** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

** **

**FORM 10-K**

** **

** **** ****  X  **** **** **ANNUAL REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

**For the fiscal year ended December 31,2009**

 

**         **TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

For thetransition period from                  to

 

CommissionFile Number     333-113982
|   |   |   |
|--------|--------|--------|

 

**AFFINITY GROUP, INC.**

 

|   | **                      Delaware** |   |   | **                    13-3377709** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|
|   | (State of incorporation or  organization)                                                                                                        |   |   | (I.R.S. Employer Identification  No.)                                                                                                  |

 

|   | 2575 Vista Del Mar Drive                  |   |   | **               **(805)  667-4100                                       |
|--------|-------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Ventura, CA   93001             |   |   | **                   **(Registrant’s  telephone |
|   | (Address of principal executive  offices) |   |   | **                 **number  including area code.)             |
|   |                                      |   |
|        |                                           |        |        |                                                                                                                                                     |  |  |

 

SECURITIESREGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:  NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OFTHE ACT:

9% SeniorSubordinated Notes Due 2012

 

Indicate by check mark if theregistrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act.     
|   |   |  YES       |  NO   X   |
|--------|--------|------------------------------------------|------------------------------------|

 

Indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.
|   |   |  YES       |  NO   X   |
|--------|--------|------------------------------------------|------------------------------------|

 

Indicate by check mark whether theregistrant (1) has filed all reports required to be filed by Section 13or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.                                                              YES    X          NO     

 

Indicate by check mark whether theregistrant has submitted electronically and posted on its corporate Website, ifany, every Interactive Data File required to be submitted and posted pursuantto Rule 405 of Regulation S-T (Section 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files).   YES                 NO      

 

Indicate by check mark if disclosureof delinquent 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.                                                                                                                        

 

Indicate by check mark whether theregistrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of theExchange Act).  (Check one):

 

Acceleratedfiler            Large accelerated filer             Non-accelerated filer   X        Smaller reporting company      

 

Indicate by check mark whether theregistrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).
|   |   |  YES       |  NO   X   |
|--------|--------|------------------------------------------|------------------------------------|

 

Indicate the numberof shares outstanding of each of the issuer’s classes of common stock, as ofthe latest practicable date.

 
|                           |       | **Outstanding as of**   |
|--------------------------------|------------|-------------------------|
| **Class**                      | ** ** | **March 31, 2010** |
| 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 ofAffinity Group Holding, Inc., (“AGHI”), a privately-ownedcorporation.  We are a member-baseddirect marketing organization targeting North American recreational vehicle (“RV”)owners and outdoor enthusiasts.  Our clubmembers form a receptive audience to which we sell products, services,merchandise and publications targeted to their specific recreationalinterests.  In addition, we are aspecialty retailer of RV-related products. We operate through three principal lines of business, consisting of (i) clubmemberships and related products and services, (ii) subscription magazinesand other publications including directories, and (iii) specialtymerchandise sold primarily through our 78 Camping World retail stores, mailorder catalogs and the Internet.

 

Thereare approximately 1.8 million dues paying members enrolled in our clubs.  We currently have approximately 4.5 millionin aggregate circulation and 0.8 million paid circulation across our 35publications.  For the year ended December 31,2009, our revenue, operating loss and net loss were $471.8 million, $23.1million and $38.9 million, respectively.

 

**CompetitiveStrengths**

 

We believe that our key competitivestrengths are as follows:

 

*Recurring Cash Flow Stream -*Approximately 79% of our operating income, net of non-recurring, non-cashcharges, is generated through our non-retail-based business which historicallyhas provided a recurring income stream through a core base of customers.  Our four established membership clubs have anaverage renewal rate for the five calendar years ended 2009 of 66%, 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 amember-based direct marketing organization targeting North American RV ownersand outdoor enthusiasts with comprehensive targeted product offerings. The GoodSam Club, which was founded in 1966, and Camping World’s President’s Clubfounded in 1986 are the preeminent 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 sizerelative to our competition is a meaningful advantage that provides us greaterleverage to negotiate benefits and discounts with third-party service providersfor our members and consequently enhances the value of our product and serviceofferings.  Additionally, thesenegotiating and pricing advantages allow us to increase membership dues withoutrisking the loss of members, who are compensated by additional savings andattractive other product and service offerings. Our 1.8 million club members and the 8.1 million consumers in ourproprietary database serve as a unique, captive audience for direct marketing,which we believe significantly lowers customer acquisition costs relative toour competitors and facilitates cost-effective cross-

 

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selling.

 

*Membership Services Segmentremains stable-* Our financial operating performancehas felt the effects of the current economic downturn but we believe that ourMembership Services segment will not experience the downturn to the same extentas our other business segments.  Whilecompetition is intense for consumer expenditures, we believe that consumersvalue the annual savings of club membership. We market our clubs, products and services to a sizable existinginstalled base of over 7.9 million RV owners, which affords us the ability tocontinue to attract new customers irrespective of new RV sales.  We believe RV owners may be more likely totake vacations utilizing RVs during an economic downturn, because they aregenerally less expensive than vacations necessitating plane or train travel andhotel accommodations, which could increase sales of our products.

 

*Favorable Demographic Trends* - Favorabledemographic trends, in particular the aging of the “baby boomers,” indicatethat RV ownership should increase during the next five years.  Overall RV ownership rates have historicallybeen highest, with 10% penetration, in the 55-64 age bracket, an age group thatis expected to experience a five-year growth of 20.1% by 2010, according to theNational Survey of the RV Consumer by the University of Michigan in 2005 (the “RVSurvey”).  Furthermore, the 45-54 agebracket, which maintains the second highest ownership rate of RVs, is expectedto experience a five-year growth of 6.3% by 2010.  The growth in these age groups is expected togenerate growth in the pool of potential RV consumers.  Also, according to the RV Survey, this agegroup shift will drive the number of households that own at least one RV from7.9 million in 2005 to 8.5 million in 2010. In addition, RV owners havehousehold incomes that generally exceed the national average.  These demographics are attractive foradvertisers and third-party providers of products and services.

 

*Experienced and IncentivizedManagement Team -* Our executive management team hasextensive publishing, direct marketing and retail experience with significantexpertise in the RV industry. With an average of fifteen 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.  Ourexecutive management team is compensated both through an annual salary andthrough a management incentive program that is directly tied to our financialperformance.

 

**Our Strategy**

 

Our primary business strategy is tomaximize the sale of club memberships, products, services, publications andmerchandise to our target customer base of RV owners and outdoor enthusiasts.To this end, we focus on cross-selling our various offerings to each of ourcustomers while managing customer acquisition costs and maintaining highrenewal rates by providing attractively priced product offerings tailored tomeet the needs of our target customers.

 

*Maximize Customer Retention withValue-Added Product Offerings -*A key aspect of our strategy is todevelop strong membership loyalty by providing an attractive value propositionfor club members and offering add-on products specifically targeted to meettheir needs as reflected by our strong customer renewal rates. Each of our fivemembership clubs provides our customers with tangible savings whichsubstantially exceed the membership fee. On average, club members benefit by saving approximately six times thecost of their annual membership dues as the result of being able to purchaseproducts and services at discounts made available through our clubs.  We believe that the participation levels andrenewal rates of club members reflect the benefits derived from theirmembership.  To improve customer renewalrates, we constantly evaluate member satisfaction and actively respond tochanging member preferences through the enhancement or introduction of newmembership benefits including products and services.

 

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*Efficiently Acquire New Customers-*We believe efficient customer acquisition and a sizeabledatabase population are critical to driving our growth and profitability.  Camping World and its discount buyer’s club,President’s Club, together, account for approximately 53% 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 ourproducts and services across our customer base. For example, we use ourexisting customer database to cost-efficiently market Camping World productsthrough catalogs.  Conversely, CampingWorld supercenters 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 ofour magazines is an important factor in determining the amount of revenue wecan obtain from advertisers. Consequently, we seek to expand our presence as a publisher in selectrecreational niches through the introduction of new magazine titles and theacquisition of other publications or businesses in our markets or incomplementary recreational market niches. Publications in complementary niches may also provide the opportunity tolaunch new membership clubs, to market our products and services to newcustomers and to develop other products and services, which meet the specialneeds of these customers.  For example,our acquisition of the publishing assets of Nordskog Publications, Inc. inMay 2005 allowed us to expand our presence in the recreational boat marketniche.  In addition, we now operate 40consumer outdoor recreation shows, most of which were acquired from RoyalProductions, Inc. in December 2005, Plus Events shows in February 2006,four shows purchased 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 haveslowed the controlled expansion of our Camping World supercenter network.  In 2009, we opened one new Camping Worldstore, closed one under-performing store, and do not intend to open additionalretail stores in 2010.  In addition togenerating increased cash flows from the sale of merchandise, our large networkof geographically diverse Camping World stores enhances our ability to marketour portfolio of membership clubs, publications and product and serviceofferings to a significantly larger customer base.

 

**RVIndustry**

 

The use of RVs and the demand forclub memberships and related products and services may be influenced by anumber of factors including general economic conditions, consumer creditavailability, the availability and price of propane and gasoline, and the totalnumber of RVs.  We believe that both theinstalled base of RVs and the type of RV owned (full service vehicles excludingvan conversions) are the most important factors affecting the demand for ourmembership clubs, merchandise, products and services.  Based on the RV Survey, the number ofhouseholds owning RVs is projected to increase from 7.9 million in 2005 tonearly 8.5 million in 2010.  The RVSurvey also indicates that the percentage of households owning RVs during thisperiod will rise slightly from 8.0% to 8.2%.

 

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According to the RV Survey, theaverage RV owner is 49 years old.  RVownership also increases with age reaching its highest percentage level amongthose 55 to 64 years old.  Households inthis age group are projected to increase from 18.2 million in 2005 to 21.6million in 2010.  RV ownership also isconcentrated in the western United States, an area in which the populationgrowth rate continues to be greater than the national average.  The RV Survey also indicates that RVownership is associated with higher than average annual household income, whichamong RV owners was approximately $68,000 per annum as compared to the nationalaverage of $43,000 per annum.  We believethat the demographic trend towards an aging population will have a favorableimpact on RV ownership.  The demographicprofile of our typical club member follows that of the general population andthus we believe this will also have a favorable impact on demand for our clubmemberships 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, 2009,annual membership dues and average annual renewal rates during the period of2005 to 2009 for each club:

 
|                    |   | Number of Members             |   |           |       | Average Renewal |   |
|-------------------------|--------|-------------------------------|--------|----------------|------------|-----------------|--------|
| Membership Club         |   | at December 31, 2009 (1) |   | Annual Fee (2) |       | Rate (3)        |   |
|                    |   |                          |   |           |       |            |   |
| Good Sam Club           |   | 930,000                       |   |           | $12 - $30  |            | 62%    |   |
|                    |   |                          |   |           |       |            |   |   |
| President’s Club   |   | 755,300                       |   |           | $15 - $20  |            | 71%    |   |
|                    |   |                          |   |           |       |            |   |   |
| Coast to Coast Club     |   | 53,700                        |   |           | $90 - $140 |            | 69%    |   |
|                    |   |                          |   |           |       |            |   |   |
| Other Clubs:            |   |                          |   |           |       |            |   |   |
| Golf Card Club          |   | 24,400                        |   |           | $49 - $65  |            | 52%    |   |
|                    |   |                          |   |           |       |            |   |   |
| Camp Club USA  (4) |   | 41,300                        |   |           | $40 - $50  |            | 38%    |   |

 

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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)  Camp ClubUSA was launched in 2006; includes only two full years of renewal data.

 

In addition to regular annualmemberships, we also sell multi-year memberships.  We believe that multi-year membershipsprovide several advantages, including the up-front receipt of dues in cash,reduced membership costs and a strengthened member commitment.

 

*Good SamClub*

 

The Good SamClub, a membership organization for RV owners, is the largest RV organizationworldwide with approximately 930,000 member families.  As of December 31, 2009, there were1,557 local chapters throughout the United States and Canada.  The average renewal rate for Good Sam Clubmembers was approximately 62% during the period 2005 through 2009. The renewalrate was approximately 58% in 2009.

 

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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 at1,580 RV parks and service centers across the U.S. and Canada, members save money,come together to share experiences and more thoroughly enjoy RVing.  Other benefits include a free annualsubscription to *Highways*, the club’s newsmagazine; discounts on the Company’s 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 annualsavings from discounts of approximately $110.

 

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 andremove substandard facilities from our program to ensure that our brand imageand reputation are not diluted.

 

In1992, the Good Sam Club began selling lifetime memberships.  In 2009, the average price for a lifemembership was $302 with approximately 157,700 members registered as of December 31,2009.  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 2005 through 2009 at which discounts for members were available at December 31stof the respective year:

 
|                                                             | 2009          | 2008          | 2007            | 2006                | 2005          |   |
|------------------------------------------------------------------|---------------|---------------|-----------------|---------------------|---------------|--------|
|                                                             |          |          |            |                |          |   |
| Number of Good Sam memberships                                   | 930,000  | 952,200  | 1,012,500  | 992,000   | 984,100  |   |
|                                                             |          |          |            |                |          |   |
| Lifetime members included above                                  | 157,700  | 150,900  | 146,400    | 143,000   | 136,100  |   |
|                                                             |          |          |            |                |          |   |
| Number of RV campgrounds offering discounts to Good Sam  members | 1,580    | 1,520    | 1,500      | 1,610     | 1,580    |   |

 

*President’sClub*

 

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 31,2009, the President’s Club had approximately 755,300 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 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 marketed in conjunction with the CampingWorld brand in the majority of our promotional pieces directed at thesecustomers related to our product and service offerings.

 

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President’sClub memberships may initially be obtained for one, two or three years at astandard price of $20, $35 or $50, respectively.  We estimate that the average President’s Clubmember realizes annual savings of approximately $35.  The average renewal rate for members of thePresident’s Club was 71% during the period from 2005 to 2009.

 

Thefollowing table sets forth the number of President’s Club members and number ofretail stores at year-end for 2005 through 2009:

 
|                                                   | 2009                | 2008                | 2007                      | 2006                | 2005                |
|--------------------------------------------------------|---------------------|---------------------|---------------------------|---------------------|---------------------|
|                                                   |                |                |                      |                |                |
| Camping World’s President’s Club memberships | 755,300   | 718,500   | 738,500    | 680,300   | 643,100   |
|                                                   |                |                |                      |                |                |
| Number of stores                                       | 78        | 78        | 77         | 63        | 44        |

 

*Coast toCoast Club*

 

The Coast to Coast Club has operateda reciprocal use network of private RV resorts in North America since1972.  The club offers a series ofmembership benefits depending upon pricing and program type under the Coast toCoast Club name.  Members of the Coast toCoast Club belong to a private RV resort owned and operated by partiesunrelated to us.  Our club members mayuse the other resorts in the Coast to Coast Club network on a reservation orspace available basis and obtain discounts from other non-private campgrounds.  At December 31, 2009, there wereapproximately 53,700 member families in the Coast to Coast Club which hadnationwide access to approximately 238 private RV resorts and a network of 189public affiliated campgrounds that participated in the Coast to Coast Clubreciprocal use programs.  These privateresorts are designed primarily for RV owners, but typically provide camping orlodging facilities, comprised of RVs, cabins, park models, andcondominiums.  For an initial membershipfee plus annual maintenance fees, both paid by the customer to the resort, theprivate resorts provide an RV site with water, sewer and electrical hook-upsand recreational amenities, such as swimming, tennis or fishing, or proximityto 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 to discountedcondo vacation getaways and other discounted travel such as cruises; access todiscount hotels and travel services; and access to ancillary products andservices developed for our club members.

 

We believe that resortsparticipating in the Coast to Coast Club networks view access to reciprocatingmember resorts as an incentive for their customers to join their resort.  Because a majority of Coast to Coast Clubmembers own RVs, access to participating resorts throughout North America canbe 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 69% during the period 2005 through 2009.

 

The following table sets forth thenumber of members in the Coast to Coast Club, resorts participating in thereciprocal use program, and the number of public resorts extending discounts toCoast to Coast Club members for 2005 through 2009.   The membership decline in Coast to CoastClub results from our reliance on the private park network to promote andgenerate new park members, and ultimately sell our product, a lack of new parkdevelopment, and our exclusion of sub-

 

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standard parks from the network.

 
|                                      | 2009                           | 2008               | 2007                           | 2006                     | 2005         |   |
|-------------------------------------------|--------------------------------|--------------------|--------------------------------|--------------------------|--------------|--------|
|                                      |                           |               |                           |                     |         |   |
| Number of Coast to Coast Club memberships | 53,700     | 60,200   | 69,600     | 78,900    | 85,200  |   |
|                                      |                           |               |                           |                     |         |   |
| Participating private resorts             | 238        | 239      | 241        | 301       | 301     |   |
| Participating public resorts              | 189        | 211      | 210        | 228       | 225     |   |

 

##### *Golf Card Club*

##### * *

The Golf Card Club, founded in 1974,had approximately 24,400 members at December 31, 2009.  The major attraction for membership is thefinancial savings which members receive when playing at any of theapproximately 2,610 participating golf courses located throughout the US andCanada. The annual membership fee varies with the length and type (single ordouble) of membership.  We believe thatthe participating golf courses providing playing privileges to club membersrepresent the largest number of golf courses participating in a discountprogram in North America.  None of theparticipating golf courses are owned or operated by us.

 

Golf Card Club members receive avariety of benefits, including:  aminimum of two rounds annually of free or discounted golf at participating golfcourses; discounted vacation packages at 132 “Stay and Play” resorts; discountson golf practice at 35 driving ranges; savings on golf merchandise purchases atselect member golf courses; car rental discounts from National and Alamo; anannual subscription to the *Golf Traveler*member publication, published three times per year in print and twelve timeselectronically; the annual directory listing participating golf courses andresorts; chances to win free golf merchandise in quarterly member giveaways;access to 61 local Grasshopper Clubs for tournaments and social activities; anopportunity to play in member-guest tournaments; an opportunity to test (andkeep) select golf products; a chance to win a free golf lesson from a participatingGolf Card pro; and access to the club web site (www.golfcard.com)including member-only features such as handicap tracking, course reviews, andtrip 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.

 

The standard annual membership feeis $49 for a single membership and $89 for a twosome membership.  Multi-year memberships range from a singletwo-year membership for $118, to a three-year twosome membership for $267.  The average renewal rate for Golf Card Clubmembers was approximately 52% for the period from 2005 to 2009.  The membership decline in Golf Card Clubsince 2004 resulted from management’s decision to cease acquisition marketingdue to lack of affinity to our other clubs.

 

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

 
|                                             | 2009                     | 2008                     | 2007                           | 2006                     | 2005               |   |
|--------------------------------------------------|--------------------------|--------------------------|--------------------------------|--------------------------|--------------------|--------|
|                                             |                     |                     |                           |                     |               |   |
| Number of Golf Card Club memberships  (1)        | 24,400    | 31,700    | 44,900     | 55,000    | 57,800   |   |
|                                             |                     |                     |                           |                     |               |   |
| Number of Participating Golf  Courses            | 2,610     | 2,820     | 3,000      | 3,300     | 3,600    |   |
|                                             |                     |                     |                           |                     |               |   |
| Number of “Stay and Play” Golf Resorts | 132       | 133       | 144        | 165       | 175      |   |

 

 

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(1)  A single membership countsas one member and a double membership as two members.

 

 

*CampClub USA*

 

Camp Club USA was launched January 2006as a discount camping club offering a 50% discount on campsites.  At December 31, 2009 we hadapproximately 41,300 members.  Membersreceive a variety of benefits, including 50% savings at 1,136 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 thenumber of Camp Club USA members and participating campgrounds at December 31stof each respective year:

 
|                      | 2009                     | 2008                     | 2007                     | 2006                     |   |
|---------------------------|--------------------------|--------------------------|--------------------------|--------------------------|--------|
|                      |                     |                     |                     |                     |   |
| Camp Club USA members     | 41,300    | 41,200    | 38,100    | 22,900    |   |
|                      |                     |                     |                     |                     |   |
| Participating campgrounds | 1,136     | 1,113     | 727       | 603       |   |

 

 

**MembershipProducts 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 ERS and the vehicle insurance programs.  Most of our products and services areprovided by third parties who pay us a marketing fee, with the exception ofERS, 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 theseproducts through direct mail, advertising in publications, campgrounddirectories, space ads, the Internet, telemarketing and direct sales.

 

*EmergencyRoad Service*

 

TheCompany developed ERS initially for Good Sam Club members in 1984, as an enhancementto their club membership.  Since then,the Company has expanded the breadth of its programs and now includes clubmembers as well as non-club members. Currently 33% of the Good Sam Club

 

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membersare enrolled in the Good Sam ERS program. Specializing in RV towing, the Company targets diversified market nicheswith identifiable products that serve various service level objectives.  The Company markets its products throughdirect mail, but also through the internet, RV publication advertising, spaceads, promotional events, and telemarketing. Annual subscriber dues range from $64.95 to $149.95 and benefits includespecialized towing, roadside assistance, towing, and other travel-relatedbenefits and services.

 

Thetable below sets forth the total enrollment in the various ERS programs for2005 through 2009:

 
|           |   | 2009                |   | 2008                |   | 2007                |   | 2006                |   | 2005                |   |
|----------------|--------|---------------------|--------|---------------------|--------|---------------------|--------|---------------------|--------|---------------------|--------|
|           |   |                |   |                |   |                |   |                |   |                |   |
| ERS Enrollment |   | 356,200   |   | 354,400   |   | 388,500   |   | 379,200   |   | 369,900   |   |

 

Enrollmentin the various ERS programs grew consistently since 1998 with the exception ofa decline in 2008 due to soft market conditions, which resulted in a reductionin member acquisitions.  A focus onmarketing efforts in key distribution channels, including the internet,reversed the decline in 2009.

 

*VehicleInsurance 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, 2009, the two programs had approximately 168,200policyholders, which represented a 12.0% and 4.5% penetration, respectively, ofthe Good Sam Club and the President’s Club. During the period 2005 to 2009, 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 2005 through 2009:

 
|                                                       | 2009                                                       | 2008                                                       | 2007                                                      | 2006                                                      | 2005                                                      |   |
|------------------------------------------------------------|------------------------------------------------------------|------------------------------------------------------------|-----------------------------------------------------------|-----------------------------------------------------------|-----------------------------------------------------------|--------|
|                                                       |                                                       |                                                       |                                                      |                                                      |                                                      |   |
| Total policies in force                                    | 168,200                                          | 184,100                                          | 201,700                                         | 201,400                                         | 205,800                                         |   |
|                                                       |                                                       |                                                       |                                                      |                                                      |                                                      |   |
| Written premiums paid to insurance providers (in millions) | $      197              | $      218              | $     243              | $     253              | $     251              |   |
|                                                       |                                                       |                                                       |                                                      |                                                      |                                                      |   |
| Marketing fees (in millions)                               | $        17   | $        18   | $       20   | $       20   | $       20   |   |

 

Thereduction in policies in force from 2008 to 2009 resulted from consumersincreasingly buying travel trailers instead of motorhomes, which hastraditionally been the best responding segment for our product.  More competitive insurance pricing has beenrecently initiated to better appeal to non-motorized/travel trailer needs.

 

*Other Products and Services*

 

Otherproducts and services marketed to club members include extended vehiclewarranties, vehicle financing, credit cards, supplemental health and lifeinsurance, and financial services.  Mostof these services are provided to club members by third parties who pay us amarketing fee.

 

9

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OurContinued Service Plan (“CSP”), a private label extended vehicle warrantyprogram for RVs, had total net revenue for 2009 of $34.9 million, increasing14% over 2008.  The program hadapproximately 47,700 policies in force as of December 31, 2009.  Sales of new policies were derived fromdirect mail marketing, print ads in our magazines, Internet and e-mailsolicitations, and retail kiosks in Camping World stores.  Policy renewals represented 59% of the totalrevenue in 2009.  We also offer CSPthrough our Authorized RV Dealer Program. As of December 31, 2009, there were 82 dealer locations authorizedto sell extended vehicle warranty and other products and services offered bythe Company.  Of the 82 dealer locations,none are owned and operated by FreedomRoads Holding LLC or its subsidiaries(collectively “FreedomRoads”). FreedomRoads is indirectly owned and controlled by Stephen Adams, ourChairman and principal owner of our ultimate parent company.

 

Our RV financing program isadministered by a third party financial institution.  The number of RV loans extended to our clubmembers in 2009 increased by 33% from 2008. This increase in loans can be directly attributed to our new third-partyfinancing arrangement allowing our members access to more competitive interestrates.

 

In addition, weevaluate other products and services that club members may findattractive.  When introducing newproducts and services, we concentrate on products and services provided bythird parties, which we can market without significant capital investment byus, and for which we receive a marketing fee from the service provider based onsales volume.  We seek to utilize thepurchasing power of our club members to obtain products and services atattractive prices.

 

 

**Publications**

** **

We produce and distribute a varietyof publications for select markets in the recreation and leisure industry,including general circulation periodicals, club magazines, directories, and RVand power sports industry trade magazines. Revenues are recognized from the sale of advertising, subscriptions anddirect sales of some of the publications. We believe that the focused audience of each publication is an importantfactor in attracting advertisers.

 

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

 
| ** **                                | ** **                                      | **      2009** | ** ** | **Issues Published** |
|-------------------------------------------|-------------------------------------------------|----------------------------------------------|------------|----------------------|
| ** **                                | **Publication**                                 | **Circulation**                              | ** ** | **Annually**         |
|                                      |                                            |                                         |       |                 |   |
| **PAID  CIRCULATION MAGAZINES (1)**       |                                            |                                         |       |                 |
|                                      | American Rider                                  | 53,048                                       |       | 6                    |   |
|                                      | ATV Sport                                       | 31,338                                       |       | 3                    |   |
|                                      | Bass & Walleye Boats                   | 50,598                                       |       | 4                    |   |
|                                      | Camping Life                                    | 68,206                                       |       | 8                    |   |
|                                      | MotorHome                                       | 126,051                                      |       | 12                   |   |
|                                      | Powerboat                                       | 21,228                                       |       | 8                    |   |
|                                      | Rider                                           | 137,624                                      |       | 12                   |   |
|                                      | SnowGoer                                        | 64,037                                       |       | 7                    |   |
|                                      | Trailer Boats                                   | 85,021                                       |       | 9                    |   |
|                                      | Trailer Life                                    | 196,210                                      |       | 12                   |   |
|                                      |                                            |                                         |       |                 |   |
| **CONTROLLED  CIRCULATION- Business (2)** |                                            |                                         |       |                 |
|                                      | Boating Industry                                | 26,000                                       |       | 11                   |   |
|                                      | Campground Management                           | 14,219                                       |       | 12                   |   |
|                                      | PowerSports Business                            | 12,000                                       |       | 14                   |   |
|                                      | PowerSports Business Dealer Directory           | 12,000                                       |       | 1                    |   |
|                                      | PowerSports Business Market Data Book           | 12,000                                       |       | 1                    |   |
|                                      | RV Business                                     | 15,019                                       |       | 6                    |   |
|                                      |                                            |                                         |       |                 |   |
| **CONTROLLED  CIRCULATION- Consumer (3)** |                                            |                                         |       |                 |
|                                      | ATV Magazine                                    | 160,211                                      |       | 6                    |   |
|                                      | Watercraft World                                | 50,548                                       |       | 1                    |   |
|                                      |                                            |                                         |       |                 |   |
| **FREE  DISTRIBUTION (4)**                |                                            |                                         |       |                 |
|                                      | Thunder Press- North                            | 27,222                                       |       | 12                   |   |
|                                      | Thunder Press- South                            | 20,199                                       |       | 12                   |   |
|                                      | Thunder Press- West                             | 35,425                                       |       | 12                   |   |
|                                      | Woodall’s Regional News Tabloids           | 25,627                                       |       | 6                    |   |
|                                      |                                            |                                         |       |                 |   |
| **ANNUALS  (1)**                          |                                            |                                         |       |                 |
| ** **                                | Cruiser Buyers Guide                            | 47,000                                       |       | 1                    |   |
|                                      | Trailer Life RV Parks and Campgrounds Directory | 192,826                                      |       | 1                    |   |
|                                      | Trailer Life’s RV Buyers Guide             | 95,745                                       |       | 1                    |   |
|                                      | Towing Guide                                    | 697,780                                      |       | 2                    |   |
| ** **                                | Ultimate Snowmobile Buyers Guide                | 47,227                                       |       | 1                    |   |
|                                      | Woodall’s Buyer’s Guide               | 38,792                                       |       | 1                    |   |
|                                      | Woodall’s Campground Directory             | 222,411                                      |       | 1                    |   |
|                                      | Woodall’s Tenting Directory                | 111,136                                      |       | 1                    |   |
|                                      |                                            |                                         |       |                 |   |
| **CLUB MAGAZINES (5)**                    |                                            |                                         |       |                 |
| ** **                                | Camp Club USA Directory                         | 71,737                                       |       | 1                    |   |
|                                      | Coast to Coast Magazine                         | 67,666                                       |       | 6                    |   |
|                                      | Golf Traveler (6)                               | 28,462                                       |       | 4                    |   |
|                                      | Highways                                        | 934,021                                      |       | 11                   |   |
|                                      | RV View                                         | 740,750                                      |       | 4                    |   |

 

----

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

*(2)**   *Tradepublication distributed to industry-specific groups.

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

*(4)**   *Includeslimited paid circulation.

*(5)**   *Limited toclub members and promotional copies.  Themagazine is included with the membership.

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

 

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*Paid Circulation Magazines*

 

*American Rider*, introducedin November 1993, is targeted to owners and operators of Harley-Davidsonmotorcycles.

 

*ATV Sport* was introducedin May 1998 and targets recreational and racing sport quad riders.

 

*Bass and Walleye Boats* is dedicated to freshwater fishingboat owners who demand top performance from their boats, engines andaccessories.

 

*Camping Life*appeals to family-style campers andother outdoor enthusiasts with articles about destinations, products andactivities to enhance their outdoor lifestyles.

 

*MotorHome* is amonthly periodical for owners and prospective buyers of motorhomes which hasbeen published since 1968 and features articles on subjects such as producttests, travel and tourist attractions.

 

*Powerboat* is aleading performance boating magazine which was founded in 1968 and acquired byus in 2005.  This magazine focuses onperformance boats, engines, as well as race coverage. The magazine is wellknown for its “Performance Trials,” regarded as one of the industry’s mostcomprehensive and authoritative testing programs while boasting some of themarine industry’s finest photography and writing.

 

*Rider* is amonthly magazine for motorcycle touring enthusiasts and has been publishedsince 1974.  Each issue focuses onmotorcycles, personalities, technical subjects, travel notes and other featuresof interest to this recreational affinity group.

 

*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-coreenthusiast of trailerable boats, marine propulsion, accessory installations anduse, maintenance and repair, tow vehicles, boat trailering, seamanship, watersports and cruising.

 

*Trailer Life*, initiallypublished in 1941, is the leading consumer magazine for the RV industry,featuring articles on subjects including product tests, travel and touristattractions.

 

 

#### *Controlled Circulation Magazines-Business*

#### * *

*Boating Industry*is theleading source of news and information for dealers, manufacturers, aftermarketvendors and other professionals in the marine industries through its bi-monthlymagazine and daily web site.

 

*Campground Management* is theleading trade magazine for the campground industry.

 

*PowerSports Business*is anindustry trade magazine, introduced in January 1998, which combines thepreviously issued *Snowmobile Business* and *Watercraft Business* with a motorcycle and ATV businesssection.  Distribution is to dealersservicing these industries, which in numerous cases have combined operations toservice more than one of these segments.

 

*PowerSports Business DealerDirectory* is a supplier directory for each of the ATV, snowmobile andwatercraft markets.  This directoryfeatures hundreds of manufacturers and suppliers of parts,

 

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services, apparel and much more,complete with detailed company information.

 

*PowerSports Business Market DataBook* is an annual publication that provides industry salestrends for power sports manufacturers and dealers; dealer customer service andperformance data; manufacturer stock performance updates; industry supplierinformation; and various industry research projects.

 

*RV Business* is theleading trade magazine covering industry news and trends for RV dealers,manufacturers, suppliers, associations and others.

 

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

##### * *

*ATV Magazine’s* first issue was published in October 1995.  The publication is designed to reach largenumbers of active ATV owners with comprehensive product information during thepeak periods when equipment is purchased.

 

*Watercraft World* is targeted to avid personalwatercraft enthusiasts and provides detailed critiques of watercraft, in-depthgear and accessory evaluations, technical tips and racing information.

 

#### *Free Distribution Publications*

#### * *

###### *Thunder Press*newspapers are published monthly in three separate editionsto reach the country’s motorcycling public and are available primarily throughmotorcycle dealers.  Thistell-it-like-it-is magazine is designed for the ultra-active motorcycleenthusiast who feels passionate about the lifestyle.

###### * *

*Woodall’s Regional News Tabloids*publications are designed to appeal to the prospective or first-time RVowner.  Stories in these publicationscover area campgrounds and RV dealerships, as well as new vehicles on themarket and new products within the industry. The publications are primarily distributed at campgrounds and RV parks,as well as at RV shows and state welcome centers.

 

#### *Annual Publications*

#### * *

*Cruiser Buyers Guide* is anannual publication which provides information about new and modified cruiserswith features embracing the motorcycle cruiser lifestyle.

 

*Trailer Life RV Parks andCampgrounds Directory*, initially published in 1972, is anannually updated directory which provides comprehensive information onapproximately 11,650 public and private campgrounds, over 860 RV servicecenters, and over 875 tourist attractions in North America.  It is the official directory of the Good SamClub and is the premier source to find all the Good Sam discountlocations.  This directory is soldprimarily 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 400 listings with photos, floorplans and specifications onnew RVs including travel trailers, fifth-wheel trailers, folding campingtrailers, motorhomes and truck campers. The publication is sold at newsstands and by mail order from magazineadvertisements.

 

The*Towing Guide*is a booklet dedicated to meeting the needs ofall camping and boating enthusiasts that are towing a trailer.  This booklet serves as a step-by-steptutorial for newcomers and a refresher course for trailer-towing veterans toensure that maximum enjoyment of their trailer by making informed decisions.

 

The*Ultimate Snowmobile Buyers Guide*is an annual publicationfocusing on new snowmobiles introduced in the current year, along withaccessories, providing competitive statistics to enable the

 

13

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reader tomake informed purchases.

 

*Woodall’s Buyer’s Guide* is an annual publicationdistributed mainly through bookstores and newsstands, which provides photos,floor plans and specifications of the new model year RVs.  The buyer’s guide was first published in1978.

 

*Woodall’s Campground Directory,* initiallypublished in 1948, is an annual consumer directory offered in both national andregional editions.  This directory isprimarily distributed through 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 and Books*

#### * *

Each of our membership clubs has itsown publication which provides information on club activities and events,feature stories and other articles.  Wepublish *Highways* for the Good Sam Club, *Coast to Coast Magazine* for the Coast to Coast Club, *The Golf Traveler* for the Golf Card Club, the *Camp Club USA Directory* for Camp Club members, and*RV View* for the President’s Club.  We also periodically publish books targetedto our club membership which address the RV lifestyle.

 

#### *Consumer Shows*

#### * *

We operate 40 consumer outdoorrecreation shows primarily focused on RV and power sports markets.  Twelve of the shows were acquired from RoyalProductions, Inc. in December 2005, six consumer shows were purchasedfrom H & S Productions, LLC in February 2006, four RV shows werepurchased from 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 Campground Guides*

#### * *

We produce local campground guidesdistributed free of charge to approximately 350 campgrounds across the U.S.,with limited distribution in Canada. These guides include paid advertisements for local attractions,restaurants and services and also include a site map of the campground.

 

**Retail**

 

Camping World is a nationalspecialty retailer of merchandise and services for RV owners.  With the opening of one Camping Worldsupercenter in 2009, we currently operate 78 Camping World retail locations in31 states.  These stores accounted forapproximately 88% of the 2009 total retail revenue, while approximately 12% wasderived from catalog and Internet sales. One under-performing retail store was closed in 2009.

 

In the RV accessory industry, webelieve that Camping World has a high level of name recognition, an effectivetriple channel distribution strategy (store, catalog, and Internet), and acommitment to offer a broad selection of specialized RV products and servicesat competitive prices combined with technical assistance and on-siteinstallation.  Camping World offersapproximately 10,600 SKUs, most of which are not regularly available in generalmerchandise stores.  The Camping Worldsupercenters provide

 

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installation and repair services forRV products, which are also not available at general merchandise stores.  Products sold by Camping World includespecialty-sized refrigerators, housewares and other appliances, bedding andfurniture, generators and hydraulic leveling systems, awnings, folding boats,chairs, ladders, cleaning and maintenance products, bicycles, hitch-towing,sanitation products, automotive electronics and lifestyle products.  Some Camping World stores feature resourcecenters, staffed with licensed insurance agents who market such products andservices as vehicle insurance, extended warranty and ERS.  Camping World’s supercenters are designed toprovide one-stop shopping by combining broad product selection, technicalassistance and on-site installation services. We strategically locate Camping World supercenters in areas where manyRV owners live, along major Interstates, and/or in proximity to destinationsfrequented by RV users.

 

Camping World sources its productsfrom approximately 1,100 vendors. Camping World attends regional, national and international trade showsto determine the products it will offer. The purchasing activities of Camping World are focused on RV parts andaccessories, electronics, housewares, hardware, automotive, crafts, clothing,home furnishings, gifts, camping and sporting goods.  Camping World uses an automated “plan-o-gram”system to develop and maintain merchandising plans unique to each supercenterand an inventory replenishment system for its operations to improve in stockrates on key items.  Camping Worldbelieves that the volume of merchandise it purchases from domestic andinternational suppliers and its ability to buy direct from manufacturersenables them to obtain merchandise at costs which compare favorably to local RVdealers and retailers.

 

The retailsupercenters are periodically reset to enhance the customers’ shopping experienceas 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 supercentersgenerally range in size from approximately 10,000 to 64,000 square feet.  Approximately 40% of each supercenter isdevoted to a retail sales floor, a customer service area, and a technicalinformation counter; 40% is comprised of the installation facility, whichcontains 4 to 16 drive-through installation bays; and 20% is allocated tooffice and warehouse space.  Largeparking areas provide sufficient space and facilitate maneuvering of RVs.  By combining broad product selection, technicalassistance, installation and repair services, Camping World’s supercentersprovide one-stop shopping for RV owners. Camping World maintains toll-free telephone numbers for customers toschedule installation and repair appointments. Most supercenters are open seven days a week.

 

CampingWorld continued its controlled expansion of their supercenter store networkwhile simultaneously developing dealer alliances 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 operate51 Camping World stores alongside or within RV dealerships, including 48Camping World stores that are part of our dealer alliance program.  Of these 51 Camping World stores that arealongside or within RV dealerships, 42 are located alongside or withindealerships indirectly owned or operated by FreedomRoads Holding LLC

 

15

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andits subsidiaries (collectively “FreedomRoads”). FreedomRoads is indirectly owned and controlled by Stephen Adams, ourChairman and principal owner of our parent company. As of December 31,2009, FreedomRoads through its subsidiaries operated 45 RV dealerships in NorthAmerica.

 

OnMarch 6, 2006, Camping World entered into a Joint Venture Agreement withFreedomRoads.  FreedomRoads is indirectlyowned and controlled by Stephen Adams, the Chairman and indirect controllingshareholder of AGHI.  FreedomRoads,through its wholly-owned subsidiaries, owns and operates RV dealerships,currently operating across the United States. The Joint Venture Agreement provides that Camping World and FreedomRoadsare to 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 no capitalrequirements or sharing of income and expenses.

 

Pursuant to the terms of the Amended and RestatedCooperative Resources Agreement (“Cooperative Resources Agreement”) dated January 1,2008, by and between the Company and FreedomRoads and Camping World, Inc.,FreedomRoads affirmed 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 requires payment by FreedomRoads of anannual fee based on revenue, as defined, in exchange for the right to use theCW Marks granted by AGI.  The fee for2008 was $5.0 million and was paid by FreedomRoads to AGI in the first quarterof 2009.  On December 14, 2009, theSecond Amendment to the Amended and Restated Cooperative Resources Agreementeliminated the annual fee payment by FreedomRoads to AGI, provided thatFreedomRoads exclusively offer AGI products and services in point of salecustomer transactions, and required that FreedomRoads and its subsidiariespurchase certain parts exclusively from Camping World.

 

On December 1, 2009, AGI entered into an agreement withFreedomRoads pursuant to which AGI acquired an option (“the “Option”) topurchase FreedomRoads’ “choice model” insurance business for the lesser of $5.0million or seven times the business’ EBITDA (as defined) during the fourquarters immediately preceding the closing date, and AGI paid FreedomRoads a$2.5 million deposit.  An additionaldeposit of $2.5 million is due no later than December 15, 2011.  By the terms of the Option, FreedomRoads isrequired to implement such policies, practices and procedures as AGI requestswith respect to such business and apply the deposited funds to pay suchimplementation costs.  The Option may beexercised by AGI on or after May 15, 2012 but before May 15,2013.  In the event the Option is notexercised, AGI shall have the right to return of the deposits, less costsincurred by FreedomRoads to implement any policies, practices or proceduresthat AGI requests with respect to such business.  The $2.5 million deposit is currentlyreported in Other Assets on the accompanying balance sheet as of December 31,2009.

 

CampingWorld initiated its catalog operations in 1967. Camping World currently has a proprietary mailing list of approximately2.5 million RV owners, all of whom have made a purchase or requested a catalogfrom Camping World within the prior 60 months. Camping World maintains a database of these names, which includesinformation such as order frequency, size of order, date of most recent orderand type of merchandise purchased. Camping World analyzes its database to determine those customers mostlikely to order from Camping World’s catalogs. As a result, Camping World is able to target catalog mailings moreeffectively than direct marketers of catalogs offering generalmerchandise.  Camping World continuallyexpands its proprietary mailing list through in-store subscriptions andrequests for catalogs in response to advertisements in regional publicationsdirected to RV owners.  In addition,Camping World rents mailing lists of RV owners from third parties.

 

During2009, Camping World distributed 3.0 million catalogs, 2.5 million of which weremailed in five separate mailings, and the remaining 500,000 catalogs weredistributed in supercenters, at campgrounds and other RV locations, and aspackage inserts.  During the same period,Camping World processed approximately 229,000 catalog orders at an average netorder size of $117, excluding 

 

16

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postageand handling charges.

 

OnJanuary 1, 2009, a Series Entitlement and Sponsorship Agreement wasentered into by and between National Association for Stock Car Auto Racing, Inc.(“NASCAR”) and FreedomRoads, and CWI, Inc. (“CWI”), a wholly ownedsubsidiary of Camping World, Inc. (the “NASCAR Sponsorship Agreement”).  Pursuant to the terms of this agreement, CWIand FreedomRoads 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 FreedomRoads and CWI.  The obligations of FreedomRoads and CWI underthe Sponsorship Agreement are joint and several in nature, provided that theliability of CWI for the annual rights fees during the term of the NASCARSponsorship Agreement is capped at an aggregate of $6.5 million.  The amounts paid by CWI and allocated to FRare included in the payments to FreedomRoads as discussed in Item 13 — CertainRelationships and Related Transactions, and Director Independence.

 

**Internet**

 

TheInternet has proven to be a significant, low-cost source for new club members,subscriptions and other ancillary product sales.  We maintain fifty-three 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 2009 underthese programs represented over approximately 13% of all new club members.  E-mail acquisition campaigns and Internetonline advertising generated $38.2 million of revenue in 2009.

 

**Marketing**

 

We market our clubmemberships and related products and services through direct mail, e-mail,inserts, ride-alongs, space advertisements, promotional events, point of sale,member-get-a-member campaigns, and telemarketing.  Direct response marketing efforts account forapproximately 47% of new enrollments with the remaining 53% derived from othersources.  We use a variety ofcommercially available mailing lists of RV owners in our direct mailefforts.  Currently, the most widely usedlist databases are provided by three commercial list compilers, and directresponse lists are from RV industry participants, RV consumer surveys, andproprietary in-house lists.

 

OurMedia segment solicits advertisements through an internal sales force and bypaying commissions to advertising agencies and independent contractors whoplace advertisements.  Many advertisersare repeat customers with whom we have long standing relationships.

 

Wemarket our retail products through mail order catalogs, direct mail retailflyers, advertisements in national and regional industry publications, vendorco-op advertising programs, promotional events, the President’s Club directmailings and personal solicitations and referrals. Camping World’s principalmarketing strategy is to capitalize on its broad name recognition among RV owners.

 

**Operations**

** **

Ourcustomer service operations are located in Denver, Colorado and Bowling Green,Kentucky.  The primary focus of thesegroups is to manage our customers’ expectations and relationship with theorganization.  These member serviceoperations processed approximately 1.3 million telephone calls in 2009.  Over sixty 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.

 

CampingWorld’s catalog, internet and fulfillment operations are located in Franklin,Kentucky and Bakersfield, California. Fulfillment operations involve the processing of orders and checksprincipally 

 

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receivedby mail.  Orders are usually processedand shipped within 24 hours of receipt. Certain fulfillment operations are performed by third parties.

 

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

 

**Information Support Services**

 

We utilizeintegrated computer systems to support our membership club and publishingoperations.  A database containing allcustomer activity across our various businesses and programs has beenintegrated into our web sites and call centers. Comprehensive information on each member, including a profile of thepurchasing activities of members, is available to customer servicerepresentatives when responding to member requests and when marketing ourproducts and 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’smanagement information systems and electronic data processing systems consistof an extensive range of retail, mail order, financial and merchandisingsystems, including purchasing, inventory distribution and control, salesreporting, accounts payable and merchandise management.  Camping World’s management information systemincludes point-of-sale registers that are equipped with bar code readers ineach supercenter.  These registers aretrickle-polled throughout the day for “flash reporting” and a full polling ofdata is performed nightly at the close of business into the data center locatedin Bowling Green, KY.  With thispoint-of-sale information and the information from Camping World’s on-linedistribution centers, Camping World compiles comprehensive data, includingdetailed sales volume and inventory information by product, merchandisetransfers and receipts, special orders, supply orders and returns of productpurchases to vendors.  In conjunctionwith its nightly polling, Camping World’s central computer sends price changesto registers at the point of sale.  Theregisters capture President’s Club member numbers and associated sales andreferences to specific promotional campaigns. Management monitors the performance of each supercenter and mail orderoperation to evaluate inventory levels, determine markdowns and analyze grossprofit margins by product.

 

Camping World’scatalog operations also utilize a computerized management system allowingon-line desktop access to information which previously required manualretrieval.  Screen prompts that provideproduct, promotional, and revenue potential information have allowed CampingWorld to maintain high service levels during seasonal sales peaks.

 

**Regulation**

 

Ouroperations are subject to varying degrees of federal, state and localregulation.  Specifically, our outboundtelemarketing, direct mail, and ERS, as well as certain services provided bythird parties, including insurance, RV financing, and extended warrantyprograms, are currently subject to certain regulation, and may be subjected toincreased regulation in the future.  Wedo not believe 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.

 

18

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**Competition**

 

Ingeneral, our membership clubs, retail (including internet and catalog)operations and publications compete with numerous organizations in the recreationindustry for disposable income spent on leisure activities.  By offering significant membership benefitsat a reasonable cost and actively marketing to club members, we believe that wehave been able to maintain a loyal following for our membership organizationsas evidenced by the high renewal rates of our membership clubs.  The products and services marketed by uscompete with similar products and services offered by other providers.  However, management believes that we are ableto use the large volume of purchases by our club members to secure attractivepricing for the products and services marketed by us.

 

**Employees**

 

Asof December 31, 2009, we had 1,541 full-time and 96 part-time or seasonalemployees, consisting of 9 executives, 1,083 employees in retail operations,327 employees in administrative and club operations, 166 employees inpublishing and advertising sales, 6 employees in resort services and 46employees in marketing.  No employees arecovered by a collective bargaining agreement. We believe that our employee relations are good.

 

**Trademarks and Copyrights**

 

Weown a variety of registered trademarks and service marks for the names of ourclubs, magazines and other publications. We also own the copyrights to certain articles in our publications.  We believe that our trademark and copyrightshave significant value and are important to our marketing efforts.

 

**ITEM 1A:  RISK FACTORS**

 

The risks described below are not the only risks weface.  Any of the following risks couldmaterially adversely affect our business, financial condition or results ofoperations. Additional risks and uncertainties not currently known to us, orthat we currently deem to be immaterial, may also materially adversely affectour business operations.

 

**Risks Relatingto our Debt**

 

*Our substantialindebtedness could adversely affect our financial health.*

 

We have a significant amount of indebtedness.  As of December 31, 2009, our total debtand total stockholder’s deficit were $278.4 million and $221.5 million, respectively.  Our total debt as of December 31, 2009primarily consisted of: (1) $128.9 million under the Amended and RestatedCredit Agreement and Senior Secured floating Rate Note Purchase Agreement due March 31,2010, (“Senior Credit Facility”), consisting of $110.8 million in term notesdue March 31, 2010 and $18.1 million under the revolving credit facilitydue March 31, 2010, (2) $137.8 million under the Company’s 9% SeniorSubordinated Notes due 2012 (“Senior Notes”), (3) $9.7 million under asecond lien loan at 9% interest due July 31, 2010 (“the “Second Lien Loan”),(4) $1.0 million under loans from SA Holding, Inc., owned by ourChairman, Stephen Adams due March 1, 2010, and (5) $1.0 million underdebt relating to publication and consumer event acquisitions over the last sixyears within our Media segment.  In thefuture, we intend to use cash generated by operations to reduce ourindebtedness.  However, we may from timeto time, subject to restrictions imposed by the terms of our indebtedness, paydividends or find it more advantageous to employ cash generated by operationsfor capital investments and acquisitions.

 

19

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The Senior Credit Facility matures on March 31,2010.  As of December 31, 2009,there was $128.9 million outstanding under the Senior Credit Facility and itwas secured by a lien on all of the Company’s assets and a pledge of theCompany’s stock and the stock of its subsidiaries.  On March 1, 2010, AGI refinanced itsexisting Senior Credit Facility and its Second Lien Loan ($9.7 millionoutstanding on December 31, 2009) due July 31, 2010 through anamendment and restatement of the Senior Credit Facility (the “New Senior CreditFacility”).  The New Senior CreditFacility provides for term loans aggregating $144.3 million, including anoriginal issue discount of 2%, that are payable in quarterly installments of$360,750 beginning March 1, 2011. In addition, there are mandatory prepayments of the term loans fromexcess cash flow (as defined) and from asset sales.  The term loans under the New Senior CreditFacility mature on the earlier of March 1, 2015 or 90 days prior to thematurity of either the Senior Notes ($137.8 million principal amountoutstanding at December 31, 2009 and are due on February 15, 2012) orAGHI’s 10-7/8% senior notes due 2012 ($113.6 million aggregate principal amountoutstanding as at December 31, 2009 and are due February 15,2015).  The New Senior Credit Facilityalso includes several restrictions on us, including on our ability to incuradditional indebtedness, pledge assets, and make dividends and distributions.

 

In addition, on March 1, 2010, Camping World enteredinto a credit agreement (the “CW Credit Facility”) providing for an asset basedlending facility of up to $22.0 million, of which $10.0 million is availablefor letters of credit and $12.0 million is available for revolving loans.  The CW Credit Facility matures on the earlierof March 1, 2013, 60 days prior to the date of maturity of the New SeniorCredit Facility, or 120 days prior to the earlier date of maturity of theSenior Notes and the AGHI Notes. Interest under the revolving loans under the CW Credit Facility floatsat either 3.25% over the base rate (defined as the greater of the prime rate,federal funds rate plus 50 basis points or 1 month LIBOR) for borrowings whoseinterest is based on the prime rate or 3.25% over the LIBOR rate (defined asthe greater of LIBOR rate applicable to the period of the respective LIBORborrowings or 1.0%) for borrowings whose interest is based on LIBOR.  Borrowings under the CW Credit Facility arebased on the borrowing base of eligible inventory and accounts receivable ofCamping World and its subsidiaries.  TheCW Credit Facility contains affirmative covenants, including financialcovenants, and negative covenants. Borrowings under the Camping World Credit Agreement are guaranteed bythe direct and indirect subsidiaries of Camping World and are secured by apledge on the stock of Camping World and its direct and indirect subsidiariesand liens on the assets of Camping World and its direct and indirectsubsidiaries.  The lenders under the NewSenior Credit Facility and the CW Credit Facility have entered into anintercreditor agreement that governs their rights in the collateral that ispledged to secure their respective loans.

 

Our ability to satisfy our debt service obligations dependsprimarily on our operating performance. Future debt repayments by us, including the principal amount of thenotes, may require funds in excess of our available cash flow.  We cannot assure our stakeholders that wewill be able to raise additional funds, if necessary, through futurefinancings.  The indenture (the “AGIIndenture”) pursuant to which the Company issued the Senior Notes due 2012imposes several restrictions upon us, including restrictions on our ability toincur additional indebtedness, pledge assets, and make dividends anddistributions.

 

Our parent, AGHI, had debt as of December 31,2009 consisting of $112.3 million principal amount of AGHI Notes which is netof $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 same tenor as the AGHI Notes, exceptthe maturity date is March 15, 2010. AGI has not paid any dividends to AGHI to fund payment of interest onthe AGHI Notes and AGHI made the interest payments due 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, 

 

20

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August 16, 2008 and February 15,2009 from proceeds of capital contributions made by AGHI’s parent, AGHC in theamount of $5.9 million, $6.2 million, and $6.2 million, respectively.  The interest payment due August 15, 2009was paid in January 2010 with a $4.5 million cash payment (a $2.8 millioncapital contribution from its shareholder, and $1.7 million of permitted taxdistributions from AGI), and the remaining $1.7 million was forgiven as thebonds were held by related entities. AGHI satisfied the interest payment due February 15, 2010 on March 5,2010 with $4.4 million in cash (funded, in part, from $2.5 million received byAGHI in connection with a waiver by AGHI of certain first refusal rightsrelated to AGI’s vehicle insurance business and the balance from AGI as apermitted tax distribution) and the remaining $1.8 million through forgivenessof interest on AGHI Notes held by entities indirectly controlled by the Company’ssole shareholder.  As of December 31,2009, $112.3 million of AGHI Notes remain outstanding, including $25.4 milliondue on March 15, 2010.  As part ofthe refinancing of the Senior Credit Facility on March 1, 2010, AGHIacquired the $25.4 million of AGHI Notes due on March 15, 2010 that wereheld by an affiliate of AGHI and cancelled those notes.  Although a potential source of the cashpayments of the AGHI Notes is dividends from AGI, there are certainrestrictions on the payment of dividends under the New Senior Credit Facilityand the AGI Indenture.

 

As a result of restrictions in the SeniorCredit Facility, AGI is blocked from making distributions to AGHI for thepurpose of paying interest on the AGHI Notes. Recent interest payments have been made in whole or in part using theproceeds of capital contributions from AGHI’s parent and there can be noassurance that AGHI’s parent will continue to do so.

 

TheNew 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.  The new loan agreement also has othersignificant obligations- observation rights, change in control, etc.  If we don’t provide satisfactory evidenceregarding certain tax liabilities, etc., the loan can be called early.

 

Our substantial indebtedness could have importantconsequences to stakeholders in the Company. For example, it could: (i) increase our vulnerability to generaladverse economic and industry conditions, (ii) require us to dedicate asubstantial portion of our cash flow from operations to payments on ourindebtedness, thereby reducing the availability of our cash flow to fundworking capital, capital expenditures, expansion through acquisitions and othergeneral corporate purposes, (iii) limit our flexibility in planning for,or reacting to, changes in our business and the industry in which we operate, (iv) placeus at a competitive disadvantage compared to our competitors that have lessdebt, and (v) limit our ability, among other things, to borrow additionalfunds.

 

*Despite currentindebtedness levels and restrictive covenants, we still may be able to incursubstantially more debt in the future.*

 

Despite our current level of debt, we or our subsidiariesmay be able to incur substantial additional debt in the future.  Our New Senior Credit Facility and the CWCredit Facility, both entered into on March 1, 2010, permit totalborrowings of up to $166.3 million, including $144.3 million of term loans andan asset based lending facility of up to $22.0 million, of which $10.0 millionis available for letters of credit and $12.0 million is available for revolvingloans.  Although our New Senior CreditFacility, CW Credit Facility and AGI Indenture restrict us and our restrictedsubsidiaries from incurring additional debt, these restrictions are subject toimportant exceptions and qualifications. If we or our subsidiaries incur additional debt, the risks that we andthey now face as result of our leverage could increase.

 

If our financial condition and operating resultsdeteriorate, our relationships with our creditors, including the lenders underour New Senior Credit Facility, the holders of the Senior Notes and oursuppliers, may be adversely affected.

 

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*Our operationsare substantially restricted by the terms of the New Senior Credit Facility andthe AGI Indenture which could adversely affect us and increase our credit risk.*

 

The New Senior Credit Facility and the AGI Indenture includea number of significant restrictive covenants. These covenants restrict, among other things, our ability to: (i) incurmore debt, (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 New Senior Credit Facility contains additional and morerestrictive covenants than the terms of the AGI Indenture, including financialcovenants that require us to achieve certain financial and operating resultsand maintain compliance with specified financial ratios.  Our ability to comply with these covenantsand requirements may be affected by events beyond our control, and we may haveto curtail some of our operations and growth plans to maintain compliance.

 

These covenants could limit our ability to plan for or reactto market conditions or to meet our capital needs.  These covenants are subject to certainimportant exceptions.  AGI was incompliance with its debt covenants at December 31, 2009.

 

If we are not able to comply with the covenants and otherrequirements contained in the New Senior Credit Facility, the AGI Indenture orour other debt instruments, an event of default under the relevant debtinstrument could occur.  Our ability tocomply with the provisions of the New Senior Credit Facility, the AGI Indentureand the agreements or indentures governing other debt we may incur in thefuture could be affected by events beyond our control and, therefore, we mightbe unable to meet the requirements of those debt instruments, includingoperating 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 ourstakeholders that our assets or cash flow would be sufficient to fully repayborrowings under our outstanding debt instruments or that we would be able torefinance or restructure the payments of these debt instruments.  Even if we were able to secure additionalfinancing, it may not be available on terms favorable to us.

 

*To service ourindebtedness, we will require a significant amount of cash, the availability ofwhich depends on many factors beyond our control.*

 

Our ability to make payments on and to refinance ourindebtedness and the indebtedness of our subsidiaries, and to fund plannedcapital expenditures will depend on our ability to generate cash in the futureand our creditworthiness. To a certain extent, this is subject to generaleconomic, financial, competitive, legislative, regulatory and other factorsthat are beyond our control.

 

We cannot assure our stakeholders that our business willgenerate sufficient cash flow from operations or that future borrowings will beavailable to us under the New Senior Credit Facility in an amount sufficient toenable us to pay our indebtedness, including the New Senior Credit Facility andthe Senior Notes, as they become 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 matureor to fund our liquidity needs, we may be forced to reduce or delay ourbusiness activities and capital expenditures, sell assets, sell additionalshares of capital stock or restructure or refinance all or a portion of ourdebt, including the Senior Notes, on or before its maturity.  We cannot assure our stakeholders that wewill be able to refinance any of our indebtedness, including the New SeniorCredit Facility and the Senior Notes, on satisfactory terms or at all.

 

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Our failure to comply with our obligations under the NewSenior Credit Facility or the AGI Indenture may result in an event of defaultunder those debt instruments.  A default,if not cured or waived, may permit acceleration of our other indebtedness.  We cannot be certain that we will have funds availableto remedy these defaults. If our indebtedness is accelerated, we cannot becertain that we will have sufficient funds available to pay the acceleratedindebtedness or that we will have the ability to refinance the acceleratedindebtedness on terms favorable to us or at all.

 

*We may not havethe ability to raise the funds necessary to repurchase the Senior Notes upon achange of control.*

 

Upon the occurrence of certain specific kinds of change ofcontrol events, we will be required to offer to repurchase all outstandingSenior Notes at 101% of the principal amount thereof plus accrued and unpaidinterest and liquidated damages, if any, to the date of repurchase.  However, it is possible that we may not havesufficient funds at the time of the change of control to make any requiredrepurchases or that the New Senior Credit Facility will not allow suchrepurchases.  Our failure to purchasetendered notes would constitute a default under the AGI Indenture. In addition,certain important corporate events relating to our capital structure would notconstitute a “change of control” under the AGI Indenture.

 

*The interestsof affiliates of our senior lender may conflict with the interests of holdersof the debt instruments.*

 

We understand that an affiliate of a lender under the NewSenior Credit Facility may hold a significant amount of the AGHI Notes.  The interests of such affiliate may conflictwith the interests of stakeholders in AGI, including holders of the SeniorNotes, leading such lender under the New Senior Credit Facility to takeactions, or defer from taking actions, that a lender would have taken withoutsuch affiliate’s interest in the AGHI Notes.

 

**Risks Relatingto Our Business**

 

*We depend onour ability to attract and retain active members.*

 

Our future success depends in large part upon continueddemand for our membership club programs by consumers.  Any number of factors could affect thefrequency with which consumers participate in our programs or whether theyenroll in a membership club at all. These factors include (1) consumer taste preferences, (2) thefrequency with which members participate in club activities, (3) generaleconomic conditions, (4) weather conditions, (5) the availability ofalternative discount programs in the region in which consumers live and work, (6) significantincreases in gasoline prices, and (7) the disposable income of consumersavailable for discretionary expenditures. Any significant decline in usage or increase in program cancellations,without a corresponding increase in new member enrollments, could have amaterial adverse effect on our business.

 

Our future growth depends upon continued demand for ourmembership clubs from consumers we serve or seek to serve.  A significant downturn in leisure travel orin any of the other areas served by our membership clubs would have a materialadverse effect on our business, financial condition and results of operations.

 

*We depend onour relationships with our marketing partners and a disruption of theserelationships or of our marketing partners’ operations could have an adverseeffect on our business and results of operations.*

 

Our business depends in part on developing and maintainingproductive relationships with third party providers of products and servicesthat we market to our customers. Many factors outside our control 

 

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may harm these relationships.  For example, financial difficulties that someof our providers may face may adversely affect our marketing program withthem.  A disruption of our relationshipswith our marketing partners or a disruption in our marketing partners’operations could have a material adverse effect on our business and results ofoperations.

 

*We facesignificant competition for disposable income spent on leisure merchandise andactivities.*

 

In general, our membership clubs, retail and catalogoperations and publications compete with numerous organizations in therecreation industry for disposable income spent on leisure merchandise and activities.The products and services we market compete with similar products, services,publications and retail businesses offered by other providers.  Increased competition from these and othersources could require us to respond to competitive pressures by establishingpricing, marketing and other programs or seeking out additional strategicalliances or acquisitions that may be less favorable to us than we couldotherwise establish or obtain.

 

*Our businesscould be adversely affected by deteriorating general economic conditions.*

 

Our activities relate significantly to the amount of leisuretime and the amount of disposable income available to users of our products andservices.  Our business, therefore, issensitive to general economic conditions affecting the willingness of consumersto purchase club memberships and related products and services and ofadvertisers to place advertisements in our publications.  Our 2009 total revenue experienced a 10.3%drop from 2008 primarily as a result of the 2008/2009 recession.  In particular, during the gasoline shortagesand resulting price increases in 1973, 1980 and 1990, there was a reduction inadvertising revenues for our publications. In addition, the success of the membership club portion of our businessdepends on our members’ use of certain RV sites and/or golf courses or thepurchase of goods through participating merchants.  If the economy slows, our members mayperceive that they have less disposable income to permit them to pursue leisureactivities.  As a consequence, they maytravel less frequently, spend less when they travel and use the benefits oftheir club memberships less often, if at all. Any decline in program usagewould hurt our business. In addition, the current decline in the nationaleconomy could cause some of the merchants who participate in our programs to goout of business.  It is likely that,should the number of merchants entering bankruptcy rise, the number ofuncollectible accounts would also rise. This would have an adverse effect on our business and financial results.

 

*Our businesscould be adversely affected by deteriorating economic condition ofFreedomRoads.*

 

Forty-two of our Camping World stores are co-located with RVdealerships owned and operated by FreedomRoads. In virtually all of such locations, Camping World is a sub-tenant ofFreedomRoads. Camping World’s business and occupancy rights in such co-locatedstores is sensitive to the viability of FreedomRoads’ RV dealership businessesand performance by FreedomRoads of its obligations as tenant to its landlord.Closing of dealerships in co-located stores or loss of occupancy rights byvirtue of FreedomRoad’s failure to perform its lease obligations would have anadverse effect on our business and financial results*.*

 

*The interestsof our principal shareholder may conflict with the interests of holders of thedebt 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.

 

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Circumstances may occur in which the interests of Mr. Adamscould be in conflict with the interests of the holders of our debt instrumentsand lenders.  For example, Mr. Adamsmay have an interest in pursuing acquisitions, divestitures or other transactionsthat, in his judgment, could enhance the value of his equity investment, eventhough such transactions may involve risks to the holders of our debtinstruments and lenders.

 

*We are subjectto varying degrees of federal, state and local regulations which may affect ouroperations.*

 

Our operations are subject to varying degrees of federal,state and local 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 registration information.

 

In addition to the existing regulatory framework, newregulatory efforts affecting our operations may be proposed from time to timein the future at the federal, state and local level. There can be no assurancethat such regulatory efforts will not have a material adverse effect on ourability to operate our businesses or our results of operations.

 

Our direct marketing operations are subject to variousfederal and state “do not call” list requirements.  The Federal Trade Commission has created anational “do not call” registry.  Underthese federal regulations, consumers may have their phone numbers added to thenational “do not call” registry. Generally, we are prohibited 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.

 

*Increase inpaper costs, postage costs and shipping costs may have an adverse impact on ourfuture 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 areunable to retain senior executives and attract and retain other qualifiedemployees, our business might be adversely affected.*

 

Our success depends in part on our ability to attract, hire,train and retain 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 andadversely affected.  Our success alsodepends to a significant extent on the continued service and performance of oursenior management team.  The loss of anymember of our senior management team could impair our ability to execute ourbusiness plan and could therefore have a material adverse effect on ourbusiness, results of operations and financial condition.

 

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**ITEM 2:  PROPERTIES**

 

We lease all of the real properties where we haveoperations.  Our real property leasesgenerally provide for fixed monthly rentals with annual escalationclauses.  The table below sets forthcertain information concerning our properties and the lease expiration dateincludes 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           |       |       |       | 2010                  |       |
| 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                  |       |
| Chesterfield, VA (shows sales office)                                                      |       | 5,900            |       |       |       | 2011                  |       |
| Maple Grove, MN (Ehlert Publications  Group, Inc. headquarters)                       |       | 17,496           |       |       |       | 2010                  |       |
| Scotts Valley, CA (regional  publication office)                                           |       | 3,905            |       |       |       | 2011                  |       |
| Bowling Green, KY (database and  online media support)                                     |       | 5,952            |       |       |       | 2015                  |       |
|                                                                                       |       |             |       |       |       |                  |       |
| **Distribution Centers:**                                                                  |       |             |       |       |       |                  |       |
| Bakersfield, California                                                                    |       | 164,747          |       | 14.827     |       | 2037                  |       |
| Franklin, Kentucky                                                                         |       | 250,000          |       | 33.000     |       | 2035                  |       |
|                                                                                       |       |             |       |       |       |                  |       |
| **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                  |       |
| North Little Rock, AR                                                                      |       | 20,592           |       | 10.000     |       | 2042                  |       |
| Earnhardt, AZ (1)                                                                          |       | 2,000            |       | 24.000     |       | 2017                  |       |
| Flagstaff, AZ                                                                              |       | 23,110           |       | 7.350      |       | 2024                  |       |
| Tucson, AZ (2)                                                                             |       | 12,145           |       | 2.000      |       | 2018                  |       |
| Mesa, AZ (1)                                                                               |       | 27,500           |       | 3.140      |       | 2010                  |       |
| Bakersfield, CA (1)                                                                        |       | 23,325           |       | 9.940      |       | 2023                  |       |
| La Mirada, CA                                                                              |       | 33,479           |       | 5.501      |       | 2037                  |       |
| San Marcos, CA                                                                             |       | 25,522           |       | 2.212      |       | 2027                  |       |
| Rocklin, CA                                                                                |       | 29,085           |       | 4.647      |       | 2037                  |       |
| San Bernardino, CA                                                                         |       | 18,126           |       | 1.665      |       | 2012                  |       |
| San Martin, CA                                                                             |       | 29,486           |       | 5.000      |       | 2023                  |       |
| Vacaville, CA                                                                              |       | 35,917           |       | 8.700      |       | 2024                  |       |
| Valencia, CA                                                                               |       | 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                                                                              |       | 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                  |       |

 

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| ** **                                            | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|-------------------------------------------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| **Camping World Supercenter  Locations (continued):** |       |             |       |      |       |                  |       |
| Savannah, GA (1)                                      |       | 6,285            |       | 4.898     |       | 2026                  |       |
| Woodstock, GA (1)                                     |       | 4,510            |       | 7.715     |       | 2026                  |       |
| Council Bluffs, IA (3)                                |       | 23,620           |       | 5.770     |       | 2023                  |       |
| Boise, ID (1)                                         |       | 6,033            |       | 12.690    |       | 2018                  |       |
| Island Lake, IL (1)                                   |       | 2,540            |       | 17.028    |       | 2026                  |       |
| 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                  |       |
| 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                                          |       | 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                                         |       | 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                                           |       | 20,400           |       | 4.866     |       | 2023                  |       |

 

27

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(1)        This supercenter is leased from a FreedomRoads dealershipand the acreage reflects the total dealership property.  The square footage reported is the portion ofthe building leased by Camping World, Inc.

(2)        This supercenter is located with an RV dealership (otherthan a FreedomRoads dealership) and the acreage reflects the total dealershipproperty. The square footage reported is the portion of the building leased byCamping World, Inc.

(3)        The supercenter is co-located with a FreedomRoads dealershipwherein 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 12,000 square feet onapproximately 1.9 acres in Bellville, Michigan and other miscellaneous officeequipment.  In addition, we own 12.439acres of unimproved land adjacent to the New Braunfels, Texas Camping WorldSupercenter.

 

**ITEM 3: LEGAL PROCEEDINGS**

 

Fromtime to time, the Company is involved in litigation arising in the normalcourse of business operations.   TheCompany does not believe it is currently involved in any litigation that willhave a material adverse effect on the Company’s results of operations orfinancial position.

 

 

**ITEM 4:  (RESERVED)**

 

 

**PART II**

 

 

**ITEM 5:  MARKET FOR REGISTRANT’SCOMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES**

 

Not Applicable

 

28

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**ITEM 6: SELECTED FINANCIAL DATA**

 

 

The selected financial dataof our company for each of the five years ended December 31 are derivedfrom our audited consolidated financial statements.  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:**                 |   | 2009                            |    | 2008 |   | 2007 |   | 2006 |   | 2005 |   |
| REVENUES:                                          |   |                            |    |   |   |   |   |   |   |   |   |
| Membership services                                |   |  $                         | 142,147 |   |  $ | 152,643 |   |  $ | 149,937 |   |  $ | 137,394 |   |  $ | 133,756 |   |
| Media                                              |   | 59,061                          |    | 82,424 |   | 90,537 |   | 86,742 |   | 79,122 |   |
| Retail                                             |   | 270,573                         |    | 291,070 |   | 321,730 |   | 290,422 |   | 272,682 |   |
|                                               |   | 471,781                         |    | 526,137 |   | 562,204 |   | 514,558 |   | 485,560 |   |
|                                               |   |                            |    |   |   |   |   |   |   |   |   |
| COSTS APPLICABLE TO REVENUES:                      |   |                            |    |   |   |   |   |   |   |   |   |
| Membership services                                |   | 84,826                          |    | 90,758 |   | 94,840 |   | 87,407 |   | 85,551 |   |
| Media                                              |   | 46,079                          |    | 61,126 |   | 62,258 |   | 58,302 |   | 53,855 |   |
| Retail                                             |   | 164,510                         |    | 170,911 |   | 194,940 |   | 175,015 |   | 162,363 |   |
|                                               |   | 295,415                         |    | 322,795 |   | 352,038 |   | 320,724 |   | 301,769 |   |
|                                               |   |                            |    |   |   |   |   |   |   |   |   |
| GROSS PROFIT                                       |   | 176,366                         |    | 203,342 |   | 210,166 |   | 193,834 |   | 183,791 |   |
|                                               |   |                            |    |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                                |   |                            |    |   |   |   |   |   |   |   |   |
| Selling, general and  administrative               |   | 128,917                         |    | 142,757 |   | 145,556 |   | 133,129 |   | 121,178 |   |
| Restructuring charge                               |   | -           |    | -     |   | -     |   | 93 |   | -     |   |
| Goodwill impairment                                |   | 46,884                          |    | 47,601 |   | -     |   | -     |   | 4,344 |   |
| Impairment of investment in  affiliate             |   | -           |    | 81,005 |   | -     |   | -     |   | -     |   |
| Financing expense                                  |   | 2,607                           |    | -     |   | -     |   | -     |   | -     |   |
| Depreciation and amortization                      |   | 21,076                          |    | 19,798 |   | 18,948 |   | 18,656 |   | 15,529 |   |
|                                               |   | 199,484                         |    | 291,161 |   | 164,504 |   | 151,878 |   | 141,051 |   |
|                                               |   |                            |    |   |   |   |   |   |   |   |   |
| (LOSS) INCOME FROM OPERATIONS                      |   | (23,118                         | )       | (87,819 | ) | 45,662 |   | 41,956 |   | 42,740 |   |
|                                               |   |                            |    |   |   |   |   |   |   |   |   |
| NON-OPERATING ITEMS:                               |   |                            |    |   |   |   |   |   |   |   |   |
| Interest expense, net                              |   | (30,356                         | )       | (23,649 | ) | (24,227 | ) | (24,593 | ) | (24,581 | ) |
| Gain (loss) on derivative  instrument (1)          |   | 745                             |    | (2,394 | ) | -     |   | -     |   | -     |   |
| Gain (loss) on debt restructure                    |   | 4,678                           |    | -     |   | (775 | ) | (835 | ) | -     |   |
| Other non-operating income  (expense), net         |   | (1,263                          | )       | (323 | ) | (149 | ) | 9 |   | (5 | ) |
|                                               |   | (26,196                         | )       | (26,366 | ) | (25,151 | ) | (25,419 | ) | (24,586 | ) |
|                                               |   |                            |    |   |   |   |   |   |   |   |   |
| (LOSS) INCOME FROM OPERATIONS  BEFORE INCOME TAXES |   | (49,314                         | )       | (114,185 | ) | 20,511 |   | 16,537 |   | 18,154 |   |
|                                               |   |                            |    |   |   |   |   |   |   |   |   |
| INCOME TAX BENEFIT (EXPENSE) (2)                   |   | 10,366                          |    | 2,213 |   | (1,583 | ) | (22,268 | ) | (7,416 | ) |
|                                               |   |                            |    |   |   |   |   |   |   |   |   |
| NET (LOSS) INCOME                                  |   |  $                         | (38,948 | ) |  $ | (111,972 | ) |  $ | 18,928 |   |  $ | (5,731 | ) |  $ | 10,738 |   |

 

29

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**SELECTED FINANCIAL DATA (continued)**

 

 
| * *                             |   |    December 31, |   |
|--------------------------------------|--------|---------------------------|--------|
| *(dollars  in thousands)*            |   | 2009                      |   | 2008 |   | 2007 |   | 2006 |   | 2005 |   |
| Balance Sheet Data (at period  end): |   |                      |   |   |   |   |   |   |   |   |   |
| Working capital (deficiency)         |   | $                         | (4,754 | ) | $ | (10,494 | ) | $ | (21,064 | ) | $ | (34,983 | ) | $ | (6,731 | ) |
| Total assets                         |   | 221,569                   |   | 294,352 |   | 421,611 |   | 408,008 |   | 415,460 |   |
| Deferred revenues and gains (3)      |   | 96,335                    |   | 96,424 |   | 104,390 |   | 100,089 |   | 98,920 |   |
| Total debt                           |   | 278,414                   |   | 292,146 |   | 287,173 |   | 285,155 |   | 320,000 |   |
| Total stockholders’ deficit     |   | (221,525                  | )      | (186,514 | ) | (66,910 | ) | (75,383 | ) | (66,365 | ) |
|                                      |        |                           |        |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

----

 

 

(1) The 2009 gain onderivative instrument pertains to the change in value of the $35.0 millioninterest rate swap agreement effective April 30, 2008, and $20.0 millionof the $100.0 million interest rate swap agreement effective October 15,2007.  The 2008 loss on derivativeinstrument pertains to change in value of the $35.0 million interest rate swaponly.

 

(2) EffectiveJanuary 1, 2006, the Company changed its tax status from a Subchapter Ccorporation to a Subchapter S corporation, upon receiving approval from theInternal Revenue Service.  The electionto change included the Company and all its subsidiaries, with the exception ofCamping World, Inc. and its wholly-owned subsidiaries, which remainedSubchapter C Corporations.  As a resultof the change in tax status, all deferred tax accounts of the Company,excluding Camping World and its wholly-owned subsidiaries, were revalued toaccount for the lower tax rates applicable to the Subchapter S corporationstatus and such reduction was charged to income tax expense for the year endDecember 31, 2006.

 

(3) Deferredrevenues represent cash received by us in advance of the recognition ofrevenues in accordance with accounting principles generally accepted in theUnited States.  Deferred revenuesprimarily reflect club membership dues, annual ERS fees, advances on thirdparty credit card fee revenues and publication subscriptions.  These revenues are recognized at the time thegoods or services are provided or over the membership period, which averagesapproximately 17 months.  The deferredrevenue balance for 2009, 2008, 2007, 2006 and 2005 also include deferred gainsof $8.4 million, $8.9 million, $9.3 million, $9.8 million and $10.3 million,respectively, from the real estate sale-leaseback transactions which occurredin December 2001.

 

30

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**ITEM 7:MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATION**

 

 

The following tables setforth the components of the statements of operations for the years endedDecember 31, 2009, 2008, and 2007 as a percentage of total revenues, andthe 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 2009 | Year 2008 |
|                                               |   | 2009           | 2008    | 2007                 |   | over 2008 | over 2007 |
|                                               |   |           |    |                 |   |   |   |
| REVENUES:                                          |   |           |    |                 |   |   |   |
| Membership services                                |   | 30.1%          | 29.0%   | 26.7%                |   | (6.9%) | 1.8% |
| Media                                              |   | 12.5%          | 15.7%   | 16.1%                |   | (28.3%) | (9.0%) |
| Retail                                             |   | 57.4%          | 55.3%   | 57.2%                |   | (7.0%) | (9.5%) |
|                                               |   | 100.0%         | 100.0%  | 100.0%               |   | (10.3%) | (6.4%) |
|                                               |   |           |    |                 |   |   |   |
| COSTS APPLICABLE TO REVENUES:                      |   |           |    |                 |   |   |   |
| Membership services                                |   | 18.0%          | 17.2%   | 16.9%                |   | (6.5%) | (4.3%) |
| Media                                              |   | 9.8%           | 11.6%   | 11.1%                |   | (24.6%) | (1.8%) |
| Retail                                             |   | 34.8%          | 32.6%   | 34.6%                |   | (3.7%) | (12.3%) |
|                                               |   | 62.6%          | 61.4%   | 62.6%                |   | (8.5%) | (8.3%) |
|                                               |   |           |    |                 |   |   |   |
| GROSS PROFIT                                       |   | 37.4%          | 38.6%   | 37.4%                |   | (13.3%) | (3.2%) |
|                                               |   |           |    |                 |   |   |   |
| OPERATING EXPENSES:                                |   |           |    |                 |   |   |   |
| Selling, general and  administrative               |   | 27.3%          | 27.1%   | 25.9%                |   | (9.7%) | (1.9%) |
| Goodwill impairment                                |   | 9.9%           | 9.0%    | -                    |   | (1.5%) | 100.0% |
| Impairment of investment in  affiliate             |   | -              | 15.4%   | -                    |   | (100.0%) | 100.0% |
| Financing expense                                  |   | 0.6%           | -       | -                    |   | 100.0% | - |
| Depreciation and amortization                      |   | 4.5%           | 3.8%    | 3.4%                 |   | 6.5% | 4.5% |
|                                               |   | 42.3%          | 55.3%   | 29.3%                |   | (31.5%) | 77.0% |
|                                               |   |           |    |                 |   |   |   |
| (LOSS) INCOME FROM OPERATIONS                      |   | (4.9%)         | (16.7%) | 8.1%                 |   | (73.7%) | (292.3%) |
|                                               |   |           |    |                 |   |   |   |
| NON-OPERATING ITEMS:                               |   |           |    |                 |   |   |   |
| Interest income                                    |   | 0.1%           | 0.1%    | 0.1%                 |   | (10.7%) | (2.2%) |
| Interest expense                                   |   | (6.5%)         | (4.5%)  | (4.5%)               |   | 27.4% | (2.4%) |
| Gain (loss) on derivative  instrument              |   | 0.2%           | (0.5%)  | -                    |   | (131.1%) | 100.0% |
| Gain (loss) on debt restructure                    |   | 1.0%           | -       | (0.1%)               |   | 100.0% | (100.0%) |
| Other non-operating (expense)  income, net         |   | (0.4%)         | (0.1%)  | -                    |   | 291.0% | 116.8% |
|                                               |   | (5.6%)         | (5.0%)  | (4.5%)               |   | (0.6%) | 4.8% |
| (LOSS) INCOME FROM OPERATIONS  BEFORE INCOME TAXES |   | (10.5%)        | (21.7%) | 3.6%                 |   | (56.8%) | (656.7%) |
|                                               |   |           |    |                 |   |   |   |
| INCOME TAX BENEFIT (EXPENSE)                       |   | 2.2%           | 0.4%    | (0.2%)               |   | 368.4% | (239.8%) |
|                                               |   |           |    |                 |   |   |   |
| NET (LOSS) INCOME                                  |   | (8.3%)         | (21.3%) | 3.4%                 |   | 65.2% | (691.6%) |

 

31

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**YearEnded December 31, 2009 Compared with Year Ended December 31, 2008**

 

 

*Revenues*

 

Revenues of $471.8million for 2009 decreased by $54.4 million or 10.3% from the comparable periodin 2008.

 

Membership servicesrevenues for 2009 of $142.1 million decreased by $10.5 million or 6.9% from2008.  This revenue decrease was largelyattributable to a $5.0 million reduction in brand usage licensing fee charged toFreedomRoads Holding LLC and its subsidiaries (collectively “FreedomRoads”) in2008 and terminated by agreement in 2009, a $2.5 million decrease inadvertising revenue in *Highways Magazine*,the Good Sam Club publication, a $1.7 million revenue decrease in the Coast toCoast Club and Golf Club due to decreased enrollment, a $1.4 million reductionin dealer program marketing revenue, a $1.3 million reduction in member eventsrevenue, a $0.9 million decrease in Presidents’ Club revenue due to lowerpromotional pricing and reduced advertising revenue, a $0.7 million decrease infee income recognized on vehicle insurance products, a $0.5 million decrease inemergency road service revenue attributable to decreased average enrollment,and a $0.2 million reduction in other various ancillary products.  These decreases were partially offset by a$3.7 million increase in extended vehicle warranty program revenue due tocontinued policy growth and strong renewals.

 

Media revenues for2009 of $59.1 million decreased by $23.4 million or 28.3% from 2008.  This decrease was primarily attributable to a$9.1 million revenue decrease from our outdoor power sports magazine group dueto reduced advertising revenue and reduced published issues of boating and ATVmagazines, a $7.0 million revenue decrease for the RV magazine group primarilydue to decreased advertising revenue, a $4.9 million decrease in consumer showrevenue mainly due to reduced exhibitor contracts, a $2.1 million reduction inannual directory and campground guide revenue, and a $0.3 million revenuereduction due to the elimination of regional campground publications.

 

Retail revenue for2009 of $270.6 million decreased approximately $20.5 million or 7.0% from2008.  Store merchandise sales decreased$10.9 million from 2008 primarily due to a same store sales decrease of $9.2million, or 4.5%, compared to a 15.6% decrease in 2008, and decreased revenuefrom discontinued stores of $5.9 million, was partially offset by a $4.2million revenue increase from the addition of 7 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, supplies and other sales decreased$6.2 million, catalog revenue decreased $2.4 million, installation and servicefees decreased $0.8 million and product extended warranty sales decreased $0.2million.

 

*CostsApplicable to Revenues*

 

Costs applicable to revenues totaled$295.4 million in 2009, a decrease of $27.4 million or 8.5% from 2008.

 

Membership services costs andexpenses decreased by $5.9 million or 6.5% to $84.8 million for 2009.  This decrease consisted of a $2.2 millionreduction in wage-related expenses, a $1.2 million reduction in memberpublication costs, a $1.1 million reduction in vehicle insurance costsassociated with lower revenue, a $1.1 million reduction in dealer programmarketing costs related to reduced revenue, a $1.6 million reduction related tovarious other marketing, overhead and ancillary product cost decreases, a $0.6million decrease in member events costs related to reduced revenue, and a $0.3million reduction of marketing and program costs associated with the Coast toCoast Club and the Golf Card Club.  Thesedecreases were partially offset by a $1.1 million increase associated with the 

 

32

----

 

extended vehicle warranty programprimarily related to program costs, and a $1.1 million cost increase foremergency road service programs primarily related to claims costs.

 

Media costs and expenses of$46.1 million for 2009 decreased approximately $15.1 million or 24.6% comparedto 2008.  This decrease was attributableto a $4.9 million reduction in wage-related expenses, a $4.0 million costreduction in the outdoor power sports magazines primarily related to areduction in the number of issues published, a $2.3 million reduction relatedto consumer show costs, including reduced site rental, outside services andpromotion expense related to fewer exhibitors, a $2.0 million reduction inproduction and advertising costs of the RV magazines, a $1.0 million reductionin costs associated with reduced annual directory and campground guide revenue,a $0.3 million reduction associated with the cancellation of regionalcampground publications, and a $0.6 million reduction in other marketing andoverhead expenses.

 

Retail costs applicable to revenuesdecreased $6.4 million or 3.7% to $164.5 million primarily due to reduced samestore revenue.  The retail gross profitdecreased by $14.1 million, with gross margin as a percent of revenuesdeceasing from 41.3% in 2008 to 39.2% in 2009 due primarily to a new,discounted “value pricing” strategy adopted on over 1,000 products and priceincreases from key vendors.

 

*OperatingExpenses*

 

Selling, generaland administrative expenses of approximately $128.9 million for 2009 decreased$13.8 million or 9.7% from 2008.  Thisdecrease was largely attributable to a $13.5 million decrease in retail generaland administrative expenses primarily consisting of decreases in selling andlabor expenses.  In addition,wage-related expense savings were $1.5 million in the other two segments, theconsumer shows group in the Media segment had a $0.5 million reduction ingeneral and administrative expenses related to discontinued consultingagreements and management fees, and other expenses were reduced $0.6million.  These decreases were partiallyoffset by a $2.3 million increase in professional fees related primarily to theextension of the maturity date under the Company’s Senior Credit Facility dueMarch 31, 2010 and Second Lien Loan due July 31, 2010.

 

The Companyrecorded a non-cash goodwill impairment charge of $46.9 million in the thirdquarter of 2009 related to our RV and powersports publications, which is partof the Media segment, based on managements’ evaluation that determined thecarrying value of the goodwill associated with the Media segment exceeded itsestimated fair value.  The Companyrecorded a non-cash goodwill impairment charge of $47.6 million in the thirdquarter of 2008 based on management’s evaluation, prepared in anticipation ofthe potential sale of Camping World, that determined the carrying value of thegoodwill associated with Camping World exceeded the estimated fair value ofCamping World, which encompasses the entire Retail segment, and to a lesserextent, part of the Membership Services segment.  The Company further recorded an $81.0 millionnon-cash long-lived asset impairment charge in the third quarter of 2008relating to the carrying value of the preferred interest in FreedomRoadsHolding Company, LLC, held by an indirect subsidiary of Camping World,exceeding its estimated fair value.

 

The Companyincurred financing expense of $2.6 million in 2009 for legal and other costsassociated with the amendment to the Senior Credit Facility dated in June,2009, which were expensed in accordance with accounting guidance for debtorsaccounting for a modification or exchange of debt instruments.

 

Depreciation andamortization expenses of $21.1 million were approximately $1.2 million higherthan in 2008 due primarily to increased amortization related to the currentSenior Credit Facility re-financing and increased depreciation associated with newretail stores, partially offset by reduced amortization of intangible assetsassociated with the recent acquisitions.

 

33

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*Loss from Operations*

 

Loss from operations for 2009 wasapproximately $23.1 million compared to a loss from operations of $87.8 millionfor 2008.  This $64.7 million reductionin loss was primarily the result of the $81.0 million asset impairment chargein 2008 and a $0.7 million net decrease in goodwill impairment charges from the2008 period to the 2009 period, partially offset by $2.6 million of financingexpense in 2009.  Operationally, theremaining loss resulted from reduced gross profit for the Retail, Media andMembership Services segments of $14.1 million, $8.3 million and $4.6 million,respectively, and increased depreciation and amortization expenses of $1.2million, partially offset by reduced selling, general and administrativeexpenses of $13.8 million.

 

*Non-OperatingItems*

 

Net non-operatingitems for 2009 were $26.2 million, a decrease of $0.2 million from 2008.  This expense reduction was primarilyattributable to a $4.7 million gain on purchase of the $14.6 million SeniorNotes in the second quarter of 2009, and a net gain on derivative interest rateswap agreements of $3.1 million.  Thesereductions were partially offset by a $6.7 million increase in net interestexpense resulting from increased average interest rates in 2009 and a $0.6million increase in other non-operating expenses, a $0.3 million increase inloss on sale of equipment.

 

*Loss before Income Taxes*

 

Loss before income taxes for 2009was $49.3 million compared to a loss before income taxes of approximately$114.1 million in 2008.  This $64.9million decrease in loss from the prior year was attributable to the $64.7million reduction in loss from operations in 2009 from 2008, and a reduction innon-operating items of approximately $0.2 million.

 

*IncomeTax Expense*

 

The Companyrecorded $10.4 million of income tax benefit for 2009, compared to a $2.2million income tax benefit for 2008.  Thedifference is due to the decrease in previously unrecognized tax benefits,reversal of accrued interest and penalties related to the previouslyunrecognized tax benefits, and decrease in the valuation allowance against deferredtax assets.

 

*NetLoss*

 

Net loss for 2009was approximately $38.9 million compared to $111.2 million for 2008 mainly dueto the reasons discussed above.

 

*Segment(Loss) Profit*

 

The Company’s three principal linesof business are Membership Services, Media and Retail.  The Membership Services segment operates theGood Sam Club, the Coast to Coast Club, the President’s Club, Camp Club USA andassorted membership products and services for RV owners, campers and outdoorvacationers, and the Golf Card Club for golf enthusiasts.  The Media segment publishes a variety ofpublications for selected markets in the recreation and leisure industry,including general circulation periodicals, directories, and RV and powersports industrytrade magazines.  In addition, the Mediasegment operates consumer outdoor recreation shows primarily focused on RV andpowersports markets.  The Retail segmentsells specialty retail merchandise and services for RV owners primarily throughretail supercenters, mail order catalogs and internet.  The Company evaluates performance based onprofit or loss from operations before income taxes and unusual items.

 

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The reportable segments arestrategic business units that offer different products and services.  They are managed separately because eachbusiness requires different technology, management expertise and marketing strategies.

 

Membership services segment profitof $47.6 million in 2009 decreased by $4.0 million, or 7.8% from 2008.  This decrease was largely attributable to a$4.5 million reduction in segment profit relating primarily to reduced brandusage licensing fees, a $1.7 million reduction in emergency road service profitrelating to increased claims, a $1.2 million decrease in segment profit inCoast to Coast Club and Golf Card Club due to reduced member enrollment, a $1.1million decrease in member publication segment profit primarily relating to reducedadvertising revenue in the club publications and a $0.6 million reduction inmember event profit, partially offset by a $3.2 million increase in profit fromthe extended vehicle warranty program, associated with increased revenue, a$1.1 million increase in profit from our vehicle insurance products and an $0.8million decrease in overhead expenses.

 

Media segment loss for 2009 was$43.9 million compared to a $9.2 million segment profit in 2009.  This $53.1 million segment  decrease, or 575.7%, was primarily due to anon-cash goodwill impairment charge of $46.9 million in the third quarter of2009 related to our RV and powersports publications, a $5.0 million decrease insegment profit from the RV-related publications primarily attributable to reducedadvertising revenue, a $1.4 million decrease in segment profit from ourconsumer shows group primarily related to reduced exhibitor revenue, and a $0.9million decrease in segment profit from our outdoor powersports magazine group,primarily attributable to reduced advertising revenue and fewer issuespublished.  These decreases werepartially offset by a $0.7 million reduction in overhead expenses and a $0.4million segment profit increase for annual directories.

 

Retail segment loss for 2009 of$11.4 million decreased $134.3 million, or 92.2% from 2008.  This reduced segment loss resulted primarilyfrom an $81.0 million non-cash long-lived asset impairment charge in the thirdquarter of 2008 relating to the carrying value of the preferred interest inFreedomRoads Holding Company, LLC, held by an indirect subsidiary of CampingWorld, a non-cash goodwill impairment charge of $47.6 million in the thirdquarter of 2008 related to the potential sale of Camping World, a $13.5 milliondecrease in selling, general and administrative expenses and an $8.3 millionreduction in allocated interest expense. These segment increases were partiallyoffset by a $14.7 million decrease in segment gross profit, a $0.6 millionincrease in depreciation and amortization expense, $0.6 million of financingexpense in 2009, and a $0.2 million loss on sale of retail equipment.

 

 

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

* *

*Revenues*

 

Revenues of $526.1million for 2008 decreased by $36.1 million or 6.4% from the comparable periodin 2007.

 

Membership servicesrevenues for 2008 of $152.6 million increased by $2.7 million or 1.8% from2007.  This revenue increase was largelyattributable to a $5.0 million brand usage licensing charged to FreedomRoadsHolding LLC and its subsidiaries (collectively “FreedomRoads”), a $1.6 millionincrease in marketing fee revenue from health and life insurance products, a$0.7 million increase in emergency road service revenue attributable toincreased average enrollment, and a $0.6 million increase in extended vehiclewarranty program revenue due to continued growth in the sales of one-yearrenewable warranty products including warranty sales through our growingnetwork 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

 

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in advertisingrevenue in *Highways Magazine*, the Good Sam Clubpublication, and a $1.1 million revenue decrease in the Coast to Coast Club dueto decreased enrollment.

 

Media revenues for2008 of $82.4 million decreased by $8.1 million or 9.0% from 2007.  This decrease was primarily attributable to a$4.3 million revenue decrease from our outdoor power sports magazine group dueto decreased number of issues published and decreased advertising revenue, a$3.3 million reduction in annual directory and campground guide revenue, and a$2.9 million revenue decrease for the RV magazine group primarily due todecreased advertising revenue.  Thesedecreases were partially offset by a $2.4 million increase in consumer showrevenue.

 

Retail revenue for2008 of $291.1 million decreased approximately $30.7 million or 9.5% from2007.  Store merchandise sales decreased$26.8 million from 2007 primarily due to a $33.5 million, or 15.6%, same storesales 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, catalog revenue decreased $8.6million, 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.

 

*CostsApplicable to Revenues*

 

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

 

Membership services costs andexpenses 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 serviceprograms primarily related to claims costs, partially offset by $1.0 million ofadditional program costs associated with increased marketing fee revenue fromhealth and life insurance products.

 

Media costs and expenses of$61.1 million for 2008 decreased $1.1 million or 1.8% compared to 2007.  This decrease was attributable to a $1.6million cost reduction in the outdoor power sports magazines primarily relatedto a reduction in the number of issues published, a $0.9 million reduction inproduction and advertising costs of the RV magazines, and $0.6 million ofreduced costs associated with reduced annual directory revenue, partiallyoffset by $2.0 million of additional costs associated with the recentlyacquired consumer shows.

 

Retail costs applicable to revenuesdecreased $24.0 million or 12.3% to $170.9 million primarily due to reducedsame store revenue.  The retail gross profitdecreased by $6.6 million, with gross margin as a percent of revenuesincreasing from 39.4% in 2007 to 41.3% in 2008 due primarily to general priceincreases.

 

*OperatingExpenses*

 

Selling, generaland administrative expenses of approximately $142.7 million for 2008 decreased$2.8 million or 1.9% from 2007.  Thisdecrease was largely attributable to a $1.8 million reduction in executivewage-related expenses and professional fees, a $0.9 million reduction in arbitrationexpenses in connection with our 2007 asserted claim to a right of first refusalin connection with the sale of the insurance provider for the RV vehicleinsurance offered by our Membership Services segment, which claim was rejectedby the arbitration panel, and a $0.7 million reduction in deferred

 

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executivecompensation.  These decreases werepartially offset by increased retail selling and general and administrativeexpenses of $0.6 million consisting of increased rent expense partially offsetby decreased wages and travel.

 

The $47.6 millionnon-cash goodwill impairment charge was based management’s evaluation, preparedin anticipation of the potential sale of Camping World, which determined thatthe carrying value of the goodwill associated with Camping World exceeded itsestimated fair value.  The $81.0 millionnon-cash long-lived asset impairment charge in the third quarter of 2008related to the carrying value of the preferred interest in FreedomRoads HoldingCompany, LLC, held by an indirect subsidiary of Camping World, exceeded itsestimated fair value.

 

Depreciation andamortization expenses of $19.8 million were $0.8 million higher than in 2007due primarily to increased amortization of intangible assets associated withthe recent acquisitions and depreciation associated with new stores.

 

*(Loss) Income from Operations*

 

Loss from operations for 2008 was$87.8 million versus income from operations of $45.7 million for 2007.  This $133.5 million decrease, or 292.3%, wasattributable to increased operating expenses of $126.7 million, and reducedgross profit in the media and retail operations of $7.0 million and $6.6million, respectively, partially offset by $6.8 million of increased grossprofit for membership services operations.

 

*Non-OperatingItems*

 

Net non-operatingitems for 2008 were $26.4 million, a $1.2 million increase from 2007.  This increase was primarily attributable to a$2.4 million loss on derivative instrument recorded in the fourth quarter of2008 related to the ineffective portion of the loss in fair value of our $35.0million interest rate swap, and $0.2 million of additional loss on sale ofequipment, partially offset by an $0.8 million reduction in debt extinguishmentexpense, and a $0.6 million reduction in interest expense in 2008 resultingfrom lower average interest rates in 2008.

 

*(Loss) Income before Income Taxes*

 

Loss before income taxes for 2008was $114.2 million versus income of $20.5 million in 2007.  This $134.7 million decrease from the prioryear was attributable to the $133.5 million decrease in income from operationsmentioned above, and a $1.2 million increase in non-operating items.

 

*IncomeTax Expense*

 

The Companyrecorded $2.2 million of income tax benefit for 2008, compared to a $1.6million income tax expense for 2007.  Thechange was primarily due the reversal of a deferred tax liability related to along-lived intangible.

 

*Net(Loss) Income*

 

Net loss for 2008was $112.0 million compared to net income of $18.9 million for 2007 mainly dueto the reasons discussed above.

 

*Segment(Loss) Profit*

 

The Company’s three principal linesof business are Membership Services, Media and Retail.  The Membership Services segment operates theGood Sam Club, the Coast to Coast Club, the President’s Club, Camp Club USA andassorted membership products and services for RV owners, 

 

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campers and outdoor vacationers, andthe Golf Card Club for golf enthusiasts. The Media segment publishes a variety of publications for selectedmarkets in the recreation and leisure industry, including general circulationperiodicals, directories, and RV and powersports industry trade magazines.  In addition, the Media segment operatesconsumer outdoor recreation shows primarily focused on RV and powersportsmarkets.  The Retail segment sellsspecialty retail merchandise and services for RV owners primarily throughretail supercenters, mail order catalogs and internet.  The Company evaluates performance based onprofit or loss from operations before income taxes and unusual items.

 

The reportable segments arestrategic business units that offer different products and services.  They are managed separately because eachbusiness required different technology, management expertise and marketingstrategies.

 

Membership services segment profitof $51.7 million in 2008 increased by $1.2 million, or 2.4% from 2007.  This increase was primarily attributable to a$5.0 million brand licensing fee charged to FreedomRoads, a $1.8 millionincrease in segment profit related to extended warranty programs, a $1.0million increase in profit associated with reduced marketing and program costsin the Coast to Coast Club and the Golf Card Club, and a $0.7 million increasein segment profit related to health and life insurance.  These increases were partially offset by a$4.6 million decrease in segment profit for the ERS programs primarily relatedto decreased interest income, a $1.4 million decrease in segment profit relatedto decreased vehicle insurance products revenue, a $0.8 million segment profitdecrease related to reduced revenue for RV financing products, and a $0.5million segment profit decrease related to reduced credit card marketing feerevenue.

 

Media segment profit for 2008 of$9.2 million decreased by $8.3 million, or 47.3% from $17.5 million in2007.  The decrease in gross profitmargin was primarily due to a $2.3 million reduction in segment profit relatedto the outdoors power sports magazine group, a $2.5 million reduction insegment profit in annual directories and campground guides, a $2.0 millionreduction 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.

 

Retail segment loss for 2008 of$145.7 million increased by $137.5 million from 2007.  This increased segment loss resultedprimarily from $81.0 million of impairment of investment in affiliate, $47.6million of goodwill impairment, a $6.7 million decrease in gross profit, a $0.8million increase in depreciation and amortization expense, a $0.6 millionincrease in selling, general and administrative expenses, and an $0.8 millionincrease in net interest expense.

 

 

**Liquidityand Capital Resources**

*** ***

We have historically operated with a working capital deficit.  The working capital deficit as of December 31,2009 and 2008 was $4.8 million and $10.5 million, respectively.  The primary reason for the working capitaldeficit is the deferred revenue andgains reported under current liabilities of $60.7 million and $60.6 million asof December 31, 2009 and 2008, respectively.  Deferred revenue is primarily comprised ofcash collected for club memberships in advance of services to be provided whichis deferred and recognized as revenue over the life of the membership.  We use net proceeds from this deferredmembership revenue to lower our long-term borrowings and finance our workingcapital needs.  We generated net cash**from operations of $19.4 million and $15.5 million, in 2009and 2008, respectively.  At December 31,2009, $8.1 million of our cash was classified as restricted as it was used tosecure letters of credit and performance bonds.

 

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The Companyand AGHI have engaged a financial advisor to assist in the refinancing orrestructuring of the Senior Credit Facility ($128.9 million principaloutstanding as of December 31, 2009), the Senior Notes due 2012 ($137.8million principal outstanding as of December 31, 2009) and the AGHI Notesdue 2012 ($112.3 million principal outstanding as of December 31, 2009 ofwhich $25.4 million was due March 2010 and which has been paid through thecancellation of AGHI Notes in that amount).

 

The Company and AGHI have engaged in discussions with the holders of theAGHI Notes and the holders of other indebtedness of the Company regarding arefinancing or restructuring of the indebtedness of the Company and its parent,AGHI.  As part of those discussions, AGHIdeferred payment of the interest on the AGHI Notes that was due on August 15,2009.  The indenture governing the AGHINotes provides a 30 day grace period for the payment of interest.  Before the end of the grace period, AGHIreceived consent letters for extending such grace period from certaininstitutional holders of the AGHI Notes holding in the aggregate $65.8 millionprincipal amount of the AGHI Notes and from non-institutional holders holdingin the aggregate $46.6 million principal amount of the AGHI Notes and paid theinterest of the remaining AGHI Notes. The aggregate principal amount of the AGHI Notes outstanding was then$113.6 million so the holders executing the consents held 98.9% of theoutstanding principal amount of the AGHI Notes. Pursuant to the consent letters from the institutional holders, AGHIagreed to pay the legal fees for a law firm to represent the institutionalholders. In addition, AGHI paid a consent fee equal 1⁄4 of 1% of the principalamount to the institutional holders who signed a consent letter, or an aggregateof $164,600.  No consent fee was paid tothe non-institutional holders.  AGHIsatisfied the August 15, 2009 interest payment in January, 2010 with a$4.5 million in cash (funded, in part, from a $2.8 million capital contributionfrom its shareholder, and the balance from AGI as a permitted taxdistributions), and the remaining $1.7 million through forgiveness of intereston the AGHI Notes held by entities indirectly controlled by the Company’s soleshareholder. AGHI satisfied the interest payment due February 15, 2010 on March 5,2010 with $4.4 million in cash (funded, in part, from $2.5 million received byAGHI in connection with a waiver by AGHI of certain first refusal rightsrelated to AGI’s vehicle insurance business and the balance from AGI as apermitted tax distribution) and the remaining $1.8 million through forgivenessof interest on AGHI Notes held by entities indirectly controlled by the Company’ssole shareholder.  As a condition tofunding of the New Senior Credit Facility, AGHI acquired $25.4 million of AGHINotes due on March 15, 2010 that were held by an affiliate of AGHI andcancelled those notes, thereby reducing the approximately $112.3 million of AGHI Notes outstanding as of December 31,2009 to $86.9 million as of March 1, 2010.

 

*ContractualObligations and Commercial Commitments*

 

The followingtable reflects our contractual obligations and commercial commitments at December 31,2009, in thousands.  The table belowincludes principal and future interest due under our debt agreements based oninterest rates as of December 31, 2009 and assumes debt obligations willbe held to maturity.

 
| * *                     |   |    Payments Due by Period |    |
|------------------------------|--------|--------------------------------|---------|
| * *                     |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |
| *(in  thousands)*            |   | Total                          |    | 2010 |   | 2011 |   | 2012 |   | 2013 |   | 2014 |   | Thereafter |   |
|                         |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt (1)           |   |  $                        | 352,480 |   | $ | 36,275 |   | $ | 172,179 |   | $ | 144,026 |   | $ | - |   | $ | - |   |   |   |
| Operating lease obligations  |   | 221,576                        |    | 23,080 |   | 21,661 |   | 20,056 |   | 17,978 |   | 17,636 |   | 121,165 |   |
| Other commercial commitments |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Letters of credit            |   | 5,770                          |    | 5,770 |   | - |   | - |   | - |   | - |   | - |   |
|                         |   |                           |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Grand total                  |   |  $                        | 579,826 |   | $ | 65,125 |   | $ | 193,840 |   | $ | 164,082 |   | $ | 17,978 |   | $ | 17,636 |   | $ | 121,165 |   |
|                              |        |                                |         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

(1) The long-term debt due in 2011 includes the amountrefinanced under the New Senior Credit Facility that matures 90 days prior tothe maturity of the Senior Notes and AGHI Notes but no later than March 1,2015.

 

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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”).  The Senior Credit Facility was subsequentlyamended on March 3, 2006, June 8, 2006, February 27, 2007 and June 5,2009, and provides for term loans (“Term Loans”) in the aggregate of $140.0million and a revolving credit facility of $25.0 million.  The funds available under the revolvingcredit line of the Senior Credit Facility may be utilized for borrowings orletters of credit; however, a maximum of $7.5 million may be allocated to suchletters of credit.  Re-borrowings underthe Term Loans are not permitted.  Theinterest on borrowings under the Senior Credit Facility is at variable ratesbased on the ratio of total cash flow to outstanding indebtedness (as defined).  Interest rates float with prime and theLondon Interbank Offered Rates, (“LIBOR”), plus an applicable margin rangingfrom 9.00% to 10.00%, respectively, over the stated rates and a LIBOR floor of2.75%.  The Company also pays acommitment fee of 1.0% per annum on the unused amount of the revolving creditfacility.  The aggregate quarterlyscheduled payments on the term loans are $0.4 million.  The funds available under the Senior CreditFacility may be utilized for borrowings or letters of credit, except a maximumof $7.5 million may be allocated to such letters of credit.  The Senior Credit Facility is secured byvirtually all of AGI’s assets and a pledge of AGI’s stock and the stock of AGI’ssubsidiaries.

 

As of December 31,2009, $110.8 million was outstanding under the Term Loans and after considerationfor fixed rates under the interest rate swap agreements, as discussed in Note 8to Consolidated Financial Statements — Interest Rate Swap Agreements, theaverage interest rate on the Term Loans was 17.01%.  As of December 31, 2009, permittedborrowings under the undrawn revolving line were $19.2 million.  The Company had commercial and standbyletters of credit in the aggregate amount of $5.8 million outstanding as of December 31,2009.

 

Second Lien Loan

Concurrent with the June 5,2009 amendment to the Senior Credit Facility, AGI obtained a $9.7 millionsecond lien loan (the “Second Lien Loan”), the net proceeds of which were usedto purchase $14.6 million in principal amount of Senior Notes.  The Second Lien Loan carries an interest rateof 9.0% and matures on July 31, 2010. The Second Lien Loan is secured by substantially all of the assets and apledge of the stock of AGI and is second in priority only to the Senior CreditFacility.

 

Shareholder Loans

The June 2009 Amendment to theSenior Credit Facility also requires the commitment of Stephen Adams, AGHI’sultimate shareholder, to cause loans to be made to AGI in amounts equal to thecash interest payments on $16.0 million in aggregate principal amount of theterm loans.  In connection with that requirement,on June 10, 2009, AGI entered into a loan agreement with SA Holding, LLC,(“SA Holding”), which is owned by Stephen Adams, pursuant to which SA Holdingagreed to loan to AGI (the “SA Loans”) amounts equal to the cash interestpayments on $16.0 million in aggregate principal amount of term loans.  The interest rate on the SA Loans is equal tothe interest rate payable on the Senior Credit Facility plus 2.0% per annumcompounded monthly.  The SA Loans matureon the date on which the indebtedness under the Senior Credit Facility is paidin full.  As of December 31, 2009,$1.0 million of SA Loans were outstanding. The Company’s indebtedness under the Senior Credit Facility, Second LienLoan, and SA Loans were repaid in full on March 1, 2010 from the proceedsof the New Senior Credit Facility discussed below.

 

New SeniorCredit Facility

On March 1,2010, the Company entered into the Second Amended and Restated Credit Agreement(the “New Senior Credit Facility”) to refinance the Senior Credit Facility ($128.9million aggregate principal amount outstanding as at December 31, 2009)which was scheduled to mature on March 31, 2010, the Second Lien Notestotaling $9.7 million due July 31, 2010, and the SA Loans.  The New Senior Credit Facility provides forterm loans aggregating $144.3 million, including an original issue discount of2%, that are payable in quarterly installments of $360,750 beginning March 1,2011.  In addition, there are mandatoryprepayments of the term loans from excess cash flow (as defined) of

 

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AGI and from assetsales.  The term loans under the NewSenior Credit Facility mature on the earlier of March 1, 2015 or 90 daysprior to the maturity of either Senior Notes ($137.8 million principal amountoutstanding as at December 31, 2009 and are due on February 15, 2012)or the AGHI Notes ($113.6 million aggregate principal amount outstanding as at December 31,2009 and are due February 15, 2012). Interest on the term loans under the New Senior Credit Facility floatsat either 8.75% over the base rate (defined as the greater of the prime rate,federal funds rate plus 50 basis points or 5.25%) for borrowings whose interestis based on the prime rate or 10.0% over the LIBOR rate (defined as the greaterof the 3 months LIBOR rate or 3.0%) for borrowings whose interest is based onLIBOR.  The New Senior Credit Facilitycontains affirmative covenants, including financial covenants, and negativecovenants, including a restriction on dividends or distributions by AGI toAGHI.  Borrowings under the New SeniorCredit Facility are guaranteed by the direct and indirect subsidiaries of AGIand are secured by liens on the assets of AGI and its direct and indirectsubsidiaries.  As a condition to the termloans under the New Senior Credit Facility, $25.4 million of AGHI Notes due on March 15,2010 that were held by an affiliate of AGHI were contributed to AGHI for zeroconsideration and AGHI cancelled those notes.

 

CW CreditFacility

In addition, on March 1,2010, Camping World entered into a credit agreement (the “CW Credit Facility”)providing for an asset based lending facility of up to $22.0 million, of which$10.0 million is available for letters of credit and $12.0 million is availablefor revolving loans.  The CW CreditFacility matures on the earlier of March 1, 2013, 60 days prior to thedate of maturity of the New Senior Credit Facility, or 120 days prior to theearlier date of maturity of the Senior Notes and the AGHI Notes.  Interest under the revolving loans under theCW Credit Facility floats at either 3.25% over the base rate (defined as thegreater of the prime rate, federal funds rate plus 50 basis points or 1 monthLIBOR) for borrowings whose interest is based on the prime rate or 3.25% overthe LIBOR rate (defined as the greater of LIBOR rate applicable to the periodof the respective LIBOR borrowings or 1.0%) for borrowings whose interest isbased on LIBOR.  Borrowings under the CWCredit Facility are based on the borrowing base of eligible inventory andaccounts receivable of Camping World and its subsidiaries.  The CW Credit Facility contains affirmativecovenants, including financial covenants, and negative covenants.  Borrowings under the Camping World CreditAgreement are guaranteed by the direct and indirect subsidiaries of CampingWorld and are secured by a pledge on the stock of Camping World and its directand indirect subsidiaries and liens on the assets of Camping World and itsdirect and indirect subsidiaries.  Thelenders under the New Senior Credit Facility and the CW Credit Facility haveentered into an intercreditor agreement that governs their rights in thecollateral that is pledged to secure their respective loans.

 

The New SeniorCredit Facility, the CW Credit Facility and the AGI Indenture contain certainrestrictive covenants relating to, but not limited to, mergers, changes in thenature of the business, acquisitions, additional indebtedness, sale of assets,investments, and the payment of dividends subject to certain limitations andminimum operating covenants.  We were incompliance with all debt covenants at December 31, 2009.

 

The Company’sforecast for 2010 anticipates compliance with all required financial ratio andoperating covenants under the New Senior Credit Facility and CW Credit Facilitythroughout 2010.  Significant costreductions have been implemented over the last eighteen months, including theelimination of personnel, suspension of 401(k) employer contributions,salary cutbacks, hiring and capital expenditure spending freezes, satelliteoffice closures, and magazine size and frequency reductions.  The Company believes that the New SeniorCredit Facility and the CW Credit Facility, as well as forecasted cash flowwill provide the cash flow needed to continue as a going concern through atleast January 1, 2011.

 

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AGI Senior Notes

In February 2004, the Companyissued $200.0 million aggregate principal amount of 9% Senior SubordinatedNotes due 2012 (the “Senior Notes”).  TheCompany completed a registered exchange of the Senior Notes under theSecurities Act of 1933 in August 2004. On June 8, 2006, AGI amended its Senior Credit Facility to permitAGI to purchase up to $30.0 million of the Senior Notes from time to time asand when the Company determines.  AGIpurchased $29.9 million of the Senior Notes at various times from June 2006through August 2006.  The purchasesof Senior Notes 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 theSenior 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 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, 2009,$137.8 million of Senior Notes remained outstanding.

 

AGHI Notes

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.  As of December 31,2009, approximately $112.3 million of AGHI Notes were outstanding, including$25.4 million due on March 15, 2010. For interest payments on and prior to February 15, 2008, AGHI hadthe election to pay interest on the AGHI Notes in cash or by the issuance ofadditional notes of the same tenor as the AGHI Notes, except the maturity dateis March 15, 2010.  AGI has not paidany dividends to AGHI to fund payment of interest on the AGHI Notes and AGHImade the interest payments due on August 15, 2005, February 15, 2006,August 15, 2006, February 15, 2007, and February 15, 2008through the issuance of additional notes. AGHI paid the interest on the AGHI Notes due August 15, 2007, August 15,2008, and due February 15, 2009 from proceeds of capital contributionsmade by AGHI’s parent, AGHC, in the amount of $5.9 million, $6.2 million, and$6.2 million, respectively.  The intereston the AGHI Notes due on August 15, 2009 and February 15, 2010 wassatisfied as discussed above. As a condition to the funding under the AGI NewSenior Credit Facility, $25.4 million of AGHI Notes due on March 15, 2010that were held by an affiliate of AGHI were contributed to AGHI for zeroconsideration and AGHI cancelled those notes, thereby reducing theapproximately $112.3 million of AGHI Notes outstanding as of December 31,2009 to $86.9 million as of March 1, 2010.

 

In 2005, 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”).  CWI 

 

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created a new wholly-owned subsidiary named CWFRCapital Corp., a Delaware corporation (“CWFR”) which is an “unrestrictedsubsidiary” as defined under the AGHI Notes and the AGI Indenture.  Since CWFR is an unrestricted subsidiary, itsoperations are not restricted by either the AGI Indenture or the AGHINotes.  CWI made an equity capitalcontribution to CWFR in an equal amount to the capital contribution that CWIreceived from Camping World.  CWFR usedthe proceeds from the equity capital contribution to acquire a preferredmembership interest in FreedomRoads.

 

In the third quarter of 2008, theCompany recorded an impairment charge of $81.0 million that wrote down to zerothe carrying value of the preferred interest (the “FreedomRoads PreferredInterest”) held by an indirect subsidiary of Camping World in FreedomRoadsHolding Company, LLC (“FreedomRoads”), a holding company whose subsidiariessell and service new and used recreational vehicles.  Management was assisted in determining thefair value of the FreedomRoads Preferred Interest by an independent third partyvaluation firm.  The $81.0 millionimpairment charge was recorded as a result of declining performance of therecreational vehicle industry driven by overall weakening of the economy and asignificant decline in consumer confidence, in addition to limited creditavailable to consumers interested in purchasing recreational vehicles.

 

Interest Rate Swap Agreements

On October 15, 2007, theCompany 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 (0.281% percent at December 31, 2009 basedupon the October 31, 2009 reset date) and make periodic payments at a fixedrate 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 ratedebt.  The interest rate swap isdesignated as a cash flow hedge of the variable rate interest payments due on$100.0 million of the Term Loans issued June 24, 2003, and accordingly,gains and losses on the fair value of the interest rate swap agreement arereported in accumulated other comprehensive loss and reclassified to earningsin the same period in which 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 (0.281% at December 31,2009 based upon the October 31, 2009 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 $8.1 million and $12.7million as of December 31, 2009 and December 31, 2008, respectively.

 

Due to the potential sale of CampingWorld in September 2008, 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 beginning on October 1, 2008. Change in value from October 1, 2008 to December 31, 2008 was$2.4 million.  On June 11, 2009, theCompany partially terminated the $35.0 million interest rate swap, subject to apartial termination fee of $0.6 million which was expensed.  The notional amount was reduced to $20.0million.  All other terms of the interestrate swap agreement remained unchanged. As a result, the amount included in other comprehensive income relatedto the $35.0 million interest rate swap was reduced prorata and included inearnings as a gain (loss) on derivative instrument.

 

Due to the issuance of an option tothe shareholder of the ultimate parent of the Company to purchase CampingWorld, in the second quarter of 2009, which option was subsequently terminated,a portion of the highly effective hedge on the $100.0 million outstanding debtby the $100.0 million notional amount interest rate swap agreement was deemedto be no longer probable and is now deemed to be reasonably possible.  As a result, changes in the value of the last$20.0 million of the 

 

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$100.0 million interest rate swapagreement are included in earnings beginning on June 5, 2009.  Included in other comprehensive loss is $1.6million related to the last $20.0 million of the $100.0 million interest rateswap which will be amortized over the remaining life of the interest rate swapand included in earnings as a gain (loss) on derivative instrument.

 

Other Contractual Obligations andCommercial Commitments

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.

 

As a condition of the June 5,2009 amendment to its Senior Credit Facility pursuant to which the maturitydate was extended from June 24, 2009 to March 31, 2010, theshareholder of the ultimate parent of the Company was required to arrange forthe purchase of approximately $26.6 million in principal amount of the termportion of the Senior Credit Facility by new lenders, enhance the yield to suchnew lenders, purchase AGHI Notes held by one of such new lenders at a premiumto the most recent market price, contribute $8.5 million in capital to theCompany and guarantee two required principal payments on the term loans underthe Senior Credit Facility, aggregating $15.0 million.  In consideration of such support, the Companyentered into an option agreement with the shareholder of the ultimate parent ofthe Company pursuant to which the Company granted such shareholder or hisassigns an option, exercisable on or before March 1, 2010, to purchase theCompany’s Camping World subsidiary for $55.0 million.  The Company also agreed to pay theshareholder of the ultimate parent, upon successful refinancing of the Company’ssecured debt which is currently the New Senior Credit Facility, a success feeequal in amount to the fair value of such credit support, taking into accountthe fair value of the option to purchase Camping World.  Management was assisted in determining thefair value of Camping World by an independent third party valuation firm.  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.  On December 14, 2009, a Termination ofOption agreement was signed whereby the purchase option with the shareholderwas terminated and there would not be a credit for the value of the CampingWorld purchase option against value of such credit support.  In November 2009, management wasassisted by an independent third party valuation firm in determining that thevalue of the credit support was $26.8 million. For accounting purposes, any fee paid under this agreement will betreated, if and when paid, as a shareholder distribution.

 

During 2009, no expense was incurredrelating to deferred executive compensation under our phantom stock agreementsand made payments of $1.4 million on mature phantom stock agreements.  There are no phantom stock payments scheduledduring 2010.

 

Capitalexpenditures for 2009 totaled $3.2 million compared to capital expenditures of$11.8 million in 2008.  Capitalexpenditures are anticipated to be approximately $5.1 million for 2010,primarily for information technology upgrades and software enhancements.

 

**Factors Affecting Future Performance**

 

Our financial operations have beenaffected by the current economic downturn. Other factors that could adversely affect our operations includeincreases in operating costs, fuel shortages and substantial increases inpropane and gasoline prices.  Such eventscould cause declines in advertisements, club enrollment and retailspending.  We are unable to predict atwhat point

 

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fluctuating fuel prices may begin toadversely impact revenues or cash flow. We believe we will be able to partially offset any cost increases withprice increases to our members along with certain cost reducing measures.

 

**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.

 

**Critical Accounting Policies**

 

*General*

 

Our discussion and analysis of ourfinancial condition and results of operations is based upon our consolidatedfinancial statements, which have been prepared in accordance with accountingprinciples 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 following criticalaccounting policies affect our more significant judgments and estimates used inthe preparation of our consolidated financial statements.

 

*Revenue Recognition*

 

Merchandise revenueis recognized when products are sold in the retail stores, shipped for mail andInternet orders, or when services are provided to customers.* *Emergency RoadService (“ERS”) revenues are deferred and recognized over the life of themembership.  ERS claim expenses are recognizedwhen incurred.  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. Membership revenue is generated from annual, multi-year and lifetimememberships.  The revenue and expensesassociated with these memberships are deferred and amortized over themembership period.  For lifetimememberships, an 18-year period is used, which is the actuarially determinedestimated fulfillment period. Promotional expenses, consisting primarily of direct mail advertising,are deferred and expensed over the period of expected future benefit, typicallythree months based on historical actual response rates.  Renewal expenses are expensed at the timerelated materials are mailed.  Recognizedrevenues and profit are subject to revisions as the membership progresses tocompletion.  Revisions to membershipperiod estimates would change the amount of income and expense amortized infuture accounting periods.

 

Newsstand sales ofpublications and related expenses are recorded at the time of delivery, net ofestimated provision for returns. Subscription sales of publications are reflected in income over thelives of the subscriptions.  The relatedselling expenses are expensed as incurred. Advertising revenues and related expenses are recorded at the time ofdelivery.  Subscription and newsstandrevenues and expenses related to annual publications are deferred until thepublications are distributed.  Revenuesand related expenses for consumer shows are recognized when the show occurs.

 

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*Accounts Receivable*

 

We estimate the collectability ofour trade receivables.  A considerableamount of judgment is required in assessing the ultimate realization of thesereceivables including the current credit-worthiness 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 at the lower ofcost or market.  In assessing theultimate realization of inventories, we are required to make judgments as tofuture demand requirements and compare that with the current or committedinventory levels.  We have recordedchanges in required reserves in recent periods due to changes in strategicdirection, such as discontinuances of product lines as well as changes inmarket 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 intangible assets withfinite lives are amortized using the straight-line method over the estimated economiclives of the assets, ranging from one to fifteen years.

 

Long-lived assets, such as property,plant and equipment and purchased intangible assets with finite lives areevaluated for impairment whenever events or changes in circumstances indicatethe carrying value of an asset may not be recoverable in accordance with SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets.”  We assess the fair value of the assets basedon the future cash flow the assets are expected to generate and recognize animpairment loss when estimated undiscounted future cash flow expected to resultfrom the use of the asset plus net proceeds expected from disposition of theasset (if any) are less than the carrying value of the asset.  When an impairment is identified, we reducethe carrying amount of the asset to its estimated fair value based on adiscounted cash flow approach or, when available and appropriate, comparablemarket values.  In the third quarter of2008, the Company recorded an impairment charge of $81.0 million that wrotedown 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.  Management was assisted in determining thenon-cash goodwill impairment charge by an independent third party valuationfirm.  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.  We determined there were no indicators ofimpairment of long-lived assets as of December 31, 2009.

 

We have evaluated the remaininguseful lives of our finite-lived purchased intangible assets to determine ifany adjustments to the useful lives were necessary or if any of these assetshad indefinite lives and were therefore not subject to amortization.  We determined that no adjustments to theuseful lives of our finite-lived purchased intangible assets were necessary.  The finite-lived purchased intangible assetsconsist of membership customer lists, resort and golf course agreements,non-compete and deferred consulting agreements and deferred financing costswhich have weighted average useful lives of approximately 6 years, 4 years, 15years and 6 years, respectively.

 

*Indefinite-Lived IntangibleAssets*

 

We evaluate indefinite-livedintangible assets for impairment at least annually or when events indicate thatan impairment exists.  The impairmenttests for goodwill and other indefinite-lived intangible assets are assessedfor impairment using fair value measurement techniques.  Specifically, goodwill impairment isdetermined using a two-step process.  Thefirst step of the goodwill impairment test is 

 

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used to identify potentialimpairment by comparing the fair value of a reporting unit with the net bookvalue (or carrying amount), including goodwill. If the fair value of the reporting unit exceeds the carrying amount,goodwill of the reporting unit is considered not impaired and the second stepof the impairment test is unnecessary. If the carrying amount of the reporting unit exceeds the fair value, orif another indicator of impairment exists, 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.

 

Determining the fair value of areporting unit under the first step of the goodwill impairment test anddetermining the fair value of individual assets and liabilities of a reportingunit under the second step of the goodwill impairment test is judgmental innature 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 our reportingunits is annually determined using a combination of the income approach and themarket approach.  Under the incomeapproach, the fair value of a reporting unit is calculated based on the presentvalue of estimated future cash flows. Future cash flows are estimated by us under the market approach, fair valueis estimated based on market multiples of revenue or earnings for comparablecompanies.

 

In the third quarter of 2009, theCompany noted continued decline in advertising revenue compared to historicaltrends, in the operations of our RV and powersports publications, as well asflat to moderate projected growth in future advertising revenue as a result ofcontinued deterioration of general economic conditions and consumerconfidence.  Based on the above, theCompany determined that there were identified interim indicators of impairmentwithin these reporting units in the Media segment.

 

The Company performed an impairmenttest of the goodwill and intangible assets of the reporting units of our RV andpowersports publications.  The impairmenttest indicated that the estimated fair value of these reporting units were lessthan book value.  The excess of thecarrying value over the estimated fair value of the these reporting units wasprimarily due to a decline in advertising revenue leading to lower expectedfuture cash flows for these reporting units. In determining the fair value, theCompany used an income valuation approach.

 

In performing the second step of thegoodwill impairment test, the Company allocated the estimated fair values ofthe reporting units of our RV and powersports publications determined in stepone of the impairment test, to the assets and liabilities of the respectivereporting unit in accordance with the accounting guidance for businesscombinations. The Company determined the impairment for these units to be equalto the carrying value of its goodwill, or $46.9 million.  The Company recorded an impairment charge of$46.9 million in the third quarter of 2009 related to these units, which ispart of the Media segment.  The Mediasegment goodwill was reduced to zero.

 

In the third quarter of 2008, theCompany noted continued reduction in same store sales at Camping World, Inc. (“CampingWorld”) as well as deterioration of general economic conditions and consumer 

 

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confidence.  Based on the above, the Company determinedthat there were identified indicators of impairment within the Camping Worldreporting unit.

 

Management was assisted indetermining that the estimated fair value of the Camping World reporting unitwas less than book value by an independent third party valuation firm.  The excess of carrying value over theestimated fair value of the Camping World reporting unit was primarily due to thedecline in the recreational vehicle and camping retail markets leading to lowerexpected future cash flows for the business and lower market comparables. Indetermining the fair value, the Company used a weighted average of the incomevaluation 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.  The Retailsegment goodwill was reduced to zero. See Long-Lived Assets under CriticalAccounting Policies.

 

We performed an annual goodwillimpairment test as required and there were no goodwill impairment indicatorsfor our other reporting units.  Based onthe results of the annual impairment tests, we determined that no indicators ofgoodwill impairment existed for the other reporting units as of December 31,2009.  However, future goodwillimpairments tests could result in a charge to earnings.  We will continue to evaluate goodwill on anannual basis and whenever events and changes in circumstances indicate thatthere may be a potential impairment.

 

*Self-insurance Program*

 

Self-insurance accruals forworkers compensation and general liability programs are calculated by outsideactuaries and are based on claims filed and include estimates for claimsincurred 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.

 

*Accumulated OtherComprehensive Loss*

 

Accumulated other comprehensiveloss consists of unrealized losses on cash flow hedges.  At December 31, 2009, accumulated othercomprehensive loss was $7.0 million.

 

*DerivativeFinancial Instruments*

 

As discussed inNote 8 to Consolidated Financial Statements - Interest Rate Swap Agreement, theCompany accounts for derivative instruments and hedging activities inaccordance with new accounting guidance for accounting for derivativeinstruments and hedging activities.  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 is highly effective andthat is designated and qualifies as a cash flow hedge (a “swap”), to the extentthat the hedge is effective, are recorded in accumulated other comprehensiveloss, until earnings are affected by the variability of cash flows of thehedged transaction.  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, 

 

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as defined in the accounting literature.  Once a swap is settled, the effective portionis amortized over the estimated life of the hedge item.

 

The Company utilizes derivative financial instruments to manage itsexposure to interest rate risks.  TheCompany does not enter into derivative financial instruments for tradingpurposes.

 

On June 11, 2009, the Companypartially terminated the $35.0 million interest rate swap, subject to a partialtermination fee of $0.6 million which was recorded to earnings in Gain onderivative.  The notional amount wasreduced to $20.0 million.  All otherterms of the interest rate swap agreement remained unchanged.  As a result, the amount included in othercomprehensive income related to the $35.0 million interest rate swap wasreduced prorata and included in earnings as a gain (loss) on derivativeinstrument.

 

Due to the potential sale of CampingWorld, in the fourth quarter of 2008 a highly effective hedge on the $35.0million outstanding debt by the $35.0 million notional amount interest rateswap agreement was 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 on October 1, 2008.  Included in other comprehensive loss is $0.4million related to the $35.0 million interest rate swap prior to October 1,2008 which will be amortized over the remaining life of the interest rate swapand included in earnings as a gain (loss) on derivative instrument.

 

Due to the issuance of an option tothe shareholder of the ultimate parent of the Company to purchase CampingWorld, in the second quarter of 2009, which option was subsequently terminated,a portion of the highly effective hedge on the $100.0 million outstanding debtby the $100.0 million notional amount interest rate swap agreement was deemedto be no longer probable and is now deemed to be reasonably possible.  As a result, changes in the value of the last$20.0 million of the $100.0 million interest rate swap agreement are includedin earnings beginning on June 5, 2009. Included in other comprehensive loss is $1.6 million related to the last$20.0 million of the $100.0 million interest rate swap which will be amortizedover the remaining life of the interest rate swap and included in earnings as again (loss) on derivative instrument.  SeeNote 8 to Consolidated Financial Statements – Interest Rate Swap Agreements.

 

*IncomeTaxes*

 

Significant judgment is required in determining the Company’s taxprovision and in evaluating its tax positions. The Company establishes accruals for certain tax contingencies when,despite the belief that the Company’s tax return positions are fully supported,the Company believes that certain positions may be challenged and that theCompany’s positions may not be fully sustained. The tax contingency accruals are adjusted in light of changing facts andcircumstances, such as the progress of tax audits, case law and emerginglegislation.  The Company’s tax provisionincludes the impact of tax contingency accruals and changes to the accruals,including related interest and penalties, as considered appropriate bymanagement.

 

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

 

In June 2009, the FinancialAccounting Standards Board (“FASB”) issued new accounting guidance entitled, “TheFASB Accounting Standards Codification and the Hierarchy of Generally AcceptedAccounting Principles – a replacement of FASB Statement No. 162”.  The Accounting Standards Codification (“ASC”or “Codification”) identifies the sources of accounting principles and theframework for selecting the principles used in the preparation of financialstatements of nongovernmental entities that are presented in conformity withGAAP.  This new guidance is effective forfinancial statements issued for interim and annual periods ending after September 15,2009.  The adoption of this guidance haschanged how we reference various elements of GAAP when preparing 

 

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our financial statement disclosures,but did not have an impact on our financial position, results of operations orcash flows.

 

In April 2009, the FASB issuednew accounting guidance on fair value measurements. The new guidance impactscertain aspects of fair value measurement and related disclosures. The newguidance was effective beginning in the second quarter of 2009. The adoption ofthis new guidance resulted in additional interim disclosures and did not have amaterial effect on our consolidated results of operations or financialposition.

 

In May 2009, the FASB issuednew accounting guidance on subsequent events. The objective of this guidance isto establish general standards of accounting for and disclosure of events thatoccur after the balance sheet date but before financial statements are issuedor are available to be issued. This new accounting guidance was effective forinterim and annual periods ending after June 15, 2009. The impact ofadopting this new guidance resulted in additional financial statementdisclosures and did not have an impact on our financial position, results ofoperations, or cash flow.

 

**ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

 

We are exposed to market risksrelating to fluctuations in interest rates. Our objective of financial risk management is to minimize the negativeimpact of interest rate fluctuations on our earnings and cash flows.  Interest rate risk is managed through the useof a combination of fixed and variable interest debt as well as the periodicuse of interest rate collar contracts.

 

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, 2009, we haddebt totaling $278.4 million, comprised of $8.9 million of variable rate debt,and $269.5 million of fixed rate debt, comprised of $120.0 million of debtfixed through the interest rate swap agreements, $137.8 million of SeniorNotes, $9.7 million of Second Lien Loan, $1.0 million of SA Debt andapproximately $1.0 million of purchase debt. Holding other variables constant (such as debt levels), the earnings andcash flow impact of a one-percentage point increase/ decrease in interest rateswould have an unfavorable/ favorable impact of approximately $0.1 million.

 

#### *Credit Risk*

 

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

 

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

 

This filingcontains statements that are “forward looking statements,” and includes, amongother things, discussions of our business strategy and expectations concerningmarket position, future operations, margins, profitability, liquidity andcapital resources, as well as statements concerning the integrations ofacquired operations and the achievement of financial benefits and operationalefficiencies in connection with acquisitions. Forward looking statements are included in “Business- General,” “Business-Competitive Strengths,” “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 be accurate.  Reference is made to Item 1A relating to RiskFactors applicable to us.

 

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

 

 

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

 
| ** **                                                                                                        | **Page**   |
|-------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                        | ** ** |
| Report of Independent Registered Public Accounting  Firm                                                          | 53         |
|                                                                                                              |       |
|                                                                                                              |       |
| Consolidated  Balance Sheets as of December 31, 2009 and 2008                                                | 54         |
|                                                                                                              |       |
|                                                                                                              |       |
| Consolidated  Statements of Operations for the years ended December 31, 2009, 2008 and  2007                 | 55         |
|                                                                                                              |       |
|                                                                                                              |       |
| Consolidated  Statements of Stockholder’s Deficit for the years ended December 31,  2009, 2008 and 2007 | 56         |
|                                                                                                              |       |
|                                                                                                              |       |
| Consolidated  Statements of Cash Flows for the years ended December 31, 2009, 2008 and  2007                 | 57         |
|                                                                                                              |       |
|                                                                                                              |       |
| Notes  to Consolidated Financial Statements                                                                       | 58         |
|                                                                                                              |       |

 

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.

 

52

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

 

The Board ofDirectors of Affinity Group, Inc.

 

 

We have audited the accompanyingconsolidated balance sheets of Affinity Group, Inc. and its subsidiaries(the “Company”), a wholly-owned subsidiary of Affinity Group Holding, Inc.,as of December 31, 2009, and 2008, and the related consolidated statementsof operations, stockholder’s deficit and cash flows for each of the three yearsin the period ended December 31, 2009. These financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards ofthe Public Company 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 includes assessingthe accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, the financial statementsreferred to above present fairly, in all material respects, the consolidatedfinancial position of Affinity Group, Inc. and subsidiaries at December 31,2009 and 2008, and the consolidated results of their operations and their cashflows for each of the three years in the period ended December 31, 2009,in conformity with U.S. generally accepted accounting principles.

 

 
|   | /s/  Ernst & Young LLP |
|--------|---------------------------------|

 

March 31, 2010

LosAngeles, California

 

53

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**AFFINITYGROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER31, 2009 AND 2008 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)**

 

 
|                                                                                            |   | 2009     |    | 2008   |     |
|-------------------------------------------------------------------------------------------------|--------|----------|---------|--------|----------|
| **ASSETS**                                                                                      |   |     |    |   |     |   |   |
| CURRENT ASSETS:                                                                                 |   |     |    |   |     |   |   |
| Cash and cash equivalents                                                                       |   | $        | 8,640   |   |     | $ | 10,608 |   |   |
| Restricted cash                                                                                 |   | 8,058    |    |   | -        |   |   |
| Accounts receivable, less  allowance for doubtful accounts of $3,128 in 2009 and $2,147 in 2008 |   | 32,321   |    |   | 40,191   |   |   |
| Inventories                                                                                     |   | 49,921   |    |   | 57,137   |   |   |
| Prepaid expenses and other assets                                                               |   | 13,067   |    |   | 13,545   |   |   |
| Total current assets                                                                            |   | 112,007  |    |   | 121,481  |   |   |
|                                                                                            |   |     |    |   |     |   |   |
| PROPERTY AND EQUIPMENT, net                                                                     |   | 34,276   |    |   | 44,077   |   |   |
| NOTE FROM AFFILIATE                                                                             |   | 4,837    |    |   | 4,608    |   |   |
| INTANGIBLE ASSETS, net                                                                          |   | 13,738   |    |   | 20,754   |   |   |
| GOODWILL                                                                                        |   | 49,944   |    |   | 96,828   |   |   |
| DEFERRED TAX ASSETS, net                                                                        |   | -        |    |   | 4,569    |   |   |
| OTHER ASSETS                                                                                    |   | 6,767    |    |   | 2,035    |   |   |
| Total assets                                                                                    |   | $        | 221,569 |   |     | $ | 294,352 |   |   |
|                                                                                            |   |     |    |   |     |   |   |
| **LIABILITIES  AND STOCKHOLDER’S DEFICIT**                                                 |   |     |    |   |     |   |   |
| CURRENT LIABILITIES:                                                                            |   |     |    |   |     |   |   |
| Accounts payable                                                                                |   | $        | 23,795  |   |     | $ | 23,950 |   |   |
| Accrued interest                                                                                |   | 5,688    |    |   | 6,946    |   |   |
| Accrued income taxes                                                                            |   | 1,598    |    |   | 1,165    |   |   |
| Accrued liabilities                                                                             |   | 24,060   |    |   | 26,954   |   |   |
| Deferred revenues and gains                                                                     |   | 60,728   |    |   | 60,569   |   |   |
| Current portion of long-term debt                                                               |   | 892      |    |   | 12,391   |   |   |
| Total current liabilities                                                                       |   | 116,761  |    |   | 131,975  |   |   |
|                                                                                            |   |     |    |   |     |   |   |
| DEFERRED REVENUES AND GAINS                                                                     |   | 35,607   |    |   | 35,855   |   |   |
| LONG-TERM DEBT, net of current  portion                                                         |   | 277,522  |    |   | 279,755  |   |   |
| OTHER LONG-TERM LIABILITIES                                                                     |   | 13,204   |    |   | 33,281   |   |   |
|                                                                                            |   | 443,094  |    |   | 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                                                                      |   | 89,505   |    |   | 81,005   |   |   |
| Accumulated deficit                                                                             |   | (304,031 | )       |   | (257,183 | ) |   |
| Accumulated other comprehensive  loss                                                           |   | (7,000   | )       |   | (10,337  | ) |   |
| Total stockholder’s deficit                                                                |   | (221,525 | )       |   | (186,514 | ) |   |
| Total liabilities and  stockholder’s deficit                                               |   | $        | 221,569 |   |     | $ | 294,352 |   |   |

 

See notes to consolidated financialstatements.

 

54

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**AFFINITYGROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FORTHE YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 (IN THOUSANDS)**

 

 
|                                               |   | 2009                            |    | 2008   |                            | 2007   |     |
|----------------------------------------------------|--------|---------------------------------|---------|--------|---------------------------------|--------|----------|
|                                               |   |                            |    |   |                            |   |     |
| REVENUES:                                          |   |                            |    |   |                            |   |     |   |   |   |
| Membership services                                |   | $                               | 142,147 |   |                            | $      | 152,643  |   |   | $ | 149,937 |   |   |
| Media                                              |   | 59,061                          |    |   | 82,424                          |   |     | 90,537 |   |   |
| Retail                                             |   | 270,573                         |    |   | 291,070                         |   |     | 321,730 |   |   |
|                                               |   | 471,781                         |    |   | 526,137                         |   |     | 562,204 |   |   |
|                                               |   |                            |    |   |                            |   |     |   |   |   |
| COSTS APPLICABLE TO REVENUES:                      |   |                            |    |   |                            |   |     |   |   |   |
| Membership services                                |   | 84,826                          |    |   | 90,758                          |   |     | 94,840 |   |   |
| Media                                              |   | 46,079                          |    |   | 61,126                          |   |     | 62,258 |   |   |
| Retail                                             |   | 164,510                         |    |   | 170,911                         |   |     | 194,940 |   |   |
|                                               |   | 295,415                         |    |   | 322,795                         |   |     | 352,038 |   |   |
|                                               |   |                            |    |   |                            |   |     |   |   |   |
| GROSS PROFIT                                       |   | 176,366                         |    |   | 203,342                         |   |     | 210,166 |   |   |
|                                               |   |                            |    |   |                            |   |     |   |   |   |
| OPERATING EXPENSES:                                |   |                            |    |   |                            |   |     |   |   |   |
| Selling, general and  administrative               |   | 128,917                         |    |   | 142,757                         |   |     | 145,556 |   |   |
| Goodwill impairment                                |   | 46,884                          |    |   | 47,601                          |   |     | -      |   |   |
| Impairment of investment in  affiliate             |   | -      |    |   | 81,005                          |   |     | -      |   |   |
| Financing expense                                  |   | 2,607                           |    |   | -      |   |     | -      |   |   |
| Depreciation and amortization                      |   | 21,076                          |    |   | 19,798                          |   |     | 18,948 |   |   |
|                                               |   | 199,484                         |    |   | 291,161                         |   |     | 164,504 |   |   |
|                                               |   |                            |    |   |                            |   |     |   |   |   |
| (LOSS) INCOME FROM OPERATIONS                      |   | (23,118                         | )       |   | (87,819                         | )      |     | 45,662 |   |   |
|                                               |   |                            |    |   |                            |   |     |   |   |   |
| NON-OPERATING ITEMS:                               |   |                            |    |   |                            |   |     |   |   |   |
| Interest income                                    |   | 517                             |    |   | 579                             |   |     | 592 |   |   |
| Interest expense                                   |   | (30,873                         | )       |   | (24,228                         | )      |     | (24,819 | ) |   |
| Gain (loss) on derivative  instrument              |   | 745                             |    |   | (2,394                          | )      |     | -      |   |   |
| Gain (loss) on debt restructure                    |   | 4,678                           |    |   | -      |   |     | (775 | ) |   |
| Other non-operating income  (expense), net         |   | (1,263                          | )       |   | (323                            | )      |     | (149 | ) |   |
|                                               |   | (26,196                         | )       |   | (26,366                         | )      |     | (25,151 | ) |   |
|                                               |   |                            |    |   |                            |   |     |   |   |   |
| (LOSS) INCOME FROM OPERATIONS  BEFORE INCOME TAXES |   | (49,314                         | )       |   | (114,185                        | )      |     | 20,511 |   |   |
|                                               |   |                            |    |   |                            |   |     |   |   |   |
| INCOME TAX BENEFIT (EXPENSE)                       |   | 10,366                          |    |   | 2,213                           |   |     | (1,583 | ) |   |
|                                               |   |                            |    |   |                            |   |     |   |   |   |
| NET (LOSS) INCOME                                  |   | $                               | (38,948 | )      |                            | $      | (111,972 | ) |   | $ | 18,928 |   |   |

 

See notes to consolidated financialstatements.

 

55

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**AFFINITY GROUP,INC. AND SUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF STOCKHOLDER’S DEFICIT**

**FOR THE YEARS ENDEDDECEMBER 31, 2009, 2008 AND 2007**
| **(IN THOUSANDS, EXCEPT SHARE AMOUNTS)** |
|------------------------------------------|

 
|                                   |       |         |       |       |       |        |       |       |          |       | Accumulated |       |       |       |       |
|----------------------------------------|------------|--------------|------------|------------|------------|-------------|------------|------------|---------------|------------|-------------|------------|------------|------------|------------|
|                                   |       |         |       | Additional |       |        |       |       | Other         |       |        |       |       |
|                                   |       | Common Stock |       | Paid-in    |       | Accumulated |       |       | Comprehensive |       |        |       |       |
|                                   |       | Shares       |       | Amount     |       | Capital     |       | Deficit    |          |       | Loss        |       |       | Total      |       |
|                                   | ** ** | ** **   | ** ** | ** ** | ** ** | ** **  | ** ** | ** ** | ** **    | ** ** | ** **  | ** ** | ** ** | ** ** | ** ** |
| BALANCES AT JANUARY 1, 2007            |       | 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   | )          |
|                                   |       |         |       |       |       |        |       |       |          |       |        |       |       |       |       |
| Dividends                              |       | -            |       | -          |       | -           |       | (7,900     | )             |       | -           |       |       | (7,900     | )          |
| Contributions                          |       | -            |       | -          |       | 8,500       |       | -          |          |       | -           |       |       | 8,500      |       |
|                                   |       |         |       |       |       |        |       |       |          |       |        |       |       |       |       |
| Unrealized gain on interest rate  swap |       | -            |       | -          |       | -           |       | -          |          |       | 3,337       |       |       | 3,337      |       |
| Net loss                               |       | -            |       | -          |       | -           |       | (38,948    | )             |       | -           |       |       | (38,948    | )          |
| Total comprehensive loss               |       | -            |       | -          |       | -           |       | -          |          |       | -           |       |       | (35,611    | )          |
|                                   |       |         |       |       |       |        |       |       |          |       |        |       |       |       |       |
| BALANCES AT DECEMBER 31, 2009          |       | 2,000        |       | $          | 1          |        | $          | 89,505     |          | $          | (304,031    | )          |       | $          | (7,000     | ) |   | $ | (221,525 | ) |

 

See notes to consolidated financialstatements.

 

56

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**AFFINITY GROUP,INC. AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007 (IN THOUSANDS)**

 
|                                                    |   | 2009    |    |   | 2008    |   |     | 2007    |   |
|---------------------------------------------------------|--------|---------|---------|--------|---------|--------|----------|---------|--------|
|                                                    |   |    |    |   |    |   |     |    |   |
| CASH FLOWS FROM OPERATING  ACTIVITIES:                  |   |    |    |   |    |   |     |    |   |
| Net (loss) income                                       |   | $       | (38,948 | )      |    | $      | (111,972 | )       |   | $ | 18,928 |   |
| Adjustments to reconcile net  income (loss) to net cash |   |    |    |   |    |   |     |    |   |
| provided by operating activities:                       |   |    |    |   |    |   |     |    |   |
| Deferred tax provision                                  |   | 4,569   |    |   | (3,349  | )      |     | 443     |   |
| Depreciation                                            |   | 12,358  |    |   | 11,670  |   |     | 9,933   |   |
| Amortization                                            |   | 8,718   |    |   | 8,128   |   |     | 9,015   |   |
| Impairment loss on goodwill                             |   | 46,884  |    |   | 47,601  |   |     | -       |   |
| Impairment loss on investment in  affiliate             |   | -       |    |   | 81,005  |   |     | -       |   |
| (Gain) loss on derivative  instrument                   |   | (745    | )       |   | 2,394   |   |     |    |   |
| Provision for losses on accounts  receivable            |   | 2,945   |    |   | 1,493   |   |     | 1,373   |   |
| Deferred compensation                                   |   | -       |    |   | (311    | )      |     | 350     |   |
| Loss on sale of property and  equipment                 |   | 604     |    |   | 321     |   |     | 150     |   |
| (Gain) loss on debt restructure                         |   | (4,678  | )       |   | -       |   |     | 775     |   |
| Changes in operating assets and  liabilities (net of    |   |    |    |   |    |   |     |    |   |
| purchased businesses):                                  |   |    |    |   |    |   |     |    |   |
| Accounts receivable                                     |   | 4,925   |    |   | (8,354  | )      |     | (7,504  | )      |
| Inventories                                             |   | 7,216   |    |   | 7,072   |   |     | (11,506 | )      |
| Prepaid expenses and other assets                       |   | (4,254  | )       |   | 1,250   |   |     | (1,428  | )      |
| Accounts payable                                        |   | (155    | )       |   | (3,221  | )      |     | (5,406  | )      |
| Accrued and other liabilities                           |   | (19,943 | )       |   | (9,156  | )      |     | 702     |   |
| Deferred revenues and gains                             |   | (89     | )       |   | (9,027  | )      |     | 3,495   |   |
| Net cash provided by operating  activities              |   | 19,407  |    |   | 15,544  |   |     | 19,320  |   |
|                                                    |   |    |    |   |    |   |     |    |   |
| CASH FLOWS FROM INVESTING  ACTIVITIES:                  |   |    |    |   |    |   |     |    |   |
| Capital expenditures                                    |   | (3,190  | )       |   | (11,782 | )      |     | (19,708 | )      |
| Net proceeds from sale of property  and equipment       |   | 29      |    |   | 22      |   |     | 178     |   |
| Acquisitions, net of cash received                      |   | -       |    |   | (3,409  | )      |     | (304    | )      |
| Cash (received) paid on loans to  affiliate             |   | -       |    |   | 42      |   |     | 38      |   |
| Net cash used in investing  activities                  |   | (3,161  | )       |   | (15,127 | )      |     | (19,796 | )      |
|                                                    |   |    |    |   |    |   |     |    |   |
| CASH FLOWS FROM FINANCING  ACTIVITIES:                  |   |    |    |   |    |   |     |    |   |
| Dividends paid                                          |   | (7,900  | )       |   | (2,000  | )      |     | (5,750  | )      |
| Contribution from parent                                |   | 8,500   |    |   | -       |   |     | -       |   |
| Restricted cash                                         |   | (8,058  | )       |   | -       |   |     | -       |   |
| Borrowings on long-term debt                            |   | 28,089  |    |   | 33,000  |   |     | 64,300  |   |
| Payment of debt issue costs                             |   | (2,541  | )       |   | (271    | )      |     | (291    | )      |
| Principal payments of long-term  debt                   |   | (36,304 | )       |   | (28,895 | )      |     | (64,432 | )      |
| Net cash (used in) provided by  financing activities    |   | (18,214 | )       |   | 1,834   |   |     | (6,173  | )      |
|                                                    |   |    |    |   |    |   |     |    |   |
| NET (DECREASE) INCREASE IN CASH  AND CASH EQUIVALENTS   |   | (1,968  | )       |   | 2,251   |   |     | (6,649  | )      |
|                                                    |   |    |    |   |    |   |     |    |   |
| CASH AND CASH EQUIVALENTS AT  BEGINNING OF YEAR         |   | 10,608  |    |   | 8,357   |   |     | 15,006  |   |
|                                                    |   |    |    |   |    |   |     |    |   |
| CASH AND CASH EQUIVALENTS AT END  OF YEAR               |   | $       | 8,640   |   |    | $      | 10,608   |    |   | $ | 8,357 |   |

 

See notes to consolidated financialstatements.

 

57

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**AFFINITY GROUP, INC. AND SUBSIDIARIES**

 

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**YEARSENDED DECEMBER 31, 2009, 2008 AND 2007**

 

 

1.                         SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

 

*Principles of Consolidation*–**The consolidated financial statements include the accountsof Affinity Group, Inc. (“AGI”) and its subsidiaries (collectively the “Company”).  Affinity Group Holding, Inc., a Delawarecorporation (“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* – As of December 31,2009, there was $128.9 million outstanding under the Senior Credit Facility andit was secured by a lien on all of the Company’s assets and a pledge of theCompany’s stock and the stock of its subsidiaries. The Senior Credit Facilitywas scheduled to mature on March 31, 2010.

 

On March 1, 2010, AGI refinanced its existing SeniorCredit Facility ($128.9 million aggregate principal amount outstanding as at December 31,2009) and second lien notes totaling $9.7 million due July 31, 2010.  The New Senior Credit Facility provides forterm loans aggregating $144.3 million, including an original issue discount of2%, that are payable in quarterly installments of $360,750 beginning March 1,2011.  In addition, there are mandatoryprepayments of the term loans from excess cash flow (as defined) of AGI andfrom asset sales.  The term loans underthe New Senior Credit Facility mature on the earlier of March 1, 2015 or90 days prior to the maturity of either AGI’s 9% senior subordinated notes due2012 (the “Senior Notes”) ($137.8 million principal amount outstanding as at December 31,2009) or AGHI’s 10-7/8% senior notes due 2012 (the “AGHI Notes”) ($113.6million aggregate principal amount outstanding as at December 31, 2009).

 

In addition, on March 1, 2010, Camping World enteredinto a credit agreement (the “CW Credit Facility”) providing for an asset basedlending facility of up to $22 million, of which $10.0 million is available forletters of credit and $12.0 million is available for revolving loans.  The CW Credit Facility matures on the earlierof March 1, 2013, 60 days prior to the date of maturity of the New SeniorCredit Facility, or 120 days prior to the earlier date of maturity of theSenior Notes and the AGHI Notes. Interest under the revolving loans under the CW Credit Facility floatsat either 3.25% over the base rate (defined as the greater of the prime rate,federal funds rate plus 50 basis points or 1 month LIBOR) for borrowings whoseinterest is based on the prime rate or 3.25% over the LIBOR rate (defined asthe greater of LIBOR rate applicable to the period of the respective LIBORborrowings or 1.0%) for borrowings whose interest is based on LIBOR.  Borrowings under the CW Credit Facility arebased on the borrowing base of eligible inventory and accounts receivable ofCamping World and its subsidiaries.

 

Currently, the New Senior Credit Facility, CW CreditFacility, and the AGI Indenture impose limitations on the ability ofsubsidiaries of AGHI to make dividend distributions or loans to AGHI to payinterest on the AGHI Notes.

 

*Description of the Business*–**The Company isa membership-based direct marketing company which sells club memberships,products, services, and publications to selected affinity groups primarily inNorth America.** The Company markets club memberships,merchandise and services to RV owners, and camping and golf enthusiasts.  In addition, the Company operates

 

58

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1.                         SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (continued)

 

78 retail stores and a mail orderbusiness selling RV accessories, supplies and services through its wholly-ownedsubsidiary, Camping World, Inc. (“Camping World”).  The stores are located

throughout the United States.  The Company also operates consumer shows andpublishes magazines, directories and books.

 

*Use of Estimates*–**The preparation of the Company’s consolidated financialstatements in conformity with accounting principles generally accepted in theUnited States requires the Company’s management to make estimates andassumptions that affect the amounts reported in these financial statements andaccompanying notes.  Actual results coulddiffer from those estimates.

 

*Fair Value Measurement*– The Company adopted a new accounting standardthat defines fair value and established a framework for fair value measurementseffective January 1, 2008 for financial assets and liabilities andeffective January 1, 2009 for non-financial assets and liabilities thatare not remeasured on a recurring basis. Under this standard, fair value is generally defined as the price thatwould be received to sell an asset or paid to transfer a liability (i.e. the “exitprice”) in an orderly transaction between market participants at themeasurement date.  The adoption of thisaccounting standard did not have a material impact on our consolidated resultsof operations, financial position or cash flows.  See Note 9 – Fair Value Measurements.

 

*Cash, Cash Equivalents and Restricted Cash*–**The Company considers all short-term, highly liquidinvestments purchased with a maturity date of three months or less to be cashequivalents.  The carrying amountapproximates fair value because of the short maturity of theseinstruments.  At December 31, 2009,we had restricted cash of $8.1 million. The restricted cash includes $6.1 million held in escrow to backstop theletters of credit and $2.0 million held in escrow in lieu of issuing a letterof credit.  The restricted cash istreated as financing activities in the Company’s Consolidated Statement of CashFlows.

 

*Concentration of Credit Risk*–**The Company is potentially subject to concentrations ofcredit risk in accounts receivable. Concentrations of credit risk with respect to accounts receivable islimited due to the large number of customers and their geographical dispersion.

 

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

 

*Property and Equipment*–**Property and equipment are recorded at cost.  We review our property, plant and equipmentassets for impairment whenever events or changes in circumstances indicate thatthe carrying amount of an asset may not be recoverable.  Depreciation of property and equipment isprovided using the straight-line method over the following estimated usefullives of the assets:

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

 

Leasehold improvements are amortizedover their useful lives of the assets or the remaining term of the respectivelease, whichever is shorter.

 

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1.                       SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (continued)

 

*Goodwill and Other Intangible Assets –*Goodwillis reviewed at least annually for impairment, and more often when impairmentindicators are present (See Note 3).  Thefinite-lived intangible assets consisting of membership customer lists, resortand golf course agreements, non-compete and deferred consulting agreements, anddeferred financing costs have weighted average useful lives of approximately 6years, 4 years, 15 years and 6 years, respectively.

 

*Long-lived Assets* -Long-lived assets, including capitalized software costs, to be held and usedare reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable.  Impairment is recognized to the extent thesum of the discounted estimated future cash flows from the use of the asset isless than the carrying value.

 

*Self-insurance Program* –Self-insurance accruals for workers compensation and general liability programsare calculated by outside actuaries and are based on claims filed and includeestimates for claims incurred but not yet reported.  Projections of future loss are inherentlyuncertain because of the random nature of insurance claims occurrences andcould be substantially affected if future occurrences and claims differsignificantly from these assumptions and historical trends.

 

*Long-term Debt**–* The fair value of the Company’s long-term debt isestimated based on the quoted market prices for the same or similar issues oron the current rates offered for debt of the same or similar remainingmaturities.  The fair value of theCompany’s long-term debt was $228.1 million as of December 31, 2009.

 

*Revenue Recognition –*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 andlifetime memberships.  The revenue andexpenses associated with these memberships are deferred and amortized over themembership period.  For lifetime memberships,an 18-year period is used, which is the actuarially determined estimatedfulfillment period.  Promotionalexpenses, consisting primarily of direct mail advertising, are deferred andexpensed over the period of expected future benefit, typically three monthsbased on historical actual response rates. Renewal expenses are expensed at the time related materials aremailed.  Recognized revenues and profitare subject to revisions as the membership progresses to completion.  Revisions to membership period estimateswould change the amount of income and expense amortized in future accountingperiods.  At December 31, 2009 and2008, $6.2 million and $6.8 million of advertising expenses have beencapitalized as direct-response advertising, of which $3.5 million and $4.2million, respectively, were reported as assets and $2.7 million and $2.6million, respectively, were reported net of related deferred revenue.  Advertising expenses for 2009, 2008 and 2007were $25.1 million, $37.3 million and $39.1 million, respectively.

 

*Publications Revenue andExpense –*Newsstand sales of publications and related expensesare recorded at the time of delivery, net of estimated provision forreturns.  Subscription sales ofpublications 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

 

60

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1.                       SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (continued)

 

publications are deferred untilthe publications are distributed. Revenues and related expenses for consumer shows are recognized when theshow occurs.

 

*Accumulated OtherComprehensive Loss –*Accumulated other comprehensive loss consists of unrealizedlosses on effective portion cash flow hedges. At December 31, 2009, accumulated other comprehensive loss was $7.0million.

 

*Vendor Allowances* – TheCompany receives rebates from vendors pursuant to several different types ofprograms.  Vendor consideration isaccounted for as a reduction of the inventory cost and related cost of saleswhen the inventory is sold.

 

*Shipping and Handling Feesand Costs**–*The Companyreports shipping and handling costs billed to customers as a component ofrevenues, and related costs are reported as a component of cost applicable torevenues.  At December 31, 2009 and2008, $5.2 million and $4.9 million of shipping and handling fees,respectively, were included in the Retail segment as revenue.

 

*DerivativeFinancial Instruments**–*The Company accounts for derivativeinstruments and hedging activities in accordance with accounting guidance forderivative instruments and hedging activities, which states that 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 aderivative that is highly effective and that is designated and qualifies as acash flow hedge (a “swap”), to the extent that the hedge is effective, arerecorded in accumulated other comprehensive loss, until earnings are affectedby the variability of cash flows of the hedged transaction.  The Company measures effectiveness of theswap at each quarter end using the Hypothetical Derivative Method.  Under this method, hedge effectiveness ismeasured based on a comparison of the change in fair value of the actual swapdesignated as the hedging instrument and the change in fair value of thehypothetical swap which would have the terms that identically match thecritical 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.  See Note 8 - Interest Rate Swap Agreements.

 

TheCompany utilizes derivative financial instruments to manage its exposure to interestrate risks.  The Company does not enterinto derivative financial instruments for trading purposes.

 

*Income Taxes**–***The Company recognizes deferred tax assets and liabilities based on theliability method, which requires an adjustment to the deferred tax asset orliability to reflect income tax rates currently 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.

 

The Company adoptedaccounting guidance relating to accounting for uncertainty in income taxes on January 1,2007.  At the date of adoption, theCompany had $14.2 million of unrecognized tax benefits.  The Company reversed $13.2 million of itsliability for unrecognized tax benefits in the third quarter due to statuteexpirations.

 

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1.      SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES (continued)

 

*Major Customers*– Includedin the Membership Services segment is revenue in the amount of $16.8 million,$18.5 million and $19.9 million, for the years 2009, 2008 and 2007,respectively, which was received under contracts from one customer of theCompany.

 

*Subsequent Events -*We have evaluated subsequent eventsthrough the date of issuance of our financial statements in this Form 10-K.

 

*Recent Accounting Pronouncements -*In June 2009,the Financial Accounting Standards Board (“FASB”) issued new accountingguidance entitled, “The FASB Accounting Standards Codification and the Hierarchyof Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162”.  The Accounting Standards Codification (“ASC”or “Codification”) identifies the sources of accounting principles and theframework for selecting the principles used in the preparation of financialstatements of nongovernmental entities that are presented in conformity withGAAP.  This new guidance is effective forfinancial statements issued for interim and annual periods ending after September 15,2009.  The adoption of this guidance haschanged how we reference various elements of GAAP when preparing our financialstatement disclosures, but did not have an impact on our financial position,results of operations or cash flows.

 

In May 2009,the FASB issued new accounting guidance on subsequent events. The objective ofthis guidance is to establish general standards of accounting for anddisclosure of events that occur after the balance sheet date but beforefinancial statements are issued or are available to be issued. This newaccounting guidance was effective for interim and annual periods ending after June 15,2009. The impact of adopting this new guidance had no effect on theaccompanying condensed consolidated financial statements.

 

 

2.    PROPERTY AND EQUIPMENT

 

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

 
|                                              |   | 2009    |         |   | 2008    |    |
|---------------------------------------------------|--------|---------|--------------|--------|---------|---------|
|                                              |   |    |         |   |    |    |
| Land                                              |   |  $ |  477    |   |    |  $ | 477 |   |
| Building and improvements                         |   | 16,204  |         |   | 17,038  |    |
| Furniture and equipment                           |   | 73,095  |         |   | 64,764  |    |
| Software                                          |   | 26,991  |         |   | 28,404  |    |
| Systems development and  construction in progress |   | 220     |         |   | 8,932   |    |
|                                              |   | 116,987 |         |   | 119,615 |    |
| Less: accumulated depreciation and  amortization  |   | (82,711 | )            |   | (75,538 | )       |
|                                              |   |  $ |  34,276 |   |    |  $ |  44,077 |   |

 

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3.        GOODWILL ANDINTANGIBLE ASSETS

 

The following is a summary of changes in the Company’sgoodwill by business segment, for the years ended December 31, 2009 and2008 (in thousands):

 
|                                      |   | Membership  Services |   |   | Media   |    |   | Retail  |   |    | Consolidated |   |
|-------------------------------------------|--------|----------------------|--------|--------|---------|---------|--------|---------|--------|---------|--------------|--------|
|                                      |   |                 |   |   |    |    |   |    |   |    |         |   |
| Gross goodwill                            |   |  $              | 56,030 |   |    |  $ | 46,884 |    |   |  $ | 47,601       |   |   |  $ | 150,515 |   |
| Impairment prior to  January 1, 2008 |   | (6,086               | )      |   | -       |    |   | -       |   |    | (6,086       | )      |
| Balance as of January 1, 2008        |   | 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       |   |
| Impairment                                |   | -                    |   |   | (46,884 | )       |   | -       |   |    | (46,884      | )      |
| Balance as of December 31,  2009     |   |  $              | 49,944 |   |    |  $ | -      |    |   | $       | -            |   |   |  $ | 49,944 |   |

 

 

Finite-lived intangible assets and related accumulatedamortization consisted of the following at December 31 (in thousands):

 
| ** **                                       |   |   |    |   |         | 2009    |    |   |    |   |
|--------------------------------------------------|--------|--------|---------|--------|--------------|---------|---------|--------|---------|--------|
|                                             |   |   |    |   | Accumulated  |    |    |   |
|                                             |   |   | Gross   |   | Amortization |    | Net     |   |
|                                             |   |   |    |   |         |    |    |   |
| Membership and customer lists                    |   |   |  $ | 35,724 |         |  $ | (26,684 | )      |  $ | 9,040  |   |
| Resort and golf course  participation agreements |   |   | 13,346  |   | (13,343      | )       | 3       |   |
| Non-compete and deferred  consulting agreements  |   |   | 18,830  |   | (16,322      | )       | 2,508   |   |
| Deferred financing costs                         |   |   | 12,694  |   | (10,507      | )       | 2,187   |   |
|                                             |   |   |  $ | 80,594 |         |  $ | (66,856 | )      |  $ | 13,738 |   |
|                                             |   |   |    |   |         |    |    |   |
| ** **                                       |   |   |    |   |         | 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 |   |

 

 

The aggregate future five-year amortization of finite-livedintangibles at December 31, 2009 is as follows (in thousands):

 
|   |   | 2010  |   |   | $     | 6,085  |   |   |   |   |   |   |
|--------|--------|-------|--------|--------|-------|--------|--------|--------|--------|--------|--------|--------|
|   |   | 2011  |   |   | 4,930 |   |   |   |   |   |   |
|   |   | 2012  |   |   | 2,634 |   |   |   |   |   |   |
|   |   | 2013  |   |   | 89    |   |   |   |   |   |   |
|   |   | Total |   |   | $     | 13,738 |   |   |   |   |   |   |

 

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3.        GOODWILL ANDINTANGIBLE ASSETS (continued)

 

Under accountingguidance for goodwill and other intangible assets, goodwill impairment isdeemed to exist if the carrying value of a reporting unit exceeds its estimatedfair value.  The Company’s reportingunits are generally consistent with the operating segments underlying thereporting 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.

 

In the thirdquarter of 2009, the Company noted continued decline in advertising revenuecompared to historical trends, in the operations of our RV and powersportspublications, as well as flat to moderate projected growth in futureadvertising revenue as a result of continued deterioration of general economicconditions and consumer confidence. Based on the above, the Company determined that there were identifiedinterim indicators of impairment within these reporting units in the Mediasegment.

 

The Companyperformed an impairment test of the goodwill and intangible assets of the reportingunits of our RV and powersports publications. The impairment test indicated that the estimated fair value of thesereporting units were less than book value. The excess of the carrying value over the estimated fair value of thethese reporting units was primarily due to a decline in advertising revenueleading to lower expected future cash flows for these reporting units. Indetermining the fair value, the Company used an income valuation approach.

 

In performing thesecond step of the goodwill impairment test, the Company allocated theestimated fair values of the reporting units of our RV and powersportspublications determined in step one of the impairment test, to the assets andliabilities of the respective reporting unit in accordance with the accountingguidance for business combinations. The Company determined the impairment forthese units to be equal to the carrying value of its goodwill, or $46.9million.  The Company recorded animpairment charge of $46.9 million in the third quarter of 2009 related tothese units, which is part of the Media segment.  The Media segment goodwill was reduced tozero.  See Indefinite Lived IntangibleAssets under Critical Accounting Policies.

 

In the thirdquarter of 2008, the Company noted continued reduction in same store sales atCamping World, Inc. (“Camping World”) as well as deterioration of generaleconomic conditions and consumer confidence. Based on the above, the Company determined that there were identifiedindicators of impairment within the Camping World reporting unit.

 

Management wasassisted in determining that the estimated fair value of the Camping Worldreporting unit was less than book value by an independent third party valuationfirm.  The excess of carrying value overthe estimated fair value of the Camping World reporting unit was primarily dueto the decline in the recreational vehicle and camping retail markets leadingto lower expected future cash flows for the business and lower marketcomparables. In determining the fair value, the Company used a weighted averageof the income 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.  The Retailsegment goodwill was reduced to zero. See Long-Lived Assets under CriticalAccounting Policies.

 

The Companyperformed an annual goodwill impairment test as required and there were nogoodwill impairment indicators for our other reporting units.  Based on the results of the annual

 

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3.    GOODWILL AND INTANGIBLEASSETS (continued)

 

impairment tests,we determined that no indicators of goodwill impairment existed in the otherreporting units as of December 31, 2009. However, future goodwill impairments tests could result in a charge toearnings.  We will continue to evaluategoodwill on an annual basis and whenever events and changes in circumstancesindicate that there may be a potential impairment.

 

Effective January 1,2009, the Company adopted new accounting guidance related to businesscombinations which establishes principles and requirements for how an acquirerrecognizes and measures in its financial statements the identifiable assetsacquired, the liabilities assumed, any noncontrolling interest in the acquireeand the goodwill acquired in a business combination.  The Company will apply the provisions anddisclosure requirements of the new guidelines for any acquisitions after theadoption date.

 

In January 2007,AGI Productions, Inc. acquired a consumer show from MAC Events, Inc.for $0.5 million.  As part of thepurchase, 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.  The cost of the acquisitions was allocatedprimarily to membership and customer lists.

 

In January 2008,AGI Productions, Inc. acquired 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 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 ofthe acquisitions have been allocated to the assets acquired and the liabilitiesassumed based on their respective fair values in accordance with accountingguidance for business combinations.  Theallocations of the purchase price to assets and liabilities include variousfinite-lived assets and no additional goodwill. The results of operations for each respective acquisition have beenincluded in the Company’s results of operations from the date of theacquisitions.  Proforma results ofoperations for each year in which an acquisition occurred, assuming theacquisitions took place at the beginning of the year, would not differsignificantly from the actual reported results.

 

4.        LONG-LIVEDASSETS

 

In 2005,AGHI issued $88.2 million principal amount of its 10-7/8% Senior Notes due 2012(the “AGHI Notes”) and contributed the net proceeds, approximately $81.0million, to the Company and in turn, the Company made an equity contribution toCamping World.  Camping World then madean equity capital contribution in the same amount to its wholly-ownedsubsidiary, CWI, Inc. that created a new wholly-owned subsidiary namedCWFR Capital Corp. (“CWFR”) which is an “unrestricted subsidiary” under theAGHI Notes, and the AGI Indenture, and made an equity capital contribution toCWFR in an equal amount to the capital contribution that it received fromCamping World.  Since CWFR is anunrestricted subsidiary, its operations are not restricted by either the AGIIndenture or the AGHI Notes.  CWFR usedthe proceeds from the equity capital contribution to acquire the FreedomRoadsPreferred Interest.  FreedomRoads isowned 90% by the Stephen Adams Living Trust, which also indirectly owns 100.0%of the outstanding capital stock of AGHC and indirectly AGHI.

 

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4.        LONG-LIVEDASSETS (continued)

 

In the third quarter of 2008, theCompany recorded an impairment charge of $81.0 million that wrote down to zerothe carrying value of the preferred interest (the “FreedomRoads Preferred Interest”)held by an indirect subsidiary of Camping World in FreedomRoads HoldingCompany, LLC (“FreedomRoads”), a holding company whose subsidiaries sell andservice new and used recreational vehicles. Management was assisted in determining the non-cash goodwill impairmentcharge by an independent third party valuation firm.  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

 

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

 
|                      |   | 2009    |   |   | 2008   |    |
|---------------------------|--------|---------|--------|--------|--------|---------|
|                      |   |    |   |   |   |    |
| Compensation and benefits |   |  $ | 8,653  |   |   |  $ | 9,549 |   |
| Other accruals            |   | 15,407  |   |   | 17,405 |    |
|                      |   |  $ | 24,060 |   |   |  $ | 26,954 |   |

 

6.                         LONG-TERMDEBT

 

The following reflects outstanding long-term debt as of December 31(in thousands):

 
|                                       |   | 2009    |    |   | 2008          |    |
|--------------------------------------------|--------|---------|---------|--------|---------------|---------|
|                                       |   |    |    |   |          |    |
| Revolving Credit and Term Loan  Facility:  |   |  $ | 110,797 |   |          |  $ | 126,955 |   |
| Term Loans                                 |   | 18,059  |    |   | 8,500         |    |
| Revolving credit facility                  |   | 137,824 |    |   | 152,399       |    |
| AGI 9% Senior Subordinated Notes  due 2012 |   | 9,717   |    |   | -   |    |
| Second Lien Loan Note                      |   | 1,032   |    |   | -   |    |
| SA Debt                                    |   | 985     |    |   | 4,292         |    |
| Other long-term obligations                |   | 278,414 |    |   | 292,146       |    |
|                                       |   | (892    | )       |   | (12,391       | )       |
| Less: current portion                      |   |  $ | 277,522 |   |          |  $ | 279,755 |   |

 

*Senior Credit Facility* - On June 24,2003, the Company entered into an Amended and Restated Credit Agreement and aSenior Secured Floating Rate Note Purchase Agreement (“Senior Credit Facility”).  The Senior Credit Facility was subsequentlyamended on March 3, 2006, June 8, 2006, February 27, 2007 and June 5,2009, and provides for term loans (“Term Loans”) in the aggregate of $140.0million and a revolving credit facility of $25.0 million.  The funds available under the revolvingcredit line of the Senior Credit Facility may be utilized for borrowings orletters of credit; however, a maximum of $7.5 million may be allocated to suchletters of credit.  Re-borrowings underthe Term Loans are not permitted.  Theinterest on borrowings under the Senior Credit Facility is at variable ratesbased on the ratio of total cash flow to outstanding indebtedness (asdefined).  Interest rates float withprime and the London Interbank Offered Rates, (“LIBOR”), plus an applicablemargin ranging from 9.00% to 10.00%, respectively, over the stated rates and aLIBOR floor of 2.75%.  The Company alsopays a commitment fee of 1.0% per annum on the unused amount of the revolvingcredit facility.  The aggregate quarterlyscheduled payments on the term loans are $0.4 million.  The funds available under the Senior CreditFacility may be utilized for borrowings or letters of credit, except a maximumof $7.5

 

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6.                         LONG-TERM DEBT (continued)

 

million may be allocated to suchletters of credit.  The Senior CreditFacility is secured by virtually all of AGI’s assets and a pledge of AGI’sstock and the stock of AGI’s subsidiaries.

 

As of December 31, 2009, $110.8million was outstanding under the Term Loans and after consideration for fixedrates under the interest rate swap agreements, as discussed in Note 8 –Interest Rate Swap Agreements, the average interest rate on the Term Loans was17.01%.  As of December 31, 2009,permitted borrowings under the undrawn revolving line were $19.2 million.  The Company had commercial and standbyletters of credit in the aggregate amount of $5.8 million outstanding as of December 31,2009.

 

Concurrent with theJune 5, 2009 amendment to the Senior Credit Facility, the Company obtaineda $9.7 million Second Lien Loan, the net proceeds of which were used topurchase $14.6 million in principal amount of Senior Notes.  The Second Lien Loan carries an interest rateof 9.0% and matures on July 31, 2010. The Second Lien Loan is secured by substantially all of the assets and apledge of the stock of AGI and is second in priority only to the Senior CreditFacility.

 

In connection withthe June 5, 2009 amendment to the Senior Credit Facility, the seniorlenders required the commitment of Stephen Adams, the Company’s ultimateshareholder, to cause loans to be made to the Company in amounts equal to thecash interest payments on $16.0 million in aggregate principal amount of theterm loans under the Senior Credit Facility. In connection with that requirement, on June 10, 2009, the Companyentered into a loan agreement with SA Holding, LLC, (“SA Holding”), which isowned by Stephen Adams, pursuant to which SA Holding agreed to loan to AGI (the“SA Loans”) amounts equal to the cash interest payments on $16.0 million inaggregate principal amount of term loans. The interest rate on the SA Loans is equal to the interest rate payableon the Senior Credit Facility plus 2.0% per annum compounded monthly.  The SA Loans mature on the date on which theindebtedness under the Senior Credit Facility is paid in full.  As of December 31, 2009, $1.0 million ofSA Loans were outstanding.** **On March 1, 2010, the SALoans were repaid in full with the proceeds from the AGI New Senior CreditFacility.

 

*New Senior Credit Facility -* On March 1,2010, AGI entered into the Second Amended and Restated Credit Agreement (the “NewSenior Credit Facility”) to refinance its existing senior credit facility($128.9 million aggregate principal amount outstanding as at December 31,2009) which was scheduled to mature on March 31, 2010 and second liennotes totaling $9.7 million due July 31, 2010.  The New Senior Credit Facility provides forterm loans aggregating $144.3 million, including an original issue discount of2%, that are payable in quarterly installments of $360,750 beginning March 1,2011.  In addition, there are mandatoryprepayments of the term loans from excess cash flow (as defined) of AGI andfrom asset sales.  The term loans underthe New Senior Credit Facility mature on the earlier of March 1, 2015 or90 days prior to the maturity of either AGI’s 9% senior subordinated notes due2012 (“Senior Notes”) ($137.8 million principal amount outstanding as at December 31,2009) or AGHI’s 10-7/8% senior notes due 2012 (the “AGHI Notes”) ($113.6million aggregate principal amount outstanding as at December 31,2009).  Interest on the term loans underthe New Senior Credit Facility floats at either 8.75% over the base rate (definedas the greater of the prime rate, federal funds rate plus 50 basis points or5.25%) for borrowings whose interest is based on the prime rate or 10.0% overthe LIBOR rate (defined as the greater of the 3 months LIBOR rate or 3.0%) forborrowings whose interest is based on LIBOR. The New Senior Credit Facility contains affirmative covenants, includingfinancial covenants, and negative covenants, including a restriction ondividends or distributions by AGI to AGHI. Borrowings under the New Senior Credit Facility are

 

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6.                         LONG-TERMDEBT (continued)

 

guaranteed by the direct andindirect subsidiaries of AGI and are secured by liens on the assets of AGI andits direct and indirect subsidiaries.  Asa condition to the term loans under the New Senior Credit Facility, $25.4million of AGHI Notes due on March 15, 2010 that were held by an affiliateof AGHI were contributed to AGHI for zero consideration and AGHI cancelledthose notes.

 

TheNew Senior Credit Facility also revised the Company’s financial covenants ineffect through the extended maturity date. The Company’s forecast for 2010 anticipates compliance with all requiredcovenants throughout 2010.  Significantcost reductions have been implemented over the last eighteen months, includingthe elimination of personnel, suspension of 401(k) employer contributions,salary cutbacks, hiring and capital expenditure spending freezes, satelliteoffice closures, and magazine size and frequency reductions.  The Company believes that the amended seniorsecured financing, new secured loans, as well as forecasted cash flow willprovide the cash flow needed to continue as a going concern through at least January 1,2011.

 

*Camping World Credit Facility* - On March 1, 2010, CampingWorld entered into a credit agreement (the “CW Credit Facility”) providing foran asset based lending facility of up to $22.0 million, of which $10.0 millionis available for letters of credit and $12.0 million is available for revolvingloans.  The CW Credit Facility matures onthe earlier of March 1, 2013, 60 days prior to the date of maturity of theNew Senior Credit Facility, or 120 days prior to the earlier date of maturityof the Senior Notes and the AGHI Notes. Interest under the revolving loans under the CW Credit Facility floatsat either 3.25% over the base rate (defined as the greater of the prime rate,federal funds rate plus 50 basis points or 1 month LIBOR) for borrowings whoseinterest is based on the prime rate or 3.25% over the LIBOR rate (defined asthe greater of LIBOR rate applicable to the period of the respective LIBORborrowings or 1.0%) for borrowings whose interest is based on LIBOR.  Borrowings under the CW Credit Facility arebased on the borrowing base of eligible inventory and accounts receivable ofCamping World and its subsidiaries.  TheCW Credit Facility contains affirmative covenants, including financialcovenants, and negative covenants. Borrowings under the Camping World Credit Agreement are guaranteed bythe direct and indirect subsidiaries of Camping World and are secured by apledge on the stock of Camping World and its direct and indirect subsidiariesand liens on the assets of Camping World and its direct and indirectsubsidiaries.  The lenders under the NewSenior Credit Facility and the CW Credit Facility have entered into anintercreditor agreement that governs their rights in the collateral that ispledged to secure their respective loans.

 

*AGI Senior Subordinated Notes -*In February 2004,the Company issued $200.0 million aggregate principal amount of 9% SeniorSubordinated Notes due 2012 (the “Senior Notes”).  The Company completed a registered exchangeof the Senior Notes under the Securities Act of 1933 in August 2004.  Interest is payable on the Senior Notes twicea year on each February 15 and August 15, beginning August 15,2004, and the Senior Notes mature on February 15, 2012.  On June 8, 2006, AGI amended its SeniorCredit Facility to permit AGI to purchase up to $30.0 million of the SeniorNotes from time to time as and when the Company determines.  AGI purchased $29.9 million of the SeniorNotes at various times in 2006.  TheSenior Notes purchases were made with available cash and the notes purchasedhave been retired.

 

On March 8,2007, the Company purchased $17.7 million of the 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

 

68

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6.    LONG-TERM DEBT (continued)

 

credit facility by$6.5 million 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 Senior Notes.  Asof December 31, 2009, $137.8 million of Senior Notes remain outstanding.

 

The New SeniorCredit Facility and the indenture under the Senior Notes were issued containcertain restrictive covenants relating to, but not limited to, mergers, changesin the nature of the business, acquisitions, additional indebtedness, sale ofassets and investments, and the payment of dividends subject to certainlimitations and minimum operating covenants. The Company was in compliance with all debt covenants at December 31,2009.

 

*Total Long-term Debt -*Theaggregate future maturities of long-term debt at December 31, 2009 were asfollows (in thousands):

 

| 2010  |   |  $ | 892     |   |
|-------|--------|---------|---------|--------|
| 2011  |   | 139,698 |    |
| 2012  |   | 137,824 |    |
| Total |   |  $ | 278,414 |   |

 

7.                         INCOME TAXES

 

The components of the Company’s income tax expense (benefit)from operations for the year ended December 31, consisted of (inthousands):

 
|                         |   | 2009    |    | 2008   |   | 2007   |   |
|------------------------------|--------|---------|---------|--------|--------|--------|--------|
| Current:                     |   |    |    |   |   |   |   |
| Federal                      |   |  $ | -       |   | $      | -      |   | $ | - |   |
| State                        |   | 20      |    | 29     |   | 16     |   |
| Deferred                     |   |    |    |   |   |   |   |
| Federal                      |   | (9,548  | )       | (2,065 | )      | 1,443  |   |
| State                        |   | (838    | )       | (177   | )      | 124    |   |
| Income tax expense (benefit) |   |  $ | (10,366 | )      | $      | (2,213 | )      | $ | 1,583 |   |

 

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

 
|                                             |   | 2009    |    | 2008   |   | 2007    |   |
|--------------------------------------------------|--------|---------|---------|--------|--------|---------|--------|
|                                             |   |    |    |   |   |    |   |
| Income taxes computed at federal  statutory rate |   |  $ | (6,882  | )      | $      | (49,321 | )      | $ | (992 | ) |
| State income taxes - net of  federal benefit     |   | (590    | )       | (4,227 | )      | (85     | )      |
| Other differences:                               |   |    |    |   |   |    |   |
| Goodwill written off                             |   | -       |    | 14,739 |   | -       |   |
| Increase (decrease) of valuation  allowance      |   | (2,792  | )       | 36,696 |   | 2,724   |   |
| Other                                            |   | (102    | )       | (100   | )      | (64     | )      |
| Income tax expense (benefit)                     |   |  $ | (10,366 | )      | $      | (2,213  | )      | $ | 1,583 |   |

 

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7.                         INCOME TAXES(continued)

 

Deferredincome taxes reflect the net tax effects of temporary differences between thecarrying amounts of assets and liabilities for financial reporting purposes andthe amounts used for income tax purposes and operating loss and tax creditcarryforwards.  Significant itemscomprising the net deferred tax asset at December 31 are (in thousands):

 
|                                         |   | 2009    |   | 2008    |    |
|----------------------------------------------|--------|---------|--------|---------|---------|
| **Deferred  tax liabilities:**               |   |    |   |    |    |
| Accelerated depreciation                     |   |  $ | (2,314 | )       |  $ | (1,187 | ) |
| Prepaid expenses                             |   | (22     | )      | (386    | )       |
| Deferred tax gain                            |   | (10,709 | )      | -       |    |
| Other                                        |   | (75     | )      | (490    | )       |
|                                         |   | (13,120 | )      | (2,063  | )       |
|                                         |   |    |   |    |    |
| **Deferred  tax assets:**                    |   |    |   |    |    |
| Investment impairment                        |   | 30,784  |   | 30,784  |    |
| Gift Cards                                   |   | 866     |   | 796     |    |
| Deferred revenues                            |   | 968     |   | 27      |    |
| Accrual for employee benefits and  severance |   | 420     |   | 325     |    |
| Net operating loss carryforward              |   | 14,320  |   | 11,179  |    |
| Claims reserves                              |   | 543     |   | 684     |    |
| Intangible assets                            |   | 113     |   | 179     |    |
| Deferred book gain                           |   | 2,259   |   | 2,521   |    |
| Other reserves                               |   | 1,934   |   | 2,016   |    |
|                                         |   | 52,207  |   | 48,511  |    |
|                                         |   |    |   |    |    |
| Valuation allowance                          |   | (39,087 | )      | (41,879 | )       |
|                                         |   |    |   |    |    |
| Net deferred tax liabilities                 |   |  $ | -      |    |  $ | 4,569 |   |

 

Effective January 1, 2006,the Company received approval from the Internal Revenue Service for a change intax status to an S corporation which included AGHC and all its subsidiarieswith the exception of Camping World, Inc. and its wholly-ownedsubsidiaries, which are to remain Subchapter C corporations.  At December 31, 2009, Camping World, Inc.and its subsidiaries had a net operating loss carryforward of approximately$37.7 million, which will be able to offset future taxable income.  If not used, the net operating losscarryforward will expire between 2027 and 2029. The valuation allowance for deferred taxes was decreased by $2.7 millionas it was determined that the Company would have insufficient taxable income inthe current or carryforward periods under the tax laws to realize the futuretax benefits of its deferred tax assets.

 

TheCompany recognizes the tax benefit from an uncertain tax position only if it ismore likely than not that the tax position will be sustained on examination bythe taxing authorities based on the technical merits of the position.  The tax benefits recognized in the financialstatements on a particular tax position are measured based on the largest benefitthat has a greater than a 50% likelihood of being realized uponsettlement.  The amount of unrecognizedtax benefits (“UTBs”) is adjusted as appropriate for changes in facts andcircumstances, such as significant amendments to existing tax law, newregulations or interpretations by the taxing authorities, new informationobtained during a tax examination, or resolution of an examination.  We recognize both accrued interest andpenalties, where appropriate, related to UTBs in income tax expense.  At the date of adoption, the Company had$14.2 million of unrecognized tax benefits. The Company reversed its liability for unrecognized tax benefits in thethird quarter of 2009 due to statute expirations.

 

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7.                         INCOME TAXES(continued)

 

Thefollowing table summarizes the activity related to unrecognized tax benefits:

 
| Balance at January 1, 2009                                                          |   |  $ | 14,493 |   |
|------------------------------------------------------------------------------------------|--------|---------|--------|--------|
| 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                 |   | (13,154 | )      |
| Other                                                                                    |   | -       |   |
| Unrecognized tax benefits at  December 31, 2009                                     |   |  $ | 1,339  |   |

 

TheCompany accrues interest and penalties related to unrecognized tax benefits inits income tax provision.  The Companyreversed accrued interest and penalties of $2.0 million related to decreases inunrecognized tax benefits during 2009 due to statute expirations. As of December 31,2009, the liability for penalties and interest was $0.5 million.  The Company expects its unrecognized taxbenefits to decrease by $1.3 million over the next twelve months.

 

TheCompany and its subsidiaries file income tax returns in the U.S. federaljurisdiction and various states.  Withfew exceptions, the Company is no longer subject to U.S. federal and stateexaminations by tax authorities for fiscal years prior to fiscal 2005 and 2005,respectively.  There currently is anInternal Revenue Service examination that is scheduled to take place, but hasnot commenced, of the Company’s wholly owned subsidiary, Camping World, Inc.,for fiscal year 2008.

 

8.        INTERESTRATE SWAP AGREEMENTS

 

The Company is exposed to certainrisks related to its business operations. The primary risks that we managed by using derivatives is interest raterisk.  We use financial instruments,including interest rate swap agreements, to reduce our risk to thisexposure.  We do not use derivatives forspeculative trading purposes and are not a party to leveraged derivatives.

 

We recognize all of our derivativeinstruments as either assets or liabilities at fair value.  Fair value is determined in accordance withthe accounting guidance for Fair Value Measurements.  See Note 9 – Fair Value Measurements.  The accounting for changes in the fair valueof a derivative instrument depends on whether it has been designated andqualifies as part of a hedging relationship and, further, on the type ofhedging relationship.  For derivativesdesignated as hedges under the accounting guidance for Derivative Instrumentsand Hedging Activities, we formally assess, both at inception and periodicallythereafter, whether the hedging derivatives are highly effective in offsettingchanges in either the fair value or cash flows of the hedged item.  Our derivatives that are not designated anddo not qualify as hedges under the accounting guidance for DerivativeInstruments and Hedging Activities are adjusted to fair value through currentearnings.

 

Effective January 1, 2009,the Company adopted the provisions of the new accounting guidance forDisclosures about Derivative Instruments and Hedging Activities.  The guidance requires that the objectives forusing derivative instruments be disclosed to better convey the purpose ofderivative use in terms of the risks that the Company is intending tomanage.  This standard also requiresdisclosure of how derivatives and related hedged items are accounted for andhow they affect the Company’s financial statements.  The adoption of the new guidance did not have

 

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8.                         INTERESTRATE SWAP AGREEMENTS (continued)

 

a material impact on our condensedconsolidated results of operations, financial position or cash flows.

 

On October 15, 2007, AGIentered into a five-year interest rate swap agreement with a notional amount of$100.0 million from which it will receive periodic payments at the 3 monthLIBOR-based variable rate (0.281% at December 31, 2009 based upon the October 31,2009 reset date) and make periodic payments at a fixed rate of 5.135%, withsettlement and rate reset dates every January 31, April 30, July 31,and October 31.  The fair value ofthe 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.  The interest rateswap is designated as a cash flow hedge of the variable rate interest paymentsdue on $100.0 million of the Term Loans issued June 24, 2003, andaccordingly, gains and losses on the fair value of the interest swap agreementare reported in accumulated other comprehensive loss and reclassified toearnings in the same period in which the hedged interest payment affectsearnings.  The interest rate swapagreement expires on October 31, 2012.

 

On March 19, 2008, AGIentered 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 (0.281% at December 31,2009 based upon the October 31, 2009 reset date) and make periodicpayments at a fixed rate of 3.430%, 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 agreements werezero at inception.  The Company enteredinto the interest rate swap agreements to limit the effect of increases on ourfloating rate debt.  The interest rateswap agreements are designated as a cash flow hedge of the variable rateinterest payments due on $135.0 million of the term loans and the revolvingcredit facility issued June 24, 2003, and accordingly, gains and losses onthe fair value of the interest rate swap agreements are reported in accumulatedother comprehensive loss and reclassified to earnings in the same period inwhich the hedged interest payment affects earnings.

 

Due to the potential sale ofCamping World, in the fourth quarter of 2008, a highly effective hedge on the$35.0 million outstanding debt by the $35.0 million notional amount interestrate swap agreement was 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 as a gain (loss) on derivative instrument on October 1,2008.  Included in other comprehensiveloss at December 31, 2009 is $0.4 million related to changes in the fairvalue of the $35.0 million interest rate swap prior to October 1, 2008which will be amortized over the remaining life of the interest rate swap andincluded in earnings as a gain (loss) on derivative instrument.  On June 11, 2009, the Company partiallyterminated the $35.0 million interest rate swap, subject to a partialtermination fee of $0.6 million which was expensed.  The notional amount was reduced to $20.0million.  All other terms of the interestrate swap agreement remained unchanged. As a result, the amount included in other comprehensive income relatedto the $35.0 million interest rate swap was reduced prorata and included inearnings as a gain (loss) on derivative instrument.

 

Due to the issuance of an optionto the shareholder of the ultimate parent of the Company to purchase CampingWorld, in the second quarter of 2009, which option was subsequently terminated,a portion of the highly effective hedge on the $100.0 million outstanding debtby the$100.0 million notional amount interest rate swap agreement was deemed tobe no longer probable and is now deemed to be reasonably possible.  As a result, changes in the value of the last$20.0 million of the $100.0 million interest rate swap agreement are includedin earnings

 

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8.                         INTERESTRATE SWAP AGREEMENTS (continued)

 

beginning on June 5,2009.  Included in other comprehensiveloss is $1.3 million related to the last $20.0 million of the $100.0 millioninterest rate swap which will be amortized over the remaining life of theinterest rate swap and included in earnings as a gain (loss) on derivativeinstrument.

 

Thefollowing is the location and amounts of derivative instruments fair values inthe statement of financial position segregated between designated, qualifyinghedging instruments segregated by assets and liabilities as required byaccounting guidance.

 
| Derivatives designated as    |   |                        |   |                                   |
|------------------------------|--------|-----------------------------|--------|----------------------------------------|
| hedging intruments under     |   |                        |   | Fair Value as of:                      |
| Statement 133                |   | Balance Sheet Location      |   | 12/31/2009                             |   | 12/31/2008 |
|                         |   |                        |   |                                   |   |   |
| Interest rate swap contracts |   | Other long-term liabilities |   | $     (8,090) |   | $     (12,731) |

 

Thefollowing is the location and amount of gains and losses on derivativeinstruments in the statement of operations for the years ended December 31,2009 and 2008 segregated between designated, qualifying hedging instruments andthose that are not, and segregated by assets and liabilities as required by theaccounting guidance for derivative instruments (in thousands):

 
| Derivatives in Cash Flow Hedging Relationships:                                                                                                     |   | Interest Rate Swap Agreements         |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|
|                                                                                                                                                |   | 12/31/2009                            |   |   | 12/31/2008 |   |
| Amount of Gain or (Loss) recognized in OCI on Derivatives                                                                                           |   |  $                               | (3,337 | ) |   |  $ | (5,632 | ) |
|                                                                                                                                                |   |                                  |   |   |   |   |
| Location of Gain (Loss) Reclassified from Accumulated OCI  into Statement of operations (Effective Portion)                                         |   | Gain (loss) on derivative  Instrument |   |
|                                                                                                                                                |   |                                  |   |   |   |   |
|                                                                                                                                                |   | 12/31/2009                            |   |   | 12/31/2008 |   |
| Amount of Gain or (Loss) reclassified from OCI into  Statement of Operations (Effective portion)                                                    |   |  $                               | (126 | ) |   |  $ | (2,394 | ) |
|                                                                                                                                                |   |                                  |   |   |   |   |
| Location of Gain (Loss) Recognized in Statement of  Operations on Derivatives (Ineffective portion and amount excluded from  effectiveness testing) |   | Gain (loss) on derivative  Instrument |   |
|                                                                                                                                                |   |                                  |   |   |   |   |
|                                                                                                                                                |   | 12/31/2009                            |   |   | 12/31/2008 |   |
| Amount of Gain or (Loss) recognized in income on  Derivatives (Ineffective portion and amount excluded from effectiveness  testing)                 |   |  $                               | 871 |   |   |  $ | - |   |

 

 

The fairvalue of these swaps included in other long-term liabilities was $8.1 millionof which $7.0 million is in accumulated other comprehensive loss and $1.1million has been recorded in the statement of operations in aggregate periodsthrough December 31, 2009.

 

9.        FAIR VALUEMEASUREMENTS

 

Accounting guidance for fair valuemeasurements establishes a three-tier fair value hierarchy, which prioritizesthe inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such asquoted prices in active markets; Level 2, defined as inputs other than quotedprices in active markets that are either directly or indirectly observable; andLevel 3, defined as unobservable inputs in which little or no market dataexists, therefore requiring an entity to develop its own assumptions.

 

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9.                       FAIR VALUE MEASUREMENTS (continued)

 

As of December 31, 2009, theCompany holds interest rate swap contracts that are required to be measured atfair value on a recurring basis.  TheCompany’s interest rate swap contracts are not traded on a public exchange.  See Note 8 Interest Rate Swap Agreements forfurtherinformationon the interest rate swap contracts.  Thefair value of these interest rate swap contracts are determined based on inputsthat are readily available in public markets or can be derived from informationavailable in publicly quoted markets. Therefore, the Company has categorized these swap contracts as Level 2.

 

The Company performed animpairment test of the goodwill and intangible assets of the reporting units ofour RV and powersports publications in the Media segment.  The impairment test indicated that theestimated fair value of these reporting units were less than book value.  The excess of the carrying value over theestimated fair value of the these reporting units was primarily due to adecline in advertising revenue leading to lower expected future cash flows forthe business. In determining the fair value, the Company used an incomevaluation approach.

 

In performing the second step ofthe goodwill impairment test, the Company allocated the estimated fair valuesof the reporting units of our RV and powersports publications determined instep one of the impairment test, to the assets and liabilities of therespective reporting unit in accordance with the accounting guidance forbusiness combinations. The Company measured the impairment for these units tobe equal to the carrying value of its goodwill, or $46.9 million.  The fair value of the goodwill in the Mediasegment is measured on a non-recurring basis, and therefore, the Company hascategorized this asset as Level 3.  TheCompany recorded an impairment charge of $46.9 million in the third quarter of2009 related to these units, which is part of the Media segment.

 

Inthe third quarter of 2008, the Company noted continued reduction in same storesales at Camping World, Inc. (“Camping World”) as well as deterioration ofgeneral economic conditions and consumer confidence.  Based on the above, the Company determinedthat there were identified indicators of impairment within the Camping Worldreporting unit.  Management was assistedin determining that the estimated fair value of the Camping World reportingunit was less than book value by an independent third party valuation firm.  The excess of 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.  Thefair value of the goodwill in the Retail segment is measured on a non-recurringbasis, and therefore, the Company has categorized this asset as Level 3.  The Company recorded an impairment charge of $47.6 millionin the third quarter of 2008 related to Camping World, which is part of theRetail segment.

 

Determining the fair value of areporting unit under the first step of the goodwill impairment test anddetermining the fair value of individual assets and liabilities of a reportingunit under the second step of the goodwill impairment test is judgmental innature and often involves the use of significant estimates and assumptions.These estimates and assumptions could have a significant impact on whether ornot an impairment charge is recognized and also the extent of such charge. TheCompany’s estimates of fair value utilized in goodwill test may be based upon anumber of factors, including assumptions about the projected future cash flows,discount rate, growth rate, determination of market comparables, economicconditions, or changes to the Company’s business operations. Such changes mayresult in impairment charges recorded in future periods.

 

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9.                       FAIR VALUE MEASUREMENTS (continued)

 

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.  FreedomRoads is an affiliate under commonownership with the Company’s ultimate parent. Management was assisted in determining the fair value of the preferredinterest in FreedomRoads by an independent third party valuation firm.  In anticipation of the potential sale ofCamping World, the impairment charge 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.  The impairment charge relating to the FreedomRoadsPreferred Interest was allocated to the retail operating segment.

 

The Company’s liability at December 31,2009, measured at fair value on a recurring basis subject to the disclosurerequirements from accounting guidance, was as follows:

 
|                            |   |                       |   | Fair Value Measurements at Reporting  Date Using                                                                                             |
|---------------------------------|--------|----------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
| (in thousands)                  |   |                       |   | Quoted Prices in  Active Markets for  Identical Assets                                                                             |   | Significant Other  Observable  Inputs |   | Significant  Unobservable  Inputs |
| Description                     |   | Amount                     |   | (Level 1)                                                                                                                                    |   | (Level 2) |   | (Level 3) |
| As of December 31, 2009:   |   |                       |   |                                                                                                                                         |   |   |   |   |
| Interest Rate Swap Contracts    |   | $   (8,090) |   | $                      -  |   | $           (8,090) |   | $                  -  |
| FreedomRoads Preferred Interest |   | -                     |   | -                                                                                                                                       |   | -  |   | -  |
| Retail Goodwill                 |   | -                     |   | -                                                                                                                                       |   | -  |   | -  |
| Media Goodwill                  |   | -                     |   | -                                                                                                                                       |   | -  |   | -  |
|                            |   |                       |   |                                                                                                                                         |   |   |   |   |
| As of December 31, 2008:   |   |                       |   |                                                                                                                                         |   |   |   |   |
| Interest Rate Swap Contracts    |   | (12,731)                   |   | -                                                                                                                                       |   | (12,731) |   | -  |
| FreedomRoads Preferred Interest |   | -                     |   | -                                                                                                                                       |   | -  |   | -  |
| Retail Goodwill                 |   | -                     |   | -                                                                                                                                       |   | -  |   | -  |

 

Goodwillrelated to the Media segment was re-measured in the third quarter of 2009 andgoodwill related to the Retail segment was re-measured in the third quarter of2008.  The fair values of cashequivalents, accounts receivable and accounts payable approximate theircarrying values due to the short-term nature of these financial instruments.

 

The following tablepresents the reported carrying value and fair value information for the Company’sSenior Notes, and Senior Credit Facility. The fair values shown below for the Senior Notes and the Senior CreditFacility are based on quoted prices in the market for identical assets (Level1) (in thousands):

 
|                   |   | 12/31/2009           |   | 12/31/2008          |   |
|------------------------|--------|----------------------|--------|---------------------|--------|
|                   |   | Carrying Value  |   | Fair Value          |   | Carrying Value |   | Fair Value |   |
| Senior Notes           |   | $137,824   |   | $93,893   |   | $152,399   |   | $80,771   |   |
| Senior Credit Facility |   | 128,856    |   | 122,425   |   | 135,455   |   | 108,364   |   |

 

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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 31,2009 are as follows (in thousands):

 
|       |   | Third Party   |    | Related Party |          | Total   |   |
|------------|--------|---------------|---------|---------------|---------------|---------|--------|
| 2010       |   |   $ | 14,090  |          |   $ | 8,990   |   |   $ | 23,080 |   |
| 2011       |   | 12,671        |    | 8,990         |          | 21,661  |   |
| 2012       |   | 11,066        |    | 8,990         |          | 20,056  |   |
| 2013       |   | 9,032         |    | 8,946         |          | 17,978  |   |
| 2014       |   | 8,870         |    | 8,766         |          | 17,636  |   |
| Thereafter |   | 69,160        |    | 52,005        |          | 121,165 |   |
| Total      |   |   $ | 124,889 |          |   $ | 96,687  |   |   $ | 221,576 |   |

 

During 2009, 2008and 2007, respectively, approximately $23.7 million, $21.7 million and $17.9million, of rent expense was charged to costs and expenses.

 

On December 5, 2001, the Companysold eleven real estate properties to eleven separate wholly-owned subsidiariesof AGRP Holding Corp., a wholly-owned subsidiary of the Company’s ultimateparent, AGI Holding Corp., for $52.3 million in cash and a notereceivable.  The properties have beenleased back to the Company on a triple net basis.  Both the sales price and lease rates werebased on market rates determined by third party independent appraisers engagedby the mortgage lender and approved by the AGI Senior Credit Facility agentbank.  These leases have an initial termof 25 to 27 years with two five-year options at the then current marketrent.  The leases are classified asoperating leases in accordance with accounting guidance for accounting forleases.”  Land and buildings with a netbook value totaling $45.8 million have been removed from the balancesheet.  The transaction resulted in a netgain of $6.1 million consisting of a $12.1 million gain on certain propertiesand a $6.0 million loss on other properties. In accordance with accounting principles generally accepted in theUnited States, the $6.0 million loss was recognized upon the date of sale in2001 in the statement of operations and the $12.1 million gain was deferred andwill be credited to income as rent expense adjustments over the leaseterms.  The average net annual leasepayments over the lives of the leases are $3.4 million.  As of December 31, 2009, an $8.4 milliongain remains and will be recognized over the future lease terms.

 

*NASCAR Agreement*— Pursuant to the terms of a certain Series Entitlementand Sponsorship Agreement dated as of January 1, 2009, by and betweenNational Association for Stock Car Auto Racing, Inc. (“NASCAR”) andFreedomRoads, LLC (“FR”), a wholly owned subsidiary of FreedomRoads, and CWI, Inc.(“CWI”), a wholly owned subsidiary of Camping World, Inc. (the “NASCARSponsorship Agreement”), CWI and FR obtained rights as the title sponsor of theNASCAR Truck Series.  The NASCARSponsorship Agreement provides for a term of seven years, commencing January 1,2009 and 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 NASCARSponsorship Agreement is capped at an aggregate of $6.5 million.

 

*Litigation*— From time to time, the Company is involved in litigationarising in the normal course of business operations.  The Company does not believe it is involvedin any litigation that will have a material adverse effect on its results ofoperations or financial position.

 

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10.              COMMITMENTS, CONTINGENCIES (continued)

 

*EmploymentAgreements*— The Company has employmentagreements with certain officers.  Theagreements include, among other things, an annual bonus based on earningsbefore interest, taxes, depreciation and amortization, and up to one year’sseverance pay beyond termination date or three weeks of severance pay for everyyear of continuous employment, whichever is greater.

 

*Joint VentureAgreement*— 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.              RELATED PARTY TRANSACTIONS

 

In conjunction with the sale of realestate properties to an affiliate on December 5, 2001, the Companyaccepted $4.8 million of the purchase price in the form of a ten-year balloonnote receivable yielding 11% per annum, with monthly payments of approximately$46,000.  Suchamount is included in Note from Affiliate on the accompanying balance sheet.

 

In connectionwith our effort to expand the number of Camping World stores by developingretail alliances with RV dealerships across North America, the Company hasestablished 42 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, 2009, the Company leased 35 properties fromFreedomRoads, sub-leased one property to FreedomRoads, and Camping World andFreedomRoads are joint tenants under six leases.  Total payments by the Company to FreedomRoadsunder these leased properties for 2009 and 2008 were approximately $5.7 millionand $4.2 million, respectively, and future commitments under these leases totalapproximately $35.1 million.  The leasesexpire at various dates from August 2013 through September 2018.  In 2009, FreedomRoads vacated threeproperties in which Camping World and FreedomRoads were joint tenants andCamping World took over the lease.  For2009 and 2008, lease payments received from FreedomRoads for the one subleasedproperty was approximately $0.4 million and $0.7 million, respectively, andfuture payments to be received under this sublease total approximately $2.5million.  The Company paid FreedomRoadsapproximately $18.6 million and $7.7 million in 2009 and 2008, respectively,and FreedomRoads paid the Company approximately $24.7 million and $27.7 millionin 2009 and 2008, respectively, under the product marketing and salesagreements.  Camping World’s outstandingaccounts receivable balance to FreedomRoads was $1.1 million, consisting of$5.8 million in accounts receivable and $4.7 million in accounts payable, at December 31,2009.

 

*CooperativeResources Agreement* — Pursuant to the terms of the Amended and RestatedCooperative Resources Agreement (“Cooperative Resources Agreement”) dated January 1,2008, by and between the Company and FreedomRoads Holding Company, Inc. (“FreedomRoads”)and Camping World, Inc., FreedomRoads obtained the right to use theCamping World logos, trademarks, and trade names (“CW Marks”).  The Cooperative Resources Agreement providesfor a term of twenty-five years, commencing January 1, 2008

 

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11.                  RELATEDPARTY TRANSACTIONS (continued)

 

andterminating December 31, 2032, and requires payment by FreedomRoads of anannual fee based on revenue, as defined, in exchange for the right to use theCW Marks granted by AGI.  The fee for2008 was $5.0 million and was paid by FreedomRoads to AGI in the first quarterof 2009.  On December 14, 2009, theSecond Amendment to the Amended and Restated Cooperative Resources Agreementeliminated the annual fee payment by FreedomRoads to AGI, provided thatFreedomRoads exclusively offer AGI products and services in point of salecustomer transactions, and FreedomRoads has agreed to purchase their parts fromCamping World.

 

On June 5, 2009,the Company entered into an option agreement with the shareholder of itsultimate parent to which the Company granted such shareholder or his assigns anoption, exercisable on or before March 1, 2010, to purchase the Company’sCamping World subsidiary for $55.0 million. In the event the Camping Worldpurchase option was exercised and, subject to the consent of the lenders underthe Senior Credit Facility, the sale of Camping World consummated, the Companyintended to use the net cash proceeds from the sale of Camping World to repayindebtedness outstanding under the Senior Credit Facility, as amended.  On December 14, 2009, a Termination ofOption agreement was signed whereby the purchase option with the shareholderwas terminated.

 

On December 1,2009, our parent company entered into an agreement which grants AGI the rightand option (“the “Option”) to purchase FreedomRoads’ “choice model” insurancebusiness for a $2.5 million deposit, paid by AGI, with $2.5 million due on orbefore December 15, 2011.  TheOption shall be exercised on or after May 15, 2012 but before May 15,2013.  In the event the Option is notexercised, AGI shall have the right to return of the deposit, less costsincurred.  The $2.5 million deposit isreported in Other Non-current Assets on the accompanying balance sheet as of December 31,2009.

 

On December 14, 2009, the Companypaid to FreedomRoads, by agreement, a one-time fee of $1.8 million for thenon-exclusive license to access the FreedomRoads database for use in connectionwith the sale and promotion of RV produces and services for ten years.  The $1.6 million of the access fee isreported in Other Non-current Assets and the current portion of $180,000 inPrepaid expenses on the accompanying balance sheet as of December 31, 2009.

 

As a condition of the June 5, 2009amendment to its Senior Credit Facility pursuant to which the maturity date wasextended from June 24, 2009 to March 31, 2010, the shareholder of theultimate parent of the Company was required to arrange for the purchase ofapproximately $26.6 million in principal amount of the term portion of theSenior 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 recentmarket price, contribute $8.5 million in capital to the Company and guaranteetwo required principal payments on the term loans under the Senior CreditFacility, 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 Worldsubsidiary for $55.0 million.  TheCompany also agreed to pay the shareholder of the ultimate parent, uponsuccessful refinancing of the Company’s secured debt which is currently the NewSenior Credit Facility, a success fee equal in amount to the fair value of suchcredit support, taking into account the fair value of the option to purchaseCamping World.  Management was assistedin determining the fair value of Camping World by an independent third partyvaluation firm.  In the event the fairvalue of the Camping World purchase option exceeds the fair value of suchcredit support, the shareholder will pay the amount of such excess to theCompany.  On December 14, 2009, aTermination of Option agreement was signed whereby the purchase option with theshareholder was terminated and there would not be a credit for the value of theCamping World purchase option against value of

 

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11.              RELATED PARTY TRANSACTIONS (continued)

 

such credit support.  In November 2009, management was assistedby an independent third party valuation firm in determining that the value ofthe credit support was $26.8 million. For accounting purposes, any fee paid under this agreement will betreated, if and when paid, as a shareholder distribution.

 

The law firm ofKaplan, Strangis and Kaplan, P.A. (“KSK”) provides ongoing legal services tothe Company and certain subsidiaries in connection with various matters. AndrisA. Baltins, a member of the Board of Directors, is a member of that firm.  During 2009, 2008 and 2007, KSK received$920,000, $201,000 and $257,000 in legal fees from the Company, respectively.

 

The consultingfirm of Pransky and Associates, P.S. (“PA”) provides ongoing consultingservices to the Company and certain subsidiaries.  George Pransky, a member of the Board ofDirectors, is a director of that company. During 2009 and 2008, PA received $2,500 and $0 in fees from theCompany, respectively.

 

The accountingfirm of Frith-Smith & Archibald, LLP (“FSA”), provides tax preparationand review services to the Company and certain subsidiaries.  David Frith-Smith, a member of the Board ofDirectors, is a partner of that company. During 2009 and 2008, FSA received $256,000 and $0 in fees from theCompany, respectively.

 

 

12.              STATEMENTS OF CASH FLOWS

 

Supplemental disclosures of cash flowinformation for December 31 (in thousands):

 
|                                      |   | 2009          |   | 2008   |          | 2007         |   |
|-------------------------------------------|--------|---------------|--------|--------|---------------|--------------|--------|
| Cash paid (received) during the year for: |   |          |   |   |          |         |   |
| Interest                                  |   |   $ | 32,131 |   |   $ | 23,982  |   |   $ | 24,055  |   |
| Income taxes                              |   | 5             |   | (5)    |          | (195)        |   |
|                                           |        |               |        |        |               |              |        |  |  |  |

 

The Company entered into the followingnon-cash investing and financing transactions:

 

**2009:**

In February 2009,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 2009,the Company recorded an adjustment to the fair value of the interest rate swapresulting in a $4.6 million decrease in Other Long-Term Liabilities and a $3.3million decrease in Other Comprehensive Loss and ineffective portion in thestatement of operations as a non-cash gain on derivative instruments of $0.7million.

 

**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.

 

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12.              STATEMENTS OF CASH FLOWS (continued)

 

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 an increase in the fair value of the interest rate swapsin Other Long-Term Liabilities of $8.0 million, an increase in AccumulatedOther Comprehensive Loss of $5.6 million, and ineffective portion in statementof operations of as a non-cash loss on derivative instruments of $2.4 million.

 

**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.

 

13.              BENEFIT PLAN

 

Affinity Group, Inc.

The Companysponsored a 401(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, $0.5 million and $0.9 million for 2009, 2008 and2007, respectively.

 

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) Defined ContributionPlan, 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, $0.4 million and $0.8 million for 2009, 2008and 2007, respectively.

 

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14.              DEFERRED PHANTOM 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 2010, 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 expense of $0.0 million for 2009, benefit of$0.3 million in 2008, and expense of $0.4 million for 2007, due to changes inthe cumulative amount due under the plan.

 

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 40 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 unitsthat offer different products and services. They are managed separately because each business requires differenttechnology, management expertise and marketing strategies.

 

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15.              SEGMENT INFORMATION (continued)

 

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

 
|                                           |   | Membership    |    |    |          |     |   |          |    |
|------------------------------------------------|--------|---------------|---------|---------|---------------|----------|--------|---------------|---------|
|                                           |   | Services      |    | Media   |          | Retail   |   | Consolidated  |    |
| **YEAR ENDED DECEMBER 31, 2009**               |   |          |    |    |          |     |   |          |    |
| Revenues  from external customers              |   |   $ | 142,147 |    |   $ | 59,061   |   |   $ | 270,573 |   |   $ | 471,781 |   |
| Loss  on sale of property and equipment        |   | -             |    | -       |          | (558     | )      | (558          | )       |
| Interest  income                               |   | 3,370         |    | -       |          | 4        |   | 3,374         |    |
| Interest  expense                              |   | -             |    | 80      |          | 7,786    |   | 7,866         |    |
| Depreciation  and amortization                 |   | 3,077         |    | 5,307   |          | 9,128    |   | 17,512        |    |
| Goodwill  impairment                           |   | -             |    | 46,884  |          | -        |   | 46,884        |    |
| Segment  profit (loss)                         |   | 47,645        |    | (43,898 | )             | (11,375  | )      | (7,628        | )       |
| Segment  assets                                |   | 237,597       |    | 26,876  |          | 95,193   |   | 359,666       |    |
| Expenditures  for segment assets               |   | 379           |    | 62      |          | 2,669    |   | 3,110         |    |
|                                           |   |          |    |    |          |     |   |          |    |
| **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        |    |
| Goodwill  impairment                           |   | -             |    | -       |          | 47,601   |   | 47,601        |    |
| Impairment  of investment in affiliate         |   | -             |    | -       |          | 81,005   |   | 81,005        |    |
| Segment  profit (loss)                         |   | 51,679        |    | 9,228   |          | (145,683 | )      | (84,776       | )       |
| 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        |    |

 

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15.              SEGMENT INFORMATION (continued)

 

The followingis a summary of the reconciliations of reportable segments to the consolidatedfinancial statements for the years ended December 31, 2009, 2008 and 2007(in thousands):

 
|                                                         |   | 2009          |    |   | 2008     |          |     | 2007     |   |
|--------------------------------------------------------------|--------|---------------|---------|--------|----------|---------------|----------|----------|--------|
| **(Loss) gain on Sale of Property and  Equipment**           |   |          |    |   |     |          |     |     |   |
| Total (loss) gain on sale for reportable segments            |   |   $ | (558    | )      |     |   $ | (321     | )        |   |   $ | (211 | ) |
| Other non-allocated gain                                     |   | (46           | )       |   | -        |          |     | 61       |   |
| Total (loss) gain on sale of property and equipment          |   |   $ | (604    | )      |     |   $ | (321     | )        |   |   $ | (150 | ) |
|                                                         |   |          |    |   |     |          |     |     |   |
| **Interest Income**                                          |   |          |    |   |     |          |     |     |   |
| Total interest income for reportable segments                |   |   $ | 3,374   |   |     |   $ | 3,618    |     |   |   $ | 9,605 |   |
| Elimination of intersegment interest income                  |   | (3,370        | )       |   | (3,589   | )             |     | (9,521   | )      |
| Other non-allocated interest income                          |   | 513           |    |   | 550      |          |     | 508      |   |
| Total interest income                                        |   |   $ | 517     |   |     |   $ | 579      |     |   |   $ | 592 |   |
|                                                         |   |          |    |   |     |          |     |     |   |
| **Interest Expense**                                         |   |          |    |   |     |          |     |     |   |
| Total interest expense for reportable segments               |   |   $ | 7,866   |   |     |   $ | 16,334   |     |   |   $ | 15,660 |   |
| Elimination of intersegment interest expense                 |   | (7,071        | )       |   | (15,612  | )             |     | (15,026  | )      |
| Other non-allocated interest expense                         |   | 30,078        |    |   | 23,506   |          |     | 24,185   |   |
| Total interest expense                                       |   |   $ | 30,873  |   |     |   $ | 24,228   |     |   |   $ | 24,819 |   |
|                                                         |   |          |    |   |     |          |     |     |   |
| **Depreciation and Amortization**                            |   |          |    |   |     |          |     |     |   |
| Total depreciation and amortization for reportable  segments |   |   $ | 17,512  |   |     |   $ | 17,737   |     |   |   $ | 16,498 |   |
| Unallocated depreciation and amortization expense            |   | 3,564         |    |   | 2,061    |          |     | 2,450    |   |
| Total consolidated depreciation and amortization             |   |   $ | 21,076  |   |     |   $ | 19,798   |     |   |   $ | 18,948 |   |
|                                                         |   |          |    |   |     |          |     |     |   |
| **(Loss) Income From Operations Before  Taxes**              |   |          |    |   |     |          |     |     |   |
| Total (loss) income for reportable segments                  |   |   $ | (7,628  | )      |     |   $ | (84,776  | )        |   |   $ | 59,852 |   |
| Unallocated depreciation and amortization expense            |   | (3,564        | )       |   | (2,061   | )             |     | (2,450   | )      |
| Unallocated G & A expense                           |   | (14,984       | )       |   | (14,021  | )             |     | (17,050  | )      |
| Unallocated interest expense, net                            |   | (29,565       | )       |   | (22,956  | )             |     | (23,677  | )      |
| Unallocated gain (loss) on sale of property and equipment    |   | (46           | )       |   | -        |          |     | 61       |   |
| Unallocated debt restructure expense                         |   | 4,678         |    |   | -        |          |     | (775     | )      |
| Unallocated arbitration expense                              |   | -             |    |   | -        |          |     | (955     | )      |
| Unallocated gain (loss) on derivative instrument             |   | 745           |    |   | (2,394   | )             |     | -        |   |
| Unallocated financing expense                                |   | (1,997        | )       |   | -        |          |     | -        |   |
| Unallocated other expense                                    |   | (654          | )       |   | -        |          |     | -        |   |
| Elimination of intersegment interest expense, net            |   | 3,701         |    |   | 12,023   |          |     | 5,505    |   |
| (Loss) income from operations before income taxes            |   |   $ | (49,314 | )      |     |   $ | (114,185 | )        |   |   $ | 20,511 |   |
|                                                         |   |          |    |   |     |          |     |     |   |
| **Assets**                                                   |   |          |    |   |     |          |     |     |   |
| Total assets for reportable segments                         |   |   $ | 359,666 |   |     |   $ | 420,327  |     |   |   $ | 539,382 |   |
| Restricted cash                                              |   | 8,058         |    |   | -        |          |     | -        |   |
| Intangible assets not allocated to segments                  |   | 2,185         |    |   | 4,201    |          |     | 5,348    |   |
| Corporate unallocated assets                                 |   | 6,654         |    |   | 3,066    |          |     | 3,334    |   |
| Elimination of intersegment receivable                       |   | (154,994      | )       |   | (133,242 | )             |     | (126,453 | )      |
| Consolidated total assets                                    |   |   $ | 221,569 |   |     |   $ | 294,352  |     |   |   $ | 421,611 |   |
|                                                         |   |          |    |   |     |          |     |     |   |
| **Capital Expenditures**                                     |   |          |    |   |     |          |     |     |   |
| Total expenditures for assets for reportable segments        |   |   $ | 3,110   |   |     |   $ | 11,598   |     |   |   $ | 19,638 |   |
| Other asset expenditures                                     |   | 80            |    |   | 184      |          |     | 70       |   |
| Total capital expenditures                                   |   |   $ | 3,190   |   |     |   $ | 11,782   |     |   |   $ | 19,708 |   |

 

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16.              SELECTEDQUARTERLY INFORMATION (UNAUDITED)

 

Thefollowing is a summary of selected quarterly information for the years ended December 31,2009, 2008 and 2007 (in thousands):

 
|               |   | March 31, |    | June 30, |          | September 30, |   | December 31, |    |
|--------------------|--------|----------------|---------|---------------|---------------|--------------------|--------|-------------------|---------|
|               |   | 2009           |    | 2009          |          | 2009               |   | 2009              |    |
|               |   |           |    |          |          |               |   |              |    |
| Total  revenue     |   |   $  | 105,053 |          |   $ | 129,899            |   |   $     | 124,944 |   |   $ | 111,885 |   |
| Gross  profit      |   | 39,703         |    | 48,518        |          | 44,827             |   | 43,318            |    |
| Net  income (loss) |   | (1,224         | )       | 4,917         |          | (37,850            | )      | (4,791            | )       |
|               |   |           |    |          |          |               |   |              |    |
|               |   | 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             |    |

 

For thequarter ended June 30, 2009, the Company recorded a $4.7 million gain onpurchase of the $14.6 million Senior Notes.

 

For thequarter ended September 30, 2009, the Company recorded an impairmentcharge of $46.9 million relating to Media segment.  See Note 3- Goodwill and Intangible Assets.

 

The Companyincurred financing expense of $1.5 million, $0.4 million and $0.7 million inthe second, third and fourth quarters of 2009, respectively, for legal andother costs related to the amendment to the Senior Credit Facility.

 

For thequarter ended September 30, 2008, the Company recorded a goodwillimpairment charge of $47.6 million and an intangible asset impairment charge of$81.0 million that wrote down to zero the carrying value of the FreedomRoadsPreferred Interest” held by an indirect subsidiary of Camping World inFreedomRoads.  Both charges related tothe Retail segment.  See Note 3- Goodwilland Intangible Assets and Note 3- Long-Lived Assets.

 

For the quarter ended the March 31,2007, Company incurred $0.8 million of debt extinguishment expense relating tothe purchase of Senior Notes.

 

84

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17.               VALUATIONAND 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, 2009:          |   |          |   |            |          |       |   |          |   |
| Allowance  for doubtful accounts receivable |   |   $ | 2,147  |            |   $ | 2,945      |   |   $ | 1,964  |   |   $ | 3,128 |   |
|                                        |   |          |   |            |          |       |   |          |   |
| 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 |   |

 

(a)          Accounts determined to be uncollectable and charged againstallowance account, net of collection on accounts previously charged againstallowance account.

 

 

18.              NOTESOFFERING AND GUARANTOR FINANCIAL INFORMATION

 

In February 2004, the Companycompleted an offering of $200.0 million 9.0% Senior Subordinated Notes (“SeniorNotes”) due in 2012.  Interest is payableon the Senior Notes twice a year on February 15 and August 15,beginning August 15, 2004.  TheCompany’s present and future restricted subsidiaries will guarantee the SeniorNotes with unconditional guarantees of payment that will rank junior in rightof payment to their existing and future senior debt, but will rank equal inright of payment to their existing and future senior subordinated debt.

 

All of the Company’s subsidiaries havejointly and severally guaranteed the indebtedness under the Senior Notes.  Full financial statements of the Guarantorshave not been included because, pursuant to their respective guarantees, theGuarantors are jointly and severally liable with respect to the Senior Notes.

 

85

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18.              NOTESOFFERING AND GUARANTOR FINANCIAL INFORMATION (continued)

 

The following aresummarized statements setting forth certain financial information concerningthe Guarantor Subsidiaries as of and for the year ended December 31, 2009(in thousands).

 
|                                                     |   |     |    |   |      |   |    | NON-      |   |         |   |   | AGI          |     |
|----------------------------------------------------------|--------|----------|---------|--------|-----------|--------|---------|-----------|--------|--------------|--------|--------|--------------|----------|
|                                                     |   | AGI      |    |   | GUARANTOR | S      |    | GUARANTOR |   | ELIMINATIONS |   |   | CONSOLIDATED |     |
|                                                     |   |     |    |   |      |   |    |      |   |         |   |   |         |     |
| Cash & cash equivalents                         |   | $        | 402     |   |      | $      | 8,238   |      |   | $            | -      |   | $            | -        |   |   | $ | 8,640 |   |
| Restricted cash                                          |   | 8,058    |    |   | -         |   |    | -         |   | -            |   |   | 8,058        |     |
| Accounts receivable- net of  allowance                   |   | 1,363    |    |   | 185,952   |   |    |      |   | (154,994     | )      |   | 32,321       |     |
| Inventories                                              |   | -        |    |   | 49,921    |   |    | -         |   | -            |   |   | 49,921       |     |
| Other current assets                                     |   | 2,210    |    |   | 10,488    |   |    | -         |   | -            |   |   | 12,698       |     |
| Total current assets                                     |   | 12,033   |    |   | 254,599   |   |    | -         |   | (154,994     | )      |   | 111,638      |     |
|                                                     |   |     |    |   |      |   |    |      |   |         |   |   |         |     |
| Property and equipment, net                              |   | 2,913    |    |   | 31,363    |   |    | -         |   | -            |   |   | 34,276       |     |
| Intangible assets                                        |   | 2,185    |    |   | 11,553    |   |    | -         |   | -            |   |   | 13,738       |     |
| Goodwill                                                 |   | 49,944   |    |   | -         |   |    | -         |   | -            |   |   | 49,944       |     |
| Investment in subsidiaries                               |   | 649,597  |    |   | -         |   |    | -         |   | (649,597     | )      |   | -            |     |
| Affiliate note and investments                           |   | 40,000   |    |   | 4,837     |   |    | -         |   | (40,000      | )      |   | 4,837        |     |
| Other assets                                             |   | 4,683    |    |   | 2,453     |   |    | -         |   | -            |   |   | 7,136        |     |
| Total assets                                             |   | $        | 761,355 |   |      | $      | 304,805 |      |   | $            | -      |   | $            | (844,591 | ) |   | $ | 221,569 |   |
|                                                     |   |     |    |   |      |   |    |      |   |         |   |   |         |     |
| Accounts payable                                         |   | $        | 984     |   |      | $      | 22,811  |      |   | $            | -      |   | $            | -        |   |   | $ | 23,795 |   |
| Accrued and other liabilities                            |   | 10,677   |    |   | 20,669    |   |    | -         |   | -            |   |   | 31,346       |     |
| Current portion of long-term debt                        |   | 154,994  |    |   | 40,892    |   |    | -         |   | (194,994     | )      |   | 892          |     |
| Current portion of deferred  revenue                     |   | 738      |    |   | 59,990    |   |    | -         |   | -            |   |   | 60,728       |     |
| Total current liabilities                                |   | 167,393  |    |   | 144,362   |   |    |      |   | (194,994     | )      |   | 116,761      |     |
|                                                     |   |     |    |   |      |   |    |      |   |         |   |   |         |     |
| Deferred revenue                                         |   | 2,292    |    |   | 33,315    |   |    | -         |   | -            |   |   | 35,607       |     |
| Long-term debt                                           |   | 277,427  |    |   | 95        |   |    | -         |   | -            |   |   | 277,522      |     |
| Other long-term liabilities                              |   | 535,768  |    |   | (522,564  | )      |    | -         |   | -            |   |   | 13,204       |     |
| Total liabilities                                        |   | 982,880  |    |   | (344,792  | )      |    |      |   | (194,994     | )      |   | 443,094      |     |
|                                                     |   |     |    |   |      |   |    |      |   |         |   |   |         |     |
| Interdivisional equity                                   |   | -        |    |   | 649,597   |   |    | -         |   | (649,597     | )      |   | -            |     |
| Stockholders’ deficit                               |   | (221,525 | )       |   | -         |   |    | -         |   | -            |   |   | (221,525     | )        |
|                                                     |   |     |    |   |      |   |    |      |   |         |   |   |         |     |
| Total liabilities &  stockholders’ deficit |   | $        | 761,355 |   |      | $      | 304,805 |      |   | $            | -      |   | $            | (844,591 | ) |   | $ | 221,569 |   |
|                                                     |   |     |    |   |      |   |    |      |   |         |   |   |         |     |
| Revenue                                                  |   | $        | 3,290   |   |      | $      | 468,491 |      |   | $            | -      |   | $            | -        |   |   | $ | 471,781 |   |
| Costs applicable to revenues                             |   | (9,803   | )       |   | (285,612  | )      |    | -         |   | -            |   |   | (295,415     | )        |
| Operating expenses                                       |   | (21,192  | )       |   | (178,292  | )      |    | -         |   | -            |   |   | (199,484     | )        |
| Interest expense, net                                    |   | (25,864  | )       |   | (4,492    | )      |    | -         |   | -            |   |   | (30,356      | )        |
| Income from investment in  consolidated subsidiaries     |   | 2,018    |    |   | -         |   |    | -         |   | (2,018       | )      |   | -

-         |     |
| Other non operating income  (expenses)                   |   | 9,855    |    |   | (5,695    | )      |    | -         |   | -            |   |   | 4,160        |     |
| Income tax expense                                       |   | 2,748    |    |   | 7,618     |   |    | -         |   | -            |   |   | 10,366       |     |
| Net income                                               |   | $        | (38,948 | )      |      | $      | 2,018   |      |   | $            | -      |   | $            | (2,018   | ) |   | $ | (38,948 | ) |
|                                                     |   |     |    |   |      |   |    |      |   |         |   |   |         |     |
| Cash flows from operations                               |   | $        | (29,926 | )      |      | $      | 49,333  |      |   | $            | -      |   | $            | -        |   |   | $ | 19,407 |   |
| investing activities                                     |   | 1,775    |    |   | (4,936    | )      |    | -         |   | -            |   |   | (3,161       | )        |
| Cash flows provided by (used in)  financing activities   |   | 27,253   |    |   | (45,467   | )      |    | -         |   | -            |   |   | (18,214      | )        |
| Cash at beginning of year                                |   | 1,300    |    |   | 9,308     |   |    | -         |   | -            |   |   | 10,608       |     |
| Cash at end of period                                    |   | $        | 402     |   |      | $      | 8,238   |      |   | $            | -      |   | $            | -        |   |   | $ | 8,640 |   |

 

86

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18.   NOTES OFFERING AND GUARANTOR FINANCIALINFORMATION (continued)

 

The following aresummarized statements setting forth certain financial information concerningthe Guarantor Subsidiaries as of and for the year ended December 31, 2008(in thousands).

 
|                                                     |   |     |     |   |      |   |    | NON-      |   |   |         |   |   | AGI          |     |
|----------------------------------------------------------|--------|----------|----------|--------|-----------|--------|---------|-----------|--------|--------|--------------|--------|--------|--------------|----------|
|                                                     |   | AGI      |     |   | GUARANTOR | S      |    | GUARANTOR |   |   | ELIMINATIONS |   |   | CONSOLIDATED |     |
|                                                     |   |     |     |   |      |   |    |      |   |   |         |   |   |         |     |
| Cash & cash equivalents                         |   | $        | 1,300    |   |      | $      | 9,308   |      |   | $      | -            |   |   | $            | -        |   |   | $ | 10,608 |   |
| Accounts receivable- net of  allowance                   |   | 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 |   |

 

87

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18.   NOTES OFFERING AND GUARANTOR FINANCIALINFORMATION (continued)

 

The following aresummarized statements setting forth certain financial information concerningthe Guarantor Subsidiaries for the year ended December 31, 2007 (inthousands).

 
|                                                   |   |    |    |   |      |   |    | NON-      |   |         |   |   | AGI          |    |
|--------------------------------------------------------|--------|---------|---------|--------|-----------|--------|---------|-----------|--------|--------------|--------|--------|--------------|---------|
|                                                   |   | AGI     |    |   | GUARANTOR | S      |    | GUARANTOR |   | ELIMINATIONS |   |   | CONSOLIDATED |    |
| 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     | )       |
| 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 |   |

 

19.   SUBSEQUENT EVENTS

 

TheCompany has completed an evaluation of all subsequent events through March 31,2010 and concluded, that except as disclosed below, no other subsequent eventshave occurred that would require recognition in the Company’s ConsolidatedFinancial Statements or disclosed in the Notes to the Consolidated FinancialStatements.

 

OnMarch 1, 2010, AGI entered into the second amended and restated creditagreement (the “New Senior Credit Facility”) to refinance its existing seniorcredit facility ($128.9 million aggregate principal amount outstanding as at December 31,2009) which was scheduled to mature on March 31, 2010 and second liennotes totaling $9.7 million due July 31, 2010.  The New Senior Credit Facility provides forterm loans aggregating $144.3 million, including an original issue discount of2%, that are payable in quarterly installments of $360,750 beginning March 1,2011.  In addition, there are mandatoryprepayments of the term loans from excess cash flow (as defined) of AGI andfrom asset sales.  The term loans underthe New Senior Credit Facility mature on the earlier of March 1, 2015 or90 days prior to the maturity of either AGI’s 9% senior subordinated notes due2012 (“Senior Notes”) ($137.8 million principal amount outstanding as at December 31,2009) or AGHI’s 10-7/8% senior notes due 2012 (the “AGHI Notes”) ($113.6million aggregate principal amount outstanding as at December 31,2009).  Interest on the term loans underthe New Senior Credit Facility floats at either 8.75% over the base rate(defined as the greater of the prime rate, federal funds rate plus 50 basispoints or 5.25%) for borrowings whose interest is based on the prime rate or10.0% over the LIBOR rate (defined as the greater of the 3 months LIBOR rate or3.0%) for borrowings whose interest is based on LIBOR.  The New Senior Credit Facility containsaffirmative covenants, including financial covenants, and negative covenants,including a restriction on dividends or distributions by AGI to AGHI.  Borrowings under the New Senior CreditFacility are guaranteed by the direct and indirect subsidiaries of AGI and aresecured by liens on the assets of AGI and its direct and indirectsubsidiaries.  As a condition to thefunding under the New Senior Credit Facility, the $25.4 million of AGHI Notesdue on March 15, 2010 that were held by an affiliate of AGHI werecontributed to AGHI for zero consideration and were cancelled by AGHI on March 1,2010.

 

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19.   SUBSEQUENT EVENTS (continued)

 

Inaddition, on March 1, 2010, AGI’s wholly-owned subsidiary, Camping World, Inc.an indirect subsidiary, CWI, Inc. (collectively, “Camping World”), asco-borrowers, and Camping World’s subsidiaries entered into a credit agreement(the “CW Credit Facility”) providing for an asset based lending facility of upto $22.0 million, of which $10.0 million is available for letters of credit and$12.0 million is available for revolving loans. The CW Credit Facility matures on the earlier of March 1, 2013, 60days prior to the date of maturity of the New Senior Credit Facility, or 120days prior to the earlier date of maturity of the Senior Notes and the AGHINotes.  Interest under the revolvingloans under the CW Credit Facility floats at either 3.25% over the base rate(defined as the greater of the prime rate, federal funds rate plus 50 basispoints or 1 month LIBOR) for borrowings whose interest is based on the primerate or 3.25% over the LIBOR rate (defined as the greater of LIBOR rateapplicable to the period of the respective LIBOR borrowings or 1.0%) forborrowings whose interest is based on LIBOR.  Borrowings under the CW Credit Facility are based on the borrowing baseof eligible inventory and accounts receivable of Camping World and itssubsidiaries.  The CW Credit Facilitycontains affirmative covenants, including financial covenants, and negativecovenants.  Borrowings under the CampingWorld Credit Agreement are guaranteed by the direct and indirect subsidiariesof Camping World and are secured by a pledge on the stock of Camping World and itsdirect and indirect subsidiaries and liens on the assets of Camping World andits direct and indirect subsidiaries. The lenders under the New Senior Credit Facility and the CW CreditFacility have entered into an intercreditor agreement that governs their rightsin the collateral that is pledged to secure their respective loans.

 

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**ITEM 9: CHANGES IN AND DISAGREEMENTS WITHACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

None

 

**ITEM 9A: CONTROLS AND PROCEDURES**

 

**Management’s annual report oninternal control over financial reporting**

 

Managements’Report on Internal Control over Financial Reporting

Within 90 days prior to the filingof this Annual Report on Form 10-K, we carried out an evaluation, under thesupervision and with the participation of our management, including ourPresident and Chief Executive Officer and our Senior Vice President and ChiefFinancial Officer, of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures pursuant to Regulation 13a-15(e) underthe Securities Exchange Act of 1934, as amended.  Based upon that evaluation, our President andChief Executive Officer, along with our Senior Vice President and ChiefFinancial Officer, concluded that our disclosure controls and procedures areeffective in timely alerting them to material information relating to theCompany (including our consolidated subsidiaries) required to be included inour periodic SEC filings.  Managementdetermined that, as of December 31, 2009, there have been no significantchanges in the Company’s internal control over financial reporting or in otherfactors that could significantly affect these controls subsequent to the datethe Company carried out its evaluation.

 

Management of theCompany is responsible for establishing and maintaining adequate internalcontrol over financial 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 assessedthe effectiveness of the Company’s internal control over financial reporting asof December 31, 2009.  In makingthis assessment, management used the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission in InternalControl-Integrated Framework. Based on our assessment, management believes thatthe Company maintained effective internal control over financial reporting asof December 31, 2009, based on those criteria.

 

This annual reportdoes not 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, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

 

 

Our executive officers and directorsare as follows:

 
| **Name**              | **Age** | **Position**                                                                                 |
|-----------------------|---------|----------------------------------------------------------------------------------------------|
|                  |    |                                                                                         |
| Michael A.  Schneider | 55      | President, Chief Executive Officer  and Director                                             |
| Marcus A. Lemonis     | 36      | Chief Executive Officer and  President of Camping World, Inc.                           |
| Thomas F. Wolfe       | 48      | Senior Vice President and Chief  Financial Officer                                           |
| Laura A. James        | 53      | Senior Vice President/ Human  Resources                                                      |
| Joseph Daquino        | 50      | Senior Vice President, Membership  Clubs President                                           |
| John A. Sirpilla      | 43      | President of Retail Operations of  Camping World, Inc.                                  |
| Kenneth Marshall      | 50      | Executive Vice President of  Finance of Camping World, Inc.                             |
| Brent Moody           | 48      | Senior Vice President/ Business  Development and General Counsel of Camping World, Inc. |
| Prabhuling Patel      | 63      | Senior Vice President, Products  and Services                                                |
| Stephen Adams         | 72      | Chairman of the Board of Directors                                                           |
| Andris A. Baltins     | 64      | Director                                                                                     |

 

 

Michael A. Schneider became ourPresident and Chief Executive Officer as of January 1, 2004.  Prior to that time, Mr. Schneider hadbeen our Chief Operating Officer since 1996. Prior thereto, Mr. Schneider served as our Senior Vice Presidentand General Counsel since January 1993 and was responsible foradministrative areas, development of new corporate ventures and portions of theRV publication business and the advertising and sales departments.  Prior to January 1993 and since 1977, Mr. Schneiderhas held a variety of senior management positions in our publicationbusiness.  Mr. Schneider joined theBoard of Directors in 2004.  Mr. Schneideris also a director of the Company.  Mr. Schneider’sspecial contribution to the Board of Directors comes through his extensivemanagement experience in various aspects of the Company’s business through his30-plus-year tenure with the Company. The Company’s Chief Financial Officer reports to Mr. Schneider andhe reviews and analyses the financial and operational data on the Company’soperations on a frequent basis.

 

Marcus A. Lemonis was appointedPresident and Chief Executive Officer of Camping World, Inc. (“CampingWorld”) effective September 13, 2006. Mr. Lemonis also currently serves and, since 2003, has served asChief Executive Officer and President of FreedomRoads Holding Company LLC andits subsidiaries (“FreedomRoads”). FreedomRoads operates RV dealerships across the United States and iscontrolled by Mr. Adams.  From 2001to 2003, Mr. Lemonis served as President, Chief Executive Officer andChairman of the Board of Directors of Holiday RV Superstores, Inc.  Holiday RV Superstores, Inc. filed forbankruptcy on October 18, 2003.

 

Thomas F. Wolfe became our SeniorVice President and Chief Financial Officer as of January 1, 2004.  Prior to that time, Mr. Wolfe had beenour 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 since 1983, Mr. Wolfeheld a variety of staff and management positions at Deloitte & ToucheLLP.

 

Laura A. James became our SeniorVice President/Human Resources as of January 1, 2004.  Prior to that time, Ms. James served asVice President/Human Resources since 1996. From 1984 until her

 

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appointment as Vice President/HumanResources, Ms. James served in various management and staff positions atthe Company.

 

Joe Daquino became our Senior VicePresident and Membership Clubs President of AGI in March 2008 in additionto overseeing AGI’s Multimedia Division. From January 2007 to March 2008, Joe served as senior vicepresident for AGI’s Multimedia Division as well as its Interactive Group.  From 1995 until 2006, he was Vice Presidentfor AGI Multimedia, overseeing publication of annual directories.  From 1984 until his appointment as VicePresident, Mr. Daquino served in various management and staff positions atthe company.

 

John A. Sirpilla was appointedPresident of the Retail Operations of Camping World on January 15,2008.   Prior to that time, Mr. Sirpillawas the Executive Vice President of Operations for Camping World retail storesand FreedomRoads RV dealerships from June 2005 through January 2008.   He joined FreedomRoads as a RegionalPresident in October 2003 and ran the Mid-American Region of 14locations.  Mr. Sirpilla wasPresident and CEO of Sirpilla RV Center, Inc. for 15 years prior tojoining the company through the acquisition of his dealership.

 

Kenneth W. Marshall is the ExecutiveVice President of Finance for Camping World. Mr. Marshall has been with Camping World for seven years and hasserved in the finance, accounting, IT, distribution and logistics and Ecommerceareas of the business during his tenure with the company.  Prior to that time and since 2000, Mr. Marshallserved as Chief Information Officer of Harwood International, a real estatedevelopment company in Dallas, Texas. From 1995 to 2000, Mr. Marshall served as Chief FinancialOfficer/Chief Operating Officer and was a shareholder of Virtual Solutions, Inc.,a technology consulting firm in Dallas, Texas.

 

Brent Moody joined Camping World in2002 and since that time has served Camping World as Vice President and GeneralCounsel and then Senior Vice President/ General Counsel and BusinessDevelopment as well as General Counsel of the Company from 2004-2006.  Mr. Moody also serves as the ExecutiveVice President Business Development and General Counsel of FreedomRoads, aposition he has held since September 1, 2006.** **Prior to that time and since 1998,Mr. Moody was a shareholder of the law firm of Greenberg Traurig,P.A.  From 1996 to 1998, Mr. Moodyserved as Vice President and Assistant General Counsel for Blockbuster, Inc.

 

Prabhuling Patel was appointedSenior Vice President of Products & Services as of May 1,2004.  Mr. Patel joined the Companyin 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.

 

Stephen Adams has been the Chairmanof 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 of AdamsOutdoor Advertising, Inc.(“AOA”) which operates an outdoor mediaadvertising business through its subsidiaries. Mr. Adams is also the Chairman and 95% owner of Affinity BankHoldings, Inc. (“ABH”).  Mr. Adamsprovides a special contribution to the Board of Directors through his longassociation with the Company as its Chairman since he acquired the Company in1988, and because he is or has been the owner of a variety of businesses withsignificant assets and operations during his 40-plus-year business careerduring which time he had had substantial experience in providing managementoversight and strategic direction.

 

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Andris A. Baltins has been a memberof the law firm of Kaplan, Strangis and Kaplan, P.A. since 1979.  Mr. Baltins is a member of the board ofPolaris Industries Inc., a manufacturer of snowmobiles, all-terrain vehicles,motorcycles and related products, and serves as the Chair of its CorporateGovernance and Nominating Committee and is also a member of its CompensationCommittee.  He also serves as a directorof various private and non-profit corporations. Mr. Baltins joined the Board of Directors in February 2006.  Mr. Baltins’ law firm provides legalservices to the Company and its subsidiaries. Mr. Baltins also serves as a director of FreedomRoads and of AOA,both of which are controlled by Stephen Adams. Mr. Baltins’ special contribution comes from his 40-year legalcareer as advisor to numerous public and private companies and his legalpractice in the areas of mergers and acquisitions and corporate law.  He has been a leader at Board meetings andits strategic Board decisioning based on that experience in countless complex businesstransactions.

 

Directors are elected for terms ofone year or until their successors have been duly elected.  There are no family relationships between anyof the directors and/or executive officers.

 

**Board Functions as Audit Committee**

 

Our securities are not listed on any national securitiesexchange and we are not required to maintain a separate audit committee of theBoard nor are we subject to the audit committee independence requirements setforth in Rule 10A-3 of the Securities Exchange Act of 1934, asamended.  On February 22, 2006, theBoard of Directors of the Company disbanded the Audit Committee and assumed itsoversight of the integrity of our financial statements; our compliance withlegal and regulatory requirements; the retention, independence andqualifications of our independent auditor; and the responsibilities, budget andperformance of our independent auditor. The Board of Directors does not have a director that it had designatedan “Audit Committee Financial Expert” as such term has been defined by theSecurities and Exchange Commission because all of the board members haveextensive practical experience in reviewing and evaluating financialstatements, including those of the Company. None of the directors are “independent” as such term has been defined bythe Securities and Exchange Commission.

 

**Code ofProfessional Conduct**

 

We have adopted a Code ofProfessional Conduct that applies to our principal executive officer, principalfinancial officer, principal accounting officer and all other employees.  This Code of Professional Conduct is postedon our website at www.affinitygroup.com and may be found as follows:

 

·              From our main webpage, first click on “About AGI,”

 

·              Then, click on “Codeof Conduct.”

 

The Company intendsto 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 OwnershipReporting Compliance**

 

The Company is avoluntary filer pursuant to Section 15(d) of the Securities ExchangeAct of 1934, as amended (the “Act”) and does not have a class of equitysecurities registered pursuant to Section 12 of the Act.  Accordingly, our officers, directors and 10%or greater holders of our securities are not currently required to file reportspursuant to Section 16(a) of the Act.

 

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**ITEM 11: EXECUTIVE COMPENSATION**

 

**Compensation Discussion and Analysis**

 

***Overview***

 

The following discussion andanalysis describes the Company’s compensation objectives and policies asapplied to the named executive officers appearing in the Summary CompensationTable below (the “Executive Officers”). This section is intended to provide a framework within which tounderstand the actual compensation awarded to, earned or held by each ExecutiveOfficer during 2009, 2008 and 2007 as reported in the compensation tables andaccompanying narrative sections appearing on pages 101 to 109 of thisannual report on Form 10-K.

 

In connection with our jointmarketing agreement with FreedomRoads, some of our officers also performservices for FreedomRoads.  Messrs. Sirpillaand Marshall were officers of our Camping World subsidiary prior to enteringinto the joint marketing agreement with FreedomRoads, and are compensated bythe Company.  Mr. Lemonis was, andcurrently is, President and Chief Executive Officer of FreedomRoads before thejoint marketing agreement was implemented and receives his primary compensationfrom FreedomRoads, except for $100,000 in annual salary paid by CampingWorld.  Accordingly, Mr. Lemonis isnot included in the Summary Compensation Table below or the followingdiscussion.

 

***CompensationObjectives***

 

Our executive compensation programis tied closely to our performance and aimed at enabling us to attract andretain the best possible executive talent. In addition, the total compensation opportunities provided to ExecutiveOfficers reflect both the responsibility of each position (internal equity) andcompetitive market levels (external competitiveness).

 

Driving Performance:  The Company seeks to significantly correlatethe level of compensation paid to its Executive Officers, when taken as awhole, with the financial performance of the Company.  Accordingly, base salary comprises only15-20% of the total compensation opportunity for the President and ChiefExecutive Officer of the Company, Mr. Schneider, and 50-75% of the totalcompensation 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.

 

The base salary and annual incentiveawards are designed to reward Executive Officers for annual achievements, bothindividually and as a Company.  Thephantom stock agreements are designed to drive long-term Company performanceand value, and to retain the Executive Officer.

 

Attracting and Retaining ExecutiveTalent:  The Company hasstructured the incentive opportunities under the annual incentive awardprograms and the phantom stock agreements to provide Executive Officers with asubstantial upside in driving the value of the Company, which it views as atool for attracting new talent.  Inaddition, the phantom stock agreements, which are based on performance over amultiple-year period, provide Executive Officers with an incentive to stay withthe Company.

 

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***DeterminingCompensation***

 

The Company relies upon its ownjudgment in designing the compensation opportunities provided to the ExecutiveOfficers.  Messrs. Schneider andLemonis make recommendations to the Chairman of the Board of Directorsregarding the appropriate levels of total compensation opportunities based upontheir review of the individual performance and responsibilities of theExecutive Officers under their supervision and the financial and operationalperformance of the Company 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. Wolfeand Patel within the scope of authority provided by the Chairman of the Boardof Directors.  In addition, Mr. Lemonisultimately determines the amount of compensation opportunities provided to Messrs. Sirpillaand Marshall within the scope of authority provided by the Chairman of theBoard of Directors.  The Chairman of theBoard of Directors or the Chief Executive Officer of either the Company orCamping World, 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.

 

The Company does not employ acompensation consultant, nor does it engage in any formal market analysis indetermining the levels of total compensation opportunity (or componentsthereof) 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 30-50% of the totalcompensation opportunity provided to each of the other Executive Officers,excluding Messrs. Sirpilla and Marshall, dependent upon the Company’sannual and long-term performance and value. A higher proportion of the compensation opportunity provided to Mr. Schneider,as compared to the other Executive Officers, is tied to Company performancebecause he is the leader of the Membership Services and Media segments of theCompany’s business operations and thus is in a more unique position toinfluence the performance of those segments 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.

 

The Company, which is a wholly-ownedsubsidiary of Affinity Group Holding, Inc. (“AGHI”), does not grant sharesof Company stock or stock options to the Executive Officers.  The long-term incentive awards in the form ofphantom stock agreements are intended to provide Executive Officers with a cashequivalent to the increase in value of the Company or Camping World that wouldotherwise be realized in stock or option awards of a company with publiclytraded equity securities.

 

***Elements of Compensation***

 

Annual Compensation

 

**BaseSalary**

 

Each Executive Officer receives aminimum level of fixed compensation in the form of base salary.  The Company does not review the base salariesof the Executive Officers on a regular basis; however, it has adjusted basesalary levels from time to time on a discretionary basis based upon factorssuch as an increase in the responsibilities or duties of a particular ExecutiveOfficer.  The Company provided nominalcost of living increases to Messrs. Wolfe and Patel, but no increase for Mr. Schneiderin 2008 and 2007.  The Company reducedthe salaries of Messrs. Schneider, Patel and Wolfe by 15% beginning inlate January 2009.  In 2008, aportion of Mr. Marshall’s salary was allocated to FreedomRoads and suchportion is excluded from the Summary Compensation Table.

 

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The amount of base salary paid toeach of the Executive Officers for 2009, 2008 and 2007 is reflected in theSalary column of the Summary Compensation Table below.

 

**AnnualIncentive Awards**

 

The Company adopts an annualincentive award program applicable to its Executive Officers and otheremployees.

 

*2009 – Non-Equity IncentiveAwards and Bonus:*

 

For 2009, Messrs. Schneider andWolfe received their annual incentive awards based on the actual performance ofthe Company as measured under the parameters of the annual incentive awardprogram.  The amount of the annualincentive award for Messrs. Schneider and Wolfe was based on 1.0% and0.25%, respectively, of the Company’s income from operations excludingdepreciation, amortization, phantom stock expense, other non-recurring expense,and the operations of Camping World, Inc. (the “2009 Value”).  The 2009 Value was $39.2 million.  This amount was paid on a pro rata basisevery two weeks, in connection with the regular payroll cycle, based onestimated Company performance.  A finalmeasurement 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 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.

 

For 2009, Mr. Patelparticipated in a discretionary annual incentive award program.  The annual incentive awards were based on theperformance of specific subsidiaries and programs of the Company as determinedby Mr. Schneider.  The amount ofannual incentive award for Mr. Patel was $161,678 for 2009 and was paid inthe first quarter of 2010.  This amountis reflected in the Bonus column of the Summary Compensation table.

 

For 2009, Mr. Sirpilla did notreceive an annual incentive award based on actual performance of the Company.

 

For 2009, Mr. Marshallparticipated in a discretionary bonus program based on the combined performanceof FreedomRoads and CWI that includes a guaranteed minimum bonus payment basedupon the review and evaluation by Mr. Lemonis. The amount of bonus paid toMr. Marshall was $75,000 and was paid pro rata every two weeks, inconnection with the regular payroll cycle. This amount is reflected in the Bonus column of the Summary Compensationtable.

 

*2008 – Non-Equity IncentiveAwards and Bonus:*

 

For 2008, Messrs. Schneider andWolfe received their annual incentive awards based on the actual performance ofthe Company as measured under the parameters of the annual incentive awardprogram.  The amount of the annualincentive award for Messrs. Schneider and Wolfe was based on 1.0% and0.25%, respectively, of the Company’s income from operations excludingdepreciation, amortization, phantom stock expense, other non-recurring expense,and the operations of Camping World, Inc. (the “2008 Value”).  The 2008 Value was $44.7 million.  This amount was paid on a pro rata basisevery two weeks, in connection with the regular payroll cycle, based onestimated Company performance.  A finalmeasurement 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 incentiveaward paid correlates with his assigned 

 

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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.

 

For 2008, Mr. Patelparticipated in a discretionary annual incentive award program.  This annual incentive award was based on theperformance of specific subsidiaries and programs of the Company as determinedby Mr. Schneider.  The amount ofannual incentive award from the Company for Mr. Patel was $121,125 for2008 and was paid in the first quarter of 2009.  The amount is reflected in the Bonus column ofthe Summary Compensation table.

 

For 2008, Mr. Sirpilla did notreceive an annual incentive award based on actual performance of the Company.

 

For 2008, Mr. Marshallparticipated in a discretionary bonus program based on the combined performanceof FreedomRoads and CWI that includes a guaranteed minimum bonus payment basedupon the review and evaluation by Mr. Lemonis. The amount of bonus paid toMr. Marshall was $44,635 and was paid pro rata every two weeks, inconnection with the regular payroll cycle. This amount is reflected in the Bonus column of the Summary Compensationtable.

 

*2007 – Non-Equity IncentiveAwards:*

 

For 2007, Messrs. Schneider andWolfe received their annual incentive awards based on the actual performance ofthe Company as measured under the parameters of the annual incentive awardprogram.  The amount of the annualincentive award for Messrs. Schneider and Wolfe was based on 1.0% and0.25%, respectively, of the Company’s income from operations excludingdepreciation, amortization, phantom stock expense, other non-recurring expense,and the operations of Camping World, Inc. (the “2007 Value”).  The 2007 Value was $48.2 million.  This amount was paid on a pro rata basisevery two weeks, in connection with the regular payroll cycle, based onestimated Company performance.  A finalmeasurement 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 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.

 

For 2007, Mr. Patelparticipated in a discretionary annual incentive award program.  This annual incentive award was based on theperformance of specific subsidiaries and programs of the Company as determinedby Mr. Schneider.  The annualincentive award for Mr. Patel was $132,350 for 2007 and was paid in thefirst quarter of 2008.  This amount isreflected in the Bonus column of the Summary Compensation table.

 

For 2007, Mr. Sirpilla did notreceive an annual incentive award based on actual performance of the Company.

 

For 2007, Mr. Marshallparticipated in a discretionary bonus program based on the combined performanceof FreedomRoads and CWI based upon the review and evaluation by Mr. Lemonis.The amount of bonus paid to Mr. Marshall was $135,000 and was paid prorata every two weeks, in connection with the regular payroll cycle.  This amount is reflected in the Bonus columnof the Summary Compensation table.

 

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Long-Term Compensation/Phantom StockAgreements

 

The Company has entered into phantomstock agreements with each of the Executive Officers.  In general, payouts under the phantom stockagreements are based upon increases in the base value of certain business unitsmeasured over a multiple-year period. The amount earned over the measurement period is generally paid out inthree equal annual installments following the end of such period.  The first such installment is generally paidin the second quarter of the year following the end of the measurement periodonce the audited financial statements for the last year of the measurementperiod have been determined, with the two remaining annual payments made in January ofeach of the next two years.

 

The amount of phantom stock expensedduring 2009, 2008 and 2007 for each Executive Officer is included in the StockAwards column of the Summary Compensation Table below.

 

*Messrs. Schneider, Wolfe andPatel*:  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 pertheir respective agreements and ending December 31, 2006.  The phantom stock payout under the 2004agreements were paid in three equal annual installments of $826,637, $109,116and $35,660 for Messrs. Schneider, Wolfe and Patel, respectively, thefirst of which was distributed during the second quarter of 2007 and theremaining payments were made in the first quarter of 2008 and 2009.

 

*Messrs. Schneider, Wolfe,and Patel*:  Messrs. Schneider,Wolfe, and Patel have each entered into phantom stock agreements with theCompany in 2007.  The agreements for Messrs. Schneider,Wolfe and Patel are dated January 1, 2007, pursuant to which Mr. Schneiderwill receive 5.0%, Mr. Wolfe will receive 0.66%,and Mr. Patel willreceive 0.25% of the increase in Company value as measured over the periodbeginning as per their respective agreements and ending December 31,2009.  There are no phantom stock payoutsplanned under the 2007 agreements.

 

*Mr. Marshall*:  Mr. Marshall did not earn any awardsunder any phantom stock agreements during 2007-2009.  Mr. Marshall is party to the phantomstock agreement with the Company dated June 30, 2002, as amended July 31,2003.  On March 1, 2006, the Companydecided to freeze the measurement period under such agreements effective as of December 31,2005 as a result of various changes in corporate structure, organization andadministration affecting Camping World, including the joint marketingarrangement between Camping World and FreedomRoads.  The amount of phantom stock payments earnedby Mr. Marshall under this phantom stock agreement was paid in one lumpsum of $463,883 on January 2, 2007.

 

Other Elements of Compensation

 

The Company provides a full range ofbenefits to its Executive Officers, including a 401(k) Savings and Profit Planand the standard medical, dental and disability coverage, which are availableto employees generally.  The Companybelieves that these benefits are reasonable in amount and are designed to becompetitive with comparable companies.

 

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**401(k) Savingsand Profit Plan**

 

Affinity Group, Inc.

 

The Company sponsored a deferredsavings and profit sharing plan (the “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 age twenty-one, includingthe Executive Officers, are eligible to participate in the 401(k) Plan.  Employees who had completed one year ofservice (minimum of 1,000 hours) were eligible for matching contributions.  For the plan year 2008, the Company electedSafe Harbor Matching Contribution for the employer match and set the employermatch, which vested 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).  TheCompany did not pay Employer Matching Contributions for the Affinity employeesin 2009.  The amounts of 401(k) Planmatching contributions by the Company during the past three years are reflectedin the All Other Compensation column of the Summary Compensation Table below.

 

Camping World, Inc.

 

Beginning January 1, 2007Camping World was no longer a participating employer in the Affinity Group 401(k) Planand elected to begin participating in the FreedomRoads 401(k) DefinedContribution Plan, Freedom Rewards 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 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 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 did not pay EmployerMatching Contributions for the Camping World employees in 2009.  The amounts of 401(k) Plan matchingcontributions by the Company during the past three years are reflected in theAll Other Compensation column of the Summary Compensation Table below.

 

**KEYSOP**

 

Effective January 1999, theCompany participated in AGHC’s KEYSOP, a non-qualified deferred compensationplan administered through RABBI trusts, for key employees of the Company andits subsidiaries.  Messrs. Sirpilla andMarshall elected not to participate in the KEYSOP.  Through March 2007 participants couldcontribute all or a portion of their annual incentive awards and payout fromthe phantom stock awards to the KEYSOP. Beginning April 1, 2007 future contributions to the KEYSOP were nolonger allowed.  Trustees under theKEYSOP received such contributions and invest the deferred amounts based uponthe specific election of each participant. The Company does not 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.

 

**Other Benefit Plans**

 

Employees ofthe Company, including the Executive Officers, receive certain medical anddental benefits during their employment. One of the Company’s predecessors also provided eligible employees withmedical, dental and life insurance coverage after retirement.  The estimated future costs associated withsuch coverage to retirees are reserved as a liability in the Company’sconsolidated financial statements. Current employees are not provided medical and dental benefits uponretirement.

 

99

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**Perquisites**

The Company provides its ExecutiveOfficers with very limited perquisites, which it believes are appropriatecomponents of the compensation package for the particular ExecutiveOfficer.  The Company pays the premiumson life insurance policies for Mr. Schneider.  In addition, Mr. Sirpilla received anannual car allowance of approximately $18,382. 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.

 

Phantom Stock 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 three Executive Officers, Messrs. Schneider,Wolfe and Patel.  The phantom stockagreements also include the terms of employment for such Executive Officers,which are described in more detail in the section entitled “*Potential Payments upon Termination or Change in Control—EmploymentTerms in Phantom Stock Agreements*” below.  The terms of the phantom stock agreements forMessrs. Schneider, Wolfe, and Patel ended on December 31, 2009.  On December 31, 2009, the term of thephantom stock agreement was extended (other than the long-term compensationcomponent) and will continue until such time as AGI and the Executive haveentered into an amended agreement or a replacement agreement on terms that aremutually acceptable to AGI and the Executive.

 

 

**Compensation Committee Report**

 

Our securities are not listed on anational securities exchange and we are not required to maintain a separatecompensation committee of the Board of Directors.  The full Board of Directors functions as theCompensation Committee.  The Board ofDirectors has reviewed the Compensation Discussion and Analysis and discussedthat analysis with management.  Based onits review and discussions with management, the Board of Directors hasdetermined that the Compensation Discussion and Analysis be included in the Company’sAnnual Report on Form 10-K.

 
|   | Stephen Adams        |
|--------|----------------------|
|   | Andris A. Baltins    |
|   | Michael A. Schneider |

 

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**Summary Compensation Table**

 

The following tableshows, for the fiscal years completed December 31, 2009, 2008 and 2007,the annual compensation paid to or earned by the Company’s President and ChiefExecutive Officer, the Company’s Senior Vice President and Chief FinancialOfficer and the other three most highly compensated executive officers whoserved as executive officers as of December 31, 2009 (collectively, the “ExecutiveOfficers”).

 
|                         |   |                |                                               |                                               |                 | Change in                                                                                    |                           |                 |
|------------------------------|--------|---------------------|----------------------------------------------------|----------------------------------------------------|----------------------|----------------------------------------------------------------------------------------------|--------------------------------|----------------------|
|                         |   |                |                                               |                                               |                 | Pension                                                                                      |                           |                 |
|                         |   |                |                                               |                                               | Non-Equity           | Value and                                                                                    |                           |                 |
|                         |   |                |                                               |                                               | Incentive            | Non-qualified                                                                                | All                            |                 |
|                         |   |                |                                               |                                               | Plan                 | Deferred                                                                                     | Other                          |                 |
|                         |   |                |                                               | Stock                                              | Compen-              | Compensation                                                                                 | Compen-                        |                 |
|                         |   | Salary              | Bonus                                              | Awards                                             | sation               | Earnings                                                                                     | sation                         | Total                |
| Name  and Principal Position | Year   | ($)                 | ($)                                                | ($)(1)                                             | ($)                  | ($)(2)                                                                                       | ($)(3)                         | ($)                  |
| Michael A. Schneider         | 2009   | $  86,269 | $        - | $        - | $  392,380 | $               - | $    3,686 | $  482,335 |
| President,                   | 2008   | 100,000             | -                                                  | -                                                  | 447,000              | 31,106                                                                                       | 7,634                          | 585,740              |
| Chief Executive Officer      | 2007   | 100,000             | -                                                  | 236,167                                            | 481,850              | 248,070                                                                                      | 11,608                         | 1,077,695            |
|                         |   |                |                                               |                                               |                 |                                                                                         |                           |                 |
| John Sirpilla (4)            | 2009   | 480,000             | -                                                  | -                                                  | -                    | -                                                                                            | 18,562                         | 498,562              |
| President                    | 2008   | 440,000             | -                                                  | -                                                  | -                    | -                                                                                            | 29,778                         | 469,778              |
| Retail Operations of         |   |                |                                               |                                               |                 |                                                                                         |                           |                 |
| Camping World, Inc.     |   |                |                                               |                                               |                 |                                                                                         |                           |                 |
|                         |   |                |                                               |                                               |                 |                                                                                         |                           |                 |
| Prabhuling Patel             | 2009   | 163,912             | 161,875                                            | -                                                  | -                    | -                                                                                            | 1,224                          | 327,011              |
| Senior Vice President        | 2008   | 184,577             | 121,125                                            | -                                                  | -                    | (9,306)                                                                                      | 6,677                          | 303,073              |
|                         | 2007   | 179,808             | 132,350                                            | 11,808                                             | -                    | 19,309                                                                                       | 4,133                          | 347,408              |
|                         |   |                |                                               |                                               |                 |                                                                                         |                           |                 |
| Ken Marshall (4)(5)          | 2009   | 200,000             | 75,000                                             | -                                                  | -                    | -                                                                                            | 414                            | 275,414              |
| Executive Vice President     | 2008   | 110,769             | 44,635                                             | -                                                  | -                    | -                                                                                            | 3,269                          | 158,673              |
| of Finance of Camping        | 2007   | 200,000             | 135,000                                            | -                                                  | -                    | -                                                                                            | 26,387                         | 361,387              |
| World, Inc.             |   |                |                                               |                                               |                 |                                                                                         |                           |                 |
|                         |   |                |                                               |                                               |                 |                                                                                         |                           |                 |
| Thomas F. Wolfe              | 2009   | 164,774             | -                                                  | -                                                  | 97,500               | -                                                                                            | 280                            | 262,554              |
| Senior Vice President        | 2008   | 191,000             | -                                                  | -                                                  | 111,750              | (13,067)                                                                                     | 4,870                          | 294,553              |
| Chief Financial Officer      | 2007   | 190,769             | -                                                  | 31,174                                             | 120,463              | 23,284                                                                                       | 8,857                          | 374,547              |
|                         |   |                |                                               |                                               |                 |                                                                                         |                           |                 |

 

(1)                              Includesdollar amounts recognized for financial statement reporting purposes for thefiscal year ended December 31, 2009, 2008 and 2007 pursuant to the phantomstock agreements and thus may include awards granted in and prior to 2009.  These amounts differ from the actual paymentsdescribed under Long-Term Compensation/ Phantom Stock Agreements as the amountsdescribed in that section include amounts of phantom stock awards earned inprior years.

 

(2)                              The amountof earnings on amounts deferred under the KEYSOP is dependent upon theparticular investment choices of the participant, which may include privateinvestments.  The Company does notinfluence or have any involvement in the earnings under the KEYSOP.  The amounts shown in the table reflect the aggregateearnings on each Executive Officer’s account during 2009, 2008 and 2007(including earnings that are at or below market).  Messrs. Sirpilla and Marshall electednot to participate in the KEYSOP.  Theremaining assets of the KEYSOP were distributed and the program dissolved in2008.  The Company does not maintain anypension plans.  In addition, theExecutive Officers do not receive above-market or preferential earnings oncompensation that is deferred pursuant to the 401(k) Plan.

 

(3)                              In 2009there were no Company matching contributions for the 401(k).  Includes $5,600, $3,650, $5,640, $714 and$4,600 for 2008 and $8,857, $0, $4,133, $6,750, and $8,857 for 2007 of Companymatching contributions under the 401(k) Plan for Messrs. Schneider,Sirpilla, Patel, Marshall and Wolfe, respectively.  In addition, includes $3,686 and $180 for2009; $2,034 

 

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and $173 for 2008;and $2,751 and $0 for 2007 of Company-paid life insurance premiums for Mr. Schneiderand Mr. Sirpilla, respectively. Also includes $18,382 and $0 for 2009; $25,955 and $2,399 for 2008; and$0 and $19,637 for 2007 for automobile allowance for Messrs. Sirpilla andMarshall, respectively.

 

(4)                              The annualincentive award paid to Mr. Marshall includes a minimum guaranteed amountand is included in the Bonus column.

 

(5)        Doesnot include compensation paid by FreedomRoads.

 

**Grants of Plan-Based Awardsin 2009**

 

AGI, which is a wholly-ownedsubsidiary of AGHI, does not grant shares of Company stock or stock options tothe Executive Officers.  However, theCompany has historically entered into phantom stock agreements with theExecutive Officers, which are intended to provide the Executive Officers with acash equivalent to the increase in value of the Company or Camping World thatwould otherwise be realized in stock or option awards of a public company.  These awards are described in the sectionentitled “*Compensation Discussion and Analysis—Elements ofCompensation—Long-Term Compensation/Phantom Stock Agreements*” above.

 

The following table reflects theactual payout to Messrs. Schneider and Wolfe pursuant to the annualincentive award program based on Company performance in 2009, 2008 and 2007, aportion of which were paid the year earned with the remainder paid thefollowing year.  As noted in footnote 1to the following table, the annual incentive awards paid to Messrs. Sirpilla,Patel and Marshall for 2009, 2008 and 2007 were discretionary and thus are notreflected in this table.

 
|                               |   |   | Estimated Future Payouts Under  Non-  Equity Incentive Plan Awards |
|------------------------------------|--------|--------|--------------------------------------------------------------------|
| Name                               |   | Year   | Target ($)(1)                                                      |
| Michael A. Schneider               |   | 2009   |                                                               | $392,380 |   |
| President, Chief Executive Officer |   | 2008   |                                                               | 447,000 |   |
|                               |   | 2007   |                                                               | 481,350 |   |
| John Sirpilla                      |   | 2009   |                                                               | - |   |
| President Retail Operations of     |   | 2008   |                                                               | - |   |
| Camping World, Inc.           |   | 2007   |                                                               | - |   |
| Prabhuling Patel                   |   | 2009   |                                                               | - |   |
| Senior Vice President              |   | 2008   |                                                               | - |   |
|                               |   | 2007   |                                                               | - |   |
| Ken Marshall                       |   | 2009   |                                                               | - |   |
| Executive Vice President           |   | 2008   |                                                               | - |   |
| of Finance of Camping              |   | 2007   |                                                               | - |   |
| World, Inc.                   |   |   |                                                               |   |   |
| Thomas F. Wolfe                    |   | 2009   |                                                               | 97,500 |   |
| Senior Vice President              |   | 2008   |                                                               | 111,750 |   |
| Chief Financial Officer            |   | 2007   |                                                               | 120,463 |   |

 

(1)                              Representsaward under the Company’s annual incentive award program.  The amounts in column (d) reflect theactual payout to each of Messrs. Schneider and Wolfe under the annualincentive award program based upon Company performance in 2009, 2008 and 2007,a portion of which was paid in the year earned with the remainder paid thefollowing year.  These amounts are alsoreflected in the Non-Equity Incentive Plan Compensation column of the SummaryCompensation Table for the respective Executive Officer.  The annual incentive 

 

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award program doesnot include threshold or maximum target amounts.  The annual incentive awards paid to Messrs. Pateland Marshall for 2009, 2008 and 2007 performance were discretionary and thusare not included in the foregoing table. Mr. Sirpilla did not receive an annual incentive award.  The terms of the Company’s annual incentiveaward program for 2009, 2008 and 2007 are described in more detail under thesection entitled “*Compensation Discussion andAnalysis—Elements of Compensation—Annual Compensation—Annual Incentive Awards*”above.

 

**Outstanding Equity Awards at 2009 FiscalYear-End**

 

AGI, which is a wholly-ownedsubsidiary of AGHI, does not grant shares of Company stock or stock options tothe Executive Officers.  However, theCompany has historically entered into phantom stock agreements with theExecutive Officers, which are intended to provide the Executive Officers with acash equivalent to the increase in value of the Company or Camping World thatwould otherwise be realized in stock or option awards of a public company.  These awards are described in the sectionentitled “*Compensation Discussion and Analysis—Elements ofCompensation—Long-Term Compensation/Phantom Stock Agreements*”above.  All prior awards to the ExecutiveOfficers pursuant to phantom stock agreements were earned or vested as of December 31,2009.

 

**Option Exercises and Stock Vested in 2009**

 

Thefollowing table gives information concerning the vesting of the ExecutiveOfficers’ interests under phantom stock agreements during 2009, 2008 and2007.  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                 |   | 2009   |             | $                  - |   | $                 - |   |
| President, Chief Executive Officer   |   | 2008   |             | - |   | - |   |
|                                 |   | 2007   |             | 236,167 | (2) | 236,167 | (4) |
|                                 |   |   |             |   |   |   |   |
| John Sirpilla (3)                    |   | 2009   |             | - |   | - |   |
| President Retail Operations of       |   | 2008   |             | - |   | - |   |
| Camping World, Inc.             |   |   |             |   |   |   |   |
|                                 |   |   |             |   |   |   |   |
| Prabhuling Patel                     |   | 2009   |             | - |   | - |   |
| Senior Vice President                |   | 2008   |             | - |   | - |   |
|                                 |   | 2007   |             | 11,808 | (2) | 11,808 | (4) |
|                                 |   |   |             |   |   |   |   |
| Kenneth Marshall (3)                 |   | 2009   |             | - |   | - |   |
| Executive Vice President of  Finance |   | 2008   |             | - |   | - |   |
| of Camping World, Inc.          |   | 2007   |             | - |   | - |   |
|                                 |   |   |             |   |   |   |   |
| Thomas F. Wolfe                      |   | 2009   |             | - |   | - |   |
| Senior Vice President                |   | 2008   |             | - |   | - |   |
| Chief Financial Officer              |   | 2007   |             | 31,174 | (2) | 31,174 | (4) |

 

(1)                          TheExecutive Officers’ interests under the phantom stock agreements aredenominated 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.

 

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(2)                              Representsthe dollar value of Messrs. Schneider’s, Patel’s and Wolfe’s percentageincrease in the value during 2007, pursuant to their respective phantom stockagreements dated January 1, 2007, as described in more detail under thesection entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above.  Theseamounts were not paid as there was no increase in the value over the three yearperiod.

 

(3)                              Messrs. Sirpillaand Marshall did not earn any interests under the phantom stock agreementsduring 2009, 2008 or 2007 and are not party to a phantom stock agreement.

 

(4)                              As describedin more detail under the section entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*,” this amount represents the phantom stock interestearned in 2007 under the agreements entered into on January 1, 2007 with adetermination date of December 31, 2009. These amounts were not paid asthere was no increase in the value over the three year period.

 

**Nonqualified Deferred Compensation in Fiscal2009**

 

Thefollowing table sets forth information regarding the Executive Officers’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                            | Year   |   | ($)                                                                                    |   | ($)                                                                                    | ($)        | ($)                                                                        | ($)         |
| Michael A. Schneider            | 2009   |   | $              - |   | $              - |       | $            - |        | $               -  | 0 |
| President, Chief                | 2008   |   | -                                                                                      |   | -                                                                                      |       | 31,106                                                                     |        | 2,262,704 |   | - |
| Executive Officer               | 2007   |   | -                                                                                      |   | -                                                                                      |       | 248,070                                                                    |        | 2,816,304 |   | 2,231,598 |
| John Sirpilla                   | 2009   |   | -                                                                                      |   | -                                                                                      |       | -                                                                          |        | - |   | - |
| President Retail Operations     | 2008   |   | -                                                                                      |   | -                                                                                      |       | -                                                                          |        | - |   | - |
| of Camping World, Inc. (1) | 2007   |   | -                                                                                      |   | -                                                                                      |       | -                                                                          |        | - |   | - |
| Prabhuling Patel                | 2009   |   | -                                                                                      |   | -                                                                                      |       | -                                                                          |        | - |   | - |
| Senior Vice President           | 2008   |   | -                                                                                      |   | -                                                                                      |       | (9,306)                                                                    |        | 233,417 |   | - |
|                            | 2007   |   | 102,722                                                                                |   | -                                                                                      |       | 19,309                                                                     |        | - |   | 242,723 |
| Kenneth Marshall                | 2009   |   | -                                                                                      |   | -                                                                                      |       | -                                                                          |        | - |   | - |
| Executive Vice President        | 2008   |   | -                                                                                      |   | -                                                                                      |       | -                                                                          |        | - |   | - |
| of Finance of Camping           | 2007   |   | -                                                                                      |   | -                                                                                      |       | -                                                                          |        | - |   | - |
| World, Inc. (1)            |   |   |                                                                                   |   |                                                                                   |       |                                                                       |        |   |   |   |
| Thomas F. Wolfe                 | 2009   |   | -                                                                                      |   | -                                                                                      |       | -                                                                          |        | - |   | - |
| Senior Vice President           | 2008   |   | -                                                                                      |   | -                                                                                      |       | (13,067)                                                                   |        | 265,979 |   | - |
| Chief Financial Officer         | 2007   |   | -                                                                                      |   | -                                                                                      |       | 23,284                                                                     |        | - |   | 279,046 |

 

(1)                              Messrs. Sirpillaand Marshall elected not to participate in the KEYSOP.

 

Keyemployees of the Company, including the Executive Officers, were eligible toparticipate in the KEYSOP, the terms of which are described under the sectionentitled “*Compensation Discussion and Analysis—Elements ofCompensation—Other Elements of Compensation—KEYSOP*” above through March 2007.  The eligible Executive Officers could electto defer all or a portion of their annual incentive awards and payout from thephantom stock awards to the KEYSOP. Beginning April 1, 2007 future contributions to the KEYSOP were nolonger allowed.  Trustees under theKEYSOP receive such contributions and invest the deferred amounts based on thespecific elections of each participant. Participants may invest in a wide range of products, excludingcertificates of deposits and money 

 

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market accounts.  The Company does not make matchingcontributions to the KEYSOP.  Theremaining assets of the KEYSOP were distributed and the program was dissolvedin 2008.

 

**Potential Payments upon Termination orChange-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 bythe Company; or

 

·                                          Without cause bythe Company or with good reason by the Executive Officer in connection with achange in control.

 

An ExecutiveOfficer is not entitled to a severance payment upon (i) termination of thephantom stock agreement or employment at any time by the Executive Officer(other than termination with good reason in connection with a change incontrol); (ii) death of the Executive Officer or (iii) disability ofthe Executive Officer.

 

The amountsset forth in the tables below do not reflect any applicable tax withholdings orother deductions by the Company from the amounts otherwise payable to theExecutive Officers upon termination of employment.

 

PotentialPayments Upon Termination Without Cause by the Company:  The phantom stock agreements provide forseverance payments to the Executive Officers in the event the Companyterminates their employment without “cause.” “Cause” includes, but is not limited to:

 

·                                          The ExecutiveOfficer’s breach of the terms of the phantom stock agreement or any other legalobligation of the Company; or

 

·                                          The ExecutiveOfficer’s fraud, dishonesty, negligence, misconduct or other deliberate actionwhich causes injury to the Company or any of its subsidiaries or to theirrespective reputations or an act of the Executive involving moral turpitude ora serious crime.

 

For purposesof calculating the potential payments set forth in the table below, we haveassumed that the date of termination was December 31, 2009.  The total amounts set forth in the tablebelow would be distributed to each Executive Officer in a lump sum within 30days after the determination of the amount of accrued but unpaid annualincentive award.

 
| Benefits and   Payments                       |   | Mr. Schneider | Mr. Sirpilla | Mr. Patel                                           | Mr. Marshall | Mr. Wolfe |
|-----------------------------------------------|--------|--------------------|-------------------|----------------------------------------------------------|-------------------|----------------|
| Basic Compensation                            |   | $ 800,817     | (2)               | $         - | (3)               | $ 217,191 | (4) | $ 200,000 | (5) | $ 262,274 | (6) |
|                                          |   |               |              |                                                     |              |           |   |   |   |   |   |
| Accrued and unpaid annual incentive award (1) |   | 2,380              |              | -                                                        |              | 161,875        |   | - |   | 595 |   |
| Total                                         |   | $ 803,197     |              | $         - |              | $ 379,066 |   | $ 200,000 |   | $ 262,869 |   |

 

(1)                              Representsan amount equal to each Executive Officer’s accrued but unpaid annual incentiveaward as of December 31, 2009.

 

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(2)                              Representsan amount equal to Mr. Schneider’s base salary and annual incentive awardas of December 31, 2009, divided by 52 weeks, times 87 weeks.   As of December 31, 2009, Mr. Schneiderhad been employed with the Company for 32 years.  The annual base salary and annual incentiveaward in effect for Mr. Schneider as of December 31, 2009 isreflected in the Salary column and Non-Equity Incentive Plan Compensationcolumn, respectively, of the Summary Compensation Table above.

 

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

 

(4)                              Representsan amount equal to eight months of base salary and annual incentive award for Mr. Patelas of December 31, 2009.  The annualbase salary and annual incentive award in affect as of December 31, 2009is reflected in the Salary column and Bonus column, respectively, of theSummary Compensation Table above.

 

(5)                              Representsan amount equal to one full year of base salary for Mr. Marshall, as perhis employment agreement.  Mr. Marshallis not a participant in a current phantom stock agreement.

 

(6)                              Representsan amount equal to one full year of the base salary and annual incentive awardto Mr. Wolfe as of December 31, 2009. The annual base salary and annual incentive award in effect as of December 31,2009 is reflected in the Salary column and the Non-Equity Incentive PlanCompensation column, respectively, of the Summary Compensation Table above.

 

PotentialPayments Upon Termination by Executive Officer with Good Reason upon a Changein Control:  The phantomstock agreements entered into by Messrs. Schneider, Wolfe and Patelprovide for severance payments in the event their employment is terminatedwithout “cause” by the Company (as defined in the preceding section) or with “goodreason” by the Executive Officer in connection with a “change in control.”  A “change in control” will be deemed to haveoccurred under the phantom stock agreements at such time as:

 

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

 

·                                          There is aconsolidation or merger of AGI or its parent, AGHI (or such other entity thatholds in excess of 80% of the issued and outstanding equity securities of AGHI)(the “Parent”), in which the Company or the Parent is not the surviving entityor in which the holders of the voting equity interests in the Company or theParent, as the case may be, do not continue to hold at least a majority of thevoting equity interests of the surviving entity following the merger;

 

·                                          There is a sale,lease or transfer of all or substantially all of the assets of the Company orthe Parent to any person or group; or

 

·                                          The shareholders ofthe Company or the Parent shall approve a plan or proposal for the liquidationor dissolution of the Company or the Parent, as the case may be.

 

The phantomstock agreements define “good reason” as occurrence of one or more of thefollowing events, without the Executive Officer’s written consent, within 3years following a change in control (or before the change in control if theoccurrence is directly connected to the change in control and the change incontrol occurs):

 

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

 

·                                          A reduction in basesalary or annual incentive award compensation; or

 

·                                          A relocation of theExecutive Officer outside the same metropolitan area as the Executive Officer’scurrent office location.

 

For purposesof calculating the potential payments set forth in the table below, we haveassumed that the date of termination was December 31, 2009.  The amounts of basic compensation and accruedbut unpaid annual incentive award would be paid in a lump sum within 30 daysafter the determination of the amount of the accrued annual incentive award.

 
| Benefits and   Payments                       |   | Mr. Schneider | Mr. Sirpilla | Mr. Patel                                           | Mr. Marshall | Mr. Wolfe |
|-----------------------------------------------|--------|--------------------|-------------------|----------------------------------------------------------|-------------------|----------------|
| Basic Compensation                            |   | $ 800,817     | (3)               | $         - | (4)               | $ 217,191 | (5) | $ 200,000 | (6) | $ 262,274 | (7) |
| *(base salary*                                |   |               |              |                                                     |              |           |   |   |   |   |   |
| *and annual*                                  |   |               |              |                                                     |              |           |   |   |   |   |   |
| *incentive award)*                            |   |               |              |                                                     |              |           |   |   |   |   |   |
| * *                                      |   |               |              |                                                     |              |           |   |   |   |   |   |
| Accrued and unpaid annual incentive award (1) |   | 2,380              |              | -                                                        |              | 161,875        |   | - |   | 595 |   |
|                                          |   |               |              |                                                     |              |           |   |   |   |   |   |
| Life and Health Insurance Benefits (2)        |   | 53,875             |              | -                                                        |              | 37,915         |   | - |   | 5,189 |   |
| Total                                         |   | $ 857,072     |              | $         - |              | $ 416,981 |   | $ 200,000 |   | $ 268,058 |   |

 

(1)                              Representsan amount equal to each Executive Officer’s accrued but unpaid annual incentiveaward as of December 31, 2009.

 

(2)                              Representsthe value of health benefits for a three year period following terminationbased on a monthly premium of $1,394 for Messrs. Schneider and Wolfe, and$1,053 for Mr. Patel.  In the caseof Mr. Schneider, also includes the value of life insurance benefits for aperiod of three years following termination based on a monthly premium of $307.

 

(3)                              Representsan amount equal to Mr. Schneider’s base salary and annual incentive awardas of December 31, 2009, divided by 52 weeks, times 87 weeks.  The annual base salary and annual incentiveaward in effect for Mr. Schneider as of December 31, 2009 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 payment upon termination or change of control.

 

(5)                              Representsan amount equal to eight months of base salary and annual incentive award for Mr. Patelas of December 31, 2009.  The annualbase salary and annual incentive award in affect as of December 31, 2009is reflected in the salary column, respectively, of the Summary CompensationTable.

 

(6)                              Representsan amount equal to one full year of base salary of Mr. Marshall as per hisemployment agreement.  The annual salaryin effect, as of December 31, 2009, is reflected in the salary column ofthe Summary Compensation table above.  Mr. Marshallis not a participant in a current phantom stock agreement.

 

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(7)                              Representsan amount equal to one full year of the base salary and annual incentive awardof Mr. Wolfe as of December 31, 2009. The annual base salary and annual incentive award in effect as of December 31,2009 is reflected in the Salary column and the Non-Equity Incentive PlanCompensation column, respectively, of the Summary Compensation Table above.

 

Non-Competitionand Non-Solicitation Agreements: The phantom stock agreemententered into by each Executive Officer includes an eighteen month covenant notto compete and a one year non-solicitation clause.

 

EmploymentTerms of Phantom Stock Agreements: In addition to establishing theparameters for phantom stock incentive awards (as described under the sectionentitled “*Compensation Discussion and Analysis—Elements ofCompensation—Long-Term Compensation/Phantom Stock Agreements*”) andthe severance payments described above, the phantom stock agreements set forththe terms of employment for each Executive Officer as follows:

 

·                  *Mr. Schneider*: Mr. Schneider’s phantom stock agreement, dated January 1,2007, provides that he will be employed as the President and Chief ExecutiveOfficer of the Company.  Mr. Schneideris 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 expired on December 31, 2009.   On December 31, 2009, the term of the phantom stock agreement wasextended and will continue until such time as AGI and the Mr. Schneiderhave entered into an amended agreement or a replacement agreement on terms thatare mutually acceptable to AGI and the Executive.

 

·                  *Mr. Patel*: Mr. Patel’s phantom stock agreement, dated January 1, 2007,provides that he will be employed as the Senior Vice President of theCompany.  Mr. Patel is entitled toreceive a base salary and annual incentive award in accordance with suchpractices and procedures as are generally applicable to other employees.  The term of the phantom stock agreementexpired on December 31, 2009.  On December 31,2009, the term of the phantom stock agreement was extended and will continueuntil such time as AGI and the Mr. Patel have entered into an amendedagreement or a replacement agreement on terms that are mutually acceptable toAGI and the Executive.

 

·                  *Mr. Wolfe*: Mr. Wolfe’s phantom stock agreement, dated January 1, 2007,provides that he will be employed as the Senior Vice President and ChiefFinancial Officer of the Company.  Mr. Wolfeis 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 expired on December 31, 2009. On December 31, 2009, the term of the phantom stock agreement wasextended and will continue until such time as AGI and the Mr. Wolfe haveentered into an amended agreement or a replacement agreement on terms that aremutually acceptable to AGI and the Executive.

 

Each of theExecutive Officer’s phantom stock agreement also provides that he (i) willbe eligible to receive such benefits as are provided by the Company from timeto time to similarly situated employees and (ii) will be eligible toparticipate in any future bonus programs adopted by the Company.  An Executive Officer may terminate hisemployment upon two-weeks’ notice.  TheCompany may terminate the employment of an Executive Officer at any time uponwritten notice, effective immediately.

 

EmploymentAgreements

Mr. Marshallhas an employment agreement with Camping World dated May 31, 2007 thatprovided for a base salary and a discretionary bonus program based on thecombined performance of FreedomRoads and Camping World that includes aguaranteed minimum bonus payment based upon 

 

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the reviewand evaluation by Mr. Lemonis.  Theagreement includes a two year covenant not to compete and a one yearnon-solicitation covenant.

 

**Director Compensation in 2009**

 

The Companypaid its non-management directors a monthly director’s fee of $1,800 per monthfor January and February 2009 and $900 per month for the remainder ofthe year.  The Company does notcompensate Messrs. Adams or Schneider for their service on the Board ofDirectors.  The Company does not provideany other compensation or benefits to the members of its Board ofDirectors.  During 2009, the followingfees were earned or paid in cash to the respective director:

 
| Name                     | Year | Fees Earned or   Paid in Cash ($)                 | Total ($)                 |
|--------------------------|------|---------------------------------------------------|---------------------------|
| Andris A. Baltins        | 2009 | $       12,600 | $   12,600 |
|                     | 2008 | 21,600                                            | 21,600                    |
|                     | 2007 | 21,600                                            | 21,600                    |
| David Frith-Smith (1)    | 2009 | 12,600                                            | 12,600                    |
|                     | 2008 | 21,600                                            | 21,600                    |
|                     | 2007 | 21,600                                            | 21,600                    |
| J. Kevin Gleason (1)     | 2009 | 12,600                                            | 12,600                    |
|                     | 2008 | 21,600                                            | 21,600                    |
|                     | 2007 | 21,600                                            | 21,600                    |
| George Pransky (1)       | 2009 | 12,600                                            | 12,600                    |
|                     | 2008 | 21,600                                            | 21,600                    |
|                     | 2007 | 21,600                                            | 21,600                    |
| Townsend C. Smith (1)(2) | 2009 | 12,600                                            | 12,600                    |
|                     | 2008 | 18,000                                            | 18,000                    |

 

(1)         Resigned as directors effective March 19,2010.

(2)         Mr. Smith was elected to theBoard of Directors in March 2008.

 

**Compensation Committee Interlocks and InsiderParticipation**

 

The Company’s Board of Directorsdetermines the compensation of the executive officers.  Michael A. Schneider, President and ChiefExecutive Officer of the Company, serves on the Board of Directors. Mr. Schneideralso serves as a director of AOA, which is controlled by Mr. Adams and forwhich Mr. Gleason is the Chief Executive Officer.  Mr. Gleason, a member of the Company’sBoard of Directors, is also the Chief Executive Officer of AOA, which iscontrolled by Mr. Adams and Mr. Schneider is on the Board of Directorsof AOA.

 

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

 

AGI is a wholly-owned subsidiary ofAGHI.  AGHI is an indirect wholly-ownedsubsidiary of AGI Holding Corp. (“AGHC”), a privately-owned corporation.  The following table sets forth, as of December 31,2009, certain information with respect to the beneficial ownership of theCommon Stock of AGHC by each shareholder who is known to us to beneficially ownmore than 5% of the outstanding shares, each director, each executive officerlisted in the Summary Compensation Table and all of our executive officers anddirectors as a group.

 
|  

Name and Address of Beneficial  Owner                                      |   | Number of

Shares   of Stock Owned |   | Percent of  Common   Stock |
|------------------------------------------------------------------------------------|--------|------------------------------------|--------|----------------------------|
|                                                                               |   | (1)                                |   |                       |
|                                                                               |   |                               |   |                       |
| Stephen  Adams, Director   2575 Vista Del Mar Drive   Ventura, CA  93001 |   | 1,407.7                            |   | 100.0%                     |

 

----

(1) Except as otherwise indicated, the beneficial owners have sole voting andinvestment power with respect to the shares in the table.

 

 

**ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE**

 

**Certain Relationships and Related PersonTransactions**

 

Review and Approval ofRelated Person Transactions

 

The Company entered into anindenture in connection with the issuance of the Senior Notes, which requiresthe Board of Directors to approve any new transaction or series of transactionsentered into between the Company and other entities controlled by Mr. Adamssubsequent to the date of the indenture which, either individually or in theaggregate, exceeds $2.5 million.  Inaddition, the Company must obtain a fairness opinion with respect to any suchnew transaction or series of transactions entered into subsequent to the dateof the indenture which, either individually or in the aggregate, exceeds $10.0million.  The Company has been incompliance with the indenture requirements at all times.

 

In connection with our effort toexpand the number of Camping World stores by developing retail alliances withRV dealerships across North America, the Company has established 42 CampingWorld stores alongside or within RV dealerships owned by FreedomRoads, which iscontrolled by the Chairman of our Board of Directors, Stephen Adams, and weexpect additional Camping World stores alongside or within such RV dealershipsin the future.  At December 31,2009, the Company leased 35 properties from FreedomRoads, sub-leased oneproperty to FreedomRoads, and Camping World and FreedomRoads are joint tenantsunder six leases.  Total payments by theCompany to FreedomRoads under these leased properties for 2009 and 2008 wereapproximately $5.7 million and $4.2 million, respectively, and futurecommitments under these leases total approximately $35.1 million.  The leases expire at various dates from August 2013through September 2018.  In 2009,FreedomRoads vacated three properties in which Camping World and FreedomRoadswere joint tenants and Camping World took over the lease.  For 2009 and 2008, lease payments receivedfrom FreedomRoads for the one subleased property was approximately $0.4 millionand $0.7 million, respectively, and future payments to be received under thissublease total approximately $2.5 million. The Company paid FreedomRoads 

 

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approximately $18.6 million and $7.7million in 2009 and 2008, respectively, and FreedomRoads paid the Companyapproximately $24.7 million and $27.7 million in 2009 and 2008, 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, 2009.

 

On June 5,2009, the Company entered into an option agreement with the shareholder of itsultimate parent to which the Company granted such shareholder or his assigns anoption, exercisable on or before March 1, 2010, to purchase the Company’sCamping World subsidiary for $55.0 million. In the event the Camping Worldpurchase option was exercised and, subject to the consent of the lenders underthe Senior Credit Facility, the sale of Camping World consummated, the Companyintended to use the net cash proceeds from the sale of Camping World to repayindebtedness outstanding under the Senior Credit Facility, as amended.  On December 14, 2009, a Termination ofOption agreement was signed whereby the purchase option with the shareholderwas terminated.

 

As a condition of the June 5,2009 amendment to its Senior Credit Facility pursuant to which the maturitydate was extended from June 24, 2009 to March 31, 2010, theshareholder of the ultimate parent of the Company was required to arrange forthe purchase of approximately $26.6 million in principal amount of the termportion of the Senior Credit Facility by new lenders, enhance the yield to suchnew lenders, purchase AGHI Notes held by one of such new lenders at a premiumto the most recent market price, contribute $8.5 million in capital to theCompany and guarantee two required principal payments on the term loans underthe Senior Credit Facility, aggregating $15.0 million.  In consideration of such support, the Companyentered into an option agreement with the shareholder of the ultimate parent ofthe Company pursuant to which the Company granted such shareholder or hisassigns an option, exercisable on or before March 1, 2010, to purchase theCompany’s Camping World subsidiary for $55.0 million.  The Company also agreed to pay theshareholder of the ultimate parent, upon successful refinancing of the Company’ssecured debt which is currently the New Senior Credit Facility, a success feeequal in amount to the fair value of such credit support, taking into accountthe fair value of the option to purchase Camping World.  Management was assisted in determining thefair value of Camping World by an independent third party valuation firm.  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.  On December 14, 2009, a Termination ofOption agreement was signed whereby the purchase option with the shareholderwas terminated and there would not be a credit for the value of the CampingWorld purchase option against value of such credit support.  In November 2009, management wasassisted by an independent third party valuation firm in determining that thevalue of the credit support was $26.8 million. For accounting purposes, any fee paid under this agreement will betreated, if and when paid, as a shareholder distribution.

 

On December 1,2009, our parent company entered into an agreement which grants AGI the rightand option (“the “Option”) to purchase FreedomRoads’ “choice model” insurancebusiness for a $2.5 million deposit, paid by AGI, with $2.5 million due on orbefore December 15, 2011.  TheOption shall be exercised on or after May 15, 2012 but before May 15,2013.  In the event the Option is notexercised, AGI shall have the right to return of the deposit, less costsincurred.  The $2.5 million deposit isreported in Non-Current Assets on the accompanying balance sheet as of December 31,2009.

 

On December 14,2009, the Company paid to FreedomRoads, by agreement, a one-time fee of $1.8million for the non-exclusive license to access the FreedomRoads database foruse in connection with the sale and promotion of RV produces and services forten years.  The $1.6 million access feeis reported in Other Non-current Assets and the current portion of $180,000 inPrepaids on the accompanying balance sheet as of December 31, 2009.

 

On December 5, 2001, we soldeleven real estate properties to eleven separate wholly-owned subsidiaries ofAGRP Holding Corp, a wholly-owned subsidiary of our ultimate parent, AGHC,which is 

 

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owned 98.2% by Mr. Adams, for$52.3 million 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 $3.4 million.  These leases have an initial term of 25 to 27years with two five-year options at the then current market rent.  The $4.8 million note receivable yields 11%per annum, with monthly payments of approximately $46,000 and a ten-yearballoon due December 2011.

 

For a description of the employment,consulting and non-competition agreements between the Company and the ExecutiveOfficers, see the sections entitled “*Potential Payments uponTermination and Change in Control—Non-Competition and Non-SolicitationAgreements*” and “*—Employment Terms of PhantomStock Agreements*” above.  Fora description of the management incentive and phantom stock agreements betweenthe Company and the Executive Officers, see the sections entitled “*Compensation Discussion and Analysis—Elements of Compensation—AnnualCompensation—Annual Incentive Awards*” and “*—Long-TermCompensation/Phantom Stock Agreements*” above.

 

The law firm of Kaplan, Strangisand Kaplan, P.A. (“KSK”) provides ongoing legal services to the Company andcertain subsidiaries in connection with various matters. Andris A. Baltins, amember of the Board of Directors, is a member of that firm.  During 2009, 2008 and 2007, KSK received$920,000, $201,000 and $257,000 in legal fees from the Company, respectively.

 

The consulting firm of Pransky andAssociates, P.S. (“PA”) provides ongoing consulting services to the Company andcertain subsidiaries.  George Pransky, amember of the Board of Directors until March 19, 2010, is a director ofthat company.  During 2009 and 2008, PAreceived $2,500 and $0 in fees from the Company, respectively.

 

The accounting firm of Frith-Smith &Archibald, LLP (“FSA”), provides tax preparation and review services to theCompany and certain subsidiaries.  DavidFrith-Smith, a member of the Board of Directors until March 19, 2010, is apartner of that company.  During 2009 and2008, FSA received $256,000 and $0 in fees from the Company, respectively.

 

DirectorIndependence

 

The Company’ssecurities are not listed on any national securities exchange and it is notsubject 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 the independenceof its directors under the standards adopted by the New York Stock Exchange.  The Company has determined that none of themembers of the Board of Directors are independent under the New York StockExchange standards.

 

**ITEM 14:PRINCIPAL ACCOUNTING FEES AND SERVICES**

 

The Board ofDirectors engaged Ernst & Young LLP as an independent RegisteredPublic Accounting Firm to examine our accounts for the fiscal years ending December 31,2009 and 2008.

 

**AuditFees**

 

The aggregate audit fees paid toErnst & Young LLP for the fiscal years ended December 31, 2009and 2008 were $458,000 and $459,695, respectively.   These fees include amounts for the audit ofthe Company’s consolidated annual financial statements, stand alone audits ofcertain subsidiaries, and the reviews of the consolidated financial statementsincluded in the Company’s Quarterly Reports on Form 10-Q, includingassistance with and review of documents filed with the SEC.

 

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**Audit-RelatedFees**

 

The aggregate audit-related feespaid to Ernst & Young LLP for the fiscal year ended 2009 was$4,300.  There were no audit-related feespaid to Ernst & Young LLP for the year ended December 31, 2008.

 

**Tax Fees**

 

The aggregate fees billed by Ernst &Young LLP for tax services rendered for the fiscal years ended December 31,2009 and 2008 were $16,014 and $2,064, respectively.  The fees paid in each of those yearsprimarily related to tax planning and compliance services.

 

**AllOther Fees**

 

There were no other fees paid toErnst & Young LLP for the years ended December 31, 2009 and 2008.

 

**Pre-ApprovalRequirements**

 

The Board of Directors has the soleauthority to review in advance and grant any pre-approvals of (i) allauditing services to be provided by the independent Registered PublicAccounting Firm, (ii) all significant non-audit services to be provided bythe independent auditors as permitted by Section 10A of the SecuritiesExchange Act of 1934, and (iii) all fees and the terms of engagement withrespect to such services.  All audit andnon-audit services performed by Ernst & Young LLP during fiscal 2009were 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 includedin Item 8 hereto.

 

(a) (2)  Consolidated financial statement schedules areincluded 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 therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized, in the City of Ventura, State ofCalifornia on March 31, 2010.

 
| AFFINITY GROUP, INC.    |                                 |
|-------------------------|--------------------------------------|
|                    |                                 |
|                    |                                 |
| By                      |   /s/ Michael A. Schneider |   |   |
| Michael A. Schneider    |                                 |
| Chief Executive Officer |                                 |
|                         |                                      |  |  |

 

 

Pursuant to the requirements of theSecurities Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant in the capacities and on the datesindicated.

 

|   /s/ Thomas F. Wolfe |                | Senior Vice President and                     |   | March 31,  2010 |                 |
|---------------------------------|---------------------|-----------------------------------------------|--------|----------------------|----------------------|
| Thomas F. Wolfe                 |                | Chief Financial Officer                       |   |                 |                 |
|                            |                | (Principal Financial and  Accounting Officer) |   |                 |                 |
|                            |                |                                          |   |                 |                 |
|                            |                |                                          |   |                 |                 |
| *                               |                | Director                                      |   | March 31,  2010 |                 |
| Stephen Adams                   |                |                                          |   |                 |                 |
|                            |                |                                          |   |                 |                 |
| *                               |                | Director                                      |   | March 31,  2010 |                 |
| Andris A. Baltins               |                |                                          |   |                 |                 |
|                            |                |                                          |   |                 |                 |
| *                               |                | Chief Executive Officer                       |   | March 31,  2010 |                 |
| Michael A. Schneider            |                |                                          |   |                 |                 |
|                            |                |                                          |   |                 |                 |
|                            |                |                                          |   |                 |                 |
|                            |                |                                          |   |                 |                 |
| *By:                            | /s/ Thomas F. Wolfe |                                          |   |                 | March 31,  2010 |   |
|                            | (Thomas F. Wolfe    |                                          |   |                 |                 |   |
|                            | Attorney-in-Fact)   |                                          |   |                 |                 |   |
|                                 |                     |                                               |        |                      |                      |  |  |  |

 

 

Thomas F.Wolfe, pursuant to Powers of Attorney executed by each of the officers anddirectors listed above whose name is marked by an “*” and filed as an exhibithereto, by signing his name hereto does hereby sign and execute this Report ofAffinity Group, Inc. on behalf of each of such officers and directors inthe capacities in which the names of each appear above.

 

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**AFFINITY GROUP, INC.**

**EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K**

**For Fiscal Year Ended December 31, 2009**

 
|                                                                                                                                                                                                                                                                                                                                            |   | Regulation  S-K Exhibit  TableReference |   | SequentialPage 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  TableReference |   | SequentialPage 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                                   |   |                    |
| Lease Agreement for distribution center in Franklin,  Kentucky (5)                                                                                                                                                                                                                                                                                                                                             |   | 10.20                                   |   |                    |

 

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|                                                                                                                                                                                                                                                                                                                                                    |   | Regulation  S-K Exhibit  TableReference |   | SequentialPage No. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------|
| 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 as documentation agent. (16) |   | 10.31                                   |   |                    |

 

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|                                                                                                                                                                                                                                                                                                                                     |   | Regulation  S-K Exhibit  TableReference |   | SequentialPage No. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------|
| 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 (17)                                                                                                  |   | 10.32                                   |   |                    |
| Option Agreement dated June 5, 2009 between Affinity  Group, Inc. and The Stephen Adams Living Trust (18)                                                                                                                                                                                                                      |   | 10.33                                   |   |                    |
| Loan  Agreement with SA Holding LLC dated June 10, 2009 (19)                                                                                                                                                                                                                                                                        |   | 10.34                                   |   |                    |
| Promissory  Note with SA Holding LLC dated June 10, 2009 (20)                                                                                                                                                                                                                                                                       |   | 10.35                                   |   |                    |
| Termination of Option and Second Amendment to Amended and  Restated Cooperative Resources Agreement dated December 14, 2009 (21)                                                                                                                                                                                                    |   | 10.36                                   |   |                    |
| Credit Agreement dated as of March 1, 2010, among  Camping World, Inc. and CWI, Inc., as Borrowers, the certain  Subsidiaries of Borrowers party hereto as Guarantors, the financial  institutions party hereto as the Lenders, SunTrust Bank, as the Issuing Bank,  and SunTrust Bank, as the Administrative Agent. (22) |   | 10.37                                   |   |                    |
| Second Amended and Restated Credit Agreement dated as of  March 1, 2010 among Affinity Group, Inc., the Guarantors party  hereto, the Lenders party hereto and Wilmington Trust FSB, as Administrative  Agent (22)                                                                                                             |   | 10.38                                   |   |                    |
| Form of  Phantom Stock Extension Agreement                                                                                                                                                                                                                                                                                          |   | 10.39                                   |   | 121                     |
| Subsidiaries  of the Registrant                                                                                                                                                                                                                                                                                                          |   | 21                                      |   |                    |
| Powers of  Attorney                                                                                                                                                                                                                                                                                                                      |   | 24.1                                    |   |                    |
| 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                                    |   |                    |
| Departure  of Directors (23)                                                                                                                                                                                                                                                                                                             |   | 31.5                                    |   |                    |
| 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-Qfor the 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.

 

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(5) Filed with the Company’s Report on Form 8-K datedDecember 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.

 

(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.

 

(16) Filed with the Company’s Report on Form 10-K dated December 31,2008 and incorporated by reference herein.

 

(17) Filed with the Company’s Report on Form 10-K dated December 31,2008 and incorporated by reference herein.

 

(18) Filed with the Company’s Report on Form 10-K dated December 31,2008 and incorporated by reference herein.

 

(19) Filed with the Company’s Report on Form 10-Q dated September 30,2009 and incorporated by reference herein.

 

(20) Filed with the Company’s Report on Form 10-Q dated September 30,2009 and incorporated by reference herein.

 

(21) Filed with the Company’s Report on Form 8-K dated December 14,2009 and incorporated by reference herein.

 

(22) Filed with the Company’s Report on Form 8-K dated March 1,2010 and incorporated by reference herein.

 

(23) Filed with the Company’s Report on Form 8-K dated March19, 2010 and incorporated by reference herein.

 

A copy of any of these exhibits will be furnished at areasonable cost to any person upon receipt from such person of a writtenrequest for such exhibit.  Such requestshould be sent to Affinity Group, Inc., 2575 Vista Del Mar Drive, Ventura,CA  93001, Attention:  Chief Financial Officer.

 

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