**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-K**

** **

| **x**                                                 | ** ** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|-------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|
|                                                  |
| **For the  fiscal year ended December 31, 2008** |
|                                                  |
| **o**                                                 | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |

 

**For the transition period from            to           **

 

**Commission File Number  333-113982**

 

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**AFFINITYGROUP, INC.**

(Exact name of registrantas specified in its charter)

 

| **Delaware**                              | ** ** | **13-3377709**                        |
|-------------------------------------------|------------|---------------------------------------|
| (State of incorporation  or organization) |       | (I.R.S. Employer  Identification No.) |
|                                      |       |                                  |
| **2575  Vista Del Mar Drive**             |       | ** **                            |
| **Ventura,  CA 93001**                    |       | **(805)  667-4100**                   |
| (Address of principal  executive offices) |       | (Registrant’s telephone          |
|                                      |       | number including area  code.)         |

 

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SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THEACT:  **NONE**

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: **9% Senior Subordinated Notes Due 2012**

 

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES  o    NO  x

 

Indicate by check mark if the registrant isnot required to file reports pursuant to Section 13 orSection 15(d) of the Act.

YES  o    NO  x

 

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

YES x    NO   o

 

Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in Part IIIof this Form 10-K or any amendment to this Form 10-K.

o

 

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, or a non-acceleratedfiler.  See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct).  (Check one):

 
| Accelerated filer o |   | Large accelerated filer o |   | Non-accelerated filer x |   | Smaller reporting company o |
|---------------------|--------|---------------------------|--------|-------------------------|--------|-----------------------------|

 

Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  o    NO  x

 

Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practicable date.

 

| ** **                     | ** ** | **Outstanding as of** |
|--------------------------------|------------|---------------------------------|
| **Class**                      | ** ** | **June 5, 2009**      |
| Common  stock, $.001 par value |       | 2,000                           |

 

 

 

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**PART I**

 

**ITEM 1: BUSINESS**

 

**General**

 

Exceptwhere the context indicates otherwise, the term “Company,” or “AGI” meansAffinity Group, Inc. and its predecessors and subsidiaries.

 

We are a wholly-owned subsidiary of Affinity Group Holding, Inc.,(“AGHI”), a privately-owned corporation. We are a member-based direct marketing organization targeting NorthAmerican recreational vehicle (“RV”) owners and outdoor enthusiasts.  Our club members form a receptive audience towhich we sell products, services, merchandise and publications targeted totheir specific recreational interests. In addition, we are a specialty retailer of RV-related products.  We operate through three principal lines ofbusiness, consisting of (i) club memberships and related products andservices, (ii) subscription magazines and other publications includingdirectories, and (iii) specialty merchandise sold primarily through our 78Camping World retail stores, mail order catalogs and the Internet.

 

Thereare approximately 1.8 million dues paying members enrolled in our clubs.  We currently have approximately 4.6 millionin aggregate circulation and 1.0 million paid circulation across our 37publications.  For the year ended December 31,2008, our revenue, operating loss and net loss were $526.1 million, $87.8million and $112.0 million, respectively.

 

**Competitive Strengths**

 

We believe that our key competitive strengthsare as follows:

 

*Recurring Cash Flow Stream -* Approximately 73% of our operatingincome, net of non-cash charges, is generated through our membership club andsubscription-based products and services which historically have provided arecurring income stream through a core base of customers.  Our four established membership clubs have anaverage renewal rate for the five calendar years ended 2008 of 67%, which webelieve compares favorably to other subscription-based businesses. Similarly,our membership-based products and services have historically also experiencedhigh renewal rates, averaging approximately 86% over the past five years forour largest product and service offerings, Emergency Road Service (“ERS”), RVvehicle insurance and extended warranty.

 

*Established Market Positions* - We are a member-based direct marketingorganization targeting North American RV owners and outdoor enthusiasts withcomprehensive targeted product offerings. The Good Sam Club, which was foundedin 1966, and Camping World’s President’s Club founded in 1986 are thepreeminent RV membership clubs in North America.  Camping World is a national specialtyretailer of merchandise accessories and services for RV owners and campingenthusiasts that has grown to 78 retail stores since it began business.

 

We believe our significant size relative to our competition is a meaningfuladvantage that provides us greater leverage to negotiate benefits and discountswith third-party service providers for our members and consequently enhancesthe value of our product and service offerings. Additionally, these negotiating and pricing advantages allow us toincrease membership dues without risking the loss of members, who arecompensated by additional savings and attract other product and serviceofferings.  Our 1.8 million club membersand the 8.1 million consumers in our proprietary database serve as a unique,captive audience for direct marketing, which we believe significantly lowerscustomer acquisition costs relative to our competitors and facilitatescost-effective cross-selling.

 

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*Membership Services Segment remains stable-* Our operating performance has felt theeffects of the current economic downturn but we believe that our membershipsegment will not experience the downturn to the same extent as our otherbusiness segments.  While competition isintense for consumer expenditures, we believe that consumers value the annualsavings of club membership.  We marketour clubs, products and services to a sizable existing installed base of over7.9 million RV owners, which affords us the ability to continue to attract newcustomers irrespective of new RV sales. We believe RV owners may be more likely to take vacations utilizing RVsduring an economic downturn, because they are generally less expensive thanvacations necessitating plane or train travel and hotel accommodations, whichwould drive increased sales of our products.

 

*Favorable Demographic Trends* - Favorable demographic trends, inparticular the aging of the “baby boomers,” indicate that RV ownership shouldincrease during the next five years. Overall RV ownership rates have historically been highest, with 10%penetration, in the 55-64 age bracket, an age group that is expected toexperience a five-year growth of 20.1% by 2010, according to the NationalSurvey of the RV Consumer by the University of Michigan in 2005 (the “RV Survey”).  Furthermore, the 45-54 age bracket, whichmaintains the second highest ownership rate of RVs, is expected to experience afive-year growth of 6.3% by 2010.  Thegrowth in these age groups is expected to generate growth in the pool ofpotential RV consumers.  Also, accordingto the RV Survey, this age group shift will drive the number of households thatown at least one RV from 7.9 million in 2005 to 8.5 million in 2010. Inaddition, RV owners have household incomes that generally exceed the nationalaverage.  These demographics areattractive for advertisers and third-party providers of products and services.

 

*Experienced and Incentivized Management Team -* Our executive management team hasextensive publishing, direct marketing and retail experience with significantexpertise in the RV industry. With an average of sixteen years with ourcompany, the team has developed substantial experience in increasing our targetcustomer base, using strategic alliances to bolster product offerings thatcreate value for our customers and increasing cross-selling opportunities forour high margin product offerings. Our consistent operating performance, to agreat extent, is attributable to our senior managers who are responsible fordeveloping and implementing our business strategy and focusing on increasingprofitability. Our executive management team is compensated both through anannual salary and through a management incentive program that is directly tiedto our financial performance.

 

**Our Strategy**

 

Our primary business strategy is to maximizethe sale of club memberships, products, services, publications and merchandiseto our target customer base of RV owners and outdoor enthusiasts. To this end,we focus on cross-selling our various offerings to each of our customers whilemanaging customer acquisition costs and maintaining high renewal rates byproviding high value product offerings.

 

*Maximize Customer Retention withValue-Added Product Offerings -*A key aspect of our strategyis to develop strong membership loyalty by providing an attractive valueproposition for club members and offering add-on products specifically targetedto meet their needs as reflected by our strong customer renewal rates. Each ofour five membership clubs provides our customers with tangible savings whichsubstantially exceed the membership fee. On average, club members benefit by saving approximately five timesgreater than the cost of their annual membership dues as the result of being ableto purchase products and services at discounts made available through ourclubs.  We believe that the participationlevels and renewal rates of club members reflect the benefits derived fromtheir membership.  As such, in order tomaximize customer renewal rates, we constantly evaluate member satisfaction andactively respond to changing member preferences through the enhancement orintroduction of new membership benefits including products and services.

 

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*Efficiently Acquire New Customers-*We believe efficient customer acquisition and a sizeable databasepopulation are critical to driving our growth and profitability.  Camping World and its discount buyer’s club,President’s Club, together, account for approximately 59% of our new customerdatabase entries.  In addition to being ahighly valuable customer loyalty program, President’s Club allows us to capturespecific information about each customer including RV type and usage, as wellas information on the customer’s age, income, net worth and interests, whileadding virtually no incremental customer acquisition costs.  We are able to customize our direct marketingoffers based upon our customers’ profiles. Other methods of customer acquisition include purchasing lists from dataproviders and placing our publications at campgrounds and RV dealerships. Wethen manage our database and target our offers to the customers most likely topurchase more than one of our product offerings.

 

*Cross-Sell Products and Servicesto Existing Customers -*We proactively cross-sell our products andservices across our customer base. For example, we use our existing customerdatabase to cost-efficiently market Camping World products throughcatalogs.  Conversely, Camping Worldsupercenters provide direct customer referrals to our membership clubs,products and services through their in-store kiosks.  In addition, we use our publications tocommunicate with our core customer base and to promote our other businesssegments to existing club members.  Ourmagazines contain relevant content as well as various forms of advertisementsfor our membership clubs, products and services.

 

*Expand Presence in SpecialtyRecreation Niche -*We believe aggregate circulation of our magazines isan important factor in determining the amount of revenue we can obtain fromadvertisers.  Consequently, we seek toexpand our presence as a publisher in select recreational niches through theintroduction of new magazine titles and the acquisition of other publicationsor businesses in our markets or in complementary recreational marketniches.  Publications in complementaryniches may also provide the opportunity to launch new membership clubs, tomarket our products and services to new customers and to develop other productsand services, which meet the special needs of these customers.  For example, our acquisition of thepublishing assets of Nordskog Publications, Inc. in May 2005 allowedus to expand our presence in the recreational boat market niche.  In addition, we now own 49 consumer outdoorrecreation shows, most of which were acquired from Royal Productions, Inc.in December 2005, Plus Events shows in February 2006, four showspurchased from Apple Rock Advertising and Promotions, Inc. in September 2006,five shows purchased from Industrial Expositions, Inc. in February 2007,nine shows were purchased from MAC Events, LLC in January 2008, and threeshows were purchased from Mid America Expositions, Inc. in February 2008.  These shows provide an expanded face-to-faceforum for acquiring new customers.

 

*Camping World Penetration -*We continuedthe controlled expansion of our Camping World supercenter network by developingCamping World stores alongside or within independent RV dealerships, includingRV dealerships owned and operated by our affiliates, which provides acompetitive advantage by creating a means of increasing retail customertraffic.  In 2008, we opened 6 newCamping World stores, all of which are adjacent to or within RV dealershipsowned or operated by affiliates, and in 2009 we intend to open one additionalCamping World store which will be located adjacent to an RV dealershipaffiliated with us through common ownership with our Chairman, StephenAdams.  In addition to generatingincreased cash flows from the sale of merchandise, a larger network ofgeographically diverse Camping World stores will enhance our ability to marketour portfolio of membership clubs, publications and product and serviceofferings to a significantly larger customer base.

 

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**RV Industry**

 

The use of RVs and the demand for club memberships and related productsand services may be influenced by a number of factors including generaleconomic conditions, consumer credit availability, the availability and priceof propane and gasoline, and the total number of RVs.  We believe that both the installed base ofRVs and the type of RV owned (full service vehicles excluding van conversions) arethe most important factors affecting the demand for our membership clubs,merchandise, products and services. Based on the RV Survey, the number of households owning RVs is projectedto increase from 7.9 million in 2005 to nearly 8.5 million in 2010.  The RV Survey also indicates that the percentageof households owning RVs during this period will rise slightly from 8.0% to8.2%.

 

According to the RV Survey, the average RV owner is 49 years old.  RV ownership also increases with age reachingits highest percentage level among those 55 to 64 years old.  Households in this age group are projected toincrease from 18.2 million in 2005 to 21.6 million in 2010.  RV ownership also is concentrated in thewestern United States, an area in which the population growth rate continues tobe greater than the national average. The RV Survey also indicates that RV ownership is associated with higherthan average annual household income, which among RV owners was approximately$68,000 per annum as compared to the national average of $43,000 per annum.

 

The average age and annual household income of our club members in 2008were 56 years and $80,000, respectively. We believe that the demographic trend towards an aging population willhave a favorable impact on RV ownership. The demographic profile of our typical club member follows that of thegeneral population and thus we believe this will also have a favorable impacton demand for our club memberships and related products and services.

 

**Membership Clubs**

** **

Weoperate the Good Sam Club, President’s Club, Coast to Coast Club and Camp ClubUSA for RV owners, campers and outdoor vacationers, and the Golf Card Club forgolf enthusiasts.  The membership clubsform a receptive audience to which we market our products and services.

 

Thefollowing table sets forth the number of members at December 31, 2008,annual membership dues and average annual renewal rates during the period of2004 to 2008 for each club:

 
| ** **               | ** ** | **Number of Members**                  | ** ** | ** **                   | ** ** | **Average Renewal** | ** ** |
|--------------------------|------------|--------------------------------------------------|------------|------------------------------|------------|--------------------------|------------|
| **Membership Club** | ** ** | **at December 31, 2008 (1)** | ** ** | **Annual Fee (2)** | ** ** | **Rate (3)**        | ** ** |
|                     |       |                                             |       |                         |       |                     |       |
| Good Sam Club            |       | 952,200                                          |       | $12 - $25                    |       | 63                       | %          |
|                     |       |                                             |       |                         |       |                     |       |
| President’s Club    |       | 718,500                                          |       | $15 - $20                    |       | 71                       | %          |
|                     |       |                                             |       |                         |       |                     |       |
| Coast to Coast  Club     |       | 60,200                                           |       | $90 - $140                   |       | 71                       | %          |
|                     |       |                                             |       |                         |       |                     |       |
| Other Clubs:             |       |                                             |       |                         |       |                     |       |
| Golf Card Club           |       | 31,700                                           |       | $49 - $65                    |       | 51                       | %          |
|                     |       |                                             |       |                         |       |                     |       |
| Camp Club USA  (4)       |       | 41,200                                           |       | $40 - $50                    |       | —                   |       |

 

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(1)  Alsoincludes multi-year and lifetime members.

(2)  For asingle member, subject to special discounts and promotions.

(3)  Excludesmembers having lifetime memberships.

(4)  CampClub USA was launched in 2006 so renewal data is not yet available.

 

In addition to regular annual memberships, wealso sell multi-year memberships.  Webelieve that multi-year memberships provide several advantages, including theup-front receipt of dues in cash,

 

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reduced membership costs and a strengthenedmember commitment.

 

*Good Sam Club*

 

The Good Sam Club,a membership organization for RV owners, is the largest RV organizationworldwide with approximately 952,200 member families.  As of December 31, 2008, there were1,640 local chapters throughout the United States and Canada.  The average renewal rate for Good Sam Clubmembers was approximately 63% during the period 2004 through 2008. The renewalrate was approximately 58% in 2008.

 

TheGood Sam Club is widely recognized as an essential part of the RV ownershipexperience.  By delivering value tomembers through information, support and benefits, including 10% discounts atapproximately 1,520 RV parks across the U.S. and Canada, members save money,come together to share experiences and more thoroughly enjoy RVing.  Other benefits include discounts on thepurchase of RV supplies and accessories at select RV service centers; an annualsubscription to *Highways*, the club’s newsmagazine; discounts on our other publications; trip routing andmail-forwarding; and access to products and services developed for clubmembers.  Based on typical usagepatterns, we estimate that Good Sam Club members realize estimated annual savingsfrom discounts of approximately $90.

 

TheGood Sam Club establishes quality standards for RV parks and campgroundsparticipating in its network. Campgrounds and parks participating in the Good Sam Club program benefitfrom increased occupancy and sales of camping-related products.  We believe that we have establishedconsiderable penetration of those for-profit RV parks and campgrounds that meetour quality standards for participation in the discount program.  We monitor our affiliated campgrounds and removesubstandard facilities from our program to ensure that our brand image andreputation are not diluted.

 

In1992, the Good Sam Club began selling lifetime memberships.  In 2008, the average price for a lifemembership was $237 with approximately 150,900 members registered as of December 31,2008.  Based on an actuarial analysis ofthe life members, we expect the average length of a lifetime membership to be18 years.

 

Thefollowing table lists the number of club members and RV parks and campgroundsfrom 2004 through 2008 at which discounts for members were available at December 31stof the respective year:

 
| ** **                                                       | ** ** | **2008** | ** ** | **2007**  | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|
|                                                             |       |     |       |      |       |     |       |     |       |     |       |
| Number of Good  Sam memberships                                  |       | 952,200  |       | 1,012,500 |       | 992,000  |       | 984,100  |       | 971,000  |       |
|                                                             |       |     |       |      |       |     |       |     |       |     |       |
| Lifetime members  included above                                 |       | 150,900  |       | 146,400   |       | 143,000  |       | 136,100  |       | 131,900  |       |
|                                                             |       |     |       |      |       |     |       |     |       |     |       |
| Number of RV  campgrounds offering discounts to Good Sam members |       | 1,520    |       | 1,500     |       | 1,610    |       | 1,580    |       | 1,750    |       |

 

*President’s Club*

 

ThePresident’s Club program, which was established in 1986, is the discount buyer’sclub for Camping World and the second largest RV club worldwide (behind onlyour Good Sam Club).  As of December 31,2008, the President’s Club had approximately 718,500 members.  The primary benefit offered to members of thePresident’s Club is a 10% discount on all retail merchandise at Camping Worldstores.  The President’s Club offers usan extremely cost effective and powerful method of acquiring new customers andretaining existing customers who are entering the RV lifestyle or have been inthe lifestyle for some time.  We use thesignificant amount of information gathered when a customer signs

 

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up formembership in the President’s Club to tailor product offers that are mostmeaningful to the customer’s needs and interests.  Additionally, we believe that the President’sClub, much like a traditional customer loyalty program, serves to bolster salesat our Camping World supercenters.

 

Inaddition to the 10% discount at Camping World stores, President’s Club membersalso receive *RV View*, the club magazine, aswell as special mailings, including newsletters and flyers offering selectedproducts and services at special prices. The President’s Club brand is marketing in conjunction with the CampingWorld brand in the majority of our promotional pieces directed at thesecustomers related to our product and service offerings.

 

President’sClub memberships may initially be obtained for one, two or three years at acost of $20, $35 or $50, respectively. We estimate that the average President’s Club member realizes annualsavings of approximately $38.  Theaverage renewal rate for members of the President’s Club was 71% during theperiod from 2004 to 2008.

 

Thefollowing table sets forth the number of President’s Club members and number ofretail stores at year-end for 2004 through 2008:

 
| ** **                                              | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                                    |       |     |       |     |       |     |       |     |       |     |       |
| Camping World’s  President’s Club memberships |       | 718,500  |       | 738,500  |       | 680,300  |       | 643,100  |       | 596,700  |       |
|                                                    |       |     |       |     |       |     |       |     |       |     |       |
| Number of stores                                        |       | 78       |       | 77       |       | 63       |       | 44       |       | 39       |       |

 

*Coast to Coast Club*

 

The Coast to Coast Club has operated a reciprocal use network ofprivate RV resorts in North America since 1972. The club offers a series of membership benefits depending upon pricingand program type under the Coast to Coast Club name.  Members of the Coast to Coast Club belong toa private RV resort owned and operated by parties unrelated to us.  Our club members may use the other resorts inthe Coast to Coast Club network on a reservation or space available basis andobtain discounts from other non-private campgrounds.  At December 31, 2008, there wereapproximately 60,200 member families in the Coast to Coast Club which hadnationwide access to approximately 239 private RV resorts and a network ofapproximately 211 public affiliated campgrounds that participated in the Coastto Coast Club reciprocal use programs. These private resorts are designed primarily for RV owners, buttypically provide camping or lodging facilities, comprised of RVs, cabins, parkmodels, and condominiums.  For an initialmembership fee plus annual maintenance fees, both paid by the customer to theresort, the private resorts provide an RV site with water, sewer and electricalhook-ups and recreational amenities, such as swimming, tennis or fishing, orproximity to theme parks or other recreational activities.  We have established quality criteria forresorts to join and remain in the Coast to Coast Club networks.

 

For standardannual renewal dues from $89.95 for a single year membership to $337.95 for afive-year membership, Coast to Coast Club members receive the followingbenefits: discounts for overnight stays at participating resorts andcampgrounds; an annual subscription to *Coast to Coast Magazine;*the*Coast to Coast Directory*providing information on theparticipating resorts; discounts on our other publications; access todiscounted condo vacation getaways and other discounted travel such as cruises;access to discount hotels and travel services; and access to ancillary productsand services developed for our club members.

 

We believe that resorts participating in the Coast to Coast Clubnetworks view access to reciprocating member resorts as an incentive for theircustomers to join their resort.  Becausea majority of Coast to Coast Club members own RVs, access to participatingresorts throughout North

 

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America can be an important complement to local resort membership.  Based on typical use patterns, we estimatethat Coast to Coast Club members realize estimated annual savings from thesediscounts of approximately $117.  Theaverage annual renewal rate for members of the Coast to Coast Club after theinitial one-year membership (which is generally paid by the member resort notthe club member) was approximately 71% during the period 2004 through 2008.

 

The following table sets forth the number of members in the Coast toCoast Club, resorts participating in the reciprocal use program, and the numberof public resorts extending discounts to Coast to Coast Club members for 2004through 2008.   The membership decline inCoast to Coast Club in 2008 resulted from our reliance on the private parknetwork to promote and generate new park members, and ultimately sell ourproduct, a lack of new park development, and our exclusion of sub-standardparks from the network.

 
| ** **                                 | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                       |       |     |       |     |       |     |       |     |       |     |       |
| Number of Coast  to Coast Club memberships |       | 60,200   |       | 69,600   |       | 78,900   |       | 85,200   |       | 98,700   |       |
|                                       |       |     |       |     |       |     |       |     |       |     |       |
| Participating  private resorts             |       | 239      |       | 241      |       | 301      |       | 301      |       | 309      |       |
| Participating  public resorts              |       | 211      |       | 210      |       | 228      |       | 225      |       | 176      |       |

 

##### *Golf Card Club*

##### * *

The Golf Card Club, founded in 1974, had approximately 31,700 members atDecember 31, 2008.  The majorattraction for membership is the financial savings which members receive whenplaying at any of the approximately 2,820 participating golf courses locatedthroughout the US and Canada. The annual membership fee varies with the lengthand type (single or double) of membership. We believe that the participating golf courses providing playingprivileges to club members represent the largest number of golf coursesparticipating in a discount program in North America.  None of the participating golf courses areowned or operated by us.

 

Golf Card Club members receive a variety of benefits, including:  a minimum of two rounds annually of free ordiscounted golf at participating golf courses; discounted vacation packages at133 “Stay and Play” resorts; discounts on golf practice at 43 driving ranges;savings on golf merchandise purchases at select member golf courses; car rentaldiscounts from National and Alamo; an annual subscription to the *Golf Traveler* member publication, published three times peryear in print and twelve times electronically; the annual directory listingparticipating golf courses and resorts; chances to win free golf merchandise inquarterly member giveaways; access to 71 local Grasshopper Clubs for tournamentsand social activities; an opportunity to play in member-guest tournaments; anopportunity to test (and keep) select golf products; a chance to win a freegolf lesson from a participating Golf Card pro; and access to the club web site(www.golfcard.com) including member-only features such as handicap tracking,course reviews, and trip routing.

 

Municipal, daily-fee, semi-private, and resort golf coursesparticipate in the Golf Card program. The program is attractive to participating courses because it buildstraffic and helps fill empty tee times during off-peak hours.  In addition, participating courses receivepromotion of their golf course in the *Golf Traveler*member publication, the Annual Directory, and the club website.  Members also purchase other merchandise orservices when exercising their playing privileges.  In this manner, Golf Card members tend toprovide incremental revenue to the golf courses.  Based on surveys conducted by us, membersrealize savings on green fees ranging from $150 to $250 annually, whichsignificantly exceed the cost of membership.

 

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The standard annual membership fee is $49 for a single membership and$89 for a twosome membership.  Multi-yearmemberships range from a single two-year membership for $118, to a three-yeartwosome membership for $267.  The averagerenewal rate for Golf Card Club members was approximately 51% for the periodfrom 2004 to 2008.  The membershipdecline in Golf Card Club since 2004 resulted from management’s decision tocease acquisition marketing due to lack of affinity to our other clubs.

 

The following table sets forth the number of Golf Card Club members,participating golf courses and “Stay and Play” resorts at December 31st ofeach respective year:

 
| ** **                                        | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of Golf  Card Club memberships (1)         |       | 31,700   |       | 44,900   |       | 55,000   |       | 57,800   |       | 67,200   |       |
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of  Participating Golf Courses             |       | 2,820    |       | 3,000    |       | 3,300    |       | 3,600    |       | 3,650    |       |
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of “Stay  and Play” Golf Resorts |       | 133      |       | 144      |       | 165      |       | 175      |       | 200      |       |

 

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(1)  A single membership counts as one member and a doublemembership as two members.

 

*Camp Club USA*

 

Camp Club USA was launched January 2006as a discount camping club offering a 50% discount on campsites.  At December 31, 2008 we hadapproximately 41,200 members.  Membersreceive a variety of benefits, including 50% savings at 1,113 campgrounds, anannual directory with maps, directions, amenities, monthly member giveaways,$50 cash for camping and travel tips, and a monthly eNewsletter with campgroundupdates, features and travel tips.  Basedon surveys conducted by us, members realize savings at campgrounds ranging from$100 to $150 annually, which significantly exceed the cost of membership.

 

The following table sets forth the number of Camp Club USA members andparticipating campgrounds at December 31st of each respective year:

 
| ** **                 | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|----------|------------|
|                       |       |     |       |     |       |     |       |
| Camp Club USA  members     |       | 41,200   |       | 38,100   |       | 22,900   |       |
|                       |       |     |       |     |       |     |       |
| Participating  campgrounds |       | 1,113    |       | 727      |       | 603      |       |

 

**Membership Products and Services**

 

Ourapproximately 1.8 million club members form a receptive audience to which wesell products and services targeted to the recreational interests of our clubmembers.  We promote products andservices which either address special needs arising in the activities of ourclub members or appeal generally to persons with the demographiccharacteristics of our club members.  Thetwo most established products are the emergency road service (“ERS”) and thevehicle insurance programs.  Most of ourproducts and services are provided by third parties who pay us a marketing fee,with the exception of ERS, where we assume the risk of incurred claims.  We believe it is important to target thediversified market niches with identifiable products that offer a full range ofbenefits.  We currently market these productsthrough direct mail, advertising in publications, campground directories, spaceads, the Internet, telemarketing and direct sales.

 

8

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*Emergency Road Service*

 

TheCompany developed Emergency Road Service (“ERS”) initially for Good Sam Clubmembers in 1984, as an enhancement to their club membership.  Since then, the Company has expanded thebreadth of its programs and now includes club members as well as non-clubmembers.  Currently 32% of the Good SamClub members are enrolled in the Good Sam ERS program.  Specializing in RV towing, the Companybelieves it is important to target diversified market niches with identifiableproducts that serve various service level objectives.  The Company markets its products throughdirect mail, but also through publication advertising, space ads, promotionalevents, telemarketing, and the Internet. Annual subscriber dues range from $64.95 to $129.95 and benefits includeroadside assistance, towing, and other travel-related benefits and services.

 

Thetable below sets forth the total enrollment in the various ERS programs for2004 through 2008:

 
| ** **     | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|           |       |     |       |     |       |     |       |     |       |     |       |
| ERS Enrollment |       | 354,400  |       | 388,500  |       | 379,200  |       | 369,900  |       | 360,900  |       |

 

Enrollmentin the various ERS programs grew consistently through 2007, however declined by34,100 members, or 8.8%, in 2008 due to soft market conditions resulting inreduced acquisition members.  Expandedmarketing efforts are underway to improve enrollment in 2009.

 

*Vehicle Insurance Programs*

 

Weprovide our customers with several property and casualty insurance products,including two specialized RV insurance programs, a motorcycle insurance programand a homeowner’s insurance program.  Thetwo core brands are the Vehicle Insurance Program (“VIP”) and the Motor VehicleProgram (“MVP”); each of these products is promoted to the Company’s databasethrough various direct marketing channels. At December 31, 2008, the two programs had approximately 184,100policyholders, which represented a 13.5% and 5.3% penetration, respectively, ofthe Good Sam Club and the President’s Club. During the period 2004 to 2008, the average renewal rate of membersparticipating in these insurance programs was 90%.  We have a marketing arrangement with a thirdparty licensed insurer that provides the vehicle insurance.  The Company receives revenue for both new andrenewing policyholders, while we share only in the acquisition marketingexpenses with the insurer.  All claimsrisk is carried by the third-party provider.

 

Thefollowing provides detail of the total number of policies in force, the dollaramount of written premiums generated on the book of business, and the marketingfees generated for 2004 through 2008:

 
| ** **                                                  | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                                        |       |     |       |     |       |     |       |     |       |     |       |
| Total policies  in force                                    |       | 184,100  |       | 201,700  |       | 201,400  |       | 205,800  |       | 208,000  |       |
|                                                        |       |     |       |     |       |     |       |     |       |     |       |
| Written premiums  paid to insurance providers (in millions) |       | $        | 218        |     | $          | 243      |       | $        | 253        |     | $          | 251 |   | $ | 253 |   |
|                                                        |       |     |       |     |       |     |       |     |       |     |       |
| Marketing fees  (in millions)                               |       | $        | 18         |     | $          | 20       |       | $        | 20         |     | $          | 20 |   | $ | 20 |   |

 

The reduction in policiesin force from 2007 to 2008 resulted from consumers increasingly buying traveltrailers instead of motorhomes, and reduced marketing efforts beginning in mid2008 because of lower response rates. New competitive insurance products are currently being developed tobetter address travel trailer needs.

 

9

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*Other Products and Services*

 

Other products andservices marketed to club members include extended vehicle warranties, vehiclefinancing, credit cards, supplemental health and life insurance, and financialservices.  Most of these services areprovided to club members by third parties who pay us a marketing fee.

 

Our Continued ServicePlan (“CSP”), a private label extended vehicle warranty program for RVs, had totalnet revenue for 2008 of $30.6 million, increasing 5% over 2007.  The program had approximately 44,000 policiesin force as of December 31, 2008. Sales of new policies were derived from direct mail marketing, print adsin our magazines, Internet and e-mail solicitations, and retail kiosks inCamping World stores.  Policy renewalsrepresented 58% of the total revenue in 2008. We now offer CSP through our Authorized RV Dealer Program.  As of December 31, 2008, there were 69dealer locations authorized to sell extended vehicle warranty and otherproducts and services offered by the Company.

 

Our RV financing program is administered by a third party financialinstitution.  The number of RV loansextended to our club members in 2008 increased by 33% from 2007.  This increase in loans can be directlyattributed to a new third-party financing partnership allowing our membersaccess to more competitive interest rates.

 

In addition, we evaluateother products and services that club members may find attractive.  When introducing new products and services,we concentrate on products and services provided by third parties, which we canmarket without significant capital investment by us, and for which we receive amarketing fee from the service provider based on sales volume.  We seek to utilize the purchasing power ofour club members to obtain products and services at attractive prices.

 

**Publications**

** **

We produce and distribute a variety of publications for select marketsin the recreation and leisure industry, including general circulationperiodicals, club magazines, directories, and RV and power sports industrytrade magazines.  Revenues are recognizedfrom the sale of advertising, subscriptions and direct sales of some of thepublications.  We believe that thefocused audience of each publication is an important factor in attractingadvertisers.

 

10

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Thefollowing chart sets forth the circulation and frequency of our publications:

 
| ** **                                                     | ** ** | **2008**        | ** ** | **Issues Published** | ** ** |
|----------------------------------------------------------------|------------|-----------------|------------|---------------------------|------------|
| **Publication**                                                | ** ** | **Circulation** | ** ** | **Annually**              | ** ** |
|                                                           |       |            |       |                      |       |
| **PAID  CIRCULATION MAGAZINES (1)**                            |       |            |       |                      |       |
| American Rider                                                 |       | 58,524          |       | 6                         |       |
| ATV Sport                                                      |       | 66,139          |       | 10                        |       |
| Bass &  Walleye Boats                                 |       | 62,507          |       | 9                         |       |
| Camping Life                                                   |       | 79,578          |       | 8                         |       |
| MotorHome                                                      |       | 140,468         |       | 12                        |       |
| Powerboat                                                      |       | 27,043          |       | 11                        |       |
| Rider                                                          |       | 144,593         |       | 12                        |       |
| SnowGoer                                                       |       | 64,231          |       | 7                         |       |
| Trailer Boats                                                  |       | 94,996          |       | 11                        |       |
| Trailer Life                                                   |       | 248,675         |       | 12                        |       |
|                                                           |       |            |       |                      |       |
| **CONTROLLED  CIRCULATION- Business (2)**                      |       |            |       |                      |       |
| Boating Industry                                               |       | 26,000          |       | 12                        |       |
| Campground  Management                                         |       | 14,332          |       | 12                        |       |
| PowerSports  Business                                          |       | 12,000          |       | 16                        |       |
| PowerSports  Business Dealer Directory                         |       | 12,000          |       | 1                         |       |
| PowerSports  Business Market Data Book                         |       | 12,000          |       | 1                         |       |
| RV Business                                                    |       | 18,000          |       | 12                        |       |
|                                                           |       |            |       |                      |       |
| **CONTROLLED  CIRCULATION- Consumer (3)**                      |       |            |       |                      |       |
| ATV Magazine                                                   |       | 220,390         |       | 6                         |       |
| Snow Week                                                      |       | 30,000          |       | 2                         |       |
| Watercraft World                                               |       | 46,068          |       | 6                         |       |
|                                                           |       |            |       |                      |       |
| **FREE  DISTRIBUTION (4)**                                     |       |            |       |                      |       |
| Thunder Press-  North                                          |       | 28,862          |       | 12                        |       |
| Thunder Press-  South                                          |       | 22,490          |       | 12                        |       |
| Thunder Press-  West                                           |       | 41,035          |       | 12                        |       |
| Woodall’s  Specials (5)                                   |       | 66,002          |       | 1                         |       |
| Woodall’s  Regional News Tabloids                         |       | 70,847          |       | 36                        |       |
|                                                           |       |            |       |                      |       |
| **ANNUALS  (1)**                                               |       |            |       |                      |       |
| Cruiser Buyers  Guide                                          |       | 73,480          |       | 1                         |       |
| Trailer Life  Campground/RV Park & Services Directory |       | 170,132         |       | 1                         |       |
| Trailer Life’s  RV Buyers Guide                           |       | 85,558          |       | 1                         |       |
| Towing Guide                                                   |       | 313,790         |       | 1                         |       |
| Ultimate  Snowmobile Buyers Guide                              |       | 82,114          |       | 1                         |       |
| Woodall’s  Buyer’s Guide                             |       | 45,742          |       | 1                         |       |
| Woodall’s  Campground Directory                           |       | 236,361         |       | 1                         |       |
| Woodall’s  Tenting Directory                              |       | 118,808         |       | 1                         |       |
|                                                           |       |            |       |                      |       |
| **CLUB  MAGAZINES (6)**                                        |       |            |       |                      |       |
| Camp Club USA  Directory                                       |       | 73,053          |       | 1                         |       |
| Coast to Coast  Magazine                                       |       | 81,824          |       | 8                         |       |
| Golf Traveler  (7)                                             |       | 40,467          |       | 4                         |       |
| Highways                                                       |       | 982,741         |       | 12                        |       |
| RV View                                                        |       | 736,074         |       | 4                         |       |

 

----

*(1)**      *Paidcirculation, may include supplemental qualified controlled circulation.

*(2)**      *Trade publicationdistributed to industry-specific groups.

*(3)**      *Qualified andlimited paid circulation.

*(4)**      *Includes limitedpaid circulation.

*(5)**      *Distribution toRV outlets, including campgrounds and dealerships.

*(6)**      *Limited to clubmembers and promotional copies.  Themagazine is included with the membership.

*(7)**      *Only onemagazine is issued when two members are from the same household.

 

11

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*PaidCirculation Magazines*

 

*American Rider*, introduced in November 1993, is targeted toowners and operators of Harley-Davidson motorcycles.

 

*ATV Sport* was introduced in May 1998 and targetsrecreational and racing sport quad riders.

 

*Bass andWalleye Boats* isdedicated to freshwater fishing boat owners who demand top performance fromtheir boats, engines and accessories.

 

*CampingLife*appeals tofamily-style campers and other outdoor enthusiasts with articles aboutdestinations, products and activities to enhance their outdoor lifestyles.

 

*MotorHome* is a monthly periodical for owners and prospectivebuyers of motorhomes which has been published since 1968 and features articleson subjects such as product tests, travel and tourist attractions.

 

*Powerboat* is a leading performance boating magazine which wasfounded in 1968 and acquired by us in 2005. This magazine focuses on performance boats, engines, as well as racecoverage. The magazine is well known for its “Performance Trials,” regarded asone of the industry’s most comprehensive and authoritative testing programswhile boasting some of the marine industry’s finest photography and writing.

 

*Rider* is a monthly magazine for motorcycle touringenthusiasts and has been published since 1974. Each issue focuses on motorcycles, personalities, technical subjects,travel notes and other features of interest to this recreational affinitygroup.

 

*SnowGoer* is designed for highly activesnowmobiling participants and provides detailed equipment and productcritiques, and maintenance tips.

 

*Trailer Boats*magazine, the country’s only trailer boating magazine,is dedicated to the hard-core enthusiast of trailerable boats, marinepropulsion, accessory installations and use, maintenance and repair, towvehicles, boat trailering, seamanship, water sports and cruising.

 

*Trailer Life*, initially published in 1941, is the leading consumermagazine for the RV industry, featuring articles on subjects including producttests, travel and tourist attractions.

 

#### *Controlled CirculationMagazines- Business*

#### * *

*Boating Industry*is the leading source of news and information fordealers, manufacturers, aftermarket vendors and other professionals in themarine industries through its bi-monthly magazine and daily web site.

 

*Campground Management* is the leading trade magazine for thecampground industry.

 

*PowerSports Business*is an industry trade magazine, introducedin January 1998, which combines the previously issued *SnowmobileBusiness* and *Watercraft Business*with a motorcycle and ATV business section. Distribution is to dealers servicing these industries, which in numerouscases have combined operations to service more than one of these segments.

 

*PowerSports Business Dealer Directory* is a supplier directory for each of theATV, snowmobile and watercraft markets. This directory features hundreds of manufacturers and suppliers ofparts,

 

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services, apparel and much more, complete with detailed companyinformation.

 

*PowerSports Business Market Data Book* is an annual publication that providesindustry sales trends for power sports manufacturers and dealers; dealercustomer service and performance data; manufacturer stock performance updates;industry supplier information; and various industry research projects.

 

*RV Business* is the leading trade magazine covering industry newsand trends for RV dealers, manufacturers, suppliers, associations and others.

 

##### *Controlled Circulation Magazines- Consumer*

##### * *

*ATVMagazine’s* firstissue was published in October 1995. The publication is designed to reach large numbers of active ATV ownerswith comprehensive product information during the peak periods when equipmentis purchased.

 

*Snow Week* is the central source of information forthe competition and high-performance snowmobiling market segment.  The publication provides timely, year-roundarticles on racing, performance enhancing products, technical assistance, newproduct introductions, and general industry information.

 

*WatercraftWorld* is targetedto avid personal watercraft enthusiasts and provides detailed critiques ofwatercraft, in-depth gear and accessory evaluations, technical tips and racinginformation.

 

#### *Free Distribution Publications*

#### * *

###### *Thunder Press*newspapers are published monthly in threeseparate editions to reach the country’s motorcycling public and are availableprimarily through motorcycle dealers. This tell-it-like-it-is magazine is designed for the ultra-activemotorcycle enthusiast who feels passionate about the lifestyle.

###### * *

*Woodall’s Specials* are annual publications geared around specificevents, such as the beginning of the camping season and the beginning of thesnowbird season.  Its editorial contentis aimed at seasonal events and the ads are largely from regional campgrounds.

 

*Woodall’s Regional News Tabloids* publications are designed to appeal tothe prospective or first-time RV owner. Stories in these publications cover area campgrounds and RV dealerships,as well as new vehicles on the market and new products within theindustry.  The publications are primarilydistributed at campgrounds and RV parks, as well as at RV shows and statewelcome centers.

 

#### *Annual Publications*

#### * *

*Cruiser Buyers Guide* is an annual publication which provides informationabout new and modified cruisers with features embracing the motorcycle cruiserlifestyle.

 

*Trailer Life RV Parks, Campground & ServicesDirectory*,initially published in 1972, is an annually updated directory which providescomprehensive information on approximately 11,600 public and privatecampgrounds, over 860 RV service centers, and over 875 tourist attractions inNorth America.  It is the officialdirectory of the Good Sam Club and is the premier source to find all the GoodSam discount locations.  This directoryis sold primarily to Good Sam Club members and RV enthusiasts via direct mail,e-commerce, at RV dealerships, RV Parks and in bookstores.

 

*Trailer Life’s RV Buyers Guide*, issued annually, features more than 400listings with photos, floorplans and specifications on new RVs including traveltrailers, fifth-wheel trailers, folding camping trailers, motorhomes and truckcampers.  The publication is sold atnewsstands and by mail order

 

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from magazineadvertisements.

 

The*TowingGuide*is a booklet dedicated to meeting the needs of all camping andboating enthusiasts that are towing a trailer. This booklet serves as a step-by-step tutorial for newcomers and arefresher course for trailer-towing veterans to ensure that maximum enjoymentof their trailer by making informed decisions.

 

The*UltimateSnowmobile Buyers Guide*is an annual publication focusing on newsnowmobiles introduced in the current year, along with accessories, providingcompetitive statistics to enable the reader to make informed purchases.

 

*Woodall’s Buyer’s Guide* is an annual publication distributedmainly through bookstores and newsstands, which provides photos, floor plansand specifications of the new model year RVs. The buyer’s guide was first published in 1978.

 

*Woodall’s Campground Directory,* initially published in 1948, is anannual consumer directory offered in both national and regional editions.  This directory is primarily distributedthrough book stores.

 

*Woodall’s Tenting Directory*is an annual directory distributedprimarily through newsstands, which provides information on both government andprivately-owned campgrounds and the outdoor activities and attractions that areavailable near them.

 

#### *Club or Trade Magazines andBooks*

#### * *

Each of our membership clubs has its own publication which providesinformation on club activities and events, feature stories and otherarticles.  We publish *Highways* for the Good Sam Club, *Coast toCoast Magazine* for the Coast to Coast Club, *The GolfTraveler* for the Golf Card Club, the *Camp ClubUSA Directory* for Camp Club members, and*RV View*for the President’s Club.  We alsoperiodically publish books targeted to our club membership which address the RVlifestyle.

 

#### *Consumer Shows*

#### * *

We operate 49 consumer outdoor recreationshows primarily focused on RV and power sports markets.  Twelve of the shows were acquired from RoyalProductions, Inc. in December 2005, six consumer shows were purchased from H & SProductions, LLC in February 2006, four RV shows were purchasedfrom Apple Rock Advertising and Promotions, Inc. in September 2006,one show was acquired from MAC Events, LLC in January 2007, five showswere acquired from Industrial Expositions, Inc. in February 2007,nine RV and boat shows were acquired from MAC Events, LLC in January 2008,and three RV and boat shows were acquired from Mid America Expositions, Inc.in February 2008.  These showsprovide us with the opportunity to reach new customers and interact with themon a face-to-face basis.  Revenues arerecognized primarily from the sale of exhibitor booth space and admission fees.

 

#### *Guest Services CampgroundGuides*

#### * *

We produce local campground guidesdistributed free of charge to approximately 370 campgrounds across the U.S.,with limited distribution in Canada. These guides include paid advertisements for local attractions, restaurantsand services and also include a site map of the campground.

 

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**Retail**

 

Camping World is a national specialty retailer of merchandise andservices for RV owners.  With the openingof our six newest Camping World supercenters in 2008, we currently operate 78Camping World retail locations in 31 states. These stores accounted for approximately 89% of the 2008 total retailrevenue, while approximately 11% was derived from catalog and Internet sales.  Five under-performing retail stores wereclosed in 2008.

 

In the RV accessory industry, we believe that Camping World has a highlevel of name recognition, an effective triple channel distribution strategy(store, catalog, and Internet), and a commitment to offer a broad selection ofspecialized RV products and services at competitive prices combined withtechnical assistance and on-site installation. Camping World offers approximately 10,600 SKUs, most of which are notregularly available in general merchandise stores.  The Camping World supercenters provideinstallation and repair services for RV products, which are also not availableat general merchandise stores.  Productssold by Camping World include specialty-sized refrigerators, housewares andother appliances, bedding and furniture, generators and hydraulic levelingsystems, awnings, folding boats, chairs, ladders, cleaning and maintenanceproducts, bicycles, hitch-towing, sanitation products, automotive electronicsand lifestyle products.  Some CampingWorld stores feature resource centers, staffed with licensed insurance agentswho market such products and services as vehicle insurance, extended warrantyand ERS.  Camping World’s supercentersare designed to provide one-stop shopping by combining broad product selection,technical assistance and on-site installation services.  We strategically locate Camping Worldsupercenters in areas where many RV owners live, along major Interstates,and/or in proximity to destinations frequented by RV users.

 

Camping World sources its products from approximately 1,100vendors.  Camping World attends regional,national and international trade shows to determine the products it willoffer.  The purchasing activities ofCamping World are focused on RV parts and accessories, electronics, housewares,hardware, automotive, crafts, clothing, home furnishings, gifts, camping andsporting goods.  Camping World uses anautomated “plan-o-gram” system to develop and maintain merchandising plansunique to each supercenter and an inventory replenishment system for itsoperations to improve in stock rates on key items.  Camping World believes that the volume ofmerchandise it purchases from domestic and international suppliers and itsability to buy direct from manufacturers enables them to obtain merchandise atcosts which compare favorably to local RV dealers and retailers.

 

The retailsupercenters are periodically reset to enhance the customers’ shoppingexperience as well as to maximize merchandise category offerings.  New products and services are introduced inorder to keep pace with the advances of the RV industry and to satisfy ourcustomers’ needs.  Customers takeadvantage of the state-of-the art performance centers staffed with expert RVtechnical consultants and equipped with demonstrable merchandise to assist ineducating customers about RV performance products.  The resource centers provide an opportunityto promote service offerings in a more interactive and consultative sellingenvironment.  They are staffed withprofessionals marketing insurance products, extended warranties, roadsideservice, club memberships, and RV financing, which product offerings add to thedepth of services that Camping World customers have become accustomed toreceiving at our supercenters.  Finally,store dress, promotional signage and directional signage are periodicallyrefreshed to further enhance our customers’ shopping experience at CampingWorld’s supercenters.

 

Camping World’s supercenters generally range in size from approximately10,000 to 64,000 square feet. Approximately 40% of each supercenter is devoted to a retail salesfloor, a customer service area, and a technical information counter; 40% iscomprised of the installation facility, which contains 4 to 16 drive-throughinstallation bays; and 20% is allocated to office and warehouse space.  Large parking areas provide sufficient spaceand facilitate maneuvering of RVs.  Bycombining broad product selection, technical assistance, installation andrepair services, Camping World’s supercenters provide one-stop shopping for RVowners.  Camping World maintains toll-freetelephone numbers for

 

15

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customers to schedule installation and repair appointments.  Most supercenters are open seven days a week.

 

Camping Worldcontinued its controlled expansion of their supercenter store network whilesimultaneously developing dealer partnerships across North America.  This marketing strategy provides an expandednumber of customers with access to the vast array of products and services thatwe offer and generate traffic for our dealer partners by marketing locally,regionally and nationally our extensive parts and accessories business.  In 2003, we initiated the dealer allianceprogram under which we sublease space in an existing RV dealership where weoperate a Camping World store or operate the Camping World store adjacent tothe RV dealership.  Currently, we operate60 Camping World stores alongside or within RV dealerships, including 52Camping World stores that are part of our dealer alliance program.  Of these 60 Camping World stores that arealongside or within RV dealerships, 45 are located alongside or withindealerships indirectly owned or operated by FreedomRoads Holding LLC and itssubsidiaries (collectively “FreedomRoads”). FreedomRoads is indirectly owned and controlled by Stephen Adams, ourChairman and principal owner of our parent company.

 

#### *On March 6, 2006, Camping World, Inc., an indirectwholly-owned subsidiary that operates the Camping World stores, entered into ajoint venture agreement with FreedomRoads. The joint venture agreement provides that Camping World and FreedomRoadswill act cooperatively with a view to maximizing synergies and to locate,establish and utilize mutually beneficial relationships that are available onlyto the parties acting together that would not otherwise be available to eitherparty independently.  There are nocapital requirements or sharing of income and expenses under the agreement.*

#### * *

On January 1, 2009, a Series Entitlementand Sponsorship Agreement was entered into by and between National Associationfor Stock Car Auto Racing, Inc. (“NASCAR”) and FreedomRoads, LLC (“FR”), awholly owned subsidiary of FreedomRoads, and CWI, Inc. (“CWI”), a whollyowned subsidiary of Camping World, Inc. (the “NASCAR Sponsorship Agreement”).  Pursuant to the terms of this agreement, CWIand FR obtained rights as the title sponsor of the NASCAR Truck Series.  The NASCAR Sponsorship Agreement provides fora term of seven years, commencing January 1, 2009 and terminating December 31,2015, and requires the payment of annual rights fees in exchange for the rightsgranted to FR and CWI.  The obligationsof FR and CWI under the Sponsorship Agreement are joint and several in nature,provided that the liability of CWI for the annual rights fees during the termof the NASCAR Sponsorship Agreement is capped at an aggregate of $6,500,000.

 

Camping World initiated its catalog operations in 1967.  Camping World currently has a proprietarymailing list of approximately 2.3 million RV owners, all of whom have made apurchase or requested a catalog from Camping World within the prior 60months.  Camping World maintains adatabase of these names, which includes information such as order frequency,size of order, date of most recent order and type of merchandisepurchased.  Camping World analyzes itsdatabase to determine those customers most likely to order from Camping World’scatalogs.  As a result, Camping World isable to target catalog mailings more effectively than direct marketers ofcatalogs offering general merchandise. Camping World continually expands its proprietary mailing list throughin-store subscriptions and requests for catalogs in response to advertisementsin regional publications directed to RV owners. In addition, Camping World rents mailing lists of RV owners from thirdparties.

 

During 2008, Camping World distributed 4.8 million catalogs, 3.9million of which were mailed in eight separate mailings, and the remaining900,000 catalogs were distributed in supercenters, at campgrounds and other RVlocations, and as package inserts. During the same period, Camping World processed approximately 242,000catalog orders at an average net order size of $115, excluding postage andhandling charges.  Camping World distributedeight high-quality, full-color catalogs during 2008, consisting of sevencatalogs plus a Master Catalog in the spring of 2008.

 

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**Internet**

 

TheInternet has proven to be a significant, low-cost source for new club members,subscriptions and other ancillary product sales.  We maintain fifty-two Internet web sites,which are accessible directly or through *http://www.rv.net*.  In 2000, our club operations commenced alow-cost marketing strategy through e-mail membership acquisitioncampaigns.  Members added in 2008 underthese programs represented over 10% of all new club members.  E-mail acquisition campaigns and Internetonline advertising generated $36.1 million of revenue in 2008.

 

**Marketing**

 

We market our club memberships and related products andservices through direct mail, e-mail, inserts, ride-alongs, spaceadvertisements, promotional events, point of sale, member-get-a-member campaigns,and telemarketing.  Direct responsemarketing efforts account for approximately 39% of new enrollments with theremaining 61% derived from other sources. We use a variety of commercially available mailing lists of RV owners inour direct mail efforts.  Currently, themost widely used list databases are provided by three commercial listcompilers, and direct response lists are from RV industry participants, RVconsumer surveys, and proprietary in-house lists.

 

Our media segmentsolicits advertisements through an internal sales force and by payingcommissions to advertising agencies and independent contractors who placeadvertisements.  Many advertisers arerepeat customers with whom we have long standing relationships.

 

We market our retailproducts through mail order catalogs, direct mail retail flyers, advertisementsin national and regional industry publications, vendor co-op advertisingprograms, promotional events, the President’s Club direct mailings and personalsolicitations and referrals. Camping World’s principal marketing strategy is tocapitalize on its broad name recognition among RV owners.

 

**Operations**

** **

Our customer serviceoperations are located in Denver, Colorado and Bowling Green, Kentucky.  The primary focus of these groups is to manageour customers’ expectations and relationship with the organization.  These member service operations processedapproximately 1.1 million telephone calls in 2008.  Over fifty percent of the calls originatedfrom the marketing efforts of catalog mailings, membership acquisition,membership renewals and associated ancillary products and events.  All such efforts use toll-free numbers as aresponse mechanism.

 

Camping World’s catalog,Internet and fulfillment operations are located in Franklin, Kentucky andBakersfield, California.  Fulfillmentoperations involve the processing of orders and checks principally received bymail.  Orders are usually processed andshipped within 24 hours of receipt. Certain fulfillment operations are performed by third parties.

 

Our publicationoperations are based in Minnesota and California.  We develop the layout for publications andoutsource printing to third parties.

 

**Information Support Services**

 

We utilize integrated computer systems to support ourmembership club and publishing operations. A database containing all customer activity across our variousbusinesses and programs has been integrated into our web sites and callcenters.  Comprehensive information oneach member, including a profile of the purchasing activities of members, isavailable to customer service representatives when responding to memberrequests and when marketing our products and 

 

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services.  We employpublishing software for publication makeup and content, and for advertising tosupport our publications operations.  Awide-area network facilitates communication within and between ouroffices.  We also utilize informationtechnology, including list segmentation, merge and purge programs, and advanceddata base analysis and modeling techniques to select prospects for direct mailsolicitations and other direct marketing efforts.

 

Camping World’s management information systems and electronicdata processing systems consist of an extensive range of retail, mail order,financial and merchandising systems, including purchasing, inventorydistribution and control, sales reporting, accounts payable and merchandisemanagement.  Camping World’s managementinformation system includes point-of-sale registers that are equipped with barcode readers in each supercenter.  Theseregisters are trickle-polled throughout the day for “flash reporting” and afull polling of data is performed nightly at the close of business into thedata center located in Bowling Green, KY. With this point-of-sale information and the information from CampingWorld’s on-line distribution centers, Camping World compiles comprehensivedata, including detailed sales volume and inventory information by product,merchandise transfers and receipts, special orders, supply orders and returnsof product purchases to vendors.  Inconjunction with its nightly polling, Camping World’s central computer sendsprice changes to registers at the point of sale.  The registers capture President’s Club membernumbers and associated sales and references to specific promotionalcampaigns.  Management monitors theperformance of each supercenter and mail order operation to evaluate inventorylevels, determine markdowns and analyze gross profit margins by product.

 

Camping World’s catalog operations also utilize acomputerized management system allowing on-line desktop access to informationwhich previously required manual retrieval. Screen prompts that provide product, promotional, and revenue potentialinformation have allowed Camping World to maintain high service levels duringseasonal sales peaks.

 

**Regulation**

 

Our operations aresubject to varying degrees of federal, state and local regulation.  Specifically, our outbound telemarketing,direct mail, and ERS, as well as certain services provided by third parties,including insurance, RV financing, and extended warranty programs, arecurrently subject to certain regulation, and may be subjected to increasedregulation in the future.  We do notbelieve that such federal, state and local regulations currently have amaterial impact on our operations. However, new regulatory efforts impacting our operations may be proposedfrom time to time in the future at the federal, state and local level.  There can be no assurance that suchregulatory efforts will not have a material adverse effect on our ability tooperate our businesses or on our results of operations.

 

**Competition**

 

In general, ourmembership clubs, retail and catalog operations and publications compete withnumerous organizations in the recreation industry for disposable income spenton leisure activities.  By offeringsignificant membership benefits at a reasonable cost and actively marketing toclub members, we believe that we have been able to maintain a loyal followingfor our membership organizations as evidenced by the high renewal rates of ourmembership clubs.  The products andservices marketed by us compete with similar products and services offered byother providers.  However, managementbelieves that we are able to use the large volume of purchases by our clubmembers to secure attractive pricing for the products and services marketed byus.

 

18

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**Employees**

 

As of December 31,2008, we had 1,674 full-time and 140 part-time or seasonal employees,consisting of 7 executives, 1,194 employees in retail operations, 364 employeesin administrative and club operations, 195 employees in publishing andadvertising sales, 6 employees in resort services and 48 employees inmarketing.  No employees are covered by acollective bargaining agreement.  Webelieve that our employee relations are good.

 

**Trademarks and Copyrights**

 

We own a variety ofregistered trademarks and service marks for the names of our clubs, magazinesand other publications.  We also own thecopyrights to certain articles in our publications.  We believe that our trademark and copyrightshave significant value and are important to our marketing efforts.

 

**ITEM1A:  RISK FACTORS**

 

The risks described below are not the only risks we face.  Any of the following risks could materiallyadversely affect our business, financial condition or results of operations.Additional risks and uncertainties not currently known to us, or that wecurrently deem to be immaterial, may also materially adversely affect ourbusiness operations.

 

**Risks Relating to our Debt**

 

*Our substantial indebtedness could adversely affect our financialhealth.*

 

We have a significant amount of indebtedness.  As of December 31, 2008, our total debtand total stockholder’s deficit were $292.1 million and $186.5 million,respectively.  Our total debt as of December 31,2008 primarily consists of: (1) $127.0 million under the Amended andRestated Credit Agreement and Senior Secured floating Rate Note PurchaseAgreement due June 24, 2009 (“Senior Credit Facility”), (2) $8.5million under the Revolving Credit Facility due June 24, 2009, (3) $152.4million under the AGI 9% Senior Subordinated Notes due 2012 (“AGI Senior Notes”),and (4) $4.2 million of debt relating to publication and consumer eventacquisitions over the last six years within our Media segment.  In the future, we intend to use cashgenerated by operations to reduce our indebtedness.  However, we may from time to time, subject torestrictions imposed by the terms of our indebtedness, pay dividends or find itmore advantageous to employ cash generated by operations for capitalinvestments and acquisitions.

 

The Senior CreditFacility matures on March 31, 2010.  Asof December 31, 2008, there was $135.5 million outstanding under the SeniorCredit Facility and it is secured by a lien on all of the Company’s assets anda pledge of the Company’s stock and the stock of its subsidiaries.  Although the Company is currently seeking torefinance or replace the Senior Credit Facility and has received a number ofproposals from prospective lenders, there can be no assurance that the SeniorCredit Facility will be refinanced or replaced prior to its maturity.  The availability of financing is limited dueto the current uncertainties in the capital markets.  In addition, the current general conditionsin the U.S. economy had an adverse impact on the Company’s operations becauseconsumers are reducing discretionary spending, including spending on the recreationalactivities offered by the Company, and businesses are reducing advertising andmarketing expenditures which have adversely affected the advertising revenuesreceived by the Company.  As a result, itmay be even more difficult for the Company to refinance or replace the SeniorCredit Facility due to the current deterioration in the Company’s operatingresults.  If the Company is not able torefinance or replace the Senior Credit Facility prior to its maturity on March31, 2010, the lenders will be entitled to exercise their remedies to sell thecollateral securing the repayment of the Senior Credit Facility, including theCompany’s assets, the stock of the Company and the stock of the Company’ssubsidiaries.  Since the indebtednessowed under the Senior Credit Facility is secured, it would be repaid before anyof the unsecured or subordinated obligations of the Company and itssubsidiaries.  It is also possible thatthe interest rate payable on a new credit facility will be higher than theinterest rates under the current Senior Credit Facility as amended June 5,2009 which will adversely affect the Company’s cash flow and profitability (orincrease losses).

 

Our ability to satisfy our debt service obligations depends primarilyon our operating performance.  Futuredebt repayments by us, including the principal amount of the notes, may requirefunds in excess of our available cash flow. We cannot assure our investors that we will be able to raise additionalfunds, if necessary, through future financings. The indentures pursuant to which the Company issued its 9% SeniorSubordinated Notes due 2012 impose several restrictions upon us, includingrestrictions on our ability to incur additional indebtedness, pledge assets,and make dividends and distributions.

 

Ourparent, AGHI, has debt as of December 31, 2008 consisting of $111.8million principal amount of 10-7/8% senior notes due 2012 (the “AGHI Notes”)which is net of $1.9 million unamortized original issue discount.  The AGHI Notes are unsecured obligations ofAGHI, and neither AGI nor its subsidiaries have guaranteed payment of principalor interest on the AGHI Notes.  Intereston the AGHI Notes is payable semi-annually and the entire principal amount ofthe AGHI Notes is due in full on February 15, 2012.  For interest payments on and prior to February 15,2008, the Company had the election to pay interest on the AGHI Notes in cash orby the issuance of additional notes of the 

 

19

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sametenor as the AGHI Notes, except the maturity date is March 15, 2010.  AGI has not paid any dividends to AGHI tofund payment of interest on the AGHI Notes and AGHI made the interest paymentsdue on August 15, 2005, February 15, 2006, August 15, 2006, February 15,2007, and February 15, 2008 through the issuance of additional notes.  AGHI paid the interest on the AGHI Notes due August 15,2007 and 2008 from proceeds of capital contributions made by AGHI’s parent,AGHC in the amount of $5.9 million and $6.2 million, respectively.  As of December 31, 2008, $111.8 millionof AGHI Notes remain outstanding, including $25.4 million due on March 15,2010.  Any additional AGHI Notes issuedin payment of interest are due in full on or before March 15, 2010.  In 2009, AGHI must rely on dividends from AGIor contributions from AGHC to fund the interest payments due under the AGHINotes.  Although a source of the cashpayment of the AGHI Notes is dividends from AGI, there are certain restrictionson the payment of dividends under the AGI Senior Credit Facility and the AGIIndenture.

 

TheAGI Senior Credit Facility, the AGI Indenture and the indenture governing ourAGHI Notes contain certain restrictive covenants relating to, but not limitedto, mergers, changes in the nature of the business, acquisitions, additionalindebtedness, sale of assets and investments, and the payment of dividendssubject to certain limitations and minimum operating covenants.

 

Our substantial indebtedness could have important consequences to ourinvestors.  For example, it could: (i) increaseour vulnerability to general adverse economic and industry conditions, (ii) requireus to dedicate a substantial portion of our cash flow from operations topayments on our indebtedness, thereby reducing the availability of our cashflow to fund working capital, capital expenditures, expansion throughacquisitions and other general corporate purposes, (iii) limit ourflexibility in planning for, or reacting to, changes in our business and theindustry in which we operate, (iv) place us at a competitive disadvantagecompared to our competitors that have less debt, and (v) limit ourability, among other things, to borrow additional funds.

 

*Despite current indebtedness levels and restrictive covenants, we stillmay be able to incur substantially more debt in the future.*

 

Despite our current level of debt, we or our subsidiaries may be ableto incur substantial additional debt in the future.  Our Amended and Restated Credit Agreement (“SeniorCredit Facility”) will permit total borrowings of up to $187.0 million.  Although our Senior Credit Facility and ourAGI Senior Notes restrict us and our restricted subsidiaries from incurringadditional debt, these restrictions are subject to important exceptions andqualifications.  If we or oursubsidiaries incur additional debt, the risks that we and they now face asresult of our leverage could increase.

 

If our financial condition and operating results deteriorate, ourrelationships with our creditors, including the holders of the AGI SeniorNotes, the lenders under our Senior Credit Facility and our suppliers, may beadversely affected.

 

*Our operations are substantially restricted by the terms of the AGISenior Notes and our Senior Credit Facility which could adversely affect us andincrease our credit risk.*

 

The indenture governing the AGI Senior Notes, AGHI Senior Notes, andthe credit agreement for the Senior Credit Facility include a number ofsignificant restrictive covenants.  Thesecovenants restrict, among other things, our ability to: (i) incur moredebt, (ii) pay dividends or make other distributions, (iii) makeinvestments, (iv) issue stock of subsidiaries, (v) repurchase stock, (vi) createliens, (vii) enter into transactions with affiliates, (viii) enterinto sale-leaseback transactions, (ix) merge or consolidate, and (x) transferand sell assets.

 

Our Senior Credit Facility contains additional and more restrictivecovenants than the terms of the indenture governing the AGI Senior Notes,including financial covenants that require us to achieve 

 

20

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certain financial and operating results and maintain compliance withspecified financial ratios.  Our abilityto comply with these covenants and requirements may be affected by events beyondour control, and we may have to curtail some of our operations and growth plansto maintain compliance.

 

These covenants could limit our ability to plan for or react to marketconditions or to meet our capital needs. These covenants are subject to certain important exceptions.  AGI was in compliance with its debt covenantsat December 31, 2008.

 

If we are not able to comply with the covenants and other requirementscontained in the indenture for the AGI Senior Notes, our Senior Credit Facilityor our other debt instruments, an event of default under the relevant debtinstrument could occur.  Our ability tocomply with the provisions of the indenture, our Senior Credit Facility and theagreements or indentures governing other debt we may incur in the future couldbe affected by events beyond our control and, therefore, we might be unable tomeet those ratios and conditions. If an event of default does occur, it couldtrigger a default under our other debt instruments, we could be prohibited fromaccessing additional borrowings, and the holders of the defaulted debt coulddeclare amounts outstanding with respect to that debt to be immediately due andpayable.  We cannot assure our investorsthat our assets or cash flow would be sufficient to fully repay borrowingsunder our outstanding debt instruments or that we would be able to refinance orrestructure the payments of these debt instruments. Even if we were able tosecure additional financing, it may not be available on terms favorable to us.

 

*To service our indebtedness, we will require a significant amount ofcash, the availability of which depends on many factors beyond our control.*

 

Our ability to make payments on and to refinance our indebtedness andthe indebtedness of our subsidiaries, and to fund planned capital expenditureswill depend on our ability to generate cash in the future. To a certain extent,this is subject to general economic, financial, competitive, legislative,regulatory and other factors that are beyond our control.

 

We cannot assure our investors that our business will generatesufficient cash flow from operations or that future borrowings will beavailable to us under our Senior Credit Facility in an amount sufficient toenable us to pay our indebtedness, including the Senior Credit Facility and theAGI Senior Notes, as it becomes due or to fund our other liquidity needs.  If our future cash flow from operations andother capital resources are insufficient to pay our obligations as they mature orto fund our liquidity needs, we may be forced to reduce or delay our businessactivities and capital expenditures, sell assets, sell additional shares ofcapital stock or restructure or refinance all or a portion of our debt, on orbefore its maturity.  We cannot assureour investors that we will be able to refinance any of our indebtedness,including the Senior Credit Facility and the AGI Senior Notes, on satisfactoryterms or at all.

 

Our failure to comply with our obligations under the indenturegoverning the AGI Senior Notes or the Senior Credit Facility may result in anevent of default under those debt instruments. A default, if not cured or waived, may permit acceleration of our otherindebtedness.  We cannot be certain thatwe will have funds available to remedy these defaults. If our indebtedness isaccelerated, we cannot be certain that we will have sufficient funds availableto pay the accelerated indebtedness or that we will have the ability torefinance the accelerated indebtedness on terms favorable to us or at all.

 

*We may not have the ability to raise the funds necessary to repurchasethe AGI Senior Notes upon a change of control.*

 

Upon the occurrence of certain specific kinds of change of controlevents, we will be required to offer to repurchase all outstanding AGI SeniorNotes at 101% of the principal amount thereof plus accrued and unpaid interestand liquidated damages, if any, to the date of repurchase.  However, it is 

 

21

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possible that we may not have sufficient funds at the time of thechange of control to make any required repurchases or that the AGI SeniorCredit Facility will not allow such repurchases.  Our failure to purchase tendered notes wouldconstitute a default under the indenture governing the notes. In addition,certain important corporate events relating to our capital structure would notconstitute a “change of control” under the indenture.

 

**Risks Relating to Our Business**

 

*We depend on our ability to attract and retain active members.*

 

Our future success depends in large part upon continued demand for ourmembership club programs by consumers. Any number of factors could affect the frequency with which consumersparticipate in our programs or whether they enroll in a membership club atall.  These factors include (1) consumertaste preferences, (2) the frequency with which members participate inclub activities, (3) general economic conditions, (4) weatherconditions, (5) the availability of alternative discount programs in theregion in which consumers live and work, and (6) significant increases ingasoline prices.  Any significant declinein usage or increase in program cancellations, without a corresponding increasein new member enrollments, could have a material adverse effect on ourbusiness.

 

Our future growth depends upon continued demand for our membershipclubs from consumers we serve or seek to serve. A significant downturn in leisure travel or in any of the other areasserved by our membership clubs would have a material adverse effect on ourbusiness, financial condition and results of operations.

 

*We depend on our relationships with our marketing partners and adisruption of these relationships or of our marketing partners’ operationscould have an adverse effect on our business and results of operations.*

 

Our business depends in part on developing and maintaining productiverelationships with third party providers of products and services that wemarket to our customers. Many factors outside our control may harm theserelationships.  For example, financialdifficulties that some of our providers may face may adversely affect ourmarketing program with them.  Adisruption of our relationships with our marketing partners or a disruption inour marketing partners’ operations could have a material adverse effect on ourbusiness and results of operations.

 

*We face significant competition for disposable income spent on leisuremerchandise and activities.*

 

In general, our membership clubs, retail and catalog operations andpublications compete with numerous organizations in the recreation industry fordisposable income spent on leisure merchandise and activities. The products andservices we market compete with similar products, services, publications andretail businesses offered by other providers. Increased competition from these and other sources could require us torespond to competitive pressures by establishing pricing, marketing and otherprograms or seeking out additional strategic alliances or acquisitions that maybe less favorable to us than we could otherwise establish or obtain.

 

*Our business could be adversely affected by deteriorating generaleconomic conditions.*

 

Our activities relate significantly to the amount of leisure time andthe amount of disposable income available to users of our products andservices.  Our business, therefore, maybe sensitive to general economic conditions affecting the willingness ofconsumers to purchase club memberships and related products and services and ofadvertisers to place advertisements in our publications.  In 

 

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particular, during the gasoline shortages and resulting price increasesin 1973, 1980 and 1990, there was a reduction in advertising revenues for ourpublications.  In addition, the successof the membership club portion of our business depends on our members’ use ofcertain RV sites and/or golf courses or the purchase of goods throughparticipating merchants.  If the economyslows, our members may perceive that they have less disposable income to permitthem to pursue leisure activities.  As aconsequence, they may travel less frequently, spend less when they travel anduse the benefits of their club memberships less often, if at all. Any declinein program usage would hurt our business. In addition, the current decline inthe national economy could cause some of the merchants who participate in ourprograms to go out of business.  It islikely that, should the number of merchants entering bankruptcy rise, thenumber of uncollectible accounts would also rise.  This would have an adverse effect on ourbusiness and financial results.

 

*The interests of our principal shareholder may conflict with theinterests of holders of the debt instruments.*

 

We are a wholly-owned subsidiary of Affinity Group Holding, Inc.,which is indirectly a wholly-owned subsidiary of AGI Holding Corp. (“AGHC”), aprivately held company.  Stephen Adams,our Chairman, owns 100% of the outstanding shares of AGHC.  Accordingly, Mr. Adams will be able toelect our Board of Directors and to control matters submitted to the vote ofour shareholders.  Circumstances mayoccur in which the interests of Mr. Adams could be in conflict with theinterests of the holders of our debt instruments and lenders.  For example, Mr. Adams may have an interestin pursuing acquisitions, divestitures or other transactions that, in hisjudgment, could enhance the value of his equity investment, even though suchtransactions may involve risks to the holders of our debt instruments andlenders.

 

*We are subject to varying degrees of federal, state and localregulations which may affect our operations.*

 

Our operations are subject to varying degrees of federal, state andlocal regulation.  Our outboundtelemarketing, direct mail, ERS program, and insurance activities are currentlysubject to regulation. Specifically, a principal source of leads for our directresponse marketing efforts was new vehicle registrations provided by motorvehicle departments in various states. Currently, all states restrict access to motor vehicle registrationinformation.

 

In addition to the existing regulatory framework, new regulatoryefforts affecting our operations may be proposed from time to time in thefuture at the federal, state and local level. There can be no assurance that suchregulatory efforts will not have a material adverse effect on our ability tooperate our businesses or our results of operations.

 

Our direct marketing operations are subject to various federal andstate “do not call” list requirements. The Federal Trade Commission has created a national “do not call”registry.  Under these federalregulations, consumers may have their phone numbers added to the national “donot call” registry.  Generally, we areprohibited from calling anyone on that registry.  In September 2003, telemarketers weregranted access to the registry and are now required to compare their call listsagainst the national “do not call” registry at least once every 90 days.  We also are required to pay a fee to accessthe registry on a quarterly basis. Enforcement of the “do not call” provisions began in late 2003, and the rule providesfor fines of up to $11,000 per violation and other possible penalties.  These rules limit our ability to marketour products and services to new customers. Furthermore, we may incur penalties if we do not conduct our marketingactivities in compliance with these rules.

 

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*Increase in paper costs, postage costs and shipping costs may have anadverse impact on our future financial results.*

 

The price of paper is a significant expense relating to ourpublications and direct mail solicitations. Postage for publicationdistribution and direct mail solicitations is also a significant expense.  In addition, shipping costs are a significantexpense for our business.  Paper, postageand shipping costs have increased in the past and may be expected to increasein the future.  Such increases could havean adverse effect on our business if we are unable to pass them on to ourcustomers.

 

*If we are unable to retain senior executives and attract and retainother qualified employees, our business might be adversely affected.*

 

Our success depends in part on our ability to attract, hire, train andretain qualified managerial, sales and marketing personnel.  Competition for these types of personnel ishigh.  We may be unsuccessful inattracting and retaining the personnel we require to conduct our operationssuccessfully and, in such an event, our business could be materially and adverselyaffected.  Our success also depends to asignificant extent on the continued service and performance of our seniormanagement team.  The loss of any memberof our senior management team could impair our ability to execute our businessplan and could therefore have a material adverse effect on our business,results of operations and financial condition.

 

**ITEM2:  PROPERTIES**

 

We lease all ofthe real properties where we have operations. Our real property leases generally provide for fixed monthly rentalswith annual escalation clauses.  Thetable below sets forth certain information concerning our properties and thelease expiration date includes all stated option periods.

 
| ** **                                                                                  | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| **Corporate Headquarters:**                                                            |       |             |       |      |       |                  |       |
| Ventura, CA                                                                                 |       | 74,100           |       |      |       | 2039                  |       |
| ** **                                                                                  |       |             |       |      |       |                  |       |
| **Other  Office Facilities:**                                                               |       |             |       |      |       |                  |       |
| Carson, CA  (regional publication office)                                                   |       | 10,048           |       |      |       | 2012                  |       |
| Denver, CO  (customer service, warehousing fulfillment, and information system  functions). |       | 60,000           |       |      |       | 2039                  |       |
| Bowling Green,  KY (retail administrative headquarters and mail order operations)           |       | 31,278           |       |      |       | 2039                  |       |
| Seattle, WA  (regional publication sales office)                                            |       | 912              |       |      |       | 2009                  |       |
| Chesterfield, VA  (shows sales office)                                                      |       | 5,900            |       |      |       | 2011                  |       |
| Maple Grove, MN  (Ehlert Publications Group, Inc. headquarters)                        |       | 17,496           |       |      |       | 2010                  |       |
| Las Vegas, NV  (regional shows sales office)                                                |       | 2,809            |       |      |       | 2009                  |       |
| Scotts Valley,  CA (regional publication office)                                            |       | 3,905            |       |      |       | 2011                  |       |
| Bowling Green,  KY (database and online media support)                                      |       | 5,952            |       |      |       | 2015                  |       |
| Port Angeles, WA  (regional shows sales office)                                             |       | 3,300            |       |      |       | 2012                  |       |
|                                                                                        |       |             |       |      |       |                  |       |
| **Distribution  Centers:**                                                                  |       |             |       |      |       |                  |       |
| Bakersfield,  California                                                                    |       | 164,747          |       | 14.827    |       | 2037                  |       |
| Franklin,  Kentucky                                                                         |       | 250,000          |       | 33.000    |       | 2035                  |       |

 

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| ** **                                | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|-------------------------------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| **Camping  World Supercenter Locations:** |       |             |       |      |       |                  |       |
| Dothan, AL (1)                            |       | 18,906           |       | 11.275    |       | 2025                  |       |
| Oxford, AL (2)                            |       | 11,828           |       | 23.940    |       | 2027                  |       |
| Robertsdale, AL(1)                        |       | 19,670           |       | 18.360    |       | 2026                  |       |
| Earnhardt, AZ (1)                         |       | 2,000            |       | 24.000    |       | 2017                  |       |
| North Little  Rock, AR (3)                |       | 20,592           |       | 10.000    |       | 2042                  |       |
| Tucson, AZ (2)                            |       | 12,145           |       | 2.000     |       | 2018                  |       |
| Mesa, AZ                                  |       | 27,500           |       | 3.140     |       | 2010                  |       |
| Bakersfield, CA (1)                       |       | 23,325           |       | 9.940     |       | 2023                  |       |
| Fresno, CA (2)                            |       | 6,932            |       | 21.010    |       | 2037                  |       |
| La Mirada, CA                             |       | 33,479           |       | 5.501     |       | 2037                  |       |
| San Marcos, CA                            |       | 25,522           |       | 2.212     |       | 2027                  |       |
| Fairfield, CA                             |       | 43,434           |       | 3.780     |       | 2009                  |       |
| Rocklin, CA                               |       | 29,085           |       | 4.647     |       | 2037                  |       |
| San Bernardino,  CA                       |       | 18,126           |       | 1.665     |       | 2012                  |       |
| San Martin, CA                            |       | 29,486           |       | 5.000     |       | 2023                  |       |
| Valencia, CA (3)                          |       | 64,410           |       | 9.231     |       | 2037                  |       |
| Colorado  Springs, CO (1)                 |       | 11,672           |       | 26.430    |       | 2027                  |       |
| Denver, CO                                |       | 27,085           |       | 4.132     |       | 2037                  |       |
| Longmont, CO (1)                          |       | 5,003            |       | 6.750     |       | 2026                  |       |
| Ft. Myers, FL                             |       | 22,886           |       | 4.217     |       | 2012                  |       |
| Gulf Breeze, FL (1)                       |       | 5,747            |       | 13.897    |       | 2026                  |       |
| Kissimmee, FL (3)                         |       | 58,382           |       | 6.043     |       | 2037                  |       |
| St. Augustine,  FL (1)                    |       | 21,875           |       | 20.000    |       | 2026                  |       |
| Tampa, FL                                 |       | 40,334           |       | 3.711     |       | 2026                  |       |
| Tallahassee, FL (1)                       |       | 8,494            |       | 12.630    |       | 2024                  |       |
| Byron, GA (3)                             |       | 23,400           |       | 7.000     |       | 2042                  |       |
| Oakwood, GA (1)                           |       | 4,510            |       | 7.681     |       | 2026                  |       |
| Savannah, GA (1)                          |       | 6,285            |       | 4.898     |       | 2026                  |       |
| Woodstock, GA (1)                         |       | 4,510            |       | 7.715     |       | 2026                  |       |
| Boise, ID (1)                             |       | 6,033            |       | 12.690    |       | 2018                  |       |
| Island Lake, IL (1)                       |       | 2,540            |       | 17.028    |       | 2026                  |       |
| Council Bluffs,  IA (3)                   |       | 23,620           |       | 5.770     |       | 2023                  |       |
| Indianapolis, IN  (1)                     |       | 7,690            |       | 30.000    |       | 2027                  |       |
| Bowling Green,  KY                        |       | 37,615           |       | 2.750     |       | 2037                  |       |
| Hammond, LA (2)                           |       | 27,096           |       | 68.454    |       | 2034                  |       |
| Belleville, MI                            |       | 44,248           |       | 7.260     |       | 2037                  |       |
| Grand Rapids, MI  (2)                     |       | 4,618            |       | 9.180     |       | 2037                  |       |
| Houghton Lake,  MI (1)                    |       | 6,840            |       | 9.500     |       | 2018                  |       |
| Rogers, MN                                |       | 24,700           |       | 6.303     |       | 2025                  |       |
| Strafford, MO (3)                         |       | 20,592           |       | 8.510     |       | 2042                  |       |
| Colfax, NC (1)                            |       | 6,371            |       | 8.094     |       | 2026                  |       |
| Statesville, NC (1)                       |       | 39,050           |       | 7.412     |       | 2024                  |       |
| Chichester, NH (1)                        |       | 10,447           |       | 1.572     |       | 2026                  |       |
| Bridgeport, NJ                            |       | 24,581           |       | 6.920     |       | 2031                  |       |
| Lakewood, NJ (1)                          |       | 3,800            |       | 9.912     |       | 2027                  |       |
| Albuquerque, NM (1)                       |       | 20,412           |       | 31.434    |       | 2026                  |       |
| Henderson, NV                             |       | 25,850           |       | 4.400     |       | 2025                  |       |
| Las Vegas, NV (1)                         |       | 5,000            |       | 15.840    |       | 2027                  |       |
| Bath, NY (1)                              |       | 4,356            |       | 5.500     |       | 2026                  |       |
| Amsterdam, NY (2)                         |       | 13,420           |       | 28.000    |       | 2033                  |       |
| Churchville, NY (1)                       |       | 7,193            |       | 10.380    |       | 2026                  |       |
| Syracuse, NY (1)                          |       | 12,242           |       | 8.190     |       | 2026                  |       |

 

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| ** **                                          | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|-----------------------------------------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| **Camping  World Supercenter Locations continued:** |       |             |       |      |       |                  |       |
| Akron, OH (1)                                       |       | 3,865            |       | 9.622     |       | 2026                  |       |
| Oklahoma City,  OK (2)                              |       | 12,500           |       | 8.219     |       | 2023                  |       |
| Junction City,  OR (2)                              |       | 21,401           |       | 1.970     |       | 2036                  |       |
| Wilsonville, OR                                     |       | 32,850           |       | 4.653     |       | 2016                  |       |
| Wood Village, OR  (1)                               |       | 6,495            |       | 11.070    |       | 2027                  |       |
| Columbia, SC (1)                                    |       | 23,450           |       | 4.140     |       | 2017                  |       |
| Myrtle Beach, SC                                    |       | 38,962           |       | 5.410     |       | 2037                  |       |
| Myrtle Beach, SC  (1)                               |       | 2,298            |       | 18.940    |       | 2026                  |       |
| North  Charleston, SC (1)                           |       | 13,142           |       | 7.690     |       | 2027                  |       |
| Spartanburg, SC (1)                                 |       | 11,900           |       | 19.263    |       | 2033                  |       |
| Chattanooga, TN (1)                                 |       | 9,400            |       | 10.840    |       | 2024                  |       |
| Knoxville, TN (2)                                   |       | 10,763           |       | 24.580    |       | 2037                  |       |
| Nashville, TN (2)                                   |       | 34,478           |       | 3.238     |       | 2037                  |       |
| Anthony, TX (1)                                     |       | 7,061            |       | 32.000    |       | 2025                  |       |
| Denton, TX                                          |       | 22,984           |       | 6.887     |       | 2037                  |       |
| Fort Worth, TX (2)                                  |       | 11,102           |       | 16.000    |       | 2026                  |       |
| Katy, TX (1)                                        |       | 25,913           |       | 38.861    |       | 2025                  |       |
| Mission, TX                                         |       | 23,094           |       | 3.430     |       | 2015                  |       |
| New Braunfels,  TX (3)                              |       | 43,397           |       | 19.100    |       | 2035                  |       |
| Draper, UT                                          |       | 27,675           |       | 8.031     |       | 2026                  |       |
| Kaysville, UT (1)                                   |       | 6,033            |       | 16.200    |       | 2027                  |       |
| Roanoke, VA (3)                                     |       | 35,796           |       | 7.690     |       | 2023                  |       |
| Winchester, VA                                      |       | 19,400           |       | 4.120     |       | 2042                  |       |
| Burlington, WA (1)                                  |       | 23,033           |       | 6.500     |       | 2025                  |       |
| Fife, WA                                            |       | 35,659           |       | 5.840     |       | 2032                  |       |
| Madison, WI (3)                                     |       | 20,400           |       | 4.866     |       | 2023                  |       |

 

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(1)   This supercenter is leased from aFreedomRoads dealership and the acreage reflects the total dealershipproperty.  The square footage reported isthe portion of the building leased by Camping World, Inc.

(2)   This supercenter is located with an RVdealership (other than a FreedomRoads dealership) and the acreage reflects thetotal dealership property. The square footage reported is the portion of thebuilding leased by Camping World, Inc.

(3)   The supercenter is co-located with a FreedomRoadsdealership wherein Camping World, Inc. and the dealership are co-tenants or thedealership subleases space from Camping World, Inc.  The square footage reported is the portion ofthe building leased by Camping World, Inc.

 

We also lease a body shop of 10,500 square feet on approximately 0.7acres in Denver, Colorado, a body shop of 12,000 square feet on approximately1.9 acres in Bellville, Michigan and other miscellaneous office equipment.  In addition, we own 12.439 acres ofunimproved land adjacent to the New Braunfels, Texas Camping World Supercenter.

 

**ITEM 3: LEGAL PROCEEDINGS**

 

From time to time, the Company is involved in litigation arising in thenormal course of business operations.  The Company does not believe it is involved in any litigation that willhave a material adverse effect on the results of operations or financialposition.

 

26

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**ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS**

 

None.

 

**PART II**

 

**ITEM 5:  MARKET FOR REGISTRANT’S COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

 

Not Applicable

 

27

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**ITEM6:  SELECTED FINANCIAL DATA**

 

Theselected financial data of our company for each of the five years ended December 31are derived from our audited consolidated financial statements.  Prior to April 27, 2004, AGI was awholly-owned subsidiary of Affinity Group Holding, Inc. (“AGH”).  On April 27, 2004, AGH merged into 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 results of operations of AGI and AGH in2004 have been restated to reflect the April 27, 2004 merger.  Our selected financial data should be read inconjunction with “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and our Consolidated Financial Statements and thenotes thereto included herein.

 
| *** ***                                       | ** **   | **Year ended**             | ** **   |
|----------------------------------------------------|--------------|----------------------------|--------------|
| *** ***                                       | *** *** | **(dollars in thousands)** | *** *** |
| **Statement of Operations Data:**   | ** **   | **2008**                   | ** **   | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| REVENUES:                                          |         |                       |         |   |   |   |   |   |   |   |   |
| Membership  services                               |         | $                          | 152,643      |   | $ | 149,937 |   | $ | 137,394 |   | $ | 133,756 |   | $ | 131,608 |   |
| Media                                              |         | 82,424                     |         | 90,537 |   | 86,742 |   | 79,122 |   | 77,977 |   |
| Retail                                             |         | 291,070                    |         | 321,730 |   | 290,422 |   | 272,682 |   | 255,094 |   |
|                                               |         | 526,137                    |         | 562,204 |   | 514,558 |   | 485,560 |   | 464,679 |   |
|                                               |         |                       |         |   |   |   |   |   |   |   |   |
| COSTS APPLICABLE  TO REVENUES:                     |         |                       |         |   |   |   |   |   |   |   |   |
| Membership  services                               |         | 90,758                     |         | 94,840 |   | 87,407 |   | 85,551 |   | 84,231 |   |
| Media                                              |         | 61,126                     |         | 62,258 |   | 58,302 |   | 53,855 |   | 53,042 |   |
| Retail                                             |         | 170,911                    |         | 194,940 |   | 175,015 |   | 162,363 |   | 151,196 |   |
|                                               |         | 322,795                    |         | 352,038 |   | 320,724 |   | 301,769 |   | 288,469 |   |
|                                               |         |                       |         |   |   |   |   |   |   |   |   |
| GROSS PROFIT                                       |         | 203,342                    |         | 210,166 |   | 193,834 |   | 183,791 |   | 176,210 |   |
|                                               |         |                       |         |   |   |   |   |   |   |   |   |
| OPERATING  EXPENSES:                               |         |                       |         |   |   |   |   |   |   |   |   |
| Selling, general  and administrative               |         | 142,757                    |         | 145,556 |   | 133,129 |   | 121,178 |   | 116,137 |   |
| Restructuring  charge                              |         | —                     |         | — |   | 93 |   | — |   | — |   |
| Goodwill  impairment                               |         | 47,601                     |         | — |   | — |   | 4,344 |   | — |   |
| Impairment of  investment in affiliate             |         | 81,005                     |         | — |   | — |   | — |   | — |   |
| Depreciation and  amortization                     |         | 19,798                     |         | 18,948 |   | 18,656 |   | 15,529 |   | 13,893 |   |
|                                               |         | 291,161                    |         | 164,504 |   | 151,878 |   | 141,051 |   | 130,030 |   |
|                                               |         |                       |         |   |   |   |   |   |   |   |   |
| (LOSS) INCOME  FROM OPERATIONS                     |         | (87,819                    | )            | 45,662 |   | 41,956 |   | 42,740 |   | 46,180 |   |
|                                               |         |                       |         |   |   |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                              |         |                       |         |   |   |   |   |   |   |   |   |
| Interest  expense, net                             |         | (23,649                    | )            | (24,227 | ) | (24,593 | ) | (24,581 | ) | (23,239 | ) |
| Loss on  derivative instrument (1)                 |         | (2,394                     | )            | — |   | — |   | — |   | — |   |
| Debt  extinguishment expense                       |         | —                     |         | (775 | ) | (835 | ) | — |   | (5,035 | ) |
| Other  non-operating income (expense), net         |         | (323                       | )            | (149 | ) | 9 |   | (5 | ) | 420 |   |
|                                               |         | (26,366                    | )            | (25,151 | ) | (25,419 | ) | (24,586 | ) | (27,854 | ) |
|                                               |         |                       |         |   |   |   |   |   |   |   |   |
| (LOSS) INCOME  FROM OPERATIONS BEFORE INCOME TAXES |         | (114,185                   | )            | 20,511 |   | 16,537 |   | 18,154 |   | 18,326 |   |
|                                               |         |                       |         |   |   |   |   |   |   |   |   |
| INCOME TAX  BENEFIT (EXPENSE) (2)                  |         | 2,213                      |         | (1,583 | ) | (22,268 | ) | (7,416 | ) | (8,075 | ) |
|                                               |         |                       |         |   |   |   |   |   |   |   |   |
| NET (LOSS)  INCOME                                 |         | $                          | (111,972     | ) | $ | 18,928 |   | $ | (5,731 | ) | $ | 10,738 |   | $ | 10,251 |   |

 

28

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| ** **                           | ** ** | **December 31,** | ** ** |
|--------------------------------------|------------|-----------------------|------------|
| **(dollars in thousands)** | ** ** | **2008**              | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Balance Sheet  Data (at period end): |       |                  |       |   |   |   |   |   |   |   |   |
| Working capital  (deficiency)        |       | $                     | (10,494    | ) | $ | (21,064 | ) | $ | (34,983 | ) | $ | (6,731 | ) | $ | (10,813 | ) |
| Total assets                         |       | 294,352               |       | 421,611 |   | 408,008 |   | 415,460 |   | 320,222 |   |
| Deferred  revenues and gains (3)     |       | 96,424                |       | 104,390 |   | 100,089 |   | 98,920 |   | 99,130 |   |
| Total debt                           |       | 292,146               |       | 287,173 |   | 285,155 |   | 320,000 |   | 314,336 |   |
| Total  stockholders’ deficit    |       | (186,514              | )          | (66,910 | ) | (75,383 | ) | (66,365 | ) | (158,108 | ) |
|                                      |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

(1) Loss on deferred instrumentpertains to the change in value of the $35.0 million interest rate swap agreementeffective April 30, 2008.

 

(2) Effective January 1, 2006,the Company changed its tax status from a Subchapter C corporation to aSubchapter S corporation, upon receiving approval from the Internal RevenueService.  The election to change includedthe Company and all its subsidiaries, with the exception of Camping World, Inc.and its wholly-owned subsidiaries, which remained Subchapter CCorporations.  As a result of the changein tax status, all deferred tax accounts of the Company, excluding CampingWorld and its wholly-owned subsidiaries, were revalued to account for the lowertax rates applicable to the Subchapter S corporation status and such reductionwas charged to income tax expense for the year end December 31, 2006.

 

(3) Deferred revenues represent cashreceived by us in advance of the recognition of revenues in accordance withaccounting principles generally accepted in the United States.  Deferred revenues primarily reflect clubmembership dues, annual ERS fees, advances on third party credit card feerevenues and publication subscriptions. These revenues are recognized at the time the goods or services areprovided or over the membership period, which averages approximately 17 months.  The deferred revenue balance for 2008, 2007,2006, 2005, and 2004 also include deferred gains of $8.9 million, $9.3 million,$9.8 million, $10.3 million, and $10.8 million, respectively, from the realestate sale-leaseback transactions which occurred in December 2001.

 

29

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**ITEM 7: MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION**

 

Thefollowing tables set forth the components of the statements of operations forthe years ended December 31, 2008, 2007, and 2006 as a percentage of totalrevenues, and the comparison of those components from period to period.  The following discussion is based on ourConsolidated Financial Statements included elsewhere herein.  Our revenues are derived principally frommembership services, including club membership dues and marketing fees paid tous for services provided by third parties, from publications, includingsubscriptions and advertising, and from retail sales.

 
| ** **                                         | ** ** | **Percentage of**  | ** ** | **Percentage Increase/** | ** ** |
|----------------------------------------------------|------------|-------------------------|------------|-------------------------------|------------|
| ** **                                         | ** ** | **Total Revenues** | ** ** | **(Decrease)**                | ** ** |
| ** **                                         | ** ** | ** **              | ** ** | ** **                    | ** ** | ** ** | ** ** | **Year 2008** | ** ** | **Year 2007** | ** ** |
| ** **                                         | ** ** | **2008**                | ** ** | **2007**                      | ** ** | **2006** | ** ** | **over 2007** | ** ** | **over 2006** | ** ** |
|                                               |       |                    |       |                          |       |   |   |   |   |   |   |
| REVENUES:                                          |       |                    |       |                          |       |   |   |   |   |   |   |
| Membership  services                               |       | 29.0                    | %          | 26.7                          | %          | 26.7 | % | 1.8 | % | 9.1 | % |
| Media                                              |       | 15.7                    | %          | 16.1                          | %          | 16.9 | % | (9.0 | )% | 4.4 | % |
| Retail                                             |       | 55.3                    | %          | 57.2                          | %          | 56.4 | % | (9.5 | )% | 10.8 | % |
|                                               |       | 100.0                   | %          | 100.0                         | %          | 100.0 | % | (6.4 | )% | 9.3 | % |
|                                               |       |                    |       |                          |       |   |   |   |   |   |   |
| COSTS APPLICABLE  TO REVENUES:                     |       |                    |       |                          |       |   |   |   |   |   |   |
| Membership  services                               |       | 17.2                    | %          | 16.9                          | %          | 17.0 | % | (4.3 | )% | 8.5 | % |
| Media                                              |       | 11.6                    | %          | 11.1                          | %          | 11.3 | % | (1.8 | )% | 6.8 | % |
| Retail                                             |       | 32.6                    | %          | 34.6                          | %          | 34.0 | % | (12.3 | )% | 11.4 | % |
|                                               |       | 61.4                    | %          | 62.6                          | %          | 62.3 | % | (8.3 | )% | 9.8 | % |
|                                               |       |                    |       |                          |       |   |   |   |   |   |   |
| GROSS PROFIT                                       |       | 38.6                    | %          | 37.4                          | %          | 37.7 | % | (3.2 | )% | 8.4 | % |
|                                               |       |                    |       |                          |       |   |   |   |   |   |   |
| OPERATING  EXPENSES:                               |       |                    |       |                          |       |   |   |   |   |   |   |
| Selling, general  and administrative               |       | 27.1                    | %          | 25.9                          | %          | 25.9 | % | (1.9 | )% | 9.3 | % |
| Restructuring  charge                              |       | —                  |       | —                        |       | — |   | — |   | (100.0 | )% |
| Goodwill  impairment                               |       | 9.0                     | %          | —                        |       | — |   | 100.0 | % | — |   |
| Impairment of  investment in affiliate             |       | 15.4                    | %          | —                        |       | — |   | 100.0 | % | — |   |
| Depreciation and  amortization                     |       | 3.8                     | %          | 3.4                           | %          | 3.6 | % | 4.5 | % | 1.6 | % |
|                                               |       | 55.3                    | %          | 29.3                          | %          | 29.5 | % | 77.0 | % | 8.3 | % |
|                                               |       |                    |       |                          |       |   |   |   |   |   |   |
| (LOSS) INCOME  FROM OPERATIONS                     |       | (16.7                   | )%         | 8.1                           | %          | 8.2 | % | (292.3 | )% | 8.8 | % |
|                                               |       |                    |       |                          |       |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                              |       |                    |       |                          |       |   |   |   |   |   |   |
| Interest income                                    |       | 0.1                     | %          | 0.1                           | %          | 0.2 | % | (2.2 | )% | (46.9 | )% |
| Interest expense                                   |       | (4.5                    | )%         | (4.5                          | )%         | (5.0 | )% | (2.4 | )% | (3.5 | )% |
| Loss on  derivative instrument                     |       | (0.5                    | )%         | —                        |       | — |   | 100.0 | % | — |   |
| Debt  extinguishment expense                       |       | —                  |       | (0.1                          | )%         | (0.2 | )% | (100.0 | )% | (7.2 | )% |
| Other  non-operating (expense) income, net         |       | (0.1                    | )%         | —                        |       | — |   | 116.8 | % | — |   |
|                                               |       | (5.0                    | )%         | (4.5                          | )%         | (5.0 | )% | 4.8 | % | (1.1 | )% |
| (LOSS) INCOME  FROM OPERATIONS BEFORE INCOME TAXES |       | (21.7                   | )%         | 3.6                           | %          | 3.2 | % | (656.7 | )% | 24.0 | % |
|                                               |       |                    |       |                          |       |   |   |   |   |   |   |
| INCOME TAX  BENEFTI (EXPENSE)                      |       | 0.4                     | %          | (0.2                          | )%         | (4.3 | )% | (239.8 | )% | (92.9 | )% |
|                                               |       |                    |       |                          |       |   |   |   |   |   |   |
| NET (LOSS)  INCOME                                 |       | (21.3                   | )%         | 3.4                           | %          | (1.1 | )% | (691.6 | )% | 430.3 | % |

 

30

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**YearEnded December 31, 2008 Compared with Year Ended December 31, 2007**

 

*Revenues*

 

Revenuesof $526.1 million for 2008 decreased by $36.1 million or 6.4% from thecomparable period in 2007.

 

Membershipservices revenues for 2008 of $152.6 million increased by $2.7 million or 1.8%from 2007.  This revenue increase waslargely attributable to a $5.0 million brand usage licensing charged toFreedomRoads Holding LLC and its subsidiaries (collectively “FreedomRoads”), a$1.6 million increase in marketing fee revenue from health and life insuranceproducts, a $0.7 million increase in emergency road service revenueattributable to increased average enrollment, and a $0.6 million increase inextended vehicle warranty program revenue due to continued growth in the salesof one-year renewable warranty products including warranty sales through ourgrowing network of Good Sam dealers, partially offset by a $1.7 million revenuedecrease in fee income from financial services, a $1.3 million decrease in feeincome recognized on vehicle insurance products, a $1.1 million decrease inadvertising revenue in *Highways Magazine*,the Good Sam Club publication, and a $1.1 million revenue decrease in the Coastto Coast Club due to decreased enrollment.

 

Mediarevenues for 2008 of $82.4 million decreased by $8.1 million or 9.0% from2007.  This decrease was primarilyattributable to a $4.3 million revenue decrease from our outdoor power sportsmagazine group due to decreased number of issues published and decreased advertisingrevenue, a $3.3 million reduction in annual directory and campground guiderevenue, and a $2.9 million revenue decrease for the RV magazine groupprimarily due to decreased advertising revenue. These decreases were partially offset by a $2.4 million increase inconsumer show revenue.

 

Retailrevenue for 2008 of $291.1 million decreased approximately $30.7 million or9.5% from 2007.  Store merchandise salesdecreased $26.8 million from 2007 primarily due to a $33.5 million, or 15.6%,same store sales decrease compared to a 6.8% decrease in 2007.  This was partially offset by a $6.7 millionrevenue increase from the addition of 23 new stores over the past twoyears.  Same store sale calculations fora given period include only those stores that were open both at the end of thatperiod and at the beginning of the preceding fiscal year.  In addition, mail order revenue decreased$8.6 million, and product extended warranty sales decreased $0.4 million.  These decreases were partially offset by a$4.4 million increase in supplies and other sales, and a $0.7 million increasein installation and service fees.

 

*Costs Applicable to Revenues*

 

Costsapplicable to revenues totaled $322.8 million in 2008, a decrease of $29.2million or 8.3% from 2007.

 

Membership services costsand expenses decreased by $4.1 million or 4.3% to $90.8 million for 2008.  This decrease was attributable to a $3.0million reduction of marketing and program costs associated with the Good SamClub, the Coast Club and the Golf Card Club, a $1.0 million reduction inmarketing and programs costs associated with the extended vehicle warrantyprogram, a $0.6 million reduction in vehicle insurance costs associated withlower revenue, and a $0.5 million cost reduction for emergency road service programsprimarily related to claims costs, partially offset by $1.0 million ofadditional program costs associated with increased marketing fee revenue fromhealth and life insurance products.

 

Mediacosts and expenses of $61.1 million for 2008 decreased $1.1 million or 1.8%compared to 2007.  Thisdecrease was attributable to a $1.6 million cost reduction in the outdoor powersports magazines primarily related to a reduction in the number of issuespublished, a $0.9 million reduction in production and advertising costs of theRV magazines, and $0.6 million of reduced costs associated 

 

31

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with reduced annual directory revenue, partially offset by$2.0 million of additional costs associated with the recently acquired consumershows.

 

Retailcosts applicable to revenues decreased $24.0 million or 12.3% to $170.9 millionprimarily due to reduced same store revenue. The retail gross profit decreased by $6.6 million, with gross margin asa percent of revenues increasing from 39.4% in 2007 to 41.3% in 2008 dueprimarily to general price increases.

 

*Operating Expenses*

 

Selling,general and administrative expenses of approximately $142.7 million for 2008decreased $2.8 million or 1.9% from 2007. This decrease was largely attributable to a $1.8 million reduction inexecutive wage-related expenses and professional fees, a $0.9 million reductionin arbitration expenses in connection with our 2007 asserted claim to a rightof first refusal in connection with the sale of the insurance provider for theRV vehicle insurance offered by our Membership Services segment, which claimwas rejected by the arbitration panel, and a $0.7 million reduction in deferredexecutive compensation.  These decreaseswere partially offset by increased retail selling and general andadministrative expenses of $0.6 million consisting of increased rent expensepartially offset by decreased wages and travel.

 

The$47.6 million non-cash goodwill impairment charge was based on the results of athird party valuation report (“Valuation Report”), prepared in the thirdquarter of 2008 by Houlihan Smith and Company Inc., a nationally recognizedfirm, in anticipation of the potential sale of Camping World, that determinedthat the carrying value of the goodwill associated with Camping World exceededits estimated fair value.  The $81.0million non-cash long-lived asset impairment charge was also based on theValuation Report prepared in anticipation of the potential sale of CampingWorld that determined the carrying value of the preferred interest inFreedomRoads Holding Company, LLC, held by an indirect subsidiary of CampingWorld, exceeded its estimated fair value.

 

Depreciationand amortization expenses of $19.8 million were $0.8 million higher than in2007 due primarily to increased amortization of intangible assets associatedwith the recent acquisitions and depreciation associated with new stores.

 

*(Loss) Income from Operations*

 

Lossfrom operations for 2008 was $87.8 million versus income from operations of$45.7 million for 2007.  This $133.5million decrease, or 292.3%, was attributable to increased operating expensesof $126.7 million, and reduced gross profit in the media and retail operationsof $7.0 million and $6.6 million, respectively, partially offset by $6.8million of increased gross profit for membership services operations.

 

*Non-Operating Items*

 

Netnon-operating items for 2008 were $26.4 million, a $1.2 million increase from2007.  This increase was primarilyattributable to a $2.4 million loss on derivative instrument recorded in thefourth quarter of 2008 related to the ineffective portion of the loss in fairvalue of our $35.0 million interest rate swap, and $0.2 million of additionalloss on sale of equipment, partially offset by an $0.8 million reduction indebt extinguishment expense, and a $0.6 million reduction in interest expensein 2008 resulting from lower average interest rates in 2008.

 

32

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*(Loss) Income before Income Taxes*

 

Lossbefore income taxes for 2008 was $114.2 million versus income of $20.5 millionin 2007.  This $134.7 million decreasefrom the prior year was attributable to the $133.5 million decrease in incomefrom operations mentioned above, and a $1.2 million increase in non-operatingitems.

 

*Income Tax Expense*

 

TheCompany recorded $2.2 million of income tax benefit for 2008, compared to a$1.6 million income tax expense for 2007. The change was primarily due the reversal of a deferred tax liabilityrelated to a long-lived intangible.

 

*Net (Loss) Income*

 

Netloss for 2008 was $112.0 million compared to net income of $18.9 million for2007mainly due to the reasons discussed above.

 

*Segment (Loss) Profit*

 

Segmentloss of $3.8 million for 2008 (before impairment of investment in affiliate,and unallocated depreciation and amortization, general and administrative,interest, debt restructuring and income tax (expense) benefit) decreased byapproximately $63.6 million, or 106.3%, from 2007.

 

Membershipservices segment profit of $51.7 million in 2008 increased by $1.2 million, or2.4% from 2007.  This increase wasprimarily attributable to a $5.0 million brand licensing fee charged toFreedomRoads, a $1.8 million increase in segment profit related to extendedwarranty programs, a $1.0 million increase in profit associated with reducedmarketing and program costs in the Coast to Coast Club and the Golf Card Club,and a $0.7 million increase in segment profit related to health and lifeinsurance.  These increases werepartially offset by a $4.6 million decrease in segment profit for the ERSprograms primarily related to decreased interest income, a $1.4 milliondecrease in segment profit related to decreased vehicle insurance productsrevenue, a $0.8 million segment profit decrease related to reduced revenue forRV financing products, and a $0.5 million segment profit decrease related toreduced credit card marketing fee revenue.

 

Mediasegment profit for 2008 of $9.2 million decreased by $8.3 million, or 47.3%from $17.5 million in 2007.  The decreasein gross profit margin was primarily due to a $2.3 million reduction in segmentprofit related to the outdoors power sports magazine group, a $2.5 millionreduction in segment profit in annual directories and campground guides, a $2.0million reduction in segment profit from the RV-related titles, a $1.2 millionreduction in segment profit related to the consumer shows group, and a $0.3million reduction in other publishing areas.

 

Retailsegment loss for 2008 of $64.7 million increased by $56.5 million from2007.  This increased segment lossresulted primarily from $47.6 million of goodwill impairment, a $6.7 milliondecrease in gross profit, a $0.8 million increase in depreciation andamortization expense, a $0.6 million increase in selling, general andadministrative expenses, and an $0.8 million increase in net interest expense.

 

**YearEnded December 31, 2007 Compared with Year Ended December 31, 2006**

 

*Revenues*

 

Revenuesof $562.2 million for 2007 increased by $47.6 million or 9.3% from thecomparable period in 2006.

 

33

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Membershipservices revenues for 2007 of $149.9 million increased by $12.5 million or 9.1%from 2006.  This revenue increase waslargely attributable to a $6.7 million increase in extended vehicle warrantyprogram revenue due to continued growth in the sales of one-year renewablewarranty products including warranty sales through our growing network of GoodSam dealers, a $2.5 million revenue increase primarily due to increasedenrollment in the Camping World President’s Club and the Camp Club USA,partially offset by reduced enrollment in the Golf Card Club and Coast to CoastClub, a $1.7 million increase in emergency road service revenue attributable toincreased enrollment and price increases, a $1.2 million increase in marketingfee revenue from health and life insurance products, a $0.7 million increase indealer program marketing revenue and a $0.4 million increase in marketing feeincome recognized on RV financing products. These increases were partially offset by a $0.7 million revenuereduction due to the elimination of the RV Today television program.

 

Mediarevenues for 2007 of approximately $90.6 million increased by $3.8 million or4.4% from 2006.  This increase wasprimarily attributable to $2.6 million of revenue associated with theacquisition of the publishing assets of American Guide Services, Inc. in August 2006,$2.1 million of revenue associated with consumer shows acquired over the lasttwo years and $0.9 million of additional annual directory revenue.  These increases were partially offset by a$0.7 million revenue decrease from the elimination of the *CruisingRider* title, a $0.5 million decrease in campground atlas revenue,which is scheduled for its bi-annual update and reprint in 2008, a $0.3 milliondecrease in advertising revenue for the RV magazine group, and a $0.3 millionrevenue decrease due to ten fewer issues of Snow Week magazine in 2007.

 

Retailrevenue for 2007 of $321.7 million increased approximately $31.3 million or10.8% from 2006.  Store merchandise salesincreased $24.8 million over 2006 primarily due to a $38.2 million revenueincrease from the addition of 36 new stores over the past two years.  Same store sales decreased $13.4 million, or6.8%, compared to a 3.5% decrease in 2006. Same store sale calculations for a given period include only thosestores that were open both at the end of that period and at the beginning ofthe preceding fiscal year.  Supplies andother sales increased $4.5 million, including $0.8 million recorded during theperiod relating to the recognition of estimated gift card breakage.  Prior to third quarter of 2007 the Companyhad not recorded any unredeemed gift card sales into revenue.  In the third quarter the Company changed thestate of jurisdiction where gift cards will be administered and commencedaccounting for estimated breakage of gift cards under the “redemption ratemethod.”  In addition, installation andservice fees increased $1.3 million, and product extended warranty salesincreased $1.0 million.  These increaseswere partially offset by a $0.3 million decrease in mail order revenue.

 

*Costs Applicable to Revenues*

 

Costsapplicable to revenues totaled $352.0 million in 2007, an increase of $31.3 millionor 9.8% from 2006.

 

Membership services costsand expenses increased by $7.4 million or 8.5% to $94.8 million for 2007.  This increase was attributable to $5.1million of additional costs associated with increased extended vehicle warrantyprogram revenue, including incremental marketing and overhead costs associatedwith the expansion of our Good Sam authorized dealer network, $0.9 million ofadditional emergency road service costs attributable to increased enrollment, $0.9 million of net additional membershipservices costs associated with increased membership in the Camping WorldPresident’s Club and Camp Club USA, partially offset by reduced membership inthe Coast to Coast Club and the Golf Card Club, $0.7 million of additionaldealer program marketing costs, and $0.7 million of additional program costsassociated with increased marketing fee revenue from health and life insuranceproducts.  These increases were partiallyoffset by $0.9 million of reduced costs resulting from the elimination of the RVToday television program.

 

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Mediacosts and expenses of $62.3 million for 2007 increased $4.0 million or 6.8%compared to 2006.  Thisincrease was attributable to $2.7 million of incremental costs from therecently acquired Affinity Guest Services Group, $1.6 million of costsassociated with the recently acquired consumer shows, $0.7 million ofadditional costs associated with increased annual directory revenue, and $0.3million of additional advertising expenses for the RV magazine group.  These increases were partially offset by a$0.7 million reduction in costs related to the elimination of *Cruising Rider* magazine, reduced campground atlas costs of$0.3 million resulting from reduced sales, and reduced costs of $0.3 millionassociated with fewer issues of *Snow Week*magazine.

 

Retailcosts applicable to revenues increased $19.9 million or 11.4% to $194.9 millionprimarily due to the opening of 36 new stores over the past two years.  The retail gross profitincreased by $11.4 million, but the gross margin as a percent of revenuesdecreased from 39.7% in 2006 to 39.4% in 2007 due primarily to a shift inproduct mix to relatively lower margin products and margin compression causedby a combination of competitive pricing and increased product costs.

 

*Operating Expenses*

 

Selling,general and administrative expenses of $145.6 million for 2007 increased $12.4million or 9.3% over 2006.  This increasewas largely attributable to an increase in retail selling and general andadministrative expenses of approximately $10.8 million consisting of increasesin selling, labor and real property expenses primarily due to new storeopenings and other marketing programs, $1.0 million of costs associated withthe recently acquired consumer shows, $0.9 million of arbitration expenses inconnection with our asserted claim to a right of first refusal in connectionwith the sale of the insurance provider for the RV vehicle insurance offered byour Membership Services segment, which claim was rejected by the arbitrationpanel, and a $0.4 million increase in other general and administrativeexpenses.  These increases were partiallyoffset by a $0.7 million reduction in deferred executive compensation.

 

Depreciationand amortization expenses of $18.9 million were $0.3 million higher than in2006 due primarily to increased amortization of intangible assets associatedwith the recent acquisitions and depreciation associated with new stores.

 

*Income from Operations*

 

Incomefrom operations of $45.7 million for 2007 increased $3.7 million or 8.8%compared to 2006.  This increase wasattributable to increased gross profit in the retail and membership servicesoperations of $11.4 million and $5.1 million, respectively, partially offset byincreased operating expenses of $12.6 million and reduced gross profit formedia operations of $0.2 million.

 

*Non-Operating Items*

 

Netnon-operating items for 2007 were $25.2 million, a $0.3 million decrease from2006.  This decrease was primarilyattributable to a $0.9 million decrease in interest expense in 2007 resultingfrom a lower average interest rate in 2007, partially offset by a $0.5 milliondecrease in interest income and a $0.1 million loss on sale of equipment.

 

*Income before Income Taxes*

 

Incomebefore income taxes for 2007 was $20.5 million, or 24.0% more than 2006.  This $4.0 million increase from the prioryear was attributable to the $3.7 million increase in income from operationsmentioned above, and a $0.3 million decrease in non-operating items.

 

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*Income Tax Expense*

 

TheCompany recorded $1.6 million of income tax expense for 2007, compared to a$22.3 million income tax expense for 2006. This expense decrease was primarily due to AGHC’s S corporation changeof tax status election effective for the second quarter of 2006, which includedAGI and all of its subsidiaries, with the exception of Camping World, Inc.and its wholly-owned subsidiaries which will remain Subchapter Ccorporations.  As a result, all deferredtax assets and liabilities were revalued with the exception of those related toCamping World, Inc. and its wholly-owned subsidiaries and other potentialbuilt-in gains.  Further, the companyincreased its valuation allowance by $2.7 million for 2007 as it was determinedthat it is more likely that the Company would have insufficient taxable incomein the current, carryback, or carryforward periods under the tax laws torealize the future tax benefit of its deferred tax assets.

 

*Net Income (Loss)*

 

Netincome for 2007 was $18.9 million compared to a net loss of $5.7 million for2006mainly due to the reasons discussed above.

 

*Segment Profit*

 

Segmentprofit of $59.9 million for 2007 (before unallocated depreciation andamortization, general and administrative, interest, debt restructuring andincome tax expense) increased by approximately $5.5 million, or 10.0%, from2006.

 

Membershipservices segment profit of $50.5 million in 2007 increased by $5.8 million, or13.0% from 2006.  This increase wasprimarily attributable to a $3.9 million increase in profit associated withincreased enrollment and increased interest income for the ERS programs, a $1.3million increase in profit in the extended vehicle warranty program, and a $0.6million increase in profit from Camp Club USA.

 

Mediasegment profit for 2007 of $17.5 million decreased by $2.3 million, or 11.8%from $19.8 million in 2006.  The decreasein gross profit margin was primarily due to reduced profit related to theconsumer shows of $1.0 million primarily related to increased amortizationexpense, reduced gross profit from the RV-related titles of $1.0 million and$0.3 million of additional new product development costs and overhead.

 

Retailsegment loss for 2007 of $8.1 million decreased by $2.0 million from 2006.  This reduced segment loss resulted primarilyfrom a $14.2 million increase in gross profit and a $0.5 million decrease indepreciation and amortization expense partially offset by a $10.8 millionincrease in selling, general and administrative expenses primarily related tothe increase in new stores, a $1.7 million increase in net interest expense anda $0.2 million loss on sale of equipment.

 

**Liquidity and Capital Resources**

 

We have historically operated with a working capitaldeficit.  The working capital deficit asof December 31, 2008 and 2007 was $10.5 million and $21.1 million,respectively.  The primary reason for theworking capital deficit is the deferred revenue and gains reported undercurrent liabilities of $60.6 million and $65.9 million as of December 31,2008 and 2007, respectively.  Deferredrevenue is primarily comprised of cash collected for club memberships inadvance of services to be provided which is deferred and recognized as revenueover the life of the membership.  We usenet proceeds from this deferred membership revenue to lower our long-termborrowings and finance our working capital needs.  We generated net cash**fromoperations of $15.5 million and $19.3 million, in 2008 and 2007,respectively.

 

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*ContractualObligations and Commercial Commitments*

 

Thefollowing table reflects our contractual obligations and commercial commitmentsat December 31, 2008, in thousands. The table below includes principal and future interest due under ourdebt agreements based on interest rates as of December 31, 2008 andassumes debt obligations will be held to maturity.

 
| ** **                                      | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------|------------|
| **(in thousands)**                         | ** ** | **Total**                                 | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **Thereafter** | ** ** |
|                                            |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt                                  |       | $                                         | 352,221    |   | $ | 35,861 |   | $ | 143,302 |   | $ | 13,801 |   | $ | 159,257 |   | $ | — |   | $ | — |   |
| Operating lease  obligations                    |       | 228,070                                   |       | 22,227 |   | 21,782 |   | 20,351 |   | 18,496 |   | 16,288 |   | 128,926 |   |
| Deferred  compensation                          |       | 1,400                                     |       | 1,400 |   | — |   | — |   | — |   | — |   | — |   |
| Other  commercial commitments Letters of credit |       | 7,467                                     |       | 7,467 |   | — |   | — |   | — |   | — |   | — |   |
|                                            |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Grand total                                     |       | $                                         | 589,158    |   | $ | 66,955 |   | $ | 165,084 |   | $ | 34,152 |   | $ | 177,753 |   | $ | 16,288 |   | $ | 128,926 |   |

 

On June 24, 2003, weentered into the Amended and Restated Credit Agreement and a Senior SecuredFloating Rate Note Purchase Agreement (“Senior Credit Facility”) providing forterm loans (“Term Loans”) in the aggregate of $140.0 million and a revolvingcredit facility of $35.0 million.  As of December 31,2008, $127.0 million was outstanding under the Term Loans and $8.5 million wasoutstanding on the revolving credit facility. Reborrowings under the Term Loans are not permitted.  The interest on borrowings under the SeniorCredit Facility is at variable rates based on the ratio of total cash flow tooutstanding indebtedness (as defined). Interest rates float with prime and the London Interbank Offered Rates,or LIBOR, plus an applicable margin ranging from 1.50% to 2.50% over the statedrates.  As of December 31, 2008, theaverage interest rate on the Term Loans was 7.27%, and permitted borrowingsunder the undrawn revolving facility were $27.5 million.  We also pay a commitment fee of 0.5% perannum on the unused amount of the revolving credit facility.  The aggregate quarterly scheduled payments onthe Term Loans are $0.4 million.  Therevolving credit facility and the Term Loans mature on June 24, 2009.  The funds available under our Senior CreditFacility may be utilized for borrowings or letters of credit; however, amaximum of $7.5 million may be allocated to such letters of credit.  As of December 31, 2008, we had lettersof credit in the aggregate amount of $7.5 million outstanding.  The Senior Credit Facility is secured byvirtually all of our assets and a pledge of our stock and the stock of our subsidiaries.  Further, the Senior Credit Facility requiresthe loans to be prepaid in an amount equal to 75% of the excess cash flow, asdefined.  As of December 31, 2008,the Company has no excess cash flow as defined.

 

On March 3, 2006,AGI amended its Senior Credit Facility to revise the definition of ConsolidatedFixed Charges Ratio and Permitted Tax Distributions.  This amendment allows AGI to distribute taxesto its ultimate parent based on its stand-alone tax obligation rather than thetax obligation of its parent, AGHI, until such time that AGHI pays interest onits 10 7/8% Senior Notes in cash instead of by the issuance of additionalnotes.  For the year ended December 31,2008, AGI distributed $2.0 million in the form of a dividend to AGHI to fundthe Company’s tax obligations.

 

On June 5,2009, the Company entered into an amendment to its Senior Credit Facilitypursuant to which the maturity date was extended from June 24, 2009 to March31, 2010, the revolving credit portion of the facility was reduced by $10.0million to $25.0 million, the outstanding term loan borrowings were repaid by$8.0 million, the financial covenants in effect through the extended maturitydate were revised and the borrowing rate was increased to prime rate plus 7.0%or LIBOR plus 8.0% with a LIBOR floor of 2.75%. As a condition to the amendment, the shareholder of the Company wasrequired to arrange for the purchase of approximately $26.6 million inprincipal amount of the term portion of the Senior Credit Facility by new lenders,enhance the yield to such new lenders, purchase AGHI Notes held by one of suchnew lenders at a premium to the most recent market price, contribute $8.5million in capital to the Company and guarantee two required principal paymentson the term loans under the Senior Credit Facility, aggregating $15.0million.  In consideration of suchsupport, the Company entered into an option agreement with the shareholder ofthe ultimate parent of the Company pursuant to which the Company granted suchshareholder or his assigns an option, exercisable on or before March 1, 2010,to purchase the Company’s Camping World subsidiary for $55.0 million, being thefair value of such subsidiary as determined by an appraisal of Houlihan Smith& Company, Inc. dated as of March 1, 2009. The Company also agreed to pay the shareholder of the ultimate parent,upon successful refinancing of the Company’s secured debt, including the SeniorCredit Facility, a success fee equal in amount to the fair value, as determinedby an independent financial advisor of such credit support, taking into accountthe fair value of the option to purchase Camping World.  In the event the fair value of the CampingWorld purchase option exceeds the fair value of such credit support, theshareholder will pay the amount of such excess to the Company.

 

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Concurrent withthe amendment to the Senior Credit Facility, the Company obtained a $9.7million Second Lien Loan, the net proceeds of which were used to purchase $14.1million in principal amount of AGI Senior Notes.  The Second Lien Loan carries an interest rateof 9.0% and matures on July 31, 2010.

 

In addition,Company agreed to use its best efforts to secure an asset-based loan of atleast $18.5 million secured by the inventory and receivables of its subsidiary,Camping World, Inc. (the “Camping World Financing”), the proceeds of whichwould be used to further reduce the amounts outstanding under the Senior CreditFacility.  The senior lenders agreed tosubordinate their liens to such financing. If a Camping World Financing has not been consummated by September 15,2009, the borrowing rate on revolving credit loans, swing loans and terms loansincrease to prime rate plus 9.0% or LIBOR plus 10.0%.  

 

The amended SeniorCredit Facility also revised the Company’s financial covenants in effectthrough the extended maturity date.  TheCompany’s forecast for 2009 anticipates compliance with all required covenantsthroughout 2009.  Significant costreductions have been implemented in 2008, including the elimination ofpersonnel, suspension of 401(k) employer contributions, salary cutbacks, hiringand capital expenditure spending freezes, satellite office closures, andmagazine size and frequency reductions. Further cost reductions are set to be unveiled in 2009.  The Company believes that the amended bankfinancing, new secured loans, as well as forecasted cash flow will provide thecash flow needed to continue as a going concern through at least January 1, 2010.

 

The accompanyingfinancial statements have been prepared on the basis that the Company willcontinue as a going concern.  For theyear ended December 31, 2008, the Company incurred a loss from operations of$87.8 million, which included $128.6 million of non-cash impairmentcharges.  Prior to recently amending itsSenior Credit Facility, as of December 31, 2008, the Company had a workingcapital deficiency of $136.8 million, a stockholder’s deficit of $186.5 millionand $135.5 million of debt outstanding under its Senior Credit Facility whichwas scheduled to mature on June 24, 2009. In addition, the Company was forecasting that in 2009 it would be out ofcompliance with financial covenants under its Senior Credit Facility.  

 

In February 2004, weissued $200.0 million aggregate principal amount of 9% Senior SubordinatedNotes due 2012 (the “AGI Senior Notes”). The Company completed a registered exchange of the AGI Senior Notesunder the Securities Act of 1933 in August 2004.  On June 8, 2006, AGI amended its SeniorCredit Facility to permit AGI to purchase up to $30.0 million of the AGI SeniorNotes from time to time as and when the Company determines.  AGI purchased $29.9 million of the AGI SeniorNotes at various times from June 2006 through August 2006.  The purchases of AGI Senior Notes were madewith available cash and the notes purchased have been retired.

 

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On February 27,2007, the Company amended its Senior Credit Facility to extend the maturity ofthe revolving credit facility from June 24, 2008 to June 24, 2009,increase the consolidated senior leverage ratio from 1.9 to 3.5 times EBITDA,as defined, and fix the consolidated total leverage ratio at 5.0 times EBITDA,as defined.  Further, the amendmentpermits the Company to repurchase up to an additional $50.0 million of the AGISenior Notes from time to time as and when the Company determines through theissuance of additional term loans of up to $50.0 million.  Any loan amounts not used for the repurchaseof the Senior Notes may be used for acquisitions or repay revolving creditloans.

 

On March 8, 2007,the Company purchased $17.7 million of the AGI Senior Notes.  The Company funded the purchase through theissuance of the $25.0 million in additional incremental term loans as permittedunder the February 27, 2007 amendment to the Senior Credit Facility.  The balance of the $25.0 million issued wasused to pay down the Company’s revolving credit facility by $6.5 million and topay associated loan fees and transaction expenses.  The terms on the additional incremental loansare consistent with the remaining term loan outstanding under the Senior CreditFacility.  As of December 31, 2008,$152.4 million of AGI Senior Notes remained outstanding.

 

The Senior CreditFacility and the AGI Indenture contain certain restrictive covenants relatingto, but not limited to, mergers, changes in the nature of the business,acquisitions, additional indebtedness, sale of assets, investments, and thepayment of dividends subject to certain limitations and minimum operatingcovenants.  We were in compliance withall debt covenants at December 31, 2008.

 

On March 24, 2005,in a private placement, the Company’s parent, AGHI, issued $88.2 millionprincipal amount of its 10-7/8% senior notes due 2012 (the “AGHI Notes”) at a$3.2 million original issue discount. AGHI completed a registered exchange of the AGHI Notes under theSecurities Act of 1933 on June 8, 2005. The AGHI Notes are unsecured obligations of AGHI, and neither AGI norits subsidiaries have guaranteed payment of principal or interest on the AGHINotes.  Interest on the AGHI Notes ispayable semi-annually on February 15 and August 15 commencing August 15,2005 and the entire $88.2 million principal amount of the AGHI Notes are due infull on February 15, 2012.  Forinterest payments on and prior to February 15, 2008, AGHI had the electionto pay interest on the AGHI Notes in cash or by the issuance of additionalnotes of the same tenor as the AGHI Notes, except the maturity date is March 15,2010.  AGI has not paid any dividends toAGHI to fund payment of interest on the AGHI Notes and AGHI made the interestpayments due on August 15, 2005, February 15, 2006, August 15,2006, February 15, 2007, and February 15, 2008 through the issuanceof additional notes.  AGHI paid theinterest on the AGHI Notes due August 15, 2007 and 2008 from proceeds ofcapital contributions made by AGHI’s parent, AGHC, in the amount of $5.9million and $6.2 million, respectively.  Asof December 31, 2008, approximately $111.8 million of AGHI Notes remainoutstanding, including $25.4 million due on March 15, 2010.

 

AGHI contributed the net proceeds from theissuance of the AGHI Notes, approximately $81.0 million, to the Company and inturn, the Company made an equity contribution to its wholly-owned subsidiary,Camping World, Inc. (“Camping World”). Camping World then made an equity capital contribution in the sameamount to its wholly-owned subsidiary, CWI, Inc. (“CWI”).  In 2005, CWI created a new wholly-ownedsubsidiary named CWFR Capital Corp., a Delaware corporation (“CWFR”) which isan “unrestricted subsidiary” as defined 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 CWI received from Camping World. CWFR used the proceeds from the equity capital contribution to acquire apreferred membership interest in FreedomRoads.

 

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Based on the results ofthe Valuation Report, the Company recorded an impairment charge of $81.0million in the third quarter of 2008 that wrote down to zero the carrying valueof the preferred interest (the “FreedomRoads Preferred Interest”) held by anindirect subsidiary of Camping World in FreedomRoads Holding Company, LLC (“FreedomRoads”),a holding company whose subsidiaries sell and service new and used recreationalvehicles.  The $81.0 million impairmentcharge was recorded as a result of declining performance of the recreationalvehicle industry driven by overall weakening of the economy and a significantdecline in consumer confidence, in addition to limited credit available toconsumers interested in purchasing recreational vehicles.

 

In February 2006,AGI Productions, Inc. acquired the consumer shows and related assets of H &S Productions, LLC for $2.5 million.  Aspart of the purchase, the Company issued $0.4 million of debt and assumed $1.0million of liabilities.  In August 2006,TL Enterprises, Inc. acquired the consumer park guides and related assetsof American Guide Services, Inc for $1.0 million.  As part of the purchase, the Company issued$0.1 million of debt and assumed $0.3 million of liabilities.  In September 2006, AGI Productions, Inc.acquired the consumer shows and related assets of Apple Rock Advertising andPromotions, Inc. for $1.2 million. As part of the purchase, the Company issued $0.2 million of debt andassumed $0.4 million of liabilities.

 

In January 2007, AGIProductions, Inc. acquired a consumer show from MAC Events, Inc. for$0.5 million.  As part of the purchase,the Company assumed $0.3 million of liabilities.  In February 2007, AGI Productions, Inc.acquired consumer shows from Industrial Exposition Inc. for $1.9 million.  As part of the purchase, the Company issued$1.5 million of debt and assumed $0.6 million of liabilities.

 

In January 2008, AGIProductions, Inc. acquired nine consumer shows from MAC Events, LLC for$3.4 million.  As part of the purchase,the Company issued $0.4 million of debt and assumed $0.6 million inliabilities.  In February 2008, AGIProductions, Inc. acquired three consumer shows from Mid AmericaExpositions, Inc. for $1.6 million. As part of the purchase, the Company issued $0.5 million in debt andassumed $0.5 million in liabilities.

 

On October 15, 2007,the Company entered into a five-year interest rate swap agreement with a notionalamount of $100.0 million from which it will receive periodic payments at the 3month LIBOR-based variable rate (3.42% percent at December 31, 2008 basedupon the October 31, 2008 reset date) and make periodic payments at afixed rate of 5.135% percent, with settlement and rate reset dates every January 31,April 30, July 31, and October 31.  The fair value of the swap was zero atinception.  The Company entered into theinterest rate swap to limit the effect of increases on our floating rate debt.  The interest rate swap is designated as acash flow hedge of the variable rate interest payments due on $100 million ofthe Term Loans issued June 24, 2003, and accordingly, gains and losses onthe fair value of the interest rate swap agreement are reported in accumulatedother comprehensive loss and reclassified to earnings in the same period inwhich the hedged interest payment affects earnings.  The interest rate swap agreement expires on October 31,2012.  On March 19, 2008, theCompany entered into a 4.5 year interest rate swap agreement effective April 30,2008, with a notional amount of $35.0 million from which it will receiveperiodic payments at the 3 month LIBOR-based variable rate (3.42% at December 31,2008 based upon the October 31, 2008 reset date) and make periodicpayments at a fixed rate of 3.43%, with settlement and rate reset dates every January 31,April 30, July 31, and October 31.  The interest rate swap was effectivebeginning April 30, 2008 and expires on October 31, 2012.  The fair value of the swap contracts areincluded in other accrued liabilities, and totaled $12.7 million and $4.7million as of December 31, 2008 and December 31, 2007, respectively.

 

Due to the potential saleof Camping World, a highly effective hedge on the $35.0 million outstandingdebt by the $35.0 million notional amount interest rate swap agreement isdeemed to be no longer probable and is now deemed to be reasonablypossible.  As a result, changes in thevalue of the $35.0 million interest rate swap agreement are included inearnings beginning on October 1, 2008. Change in value from October 1, 2008 to December 31, 2008 was$2.4 million.  Included in othercomprehensive loss is $0.5 million related to the $35.0 million interest rateswap which will be included in earnings when the underlying transaction beinghedged is probable not to occur.  Ahighly-effective

 

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hedge on the $100.0million outstanding debt by the $100.0 million notional amount of interest rateswap agreement is still deemed to be probable as the Company will maintain itsLIBOR-based debt at a minimum of $100.0 million until the interest swap expiredate of October 31, 2012.

 

During 2008, we incurreda benefit of $0.3 million relating to deferred executive compensation under ourphantom stock agreements and made payments of $1.8 million on mature phantomstock agreements.  The earned incentivesunder these agreements are scheduled to be paid at various times over the nextfive years.  Phantom stock payments of$1.4 million are scheduled to**be made during2009.

 

Capital expenditures for2008 totaled $11.8 million compared to capital expenditures of $19.7 million in2007.  Capital expenditures areanticipated to be approximately $4.0 million for 2009, primarily for one newCamping World store and equipment, software enhancements, informationtechnology upgrades, and further website development.

 

**FactorsAffecting Future Performance**

 

Our financial operationshave been affected by the current economic downturn.  Other factors that could adversely affect ouroperations include increases in operating costs, fuel shortages and substantialincreases in propane and gasoline prices. Such events could cause declines in advertisements, club enrollment andretail spend.  We are unable to predictat what point fluctuating fuel prices may begin to adversely impact revenues orcash flow.  We believe we will be able topartially offset any cost increases with price increases to our members alongwith certain cost reducing measures.

 

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**Seasonality**

 

Our cash flow is highestin the summer months due to the seasonal nature of the retail segment,membership renewals and advertising prepayments for the annual directories.

 

**CriticalAccounting Policies**

 

*General*

 

Our discussion andanalysis of our financial condition and results of operations is based upon ourconsolidated financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States.  The preparation of these financial statementsrequires us to make estimates and judgments that affect the reported amounts ofassets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and liabilities.  On anon-going basis, we evaluate our estimates, including those related tomembership programs and incentives, bad debts, inventories, intangible assets,employee health insurance benefits, income taxes, restructuring, contingenciesand litigation.  We base our estimates onhistorical experience and on various other assumptions that are believed to bereasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from these estimates under differentassumptions or conditions.

 

We believe the followingcritical accounting policies affect our more significant judgments andestimates used in the preparation of our consolidated financial statements.

 

*RevenueRecognition*

 

Merchandiserevenue is recognized when products are sold in the retail stores, shipped formail and Internet orders, or when services are provided to customers.* *Emergency RoadService (“ERS”) revenues are deferred and recognized over the life of themembership.  ERS claim expenses arerecognized when incurred.  Royaltyrevenue is earned under the terms of an arrangement with a third party creditcard provider based on a percentage of the Company’s outstanding credit cardbalances with such third party credit card provider.  Membership revenue is generated from annual,multi-year and lifetime memberships.  Therevenue and expenses associated with these memberships are deferred andamortized over the membership period. For lifetime memberships, an 18-year period is used, which is theactuarially determined estimated fulfillment period.  Promotional expenses, consisting primarily ofdirect mail advertising, are deferred and expensed over the period of expectedfuture benefit, typically three months based on historical actual responserates.  Renewal expenses are expensed atthe time related materials are mailed. Recognized revenues and profit are subject to revisions as themembership progresses to completion. Revisions to membership period estimates would change the amount ofincome and expense amortized in future accounting periods.

 

Newsstandsales of publications and related expenses are recorded at the time ofdelivery, net of estimated provision for returns.  Subscription sales of publications arereflected in income over the lives of the subscriptions.  The related selling expenses are expensed asincurred.  Advertising revenues andrelated expenses are recorded at the time of delivery.  Subscription and newsstand revenues andexpenses related to annual publications are deferred until the publications aredistributed.  Revenues and relatedexpenses for consumer shows are recognized when the show occurs.

 

*AccountsReceivable*

 

We estimate thecollectability of our trade receivables. A considerable amount of judgment is required in assessing the ultimaterealization of these receivables including the current credit-worthiness

 

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of each customer.  Changes in required reserves have beenrecorded in recent periods and may occur in the future due to the marketenvironment.

 

*Inventory*

 

We state inventories atthe lower of cost or market.  Inassessing the ultimate realization of inventories, we are required to makejudgments as to future demand requirements and compare that with the current orcommitted inventory levels.  We haverecorded changes in required reserves in recent periods due to changes instrategic direction, such as discontinuances of product lines as well aschanges in market conditions 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 intangibleassets with finite lives are amortized using the straight-line method over theestimated economic lives of the assets, ranging from one to fifteen years.

 

Long-lived assets, suchas property, plant and equipment and purchased intangible assets with finitelives are evaluated for impairment whenever events or changes in circumstancesindicate the carrying value of an asset may not be recoverable in accordancewith SFAS No. 144, “Accounting for the Impairment or Disposal ofLong-Lived Assets.”  We assess the fairvalue of the assets based on the future cash flow the assets are expected togenerate and recognize an impairment loss when estimated undiscounted futurecash flow expected to result from the use of the asset plus net proceedsexpected from disposition of the asset (if any) are less than the carryingvalue of the asset.  When an impairmentis identified, we reduce the carrying amount of the asset to its estimated fairvalue based on a discounted cash flow approach or, when available andappropriate, comparable market values. Based on the results of the Valuation Report, the Company recorded animpairment charge of $81.0 million in the third quarter of 2008 that wrote downto zero the carrying value of the FreedomRoads Preferred Interest held by anindirect subsidiary of Camping World in FreedomRoads, a holding company whosesubsidiaries sell and service new and used recreational vehicles.  The $81.0 million impairment charge wasrecorded as a result of declining performance of the recreational vehicleindustry driven by overall weakening of the economy and a significant declinein consumer confidence, in addition to limited credit available to consumersinterested in purchasing recreational vehicles. We determined there were no indicators of impairment of long-livedassets as of December 31, 2008.

 

We have evaluated theremaining useful lives of our finite-lived purchased intangible assets todetermine if any adjustments to the useful lives were necessary or if any ofthese assets had indefinite lives and were therefore not subject toamortization.  We determined that noadjustments to the useful lives of our finite-lived purchased intangible assetswere necessary.  The finite-livedpurchased intangible assets consist of membership customer lists, resort andgolf course agreements, non-compete and deferred consulting agreements anddeferred financing costs which have weighted average useful lives ofapproximately 6 years, 4 years, 15 years and 7 years, respectively.

 

*Indefinite Lived IntangibleAssets*

 

Effective January 1,2002, we adopted new accounting standards SFAS 141 “Business Combinations” andSFAS 142 “Goodwill and Other Intangible Assets.”  In accordance with these new standards,goodwill and intangible assets with indefinite lives are no longer amortizedbut instead are measured for impairment at least annually or when eventsindicate that an impairment exists.  Asrequired by the new standards, the impairment tests for goodwill and otherindefinite-lived intangible assets are assessed for impairment using fair valuemeasurement techniques.  Specifically,goodwill impairment is determined using a two-step process.  The first step of the goodwill impairmenttest is used to identify potential impairment by comparing the fair value of areporting unit with the net book value (or 

 

43

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carrying amount),including goodwill.  If the fair value ofthe reporting unit exceeds the carrying amount, goodwill of the reporting unitis considered not impaired and the second step of the impairment test isunnecessary.  If the carrying amount ofthe reporting unit exceeds the fair value, the second step of the goodwillimpairment test is performed to measure the amount of impairment loss, ifany.  The second step of the goodwillimpairment test compares the implied fair value of the reporting unit’sgoodwill with the carrying amount of that goodwill.  If the carrying amount of the reporting unit’sgoodwill exceeds the implied fair value of that goodwill, an impairment loss isrecognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner asthe amount of goodwill recognized in a business combination, accordingly thefair value of the reporting unit is allocated to all of the assets andliabilities of that unit as if the reporting unit had been acquired in abusiness combination and the fair value of the reporting unit was the purchaseprice paid to acquire the reporting unit. The impairment test for other intangible assets consists of a comparisonof the fair value of the intangible asset with its carrying value.  If the carrying value of the intangible assetexceeds its fair value, an impairment loss is recognized in an amount equal tothat excess.

 

Determining the fairvalue of a reporting unit under the first step of the goodwill impairment testand determining the fair value of individual assets and liabilities of areporting unit under the second step of the goodwill impairment test isjudgmental in nature and often involves the use of significant estimates andassumptions.  These estimates andassumptions could have a significant impact on whether or not an impairmentcharge is recognized and also the extent of such charge.  Our estimates of fair value utilized ingoodwill and other indefinite-lived intangible asset tests may be based upon anumber of factors, including assumptions about the projected future cash flows,discount rate, growth rate, determination of market comparables, technologicalchange, economic conditions or changes to our business operations.  Such changes may result in impairment chargesrecorded in future periods.

 

The fair value of ourreporting units is annually determined using a combination of the incomeapproach and the market approach.  Underthe income approach, the fair value of a reporting unit is calculated based onthe present value of estimated future cash flows.  Future cash flows are estimated by us underthe market approach, fair value is estimated based on market multiples of revenueor earnings for comparable companies.

 

In the third quarter of2008, the Company noted continued reduction in same store sales at CampingWorld, Inc. (“Camping World”) as well as deterioration of general economicconditions and consumer confidence.  Basedon the above, the Company determined that there were identified indicators ofimpairment within the Camping World reporting unit.

 

The results of a thirdparty Valuation Report prepared in the third quarter of 2008 by a nationallyrecognized firm in anticipation of the potential sale of Camping Worldindicated that the estimated fair value of the Camping World reporting unit wasless than book value.  The excess of thecarrying value over the estimated fair value of the Camping World reportingunit was primarily due to the decline in the recreational vehicle and campingretail markets leading to lower expected future cash flows for the business andlower market comparables. In determining the fair value, the Company used aweighted average of the income valuation approach and market valuationapproaches.  The Company recorded animpairment charge of $47.6 million in the third quarter of 2008 related toCamping World, which is part of the retail segment.

 

Based on the results ofthe Valuation Report, the Company also recorded an impairment charge of $81.0million in the third quarter of 2008 that wrote down to zero the carrying valueof the FreedomRoads Preferred Interest held by an indirect subsidiary ofCamping World in FreedomRoads, a holding company whose subsidiaries sell andservice new and used recreational vehicles. The $81.0 million impairment charge was recorded as a result ofdeclining performance of the recreational vehicle industry driven by overallweakening of the economy and a significant 

 

44

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decline in consumerconfidence, in addition to limited credit available to consumers interested inpurchasing recreational vehicles.

 

We performed an annualgoodwill impairment test as required and there were no goodwill impairmentindicators for our other reporting units. Based on the results of the annual impairment tests, we determined thatno indicators of goodwill impairment existed as of December 31, 2008.  However, future goodwill impairments testscould result in a charge to earnings.  Wewill continue to evaluate goodwill on an annual basis and whenever events andchanges in circumstances indicate that there may be a potential impairment.

 

*Accumulated Other ComprehensiveLoss*

 

Accumulated other comprehensive lossconsists of unrealized losses on cash flow hedges.  At December 31, 2008, accumulated othercomprehensive loss was $10.3 million.

 

*Derivative Financial Instruments**—*The Companyaccounts for derivative instruments and hedging activities in accordance withSFAS No. 133, “Accounting for Derivative Instruments and HedgingActivities” (“SFAS 133”).  Allderivatives are recognized on the balance sheet at their fair value.  On the date that the Company enters into aderivative contract, management formally documents all relationships betweenhedging instruments and hedged items, as well as risk management objectives andstrategies for undertaking various hedge transactions.

 

Changes in the fair value of a derivative that ishighly effective and that is designated and qualifies as a cash flow hedge (a “swap”),to the extent that the hedge is effective, are recorded in accumulated othercomprehensive loss, until earnings are affected by the variability of cashflows of the hedged transaction.  The Companymeasures effectiveness of the swap at each quarter end using the HypotheticalDerivative Method.  Under this method,hedge effectiveness is measured based on a comparison of the change in fairvalue of the actual swap designated as the hedging instrument and the change infair value of the hypothetical swap which would have the terms that identicallymatch the critical terms of the hedged cash flows from the anticipated debtissuance.  The amount of ineffectiveness,if any, recorded in earnings would be equal to the excess of the cumulativechange in the fair value of the swap over the cumulative change in the fairvalue of the plain vanilla swap lock, as defined in the accountingliterature.  Once a swap is settled, theeffective portion is amortized over the estimated life of the hedge item.

 

The Company utilizes derivative financialinstruments to manage its exposure to interest rate risks.  The Company does not enter into derivativefinancial instruments for trading purposes.

 

Dueto the potential sale of Camping World, a highly effective hedge on the $35.0million outstanding debt by the $35.0 million notional amount interest rateswap agreement is deemed to be no longer probable and is now deemed to bereasonably possible.  As a result,changes in the value of the $35.0 million interest rate swap agreement areincluded in earnings beginning October 1, 2008.  A highly-effective hedge on the $100.0million outstanding debt by the $100.0 million notional amount of interest rateswap agreement is still deemed to be probable as the Company will maintain itsLIBOR-based debt at a minimum of $100.0 million until the interest swap expiredate of October 31, 2012.

 

*Income Taxes*

 

Where applicable, the Company recognizes deferredtax assets and liabilities based on the liability method, which requires anadjustment to the deferred tax asset or liability to reflect income tax ratescurrently in effect. When income tax rates increase or decrease, acorresponding adjustment to income tax expense is recorded by applying the ratechange to the cumulative temporary differences.

 

45

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*Restructuring*

 

In2006, we recorded reserves in connection with the restructuring programprimarily within our membership segment. These reserves included estimates pertaining to employee separationcosts and the settlements of contractual obligations resulting from ouractions.  We do not anticipatesignificant changes.

 

###### **New Accounting Standards**

###### ** **

The Company adopted theprovisions of Financial Accounting Standards Board (“FASB”) issued Statement ofFinancial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements”(“SFAS 157”) on January 1, 2008. The FASB delayed the effective date of SFAS 157 until January 1,2009 with respect to fair value measurement requirements for non-financialassets and liabilities that are not re-measured on a recurring basis.  SFAS 157 defines fair value, establishes aframework and gives guidance regarding the method used for measuring fairvalue, and expands disclosures about fair value measurements.  SFAS 157 requires companies to disclose thefair value of their financial instruments according to a fair value hierarchy,as defined, and may require companies to provide additional disclosures basedon that hierarchy.  SFAS 157 is effectivefor financial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years.  The adoption of the provisions of SFAS 157did not have a material impact on the Company’s consolidated financialstatements.

 

In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assetsand Liabilities” including an amendment of FASB Statement No. 115 (“SFAS159”).  SFAS 159 expands the use of fairvalue accounting but does not affect existing standards which requires assetsor liabilities to be carried at fair value. The objective of SFAS 159 is to improve financial reporting by providingcompanies with the opportunity to mitigate volatility in reported earningscaused by measuring related assets and liabilities differently without havingto apply complex hedge accounting provisions. Under SFAS 159, a company may elect to use fair value to measureeligible items at specified election dates and report unrealized gains andlosses on items for which the fair value option has been elected in earnings ateach subsequent reporting date.  Eligibleitems include, but are not limited to, accounts and loans receivable,available-for-sale and held-to-maturity securities, equity method investments,accounts payable, guarantees, issued debt and firm commitments.  If elected, SFAS 159 would be effective forfiscal years beginning after November 15, 2007.  The Company has not elected to use the fairvalue option to measure any eligible items under SFAS 159.

 

In December 2007,the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS141(R)”).  SFAS 141(R) establishesprinciples and requirements for how an acquirer recognizes and measures in itsfinancial statements the identifiable assets acquired, the liabilities assumed,any noncontrolling interest in the acquiree and the goodwill acquired.  SFAS 141(R) also establishes disclosurerequirements to enable the evaluation of the nature and financial effects of thebusiness combination.  SFAS 141(R) iseffective for fiscal years beginning after December 15, 2008.  The Company will adopt SFAS 141(R) inthe first quarter of fiscal 2009 and apply the provisions of the Statement forany acquisition after the adoption date.

 

In December 2007,the FASB issued SFAS No. 160, “Accounting and Reporting of Non-controllingInterests in Consolidated Financial Statements — an amendment of AccountingResearch Bulletin No. 51” (“SFAS 160”). This standard will significantly change the accounting and reporting forbusiness combination transactions and non-controlling (minority) interests inconsolidated financial statements, including capitalizing at the acquisitiondate the fair value acquired from in-process research and development, andre-measuring and writing down these assets, if necessary, in subsequent periodsduring their development.  This newstandard will be applied for business combinations that occur on or after January 1,2009 and presentation and disclosure requirements of SFAS 160 shall be appliedretrospectively.

 

46

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In March 2008, theFASB issued SFAS Statement No. 161 (“SFAS 161”), “Disclosures aboutDerivative Instruments and Hedging Activities”. SFAS 161 requires companieswith derivative instruments to disclose information that should enablefinancial statement users to understand how and why a company uses derivativeinstruments, how derivative instruments and related hedged items are accountedfor under FASB Statement No. 133 “Accounting for Derivative Instrumentsand Hedging Activities” and how derivative instruments and related hedged itemsaffect a company’s financial position, financial performance and cash flows.SFAS 161 is effective for financial statements issued for fiscal years andinterim periods beginning after November 15, 2008.  The disclosure requirements of SFAS 161 willbe applicable beginning in the first quarter of fiscal 2009.

 

**ITEM 7A:QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We are exposed to marketrisks relating to fluctuations in interest rates.  Our objective of financial risk management isto minimize the negative impact of interest rate fluctuations on our earningsand cash flows.  Interest rate risk ismanaged through the use of a combination of fixed and variable interest debt aswell as the periodic use of interest rate collar contracts.

 

Thefollowing information discusses the sensitivity to our earnings.  The range of changes chosen for this analysisreflects our view of changes which are reasonably possible over a one-yearperiod.  These forward-lookingdisclosures are selective in nature and only address the potential impacts fromfinancial instruments.  They do notinclude other potential effects which could impact our business as a result ofthese interest rate fluctuations.

 

#### *Interest Rate SensitivityAnalysis*

#### * *

At December 31,2008, we had debt totaling $292.1 million, comprised of $0.4 million ofvariable rate debt, and $291.7 million of fixed rate debt, comprised of $135.0million of debt fixed through the interest rate swap agreements, $152.4 millionof AGI Senior Notes and approximately $4.3 million of purchase debt.  Holding other variables constant (such asdebt levels), the earnings and cash flow impact of a one-percentage pointincrease/ decrease in interest rates would have an unfavorable/ favorableimpact of less than $0.1 million.

 

#### *Credit Risk*

#### * *

We are exposed to creditrisk on accounts receivable.  We providecredit to customers in the ordinary course of business and perform ongoingcredit evaluations.  Concentrations ofcredit risk 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.

 

###### **Disclosure Regarding Forward Looking Statements**

###### ** **

This filing contains statements that are “forwardlooking statements,” and includes, among other things, discussions of ourbusiness strategy and expectations concerning market position, futureoperations, margins, profitability, liquidity and capital resources, as well asstatements concerning the integrations of acquired operations and theachievement of financial benefits and operational efficiencies in connectionwith acquisitions.  Forward lookingstatements are included in “Business- General,” “Business- CompetitiveStrengths,” “Business- Our Strategy,” “Business- RV Industry,” “Business-Membership Clubs,” “Business- Membership Products and Services,” “Business-Publications,” “Business- Retail,” “Business- Marketing,” “Business-Operations,” “Business- Information Support Services,” “Business- Regulation,” “Business-Competition,” “Risk Factors,” “Legal Proceedings,” and in “Management’sDiscussion and Analysis of Financial Condition and Results of Operations.”  Although we believe that the expectationsreflected in such forward looking statements are reasonable, we can give noassurance that such expectations will prove to have been correct.  Generally, these statements relate tobusiness plans or strategies, projected or anticipated benefits or otherconsequences of such plans or strategies, the number of acquisitions andprojected or anticipated benefits from acquisitions made by or to be made byus, or projections involving anticipated revenues, expenses, earnings, levelsof capital expenditures or other aspects of operating results.  All phases of our operations of are subjectto a number of uncertainties, risks and other influences, including consumerspending, fuel prices, general economic conditions, regulatory changes, changesin interest rates, availability of debt financing in capital markets andcompetition, many of which are outside our control, any one of which, or acombination of which, could materially affect the results of our operations andwhether the forward looking statements made by us ultimately prove to beaccurate.

 

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**ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

 

###### **Index to Financial Statements**

 
| ** **                                                                                                        | ** ** | **Page**   |
|-------------------------------------------------------------------------------------------------------------------|------------|------------|
| ** **                                                                                                        | ** ** | ** ** |
| Report  of Independent Registered Public Accounting Firm                                                          |       | 49         |
|                                                                                                              |       |       |
| Consolidated  Balance Sheets as of December 31, 2008 and 2007                                                |       | 50         |
|                                                                                                              |       |       |
| Consolidated  Statements of Operations for the years ended December 31, 2008, 2007 and 2006                  |       | 51         |
|                                                                                                              |       |       |
| Consolidated  Statements of Stockholders’ Deficit for the years ended December 31,  2008, 2007 and 2006 |       | 52         |
|                                                                                                              |       |       |
| Consolidated  Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006                  |       | 53         |
|                                                                                                              |       |       |
| Notes to Consolidated Financial Statements                                                                        |       | 54         |

 

Allfinancial statement schedules have been omitted since the required informationis included in the consolidated financial statements, the notes thereto orbecause such information is not applicable.

 

48

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

TheBoard of Directors of Affinity Group, Inc.

 

Wehave audited the accompanying consolidated balance sheets of Affinity Group, Inc.and its subsidiaries (the “Company”), a wholly-owned subsidiary of AffinityGroup Holding, Inc., as of December 31, 2008, and 2007, and therelated consolidated statements of operations, stockholder’s deficit and cashflows for each of the three years in the period ended December 31,2008.  These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. We were not engaged to perform an audit of the Company’s internalcontrol over financial reporting.  Ouraudits included consideration of internal control over financial reporting as abasis for designing audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.  We believe that our audits provide areasonable basis for our opinion.

 

Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Affinity Group, Inc.and subsidiaries at December 31, 2008, 2007 and 2006, and the consolidatedresults of their operations and their cash flows for each of the three years inthe period ended December 31, 2008, in conformity with U.S. generallyaccepted accounting principles.

 

 
|                     | /s/  Ernst & Young LLP |
|--------------------------|---------------------------------|
|                     |                            |
| June 5,  2009       |                            |
| Los  Angeles, California |                            |

 

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** **

**AFFINITY GROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER 31, 2008 AND 2007 (IN THOUSANDS, EXCEPT SHAREAMOUNTS)**

 
| ** **                                                                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| **ASSETS**                                                                                       |       |     |       |     |       |
| CURRENT ASSETS:                                                                                  |       |     |       |     |       |
| Cash and cash  equivalents                                                                       |       | $        | 10,608     |     | $          | 8,357 |   |
| Accounts  receivable, less allowance for doubtful accounts of $2,147 in 2008 and $1,473  in 2007 |       | 40,191   |       | 33,330   |       |
| Inventories                                                                                      |       | 57,137   |       | 64,209   |       |
| Prepaid expenses  and other assets                                                               |       | 13,545   |       | 14,430   |       |
| Total current  assets                                                                            |       | 121,481  |       | 120,326  |       |
|                                                                                             |       |     |       |     |       |
| PROPERTY AND  EQUIPMENT, net                                                                     |       | 44,077   |       | 44,307   |       |
| INVESTMENT IN  AFFILIATE                                                                         |       | —   |       | 81,005   |       |
| NOTE FROM  AFFILIATE                                                                             |       | 4,608    |       | 4,650    |       |
| INTANGIBLE  ASSETS, net                                                                          |       | 20,754   |       | 23,695   |       |
| GOODWILL                                                                                         |       | 96,828   |       | 144,429  |       |
| DEFERRED TAX  ASSETS, net                                                                        |       | 4,569    |       | 1,220    |       |
| OTHER ASSETS                                                                                     |       | 2,035    |       | 1,979    |       |
| Total assets                                                                                     |       | $        | 294,352    |     | $          | 421,611 |   |
|                                                                                             |       |     |       |     |       |
| **LIABILITIES  AND STOCKHOLDER’S DEFICIT**                                                  |       |     |       |     |       |
| CURRENT  LIABILITIES:                                                                            |       |     |       |     |       |
| Accounts payable                                                                                 |       | $        | 23,950     |     | $          | 27,171 |   |
| Accrued interest                                                                                 |       | 6,946    |       | 6,700    |       |
| Accrued income  taxes                                                                            |       | 1,165    |       | 1,189    |       |
| Accrued  liabilities                                                                             |       | 26,954   |       | 36,069   |       |
| Deferred  revenues and gains                                                                     |       | 60,569   |       | 65,855   |       |
| Current portion  of long-term debt                                                               |       | 12,391   |       | 4,406    |       |
| Total current  liabilities                                                                       |       | 131,975  |       | 141,390  |       |
|                                                                                             |       |     |       |     |       |
| DEFERRED REVENUES  AND GAINS                                                                     |       | 35,855   |       | 38,535   |       |
| LONG-TERM DEBT,  net of current portion                                                          |       | 279,755  |       | 282,767  |       |
| OTHER LONG-TERM  LIABILITIES                                                                     |       | 33,281   |       | 25,829   |       |
|                                                                                             |       | 480,866  |       | 488,521  |       |
|                                                                                             |       |     |       |     |       |
| COMMITMENTS AND  CONTINGENCIES                                                                   |       |     |       |     |       |
|                                                                                             |       |     |       |     |       |
| STOCKHOLDER’S  DEFICIT:                                                                     |       |     |       |     |       |
| Common stock,  $.001 par value, 2,000 shares authorized, 2,000 shares issued and outstanding     |       | 1        |       | 1        |       |
| Additional  paid-in capital                                                                      |       | 81,005   |       | 81,005   |       |
| Accumulated  deficit                                                                             |       | (257,183 | )          | (143,211 | )          |
| Accumulated  other comprehensive loss                                                            |       | (10,337  | )          | (4,705   | )          |
| Total  stockholder’s deficit                                                                |       | (186,514 | )          | (66,910  | )          |
| Total  liabilities and stockholder’s deficit                                                |       | $        | 294,352    |     | $          | 421,611 |   |

 

Seenotes to consolidated financial statements.

 

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**AFFINITY GROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (INTHOUSANDS)**

 
| ** **                                         | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                               |       |     |       |     |       |     |       |
| REVENUES:                                          |       |     |       |     |       |     |       |
| Membership  services                               |       | $        | 152,643    |     | $          | 149,937  |       | $ | 137,394 |   |
| Media                                              |       | 82,424   |       | 90,537   |       | 86,742   |       |
| Retail                                             |       | 291,070  |       | 321,730  |       | 290,422  |       |
|                                               |       | 526,137  |       | 562,204  |       | 514,558  |       |
|                                               |       |     |       |     |       |     |       |
| COSTS APPLICABLE  TO REVENUES:                     |       |     |       |     |       |     |       |
| Membership  services                               |       | 90,758   |       | 94,840   |       | 87,407   |       |
| Media                                              |       | 61,126   |       | 62,258   |       | 58,302   |       |
| Retail                                             |       | 170,911  |       | 194,940  |       | 175,015  |       |
|                                               |       | 322,795  |       | 352,038  |       | 320,724  |       |
|                                               |       |     |       |     |       |     |       |
| GROSS PROFIT                                       |       | 203,342  |       | 210,166  |       | 193,834  |       |
|                                               |       |     |       |     |       |     |       |
| OPERATING  EXPENSES:                               |       |     |       |     |       |     |       |
| Selling, general  and administrative               |       | 142,757  |       | 145,556  |       | 133,129  |       |
| Restructuring  charge                              |       | —   |       | —   |       | 93       |       |
| Goodwill  impairment                               |       | 47,601   |       | —   |       | —   |       |
| Impairment of  investment in affiliate             |       | 81,005   |       | —   |       | —   |       |
| Depreciation and  amortization                     |       | 19,798   |       | 18,948   |       | 18,656   |       |
|                                               |       | 291,161  |       | 164,504  |       | 151,878  |       |
|                                               |       |     |       |     |       |     |       |
| (LOSS) INCOME  FROM OPERATIONS                     |       | (87,819  | )          | 45,662   |       | 41,956   |       |
|                                               |       |     |       |     |       |     |       |
| NON-OPERATING  ITEMS:                              |       |     |       |     |       |     |       |
| Interest income                                    |       | 579      |       | 592      |       | 1,115    |       |
| Interest expense                                   |       | (24,228  | )          | (24,819  | )          | (25,708  | )          |
| Loss on  derivative instrument                     |       | (2,394   | )          | —   |       | —   |       |
| Debt  extinguishment expense                       |       | —   |       | (775     | )          | (835     | )          |
| Other  non-operating income (expense), net         |       | (323     | )          | (149     | )          | 9        |       |
|                                               |       | (26,366  | )          | (25,151  | )          | (25,419  | )          |
|                                               |       |     |       |     |       |     |       |
| (LOSS) INCOME  FROM OPERATIONS BEFORE INCOME TAXES |       | (114,185 | )          | 20,511   |       | 16,537   |       |
|                                               |       |     |       |     |       |     |       |
| INCOME TAX  BENEFIT (EXPENSE)                      |       | 2,213    |       | (1,583   | )          | (22,268  | )          |
|                                               |       |     |       |     |       |     |       |
| NET (LOSS)  INCOME                                 |       | $        | (111,972   | )        | $          | 18,928   |       | $ | (5,731 | ) |

 

Seenotes to consolidated financial statements.

 

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**AFFINITY GROUP, INC. AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF STOCKHOLDER’S DEFICIT**

**FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006**

**(IN THOUSANDS, EXCEPT SHARE AMOUNTS)**

 
| ** **                             | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **        | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
|----------------------------------------|------------|-----------------------|------------|-------------|------------|-----------------|------------|-------------------|------------|-----------------|------------|------------|------------|
| ** **                             | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **        | ** ** | **Other**       | ** ** | ** ** | ** ** |
| ** **                             | ** ** | **Common Stock** | ** ** | **Paid-in** | ** ** | **Accumulated** | ** ** | **Comprehensive** | ** ** | ** **      | ** ** |
| ** **                             | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**     | ** ** | **Deficit**       | ** ** | **Loss**        | ** ** | **Total**  | ** ** |
| ** **                             | ** ** | ** **            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **        | ** ** | ** **      | ** ** | ** ** | ** ** |
| BALANCES AT JANUARY  1, 2006           |       | 2,000                 |       | $           | 1          |            | $          | 81,005            |       | $               | (147,371   | )          | $          | — |   | $ | (66,365 | ) |
|                                   |       |                  |       |        |       |            |       |              |       |            |       |       |       |
| Dividends                              |       | —                |       | —      |       | —          |       | (3,287            | )          | —          |       | (3,287     | )          |
| Net loss                               |       | —                |       | —      |       | —          |       | (5,731            | )          | —          |       | (5,731     | )          |
| BALANCES AT  DECEMBER 31, 2006         |       | 2,000                 |       | 1           |       | 81,005          |       | (156,389          | )          | —          |       | (75,383    | )          |
|                                   |       |                  |       |        |       |            |       |              |       |            |       |       |       |
| Dividends                              |       | —                |       | —      |       | —          |       | (5,750            | )          | —          |       | (5,750     | )          |
|                                   |       |                  |       |        |       |            |       |              |       |            |       |       |       |
| Unrealized loss  on interest rate swap |       |                  |       |        |       |            |       |              |       | (4,705          | )          | (4,705     | )          |
| Net income                             |       | —                |       | —      |       | —          |       | 18,928            |       | —          |       | 18,928     |       |
| Total  comprehensive income            |       |                  |       |        |       |            |       |              |       |            |       | 14,223     |       |
|                                   |       |                  |       |        |       |            |       |              |       |            |       |       |       |
| BALANCES AT  DECEMBER 31, 2007         |       | 2,000                 |       | 1           |       | 81,005          |       | (143,211          | )          | (4,705          | )          | (66,910    | )          |
|                                   |       |                  |       |        |       |            |       |              |       |            |       |       |       |
| Dividends                              |       | —                |       | —      |       | —          |       | (2,000            | )          | —          |       | (2,000     | )          |
|                                   |       |                  |       |        |       |            |       |              |       |            |       |       |       |
| Unrealized loss  on interest rate swap |       |                  |       |        |       |            |       |              |       | (5,632          | )          | (5,632     | )          |
| Net loss                               |       | —                |       | —      |       | —          |       | (111,972          | )          |            |       | (111,972   | )          |
| Total  comprehensive loss              |       |                  |       |        |       |            |       |              |       |            |       | (117,604   | )          |
|                                   |       |                  |       |        |       |            |       |              |       |            |       |       |       |
| BALANCES AT  DECEMBER 31, 2008         |       | 2,000                 |       | $           | 1          |            | $          | 81,005            |       | $               | (257,183   | )          | $          | (10,337 | ) | $ | (186,514 | ) |

 

Seenotes to consolidated financial statements.

 

52

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**AFFINITY GROUP, INC. AND SUBSIDIARIES**

** **

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 (INTHOUSANDS)**

 
| ** **                                                                                | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|-------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                    |       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net (loss)  income                                                                        |       | $          | (111,972   | )          | $          | 18,928     |       | $ | (5,731 | ) |
| Adjustments to  reconcile net (loss) income to net cash provided by operating activities: |       |       |       |       |       |       |       |
| Deferred tax  provision                                                                   |       | (3,349     | )          | 443        |       | 22,136     |       |
| Depreciation                                                                              |       | 11,670     |       | 9,933      |       | 10,333     |       |
| Amortization                                                                              |       | 8,128      |       | 9,015      |       | 8,323      |       |
| Impairment loss  on goodwill                                                              |       | 47,601     |       | —     |       | —     |       |
| Impairment loss  on investment in affiliate                                               |       | 81,005     |       | —     |       | —     |       |
| Provision for  losses on accounts receivable                                              |       | 1,493      |       | 1,373      |       | 745        |       |
| Deferred  compensation                                                                    |       | (311       | )          | 350        |       | 1,070      |       |
| Loss (gain) on  sale of property and equipment                                            |       | 321        |       | 150        |       | (16        | )          |
| Loss on sale of  notes receivable participation                                           |       |       |       |       |       |       |       |
| Loss on early  extinguishment of debt                                                     |       | —     |       | 775        |       | 835        |       |
| Changes in  operating assets and liabilities (net of purchased businesses):               |       |       |       |       |       |       |       |
| Accounts  receivable                                                                      |       | (8,354     | )          | (7,504     | )          | (1,436     | )          |
| Inventories                                                                               |       | 7,072      |       | (11,506    | )          | (5,664     | )          |
| Prepaid expenses  and other assets                                                        |       | 1,250      |       | (1,428     | )          | (1,478     | )          |
| Accounts payable                                                                          |       | (3,221     | )          | (5,406     | )          | 19,894     |       |
| Accrued and  other liabilities                                                            |       | (6,762     | )          | 702        |       | (1,446     | )          |
| Deferred  revenues and gains                                                              |       | (9,027     | )          | 3,495      |       | (460       | )          |
| Net cash  provided by operating activities                                                |       | 15,544     |       | 19,320     |       | 47,105     |       |
|                                                                                      |       |       |       |       |       |       |       |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                    |       |       |       |       |       |       |       |
| Capital  expenditures                                                                     |       | (11,782    | )          | (19,708    | )          | (15,245    | )          |
| Net proceeds from  sale of property and equipment                                         |       | 22         |       | 178        |       | 126        |       |
| Acquisitions,  net of cash received                                                       |       | (3,409     | )          | (304       | )          | (2,868     | )          |
| Cash paid on  loans to affiliate                                                          |       | 42         |       | 38         |       | 34         |       |
| Net cash used in  investing activities                                                    |       | (15,127    | )          | (19,796    | )          | (17,953    | )          |
|                                                                                      |       |       |       |       |       |       |       |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                    |       |       |       |       |       |       |       |
| Dividends paid                                                                            |       | (2,000     | )          | (5,750     | )          | (3,287     | )          |
| Borrowings on  long-term debt                                                             |       | 33,000     |       | 64,300     |       | —     |       |
| Payment of debt  issue costs                                                              |       | (271       | )          | (291       | )          | (12        | )          |
| Principal  payments of long-term debt                                                     |       | (28,895    | )          | (64,432    | )          | (35,625    | )          |
| Net cash  provided by (used in) financing activities                                      |       | 1,834      |       | (6,173     | )          | (38,924    | )          |
|                                                                                      |       |       |       |       |       |       |       |
| NET INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS                                     |       | 2,251      |       | (6,649     | )          | (9,772     | )          |
|                                                                                      |       |       |       |       |       |       |       |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF YEAR                                           |       | 8,357      |       | 15,006     |       | 24,778     |       |
|                                                                                      |       |       |       |       |       |       |       |
| CASH AND CASH  EQUIVALENTS AT END OF YEAR                                                 |       | $          | 10,608     |       | $          | 8,357      |       | $ | 15,006 |   |

 

See notes toconsolidated financial statements.

 

53

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**AFFINITYGROUP, INC. AND SUBSIDIARIES**

** **

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

**YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006**

 

1.                             SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

*Principles*of *Consolidation –*Theconsolidated financial statements include the accounts of Affinity Group, Inc.(“AGI”) and its subsidiaries (collectively the “Company”).  In March 2005, AGI Holding Corp. (“AGHC”)formed a holding company, Affinity Group Holding, Inc., a Delawarecorporation (“AGHI”) at which time AGHC contributed 100% of the outstandingshares of common stock of AGI to AGHI. AGHI is the direct parent of the Company.  Certain balances in the prior yearconsolidated financial statements were reclassified to conform with the currentyear presentation.

 

*Basis for Presentation**—*Theaccompanying financial statements have been prepared on the basis that theCompany will continue as a going concern.  For the year endedDecember 31, 2008, the Company incurred a loss from operations of $87.8million, which included $128.6 million of non-cash impairment charges. Prior to the recent amendment to the Senior Credit Facility, as ofDecember 31, 2008, the Company had a working capital deficiency of $136.8million and a stockholder’s deficit of $186.5 million and AGI had $135.5 millionof debt outstanding under the Senior Credit Facility which was scheduled tomature on June 24, 2009.  In addition, AGI was forecasting that in2009 it would be out of compliance with financial covenants under the SeniorCredit Facility.

 

OnJune 5, 2009, the Company entered into an amendment to its Senior CreditFacility pursuant to which the maturity date was extended from June 24, 2009 toMarch 31, 2010, the revolving credit portion of the facility was reduced by$10.0 million to $25.0 million, the outstanding term loan borrowings wererepaid by $8.0 million, the financial covenants in effect through the extendedmaturity date were revised and the borrowing rate was increased to prime rateplus 7.0% or LIBOR plus 8.0% with a LIBOR floor of 2.75%.  Concurrent with the amendment to the SeniorCredit Facility, the Company obtained a $9.7 million Second Lien Loan, the netproceeds of which were used to purchase $14.1 million in principal amount ofAGI Senior Notes.  The Second Lien Loancarries an interest rate of 9.0% and matures on July 31, 2010.  See Long Term Debt Note #6.

 

Theamended Senior Credit Facility also revised the Company’s financial covenantsin effect through the extended maturity date. The Company’s forecast for 2009 anticipates compliance with all requiredcovenants throughout 2009.  Significantcost reductions have been implemented in 2008, including the elimination ofpersonnel, suspension of 401(k) employer contributions, salary cutbacks,hiring and capital expenditure spending freezes, satellite office closures, andmagazine size and frequency reductions. Further cost reductions are set to be unveiled in 2009.  The Company believes that the amended bankfinancing, new secured loans, as well as forecasted cash flow will provide thecash flow needed to continue as a going concern through at least January 1,2010.

 

*Description**of the Business –*The Company is a membership-based direct marketingcompany which sells club memberships, products, services, and publications toselected affinity groups primarily in North America.** The Company markets club memberships,merchandise and services to RV owners, and camping and golf enthusiasts.  In addition, the Company operates 78 retailstores and a mail order business selling RV accessories, supplies and servicesthrough its wholly-owned subsidiary, Camping World, Inc. (“Camping World”).  The stores are located throughout the UnitedStates.  The Company also operatesconsumer shows and publishes magazines, directories and books.

 

54

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1.                            SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

*Use**of Estimates –*The preparation of the Company’s consolidated financial statements inconformity with accounting principles generally accepted in the United Statesrequires the Company’s management to make estimates and assumptions that affectthe amounts reported in these financial statements and accompanying notes.  Actual results could differ from thoseestimates.

 

*Fai**r valuemeasurement* – The Company adopted the provisions of theFinancial Accounting Standards Board’s (“FASB’s”) Statement of FinancialAccounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS157”), effective January 1, 2008, for its financial assets andliabilities.  The FASB delayed theeffective date of SFAS 157 until January 1, 2009, with respect to the fairvalue measurement requirements for non-financial assets and liabilities thatare not re-measured on a recurring basis. Under this standard, fair value is defined as the price that would bereceived to sell an asset or paid to transfer a liability (i.e., the “exitprice”) in an orderly transaction between market participants at themeasurement date.

 

*Cash and Cash Equivalents* – The Company considers allshort-term, highly liquid investments purchased with a maturity date of threemonths or less to be cash equivalents. The carrying amount approximates fair value because of the shortmaturity of these instruments.

 

*Concentration of Credit Risk* – The Company ispotentially subject to concentrations of credit risk in accountsreceivable.  Concentrations of creditrisk with respect to accounts receivable is limited due to the large number ofcustomers and their geographical dispersion.

 

*Inventories* – Inventories are stated at lower of FIFO(first-in, first-out) cost or market. Inventories consist of retail travel and leisure specialty merchandise.

 

*Property and Equipment* – Property and equipmentare recorded at cost.  Depreciation ofproperty and equipment is provided using the straight-line method over thefollowing estimateduseful lives of the assets:

 
| ** **               | ** ** | **Years** | ** ** |
|--------------------------|------------|-----------|------------|
| Leasehold  improvements  |       | 3-27      |       |
| Furniture and  equipment |       | 3-12      |       |
| Software                 |       | 3-5       |       |

 

Leasehold improvements are amortized over theiruseful lives of the assets or the remaining term of the respective lease,whichever is shorter.

 

*Goodwill and Other Intangible Assets* – Goodwill is reviewed atleast annually for impairment, and more often when impairment indicators arepresent (See Note 3).  The finite-livedintangible assets consisting of membership customer lists, resort and golfcourse agreements, non-compete and deferred consulting agreements, and deferredfinancing costs have weighted average useful lives of approximately 6 years, 4years, 15 years and 7 years, respectively.

 

*Long-lived Assets* - Long-lived assets, including capitalizedsoftware costs, to be held and used are reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying amount of an asset maynot be recoverable.  Impairment isrecognized to the extent the sum of the discounted estimated future cash flowsfrom the use of the asset is less than the carrying value.

 

*Self-insurance Program* – Self-insurance accrualsfor workers compensation and general liability programs are calculated byoutside actuaries and are based on claims filed and include

 

55

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1.                           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

estimatesfor claims incurred but not yet reported. Projections of future loss are inherently uncertain because of therandom nature of insurance claims occurrences and could be substantiallyaffected if future occurrences and claims differ significantly from theseassumptions and historical trends.

 

*Long-term Debt*– The fair value of the Company’s long-term debt is estimated based on thequoted market prices for the same or similar issues or on the current ratesoffered for debt of the same or similar remaining maturities.  The fair value of the Company’s long-termdebt was $210.5 million as of December 31, 2008.

 

*RevenueRecognition –*Merchandiserevenue is recognized when products are sold in the retail stores, shipped formail and Internet orders, or when services are provided to customers.* *Emergency RoadService (“ERS”) revenues are deferred and recognized over the life of the membership.  ERS claim expenses are recognized whenincurred.  Royalty revenue is earnedunder the terms of an arrangement with a third party credit card provider basedon a percentage of the Company’s outstanding credit card balances with suchthird party credit card provider.

 

Membershiprevenue is generated 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, typically three months based on historical actual responserates.  Renewal expenses are expensed atthe time related materials are mailed. Recognized revenues and profit are subject to revisions as themembership progresses to completion. Revisions to membership period estimates would change the amount ofincome and expense amortized in future accounting periods. At December 31, 2008 and 2007, $6.8 million and $7.0 million ofadvertising expenses have been capitalized as direct-response advertising, ofwhich $4.2 million and $4.4 million, respectively, were reported as assets and$2.6 million and $2.6 million, respectively, were reported net of relateddeferred revenue.  Advertising expensesfor 2008, 2007 and 2006 were $37.3 million, $39.1 million, and $32.8 million,respectively.

 

*Accumulated Other ComprehensiveLoss –*Accumulated othercomprehensive loss consists of unrealized losses on cash flow hedges.  At December 31, 2008, accumulated othercomprehensive loss was $10.3 million.

 

*Publications Revenue and Expense –*Newsstand sales of publications andrelated expenses are recorded at the time of delivery, net of estimatedprovision for returns.  Subscriptionsales of publications are reflected in income over the lives of the subscriptions.  The related selling expenses are expensed asincurred.  Advertising revenues andrelated expenses are recorded at the time of delivery.  Subscription and newsstand revenues andexpenses related to annual publications are deferred until the publications aredistributed.  Revenues and relatedexpenses for consumer shows are recognized when the show occurs.

 

*Vendor Allowances*– The Company receives rebates from vendors pursuant to several different typesof programs.  Vendor consideration is accountedfor as a reduction of the inventory cost and related cost of sales when theinventory is sold.

 

*Shipping andHandling Fees and Costs**–*The Company reports shipping and handling costs billed tocustomers as a component of revenues, and related costs are reported as acomponent of cost applicable to revenues.

 

56

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1.                           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

*DerivativeFinancial Instruments –***The Company accounts forderivative instruments and hedging activities in accordance with SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”).  All derivatives are recognized on the balancesheet at their fair value.  On the datethat the Company enters into a derivative contract, management formallydocuments all relationships between hedging instruments and hedged items, aswell as risk management objectives and strategies for undertaking various hedgetransactions.

 

Changesin the fair value of a derivative that is highly effective and that isdesignated and qualifies as a cash flow hedge (a “swap”), to the extent thatthe hedge is effective, are recorded in accumulated other comprehensive loss,until earnings are affected by the variability of cash flows of the hedgedtransaction.  The Company measureseffectiveness of the swap at each quarter end using the Hypothetical DerivativeMethod.  Under this method, hedgeeffectiveness is measured based on a comparison of the change in fair value ofthe actual swap designated as the hedging instrument and the change in fairvalue of the hypothetical swap which would have the terms that identicallymatch the critical terms of the hedged cash flows from the anticipated debtissuance.  The amount of ineffectiveness,if any, recorded in earnings would be equal to the excess of the cumulativechange in the fair value of the swap over the cumulative change in the fairvalue of the plain vanilla swap lock, as defined in the accountingliterature.  Once a swap is settled, theeffective portion is amortized over the estimated life of the hedge item.

 

TheCompany utilizes derivative financial instruments to manage its exposure tointerest rate risks.  The Company doesnot enter into derivative financial instruments for trading purposes.

 

*IncomeTaxes –*The Company recognizesdeferred tax assets and liabilities based on the liability method, whichrequires an adjustment to the deferred tax asset or liability to reflect incometax rates currently in effect.  When incometax rates increase or decrease, a corresponding adjustment to income taxexpense is recorded by applying the rate change to the cumulative temporarydifferences.

 

The Company adopted theprovisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48(“FIN 48”), “Accounting for Uncertainty in Income Taxes,” on January 1,2007.  At the date of adoption, theCompany had $14.2 million of unrecognized tax benefits.  Accounting for the unrecognized tax benefitshad no affect on current period earnings or retained earnings as the liabilityhad been previously recorded and was reclassified from long-term deferred taxliabilities to other long-term liabilities. There would be no affect on the effective tax rate if the unrecognizedtax benefits were recognized.  The Companydid not have any material increases in unrecognized tax benefits in the currentperiod and does not anticipate any material increases in 2009.

 

Inthe second quarter of 2006, AGHC received approval from the Internal RevenueService to change its tax status from a Subchapter C corporation to aSubchapter S corporation (“S corporation”) to be effective as of January 1,2006.  The election for change in taxstatus to an S corporation included AGHC and all of its subsidiaries with theexception of Camping World, Inc. and its wholly-owned subsidiaries, whichare to remain Subchapter C corporations. Pursuant to SFAS No. 109, “Accounting for Income taxes”, a changein tax status resulting from an S corporation election requires that alldeferred tax accounts be revalued upon formal approval of the S corporationstatus.  Accordingly, all deferred taxaccounts of AGHC and its subsidiaries, excluding Camping World, Inc. andits wholly owned subsidiaries, were revalued to account for the tax effect forthe change to the S corporation status.

 

57

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1.                             SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

*MajorCustomers –*Included in the Membership Services Segmentis revenue in the amount of $18.5 million, $19.9 million, and $20.3 million,for the years 2008, 2007 and 2006, respectively, which was received undercontracts from one customer of the Company.

 

*RecentAccounting Pronouncements:*

 

The Company adopted theprovisions of Financial Accounting Standards Board (“FASB”) issued Statement ofFinancial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements”(“SFAS 157”) on January 1, 2008. The FASB delayed the effective date of SFAS 157 until January 1,2009 with respect to fair value measurement requirements for non-financialassets and liabilities that are not re-measured on a recurring basis.  SFAS 157 defines fair value, establishes aframework and gives guidance regarding the method used for measuring fairvalue, and expands disclosures about fair value measurements.  SFAS 157 requires companies to disclose thefair value of their financial instruments according to a fair value hierarchy,as defined, and may require companies to provide additional disclosures basedon that hierarchy.  SFAS 157 is effectivefor financial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years.  The adoption of the provisions of SFAS 157did not have a material impact on the Company’s consolidated financial statements.

 

In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assetsand Liabilities” including an amendment of FASB Statement No. 115 (“SFAS159”).  SFAS 159 expands the use of fairvalue accounting but does not affect existing standards which requires assetsor liabilities to be carried at fair value. The objective of SFAS 159 is to improve financial reporting by providingcompanies with the opportunity to mitigate volatility in reported earningscaused by measuring related assets and liabilities differently without havingto apply complex hedge accounting provisions. Under SFAS 159, a company may elect to use fair value to measureeligible items at specified election dates and report unrealized gains andlosses on items for which the fair value option has been elected in earnings ateach subsequent reporting date.  Eligibleitems include, but are not limited to, accounts and loans receivable,available-for-sale and held-to-maturity securities, equity method investments,accounts payable, guarantees, issued debt and firm commitments.  If elected, SFAS 159 would be effective forfiscal years beginning after November 15, 2007.  The Company has not elected to use the fairvalue option to measure any eligible items under SFAS 159.

 

In December 2007,the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS141(R)”).  SFAS 141(R) establishesprinciples and requirements for how an acquirer recognizes and measures in itsfinancial statements the identifiable assets acquired, the liabilities assumed,any noncontrolling interest in the acquiree and the goodwill acquired.  SFAS 141(R) also establishes disclosurerequirements to enable the evaluation of the nature and financial effects ofthe business combination.  SFAS 141(R) iseffective for fiscal years beginning after December 15, 2008.  The Company will adopt SFAS 141(R) inthe first quarter of fiscal 2009 and apply the provisions of the Statement forany acquisition after the adoption date.

 

In December 2007,the FASB issued SFAS No. 160, “Accounting and Reporting of Non-controllingInterests in Consolidated Financial Statements – an amendment of AccountingResearch Bulletin No. 51” (“SFAS 160”). This standard will significantly change the accounting and reporting forbusiness combination transactions and non-controlling (minority) interests inconsolidated financial statements, including capitalizing at the acquisitiondate the fair value acquired from in-process research and development, andre-measuring and writing down these assets, if necessary, in subsequent periodsduring their development.  This newstandard will be

 

58

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1.                           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

applied for businesscombinations that occur on or after January 1, 2009 and presentation anddisclosure requirements of SFAS 160 shall be applied retrospectively.

 

In March 2008, theFASB issued SFAS Statement No. 161 (“SFAS 161”), “Disclosures aboutDerivative Instruments and Hedging Activities”. SFAS 161 requires companieswith derivative instruments to disclose information that should enablefinancial statement users to understand how and why a company uses derivativeinstruments, how derivative instruments and related hedged items are accountedfor under FASB Statement No. 133 “Accounting for Derivative Instrumentsand Hedging Activities” and how derivative instruments and related hedged itemsaffect a company’s financial position, financial performance and cash flows.SFAS 161 is effective for financial statements issued for fiscal years andinterim periods beginning after November 15, 2008.  The disclosure requirements of SFAS 161 willbe applicable beginning in the first quarter of fiscal 2009.

 

2.                           PROPERTY AND EQUIPMENT

 

Property and equipmentconsisted of the following at December 31 (in thousands):

 
| ** **                                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|
|                                              |       |     |       |     |       |
| Land                                              |       | $        | 477        |     | $          | 477 |   |
| Building and  improvements                        |       | 17,038   |       | 16,100   |       |
| Furniture and  equipment                          |       | 64,764   |       | 61,950   |       |
| Software                                          |       | 28,404   |       | 25,402   |       |
| Systems  development and construction in progress |       | 8,932    |       | 5,930    |       |
|                                              |       | 119,615  |       | 109,859  |       |
| Less:  accumulated depreciation and amortization  |       | (75,538  | )          | (65,552  | )          |
|                                              |       | $        | 44,077     |     | $          | 44,307 |   |

 

3.                           GOODWILLAND INTANGIBLE ASSETS

 

The following is asummary of changes in the Company’s goodwill by business segment, for the yearsended December 31, 2008 and 2007 (in thousands):

 
| ** **                            | ** ** | **Membership  Services** | ** ** | **Publications** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
|---------------------------------------|------------|--------------------------|------------|------------------|------------|------------|------------|------------------|------------|
|                                  |       |                     |       |             |       |       |       |             |       |
| Balance as of  January 1, 2007   |       | $                        | 49,944     |             | $          | 46,884     |       | $                | 47,601     |   | $ | 144,429 |   |
| Impairment                            |       | —                   |       | —           |       | —     |       | —           |       |
| Balance as of  December 31, 2007 |       | 49,944                   |       | 46,884           |       | 47,601     |       | 144,429          |       |
| Impairment                            |       | —                   |       | —           |       | (47,601    | )          | (47,601          | )          |
| Balance as of  December 31, 2008 |       | $                        | 49,944     |             | $          | 46,884     |       | $                | —     |   | $ | 96,828 |   |

 

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3.                           GOODWILLAND INTANGIBLE ASSETS

 

Finite-lived intangibleassets and related accumulated amortization consisted of the following at December 31(in thousands):

 
| ** **                                       | ** ** | **2008**   | ** ** |
|--------------------------------------------------|------------|------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Gross**  | ** ** | **Amortization** | ** ** | **Net** | ** ** |
|                                             |       |       |       |   |   |   |   |
| Membership and  customer lists                   |       | $          | 36,384     |   | $ | (22,182 | ) | $ | 14,202 |   |
| Resort and golf  course participation agreements |       | 13,385     |       | (13,375 | ) | 10 |   |
| Non-compete and  deferred consulting agreements  |       | 18,830     |       | (15,103 | ) | 3,727 |   |
| Deferred  financing costs                        |       | 10,685     |       | (7,870 | ) | 2,815 |   |
|                                             |       | $          | 79,284     |   | $ | (58,530 | ) | $ | 20,754 |   |

 
| ** **                                       | ** ** | **2007**   | ** ** |
|--------------------------------------------------|------------|------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Gross**  | ** ** | **Amortization** | ** ** | **Net** | ** ** |
|                                             |       |       |       |   |   |   |   |
| Membership and  customer lists                   |       | $          | 31,466     |   | $ | (16,705 | ) | $ | 14,761 |   |
| Resort and golf  course participation agreements |       | 13,410     |       | (13,383 | ) | 27 |   |
| Non-compete and  deferred consulting agreements  |       | 18,830     |       | (13,885 | ) | 4,945 |   |
| Deferred  financing costs                        |       | 10,414     |       | (6,452 | ) | 3,962 |   |
|                                             |       | $          | 74,120     |   | $ | (50,425 | ) | $ | 23,695 |   |

 

The aggregate future five-year amortizationof finite-lived intangibles at December 31, 2008 is as follows (inthousands):

 
| 2009  |   | $     | 6,880  |   |
|-------|--------|-------|--------|--------|
| 2010  |   | 5,684 |   |
| 2011  |   | 5,166 |   |
| 2012  |   | 2,908 |   |
| 2013  |   | 116   |   |
| Total |   | $     | 20,754 |   |

 

Under SFAS No. 142,Goodwill and Other Intangible Assets, (“SFAS No. 142”) goodwill impairmentis deemed to exist if the carrying value of a reporting unit exceeds itsestimated fair value.  The Company’sreporting units are generally consistent with the operating segments underlyingthe reporting segments identified in Note 12 - Segment Information.  The determination of fair value for areporting unit involves the use of assumptions and estimates such as the futureperformance of the operations of the reporting unit and discount rates used todetermine the current value of expected future cash flows of the reportingunit.  Any change in these assumptionsand estimates, and other factors such as inflation rates, competition andgeneral economic conditions, could cause the calculated fair value of theoperating unit to decrease significantly.

 

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3.                            GOODWILLAND INTANGIBLE ASSETS (continued)

 

In the third quarter of2008, the Company noted continued reduction in same store sales at CampingWorld, Inc. (“Camping World”) as well as deterioration of general economicconditions and consumer confidence. Based on the above, the Company determined that there were identifiedindicators of impairment within the Camping World reporting unit.

 

The results of a thirdparty valuation report (“Valuation Report”) prepared in the thirdquarter of 2008 by Houlihan Smith and Company Inc., a nationally recognizedfirm, in anticipationof the potential sale of Camping World, indicated that the estimated fair valueof the Camping World reporting unit was less than book value.  The excess of the carrying value over theestimated fair value of the Camping World reporting unit was primarily due tothe decline in the recreational vehicle and camping retail markets leading tolower expected future cash flows for the business and lower market comparables.In determining the fair value, the Company used a weighted average of theincome valuation approach and market valuation approaches.  The Company recorded an impairment charge of$47.6 million in the third quarter of 2008 related to Camping World, which ispart of the retail segment.

 

We performed an annualgoodwill impairment test as required and there were no goodwill impairmentindicators for our other reporting units. Based on the results of the annual impairment tests, we determined thatno indicators of goodwill impairment existed as of December 31, 2008.  However, future goodwill impairments testscould result in a charge to earnings.  Wewill continue to evaluate goodwill on an annual basis and whenever events andchanges in circumstances indicate that there may be a potential impairment.

 

In February 2006,AGI Productions, Inc. acquired the consumer shows and related assets of H &S Productions, LLC for $2.5 million.  Theacquisition price was allocated primarily to membership and customerlists.  In August 2006, the Company’ssubsidiary TL Enterprises, Inc. acquired the consumer park guides andrelated assets of American Guide Services, Inc. for $1.0 million.  The acquisition price was allocated primarilyto membership and customer lists.  In September 2006,AGI Productions, Inc. acquired the consumer shows and related assets ofApple Rock Advertising and Promotions, Inc. for $1.5 million.

 

In January 2007, AGIProductions, Inc. acquired a consumer show from MAC Events, Inc. for$0.5 million.  As part of the purchase,the Company assumed $0.3 million of liabilities.  In February 2007, AGI Productions, Inc.acquired consumer shows from Industrial Exposition Inc. for $1.9 million.  As part of the purchase, the Company issued$1.5 million of debt and assumed $0.6 million of liabilities.

 

In January 2008, AGIProductions, Inc. acquired consumer shows from MAC Events, LLC for $3.4million.  As part of the purchase, theCompany issued $0.4 million of debt and assumed $0.6 million ofliabilities.  In February 2008, AGIProductions, Inc. acquired consumer shows from Mid America Expositions, Inc.for $1.6 million.  As part of thepurchase, the Company issued $0.5 million of debt and assumed $0.5 million ofliabilities.  The cost of theacquisitions was allocated primarily to membership and customer lists.

 

The total costs of theacquisitions have been allocated to the assets acquired and the liabilitiesassumed based on their respective fair values in accordance with SFAS No. 141,“Business Combinations.”  The allocationsof the purchase price to assets and liabilities include various finite-livedassets and no additional goodwill.  Theresults of operations for each respective acquisition have been included in theCompany’s results of operations from the date of the acquisitions.  Proforma results of operations for each yearin which an acquisition occurred,

 

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3.                           GOODWILLAND INTANGIBLE ASSETS (continued)

 

assuming the acquisitionstook place at the beginning of the year, would not differ significantly fromthe actual reported results.

 

4.                           LONG-LIVEDASSETS

 

In 2005, AGHIissued $88.2 million principal amount of its 10-7/8% Senior Notes due 2012 (the“AGHI Notes”) and contributed the net proceeds, approximately $81.0 million, tothe Company and in turn, the Company made an equity contribution to CampingWorld.  Camping World then made an equitycapital contribution in the same amount to its wholly-owned subsidiary, CWI, Inc.that created a new wholly-owned subsidiary named CWFR Capital Corp. (“CWFR”)which is an “unrestricted subsidiary” under the AGHI Notes, and the AGIIndenture, and made an equity capital contribution to CWFR in an equal amountto the capital contribution that it received from Camping World.  Since CWFR is an unrestricted subsidiary, itsoperations are not restricted by either the AGI Indenture or the AGHINotes.  CWFR used the proceeds from theequity capital contribution to acquire the FreedomRoads Preferred Interest.  FreedomRoads is owned 90% by the StephenAdams Living Trust, which also indirectly owns 100.0% of the outstandingcapital stock of AGHC and indirectly AGI.

 

Based on the results of theValuation Report prepared in the third quarter of 2008, the Company recorded animpairment charge of $81.0 million in the third quarter of 2008 that wrote downto zero the carrying value of the preferred interest (the “FreedomRoadsPreferred Interest”) held by an indirect subsidiary of Camping World inFreedomRoads Holding Company, LLC (“FreedomRoads”), a holding company whosesubsidiaries sell and service new and used recreational vehicles.  The $81.0 million impairment charge wasrecorded as a result of declining performance of the recreational vehicleindustry driven by overall weakening of the economy and a significant declinein consumer confidence, in addition to limited credit available to consumersinterested in purchasing recreational vehicles.

 

5.                           ACCRUEDLIABILITIES

 

Accruedliabilities consisted of the following at December 31 (in thousands):

 
| ** **                 | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
|                       |       |     |       |     |       |
| Compensation and  benefits |       | $        | 9,549      |     | $          | 14,511 |   |
| Other accruals             |       | 17,405   |       | 21,558   |       |
|                       |       | $        | 26,954     |     | $          | 36,069 |   |

 

6.                             LONG-TERMDEBT

 

Thefollowing reflects outstanding long-term debt as of December 31 (inthousands):

 
| ** **                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|
|                                       |       |     |       |     |       |
| Revolving Credit  and Term Loan Facility:  |       |     |       |     |       |
| Term Loans                                 |       | $        | 126,955    |     | $          | 128,605 |   |
| Revolving credit  facility                 |       | 8,500    |       | —   |       |
| AGI 9% Senior  Subordinated Notes due 2012 |       | 152,399  |       | 152,399  |       |
| Other long-term  obligations               |       | 4,292    |       | 6,169    |       |
|                                       |       | 292,146  |       | 287,173  |       |
| Less: current  portion                     |       | (12,391  | )          | (4,406   | )          |
|                                       |       | $        | 279,755    |     | $          | 282,767 |   |

 

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6.                             LONG-TERMDEBT (continued)

 

*AGI Senior Credit Facility* - On June 24, 2003, the Companyentered into an Amended and Restated Credit Agreement and a Senior SecuredFloating Rate Note Purchase Agreement (“Senior Credit Facility”) providing forterm loans (“Term Loans”) in the aggregate of $140.0 million and a revolvingcredit facility of $35.0 million.  Thefunds available under the revolving credit line of the Senior Credit Facilitymay be utilized forborrowings or letters of credit; however, a maximum of $7.5 million maybe allocated to such letters of credit. Re-borrowings under the Term Loans are not permitted.  The interest on borrowings under the SeniorCredit Facility is at variable rates based on the ratio of total cash flow tooutstanding indebtedness (as defined). Interest rates float with prime and the London Interbank Offered Rates (“LIBOR”),plus an applicable margin ranging from 1.50% to 2.50% over the statedrates.  AGI also pays a commitment fee of0.5% per annum on the unused amount of the revolving credit line.  Further, the Senior Credit Facilityrequires the loans to be prepaid in an amount equal to 75% of the excess cashflow, as defined.  As of December 31,2008, the Company had no excess cash flow, as defined.  The Senior Credit Facility is secured bysubstantially all the assets and a pledge of the stock of AGI.

 

On March 3, 2006,AGI amended its Senior Credit Facility to revise the definition of ConsolidatedFixed Charges Ratio and Permitted Tax Distributions.  This amendment allows AGI to distribute taxesto its ultimate parent based on its stand-alone tax obligation rather than thetax obligation of its parent, AGHI, until such time that AGHI pays interest onits 10 7/8% AGI Senior Notes in cash instead of by the issuance of additionalnotes.  For the years ended December 31,2008 and 2007, AGI distributed cash of $2.0 million and $5.8 million,respectively, in the form of a dividend to AGHI to fund the Company’s taxobligations.  Further, AGI amended theSenior Credit Facility’s covenant restrictions with affiliates to permit ajoint venture arrangement between Camping World, Inc. and FreedomRoadsHolding Company LLC and its subsidiaries, (collectively “FreedomRoads”), anaffiliate of the Company.

 

On June 8, 2006, AGI amended itsSenior Credit Facility to permit AGI to purchase up to $30.0 million of the AGISenior Notes from time to time as and when the Company determines.  During 2006, AGI purchased $29.9 million ofthe AGI Senior Notes.  The AGI SeniorNote purchases were made with available cash and the notes purchased have beenretired.

 

On February 27,2007, the Company amended its Senior Credit Facility to extend the maturity ofthe revolving credit facility from June 24, 2008 to June 24, 2009,increase the consolidated senior leverage ratio from 1.9 to 3.5 times EBITDA,as defined, and fix the consolidated total leverage ratio at 5.0 times EBITDA,as defined.  Further, the amendmentpermits the Company to repurchase up to an additional $50.0 million of the AGISenior Notes from time to time as and when the Company determines through theissuance of additional term loans of up to $50.0 million.  Any loan amounts not used for the repurchaseof the AGI Senior Notes may be used for acquisitions or repay revolving creditloans.

 

As of December 31, 2008, $127.0 million wasoutstanding under the Term Loans and the average interest rate on the TermLoans was 7.27%.  As of December 31,2008, permitted borrowings under the undrawn revolving line were$27.5 million.  The Company hadcommercial and standby letters of credit in the aggregate amount of $7.5million outstanding as of December 31, 2008.  The aggregate quarterly scheduled payments onthe Term Loans are $0.4 million.  Therevolving credit facility and the Term Loans mature on June 24, 2009.

 

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6.                             LONG-TERMDEBT (continued)

 

OnJune 5, 2009, the Company entered into an amendment to its Senior CreditFacility pursuant to which the maturity date was extended from June 24, 2009 toMarch 31, 2010, the revolving credit portion of the facility was reduced by$10.0 million to $25.0 million, the outstanding term loan borrowings wererepaid by $8.0 million, the financial covenants in effect through the extendedmaturity date were revised and the borrowing rate was increased to prime rateplus 7.0% or LIBOR plus 8.0% with a LIBOR floor of 2.75%.  As a condition to the amendment, theshareholder of the Company was required to arrange for the purchase of approximately$26.6 million in principal amount of the term portion of the Senior CreditFacility by new lenders, enhance the yield to such new lenders, purchase AGHINotes held by one of such new lenders at a premium to the most recent marketprice, contribute $8.5 million in capital to the Company and guarantee tworequired principal payments on the term loans under the Senior Credit Facility,aggregating $15.0 million.  Inconsideration of such support, the Company entered into an option agreementwith the shareholder of the ultimate parent of the Company pursuant to whichthe Company granted such shareholder or his assigns an option, exercisable onor before March 1, 2010, to purchase the Company’s Camping World subsidiary for$55.0 million, being the fair value of such subsidiary as determined by anappraisal of Houlihan Smith & Company, Inc. dated as of March 1, 2009.  The Company also agreed to pay theshareholder of the ultimate parent, upon successful refinancing of theCompany’s secured debt, including the Senior Credit Facility, a success feeequal in amount to the fair value, as determined by an independent financialadvisor of such credit support, taking into account the fair value of theoption to purchase Camping World.  In theevent the fair value of the Camping World purchase option exceeds the fairvalue of such credit support, the shareholder will pay the amount of suchexcess to the Company.

 

Concurrentwith the amendment to the Senior Credit Facility, the Company obtained a $9.7million Second Lien Loan, the net proceeds of which were used to purchase $14.6million in principal amount of AGI Senior Notes.  The Second Lien Loan carries an interest rateof 9.0% and matures on July 31, 2010.

 

Inaddition, Company agreed to use its best efforts to secure an asset-based loanof at least $18.5 million secured by the inventory and receivables of its subsidiary,Camping World, Inc. (the “Camping World Financing”), the proceeds of whichwould be used to further reduce the amounts outstanding under the Senior CreditFacility.  The senior lenders agreed tosubordinate their liens to such financing. If a Camping World Financing has not been consummated by September 15,2009, the borrowing rate on revolving credit loans, swing loans and terms loansincrease to prime rate plus 9.0% or LIBOR plus 10.0%.  

 

Theamended Senior Credit Facility also revised the Company’s financial covenantsin effect through the extended maturity date. The Company’s forecast for 2009 anticipates compliance with all requiredcovenants throughout 2009.  Significantcost reductions have been implemented in 2008, including the elimination ofpersonnel, suspension of 401(k) employer contributions, salary cutbacks, hiringand capital expenditure spending freezes, satellite office closures, andmagazine size and frequency reductions. Further cost reductions are set to be unveiled in 2009.  The Company believes that the amended bankfinancing, new secured loans, as well as forecasted cash flow will provide thecash flow needed to continue as a going concern through at least January 1,2010.

 

*AGISenior Subordinated Notes -*In February 2004, we issued $200.0 millionaggregate principal amount of 9% Senior Subordinated Notes due 2012 (the “AGISenior Notes”).  The Company completed aregistered exchange of the AGI Senior Notes under the Securities Act of 1933 inAugust 2004.  Interest ispayable on the AGI Senior Notes twice a year on each February 15 and August 15,beginning August 15, 2004, and the AGI Senior Notes mature on February 15,2012.  On June 8, 2006, AGI amended its Senior CreditFacility to permit AGI to purchase up to $30.0 million of the AGI Senior Notesfrom time to time as and when the Company determines.  AGI purchased $29.9 million of the AGI SeniorNotes at various times in 2006.  The AGISenior Note purchases were made with available cash and the notes purchasedhave been retired.

 

On March 8, 2007,the Company purchased $17.7 million of the AGI Senior Notes.  The Company funded the purchase through theissuance of the $25.0 million in additional incremental term loans as permittedunder the February 27, 2007 amendment to the Senior Credit Facility.  The balance of the $25.0 million incrementalloan was used to pay down the Company’s revolving credit facility by $6.5million and to pay associated loan fees and transaction expenses.  The terms on the additional incremental loansare consistent with the remaining term loan outstanding under the Senior CreditFacility. The Company also incurred an $0.8 million debt extinguishment chargerepresenting the pro rata unamortized deferred finance costs associated withthe prepayment of the AGI Senior Notes. As of December 31, 2008, $152.4 million of AGI Senior Notes remainoutstanding.

 

Based on the results ofthe Valuation Report, the Company recorded an impairment charge of $81.0million in the third quarter of 2008 that wrote down to zero the carrying valueof the

 

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6.                           LONG-TERM DEBT(continued)

 

preferred interest (the “FreedomRoadsPreferred Interest”) held by an indirect subsidiary of Camping World inFreedomRoads Holding Company, LLC (“FreedomRoads”), a holding company whosesubsidiaries sell and service new and used recreational vehicles.  The $81.0 million impairment charge wasrecorded as a result of declining performance of the recreational vehicleindustry driven by overall weakening of the economy and a significant declinein consumer confidence, in addition to limited credit available to consumersinterested in purchasing recreational vehicles.

 

The AGI Credit Facilityand the AGI indenture contains certain restrictive covenants relating to, butnot limited to, mergers, changes in the nature of the business, acquisitions,additional indebtedness, sale of assets and investments, and the payment ofdividends subject to certain limitations and minimum operating covenants.  The Company was in compliance with all debtcovenants at December 31, 2008.

 

*Total Long-term Debt -*The aggregate future maturitiesof long-term debt at December 31, 2008 are as follows (in thousands):

 
| 2009  |   | $       | 12,391  |   |
|-------|--------|---------|---------|--------|
| 2010  |   | 127,273 |    |
| 2011  |   | 82      |    |
| 2012  |   | 152,400 |    |
| Total |   | $       | 292,146 |   |

 

7.                             INCOMETAXES

 

                                      Thecomponents of the Company’s income tax expense (benefit) from operations forthe year ended December 31, consisted of (in thousands):

 
| ** **                    | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Current:                      |       |     |       |     |       |     |       |
| Federal                       |       | $        | —     |     | $          | —   |       | $ | — |   |
| State                         |       | 29       |       | 16       |       | 12       |       |
| Deferred                      |       |     |       |     |       |     |       |
| Federal                       |       | (2,065   | )          | 1,443    |       | 19,549   |       |
| State                         |       | (177     | )          | 124      |       | 2,707    |       |
| Income tax  expense (benefit) |       | $        | (2,213     | )        | $          | 1,583    |       | $ | 22,268 |   |

 

A reconciliation ofincome tax expense (benefit) from operations to the federal statutory rate forthe year ended December 31 is as follows (in thousands):

 
| ** **                                       | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                             |       |     |       |     |       |     |       |
| Income taxes  computed at federal statutory rate |       | $        | (49,321    | )        | $          | (992     | )          | $ | (2,830 | ) |
| State income  taxes - net of federal benefit     |       | (4,227   | )          | (85      | )          | (243     | )          |
| Other  differences:                              |       |     |       |     |       |     |       |
| Deferred taxes  upon change in tax status        |       | —   |       | —   |       | 23,097   |       |
| Goodwill written  off                            |       | 14,739   |       | —   |       | —   |       |
| Increase  (decrease) of valuation allowance      |       | 36,696   |       | 2,724    |       | 2,459    |       |
| Other                                            |       | (100     | )          | (64      | )          | (215     | )          |
| Income tax  expense (benefit)                    |       | $        | (2,213     | )        | $          | 1,583    |       | $ | 22,268 |   |

 

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7.                         INCOMETAXES (continued)

 

Deferred income taxesreflect the net tax effects of temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and theamounts used for income tax purposes and operating loss and tax creditcarryforwards.  Significant itemscomprising the net deferred tax asset at December 31 are (in thousands):

 
| ** **                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
| **Deferred  tax liabilities:**                   |       |     |       |     |       |
| Management  incentive                            |       | $        | —     |     | $          | (3,349 | ) |
| Accelerated  depreciation                        |       | (1,187   | )          | (1,251   | )          |
| Prepaid expenses                                 |       | (386     | )          | (313     | )          |
| Other                                            |       | (490     | )          | (790     | )          |
|                                             |       | (2,063   | )          | (5,703   | )          |
| **Deferred  tax assets:**                        |       |     |       |     |       |
| Investment  impairment                           |       | 30,784   |       | —   |       |
| Gift Cards                                       |       | 796      |       | 799      |       |
| Deferred  revenues                               |       | 27       |       | 148      |       |
| Accrual for  employee benefits and severance     |       | 325      |       | 615      |       |
| Accrual for  deferred phantom stock compensation |       | —   |       | 59       |       |
| Net operating  loss carryforward                 |       | 11,179   |       | 4,569    |       |
| Claims reserves                                  |       | 684      |       | 1,250    |       |
| Intangible  assets                               |       | 179      |       | 216      |       |
| Deferred book  gain                              |       | 2,521    |       | 2,521    |       |
| Other reserves                                   |       | 2,016    |       | 1,929    |       |
|                                             |       | 48,511   |       | 12,106   |       |
|                                             |       |     |       |     |       |
| Valuation  allowance                             |       | (41,879  | )          | (5,183   | )          |
|                                             |       |     |       |     |       |
| Net deferred tax  liabilities                    |       | $        | 4,569      |     | $          | 1,220 |   |

 

Effective January 1,2006, the Company received approval from the Internal Revenue Service for achange in tax status to an S corporation which included AGHC and all itssubsidiaries with the exception of Camping World, Inc. and itswholly-owned subsidiaries, which are to remain Subchapter C corporations.  At December 31, 2008, Camping World, Inc.and its subsidiaries had a net operating loss carryforward of approximately$29.4 million, which will be able to offset future taxable income.  If not used, the net operating losscarryforward will expire between 2026 and 2028. The valuation allowance for deferred taxes was increased by $36.7million as it was determined that the Company would have insufficient taxableincome in the current, or carryforward periods under the tax laws to realizethe future tax benefits of its deferred tax assets.

 

On January 1, 2007,the Company adopted the provisions of FIN 48. At the date of adoption, the Company had $14.2 million of unrecognizedtax benefits.  Accounting for theunrecognized tax benefits had no affect on current year earnings or retainedearnings as the liability had been previously recorded and was reclassifiedfrom long-term deferred tax liabilities to other long-term liabilities.

 

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7.                             INCOMETAXES (continued)

 

The following tablesummarizes the activity related to unrecognized tax benefits:

 
| Balance at  January 1, 2008                                                         |   | $      | 14,390 |   |
|------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Gross increases  in unrecognized tax benefits due to prior year positions                |   | — |   |
| Gross decreases  in unrecognized tax benefits due to prior year positions                |   | — |   |
| Gross increases  in unrecognized tax benefits due to current year positions              |   | — |   |
| Gross decreases  in unrecognized tax benefits due to current year positions              |   | — |   |
| Gross decreases  in unrecognized tax beneifts due to settlements with taxing authorities |   | — |   |
| Gross decreases  in unrecognized tax benefits due to statute expirations                 |   | — |   |
| Other                                                                                    |   | 103    |   |
| Unrecognized tax  benefits at December 31, 2008                                     |   | $      | 14,493 |   |

 

The Company accruesinterest and penalties related to unrecognized tax benefits in its income taxprovision.  The Company recorded interestand penalties of $0.9 million related to unrecognized tax benefits during 2008and in total, as of December 31, 2008, the liability for penalties andinterest was $2.5 million.  This amountwas included in other long-term liabilities. The Company anticipates that the total amount of unrecognized taxbenefits at December 31, 2008 will decrease by a least $12.6 million dueto tax positions for which there was an uncertainty about the timing of revenuerecognition in earlier years which will more likely than not become certain bythe close of 2009.

 

The Company and itssubsidiaries file income tax returns in the U.S. and various states.  With few exceptions, the Company is no longersubject to U.S. federal, state, and local income tax examinations by taxauthorities for years before 2003.

 

8.                             INTERESTRATE SWAP AGREEMENTS

 

On October 15,2007, the Company entered into a five-year interest rate swap agreement with anotional amount of $100.0 million from which it will receive periodic paymentsat the 3 month LIBOR-based variable rate (3.42% at December 31, 2008 basedupon the October 31, 2008 reset date) and make periodic payments at afixed rate of 5.135%, with settlement and rate reset dates every January 31,April 30, July 31, and October 31.  Thefair value of the swap was zero at inception. Theinterest rate swap agreement was effective beginning October 31, 2007 andexpires on October 31, 2012.  AGIentered into the interest rate swaps to limit the effect of increases on ourfloating rate debt.  Theinterest rate swap is designated as a cash flow hedge of the variable rateinterest payments due on $100 million of the Term Loans issued June 24,2003, and accordingly, gains and losses on the fair value of the interest swapagreement are reported in accumulated other comprehensive loss and reclassifiedto earnings in the same period in which the hedged interest payment affectsearnings.  The interest rate swapagreement expires on October 31, 2012.

 

On March 19,2008, the Company entered into a 4.5 year interest rate swap agreementeffective April 30, 2008, with a notional amount of $35.0 million fromwhich it will receive periodic payments at the 3 month LIBOR-based variablerate (3.42% at December 31, 2008 based upon the October 31, 2008reset date) and make periodic payments at a fixed rate of 3.43%, withsettlement and rate reset dates every January 31, April 30, July 31,and October 31.  The interest rateswap was effective beginning April 30, 2008 and expires on October 31,2012. Gains and losses on the fair value of the interest swap agreement arereported in accumulated other comprehensive loss and reclassified to earningsin the same period in which the hedged interest payment affects earnings.

 

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8.                             INTERESTRATE SWAP AGREEMENTS (continued)

 

The fair value of these swaps included inaccrued liabilities was $12.7 million and $4.7 million as of December 31,2008 and December 31, 2007, respectively, and in accumulated othercomprehensive loss of $10.3 million and $4.7 million as of December 31,2008 and December 31, 2007, respectively. The ineffective portion included in the statement of operations in losson derivative instrument was $2.4 million at December 31, 2008.  AGI entered into the interest rate swaps tolimit the effect of interest rate changes on our floating rate debt.

 

Due to thepotential sale of Camping World, a highly effective hedge on the $35.0 millionoutstanding debt by the $35.0 million notional amount interest rate swapagreement is deemed to be no longer probable and is now deemed to be reasonablypossible.  As a result, changes in thevalue of the $35.0 million interest rate swap agreement are included inearnings prospectively beginning October 1, 2008.  The change in value from October 1, 2008to December 31, 2008 was $2.4 million. Included inother comprehensive loss is $0.5 million related to the $35.0 million interestrate swap which will be included in earnings when the underlying transactionbeing hedged is probable not to occur.  A highly-effective hedge on the $100.0million outstanding debt by the $100.0 million notional amount of interest rateswap agreement is still deemed to be probable as the Company will maintain itsLIBOR-based debt at a minimum of $100.0 million until the interest swap expireson October 31, 2012.

 

The fair valueof these swaps included in other long-term liabilities was $12.7 million ofwhich $10.3 million is in accumulated other comprehensive loss and $2.4 millionin the statement of operations at December 31, 2008, and $4.7 million forboth other long-term liabilities and accumulated other comprehensive loss as ofDecember 31, 2007, respectively.

 

9.                             FAIRVALUE

 

The Company hasadopted the provisions of SFAS 157 as of January 1, 2008, for financialinstruments.  Although the adoption ofSFAS 157 did not materially impact its financial condition, results ofoperations, or cash flow, the Company is now required to provide additionaldisclosures as part of its financial statements.

 

SFAS 157establishes a three-tier fair value hierarchy, which prioritizes the inputsused in measuring fair value.  Thesetiers include: Level 1, defined as observable inputs such as quoted prices inactive markets; Level 2, defined as inputs other than quoted prices in activemarkets that are either directly or indirectly observable; and Level 3, definedas unobservable inputs in which little or no market data exists, thereforerequiring an entity to develop its own assumptions.

 

As of December 31,2008, the Company holds interest rate swap contracts that are required to bemeasured at fair value on a recurring basis. The Company’s interest rate swap contracts are not traded on a publicexchange.  See Note 8 for furtherinformation on the interest rate swap contracts.  The fair value of these interest rate swapcontracts are determined based on inputs that are readily available in publicmarkets or can be derived from information available in publicly quoted markets.  Therefore, the Company has categorized theseswap contracts as Level 2.

 

The Companyrecorded an impairment charge of $81.0 million in the third quarter of 2008that wrote down to zero the carrying value of the preferred interest (the “FreedomRoadsPreferred Interest”) held by an indirect subsidiary of Camping World inFreedomRoads Holding Company, LLC (“FreedomRoads”), a holding company whosesubsidiaries sell and service new and used recreational vehicles.  The fair value of the FreedomRoads Preferred Interestwas based on the Valuation Report and was recorded as a result of decliningperformance of the recreational vehicle industry driven by overall weakening ofthe economy and a significant decline in consumer confidence, in addition tolimited credit available to consumers interested in purchasing recreationalvehicles.  Therefore, the Company hascategorized the FreedomRoads Preferred Interest as Level 3.

 

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9.                             FAIRVALUE (continued)

 

The Company’sliability at December 31, 2008, measured at fair value on a recurringbasis subject to the disclosure requirements of SFAS 157, was as follows:

 
| ** **                       | ** ** | ** **     | ** ** | **Fair Value Measurements at Reporting Date Using** | ** ** |
|----------------------------------|------------|----------------|------------|-----------------------------------------------------|------------|
| ** **                       | ** ** | ** **     | ** ** | **Quoted Prices**                                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                       | ** ** | ** **     | ** ** | **in Active**                                       | ** ** | **Significant** | ** ** | ** ** | ** ** |
| ** **                       | ** ** | ** **     | ** ** | **Markets for**                                     | ** ** | **Other** | ** ** | **Significant** | ** ** |
| ** **                       | ** ** | ** **     | ** ** | **Identical**                                       | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| **(in thouands)**                | ** ** | ** **     | ** ** | **Assets**                                          | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| **Description**                  | ** ** | **12/31/2008** | ** ** | **(Level 1)**                                       | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
|                             |       |           |       |                                                |       |   |   |   |   |
| Interest Rate  Swap Contracts    |       | $              | (12,731    | )                                                   | $          | — |   | $ | (12,731 | ) | $ | — |   |
| FreedomRoads  Preferred Interest |       | —         |       | —                                              |       | — |   | — |   |
|                                  |            |                |            |                                                     |            |  |  |  |  |  |  |  |  |

 

10.                       COMMITMENTS,CONTINGENCIES

 

*Leases*— The Company holds certain property and equipment under rental agreements andoperating leases which have varying expiration dates.  Future minimum annual fixed rentals underoperating leases having an original term of more than one year as of December 31,2008 are as follows (in thousands):

 
| ** ** | ** ** | **Third Party** | ** ** | **Related Party** | ** ** | **Total** | ** ** |
|------------|------------|----------------------|------------|------------------------|------------|-----------|------------|
| 2009       |       | $                    | 13,055     |                   | $          | 9,172     |       | $ | 22,227 |   |
| 2010       |       | 12,552               |       | 9,230                  |       | 21,782    |       |
| 2011       |       | 11,121               |       | 9,230                  |       | 20,351    |       |
| 2012       |       | 9,489                |       | 9,007                  |       | 18,496    |       |
| 2013       |       | 7,317                |       | 8,971                  |       | 16,288    |       |
| Thereafter |       | 64,396               |       | 64,530                 |       | 128,926   |       |
| Total      |       | $                    | 117,930    |                   | $          | 110,140   |       | $ | 228,070 |   |

 

 During 2008, 2007 and 2006, respectively, approximately $21.7million, $17.9 million, and $14.6 million of rent expense was charged to costsand expenses.

 

OnDecember 5, 2001, the Company sold eleven real estate properties to elevenseparate wholly-owned subsidiaries of AGRP Holding Corp., a wholly-ownedsubsidiary of the Company’s ultimate parent, AGI Holding Corp., for $52.3million in cash and a note receivable. The properties have been leased back to the Company on a triple netbasis.  Both the sales price and lease rateswere based on market rates determined by third party independent appraisersengaged by the mortgage lender and approved by the AGI Senior Credit Facilityagent bank.  These leases have an initialterm of 25 to 27 years with two five-year options at the then current marketrent.  The leases are classified asoperating leases in accordance with SFAS No. 13 “Accounting for Leases.”  Land and buildings with a net book valuetotaling $45.8 million have been removed from the balance sheet.  The transaction resulted in a net gain of$6.1 million consisting of a $12.1 million gain on certain properties and a$6.0 million loss on other properties. In accordance with accounting principlesgenerally accepted in the United States, the $6.0 million loss was recognizedupon the date of sale in 2001 in the statement of operations and the $12.1 milliongain was deferred and will be credited to income as rent expense adjustmentsover the lease terms.  The average netannual lease payments over the lives of the leases are $3.4 million.  As of December 31, 2008, $8.9 milliongain remains and will be recognized over the future lease terms.

 

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10.                   COMMITMENTS,CONTINGENCIES (continued)

 

*NASCAR Agreement*— Pursuant to the terms of a certain Series Entitlement andSponsorship Agreement dated as of January 1, 2009, by and between NationalAssociation for Stock Car Auto Racing, Inc. (“NASCAR”) and FreedomRoads,LLC (“FR”), a wholly owned subsidiary of FreedomRoads, and CWI, Inc. (“CWI”),a wholly owned subsidiary of Camping World, Inc. (the “NASCAR SponsorshipAgreement”), CWI and FR obtained rights as the title sponsor of the NASCARTruck Series.  The NASCAR SponsorshipAgreement provides for a term of seven years, commencing January 1, 2009and terminating December 31, 2015, and requires the payment of annualrights fees in exchange for the rights granted to FR and CWI.  The obligations of FR and CWI under theSponsorship Agreement are joint and several in nature, provided that theliability of CWI for the annual rights fees during the term of the NASCAR SponsorshipAgreement is capped at an aggregate of $6,500,000.

 

*Litigation*—From time to time, the Company is involved in litigation arising in thenormal course of business operations. The Company does not believe it is involved in any litigation that will havea material adverse effect on its results of operations or financial position.

 

*EmploymentAgreements*— The Company hasemployment agreements with certain officers. The agreements include, among other things, an annual bonus based onearnings before interest, taxes, depreciation and amortization, and up to oneyear’s severance pay beyond termination date or three weeks of severance payfor every year of continuous employment, whichever is greater.

 

*JointVenture Agreement*— On March 6, 2006, Camping World entered into a Joint Venture Agreementwith FreedomRoads.  FreedomRoads isindirectly owned and controlled by Stephen Adams, the Chairman and indirectcontrolling shareholder of AGHI. FreedomRoads, through its wholly-owned subsidiaries, owns and operatesRV dealerships, currently operating across the United States.  The Joint Venture Agreement provides thatCamping World and FreedomRoads are to act cooperatively with a view tomaximizing synergies and to locate, establish and utilize mutually beneficialrelationships that are available only to the parties acting together that wouldnot otherwise be available to either party independently.  There are no capital requirements or sharingof income and expenses.

 

11.                       RELATEDPARTY TRANSACTIONS

 

Inconjunction with the sale of real estate properties to an affiliate on December 5,2001, the Company accepted $4.8 million of the purchase price in the form of aten-year balloon note receivable yielding 11% per annum, with monthly paymentsof approximately $46,000.  Such amount is included inNote from Affiliate on the accompanying balance sheet.

 

In connection with oureffort to expand the number of Camping World stores by developing retailalliances with RV dealerships across North America, the Company has established45 Camping World stores alongside or within RV dealerships owned byFreedomRoads, which is controlled by the Chairman of our Board of Directors,Stephen Adams, and we expect additional Camping World stores alongside orwithin such RV dealerships in the future. At December 31, 2008, the Company leased 37 properties fromFreedomRoads, sub-leased 6 properties to FreedomRoads, and Camping World andFreedomRoads are joint tenants under 6 leases. Total payments by the Company to FreedomRoads under these leasedproperties for 2008 and 2007 were approximately $4.2 million and $3.7 million,respectively, and future commitments under these leases total approximately$36.3 million.  The leases expire atvarious dates from August 2013 through September 2018.  For 2008 and 2007,

 

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11.                   RELATEDPARTY TRANSACTIONS (continued)

 

lease payments receivedfrom FreedomRoads for the 6 subleased properties were approximately $0.7million and $0.9 million, respectively, and future payments to be receivedunder these subleases total approximately $4.5 million.  The Company paid FreedomRoads approximately$7.7 million and $9.4 million in 2008 and 2007, respectively, and FreedomRoadspaid the Company approximately $27.7 million and $17.5 million in 2008 and2007, respectively, under the product marketing and sales agreements.  In addition to the $5.0 million receivableunder the Cooperative Resources Agreement discussed below, Camping World’soutstanding accounts receivable balance to FreedomRoads was $1.1 million,consisting of $5.8 million in accounts receivable and $4.7 million in accountspayable, at December 31, 2008.

 

On March 6, 2006,Camping World entered into a Joint Venture Agreement with FreedomRoads.  FreedomRoads is indirectly owned andcontrolled by Stephen Adams, the Chairman and indirect controlling shareholderof AGHI.  FreedomRoads, through itswholly-owned subsidiaries, owns and operates RV dealerships, currentlyoperating across the United States.  TheJoint Venture Agreement provides that Camping World and FreedomRoads are to actcooperatively with a view to maximizing synergies and to locate, establish andutilize mutually beneficial relationships that are available only to theparties acting together that would not otherwise be available to either partyindependently.  There are no capitalrequirements or sharing of income and expenses.

 

*NASCARAgreement*—Pursuant to the terms of a certain Series Entitlement and SponsorshipAgreement dated as of January 1, 2009, by and between National Associationfor Stock Car Auto Racing, Inc. (“NASCAR”) and FreedomRoads, LLC (“FR”), awholly owned subsidiary of FreedomRoads, and CWI, Inc. (“CWI”), a whollyowned subsidiary of Camping World, Inc. (the “NASCAR Sponsorship Agreement”),CWI and FR obtained rights as the title sponsor of the NASCAR TruckSeries.  The NASCAR Sponsorship Agreementprovides for a term of seven years, commencing January 1, 2009 andterminating December 31, 2015, and requires the payment of annual rightsfees in exchange for the rights granted to FR and CWI.  The obligations of FR and CWIunder the Sponsorship Agreement are joint and several in nature, provided thatthe liability of CWI for the annual rights fees during the term of the NASCARSponsorship Agreement is capped at an aggregate of $6,500,000.

 

Pursuant to the terms ofthe Amended and Restated Cooperative Resources Agreement (“CooperativeResources Agreement”) dated January 1, 2008, by and between the Companyand FreedomRoads Holding Company, Inc. (“FreedomRoads”) and Camping World, Inc.,FreedomRoads obtained the right to use the Camping World logos, trademarks, andtrade names (“CW Marks”).  TheCooperative Resources Agreement provides for a term of twenty-five years,commencing January 1, 2008 and terminating December 31, 2032, andrequires payment by FreedomRoads of an annual fee based on revenue, as defined,in exchange for the right to use the CW Marks granted by AGI.  The fee for 2008 was $5.0 million and waspaid by FreedomRoads to AGI in the first quarter of 2009.

 

The law firm of Kaplan, Strangis andKaplan, P.A. (“KSK”) provides ongoing legal services to the Company and certainsubsidiaries in connection with various matters. Andris A. Baltins, a member ofthe Board of Directors, is a member of that firm.  During 2008, 2007 and 2006 KSK received$201,000, $257,000, and $198,000 in legal fees from the Company, respectively.

 

The consulting firm ofPransky and Associates, P.S. (“PA”) provides ongoing consulting services to theCompany and certain subsidiaries.  GeorgePransky, a member of the Board of Directors, is a director of thatcompany.  During 2008 and 2007, PAreceived $0 and $86,000 in fees from the Company, respectively.

 

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11.                       RELATEDPARTY TRANSACTIONS (continued)

 

The accounting firm ofFrith-Smith & Archibald, LLP (“FSA”), provides tax preparation andreview services to the Company and certain subsidiaries.  David Frith-Smith, a member of the Board ofDirectors, is a partner of that company. During 2008 and 2007, FSA received $0 and $13,000 in fees from theCompany, respectively.

 

12.                       STATEMENTSOF CASH FLOWS

 

Supplementaldisclosures of cash flow information for December 31 (in thousands):

 
| ** **                                 | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash paid  (received) during the year for: |       |     |       |     |       |     |       |
| Interest                                   |       | $        | 23,982     |     | $          | 24,055   |       | $ | 26,669 |   |
| Income taxes                               |       | (5       | )          | (195     | )          | (1,138   | )          |
|                                            |            |          |            |          |            |          |            |  |  |  |

 

TheCompany entered into the following non-cash investing and financingtransactions:

 

**2008:**

In January 2008,the Company assumed $0.6 million of liabilities and issued $0.4 million of debtin connection with the acquisition of nine RV and boat shows from MAC Events,LLC.

 

In February 2008,the Company assumed $0.5 million of liabilities and issued $0.5 million of debtin connection with the acquisition of three RV and boat shows from Mid AmericaExpositions, Inc.

 

In August 2008,AGHC paid the interest on the AGHI Notes of $6.2 million representing acontribution from AGHC and a payment of interest on the notes.

 

In December 2008,the Company recorded the fair value of the interest rate swaps in OtherLong-Term Liabilities of $12.7 million, in Accumulated Other Comprehensive Lossof $10.3 million, and ineffective portion in statement of operations of $2.4million.

 

**2007:**

In January 2007,the Company assumed $0.3 million of liabilities in connection with theacquisition of the Madison Boat Show from MAC Events, LLC.

 

In February 2007,the Company assumed $0.6 million of liabilities and issued $1.5 million of debtin connection with the acquisition of five RV and Sportsman Shows fromIndustrial Expositions, Inc.

 

In December 2007,the Company recorded the fair value of the interest rate swap in OtherLong-Term Liabilities of $4.7 million and through Other Comprehensive Loss.

 

**2006:**

In February 2006,the Company assumed $1.0 million of liabilities and issued $0.4 million of debtin the acquisition of Plus Events consumer shows and related assets of H &S Productions, LLC.

 

In August 2006,the Company assumed $0.3 million of liabilities and issued $0.1 million of debtin the acquisition of the publishing assets of American Guide Services, Inc.

 

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12.                     STATEMENTSOF CASH FLOWS (continued)

 

In September 2006,the Company assumed $0.4 million of liabilities and issued $0.5 million of debtin the asset acquisition of four North Carolina RV shows from Apple RockAdvertising and Promotions, Inc.

 

13.                     BENEFITPLAN

 

The Company’s totalcontribution to a deferred savings and profit sharing plan (the “401(k) Plan”)totaled approximately $0.9 million, $1.7 million, and $1.9 million for 2008,2007, and 2006, respectively.

 

Affinity Group, Inc.

The Company sponsors a401(k) Plan qualified under Section 401(a) and 401(k) ofthe Internal Revenue Service Code of 1986, as amended (the “Code”).  All employees over age twenty-one, includingthe Executive Officers, are eligible to participate in the 401(k) Plan.  Employees who have completed one year ofservice (minimum of 1,000 hours) are eligible for matching contributions.  For the plan year 2008, the Company elected aSafe Harbor Matching Contribution for the employer match and set the employermatch, which vests upon contribution, at an amount equal to 100% of the first4% of the employee’s contribution through July 2, 2008.  Effective July 3, 2008 the Companysuspended the employer matching contributions. Employees may defer up to 60% of their eligible compensation up toInternal Revenue Service limits electing pre-tax contributions or post-taxcontributions (Roth contributions). The Company’s contributions to the plantotaled approximately $0.5 million for 2008.

 

Camping World, Inc.

Beginning January 1,2007 Camping World elected to no longer participate in the Affinity Group 401(k) Planand elected to begin participating in the FreedomRoads 401(k) DefinedContribution Plan, FreedomRewards 401(k) Plan, qualified under Section 401(a) and401(k) of the Internal Revenue Service Code of 1986, as amended (the “Code”).  All employees over the age of eighteen,including the Executive Officers are eligible to participate in the 401(k) Plan.  Employees who have completed twelve months ofconsecutive service are eligible for company match.  For the plan year 2008, the matchingcontribution schedule was 50% up to the first 6% of eligible compensation.  Company matching contributions followed a six(6) year graded vesting schedule. Effective June 6, 2008 the company suspended the employer matchingcontributions. Non-highly compensated employees may defer up to 75% of theireligible compensation up to the Internal Revenue Service limits.  Highly compensated employees may defer up to15% of their eligible compensation up to the Internal Revenue Servicelimits.  The Company’s contributions tothe plan totaled approximately $0.4 million in 2008.

 

14.                     DEFERREDPHANTOM STOCK COMPENSATION

 

The Company has deferred compensationagreements with certain officers.  Theagreements provide for payment to the officers upon their termination, death,disability, or sale of the Company, and other agreed upon events.  Deferred compensation is included in otherlong-term liabilities except for amounts expected to be paid in 2009, whichhave been classified in current liabilities. This deferred compensation is subject to vesting under the terms of theindividual agreements.  Vesting periodsrange from 33% per year over a three-year period to immediate vesting uponentering an agreement.  The Companyincurred deferred compensation benefit of $0.3 million for 2008 and expense of$0.4 million and $1.1 million for 2007 and 2006, respectively, due to changesin the cumulative amount due under the plan.

 

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15.                   SEGMENT INFORMATION

 

The Company’s three principal lines of business areMembership Services, Media, and Retail. The Membership Services segment operates the Good Sam Club, the Coast toCoast Club, the President’s Club, Camp Club USA and assorted membershipproducts and services for RV owners, campers and outdoor vacationers, and theGolf Card Club for golf enthusiasts.  TheMedia segment publishes a variety of publications for selected markets in therecreation and leisure industry, including general circulation periodicals,club magazines, directories and RV and powersports industry trademagazines.  In addition, the Mediasegment operates 49 consumer outdoor recreation shows primarily focused on RVand powersports markets.  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 thatoffer different products and services. They are managed separately because each business requires differenttechnology, management expertise and marketing strategies.

 

The Company does not allocateincome taxes or unusual items to segments. Financial information by reportable business segment is summarized asfollows (in thousands):

 
| ** **                                     | ** ** | **Membership** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **       | ** ** |
|------------------------------------------------|------------|----------------|------------|------------|------------|------------|------------|------------------|------------|
| ** **                                     | ** ** | **Services**   | ** ** | **Media**  | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| **YEAR  ENDED DECEMBER 31, 2008**              |       |           |       |       |       |       |       |             |       |
| Revenues from  external customers              |       | $              | 152,643    |       | $          | 82,424     |       | $                | 291,070    |   | $ | 526,137 |   |
| Loss on sale of  property and equipment        |       | —         |       | —     |       | (321       | )          | (321             | )          |
| Interest income                                |       | 3,589          |       | —     |       | 29         |       | 3,618            |       |
| Interest expense                               |       | —         |       | 208        |       | 16,126     |       | 16,334           |       |
| Depreciation and  amortization                 |       | 3,218          |       | 5,954      |       | 8,565      |       | 17,737           |       |
| Segment profit  (loss)                         |       | 51,679         |       | 9,228      |       | (64,678    | )          | (3,771           | )          |
| Segment assets                                 |       | 221,262        |       | 88,101     |       | 110,964    |       | 420,327          |       |
| Expenditures for  segment assets               |       | 2,531          |       | 2,464      |       | 6,603      |       | 11,598           |       |
|                                           |       |           |       |       |       |       |       |             |       |
| **YEAR  ENDED DECEMBER 31, 2007**              |       |           |       |       |       |       |       |             |       |
| Revenues from  external customers              |       | $              | 149,937    |       | $          | 90,537     |       | $                | 321,730    |   | $ | 562,204 |   |
| Gain (loss) on  sale of property and equipment |       | —         |       | 5          |       | (216       | )          | (211             | )          |
| Interest income                                |       | 9,521          |       | —     |       | 84         |       | 9,605            |       |
| Interest expense                               |       | —         |       | 258        |       | 15,402     |       | 15,660           |       |
| Depreciation and  amortization                 |       | 3,620          |       | 5,124      |       | 7,754      |       | 16,498           |       |
| Segment profit  (loss)                         |       | 50,491         |       | 17,497     |       | (8,136     | )          | 59,852           |       |
| Segment assets                                 |       | 203,836        |       | 89,074     |       | 246,472    |       | 539,382          |       |
| Expenditures for  segment assets               |       | 2,744          |       | 1,244      |       | 15,650     |       | 19,638           |       |
|                                           |       |           |       |       |       |       |       |             |       |
| **YEAR  ENDED DECEMBER 31, 2006**              |       |           |       |       |       |       |       |             |       |
| Revenues from  external customers              |       | $              | 137,394    |       | $          | 86,742     |       | $                | 290,422    |   | $ | 514,558 |   |
| Gain on sale of  property and equipment        |       | —         |       | 5          |       | 11         |       | 16               |       |
| Interest income                                |       | 6,485          |       | —     |       | 6          |       | 6,491            |       |
| Interest expense                               |       | —         |       | 329        |       | 13,709     |       | 14,038           |       |
| Depreciation and  amortization                 |       | 3,658          |       | 4,365      |       | 8,217      |       | 16,240           |       |
| Segment profit  (loss)                         |       | 44,695         |       | 19,837     |       | (10,128    | )          | 54,404           |       |
| Segment assets                                 |       | 167,837        |       | 87,122     |       | 225,680    |       | 480,639          |       |
| Expenditures for  segment assets               |       | 2,263          |       | 1,171      |       | 11,309     |       | 14,743           |       |

 

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15.                   SEGMENT INFORMATION (continued)

 

The following is asummary of the reconciliations of reportable segments to the consolidatedfinancial statements for the years ended December 31, 2008, 2007 and 2006(in thousands):

 
| ** **                                                   | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **(Loss)  gain on Sale of Property and Equipment**           |       |     |       |     |       |     |       |
| Total (loss)  gain on sale for reportable segments           |       | $        | (321       | )        | $          | (211     | )          | $ | 16 |   |
| Other  non-allocated gain                                    |       | —   |       | 61       |       | —   |       |
| Total (loss)  gain on sale of property and equipment         |       | $        | (321       | )        | $          | (150     | )          | $ | 16 |   |
| **Interest  Income**                                         |       |     |       |     |       |     |       |
| Total interest  income for reportable segments               |       | $        | 3,618      |     | $          | 9,605    |       | $ | 6,491 |   |
| Elimination of  intersegment interest income                 |       | (3,589   | )          | (9,521   | )          | (6,485   | )          |
| Other  non-allocated interest income                         |       | 550      |       | 508      |       | 1,109    |       |
| Total interest  income                                       |       | $        | 579        |     | $          | 592      |       | $ | 1,115 |   |
| **Interest  Expense**                                        |       |     |       |     |       |     |       |
| Total interest  expense for reportable segments              |       | $        | 16,334     |     | $          | 15,660   |       | $ | 14,038 |   |
| Elimination of  intersegment interest expense                |       | (15,612  | )          | (15,026  | )          | (13,525  | )          |
| Other non-allocated  interest expense                        |       | 23,506   |       | 24,185   |       | 25,195   |       |
| Total interest  expense                                      |       | $        | 24,228     |     | $          | 24,819   |       | $ | 25,708 |   |
| **Depreciation  and Amortization**                           |       |     |       |     |       |     |       |
| Total  depreciation and amortization for reportable segments |       | $        | 17,737     |     | $          | 16,498   |       | $ | 16,240 |   |
| Unallocated  depreciation and amortization expense           |       | 2,061    |       | 2,450    |       | 2,416    |       |
| Total  consolidated depreciation and amortization            |       | $        | 19,798     |     | $          | 18,948   |       | $ | 18,656 |   |
| **(Loss)  Income From Operations Before Taxes**              |       |     |       |     |       |     |       |
| Total (loss) profit  for reportable segments                 |       | $        | (3,771     | )        | $          | 59,852   |       | $ | 54,404 |   |
| Unallocated  depreciation and amortization expense           |       | (2,061   | )          | (2,450   | )          | (2,416   | )          |
| Unallocated  G & A expense                          |       | (14,021  | )          | (17,050  | )          | (17,477  | )          |
| Unallocated  interest expense, net                           |       | (22,956  | )          | (23,677  | )          | (24,086  | )          |
| Unallocated gain  on sale of property and equipment          |       | —   |       | 61       |       | —   |       |
| Unallocated debt  restructure expense                        |       | —   |       | (775     | )          | (835     | )          |
| Unallocated  restructuring charge                            |       | —   |       | —   |       | (93      | )          |
| Unallocated  arbitration expense                             |       | —   |       | (955     | )          | —   |       |
| Unallocated loss  on derivative instrument                   |       | (2,394   | )          | —   |       | —   |       |
| Unallocated  impairment of investment in affiliate           |       | (81,005  | )          | —   |       | —   |       |
| Elimination of  intersegment interest expense, net           |       | 12,023   |       | 5,505    |       | 7,040    |       |
| (Loss) Income  from operations before income taxes           |       | $        | (114,185   | )        | $          | 20,511   |       | $ | 16,537 |   |
| **Assets**                                                   |       |     |       |     |       |     |       |
| Total assets for  reportable segments                        |       | $        | 420,327    |     | $          | 539,382  |       | $ | 480,639 |   |
| Intangible  assets not allocated to segments                 |       | 4,201    |       | 5,348    |       | 8,190    |       |
| Corporate  unallocated assets                                |       | 3,066    |       | 3,334    |       | 6,353    |       |
| Elimination of  intersegment receivable                      |       | (133,242 | )          | (126,453 | )          | (87,174  | )          |
| Consolidated  total assets                                   |       | $        | 294,352    |     | $          | 421,611  |       | $ | 408,008 |   |
| **Capital  Expenditures**                                    |       |     |       |     |       |     |       |
| Total  expenditures for assets for reportable segments       |       | $        | 11,598     |     | $          | 19,638   |       | $ | 14,743 |   |
| Other asset  expenditures                                    |       | 184      |       | 70       |       | 502      |       |
| Total capital expenditures                                   |       | $        | 11,782     |     | $          | 19,708   |       | $ | 15,245 |   |

 

75

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16.                   SELECTED QUARTERLY INFORMATION(UNAUDITED)

 

The following is asummary of selected quarterly information for the years ended December 31,2008, 2007 and 2006 (in thousands):

 
| ** **         | ** ** | **March 31,** | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------|------------|--------------------|------------|-------------------|------------|------------------------|------------|-----------------------|------------|
| ** **         | ** ** | **2008**           | ** ** | **2008**          | ** ** | **2008**               | ** ** | **2008**              | ** ** |
|               |       |               |       |              |       |                   |       |                  |       |
| Total revenue      |       | $                  | 124,985    |              | $          | 147,729                |       | $                     | 133,337    |   | $ | 120,086 |   |
| Gross profit       |       | 47,764             |       | 57,492            |       | 49,700                 |       | 48,386                |       |
| Net income  (loss) |       | 115                |       | 5,977             |       | (126,110               | )          | 8,046                 |       |
|                    |            |                    |            |                   |            |                        |            |                       |            |  |  |  |  |

 
| ** **        | ** ** | **March 31,** | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------|------------|--------------------|------------|-------------------|------------|------------------------|------------|-----------------------|------------|
| ** **        | ** ** | **2007**           | ** ** | **2007**          | ** ** | **2007**               | ** ** | **2007**              | ** ** |
|              |       |               |       |              |       |                   |       |                  |       |
| Total revenue     |       | $                  | 127,807    |              | $          | 153,864                |       | $                     | 146,428    |   | $ | 134,105 |   |
| Gross profit      |       | 48,527             |       | 57,234            |       | 53,505                 |       | 50,900                |       |
| Net income (loss) |       | 2,550              |       | 7,557             |       | (673                   | )          | 9,494                 |       |
|                   |            |                    |            |                   |            |                        |            |                       |            |  |  |  |  |

 
| ** **         | ** ** | **March 31,** | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------|------------|--------------------|------------|-------------------|------------|------------------------|------------|-----------------------|------------|
| ** **         | ** ** | **2006**           | ** ** | **2006**          | ** ** | **2006**               | ** ** | **2006**              | ** ** |
|               |       |               |       |              |       |                   |       |                  |       |
| Total revenue      |       | $                  | 116,870    |              | $          | 139,003                |       | $                     | 130,040    |   | $ | 128,645 |   |
| Gross profit       |       | 44,776             |       | 51,294            |       | 48,735                 |       | 49,029                |       |
| Net income  (loss) |       | 2,264              |       | (16,438           | )          | 1,885                  |       | 6,558                 |       |
|                    |            |                    |            |                   |            |                        |            |                       |            |  |  |  |  |

 

17.                   VALUATION AND QUALIFYING ACCOUNTS

 
| ** **                                  | ** ** | ** **          | ** ** | **Additions**       | ** ** | ** **     | ** ** | ** **          | ** ** |
|---------------------------------------------|------------|---------------------|------------|---------------------|------------|----------------|------------|---------------------|------------|
| ** **                                  | ** ** | **Balance at** | ** ** | **Charged to** | ** ** | ** **     | ** ** | **Balance at** | ** ** |
| ** **                                  | ** ** | **Beginning**       | ** ** | **Costs and**  | ** ** | **Deductions** | ** ** | **End**             | ** ** |
| **(in thousands)**                     | ** ** | **of Period**  | ** ** | **Expenses**        | ** ** | **(a)**        | ** ** | **of Period**  | ** ** |
| Description:                                |       |                |       |                |       |           |       |                |       |
|                                        |       |                |       |                |       |           |       |                |       |
| Year ended  December 31, 2008:         |       |                |       |                |       |           |       |                |       |
| Allowance for  doubtful accounts receivable |       | $                   | 1,473      |                | $          | 1,493          |       | $                   | 819        |   | $ | 2,147 |   |
|                                        |       |                |       |                |       |           |       |                |       |
| Year ended  December 31, 2007:         |       |                |       |                |       |           |       |                |       |
| Allowance for  doubtful accounts receivable |       | $                   | 1,193      |                | $          | 1,373          |       | $                   | 1,093      |   | $ | 1,473 |   |
|                                        |       |                |       |                |       |           |       |                |       |
| Year ended  December 31, 2006:         |       |                |       |                |       |           |       |                |       |
| Allowance for  doubtful accounts receivable |       | $                   | 952        |                | $          | 745            |       | $                   | 504        |   | $ | 1,193 |   |

 

----

|   |  (a) | Accounts  determined to be uncollectable and charged against allowance account, net of collection  on accounts previously charged against allowance account. |
|--------|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

18.                   NOTES OFFERINGAND GUARANTOR FINANCIAL INFORMATION

 

InFebruary 2004, the Company completed an offering of $200.0 million 9.0%Senior Subordinated Notes (“AGI Senior Notes”) due in 2012.  Interest is payable on the AGI Senior

 

76

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18.                   NOTES OFFERINGAND GUARANTOR FINANCIAL INFORMATION (continued)

 

Notestwice a year on February 15 and August 15, beginning August 15, 2004.  The Company’s present and future restrictedsubsidiaries will guarantee the AGI Senior Notes with unconditional guaranteesof payment that will rank junior in right of payment to their existing andfuture senior debt, but will rank equal in right of payment to their existingand future senior subordinated debt.

 

Allof the Company’s subsidiaries have jointly and severally guaranteed theindebtedness under the AGI Senior Notes. Full financial statements of the Guarantors have not been includedbecause, pursuant to their respective guarantees, the Guarantors are jointlyand severally liable with respect to the AGI Senior Notes.

 

Thefollowing are summarized statements setting forth certain financial informationconcerning the Guarantor Subsidiaries as of and for the year ended December 31,2008 (in thousands).

 
| ** **                                               | ** ** | ** ** | ** ** | ** **     | ** ** | **NON-**      | ** ** | ** **       | ** ** | **AGI**          | ** ** |
|----------------------------------------------------------|------------|------------|------------|----------------|------------|---------------|------------|------------------|------------|------------------|------------|
| ** **                                               | ** ** | **AGI**    | ** ** | **GUARANTORS** | ** ** | **GUARANTOR** | ** ** | **ELIMINATIONS** | ** ** | **CONSOLIDATED** | ** ** |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Cash &  cash equivalents                        |       | $          | 1,300      |           | $          | 9,308         |       | $                | —     |             | $          | — |   | $ | 10,608 |   |
| Accounts  receivable- net of allowance for               |       | 5,949      |       | 167,484        |       |          |       | (133,242         | )          | 40,191           |       |
| Inventories                                              |       | —     |       | 57,137         |       | —        |       | —           |       | 57,137           |       |
| Other current  assets                                    |       | 2,231      |       | 11,314         |       | —        |       | —           |       | 13,545           |       |
| Total current  assets                                    |       | 9,480      |       | 245,243        |       | —        |       | (133,242         | )          | 121,481          |       |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Property and  equipment, net                             |       | 6,885      |       | 37,192         |       | —        |       | —           |       | 44,077           |       |
| Intangible  assets                                       |       | 2,815      |       | 17,939         |       | —        |       | —           |       | 20,754           |       |
| Goodwill                                                 |       | 67,584     |       | 29,244         |       | —        |       | —           |       | 96,828           |       |
| Investment in  subsidiaries                              |       | 512,024    |       | —         |       | —        |       | (512,024         | )          | —           |       |
| Affiliate note  and investments                          |       | 40,000     |       | 4,608          |       | —        |       | (40,000          | )          | 4,608            |       |
| Other assets                                             |       | 606        |       | 5,998          |       | —        |       | —           |       | 6,604            |       |
| Total assets                                             |       | $          | 639,394    |           | $          | 340,224       |       | $                | —     |             | $          | (685,266 | ) | $ | 294,352 |   |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Accounts payable                                         |       | $          | 625        |           | $          | 23,325        |       | $                | —     |             | $          | — |   | $ | 23,950 |   |
| Accrued and  other liabilities                           |       | 13,873     |       | 21,192         |       | —        |       | —           |       | 35,065           |       |
| Current portion  of long-term debt                       |       | 268,697    |       | (90,564        | )          | —        |       | (173,242         | )          | 4,891            |       |
| Current portion  of deferred revenue                     |       | 1,073      |       | 59,496         |       | —        |       | —           |       | 60,569           |       |
| Total current  liabilities                               |       | 284,268    |       | 13,449         |       |          |       | (173,242         | )          | 124,475          |       |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Deferred revenue                                         |       | 2,415      |       | 33,440         |       | —        |       | —           |       | 35,855           |       |
| Long-term debt                                           |       | 152,399    |       | 134,856        |       | —        |       | —           |       | 287,255          |       |
| Other long-term  liabilities                             |       | 386,826    |       | (353,545       | )          | —        |       | —           |       | 33,281           |       |
| Total  liabilities                                       |       | 825,908    |       | (171,800       | )          |          |       | (173,242         | )          | 480,866          |       |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Interdivisional  equity                                  |       | —     |       | 512,024        |       |          |       | (512,024         | )          | —           |       |
| Stockholders’  deficit                              |       | (186,514   | )          | —         |       | —        |       | —           |       | (186,514         | )          |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Total  liabilities & stockholders’ deficit |       | $          | 639,394    |           | $          | 340,224       |       | $                | —     |             | $          | (685,266 | ) | $ | 294,352 |   |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Revenue                                                  |       | $          | 9,765      |           | $          | 516,372       |       | $                | —     |             | $          | — |   | $ | 526,137 |   |
| Costs applicable  to revenues                            |       | (12,271    | )          | (310,524       | )          | —        |       | —           |       | (322,795         | )          |
| Operating  expenses                                      |       | (18,954    | )          | (193,596       | )          | —        |       | —           |       | (212,550         | )          |
| Interest  expense, net                                   |       | (10,933    | )          | (12,716        | )          | —        |       | —           |       | (23,649          | )          |
| Income from  investment in consolidated subsidiaries     |       | (85,023    | )          | —         |       | —        |       | 85,023           |       | —           |       |
| Other non  operating income (expenses)                   |       | 5,761      |       | (6,084         | )          | (81,005       | )          | —           |       | (81,328          | )          |
| Income tax  expense                                      |       | (317       | )          | 2,530          |       | —        |       | —           |       | 2,213            |       |
| Net loss                                                 |       | $          | (111,972   | )              | $          | (4,018        | )          | $                | (81,005    | )                | $          | 85,023 |   | $ | (111,972 | ) |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Cash flows from  operations                              |       | $          | (28,873    | )              | $          | 44,417        |       | $                | —     |             | $          | — |   | $ | 15,544 |   |
| Cash flows used  in investing activities                 |       | (1,804     | )          | (13,323        | )          | —        |       | —           |       | (15,127          | )          |
| Cash flows (used  in) provided by financing activities   |       | 26,640     |       | (24,806        | )          | —        |       | —           |       | 1,834            |       |
| Cash at  beginning of year                               |       | 5,337      |       | 3,020          |       | —        |       | —           |       | 8,357            |       |
| Cash at end of  year                                     |       | $          | 1,300      |           | $          | 9,308         |       | $                | —     |             | $          | — |   | $ | 10,608 |   |

 

77

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| 18.    |   | NOTES OFFERING  AND GUARANTOR FINANCIAL INFORMATION (continued)                                                                                                                                  |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                             |
|   |   | The  following are summarized statements setting forth certain financial  information concerning the Guarantor Subsidiaries as of and for the year  ended December 31, 2007 (in thousands). |

 
| ** **                                               | ** ** | ** ** | ** ** | ** **     | ** ** | **NON-**      | ** ** | ** **       | ** ** | **AGI**          | ** ** |
|----------------------------------------------------------|------------|------------|------------|----------------|------------|---------------|------------|------------------|------------|------------------|------------|
| ** **                                               | ** ** | **AGI**    | ** ** | **GUARANTORS** | ** ** | **GUARANTOR** | ** ** | **ELIMINATIONS** | ** ** | **CONSOLIDATED** | ** ** |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Cash &  cash equivalents                        |       | $          | 5,337      |           | $          | 3,020         |       | $                | —     |             | $          | — |   | $ | 8,357 |   |
| Accounts  receivable- net                                |       | 431        |       | 159,352        |       | —        |       | (126,453         | )          | 33,330           |       |
| Inventories                                              |       | —     |       | 64,209         |       | —        |       | —           |       | 64,209           |       |
| Other current  assets                                    |       | 2,481      |       | 11,949         |       | —        |       | —           |       | 14,430           |       |
| Total current  assets                                    |       | 8,249      |       | 238,530        |       | —        |       | (126,453         | )          | 120,326          |       |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Property and  equipment, net                             |       | 7,744      |       | 36,563         |       | —        |       | —           |       | 44,307           |       |
| Intangible  assets                                       |       | 3,962      |       | 19,733         |       | —        |       | —           |       | 23,695           |       |
| Goodwill                                                 |       | 67,584     |       | 76,845         |       | —        |       | —           |       | 144,429          |       |
| Investment in  subsidiaries                              |       | 597,138    |       | 81,005         |       | —        |       | (678,143         | )          | —           |       |
| Affiliate note  and investments                          |       | 40,000     |       | 4,650          |       | 81,005        |       | (40,000          | )          | 85,655           |       |
| Other assets                                             |       | 759        |       | 2,440          |       | —        |       | —           |       | 3,199            |       |
| Total assets                                             |       | $          | 725,436    |           | $          | 459,766       |       | $                | 81,005     |             | $          | (844,596 | ) | $ | 421,611 |   |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Accounts payable                                         |       | $          | 1,380      |           | $          | 25,791        |       | $                | —     |             | $          | — |   | $ | 27,171 |   |
| Accrued and  other liabilities                           |       | 13,792     |       | 30,166         |       | —        |       | —           |       | 43,958           |       |
| Current portion  of long-term debt                       |       | 128,103    |       | 42,756         |       | —        |       | (166,453         | )          | 4,406            |       |
| Current portion  of deferred revenue                     |       | 2,029      |       | 63,826         |       | —        |       | —           |       | 65,855           |       |
| Total current  liabilities                               |       | 145,304    |       | 162,539        |       |          |       | (166,453         | )          | 141,390          |       |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Deferred revenue                                         |       | 2,538      |       | 35,997         |       | —        |       | —           |       | 38,535           |       |
| Long-term debt                                           |       | 279,354    |       | 3,413          |       | —        |       | —           |       | 282,767          |       |
| Other long-term  liabilities                             |       | 365,150    |       | (339,321       | )          | —        |       | —           |       | 25,829           |       |
| Total  liabilities                                       |       | 792,346    |       | (137,372       | )          |          |       | (166,453         | )          | 488,521          |       |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Interdivisional  equity                                  |       | —     |       | 597,138        |       | 81,005        |       | (678,143         | )          | —           |       |
| Stockholders’  deficit                              |       | (66,910    | )          | —         |       | —        |       | —           |       | (66,910          | )          |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Total  liabilities & stockholders’ deficit |       | $          | 725,436    |           | $          | 459,766       |       | $                | 81,005     |             | $          | (844,596 | ) | $ | 421,611 |   |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Revenue                                                  |       | $          | 5,116      |           | $          | 557,088       |       | $                | —     |             | $          | — |   | $ | 562,204 |   |
| Costs applicable  to revenues                            |       | (12,726    | )          | (339,312       | )          | —        |       | —           |       | (352,038         | )          |
| Operating  expenses                                      |       | (20,204    | )          | (144,300       | )          | —        |       | —           |       | (164,504         | )          |
| Interest  expense, net                                   |       | (18,172    | )          | (6,055         | )          | —        |       | —           |       | (24,227          | )          |
| Income from  investment in consolidated subsidiaries     |       | 59,727     |       | —         |       | —        |       | (59,727          | )          | —           |       |
| Other non  operating income (expenses)                   |       | 5,512      |       | (6,436         | )          | —        |       | —           |       | (924             | )          |
| Income tax  expense                                      |       | (325       | )          | (1,258         | )          | —        |       | —           |       | (1,583           | )          |
| Net income                                               |       | $          | 18,928     |           | $          | 59,727        |       | $                | —     |             | $          | (59,727 | ) | $ | 18,928 |   |
|                                                     |       |       |       |           |       |          |       |             |       |             |       |
| Cash flows from  operations                              |       | $          | (35,507    | )              | $          | 54,827        |       | $                | —     |             | $          | — |   | $ | 19,320 |   |
| Cash flows used  in investing activities                 |       | (3,485     | )          | (16,311        | )          | —        |       | —           |       | (19,796          | )          |
| Cash flows  provided (used in) by financing activities   |       | 31,720     |       | (37,893        | )          | —        |       | —           |       | (6,173           | )          |
| Cash at  beginning of year                               |       | 12,609     |       | 2,397          |       | —        |       | —           |       | 15,006           |       |
| Cash at end of  year                                     |       | $          | 5,337      |           | $          | 3,020         |       | $                | —     |             | $          | — |   | $ | 8,357 |   |

 

78

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| 18.    |   | NOTES OFFERING  AND GUARANTOR FINANCIAL INFORMATION (continued)                                                                                                                        |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                   |
|   |   | The  following are summarized statements setting forth certain financial  information concerning the Guarantor Subsidiaries for the year ended  December 31, 2006 (in thousands). |

 
| ** **                                           | ** ** | ** ** | ** ** | ** **     | ** ** | **NON-**      | ** ** | ** **       | ** ** | **AGI**          | ** ** |
|------------------------------------------------------|------------|------------|------------|----------------|------------|---------------|------------|------------------|------------|------------------|------------|
| ** **                                           | ** ** | **AGI**    | ** ** | **GUARANTORS** | ** ** | **GUARANTOR** | ** ** | **ELIMINATIONS** | ** ** | **CONSOLIDATED** | ** ** |
| Revenue                                              |       | $          | 5,476      |           | $          | 509,082       |       | $                | —     |             | $          | — |   | $ | 514,558 |   |
| Costs applicable  to revenues                        |       | (13,466    | )          | (307,258       | )          | —        |       | —           |       | (320,724         | )          |
| Operating  expenses                                  |       | (18,962    | )          | (132,823       | )          | —        |       | —           |       | (151,785         | )          |
| Interest  expense, net                               |       | (17,046    | )          | (7,547         | )          | —        |       | —           |       | (24,593          | )          |
| Income from  investment in consolidated subsidiaries |       | 46,755     |       | —         |       | —        |       | (46,755          | )          | —           |       |
| Other non  operating income (expenses)               |       | 4,953      |       | (5,872         | )          | —        |       | —           |       | (919             | )          |
| Income tax  expense                                  |       | (13,441    | )          | (8,827         | )          | —        |       | —           |       | (22,268          | )          |
| Net income  (loss)                                   |       | $          | (5,731     | )              | $          | 46,755        |       | $                | —     |             | $          | (46,755 | ) | $ | (5,731 | ) |
|                                                 |       |       |       |           |       |          |       |             |       |             |       |
| Cash flows from  operations                          |       | $          | (30,540    | )              | $          | 77,645        |       | $                | —     |             | $          | — |   | $ | 47,105 |   |
| Cash flows (used  in) Investing activities           |       | (2,978     | )          | (14,975        | )          | —        |       | —           |       | (17,953          | )          |
| Cash flows used  in financing activities             |       | 19,706     |       | (58,630        | )          | —        |       | —           |       | (38,924          | )          |
| Cash at  beginning of year                           |       | 26,421     |       | (1,643         | )          | —        |       | —           |       | 24,778           |       |
| Cash at end of  year                                 |       | $          | 12,609     |           | $          | 2,397         |       | $                | —     |             | $          | — |   | $ | 15,006 |   |

 
| 19.    |   | SUBSEQUENT EVENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | On June 5, 2009,  the Company entered into an amendment to its Senior Credit Facility pursuant  to which the maturity date was extended from June 24, 2009 to March 31,  2010, the revolving credit portion of the facility was reduced by $10.0  million to $25.0 million, the outstanding term loan borrowings were repaid by  $8.0 million, the financial covenants in effect through the extended maturity  date were revised and the borrowing rate was increased to prime rate plus  7.0% or LIBOR plus 8.0% with a LIBOR floor of 2.75%.  As a condition to the amendment, the  shareholder of the Company was required to arrange for the purchase of approximately  $26.6 million in principal amount of the term portion of the Senior Credit  Facility by new lenders, enhance the yield to such new lenders, purchase AGHI  Notes held by one of such new lenders at a premium to the most recent market  price, contribute $8.5 million in capital to the Company and guarantee two  required principal payments on the term loans under the Senior Credit  Facility, aggregating $15.0 million.   In consideration of such support, the Company entered into an option  agreement with the shareholder of the ultimate parent of the Company pursuant  to which the Company granted such shareholder or his assigns an option,  exercisable on or before March 1, 2010, to purchase the Company’s  Camping World subsidiary for $55.0 million, being the fair value of such  subsidiary as determined by an appraisal of Houlihan Smith & Company, Inc.  dated as of March 1, 2009.  The  Company also agreed to pay the shareholder of the ultimate parent, upon  successful refinancing of the Company’s secured debt, including the Senior  Credit Facility, a success fee equal in amount to the fair value, as determined  by an independent financial advisor of such credit support, taking into  account the fair value of the option to purchase Camping World.   In the event the fair value of the Camping  World purchase option exceeds the fair value of such credit support, the  shareholder will pay the amount of such excess to the Company.

 

Concurrent  with the amendment to the Senior Credit Facility, the Company obtained a $9.7  million Second Lien Loan, the net proceeds of which were used to purchase  $14.6 million in principal amount of AGI Senior Notes.  The Second Lien Loan carries an interest  rate of 9.0% and matures on July 31, 2010.

 

In addition, Company agreed to use its best efforts to secure an  asset-based loan of at least $18.5 million secured by the inventory and receivables  of its subsidiary, Camping World, Inc. |

 

79

----

 
| 19.    |   | SUBSEQUENT EVENT (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   | (the “Camping World Financing”), the proceeds of  which would be used to further reduce the amounts outstanding under the  Senior Credit Facility.  The senior  lenders agreed to subordinate their liens to such financing.  If a Camping World Financing has not been  consummated by September 15, 2009, the borrowing rate on revolving  credit loans, swing loans and terms loans increase to prime rate plus 9.0% or  LIBOR plus 10.0%.

 

In the event the Camping World purchase option is  exercised and, subject to the consent of the lenders under the Senior Credit  Facility, the sale of Camping World consummated, the Company would intend to  use the net cash proceeds from the sale of Camping World to repay  indebtedness outstanding under the Senior Credit Facility, as amended.  As of December 31, 2008, an aggregate  of $137.0 million was outstanding under the term loans and $8.5 million was  outstanding under the revolving credit facility of the Senior Credit  Facility.

 

The financial statements for Camping World are  different from the segment reporting in Note 3 because the Camping World  President’s Club and other related ancillary products are included as part of  the membership services segment in the segment reporting.

 

The following unaudited pro forma condensed  consolidated balance sheet as of December 31, 2008 and December 31,  2007 and the statement of operations for the years ended December 31,  2008, 2007 and 2006 reflect the reclassification adjustments associated with  the proposed disposal/sale of Camping World to the shareholder of the  ultimate parent of the Company.  The  pro forma adjustments related to the disposal are presented since the  disposition did not meet the discontinued operations reporting requirements  pursuant to SFAS Statement No. 144, “Accounting for the Impairment or  Disposal of Long-Lived Assets,” (SFAS 144) as of December 31, 2008, but  will meet such requirements in 2010 when the transaction is completed.  Since the transaction is a sale to an  entity under common ownership with AGI such long-lived assets are considered  disposed of when they are exchanged or distributed in accordance with SFAS  144.  The pro forma adjustments reflect  the reclassification of assets and liabilities associated with Camping World  to current assets and liabilities to be disposed of in accordance with SFAS  144 as if the reporting requirements had been met at December 31,  2008.  In addition, the historical  operating results have also been reclassified to reflect discontinued  operations.

 

Corporate Expenses - The allocation to Camping  World of expenses for certain Affinity Group, Inc. corporate functions  historically provided to Camping World are done in accordance with Staff  Accounting Bulletin No. 55, “Allocation of Expenses and Related  Disclosures in Subsidiaries’ Financial Statements”, (“SAB 55”).  Such allocations were made on a specific  identification basis to the extent possible and otherwise based on relative  percentages, as compared to the Company’s other businesses, of headcount or  other appropriate methods depending on the nature of each item of cost to be  allocated.

 

Interest  Expense - The interest expense included in discontinued operations below  reflects the interest allocated to Camping World based upon debt required to  be repaid upon consummation of this transaction. |

 

80

----

 
| 19.    |   | SUBSEQUENT EVENT (continued)                                                                                                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                    |
|   |   | The  unaudited pro forma balance sheet of AGI reclassifying Camping World as of December 31,  2008 to assets and liabilities of discontinued operations is as follows (in  thousands except shares and par value): |

 
| ** **                                                                                   | ** ** | ** **     | ** ** | **Reclassification of** | ** ** | ** **    |   |
|----------------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|--------|
| ** **                                                                                   | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** |   |
| **ASSETS**                                                                                   |       |           |       |                    |       |          |   |
| CURRENT ASSETS:                                                                              |       |           |       |                    |       |          |   |
| Cash and cash  equivalents                                                                   |       | $              | 10,608     |                    | $          | (842          | )      | $ | 9,766 |   |
| Accounts  receivable, less allowance for doubtbul accounts                                   |       | 40,191         |       | (9,084                  | )          | 31,107        |   |
| Inventories                                                                                  |       | 57,137         |       | (55,908                 | )          | 1,229         |   |
| Prepaid expenses  and other assets                                                           |       | 13,545         |       | (2,476                  | )          | 11,069        |   |
| Assets of  discontinued operations                                                           |       | —         |       | 110,964                 |       | 110,964       |   |
| Total current  assets                                                                        |       | 121,481        |       | 42,654                  |       | 164,135       |   |
|                                                                                         |       |           |       |                    |       |          |   |
| PROPERTY AND  EQUIPMENT, net                                                                 |       | 44,077         |       | (34,022                 | )          | 10,055        |   |
| NOTE FROM  AFFILIATE                                                                         |       | 4,608          |       | —                  |       | 4,608         |   |
| INTANGIBLE  ASSETS, net                                                                      |       | 20,754         |       | (3,391                  | )          | 17,363        |   |
| GOODWILL                                                                                     |       | 96,828         |       | —                  |       | 96,828        |   |
| DEFERRED TAX  ASSET, net                                                                     |       | 4,569          |       | (4,569                  | )          | —        |   |
| OTHER ASSETS                                                                                 |       | 2,035          |       | (672                    | )          | 1,363         |   |
| Total assets                                                                                 |       | $              | 294,352    |                    | $          | —        |   | $ | 294,352 |   |
|                                                                                         |       |           |       |                    |       |          |   |
| **LIABILITIES  AND STOCKHOLDER’S DEFICIT**                                              |       |           |       |                    |       |          |   |
| CURRENT  LIABILITIES:                                                                        |       |           |       |                    |       |          |   |
| Accounts payable                                                                             |       | $              | 23,950     |                    | $          | (19,383       | )      | $ | 4,567 |   |
| Accrued interest                                                                             |       | 6,946          |       | —                  |       | 6,946         |   |
| Accrued income  taxes                                                                        |       | 1,165          |       | 372                     |       | 1,537         |   |
| Accrued  liabilities                                                                         |       | 26,954         |       | (10,864                 | )          | 16,090        |   |
| Deferred  revenues and gains                                                                 |       | 60,569         |       | (7,254                  | )          | 53,315        |   |
| Current portion of  long-term debt                                                           |       | 12,391         |       | —                  |       | 12,391        |   |
| Liabilities of  discontinued operations                                                      |       | —         |       | 59,536                  |       | 59,536        |   |
| Total current  liabilities                                                                   |       | 131,975        |       | 22,407                  |       | 154,382       |   |
|                                                                                         |       |           |       |                    |       |          |   |
| DEFERRED  REVENUES AND GAINS                                                                 |       | 35,855         |       | (8,500                  | )          | 27,355        |   |
| LONG-TERM DEBT,  net of current portion                                                      |       | 279,755        |       | —                  |       | 279,755       |   |
| OTHER LONG-TERM  LIABILITIES                                                                 |       | 33,281         |       | (13,907                 | )          | 19,374        |   |
|                                                                                         |       | 480,866        |       | —                  |       | 480,866       |   |
|                                                                                         |       |           |       |                    |       |          |   |
| COMMITMENTS AND  CONTINGENCIES                                                               |       |           |       |                    |       |          |   |
|                                                                                         |       |           |       |                    |       |          |   |
| STOCKHOLDER’S  DEFICIT :                                                                |       |           |       |                    |       |          |   |
| Common stock,  $.001 par value, 2,000 shares authorized, 2,000 shares issued and outstanding |       | 1              |       | —                  |       | 1             |   |
| Additional  paid-in capital                                                                  |       | 81,005         |       | —                  |       | 81,005        |   |
| Accumulated  deficit                                                                         |       | (257,183       | )          | —                  |       | (257,183      | )      |
| Accumulated  other comprehensive income                                                      |       | (10,337        | )          | —                  |       | (10,337       | )      |
| Total  stockholder’s deficit                                                            |       | (186,514       | )          | —                  |       | (186,514      | )      |
| Total  liabilities and stockholder’s deficit                                            |       | $              | 294,352    |                    | $          | —        |   | $ | 294,352 |   |

 

81

----

 
| 19.                                                                                                                                                                                                                     |   | SUBSEQUENT EVENT (continued) |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|
|                                                                                                                                                                                                                    |   |                         |
| The unaudited pro forma  balance sheet of AGI reclassifying Camping World as of December 31, 2007  to assets and liabilities of discontinued operations is as follows (in  thousands except shares and par value): |

 
| ** **                                                                                   | ** ** | ** **     | ** ** | **Reclassification of** | ** ** | ** **    | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|------------|
| ** **                                                                                   | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** | ** ** |
| **ASSETS**                                                                                   |       |           |       |                    |       |          |       |
| CURRENT ASSETS:                                                                              |       |           |       |                    |       |          |       |
| Cash and cash  equivalents                                                                   |       | $              | 8,357      |                    | $          | (3,315        | )          | $ | 5,042 |   |
| Accounts  receivable, net                                                                    |       | 33,330         |       | (7,150                  | )          | 26,180        |       |
| Inventories                                                                                  |       | 64,209         |       | (63,336                 | )          | 873           |       |
| Prepaid expenses  and other assets                                                           |       | 14,430         |       | (2,741                  | )          | 11,689        |       |
| Assets of  discontinued operations                                                           |       | —         |       | 246,472                 |       | 246,472       |       |
| Total current  assets                                                                        |       | 120,326        |       | 169,930                 |       | 290,256       |       |
|                                                                                         |       |           |       |                    |       |          |       |
| PROPERTY AND  EQUIPMENT, net                                                                 |       | 44,307         |       | (35,232                 | )          | 9,075         |       |
| INVESTMENT IN  AFFILIATE                                                                     |       | 81,005         |       | (81,005                 | )          | —        |       |
| NOTE FROM  AFFILIATE                                                                         |       | 4,650          |       | —                  |       | 4,650         |       |
| INTANGIBLE  ASSETS, net                                                                      |       | 23,695         |       | (4,484                  | )          | 19,211        |       |
| GOODWILL                                                                                     |       | 144,429        |       | (47,601                 | )          | 96,828        |       |
| DEFERRED TAX  ASSET, net                                                                     |       | 1,220          |       | (1,220                  | )          | —        |       |
| OTHER ASSETS                                                                                 |       | 1,979          |       | (388                    | )          | 1,591         |       |
| Total assets                                                                                 |       | $              | 421,611    |                    | $          | —        |       | $ | 421,611 |   |
|                                                                                         |       |           |       |                    |       |          |       |
| **LIABILITIES  AND STOCKHOLDER’S DEFICIT**                                              |       |           |       |                    |       |          |       |
| CURRENT  LIABILITIES:                                                                        |       |           |       |                    |       |          |       |
| Accounts payable                                                                             |       | $              | 27,171     |                    | $          | (23,072       | )          | $ | 4,099 |   |
| Accrued interest                                                                             |       | 6,700          |       | —                  |       | 6,700         |       |
| Accrued income  taxes                                                                        |       | 1,189          |       | 206                     |       | 1,395         |       |
| Accrued  liabilities                                                                         |       | 36,069         |       | (14,866                 | )          | 21,203        |       |
| Deferred  revenues and gains                                                                 |       | 65,855         |       | (7,677                  | )          | 58,178        |       |
| Current portion  of long-term debt                                                           |       | 4,406          |       | —                  |       | 4,406         |       |
| Liabilities of  discontinued operations                                                      |       | —         |       | 67,282                  |       | 67,282        |       |
| Total current  liabilities                                                                   |       | 141,390        |       | 21,873                  |       | 163,263       |       |
|                                                                                         |       |           |       |                    |       |          |       |
| DEFERRED  REVENUES AND GAINS                                                                 |       | 38,535         |       | (8,952                  | )          | 29,583        |       |
| LONG-TERM DEBT,  net of current portion                                                      |       | 282,767        |       | —                  |       | 282,767       |       |
| OTHER LONG-TERM  LIABILITIES                                                                 |       | 25,829         |       | (12,921                 | )          | 12,908        |       |
|                                                                                         |       | 488,521        |       | —                  |       | 488,521       |       |
|                                                                                         |       |           |       |                    |       |          |       |
| COMMITMENTS AND  CONTINGENCIES                                                               |       |           |       |                    |       |          |       |
|                                                                                         |       |           |       |                    |       |          |       |
| STOCKHOLDER’S  DEFICIT :                                                                |       |           |       |                    |       |          |       |
| Common stock,  $.001 par value, 2,000 shares authorized, 2,000 shares issued and outstanding |       | 1              |       | —                  |       | 1             |       |
| Additional paid-in  capital                                                                  |       | 81,005         |       | —                  |       | 81,005        |       |
| Accumulated  deficit                                                                         |       | (143,211       | )          | —                  |       | (143,211      | )          |
| Accumulated  other comprehensive income                                                      |       | (4,705         | )          |                    |       | (4,705        | )          |
| Total  stockholder’s deficit                                                            |       | (66,910        | )          | —                  |       | (66,910       | )          |
| Total  liabilities and stockholder’s deficit                                            |       | $              | 421,611    |                    | $          | —        |       | $ | 421,611 |   |

 

82

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| 19.                                                                                                                                                                                                 |   | SUBSEQUENT EVENT (continued) |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|
|                                                                                                                                                                                                |   |                         |
| Unaudited pro forma  information relating to the operations of AGI reclassifying Camping World for  the year ended December 31, 2008 to discontinued operations is as  follows (in thousands): |

 
| ** **                                                                                | ** ** | **2008**       | ** ** | **Reclassification of** | ** ** | **2008**      | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|------------|
| ** **                                                                                | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** | ** ** |
|                                                                                      |       |           |       |                    |       |          |       |
| REVENUES:                                                                                 |       |           |       |                    |       |          |       |
| Membership  services                                                                      |       | $              | 152,643    |                    | $          | (18,013       | )          | $ | 134,630 |   |
| Media                                                                                     |       | 82,424         |       | —                  |       | 82,424        |       |
| Retail                                                                                    |       | 291,070        |       | (291,070                | )          | —        |       |
|                                                                                      |       | 526,137        |       | (309,083                | )          | 217,054       |       |
|                                                                                      |       |           |       |                    |       |          |       |
| COSTS APPLICABLE  TO REVENUES:                                                            |       |           |       |                    |       |          |       |
| Membership  services                                                                      |       | 90,758         |       | (3,792                  | )          | 86,966        |       |
| Media                                                                                     |       | 61,126         |       | —                  |       | 61,126        |       |
| Retail                                                                                    |       | 170,911        |       | (170,911                | )          | —        |       |
|                                                                                      |       | 322,795        |       | (174,703                | )          | 148,092       |       |
|                                                                                      |       |           |       |                    |       |          |       |
| GROSS PROFIT                                                                              |       | 203,342        |       | (134,380                | )          | 68,962        |       |
|                                                                                      |       |           |       |                    |       |          |       |
| OPERATING  EXPENSES:                                                                      |       |           |       |                    |       |          |       |
| Selling, general  and administrative                                                      |       | 142,757        |       | (123,812                | )          | 18,945        |       |
| Impairment of  goodwill                                                                   |       | 47,601         |       | (47,601                 | )          | —        |       |
| Impairment of  long-lived assets                                                          |       | 81,005         |       | (81,005                 | )          | —        |       |
| Depreciation and  amortization                                                            |       | 19,798         |       | (8,565                  | )          | 11,233        |       |
|                                                                                      |       | 291,161        |       | (260,983                | )          | 30,178        |       |
|                                                                                      |       |           |       |                    |       |          |       |
| (LOSS) INCOME  FROM OPERATIONS                                                            |       | (87,819        | )          | 126,603                 |       | 38,784        |       |
|                                                                                      |       |           |       |                    |       |          |       |
| NON-OPERATING  ITEMS:                                                                     |       |           |       |                    |       |          |       |
| Interest income                                                                           |       | 579            |       | (29                     | )          | 550           |       |
| Interest expense                                                                          |       | (24,228        | )          | 4,097                   |       | (20,131       | )          |
| Loss on  derivative instrument                                                            |       | (2,394         | )          | —                  |       | (2,394        | )          |
| Other  non-operating items                                                                |       | (323           | )          | 321                     |       | (2            | )          |
|                                                                                      |       | (26,366        | )          | 4,389                   |       | (21,977       | )          |
|                                                                                      |       |           |       |                    |       |          |       |
| (LOSS) INCOME  FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS |       | (114,185       | )          | 130,992                 |       | 16,807        |       |
|                                                                                      |       |           |       |                    |       |          |       |
| INCOME TAX benefit (EXPENSE)                                                              |       | 2,213          |       | (2,530                  | )          | (317          | )          |
|                                                                                      |       |           |       |                    |       |          |       |
| (LOSS) INCOME  FROM CONTINUING OPERATIONS                                                 |       | (111,972       | )          | 128,462                 |       | 16,490        |       |
|                                                                                      |       |           |       |                    |       |          |       |
| DISCONTINUED  OPERATIONS                                                                  |       |           |       |                    |       |          |       |
| Loss from  operations of discontinued Camping World, Inc.                            |       | —         |       | (130,992                | )          | (130,992      | )          |
| Income tax  benefit                                                                       |       | —         |       | 2,530                   |       | 2,530         |       |
| Loss on  discontinued operations                                                          |       | —         |       | (128,462                | )          | (128,462      | )          |
|                                                                                      |       |           |       |                    |       |          |       |
| NET LOSS                                                                                  |       | $              | (111,972   | )                       | $          | —        |       | $ | (111,972 | ) |

 

83

----

 
| 19.                                                                                                                                                                                              |   | SUBSEQUENT EVENT (continued) |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|
|                                                                                                                                                                                             |   |                         |
| Unaudited pro forma  information relating the operations of AGI reclassifying Camping World for  the year ended December 31, 2007 to discontinued operations is as  follows (in thousands): |

 
| ** **                                                                         | ** ** | **2007**       | ** ** | **Reclassification of** | ** ** | **2007**      | ** ** |
|------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|------------|
| ** **                                                                         | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** | ** ** |
|                                                                               |       |           |       |                    |       |          |       |
| REVENUES:                                                                          |       |           |       |                    |       |          |       |
| Membership  services                                                               |       | $              | 149,937    |                    | $          | (18,215       | )          | $ | 131,722 |   |
| Media                                                                              |       | 90,537         |       | —                  |       | 90,537        |       |
| Retail                                                                             |       | 321,730        |       | (321,730                | )          | —        |       |
|                                                                               |       | 562,204        |       | (339,945                | )          | 222,259       |       |
|                                                                               |       |           |       |                    |       |          |       |
| COSTS APPLICABLE  TO REVENUES:                                                     |       |           |       |                    |       |          |       |
| Membership  services                                                               |       | 94,840         |       | (4,029                  | )          | 90,811        |       |
| Media                                                                              |       | 62,258         |       | —                  |       | 62,258        |       |
| Retail                                                                             |       | 194,940        |       | (194,940                | )          | —        |       |
|                                                                               |       | 352,038        |       | (198,969                | )          | 153,069       |       |
|                                                                               |       |           |       |                    |       |          |       |
| GROSS PROFIT                                                                       |       | 210,166        |       | (140,976                | )          | 69,190        |       |
|                                                                               |       |           |       |                    |       |          |       |
| OPERATING  EXPENSES:                                                               |       |           |       |                    |       |          |       |
| Selling, general  and administrative                                               |       | 145,556        |       | (123,246                | )          | 22,310        |       |
| Depreciation and  amortization                                                     |       | 18,948         |       | (7,754                  | )          | 11,194        |       |
|                                                                               |       | 164,504        |       | (131,000                | )          | 33,504        |       |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM  OPERATIONS                                                            |       | 45,662         |       | (9,976                  | )          | 35,686        |       |
|                                                                               |       |           |       |                    |       |          |       |
| NON-OPERATING  ITEMS:                                                              |       |           |       |                    |       |          |       |
| Interest income                                                                    |       | 592            |       | (84                     | )          | 508           |       |
| Interest expense                                                                   |       | (24,819        | )          | 4,503                   |       | (20,316       | )          |
| Debt extinguishment  expense                                                       |       | (775           | )          | —                  |       | (775          | )          |
| Other  non-operating items                                                         |       | (149           | )          | 216                     |       | 67            |       |
|                                                                               |       | (25,151        | )          | 4,635                   |       | (20,516       | )          |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM  CONTINUING OPERATIONS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS |       | 20,511         |       | (5,341                  | )          | 15,170        |       |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME TAX EXPENSE                                                                 |       | (1,583         | )          | 1,258                   |       | (325          | )          |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM  CONTINUING OPERATIONS                                                 |       | 18,928         |       | (4,083                  | )          | 14,845        |       |
|                                                                               |       |           |       |                    |       |          |       |
| DISCONTINUED  OPERATIONS                                                           |       |           |       |                    |       |          |       |
| Income from  operations of discontinued Camping World, Inc.                   |       | —         |       | 5,341                   |       | 5,341         |       |
| Income tax  expense                                                                |       | —         |       | (1,258                  | )          | (1,258        | )          |
| Income from discontinued  operations                                               |       | —         |       | 4,083                   |       | 4,083         |       |
|                                                                               |       |           |       |                    |       |          |       |
| NET INCOME                                                                         |       | $              | 18,928     |                    | $          | —        |       | $ | 18,928 |   |

 

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| 19.                                                                                                                                                                                         |   | SUBSEQUENT EVENT  (continued) |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|
|                                                                                                                                                                                        |   |                          |
| Unaudited pro forma  information relating the operations of AGI reclassifying Camping World for  the year ended December 31, 2006 to discontinued operations is as follows (in  thousands): |

 
| ** **                                                                         | ** ** | **2006**       | ** ** | **Reclassification of** | ** ** | **2006**      | ** ** |
|------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|------------|
| ** **                                                                         | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** | ** ** |
|                                                                               |       |           |       |                    |       |          |       |
| REVENUES:                                                                          |       |           |       |                    |       |          |       |
| Membership  services                                                               |       | $              | 137,394    |                    | $          | (15,520       | )          | $ | 121,874 |   |
| Media                                                                              |       | 86,742         |       | —                  |       | 86,742        |       |
| Retail                                                                             |       | 290,422        |       | (290 ,422               | )          | —        |       |
|                                                                               |       | 514,558        |       | (305,942                | )          | 208,616       |       |
|                                                                               |       |           |       |                    |       |          |       |
| COSTS APPLICABLE  TO REVENUES:                                                     |       |           |       |                    |       |          |       |
| Membership  services                                                               |       | 87,407         |       | (4,015                  | )          | 83,392        |       |
| Media                                                                              |       | 58,302         |       | —                  |       | 58,302        |       |
| Retail                                                                             |       | 175,015        |       | (175,015                | )          | —        |       |
|                                                                               |       | 320,724        |       | (179,030                | )          | 141,694       |       |
|                                                                               |       |           |       |                    |       |          |       |
| GROSS PROFIT                                                                       |       | 193,834        |       | (126,912                | )          | 66,922        |       |
|                                                                               |       |           |       |                    |       |          |       |
| OPERATING  EXPENSES:                                                               |       |           |       |                    |       |          |       |
| Selling, general  and administrative                                               |       | 133,129        |       | (112,454                | )          | 20,675        |       |
| Restructuring  charge                                                              |       | 93             |       | —                  |       | 93            |       |
| Depreciation and  amortization                                                     |       | 18,656         |       | (8,217                  | )          | 10,439        |       |
|                                                                               |       | 151,878        |       | (120,671                | )          | 31,207        |       |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM  OPERATIONS                                                            |       | 41,956         |       | (6,241                  | )          | 35,715        |       |
|                                                                               |       |           |       |                    |       |          |       |
| NON-OPERATING  ITEMS:                                                              |       |           |       |                    |       |          |       |
| Interest income                                                                    |       | 1,115          |       | (6                      | )          | 1,109         |       |
| Interest expense                                                                   |       | (25,708        | )          | 4,318                   |       | (21,390       | )          |
| Debt  extinguishment expense                                                       |       | (835           | )          | —                  |       | (835          | )          |
| Other  non-operating items                                                         |       | 9              |       | 624                     |       | 633           |       |
|                                                                               |       | (25,419        | )          | 4,936                   |       | (20,483       | )          |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM  CONTINUING OPERATIONS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS |       | 16,537         |       | (1,305                  | )          | 15,232        |       |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME TAX EXPENSE                                                                 |       | (22,268        | )          | (238                    | )          | (22,506       | )          |
|                                                                               |       |           |       |                    |       |          |       |
| LOSS FROM  CONTINUING OPERATIONS                                                   |       | (5,731         | )          | (1,543                  | )          | (7,274        | )          |
|                                                                               |       |           |       |                    |       |          |       |
| DISCONTINUED  OPERATIONS                                                           |       |           |       |                    |       |          |       |
| Loss from  operations of discontinued Camping World, Inc.                          |       | —         |       | 1,305                   |       | 1,305         |       |
| Income tax  benefit                                                                |       | —         |       | 238                     |       | 238           |       |
| Loss on  discontinued operations                                                   |       | —         |       | 1,543                   |       | 1,543         |       |
|                                                                               |       |           |       |                    |       |          |       |
| NET LOSS                                                                           |       | $              | (5,731     | )                       | $          | —        |       | $ | (5,731 | ) |

 

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**ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE**

 

None

 

**ITEM 9A: CONTROLS AND PROCEDURES**

 

Within90 days prior to the filing of this Annual Report on Form 10-K, we carriedout an evaluation, under the supervision and with the participation of ourmanagement, including our President and Chief Executive Officer and our SeniorVice President and Chief Financial Officer, of the effectiveness of the designand operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) ofthe Securities Exchange Act of 1934, as amended) as of the end of the periodcovered by this report.  Based upon thatevaluation, our President and Chief Executive Officer, along with our SeniorVice President and Chief Financial Officer, concluded that our disclosurecontrols and procedures are effective in timely alerting them to materialinformation relating to our Company (including our consolidated subsidiaries)required to be included in our periodic SEC filings.  No changes have occurred during the periodcovered by this report or since the evaluation date that would have a materialeffect on the disclosure controls and procedures.

 

Management of the Companyis responsible for establishing and maintaining adequate internal control overfinancial reporting, as such term is defined in Rule 13a-15(f) underthe Securities Exchange Act of 1934. The Company’s internal control overfinancial reporting is designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accountingprinciples in the United States. However, all internal control systems, nomatter how well designed, have inherent limitations. Therefore, even thosesystems determined to be effective can provide only reasonable assurance withrespect to financial statement preparation and reporting.

 

Management assessed theeffectiveness of the Company’s internal control over financial reporting as of December 31,2008.  In making this assessment,management used the criteria set forth by the Committee of SponsoringOrganizations of the Treadway Commission in Internal Control-IntegratedFramework. Based on our assessment, management believes that the Companymaintained effective internal control over financial reporting as of December 31,2008, based on those criteria.

 

This annual report doesnot include an audit report of the company’s independent registered publicaccounting firm regarding internal control over financial reporting. Management’sreport was not subject to audit by the company’s independent registered publicaccounting firm pursuant to temporary rules of the Securities and ExchangeCommission that permit the company to provide only management’s report in thisannual report.

 

**ITEM 9B:OTHER INFORMATION**

 

None

 

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**PART III**

 

**ITEM 10:  DIRECTORS, EXECUTIVEOFFICERS AND CORPORATE GOVERNANCE**

 

Ourexecutive officers and directors are as follows:

 
| **Name**              | ** ** | **Age**    | ** ** | **Position**                                                                                  |
|-----------------------|------------|------------|------------|-----------------------------------------------------------------------------------------------|
| ** **            | ** ** | ** ** | ** ** | ** **                                                                                    |
| Michael  A. Schneider |       | 54         |       | President,  Chief Executive Officer and Director                                              |
| Marcus  Lemonis       |       | 35         |       | Chief  Executive Officer and President of Camping World, Inc.                            |
| Thomas  F. Wolfe      |       | 47         |       | Senior  Vice President and Chief Financial Officer                                            |
| Laura  A. James       |       | 52         |       | Senior  Vice President/ Human Resources                                                       |
| Joseph  Daquino       |       | 49         |       | Senior  Vice President, Membership Clubs President                                            |
| John  A. Sirpilla     |       | 42         |       | President  of Retail Operations of Camping World, Inc.                                   |
| Brent  Moody          |       | 47         |       | Senior  Vice President/ Business Development and General Counsel of Camping  World, Inc. |
| Prabhuling  Patel     |       | 62         |       | Senior  Vice President, Products and Services                                                 |
| Stephen  Adams        |       | 71         |       | Chairman  of the Board of Directors                                                           |
| Andris  A. Baltins    |       | 63         |       | Director                                                                                      |
| David  Frith-Smith    |       | 63         |       | Director                                                                                      |
| J.  Kevin Gleason     |       | 57         |       | Director                                                                                      |
| George  Pransky       |       | 68         |       | Director                                                                                      |
| Townsend  C. Smith    |       | 49         |       | Director                                                                                      |

 

MichaelA. Schneider became our President and Chief Executive Officer as of January 1,2004.  Prior to that time, Mr. Schneiderhad been our Chief Operating Officer since 1996.  Prior thereto, Mr. Schneider served asour Senior Vice President and General Counsel since January 1993 and wasresponsible for administrative areas, development of new corporate ventures andportions of the RV publication business and the advertising and salesdepartments.  Prior to January 1993and since 1977, Mr. Schneider has held a variety of senior managementpositions in our publication business.  Mr. Schneiderjoined the Board of Directors in 2004.  Mr. Schneideralso serves as a director of Adams Outdoor Advertising Inc. (“AOA”), whichoperates an outdoor media advertising business thought its subsidiaries, andAffinity Bank, a national bank owned by Affinity Bank Holdings, Inc. (“ABH”).  Mr. Adams owns a controlling interest inboth AOA and ABH.

 

MarcusA. Lemonis was appointed President and Chief Executive Officer of Camping World, Inc.(“Camping World”) effective September 13, 2006.  Mr. Lemonis also currently serves and,since 2003, has served as Chief Executive Officer and President of FreedomRoadsHolding Company LLC and its subsidiaries (“FreedomRoads”).  FreedomRoads operates RV dealerships acrossthe United States and is controlled by Mr. Adams.  From 2001 to 2003, Mr. Lemonis served asPresident, Chief Executive Officer and Chairman of the Board of Directors ofHoliday RV Superstores, Inc. Holiday RV Superstores, Inc. filed for bankruptcy on October 18,2003.

 

ThomasF. Wolfe became our Senior Vice President and Chief Financial Officer as of January 1,2004.  Prior to that time, Mr. Wolfehad been our Vice President and Controller since 1997.  From 1991 to 1997, Mr. Wolfe was VicePresident of Finance of Convenience Management Group, a privately-owneddistributor of petroleum products and equipment.  From 1989 to 1991, Mr. Wolfe was VicePresident and Controller of First City Properties, Inc.  Prior to 1989, and

 

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since1983, Mr. Wolfe held a variety of staff and management positions atDeloitte & Touche LLP.

 

LauraA. James became our Senior Vice President/Human Resources as of January 1,2004.  Prior to that time, Ms. Jamesserved as Vice President/Human Resources since 1996.  From 1984 until her appointment as VicePresident/Human Resources, Ms. James served in various management andstaff positions at the Company.

 

JoeDaquino became our Senior Vice President and Membership Clubs President of AGIin March 2008 in addition to overseeing AGI’s Multimedia Division.  From January 2007 to March 2008,Joe served as senior vice president for AGI’s Multimedia Division as well asits Interactive Group.  From 1995 until2006, he was Vice President for AGI Multimedia, overseeing publication ofannual directories.  From 1984 until hisappointment as Vice President, Mr. Daquino served in various managementand staff positions at the company.

 

JohnA. Sirpilla was appointed President of the Retail Operations of Camping Worldon January 15, 2008.   Prior to thattime, Mr. Sirpilla was the Executive Vice President of Operations forCamping World retail stores and FreedomRoads RV dealerships from June 2005through January 2008.   He joinedFreedomRoads as a Regional President in October 2003 and ran theMid-American Region of 14 locations.    Mr. Sirpillawas President and CEO of Sirpilla RV Center, Inc. for 15 years prior tojoining the company through the acquisition of his dealership.

 

BrentMoody joined Camping World in 2002 and since that time has served Camping Worldas Vice President and General Counsel and then Senior Vice President/ GeneralCounsel and Business Development as well as General Counsel of the Company from2004-2006.  Mr. Moody also serves asthe Executive Vice President Business Development and General Counsel ofFreedomRoads, a position he has held since September 1, 2006.** **Prior to that timeand since 1998, Mr. Moody was a shareholder of the law firm of GreenbergTraurig, P.A.  From 1996 to 1998, Mr. Moodyserved as Vice President and Assistant General Counsel for Blockbuster, Inc.

 

PrabhulingPatel was appointed Senior Vice President of Products & Services as ofMay 1, 2004.  Mr. Patel joinedthe Company in December 2003 as Vice President of Database Marketing.  Prior to that he served as an advisor toventure capital firms on start-up companies and was also a consultant to theCompany from 2002 to 2003.  From 2000 to2002, Mr. Patel was Senior Vice President & General Manager ofthe outsourcing business of Message Media, Inc., an email marketingcompany.  Prior to 2000, he was Presidentof the Telecommunications, Energy & Cable Division of Experian, acredit bureau and direct marketing services company.  He served in senior executive positionsrunning various businesses at Metromail Corporation, which was in the directmarketing services business.  Mr. Patelalso held a number of executive level positions in marketing, finance, IT,business development and business strategy at Citigroup, Cigna, HouseholdInternational and Montgomery Ward.

 

StephenAdams has been the Chairman of our Board of Directors since December 1988.  Mr. Adams is also chairman and 90% ownerof FreedomRoads which operates RV dealerships throughout the UnitedStates.  In addition, Mr. Adams isthe Chairman of the Board of Directors and the controlling shareholder ofAOA.  Mr. Adams is also the Chairmanand 95% owner of ABH, which operates through its subsidiary, a national bank.

 

AndrisA. Baltins has been a member of the law firm of Kaplan, Strangis and Kaplan,P.A. since 1979.  Mr. Baltins is amember of the board of Polaris Industries Inc., a manufacturer of

 

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snowmobiles,all-terrain vehicles, motorcycles and related products, and serves as the Chairof its Corporate Governance and Nominating Committee and is also a member ofits Compensation Committee.  He alsoserves as a director of various private and non-profit corporations.  Mr. Baltins joined the Board ofDirectors in February 2006.  Mr. Baltins’law firm provides legal services to the Company and its subsidiaries.  Mr. Baltins also serves as a director ofFreedomRoads and of AOA, both of which are controlled by Stephen Adams.

 

DavidFrith-Smith has served as managing partner of Biller, Frith-Smith &Archibald, Certified Public Accountants since 1988.  Mr. Frith-Smith was a principal withMaidy Biller Frith-Smith & Brenner, Certified Public Accountants from1984 to 1988, and with Maidy and Lederman, Certified Public Accountants from1980 to 1984.  Mr. Frith-Smith hasbeen a member of our Board of Directors since November 1996.  Mr. Frith-Smith is also a director ofAOA and ABH, both of which are controlled by Stephen Adams, and various privateand non-profit corporations.

 

J.Kevin Gleason has served as the Chief Executive Officer and President of AOA,an entity controlled by Mr. Adams, since 1991.  Prior to that time, Mr. Gleason wasExecutive Vice President and General Manager of AOA since 1987.  Mr. Gleason served as General Manager ofNaegele Outdoor Advertising of Southern California from 1985 to 1987.  He has served as vice chair marketing, andChairman of the Outdoor Advertising Association of America as well as a boardmember of the Traffic Audit Bureau.  Mr. Gleasonjoined the Board of Directors in October 2005.

 

GeorgePransky, Ph.D. has been in private practice as co-director of Pransky and Associatesin La Conner, Washington since 1988.  Heis a frequent consultant for government and private agencies and has been acontract faculty member for a number of educational institutions, including theUniversity of Washington, the University of Oregon and Antioch College.  Dr. Pransky has trained managementgroups in team building, stress elimination and leadership development fortwenty-five years.  Dr. Pranskyjoined the Board of Directors in February 2006 and he also serves as adirector of AOA.

 

TownsendC. Smith is a Managing Director and Market Manager of the JP Morgan PrivateBank.  Prior to joining JP Morgan in1992, Mr. Smith was an Investment Banker at Kidder, Peabody & Co.from 1987 to 1992, and a Corporate Lending Officer at Manufactures HanoverTrust Company from 1981 to 1985.  JPMorgan has provided banking services to the Company. Mr. Smith joined theBoard of Directors in March 2008. He also serves as a director of AOA and various other private andnon-profit organizations.

 

Directorsare elected for terms of one year or until their successors have been dulyelected.  There are no familyrelationships between any of the directors and/or executive officers.

 

**Board Functions as Audit Committee**

 

Our securities are notlisted on any national securities exchange and we are not required to maintaina separate audit committee of the Board nor are we subject to the auditcommittee independence requirements set forth in Rule 10A-3 of theSecurities Exchange Act of 1934, as amended. On February 22, 2006, the Board of Directors of the Companydisbanded the Audit Committee and assumed its oversight of the integrity of ourfinancial statements; our compliance with legal and regulatory requirements;the retention, independence and qualifications of our independent auditor; andthe responsibilities, budget and performance of our independent auditor.  The Board of Directors recognizes Mr. Frith-Smithas an “Audit

 

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Committee Financial Expert”as such term has been defined by the Securities and Exchange Commission.  Mr. Frith-Smith is not an independentdirector.

 

**Code ofProfessional Conduct**

 

Wehave adopted a Code of Professional Conduct that applies to our principalexecutive officer, principal financial officer, principal accounting officerand all other employees.  This Code ofProfessional Conduct is posted on our website at www.affinitygroup.com and maybe found as follows:

 

·                  From our main web page, first click on “AboutAGI,”

·                  Then, click on “Code of Conduct.”

 

TheCompany intends to satisfy the disclosure requirement under Item 5.05 of Form 8-Kregarding an amendment to, or waiver from a provision of, this Code ofProfessional Conduct by posting such information at the address and locationspecified above under the heading “Waivers.”

 

**Section 16(a) Beneficial Ownership Reporting Compliance**

 

TheCompany is a voluntary filer pursuant to Section 15(d) of theSecurities Exchange Act of 1934, as amended (the “Act”) and does not have aclass of equity securities registered pursuant to Section 12 of theAct.  Accordingly, our officers,directors and 10% or greater holders of our securities are not currentlyrequired to file reports pursuant to Section 16(a) of the Act.

 

**ITEM 11:  EXECUTIVE COMPENSATION**

 

**Compensation Discussion and Analysis**

 

***Overview***

 

Thefollowing discussion and analysis describes the Company’s compensationobjectives and policies as applied to the named executive officers appearing inthe Summary Compensation Table below (the “Executive Officers”).  This section is intended to provide aframework within which to understand the actual compensation awarded to, earnedor held by each Executive Officer during 2008, 2007 and 2006 as reported in thecompensation tables and accompanying narrative sections appearing on pages 97to 106 of this annual report on Form 10-K.

 

Inconnection with our joint marketing agreement with FreedomRoads, some of ourofficers also perform services for FreedomRoads.  Messrs. Moody and Sirpilla, wereofficers of our Camping World subsidiary prior to entering into the jointmarketing agreement with FreedomRoads, and are compensated by the Company.  Mr. Lemonis was, and currently is,President and Chief Executive Officer of FreedomRoads before the jointmarketing agreement was implemented and receives his primary compensation fromFreedomRoads, except for $100,000 in annual salary paid by Camping World.  Accordingly, Mr. Lemonis is not includedin the Summary Compensation Table below or the following discussion.

 

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***Compensation Objectives***

 

Ourexecutive compensation program is tied closely to our performance and aimed atenabling us to attract and retain the best possible executive talent.  In addition, the total compensation opportunitiesprovided to Executive Officers reflect both the responsibility of each position(internal equity) and competitive market levels (external competitiveness).

 

DrivingPerformance:  The Companyseeks to significantly correlate the level of compensation paid to itsExecutive Officers, when taken as a whole, with the financial performance ofthe Company.  Accordingly, base salarycomprises only 15-20% of the total compensation opportunity for the Presidentand Chief Executive Officer of the Company, Mr. Schneider, and 60-70% ofthe total compensation opportunity for the other Executive Officers excluding Mr. Sirpillawho is paid only a base salary.  Theremaining balance of each Executive Officer’s total compensation opportunity isdependent upon short-term and long-term increases in Company financialperformance and operating profit.

 

Thebase salary and annual incentive awards are designed to reward ExecutiveOfficers for annual achievements, both individually and as a Company.  The phantom stock agreements are designed todrive long-term Company performance and value, and to retain the ExecutiveOfficer.

 

Attractingand Retaining Executive Talent:  The Company has structured the incentiveopportunities under the annual incentive award programs and the phantom stockagreements to provide Executive Officers with a substantial upside in drivingthe value of the Company, which it views as a tool for attracting newtalent.  In addition, the phantom stockagreements, which are based on performance over a multiple-year period, provideExecutive Officers with an incentive to stay with the Company.

 

***Determining Compensation***

 

TheCompany relies upon its own judgment in designing the compensationopportunities provided to the Executive Officers.  Messrs. Schneider and Lemonis makerecommendations to the Chairman of the Board of Directors regarding theappropriate levels of total compensation opportunities based upon their reviewof the individual performance and responsibilities of the Executive Officersunder their supervision and the financial and operational performance of theCompany or Camping World, as appropriate, as a whole.  The Chairman of the Board of Directors makesthe final decision regarding the amount of base salary and annual incentiveaward opportunity provided to Mr. Schneider and the phantom stockagreement opportunities for all of the Executive Officers.  The Chairman of the Board of Directors alsoprovides Mr. Schneider and Mr. Lemonis with parameters regarding thecompensation opportunities to be provided to the remaining ExecutiveOfficers.  Mr. Schneider ultimatelydetermines the amount of compensation opportunities provided to Messrs. Wolfe,Patel and Daquino within the scope of authority provided by the Chairman of theBoard of Directors.  In addition, Mr. Lemonisultimately determines the amount of compensation opportunities provided to Mr. Sirpillawithin the scope of authority provided by the Chairman of the Board ofDirectors.  The Chairman of the Board ofDirectors or the Chief Executive Officer of either the Company or CampingWorld, as the case may be, considers the annual and long-term financialperformance of the Company or Camping World in determining the forms andamounts of compensation paid to each Executive Officer.

 

TheCompany does not employ a compensation consultant, nor does it engage in anyformal market analysis in determining the levels of total compensationopportunity (or components 

 

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thereof)provided to each Executive Officer. Generally, the Company attempts to achieve its goal of drivingperformance by making a significant portion, 80-85% of the total compensationopportunity provided to Mr. Schneider, and 30-40% of the totalcompensation opportunity provided to each of the other Executive Officers,excluding Mr. Sirpilla, dependent upon the Company’s annual and long-termperformance and value.  A higherproportion of the compensation opportunity provided to Mr. Schneider, ascompared to the other Executive Officers, is tied to Company performancebecause he is the leader of his respective business operations and thus is in amore unique position to influence the performance of the Company.  However, the Company believes that the totalcompensation opportunities of all the Executive Officers provide a substantialincentive to each of them to drive the performance of the Company—both in theshort and long-term.

 

TheCompany, which is a wholly-owned subsidiary of Affinity Group Holding, Inc.(“AGHI”), does not grant shares of Company stock or stock options to theExecutive Officers.  The long-termincentive awards in the form of phantom stock agreements are intended toprovide Executive Officers with a cash equivalent to the increase in value ofthe Company or Camping World that would otherwise be realized in stock oroption awards of a company with publicly traded equity securities.

 

***Elements of Compensation***

 

AnnualCompensation

 

**BaseSalary**

EachExecutive Officer receives a minimum level of fixed compensation in the form ofbase salary.  The Company does not reviewthe base salaries of the Executive Officers on a regular basis; however, it hasadjusted base salary levels from time to time on a discretionary basis basedupon factors such as an increase in the responsibilities or duties of aparticular Executive Officer.  TheCompany provided nominal cost of living increases to Messrs. Wolfe,Daquino and Patel, but no increase for Mr. Schneider.

 

Theamount of base salary paid to each of the Executive Officers for 2008, 2007 and2006 is reflected in the Salary column of the Summary Compensation Table below.

 

**AnnualIncentive Awards**

TheCompany adopts an annual incentive award program applicable to its ExecutiveOfficers and other employees.

 

*2008 —Non-Equity Incentive Awards:*

 

For2008, Messrs. Schneider and Wolfe received their annual incentive awardsbased on the actual performance of the Company as measured under the parametersof the annual incentive award program. The amount of the annual incentive award for Messrs. Schneider andWolfe was based on 1.0% and 0.25%, respectively, of the Company’s income fromoperations excluding depreciation, amortization, phantom stock expense, othernon-recurring expense, and the operations of Camping World, Inc. (the “2008Value”).  The 2008 Value was $44.7million.  This amount was paid on a prorata basis every two weeks, in connection with the regular payroll cycle, basedon estimated Company performance.  Afinal measurement of Company performance under the parameters of the annual incentiveaward is made following the end of the fiscal year.  To the extent necessary after year-end,additional payments were made to each of Messrs. Schneider and Wolfe basedupon this final measurement in order that the aggregate amount of incentive awardpaid correlates with his assigned percentage of actual 

 

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Companyperformance during the year.  The Companytakes a conservative position in estimating the pro rata amounts paid to Messrs. Schneiderand Wolfe throughout the year in connection with the regular payroll cycle and,to date, has not made any downward adjustments in the amount of incentive awardpaid based upon the final performance review. These amounts are reflected in the Non-Equity Incentive Compensationcolumn of the Summary Compensation table.

 

For2008, Messrs. Patel and Daquino participated in discretionary annualincentive award programs.  Messrs. Patel’sand Daquino’s annual incentive awards were based on the performance of specificsubsidiaries and programs of the Company as determined by Mr. Schneider.  The amount of annual incentive award for Mr. Patelwas $121,125 for 2008 and was paid in the first quarter of 2009.  The amount of annual incentive award for Mr. Daquinowas $89,791 for 2008 and was paid in the first quarter of 2009.  These amounts are reflected in the Bonuscolumn of the Summary Compensation table.

 

*2007 —Non-Equity Incentive Awards:*

 

For2007, Messrs. Schneider and Wolfe received their annual incentive awardsbased on the actual performance of the Company as measured under the parametersof the annual incentive award program. The amount of the annual incentive award for Messrs. Schneider andWolfe was based on 1.0% and 0.25%, respectively, of the Company’s income fromoperations excluding depreciation, amortization, phantom stock expense, othernon-recurring expense, and the operations of Camping World, Inc. (the “2007Value”).  The 2007 Value was $48.2million.  This amount was paid on a prorata basis every two weeks, in connection with the regular payroll cycle, basedon estimated Company performance.  Afinal measurement of Company performance under the parameters of the annualincentive award is made following the end of the fiscal year.  To the extent necessary after year-end,additional payments were made to each of Messrs. Schneider and Wolfe basedupon this final measurement in order that the aggregate amount of incentiveaward paid correlates with his assigned percentage of actual Companyperformance during the year.  The Companytakes a conservative position in estimating the pro rata amounts paid to Messrs. Schneiderand Wolfe throughout the year in connection with the regular payroll cycle and,to date, has not made any downward adjustments in the amount of incentive awardpaid based upon the final performance review. These amounts are reflected in the Non-Equity Incentive Compensationcolumn of the Summary Compensation table.

 

For2007, Messrs. Patel and Daquino participated in discretionary annualincentive award programs.  Messrs. Patel’sand Daquino’s annual incentive award was based on the performance of specificsubsidiaries and programs of the Company as determined by Mr. Schneider.  The amount of annual incentive award for Mr. Patelwas $132,350 for 2007 and paid in the first quarter of 2008. The amount ofannual incentive award for Mr. Daquino was $125,074 for 2007 and paid inthe first quarter of 2008.  These amountsare reflected in the Bonus column of the Summary Compensation table.

 

*2006 —Non-Equity Incentive Awards:*

 

For2006, Messrs. Schneider and Wolfe received their annual incentive awardsbased on the actual performance of the Company as measured under the parametersof the annual incentive award program. The amount of the annual incentive award for Messrs. Schneider andWolfe was based on 1.0% and 0.2%, respectively, of the Company’s income fromoperations in excess of $2.8 million, excluding depreciation, amortization,phantom stock expense and other non-recurring expenses (specifically, debtextinguishment expense of $835,000 and 

 

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reorganizationexpense of $93,000 in 2006) (“2006 Value”). The 2006 Value was $59 million. This amount was paid on a pro rata basis every two weeks, in connectionwith the regular payroll cycle, based on estimated Company performance.  A final measurement of Company performanceunder the parameters of the annual incentive award is made following the end ofthe fiscal year.  These amounts arereflected in the Non-Equity Incentive Compensation column of the SummaryCompensation table.

 

For2006, Messrs. Patel and Daquino participated in discretionary annualincentive award programs.  Mr. Patel’sand Daquino’s annual incentive award was based on the performance of specificsubsidiaries and programs of the Company as determined by Mr. Schneider.  The amount of annual incentive award for Mr. Patelwas $108,250 for 2006 and paid in the first quarter of 2007.  The amount of annual incentive award for Mr. Daquinowas $123,393 for 2006 and paid in the first quarter of 2007. These amounts arereflected in the Bonus column of the Summary Compensation table.

 

Long-TermCompensation/Phantom Stock Agreements

 

TheCompany has entered into phantom stock agreements with each of the ExecutiveOfficers.  In general, payouts under thephantom stock agreements are based upon increases in the base value of certainbusiness units measured over a multiple-year period.  The amount earned over the measurement periodis generally paid out in three equal annual installments following the end ofsuch period.  The first such installmentis generally paid in the second quarter of the year following the end of themeasurement period once the audited financial statements for the last year ofthe measurement period have been determined, with the two remaining annualpayments made in January of each of the next two years.

 

Theamount of phantom stock expensed during 2008, 2007 and 2006 for each ExecutiveOfficer is included in the Stock Awards column of the Summary CompensationTable below.

 

*Messrs. Schneider,Wolfe and Patel*:  Messrs. Schneider,Wolfe and Patel have each entered into phantom stock agreements with theCompany in 2004.  The agreements for Messrs. Schneiderand Wolfe are dated January 1, 2004, and the agreement for Mr. Patelis dated April 1, 2004 pursuant to which Mr. Schneider will receive2.50%, Mr. Wolfe will receive 0.33% and Mr. Patel will receive 0.10%of the increase in Company value as measured over the period beginning as per theirrespective agreements and ending December 31, 2006.  The phantom stock payout under the 2004agreements will be paid in three equal annual installments of $826,637,$109,116 and $35,660 for Messrs. Schneider, Wolfe and Patel, respectively,the first of which was distributed during the second quarter of 2007.

 

*Messrs. Schneider,Wolfe, Patel and Daquino*:  Messrs. Schneider,Wolfe, Patel, and Daquino have also each entered into phantom stock agreementswith the Company in 2007.  The agreementsfor Messrs. Schneider, Wolfe, Patel and Daquino are dated January 1,2007, pursuant to which Mr. Schneider will receive 5.0%, Mr. Wolfewill receive 0.66%, Mr. Patel will receive 0.25%, and Mr. Daquinowill receive 0.40% of the increase in Company value as measured over the periodbeginning as per their respective agreements and ending December 31,2009.  The phantom stock payout under the2009 agreements, if any, will be paid in three equal annual installmentsstarting in 2010.

 

OtherElements of Compensation

 

TheCompany provides a full range of benefits to its Executive Officers, includinga 401(k) Savings and Profit Plan and the standard medical, dental anddisability coverage, which are 

 

94

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availableto employees generally.  The Companybelieves that these benefits are reasonable in amount and are designed to becompetitive with comparable companies.

 

**401(k) Savingsand Profit Plan**

 

AffinityGroup, Inc.

TheCompany sponsors a deferred savings and profit sharing plan (the “401(k) Plan”)qualified under Section 401(a) and 401(k) of the InternalRevenue Service Code of 1986, as amended (the “Code”).  All employees over age twenty-one, includingthe Executive Officers, are eligible to participate in the 401(k) Plan.  Employees who have completed one year ofservice (minimum of 1,000 hours) are eligible for matching contributions.  For the plan year 2008, the Company electedSafe Harbor Matching Contribution for the employer match and set the employermatch, which vests upon contribution, at an amount equal to 100% of the first4% of the employee’s contribution through July 2, 2008.  Effective July 3, 2008, the companysuspended the employer matching contributions. Employees may defer up to 60% of their eligible compensation up toInternal Revenue Service limits electing pre-tax contributions or post-taxcontributions (Roth contributions). Employer Matching Contributions for all Affinity employees totaled$521,115 in 2008.  The amounts of 401(k) Planmatching contributions by the Company during 2008 are reflected in the AllOther Compensation column of the Summary Compensation Table below.

 

CampingWorld, Inc.

BeginningJanuary 1, 2007 Camping World was no longer a participating employer inthe Affinity Group 401(k) Plan and elected to begin participating in theFreedomRoads 401(k) Defined Contribution Plan, Freedom Rewards 401(k) Plan,qualified under Section 401(a) and 401(k) of the InternalRevenue Service Code of 1986, as amended (the “Code”).  All employees over the age of 18, includingthe Executive Officers are eligible to participate in the 401(k) Plan.  Employees who have completed twelve months ofconsecutive service are eligible for company match.  For the plan year 2008, the matchingcontribution schedule is 50% up to the first 6% of eligible compensation.  Company matching contributions follow a six (6) yeargraded vesting schedule.  Effective June 6,2008, the company suspended the employer matching contributions. Non-highlycompensated employees may defer up to 75% of their eligible compensation up tothe Internal Revenue Service limits. Highly compensated employees may defer up to 15% of their eligiblecompensation up to the Internal Revenue Service limits.  Employer Matching Contributions for allAffinity employees totaled $403,839.  Theamounts of 401(k) Plan matching contributions by the Company during 2008are reflected in the All Other Compensation column of the Summary CompensationTable below.

 

**KEYSOP**

EffectiveJanuary 1999, the Company participates in AGHC’s KEYSOP, a non-qualifieddeferred compensation plan administered through RABBI trusts, for key employeesof the Company and its subsidiaries.  Mr. Sirpillaand Daquino elected not to participate in the KEYSOP.  Through March 2007 participants could contributeall or a portion of their annual incentive awards and payout from the phantomstock awards to the KEYSOP.  Beginning April 1,2007 future contributions to the KEYSOP were no longer allowed.  Trustees under the KEYSOP received suchcontributions and invest the deferred amounts based upon the specific electionof each participant.  The Company doesnot make any matching contributions to the KEYSOP.  Payouts under the KEYSOP are based upon theelections of the specific participants and are subject to the rules andregulations governing the KEYSOP program. The remaining assets of the KEYSOP were distributed and the program wasdissolved in 2008.

 

95

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**Other Benefit Plans**

Employees of the Company, including the Executive Officers, receivecertain medical and dental benefits during their employment.  One of the Company’s predecessors alsoprovided eligible employees with medical, dental and life insurance coverageafter retirement.  The estimated futurecosts associated with such coverage to retirees are reserved as a liability inthe Company’s consolidated financial statements.  Current employees are not provided medicaland dental benefits upon retirement.

 

**Perquisites**

TheCompany provides its Executive Officers with very limited perquisites, which itbelieves are appropriate components of the compensation package for theparticular Executive Officer.  TheCompany pays the premiums on life insurance policies for Mr. Schneider.  In addition, Mr. Sirpilla receives anannual car allowance of approximately $26,000. To the extent that such aggregate incremental cost to the Company ofproviding these perquisites to each Executive Officer is equal to or greaterthan $10,000, such amount is included in the All Other Compensation column ofthe Annual Compensation Table.

 

PhantomStock Agreements:  As described in the section entitled “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*” above, the Company hasentered into phantom stock agreements with each of the Executive Officers.  The phantom stock agreements also include theterms of employment for such Executive Officers, which are described in moredetail in the section entitled “*Potential Payments uponTermination or Change in Control—Employment Terms in Phantom Stock Agreements*”below.  The terms of the phantom stockagreements for Messrs. Schneider, Wolfe, and Patel end on December 31,2009.

 

**Compensation Committee Report**

 

Oursecurities are not listed on a national securities exchange and we are notrequired to maintain a separate compensation committee of the Board ofDirectors.  The full Board of Directorsfunctions as the Compensation Committee. The Board of Directors has reviewed the Compensation Discussion andAnalysis and discussed that analysis with management.  Based on its review and discussions withmanagement, the Board of Directors has determined that the CompensationDiscussion and Analysis be included in the Company’s Annual Report on Form 10-K.

 
|   | Stephen Adams        |
|--------|----------------------|
|   | Andris A. Baltins    |
|   | David Frith-Smith    |
|   | J. Kevin Gleason     |
|   | George Pransky       |
|   | Townsend C. Smith    |
|   | Michael A. Schneider |

 

96

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**Summary Compensation Table**

 

Thefollowing table shows, for the fiscal years completed December 31, 2008,2007 and 2006, the annual compensation paid to or earned by the Company’sPresident and Chief Executive Officer, the Company’s Senior Vice President and ChiefFinancial Officer and the other three most highly compensated executiveofficers who served as executive officers as of December 31, 2008(collectively, the “Executive Officers”).

 
| ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **       | ** ** | **Change in** | ** ** | ** **       | ** ** | ** ** | ** ** |
|------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------------|------------|--------------------|------------|------------------|------------|------------|------------|
| ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **       | ** ** | **Pension**        | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **       | ** ** | **Value and** | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Non-Equity**   | ** ** | **Non-qualified**  | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Incentive**    | ** ** | **Deferred**       | ** ** | **All**          | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Stock**  | ** ** | **Plan**         | ** ** | **Compensation**   | ** ** | **Other**        | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | **Salary** | ** ** | **Bonus**  | ** ** | **Awards** | ** ** | **Compensation** | ** ** | **Earnings**       | ** ** | **Compensation** | ** ** | **Total**  | ** ** |
| **Name and Principal Position** | ** ** | **Year**   | ** ** | **($)**    | ** ** | **($)**    | ** ** | **($)(1)** | ** ** | **($)**          | ** ** | **($)(2)**         | ** ** | **($)(3)**       | ** ** | **($)**    | ** ** |
| **(a)**                                        | ** ** | **(b)**    | ** ** | **(c)**    | ** ** | **(d)**    | ** ** | **(e)**    | ** ** | **(f)**          | ** ** | **(g)**            | ** ** | **(h)**          | ** ** | **(i)**    | ** ** |
|                                           |       |       |       |       |       |       |       |       |       |             |       |               |       |             |       |       |       |
| Michael A.  Schneider                          |       | 2008       |       | $          | 100,000    |       | $          | —     |       | $                | —     |               | $          | 447,000          |       | $          | 31,106     |   | $ | 7,634 |   | $ | 585,740 |   |
| President, Chief                               |       | 2007       |       | 100,000    |       | —     |       | 236,167    |       | 481,850          |       | 248,070            |       | 11,608           |       | 1,077,695  |       |
| Executive Officer                              |       | 2006       |       | 100,000    |       | —     |       | 936,011    |       | 590,050          |       | 519,133            |       | 8,587            |       | 2,153,781  |       |
|                                           |       |       |       |       |       |       |       |       |       |             |       |               |       |             |       |       |       |
| John Sirpilla                                  |       | 2008       |       | 440,000    |       | —     |       | —     |       | —           |       | —             |       | 29,778           |       | 469,778    |       |
| President Retail                               |       |       |       |       |       |       |       |       |       |             |       |               |       |             |       |       |       |
| Operations of Camping                          |       |       |       |       |       |       |       |       |       |             |       |               |       |             |       |       |       |
| World, Inc.                               |       |       |       |       |       |       |       |       |       |             |       |               |       |             |       |       |       |
|                                           |       |       |       |       |       |       |       |       |       |             |       |               |       |             |       |       |       |
| Prabhuling Patel                               |       | 2008       |       | 184,577    |       | 121,125    |       | —     |       | —           |       | (9,306             | )          | 6,677            |       | 303,073    |       |
| Senior Vice  President                         |       | 2007       |       | 179,808    |       | 132,350    |       | 11,808     |       | —           |       | 19,309             |       | 4,133            |       | 347,408    |       |
|                                           |       | 2006       |       | 175,000    |       | 108,250    |       | 40,155     |       | —           |       | 13,989             |       | 4,000            |       | 341,394    |       |
|                                           |       |       |       |       |       |       |       |       |       |             |       |               |       |             |       |       |       |
| Thomas F. Wolfe                                |       | 2008       |       | 191,000    |       | —     |       | —     |       | 111,750          |       | (13,067            | )          | 4,870            |       | 294,553    |       |
| Senior Vice  President                         |       | 2007       |       | 190,769    |       | —     |       | 31,174     |       | 120,463          |       | 23,284             |       | 8,857            |       | 374,547    |       |
| Chief Financial  Officer                       |       | 2006       |       | 185,000    |       | —     |       | 122,985    |       | 118,010          |       | 41,080             |       | 8,673            |       | 475,748    |       |
|                                           |       |       |       |       |       |       |       |       |       |             |       |               |       |             |       |       |       |
| Joseph Daquino                                 |       | 2008       |       | 185,000    |       | 89,791     |       | —     |       | —           |       | —             |       | 5,770            |       | 280,561    |       |
| Senior Vice  President,                        |       | 2007       |       | 184,175    |       | 125,074    |       | —     |       | —           |       | —             |       | 7,180            |       | 316,429    |       |
| President  Affinity                            |       | 2006       |       | 163,000    |       | 123,393    |       | —     |       | —           |       | —             |       | 6,790            |       | 293,183    |       |
| Membership Clubs                               |       |       |       |       |       |       |       |       |       |             |       |               |       |             |       |       |       |
|                                                |            |            |            |            |            |            |            |            |            |                  |            |                    |            |                  |            |            |            |  |  |  |  |  |  |  |

 

----

(1)           Includes dollar amounts recognized forfinancial statement reporting purposes for the fiscal year ended December 31,2008, 2007 and 2006 pursuant to the phantom stock agreements and thus mayinclude awards granted in and prior to 2008. These amounts differ from the actual payments described under Long-TermCompensation/ Phantom Stock Agreements as the amounts described in that sectioninclude amounts of phantom stock awards earned in prior years.

 

(2)           The amount of earnings on amounts deferredunder the KEYSOP is dependent upon the particular investment choices of theparticipant, which may include private investments.  The Company does not influence or have anyinvolvement in the earnings under the KEYSOP. The amounts shown in the table reflect the aggregate earnings on eachExecutive Officer’s account during 2008, 2007 and 2006 (including earnings thatare at or below market).  Messrs. Sirpillaand Daquino elected not to participate in the KEYSOP.  The Company does not maintain any pensionplans.  In addition, the ExecutiveOfficers do not receive above-market or preferential earnings on compensationthat is deferred pursuant to the 401(k) Plan.

 

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(3)           Includes $5,600, $3,650, $5,640, $4,600 and$5,500 for 2008 and $8,857, $0, $4,133, $8,857 and $6,889 for 2007, and $8,587,$0, $0, $8,673 and $6,520 for 2006, of Company matching contributions under the401(k) Plan for Messrs. Schneider, Sirpilla, Patel, Wolfe andDaquino, respectively.  In addition,includes $2,034 and $173 for 2008 and $2,751 and $0 for 2007, and $0 and $0 for2006, of Company-paid life insurance premiums for Mr. Schneider and Mr. Sirpilla,respectively.  Also includes $25,955 forautomobile allowance for Mr. Sirpilla for 2008.

 

**Grants of Plan-Based Awards in2008**

 

AGI,which is a wholly-owned subsidiary of AGHI, does not grant shares of Companystock or stock options to the Executive Officers.  However, the Company has historically enteredinto phantom stock agreements with the Executive Officers, which are intendedto provide the Executive Officers with a cash equivalent to the increase invalue of the Company or Camping World that would otherwise be realized in stockor option awards of a public company. These awards are described in the section entitled “*CompensationDiscussion and Analysis—Elements of Compensation—Long-Term Compensation/PhantomStock Agreements*” above.

 

Thefollowing table reflects the actual payout to Messrs. Schneider and Wolfepursuant to the annual incentive award program based on Company performance in2008, 2007 and 2006, a portion of which were paid the year earned with theremainder paid the following year.  Asnoted in footnote 1 to the following table, the annual incentive awards paid toMessrs. Sirpilla, Patel and Daquino for 2008, 2007 and 2006 were discretionaryand thus are not reflected in this table.

 
| **Name**                                                 | ** ** | **Year** | ** ** | **Estimated Future Payouts Under Non-  Equity Incentive Plan Awards  Target ($)(1)** | ** ** |
|----------------------------------------------------------|------------|----------|------------|------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                     |       |     |       |                                                                                                                         |       |
| Michael A.  Schneider                                    |       | 2008     |       | $                                                                                                                            | 447,000    |   |
| President, Chief  Executive Officer                      |       | 2007     |       | 481,350                                                                                                                      |       |
|                                                     |       | 2006     |       | 590,050                                                                                                                      |       |
|                                                     |       |     |       |                                                                                                                         |       |
| John Sirpilla                                            |       | 2008     |       | —                                                                                                                       |       |
| President Retail  Operations of Camping World, Inc. |       | 2007     |       | —                                                                                                                       |       |
|                                                     |       | 2006     |       | —                                                                                                                       |       |
|                                                     |       |     |       |                                                                                                                         |       |
| Prabhuling Patel                                         |       | 2008     |       | —                                                                                                                       |       |
| Senior Vice  President                                   |       | 2007     |       | —                                                                                                                       |       |
|                                                     |       | 2006     |       | —                                                                                                                       |       |
|                                                     |       |     |       |                                                                                                                         |       |
| Thomas F. Wolfe                                          |       | 2008     |       | 111,750                                                                                                                      |       |
| Senior Vice  President                                   |       | 2007     |       | 120,463                                                                                                                      |       |
| Chief Financial  Officer                                 |       | 2006     |       | 118,010                                                                                                                      |       |
|                                                     |       |     |       |                                                                                                                         |       |
| Joseph Daquino                                           |       | 2008     |       | —                                                                                                                       |       |
| Senior Vice  President                                   |       | 2007     |       | —                                                                                                                       |       |
|                                                     |       | 2006     |       | —                                                                                                                       |       |
|                                                          |            |          |            |                                                                                                                              |            |  |

 

----

(1)           Represents award under the Company’s annualincentive award program.  The amounts incolumn (d) reflect the actual payout to each of Messrs. Schneider andWolfe under the annual incentive award program based upon Company performancein 2008, 2007 and 2006, a portion of which was paid in the year earned with theremainder paid the following year.  Theseamounts are also reflected in column (f) of the Summary 

 

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CompensationTable for each Executive Officer, as applicable.  The annual incentive award program does notinclude threshold or maximum target amounts. The annual incentive awards paid to Messrs. Patel and Daquino for2008, 2007 and 2006 performance were discretionary and thus are not included inthe foregoing table.  Mr. Sirpilladid not receive an annual incentive award. The terms of the Company’s annual incentive award program for 2008, 2007and 2006 are described in more detail under the section entitled “*Compensation Discussion and Analysis—Elements of Compensation—AnnualCompensation—Annual Incentive Awards*” above.

 

**Outstanding Equity Awards at 2008 Fiscal Year-End**

 

AGI,which is a wholly-owned subsidiary of AGHI, does not grant shares of Companystock or stock options to the Executive Officers.  However, the Company has historically enteredinto phantom stock agreements with the Executive Officers, which are intendedto provide the Executive Officers with a cash equivalent to the increase invalue of the Company or Camping World that would otherwise be realized in stockor option awards of a public company. These awards are described in the section entitled “*CompensationDiscussion and Analysis—Elements of Compensation—Long-Term Compensation/PhantomStock Agreements*” above.  Allprior awards to the Executive Officers pursuant to phantom stock agreementsentered into before January 1, 2007 were earned or vested as of December 31,2007.

 

**Option Exercises and Stock Vested in 2008**

 

The following table gives information concerning the vesting of theExecutive Officers’ interests under phantom stock agreements during 2008, 2007and 2006.  The Company, which is awholly-owned subsidiary of AGHI, does not grant option awards to the ExecutiveOfficers.

 
| ** **                                               | ** ** | ** ** | ** ** | **Stock Awards**          | ** ** |
|----------------------------------------------------------|------------|------------|------------|--------------------------------|------------|
| ** **                                               | ** ** | ** ** | ** ** | **Value of Options** | ** ** | **Value Realized** | ** ** |
| ** **                                               | ** ** | ** ** | ** ** | **upon Vesting**          | ** ** | **on Vesting** | ** ** |
| **Name**                                                 | ** ** | **Year**   | ** ** | **(1)**                        | ** ** | **($)** | ** ** |
|                                                     |       |       |       |                           |       |   |   |
| Michael A. Schneider                                     |       | 2008       |       | $                              | —     |   | $ | — |   |
| President, Chief  Executive Officer                      |       | 2007       |       | 236,167                        | (2)        | 236,167 | (7) |
|                                                     |       | 2006       |       | 936,011                        | (3)        | 936,011 | (6) |
|                                                     |       |       |       |                           |       |   |   |
| John Sirpilla                                            |       | 2008       |       | —                         | (4)        | — |   |
| President Retail  Operations of Camping World, Inc. |       |       |       |                           |       |   |   |
|                                                     |       |       |       |                           |       |   |   |
|                                                     |       |       |       |                           |       |   |   |
| Prabhuling Patel                                         |       | 2008       |       | —                         |       | — |   |
| Senior Vice  President                                   |       | 2007       |       | 11,808                         | (2)        | 11,808 | (7) |
|                                                     |       | 2006       |       | 40,155                         | (3)        | 40,155 | (6) |
|                                                     |       |       |       |                           |       |   |   |
| Thomas F. Wolfe                                          |       | 2008       |       | —                         |       | — |   |
| Senior Vice  President                                   |       | 2007       |       | 31,174                         | (2)        | 31,174 | (7) |
| Chief Financial  Officer                                 |       | 2006       |       | 122,985                        | (3)        | 122,985 | (6) |
|                                                     |       |       |       |                           |       |   |   |
| Joseph Daquino                                           |       | 2008       |       | —                         | (5)        | — |   |
| Senior Vice  President                                   |       | 2007       |       | —                         |       | — |   |
|                                                     |       | 2006       |       | —                         |       | — |   |
|                                                          |            |            |            |                                |            |  |  |  |  |

 

99

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(1)           The Executive Officers’ interests under the phantom stock agreementsare denominated as a percentage of increases in the value over a multiple-yearmeasurement period, as described in more detail under the section entitled “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*” above.  The amounts set forth in this column reflectthe dollar amount of that percentage interest, as calculated upon vesting.

 

(2)           Represents the dollar value of Messrs. Schneider’s, Patel’s andWolfe’s percentage increase in the value during 2008 and 2007 pursuant to theirrespective phantom stock agreements dated January 1, 2007, as described inmore detail under the section entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above.  As describedin that section, this amount, if any, will be paid out in three equal annualinstallments, the first of which will be distributed during the second quarterof 2010.

 

(3)           Represents the dollar value of Messrs. Schneider’s, Wolfe’s andPatel’s percentage increase in the value during 2006 pursuant to theirrespective phantom stock agreements dated January 1, 2004, as described inmore detail under the section entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above.  Asdescribed in that section, this amount will be paid out in three equal annualinstallments, the first of which was distributed during the second quarter of2007.

 

(4)           Mr. Sirpilla did not earn any interests under the phantom stockagreements during 2008, 2007 or 2006 and is not party to a phantom stockagreement.

 

(5)           Mr. Daquino did not earn any interest under the phantom stockagreements until January 1, 2007. This amount will be paid, if any, in three equal annual installments,the first of which will be distributed during the second quarter of 2010.

 

(6)           As described in more detail under the section entitled, “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*,” this amount will be paid outin three equal annual installments, the first of which was distributed duringthe second quarter of 2007.

 

(7)           As described in more detail under the section entitled, “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*,” this amount represents thephantom stock interest earned in 2007 under the agreements entered into on January 1,2007 with a determination date of December 31, 2009.

 

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**Nonqualified Deferred Compensation in Fiscal 2008**

 

The following table sets forth information regarding the ExecutiveOfficers’ participation in the KEYSOP.

 
| ** **                      | ** ** | ** ** | ** ** | **Executive**            | ** ** | **Registrant**           | ** ** | **Aggregate**            | ** ** | **Aggregate**     | ** ** | **Aggregate**             | ** ** |
|---------------------------------|------------|------------|------------|--------------------------|------------|--------------------------|------------|--------------------------|------------|-------------------|------------|---------------------------|------------|
| ** **                      | ** ** | ** ** | ** ** | **Contribution**         | ** ** | **Contributions**        | ** ** | **Earnings**             | ** ** | **Withdrawals/**  | ** ** | **Balance**               | ** ** |
| ** **                      | ** ** | ** ** | ** ** | **In Last FY** | ** ** | **in Last FY** | ** ** | **in Last FY** | ** ** | **Distributions** | ** ** | **at Last FYE** | ** ** |
| **Name**                        | ** ** | ** ** | ** ** | **($)**                  | ** ** | **($)**                  | ** ** | **($)**                  | ** ** | **($)**           | ** ** | **($)**                   | ** ** |
| **(a)**                         | ** ** | **Year**   | ** ** | **(b)**                  | ** ** | **(c)**                  | ** ** | **(d)**                  | ** ** | **(e)**           | ** ** | **(f)**                   | ** ** |
|                            |       |       |       |                     |       |                     |       |                     |       |              |       |                      |       |
| Michael A.  Schneider           |       | 2008       |       | —                   |       | —                   |       | $                        | 31,106     |              | $          | 2,262,704                 |       | — |   |
| President, Chief  Executive     |       | 2007       |       | —                   |       | —                   |       | 248,070                  |       | 2,816,304         |       | 2,231,598                 |       |
| Officer                         |       | 2006       |       | —                   |       | —                   |       | 519,133                  |       | —            |       | 4,799,832                 |       |
|                            |       |       |       |                     |       |                     |       |                     |       |              |       |                      |       |
| John Sirpilla                   |       | 2008       |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
| President Retail  Operations of |       | 2007       |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
| Camping  World, Inc. (1)   |       | 2006       |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
|                            |       |       |       |                     |       |                     |       |                     |       |              |       |                      |       |
| Prabhuling Patel                |       | 2008       |       | —                   |       | —                   |       | (9,306                   | )          | 233,417           |       | —                    |       |
| Senior Vice  President          |       | 2007       |       | 102,722                  |       | —                   |       | 19,309                   |       | —            |       | 242,723                   |       |
|                            |       | 2006       |       | 106,703                  |       | —                   |       | 13,989                   |       | —            |       | 120,692                   |       |
|                            |       |       |       |                     |       |                     |       |                     |       |              |       |                      |       |
| Thomas F. Wolfe                 |       | 2008       |       | —                   |       | —                   |       | (13,067                  | )          | 265,979           |       |                      |       |
| Senior Vice  President          |       | 2007       |       | —                   |       | —                   |       | 23,284                   |       | —            |       | 279,046                   |       |
| Chief Financial  Officer        |       | 2006       |       | —                   |       | —                   |       | 41,080                   |       | —            |       | 255,762                   |       |
|                            |       |       |       |                     |       |                     |       |                     |       |              |       |                      |       |
| Joseph Daquino                  |       | 2008       |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
| Senior Vice  President (1)      |       | 2007       |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
|                            |       | 2006       |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
|                                 |            |            |            |                          |            |                          |            |                          |            |                   |            |                           |            |  |  |

 

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(1)                                  Messrs. Sirpilla and Daquino elected notto participate in the KEYSOP.

 

Key employees of the Company, including the Executive Officers, areeligible to participate in the KEYSOP, the terms of which are described underthe section entitled “*Compensation Discussionand Analysis—Elements of Compensation—Other Elements of Compensation—KEYSOP*”above through March 2007.  Theeligible Executive Officers could elect to defer all or a portion of theirannual incentive awards and payout from the phantom stock awards to theKEYSOP.  Beginning April 1, 2007future contributions to the KEYSOP were no longer allowed.  Trustees under the KEYSOP receive suchcontributions and invest the deferred amounts based on the specific electionsof each participant.  Participants mayinvest in a wide range of products, excluding certificates of deposits andmoney market accounts.  The Company doesnot make matching contributions to the KEYSOP.

 

**Potential Payments upon Termination or Change-in-Control**

 

Overview:  The tables below reflect the estimated amountof compensation that would be payable to each Executive Officer under the termsof his phantom stock agreement in the event of termination of such ExecutiveOfficer’s employment under any one of the following scenarios:

 

·                  Without cause by the Company; or

 

·                  Without cause by the Company or with goodreason by the Executive Officer in connection with a change in control.

 

An Executive Officer is not entitled to a severance payment upon (i) terminationof the phantom stock agreement or employment at any time by the ExecutiveOfficer (other than termination

 

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with good reason in connection with a change in control); (ii) deathof the Executive Officer or (iii) disability of the Executive Officer.

 

The amounts set forth in the tables below do not reflect any applicabletax withholdings or other deductions by the Company from the amounts otherwisepayable to the Executive Officers upon termination of employment.

 

Potential Payments Upon Termination Without Cause by the Company:  Thephantom stock agreements provide for severance payments to the ExecutiveOfficers in the event the Company terminates their employment without “cause.”  “Cause” includes, but is not limited to:

 

·                  The Executive Officer’s breach of the termsof the phantom stock agreement or any other legal obligation of the Company; or

 

·                  The Executive Officer’s fraud, dishonesty,negligence, misconduct or other deliberate action which causes injury to theCompany or any of its subsidiaries or to their respective reputations or an actof the Executive involving moral turpitude or a serious crime.

 

For purposes of calculating the potential payments set forth in thetable below, we have assumed that the date of termination was December 31,2008.  The total amounts set forth in thetable below would be distributed to each Executive Officer in a lump sum within30 days after the determination of the amount of accrued but unpaid annualincentive award.

 
| **Benefits and  Payments**                | ** ** | **Mr. Schneider** | ** ** | **Mr. Sirpilla** | ** ** | **Mr. Patel** | ** ** | **Mr. Wolfe** | ** ** | **Mr. Daquino** | ** ** |
|------------------------------------------------|------------|------------------------|------------|-----------------------|------------|--------------------|------------|--------------------|------------|----------------------|------------|
| Basic  Compensation                            |       | $                      | 915,173    | (2)                   | —     | (3)                | $          | 203,801            | (4)        | $                    | 302,750    | (5) | $ | 274,791 | (6) |
|                                           |       |                   |       |                  |       |               |       |               |       |                 |       |
| Accrued and  unpaid annual incentive award (1) |       | 14,308                 |       | —                |       | 121,125            |       | 2,677              |       | 89,791               |       |
| Total                                          |       | $                      | 929,481    |                  | —     |               | $          | 324,926            |       | $                    | 305,427    |   | $ | 364,582 |   |

 

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(1)           Represents an amount equal to each Executive Officer’s accrued butunpaid annual incentive award as of December 31, 2008.

 

(2)           Represents an amount equal to Mr. Schneider’s base salary and annualincentive award as of December 31, 2008, divided by 52 weeks, times 87weeks.   As of December 31, 2008, Mr. Schneiderhad been employed with the Company for 31 years.  The annual base salary and annual incentiveaward in effect for Mr. Schneider as of December 31, 2008 isreflected in the Salary column and Non-Equity Incentive Plan Compensationcolumn, respectively, of the Summary Compensation Table above.

 

(3)           Mr. Sirpilla is not a participant in a current phantom stockagreement and is not entitled to any payments upon termination or change ofcontrol.

 

(4)           Represents an amount equal to eight months of base salary and annualincentive award for Mr. Patel as of December 31, 2008.  The annual base salary and annual incentiveaward in affect as of December 31, 2008 is reflected in the Salary columnand Bonus column, respectively, of the Summary Compensation Table above.

 

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(5)           Represents anamount equal to one full year of the base salary and annual incentive award to Mr. Wolfeas of December 31, 2008.  The annualbase salary and annual incentive award in effect as of December 31, 2008is reflected in the Salary column and the Non-Equity Incentive PlanCompensation column, respectively, of the Summary Compensation Table above.

 

(6)           Represents anamount equal to one full year of the base salary and annual incentive award to Mr. Daquinoas of December 31, 2008.  The annualbase salary and annual incentive award in effect as of December 31, 2008is reflected in the Salary column and the Non-Equity Incentive PlanCompensation column, respectively, of the Summary Compensation Table above.

 

Potential Payments Upon Termination by Executive Officer with GoodReason upon a Change in Control:  The phantom stock agreements entered into by Messrs. Schneider,Wolfe and Patel provide for severance payments in the event their employment isterminated without “cause” by the Company (as defined in the preceding section)or with “good reason” by the Executive Officer in connection with a “change incontrol.”  A “change in control” will bedeemed to have occurred under the phantom stock agreements at such time as:

 

·      Stephen Adams,his spouse, lineal descendants and trusts for the benefit of such persons ceaseto beneficially own (as defined under Rule 13d-3 of the Act), directly orindirectly a majority of the voting equity interests of the Company;

 

·      There is a consolidation ormerger of AGI or its parent, AGHI (or such other entity that holds in excess of80% of the issued and outstanding equity securities of AGHI) (the “Parent”), inwhich the Company or the Parent is not the surviving entity or in which theholders of the voting equity interests in the Company or the Parent, as thecase may be, do not continue to hold at least a majority of the voting equityinterests of the surviving entity following the merger;

 

·      There is asale, lease or transfer of all or substantially all of the assets of theCompany or the Parent to any person or group; or

 

·      Theshareholders of the Company or the Parent shall approve a plan or proposal forthe liquidation or dissolution of the Company or the Parent, as the case maybe.

 

The phantom stock agreements define “good reason” as occurrence of oneor more of the following events, without the Executive Officer’s writtenconsent, within 3 years following a change in control (or before the change incontrol if the occurrence is directly connected to the change in control andthe change in control occurs):

 

·      A change in theExecutive Officer’s duties, authorities or any other responsibilities(including status, offices, titles and reporting requirements);

 

·      A reduction inbase salary or annual incentive award compensation; or

 

·      A relocation ofthe Executive Officer outside the same metropolitan area as the ExecutiveOfficer’s current office location.

 

For purposes of calculating the potential payments set forth in thetable below, we have assumed that the date of termination was December 31,2008.  The amounts of basic

 

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compensation and accrued but unpaid annual incentive award would bepaid in a lump sum within 30 days after the determination of the amount of theaccrued annual incentive award.

 
| **Benefits and  Payments**                                | ** ** | **Mr. Schneider** | ** ** | **Mr. Sirpilla** | ** ** | **Mr. Patel** | ** ** | **Mr. Wolfe** | ** ** | **Mr. Daquino** | ** ** |
|----------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|--------------------|------------|--------------------|------------|----------------------|------------|
| Basic  Compensation *(base salary and annual incentive award)* |       | $                      | 915,173    | (3)                   | —     | (4)                | $          | 203,801            | (6)        | $                    | 302,750    | (5) | $ | 274,791 | (7) |
|                                                           |       |                   |       |                  |       |               |       |               |       |                 |       |
| Accrued and  unpaid annual incentive award (1)                 |       | 14,380                 |       | —                |       | 121,125            |       | 2,677              |       | 89,791               |       |
|                                                           |       |                   |       |                  |       |               |       |               |       |                 |       |
| Life and Health Insurance  Benefits (2)                        |       | 58,784                 |       | —                |       | 37,915             |       | 50,189             |       | 37,728               |       |
| Total                                                          |       | $                      | 988,337    |                  | —     |               | $          | 362,841            |       | $                    | 355,616    |   | $ | 402,310 |   |

 

----

(1)           Represents anamount equal to each Executive Officer’s accrued but unpaid annual incentiveaward as of December 31, 2008.

 

(2)           Represents thevalue of health benefits for a three year period following termination based ona monthly premium of $1,394 for Messrs. Schneider and Wolfe, $1,053 for Mr. Patel,and $1,048 for Mr. Daquino.  In thecase of Mr. Schneider, also includes the value of life insurance benefitsfor a period of three years following termination based on a monthly premium of$239.

 

(3)           Represents anamount equal to Mr. Schneider’s base salary and annual incentive award asof December 31, 2008, divided by 52 weeks, times 87 weeks.  The annual base salary and annual incentiveaward in effect for Mr. Schneider as of December 31, 2008 isreflected in the Salary column and Non-Equity Incentive Plan Compensationcolumn, respectively, of the Summary Compensation Table above.

 

(4)           Mr. Sirpillais not a participant in a current phantom stock agreement and is not entitledto any payments upon termination or change of control.

 

(5)           Represents anamount equal to one full year of the base salary and annual incentive award of Mr. Wolfeas of December 31, 2008.  The annualbase salary and annual incentive award in effect as of December 31, 2008is reflected in the Salary column and the Non-Equity Incentive PlanCompensation column, respectively, of the Summary Compensation Table above.

 

(6)           Represents anamount equal to eight months of base salary and annual incentive award for Mr. Patelas of December 31, 2008.  The annualbase salary and annual incentive award in affect as of December 31, 2008is reflected in the salary column, respectively, of the Summary CompensationTable.

 

(7)           Represents anamount equal to one full year of the base salary and annual incentive award of Mr. Daquinoas of December 31, 2008.  The annualbase salary and annual incentive award in effect as of December 31, 2008is reflected in the Salary column and the Non-Equity Incentive PlanCompensation column, respectively, of the Summary Compensation Table above.

 

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Non-Competition and Non-Solicitation Agreements: The phantomstock agreement entered into by each Executive Officer includes an eighteenmonth covenant not to compete and a one year non-solicitation clause.

 

Employment Terms of Phantom Stock Agreements: In additionto establishing the parameters for phantom stock incentive awards (as describedunder the section entitled “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*”) and the severance payments described above, the phantomstock agreements set forth the terms of employment for each Executive Officeras follows:

 

·      *Mr. Schneider*:  Mr. Schneider’s phantom stock agreement,dated January 1, 2007, provides that he will be employed as the Presidentand Chief Executive Officer of the Company. Mr. Schneider is entitled to receive a base salary and annualincentive award in accordance with such practices and procedures as aregenerally applicable to other employees. The term of the phantom stock agreement expires on December 31,2009.

 

·      *Mr. Wolfe*:  Mr. Wolfe’s phantom stock agreement,dated January 1, 2007, provides that he will be employed as the SeniorVice President and Chief Financial Officer of the Company.  Mr. Wolfe is entitled to receive a basesalary and annual incentive award in accordance with such practices andprocedures as are generally applicable to other employees.  The term of the phantom stock agreementexpires on December 31, 2009.

 

·      *Mr. Patel*:  Mr. Patel’s phantom stock agreement,dated January 1, 2007, provides that he will be employed as the SeniorVice President of the Company.  Mr. Patelis entitled to receive a base salary and annual incentive award in accordancewith such practices and procedures as are generally applicable to otheremployees.  The term of the phantom stockagreement expires on December 31, 2009.

 

·      *Mr. Daquino*:  Mr. Daquino’s phantom stock agreement,dated January 1, 2007, provides that he will be employed as the SeniorVice President of the Company.  Mr. Daquinois entitled to receive a base salary and annual incentive award in accordancewith such practices and procedures as are generally applicable to otheremployees.  The term of the phantom stockagreement expires on December 31, 2009.

 

Each of the Executive Officer’s phantom stock agreement also providesthat he (i) will be eligible to receive such benefits as are provided bythe Company from time to time to similarly situated employees and (ii) willbe eligible to participate in any future bonus programs adopted by theCompany.  An Executive Officer mayterminate his employment upon two-weeks’ notice.  The Company may terminate the employment ofan Executive Officer at any time upon written notice, effective immediately.

 

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**Director Compensation in 2008**

 

The Company pays its non-management directors a monthly director’s feeof $1,800 per month.  The Company doesnot compensate Messrs. Adams or Schneider for their service on the Boardof Directors.  The Company does notprovide any other compensation or benefits to the members of its Board of Directors.  During 2008, the following fees were earnedor paid in cash to the respective director:

 
| **Name**              | ** ** | ** ** | ** ** | **Fees Earned or  Paid in Cash ($ )** | ** ** | **Total ($ )** | ** ** |
|-----------------------|------------|------------|------------|---------------------------------------------------------------------|------------|--------------------------|------------|
| **(a)**               | ** ** | **Year**   | ** ** | **(b)**                                                             | ** ** | **(h)**                  | ** ** |
| Andris A.  Baltins(1) |       | 2008       |       | $                                                                   | 21,600     |                     | $          | 21,600 |   |
|                  |       | 2007       |       | 21,600                                                              |       | 21,600                   |       |
|                  |       | 2006       |       | 18,000                                                              |       | 18,000                   |       |
|                  |       |       |       |                                                                |       |                     |       |
| David  Frith-Smith    |       | 2008       |       | 21,600                                                              |       | 21,600                   |       |
|                  |       | 2007       |       | 21,600                                                              |       | 21,600                   |       |
|                  |       | 2006       |       | 21,600                                                              |       | 21,600                   |       |
|                  |       |       |       |                                                                |       |                     |       |
| J. Kevin  Gleason(2)  |       | 2008       |       | 21,600                                                              |       | 21,600                   |       |
|                  |       | 2007       |       | 21,600                                                              |       | 21,600                   |       |
|                  |       | 2006       |       | 21,600                                                              |       | 21,600                   |       |
|                  |       |       |       |                                                                |       |                     |       |
| George  Pransky(1)    |       | 2008       |       | 21,600                                                              |       | 21,600                   |       |
|                  |       | 2007       |       | 21,600                                                              |       | 21,600                   |       |
|                  |       | 2006       |       | 18,000                                                              |       | 18,000                   |       |
|                  |       |       |       |                                                                |       |                     |       |
| Townsend C.  Smith(3) |       | 2008       |       | 18,000                                                              |       | 18,000                   |       |
|                       |            |            |            |                                                                     |            |                          |            |  |  |

 

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(1)     Messrs. Baltins andPransky were elected to the Board of Directors in February 2006.

 

(2)      In addition to the amountset forth in this table, Mr. Gleason received $5,400 in 2006 as paymentfor his service as a member of the Board of Directors from October throughDecember of 2005.

 

(3)      Mr. Smith was electedto the Board of Directors in March 2008.

 

**Compensation Committee Interlocks and Insider Participation**

 

TheCompany’s Board of Directors determines the compensation of the executiveofficers.  Michael A. Schneider,President and Chief Executive Officer of the Company, serves on the Board ofDirectors. Mr. Schneider also serves as a director of AOA, which iscontrolled by Mr. Adams and for which Mr. Gleason is the ChiefExecutive Officer.  Mr. Gleason, amember of the Company’s Board of Directors, is also the Chief Executive Officerof AOA, which is controlled by Mr. Adams and Mr. Schneider is on theBoard of Directors of AOA.

 

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**ITEM12:  SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

AGIis a wholly-owned subsidiary of AGHI. AGHI is an indirect wholly-owned subsidiary of AGI Holding Corp. (“AGHC”),a privately-owned corporation.  Thefollowing table sets forth, as of December 31, 2008, certain informationwith respect to the beneficial ownership of the Common Stock of AGHC by eachshareholder who is known to us to beneficially own more than 5% of theoutstanding shares, each director, each executive officer listed in the SummaryCompensation Table and all of our executive officers and directors as a group.

 
| **Name and Address of Beneficial Owner**     | ** ** | **Number of Shares  of Stock Owned (1)** | ** ** | **Percent of  Common Stock** | ** ** |
|-----------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|----------------------------------------|------------|
|                                                                  |       |                                                              |       |                                   |       |
| Stephen Adams,  Director  2575 Vista Del Mar Drive  Ventura, CA 93001 |       | 1,407.7                                                           |       | 100.0                                  | %          |

 

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(1)  Except as otherwise indicated, the beneficial owners havesole voting and investment power with respect to the shares in the table.

 

**ITEM 13:  CERTAIN RELATIONSHIPSAND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

 

**Certain Relationships and Related PersonTransactions**

 

Review and Approval of Related PersonTransactions

 

TheCompany entered into an indenture for the AGHI Senior Notes in March 2005,which requires the Board of Directors to approve any new transaction or seriesof transactions entered into between the Company and other entities controlled byMr. Adams subsequent to the date of the indenture which, eitherindividually or in the aggregate, exceeds $2.5 million.  In addition, the Company must obtain afairness opinion with respect to any such new transaction or series oftransactions entered into subsequent to the date of the indenture which, eitherindividually or in the aggregate, exceeds $10 million.  The Company has been in compliance with theindenture requirements at all times.

 

RelatedParty Transactions

Inconnection with our effort to expand the number of Camping World stores bydeveloping retail alliances with RV dealerships across North America, we haveestablished 45 Camping World stores alongside or within RV dealerships owned byFreedomRoads, which is controlled by the Chairman of our Board of Directors,Stephen Adams, and we expect to open additional Camping World stores alongsideor within such RV dealerships in the future. At December 31,2008, the Company leased 37 properties from FreedomRoads, sub-leased sixproperties to FreedomRoads, and Camping World and FreedomRoads are jointtenants under six leases.  Total paymentsby the Company to FreedomRoads under these leased properties for 2008 and 2007were approximately $4.2 million and $3.7 million, respectively, and futurecommitments under these leases total approximately $36.3 million.  The leases expire at various dates from August 2013through September 2018.  For 2008and 2007, lease payments received from FreedomRoads for the six subleasedproperties were approximately $0.7 million and $0.9 million, respectively, andfuture payments to be received under these sub-leases total 

 

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approximately $4.5million.  The Company paid FreedomRoadsapproximately $7.7 million and $9.4 million in 2008 and 2007, respectively andFreedomRoads paid the Company approximately $27.7 million and $17.5 million in2008 and 2007, respectively, under the product marketing and sales agreements.

 

OnDecember 5, 2001, we sold eleven real estate properties to eleven separatewholly-owned subsidiaries of AGRP Holding Corp, a wholly-owned subsidiary ofour ultimate parent, AGHC, which is owned 98.2% by Mr. Adams, for $52.3million in cash and a $4.8 million note receivable.  The properties have been leased back to us ona triple net basis. These leases are classified as operating leases and theaverage net annual lease payments over the lives of the leases are $3.4million.  These leases have an initialterm of 25 to 27 years with two five-year options at the then current marketrent.  The $4.8 million note receivableyields 11% per annum, with monthly payments of approximately $46,000 and aten-year balloon due December 2011.

 

Fora description of the employment, consulting and non-competition agreements betweenthe Company and the Executive Officers, see the sections entitled “*Potential Payments upon Termination and Change inControl—Non-Competition and Non-Solicitation Agreements*” and “*—Employment Terms of Phantom Stock Agreements*” above.  For a description of the management incentiveand phantom stock agreements between the Company and the Executive Officers,see the sections entitled “*Compensation Discussionand Analysis—Elements of Compensation—Annual Compensation—Annual IncentiveAwards*” and “*—Long-TermCompensation/Phantom Stock Agreements*” above.

 

Thelaw firm of Kaplan, Strangis and Kaplan, P.A. (“KSK”) provides ongoing legalservices to the Company and certain subsidiaries in connection with variousmatters. Andris A. Baltins, a member of the Board of Directors, is a member ofthat firm.  During2008, 2007 and 2006, KSK received $201,000, $257,000, and $198,000 in legalfees from the Company, respectively.

 

The consulting firm ofPransky and Associates, P.S. (“PA”) provides ongoing consulting services to theCompany and certain subsidiaries.  GeorgePransky, a member of the Board of Directors, is a director of thatcompany.  During 2008 and 2007, PAreceived $0 and $86,000 in fees from the Company, respectively.

 

The accounting firm ofFrith-Smith & Archibald, LLP (“FSA”), provides tax preparation andreview services to the Company and certain subsidiaries.  David Frith-Smith, a member of the Board ofDirectors, is a partner of that company. During 2008 and 2007, FSA received $0 and $13,000 in fees from theCompany, respectively.

 

Director Independence

 

TheCompany’s securities are not listed on any national securities exchange and itis not subject to any director independence requirements.  In addition, the Company has not adopted itsown standards of director independence. For purposes of this disclosure, the Company has reviewed theindependence of its directors under the standards adopted by the New York StockExchange.  The Company has determinedthat none of the members of the Board of Directors are independent under theNew York Stock Exchange standards.

 

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**ITEM14: PRINCIPAL ACCOUNTING FEES AND SERVICES**

 

The Board of Directors engaged Ernst & Young LLP as anindependent Registered Public Accounting Firm to examine our accounts for thefiscal year ending December 31, 2008.

 

**AuditFees**

 

Theaggregate audit fees paid to Ernst & Young LLP for the fiscal yearsended December 31, 2008 and 2007 were $459,695 and $393,545,respectively.   These fees includeamounts for the audit of the Company’s consolidated annual financialstatements, stand alone audits of certain subsidiaries, and the reviews of theconsolidated financial statements included in the Company’s Quarterly Reportson Form 10-Q, including assistance with and review of documents filed withthe SEC.

 

**Audit-RelatedFees**

 

Therewere no audit-related fees in 2008 or 2007.

 

**Tax Fees**

 

The aggregate fees billed by Ernst & Young LLP for taxservices rendered for the fiscal years ended December 31, 2008 and 2007were $2,064 and $5,250, respectively. The fees paid in each of those years primarily related to tax planningand compliance services.

 

**All Other Fees**

 

There were no other fees paid to Ernst & Young LLP for theyears ended December 31, 2008 and 2007.

 

**Pre-ApprovalRequirements**

 

TheBoard of Directors has the sole authority to review in advance and grant anypre-approvals of (i) all auditing services to be provided by theindependent Registered Public Accounting Firm, (ii) all significantnon-audit services to be provided by the independent auditors as permitted by Section 10Aof the Securities Exchange Act of 1934, and (iii) all fees and the termsof engagement with respect to such services. All audit and non-audit services performed by Ernst & Young LLPduring fiscal 2008 were pre-approved pursuant to the procedures outlined above.

 

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**PART IV**

 

**ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES**

 
|   | (a) (1) |   | Consolidated financial  statements are included in Item 8 hereto.                                                         |
|--------|--------------|--------|---------------------------------------------------------------------------------------------------------------------------|
|   |         |   |                                                                                                                      |
|   | (a) (2) |   | Consolidated financial  statement schedules are included in Item 8 hereto.                                                |
|   |         |   |                                                                                                                      |
|   | (a) (3) |   | Listing of Exhibits:                                                                                                      |
|   |         |   |                                                                                                                      |
|   |         |   | The exhibits required  to be a part of this report are listed in the Index to Exhibits which follows  the signature page. |
|   |         |   |                                                                                                                      |
|   | (b)          |   | Exhibits:                                                                                                                 |
|   |         |   |                                                                                                                      |
|   |         |   | Included in Item 15 (a) (3) above.                                                                              |
|   |         |   |                                                                                                                      |
|   | (c)          |   | Financial Statement  Schedules                                                                                            |
|   |         |   |                                                                                                                      |
|   |         |   | Included in Item 15 (a) (2) above.                                                                              |

 

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**SIGNATURES**

 

Pursuant to the requirements of Section 13or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized, in the City of Ventura, State of California on June 5, 2009.

 

 

AFFINITY GROUP, INC.

 

 
| By                      | /s/ Michael A.  Schneider |   |
|-------------------------|---------------------------|--------|
| Michael A. Schneider    |                      |
| Chief Executive Officer |                      |

 

 

Pursuant to therequirements of the Securities Act of 1934, this report has been signed belowby the following persons on behalf of the registrant in the capacities and onthe dates indicated.

 

 
| /s/ Thomas F. Wolfe |   | Senior Vice President  and Chief Financial Officer |   | June 5, 2009 |
|---------------------|--------|----------------------------------------------------|--------|--------------|
| Thomas F. Wolfe     |   | (Principal Financial  and Accounting Officer)      |   |         |
|                |   |                                               |   |         |
|                |   |                                               |   |         |
| *                   |   | Director                                           |   | June 5, 2009 |
| Stephen Adams       |   |                                               |   |         |
|                |   |                                               |   |         |
|                |   |                                               |   |         |
| *                   |   | Director                                           |   | June 5, 2009 |
| Andris A. Baltins   |   |                                               |   |         |
|                |   |                                               |   |         |
|                |   |                                               |   |         |
| *                   |   | Director                                           |   | June 5, 2009 |
| David Frith-Smith   |   |                                               |   |         |
|                |   |                                               |   |         |
|                |   |                                               |   |         |
| *                   |   | Director                                           |   | June 5, 2009 |
| J. Kevin Gleason    |   |                                               |   |         |

 

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| *                 |                | Director |   | June 5, 2009 |
|-------------------|---------------------|----------|--------|--------------|
| Townsend C. Smith |                |     |   |         |
|              |                |     |   |         |
|              |                |     |   |         |
| *By:              | /s/ Thomas F. Wolfe |     |   |         | June 5, 2009 |
|              | (Thomas F. Wolfe    |     |   |         |   |
|              | Attorney-in-Fact)   |     |   |         |   |

 

 

Thomas F. Wolfe,pursuant to Powers of Attorney executed by each of the officers and directorslisted above whose name is marked by an “*” and filed as an exhibit hereto, bysigning his name hereto does hereby sign and execute this Report of AffinityGroup, Inc. on behalf of each of such officers and directors in thecapacities in which the names of each appear above.

 

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**AFFINITYGROUP, INC.**

**EXHIBITINDEX TO ANNUAL REPORT ON FORM 10-K**

**For Fiscal Year Ended December 31, 2008**

 
|                                                                                                                                                                                                                                                                                                                                             |   | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|-------------------------------|
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Certificate  of Incorporation of Affinity Group, Inc. (1)                                                                                                                                                                                                                                                                                   |   | 3.1                                           |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Bylaws  of Affinity Group, Inc. (1)                                                                                                                                                                                                                                                                                                         |   | 3.2                                           |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Certificate  of Ownership and Merger (1)                                                                                                                                                                                                                                                                                                         |   | 3.3                                           |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Indenture  (including form of 9% Senior Subordinated Notes due 2012) dated as of  February 18, 2004 among Affinity Group, Inc., the Guarantors named  therein and The Bank of New York, as Trustee (1)                                                                                                                                 |   | 4.5                                           |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Registration  Rights Agreement dated as of February 18, 2004 among Affinity  Group, Inc., the Guarantors named herein and CIBC World Markets Corp.,  as Initial Purchaser (1)                                                                                                                                                          |   | 4.6                                           |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Tax  Sharing Agreement among Affinity Group Holding, Inc., Affinity  Group, Inc. and its subsidiaries, as amended (1)                                                                                                                                                                                                                  |   | 10.1                                          |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Form of  Phantom Stock Agreement between certain executives and Affinity  Group, Inc. (1)                                                                                                                                                                                                                                              |   | 10.2                                          |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Form of  Phantom Stock Agreements between certain executives and CWI, Inc. (1)                                                                                                                                                                                                                                                         |   | 10.3                                          |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Form of  Phantom Stock Agreements between certain executives and Camp Coast to Coast, Inc. (1)                                                                                                                                                                                                                                         |   | 10.4                                          |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Working  Agreements and Service Agreements with National General Insurance Contract,  as amended (1)                                                                                                                                                                                                                                             |   | 10.6                                          |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| 401(k) Savings  and Investment Plan (1)                                                                                                                                                                                                                                                                                                     |   | 10.7                                          |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Form of  Indemnification Agreement for persons consenting to serve as directors (1)                                                                                                                                                                                                                                                         |   | 10.8                                          |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Unsecured  Promissory Note of AGRP Holding Corp., dated December 5, 2001 (1)                                                                                                                                                                                                                                                                |   | 10.9                                          |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Amended  and Restated Marketing Agreement, dated March 15, 2002 by and between  Camping World, Inc. and National General Insurance Company (1)                                                                                                                                                                                         |   | 10.10                                         |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                             |   |                                          |       |                          |   |
| Amended  and Restated Credit Agreement dated as of June 24, 2003 among Affinity  Group, Inc., the guarantors party thereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Fleet National  Bank, as administrative agent, and General Electric Capital Corporation, as  documentation agent (1) |   | 10.11                                         |       |                          |   |

 

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|                                                                                                                                                                                                                                                                                                                                                                                                           |   | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|-------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |       |                          |   |
| Senior  Secured Floating Rate Note Purchase Agreement dated as of June 24, 2003  among Affinity Group, Inc., the guarantors party thereto, the  noteholders party thereto, Canadian Imperial Bank of Commerce, as syndication  agent, Fleet National Bank, as administrative agent and General Electric  Capital Corporation, as documentation agent (1)                                             |   | 10.12                                         |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |       |                          |   |
| First  Amendment to Credit Agreement dated as of February 18, 2004 among  Affinity Group, Inc., the guarantors party thereto, the lenders party  thereto, Canadian Imperial Bank of Commerce, as syndication agent, Canadian  Imperial Bank of Commerce, as administrative agent and successor to Fleet  National Bank, and General Electric Capital Corporation, as documentation agent  (1)        |   | 10.13                                         |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |       |                          |   |
| First  Amendment to Note Purchase Agreement dated as of February 18, 2004 among  Affinity Group, Inc., the guarantors party thereto, the lenders party  thereto, Canadian Imperial Bank of Commerce, as syndication agent, Canadian  Imperial Bank of Commerce, as administrative agent and successor to Fleet  National Bank, and General Electric Capital Corporation, as documentation  agent (1) |   | 10.14                                         |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |       |                          |   |
| Second  Amendment to Credit Agreement dated as of June 30, 2004 among Affinity  Group, Inc., the guarantors party thereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Canadian Imperial  Bank of Commerce, as administrative agent and successor to Fleet National  Bank, and General Electric Capital Corporation, as documentation agent (2)            |   | 10.15                                         |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |       |                          |   |
| Second  Amendment to Note Purchase Agreement dated as of June 30, 2004 among  Affinity Group, Inc., the guarantors party thereto, the lenders party  thereto, Canadian Imperial Bank of Commerce, as syndication agent, Canadian  Imperial Bank of Commerce, as administrative agent and successor to Fleet  National Bank, and General Electric Capital Corporation, as documentation  agent (2)    |   | 10.16                                         |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |       |                          |   |
| Third  Amendment to Credit Agreement dated as of November 12, 2004 among  Affinity Group, Inc., the guarantors party thereto, the lenders party  thereto, Canadian Imperial Bank of Commerce, as syndication agent, Canadian  Imperial Bank of Commerce, as administrative agent and successor to Fleet  National Bank, and General Electric Capital Corporation, as documentation  agent (4)        |   | 10.17                                         |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |       |                          |   |
| Third  Amendment to Note Purchase Agreement dated as of November 12, 2004 among  Affinity Group, Inc., the guarantors party thereto, the lenders party  thereto, Canadian Imperial Bank of Commerce, as syndication agent, Canadian  Imperial Bank of Commerce, as administrative agent and successor to Fleet  National Bank, and General Electric Capital Corporation, as documentation  agent (4) |   | 10.18                                         |       |                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |       |                          |   |
| Agreement  with Cross Country Motor Club, Inc. dated September 7, 2004 (3)                                                                                                                                                                                                                                                                                                                           |   | 10.19                                         |       |                          |   |

 

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|                                                                                                                                                                                                                                                                                                                                                     |   | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|-------------------------------|
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Lease  Agreement for distribution center in Franklin, Kentucky (5)                                                                                                                                                                                                                                                                                       |   | 10.20                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Fourth  Amendment to Credit Agreement dated March 24, 2005 (6)                                                                                                                                                                                                                                                                                      |   | 10.21                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Fourth  Amendment to Note Purchase Agreement dated March 24, 2005 (6)                                                                                                                                                                                                                                                                               |   | 10.22                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Preferred  Membership Unit Subscription Agreement dated March 24, 2005 between  FreedomRoads Holding LLC and CWFR Capital Corp. (6)                                                                                                                                                                                                                 |   | 10.23                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Fifth  Amendment to Credit Agreement dated November 13, 2005 among Affinity  Group, Inc, the guarantors party hereto, the lenders party thereto, Canadian  Imperial Bank of Commerce, as syndication agent, Canadian Imperial Bank of  Commerce as administrative agent, and General Electric Capital Corporation as  documentation agent. (7)      |   | 10.24                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Second  Amendment to Tax Sharing Agreement among Affinity Group Holding, Inc.,  Affinity Group, Inc. and its subsidiaries (8)                                                                                                                                                                                                                  |   | 10.25                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Sixth  Amendment to Credit Agreement dated March 3, 2006 among Affinity Group,  Inc, the guarantors party hereto, the lenders party thereto, Canadian  Imperial Bank of Commerce, as syndication agent, Canadian Imperial Bank of  Commerce as administrative agent, and General Electric Capital Corporation as  documentation agent. (10)         |   | 10.26                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Seventh  Amendment to Credit Agreement dated June 8, 2006 among Affinity  Group, Inc., the guarantors party hereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Canadian Imperial  Bank of Commerce as administrative agent, and General Electric Capital  Corporation as documentation agent. (11)  |   | 10.27                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Agreement  with Brickell Financial Services Motor Club, Inc. dated  September 28, 2007 (13)                                                                                                                                                                                                                                                    |   | 10.28                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Form of  Phantom Stock Agreement between certain executives and Affinity  Group, Inc. (14)                                                                                                                                                                                                                                                     |   | 10.29                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Ninth  Amendment to Credit Agreement dated September 8, 2008 among Affinity  Group, Inc., the guarantors party hereto, the lenders party hereto,  Canadian Imperial Bank of Commerce as syndication agent, Canadian Imperial  Bank of Commerce as administrative agent, and General Electric Capital  Corporation ad documentation agent. (15) |   | 10.30                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Tenth  Amendment to Credit Agreement dated September 8, 2008 among Affinity  Group, Inc., the guarantors party hereto, the lenders party hereto,  Canadian Imperial Bank of Commerce as syndication agent, Canadian Imperial  Bank of Commerce as administrative agent, and General Electric Capital  Corporation ad documentation agent.      |   | 10.31                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Second  Lien Note Purchase Agreement dated June 5, 2009 among Affinity Group, Inc.,  the guarantors party hereto, the note purchasers party hereto, and New York  Life Investment Management LLC as Administrative Agent                                                                                                                                 |   | 10.32                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Option  Agreement dated June 5, 2009 between Affinity Group, Inc. and The Stephen  Adams Living Trust                                                                                                                                                                                                                                                    |   | 10.33                                         |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Subsidiaries  of the Registrant                                                                                                                                                                                                                                                                                                                          |   | 21                                            |       |                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                     |   |                                          |       |                          |   |   |
| Powers  of Attorney                                                                                                                                                                                                                                                                                                                                      |   | 24.1                                          |       |                          |   |   |

 

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|                                                                |   | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** |
|---------------------------------------------------------------------|--------|-----------------------------------------------|------------|-------------------------------|
|                                                                |   |                                          |       |                          |   |
| Certification  of President and Chief Executive Officer             |   | 31.1                                          |       |                          |   |
|                                                                |   |                                          |       |                          |   |
| Certification  of Senior Vice President and Chief Financial Officer |   | 31.2                                          |       |                          |   |
|                                                                |   |                                          |       |                          |   |
| Appointment  of Directors (9)                                       |   | 31.3                                          |       |                          |   |
|                                                                |   |                                          |       |                          |   |
| Appointment  of Principal Officers (12)                             |   | 31.4                                          |       |                          |   |
|                                                                |   |                                          |       |                          |   |
| Statement  Pursuant to 18 U.S.C. Section 1350                  |   | 32.1                                          |       |                          |   |
|                                                                |   |                                          |       |                          |   |
| Statement  Pursuant to 18 U.S.C. Section 1350                  |   | 32.2                                          |       |                          |   |
|                                                                |   |                                          |       |                          |   |
| Affinity  Group Code of Professional Conduct (2)                    |   | 99.1                                          |       |                          |   |

 

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(1) Filed with the Company’s Registration Statement No. 333-113982and incorporated by reference herein.

 

(2) Filed with the Company’s Report on Form 10-Q forthe quarter ended June 30, 2004 and incorporated by reference herein.

 

(3) Filed with the Company’s Report on Form 8-Kdated September 9, 2004 and incorporated by reference herein.

 

(4) Filed with the Company’s Report on Form 8-Kdated November 16, 2004 and incorporated by reference herein.

 

(5) Filed with the Company’s Report on Form 8-Kdated December 31, 2004 and incorporated by reference herein.

 

(6) Filed with the Company’s Report on Form 8-Kdated March 25, 2005 and incorporated by reference herein.

 

(7) Filed with the Company’s Report on Form 8-Kdated November 13, 2005 and incorporated by reference herein.

 

(8) Filed with the Company’s Report on Form 10-Kdated December 31, 2005 and incorporated by reference herein.

 

(9) Filed with the Company’s Report on Form 8-Kdated February 21, 2006 and incorporated by reference herein.

 

(10) Filed with the Company’s Report on Form 8-Kdated March 9, 2006 and incorporated by reference herein.

 

(11) Filed with the Company’s Report on Form 8-K dated June 8,2006 and incorporated by reference herein.

 

(12) Filed with the Company’s Report on Form 8-K dated September 13,2006 and incorporated by reference herein.

 

(13) Filed with the Company’s Report on Form 10-Q dated September 30,2007 and incorporated by reference herein.

 

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(14) Filed with the Company’s Report on Form 10-K dated December 31,2007 and incorporated by reference herein.

 

(15) Filed with the Company’s Report on Form 8-K dated September 8,2008 and incorporated by reference herein.

 

A copy of any ofthese exhibits will be furnished at a reasonable cost to any person uponreceipt from such person of a written request for such exhibit.  Such request should be sent to Affinity Group, Inc.,2575 Vista Del Mar Drive, Ventura, CA 93001, Attention:  Chief FinancialOfficer.

 

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