                        |       |            |       |           |       |
| COMMITMENTS  AND CONTINGENCIES                                                                                                                                                              |       |            |       |           |       |
|                                                                                                                                                                                        |       |            |       |           |       |
| STOCKHOLDER’S  DEFICIT:                                                                                                                                                                |       |            |       |           |       |
| Common stock,  $.01 par value, 3,000 shares authorized, 100 shares issued and outstanding  (2005) and $.001 par value, 2,000 shares authorized, 2,000 shares issued and  outstanding (2004) |       | 1               |       | 1              |       |
| Accumulated  deficit                                                                                                                                                                        |       | (152,898        | )          | (158,109       | )          |
| Total  stockholder’s deficit                                                                                                                                                           |       | (152,897        | )          | (158,108       | )          |
| Total  liabilities and stockholder’s deficit                                                                                                                                           |       | $               | 431,264    |           | $          | 320,222 |   |

 

See notes toconsolidated financial statements.

 

1

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AFFINITY GROUPHOLDING, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTSOF OPERATIONS(In Thousands)(Unaudited)

 
| ** **                                  | ** ** | **THREE MONTHS ENDED** | ** ** |
|---------------------------------------------|------------|------------------------|------------|
| ** **                                  | ** ** | **6/30/2005**          | ** ** | **6/30/2004** | ** ** |
|                                        |       |                   |       | **(Note 1)** |   |
| REVENUES:                                   |       |                   |       |   |   |
| Membership  services                        |       | $                      | 34,401     |   | $ | 36,022 |   |
| Publications                                |       | 15,301                 |       | 16,583 |   |
| Retail                                      |       | 83,510                 |       | 75,039 |   |
|                                        |       | 133,212                |       | 127,644 |   |
|                                        |       |                   |       |   |   |
| COSTS  APPLICABLE TO REVENUES:              |       |                   |       |   |   |
| Membership  services                        |       | 22,301                 |       | 24,342 |   |
| Publications                                |       | 10,238                 |       | 11,109 |   |
| Retail                                      |       | 50,098                 |       | 44,728 |   |
|                                        |       | 82,637                 |       | 80,179 |   |
|                                        |       |                   |       |   |   |
| GROSS PROFIT                                |       | 50,575                 |       | 47,465 |   |
|                                        |       |                   |       |   |   |
| OPERATING  EXPENSES:                        |       |                   |       |   |   |
| Selling,  general and administrative        |       | 32,702                 |       | 29,564 |   |
| Depreciation  and amortization              |       | 3,947                  |       | 3,035 |   |
|                                        |       | 36,649                 |       | 32,599 |   |
|                                        |       |                   |       |   |   |
| INCOME FROM  OPERATIONS                     |       | 13,926                 |       | 14,866 |   |
|                                        |       |                   |       |   |   |
| NON-OPERATING  ITEMS:                       |       |                   |       |   |   |
| Interest  income                            |       | 178                    |       | 178 |   |
| Interest  expense                           |       | (8,804                 | )          | (6,200 | ) |
| Debt  extinguishment expense                |       | —                 |       | (419 | ) |
| Other  non-operating items, net             |       | 14                     |       | 40 |   |
|                                        |       | (8,612                 | )          | (6,401 | ) |
|                                        |       |                   |       |   |   |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES |       | 5,314                  |       | 8,465 |   |
|                                        |       |                   |       |   |   |
| INCOME TAX  EXPENSE                         |       | (1,780                 | )          | (3,040 | ) |
|                                        |       |                   |       |   |   |
| NET INCOME                                  |       | $                      | 3,534      |   | $ | 5,425 |   |

 

See notes to consolidated financial statements.

 

2

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AFFINITY GROUP HOLDING, INC.AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OFOPERATIONS

(In Thousands)

(Unaudited)

 
| ** **                                  | ** ** | **SIX MONTHS ENDED** | ** ** |
|---------------------------------------------|------------|----------------------|------------|
| ** **                                  | ** ** | **6/30/2005**        | ** ** | **6/30/2004** | ** ** |
|                                        |       |                 |       | **(Note 1)** |   |
| REVENUES:                                   |       |                 |       |   |   |
| Membership  services                        |       | $                    | 66,824     |   | $ | 67,541 |   |
| Publications                                |       | 32,499               |       | 33,812 |   |
| Retail                                      |       | 142,576              |       | 127,573 |   |
|                                        |       | 241,899              |       | 228,926 |   |
|                                        |       |                 |       |   |   |
| COSTS  APPLICABLE TO REVENUES:              |       |                 |       |   |   |
| Membership  services                        |       | 42,502               |       | 45,066 |   |
| Publications                                |       | 21,759               |       | 23,111 |   |
| Retail                                      |       | 84,392               |       | 75,538 |   |
|                                        |       | 148,653              |       | 143,715 |   |
|                                        |       |                 |       |   |   |
| GROSS PROFIT                                |       | 93,246               |       | 85,211 |   |
|                                        |       |                 |       |   |   |
| OPERATING  EXPENSES:                        |       |                 |       |   |   |
| Selling,  general and administrative        |       | 62,723               |       | 54,749 |   |
| Depreciation  and amortization              |       | 7,654                |       | 6,072 |   |
|                                        |       | 70,377               |       | 60,821 |   |
|                                        |       |                 |       |   |   |
| INCOME FROM  OPERATIONS                     |       | 22,869               |       | 24,390 |   |
|                                        |       |                 |       |   |   |
| NON-OPERATING  ITEMS:                       |       |                 |       |   |   |
| Interest  income                            |       | 344                  |       | 355 |   |
| Interest  expense                           |       | (15,180              | )          | (11,624 | ) |
| Debt  extinguishment expense                |       | —               |       | (5,035 | ) |
| Other  non-operating items, net             |       | 30                   |       | 87 |   |
|                                        |       | (14,806              | )          | (16,217 | ) |
|                                        |       |                 |       |   |   |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES |       | 8,063                |       | 8,173 |   |
|                                        |       |                 |       |   |   |
| INCOME TAX  EXPENSE                         |       | (2,852               | )          | (2,930 | ) |
|                                        |       |                 |       |   |   |
| NET INCOME                                  |       | $                    | 5,211      |   | $ | 5,243 |   |

 

See notes to consolidated financial statements.

 

3

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AFFINITY GROUPHOLDING, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTSOF CASH FLOWS(In Thousands)(Unaudited)

 
| ** **                                                                         | ** ** | **SIX MONTHS ENDED** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                         | ** ** | **6/30/2005**        | ** ** | **6/30/2004** | ** ** |
| ** **                                                                         | ** ** | ** **           | ** ** | **(Note 1)** | ** ** |
| CASH FLOWS  FROM OPERATING ACTIVITIES:                                             |       |                 |       |   |   |
| Net income                                                                         |       | $                    | 5,211      |   | $ | 5,243 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                 |       |   |   |
| Depreciation                                                                       |       | 4,570                |       | 3,440 |   |
| Amortization                                                                       |       | 3,084                |       | 2,632 |   |
| Provision  for losses on accounts receivable                                       |       | 483                  |       | 1,109 |   |
| Deferred  compensation                                                             |       | 1,650                |       | — |   |
| Deferred tax  benefit                                                              |       | (1,988               | )          | (1,184 | ) |
| Loss (gain)  on sale of property and equipment                                     |       | 2                    |       | (1 | ) |
| Loss on  early extinguishment of debt                                              |       | —               |       | 5,035 |   |
| Non-cash  interest on AGHI Notes                                                   |       | 2,585                |       | — |   |
| Accretion of  original issue discount                                              |       | 49                   |       | — |   |
| Changes in  operating assets and liabilities                                       |       |                 |       |   |   |
| Accounts  receivable                                                               |       | 2,855                |       | 586 |   |
| Inventories                                                                        |       | (9,630               | )          | (9,666 | ) |
| Prepaid  expenses and other assets                                                 |       | (3,810               | )          | (3,299 | ) |
| Accounts  payable                                                                  |       | 10,288               |       | 5,520 |   |
| Accrued and  other liabilities                                                     |       | 428                  |       | 6,705 |   |
| Deferred  revenues and gains                                                       |       | 4,575                |       | 2,256 |   |
| Net cash  provided by operating activities                                         |       | 20,352               |       | 18,376 |   |
|                                                                               |       |                 |       |   |   |
| CASH FLOWS  FROM INVESTING ACTIVITIES:                                             |       |                 |       |   |   |
| Capital  expenditures                                                              |       | (4,827               | )          | (5,043 | ) |
| Net proceeds  from sale of property and equipment                                  |       | 27                   |       | 1 |   |
| Change in  intangible assets                                                       |       | (26                  | )          | (10 | ) |
| Investment  in affiliate                                                           |       | (81,005              | )          | — |   |
| Acquisitions,  net of cash received                                                |       | (2,639               | )          | — |   |
| Loans  receivable                                                                  |       | 15                   |       | (22 | ) |
| Net cash  used in investing activities                                             |       | (88,455              | )          | (5,074 | ) |
|                                                                               |       |                 |       |   |   |
| CASH FLOWS  FROM FINANCING ACTIVITIES:                                             |       |                 |       |   |   |
| Dividends  paid                                                                    |       | —               |       | (60,000 | ) |
| Borrowings  on long-term debt                                                      |       | 85,005               |       | 200,000 |   |
| Payment of  debt issue costs                                                       |       | (3,564               | )          | (7,157 | ) |
| Principal  payments of long-term debt                                              |       | (700                 | )          | (129,088 | ) |
| Net cash  provided by financing activities                                         |       | 80,741               |       | 3,755 |   |
|                                                                               |       |                 |       |   |   |
| NET INCREASE  IN CASH AND CASH EQUIVALENTS                                         |       | 12,638               |       | 17,057 |   |
|                                                                               |       |                 |       |   |   |
| CASH AND  CASH EQUIVALENTS AT BEGINNING OF YEAR                                    |       | 24,564               |       | 6,115 |   |
|                                                                               |       |                 |       |   |   |
| CASH AND  CASH EQUIVALENTS AT END OF PERIOD                                        |       | $                    | 37,202     |   | $ | 23,172 |   |

 

See notes to consolidated financial statements.

 

4

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**AFFINITYGROUP HOLDING, INC. AND SUBSIDIARIESNotes to ConsolidatedFinancial Statements(Unaudited)**

 

**(1) BASIS OF PRESENTATION**

 

*Principles of Consolidation**–*The consolidated financial statementsincluded herein include the accounts of Affinity Group Holding, Inc. (“AGHI”),its wholly-owned subsidiary, Affinity Group, Inc (“AGI”), and AGI’ssubsidiaries (collectively the “Company”), in accordance with U.S. generallyaccepted accounting principles, and pursuant to the rules and regulations ofthe Securities and Exchange Commission. AGHI was formed on March 2, 2005, at which time all of the stock ofAGI was contributed to AGHI from its parent, AGI Holding Corp. (“AGHC”) aprivately-owned corporation.  On April 27,2004, AGI’s previous parent, Affinity Group Holding, Inc. (“AGH”) was mergedinto AGI, with AGI being the surviving entity after the merger.  The merger was accounted for as a combinationof entities under common control using historical costs.  The balance sheet as of December 31,2004 is that of AGI prior to the formation of AGHI on March 2, 2005.  The three and six months ended June 30,2004 have been restated to reflect the combined financial position and resultsof operations of AGI and AGH.  Theseinterim consolidated financial statements should be read in conjunction withAGI’s consolidated financial statements and notes for the year ended December 31,2004 included in the Registration Statement on Form S-4 filed April 15,2005.  Certain balances in the prior yearconsolidated financial statements were reclassified to conform to the currentyear presentation.  In the opinion ofmanagement of the Company, these consolidated financial statements contain alladjustments of a normal recurring nature necessary to present fairly thefinancial position, results of operations and cash flows of the Company for theinterim periods presented.

 

**(2)DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION**

 

TheCompany’s three principal lines of business are Membership Services,Publications, and Retail.  The MembershipServices segment operates the Good Sam Club, Coast to Coast Club, and CampingWorld’s President’s Club for recreational vehicle (“RV”) owners, campers andoutdoor vacationers, and the Golf Card Club for golf enthusiasts.  The Publications segment publishes a varietyof publications for selected markets in the recreation and leisure industry,including general circulation periodicals, directories, and RV and powersportsindustry trade magazines.  The Retailsegment sells specialty retail merchandise and services for RV owners primarilythrough retail supercenters and mail order catalogs.  The Company evaluates performance based onprofit or loss from operations before income taxes.

 

The reportable segments are strategic business units that offerdifferent products and services.  Theyare managed separately because each business requires different technology, managementexpertise and marketing strategies.

 

5

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TheCompany does not allocate income taxes or unusual items to segments.  Financial information by reportable businesssegment is summarized as follows (in thousands):

 
| ** **                                     | ** ** | **Membership** | ** ** | ** **       | ** ** | ** ** | ** ** | ** **       | ** ** |
|------------------------------------------------|------------|----------------|------------|------------------|------------|------------|------------|------------------|------------|
| ** **                                     | ** ** | **Services**   | ** ** | **Publications** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| **THREE  MONTHS ENDED JUNE 30, 2005**     |       |           |       |             |       |       |       |             |       |
| Revenues  from external customers              |       | $              | 34,401     |             | $          | 15,301     |       | $                | 83,510     |   | $ | 133,212 |   |
| Depreciation  and amortization                 |       | 787            |       | 542              |       | 1,770      |       | 3,099            |       |
| (Gain) loss  on sale of property and equipment |       | —         |       | (5               | )          | 3          |       | (2               | )          |
| Interest  income                               |       | 1,167          |       | —           |       | 3          |       | 1,170            |       |
| Interest  expense                              |       | —         |       | 69               |       | 2,622      |       | 2,691            |       |
| Segment  operating profit                      |       | 10,653         |       | 3,763            |       | 3,446      |       | 17,862           |       |
|                                           |       |           |       |             |       |       |       |             |       |
| **THREE  MONTHS ENDED JUNE 30, 2004**     |       |           |       |             |       |       |       |             |       |
| Revenues  from external customers              |       | $              | 36,022     |             | $          | 16,583     |       | $                | 75,039     |   | $ | 127,644 |   |
| Depreciation  and amortization                 |       | 907            |       | 424              |       | 1,164      |       | 2,495            |       |
| Interest  income                               |       | 636            |       | —           |       | —     |       | 636              |       |
| Interest  expense                              |       | —         |       | 231              |       | 2,626      |       | 2,857            |       |
| Segment  operating profit                      |       | 9,787          |       | 4,250            |       | 3,788      |       | 17,825           |       |

 
| ** **                                     | ** ** | **Membership** | ** ** | ** **       | ** ** | ** ** | ** ** | ** **       | ** ** |
|------------------------------------------------|------------|----------------|------------|------------------|------------|------------|------------|------------------|------------|
| ** **                                     | ** ** | **Services**   | ** ** | **Publications** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| **SIX  MONTHS ENDED JUNE 30, 2005**       |       |           |       |             |       |       |       |             |       |
| Revenues  from external customers              |       | $              | 66,824     |             | $          | 32,499     |       | $                | 142,576    |   | $ | 241,899 |   |
| Depreciation  and amortization                 |       | 1,759          |       | 1,016            |       | 3,488      |       | 6,263            |       |
| (Gain) loss  on sale of property and equipment |       | —         |       | (5               | )          | 3          |       | (2               | )          |
| Interest  income                               |       | 2,170          |       | —           |       | 5          |       | 2,175            |       |
| Interest  expense                              |       | —         |       | 159              |       | 5,212      |       | 5,371            |       |
| Segment  operating profit                      |       | 21,012         |       | 8,191            |       | 1,788      |       | 30,991           |       |
|                                           |       |           |       |             |       |       |       |             |       |
| **SIX  MONTHS ENDED JUNE 30, 2004**       |       |           |       |             |       |       |       |             |       |
| Revenues  from external customers              |       | $              | 67,541     |             | $          | 33,812     |       | $                | 127,573    |   | $ | 228,926 |   |
| Depreciation  and amortization                 |       | 1,811          |       | 850              |       | 2,390      |       | 5,051            |       |
| Gain on sale  of property and equipment        |       | —         |       | —           |       | 1          |       | 1                |       |
| Interest  income                               |       | 1,228          |       | —           |       | 1          |       | 1,229            |       |
| Interest  expense                              |       | —         |       | 504              |       | 5,237      |       | 5,741            |       |
| Segment  operating profit                      |       | 18,790         |       | 8,165            |       | 2,623      |       | 29,578           |       |

 

6

----

 

Thefollowing is a reconciliation of income from operations to the Company’sconsolidated financial statements for the three and six months ended June 30,(in thousands):

 
| ** **                                                     | ** ** | **THREE MONTHS ENDED** | ** ** | **SIX MONTHS ENDED** | ** ** |
|----------------------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                                     | ** ** | **6/30/2005**          | ** ** | **6/30/2004**        | ** ** | **6/30/2005** | ** ** | **6/30/2004** | ** ** |
| **Income  From Continuing Operations Before Income Taxes**     |       |                   |       |                 |       |   |   |   |   |
| Total profit  for reportable segments                          |       | $                      | 17,862     |                 | $          | 17,825 |   | $ | 30,991 |   | $ | 29,578 |   |
| Unallocated  G & A expense                                 |       | (4,595                 | )          | (4,600               | )          | (9,897 | ) | (8,592 | ) |
| Unallocated  depreciation and amortization expense             |       | (848                   | )          | (540                 | )          | (1,391 | ) | (1,021 | ) |
| Unallocated  interest expense, net of intercompany elimination |       | (6,113                 | )          | (3,343               | )          | (9,809 | ) | (5,883 | ) |
| Unallocated  interest income, net of intercompany elimination  |       | (992                   | )          | (458                 | )          | (1,831 | ) | (874 | ) |
| Unallocated  debt restructure expense                          |       | —                 |       | (419                 | )          | — |   | (5,035 | ) |
| Income from  continuing operations before income taxes         |       | $                      | 5,314      |                 | $          | 8,465 |   | $ | 8,063 |   | $ | 8,173 |   |

 

Thefollowing is a reconciliation of assets of reportable segments to the Company’sconsolidated financial statements as of June 30, 2005 and December 31,2004 (in thousands):

 
| ** **                                           | ** ** | **6/30/2005** | ** ** | **12/31/2004** | ** ** |
|------------------------------------------------------|------------|---------------|------------|----------------|------------|
| Membership  services segment                         |       | $             | 177,256    |           | $          | 170,270 |   |
| Publications  segment                                |       | 77,403        |       | 75,731         |       |
| Retail  segment                                      |       | 221,956       |       | 124,325        |       |
| Total assets  for reportable segments                |       | 476,615       |       | 370,326        |       |
| Capitalized  finance costs not allocated to segments |       | 13,560        |       | 10,951         |       |
| Corporate  unallocated assets                        |       | 16,047        |       | 13,705         |       |
| Elimination  of intersegment receivable              |       | (74,958       | )          | (74,760        | )          |
| Total assets                                         |       | $             | 431,264    |           | $          | 320,222 |   |

 

Total assets for the retail segment increased $97.6 million from December 31,2004 primarily due to the acquisition of a preferred membership interest inFreedomRoads Holding Company, LLC, a related party, (See Note 5) and a seasonalincrease in inventory levels of the retail segment.

 

**(3) STATEMENTS OF CASH FLOWS**

 

Supplemental disclosures of cash flowinformation for the six months ended June 30 (in thousands):

 
| ** **                        | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|
| Cash paid  during the period for: |       |     |       |     |       |
| Interest                          |       | $        | 12,382     |     | $          | 8,829 |   |
| Income taxes                      |       | 5,138    |       | 2,246    |       |
|                                   |            |          |            |          |            |  |  |

 

7

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In February 2004, the Company declared and distributed a $4.4million non-cash dividend to its ultimate parent, AGHC, consisting of notesreceivable from the Adams Insurance Holding LLC, a related party.

 

In May 2005, the Company assumed $0.5 million of liabilities and issued$1.5 million of debt in the acquisition of the *PowerboatMagazine* title and related assets from Nordskog Publishing, Inc.

 

It is the Company’s intent to pay the current interest on the AGHI Notesthrough the issuance of additional notes of the same tenor as the AGHINotes.  Non-cash interest as of June 30,2005 was $2.6 million.

 

**(4) GOODWILL AND INTANGIBLE ASSETS**

 

The Company reviews goodwill and indefinite-lived intangible assets forimpairment at least annually.  TheCompany performs its annual impairment review during the fourth quarter.  Based on the results of the annual impairmenttest, the Company determined that no impairment of goodwill existed as of December 31,2004.

 

There were no changes in the Company’s goodwill by business segment,for the three or six months ended June 30, 2005 and 2004.

 

Finite lived intangible assets, related accumulated amortization andweighted average useful life consisted of the following at June 30, 2005 (inthousands, except as noted):

 
| ** **                                       | ** ** | **Weighted**        | ** ** | ** ** | ** ** | ** **       | ** ** | ** ** | ** ** |
|--------------------------------------------------|------------|---------------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                                       | ** ** | **Average Useful**  | ** ** | ** ** | ** ** | **Accumulated**  | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Life (in years)** | ** ** | **Gross**  | ** ** | **Amortization** | ** ** | **Net**    | ** ** |
|                                             |       |                |       |       |       |             |       |       |       |
| Membership  and customer lists                   |       | 6                   |       | $          | 16,031     |             | $          | (5,513     | )          | $ | 10,518 |   |
| Resort and  golf course participation agreements |       | 23                  |       | 13,555     |       | (11,173          | )          | 2,382      |       |
| Non-compete  and deferred consulting agreements  |       | 15                  |       | 18,455     |       | (10,921          | )          | 7,534      |       |
| Deferred  financing costs                        |       | 7                   |       | 15,152     |       | (2,965           | )          | 12,187     |       |
|                                             |       |                |       | $          | 63,193     |             | $          | (30,572    | )          | $ | 32,621 |   |

 

In April 2005, Camping World, Inc. acquired the assets of an RVcatalog retailer for $0.6 million.  Theacquisition price was allocated to inventory and membership and customerlists.  In May 2005, Ehlert PublishingGroup, Inc. acquired the publishing assets of Nordskog Publishing, Inc. for$4.0 million.  The acquisition price wasallocated primarily to membership and customer lists and non-competeagreements.

 

8

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**(5) RECENT EVENTS**

 

On March 24, 2005 in a privateplacement, the Company issued $88.2 million principal amount of its 10-7/8%senior notes due 2012 (the “AGHI Notes”) at a $3.2 million original issuediscount.  The Company completed aregistered exchange of the AGHI Notes under the Securities Act of 1933 on June 8,2005.  The AGHI Notes are unsecuredobligations of the Company, and its subsidiaries have not guaranteed payment ofprincipal or interest on the AGHI Notes. Interest on the AGHI Notes is payable semi-annually on February 15and August 15 commencing August 15, 2005 and the entire $88.2 millionprincipal amount of the AGHI Notes are due in full on February 15,2012.  For interest payments on and priorto February 15, 2008, AGHI may elect to pay interest on the AGHI Notes incash or by the issuance of additional notes of the same tenor as the AGHINotes.  Any additional AGHI Notes issuedin payment of interest are due in full on or before March 15, 2010.  The AGHI Notes cannot be redeemed prior to February 15,2008.  Although the only source of thecash payment of the AGHI Notes is dividends from its subsidiary, there arecertain restrictions on the payment of dividends under AGI’s senior securedcredit facility (the “AGI Senior Credit Facility”) and the indenture (“AGIIndenture”) under which AGI has issued $200.0 million in 9% senior subordinatednotes due 2012.

 

TheCompany contributed the net proceeds from the issuance of the AGHI Notes,approximately $81.0 million, to AGI and in turn, AGI made an equitycontribution to its wholly-owned subsidiary, Camping World, Inc. (“CampingWorld”).  Camping World then made anequity capital contribution in the same amount to its wholly-owned subsidiary,CWI, Inc. (“CWI”).  CWI created a newwholly-owned subsidiary named CWFR Capital Corp., a Delaware corporation (“CWFR”)which is an “unrestricted subsidiary” as defined under the AGHI Notes and theAGI Indenture.  Since CWFR is anunrestricted subsidiary, its operations are not restricted by either the AGIIndenture or the AGHI Notes.  CWI made anequity capital contribution to CWFR in an equal amount to the capitalcontribution that CWI received from Camping World.  CWFR used the proceeds from the equitycapital contribution to acquire a preferred membership interest in FreedomRoadsHolding Company, LLC (“FreedomRoads Holding”), a Minnesota limited liabilitycompany owned 90% by The Stephen Adams Living Trust which also indirectly owns97.4% of the outstanding capital stock of AGHC and indirectly AGHI.

 

Thepreferred membership interest acquired by CWFR has a face amount of $88.2million and is entitled to receive a preferred payment from FreedomRoadsHolding at 10-7/8% per annum when and as declared by the Board of Governors ofFreedomRoads from any source legally available therefor.  Any portion of the preferred payment not paidwill accumulate and will be compounded semi-annually until paid.  FreedomRoads Holding may redeem the preferredmembership interest upon the payment of $88.2 million plus the accrued andunpaid preferred return to the date of redemption.  FreedomRoads Holding will be required toredeem the preferred membership interest at that same redemption price if thereis a sale or reorganization of the membership interests of FreedomRoads Holdingor a sale of substantially all of the assets of FreedomRoads Holding. According to the terms of the preferred membership interest, FreedomRoadsHolding cannot make distributions with respect to membership interests otherthan (a) distributions with respect to the preferred membership interest, (b)distributions for the members’ estimated tax liabilities from earnings ofFreedomRoads Holding and (c) distributions in the aggregate not

 

9

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toexceed 50% of the amount of (i) FreedomRoads Holding’s net profit for theperiod from January 1, 2005 through the end of the fiscal quarter nextpreceding the distribution date less (ii) the aggregate amount of taxdistributions made during the period from January 1, 2005 through the endof the fiscal quarter next preceding the distribution date.  CWFR may not sell, pledge or otherwisetransfer the preferred membership interest. The preferred membership interest does not provide CWFR with any votingrights in FreedomRoads Holding.  Thepreferred membership interest FreedomRoads Holding is being carried at cost andis reviewed periodically for impairment.

 

**(6) CONTINGENCIES**

 

From time to time, the Company is involved inlitigation arising in the normal course of business operations.

 

In September 2004, the Company’s subsidiary,CWI, Inc., was sued in California state court by Privacy Rights Clearinghouseand Benjamin Greene in a suit alleging that CWI, Inc. was recording personalidentification information from retail customers in violation of certainCalifornia statutes.  The plaintiff seeksinjunctive relief preventing CWI, Inc. from engaging in any act or practiceconstituting unfair competition under the statutes and for statutory penaltiesand damages.  CWI, Inc. has responded tothe suit and denied that its practices violate the statutes.  In the opinion of management, the likelihoodof a material unfavorable outcome is not probable as of the date of theaccompanying consolidated financial statements.

 

10

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**ITEM 2:**

 

AFFINITY GROUP HOLDING, INC.AND SUBSIDIARIESMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

 

The following table is derived from the Company’s ConsolidatedStatements of Operations and expresses the results from operations as apercentage of revenues and reflects the net increase (decrease) betweenperiods:

 
| ** **                                  | ** ** | **THREE MONTHS ENDED** | ** ** |
|---------------------------------------------|------------|------------------------|------------|
| ** **                                  | ** ** | **6/30/2005**          | ** ** | **6/30/2004** | ** ** | **Inc/(Dec)** | ** ** |
|                                        |       |                   |       |   |   |   |   |
| REVENUES:                                   |       |                   |       |   |   |   |   |
| Membership  services                        |       | 25.8                   | %          | 28.2 | % | (4.5 | )% |
| Publications                                |       | 11.5                   | %          | 13.0 | % | (7.7 | )% |
| Retail                                      |       | 62.7                   | %          | 58.8 | % | 11.3 | % |
|                                        |       | 100.0                  | %          | 100.0 | % | 4.4 | % |
|                                        |       |                   |       |   |   |   |   |
| COSTS  APPLICABLE TO REVENUES:              |       |                   |       |   |   |   |   |
| Membership  services                        |       | 16.7                   | %          | 19.1 | % | (8.4 | )% |
| Publications                                |       | 7.7                    | %          | 8.7 | % | (7.8 | )% |
| Retail                                      |       | 37.6                   | %          | 35.0 | % | 12.0 | % |
|                                        |       | 62.0                   | %          | 62.8 | % | 3.1 | % |
|                                        |       |                   |       |   |   |   |   |
| GROSS PROFIT                                |       | 38.0                   | %          | 37.2 | % | 6.6 | % |
|                                        |       |                   |       |   |   |   |   |
| OPERATING  EXPENSES:                        |       |                   |       |   |   |   |   |
| Selling,  general and administrative        |       | 24.5                   | %          | 23.2 | % | 10.6 | % |
| Depreciation  and amortization              |       | 3.0                    | %          | 2.4 | % | 30.0 | % |
|                                        |       | 27.5                   | %          | 25.6 | % | 12.4 | % |
|                                        |       |                   |       |   |   |   |   |
| INCOME FROM  OPERATIONS                     |       | 10.5                   | %          | 11.6 | % | (6.3 | )% |
|                                        |       |                   |       |   |   |   |   |
| NON-OPERATING  ITEMS:                       |       |                   |       |   |   |   |   |
| Interest  income                            |       | 0.1                    | %          | 0.2 | % | — |   |
| Interest  expense                           |       | (6.6                   | )%         | (4.9 | )% | 42.0 | % |
| Debt  extinguishment expense                |       | —                 |       | (0.3 | )% | (100.0 | )% |
| Other  non-operating items, net             |       | —                 |       | — |   | (65.0 | )% |
|                                        |       | (6.5                   | )%         | (5.0 | )% | 34.5 | % |
|                                        |       |                   |       |   |   |   |   |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES |       | 4.0                    | %          | 6.6 | % | (37.2 | )% |
|                                        |       |                   |       |   |   |   |   |
| INCOME TAX  EXPENSE                         |       | (1.3                   | )%         | (2.3 | )% | (41.4 | )% |
|                                        |       |                   |       |   |   |   |   |
| NET INCOME                                  |       | 2.7                    | %          | 4.3 | % | (34.9 | )% |

 

11

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The following table is derived from the Company’s ConsolidatedStatements of Operations and expresses the results from operations as apercentage of revenues and reflects the net increase (decrease) betweenperiods:

 
| ** **                                  | ** ** | **SIX MONTHS ENDED** | ** ** |
|---------------------------------------------|------------|----------------------|------------|
| ** **                                  | ** ** | **6/30/2005**        | ** ** | **6/30/2004** | ** ** | **Inc/(Dec)** | ** ** |
|                                        |       |                 |       |   |   |   |   |
| REVENUES:                                   |       |                 |       |   |   |   |   |
| Membership  services                        |       | 27.6                 | %          | 29.5 | % | (1.1 | )% |
| Publications                                |       | 13.4                 | %          | 14.8 | % | (3.9 | )% |
| Retail                                      |       | 59.0                 | %          | 55.7 | % | 11.8 | % |
|                                        |       | 100.0                | %          | 100.0 | % | 5.7 | % |
|                                        |       |                 |       |   |   |   |   |
| COSTS  APPLICABLE TO REVENUES:              |       |                 |       |   |   |   |   |
| Membership  services                        |       | 17.6                 | %          | 19.7 | % | (5.7 | )% |
| Publications                                |       | 9.0                  | %          | 10.1 | % | (5.9 | )% |
| Retail                                      |       | 34.9                 | %          | 33.0 | % | 11.7 | % |
|                                        |       | 61.5                 | %          | 62.8 | % | 3.4 | % |
|                                        |       |                 |       |   |   |   |   |
| GROSS PROFIT                                |       | 38.5                 | %          | 37.2 | % | 9.4 | % |
|                                        |       |                 |       |   |   |   |   |
| OPERATING  EXPENSES:                        |       |                 |       |   |   |   |   |
| Selling,  general and administrative        |       | 25.8                 | %          | 23.9 | % | 14.6 | % |
| Depreciation  and amortization              |       | 3.2                  | %          | 2.6 | % | 26.1 | % |
|                                        |       | 29.0                 | %          | 26.5 | % | 15.7 | % |
|                                        |       |                 |       |   |   |   |   |
| INCOME FROM  OPERATIONS                     |       | 9.5                  | %          | 10.7 | % | (6.2 | )% |
|                                        |       |                 |       |   |   |   |   |
| NON-OPERATING  ITEMS:                       |       |                 |       |   |   |   |   |
| Interest  income                            |       | 0.1                  | %          | 0.2 | % | (3.1 | )% |
| Interest  expense                           |       | (6.3                 | )%         | (5.1 | )% | 30.6 | % |
| Debt  extinguishment expense                |       | —               |       | (2.2 | )% | (100.0 | )% |
| Other  non-operating items, net             |       | —               |       | — |   | (65.5 | )% |
|                                        |       | (6.2                 | )%         | (7.1 | )% | (8.7 | )% |
|                                        |       |                 |       |   |   |   |   |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES |       | 3.3                  | %          | 3.6 | % | (1.3 | )% |
|                                        |       |                 |       |   |   |   |   |
| INCOME TAX  EXPENSE                         |       | (1.1                 | )%         | (1.3 | )% | (2.7 | )% |
|                                        |       |                 |       |   |   |   |   |
| NET INCOME                                  |       | 2.2                  | %          | 2.3 | % | (0.6 | )% |

 

12

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**RESULTSOF OPERATIONS**

 

**Three Months Ended June 30, 2005Compared With Three Months Ended June 30, 2004**

 

*Revenues*

 

Revenuesof $133.2 million for the second quarter of 2005 increased by approximately$5.6 million, or 4.4%, from the comparable period in 2004.

 

Membershipservices revenues of $34.4 million for the second quarter of 2005 decreased byapproximately $1.6 million, or 4.5%, from the comparable period in 2004.  This revenue decrease was largelyattributable to a $1.8 million decrease in member events revenue due to thetiming of the Great North American Rally, which occurred in the second quarterof 2004 versus the third quarter of 2005, a $0.4 million reduction inmembership services revenue, primarily associated with reduced enrollment inthe Coast to Coast Club and Golf Card Club, a $0.5 million reduction inmarketing fee income recognized on RV financing products and a $0.3 milliondecrease in dealer program marketing revenue, partially offset by a $1.0million increase in extended vehicle warranty program revenue due to continuedgrowth in the sales of one-year warranty products, and a $0.4 million increasein emergency road service revenue due to increased enrollment.

 

Publicationrevenues of $15.3 million for the second quarter of 2005 decreased $1.3million, or 7.7%, from the comparable period in 2004  This decrease was primarily due to a $0.9million reduction in revenue due to the disposition of archery-relatedpublication titles in the third quarter of 2004, and a $0.4 million decrease inmotorcycle and regional publications revenue due to a reduction in the numberof issues published in the quarter, and a $0.2 million decrease in revenue fromthe reduced distribution of our campground atlas, partially offset by a $0.2million increase in revenue due to a new magazine title acquired in May2005, *Powerboat Magazine*.

 

Retail revenues of $83.5 million increased $8.5million, or 11.3%, over the second quarter of 2004.  Store merchandise sales increased $8.5million over the second quarter of 2004 due to a same store sales increase of$4.3 million or 8.4%, compared to a 10.7% increase in the second quarter of2004, and a $4.2 million revenue increase from the addition of eight new storesover the past eighteen months.  Samestore sale calculations for a given period include only those stores that wereopen both at the end of that period and at the beginning of the precedingfiscal year.  Additionally, a $0.6million decrease in mail order revenue was offset by increases in otherinstallation fees, supplies and services revenue.

 

*Costs Applicable to Revenues*

 

Costsapplicable to revenues totaled $82.6 million for the second quarter of 2005, anincrease of $2.5 million, or 3.1%, from the comparable period in 2004.

 

13

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Membership services costs and expenses of $22.3million decreased approximately $2.0 million, or 8.4%, from the second quarterof 2004.  This decrease consisted of a$1.7 million decrease primarily due to the timing of member events, a $0.6million decrease in membership services costs, primarily due to reducedmarketing expenses in the Coast to Coast Club and the Golf Card Club, a $0.2million decrease in other marketing expenses, and a $0.2 million decrease indealer marketing expenses, partially offset by a $0.7 million increase inmarketing costs and program expenses associated with increased enrollment inthe extended vehicle warranty and emergency road service programs.

 

Publication costs and expenses of $10.2 millionfor the second quarter of 2005 decreased $0.9 million from the comparableperiod in 2004 primarily due to the disposition of archery-related titles inthe third quarter of 2004, and a reduction in costs associated with reducedatlas marketing and a reduction in the number of regional issues published,partially offset by increased costs attributable to the newly acquired magazinetitle, *Powerboat Magazine*.

 

Retail costs applicable to revenues increased$5.4 million, or 12.0%, to $50.1 million primarily due to increased storesales.  The retail gross profit margin of40.0% for the second quarter of 2005 decreased from 40.4% from the comparableperiod in 2004 primarily due to the increased use of merchandising and marketingdiscounts in the second quarter of 2005.

 

*Operating Expenses*

 

Selling, general and administrative expenses of$32.7 million for the second quarter of 2005 increased $3.1 million compared tothe second quarter of 2004 primarily due to increased retail selling andgeneral and administrative expenses of approximately $3.1 million consisting ofa $2.1 million increase in retail labor, a $0.3 million increase in sellingexpenses, a $0.3 million increase in rent expense, and a $0.4 million increasein training and other retail general and administrative expenses.  Further, a $0.7 million increase in deferredexecutive compensation was offset by a $0.7 million reduction in executivewages and consulting expenses.

 

Depreciation and amortization expense of approximately$4.0 million for the second quarter of 2005 increased approximately $1.0million over the prior year primarily due to increased depreciation on capitalexpenditures at Camping World, amortization of financing costs associated withthe AGHI Notes, and the amortization of intangible assets associated with theacquisition of consumer trade shows, acquired through the acquisition of ARU,Inc. (“ARU”) in December 2004,and *Powerboat Magazine*.

 

*Income from Operations*

 

Incomefrom operations for the second quarter of 2005 of $13.9 million decreased $1.0million compared to the second quarter of 2004 primarily due to increasedoperating expenses of $4.1 million and reduced gross profit from thepublications operations of $0.4 million, partially offset by increased grossprofit from the retail and membership services operations of $3.1 million and$0.4 million, respectively.

 

14

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*Non-Operating Items*

 

Non-operating items were $8.6 million for thesecond quarter of 2005, compared to $6.4 million for the same period in2004.  This $2.2 million increase was dueto $2.6 million of additional interest expense from higher loan balancesassociated with the issuance in March 2005 of the AGHI Notes and higherinterest rates, partially offset by a $0.4 million reduction in debtextinguishment expenses.

 

*Income before Income Taxes*

 

Income before income taxes for the secondquarter of 2005 was $5.3 million, or $3.2 million lower than the second quarterof 2004.  This decrease was attributableto $2.6 million of additional interest expense, and a $1.0 million decrease inincome from operations, partially offset by a $0.4 million reduction in debtextinguishment expense.

 

*Income Tax Expense*

 

TheCompany recorded approximately $1.8 million of income tax expense for thesecond quarter of 2005, a decrease of $1.3 million over the second quarter of2004.  The effective tax rates for thesecond quarter of 2005 and 2004 were 33.5% and 35.9%.  The effective tax rates are higher than statutoryrates primarily due to state taxes.

 

# *NetIncome*

# * *

Net income in the second quarter of 2005 was$3.5 million compared to a net income of $5.4 million for the same period in2004.

 

*Segment Profit*

 

Segment profit of approximately $17.9 million for 2005 (beforeunallocated depreciation and amortization, general and administrative,interest, debt restructuring, and income tax expense) increased $0.1 millionfrom the comparable period in 2004.

 

Membership services segment profit increased $0.9 million, or 8.8%, to$10.7 million for the second quarter of 2005. This increase is largely attributable to a $0.7 million increase inprofit from emergency road service products, $0.4 million increase in profitfrom the extended warranty program, and a $0.3 million increase in profit fromthe Coast to Coast Club and Golf Card Club, partially offset by a $0.5 milliondecrease in profit from RV Financing products.

 

Publication segment profit of $3.8 million for the second quarter of2005 decreased by $0.5 million, or 11.5%, from 2004.  This decrease was primarily attributable to a$0.3 million reduction in profit due to the timing of magazine issues for themotorcycle and powersports-related publications, $0.1 million of incrementalexpenses associated with the consumer shows acquired through the acquisition ofARU in December 2004, and a $0.1 million reduction in profit related tothe disposition of the archery-related titles.

 

15

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Retail segment profit of $3.4 million for the second quarter of 2005decreased by $0.3 million, or 9.0%, from the second quarter of 2004.  The decrease in segment profit resulted primarily from a $2.8 millionincrease in selling, general and administrative expenses and other allocatedexpenses, primarily related to the increase in retail labor, and a $0.6 millionincrease in depreciation expense partially offset by a $3.1 million increase ingross profit margin.

 

**Six Months Ended June 30, 2005Compared With Six Months Ended June 30, 2004**

 

*Revenues*

 

Revenuesof $241.9 million for the first six months of 2005 increased by approximately$13.0 million, or 5.7%, from the comparable period in 2004.

 

Membershipservices revenues of $66.8 million for the first six months of 2005 decreasedby approximately $0.7 million, or 1.1%, from the comparable period in2004.  This revenue decrease was largelyattributable to $2.0 million decrease in member events revenue primarily due tothe timing of the Great North American Rally, which occurred in the secondquarter of 2004 versus the third quarter of 2005, a $1.0 million reduction inmembership services revenue, primarily associated with reduced enrollment inthe Coast to Coast Club and Golf Card Club, and a $0.7 million reduction inmarketing fee income recognized on RV financing, partially offset by a $2.3million increase in extended vehicle warranty program revenue due to continuedgrowth in the sales of one-year warranty products, and a $0.7 million increasein emergency road service revenue due to increased enrollment.

 

Publicationrevenues of $32.5 million for the first six months of 2005 decreased $1.3million, or 3.9%, from the comparable period in 2004 primarily resulting from a$1.3 million revenue reduction due to the disposition of archery-related publicationtitles in the third quarter of 2004, a $0.8 million reduction in revenue fromreduced promotion of the campground atlas and the timing of annual directoryshipments, and a $0.6 million reduction associated with reduced issues ofmotorcycle and regional publications, partially offset by a $1.4million revenue increase associated with the acquisition of consumer shows,acquired through the acquisition of ARU in December 2004and the newly acquired *Powerboat Magazine*title.

 

Retail revenues of $142.6 million increased$15.0 million, or 11.8%, over the first six months of 2004.  Store merchandise sales increased $14.2million over the first six months of 2004 due to a same store sales increase of$6.6 million or 7.3%, compared to a 12.0% increase in the first six months of2004, and a $7.6 million revenue increase from the addition of eight new storesover the past eighteen months.  Samestore sale calculations for a given period include only those stores that wereopen both at the end of that period and at the beginning of the precedingfiscal year.  In addition, retail revenueincreased $0.8 million due to increases in other installation fees, suppliesand services revenue.

 

16

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*Costs Applicable to Revenues*

 

Costsapplicable to revenues totaled $148.7 million for the first six months of 2005,an increase of $4.9 million, or 3.4%, from the comparable period in 2004.

 

Membership services costs and expenses of $42.5million decreased approximately $2.6 million, or 5.7%, from the first sixmonths of 2004.  This decrease consistedof a $1.9 million cost decrease due to the timing of member events, a $1.3million decrease in membership services costs, primarily due to reduced marketingand programs expenses of the Coast to Coast Club and Golf Card Club partiallyoffset by an increase in production costs for the Good Sam member publication, *Highways Magazine*, and a $0.7 million decrease in other newproduct development costs and overhead expenses, partially offset by a $1.3million increase in marketing costs and program expenses associated withincreased enrollment in the extended vehicle warranty programs.

 

Publication costs and expenses of $21.8 millionfor the first six months of 2005 decreased $1.4 million from the comparableperiod in 2004 primarily due to a $1.2 million reduction from the dispositionof archery-related titles in the third quarter of 2004, and a $1.0 millionreduction in costs associated with reduced atlas promotions and reduced annualdirectory revenue, partially offset by $0.8 million of additional costsattributable to the newly acquired operations of ARU and the *Powerboat Magazine* title.

 

Retail costs applicable to revenues increased$8.9 million, or 11.7%, to $84.4 million primarily due to increased storesales.  The retail gross profit margin of40.8% for the first six months of 2005 remained unchanged from the comparableperiod in 2004.

 

*Operating Expenses*

 

Selling, general and administrative expenses ofapproximately $62.7 million for the first six months of 2005 increased $8.0million compared to the first six months of 2004 primarily due to an increasein retail selling and general and administrative expenses of approximately $6.6million consisting of a $4.3 million increase in retail labor, a $0.7 millionincrease in selling expenses, a $0.6 million increase in rent expense, and a$1.0 million increase in training and other retail general and administrativeexpenses, a $1.6 million increase in deferred executive compensation expensepartially offset by a $0.2 million decrease in other general and administrativeexpenses.

 

Depreciation and amortization expense ofapproximately $7.6 million increased approximately $1.6 million over the prioryear primarily due to increased depreciation on capital expenditures at CampingWorld, amortization of intangible assets associated with the purchase of ARU,the purchase of *Powerboat Magazine*, amortizationof financing costs associated with the issuance of $200.0 million in 9% SeniorSubordinated Notes in February 2004, and amortization of financing costsassociated with the AGHI Notes.

 

*Income from Operations*

 

Incomefrom operations for the first six months of 2005 of $22.9 million decreased$1.5 million compared to the first six months of 2004 primarily due toincreased operating

 

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expensesof $9.6 million, partially offset by increased gross profit for the retail,membership services and publications operations of $6.1 million, $1.9 millionand $0.1 million, respectively.

 

*Non-Operating Items*

 

Non-operating items were $14.8 million for thefirst six months of 2005, compared to $16.2 million for the same period in2004.  This $1.4 million decreasecomprises of a $5.0 million reduction in debt extinguishment expensesassociated with the redemption in 2004 of the AGH senior notes due 2007,partially offset by approximately $3.6 million of additional interest expensein 2005 from higher loan balances associated with the issuance of $200.0million in 9% Senior Subordinated Notes in February 2004 and the AGHINotes in March 2005.

 

*Income before Income Taxes*

 

Income before income taxes for the first sixmonths of 2005 was $8.1 million, or $0.1 million lower than the first sixmonths of 2004.  This decrease was attributableto $3.6 million of additional interest expense and a $1.5 million decrease inincome from operations for the current period, partially offset by a $5.0million reduction in debt extinguishment expense from the prior period.

 

*Income Tax Expense*

 

TheCompany recorded $2.9 million of income tax expense for the first six months of2005, a decrease of approximately $0.1 million from the first six months of2004.  The effective tax rates for thefirst six months of 2005 and 2004 were 35.4% and 35.8%, respectively.  The effective tax rates are higher thanstatutory rates primarily due to state taxes.

 

# *NetIncome*

# * *

Net income in the first six months of 2005 was$5.2 million compared to $5.2 million for the same period in 2004.

 

*Segment Profit*

 

Segment profit of $31.0 million for the first six months of 2005(before unallocated depreciation and amortization, general and administrative,interest, debt restructuring, and income tax expense) increased $1.4 million,or 4.8%, from the comparable period in 2004.

 

Membership services segment profit increased $2.2 million, or 11.8%, to$21.0 million for the first six months of 2005. This increase is largely attributable to a $1.3 million increase inprofit from emergency road service products, $1.2 million increase in profitfrom the extended warranty program, a $1.0 million increase in profit from theCoast to Coast Club and Golf Card Club, partially offset by a $0.7 milliondecrease in profit from RV financing products and a $0.3 million decrease inprofit in the Good Sam member publication, *Highways Magazine*,due to increased production costs and a $0.3 million increase in other newproduct development expenses.

 

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Publication segment profit of $8.2 million for the first six months of2005 remained unchanged from the comparable period in 2004.  Reduced profit in the motorcycle publicationswas offset by an increase in profit associated with the consumer shows acquiredthrough the acquisition of ARU in December 2004 and the purchase of the *Powerboat Magazine*.

 

Retail segment profit of $1.8 million for the first six months of 2005decreased by $0.8 million, or 31.8%, from a profit of $2.6 million in2004.  The decreased profit resulted primarily froma $5.8 million increase in selling, general and administrative expenses andother allocated expenses, and a $1.1 million increase in depreciation expense,partially offset by a $6.1 million increase in gross profit margin.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The Company has historically operated with a workingcapital deficit.  The working capitaldeficit as of June 30, 2005 and December 31, 2004 was $5.6 millionand $10.8 million, respectively.  Theprimary reason for the working capital deficit is the deferred revenue andgains reported under current liabilities in the amount of $64.0 million and$57.7 million as of June 30, 2005 and December 31, 2004,respectively.  Deferred revenue isprimarily comprised of cash collected for club memberships in advance, which isamortized over the life of the membership. The Company uses net proceeds from this deferred membership revenue tolower its long-term borrowings. Management believes that funds generated by operations together withavailable borrowings under the AGI Senior Credit Facility will be sufficient tomeet all of the Company’s debt service requirements and capital requirementsover the next twelve months.

 

Interest under the AGHI Notes is due semi-annuallyon August 15 and February 15. For interest payments through and including February 15, 2008, AGHIhas the right to issue additional notes of the same tenor as the AGHINotes.  Any additional AGHI Notes issuedin payment of interest are due in full on or before March 15, 2010.  The source of cash for any interest that isto be paid in cash is dividends from AGI. Both the AGI Senior Credit Facility and the AGI Indenture containcertain restrictions on the payment of dividends by AGI to AGHI.  Interest accrued on the AGHI Notes has beenclassified in long-term debt as it is AGHI’s intent to issue additional notesto pay the interest for the next twelve months.

 

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*Contractual Obligations andCommercial Commitments*

 

The following table reflects the Company’scontractual obligations and commercial commitments by maturity period at June 30,2005, in thousands.

 

 
| *** ***                              | *** *** | **Payments Due by Period** | ** ** |
|-------------------------------------------|--------------|----------------------------|------------|
| **(in thousands)**                        | ** **   | **Total**                  | ** ** | **Balance of  2005** | ** ** | **2006 and  2007** | ** ** | **2008 and  2009** | ** ** | **Thereafter** | ** ** |
|                                      |         |                       |       |   |   |   |   |   |   |   |   |
| Long-term  debt                           |         | $                          | 402,746    |   | $ | 1,017 |   | $ | 3,962 |   | $ | 109,589 |   | $ | 288,178 |   |
| Operating  lease obligations              |         | 134,914                    |       | 6,263 |   | 22,613 |   | 16,997 |   | 89,041 |   |
| Deferred  compensation                    |         | 6,013                      |       | 564 |   | 1,768 |   | 3,061 |   | 620 |   |
| Standby and  commercial letters of credit |         | 7,354                      |       | 6,904 |   | 450 |   | — |   | — |   |
| Grand total                               |         | $                          | 551,027    |   | $ | 14,748 |   | $ | 28,793 |   | $ | 129,647 |   | $ | 377,839 |   |

 

On June 24, 2003, AGI entered into an Amended and Restated CreditAgreement and a Senior Secured Floating Rate Note Purchase Agreement (asamended, the AGI Senior Credit Facility). The AGI Senior Credit Facility provides for a revolving credit facilityof $35.0 million and term loans (“Term B1 and Term B2 loans”) in the aggregateof $140.0 million.  Proceeds from the AGISenior Credit Facility were used to refinance the existing senior securedindebtedness, pay a dividend of $13.7 million to the Company’s parent AGIHolding Corp. and redeem $30.0 million principal amount of the AGH senior notesdue 2007 (“AGH Notes”) at 103.667% of par in 2003.  As of June 30, 2005, $32.0 million and$79.9 million were outstanding under the Term B1 and Term B2 loans,respectively.  No borrowings wereoutstanding on the revolving credit facility as of June 30, 2005.  Reborrowings under the term loans are notpermitted.  The interest on borrowingsunder the AGI Senior Credit Facility is at variable rates based on the ratio oftotal cash flow to outstanding indebtedness (as defined).  Interest rates float with prime and theLondon Interbank Offered Rates, or LIBOR, plus an applicable margin rangingfrom 1.50% to 3.50% over the stated rates. As of June 30, 2005, the average interest rate on the term loanswas 6.14%, and permitted borrowings under the undrawn revolving facility were$27.6 million.  AGI also pays acommitment fee of 0.5% per annum on the unused amount of the revolving creditfacility.  The aggregate quarterlyscheduled payments on the term loans are $350,000.  The revolving credit facility matures on June 24,2008, and the Term B1 and Term B2 loans mature on June 24, 2009.  The funds available under the AGI Senior CreditFacility may be utilized for borrowings or letters of credit; however, amaximum of $12.5 million may be allocated to such letters of credit.  As of June 30, 2005, AGI had letters ofcredit in the aggregate amount of $7.4 million outstanding.  The AGI Senior Credit Facility is secured byvirtually all of the Company’s assets and a pledge of the Company’s stock andthe stock of the Company’s subsidiaries.

 

In February 2004, AGI issued $200.0million aggregate principal amount of 9% senior subordinated notes due 2012(the “AGI Notes”).  Interest is payableon the AGI Notes twice a year on each February 15 and August 15,beginning August 15, 2004, and the Notes mature on February 15,2012.  AGI completed a registeredexchange of the Notes under the Securities Act of 1933 in August 2004.  The proceeds from the sale of the AGI Noteswere used to fund the tender offer and defeasance of the remaining $100.0million outstanding principal amount of the AGH Notes, prepay $25.0 million ofthe Term B1 and

 

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Term B2 loans under the AGI Senior CreditFacility, pay a $60.0 million dividend distribution, create a $15.0 millionsegregated cash account, pay certain prepayment and transaction costs and forgeneral corporate purposes.  The amountheld in this segregated account, including any earnings thereon, was availableto pay stockholder dividends upon satisfaction of a leverage test specified inthe AGI Senior Credit Facility.  In August andNovember of 2004, AGI satisfied the specific leverage test and paid $3.6million and $11.5 million in dividends, respectively.  The segregated account replenishmentrequirement has been permanently eliminated.

 

In November 2004, AGI amended the AGISenior Credit Facility dated June 24, 2003.  The interest rates on the Term B1 and Term B2loans were reduced by 1.00%.  Theapplicable interest margin on the LIBOR and Prime Rate loans was reduced from4.00% to 3.00% and 3.00% to 2.00%, respectively.

 

On March 24, 2005 in a private placement,the Company issued $88.2 million principal amount of its 10-7/8% senior notesdue 2012 (the “AGHI Notes”) at a $3.2 million original issue discount.  The Company completed a registered exchangeof these AGHI Notes under the Securities Act of 1933 in June 2005.  The AGHI Notes are unsecured obligations ofthe Company and its subsidiaries have not guaranteed payment of principal orinterest on the AGHI Notes.  Interest onthe AGHI Notes is payable semi-annually on February 15 and August 15commencing August 15, 2005 and the entire $88.2 million principal amountof the AGHI Notes are due in full on February 15, 2012.  For interest payments on and prior to February 15,2008, AGHI may elect to pay interest on the AGHI Notes in cash or by theissuance of additional notes of the same tenor as the AGHI Notes.  Any additional AGHI Notes issued in paymentof interest are due in full on or before March 15, 2010.  The AGHI Notes cannot be redeemed prior to February 15,2008.  Although the source of the cashpayment of the AGHI Notes is dividends from AGI, its wholly-owned subsidiary,there are certain restrictions on the payment of dividends under the AGI SeniorCredit Facility and the AGI Indenture.

 

TheCompany contributed the net proceeds from the issuance of the AGHI Notes,approximately $81.0 million, to AGI and in turn, AGI made an equitycontribution to its wholly-owned subsidiary, Camping World, Inc. (“CampingWorld”).  Camping World then made anequity capital contribution in the same amount to its wholly-owned subsidiary,CWI, Inc. (“CWI”).  CWI created a newwholly-owned subsidiary named CWFR Capital Corp., a Delaware corporation (“CWFR”)which is an “unrestricted subsidiary” under the AGHI Notes, and the AGIIndenture.  Since CWFR is an unrestrictedsubsidiary, its operations are not restricted by either the AGI Indenture orthe AGHI Notes.  CWI made an equitycapital contribution to CWFR in an equal amount to the capital contributionthat it received from Camping World. CWFR used the proceeds from the equity capital contribution to acquire apreferred membership interest in FreedomRoads Holding Company, LLC (“FreedomRoadsHolding”), a Minnesota limited liability company owned 90% by The Stephen AdamsLiving Trust, which also indirectly owns 97.4% of the outstanding capital stockof AGHC and indirectly AGHI.

 

The AGI Indenture pursuant to which the AGI Notes were issued and theAGI Senior Credit Facility contain certain restrictive covenants relating to,but not limited to, mergers, changes in the nature of the business,acquisitions, additional indebtedness, sale of

 

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assets, investments, and the payment of dividends subject to certainlimitations and minimum operating covenants. The Company was in compliance with all debt covenants at June 30,2005.

 

In April 2005, Camping World, Inc. acquired the assets of a mailorder catalog retailer specializing in recreational vehicle merchandise for$0.6 million.  In May 2005, the EhlertPublishing Group, Inc. acquired the publishing assets of Nordskog Publishing,Inc. for $4.0 million.  As part of thepurchase, the Company issued $1.5 million of purchase debt and assumed $0.5million of liabilities.

 

For the six months ended June 30, 2005, the Company incurred $1.6million of deferred executive compensation expense under the phantom stockagreements and made payments of $0.9 million on the pay-out provisions ofexisting phantom stock agreements.  Theearned incentives under these agreements are scheduled to be paid at varioustimes over the next seven years.  Phantomstock payments of $0.6 million are scheduled to**bemade over the remainder of the calendar year.

 

Capital expenditures for the first six months of 2005 totaling $4.8million decreased $0.2 million from the first six months of 2004.  Additional capital expenditures of $8.0million are anticipated for the balance of 2005, primarily for new CampingWorld stores and equipment, information technology and database enhancements,computer hardware upgrades and replacements, a distribution center expansion,and computer software upgrades and enhancements.

 

**CRITICAL ACCOUNTING POLICIES**

 

*General*

 

The discussion and analysis of the Company’s financial condition andresults of operations are based upon the Company’s consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States. The preparation of these financial statements requires the Company tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assetsand liabilities.  On an on-going basis,the Company evaluates its estimates, including those related to membershipprograms and incentives, bad debts, inventories, intangible assets, employeehealth insurance benefits, income taxes, restructuring, contingencies andlitigation.  The Company bases itsestimates on historical experience and on various other assumptions that arebelieved to be reasonable under the circumstances, the results of which formthe basis for making judgments about the carrying values of assets andliabilities that are not readily apparent from other sources.  Actual results may differ from theseestimates under different assumptions or conditions.

 

The Company believes the following critical accounting policies affectthe more significant judgments and estimates used in the preparation of theCompany’s consolidated financial statements.

 

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*Revenue Recognition*

 

Merchandise revenue is recognized whenproducts are sold in the retail stores, shipped for mail and internet orders,or when services are provided to customers. Publication advertising and newsstand sales, net of estimated provisionfor returns, are recorded at time of delivery. Subscription sales of publications are deferred and recognized over thelives of the subscriptions.  Revenuesfrom the emergency road service program (“ERS”) are deferred and recognizedover the life of the membership.  ERSclaim expenses are recognized when incurred. Advances on third party credit card fee revenues are deferred andrecognized based primarily on a percentage of credit card receivables held bythird parties.  Membership revenue isgenerated from annual, multi-year and lifetime memberships.  The revenue and expenses associated withthese memberships are deferred and amortized over the membership period.  For lifetime memberships, an 18-year periodis used, which is the actuarially determined estimated fulfillment period.  Promotional expenses, consisting primarily ofdirect mail advertising, are deferred and expensed over the period of expectedfuture benefit.  Renewal expenses areexpensed at the time related materials are mailed.  Recognized revenues and profit are subject torevisions as the membership progresses to completion.  Revisions to membership period estimateswould change the amount of income and expense amortized in future accountingperiods.

 

*Accounts Receivable*

 

The Company estimates the collectability of its trade receivables.  A considerable amount of judgment is requiredin assessing the ultimate realization of these receivables including thecurrent credit-worthiness of each customer. Changes in required reserves have been recorded in recent periods andmay occur in the future due to the market environment.

 

*Inventory*

 

The Company states inventories at the lower of cost or market.  In assessing the ultimate realization ofinventories, the Company is required to make judgments as to future demandrequirements and compare that with the current or committed inventorylevels.  The Company has recorded changesin required reserves in recent periods due to changes in strategic direction,such as discontinuances of product lines as well as changes in marketconditions due to changes in demand requirements.  It is possible that changes in requiredinventory reserves may continue to occur in the future due to the marketconditions.

 

*Long-Lived Assets*

 

Purchased intangible assets with finite lives are amortized using thestraight-line method over the estimated economic lives of the assets, rangingfrom one to twenty-three years.

 

Long-lived assets, such as property, plant and equipment and purchasedintangible assets with finite lives are evaluated for impairment wheneverevents or changes in circumstances indicate the carrying value of an asset maynot be recoverable in accordance with SFAS No. 144, “Accounting for theImpairment or Disposal of Long-Lived Assets.” The Company assesses the fair value of the assets based on the futurecash flow the assets are

 

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expected to generate and recognize an impairment loss when estimatedundiscounted future cash flow expected to result from the use of the asset plusnet proceeds expected from disposition of the asset (if any) are less than thecarrying value of the asset.  When animpairment is identified, the Company reduces the carrying amount of the asset toits estimated fair value based on a discounted cash flow approach or, whenavailable and appropriate, comparable market values.  The Company determined there were noindicators of impairment of long-lived assets as of December 31, 2004 or June 30,2005.

 

The Company has evaluated the remaining useful lives of itsfinite-lived purchased intangible assets to determine if any adjustments to theuseful lives were necessary or if any of these assets had indefinite lives andwere therefore not subject to amortization. The Company determined that no adjustments to the useful lives of itsfinite-lived purchased intangible assets were necessary.  The finite-lived purchased intangible assetsconsist of membership customer lists, resort and golf course agreements, non-competeand deferred consulting agreements and deferred financing costs which haveweighted average useful lives of approximately 6 years, 23 years, 15 years and7 years, respectively.

 

*Indefinite Lived Intangible Assets*

 

The Company evaluates indefinite lived intangible assets for impairmentat least annually or when events indicate that an impairment exists inaccordance with SFAS No. 142.  Theimpairment test for goodwill and other indefinite-lived intangible assets iscalculated annually using fair value measurement techniques.

 

Determining the fair value of a reporting unit and the fair value ofindividual assets and liabilities of a reporting unit is judgmental in natureand often involves the use of significant estimates and assumptions.  These estimates and assumptions could have asignificant impact on whether or not an impairment charge is recognized andalso the extent of such charge.  TheCompany’s estimates of fair value utilized in goodwill and otherindefinite-lived intangible asset tests may be based upon a number of factors,including assumptions about the projected future cash flows, discount rate,growth rate, determination of market comparables, technological change,economic conditions or changes to the Company’s business operations.  Such changes may result in impairment chargesrecorded in future periods.

 

The fair value of the Company’s reporting units is annually determinedusing a combination of the income approach and the market approach.  Under the income approach, the fair value ofa reporting unit is calculated based on the present value of estimated futurecash flows.  Future cash flows areestimated by the Company under the market approach, fair value is estimatedbased on market multiples of revenue or earnings for comparable companies.

 

Based on the results of the annual impairment tests, the Companydetermined that no impairment of goodwill existed as of December 31,2004.  However, future goodwillimpairment tests could result in a charge to earnings.  The Company will continue to evaluategoodwill on an annual basis and whenever events and changes in circumstancesindicate that there may be a potential impairment.

 

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**ITEM3:  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

We are exposed to market risks relating tofluctuations in interest rates.  Ourobjective of financial risk management is to minimize the negative impact ofinterest rate fluctuations on our earnings and cash flows.  Interest rate risk is managed through the useof a combination of fixed and variable interest debt as well as the periodicuse of interest rate collar contracts.

 

The following information discusses thesensitivity to our earnings.  The rangeof changes chosen for this analysis reflects our view of changes which arereasonably possible over a one-year period. These forward-looking disclosures are selective in nature and onlyaddress the potential impacts from financial instruments.  They do not include other potential effectswhich could impact our business as a result of these interest ratefluctuations.

 

*Interest Rate SensitivityAnalysis*

 

At June 30, 2005, we had debt totaling$402.7 million, comprised of $111.8 million of variable rate debt and $290.9million of fixed rate debt.  Holdingother variables constant (such as debt levels), the earnings and cash flow, theimpact of a one-percentage point increase/ decrease in interest rates wouldhave an unfavorable/ favorable impact of approximately $1.1 million.

 

*Credit Risk*

 

We are exposed to credit risk on accountsreceivable.  We provide credit tocustomers in the ordinary course of business and perform ongoing creditevaluations.  Concentrations of creditrisk with respect to trade receivables are limited due to the number ofcustomers comprising our customer base. We currently believe our allowance for doubtful accounts is sufficientto cover customer credit risks.

 

**ITEM 4:CONTROL AND PROCEDURES**

 

Within 90 days prior to the filing of this Quarterly Report on Form10-Q, the Company carried out an evaluation, under the supervision and with theparticipation of the Company’s management, including the President and ChiefExecutive Officer and the Senior Vice President and Chief Financial Officer, ofthe effectiveness of the design and operation of the Company’s disclosure controlsand procedures pursuant to Regulation 13a-14 under the Securities Exchange Actof 1934.  Based upon that evaluation, thePresident and Chief Executive Officer along with the Senior Vice President andChief Financial Officer concluded that the disclosure controls and proceduresare effective in timely alerting them to material information relating to theCompany (including its consolidated subsidiaries) required to be included inthe periodic SEC filings.  There havebeen no significant changes in the Company’s internal controls or in otherfactors that could significantly affect these controls subsequent to the datethe Company carried out its evaluation.

 

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**PART II:  OTHER INFORMATION**

 

None

 

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**SIGNATURES:**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrants have duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 
|                      |   | **AFFINITY GROUP HOLDING, INC.** |
|---------------------------|--------|----------------------------------|
|                      |   |                             |
|                      |   |                             |
|                      |   | /s/ Thomas F. Wolfe              |   |
| Date: August 3, 2005 |   | Thomas F. Wolfe                  |
|                      |   | Senior Vice President and        |
|                      |   | Chief Financial Officer          |

 

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