**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

**FORM 10-K**

| **x******                                              | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES   EXCHANGE ACT OF 1934**     |
|--------------------------------------------------------|-------------------------------------------------------------------------------------------------|
| ** **                                             |
| **For the  fiscal year ended December 31, 2006****OR** |
| ** **                                             | ** **                                                                                      |
| **o******                                              | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES   EXCHANGE ACT OF 1934** |

 

**For thetransition period from            to            **

Commission FileNumber        **333-113982**

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**AFFINITY GROUP, INC.**

(Exact name ofregistrant as specified in its charter)

| **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.)         |

 

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

SECURITIESREGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:

9% SeniorSubordinated Notes Due 2012
| Indicate by check mark if  the registrant is a well-known seasoned issuer, as defined in Rule 405 of the  Securities Act. | YES o   NO x |
|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------|

 

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

YES o   NO x

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the Registrant was required 
| to file such reports), and  (2) has been subject to such filing requirements for the past 90 days. |   | YES x   NO o |
|----------------------------------------------------------------------------------------------------|--------|---------------------------------------|

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statementsincorporated by 
| reference in Part III of this Form 10-K or any  amendment to this Form 10-K. |   | o |
|------------------------------------------------------------------------------|--------|---|

 

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

| Accelerated filer o |   | Large  accelerated filer o |   | Non-accelerated  filer x |
|---------------------|--------|----------------------------|--------|--------------------------|

 

 
| Indicate by check mark  whether the registrant is a shell company (as defined in Rule 12b-2 of the  Exchange Act).     | YES o   NO x |
|--------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|

 

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

|                               | **Class** | ** ** | ** ** | ** ** | **Outstanding as of  March 20, 2007** | ** ** |
|-------------------------------|-----------|------------|------------|------------|---------------------------------------|------------|
| Common stock, $.001 par value |      | 2,000      |

 

 

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**PART I**

**ITEM 1:BUSINESS**

**General**

Except where the context indicates otherwise, the term “Company,”or “AGI” means Affinity Group, Inc. and its predecessors and subsidiaries.

Weare a wholly-owned subsidiary of Affinity Group Holding, Inc., (“AGHI”), aprivately-owned corporation.  We are amember-based direct marketing organization targeting North Americanrecreational vehicle (“RV”) owners and outdoor enthusiasts.  Our club members form a receptive audience towhich we sell products, services, merchandise and publications targeted totheir specific recreational interests. In addition, we are a specialty retailer of RV-related products.  We operate through three principal lines of business,consisting of (i) club memberships and related products and services, (ii)subscription magazines and other publications including directories, and(iii) specialty merchandise sold primarily through our 63 Camping Worldretail stores, mail order catalogs and the Internet.

There are approximately 1.8 million dues paying membersenrolled in our clubs.  We currently haveapproximately 5.1 million in aggregate circulation and 1.0 million paidcirculation across our 36 publications. For the year ended December 31, 2006, our revenue, operating income andnet loss were $514.6 million, $42.0 million and $5.7 million, respectively.

**Competitive Strengths**

Webelieve that our key competitive strengths are as follows:

*Stable, Recurring Cash FlowStream -* Approximately 85% of our operating income, net ofnon-cash charges, is generated through our membership club, subscription-basedproducts and services and publications businesses, which historically haveprovided a recurring income stream through a core base of customers. Our fivemembership clubs have a historical average renewal rate of 66%, which webelieve compares favorably to other subscription-based businesses. Similarly,our subscription-based products and services have historically also experiencedhigh renewal rates, averaging over 85% over the past four years for our largestproduct and service offerings, Emergency Road Service (“ERS”), RV vehicleinsurance and extended warranty.

*Established Market Positions*- We are a member-based direct marketing organization targeting North AmericanRV owners and outdoor enthusiasts with comprehensive targeted productofferings. The Good Sam Club, which was founded in 1966, and Camping World’sPresident’s Club founded in 1986 are the preeminent RV membership clubs inNorth America.  Camping World is anational specialty retailer of merchandise accessories and services for RVowners and camping enthusiasts that has grown to 63 retail stores since itbegan business in 1966.

We believe oursignificant size relative to our competition is a meaningful advantage thatprovides us greater leverage to negotiate benefits and discounts withthird-party service providers for our members and consequently enhances thevalue of our product and service offerings. Additionally, these negotiating and pricing advantages allow us toincrease membership dues without risking the loss of members, who arecompensated by additional savings and attract other product and serviceofferings.  Our 1.8 million club membersand the 8.3 million consumers in our proprietary database serve as a unique,captive audience for direct marketing, which we believe significantly lowerscustomer acquisition costs relative to our competitors and facilitatescost-effective cross-selling.

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*Largely Recession Resistant -*We believe the characteristics of our membership and publication businessesmitigate the effects of economic downturns on our operating performance.  While the sale of new RVs is generallyinfluenced by economic conditions, our financial performance has historicallyshown little correlation to changes in the Gross Domestic Product, gas pricesor even new RV shipments.  We believethis is partially due to the small cost of our products and services relativeto the cost of purchasing an RV and the fact that our clubs provide averageannual savings in excess of the annual dues. We market our clubs, products and services to a sizable existinginstalled base of 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 would drive increased sales of our products.

*Favorable Demographic Trends*- Favorable demographic trends, in particular the aging of the “baby boomers,”indicate that 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 grow 20.1% by 2010, according to the National Survey of the RVConsumer by the University of Michigan in 2005 (the “RV Survey”).  Furthermore, the 45-54 age bracket, whichmaintains the second highest ownership rate of RVs, is expected to grow 6.3% by2010.  The growth in these age groups isexpected to generate dramatic growth in the pool of potential RVconsumers.  Also, according to the RVSurvey, this age group shift will drive the number of households that own atleast one RV from 7.9 million in 2005 to 8.5 million in 2010. In addition, RVowners have household 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 has extensivepublishing, direct marketing and retail experience with significant expertisein the RV industry. With an average of 11 years with our company, the team hasdeveloped substantial experience in increasing our target customer base, usingstrategic alliances to bolster product offerings that create value for ourcustomers and increasing cross-selling opportunities for our high marginproduct offerings. Our consistent operating performance, to a great extent, isattributable to our senior managers who are responsible for developing andimplementing our business strategy and focusing on increasing profitability.Our executive management team is compensated both through an annual salary andthrough a management incentive program that is directly tied to our financialperformance.

**Our Strategy**

Ourprimary business strategy is to maximize the sale of club memberships,products, services, publications and merchandise to our target customer base ofRV owners and outdoor enthusiasts. To this end, we focus on cross-selling ourvarious offerings to each of our customers while managing customer acquisitioncosts and maintaining high renewal rates by providing high value productofferings.

*MaximizeCustomer Retention with Value-Added Product Offerings -*A key aspect of our strategy is to developstrong membership loyalty by providing an attractive value proposition for clubmembers and offering add-on products specifically targeted to meet their needsas reflected by our strong customer renewal rates. Each of our five membershipclubs provides our customers with tangible savings which substantially exceedthe membership fee.  On average, clubmembers benefit by saving approximately five times greater than the cost oftheir annual membership dues as the result of being able to purchase productsand 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.  As such, in order tomaximize customer renewal rates, we constantly

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evaluatemember satisfaction and actively respond to changing member preferences throughthe enhancement or introduction of new membership benefits including productsand services.

*EfficientlyAcquire New Customers -*Webelieve efficient customer acquisition and a sizeable database population arecritical to driving our growth and profitability.  Camping World and its discount buyer’s club,President’s Club, together, account for approximately 42% 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-SellProducts and Services to Existing Customers -*We proactively cross-sell our products andservices across our customer base. For example, we use our existing customerdatabase to cost-efficiently market Camping World products throughcatalogs.  Conversely, Camping Worldsupercenters provide direct customer referrals to our membership clubs,products and services through their in-store kiosks.  In addition, we use our publications tocommunicate with our core customer base and to promote our other businesssegments to existing club members.  Ourmagazines contain relevant content as well as various forms of advertisementsfor our membership clubs, products and services.

*ExpandPresence in Specialty Recreation Niche -*We believe aggregate circulation of ourmagazines is an important factor in determining the amount of revenue we canobtain from advertisers.  Consequently,we seek to expand our presence as a publisher in select recreational nichesthrough the introduction of new magazine titles and the acquisition of otherpublications or businesses in our markets or in complementary recreationalmarket niches.  Publications incomplementary niches may also provide the opportunity to launch new membershipclubs, to market our products and services to new customers and to developother products and services, which meet the special needs of thesecustomers.  For example, our acquisitionof the publishing assets of Nordskog Publications, Inc. in May 2005 allowed usto expand our presence in the recreational boat market niche.  In addition, we now own 29 consumer outdoorrecreation shows, most of which were acquired from Royal Productions, Inc. inDecember 2005, Plus Events shows in February 2006, and RV shows purchased fromApple Rock Advertising and Promotions, Inc. in September 2006.  These shows provide an expanded face-to-faceforum for acquiring new customers.

*IncreaseCamping World Penetration -*We intend to continue the controlled expansion of our Camping Worldsupercenter network by developing Camping World stores alongside or withinindependent RV dealerships, including RV dealerships owned and operated by ouraffiliates, which provides a competitive advantage by creating a means ofincreasing retail customer traffic.  In2006 we opened 19 new Camping World stores, of which 17 stores were adjacent toor within RV dealerships owned or operated by affiliates, and in 2007 we intendto open fourteen additional Camping World stores as a part of our dealeralliance program.  In addition togenerating increased cash flows from the sale of merchandise, a larger networkof geographically diverse Camping World stores will enhance our ability tomarket our portfolio of membership clubs, publications and product and serviceofferings to a significantly larger customer base.

**RV Industry**

The use of RVs and thedemand for club memberships and related products and services may be influencedby a number of factors including general economic conditions, the availabilityand price of propane and gasoline, and the total number of RVs.  We believe that both the installed base ofRVs

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and the type of RV owned(full service vehicles excluding van conversions) are the most importantfactors affecting the demand for our membership clubs, merchandise, productsand services.  Based on the RV Survey,the number of households owning RVs is projected to increase from 7.9 millionin 2005 to nearly 8.5 million in 2010. The RV Survey also indicates that the percentage of households owningRVs during this period will rise slightly from 8.0% to 8.2%.

According to the RVSurvey, the average RV owner is 49 years old. RV ownership also increases with age reaching its highest percentagelevel among those 55 to 64 years old. Households in this age group are projected to increase from 18.2 millionin 2005 to 21.6 million in 2010.  RVownership also is concentrated in the western United States, an area in whichthe population growth rate continues to be greater than the national average.  The RV Survey also indicates that RV ownershipis associated with higher than average annual household income, which among RVowners was approximately $68,000 per annum as compared to the national averageof $43,000 per annum.

The average age andannual household income of our club members in 2006 were 56 years and $72,000,respectively.  We believe that thedemographic trend towards an aging population will have a favorable impact onRV ownership.  The demographic profile ofour typical club member follows that of the general population and thus webelieve this will also have a favorable impact on demand for our clubmemberships and related products and services.

**Membership Clubs**

We operate the Good Sam Club, President’s Club, Coast toCoast Club and Camp Club USA for RV owners, campers and outdoor vacationers,and the Golf Card Club for golf enthusiasts. The membership clubs form a receptive audience to which we market ourproducts and services.

The following table sets forth the number of members atDecember 31, 2006, annual membership dues and average annual renewal ratesduring the period of 2002 to 2006 for each club:
| **Membership Club** | ** ** | **Number of Members  at December 31, 2006 (1)** | ** ** | **Annual Fee (2)** | ** ** | **Average Renewal  Rate (3)** | ** ** |
|--------------------------|------------|-------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------------------|------------|
| Good Sam Club            |       | 992,000                                                                       |       |                         | $12 - $25  |                                    | 66         | % |   |
| President's Club         |       | 680,300                                                                       |       |                         | $15 - $20  |                                    | 67         | % |   |
| Coast to Coast  Club     |       | 78,900                                                                        |       |                         | $90 - $140 |                                    | 71         | % |   |
| Other Clubs:             |       |                                                                          |       |                         |       |                                    |       |   |   |
| Golf Card Club           |       | 55,000                                                                        |       |                         | $49 - $65  |                                    | 56         | % |   |
| Camp Club USA  (4)       |       | 22,900                                                                        |       |                         | $40 - $50  |                                    | —     |   |   |

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(1)    Also includes multi-year and lifetimemembers.

(2)    For a single member, subject to specialdiscounts and promotions.

(3)    Excludes members having lifetimememberships.

(4)    A full renewal series is not yet complete

 

Inaddition to regular annual memberships, we also sell multi-yearmemberships.  We believe that multi-yearmemberships provide several advantages, including the up-front receipt of duesin cash, reduced membership costs and a strengthened member commitment.

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*Good Sam Club*

The Good Sam Club,a membership organization for RV owners, is the largest RV organizationworldwide with approximately 992,000 member families.  The club celebrated its 40th anniversary in 2006.  As of December 31, 2006, there were 1,743local chapters throughout the United States and Canada.  The average renewal rate for Good Sam Clubmembers was approximately 66% during the period 2002 through 2006.

The Good Sam Club is widely recognized as an essential partof the RV ownership experience.  Bydelivering value to members through information, support and benefits,including 10% discounts at approximately 1,610 RV parks across the U.S. andCanada, members save money, come together to share experiences and morethoroughly enjoy RVing.  Other benefitsinclude discounts on the purchase of RV supplies and accessories at select RVservice centers; an annual subscription to *Highways*, theclub’s regular news magazine; discounts on our other publications; trip routingand mail-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 $87.

The Good Sam Club establishes quality standards for RV parksand campgrounds participating 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.

In 1992, the Good Sam Club began selling lifetimememberships.  In 2006, the average pricefor a life membership was $268 with approximately 143,000 members registered asof December 31, 2006.  Based on anactuarial analysis of the life members, we expect the average length of alifetime membership to be 18 years.

The following table lists the number of club members and RVparks and campgrounds from 2002 through 2006 at which discounts for memberswere available at December 31st of the respective year:
| ** **                                                       | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Number of Good  Sam memberships                                  |       | 992,000  |       | 984,100  |       | 971,000  |       | 958,000  |       | 960,600  |       |
|                                                             |       |     |       |     |       |     |       |     |       |     |       |
| Lifetime members  included above                                 |       | 143,000  |       | 136,100  |       | 131,900  |       | 127,700  |       | 121,400  |       |
|                                                             |       |     |       |     |       |     |       |     |       |     |       |
| Number of RV  campgrounds offering discounts to Good Sam members |       | 1,610    |       | 1,580    |       | 1,750    |       | 1,750    |       | 1,650    |       |

*President’s Club*

The President’s Club program, which wasestablished in 1986, is the discount buyer’s club for Camping World and thesecond largest RV club worldwide (behind only our Good Sam Club).  As of December 31, 2006, the President’s Clubhad approximately 680,300 members.  Theprimary benefit offered to members of the President’s Club is a 10% discount onall retail merchandise at Camping World stores. The President’s Club offers us an extremely cost effective and powerfulmethod of acquiring customers who are likely to be receptive to our product andservice offerings.  We use thesignificant amount of information gathered when a customer signs up formembership in the President’s Club to tailor product offers to his or herlikely needs and interests. Additionally, we believe that the President’s Club, much like atraditional customer loyalty program, serves to bolster sales at our CampingWorld supercenters.

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In addition to the 10% discount atCamping World stores, President’s Club members also receive *RV View*, the club magazine, as well as special mailings,including newsletters and flyers offering selected products and services atspecial prices.  Typically, we use thePresident’s Club brand in the marketing of our products and services to thesecustomers.

President’s Club memberships mayinitially be obtained for one, two or three years at a cost of $20, $35 or $50,respectively.  We estimate that theaverage President’s Club member realizes annual savings of approximately$42.  The average renewal rate formembers of the President’s Club was 67% during the period from 2002 to 2006.

The following table sets forth the number of President’s Clubmembers and number of retail stores at year-end for 2002 through 2006:
| ** **                                    | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Camping World's  President's Club memberships |       | 680,300  |       | 643,100  |       | 596,700  |       | 598,200  |       | 626,000  |       |
| Number of stores                              |       | 63       |       | 44       |       | 39       |       | 33       |       | 30       |       |

*Coast to Coast Club*

The Coast to Coast Clubhas operated a reciprocal use network of private RV resorts in North Americasince 1972.  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 parties unrelatedto us.  Our club members may use theother resorts in the Coast to Coast Club network on a reservation or spaceavailable basis and obtain discounts from other non-private campgrounds.  At December 31, 2006, there wereapproximately 78,900 member families in the Coast to Coast Club which hadnationwide access to approximately 301 private RV resorts and a network ofapproximately 228 public affiliated campgrounds that participated in the Coastto Coast Club reciprocal use programs. These private resorts are designed primarily for RV owners, buttypically provide camping or lodging facilities, comprised of RVs, cabins, parkmodels, and condominiums.  For an initialmembership fee plus annual maintenance fees, both paid by the customer to theresort, the private resorts provide an RV site with water, sewer and electricalhook-ups and recreational amenities, such as swimming, tennis or fishing, orproximity to theme parks or other recreational activities.  We have established quality criteria forresorts to join and remain in the Coast to Coast Club networks.

For standardannual renewal dues from $89.95 for a single year membership to $337.95 for afive-year membership, Coast to Coast Club members receive the followingbenefits: discounts for overnight stays at participating resorts and campgrounds;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 discounthotels and travel services; and access to ancillary products and servicesdeveloped 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 $121.  Theaverage annual renewal rate for members of the Coast to Coast Club after theinitial one-year membership (which is generally paid by the member resort notthe club member) was approximately 71% during the period 2002 through 2006.

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The following table setsforth the number of members in the Coast to Coast Club, resorts participatingin the reciprocal use program, and the number of public resorts extendingdiscounts to Coast to Coast Club members for 2002 through 2006:
| ** **                                 | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Number of Coast  to Coast Club memberships |       | 78,900   |       | 85,200   |       | 98,700   |       | 117,300  |       | 139,800  |       |
| Participating  private resorts             |       | 301      |       | 301      |       | 309      |       | 329      |       | 383      |       |
| Participating  public resorts              |       | 228      |       | 225      |       | 176      |       | 220      |       | 572      |       |

 

Thereduction in the number of participating public resorts in the Coast to CoastClub reciprocal use program prior to 2005 resulted primarily due to operationalchanges in the system which were implemented by the Coast to Coast Club during2003 to improve the quality of the system for Coast to Coast Club members.  By raising the overall quality of the parksin our system, we have been able to attract more quality public resorts to ournetwork over the last several years.

##### *Golf Card Club*

The Golf Card Club,founded in 1974, had approximately 55,000 members at December 31, 2006.  The major attraction for membership is thefinancial savings which members receive when playing at any of the 3,300participating golf courses located throughout the US and Canada. The annualmembership fee varies with the length and type (single or double) ofmembership.  We believe that theparticipating 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 membersreceive a variety of benefits, including: a minimum of two rounds annually of free or discounted golf atparticipating golf courses; discounted vacation packages at 165 “Stay and Play”resorts; discounts on golf practice at 58 driving ranges; savings on golfmerchandise purchases at select member golf courses; car rental discounts fromNational and Alamo; an annual subscription to the *GolfTraveler* member publication, published three times per year in printand twelve times electronically; the annual directory listing participatinggolf courses and resorts; chances to win free golf merchandise in quarterlymember giveaways; access to 104 local Grasshopper Clubs for tournaments andsocial activities; an opportunity to play in member-guest tournaments; anopportunity to test (and keep) select golf products; a chance to win a freegolf lesson from a participating Golf Card pro; and access to the club web site(www.golfcard.com) including member-only features such as handicap tracking,course reviews, and trip routing.

Municipal, daily-fee,semi-private, and resort golf courses participate in the Golf Cardprogram.  The program is attractive toparticipating courses because it builds traffic and helps fill empty tee timesduring off-peak hours.  In addition,participating courses receive promotion of their golf course in the *Golf Traveler* member publication, the Annual Directory, andthe club website.  Members also purchaseother merchandise or services 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 annualmembership fee is $49 for a single membership and $89 for a twosomemembership.  Multi-year memberships rangefrom a single two-year membership for $118, to a three-year twosome membershipfor $267.  The average renewal rate forGolf Card Club members was approximately 56% for the period from 2002 to 2006.

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The following table setsforth the number of Golf Card Club members, participating golf courses and “Stayand Play” resorts at December 31st of each respective year:
| ** **                                        | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Number of Golf  Card Club memberships (1)         |       | 55,000   |       | 57,800   |       | 67,200   |       | 77,400   |       | 79,400   |       |
| Number of  Participating Golf Courses             |       | 3,300    |       | 3,600    |       | 3,650    |       | 3,800    |       | 3,800    |       |
| Number of "Stay  and Play" Golf Resorts |       | 165      |       | 175      |       | 200      |       | 220      |       | 225      |       |

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(1)  A single membership counts as one member anda double membership as two members.

*Camp Club USA*

CampClub USA was launched January 2006 as a discount camping club offering 50% offon campsites.  At December 31, 2006 wehad approximately 22,900 members. Members receive a variety of benefits, including 50% savings at over 600campgrounds, an annual directory with maps, directions, amenities and a monthlyeNewsletter with campground updates, features and travel tips.

**Membership Products and Services**

Our approximately 1.8 million club members form a receptiveaudience to which we sell products and services targeted to the recreationalinterests of our club members.  Wepromote products and services which either address special needs arising in theactivities of our club members or appeal generally to persons with thedemographic characteristics of our club members.  The two most established products are theemergency road service (“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 of ERSwhere we assume the risk of incurred claims. We believe it is important to target the diversified market niches withidentifiable products that offer a full range of benefits.  We currently market these products throughdirect mail, advertising in publications, campground directories, space ads,Internet, telemarketing and direct sales.

*Emergency Road Service*

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

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The table below sets forth the total enrollment in thevarious ERS programs for 2002 through 2006:
| ** **     | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| ERS Enrollment |       | 379,200  |       | 369,900  |       | 360,900  |       | 354,400  |       | 348,400  |       |

 

For theninth year in a row, enrollment in the various ERS programs has grown throughpromotional and marketing efforts which have attracted new members and improvedrenewal rates.  Combined enrollment inthe programs has increased by 30,800 members or approximately 8.8% since 2002.

*Vehicle Insurance Programs*

We provide our customers with two specialized RV insuranceprograms, offering benefits and coverage options not available throughtraditional auto insurance plans.  Boththe Vehicle Insurance Program (“VIP”) and the Motor Vehicle Program (“MVP”) arepromoted to the company’s database through multiple marketing channels.  At December 31, 2006, the two programs hadapproximately 201,400 policyholders, which represented a 14.1% and 6.1%,penetration, respectively, of the Good Sam Club and the President’s Club.  During the period 2002 to 2006, the averagerenewal rate of members participating in these insurance programs was 81%.  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 riskassociated with policyholder claims is the sole responsibility of the insurer.

The following provides detail of the total number of policiesin force, the dollar amount of written premiums generated on the book ofbusiness, and the marketing fees generated for 2002 through 2006:
| ** **                                               | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Total policies  in force                                 |       | 201,400  |       | 205,800  |       | 208,000  |       | 213,400  |       | 230,600  |       |
| Written premiums  paid to insurance providers (millions) |       | $        | 253        |     | $          | 251      |       | $        | 253        |     | $          | 254 |   | $ | 249 |   |
| Marketing fees  (millions)                               |       | $        | 20         |     | $          | 20       |       | $        | 20         |     | $          | 20 |   | $ | 19 |   |

 

*OtherProducts and Services*

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

In 1996, welaunched the Continued Service Plan, a private label extended vehicle warrantyprogram for RVs.  Total net revenue for2006 increased 16% over 2005, to a total of $23.8 million.  The program had approximately 38,600 policiesin force as of December 31, 2006.  Salesof new policies were derived from direct mail marketing, print ads in ourmagazines, Internet and e-mail solicitations, and retail kiosks in CampingWorld stores.  Policy renewalsrepresented 48% of the total sales in 2006.

The RV financing programis administered by GEMB Lending Inc., a subsidiary of GE Money Bank.  The number of GEMB RV loans to our clubmembers in 2006 decreased by 64% from 2005. The decrease in loans can be directly attributed to the current interestrate environment and the fact that most outstanding RV loans were refinancedwhen rates were lower than what is currently available.

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

**Publications**

We produce and distributea variety of publications for select markets in the recreation and leisureindustry, including general circulation periodicals, club magazines,directories, and RV and powersports industry trade magazines.  Revenues are recognized from the sale ofadvertising, subscriptions and direct sales of some of the publications.  We believe that the focused audience of eachpublication is an important factor in attracting advertisers.

 

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The following chart sets forth the circulation and frequencyof our publications:
| **Publication**                                           | ** ** | **2006**

**Circulation** | ** ** | **Issues Published**

**Annually** | ** ** |
|-----------------------------------------------------------|------------|---------------------------|------------|------------------------------------|------------|
| ** **                                                | ** ** | ** **                | ** ** | ** **                         | ** ** |
|                                                      |       |                      |       |                               |       |
| **PAID CIRCULATION MAGAZINES (1)**                        |       |                      |       |                               |       |
| American Rider                                            |       | 52,602                    |       | 6                                  |       |
| ATV Sport                                                 |       | 45,281                    |       | 10                                 |       |
| Bass & Walleye  Boats                                 |       | 64,648                    |       | 9                                  |       |
| Camping Life                                              |       | 84,024                    |       | 8                                  |       |
| MotorHome                                                 |       | 142,276                   |       | 12                                 |       |
| Powerboat                                                 |       | 24,792                    |       | 11                                 |       |
| Rider                                                     |       | 122,064                   |       | 12                                 |       |
| SnowGoer                                                  |       | 64,176                    |       | 7                                  |       |
| Snow Week                                                 |       | 22,448                    |       | 10                                 |       |
| Trailer Boats                                             |       | 100,100                   |       | 11                                 |       |
| Trailer Life                                              |       | 269,038                   |       | 12                                 |       |
|                                                      |       |                      |       |                               |       |
| **CONTROLLED CIRCULATION- Business  (2)**                 |       |                      |       |                               |       |
| Boating Industry                                          |       | 26,031                    |       | 12                                 |       |
| Campground  Management                                    |       | 14,342                    |       | 12                                 |       |
| PowerSports  Business                                     |       | 11,960                    |       | 16                                 |       |
| PowerSports  Business Directory/Market Data Book          |       | 14,433                    |       | 1                                  |       |
| RV Business                                               |       | 18,005                    |       | 12                                 |       |
|                                                      |       |                      |       |                               |       |
| **CONTROLLED CIRCULATION-  Consumer (3)**                 |       |                      |       |                               |       |
| ATV Magazine                                              |       | 239,516                   |       | 6                                  |       |
| Cruising Rider                                            |       | 67,854                    |       | 6                                  |       |
| Watercraft World                                          |       | 62,173                    |       | 6                                  |       |
|                                                      |       |                      |       |                               |       |
| **FREE DISTRIBUTION (4)**                                 |       |                      |       |                               |       |
| Thunder Press-  North                                     |       | 31,554                    |       | 12                                 |       |
| Thunder Press-  East                                      |       | 26,809                    |       | 12                                 |       |
| Thunder Press-  West                                      |       | 49,965                    |       | 12                                 |       |
| Woodall’s  Specials (5)                              |       | 69,644                    |       | 1                                  |       |
| Woodall’s  Regional News Tabloids                    |       | 90,192                    |       | 36                                 |       |
|                                                      |       |                      |       |                               |       |
| **ANNUALS (1)**                                           |       |                      |       |                               |       |
| Trailer Life  Campground/RV Park & Services Directory |       | 254,833                   |       | 1                                  |       |
| Trailer Life’s  RV Buyers Guide                      |       | 105,166                   |       | 1                                  |       |
| Towing Guide                                              |       | 596,750                   |       | 1                                  |       |
| Ultimate  Snowmobile Buyers Guide                         |       | 152,939                   |       | 1                                  |       |
| Woodall’s  Buyer’s Guide                        |       | 53,040                    |       | 1                                  |       |
| Woodall’s  Campground Directory                      |       | 297,062                   |       | 1                                  |       |
| Woodall’s  Tenting Directory                         |       | 26,317                    |       | 1                                  |       |
| Woodall’s Go  & Rent ... Rent & Go (4)       |       | 86,715                    |       | 1                                  |       |
|                                                      |       |                      |       |                               |       |
| **CLUB MAGAZINES (6)**                                    |       |                      |       |                               |       |
| Coast to Coast  Magazine                                  |       | 98,985                    |       | 8                                  |       |
| Golf Traveler  (7)                                        |       | 65,385                    |       | 4                                  |       |
| Highways                                                  |       | 962,880                   |       | 12                                 |       |
| RV View                                                   |       | 648,577                   |       | 4                                  |       |

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(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) Distributionto RV outlets, including campgrounds and dealerships.

(6) Limited toclub members and promotional copies. The price is included in the membershipfee.

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

 

*PaidCirculation Magazines*

*AmericanRider*, introduced in November 1993, is targeted to owners andoperators of Harley-Davidson motorcycles.

*ATV Sport* wasintroduced in May 1998 and targets recreational and racing sport quad riders.

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*Bass andWalleye Boats* is dedicatedto freshwater fishing boat owners who demand top performance from their boats,engines and accessories.

*Camping Life*appealsto family-style campers and other outdoor enthusiasts with articles aboutdestinations, products and activities to enhance their outdoor lifestyles.

*MotorHome*is a monthly periodical for owners and prospective buyers of motorhomes whichhas been 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 published since1974.  Each issue focuses on motorcycles,personalities, technical subjects, travel notes and other features of interestto this recreational affinity group.

*SnowGoer* isdesigned for highly active snowmobiling participants and provides detailedequipment and product critiques, and maintenance tips.

*Snow Week* is thecentral source of information for the competition and high-performancesnowmobiling market segment.  Thepublication provides timely, year-round articles on racing, performanceenhancing products, technical assistance, new product introductions, andgeneral industry information.

*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*,initially published in 1941, is the leading consumer magazine for the RVindustry, featuring articles on subjects including product tests, travel andtourist attractions.

#### *ControlledCirculation Magazines- Business*

*Boating Industry*isthe leading source of news and information for dealers, manufacturers,aftermarket vendors and other professionals in the marine industries throughits bi-monthly magazine and daily web site.

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

*PowerSports Business*isan industry 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 Directories*are supplier directories for each of the ATV, snowmobile and watercraftmarkets.  These directories featurehundreds of manufacturers and suppliers of parts, services, apparel and muchmore, complete with detailed company information.

*RV Business* isthe leading trade magazine covering industry news and trends for RV dealers,

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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 large numbers of active ATV ownerswith comprehensive product information during the peak periods when equipmentis purchased.

*Cruising Rider*was introduced in March 1998 and targets cruiser motorcycle owners and buyers.

*Watercraft World*is targeted to avid personal watercraft enthusiasts and provides detailedcritiques of watercraft, in-depth gear and accessory evaluations, technicaltips and racing information.

#### *FreeDistribution Publications*

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

*Woodall’sSpecials* are annualpublications geared around specific events, such as the beginning of thecamping season and the beginning of the snowbird season.  Its editorial content is aimed at seasonalevents and the ads are largely from regional campgrounds.

*Woodall’sRegional 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.

#### *AnnualPublications*

*Trailer Life Campground/ RV Park& Services Directory*, initially published in 1972, is anannually updated directory which provides information on and ratings forapproximately 11,000 public and private campgrounds, approximately 800 RVservice centers, and almost 800 tourist attractions in North America along withcolor maps of the areas covered.  Thepublication features Good Sam Parks that offer discounts on overnight campingfees to our club members.  This directoryis sold primarily by direct mail to Good Sam Club members, at RV dealershipsand in bookstores.  In 2000, we beganissuing a version of the directory on CD-ROM.

*TrailerLife’s RV Buyers Guide*, issued annually, features more than 400 listings with photos, floorplans and specifications on new RVs including travel trailers, fifth-wheeltrailers, folding camping trailers, motorhomes and pickup campers.  The publication is sold at newsstands and bymail order from magazine advertisements.

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 reader to makeinformed purchases.

*Woodall’sBuyer’s Guide* isan annual publication distributed mainly through bookstores and

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newsstands, whichprovides photos, floor plans and specifications of the new model year RVs.  The buyer’s guide was first published in1978.

*Woodall’sCampground Directory,* initially published in 1948, is an annual consumer directory offeredin both national and regional editions. This directory is primarily distributed through book stores.

*Woodall’sTenting Directory*isan annual directory distributed primarily through newsstands, which providesinformation on both government and privately-owned campgrounds and the outdooractivities and attractions that are available near them.

*Woodall’sGo & Rent... Rent & Go* is an annual catalog providing information on whereto find on-site lodging and cabin rentals at RV Parks & Campgrounds and “Over-the-Road”RV Rentals, as well as fully equipped campsites throughout the U.S.A. andCanada.  This book features “turn-key”camping experiences for those who want to try camping, rent a cabin, or rent afully-equipped campsite.

#### *Club orTrade Magazines and Books*

Each of our membershipclubs has its own publication which provides information on club activities andevents, feature stories and other articles. We publish *Highways* for the Good Sam Club, *Coast to Coast Magazine* for the Coast to Coast Club, *The Golf Traveler* for the Golf Card Club, and*RV View* for the President’s Club.  We also periodically publish books targetedto our club membership which address the RV lifestyle.

#### *ConsumerShows*

Weoperate 29 consumer outdoor recreation shows primarily focused on RV andpowersports markets.  Twelve of the showswere acquired from Royal Productions, Inc. in December 2005, six consumershows were purchased from H & S Productions, LLC in February 2006 and four RV shows purchasedfrom Apple Rock Advertising and Promotions, Inc. in September 2006.  These shows provide us with the opportunity toreach new customers and interact with them on a face-to-face basis.  Revenues are recognized from the sale ofexhibitor booth space and admission fees.

#### *CampgroundGuides*

Wecurrently produce local campground guides distributed to over 340 campgroundsacross the country.  These guides providelistings for local attractions, restaurants and services and a map of thecampground.

**Retail**

#### *CampingWorld Supercenters*

CampingWorld is a national specialty retailer of merchandise and services for RVowners.  With the opening of our sixnewest Camping World supercenters in the fourth quarter of 2006, we currentlyoperate 63 Camping World retail locations in 26 states.  These stores accounted for approximately 71%of the 2006 total retail revenue in merchandise revenues, while approximately14% were derived from catalog and Internet sales and approximately 15% werederived from non-merchandise revenues such as shop fees, and supplies.

Inthe RV accessory industry, we believe that Camping World has a high level ofname recognition, an effective triple channel distribution strategy (store,catalog, and Internet), and a commitment to offer a broad selection ofspecialized RV products and services at competitive prices combined withtechnical

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assistanceand on-site installation.  Camping Worldoffers approximately 12,000 SKUs, most of which are not regularly available ingeneral merchandise stores.  The CampingWorld supercenters provide installation and repair services for RV products,which are 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.  Many 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.

CampingWorld sources its products from approximately 1,100 vendors.  Camping World attends regional, national andinternational trade shows to determine the products it will offer.  The purchasing activities of Camping Worldare focused on RV parts and accessories, electronics, housewares, hardware,automotive, crafts, clothing, home furnishings, gifts, camping and sportinggoods.  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 retail supercenters are periodically reset to enhance the customers’shopping experience as well as to maximize merchandise category offerings.  New products and services are introduced inorder to keep pace with the advances of the RV industry and to satisfy ourcustomers’ needs.  Customers take advantageof the state-of-the art performance centers staffed with expert RV technicalconsultants and equipped with demonstrable merchandise to assist in educatingcustomers about RV performance products. The resource centers provide an opportunity to promote service offeringsin a more interactive and consultative selling environment.  They are staffed with professionals marketinginsurance products, extended warranties, roadside service, club memberships,and RV financing, which product offerings add to the depth of services thatCamping World customers have become accustomed to receiving at oursupercenters.  Finally, store dress,promotional signage and directional signage are periodically refreshed tofurther enhance our customers’ shopping experience at Camping World’ssupercenters.

CampingWorld’s supercenters generally range in size from approximately 10,000 to64,000 square feet.  Approximately 40% ofeach supercenter is devoted to a retail sales floor, a customer service area,and a technical information counter; 40% is comprised of the installationfacility, which contains 4 to 16 drive-through installation bays; and 20% isallocated to office and warehouse space. Large parking areas provide sufficient space and facilitate maneuveringof RVs.  By combining broad productselection, technical assistance, installation and repair services, CampingWorld’s supercenters provide one-stop shopping for RV owners.  Camping World maintains toll-free telephonenumbers for customers to schedule installation and repair appointments.  All supercenters are open seven days a week.

Camping World intends to continue the controlled expansion of theirsupercenter store network while at the same time develop dealer partnershipsacross North America.  We plan toestablish additional Camping World stores alongside or within existing RVdealerships.  This marketing strategywill provide an expanded number of customers with access to the vast array ofproducts and services that we offer and generate traffic for our dealer partnersby marketing locally, regionally and nationally our extensive parts andaccessories business.  Currently weoperate 44 Camping World stores alongside or within RV dealerships, including36 Camping World stores that are part of our dealer alliance program.  Of the Camping World stores that arealongside or within RV dealerships, 31 are located within dealerships

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indirectly owned or operated by FreedomRoads Holding LLC and itssubsidiaries (collectively “FreedomRoads”). FreedomRoads is indirectly owned and controlled by Stephen Adams, ourChairman and principal owner of our parent company.

On March 6, 2006, Camping World, a wholly-ownedsubsidiary of AGI, 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 nocapital requirements or sharing of income and expenses.

#### *Mail OrderOperations and Internet*

CampingWorld initiated its catalog operations in 1967. Camping World currently has a proprietary mailing list of approximately2.4 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.

During2006, Camping World distributed 8.9 million catalogs, 7.8 million of which weremailed in fourteen separate mailings, and the remaining 1.1 million catalogswere distributed in supercenters, at campgrounds and other RV locations, and aspackage inserts.  During the same period,Camping World processed approximately 317,000 catalog orders at an average netorder size of $116, excluding postage and handling charges.  Camping World distributed nine high-quality,full-color catalogs during 2006, consisting of eight catalogs plus a MasterCatalog in the spring of 2006.

TheInternet has proven to be a significant, low-cost source for new club members,subscriptions and other ancillary product sales.  We maintain forty-four Internet web sites,which are accessible through *http://www.rv.net*,and are experiencing significant growth. In 2000, our club operations commenced a low-cost marketing strategythrough e-mail membership acquisition campaigns.  Members added in 2006 under these programsrepresented approximately 12.6% of all new club members.  E-mail acquisition campaigns and Internet onlinerevenue totaled approximately $35.8 million in 2006, an increase of 11.5% overprior year.

**Marketing**

We market our club memberships and related products andservices through direct mail, e-mail, inserts, ride-alongs, spaceadvertisements, promotional events, point of sale, member-get-a-membercampaigns, and telemarketing.  Directresponse marketing efforts account for approximately 47% of new enrollmentswith the remaining 53% derived from other sources.  We use a variety of commercially availablemailing lists of RV owners in our direct mail efforts.  Currently, the most widely used listdatabases are provided by three commercial list compilers, and direct responselists are from RV industry participants, RV consumer surveys, and proprietaryin-house lists.

Our publications segmentsolicits advertisements through an internal sales force and by payingcommissions to advertising agencies and independent contractors who placeadvertisements.  Many

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advertisers are repeatcustomers with whom we have long standing relationships.

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

**Operations**

Our customer serviceoperations are located in Denver, Colorado and Bowling Green, Kentucky.  The primary focus of these groups is tomanage our customers’ expectations and relationship with the organization.  These member service operations processedapproximately 1.4 million telephone calls in 2006.  Approximately forty percent of the callsoriginated from the marketing efforts of catalog mailings, membership acquisition,membership renewals and associated ancillary products and events.  All such efforts use toll-free numbers as aresponse mechanism.

Camping World’s catalog,internet and fulfillment operations are located in Franklin, Kentucky.  Fulfillment operations involve the processingof orders and checks principally received by mail.   Orders are usually processed and shippedwithin 24 hours of receipt.  Certainfulfillment operations are performed by third parties.  Our publication operations develop the layoutfor publications and outsource printing to third parties.

**Information Support Services**

We utilize integrated computer systems to support ourmembership club and publishing operations. A database containing all customer activity across our various businessesand programs has been integrated into our web sites and call centers.  Comprehensive information on each member,including a profile of the purchasing activities of members, is available tocustomer service representatives when responding to member requests and whenmarketing our products and services.  Weemploy publishing software for publication makeup and content, and foradvertising to support our publications operations.  A wide-area network facilitates communicationwithin and between our offices.  We alsoutilize information technology, including list segmentation, merge and purgeprograms, and advanced data base analysis and modeling techniques to selectprospects for direct mail solicitations and other direct marketing efforts.

Camping World’s management information systems and electronicdata processing systems consist of an extensive range of retail, mail order,financial and merchandising systems, including purchasing, inventorydistribution and control, sales reporting, accounts payable and merchandisemanagement.  Camping World’s managementinformation system includes point-of-sale registers that are equipped with barcode readers in each supercenter.  Theseregisters are polled nightly by a central computer.  With this point-of-sale information and theinformation from Camping World’s on-line distribution centers, Camping Worldcompiles comprehensive data, including detailed sales volume and inventoryinformation by product, merchandise transfers and receipts, special orders,supply orders and returns of product purchases to vendors.  In conjunction with its nightly polling,Camping World’s central computer sends price changes to registers at the pointof sale.  The registers capture President’sClub member numbers and associated sales and references to specific promotionalcampaigns.  Management monitors theperformance of each supercenter and mail order operation to evaluate inventorylevels, determine markdowns and analyze gross profit margins by product.

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

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**Regulation**

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

**Competition**

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

**Employees**

As of December 31, 2006,we had 1,848 full-time and 158 part-time or seasonal employees, consisting of 8executives, 1,343 employees in retail operations, 382 employees inadministrative and club operations, 218 employees in publishing and advertisingsales, 8 employees in resort services and 47 employees in marketing.  No employees are covered by a collectivebargaining agreement.  We believe thatour employee relations are good.

**Trademarks and Copyrights**

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

**ITEM1A:  RISK FACTORS**

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

**Risks Relating to our Debt**

*Our substantial indebtedness could adversely affect our financialhealth.*

We have a significant amount of indebtedness.  As of December 31, 2006, our total debt andtotal stockholder’s deficit were $285.2 million and $75.4 million,respectively.  Our total debt as ofDecember 31, 2006 primarily consists of: (1) $170.1 million under the AGI 9%Senior Subordinated

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Notes due 2012 (“AGI Senior Notes”), (2) $108.5 million under theAmended and Restated Credit Agreement and Senior Secured floating Rate Note PurchaseAgreement (“Senior Credit Facility”), and (3) $6.6 million of debt relating topublication and consumer event acquisitions over the last four years within ourPublications Segment.  In the future, weintend to use cash generated by operations to reduce our indebtedness.  However, we may from time to time, subject torestrictions imposed by the terms of our indebtedness, pay dividends or find itmore advantageous to employ cash generated by operations for capitalinvestments and acquisitions.

Our ability to satisfy our debt service obligations depends primarilyon our operating performance.  Futuredebt repayments by us, including the principal amount of the notes, may requirefunds in excess of our available cash flow. We cannot assure our investors that we will be able to raise additionalfunds, if necessary, through future financings.

Our parent, AGHI, has debt as of December 31, 2006consisting of $99.5 million principal amount of 10-7/8% senior notes due 2012(the “AGHI Notes”) at a $3.2 million 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 toFebruary 15, 2008, the Company may elect to pay interest on the AGHI Notes incash or by the issuance of additional notes of the same tenor as the AGHI Notes.  Any additional AGHI Notes issued in paymentof interest are due in full on or before March 15, 2010.  The Company expects to issue additional notesof the same tenor as the AGHI Notes through February 15, 2008 to pay intereston the AGHI Notes when and as such interest is due.  After February 15, 2008, the AGHI must relyon dividends from AGI to fund the interest payments due under the AGHINotes.  Although the only source of thecash payment of the AGHI Notes is dividends from AGI, there are certain restrictionson the payment of dividends under the AGI Senior Credit Facility and the AGIIndenture.

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

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

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

Despite our current level of debt, we or our subsidiaries may be ableto incur substantial additional debt in the future.  Our Amended and Restated Credit Agreement (“SeniorCredit Facility”) will permit total borrowings of up to $136.4 million.  Although our Senior Credit Facility and ourAGI Senior Notes restrict us and our restricted subsidiaries from incurringadditional debt, these restrictions are subject to important exceptions andqualifications.  If we or oursubsidiaries incur additional debt, the risks that we and they now face asresult of our leverage could increase.

If our financial condition and operating results deteriorate, ourrelationships with our creditors,

19

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including the holders of the AGI Senior Notes, the lenders under ourSenior Credit Facility and our suppliers, may be adversely affected.

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

The indenture governing the AGI Senior Notes and the credit agreementfor the Senior Credit Facility include a number of significant restrictivecovenants.  These covenants restrict,among other things, our ability to: (i) incur more debt, (ii) pay dividends ormake other distributions, (iii) make investments, (iv) issue stock ofsubsidiaries, (v) repurchase stock, (vi) create liens, (vii) enter intotransactions with affiliates, (viii) enter into sale-leaseback transactions,(ix) merge or consolidate, and (x) transfer and sell assets.

These covenants could limit our ability to plan for or react to marketconditions or to meet our capital needs. These covenants are subject to certain important exceptions.

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

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

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

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

We cannot assure our investors that our business will generatesufficient cash flow from operations or that future borrowings will beavailable to us under our Senior Credit Facility in an amount sufficient toenable us to pay our indebtedness, including the Senior Credit Facility and theAGI Senior Notes, as it becomes due or to fund our other liquidity needs.  If our future cash flow from operations andother capital resources are insufficient to pay our obligations as they 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, on or before its maturity.  Wecannot assure our investors that we will be able to refinance any of ourindebtedness, including the Senior Credit Facility and the AGI Senior Notes, onsatisfactory terms or at all.

20

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

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

Upon the occurrence of certain specific kinds of change of controlevents, we will be required to offer to repurchase all outstanding AGI SeniorNotes at 101% of the principal amount thereof plus accrued and unpaid interestand liquidated damages, if any, to the date of repurchase.  However, it is possible that we will not havesufficient funds at the time of the change of control to make any requiredrepurchases or that the AGI Senior Credit Facility will not allow suchrepurchases.  Our failure to purchase tenderednotes would constitute a default under the indenture governing the notes. Inaddition, certain important corporate events relating to our capital structurewould not constitute a “change of control” under the indenture.

**Risks Relating to Our Business**

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

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

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

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

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

21

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

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

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

Our activities relate significantly to the amount of leisure time andthe amount of disposable income available to users of our products andservices.  Our business, therefore, maybe sensitive to general economic conditions affecting the willingness ofconsumers to purchase club memberships and related products and services and ofadvertisers to place advertisements in our publications.  In 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, a decline in the national economy could causesome of the merchants who participate in our programs to go out of business. Itis likely that, should the number of merchants entering bankruptcy rise, thenumber of uncollectible accounts would also rise.  This would have an adverse effect on our businessand financial results.

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

We are a wholly-owned subsidiary of Affinity Group Holding, Inc., whichis a wholly-owned subsidiary of AGI Holding Corp. (“AGHC”), a privately heldcompany.  Stephen Adams, our Chairman,owns approximately 97.4% of the outstanding shares of AGHC.  Accordingly, Mr. Adams will be able to electour Board of Directors and to control matters submitted to the vote of our shareholders.  Circumstances may occur in which theinterests of Mr. Adams could be in conflict with the interests of the holdersof our debt instruments and lenders.  Forexample, Mr. Adams may have an interest in pursuing acquisitions, divestituresor other transactions that, in his judgment, could enhance the value of hisequity investment, even though such transactions may involve risks to theholders of our debt instruments and lenders.

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

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

In addition to the existing regulatory framework, new regulatoryefforts affecting our operations may be proposed from time to time in thefuture at the federal, state and local level. There can be no

22

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assurance that such regulatory efforts will not have a material adverseeffect on our ability to operate our businesses or our results of operations.

Our direct marketing operations are subject to various federal andstate “do not call” list requirements. The Federal Trade Commission has created a national “do not call” registry.  Under these federal regulations, consumersmay have their phone numbers added to the national “do not call” registry.  Generally, we are prohibited from callinganyone on that registry.  In September2003, telemarketers were granted access to the registry and are now required tocompare their call lists against the national “do not call” registry at leastonce every 90 days.  We also are requiredto pay a fee to access the registry on a quarterly basis.  Enforcement of the “do not call” provisionsbegan in late 2003, and the rule provides for fines of up to $11,000 perviolation and other possible penalties. These rules limit our ability to market our products and services to newcustomers.  Furthermore, we may incurpenalties if we do not conduct our marketing activities in compliance withthese rules.

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

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

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

Our success depends in part on our ability to attract, hire, train andretain qualified managerial, sales and marketing personnel.  Competition for these types of personnel ishigh.  We may be unsuccessful inattracting and retaining the personnel we require to conduct our operationssuccessfully and, in such an event, our business could be materially 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 have operations.  Our real property leases generally providefor fixed monthly rentals with annual escalation clauses.  The table below sets forth certaininformation concerning our properties and the lease expiration date includesall stated option periods.
| ** **                                                                                 | ** ** | **Square** | ** ** | ** ** | ** ** | **Lease**      | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|----------------|------------|
| ** **                                                                                 | ** ** | **Feet**   | ** ** | **Acres**  | ** ** | **Expiration** | ** ** |
| **Corporate Headquarters:**                                                           |       |       |       |       |       |           |       |
| Ventura, CA                                                                                |       | 74,100     |       |       |       | 2039           |       |
|                                                                                       |       |       |       |       |       |           |       |
| **Other  Office Facilities:**                                                              |       |       |       |       |       |           |       |
| Carson, CA (regional publication office)                                                   |       | 10,048     |       |       |       | 2007           |       |
| Denver, CO (customer service, warehousing  fulfillment, and information system functions). |       | 60,000     |       |       |       | 2039           |       |
| Bowling Green, KY (retail administrative  headquarters and mail order operations)          |       | 31,278     |       |       |       | 2039           |       |
| Seattle, WA (regional publication sales office)                                            | ** ** | 912        | ** ** | ** ** |       | 2007           |       |
| Elkhart, IN (regional publication sales office)                                            | ** ** | 4,076      | ** ** | ** ** |       | 2008           |       |
| Chesterfield, VA (shows sales office)                                                      | ** ** | 5,900      | ** ** | ** ** |       | 2008           |       |
| Maple Grove, MN (Ehlert Publications Group, Inc.  headquarters)                            | ** ** | 17,496     | ** ** | ** ** |       | 2010           |       |
| Earth City, MO (information systems functions)                                             |       | 1,769      |       |       |       | 2008           |       |
| Las Vegas, NV (regional shows sales office)                                                |       | 2,809      |       |       |       | 2009           |       |
| Scotts Valley, CA (regional publication office)                                            |       | 3,905      |       |       |       | 2011           |       |
| Bowling Green, KY (database and online media  support)                                     |       | 5,952      |       |       |       | 2015           |       |
| ** **                                                                                 |       |       |       |       |       |           |       |
| **Distribution  Centers:**                                                                 |       |       |       |       |       |           |       |
| Bakersfield, California                                                                    |       | 85,747     |       | 14.827     |       | 2037           |       |
| Franklin, Kentucky                                                                         |       | 175,000    |       | 33.000     |       | 2035           |       |
|                                                                                       |       |       |       |       |       |           |       |
| **Camping  World Supercenter Locations:**                                                  |       |       |       |       |       |           |       |
| Dothan, AL (1)                                                                             |       | 18,906     |       | 11.275     |       | 2025           |       |
| Robertsdale, AL (1)                                                                        |       | 19,670     |       | 18.360     |       | 2026           |       |
| Tucson, AZ (2)                                                                             |       | 12,145     |       | 2.000      |       | 2018           |       |
| Mesa, AZ                                                                                   |       | 27,500     |       | 3.140      |       | 2010           |       |
| Bakersfield, CA (2)                                                                        |       | 23,325     |       | 9.940      |       | 2023           |       |
| La Mirada, CA                                                                              |       | 33,479     |       | 5.501      |       | 2037           |       |
| San Marcos, CA                                                                             |       | 25,522     |       | 2.212      |       | 2027           |       |
| Fairfield, CA                                                                              |       | 43,434     |       | 3.780      |       | 2009           |       |
| Rocklin, CA                                                                                |       | 29,085     |       | 4.647      |       | 2037           |       |
| San Bernardino, CA                                                                         |       | 18,126     |       | 1.665      |       | 2012           |       |
| San Martin, CA                                                                             |       | 29,486     |       | 5.000      |       | 2023           |       |
| Valencia, CA                                                                               |       | 64,410     |       | 9.231      |       | 2037           |       |
| Denver, CO                                                                                 |       | 27,085     |       | 4.132      |       | 2037           |       |
| Longmont, CO (1)                                                                           |       | 5,003      |       | 6.750      |       | 2026           |       |
| Clermont, FL (1)                                                                           |       | 3,441      |       | 4.880      |       | 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           |       |

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| ** **            | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|-----------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| Oakwood, GA (1)       |       | 4,510            |       | 7.681     |       | 2026                  |       |
| Savannah, GA (1)      |       | 6,285            |       | 4.898     |       | 2026                  |       |
| Snellville, GA (1)    |       | 12,376           |       | 5.923     |       | 2026                  |       |
| Woodstock, GA (1)     |       | 4,510            |       | 7.715     |       | 2026                  |       |
| Bolingbrook, IL       |       | 25,126           |       | 5.299     |       | 2035                  |       |
| Island Lake, IL (1)   |       | 2,540            |       | 17.028    |       | 2026                  |       |
| Clarksville, IN (2)   |       | 19,480           |       | 6.291     |       | 2034                  |       |
| Elkhart, IN (2)       |       | 25,953           |       | 2.500     |       | 2034                  |       |
| Bowling Green, KY     |       | 37,615           |       | 2.750     |       | 2037                  |       |
| Hammond, LA (2)       |       | 27,096           |       | 68.454    |       | 2034                  |       |
| Belleville, MI        |       | 44,248           |       | 7.260     |       | 2037                  |       |
| Rogers, MN            |       | 24,700           |       | 6.303     |       | 2025                  |       |
| Colfax, NC (1)        |       | 6,371            |       | 8.094     |       | 2026                  |       |
| Statesville, NC (1)   |       | 39,050           |       | 7.412     |       | 2024                  |       |
| Bridgeport, NJ        |       | 24,581           |       | 6.920     |       | 2031                  |       |
| Albuquerque, NM (1)   |       | 20,412           |       | 31.434    |       | 2026                  |       |
| Henderson, NV         |       | 25,850           |       | 4.400     |       | 2025                  |       |
| Amsterdam, NY (2)     |       | 13,420           |       | 28.000    |       | 2033                  |       |
| Churchville, NY (1)   |       | 7,193            |       | 10.380    |       | 2026                  |       |
| Hamburg, NY (1)       |       | 13,095           |       | 6.553     |       | 2025                  |       |
| Syracuse, NY (1)      |       | 12,242           |       | 8.190     |       | 2026                  |       |
| Akron, OH (1)         |       | 3,865            |       | 9.622     |       | 2026                  |       |
| Brunswick, OH         |       | 23,233           |       | 4.087     |       | 2038                  |       |
| Chichester, OH (1)    |       | 10,447           |       | 1.572     |       | 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                  |       |
| Myrtle Beach, SC      |       | 38,962           |       | 5.410     |       | 2037                  |       |
| Myrtle Beach, SC (1)  |       | 2,298            |       | 18.940    |       | 2026                  |       |
| Spartanburg, SC (1)   |       | 11,900           |       | 19.263    |       | 2033                  |       |
| Chattanooga, TN (1)   |       | 9,400            |       | 10.840    |       | 2024                  |       |
| Nashville, TN (2)     |       | 34,478           |       | 3.238     |       | 2037                  |       |
| Anthony, TX (1)       |       | 7,061            |       | 32.000    |       | 2025                  |       |
| Denton, TX            |       | 22,984           |       | 6.887     |       | 2037                  |       |
| Fort Worth, TX (2)    |       | 11,102           |       | 16.000    |       | 2026                  |       |
| Katy, TX (1)          |       | 25,913           |       | 38.861    |       | 2025                  |       |
| Mission, TX           |       | 23,094           |       | 3.430     |       | 2015                  |       |
| New Braunfels, TX     |       | 43,397           |       | 19.100    |       | 2035                  |       |
| Draper, UT            |       | 27,675           |       | 8.031     |       | 2026                  |       |
| Manassas, VA (2)      |       | 16,348           |       | 9.754     |       | 2018                  |       |
| Burlington, WA (1)    |       | 23,033           |       | 6.500     |       | 2025                  |       |
| Fife, WA              |       | 35,659           |       | 5.840     |       | 2032                  |       |

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(1)            Thissupercenter is leased from a FreedomRoads dealership and the acreage reflectsthe total dealership property.  Thesquare footage reported is the portion of the building leased by Camping World,Inc.

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

Wealso lease a body shop of 10,500 square feet on approximately 0.7 acres inDenver, Colorado, a body shop of 12,000 square feet on approximately 1.9 acresin Bellville, Michigan and other

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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 involved in any litigation that will have amaterial adverse effect on the results of operations or financial position.

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

None.

**PART II**

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

Not Applicable

 

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**ITEM6:  SELECTED FINANCIAL DATA**

The selected financial data of our company for each of thefive years ended December 31 are derived from our audited consolidatedfinancial statements.  Prior to April 27,2004, AGI was a wholly-owned subsidiary of Affinity Group Holding, Inc. (“AGH”).  On April 27, 2004, AGH was merged into AGI,with AGI being the surviving entity after the merger.  The merger was accounted for as a combinationof entities under common control using historical costs.  All periods have been restated to reflect theresults of operations of AGI and AGH prior to the April 27, 2004 merger.  Our selected financial data should be read inconjunction with “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and our Consolidated Financial Statements and thenotes thereto included herein.
| ** **                                                                             | ** ** | **December 31,**                | ** ** |
|----------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Statement of Operations Data:**                                       | ** ** | **2006**                             | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                             | ** ** | **(dollars in thousands)** | ** ** |
| REVENUES:                                                                              |       |                                 |       |   |   |   |   |   |   |   |   |
| Membership  services                                                                   |       | $                                    | 137,394    |   | $ | 133,756 |   | $ | 131,608 |   | $ | 128,664 |   | $ | 124,546 |   |
| Publications                                                                           |       | 86,742                               |       | 79,122 |   | 77,977 |   | 71,436 |   | 66,654 |   |
| Retail                                                                                 |       | 290,422                              |       | 272,682 |   | 255,094 |   | 225,306 |   | 239,922 |   |
|                                                                                   |       | 514,558                              |       | 485,560 |   | 464,679 |   | 425,406 |   | 431,122 |   |
| COSTS APPLICABLE TO  REVENUES:                                                         |       |                                 |       |   |   |   |   |   |   |   |   |
| Membership  services                                                                   |       | 87,407                               |       | 85,551 |   | 84,231 |   | 79,500 |   | 74,097 |   |
| Publications                                                                           |       | 58,302                               |       | 53,855 |   | 53,042 |   | 48,392 |   | 45,351 |   |
| Retail                                                                                 |       | 175,015                              |       | 162,363 |   | 151,196 |   | 136,137 |   | 158,265 |   |
|                                                                                   |       | 320,724                              |       | 301,769 |   | 288,469 |   | 264,029 |   | 277,713 |   |
|                                                                                   |       |                                 |       |   |   |   |   |   |   |   |   |
| GROSS PROFIT                                                                           |       | 193,834                              |       | 183,791 |   | 176,210 |   | 161,377 |   | 153,409 |   |
|                                                                                   |       |                                 |       |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                                                                    |       |                                 |       |   |   |   |   |   |   |   |   |
| Selling, general  and administrative                                                   |       | 133,129                              |       | 121,178 |   | 116,137 |   | 104,066 |   | 101,608 |   |
| Restructuring  charge                                                                  |       | 93                                   |       | — |   | — |   | 1,210 |   | 2,269 |   |
| Goodwill  impairment                                                                   |       | —                               |       | 4,344 |   | — |   | — |   | — |   |
| Depreciation and  amortization                                                         |       | 18,656                               |       | 15,529 |   | 13,893 |   | 10,298 |   | 9,893 |   |
|                                                                                   |       | 151,878                              |       | 141,051 |   | 130,030 |   | 115,574 |   | 113,770 |   |
|                                                                                   |       |                                 |       |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS                                                                 |       | 41,956                               |       | 42,740 |   | 46,180 |   | 45,803 |   | 39,639 |   |
|                                                                                   |       |                                 |       |   |   |   |   |   |   |   |   |
| NON-OPERATING ITEMS:                                                                   |       |                                 |       |   |   |   |   |   |   |   |   |
| Interest  expense, net                                                                 |       | (24,593                              | )          | (24,581 | ) | (23,239 | ) | (18,123 | ) | (16,862 | ) |
| Debt  extinguishment expense                                                           |       | (835                                 | )          | — |   | (5,035 | ) | (3,218 | ) | — |   |
| Other  non-operating income (expense), net                                             |       | 9                                    |       | (5 | ) | 420 |   | 201 |   | (44 | ) |
|                                                                                   |       | (25,419                              | )          | (24,586 | ) | (27,854 | ) | (21,140 | ) | (16,906 | ) |
| INCOME  FROM OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE |       | 16,537                               |       | 18,154 |   | 18,326 |   | 24,663 |   | 22,733 |   |
|                                                                                   |       |                                 |       |   |   |   |   |   |   |   |   |
| INCOME TAX EXPENSE                                                                     |       | (22,268                              | )          | (7,416 | ) | (8,075 | ) | (9,275 | ) | (9,032 | ) |
|                                                                                   |       |                                 |       |   |   |   |   |   |   |   |   |
| INCOME (LOSS) FROM  OPERATIONS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE           |       | (5,731                               | )          | 10,738 |   | 10,251 |   | 15,388 |   | 13,701 |   |
|                                                                                   |       |                                 |       |   |   |   |   |   |   |   |   |
| CUMULATIVE EFFECT OF  ACCOUNTING CHANGE (1)                                            |       | —                               |       | — |   | — |   | — |   | (1,742 | ) |
|                                                                                   |       |                                 |       |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                                                                      |       | $                                    | (5,731     | ) | $ | 10,738 |   | $ | 10,251 |   | $ | 15,388 |   | $ | 11,959 |   |

 

 

 

27

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**SELECTEDFINANCIAL DATA (continued)**
| ** **                           | ** ** | **December 31,**                | ** ** |
|--------------------------------------|------------|--------------------------------------|------------|
| ** **                           | ** ** | **2006**                             | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                           | ** ** | **(dollars in thousands)** | ** ** |
| Balance Sheet  Data (at period end): |       |                                 |       |   |   |   |   |   |   |   |   |
| Working capital (deficiency)         |       | $                                    | (34,983    | ) | $ | (6,731 | ) | $ | (10,813 | ) | $ | (25,770 | ) | $ | (39,820 | ) |
| Total assets                         |       | 408,008                              |       | 415,460 |   | 320,222 |   | 302,862 |   | 285,960 |   |
| Deferred revenues and gains (2)      |       | 100,089                              |       | 98,920 |   | 99,130 |   | 98,410 |   | 94,475 |   |
| Total debt                           |       | 285,155                              |       | 320,000 |   | 314,336 |   | 240,127 |   | 223,001 |   |
| Total  stockholder's deficit         |       | (75,383                              | )          | (66,365 | ) | (158,108 | ) | (88,905 | ) | (87,548 | ) |
|                                      |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1) Effective January 1, 2006 the Company changed its taxstatus from a Subchapter C corporation to a Subchapter S corporation, uponreceiving approval from the Internal Revenue Service.  The election to change included the Companyand all subsidiaries, with the exception of Camping World, Inc. and itswholly-owned subsidiaries, which remained Subchapter C Corporations.  As a result of the change in tax status, alldeferred tax accounts of the Company, excluding Camping World and itswholly-owned subsidiaries, were revalued to account for the lower tax ratesapplicable to the Subchapter S corporation status and such reduction wascharged to income tax expense for the year end December 31, 2006.

(2) Deferred revenues represent cash received by us inadvance of the recognition of revenues in accordance with accounting principlesgenerally accepted in the United States. Deferred revenues primarily reflect club membership dues, annual ERSfees, advances on third party credit card fee revenues and publicationsubscriptions.  These revenues arerecognized at the time the goods or services are provided or over themembership period, which averages approximately 18 months.  The deferred revenue balance for 2006, 2005,2004, 2003 and 2002 also include deferred gains of $9.8 million, $10.3 million,$10.8 million, $11.3 million and $11.8 million, respectively, from the realestate sale-leaseback transactions which occurred in December 2001.

28

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

The following tables set forth the components of thestatements of operations for the years ended December 31, 2006, 2005, and 2004as a percentage of total revenues, and the comparison of those components fromperiod to period.  The followingdiscussion is based on our Consolidated Financial Statements included elsewhereherein.  Our revenues are derivedprincipally from membership services, including club membership dues andmarketing fees paid to us for services provided by third parties, frompublications, including subscriptions and advertising, and from retail sales.
| ** **                                  | ** ** | **Percentage of**  | ** ** | **Percentage Increase/** | ** ** |
|---------------------------------------------|------------|-------------------------|------------|-------------------------------|------------|
| ** **                                  | ** ** | **Total Revenues** | ** ** | **(Decrease)**                | ** ** |
| ** **                                  | ** ** | ** **              | ** ** | ** **                    | ** ** | ** ** | ** ** | **Year 2006** | ** ** | **Year 2005** | ** ** |
| ** **                                  | ** ** | **2006**                | ** ** | **2005**                      | ** ** | **2004** | ** ** | **over 2005** | ** ** | **over 2004** | ** ** |
| REVENUES:                                   |       |                    |       |                          |       |   |   |   |   |   |   |
| Membership services                         |       | 26.7                    | %          | 27.5                          | %          | 28.3 | % | 2.7 | % | 1.6 | % |
| Publications                                |       | 16.9                    | %          | 16.3                          | %          | 16.8 | % | 9.6 | % | 1.5 | % |
| Retail                                      |       | 56.4                    | %          | 56.2                          | %          | 54.9 | % | 6.5 | % | 6.9 | % |
|                                        |       | 100.0                   | %          | 100.0                         | %          | 100.0 | % | 6.0 | % | 4.5 | % |
| COSTS APPLICABLE  TO REVENUES:              |       |                    |       |                          |       |   |   |   |   |   |   |
| Membership services                         |       | 17.0                    | %          | 17.6                          | %          | 18.1 | % | 2.2 | % | 1.6 | % |
| Publications                                |       | 11.3                    | %          | 11.1                          | %          | 11.4 | % | 8.3 | % | 1.5 | % |
| Retail                                      |       | 34.0                    | %          | 33.4                          | %          | 32.6 | % | 7.8 | % | 7.4 | % |
|                                        |       | 62.3                    | %          | 62.1                          | %          | 62.1 | % | 6.3 | % | 4.6 | % |
| GROSS PROFIT                                |       | 37.7                    | %          | 37.9                          | %          | 37.9 | % | 5.5 | % | 4.3 | % |
|                                        |       |                    |       |                          |       |   |   |   |   |   |   |
| OPERATING  EXPENSES:                        |       |                    |       |                          |       |   |   |   |   |   |   |
| Selling, general and administrative         |       | 25.9                    | %          | 25.0                          | %          | 25.0 | % | 9.9 | % | 4.3 | % |
| Goodwill impairment                         |       | —                  |       | 0.9                           | %          | — |   | (100.0 | %) | 100.0 | % |
| Depreciation and amortization               |       | 3.6                     | %          | 3.2                           | %          | 3.0 | % | 20.1 | % | 11.8 | % |
|                                        |       | 29.5                    | %          | 29.1                          | %          | 28.0 | % | 7.7 | % | 8.5 | % |
| INCOME FROM  OPERATIONS                     |       | 8.2                     | %          | 8.8                           | %          | 9.9 | % | (1.8 | %) | (7.4 | %) |
|                                        |       |                    |       |                          |       |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                       |       |                    |       |                          |       |   |   |   |   |   |   |
| Interest income                             |       | 0.2                     | %          | 0.2                           | %          | 0.2 | % | 5.1 | % | 40.5 | % |
| Interest expense                            |       | (5.0                    | %)         | (5.3                          | %)         | (5.2 | %) | 0.3 | % | 6.9 | % |
| Debt extinguishment expense                 |       | (0.2                    | %)         | —                        |       | (1.1 | %) | — |   | (100.0 | %) |
| Other non-operating (expense) income, net   |       | —                  |       | —                        |       | 0.1 | % | (280.0 | %) | (101.2 | %) |
|                                        |       | (5.0                    | %)         | (5.1                          | %)         | (6.0 | %) | 3.4 | % | (11.7 | %) |
|                                        |       |                    |       |                          |       |   |   |   |   |   |   |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES |       | 3.2                     | %          | 3.7                           | %          | 3.9 | % | (8.9 | %) | (0.9 | %) |
|                                        |       |                    |       |                          |       |   |   |   |   |   |   |
| INCOME TAX  EXPENSE                         |       | (4.3                    | %)         | (1.5                          | %)         | (1.7 | %) | 200.3 | % | (8.2 | %) |
|                                        |       |                    |       |                          |       |   |   |   |   |   |   |
| NET INCOME (LOSS)                           |       | (1.1                    | %)         | 2.2                           | %          | 2.2 | % | (153.4 | %) | 4.8 | % |

 

29

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**YearEnded December 31, 2006 Compared with Year Ended December 31, 2005**

*Revenues*

Revenues of $514.6 million for 2006 increased by$29.0 million or 6.0% from the comparable period in 2005.

Membership services revenues for 2006 of $137.4million increased by approximately $3.6 million or 2.7% from 2005.  This revenue increase was largelyattributable to a $3.4 million increase in extended vehicle warranty programrevenue due to continued growth in the sales of one-year renewable warrantyproducts, an $0.8 million increase in ERS revenue attributable to increasedenrollment, a $0.5 million revenue increase from the rollout of our newdiscount camping club, Camp Club USA, and a $0.2 million increase inadvertising revenue for *Highways m*agazine.  These increases were partially offset by a$1.3 million decrease in dealer marketing program revenue.

Publications revenues for 2006 of approximately$86.8 million increased by approximately $7.6 million or 9.6% from 2005.  This increase was primarily attributable to a$6.8 million increase associated with the acquisition of consumer shows,acquired from Royal Productions, Inc. in December 2005, Plus Events shows inFebruary 2006, and RV shows purchased from Apple Rock Advertising andPromotions, Inc. in September 2006, a $0.9 million revenue increase in theboating group primarily associated with the acquisition of *PowerboatMagazine* in May 2005, a $0.5 million increase in revenue from theupdated edition of the campground atlas, a $0.6 million revenue increaseresulting from the purchase of the publishing assets of American GuideServices, Inc. in August 2006, and a $0.5 million revenue increase for thepowersports group titles due to increased issues published.  These revenue increases were partially offsetby a $0.9 million decrease in the snow group titles primarily due todiscontinuing *Snowmobile Magazine* in 2006 andfour fewer issues of *Snow Week* in2006, and a $0.8 million decrease in advertising and circulation revenue forthe RV-related titles.

Retail revenue for 2006 of $290.4 million increasedapproximately $17.8 million or 6.5% from 2005. Store merchandise sales increased $18.0 million over 2005 primarily dueto a $24.9 million revenue increase from the addition of twenty-four new storesover the past two years.  Same storesales decreased $6.9 million, or 3.5%, compared to a 2.1% increase in2005.  Same store sale calculations for agiven 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, installation fees, supplies andservice revenue increased by $0.9 million from 2005 to 2006.  These increases were partially offset by a$1.1 million decrease in mail order sales.

*Costs Applicable to Revenues*

Costsapplicable to revenues totaled $320.7 million in 2006, an increase of $19.0million or 6.3% from 2005.

Membership services costsand expenses increased by approximately $1.9 million or 2.2% to $87.4 millionfor 2006.  This increase consisted of $1.7 million ofmarketing and program expenses associated with the increased enrollment in theextended vehicle warranty programs and ERS programs, a $1.4 million increase inmembership services and start-up costs associated with our new camping club,Camp Club USA, partially offset by a $1.2 million decrease in dealer marketingprogram costs.

Publication costs and expensesof $58.3 million for 2006 increased $4.4 million or 8.3% compared to 2005.  This increase consisted of $4.1 million ofadditional costs resulting from the operations of the acquired consumer showsand the publishing assets of American Guide Services, Inc., a $0.6 millionincrease in boating group costs primarily associated with the purchase of *Powerboat Magazine*, a $0.5 million increase in campgroundatlas costs related to increased revenue, and a $0.2 million increase in costsassociated with the increased issues published within our powersportsgroup.  These increases 

30

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were partially offset by a $0.5million decrease in costs within the snow group due to decreased issuespublished, and a $0.5 million decrease in costs related to the RV publications.

Retail costs applicable to revenues increased $12.7 million or 7.8% to$175.0 million primarily due to the opening of 24 new stores over the past twoyears.  The retail gross profit increased by $5.1million but the gross margin as a percent of revenues decreased from 40.5% in2005 to 39.7% in 2006 due primarily to vendor price increases and increased internationalfreight charges as our import program continues to grow.

*Operating Expenses*

Selling, general and administrative expenses of$133.1 million for 2006 increased $12.0 million or 9.9% over 2005.  The increase in selling, general andadministrative expenses resulted primarily from increased retail selling, laborand other general and administrative expenses of $11.9 million primarilyrelated to the opening of 24 new stores over the past two years, and a $1.2million increase in expense related to the consumer show acquisitions,partially offset by a $1.1 million decrease in executive compensation.  The Company incurredrestructuring charges of $0.1 million in 2006 which was primarily attributableto an operating management restructuring in the membership segment.

Depreciation and amortization expenses of $18.7million were $3.1 million higher than in 2005 due primarily to increasedcapital expenditures at Camping World, and the amortization of intangibleassets associated with the purchase of consumer shows and *PowerboatMagazine*.

*Income from Operations*

Income from operations of $42.0 million for 2006 decreased $0.8 millionor 1.8% compared to 2005.  This decreasewas attributable to increased operating expenses of $10.9 million, partiallyoffset by increased gross profit in the retail, publications and membershipservices operations of $5.1 million, $3.2 million and $1.8 million,respectively.  For 2005, income fromoperations included a $4.3 million non-cash goodwill impairment charge.

*Non-Operating Items*

Net non-operating items for 2006 were $25.4 million,a $0.8 million increase from 2005.  Thisincrease was primarily attributable to an $0.8 million debt extinguishmentexpense relating to the purchase and retirement of $29.9 million of the Company’sSenior Subordinated Notes.

*Income before Income Taxes*

Income before income taxes for 2006 was $16.5 million, or 8.9% lessthan 2005.  This $1.6 million decreasefrom the prior year was attributable to the $0.8 million decrease in incomefrom operations mentioned above, and an $0.8 million debt extinguishmentexpense.

*Income Tax Expense*

TheCompany recorded $22.3 million of income tax expense for 2006, an increase of$14.9 million from 2005.  The increasewas primarily due to AGHC’s S corporation change of tax status electioneffective for 2006, which included AGI and all its subsidiaries with theexception of Camping World, Inc. and its wholly-owned subsidiaries which remainSubchapter C corporations.  As a result,all deferred assets and liabilities were revalued  based on S corporation rates with theexception of those related to Camping World, Inc. and its wholly-ownedsubsidiaries which remained Subchapter C corporations.  As a result, $22.3 million of tax expenseswas recorded.  Deferred tax liabilitiesrelated to Camping World, Inc. and its wholly-owned subsidiaries which remainedSubchapter C corporations were approximately $12.9 million.  As the result of the Company’s change in taxstatus to S corporation, a deferred tax 

31

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liabilityrelated to a Subchapter S corporation of approximately $2.8 million wasrecorded on the financial statements for a potential tax liability in prior Ccorporation years.  The deferred taxassets of $3.2 million are related solely to Camping World, Inc.

*Net Income (Loss)*

Net loss for 2006 was $5.7 million compared to netincome of $10.7 million for 2005.

*Segment Profit*

Segment profit of $54.4million for 2006 (before unallocated depreciation and amortization, general andadministrative, interest, debt restructuring and income tax expense) decreasedby $3.8 million, or 6.6%, from 2005.

Membership services segmentprofit of $44.7 million in 2006 increased by $7.0 million, or 18.6% from $37.7million in 2005.  This increase wasprimarily attributable to the $4.3 million goodwill impairment charge in 2005,a $2.1 million increase in profit associated with increased enrollment andincreased interest income for the ERS programs, a $1.5 million increase inprofit in the extended vehicle warranty program, partially offset by a $0.9million decrease in profit associated with the start-up of our new club, CampClub USA.

Publication segment profitfor 2006 of $19.8 million decreased by $0.1 million, or 0.3% from $19.9 millionin 2005.  The $0.1 million decrease ingross profit margin was primarily due to reduced gross profit from theRV-related titles of $0.5 million partially offset by increased profit relatedto the consumer shows of $0.4 million.

Retailsegment loss for 2006 of $10.1 million increased by $10.8 million from2005.  This increased segment lossresulted primarily from a $12.0 million increase in selling, general andadministrative expenses primarily related to the increase in new stores, a $3.4million increase in interest expense and a $1.1 million increase indepreciation and amortization expense partially offset by a $5.7 millionincrease in gross profit.

**YearEnded December 31, 2005 Compared with Year Ended December 31, 2004**

*Revenues*

Revenues of $485.6 million for 2005 increased byapproximately $20.9 million or 4.5% from the comparable period in 2004.

Membership services revenues for 2005 of $133.8million increased by approximately $2.2 million or 1.6% from 2004.  This revenue increase was largelyattributable to a $4.6 million increase in extended vehicle warranty program revenuedue to continued growth in the sales of one-year renewable warranty products,and a $1.3 million increase in ERS revenue attributable to increasedenrollment, partially offset by a $1.5 million reduction in membership servicesrevenue primarily associated with reduced enrollment in the Coast to Coast Cluband Golf Card Club, a $1.4 million reduction in marketing fee income recognizedon RV financing products, and an $0.8 million decrease in dealer marketingprogram revenue.

Publications revenues for 2005 of $79.1 millionincreased by approximately $1.1 million or 1.5% from 2004.  This increase was primarily attributable to a$1.4 million revenue increase due to the acquisition of *PowerboatMagazine* in May 2005, a $1.4 million increase associated with theacquisition of three consumer shows, acquired through the acquisition of ARUInc. (“ARU”) in December 2004, and a $0.7 million increase in advertisingrevenue for the recreational vehicle related titles, partially offset by a $2.0

32

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million revenue reduction due to the disposition ofarchery-related publication titles in the third quarter of 2004, and a $0.4million decrease due to a reduction in the number of issues of *Snowmobile Magazine*.

Retail revenue for 2005 of $272.7 million increased$17.6 million or 6.9% from 2004.  Storemerchandise sales increased $17.9 million over 2004 primarily due to a $14.1million revenue increase from the addition of eleven new stores over the pasttwo years.  Same store sales increased$3.8 million, or 2.1%, compared to an 11.0% increase in 2004.  Same store sale calculations for a givenperiod include only those stores that were open both at the end of that periodand at the beginning of the preceding fiscal year.  In addition, installation fees, supplies andservice revenue increased by $0.8 million from 2004 to 2005.  These increases were partially offset by a$1.1 million decrease in mail order sales.

*Costs Applicable to Revenues*

Costsapplicable to revenues totaled $301.8 million in 2005, an increase of $13.3million or 4.6% from 2004.

Membership services costsand expenses increased by approximately $1.3 million or 1.6% to $85.6 millionfor 2005.  This increase consisted of $3.9 million ofmarketing and program expenses associated with the increased enrollment in theextended vehicle warranty programs and ERS programs, partially offset by a $1.7million decrease in membership services costs primarily associated with reducedmarketing and program expenses for Coast to Coast Club and Golf Card Club, a$0.6 million decrease in dealer marketing program costs, and a $0.3 milliondecrease in other overhead expenses.

Publication costs and expensesof $53.9 million for 2005 increased $0.8 million or 1.5% compared to 2004.  This increase was primarily attributable tothe recently acquired operations of the *Powerboat Magazine*and ARU consumer shows.  This increasewas partially offset by a reduction in costs due to the sale of archery-relatedpublication titles in the third quarter of 2004.

Retail costs applicable to revenues increased $11.2 million or 7.4% to$162.4 million primarily due to the opening of eleven new stores over the pasttwo years.  The retail gross profit margin increased by$6.4 million but the gross margin as a percent of revenues decreased from 40.7%in 2004 to 40.5% in 2005 due primarily to increased freight charges.

*Operating Expenses*

Selling, general and administrative expenses of$121.2 million for 2005 increased $5.0 million or 4.3% over 2004.  The increased selling, general andadministrative expenses resulted primarily from increased retail selling, laborand other general and administrative expenses of $6.0 million, partially offsetby a $0.5 million decrease in executive compensation and a $0.5 milliondecrease in other corporate general and administrative expenses.  The $4.3 million non-cash goodwill impairmentcharge was based on the estimate of the fair value of the Golf Card Clubprimarily using projected discounted cash flows as determined in conjunctionwith the Company’s impairment review of goodwill in the fourth quarter of 2005.

Depreciation and amortization expenses of $15.5million were $1.7 million higher than in 2004 due primarily to increasedcapital expenditures at Camping World, and the amortization of intangibleassets associated with the purchase of ARU and Powerboat magazine.

*Income from Operations*

Income from operations of $42.7 million for 2005 decreased $3.4 millionor 7.4% compared to 2004.  This decreasewas attributable to increased operating expenses of $11.0 million, which includedthe $4.3 million non-cash goodwill impairment charge, partially offset byincreased gross profit in the retail, 

33

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membership services and publications operations of $6.4 million, $0.9million and $0.3 million, respectively.

*Non-Operating Items*

Net non-operating items for 2005 were approximately$24.6 million, a $3.3 million decrease from 2004.  This decrease was primarily attributable to a$5.0 million reduction in debt extinguishment expense associated with the redemptionin 2004 of the Affinity Group Holding, Inc. (“AGH”) senior notes and a $0.3million increase in interest income, partially offset by $1.6 million ofadditional interest expense from higher interest rates and higher loan balancesassociated with the issuance of the $200.0 million in 9% Senior SubordinatedNotes in 2004, and a $0.4 million reduction in net gains on sales of variousassets.

*Income before Income Taxes*

Income before income taxes for 2005 was $18.2 million, or 0.9% lessthan 2004.  This $0.2 million decreasefrom the prior year was attributable to the $3.4 million decrease in incomefrom operations mentioned above, the increase in net interest expense ofapproximately $1.4 million and the $0.4 million reduction in net gain on sales of various assets, partially offset by the $5.0 milliondecrease in debt extinguishment expenses.

*Income Tax*

Income taxes for 2005 of $7.4 million decreased $0.7million from 2004 due primarily to lower pretax income.  The effective tax rates for 2005 and 2004were 40.9% and 44.1%, respectively.  Theeffective tax rate for 2005 is higher than the statutory rate due primarily tostate sales taxes, and a permanent difference created as a result of thegoodwill impairment charge.  Theseincreases were partially offset by a reduction in the valuation allowance dueto the ultimate realization of the asset related to the charitable contributioncarryover.  The effective tax rate for2004 was higher than the statutory rate due to state taxes and the permanentdifferences created as a result of the write-off of book goodwill on the saleof archery-related publication assets in August 2004.

*Net Income*

Net income for 2005 was $10.7 million compared to$10.3 million for 2004.

*Segment Profit*

Segment profit of $58.2million for 2005 (before unallocated depreciation and amortization, general andadministrative, interest, debt restructuring and income tax expense) decreasedby $1.7 million, or 2.9%, from 2004.

Membership services segmentprofit of $37.7 million in 2005 decreased by $2.1 million, or 5.4% from $39.8million in 2004.  This decrease wasprimarily attributable to a $4.0 million reduction in profit in the Golf CardClub primarily related to the goodwill impairment, a $1.4 million decrease inprofit from a reduction in marketing fee income from RV financing products, a$1.2 million increase in new product and club development efforts, a $0.2million reduction in profit in the Good Sam Club member publication, *Highways Magazine*, due to increased production costs and a$0.2 million decrease in dealer program marketing profit.  These decreases were partially offset by a$2.6 million increase in profit associated with increased enrollment andincreased interest income for the ERS programs, a $1.4 million increase inprofit in the extended vehicle warranty program and a $0.9 million increase inprofit in the Coast to Coast Club primarily due to expense reductions.

 

34

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Publication segment profitfor 2005 of $19.9 million remained the same as 2004.  The $0.3 million increase in gross profitmargin was offset by increased amortization expense related to theacquisitions.

Retailsegment profit for 2005 of approximately $0.6 million increased by $0.4million, or 145.4%, over 2004.  Theincreased segment profit resulted primarily from a $6.4 million increase ingross profit margin partially offset by a $6.0 million increase in selling, generaland administrative expenses.

**Liquidity and Capital Resources**

We havehistorically operated with a working capital deficit.  The working capital deficit as of December31, 2006 and 2005 was $35.0 million and $6.7 million, respectively.  The primary reason for the working capitaldeficit is the deferred revenue and gains reported under current liabilities inthe amount of $62.9 million and $61.0 million as of December 31, 2006 and 2005,respectively.  Deferred revenue isprimarily comprised of cash collected for club memberships in advance which isdeferred 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.  The primary reason forthe fluctuation in working capital is the $29.9 million paydown of the SeniorSubordinated Notes in 2006.  We generatednet cash**from operations of $47.1 million and $17.2 million, in 2006 and 2005, respectively.

*Contractual Obligations andCommercial Commitments*

The following table reflects ourcontractual obligations and commercial commitments at December 31, 2006, inthousands.  The table below includesprincipal and future interest due under our debt agreements based on interestrates as of December 31, 2006 and assumes debt obligations will be held tomaturity.
| ** **                    | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------|------------|-------------------------------------------|------------|
| **(in thousands)**       | ** ** | **Total**                                 | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **Thereafter** | ** ** |
| ** **                    | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Long-term debt                |       | $                                         | 390,527    |   | $ | 31,201 |   | $ | 27,527 |   | $ | 123,018 |   | $ | 15,725 |   | $ | 15,308 |   | $ | 177,748 |   |
| Operating lease obligations   |       | 160,414                                   |       | 15,517 |   | 14,752 |   | 13,771 |   | 13,326 |   | 11,733 |   | 91,315 |   |
| Deferred compensation         |       | 6,310                                     |       | 3,172 |   | 1,758 |   | 1,380 |   | — |   | — |   | — |   |
| Other commercial  commitments |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Letters of  credit            |       | 7,104                                     |       | 6,754 |   | 350 |   | — |   | — |   | — |   | — |   |
| Grand total                   |       | $                                         | 564,355    |   | $ | 56,644 |   | $ | 44,387 |   | $ | 138,169 |   | $ | 29,051 |   | $ | 27,041 |   | $ | 269,063 |   |

 

On June 24, 2003, we entered into the Amended andRestated Credit Agreement and a Senior Secured Floating Rate Note PurchaseAgreement (“Senior Credit Facility”) providing for term loans (“Term Loans”) inthe aggregate of $140.0 million and a revolving credit facility of $35.0million.  As of December 31, 2006, $108.5million was outstanding under the Term Loans. No borrowings were outstanding on the revolving credit facility as ofDecember 31, 2006.  Reborrowings 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, or LIBOR, plus an applicablemargin ranging from 0.75% to 2.75% over the stated rates.  As of December 31, 2006, the average interestrate on the Term Loans was 7.85%, and permitted borrowings under the undrawnrevolving facility were $27.9 million. We also pay a commitment fee of 0.5% per annum on the unused amount ofthe revolving credit facility.  Theaggregate quarterly scheduled payments on the Term Loans are

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$350,000.  Therevolving credit facility matures on June 24, 2008, and the Term Loans matureon June 24, 2009.  The funds availableunder our Senior Credit Facility may be utilized for borrowings or letters ofcredit; however, a maximum of $12.5 million may be allocated to such letters ofcredit.  As of December 31, 2006, we hadletters of credit in the aggregate amount of $7.1 million outstanding.  The Senior Credit Facility is secured byvirtually all of our assets and a pledge of our stock and the stock of oursubsidiaries.  Further the Senior CreditFacility requires the loans to be prepaid in an amount equal to 75% of theexcess cash flow, as defined.  As ofDecember 31, 2006, the Company generated $4.4 million of excess cash flow, asdefined and will prepay the Term Loans in an amount equal to 75% of the excesscash flow in the first quarter of 2007, on a pro-rata basis, in inverse orderof maturity, per the agreement.

On March 3, 2006, AGI amended its Senior CreditFacility to revise the definition of Consolidated Fixed Charges Ratio andPermitted Tax Distributions.  Thisamendment allows AGI to distribute taxes to its ultimate parent based on itsstand-alone tax obligation rather than the tax obligation of its parent, AGHI,until such time that AGHI pays interest on its 10 7/8% Senior Notes in cashinstead of by the issuance of additional notes. For the year ended December 31, 2006, AGI has distributed $3.3 millionin the form of a dividend to AGHI to fund the Company’s tax obligations.  Further, AGI amended the Senior CreditFacility’s covenant restrictions with affiliates to permit a joint venturearrangement between Camping World and FreedomRoads Holding LLC and itssubsidiaries, (collectively “FreedomRoads”), an affiliate of the Company.

In February 2004, we issued $200.0 million aggregateprincipal amount of 9% Senior Subordinated Notes due 2012 (the “AGI SeniorNotes”).  The Company completed aregistered exchange of the AGI Senior Notes under the Securities Act of 1933 inAugust 2004.  On June 8, 2006, AGIamended its Senior Credit Facility to permit AGI to purchase up to $30.0million of AGI’s Senior Subordinated Notes from time to time as and when theCompany determines.  AGI purchased $29.9million of the Senior Subordinated Notes at various times from June 2006through August 2006.  The Senior SubordinatedNote purchases were made with available cash and the notes purchased have beenretired.  As of December 31, 2006, $170.1million of Senior Subordinated Notes remain outstanding.

The Senior Credit Facility and the AGI Indenturecontain certain restrictive covenants relating to, but not limited to, mergers,changes in the nature of the business, acquisitions, additional indebtedness,sale of assets, investments, and the payment of dividends subject to certainlimitations and minimum operating covenants. We were in compliance with all debt covenants at December 31, 2006.

On March 24, 2005 in a private placement, the Company’sparent, AGHI, issued $88.2 million principal amount of its 10-7/8% senior notesdue 2012 (the “AGHI Notes”) at a $3.2 million original issue discount.  AGHI completed a registered exchange of theAGHI Notes under the Securities Act of 1933 on June 8, 2005.  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 on February 15 and August 15commencing August 15, 2005 and the entire $88.2 million principal amount of theAGHI Notes are due in full on February 15, 2012.  For interest payments on and prior toFebruary 15, 2008, AGHI may elect to pay interest on the AGHI Notes in cash orby the issuance of additional notes of the same tenor as the AGHI Notes.  Any additional AGHI Notes issued in paymentof interest are due in full on or before March 15, 2010.  The AGHI Notes cannot be redeemed prior toFebruary 15, 2008.  Although the onlysource of the cash payment of the AGHI Notes is dividends from AGI, there arecertain restrictions on the payment of dividends under the Senior Credit Facilityand the AGI Indenture.

AGHIcontributed the net proceeds from the issuance of the AGHI Notes, approximately$81.0 million, to the Company and in turn, the Company made an equitycontribution to its wholly-owned subsidiary, Camping World, Inc. (“CampingWorld”).  Camping World then made anequity capital contribution in the same amount to its wholly-owned subsidiary,CWI, Inc. (“CWI”).  CWI created a newwholly-owned subsidiary named CWFR Capital Corp., a Delaware corporation (“CWFR”)which

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isan “unrestricted subsidiary” as defined under the AGHI Notes and the AGIIndenture.  Since CWFR is an unrestrictedsubsidiary, its operations are not restricted by either the AGI Indenture orthe AGHI Notes.  CWI made an equitycapital contribution to CWFR in an equal amount to the capital contributionthat CWI received from Camping World. CWFR used the proceeds from the equity capital contribution to acquire apreferred membership interest in FreedomRoads, a Minnesota limited liabilitycompany owned 90%by The Stephen Adams Living Trust which also indirectly owns 97.4% of theoutstanding capital stock of AGHC and indirectly AGI.

The preferred membershipinterest acquired by CWFR has a face amount of $88.2 million and is entitled toreceive a preferred payment from FreedomRoads at 10-7/8% per annum when and asdeclared by the Board of Governors of FreedomRoads from any source legallyavailable therefor.  Any portion of thepreferred payment not paid will accumulate and will be compounded semi-annuallyuntil paid.  FreedomRoads may redeem thepreferred membership interest upon the payment of $88.2 million plus theaccrued and unpaid preferred return to the date of redemption.  FreedomRoads will be required to redeem thepreferred membership interest at that same redemption price if there is a saleor reorganization of the membership interests of FreedomRoads or a sale ofsubstantially all of the assets of FreedomRoads.  According to the terms of the preferredmembership interest, FreedomRoads cannot make distributions with respect tomembership interests other than (a) distributions with respect to the preferredmembership interest, (b) distributions for the members’ estimated taxliabilities from earnings of FreedomRoads and (c) distributions in theaggregate not to exceed 50% of the amount of (i) FreedomRoads net profit forthe period from January 1, 2005 through the end of the fiscal quarter nextpreceding the distribution date less (ii) the aggregate amount of taxdistributions made during the period from January 1, 2005 through the end ofthe fiscal quarter next preceding the distribution date.  CWFR may not sell, pledge or otherwisetransfer the preferred membership interest. The preferred membership interest does not provide CWFR with any votingrights in FreedomRoads.  The preferredmembership interest in FreedomRoads is being carried at cost and is reviewedperiodically for impairment.

In April 2005, Camping World, Inc. acquired the assetsof an RV catalog retailer specializing in recreational vehicle merchandise for$0.6 million.  In May 2005, the EhlertPublishing Group, Inc. acquired the *Powerboat Magazine*title and related assets from Nordskog Publishing, Inc. for $4.0 million.  As part of the purchase, we issued $1.5million of debt and assumed $0.5 million of liabilities.  In December 2005, AGI Productions, Inc., asubsidiary of Ehlert Publishing Group, Inc., acquired the consumer outdoorrecreation show assets of Royal Productions, Inc. for $8.5 million.  As part of the purchase, we issued $6.0million of debt and assumed $1.8 million of liabilities.

On March 6, 2006, Camping World, a wholly-ownedsubsidiary of AGI, 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.

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

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During 2006, we incurred$1.1 million of deferred executive compensation expense under our phantom stockagreements and made payments of $0.8 million on mature phantom stockagreements.  The earned incentives underthese agreements are scheduled to be paid at various times over the next threeyears.  Phantom stock payments of $3.2million are scheduled to**be made during2007.

Capital expenditures for 2006 totaled $15.2 millioncompared to capital expenditures of $11.4 million in 2005.  Capital expenditures are anticipated to beapproximately $15.8 million for 2007, primarily for 19 new Camping World storesand equipment, information technology, existing store upgrades, inventorysystem replacement, and computer software upgrades and enhancements.

Management believes thatfunds generated by operations, together with available borrowings under ourrevolving credit line, will be sufficient to meet all of our anticipated cashrequirements for the foreseeable future.

**Factors Affecting FuturePerformance**

Although increases in operating costs could adverselyaffect our operations, management does not believe that inflation has had amaterial effect on operating profit during the past several years.  However, fuel shortages and substantialincreases in propane and gasoline costs could have a significant impact on ourtravel-related membership services and publications revenues.  Historically such events have caused declinesin advertisements but have not significantly affected club membershipenrollment.  We are unable to predict atwhat point fluctuating fuel prices may begin to adversely impact revenues orcash flow.  We believe we will be able topartially offset any cost increases with price increases to our members andcertain cost reducing measures.

**Seasonality**

Our cash flow is highest in the summer months due tothe seasonal nature of the retail segment, membership renewals and advertisingprepayments for the annual directories.

**Critical Accounting Policies**

*General*

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

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

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*RevenueRecognition*

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

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 publications are deferred until the publications aredistributed.  Revenues and relatedexpenses for consumer shows are recognized when the show occurs.

*AccountsReceivable*

We estimate thecollectability of our trade receivables. A considerable amount of judgment is required in assessing the ultimaterealization of these receivables including the current credit-worthiness ofeach customer.  Changes in requiredreserves have been recorded in recent periods and may occur in the future dueto the market environment.

*Inventory*

We state inventories atthe lower of cost or market.  Inassessing the ultimate realization of inventories, we are required to makejudgments as to future demand requirements and compare that with the current orcommitted inventory levels.  We haverecorded changes in required reserves in recent periods due to changes instrategic direction, such as discontinuances of product lines as well aschanges in market conditions due to changes in demand requirements.  It is possible that changes in required inventoryreserves may continue to occur in the future due to the market conditions.

*Long-Lived Assets*

Purchased intangibleassets with finite lives are amortized using the straight-line method over theestimated economic lives of the assets, ranging from one to twenty-three years.

Long-lived assets, suchas property, plant and equipment and purchased intangible assets with finitelives are evaluated for impairment whenever events or changes in circumstancesindicate the carrying value of an asset may not be recoverable in accordancewith SFAS No. 144, “Accounting for the Impairment or Disposal of Long-LivedAssets.”  We assess the fair value of theassets based on the future cash flow the assets are expected to generate andrecognize an impairment loss when estimated undiscounted future cash flowexpected to result from the use of the asset plus net proceeds expected fromdisposition of the asset (if any) are less than the carrying value of theasset.  When an impairment is identified,we reduce the carrying amount of the asset to its estimated fair value based ona

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discounted cash flowapproach or, when available and appropriate, comparable market values.  We determined there were no indicators ofimpairment of long-lived assets as of December 31, 2006.

We have evaluated theremaining useful lives of our finite-lived purchased intangible assets todetermine if any adjustments to the useful lives were necessary or if any ofthese assets had indefinite lives and were therefore not subject toamortization.  We determined that noadjustments to the useful lives of our finite-lived purchased intangible assetswere necessary.  The finite-livedpurchased intangible assets consist of membership customer lists, resort andgolf course agreements, non-compete and deferred consulting agreements anddeferred financing costs which have weighted average useful lives ofapproximately 6 years, 23 years, 15 years and 7 years, respectively.

*Indefinite Lived IntangibleAssets*

Effective January 1,2002, we adopted new accounting standards on “Business Combinations” and “Goodwilland Other Intangible Assets.”  Inaccordance with these new standards, goodwill and intangible assets withindefinite lives are no longer amortized but instead are measured forimpairment at least annually or when events indicate that an impairmentexists.  As required by the newstandards, the impairment tests for goodwill and other indefinite-livedintangible assets are assessed for impairment using fair value measurementtechniques.  Specifically, goodwillimpairment is determined using a two-step process.  The first step of the goodwill impairmenttest is used to identify potential impairment by comparing the fair value of areporting unit with the net book value (or carrying amount), includinggoodwill.  If the fair value of thereporting unit exceeds the carrying amount, goodwill of the reporting unit isconsidered not impaired and the second step of the impairment test isunnecessary.  If the carrying amount ofthe reporting unit exceeds the fair value, the second step of the goodwillimpairment test is performed to measure the amount of impairment loss, ifany.  The second step of the goodwillimpairment test compares the implied fair value of the reporting unit’sgoodwill with the carrying amount of that goodwill.  If the carrying amount of the reporting unit’sgoodwill exceeds the implied fair value of that goodwill, an impairment loss isrecognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner asthe amount of goodwill recognized in a business combination, accordingly thefair value of the reporting unit is allocated to all of the assets andliabilities of that unit as if the reporting unit had been acquired in abusiness combination and the fair value of the reporting unit was the purchaseprice paid to acquire the reporting unit. The impairment test for other intangible assets consists of a comparisonof the fair value of the intangible asset with its carrying value.  If the carrying value of the intangible assetexceeds its fair value, an impairment loss is recognized in an amount equal tothat excess.

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

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

Based on the results ofthe annual impairment tests, we determined that no indicators of goodwillimpairment existed as of December 31, 2006. However, future goodwill impairments tests could result

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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.

*Income Taxes*

The Company recognizesdeferred tax assets and liabilities based on the liability method, whichrequires an adjustment to the deferred tax asset or liability to reflect incometax rates currently in effect. When income tax rates increase or decrease, acorresponding adjustment to income tax expense is recorded by applying the ratechange to the cumulative temporary differences.

*Restructuring*

In 2006, we recorded reserves in connection with therestructuring program primarily within our membership segment.  These reserves included estimates pertainingto employee separation costs and the settlements of contractual obligationsresulting from our actions.  Although wedo not anticipate significant changes, the actual costs may differ from theseestimates.

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

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

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-looking disclosuresare selective in nature and only address the potential impacts from financialinstruments.  They do not include otherpotential effects which could impact our business as a result of these interestrate fluctuations.

#### *Interest Rate Sensitivity Analysis*

At December 31, 2006, we had debt totaling $285.2million, comprised of $108.5 million of variable rate debt and $176.7 millionof fixed rate debt.  Holding othervariables constant (such as debt levels), the earnings and cash flow impact ofa one-percentage point increase/ decrease in interest rates would have anunfavorable/ favorable impact of approximately $1.1 million.

#### *Credit Risk*

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

###### **New AccountingStandards**

InJuly 2006, the FASB issued *FASB Interpretation No. 48(“FIN 48”), “Accounting for Uncertainty in Income Taxes, an interpretation ofFASB Statement No. 109,  Accounting forIncome Taxes*,” which is effective for fiscal years beginning afterDecember 15, 2006, and clarifies the accounting for uncertainty in taxpositions.  FIN 48 requires that werecognize the impact of a tax position in our financial statements if thatposition is more likely than not of being sustained on audit, based on the technicalmerits of the position.  The cumulativeeffect of the change in accounting principle is recorded as an adjustment to

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openingretained earnings.  We are currentlyevaluating the impact of the adoption of FIN 48 on our financial statements.

Effective December 31,2006, the Company adopted the provisions of Staff Accounting Bulletin No. 108(SAB 108), Guidance for Quantifying Financial Statement Misstatements.  In SAB 108, the SEC staff establishes anapproach that requires quantification of Financial Statement errors based on theeffects of the error on each of the Company’s Financial Statements and therelated Financial Statement disclosures. This model is commonly referred to as a “dual approach” because itessentially requires quantification of errors under both the “iron-curtain” andthe “roll-over” methods.  The ironcurtain method focuses primarily on the effect of correcting the period-endbalance sheet with less emphasis on the reversing effects of prior year errorson the income statement in the period of correction.  The roll-over method focuses primarily on theimpact of a misstatement on the income statement, including the reversingeffect of prior year misstatements, but can lead to the accumulation ofmisstatements in the balance sheet.  Theadoption of this bulletin did not impact the Company’s Financial Statements.

###### **Disclosure RegardingForward Looking Statements**

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

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

###### **Indexto Financial Statements**

|                                                                                                        |
|-------------------------------------------------------------------------------------------------------------|
|                                                                                                             |
| Report of Independent Registered Public Accounting  Firm                                                    |
|                                                                                                        |
|                                                                                                        |
|                                                                                                        |
| Consolidated Balance Sheets as of December 31, 2006  and 2005                                               |
|                                                                                                        |
|                                                                                                        |
|                                                                                                        |
| Consolidated Statements of Operations for the years  ended December 31, 2006, 2005 and 2004                 |
|                                                                                                        |
|                                                                                                        |
|                                                                                                        |
| Consolidated Statements of Stockholder’s Deficit for  the years ended December 31, 2006, 2005 and 2004 |
|                                                                                                        |
|                                                                                                        |
|                                                                                                        |
| Consolidated Statements of Cash Flows for the years  ended December 31, 2006, 2005 and 2004                 |
|                                                                                                        |
|                                                                                                        |
|                                                                                                        |
| Notes to Consolidated Financial Statements                                                                  |
|                                                                                                        |
|                                                                                                        |
|                                                                                                        |

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.

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

The Board of Directors ofAffinity Group, Inc.

We have audited theaccompanying consolidated balance sheets of Affinity Group, Inc. and itssubsidiaries, a wholly-owned subsidiary of Affinity Group Holding, Inc., as ofDecember 31, 2006 and 2005, and the related consolidated statements ofoperations, stockholder’s deficit and cash flows for each of the three years inthe period ended December 31, 2006. 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 inaccordance with the standards of the Public Company Accounting Oversight Board(United States).  Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement.  We are not engaged to perform an audit of theCompany’s internal control over financial reporting.  Our audit included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting.  Accordingly, we express nosuch opinion.  An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financialstatement presentation.  We believe thatour audits provide a reasonable basis for our opinion.

In our opinion, thefinancial statements referred to above present fairly, in all materialrespects, the consolidated financial position of Affinity Group, Inc. andsubsidiaries at December 31, 2006 and 2005, and the consolidated results of theiroperations and their cash flows for each of the three years in the period endedDecember 31, 2006, in conformity with U.S. generally accepted accountingprinciples.

/
|                            |   |   | /s/ Ernst & Young LLP |   |
|----------------------------|--------|--------|---------------------------|--------|
| February 14, 2007          |   |   |                      |
| Woodland Hills, California |   |   |                      |

 

 

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**AFFINITY GROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER 31, 2006 AND 2005 (IN THOUSANDS, EXCEPT SHAREAMOUNTS)**

----

 
| ** **                                                                                    | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|-----------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **ASSETS**                                                                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| CURRENT ASSETS:                                                                               |       |       |       |       |       |
| Cash and cash  equivalents                                                                    |       | $          | 15,006     |       | $          | 24,778 |   |
| Accounts  receivable, less allowance for doubtful accounts of $1,193 in 2006 and $952 in 2005 |       | 27,199     |       | 26,508     |       |
| Inventories                                                                                   |       | 52,703     |       | 47,039     |       |
| Prepaid expenses  and other assets                                                            |       | 12,995     |       | 11,218     |       |
| Deferred tax  assets, net                                                                     |       | 3,203      |       | 4,995      |       |
| Total current  assets                                                                         |       | 111,106    |       | 114,538    |       |
|                                                                                          |       |       |       |       |       |
| PROPERTY AND  EQUIPMENT, net                                                                  |       | 34,765     |       | 29,843     |       |
| INVESTMENT IN  AFFILIATE                                                                      |       | 81,005     |       | 81,005     |       |
| NOTE FROM  AFFILIATE                                                                          |       | 4,688      |       | 4,722      |       |
| INTANGIBLE  ASSETS, net                                                                       |       | 30,311     |       | 34,572     |       |
| GOODWILL                                                                                      |       | 144,429    |       | 144,429    |       |
| DEFERRED TAX  ASSETS, net                                                                     |       | —     |       | 4,620      |       |
| OTHER ASSETS                                                                                  |       | 1,704      |       | 1,731      |       |
| Total assets                                                                                  |       | $          | 408,008    |       | $          | 415,460 |   |
|                                                                                          |       |       |       |       |       |
| **LIABILITIES AND STOCKHOLDER'S  DEFICIT**                                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| CURRENT  LIABILITIES:                                                                         |       |       |       |       |       |
| Accounts payable                                                                              |       | $          | 32,577     |       | $          | 12,683 |   |
| Accrued interest                                                                              |       | 5,936      |       | 6,897      |       |
| Accrued income  taxes                                                                         |       | 1,736      |       | 465        |       |
| Accrued  liabilities                                                                          |       | 35,663     |       | 34,094     |       |
| Deferred  revenues and gains                                                                  |       | 62,906     |       | 60,994     |       |
| Current portion  of long-term debt                                                            |       | 7,271      |       | 6,136      |       |
| Total current  liabilities                                                                    |       | 146,089    |       | 121,269    |       |
|                                                                                          |       |       |       |       |       |
| DEFERRED  REVENUES AND GAINS                                                                  |       | 37,183     |       | 37,926     |       |
| LONG-TERM DEBT,  net of current portion                                                       |       | 277,884    |       | 313,864    |       |
| DEFERRED TAX  LIABILITY                                                                       |       | 15,724     |       | —     |       |
| OTHER LONG-TERM  LIABILITIES                                                                  |       | 6,511      |       | 8,766      |       |
|                                                                                          |       | 483,391    |       | 481,825    |       |
| COMMITMENTS AND  CONTINGENCIES                                                                |       |       |       |       |       |
|                                                                                          |       |       |       |       |       |
| STOCKHOLDER'S  DEFICIT:                                                                       |       |       |       |       |       |
| Common stock,  $.001 par value, 2,000 shares authorized, 2,000 shares issued and outstanding  |       | 1          |       | 1          |       |
| Additional  paid-in capital                                                                   |       | 81,005     |       | 81,005     |       |
| Accumulated  deficit                                                                          |       | (156,389   | )          | (147,371   | )          |
| Total  stockholder's deficit                                                                  |       | (75,383    | )          | (66,365    | )          |
| Total liabilities and  stockholder's deficit                                                  |       | $          | 408,008    |       | $          | 415,460 |   |

 

See notes toconsolidated financial statements.

 

45

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**AFFINITYGROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (INTHOUSANDS)**

----

 
| ** **                                  | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                        |       |     |       |     |       |     |       |
| REVENUES:                                   |       |     |       |     |       |     |       |
| Membership services                         |       | $        | 137,394    |     | $          | 133,756  |       | $ | 131,608 |   |
| Publications                                |       | 86,742   |       | 79,122   |       | 77,977   |       |
| Retail                                      |       | 290,422  |       | 272,682  |       | 255,094  |       |
|                                        |       | 514,558  |       | 485,560  |       | 464,679  |       |
| COSTS APPLICABLE  TO REVENUES:              |       |     |       |     |       |     |       |
| Membership services                         |       | 87,407   |       | 85,551   |       | 84,231   |       |
| Publications                                |       | 58,302   |       | 53,855   |       | 53,042   |       |
| Retail                                      |       | 175,015  |       | 162,363  |       | 151,196  |       |
|                                        |       | 320,724  |       | 301,769  |       | 288,469  |       |
|                                        |       |     |       |     |       |     |       |
| GROSS PROFIT                                |       | 193,834  |       | 183,791  |       | 176,210  |       |
|                                        |       |     |       |     |       |     |       |
| OPERATING  EXPENSES:                        |       |     |       |     |       |     |       |
| Selling, general and administrative         |       | 133,129  |       | 121,178  |       | 116,137  |       |
| Restructuring charge                        |       | 93       |       | —   |       | —   |       |
| Goodwill impairment                         |       | —   |       | 4,344    |       | —   |       |
| Depreciation and amortization               |       | 18,656   |       | 15,529   |       | 13,893   |       |
|                                        |       | 151,878  |       | 141,051  |       | 130,030  |       |
| INCOME FROM  OPERATIONS                     |       | 41,956   |       | 42,740   |       | 46,180   |       |
|                                        |       |     |       |     |       |     |       |
| NON-OPERATING  ITEMS:                       |       |     |       |     |       |     |       |
| Interest income                             |       | 1,115    |       | 1,061    |       | 755      |       |
| Interest expense                            |       | (25,708  | )          | (25,642  | )          | (23,994  | )          |
| Debt extinguishment expense                 |       | (835     | )          | —   |       | (5,035   | )          |
| Other non-operating income (expense), net   |       | 9        |       | (5       | )          | 420      |       |
|                                        |       | (25,419  | )          | (24,586  | )          | (27,854  | )          |
|                                        |       |     |       |     |       |     |       |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES |       | 16,537   |       | 18,154   |       | 18,326   |       |
|                                        |       |     |       |     |       |     |       |
| INCOME TAX  EXPENSE                         |       | (22,268  | )          | (7,416   | )          | (8,075   | )          |
|                                        |       |     |       |     |       |     |       |
| NET INCOME (LOSS)                           |       | $        | (5,731     | )        | $          | 10,738   |       | $ | 10,251 |   |

 

See notes toconsolidated financial statements.

 

46

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**AFFINITY GROUP, INC. AND SUBSIDIARIES**

** **

**CONSOLIDATED STATEMENTS OFSTOCKHOLDER'S DEFICIT**

**FOR THE YEARS ENDED DECEMBER 31,2006, 2005 AND 2004**

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

----

 
| ** **                     | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **  | ** ** | ** ** | ** ** |
|--------------------------------|------------|-----------------------|------------|-------------|------------|-----------------|------------|-------------|------------|------------|------------|
| ** **                     | ** ** | **Common Stock** | ** ** | **Paid-in** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
| ** **                     | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Total**  | ** ** |
|                           |       |                  |       |        |       |            |       |        |       |       |       |
| BALANCES AT  JANUARY 1, 2004   |       | 2,000                 |       | $           | 1          |            | $          | —      |       | $          | (88,906    | ) | $ | (88,905 | ) |
|                           |       |                  |       |        |       |            |       |        |       |       |       |
| Dividends                      |       | —                |       | —      |       | —          |       | (79,454     | )          | (79,454    | )          |
| Net income                     |       | —                |       | —      |       | —          |       | 10,251      |       | 10,251     |       |
| BALANCES AT  DECEMBER 31, 2004 |       | 2,000                 |       | 1           |       | —          |       | (158,109    | )          | (158,108   | )          |
|                           |       |                  |       |        |       |            |       |        |       |       |       |
| Additional paid in capital     |       | —                |       | —      |       | 81,005          |       | —      |       | 81,005     |       |
| Net income                     |       | —                |       | —      |       | —          |       | 10,738      |       | 10,738     |       |
| BALANCES AT  DECEMBER 31, 2005 |       | 2,000                 |       | 1           |       | 81,005          |       | (147,371    | )          | (66,365    | )          |
|                           |       |                  |       |        |       |            |       |        |       |       |       |
| Dividends                      |       | —                |       | —      |       | —          |       | (3,287      | )          | (3,287     | )          |
| Net loss                       |       | —                |       | —      |       | —          |       | (5,731      | )          | (5,731     | )          |
| BALANCES AT DECEMBER  31, 2006 |       | 2,000                 |       | $           | 1          |            | $          | 81,005      |       | $          | (156,389   | ) | $ | (75,383 | ) |

 

See notes toconsolidated financial statements.

** **

47

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**AFFINITY GROUP, INC. AND SUBSIDIARIES**

** **

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004 (INTHOUSANDS)**

----

 
| ** **                                                                                | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                    |       |     |       |     |       |     |       |
| Net (loss) income                                                                         |       | $        | (5,731     | )        | $          | 10,738   |       | $ | 10,251 |   |
| Adjustments to reconcile net (loss) income to net  cash provided by operating activities: |       |     |       |     |       |     |       |
| Deferred tax provision (benefit)                                                          |       | 22,136   |       | (2,677   | )          | 2,274    |       |
| Depreciation                                                                              |       | 10,333   |       | 9,194    |       | 8,433    |       |
| Amortization                                                                              |       | 8,323    |       | 6,335    |       | 5,460    |       |
| Goodwill impairment                                                                       |       | -        |       | 4,344    |       | -        |       |
| Provision for losses on accounts receivable                                               |       | 745      |       | 521      |       | 585      |       |
| Deferred compensation                                                                     |       | 1,070    |       | 2,200    |       | 2,950    |       |
| Gain on sale of property and equipment                                                    |       | (16      | )          | (2       | )          | (435     | )          |
| Loss on early extinguishment of debt                                                      |       | 835      |       | -        |       | 5,035    |       |
| Changes in operating assets and liabilities (net of purchased  businesses):               |       |     |       |     |       |     |       |
| Accounts receivable                                                                       |       | (1,436   | )          | (2,765   | )          | 547      |       |
| Inventories                                                                               |       | (5,664   | )          | (4,475   | )          | (5,624   | )          |
| Prepaid expenses and other assets                                                         |       | (1,478   | )          | 442      |       | (427     | )          |
| Accounts payable                                                                          |       | 19,894   |       | (3,828   | )          | 3,800    |       |
| Accrued and other liabilities                                                             |       | (1,446   | )          | (331     | )          | 4,774    |       |
| Deferred revenues and gains                                                               |       | (460     | )          | (2,454   | )          | 743      |       |
| Net cash provided by operating activities                                                 |       | 47,105   |       | 17,242   |       | 38,366   |       |
|                                                                                      |       |     |       |     |       |     |       |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                    |       |     |       |     |       |     |       |
| Capital expenditures                                                                      |       | (15,245  | )          | (11,371  | )          | (8,869   | )          |
| Net proceeds from sale of property and equipment                                          |       | 126      |       | 33       |       | 420      |       |
| Change in intangible assets                                                               |       | -        |       | (45      | )          | (22      | )          |
| Investment in affiliate                                                                   |       | -        |       | (81,005  | )          | -        |       |
| Acquisitions, net of cash received                                                        |       | (2,868   | )          | (3,620   | )          | (2,599   | )          |
| Cash (received) paid on loans to affiliate                                                |       | 34       |       | 30       |       | (8       | )          |
| Sale of publication assets                                                                |       | -        |       | -        |       | 3,939    |       |
| Net cash used in investing activities                                                     |       | (17,953  | )          | (95,978  | )          | (7,139   | )          |
|                                                                                      |       |     |       |     |       |     |       |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                    |       |     |       |     |       |     |       |
| Dividends paid                                                                            |       | (3,287   | )          | -        |       | (75,096  | )          |
| Borrowings on long-term debt                                                              |       | -        |       | 81,005   |       | 200,000  |       |
| Payment of debt issue costs                                                               |       | (12      | )          | (264     | )          | (7,777   | )          |
| Principal payments of long-term debt                                                      |       | (35,625  | )          | (1,791   | )          | (129,905 | )          |
| Net cash provided by (used in) financing activities                                       |       | (38,924  | )          | 78,950   |       | (12,778  | )          |
|                                                                                      |       |     |       |     |       |     |       |
| NET (DECREASE)  INCREASE IN CASH AND CASH EQUIVALENTS                                     |       | (9,772   | )          | 214      |       | 18,449   |       |
|                                                                                      |       |     |       |     |       |     |       |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF YEAR                                           |       | 24,778   |       | 24,564   |       | 6,115    |       |
|                                                                                      |       |     |       |     |       |     |       |
| CASH AND CASH  EQUIVALENTS AT END OF YEAR                                                 |       | $        | 15,006     |     | $          | 24,778   |       | $ | 24,564 |   |

 

See notes toconsolidated financial statements.

 

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**AFFINITY GROUP, INC. AND SUBSIDIARIES**

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

**YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

----

 

1.                             SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

*Principles of Consolidation —*The consolidated financial statementsinclude the accounts of Affinity Group, Inc. (“AGI”) and its subsidiaries(collectively the “Company”).  In March2005, Affinity Group Holding Corp. (“AGHC”) formed a holding company, AffinityGroup Holding, Inc., a Delaware corporation (“AGHI”) at which time AGHCcontributed 100% of the outstanding shares of common stock of AGI to AGHI.  AGHI is the direct parent of the Company.

*Description of the Business*—**The Company is a membership-based direct marketing companywhich sells club memberships, products, services, and publications to selectedaffinity groups primarily in North America.** The Company markets club memberships,merchandise and servicesto RV owners, and camping and golf enthusiasts. In addition, the Company operates 63 retail outlets and a mail orderbusiness selling RV accessories, supplies and services.  The stores are located throughout the UnitedStates.  The Company also publishesmagazines, directories and books.

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

*Cash and Cash Equivalents* — The Company considers all short-term,highly liquid investments purchased with a maturity date of three months or lessto be cash equivalents.  The carryingamount approximates fair value because of the short maturity of theseinstruments.

*Concentration of Credit Risk* — The Company is potentially subject toconcentrations of credit risk in accounts receivable.  Concentrations of credit risk with respect toaccounts receivable is limited due to the large number of customers and theirgeographical dispersion.

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

*Property and Equipment* — Property and equipment are recorded atcost.  Depreciation of property andequipment is provided using the straight-line method over the followingestimated useful lives of the assets:

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

 

Leasehold improvementsare amortized over their useful lives or the remaining term of the respectivelease, whichever is shorter.

*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

49

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assets consisting ofmembership customer lists, resort and golf course agreements, non-compete anddeferred consulting agreements, and deferred financing costs have weightedaverage useful lives of approximately 6 years, 23 years, 15 years and 7 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 liabilityprograms are calculated by outside actuaries and are based on claims filed andinclude estimates 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 is estimated based on the quotedmarket prices for the same or similar issues or on the current rates offeredfor debt of the same or similar remaining maturities.  The fair value of the Company’s long-termdebt was $284.2 million as of December 31, 2006.

*Revenue Recognition*— Merchandise revenue is recognized when products are sold in the retailstores, shipped for mail and Internet orders, or when services are provided tocustomers.  Emergency Road Service (“ERS”)revenues are deferred and recognized over the life of the membership.  ERS claim expenses are recognized whenincurred.  Royalty revenue is earnedunder the terms of an arrangement with a third party credit card provider basedon a percentage of the Company’s outstanding credit card balances with suchthird party credit card provider. 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 time relatedmaterials are mailed.  Recognized revenuesand 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.  At December31, 2006 and 2005, $6.0 million and $5.8 million of advertising expenses havebeen capitalized as direct-response advertising, of which $3.5 million and $3.3million, respectively, were reported as assets and $2.5 million in each yearwere reported net of related deferred revenue. Advertising expenses for 2006, 2005 and 2004 were $32.8 million, $27.4million and $28.1 million, respectively.

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

 

50

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*Vendor Allowances*— The Company receives rebates from vendors pursuant to several different typesof programs.  Vendor consideration isaccounted for as a reduction of the inventory cost and related cost of saleswhen the inventory is sold.

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

*Income Taxes**—***The Company recognizes deferred tax assets andliabilities based on the liability method, which requires an adjustment to thedeferred tax asset or liability to reflect income tax rates currently ineffect.  When income tax rates increaseor decrease, a corresponding adjustment to income tax expense is recorded byapplying the rate change to the cumulative temporary differences.

Inthe second quarter of 2006, AGHC received approval from the Internal RevenueService to change its tax status from a Subchapter C corporation to aSubchapter S corporation (“S corporation”) to be effective as of January 1,2006.  The election for change in taxstatus to an S corporation included AGHC and all its subsidiaries with theexception of Camping World, Inc. and its wholly-owned subsidiaries, which areto remain Subchapter C corporations. Pursuant to FAS 109, “Accounting for Income taxes”, a change in taxstatus resulting from an S corporation election requires that all deferred taxaccounts be revalued upon formal approval of the S corporation status.  Accordingly, all deferred tax accounts ofAGHC and its subsidiaries, excluding Camping World, Inc. and its wholly ownedsubsidiaries, were revalued to account for the tax effect for the change to theS corporation status.

*Major Customers*— Included in theMembership Services Segment is revenue in the amount of $20.3 million, $20.0million and $20.2 million, for the years 2006, 2005 and 2004, respectively,which was received under contracts from one customer of the Company.

*Recent Accounting Pronouncements:*

In July 2006, the FASB issued *FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty inIncome Taxes, an interpretation of FASB Statement No. 109,  Accounting for Income Taxes*,”which is effective for fiscal years beginning after December 15, 2006, and clarifiesthe accounting for uncertainty in tax positions.  FIN 48 requires that we recognize the impactof a tax position in our financial statements if that position is more likelythan not of being sustained on audit, based on the technical merits of the position.  The cumulative effect of the change inaccounting principle is recorded as an adjustment to opening retainedearnings.  We are currently evaluatingthe impact of the adoption of FIN 48 on our financial statements.

Effective December 31, 2006, the Company adopted the provisions ofStaff Accounting Bulletin No. 108 (SAB 108), Guidance for Quantifying FinancialStatement Misstatements.  In SAB 108, theSEC staff establishes an approach that requires quantification of FinancialStatement errors based on the effects of the error on each of the Company’sFinancial Statements and the related Financial Statement disclosures.  This model is commonly referred to as a “dualapproach” because it essentially requires quantification of errors under boththe “iron-curtain” and the “roll-over” methods. The iron curtain method focuses primarily on the effect of correctingthe period- end balance sheet with less emphasis on the reversing effects ofprior year errors on the income statement in the period of correction.  The roll-over method focuses primarily on theimpact of a misstatement on the income statement, including the reversingeffect of prior year misstatements,

51

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but can lead to the accumulation of misstatements in the balancesheet.  The adoption of this bulletin didnot impact the Company’s Financial Statements.

2.       PROPERTYAND EQUIPMENT

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

|                                                   | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|
| Land                                              |       | $        | 477        |     | $          | 477 |   |
| Building and improvements                         |       | 12,134   |       | 7,969    |       |
| Furniture and  equipment                          |       | 51,479   |       | 45,250   |       |
| Software                                          |       | 20,538   |       | 18,000   |       |
| Systems  development and construction in progress |       | 6,180    |       | 4,117    |       |
|                                              |       | 90,808   |       | 75,813   |       |
| Less:  accumulated depreciation                   |       | (56,043  | )          | (45,970  | )          |
|                                              |       | $        | 34,765     |     | $          | 29,843 |   |

 

3.          GOODWILLAND OTHER INTANGIBLE ASSETS

Asummary of changes in the carrying amount of goodwill by business segmentconsisted of the following at December 31 (in thousands):

|                                  | ** ** | **Membership** | ** ** | ** **       | ** ** | ** ** | ** ** | ** **       | ** ** |
|----------------------------------|------------|----------------|------------|------------------|------------|------------|------------|------------------|------------|
| ** **                       | ** ** | **Services**   | ** ** | **Publications** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| Balance as of  January 1, 2005   |       | $              | 54,288     |             | $          | 46,884     |       | $                | 47,601     |   | $ | 148,773 |   |
| Impairments                      |       | (4,344         | )          | —           |       | —     |       | (4,344           | )          |
| Balance as of  December 31, 2005 |       | 49,944         |       | 46,884           |       | 47,601     |       | 144,429          |       |
| Impairments                      |       | —         |       | —           |       | —     |       | —           |       |
| Balance as of December 31, 2006  |       | $              | 49,944     |             | $          | 46,884     |       | $                | 47,601     |   | $ | 144,429 |   |

 

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

|                                                  | ** ** | **2006**   | ** ** |
|--------------------------------------------------|------------|------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Gross**  | ** ** | **Amortization** | ** ** | **Net** | ** ** |
| Membership and  customer lists                   |       | $          | 28,961     |   | $ | (11,561 | ) | $ | 17,400 |   |
| Resort and golf  course participation agreements |       | 13,465     |       | (12,503 | ) | 962 |   |
| Non-compete and  deferred consulting agreements  |       | 18,830     |       | (12,667 | ) | 6,163 |   |
| Deferred  financing costs                        |       | 10,769     |       | (4,983 | ) | 5,786 |   |
|                                             |       | $          | 72,025     |   | $ | (41,714 | ) | $ | 30,311 |   |

 

|                                                  | ** ** | **2005**   | ** ** |
|--------------------------------------------------|------------|------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Gross**  | ** ** | **Amortization** | ** ** | **Net** | ** ** |
| Membership and  customer lists                   |       | $          | 24,514     |   | $ | (7,007 | ) | $ | 17,507 |   |
| Resort and golf  course participation agreements |       | 13,539     |       | (11,622 | ) | 1,917 |   |
| Non-compete and  deferred consulting agreements  |       | 18,455     |       | (11,492 | ) | 6,963 |   |
| Deferred  financing costs                        |       | 11,851     |       | (3,666 | ) | 8,185 |   |
|                                             |       | $          | 68,359     |   | $ | (33,787 | ) | $ | 34,572 |   |

 

The aggregate future five-year amortization of finite-lived intangiblesat December 31, 2006 is as follows (in thousands):

| 2007       |   | $     | 8,436  |   |
|------------|--------|-------|--------|--------|
| 2008       |   | 6,779 |   |
| 2009       |   | 5,317 |   |
| 2010       |   | 4,189 |   |
| 2011       |   | 3,685 |   |
| Thereafter |   | 1,905 |   |
| Total      |   | $     | 30,311 |   |

 

Under SFAS No. 142, Goodwill and Other Intangible Assets, (“SFAS No.142”) goodwill impairment is deemed to exist if the carrying value of areporting unit exceeds its estimated fair value.  The Company’s reporting units are generallyconsistent with the operating segments underlying the reporting segmentsidentified in Note 12 - Segment Information. The determination of fair value for a reporting unit involves the use ofassumptions and estimates such as the future performance of the operations ofthe reporting unit and discount rates used to determine the current value ofexpected future cash flows of the reporting unit.  Any change in these assumptions andestimates, and other factors such as inflation rates, competition and generaleconomic conditions, could cause the calculated fair value of the operatingunit to decrease significantly.

53

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The Company performed its annual impairment test of its goodwill andintangible assets during the fourth quarter of 2006.  Based on this test, the Company concludedthat no impairment existed as of December 31, 2006.

InApril 2005, Camping World, Inc. acquired the assets of an RV catalog retailerfor $0.6 million.  The acquisition pricewas allocated to inventory and membership and customer lists.  In May 2005, Ehlert Publishing Group, Inc.acquired the publishing assets of Nordskog Publishing, Inc. for $4.0million.  The acquisition price wasallocated primarily to membership and customer lists and non-competeagreements.  In December 2005, EhlertPublishing Group, Inc., through its wholly-owned subsidiary, AGI Productions,Inc., acquired the consumer outdoor recreation show assets of RoyalProductions, Inc. for $8.5 million.  Theacquisition price was allocated primarily to membership and customer lists.

In February 2006, AGI Productions, Inc. acquired the consumer shows andrelated assets of H & S Productions, LLC for $2.5 million.  The acquisition price was allocated primarilyto membership and customer lists.  InAugust 2006, the Company’s subsidiary TL Enterprises, Inc. acquired theconsumer park guides and related assets of American Guide Services, Inc. for$1.0 million.  The acquisition price wasallocated primarily to membership and customer lists.  In September 2006, AGI Productions, Inc.acquired the consumer shows and related assets of Apple Rock Advertising andPromotions, Inc. for $1.2 million.  Theacquisition price was allocated primarily to membership and customer lists.

The total costs of the 2006 and 2005 acquisitions have been allocatedto the assets acquired and the liabilities assumed based on their respectivefair values in accordance with SFAS 141, Business Combinations.  The results of operations for each respectiveacquisition have been included in the Company’s results of operations from thedate of the acquisitions.

4.                             ACCRUEDLIABILITIES

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

|                            | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
| Compensation and  benefits |       | $        | 15,341     |     | $          | 12,911 |   |
| Other accruals             |       | 20,322   |       | 21,183   |       |
|                       |       | $        | 35,663     |     | $          | 34,094 |   |

 

5.                             LONG-TERMDEBT

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

|                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|
| AGI 9% Senior  Subordinated Notes due 2012 |       | $        | 170,094    |     | $          | 200,000 |   |
| AGI Credit  Facility: Term Loans           |       | 108,475  |       | 111,150  |       |
| Other long-term  obligations               |       | 6,586    |       | 8,850    |       |
|                                       |       | 285,155  |       | 320,000  |       |
| Less: current  portion                     |       | (7,271   | )          | (6,136   | )          |
|                                       |       | $        | 277,884    |     | $          | 313,864 |   |

 

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OnJune 24, 2003, the Company entered into an Amended and Restated CreditAgreement and a Senior Secured Floating Rate Note Purchase Agreement (“SeniorCredit Facility”) providing for term loans (“Term Loans”) in the aggregate of$140.0 million and a revolving credit facility of $35.0 million.  The funds available under the revolvingcredit line of the Senior Credit Facility may be utilized forborrowings or letters of credit; however,a maximum of $12.5 million may be allocated to such letters of credit.  Re-borrowings under the Term Loans are notpermitted.  The interest on borrowingsunder the Senior Credit Facility is at variable rates based on the ratio oftotal cash flow to outstanding indebtedness (as defined).  Interest rates float with prime and theLondon Interbank Offered Rates (“LIBOR”), plus an applicable margin rangingfrom 0.75% to 2.75% over the stated rates. AGI also pays a commitment fee of 0.5% per annum on the unused amount ofthe revolving credit line.  Further, the SeniorCredit Facility requires the loans to be prepaid in an amount equal to 75% ofthe excess cash flow, as defined.  As ofDecember 31, 2006, the Company generated $4.4 million of excess cash flow, asdefined and will prepay the Term Loans in an amount equal to 75% of the excesscash flow in the first quarter of 2007, on a pro-rata basis, in inverse orderof maturity, per the agreement.  TheSenior Credit Facility is secured by substantially all the assets and a pledgeof the stock of AGI.

On March 3, 2006, AGI amended its Senior Credit Facility to revise thedefinition of Consolidated Fixed Charges Ratio and Permitted TaxDistributions.  This amendment allows AGIto distribute taxes to its ultimate parent based on its stand-alone taxobligation rather than the tax obligation of its parent, AGHI, until such timethat AGHI pays interest on its 10 7/8% Senior Notes in cash instead of by theissuance of additional notes.  For the yearended December 31, 2006, AGI has distributed $3.3 million in the form of adividend to AGHI to fund the Company’s tax obligations.  Further, AGI amended the Senior CreditFacility’s covenant restrictions with affiliates to permit a joint venturearrangement between Camping World, Inc. and FreedomRoads Holding Company LLCand its subsidiaries, (collectively “FreedomRoads”), an affiliate of theCompany.

On June 8, 2006, AGI amended its Senior Credit Facility to permit AGIto purchase up to $30.0 million of AGI’s Senior Subordinated Notes from time totime as and when the Company determines. During 2006 AGI purchased $29.9 million of the Senior SubordinatedNotes.  The Senior Subordinated Notepurchases were made with available cash and the notes purchased have beenretired.  As of December 31, 2006, $170.1million of Senior Subordinated Notes remain outstanding.

Asof December 31, 2006, $108.5 million was outstanding under the Term Loans andthe average interest rate on the Term Loans was 7.85%.  As of December 31, 2006 permitted borrowingsunder the undrawn revolving line were $27.9 million.  The Company had commercial and standbyletters of credit in the aggregate amount of $7.1 million outstanding as ofDecember 31, 2006.  The aggregatequarterly scheduled payments on the Term Loans are $0.35 million.  The revolving credit facility matures on June24, 2008, and the Term Loans mature on June 24, 2009.

On February 18, 2004, the Company issued $200.0 million of 9% SeniorSubordinated Notes due 2012 (the “AGI Senior Notes”).  Interest is payable on the AGI Senior Notestwice a year on each February 15 and August 15, beginning August 15, 2004, andthe AGI Senior Notes mature on February 15, 2012.  The proceeds of the issuance were used tofund the tender offer and defeasance of the remaining $100.0 millionoutstanding principal amount of the AGH Notes. The Company used the remaining proceeds from the issuance of the AGISenior Notes to prepay $25.0 million of the Term Loans under our Senior CreditFacility, pay a $60.0 million dividend, create a $15.0 million segregated cashaccount, pay certain prepayment and transaction costs and for general corporatepurposes.   The bond redemption premium,consent fee and the unamortized deferred financing costs in the amount of $1.7million, $1.7 million, and $1.1 million, respectively, were recognized as ofthe redemption date.  The Company alsoincurred a $0.5

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million debt extinguishment charge representing the pro rataunamortized deferred financing costs associated with the prepayment of theSenior Credit Facility.  On June 8, 2006,AGI amended its Senior Credit Facility to permit AGI to purchase up to $30.0million of AGI’s Senior Subordinated Notes from time to time as and when theCompany determines.  During 2006 AGIpurchased $29.9 million of the Senior Subordinated Notes.  The Senior Subordinated Note purchases weremade with available cash and the notes purchased have been retired.  As of December 31, 2006, $170.1 million ofSenior Subordinated Notes remain outstanding.

On March 24, 2005 in aprivate placement, AGHI, our parent company, issued $88.2 million principalamount of its 10-7/8% senior notes due 2012 (the “AGHI Notes”) at a $3.2million original issue discount.  AGHIcompleted a registered exchange of the AGHI Notes under the Securities Act of1933 on June 8, 2005.  The AGHI Notes areunsecured obligations of AGHI, and AGI and its subsidiaries have not guaranteedpayment of principal or interest on the AGHI Notes.  Interest on the AGHI Notes is payablesemi-annually on February 15 and August 15 commencing August 15, 2005 and theentire $88.2 million principal amount of the AGHI Notes are due in full onFebruary 15, 2012.  For interest paymentson and prior to February 15, 2008, AGHI may elect to pay interest on the AGHINotes in cash or by the issuance of additional notes of the same tenor as theAGHI Notes.  Any additional AGHI Notesissued in payment of interest are due in full on or before March 15, 2010.  The AGHI Notes cannot be redeemed prior toFebruary 15, 2008.  Although the onlysource of the cash payment of the AGHI Notes is dividends from its subsidiary,there are certain restrictions on the payment of dividends under the SeniorCredit Facility and the indenture governing the terms of the AGI Senior Notes(the “AGI Indenture”) under which AGI has issued $200.0 million in 9% seniorsubordinated notes due 2012.  AGHIexpects to issue additional notes of the same tenor as the AGHI Notes throughFebruary 15, 2008 to pay interest on the AGHI Notes when and as such interestis due.  After February 15, 2008, AGHImust rely on dividends from AGI to fund the interest payments due under theAGHI Notes.

AGHIcontributed the net proceeds from the issuance of the AGHI Notes, approximately$81.0 million, to AGI and in turn, AGI made an equity contribution to itswholly-owned subsidiary, Camping World, Inc. (“Camping World”).  Camping World then made an equity capitalcontribution in the same amount to its wholly-owned subsidiary, CWI, Inc. (“CWI”).  CWI created a new wholly-owned subsidiarynamed CWFR Capital 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 AGHI Notes.  CWI made an equity capital contribution toCWFR in an equal amount to the capital contribution that CWI received fromCamping World.  CWFR used the proceedsfrom the equity capital contribution to acquire a preferred membership interestin FreedomRoads, a Minnesota limited liability company owned 90% by The StephenAdams Living Trust which also indirectly owns 97.4% of the outstanding capitalstock of AGHC and indirectly AGHI.

Thepreferred membership interest acquired by CWFR has a face amount of $88.2million and is entitled to receive a preferred payment from FreedomRoads at10-7/8% per annum when and as declared by the Board of Governors ofFreedomRoads from any source legally available therefor.  Any portion of the preferred payment not paidwill accumulate and will be compounded semi-annually until paid.  FreedomRoads may redeem the preferredmembership interest upon the payment of $88.2 million plus the accrued andunpaid preferred return to the date of redemption.  FreedomRoads will be required to redeem thepreferred membership interest at that same redemption price if there is a saleor reorganization of the membership interests of FreedomRoads or a sale ofsubstantially all of the assets of FreedomRoads.  According to the terms of the preferredmembership interest, FreedomRoads cannot make distributions with respect tomembership interests other than (a) distributions with respect to the preferredmembership interest, (b) distributions for the members’ estimated taxliabilities from earnings of

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FreedomRoadsand (c) distributions in the aggregate not to exceed 50% of the amount of (i)FreedomRoads’ net profit for the period from January 1, 2005 through the end ofthe fiscal quarter next preceding the distribution date less (ii) the aggregateamount of tax distributions made during the period from January 1, 2005 throughthe end of the fiscal quarter next preceding the distribution date.  CWFR may not sell, pledge or otherwisetransfer the preferred membership interest. The preferred membership interest does not provide CWFR with any votingrights in FreedomRoads.  The preferredmembership interest FreedomRoads is being carried at cost and is reviewedperiodically for impairment.

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

The AGI Credit Facility and the AGI indenture containscertain 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 31,2006.

The aggregate future maturities oflong-term debt at December 31, 2006 are as follows (in thousands):

| 2007       |   | $       | 7,271   |   |
|------------|--------|---------|---------|--------|
| 2008       |   | 3,810   |    |
| 2009       |   | 103,575 |    |
| 2010       |   | 405     |    |
| 2011       |   | —  |    |
| Thereafter |   | 170,094 |    |
| Total      |   | $       | 285,155 |   |

 

6.                             INCOMETAXES

The components of theCompany’s income tax expense from operations for the year ended December 31,consisted of (in thousands):

|                    | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------|------------|----------|------------|----------|------------|----------|------------|
| Current:           |       |     |       |     |       |     |       |
| Federal            |       | $        | —     |     | $          | 8,866    |       | $ | 5,090 |   |
| State              |       | 12       |       | 1,227    |       | 711      |       |
| Deferred           |       |     |       |     |       |     |       |
| Federal            |       | 19,549   |       | (2,352   | )          | 1,995    |       |
| State              |       | 2,707    |       | (325     | )          | 279      |       |
| Income tax expense |       | $        | 22,268     |     | $          | 7,416    |       | $ | 8,075 |   |

 

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A reconciliation of income tax expense from operationsto the federal statutory rate for the year ended December 31 is as follows (inthousands):

|                                                  | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Income taxes  computed at federal statutory rate |       | $        | (2,830     | )        | $          | 6,354    |       | $ | 6,413 |   |
| State income  taxes - net of federal benefit     |       | (243     | )          | 545      |       | 550      |       |
| Other  differences:                              |       |     |       |     |       |     |       |
| Deferred taxes upon change in tax status         |       | 23,097   |       | —   |       | —   |       |
| Disposition of book goodwill                     |       | —   |       | —   |       | 1,334    |       |
| Goodwill written off                             |       | —   |       | 1,651    |       | —   |       |
| Increase (decrease) of valuation allowance       |       | 2,459    |       | (1,036   | )          | —   |       |
| Other                                            |       | (215     | )          | (98      | )          | (222     | )          |
| Income tax expense                               |       | $        | 22,268     |     | $          | 7,416    |       | $ | 8,075 |   |

 

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):

|                                                  | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|--------------------------------------------------|------------|------------|------------|------------|------------|
| **Deferred  tax liabilities:**                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Management  incentive                            |       | $          | (3,349     | )          | $          | (3,254 | ) |
| Accelerated  depreciation                        |       | (3,001     | )          | (2,236     | )          |
| Prepaid expenses                                 |       | (254       | )          | (3,051     | )          |
| Intangible  assets                               |       | (1,303     | )          | (1,996     | )          |
| Basis difference  on building and land           |       | (8,861     | )          | (11,868    | )          |
| Other                                            |       | (662       | )          | (271       | )          |
|                                             |       | (17,430    | )          | (22,676    | )          |
| **Deferred  tax assets:**                        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Intangible  assets                               |       | —     |       | 1,163      |       |
| Deferred  revenues                               |       | 630        |       | 8,957      |       |
| Accrual for  employee benefits and severance     |       | 1,033      |       | 1,720      |       |
| Accrual for  deferred phantom stock compensation |       | 59         |       | 2,280      |       |
| Net operating  loss carryforward                 |       | 2,459      |       | —     |       |
| Claims reserves                                  |       | 1,649      |       | 2,996      |       |
| Reserve for  resort points                       |       | —     |       | 1,162      |       |
| Deferred  compensation                           |       | —     |       | 9,704      |       |
| Bad debt reserve                                 |       | —     |       | 1,103      |       |
| Other reserves                                   |       | 1,538      |       | 3,206      |       |
|                                             |       | 7,368      |       | 32,291     |       |
| Valuation  allowance                             |       | (2,459     | )          | —     |       |
| Net deferred tax  (liabilities) assets           |       | $          | (12,521    | )          | $          | 9,615 |   |

 

EffectiveJanuary 1, 2006 the Company received approval from the Internal Revenue Servicefor a change in tax status to an S corporation which included AGHC and all itssubsidiaries with the exception of Camping World, Inc. and its wholly-ownedsubsidiaries, which are to remain Subchapter C corporations.  At December 31, 2006, Camping World, Inc. andits subsidiaries had

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anet operating loss carryforward of approximately $6.5 million, which will beable to offset future taxable income.  Ifnot used, the net operating loss carryforward will expire in 2026.  The valuation allowance for deferred taxeswas increasd by $2.5 million as the utilization of the net loss carry forwardin future periods is not certain.

7.          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 December31, 2006 are as follows (in thousands):

| 2007       |   | $      | 15,517  |   |
|------------|--------|--------|---------|--------|
| 2008       |   | 14,752 |    |
| 2009       |   | 13,771 |    |
| 2010       |   | 13,326 |    |
| 2011       |   | 11,733 |    |
| Thereafter |   | 91,315 |    |
| Total      |   | $      | 160,414 |   |

 

During 2006, 2005 and2004, respectively, approximately $14.7 million, $13.1 million, and $12.5million of rent expense was charged to costs and expenses.

On December 5, 2001, the Company sold elevenreal estate properties to eleven separate wholly-owned subsidiaries of AGRPHolding Corp., a wholly-owned subsidiary of the Company’s ultimate parent, AGIHolding Corp., for $52.3 million in cash and a note receivable.  The properties have been leased back to theCompany on a triple net basis.  Both thesales price and lease rates were based on market rates determined by thirdparty independent appraisers engaged by the mortgage lender and approved by theAGI Senior Credit Facility agent bank. These leases have an initial term of 25 to 27 years with two five-yearoptions at the then current market rent. The leases are classified as operating leases in accordance with SFASNo. 13 “Accounting for Leases.”  Land andbuildings with a net book value totaling $45.8 million have been removed fromthe balance sheet.  The transactionresulted in a net gain of $6.1 million consisting of a $12.1 million gain oncertain properties and a $6.0 million loss on other properties.  In accordance with accounting principlesgenerally accepted in the United States, the $6.0 million loss was recognizedupon the date of sale in 2001 in the statement of operations and the $12.1million gain was deferred and will be credited to income as rent expenseadjustments over the lease terms.  Theaverage net annual lease payments over the lives of the leases are $3.4million.

*Litigation*— From time to time, the Company is involved inlitigation arising 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 the results ofoperations or financial position.

*Employment Agreements*—The Company has employment agreements with certain officers.  The agreements include, among other things,an annual bonus based on earnings before interest, taxes, depreciation andamortization, and up to one year’s severance pay beyond termination date orthree weeks of severance pay for every year of continuous employment, whicheveris greater.

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8.          RELATED-PARTY TRANSACTIONS

In conjunction with the saleof real estate properties to an affiliate on December 5, 2001, (see Note 7),the Company accepted $4.8 million of the purchase price in the form of ten-yearballoon note receivable yielding 11% per annum, with monthly payments ofapproximately $46,000.  Such amount is included inNote from Affiliate on the accompanying balance sheet.

Certain directors of the Company arepartners in partnerships and shareholders of corporations that lease facilitiesto the Company under long-term leases. For the years ended December 31, 2006, 2005 and 2004, payments underthese leases were approximately $4.3 million, $6.7 million, and $7.1 million,respectively.  Future commitments underthese leases total approximately $89.4 million. The leases expire at various dates from March 2014 through July 2029,subject to the Company’s right to exercise renewal options.

In connection with our effort to expand the number ofCamping World stores by developing retail alliances with RV dealerships acrossNorth America, we have established 31 Camping World stores alongside or withinRV dealerships owned by FreedomRoads, which is controlled by the Chairman ofour Board of Directors, Stephen Adams, and we expect to open additional CampingWorld stores alongside or within such RV dealerships in the future.  At December 31, 2006, the Company leased 26properties from FreedomRoads and sub-leased five properties toFreedomRoads.  Total payments by theCompany to Freedom Roads under these 26 leased properties for 2006 and 2005were approximately $1.7 million and $0.7 million, respectively, and futurecommitments under these leases total approximately $26.5 million.  The leases expire at various dates fromAugust 2013 through December 2016.  For2006 and 2005, lease payments received from FreedomRoads for the five subleasedproperties were approximately $1.8 million and $0.7 million, respectively, andfuture payments to be received under these subleases total approximately $6.2million.  Camping World paid FreedomRoadsapproximately $4.3 million in 2006 and FreedomRoads paid the Companyapproximately $5.5 million, $3.2 million and $3.7 million in 2006, 2005 and2004, respectively, under the product marketing and sales agreements.

Thelaw firm of Kaplan, Strangis and Kaplan, P.A. (“KSK”) provides ongoing legalservices to the Company and certain subsidiaries in connection with variousmatters. Andris A. Baltins, a member of the Board of Directors, is a member ofthat firm.  During 2006, KSK received$0.2 million in legal fees from the Company.

9.          STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information for December31 (in thousands):

|                                            | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash paid  (received) during the year for: |       |     |       |     |       |     |       |
| Interest                                   |       | $        | 26,669     |     | $          | 25,602   |       | $ | 21,236 |   |
| Income taxes                               |       | (1,138   | )          | 9,633    |       | 5,552    |       |
|                                            |            |          |            |          |            |          |            |  |  |  |

 

The Company entered into the following non-cash investingand financing transactions:

**2006:**

In February 2006, the Company assumed $1.0 million ofliabilities and issued $0.4 million of debt in the acquisition of Plus Eventsconsumer shows and related assets of H & S Productions, LLC.

In August 2006, the Company assumed $0.3 million ofliabilities and issued $0.1 million of debt in the acquisition of thepublishing assets of American Guide Services, Inc.

 

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In September 2006, the Company assumed $0.4 million ofliabilities and issued $0.2 million of debt in the asset acquisition of fourNorth Carolina RV shows from Apple Rock Advertising and Promotions, Inc.

**2005:**

InMay 2005, the Company assumed $0.5 million of liabilities and issued $1.5million of debt in the acquisition of the Powerboat magazine title and relatedassets from Nordskog Publishing, Inc.

InDecember 2005, the Company assumed $1.8 million of liabilities and issued $6.0million of debt in the acquisition from Royal Productions, Inc.

**2004:**

InFebruary 2004, the Company declared and distributed a $4.4 million non-cashdividend consisting of the Adams Insurance Holding LLC notes receivable.

InDecember 2004, the Company assumed $0.4 million in liabilities and issued $0.7million of purchase debt in the acquisition of ARU, Inc.

10.       BENEFITPLAN

TheCompany sponsors a deferred savings and profit sharing plan (the “401(k) Plan”)qualified under Section 401(a) and 401(k) of the Internal Revenue Code of 1986,as amended (the “Code”).  All employeesover age 21, including the Executive Officers, who have completed one year ofservice (minimum 1,000 hours) are eligible to participate in the 401(k)Plan.  For the plan year 2006, theCompany elected a Safe Harbor Matching Contribution for the employer match andset the employer match, which vests upon contribution, at an amount equal to100% of the first 4% of the employee’s contribution.  Employees may defer up to 60% of theireligible compensation up to Internal Revenue Service limits.  The Company’s contributions to the plantotaled approximately $1.9 million, $1.7 million, and $1.5 million for 2006,2005, and 2004, respectively.

11.       DEFERRED PHANTOM STOCK COMPENSATION

TheCompany has deferred compensation agreements with certain officers.  The agreements provide for payment to theofficers upon their termination, death, disability, or sale of the Company, andother agreed upon events.  Deferredcompensation is included in other long-term liabilities except for amountsexpected to be paid in 2007, which have been classified in currentliabilities.  This deferred compensationis subject to vesting under the terms of the individual agreements.  Vesting periods range from 20% per year overa five-year period to immediate vesting upon entering an agreement.  The Company incurred deferred compensationexpense of $1.1 million, $2.2 million, and $3.0 million for 2006, 2005, and2004, respectively.

12.        SEGMENTINFORMATION

The Company’s three principallines of business are Membership Services, Publications, 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 Publications segment publishes a varietyof publications for selected markets in the recreation and leisure industry,including general circulation periodicals, club magazines, directories and RVand powersports industry trade magazines. In addition, the Publications segment operates 29 consumer outdoorrecreation shows primarily focused on RV and powersports markets.  The Retail segment sells specialty retailmerchandise and services for RV owners primarily through

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retail supercenters and mail ordercatalogs.  The Company evaluatesperformance based on profit or loss from operations before income taxes.

The reportable segments arestrategic business units that offer different products and services.  They are managed separately because eachbusiness requires different technology, management expertise and marketingstrategies.  Most of the businesses wereacquired as a unit, and the management at the time of acquisition was retained.

The Company does not allocateincome taxes or unusual items to segments. Financial information by reportable business segment is summarized asfollows (in thousands):
| ** **                                    | ** ** | **Membership** | ** ** | ** **       | ** ** | ** ** | ** ** | ** **       | ** ** |
|-----------------------------------------------|------------|----------------|------------|------------------|------------|------------|------------|------------------|------------|
| ** **                                    | ** ** | **Services**   | ** ** | **Publications** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| **YEAR  ENDED DECEMBER 31, 2006**             |       |           |       |             |       |       |       |             |       |
| Revenues from external customers              |       | $              | 137,394    |             | $          | 86,742     |       | $                | 290,422    |   | $ | 514,558 |   |
| Gain on sale of property and equipment        |       | —         |       | 5                |       | 11         |       | 16               |       |
| Interest income                               |       | 6,485          |       | —           |       | 6          |       | 6,491            |       |
| Interest expense                              |       | —         |       | 329              |       | 13,709     |       | 14,038           |       |
| Depreciation and amortization                 |       | 3,658          |       | 4,365            |       | 8,217      |       | 16,240           |       |
| Segment profit (loss)                         |       | 44,695         |       | 19,837           |       | (10,128    | )          | 54,404           |       |
| Segment assets                                |       | 167,837        |       | 87,122           |       | 225,680    |       | 480,639          |       |
| Expenditures for segment assets               |       | 2,263          |       | 1,171            |       | 11,309     |       | 14,743           |       |
|                                          |       |           |       |             |       |       |       |             |       |
| **YEAR  ENDED DECEMBER 31, 2005**             |       |           |       |             |       |       |       |             |       |
| Revenues from external customers              |       | $              | 133,756    |             | $          | 79,122     |       | $                | 272,682    |   | $ | 485,560 |   |
| Gain (loss) on sale of property and equipment |       | —         |       | (5               | )          | 7          |       | 2                |       |
| Interest income                               |       | 5,000          |       | —           |       | 14         |       | 5,014            |       |
| Interest expense                              |       | —         |       | 273              |       | 10,375     |       | 10,648           |       |
| Depreciation and amortization                 |       | 3,546          |       | 2,401            |       | 7,085      |       | 13,032           |       |
| Segment profit                                |       | 37,685         |       | 19,894           |       | 660        |       | 58,239           |       |
| Segment assets                                |       | 162,562        |       | 89,104           |       | 207,736    |       | 459,402          |       |
| Expenditures for segment assets               |       | 2,241          |       | 849              |       | 8,005      |       | 11,095           |       |
|                                          |       |           |       |             |       |       |       |             |       |
| **YEAR  ENDED DECEMBER 31, 2004**             |       |           |       |             |       |       |       |             |       |
| Revenues from external customers              |       | $              | 131,608    |             | $          | 77,977     |       | $                | 255,094    |   | $ | 464,679 |   |
| Gain on sale of property and equipment        |       | —         |       | 13               |       | 22         |       | 35               |       |
| Interest income                               |       | 2,831          |       | —           |       | 4          |       | 2,835            |       |
| Interest expense                              |       | —         |       | 674              |       | 10,221     |       | 10,895           |       |
| Depreciation and amortization                 |       | 3,643          |       | 1,811            |       | 6,243      |       | 11,697           |       |
| Segment profit                                |       | 39,822         |       | 19,881           |       | 269        |       | 59,972           |       |
| Segment assets                                |       | 170,270        |       | 75,731           |       | 124,325    |       | 370,326          |       |
| Expenditures for  segment assets              |       | 1,455          |       | 1,228            |       | 6,091      |       | 8,774            |       |

 

62

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The following is asummary of the reconciliations of reportable segments to the consolidated financialstatements for the years ended December 31, 2006, 2005 and 2004 (in thousands):
| ** **                                                   | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Gain on  Sale of Property and Equipment**                  |       |     |       |     |       |     |       |
| Total gain on  sale for reportable segments                  |       | $        | 16         |     | $          | 2        |       | $ | 35 |   |
| Other  non—allocated gain                               |       | —   |       | —   |       | 397      |       |
| Total gain on sale of property and equipment                 |       | $        | 16         |     | $          | 2        |       | $ | 432 |   |
| **Interest  Income**                                         |       |     |       |     |       |     |       |
| Total interest  income for reportable segments               |       | $        | 6,491      |     | $          | 5,014    |       | $ | 2,835 |   |
| Elimination of  intersegment interest income                 |       | (6,485   | )          | (4,994   | )          | (2,829   | )          |
| Other  non—allocated interest income                    |       | 1,109    |       | 1,041    |       | 749      |       |
| Total interest income                                        |       | $        | 1,115      |     | $          | 1,061    |       | $ | 755 |   |
| **Interest  Expense**                                        |       |     |       |     |       |     |       |
| Total interest  expense for reportable segments              |       | $        | 14,038     |     | $          | 10,648   |       | $ | 10,895 |   |
| Elimination of  intersegment interest expense                |       | (13,525  | )          | (10,534  | )          | (10,843  | )          |
| Other  non—allocated interest expense                   |       | 25,195   |       | 25,528   |       | 23,942   |       |
| Total interest expense                                       |       | $        | 25,708     |     | $          | 25,642   |       | $ | 23,994 |   |
| **Depreciation  and Amortization**                           |       |     |       |     |       |     |       |
| Total  depreciation and amortization for reportable segments |       | $        | 16,240     |     | $          | 13,032   |       | $ | 11,697 |   |
| Unallocated  depreciation and amortization expense           |       | 2,416    |       | 2,497    |       | 2,196    |       |
| Total consolidated depreciation and amortization             |       | $        | 18,656     |     | $          | 15,529   |       | $ | 13,893 |   |
| **Income  From Operations Before Taxes**                     |       |     |       |     |       |     |       |
| Total profit for  reportable segments                        |       | $        | 54,404     |     | $          | 58,239   |       | $ | 59,972 |   |
| Unallocated  depreciation and amortization expense           |       | (2,416   | )          | (2,497   | )          | (2,196   | )          |
| Unallocated G  & A expense                               |       | (17,477  | )          | (18,641  | )          | (19,633  | )          |
| Unallocated  interest expense, net                           |       | (24,086  | )          | (24,487  | )          | (23,193  | )          |
| Unallocated gain  on sale of property and equipment          |       | —   |       | —   |       | 397      |       |
| Unallocated debt  restructure expense                        |       | (835     | )          | —   |       | (5,035   | )          |
| Unallocated  restructuring charge                            |       | (93      | )          | —   |       | —   |       |
| Elimination of  intersegment interest expense, net           |       | 7,040    |       | 5,540    |       | 8,014    |       |
| Income from operations before income taxes                   |       | $        | 16,537     |     | $          | 18,154   |       | $ | 18,326 |   |
| **Assets**                                                   |       |     |       |     |       |     |       |
| Total assets for  reportable segments                        |       | $        | 480,639    |     | $          | 459,402  |       | $ | 370,326 |   |
| Capitalized  finance costs not allocated to segments         |       | 8,190    |       | 9,568    |       | 10,951   |       |
| Corporate  unallocated assets                                |       | 6,353    |       | 16,376   |       | 13,705   |       |
| Elimination of  intersegment receivable                      |       | (87,174  | )          | (69,886  | )          | (74,760  | )          |
| Consolidated total assets                                    |       | $        | 408,008    |     | $          | 415,460  |       | $ | 320,222 |   |
| **Capital  Expenditures**                                    |       |     |       |     |       |     |       |
| Total  expenditures for assets for reportable segments       |       | $        | 14,743     |     | $          | 11,095   |       | $ | 8,774 |   |
| Other asset  expenditures                                    |       | 502      |       | 276      |       | 95       |       |
| Total capital  expenditures                                  |       | $        | 15,245     |     | $          | 11,371   |       | $ | 8,869 |   |

 

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13.                      SELECTEDQUARTERLY INFORMATION (UNAUDITED)

The following is a summary of selectedquarterly information for the years ended December 31, 2006, 2005 and 2004 (inthousands):

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

 

|               | ** ** | **March 31,** | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|---------------|------------|--------------------|------------|-------------------|------------|------------------------|------------|-----------------------|------------|
| ** **    | ** ** | **2005**           | ** ** | **2005**          | ** ** | **2005**               | ** ** | **2005**              | ** ** |
| Total revenue |       | $                  | 108,687    |              | $          | 133,212                |       | $                     | 124,717    |   | $ | 118,944 |   |
| Gross profit  |       | 42,671             |       | 50,575            |       | 44,627                 |       | 45,918                |       |
| Net income    |       | 1,898              |       | 5,131             |       | 1,736                  |       | 1,973                 |       |
|               |            |                    |            |                   |            |                        |            |                       |            |  |  |  |  |

 

|                   | ** ** | **March 31,** | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------|------------|--------------------|------------|-------------------|------------|------------------------|------------|-----------------------|------------|
| ** **        | ** ** | **2004**           | ** ** | **2004**          | ** ** | **2004**               | ** ** | **2004**              | ** ** |
| Total revenue     |       | $                  | 101,282    |              | $          | 127,644                |       | $                     | 117,613    |   | $ | 118,140 |   |
| Gross profit      |       | 37,746             |       | 47,465            |       | 43,458                 |       | 47,541                |       |
| Net income (loss) |       | (182               | )          | 5,425             |       | 1,851                  |       | 3,157                 |       |
|                   |            |                    |            |                   |            |                        |            |                       |            |  |  |  |  |

 

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(1) During the thirdquarter, the Company revised the deferred tax assets expensed in the secondquarter of 2006 resulting in a credit of $2.3 million. Amounts have beenrestated to correct the second quarter.

14.                      VALUATIONAND QUALIFYING ACCOUNTS
| ** **                                  | ** ** | ** **          | ** ** | **Additions**       | ** ** | ** **     | ** ** | ** **          | ** ** |
|---------------------------------------------|------------|---------------------|------------|---------------------|------------|----------------|------------|---------------------|------------|
| ** **                                  | ** ** | **Balance at** | ** ** | **Charged to** | ** ** | ** **     | ** ** | **Balance at** | ** ** |
| ** **                                  | ** ** | **Beginning**       | ** ** | **Costs and**  | ** ** | ** **     | ** ** | **End**             | ** ** |
| **(in thousands)**                     | ** ** | **of Period**  | ** ** | **Expenses**        | ** ** | **Deductions** | ** ** | **of Period**  | ** ** |
| Description:                                |       |                |       |                |       |           |       |                |       |
| Year ended  December 31, 2006:              |       |                |       |                |       |           |       |                |       |
| Allowance for doubtful accounts receivable  |       | $                   | 952        |                | $          | 745            |       | $              | 504        | (a) | $ | 1,193 |   |
| Year ended  December 31, 2005:              |       |                |       |                |       |           |       |                |       |
| Allowance for doubtful accounts receivable  |       | $                   | 810        |                | $          | 521            |       | $              | 379        | (a) | $ | 952 |   |
| Year ended  December 31, 2004:              |       |                |       |                |       |           |       |                |       |
| Allowance for  doubtful accounts receivable |       | $                   | 1,039      |                | $          | 585            |       | $              | 814        | (a) | $ | 810 |   |

----

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

 

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15.                     NOTES OFFERING AND GUARANTOR FINANCIALINFORMATION

In February 2004, theCompany completed an offering of $200.0 million 9.0% Senior Subordinated Notes(“AGI Senior Notes”) due in 2012. Interest is payable on the AGI Senior Notes twice a year on February 15and August 15, beginning August 15, 2004. The Company’s present and future restricted subsidiaries will guaranteethe AGI Senior Notes with unconditional guarantees of payment that will rankjunior in right of payment to their existing and future senior debt, but willrank equal in right of payment to their existing and future senior subordinateddebt.

All of the Company’s subsidiaries havejointly and severally guaranteed the indebtedness under the AGI SeniorNotes.  Full financial statements of theGuarantors have not been included because, pursuant to their respectiveguarantees, the Guarantors are jointly and severally liable with respect to theAGI Senior Notes.

The following are summarizedstatements setting forth certain financial information concerning the GuarantorSubsidiaries as of and for the year ended December 31, 2006 (in thousands).
| ** **                                             | ** ** | ** ** | ** ** | ** **     | ** ** | **NON-**      | ** ** | ** **       | ** ** | **AGI**          | ** ** |
|--------------------------------------------------------|------------|------------|------------|----------------|------------|---------------|------------|------------------|------------|------------------|------------|
| ** **                                             | ** ** | **AGI**    | ** ** | **GUARANTORS** | ** ** | **GUARANTOR** | ** ** | **ELIMINATIONS** | ** ** | **CONSOLIDATED** | ** ** |
| Cash & cash  equivalents                           |       | $          | 12,609     |           | $          | 2,397         |       | $                | —     |             | $          | — |   | $ | 15,006 |   |
| Accounts  receivable (net of allowance for             |       |       |       |           |       |          |       |             |       |             |       |
| doubtful accounts)                                     |       | 436        |       | 131,028        |       | —        |       | (104,265         | )          | 27,199           |       |
| Inventories                                            |       | —     |       | 52,703         |       | —        |       | —           |       | 52,703           |       |
| Other current  assets                                  |       | 2,439      |       | 13,759         |       | —        |       | —           |       | 16,198           |       |
| Total current  assets                                  |       | 15,484     |       | 199,887        |       | —        |       | (104,265         | )          | 111,106          |       |
| Property and  equipment, net                           |       | 6,581      |       | 28,184         |       | —        |       | —           |       | 34,765           |       |
| Intangible  assets                                     |       | 5,816      |       | 24,495         |       | —        |       | —           |       | 30,311           |       |
| Goodwill                                               |       | 67,584     |       | 76,845         |       | —        |       | —           |       | 144,429          |       |
| Investment in  subsidiaries                            |       | 530,094    |       | 81,005         |       | —        |       | (611,099         | )          | —           |       |
| Affiliate note  and investments                        |       | 44,688     |       | —         |       | 81,005        |       | (40,000          | )          | 85,693           |       |
| Other assets                                           |       | 915        |       | 789            |       | —        |       | —           |       | 1,704            |       |
| Total assets                                           |       | $          | 671,162    |           | $          | 411,205       |       | $                | 81,005     |             | $          | (755,364 | ) | $ | 408,008 |   |
|                                                   |       |       |       |           |       |          |       |             |       |             |       |
| Accounts payable                                       |       | $          | 1,305      |           | $          | 31,272        |       | $                | —     |             | $          | — |   | $ | 32,577 |   |
| Accrued and  other liabilities                         |       | 13,154     |       | 30,181         |       | —        |       | —           |       | 43,335           |       |
| Current portion  of long-term debt                     |       | 108,948    |       | 42,588         |       | —        |       | (144,265         | )          | 7,271            |       |
| Current portion  of deferred revenue                   |       | 1,386      |       | 61,520         |       | —        |       | —           |       | 62,906           |       |
| Total current  liabilities                             |       | 124,793    |       | 165,561        |       |          |       | (144,265         | )          | 146,089          |       |
|                                                   |       |       |       |           |       |          |       |             |       |             |       |
| Deferred revenue                                       |       | 2,663      |       | 34,520         |       | —        |       | —           |       | 37,183           |       |
| Long-term debt                                         |       | 273,886    |       | 3,998          |       | —        |       | —           |       | 277,884          |       |
| Other long-term  liabilities                           |       | 345,203    |       | (322,968       | )          | —        |       | —           |       | 22,235           |       |
| Total  liabilities                                     |       | 746,545    |       | (118,889       | )          |          |       | (144,265         | )          | 483,391          |       |
|                                                   |       |       |       |           |       |          |       |             |       |             |       |
| Interdivisional  equity                                |       | —     |       | 530,094        |       | 81,005        |       | (611,099         | )          | —           |       |
| Stockholders'  deficit                                 |       | (75,383    | )          | —         |       | —        |       | —           |       | (75,383          | )          |
|                                                   |       |       |       |           |       |          |       |             |       |             |       |
| Total  liabilities & stockholders' equity          |       | $          | 671,162    |           | $          | 411,205       |       | $                | 81,005     |             | $          | (755,364 | ) | $ | 408,008 |   |
|                                                   |       |       |       |           |       |          |       |             |       |             |       |
| Revenue                                                |       | $          | 5,476      |           | $          | 509,082       |       | $                | —     |             | $          | — |   | $ | 514,558 |   |
| Costs applicable  to revenues                          |       | (13,466    | )          | (307,258       | )          | —        |       | —           |       | (320,724         | )          |
| Operating  expenses                                    |       | (18,962    | )          | (132,823       | )          | —        |       | —           |       | (151,785         | )          |
| Interest  expense, net                                 |       | (17,046    | )          | (7,547         | )          | —        |       | —           |       | (24,593          | )          |
| Income from  investment in consolidated subsidiaries   |       | 46,755     |       | —         |       | —        |       | (46,755          | )          | —           |       |
| Other non  operating income (expenses)                 |       | 4,953      |       | (5,872         | )          | —        |       | —           |       | (919             | )          |
| Income tax  expense                                    |       | (13,441    | )          | (8,827         | )          | —        |       | —           |       | (22,268          | )          |
| Net income  (loss)                                     |       | $          | (5,731     | )              | $          | 46,755        |       | $                | —     |             | $          | (46,755 | ) | $ | (5,731 | ) |
|                                                   |       |       |       |           |       |          |       |             |       |             |       |
| Cash flows from  operations                            |       | $          | (30,540    | )              | $          | 77,645        |       | $                | —     |             | $          | — |   | $ | 47,105 |   |
| Cash flows used  in investing activities               |       | (2,978     | )          | (14,975        | )          | —        |       | —           |       | (17,953          | )          |
| Cash flows (used  in) provided by financing activities |       | 19,706     |       | (58,630        | )          | —        |       | —           |       | (38,924          | )          |
| Cash at  beginning of year                             |       | 26,421     |       | (1,643         | )          | —        |       | —           |       | 24,778           |       |
| Cash at end of year                                    |       | $          | 12,609     |           | $          | 2,397         |       | $                | —     |             | $          | — |   | $ | 15,006 |   |

 

65

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The following are summarized statementssetting forth certain financial information concerning the GuarantorSubsidiaries as of and for the year ended December 31, 2005 (in thousands).
| ** **                                           | ** ** | ** ** | ** ** | ** **     | ** ** | **NON–** | ** ** | ** **       | ** ** | **AGI**          | ** ** |
|------------------------------------------------------|------------|------------|------------|----------------|------------|---------------|------------|------------------|------------|------------------|------------|
| ** **                                           | ** ** | **AGI**    | ** ** | **GUARANTORS** | ** ** | **GUARANTOR** | ** ** | **ELIMINATIONS** | ** ** | **CONSOLIDATED** | ** ** |
| Cash & cash  equivalents                         |       | $          | 26,421     |           | $          | (1,643        | )          | $                | —     |             | $          | — |   | $ | 24,778 |   |
| Accounts receivable (net  of allowance for           |       |       |       |           |       |          |       |             |       |             |       |
| doubtful  accounts)                                  |       | 317        |       | 96,077         |       | —        |       | (69,886          | )          | 26,508           |       |
| Inventories                                          |       | —     |       | 47,039         |       | —        |       | —           |       | 47,039           |       |
| Other current assets                                 |       | 4,769      |       | 11,444         |       | —        |       | —           |       | 16,213           |       |
| Total current assets                                 |       | 31,507     |       | 152,917        |       | —        |       | (69,886          | )          | 114,538          |       |
| Property and  equipment, net                         |       | 5,680      |       | 24,163         |       | —        |       | —           |       | 29,843           |       |
| Intangible assets                                    |       | 8,245      |       | 26,327         |       | —        |       | —           |       | 34,572           |       |
| Goodwill                                             |       | 67,584     |       | 76,845         |       | —        |       | —           |       | 144,429          |       |
| Investment in subsidiaries                           |       | 468,270    |       | 81,005         |       | —        |       | (549,275         | )          | —           |       |
| Affiliate note and  investments                      |       | 44,795     |       | —         |       | 81,005        |       | (40,073          | )          | 85,727           |       |
| Other assets                                         |       | 11,844     |       | (5,493         | )          | —        |       | —           |       | 6,351            |       |
| Total assets                                         |       | $          | 637,925    |           | $          | 355,764       |       | $                | 81,005     |             | $          | (659,234 | ) | $ | 415,460 |   |
| Accounts payable                                     |       | $          | 985        |           | $          | 11,698        |       | $                | —     |             | $          | — |   | $ | 12,683 |   |
| Accrued and other  liabilities                       |       | 18,932     |       | 22,524         |       | —        |       | —           |       | 41,456           |       |
| Current portion of  long-term debt                   |       | 72,561     |       | 43,534         |       | —        |       | (109,959         | )          | 6,136            |       |
| Current portion of  deferred revenue                 |       | 1,592      |       | 59,402         |       | —        |       | —           |       | 60,994           |       |
| Total current  liabilities                           |       | 94,070     |       | 137,158        |       |          |       | (109,959         | )          | 121,269          |       |
| Deferred revenue                                     |       | 2,785      |       | 35,141         |       | —        |       | —           |       | 37,926           |       |
| Long-term debt                                       |       | 308,475    |       | 5,389          |       | —        |       | —           |       | 313,864          |       |
| Other long-term  liabilities                         |       | 298,960    |       | (290,194       | )          | —        |       | —           |       | 8,766            |       |
| Total liabilities                                    |       | 704,290    |       | (112,506       | )          |          |       | (109,959         | )          | 481,825          |       |
| Interdivisional  equity                              |       | —     |       | 468,270        |       | 81,005        |       | (549,275         | )          | —           |       |
| Stockholders' deficit                                |       | (66,365    | )          | —         |       | —        |       | —           |       | (66,365          | )          |
| Total liabilities  & stockholder's equity        |       | $          | 637,925    |           | $          | 355,764       |       | $                | 81,005     |             | $          | (659,234 | ) | $ | 415,460 |   |
| Revenue                                              |       | $          | 5,432      |           | $          | 480,128       |       | $                | -          |             | $          | - |   | $ | 485,560 |   |
| Costs applicable to  revenues                        |       | (12,995    | )          | (288,774       | )          | —        |       | —           |       | (301,769         | )          |
| Operating expenses                                   |       | (20,617    | )          | (120,434       | )          | —        |       | —           |       | (141,051         | )          |
| Interest income  (expense), net                      |       | (18,947    | )          | (5,634         | )          | —        |       | —           |       | (24,581          | )          |
| Income from investment  in consolidated subsidiaries |       | 35,115     |       | —         |       | —        |       | (35,115          | )          | —           |       |
| Other non operating  income (expenses)               |       | 5,914      |       | (5,919         | )          | —        |       | —           |       | (5               | )          |
| Income tax benefit  (expense)                        |       | 16,836     |       | (24,252        | )          | —        |       | —           |       | (7,416           | )          |
| Net income                                           |       | $          | 10,738     |           | $          | 35,115        |       | $                | —     |             | $          | (35,115 | ) | $ | 10,738 |   |
| Cash flows from  operations                          |       | $          | (16,663    | )              | $          | 33,905        |       | —           |       | —           |       | $ | 17,242 |   |
| Cash flows used in  investing activities             |       | (123,159   | )          | (93,897        | )          | (81,005       | )          | 202,083          |       | (95,978          | )          |
| Cash flows provided by  financing activities         |       | 141,391    |       | 58,637         |       | 81,005        |       | (202,083         | )          | 78,950           |       |
| Cash at beginning of  year                           |       | 24,852     |       | (288           | )          | —        |       | —           |       | 24,564           |       |
| Cash at end of year                                  |       | $          | 26,421     |           | $          | (1,643        | )          | $                | —     |             | $—    |   | $ | 24,778 |   |

 

66

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The following are summarized statementssetting forth certain financial information concerning the GuarantorSubsidiaries for the year ended December 31, 2004 (in thousands).
| ** **                                             | ** ** | ** ** | ** ** | ** **     | ** ** | **NON-**      | ** ** | **AGI**          | ** ** | ** **       | ** ** |
|--------------------------------------------------------|------------|------------|------------|----------------|------------|---------------|------------|------------------|------------|------------------|------------|
| ** **                                             | ** ** | **AGI**    | ** ** | **GUARANTORS** | ** ** | **GUARANTOR** | ** ** | **ELIMINATIONS** | ** ** | **CONSOLIDATED** | ** ** |
| Revenue                                                |       | $          | 5,499      |           | $          | 459,180       |       | $                | —     |             | $          | — |   | $ | 464,679 |   |
| Costs applicable  to revenues                          |       | (13,364    | )          | (275,105       | )          | —        |       | —           |       | (288,469         | )          |
| Operating  expenses                                    |       | (21,816    | )          | (108,214       | )          | —        |       | —           |       | (130,030         | )          |
| Interest expense,  net                                 |       | (15,179    | )          | (8,060         | )          | —        |       | —           |       | (23,239          | )          |
| Income from  investment in consolidated subsidiaries   |       | 34,015     |       | —         |       | —        |       | (34,015          | )          | —           |       |
| Other non  operating income (expenses)                 |       | 2,376      |       | (6,991         | )          | —        |       | —           |       | (4,615           | )          |
| Income tax  benefit (expense)                          |       | 18,720     |       | (26,795        | )          | —        |       | —           |       | (8,075           | )          |
| Net income (loss)                                      |       | $          | 10,251     |           | $          | 34,015        |       | $                | —     |             | $          | (34,015 | ) | $ | 10,251 |   |
| Cash flows from operations                             |       | $          | (15,565    | )              | $          | 53,931        |       | $                | —     |             | $          | — |   | $ | 38,366 |   |
| Cash flows used  in investing activities               |       | (1,435     | )          | (5,704         | )          | —        |       | —           |       | (7,139           | )          |
| Cash flows (used  in) provided by financing activities |       | 37,003     |       | (49,781        | )          | —        |       | —           |       | (12,778          | )          |
| Cash at beginning  of year                             |       | 4,849      |       | 1,266          |       | —        |       | —           |       | 6,115            |       |
| Cash at end of year                                    |       | $          | 24,852     |           | $          | (288          | )          | $                | —     |             | $          | — |   | $ | 24,564 |   |

 

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

None

**ITEM 9A: CONTROLS AND PROCEDURES**

Within90 days prior to the filing of this Annual Report on Form 10-K, we carried outan evaluation, under the supervision and with the participation of ourmanagement, including our President and Chief Executive Officer and our SeniorVice President and Chief Financial Officer, of the effectiveness of the designand operation of our disclosure controls and procedures (as defined in Rule13a-15(e) of the Securities Exchange Act of 1934, as amended) as of the end ofthe period covered by this report.  Basedupon that evaluation, our President and Chief Executive Officer, along with ourSenior Vice President and Chief Financial Officer, concluded that our disclosurecontrols and procedures are effective in timely alerting them to materialinformation relating to our Company (including our consolidated subsidiaries)required to be included in our periodic SEC filings.  No changes have occurred during the periodcovered by this report or since the evaluation date that would have a materialeffect on the disclosure controls and procedures.

**ITEM 9B: OTHER INFORMATION**

None

 

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**PART III**

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

Our executive officers and directors are as follows:
| **Name**             | ** ** | **Age** | ** ** | **Position**                                                                            |
|----------------------|------------|---------|------------|-----------------------------------------------------------------------------------------|
| Michael A. Schneider |       | 52      |       | President, Chief Executive Officer and Director                                         |
| Marcus Lemonis       |       | 33      |       | Chief Executive Officer and President of Camping  World, Inc.                           |
| Mark J. Boggess      |       | 51      |       | Chief Operating Officer of Camping World, Inc.                                          |
| Thomas F. Wolfe      |       | 45      |       | Senior Vice President and Chief Financial Officer                                       |
| Laura A. James       |       | 50      |       | Senior Vice President/ Human Resources                                                  |
| Kenneth Marshall     |       | 47      |       | Executive Vice President of Finance and Information  Technology of Camping World, Inc.  |
| Brent Moody          |       | 45      |       | Senior Vice President/ General Counsel and Business  Development of Camping World, Inc. |
| Prabhuling Patel     |       | 60      |       | Senior Vice President                                                                   |
| Stephen Adams        |       | 69      |       | Chairman of the Board of Directors                                                      |
| Andris A. Baltins    |       | 61      |       | Director                                                                                |
| David Frith-Smith    |       | 61      |       | Director                                                                                |
| J. Kevin Gleason     |       | 55      |       | Director                                                                                |
| George Pransky       |       | 66      |       | Director                                                                                |

 

MichaelA. Schneider became our President and Chief Executive Officer as of January 1,2004.  Prior to that time, Mr. Schneiderhad been our Chief Operating Officer since 1996.  Prior thereto, Mr. Schneider served as ourSenior Vice President and General Counsel since January 1993 and wasresponsible for administrative areas, development of new corporate ventures andportions of the RV publication business and the advertising and salesdepartments.  Prior to January 1993 andsince 1977, Mr. Schneider has held a variety of senior management positions inour publication business.  Mr. Schneiderjoined the Board of Directors in 2004. Mr. Schneider also serves as a director of Adams Outdoor AdvertisingInc. (“AOA”), which operates an outdoor media advertising business thought itssubsidiaries, and Affinity Bank, a national bank owned by Affinity BankHoldings, Inc. (“ABH”).  Mr. Adams owns acontrolling interest in both AOA and ABH.

MarcusA. Lemonis was appointed President and Chief Executive Officer of CampingWorld, Inc. (“Camping World”) effective September 13, 2006.  Mr. Lemonis also currently serves and, since2003, has served as Chief Executive Officer and President of FreedomRoadsHolding Company LLC and its subsidiaries (“FreedomRoads”).  FreedomRoads operates RV dealerships acrossthe United States (53 dealerships as of December 31, 2006) and is controlled byMr. Adams.  From 2001 to 2003, Mr.Lemonis served as President, Chief Executive Officer and Chairman of the Boardof Directors of Holiday RV Superstores, Inc. Holiday RV Superstores, Inc. filed for bankruptcy on October 18, 2003.

MarkJ. Boggess became the Chief Operating Officer of Camping World effectiveSeptember 2006.  Mr. Boggess served asthe President and Chief Executive Officer of our Camping World subsidiary as ofJanuary 2004 through September 2006. Prior to that time, Mr. Boggess had been our Senior Vice President andChief Financial Officer since June 1993. From June 1992 through May 1993, Mr. Boggess was Vice President and ChiefFinancial Officer of Hypro

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Corporation,a privately owned manufacturer of fluid transfer pumps.  From June 1989 through June 1992, Mr. Boggesswas Treasurer of Adams Communications Corporation, a holding company controlledby Stephen Adams which owned television and radio station operations throughoutthe United States.

ThomasF. Wolfe became our Senior Vice President and Chief Financial Officer as ofJanuary 1, 2004.   Prior to that time,Mr. Wolfe had been our Vice President and Controller since 1997.  From 1991 to 1997, Mr. Wolfe was VicePresident of Finance of Convenience Management Group, a privately-owneddistributor of petroleum products and equipment.  From 1989 to 1991, Mr. Wolfe was VicePresident and Controller of First City Properties, Inc.  Prior to 1989, and since 1983, Mr. Wolfe helda variety of staff and management positions at Deloitte & Touche LLP.

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

KennethMarshall became Executive Vice President of Finance and Information Technologyof Camping World as of November 1, 2005. Prior to that, he served as Vice President of Finance and Controller andthen Senior Vice President of Finance/Information Technology and Distributionsince joining Camping World in 2002. Prior to that time and since 2000, Mr. Marshall served as ChiefInformation Officer of Harwood International, a real estate development companyin Dallas, Texas.  From 1995 to 2000, Mr.Marshall served as Chief Financial Officer/Chief Operating Officer and was ashareholder of Virtual Solutions, Inc., a technology consulting firm in Dallas,Texas.

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

PrabhulingPatel was appointed Senior Vice President of Products & Services as of May1, 2004.  Mr. Patel joined the Company inDecember 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 of theoutsourcing business of Message Media, Inc., an email marketing company.  Prior to 2000, he was President of theTelecommunications, Energy & Cable Division of Experian, a credit bureauand direct marketing services company. He served in senior executive positions running various businesses atMetromail Corporation, which was in the direct marketing servicesbusiness.  Mr. Patel also held a numberof executive level positions in marketing, finance, IT, business developmentand business strategy at Citigroup, Cigna, Household International andMontgomery Ward.

StephenAdams has been the Chairman of our Board of Directors since December 1988.  Mr. Adams is also chairman and 90% owner ofFreedomRoads which operates RV dealerships (53 dealerships as of December 31,2006) throughout the United States.  Inaddition, Mr. Adams is

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thechairman of the board of directors and the controlling shareholder of AOA.  Mr. Adams is also the chairman and 95% ownerof ABH, which operates through its subsidiary, a national bank.

AndrisA. Baltins has been a member of the law firm of Kaplan, Strangis and Kaplan,P.A. since 1979.  Mr. Baltins is a memberof the board of Polaris Industries Inc., a manufacturer of snowmobiles, all-terrainvehicles, motorcycles and related products, and serves as the Chair of itsCorporate Governance and Nominating Committee and is also a member of itsCompensation Committee.  He also servesas a director of various private and non-profit corporations.  Mr. Baltins joined the Board of Directors inFebruary 2006.  Mr. Baltins’ law firmprovides legal services to the Company and its subsidiaries.  Mr. Baltins also serves as a director ofFreedomRoads and of AOA, both of which are controlled by Stephen Adams.

DavidFrith-Smith has served as managing partner of Biller, Frith-Smith &Archibald, Certified Public Accountants since 1988.  Mr. Frith-Smith was a principal with MaidyBiller Frith-Smith & Brenner, Certified Public Accountants from 1984 to1988, and with Maidy and Lederman, Certified Public Accountants from 1980 to1984.  Mr. Frith-Smith has been a memberof our Board of Directors since November 1996. Mr. Frith-Smith is also a director of AOA and ABH, both of which arecontrolled by Stephen Adams, and various private and non-profit corporations.

J.Kevin Gleason has served as the Chief Executive Officer and President of AOA,an entity controlled by Mr. Adams, since 1991. Prior to that time, Mr. Gleason was Executive Vice President and GeneralManager of AOA since 1987.  Mr. Gleasonserved as General Manager of Naegele Outdoor Advertising of Southern Californiafrom 1985 to 1987.  He has served as vicechair marketing, and Chairman of the Outdoor Advertising Association of Americaas well as a board member of the Traffic Audit Bureau.  Mr. Gleason joined the Board of Directors inOctober 2005.

GeorgePransky, Ph.D. has been in private practice as co-director of Pransky andAssociates in La Conner, Washington since 1988. He is a frequent consultant for government and private agencies and hasbeen a contract faculty member for a number of educational institutions,including the University of Washington, the University of Oregon and AntiochCollege.  Dr. Pransky has trainedmanagement groups in team building, stress elimination and leadershipdevelopment for twenty-five years.  Dr.Pransky joined the Board of Directors in February 2006 and he also serves as adirector of AOA.

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

**Board Functions as Audit Committee**

Oursecurities are not listed on any national securities exchange and we are notrequired to maintain a separate audit committee of the Board nor are we subjectto the audit committee independence requirements set forth in Rule 10A-3 of theSecurities Exchange Act of 1934, as amended. On February 22, 2006, the Board of Directors of the Company disbandedthe Audit Committee and assumed its oversight of the integrity of our financialstatements; our compliance with legal and regulatory requirements; theretention, independence and qualifications of our independent auditor; and theresponsibilities, budget and performance of our independent auditor.  The Board of Directors recognizes Mr.Frith-Smith as an “Audit Committee Financial Expert” as such term has beendefined by the Securities and Exchange Commission.  Mr. Frith-Smith is not an independentdirector.

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**Code ofProfessional Conduct**

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

·              Fromour main web page, first click on “About AGI,”

·              Then,click on “Code of Conduct.”

The Company intends to satisfy the disclosurerequirement under Item 5.05 of Form 8-K regarding an amendment to, or waiverfrom a provision of, this Code of Professional Conduct by posting suchinformation at the address and location specified above under the heading “Waivers.”

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

The Company is a voluntary filer pursuant to Section15(d) of the Securities Exchange Act of 1934, as amended (the “Act”) and doesnot have a class of equity securities registered pursuant to Section 12 of theAct.  Accordingly, our officers,directors and 10% or greater holders of our securities are not currentlyrequired to file reports pursuant to Section 16(a) of the Act.

**ITEM 11:  EXECUTIVE COMPENSATION**

**Compensation Discussion and Analysis**

***Overview***

Thefollowing discussion and analysis describes the Company’s compensationobjectives and policies as applied to the named executive officers appearing inthe Summary Compensation Table below (the “Executive Officers”).  This section is intended to provide aframework within which to understand the actual compensation awarded to, earnedor held by each Executive Officer during 2006 as reported in the compensationtables and accompanying narrative sections appearing on pages 78 to 89 of thisannual report on Form 10-K.

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

***Compensation Objectives***

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

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DrivingPerformance:  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 only 15-20%of the total compensation opportunity for the President and Chief ExecutiveOfficer of the Company, Mr. Schneider, and the Chief Operating Officer of ourCamping World subsidiary, Mr. Boggess, and 55-60% of the total compensationopportunity for the other Executive Officers. The remaining balance of each Executive Officer’s total compensationopportunity is dependent upon short-term and long-term increases in Companyfinancial performance and operating profit and is comprised of:

·                                          In the case of Messrs. Schneider, Boggess andWolfe, an annual incentive award that is based on an assigned percentage ofincome from operations in excess of $2.8 million, excluding depreciation,amortization, phantom stock expense and other non-recurring expenses(specifically, debt extinguishment expense of $835,000 and reorganizationexpense of $93,000 in 2006);

·                                          In the case of Messrs. Moody and Marshall,the annual discretionary incentive award for 2006 was determined and valued byMr. Lemonis; and

·                                          A payout under their phantom stock agreement,the amount of which is dependent upon increases in the base value of theCompany or Camping World, as appropriate, over a multiple-year period based ona formula related to cash flow, subject to certain adjustments.

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

Attractingand Retaining Executive Talent:  The Company has structured theincentive opportunities under the annual incentive award programs and thephantom stock agreements to provide Executive Officers with a substantialupside in driving the value of the Company, which it views as a tool forattracting new talent.  In addition, thephantom stock agreements, which are based on performance over a multiple-yearperiod, provide Executive Officers with an incentive to stay with the Company.

***Determining Compensation***

TheCompany relies upon its own judgment in designing the compensationopportunities provided to the Executive Officers.  Messrs. Schneider and Lemonis makerecommendations to the Chairman of the Board of Directors regarding theappropriate levels of total compensation opportunities based upon their reviewof the individual performance and responsibilities of the Executive Officersunder their supervision and the financial and operational performance of theCompany or Camping World, as appropriate, as a whole.  The Chairman of the Board of Directors makesthe final decision regarding the amount of base salary and annual incentiveaward opportunity provided to Mr. Schneider and the phantom stock agreementopportunities 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 Mr. Wolfewithin the scope of authority provided by the Chairman of the Board ofDirectors.  In addition, Mr. Lemonisultimately determines the amount of compensation opportunities provided toMessrs. Boggess, Moody and Marshall

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withinthe scope of authority provided by the Chairman of the Board of Directors.  The Chairman of the Board of Directors or theChief Executive Officer of either the Company or Camping World, as the case maybe, considers the annual and long-term financial performance of the Company or CampingWorld in determining the forms and amounts of compensation paid to eachExecutive Officer.

TheCompany does not employ a compensation consultant, nor does it engage in anyformal market analysis in determining the levels of total compensation opportunity(or components thereof) provided to each Executive Officer.  Generally, the Company attempts to achieveits goal of driving performance by making a significant portion, 80-85% of thetotal compensation opportunity provided to each of Messrs. Schneider andBoggess, and 40-45% of the total compensation opportunity provided to each ofthe other Executive Officers, dependent upon the Company’s annual and long-termperformance and value.  A higherproportion of the compensation opportunity provided to each of Messrs.Schneider and Boggess, as compared to the other Executive Officers, is tied toCompany performance because each is the leader of his respective businessoperations and thus is in a more unique position to influence the performanceof the Company.  However, the Companybelieves that the total compensation opportunities of all the ExecutiveOfficers provide a substantial incentive to each of them to drive theperformance of the Company—both in the short and long-term.

TheCompany, which is a wholly-owned subsidiary of Affinity Group Holding, Inc. (“AGHI”),does not grant shares of Company stock or stock options to the ExecutiveOfficers.  The long-term incentive awardsin the form of phantom stock agreements are intended to provide Executive Officerswith a cash equivalent to the increase in value of the Company or Camping Worldthat would otherwise be realized in stock or option awards of a company withpublicly traded equity securities.

***Elements of Compensation***

AnnualCompensation

**Base Salary**

EachExecutive Officer receives a minimum level of fixed compensation in the form ofbase salary.  The Company does not reviewthe base salaries of the Executive Officers on a regular basis; however, it hasadjusted base salary levels from time to time on a discretionary basis basedupon factors such as an increase in the responsibilities or duties of aparticular Executive Officer.  In 2006,the Company exercised its discretion and increased the amount of base salary paidto each of Messrs. Moody and Marshall in recognition of increased dutiesassumed by each in connection with the joint marketing arrangement entered intobetween Camping World and FreedomRoads, which is described under Item 13 ofthis Annual Report on Form 10-K.  TheCompany did not adjust the amount of base salary paid to the other ExecutiveOfficers in 2006.

Theamount of base salary paid to each of the Executive Officers for 2006 isreflected in the Salary column of the Summary Compensation Table below.

**Annual Incentive Awards**

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

*Messrs.Schneider, Boggess and Wolfe*:  The 2006 annual incentiveaward for Messrs. Schneider, Boggess and Wolfe is paid on a pro rata basis everytwo weeks, in connection with

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theregular payroll cycle, based on estimated Company performance.  The actual performance of the Company ismeasured under the parameters of the annual incentive award program at varioustimes during the fiscal year. Adjustments to the bi-weekly pro rata payments are made as necessarybased upon those reviews.  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, additional paymentsare made to each of Messrs. Schneider, Boggess and Wolfe based upon this finalmeasurement in order that the aggregate amount of incentive award paidcorrelates with his assigned percentage of actual Company performance duringthe year.  The Company takes aconservative position in estimating the pro rata amounts paid to Messrs.Schneider, Boggess and Wolfe throughout the year in connection with the regularpayroll cycle and, to date, has not made any downward adjustments in the amountof incentive award paid based upon the final performance review.

For2006, the amount of annual incentive award payable to each of Messrs.Schneider, Boggess and Wolfe was based on 1.0%, 1.0% and 0.2%, respectively, ofthe Company’s income from operations in excess of $2.8 million, excludingdepreciation, amortization, phantom stock expense and other non-recurringexpenses (specifically, debt extinguishment expense of $835,000 andreorganization expense of $93,000 in 2006) (“2006 Value”).  The 2006 Value was $59 million.

*Messrs.Moody and Marshall*:  The 2006 annual incentive award for Messrs.Moody and Marshall was paid in a lump-sum in March 2007.  For 2006, Messrs. Moody and Marshallparticipated in a discretionary annual incentive award program pursuant towhich the aggregate amount of each of their annual incentive award is basedupon the review and evaluation of Mr. Lemonis. In the fourth quarter of 2006, Mr. Lemonis determined that the amount ofannual incentive awards payable to each of Messrs. Moody and Marshall should be$123,000.

Theaggregate amount of annual incentive award paid to each of Messrs. Schneider,Boggess and Wolfe based upon 2006 performance is reflected in the Non-EquityIncentive Plan Compensation column of the Summary Compensation Table below.  The aggregate amount of annual incentiveaward paid to each of Messrs. Moody and Marshall based upon 2006 performance isreflected in the Bonus column of the Summary Compensation Table below.

Long-TermCompensation/Phantom Stock Agreements

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

Theamount of phantom stock expensed during 2006 for each Executive Officer is includedin the Stock Awards column of the Summary Compensation Table below.

*Mr.Schneider*:  Mr. Schneider entered into a phantom stockagreement with the Company, dated January 1, 2000, pursuant to which Mr.Schneider received 1.8% of the Increase in Company Value as measured over theperiod beginning January 1, 2000 until December 31, 2003.  The value of such earnings were paid in threeequal annual installments of $43,326. The last payment under the 2000 phantom stock agreement was made to Mr.Schneider in

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January2006.  The payments to Mr. Schneiderpursuant to his 2000 phantom stock agreement were previously reported in theAll Other Compensation column of the Company’s Summary Compensation Table forprior years.

*Messrs.Schneider and Wolfe*:  Messrs. Schneider and Wolfe have also eachentered into a phantom stock agreement with the Company, in each case datedJanuary 1, 2004, pursuant to which Mr. Schneider will receive 2.50% and Mr.Wolfe will receive 0.33% of the increase in Company value as measured over theperiod beginning January 1, 2004 and ended December 31, 2006.  The phantom stock payout under the 2004agreements will be paid in three equal annual installments of $826,637and$109,116 for Messrs. Schneider and Wolfe, respectively, the first of which willbe distributed during the second quarter of 2007.

*Mr.Boggess*:  Mr. Boggess did not earn any awards under,nor did he receive any payments as a result of, any phantom stock agreementsduring 2006.  The last phantom stockagreement entered into between Mr. Boggess and the Company, dated July 1, 2003,which was amended March 1, 2006 to freeze the measurement period under suchagreement effective as of December 31, 2005 as a result of various changes incorporate structure, organization and administration affecting Camping WorId,including the joint marketing arrangement between Camping World andFreedomRoads.  The amount of phantomstock payments earned by Mr. Boggess under this agreement will be paid in threeequal annual installments of $382,209 in each January of 2007, 2008 and 2009.

*Messrs. Moody and Marshall*:  Messrs. Moody and Marshall didnot earn any awards under, nor did they receive any payments as a result of,any phantom stock agreements during 2006. Mr. Moody is party to a phantom stock agreement with the Company, datedJuly 1, 2003, and Mr. Marshall is party to a phantom stock agreement with theCompany dated June 30, 2002, as amended July 31, 2003.  On March 1, 2006, the Company determined tofreeze the measurement period under such agreements effective as of December31, 2005 as a result of various changes in corporate structure, organizationand administration affecting Camping World, including the joint marketingarrangement between Camping World and FreedomRoads.  The amount of phantom stock payments earnedby Messrs. Moody and Marshall under their respective phantom stock agreementswere paid in one lump sum of $463,883 each on January 2, 2007.

*2007 Agreements*:  The Company is not currently a party to anyphantom stock agreements with the Executive Officers.  However, the Company is considering newagreements with each of the Executive Officers, which will be based on theperformance of the Company or certain of its business units.

OtherElements of Compensation

TheCompany provides a full range of benefits to its Executive Officers, includinga 401(k) Savings and Profit Plan and the standard medical, dental anddisability coverage, which are available to employees generally.  The Company believes that these benefits arereasonable in amount and are designed to be competitive with comparablecompanies.

**401(k) Savings and Profit Plan**

TheCompany sponsors a deferred savings and profit sharing plan (the “401(k) Plan”)qualified under Section 401(a) and 401(k) of the Internal Revenue Code of 1986,as amended (the “Code”).  All employeesover age 21, including the Executive Officers, who have completed one year ofservice (minimum 1,000 hours) are eligible to participate in the 401(k)Plan.  For the plan year 2006, theCompany elected a Safe Harbor Matching Contribution for the employer

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matchand set the employer match, which vests upon contribution, at an amount equalto 100% of the first 4% of the employee’s contribution.  Employees may defer up to 60% of theireligible compensation up to Internal Revenue Service limits.  The amounts of 401(k) Plan matchingcontributions by the Company during 2006 are reflected in the All OtherCompensation column of the Summary Compensation Table below.

**KEYSOP**

EffectiveJanuary 1999, the Company introduced the KEYSOP, a non-qualified deferredcompensation plan administered through RABBI trusts, for key employees of theCompany and its subsidiaries.  Messrs.Moody and Marshall elected not to participate in the KEYSOP.  Participants may contribute all or a portionof their annual incentive awards and payout from the phantom stock awards tothe KEYSOP.  Trustees under the KEYSOPreceive such contributions and invest the deferred amounts based upon thespecific 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.

**OtherBenefit Plans**

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

**Perquisites**

TheCompany provides its Executive Officers with very limited perquisites, which itbelieves are appropriate components of the compensation package for theparticular Executive Officer.  TheCompany pays the premiums on life insurance policies for each of Messrs.Schneider and Boggess.  In addition, eachof Messrs. Moody and Marshall receive an annual car allowance of approximately$9,000.  To the extent that suchaggregate incremental cost to the Company of providing these perquisites toeach Executive Officer is equal to or greater than $10,000, such amount isincluded in the All Other Compensation column of the Annual Compensation Table.

PhantomStock Agreements:  As described in the section entitled “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*” above, the Company hasentered into phantom stock agreements with each of the Executive Officers.  The phantom stock agreements also include theterms of employment for such Executive Officers, which are described in moredetail in the section entitled “*Potential Payments uponTermination or Change in Control—Employment Terms in Phantom Stock Agreements*”below.  The terms of the phantom stockagreements for Messrs. Schneider and Wolfe ended on December 31, 2006.  The Company is considering entering into newphantom stock agreements with Messrs. Schneider and Wolfe in 2007.  The Company expects that these new agreementswill include terms of employment similar to the prior agreements.  The Company believes that the phantom stockagreements are a key component in attracting, retaining and providing anincentive to Executive Officers.

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**Compensation Committee Report**

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

StephenAdams

AndrisA. Baltins

DavidFrith-Smith

J.Kevin Gleason

GeorgePransky

Michael A. Schneider

 

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**Summary Compensation Table**

Thefollowing table shows, for the fiscal year completed December 31, 2006, theannual 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, 2006 (collectively, the “ExecutiveOfficers”).
| ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | **Change in** | ** ** | ** **  | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|--------------------|------------|-------------|------------|------------|------------|
| ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | **Pension**        | ** ** | ** **  | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | **Value and** | ** ** | ** **  | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | **Non-**           | ** ** | ** **  | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Non-Equity** | ** ** | **qualified**      | ** ** | ** **  | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Incentive**  | ** ** | **Deferred**       | ** ** | **All**     | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Plan**       | ** ** | **Compen-**        | ** ** | **Other**   | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Stock**  | ** ** | **Compen-**    | ** ** | **sation**         | ** ** | **Compen-** | ** ** | ** ** | ** ** |
| ** **                                                                           | ** ** | ** ** | ** ** | **Salary** | ** ** | **Bonus**  | ** ** | **Awards** | ** ** | **sation**     | ** ** | **Earnings**       | ** ** | **sation**  | ** ** | **Total**  | ** ** |
| **Name and Principal Position**                                       | ** ** | **Year**   | ** ** | **($)**    | ** ** | **($)**    | ** ** | **($)(2)** | ** ** | **($)(3)(4)**  | ** ** | **($)(5)**         | ** ** | **($)(6)**  | ** ** | **($)**    | ** ** |
| **(a)**                                                                              | ** ** | **(b)**    | ** ** | **(c)**    | ** ** | **(d)**    | ** ** | **(e)**    | ** ** | **(g)**        | ** ** | **(h)**            | ** ** | **(i)**     | ** ** | **(j)**    | ** ** |
| Michael A. Schneider   President,   Chief Executive Officer                          |       | 2006       |       | $          | 100,000    |       | —     | (1)        | $          | 936,011        |       | $                  | 590,050    |        | $          | 519,133    |       | $ | 8,587 |   | $ | 2,153,781 |   |
|                                                                                 |       |       |       |       |       |       |       |       |       |           |       |               |       |        |       |       |       |
| Mark J. Boggess   Chief Operating Officer of   Camping World, Inc.                   |       | 2006       |       | 101,923    |       | —     | (1)        | —     |       | 590,050        |       | 368,723            |       | 21,006      |       | 1,081,702  |       |
|                                                                                 |       |       |       |       |       |       |       |       |       |           |       |               |       |        |       |       |       |
| Brent Moody   Senior Vice President- New Business Development of Camping World, Inc. |       | 2006       |       | 197,404    |       | $          | 123,000    | (3)        | —     |           | —     |               | —     |        | 8,447      |       | 328,851    |   |
|                                                                                 |       |       |       |       |       |       |       |       |       |           |       |               |       |        |       |       |       |
| Kenneth Marshall   Senior Vice President   Finance and I.T. of   Camping World, Inc. |       | 2006       |       | 191,346    |       | 123,000    | (3)        | —     |       | —         |       | —             |       | 8,700       |       | 323,046    |       |
|                                                                                 |       |       |       |       |       |       |       |       |       |           |       |               |       |        |       |       |       |
| Thomas F. Wolfe   Senior Vice President    Chief Financial Officer              |       | 2006       |       | 185,000    |       | —     | (1)        | 122,985    |       | 118,010        |       | 41,080             |       | 8,673       |       | 475,748    |       |
|                                                                                      |            |            |            |            |            |            |            |            |            |                |            |                    |            |             |            |            |            |  |  |  |  |  |  |  |

 

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(1)                                  In prior years, the Company reported annualincentive awards in the Bonus column (column (d)).  The amount of annual incentive award paymentsis now reported in column (g) of this table for the year in which the relatedservices were performed.

(2)                                  Includes dollar amounts recognized forfinancial statement reporting purposes for the fiscal year ended December 31,2006 of awards pursuant to the phantom stock agreements and thus may includeawards granted in and prior to 2006.  Forfurther discussion of the phantom stock agreements, see Note 11 to the Company’consolidated financial statements for the years ended December 31, 2006, 2005and 2004 beginning on page 61 of this Annual Report on Form 10-K.

(3)                                  Includes discretionary awards pursuant to theCompany’s annual incentive award programs, which are reported for the year inwhich the related services were performed.

(4)                                  Mr. Boggess deferred $407,582 of the annualincentive awards otherwise payable to him during 2006 under the terms of theKEYSOP.

(5)                                  The amount of earnings on amounts deferredunder the KEYSOP is dependent upon the particular investment choices of theparticipant, which may include private investments.  The Company does not influence or have anyinvolvement in the earnings 

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under the KEYSOP.  The amounts shown in the table reflect theaggregate earnings on each Executive Officer’s account during 2006 (includingearnings that are at or below market). Messrs. Moody and Marshall elected not to participate in theKEYSOP.  The Company does not maintainany pension plans.  In addition, theExecutive Officers do not receive above-market or preferential earnings oncompensation that is deferred pursuant to the 401(k) Plan.

(6)                                  Includes $8,587, $8,407, $8,447, $8,700 and $8,673of Company matching contributions under the 401(k) Plan for Messrs. Schneider,Boggess, Moody, Marshall and Wolfe, respectively.  In addition, includes $3,290 of Company-paidlife insurance premiums and a $9,309 automobile allowance for Mr. Boggess.  The aggregate incremental cost to the Companyof the perquisites provided to each of the other Executive Officers in 2006 wasless than $10,000.

**Grants of Plan-Based Awards in2006**

TheCompany, which is a wholly-owned subsidiary of AGHI, does not grant shares ofCompany stock or stock options to the Executive Officers.  However, the Company has historically enteredinto phantom stock agreements with the Executive Officers, which are intendedto provide the Executive Officers with a cash equivalent to the increase invalue of the Company or Camping World that would otherwise be realized in stockor option awards of a public company.  Theseawards are described in the section entitled “*CompensationDiscussion and Analysis—Elements of Compensation—Long-Term Compensation/PhantomStock Agreements*” above.  TheCompany did not enter into any such agreements during 2006.

Thefollowing table reflects the actual payout to Messrs. Schneider, Boggess andWolfe pursuant to the annual incentive award program based on Companyperformance in 2006, a portion of which were paid in 2006 with the remainingbalance to be paid in early 2007.  Asnoted in footnote 1 to the following table, the annual incentive awards paid toMessrs. Moody and Marshall for 2006 were discretionary and thus are notreflected in this table.

 

|                                                                  | ** ** | **Estimated   Future Payouts   Under Non-  Equity Incentive   Plan Awards** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------|------------|
| **Name**                                                         | ** ** | **Target ($)(1)**                                                                                         | ** ** |
| **(a)**                                                          | ** ** | **(d)**                                                                                                        | ** ** |
| Michael A.  Schneider   President, Chief Executive Officer       |       | $                                                                                                              | 590,050    |   |
| Mark J. Boggess   Chief Operating Officer of Camping World, Inc. |       | 590,050                                                                                                        |       |
|                                                                  |            |                                                                                                                |            |  |

 

 

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|                                                                                            | ** ** | **Estimated   Future Payouts   Under Non-  Equity Incentive  Plan Awards** | ** ** |
|--------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|
| **Name**                                                                                   | ** ** | **Target ($)(1)**                                                                                   | ** ** |
| **(a)**                                                                                    | ** ** | **(d)**                                                                                                  | ** ** |
| Brent Moody   Senior Vice President—New Business   Development of Camping World, Inc. |       | —                                                                                                   |       |
| Kenneth Marshall    Senior Vice President Finance and   I.T. of Camping World, Inc.        |       | —                                                                                                   |       |
| Thomas F. Wolfe   Senior Vice President, Chief Financial Officer                           |       | 118,010                                                                                                  |       |

 

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(1)                                  Represents award under the Company’s annualincentive award program.  The amounts incolumn (d) reflect the actual payout to each of Messrs. Schneider, Boggess andWolfe under the annual incentive award program based upon Company performancein 2006, a portion of which were paid in 2006 with the remaining balance to bepaid in early 2007.  These amounts arealso reflected in column (g) of the Summary Compensation Table for eachExecutive Officer, as applicable.  Theannual incentive award program does not include threshold or maximum targetamounts.  The annual incentive awardspaid to Messrs. Moody and Marshall for 2006 performance were discretionary andthus are not included in the foregoing table. The terms of the Company’s annual incentive award program for 2006 aredescribed in more detail under the section entitled “*CompensationDiscussion and Analysis—Elements of Compensation—Annual Compensation—AnnualIncentive Awards*” above.

**Outstanding Equity Awards at 2006 Fiscal Year-End**

TheCompany, which is a wholly-owned subsidiary of AGHI, does not grant shares ofCompany stock or stock options to the Executive Officers.  However, the Company has historically enteredinto phantom stock agreements with the Executive Officers, which are intendedto provide the Executive Officers with a cash equivalent to the increase invalue of the Company or Camping World that would otherwise be realized in stockor option awards of a public company. These awards are described in the section entitled “*CompensationDiscussion and Analysis—Elements of Compensation—Long-Term Compensation/PhantomStock Agreements*” above.  Allprior awards to the Executive Officers pursuant to phantom stock agreementswere earned or vested as of December 31, 2006.

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**Option Exercises and Stock Vested in 2006**

The following table gives information concerning the vesting of theExecutive Officers’ interests under phantom stock agreements during 2006.  The Company, which is a wholly-ownedsubsidiary of AGHI, does not grant option awards to the Executive Officers.

|                                                                                              | ** ** | **Stock Awards**                                         | ** ** |
|----------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| **Name**                                                                                     | ** ** | **Number of  Shares  Acquired  on Vesting  (#)(1)** | ** ** | **Value Realized  on Vesting  ($)** | ** ** |
| **(a)**                                                                                      | ** ** | **(d)**                                                       | ** ** | **(e)** | ** ** |
| Michael A.  Schneider   President, Chief Executive Officer                                   |       | $                                                             | 936,011    | (2) | $ | 936,011 | (4) |
| Mark J. Boggess   Chief Operating Officer of   Camping World, Inc.                           |       | —                                                        | (3)        | — |   |
| Brent Moody   Senior Vice President—New   Business Development of   Camping World, Inc. |       | —                                                        | (3)        | — |   |
| Kenneth Marshall    Senior Vice President Finance   and I.T. of Camping World, Inc.          |       | —                                                        | (3)        | — |   |
| Thomas F. Wolfe   Senior Vice President,   Chief Financial Officer                           |       | 122,985                                                       | (2)        | 122,985 | (4) |
|                                                                                              |            |                                                               |            |  |  |  |  |

 

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(1)                                  The Executive Officers’ interests under thephantom stock agreements are denominated as a percentage of increases in thevalue over a multiple-year measurement period, as described in more detailunder the section entitled “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above.  Theamounts set forth in this column reflect the dollar amount of that percentageinterest, as calculated upon vesting.

(2)                                  Represents the dollar value of Messrs.Schneider’s and Wolfe’s percentage increase in the value during 2006 pursuantto their respective phantom stock agreements dated January 1, 2004, as describedin more detail under the section entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above.  Asdescribed in that section, this amount will be paid out in three equal annualinstallments, the first of which will be distributed during the second quarterof 2007.

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(3)                                  None of Messrs. Boggess, Moody or Marshallearned any interests under the phantom stock agreements during 2006.  As described in more detail under the sectionentitled “*Compensation Discussion and Analysis—Elements ofCompensation—Long-Term Compensation/Phantom Stock Agreements*” above,each of Messrs. Boggess, Moody and Marshall are parties to phantom stockagreements which were deemed to be vested as of December 31, 2005 as a resultof various changes in corporate structure, organization and administrationaffecting Camping World, including the joint marketing arrangement betweenCamping World and FreedomRoads.  Also, asexplained in that section, the amount of phantom stock interest earned byMessrs. Moody and Marshall as of December 31, 2005 was distributed to each ofthem in one lump-sum payment on January 2, 2007.  The amount of phantom stock interest earnedby Mr. Boggess as of December 31, 2005 will be paid out in three equal annualinstallments in 2007, 2008 and 2009.

(4)                                  As described in more detail under the sectionentitled, “*Compensation Discussion and Analysis—Elements ofCompensation—Long-Term Compensation/Phantom Stock Agreements*,” thisamount will be paid out in three equal annual installments, the first of whichwill be distributed during the second quarter of 2007.

 

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**Nonqualified Deferred Compensation in Fiscal 2006**

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

 
| ** **                                                                                  | ** ** | **Executive**            | ** ** | **Registrant**           | ** ** | **Aggregate**            | ** ** | **Aggregate**     | ** ** | **Aggregate**             | ** ** |
|---------------------------------------------------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|--------------------------|------------|-------------------|------------|---------------------------|------------|
| ** **                                                                                  | ** ** | **Contributions**        | ** ** | **Contributions**        | ** ** | **Earnings**             | ** ** | **Withdrawals/**  | ** ** | **Balance**               | ** ** |
| ** **                                                                                  | ** ** | **in Last FY** | ** ** | **in Last FY** | ** ** | **in Last FY** | ** ** | **Distributions** | ** ** | **at Last FYE** | ** ** |
| **Name**                                                                                    | ** ** | **($)**                  | ** ** | **($)**                  | ** ** | **($)**                  | ** ** | **($)**           | ** ** | **($)(2)**                | ** ** |
| **(a)**                                                                                     | ** ** | **(b)**                  | ** ** | **(c)**                  | ** ** | **(d)**                  | ** ** | **(e)**           | ** ** | **(f)**                   | ** ** |
| Michael A. Schneider   President, Chief Executive Officer                                   |       | —                   |       | —                   |       | $                        | 519,133    |              | —     |                      | $          | 4,799,832 |   |
| Mark J. Boggess   Chief Operating Officer of Camping World, Inc.                            |       | $                        | 407,582    |                     | —     |                     | 368,723    |              | —     |                      | 3,839,878  |   |
| Brent Moody(1)   Senior Vice President—New Business Development of Camping World, Inc. |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
| Kenneth Marshall(1)   Senior Vice President Finance and I.T. of Camping World, Inc.         |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
| Thomas F. Wolfe   Senior Vice President, Chief Financial Officer                            |       | —                   |       | —                   |       | 41,080                   |       | —            |       | 255,762                   |       |
|                                                                                             |            |                          |            |                          |            |                          |            |                   |            |                           |            |  |  |  |

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

(2)             Allcontributions to the KEYSOP by Messrs. Schneider, Boggess and Wolfe, whichtotal $3,120,807, $3,116,041 and $169,859, respectively, were previouslyreported as compensation in the Summary Compensation Table for the relevantyear (or would have been reported if the Executive Officer was named in theSummary Compensation Table for the relevant year).

Key employees of the Company, including the Executive Officers, areeligible to participate in the KEYSOP, the terms of which are described underthe section entitled “*Compensation Discussionand Analysis—Elements of Compensation—Other Elements of Compensation—KEYSOP*”above.  The eligible Executive Officersmay elect to defer all or a portion of their annual incentive awards and payoutfrom the phantom stock awards to the KEYSOP. Trustees under the KEYSOP receive such contributions and invest thedeferred amounts based on the specific elections of each participant.  Participants may invest in a wide range ofproducts, 

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excluding certificates of deposits and money market accounts.  The Company does not make matchingcontributions to the KEYSOP.

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

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

·                                          Without cause by the Company; or

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

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

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

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

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

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

For purposes of calculating the potential payments set forth in thetable below, we have assumed that the date of termination was December 31,2006.  The total amounts set forth in thetable below would be distributed to each Executive Officer in a lump sum within30 days after the determination of the amount of accrued but unpaid annualincentive award.

 
| **Benefits and Payments**              | ** ** | **Mr. Schneider** | ** ** | **Mr. Boggess** | ** ** | **Mr. Moody** | ** ** | **Mr. Marshall** | ** ** | **Mr. Wolfe** | ** ** |
|--------------------------------------------------|------------|------------------------|------------|----------------------|------------|--------------------|------------|-----------------------|------------|--------------------|------------|
| *Basic  Compensation*                            |       | $                      | 1,154,507  | (2)                  | $          | 690,050            | (3)        | $                     | 98,702     | (4)                | $          | 85,673 | (4) | $ | 303,001 | (3) |
| *Accrued  and unpaid annual incentive award (1)* |       | 30,050                 |       | 37,229               |       | 123,000            |       | 123,000               |       | 6,010              |       |
| ***Total***                                      |       | $                      | 1,184,557  |                 | $          | 727,279            |       | $                     | 221,702    |               | $          | 218,673 |   | $ | 309,011 |   |

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(1)             Representsan amount equal to each Executive Officer’s accrued but unpaid annual incentiveaward as of December 31, 2006.

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(2)             Representsan amount equal to Mr. Schneider’s base salary and annual incentive award as ofDecember 31, 2006, divided by 52 weeks, multiplied by 3 times the number ofyears Mr. Schneider has worked at the Company. As of December 31, 2006, Mr. Schneider had been employed with theCompany for 29 years.  The annual basesalary and annual incentive award in effect for Mr. Schneider as of December31, 2006 is reflected in the Salary column and Non-Equity Incentive Plan Compensationcolumn, respectively, of the Summary Compensation Table above.

(3)             Representsan amount equal to one full year of the base salary and annual incentive awardof Messrs. Boggess and Wolfe, as applicable, as of December 31, 2006.  The annual base salary and annual incentiveaward in effect as of December 31, 2006 is reflected in the Salary column andthe Non-Equity Incentive Plan Compensation column, respectively, of the SummaryCompensation Table above.

(4)             Representsan amount equal to six months of the base salary of Messrs. Moody and Marshall,as applicable, as of December 31, 2006.  “BasicCompensation,” as it applies to Messrs. Moody and Marshall, does not includeannual incentive award payments.  Theannual base salary in effect as of December 31, 2006 is reflected in the Salarycolumn of the Summary Compensation Table above.

Potential Payments Upon Termination by Executive Officer with GoodReason upon a Change in Control:  The phantom stock agreementsentered into by Messrs. Schneider, Boggess and Wolfe provide for severancepayments in the event their employment is terminated without “cause” by theCompany (as defined in the preceding section) or with “good reason” by theExecutive 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, his spouse, lineal descendantsand trusts for the benefit of such persons cease to beneficially own (asdefined under Rule 13d-3 of the Act), directly or indirectly a majority of thevoting equity interests of the Company;

·                                          There is a consolidation or merger of theCompany or its parent, AGHI (or such other entity that holds in excess of 80%of the issued and outstanding equity securities of AGHI) (the “Parent”), inwhich the Company or the Parent is not the surviving entity or in which theholders of the voting equity interests in the Company or the Parent, as thecase may be, do not continue to hold at least a majority of the voting equityinterests of the surviving entity following the merger;

·                                          There is a sale, lease or transfer of all orsubstantially all of the assets of the Company or the Parent to any person orgroup; or

·                                          The shareholders of the Company or the Parentshall approve a plan or proposal for the liquidation or dissolution of theCompany or the Parent, as the case may be.

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

·                                          A change in the Executive Officer’s duties,authorities or any other responsibilities (including status, offices, titlesand reporting requirements);

·                                          A reduction in base salary or annualincentive award compensation; or

·                                          A relocation of the Executive Officer outsidethe same metropolitan area as the Executive Officer’s current office location.

The phantom stock agreements entered into by Messrs. Moody and Marshalldo not provide for payments upon termination in connection with a change incontrol.

For purposes of calculating the potential payments set forth in thetable below, we have assumed that the date of termination was December 31,2006.  The amounts of basic compensationand accrued but unpaid annual incentive award would be paid in a lump sumwithin 30 days after the determination of the amount of the accrued annualincentive award.

 
| **Benefits and Payments**                           | ** ** | **Mr. Schneider** | ** ** | **Mr. Boggess** | ** ** | **Mr. Moody** | ** ** | **Mr. Marshall** | ** **   | **Mr. Wolfe** | ** ** |
|---------------------------------------------------------------|------------|------------------------|------------|----------------------|------------|--------------------|------------|-----------------------|--------------|--------------------|------------|
| *Basic Compensation*(base  salary and annual incentive award) |       | $                      | 1,154,507  | (3)                  | $          | 690,050            | (4)        | $                     | —— |               | $          | —— |   | $ | 303,001 | (4) |
| *Accrued and unpaid annual  incentive award (1)*              |       | 30,050                 |       | 37,229               |       | 123,000            |       | 123,000               |         | 6,010              |       |
| *Life and Health Insurance  Benefits (2)*                     |       | 49,359                 |       | 54,564               |       | —-            |       | —-               |         | 44,694             |       |
| ***Total***                                                   |       | $                      | 1,233,916  |                 | $          | 781,843            |       | $                     | 123,000      |               | $          | 123,000 |   | $ | 353,705 |   |

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(1)             Representsan amount equal to each Executive Officer’s accrued but unpaid annual incentiveaward as of December 31, 2006.

(2)             Representsthe value of health benefits for a three year period following terminationbased on a monthly premium of $1,242 per Executive Officer.  In the case of Messrs. Schneider and Boggess,also includes the value of life insurance benefits for a period of three yearsfollowing termination based on a monthly premium of $130 and $274,respectively.

(3)             Representsan amount equal to Mr. Schneider’s base salary and annual incentive award as ofDecember 31, 2006, divided by 52 weeks, multiplied by 3 times the number ofyears Mr. Schneider has worked at the Company. As of December 31, 2006, Mr. Schneider had been employed with theCompany for 29 years.  The annual basesalary and annual incentive award in effect for Mr. Schneider as of 

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December 31, 2006 isreflected in the Salary column and Non-Equity Incentive Plan Compensationcolumn, respectively, of the Summary Compensation Table above.

(4)             Representsan amount equal to one full year of the base salary and annual incentive awardof Messrs. Boggess and Wolfe, as applicable, as of December 31, 2006.  The annual base salary and annual incentiveaward in effect as of December 31, 2006 is reflected in the Salary column andthe Non-Equity Incentive Plan Compensation column, respectively, of the SummaryCompensation Table above.

Non-Competition and Non-Solicitation Agreements: The phantom stock agreement entered into byeach Executive Officer includes an eighteen month covenant not to compete and aone year non-solicitation clause.

Employment Terms of Phantom Stock Agreements: In addition to establishing the parametersfor phantom stock incentive awards (as described under the section entitled “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*” and the severance paymentsdescribed above, the phantom stock agreements set forth the terms of employmentfor each Executive Officer as follows:

·                                          *Mr. Schneider*:  Mr.Schneider’s phantom stock agreement, dated January 1, 2004, provides that hewill be employed as the President and Chief Executive Officer of theCompany.  Mr. Schneider 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, 2006.

·                                          *Mr.**Boggess*:  Mr. Boggess’ phantom stock agreement, datedJanuary 1, 2005, provides that he will be employed as the President and ChiefExecutive Officer of Camping World.  InSeptember 2006, Mr. Boggess was appointed to his current position as the ChiefOperating Officer of Camping World and Mr. Lemonis assumed the role ofPresident and Chief Executive Officer of Camping World in connection withvarious changes in corporate structure, organization and administrationaffecting Camping World, including the joint marketing arrangement betweenCamping World and FreedomRoads.  Theother terms of Mr. Boggess’ employment remained the same following suchrestructuring.  Accordingly, Mr. Boggesscontinues to be entitled to receive a base salary and annual incentive award inaccordance with such practices and procedures as are generally applicable toother employees.  The term of the phantomstock agreement expired on December 31, 2006.

·                                          *Mr. Moody*: Mr. Moody’s phantom stock agreement, datedJuly 1, 2003 as amended on March 1, 2006, provides that he will be employed asthe Vice President—General Counsel of Camping World.  In September 2006, Mr. Moody was appointed tohis current position as the Senior Vice President—New Business Development ofFreedomRoads in connection with various changes in corporate structure,organization and administration affecting Camping World, including the jointmarketing arrangement between Camping World and FreedomRoads.  In connection with his new role, Mr. Moodyreceived an increase in base salary to $200,000.  The other terms of Mr. Moody’s employmentremained unchanged.  The term of thephantom stock agreement expires on July 1, 2008.

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·                                          *Mr. Marshall*:  Mr.Marshall’s phantom stock agreement, dated July 31, 2002 as amended on July 31,2003 and March 1, 2006, provides that he will be employed as the Vice PresidentFinance/Controller of Camping World.  InSeptember 2006, Mr. Marshall was appointed to his current position as SeniorVice President Finance and I.T. of Camping World in connection with variouschanges in corporate structure, organization and administration affectingCamping World, including the joint marketing arrangement between Camping Worldand FreedomRoads.  In connection with hisnew role, Mr. Marshall received an increase in base salary to $200,000.  The other terms of Mr. Marshall’s employmentremained unchanged.  The term of thephantom stock agreement expires on June 30, 2007.

·                                          *Mr. Wolfe*:  Mr.Wolfe’s phantom stock agreement, dated January 1, 2004, provides that he willbe employed as the Senior Vice President and Chief Financial Officer of theCompany.  Mr. Wolfe is entitled toreceive a base salary and annual incentive award in accordance with such practicesand procedures as are generally applicable to other employees.  The term of the phantom stock agreementexpired on December 31, 2006.

Each of the Executive Officer’s phantom stock agreement also providesthat he (i) will be eligible to receive such benefits as are provided by theCompany or Camping World, as applicable, from time to time to similarlysituated employees and (ii) will be eligible to participate in any future bonusprograms adopted by the Company.  AnExecutive Officer may terminate his employment upon two-weeks’ notice.  The Company or Camping World, as applicable,may terminate the employment of an Executive Officer at any time upon writtennotice, effective immediately.

88

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**Director Compensation in 2006**

The Company pays its non-management directors a monthly director’s feeof $1,800 per month.  The Company doesnot compensate Messrs. Adams or Schneider for their service on the Board ofDirectors.  The Company does not provideany other compensation or benefits to the members of its Board ofDirectors.  During 2006, the followingfees were earned or paid in cash to the respective director:

 

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

----

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

(2)             Inaddition to the amount set forth in this table, Mr. Gleason received $5,400 in2006 as payment for his service as a member of the Board of Directors fromOctober through December of 2005.

**Compensation Committee Interlocks and Insider Participation**

TheCompany’s Board of Directors determines the compensation of the executiveofficers.  Michael A. Schneider,President and Chief Executive Officer of the Company, serves on the Board ofDirectors. Mr. Schneider also serves as a director of AOA, which is controlledby Mr. Adams and for which Mr. Gleason is the Chief Executive Officer.  Mr. Gleason, a member of the Company’s Boardof Directors, is also the Chief Executive Officer of AOA, which is controlledby Mr. Adams and Mr. Schneider is on the Board of Directors of AOA.

89

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**ITEM12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

AGIis a wholly-owned subsidiary of AGHI. AGHI is a wholly-owned subsidiary of AGI Holding Corp. (“AGHC”), aprivately-owned corporation.  Thefollowing table sets forth, as of December 31, 2006, certain information withrespect to the beneficial ownership of the Common Stock of AGHC by eachshareholder who is known to us to beneficially own more than 5% of theoutstanding shares, each director, each executive officer listed in the SummaryCompensation Table and all of our executive officers and directors as a group.

 

| Name and Address of Beneficial Owner                            | ** ** | **Number of Shares of   Stock Owned (1)** | ** ** | **Percent of   Common Stock** | ** ** |
|------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| Stephen Adams,  Director   2575 Vista Del Mar Drive   Ventura, CA93001                   |       | 1,407.7                                                                 | (2)        | 97.41                                        | %          |
| Michael A.  Schneider   President, Chief Executive Officer and Director                  |       | 0                                                                       |       | 0                                            |       |
| Mark J. Boggess   Chief Operating Officer of Camping World, Inc.                         |       | 0                                                                       |       | 0                                            |       |
| Brent Moody   Senior Vice President—New Business Development of Camping World, Inc. |       | 0                                                                       |       | 0                                            |       |
| Kenneth Marshall    Senior Vice President Finance and I.T. of Camping World, Inc.        |       | 0                                                                       |       | 0                                            |       |
| Thomas F. Wolfe   Senior Vice President, Chief Financial Officer                         |       | 0                                                                       |       | 0                                            |       |
| Andris A.  Baltins                                                                       |       | 0                                                                       |       | 0                                            |       |
| David  Frith-Smith                                                                       |       | 0                                                                       |       | 0                                            |       |
| J. Kevin Gleason                                                                         |       | 0                                                                       |       | 0                                            |       |
| George Pransky                                                                           |       | 0                                                                       |       | 0                                            |       |
| All executive officers  and directors as a group (12 persons)                            |       | 1,407.7                                                                 |       | 97.41                                        | %          |

----

(1)             Exceptas otherwise indicated, the beneficial owners have sole voting and investmentpower with respect to the shares in the table.

(2)             Doesnot include 37.5 shares owned by members of the Adams’ family, representing theremaining outstanding shares, who do not reside with him and as to which Mr.Adams disclaims beneficial ownership.

90

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

**Certain Relationships and RelatedPerson Transactions**

Reviewand Approval of Related Person Transactions

The Company entered into an indenture forthe AGI Senior Notes in February 2004, which requires the Board of Directors toapprove any new transaction or series of transactions entered into between theCompany and other entities controlled by Mr. Adams subsequent to the date ofthe indenture which, either individually or in the aggregate, exceeds $2.5million.  In addition, the Company mustobtain a fairness opinion with respect to any such new transaction or series oftransactions entered into subsequent to the date of the indenture which, eitherindividually or in the aggregate, exceeds $10 million.  The Company has been in compliance with theindenture requirements at all times.

Related PartyTransactions

Inconnection with our effort to expand the number of Camping World stores bydeveloping retail alliances with RV dealerships across North America, we haveestablished 31 Camping World stores alongside or within RV dealerships owned byFreedomRoads, which is controlled by the Chairman of our Board of Directors,Stephen Adams, and we expect to open additional Camping World stores alongsideor within such RV dealerships in the future. At December 31, 2006, the Company leased 26 properties from FreedomRoadsand sub-leased five properties to FreedomRoads. Total payments by the Company to Freedom Roads under these 26 leasedproperties for 2006 and 2005 were approximately $1.7 million and $0.7 million,respectively, and future commitments under these leases total approximately$26.5 million.  The leases expire atvarious dates from August 2013 through December 2016.  For 2006 and 2005, lease payments receivedfrom FreedomRoads for the five subleased properties were approximately $1.8million and $0.7 million, respectively, and future payments to be receivedunder these subleases total approximately $6.2 million.  Camping World paid FreedomRoads approximately$4.3 million in 2006 and FreedomRoads paid the Company approximately $5.5million, $3.2 million and $3.7 million in 2006, 2005 and 2004, respectively,under the product marketing and sales agreements.

OnDecember 5, 2001, we sold eleven real estate properties to eleven separatewholly-owned subsidiaries of AGRP Holding Corp, a wholly-owned subsidiary ofour ultimate parent, AGHC, which is owned 97.4% by Mr. Adams, for $52.3 millionin cash and a $4.8 million note receivable. The properties have been leased back to us on a triple net basis. Theseleases are classified as operating leases and the average net annual leasepayments 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 $46,000 and a ten-year balloon due December2011.

Mr. Boggess, Chief Operating Officer of CampingWorld, and Michael Blumer, a Senior Vice President of the Company until July 2006,are partners in various partnerships that lease two facilities under long-termleases to Camping World, Inc. in 2006. In prior years other related-party leases existed with executives whoare no longer with the Company.  For theyears ended December 31, 2006, 2005 and 2004, payments under these leases wereapproximately $0.9 million, $3.3 million, and $3.7 million respectively.  The leases expire between December 2015 andDecember 2020, subject to the right of Camping World to exercise renewal options.

 

91

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

The law firm of Kaplan, Strangis and Kaplan,P.A. (“KSK”) provides ongoing legal services to the Company and certainsubsidiaries in connection with various matters. Andris A. Baltins, a member ofthe Board of Directors, is a member of that firm.  During 2006, KSK received $0.2 million inlegal fees from the Company.

Director Independence

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

**ITEM14: PRINCIPAL ACCOUNTING FEES AND SERVICES**

The Board of Directors engaged Ernst & Young LLP as independentauditors to examine our accounts for the fiscal year ending December 31, 2006.

**Audit Fees**

The aggregate audit fees paid to Ernst & Young LLP for the fiscalyears ended December 31, 2006, 2005 and 2004, were $435,118, $309,960 and$256,680, respectively.   These feesinclude amounts for the audit of the Company’s consolidated annual financialstatements, stand alone audits of certain subsidiaries, and the reviews of theconsolidated financial statements included in the Company’s Quarterly Reportson Form 10-Q, including assistance with and review of documents filed with theSEC.

**Audit-RelatedFees**

Theaggregate audit-related fees paid to Ernst & Young LLP for the fiscal yearsended December 31, 2006, 2005 and 2004 were $16,000, $3,400, and $17,700,respectively.  These fees related to****specific analysis of accounting treatments and generalassistance with the implementation of the SEC rules pursuant to theSarbanes-Oxley Act of 2002.

**Tax Fees**

The aggregate fees billed by Ernst & Young LLP for tax servicesrendered for the fiscal years ended December 31, 2006, 2005 and 2004 were$47,900, $99,300, and $27,374, respectively. The fees paid in each of those years primarily related to tax planningand compliance services.

92

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**All Other Fees**

There were no other fees paid to Ernst & Young LLP for the yearsended December 31, 2006, 2005 and 2004.

**Pre-ApprovalRequirements**

TheBoard of Directors has the sole authority to review in advance and grant anypre-approvals of (i) all auditing services to be provided by the independentauditor, (ii) all significant non-audit services to be provided by theindependent auditors as permitted by Section 10A of the Securities Exchange Actof 1934, and (iii) all fees and the terms of engagement with respect to suchservices.  All audit and non-auditservices performed by Ernst & Young LLP during fiscal 2006 werepre-approved pursuant to the procedures outlined above.

93

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**PART IV**

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

(a) (1)      Consolidated financial statements areincluded in Item 8 hereto.

(a) (2)      Consolidated financial statement schedulesare included in Item 8 hereto.

(a) (3)      Listing of Exhibits:

                                                                                                Theexhibits required to be a part of this report are listed in the Index toExhibits which follows the signature page.

(b)           Exhibits:

Included in Item15 (a) (3) above.

(c)           Financial Statement Schedules

Included in Item15 (a) (2) above.

94

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**SIGNATURES**

 

Pursuantto the requirements 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 20, 2007.
| AFFINITY GROUP, INC.     |
|--------------------------|
|                     |
| By                       | /s/ Michael A. Schneider |   |
| Michael A.  Schneider    |   |
| Chief Executive  Officer |   |
|                          |  |  |  |

 

Pursuant to therequirements of the Securities Act of 1934, this report has been signed belowby the following persons on behalf of the registrant in the capacities and onthe dates indicated.
| /s/ Thomas F. Wolfe |   | Senior Vice President and                    |   | March 20, 2007 |   |
|---------------------|--------|----------------------------------------------|--------|----------------|--------|
| Thomas F. Wolfe     |   | Chief Financial Officer                      |   |           |   |
|                |   | (Principal Financial and Accounting Officer) |   |           |   |
|                |   |                                         |   |           |   |
| *                   |   | Director                                     |   | March 20, 2007 |   |
| Stephen Adams       |   |                                         |   |           |   |
|                |   |                                         |   |           |   |
| *                   |   | Director                                     |   | March 20, 2007 |   |
| Andris A. Baltins   |   |                                         |   |           |   |
|                |   |                                         |   |           |   |
| *                   |   | Director                                     |   | March 20, 2007 |   |
| David Frith-Smith   |   |                                         |   |           |   |
|                |   |                                         |   |           |   |
| *                   |   | Director                                     |   | March 20, 2007 |   |
| J. Kevin Gleason    |   |                                         |   |           |   |
|                |   |                                         |   |           |   |
| *                   |   | Director                                     |   | March 20, 2007 |   |
| George Pransky      |   |                                         |   |           |   |

95

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| *By:   | /s/ Thomas F.  Wolfe |   |   |   | March 20, 2007 |   |
|--------|----------------------|--------|--------|--------|----------------|--------|
|   | (Thomas F. Wolfe     |   |   |   |           |   |
|   | Attorney-in-Fact)    |   |   |   |           |   |

 

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

96

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**AFFINITYGROUP, INC.**

**EXHIBIT INDEX TO ANNUAL REPORT**

**ON FORM 10-K**

 

**For Fiscal Year Ended December 31, 2006**

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

 

97

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|                                                                                                                                                                                                                                                                                                                                                                                                     | ** ** | **Regulation   S-K Exhibit   Table   Reference** | ** ** | **Sequential   Page No.** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|-------------------------------------|------------|
| 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                                                                |       |                                |       |
|                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                                 |       |                                |       |
| 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                                                                |       |                                |       |

 

98

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|                                                                                                                                                                                                                                                                                                                                                                                                     | ** ** | **Regulation   S-K Exhibit   Table   Reference** | ** ** | **Sequential  Page No.** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|-------------------------------|------------|
| 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                                                                |       |                          |       |
|                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                                 |       |                          |       |
| 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                                                                |       |                          |       |
|                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                                 |       |                          |       |
| Subsidiaries of  the Registrant                                                                                                                                                                                                                                                                                                                                                                     |       | 21                                                                   |       | 102                           |       |
|                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                                 |       |                          |       |
| Powers of  Attorney                                                                                                                                                                                                                                                                                                                                                                                 |       | 24.1                                                                 |       | 103                           |       |
|                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                                 |       |                          |       |
| Certification of  President and Chief Executive Officer                                                                                                                                                                                                                                                                                                                                             |       | 31.1                                                                 |       | 105                           |       |
|                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                                 |       |                          |       |
| Certification of  Senior Vice President and Chief Financial Officer                                                                                                                                                                                                                                                                                                                                 |       | 31.2                                                                 |       | 106                           |       |
|                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                                 |       |                          |       |
| Appointment of  Directors (9)                                                                                                                                                                                                                                                                                                                                                                       |       | 31.3                                                                 |       |                          |       |
|                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                                 |       |                          |       |
| Appointment of  Principal Officers (12)                                                                                                                                                                                                                                                                                                                                                             |       | 31.4                                                                 |       |                          |       |
|                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                                 |       |                          |       |
| Statement Pursuant to  18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                                                                                       |       | 32.1                                                                 |       | 107                           |       |

 

99

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|                                                 | ** ** | **Regulation   S-K Exhibit   Table   Reference** | ** ** | **Sequential  Page No.** | ** ** |
|-------------------------------------------------|------------|----------------------------------------------------------------------|------------|-------------------------------|------------|
| Statement Pursuant to 18 U.S.C. Section 1350    |       | 32.2                                                                 |       | 108                           |       |
|                                            |       |                                                                 |       |                          |       |
| Affinity Group Code of Professional Conduct (2) |       | 99.1                                                                 |       |                          |       |

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A copy of any of these exhibits will be furnished at a reasonable costto any person upon receipt from such person of a written request for suchexhibit.  Such request should be sent toAffinity Group, Inc., 2575 Vista Del Mar Drive, Ventura, CA  93001, Attention:  Chief Financial Officer.

 

100

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