**UNITED STATES**

**SECURITIES 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,  2007      OR**               |
| ** **                                                                                                                             | ** ** | ** **                                                                                           |
| **o**                                                                                                                                  | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**  |
| ** **                                                                                                                             | ** ** | ** **                                                                                           |
| **For the  transition period from         to        ** |
| ** **                                                                                                                             | ** ** | ** **                                                                                           |
| **Commission  File Number 333-124109**                                                                                                 |
|                                                                                                                                        |            |                                                                                                      |  |  |

 

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**AFFINITYGROUP HOLDING, INC.**

(Exact name ofregistrant as specified in its charter)

 

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

 

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SECURITIES REGISTEREDPURSUANT TO SECTION 12 (b) OF THE ACT:**  NONE**

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

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

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.
|   |   | YES o | NO x |
|--------|--------|-------|------|

 

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act.
|   |   | YES o | NO x |
|--------|--------|-------|------|

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15 (d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.                                                                    YESx        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 anyamendment to this Form 10-K.                                                                                                                        o

 

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

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

 

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

 

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

 
| ** **                    | ** ** | **Outstanding as of**    | ** ** |
|-------------------------------|------------|--------------------------|------------|
| **Class**                     | ** ** | **March 14,  2008** | ** ** |
| Common stock, $.01 par  value |       | 100                      |       |

 

 

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**PART I**

 

**ITEM 1: BUSINESS**

 

**General**

 

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

 

AffinityGroup Holding, Inc. is a holding company and the direct parent of AffinityGroup, Inc.  We are an indirectwholly-owned subsidiary of AGI Holding Corp (“AGHC”), a privately-ownedcorporation.  We are a member-baseddirect marketing organization targeting North American recreational vehicle (“RV”)owners and outdoor enthusiasts.  Our clubmembers form a receptive audience to which we sell products, services,merchandise and publications targeted to their specific recreational interests.  In addition, we are a specialty retailer ofRV-related products.  We operate throughthree principal lines of business, consisting of (i) club memberships andrelated products and services, (ii) subscription magazines and otherpublications including directories, and (iii) specialty merchandise soldprimarily through our 77 Camping World retail stores, mail order catalogs andthe Internet.

 

There are approximately 1.9 million dues paying membersenrolled in our clubs.  We currently haveapproximately 5.3 million in aggregate circulation and 1.0 million paidcirculation across our 39 publications. For the year ended December 31, 2007, our revenue, operating incomeand net income were $562.2 million, $45.1 million and $6.3 million,respectively.

 

**Competitive Strengths**

 

Webelieve that our key competitive strengths are as follows:

 

*Stable, Recurring Cash FlowStream -* Approximately 78% 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 five membership clubs have a historicalaverage renewal rate of 67%, which we believe compares favorably to othersubscription-based businesses. Similarly, our membership-based products andservices have historically also experienced high renewal rates, averaging over86% over the past four years for our largest product and service offerings,Emergency Road Service (“ERS”), RV vehicle insurance 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 77 retail stores since itbegan business.

 

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 1.9 million club membersand the 7.8 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 over 7.9 million RV owners, which affords us the ability tocontinue to attract new customers irrespective of new RV sales.  We believe RV owners may be more likely totake vacations utilizing RVs during an economic downturn, because they aregenerally less expensive than vacations necessitating plane or train travel andhotel accommodations, which 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 growth in the pool of potential RV consumers.  Also, according to the RV Survey, this agegroup shift will drive the number of households that own at least one RV from7.9 million in 2005 to 8.5 million in 2010. In addition, RV owners havehousehold incomes that generally exceed the national average.  These demographics are attractive foradvertisers and third-party providers of products and services.

 

*Experienced and IncentivizedManagement Team -* Our executive management team has extensivepublishing, direct marketing and retail experience with significant expertisein the RV industry. With an average of twelve years with our company, the teamhas developed substantial experience in increasing our target customer base,using strategic alliances to bolster product offerings that create value forour customers 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 of theirannual membership dues as the result of being able to purchase products andservices at discounts made available through our clubs.  We believe that the participation levels andrenewal rates of club members reflect the benefits derived from their membership.  As such, in order to maximize customerrenewal rates, we constantly evaluate member satisfaction and actively respondto changing member preferences through the

 

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enhancementor introduction of new membership benefits including products and 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 40% 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 business segmentsto existing club members.  Our magazinescontain relevant content as well as various forms of advertisements for ourmembership clubs, products and services.

 

*ExpandPresence in Specialty Recreation Niche -*We believe aggregate circulation of our magazinesis an important factor in determining the amount of revenue we can obtain fromadvertisers.  Consequently, we seek toexpand our presence as a publisher in select recreational niches through theintroduction of new magazine titles and the acquisition of other publicationsor businesses in our markets or in complementary recreational marketniches.  Publications in complementaryniches may also provide the opportunity to launch new membership clubs, tomarket our products and services to new customers and to develop other productsand services, which meet the special needs of these customers.  For example, our acquisition of thepublishing assets of Nordskog Publications, Inc. in May 2005 allowedus to expand our presence in the recreational boat market niche.  In addition, we now own 36 consumer outdoorrecreation shows, most of which were acquired from Royal Productions, Inc.in December 2005, Plus Events shows in February 2006, four showspurchased from Apple Rock Advertising and Promotions, Inc. in September 2006and five shows purchased from Industrial Expositions, Inc. in February 2007.  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 of increasingretail customer traffic.  In 2007, weopened 17 new Camping World stores, of which 12 stores are adjacent to orwithin RV dealerships owned or operated by affiliates, and in 2008 we intend toopen six additional Camping World stores which will be located in or adjacentRV dealerships that may or may not be affiliated with us under common ownershipof our Chairman, Stephen Adams.  Inaddition to generating increased cash flows from the sale of merchandise, a largernetwork of geographically diverse Camping World stores will enhance our abilityto market our portfolio of membership clubs, publications and product andservice offerings 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

 

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propane and gasoline, andthe total number of RVs.  We believe thatboth the installed base of RVs and the type of RV owned (full service vehiclesexcluding van conversions) are the most important factors affecting the demandfor our membership clubs, merchandise, products and services.  Based on the RV Survey, the number of householdsowning RVs is projected to increase from 7.9 million in 2005 to nearly 8.5million in 2010.  The RV Survey alsoindicates that the percentage of households owning RVs during this period willrise slightly from 8.0% to 8.2%.

 

According to the RV Survey,the average RV owner is 49 years old.  RVownership also increases with age reaching its highest percentage level amongthose 55 to 64 years old.  Households inthis age group are projected to increase from 18.2 million in 2005 to 21.6million in 2010.  RV ownership also isconcentrated in the western United States, an area in which the populationgrowth rate continues to be greater than the national average.  The RV Survey also indicates that RVownership is associated with higher than average annual household income, whichamong RV owners was approximately $68,000 per annum as compared to the nationalaverage of $43,000 per annum.

 

The average age andannual household income of our club members in 2007 were 57 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 at December 31,2007, annual membership dues and average annual renewal rates during the periodof 2003 to 2007 for each club:

 
| ** **               | ** ** | **Number of Members**                  | ** ** | ** **                   | ** ** | **Average Renewal** | ** ** |
|--------------------------|------------|--------------------------------------------------|------------|------------------------------|------------|--------------------------|------------|
| **Membership Club** | ** ** | **at December 31, 2007 (1)** | ** ** | **Annual Fee (2)** | ** ** | **Rate (3)**        | ** ** |
|                     |       |                                             |       |                         |       |                     |       |
| Good Sam Club            |       | 1,012,500                                        |       | $12 - $30                    |       | 65%                      |       |
|                     |       |                                             |       |                         |       |                     |       |
| President’s Club    |       |    738,500                        |       | $15 - $20                    |       | 69%                      |       |
|                     |       |                                             |       |                         |       |                     |       |
| Coast to Coast  Club     |       |     69,600                   |       | $90 - $140                   |       | 73%                      |       |
|                     |       |                                             |       |                         |       |                     |       |
| Other Clubs:             |       |                                             |       |                         |       |                     |       |
| Golf Card Club           |       |     44,900                   |       | $49 - $59                    |       | 52%                      |       |
|                     |       |                                             |       |                         |       |                     |       |
| Camp Club USA  (4)       |       |     38,100                   |       | $40 - $50                    |       | —                   |       |

 

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| (1) | Also includes  multi-year and lifetime members.                           |
|-----|---------------------------------------------------------------------------|
| (2) | For a single member,  subject to special discounts and promotions.        |
| (3) | Excludes members having  lifetime memberships.                            |
| (4) | Camp Club USA was  launched in 2006 so renewal data is not yet available. |

 

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 1,012,500 member families.  As of December 31, 2007, there were1,681 local chapters throughout the United States and Canada.  The average renewal rate for Good Sam Clubmembers was approximately 65% during the period 2003 through 2007.

 

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 1,500 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 monthly 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 $93.

 

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 2007, the average pricefor a life membership was $331 with approximately 146,400 members registered asof December 31, 2007.  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 2003 through 2007 at which discounts for memberswere available at December 31st of the respective year:

 
| ** **                                                       | ** ** | **2007**  | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------------------------------------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                                             |       |      |       |     |       |     |       |     |       |     |       |
| Number of Good  Sam memberships                                  |       | 1,012,500 |       | 992,000  |       | 984,100  |       | 971,000  |       | 958,000  |       |
|                                                             |       |      |       |     |       |     |       |     |       |     |       |
| Lifetime members  included above                                 |       | 146,400   |       | 143,000  |       | 136,100  |       | 131,900  |       | 127,700  |       |
|                                                             |       |      |       |     |       |     |       |     |       |     |       |
| Number of RV  campgrounds offering discounts to Good Sam members |       | 1,500     |       | 1,610    |       | 1,580    |       | 1,750    |       | 1,750    |       |

 

*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 31,2007, the President’s Club had approximately 738,500 members. The primarybenefit offered to members of the President’s Club is a 10% discount on allretail merchandise at Camping World stores. The President’s Club offers us anextremely cost effective and powerful method of acquiring customers who arelikely to be receptive to our product and service 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 a traditional customer loyalty program, serves to bolster sales atour Camping World 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 the President’s Club brand in the marketingof our products and services to these customers.

 

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 the average President’s Club member realizesannual savings of approximately $43. The average renewal rate for members ofthe President’s Club was 69% during the period from 2003 to 2007.

 

The following table sets forth the number of President’s Clubmembers and number of retail stores at year-end for 2003 through 2007:

 
| ** **                                              | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                                    |       |     |       |     |       |     |       |     |       |     |       |
| Camping World’s  President’s Club memberships |       | 738,500  |       | 680,300  |       | 643,100  |       | 596,700  |       | 598,200  |       |
|                                                    |       |     |       |     |       |     |       |     |       |     |       |
| Number of stores                                        |       | 77       |       | 63       |       | 44       |       | 39       |       | 33       |       |

 

*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 of membership benefits depending uponpricing and program type under the Coast to Coast Club name. Members of theCoast to Coast Club belong to a private RV resort owned and operated by partiesunrelated to us. Our club members may use the other resorts in the Coast toCoast Club network on a reservation or space available basis and obtaindiscounts from other non-private campgrounds. At December 31, 2007, therewere approximately 69,600 member families in the Coast to Coast Club which hadnationwide access to approximately 241 private RV resorts and a network ofapproximately 210 public affiliated campgrounds that participated in the Coastto Coast Club reciprocal use programs. These private resorts are designedprimarily for RV owners, but typically provide camping or lodging facilities,comprised of RVs, cabins, park models, 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 establishedquality criteria for resorts to join and remain in the Coast to Coast Clubnetworks.

 

For standardannual renewal dues from $89.95 for a single year membership to $337.95 for afive-year membership, Coast to Coast Club members receive the followingbenefits: discounts for overnight stays at participating resorts andcampgrounds; an annual subscription to *Coast to Coast Magazine;*the*Coast to Coast Directory*providing information on theparticipating resorts; discounts on our other publications; access to 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. Becausea majority of Coast to Coast Club members own RVs, access to participatingresorts throughout North America can be an important complement to local resortmembership. Based on typical use patterns, we estimate that Coast to Coast Clubmembers realize estimated annual savings from these discounts of approximately$118. The average annual renewal rate for members of the Coast to Coast Clubafter the initial one-year membership (which is generally paid by the memberresort not the club member) was approximately 73% during the period 2003through 2007.

 

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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 2003 through 2007:

 
| ** **                                 | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                       |       |     |       |     |       |     |       |     |       |     |       |
| Number of Coast  to Coast Club memberships |       | 69,600   |       | 78,900   |       | 85,200   |       | 98,700   |       | 117,300  |       |
|                                       |       |     |       |     |       |     |       |     |       |     |       |
| Participating  private resorts             |       | 241      |       | 301      |       | 301      |       | 309      |       | 329      |       |
| Participating  public resorts              |       | 210      |       | 228      |       | 225      |       | 176      |       | 220      |       |

 

Participating resortsdecreased from 2006 to 2007 due to the loss of a large resort group, somenormal attrition and some proactive deletions on our part of substandardresorts.

 

##### *Golf Card Club*

##### * *

The Golf Card Club,founded in 1974, had approximately 44,900 members at December 31, 2007. Themajor attraction for membership is the financial savings which members receivewhen playing at any of the more than 3,000 participating golf courses locatedthroughout the US and Canada. The annual membership fee varies with the lengthand type (single or double) of membership. We believe that the participatinggolf courses providing playing privileges to club members represent the largestnumber of golf courses participating in a discount program in North America. Noneof the participating golf courses are owned or operated by us.

 

Golf Card Club membersreceive a variety of benefits, including: a minimum of two rounds annually offree or discounted golf at participating golf courses; discounted vacationpackages at 144 “Stay and Play” resorts; discounts on golf practice at 51driving ranges; savings on golf merchandise purchases at select member golfcourses; car rental discounts from National and Alamo; an annual subscriptionto the *Golf Traveler* member publication, publishedthree times per year in print and twelve times electronically; the annualdirectory listing participating golf courses and resorts; chances to win freegolf merchandise in quarterly member giveaways; access to 87 local GrasshopperClubs for tournaments and social activities; an opportunity to play inmember-guest tournaments; an opportunity to test (and keep) select golfproducts; a chance to win a free golf lesson from a participating Golf Cardpro; and access to the club web site (www.golfcard.com) including member-onlyfeatures such as handicap tracking, course reviews, and trip routing.

 

Municipal, daily-fee, semi-private, andresort golf courses participate in the Golf Card program. The program isattractive to participating courses because it builds traffic and helps fillempty tee times during off-peak hours. In addition, participating coursesreceive promotion of their golf course in the *GolfTraveler* member publication, the Annual Directory, and the clubwebsite. Members also purchase other merchandise or services when exercisingtheir playing privileges. In this manner, Golf Card members tend to provideincremental revenue to the golf courses. Based on surveys conducted by us,members realize 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 twosome membership.Multi-year memberships range from a single two-year membership for $118, to athree-year twosome membership for $267. The average renewal rate for Golf CardClub members was approximately 52% for the period from 2003 to 2007.

 

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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:

 
| ** **                                        | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of Golf  Card Club memberships (1)         |       | 44,900   |       | 55,000   |       | 57,800   |       | 67,200   |       | 77,400   |       |
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of  Participating Golf Courses             |       | 3,000    |       | 3,300    |       | 3,600    |       | 3,650    |       | 3,800    |       |
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of “Stay  and Play” Golf Resorts |       | 144      |       | 165      |       | 175      |       | 200      |       | 220      |       |

 

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

 

*Camp Club USA*

 

CampClub USA was launched January 2006 as a discount camping club offering 50%off on campsites. At December 31, 2007 we had approximately 38,100members. Members receive a variety of benefits, including 50% savings at over700 campgrounds, an annual directory with maps, directions, amenities, monthlymember giveaways, $50 cash for camping and travel tips, and a monthlyeNewsletter with campground updates, features and travel tips. Based on surveysconducted by us, members realize savings at campgrounds, ranging from $100 to$150 annually, which significantly exceed the cost of membership.

 

**Membership Products and Services**

 

Our approximately 1.9 million club members form a receptiveaudience to which we sell products and services targeted to the recreationalinterests of our club members. We promote products and services which eitheraddress special needs arising in the activities of our club members or appealgenerally to persons with the demographic characteristics of our club members. Thetwo most established products are the emergency road service (“ERS”) and thevehicle insurance programs. Most of our products and services are provided bythird parties who pay us a marketing fee, with the exception of ERS where weassume the risk of incurred claims. We believe it is important to target thediversified market niches with identifiable products that offer a full range ofbenefits. We currently market these products through direct mail, advertisingin publications, campground directories, space ads, the Internet, telemarketingand 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 has expanded the breadth of its programsand now includes club members as well as non-club members. Currently 32% of theGood Sam Club members are enrolled in the Good Sam ERS program. Specializing inRV towing, the Company believes it is important to target diversified marketniches with identifiable products that serve various service level objectives. TheCompany markets its products through direct mail, but also through publicationadvertising, space ads, promotional events, telemarketing, and the Internet. Annualsubscriber dues range from $59.95 to $129.95 and benefits include roadsideassistance, towing, and other travel-related benefits and services.

 

8

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The table below sets forth the total enrollment in thevarious ERS programs for 2003 through 2007:

 
| ** **     | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|----------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|           |       |     |       |     |       |     |       |     |       |     |       |
| ERS Enrollment |       | 388,500  |       | 379,200  |       | 369,900  |       | 360,900  |       | 354,400  |       |

 

For the tenth year in a row, enrollment in the various ERSprograms has grown through promotional and marketing efforts which haveattracted new members. Combined enrollment in the programs has increased by34,100 members or approximately 9.6% since 2003.

 

*Vehicle Insurance Programs*

 

We provide our customers with several property and casualtyinsurance products, including two specialized RV insurance programs, amotorcycle insurance program and a homeowner’s insurance program. The two corebrands are the Vehicle Insurance Program (“VIP”) and the Motor Vehicle Program(“MVP”); each of these products is promoted to the company’s database throughvarious direct marketing channels. At December 31, 2007, the two programshad approximately 201,700 policyholders, which represented a 13.6% and 5.6%penetration, respectively, of the Good Sam Club and the President’s Club. Duringthe period 2003 to 2007, the average renewal rate of members participating inthese insurance programs was 90%. We have a marketing arrangement with a thirdparty licensed insurer that provides the vehicle insurance. The companyreceives revenue for both new and renewing policyholders, while we share onlyin the acquisition marketing expenses with the insurer. All claims risk iscarried by the third-party provider.

 

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 2003 through 2007:

 
| ** **                                               | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                                     |       |     |       |     |       |     |       |     |       |     |       |
| Total policies  in force                                 |       | 201,700  |       | 201,400  |       | 205,800  |       | 208,000  |       | 213,400  |       |
|                                                     |       |     |       |     |       |     |       |     |       |     |       |
| Written premiums  paid to insurance providers (millions) |       | $        | 243        |     | $          | 253      |       | $        | 251        |     | $          | 253 |   | $ | 254 |   |
|                                                     |       |     |       |     |       |     |       |     |       |     |       |
| Marketing fees  (millions)                               |       | $        | 20         |     | $          | 20       |       | $        | 20         |     | $          | 20 |   | $ | 20 |   |

 

*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 are provided to club members by third partieswho pay us a marketing fee.

 

In 1996, welaunched the Continued Service Plan (“CSP”), a private label extended vehiclewarranty program for RVs. Total net revenue for 2007 increased 28% over 2006,to a total of $30.5 million. The program had approximately 43,000 policies inforce as of December 31, 2007. Sales of new policies were derived fromdirect mail marketing, print ads in our magazines, Internet and e-mailsolicitations, and retail kiosks in Camping World stores. Policy renewalsrepresented 54% of the total revenue in 2007. We now offer CSP through ourAuthorized RV Dealer Program. As of December 31, 2007, there were 55dealer locations authorized to sell extended vehicle warranty and otherproducts and services offered by the Company. CSP sales through the AuthorizedDealer Program exceeded $1.5 million for 2007.

 

The RV financing programwas administered by GEMB Lending Inc., a subsidiary of GE Money Bank. Thenumber of GEMB RV loans to our club members in 2007 decreased by 7% from 2006.

 

9

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The decrease in loans canbe directly attributed to the higher interest rate environment and the factthat most outstanding RV loans were refinanced when rates were lower than whatis currently available.

 

In addition, we evaluate other products and services that club membersmay find attractive. When introducing new products and services, we concentrateon products and services provided by third parties, which we can market withoutsignificant capital investment by us, and for which we receive a marketing feefrom the service provider based on sales volume. We seek to utilize thepurchasing power of our club members to obtain products and services atattractive 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 arerecognized from the sale of advertising, subscriptions and direct sales of someof the publications. We believe that the focused audience of each publicationis an important factor in attracting advertisers.

 

10

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

 
| ** **                                                     | ** ** | **2007**        | ** ** | **Issues Published** | ** ** |
|----------------------------------------------------------------|------------|-----------------|------------|---------------------------|------------|
| **Publication**                                                | ** ** | **Circulation** | ** ** | **Annually**              | ** ** |
| ** **                                                     | ** ** | ** **      | ** ** | ** **                | ** ** |
| **PAID  CIRCULATION MAGAZINES (1)**                            |       |            |       |                      |       |
| American Rider                                                 |       | 61,054          |       | 6                         |       |
| ATV Sport                                                      |       | 68,450          |       | 10                        |       |
| Bass &  Walleye Boats                                 |       | 62,980          |       | 9                         |       |
| Camping Life                                                   |       | 85,764          |       | 8                         |       |
| MotorHome                                                      |       | 141,296         |       | 12                        |       |
| Powerboat                                                      |       | 24,758          |       | 11                        |       |
| Rider                                                          |       | 139,467         |       | 12                        |       |
| SnowGoer                                                       |       | 66,196          |       | 7                         |       |
| Trailer Boats                                                  |       | 100,510         |       | 11                        |       |
| Trailer Life                                                   |       | 268,605         |       | 12                        |       |
|                                                           |       |            |       |                      |       |
| **CONTROLLED  CIRCULATION- Business (2)**                      |       |            |       |                      |       |
| Boating Industry                                               |       | 26,000          |       | 12                        |       |
| Campground  Management                                         |       | 14,468          |       | 12                        |       |
| PowerSports  Business                                          |       | 12,000          |       | 16                        |       |
| Power Sports  Business Dealer Directory                        |       | 12,000          |       | 1                         |       |
| Power Sports  Business Market Data Book                        |       | 12,000          |       | 1                         |       |
| RV Business                                                    |       | 18,000          |       | 12                        |       |
|                                                           |       |            |       |                      |       |
| **CONTROLLED  CIRCULATION- Consumer (3)**                      |       |            |       |                      |       |
| ATV Magazine                                                   |       | 232,331         |       | 6                         |       |
| Snow Week                                                      |       | 30,000          |       | 4                         |       |
| Watercraft World                                               |       | 51,465          |       | 6                         |       |
|                                                           |       |            |       |                      |       |
| **FREE  DISTRIBUTION (4)**                                     |       |            |       |                      |       |
| Thunder Press-  North                                          |       | 30,139          |       | 12                        |       |
| Thunder Press-  South                                          |       | 23,925          |       | 12                        |       |
| Thunder Press-  West                                           |       | 45,607          |       | 12                        |       |
| Woodall’s  Specials (5)                                   |       | 6,074           |       | 1                         |       |
| Woodall’s  Regional News Tabloids                         |       | 100,101         |       | 36                        |       |
|                                                           |       |            |       |                      |       |
| **ANNUALS  (1)**                                               |       |            |       |                      |       |
| Cruisers Buyers  Guide                                         |       | 76,507          |       | 1                         |       |
| Touring Rider                                                  |       | 65,728          |       | 1                         |       |
| Trailer Life  Campground/RV Park & Services Directory |       | 233,954         |       | 1                         |       |
| Trailer Life’s  RV Buyers Guide                           |       | 113,125         |       | 1                         |       |
| Towing Guide                                                   |       | 536,246         |       | 1                         |       |
| Ultimate  Snowmobile Buyers Guide                              |       | 90,000          |       | 1                         |       |
| Woodall’s Buyer’s  Guide                             |       | 46,866          |       | 1                         |       |
| Woodall’s  Campground Directory                           |       | 283,641         |       | 1                         |       |
| Woodall’s  Tenting Directory                              |       | 24,268          |       | 1                         |       |
| Woodall’s Go &  Rent Rent & Go (4)      |       | 78,824          |       | 1                         |       |
|                                                           |       |            |       |                      |       |
| **CLUB  MAGAZINES (6)**                                        |       |            |       |                      |       |
| Camp Club USA  Directory                                       |       | 60,438          |       | 1                         |       |
| Coast to Coast  Magazine                                       |       | 89,925          |       | 8                         |       |
| Golf Traveler  (7)                                             |       | 57,527          |       | 4                         |       |
| Highways                                                       |       | 993,573         |       | 12                        |       |
| RV View                                                        |       | 883,722         |       | 4                         |       |

 

----

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

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

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

*(4)**      *Includes limitedpaid circulation.

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

*(6)**      *Limited to clubmembers and promotional copies.  Theprice is included in the membership fee.

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

 

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*PaidCirculation Magazines*

 

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

 

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

 

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

 

*Camping Life*appeals to family-style campers and other outdoorenthusiasts with articles about destinations, products and activities toenhance their outdoor lifestyles.

 

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

 

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

 

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

 

*SnowGoer* is designed for highly active snowmobiling participantsand provides detailed equipment and product critiques, and maintenance tips.

 

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

 

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

 

#### *Controlled CirculationMagazines- Business*

#### * *

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

 

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

 

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

 

*PowerSports Business Market Data Book* is an annual publication that providesindustry sales trends for powersports manufacturers and dealers; dealercustomer service and performance data; 

 

12

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manufacturer stock performance updates; industry supplier information;and various industry research projects.

 

*PowerSports Business Dealer Directory* is a supplier directory for each of theATV, snowmobile and watercraft markets. This directory features hundreds of manufacturers and suppliers ofparts, services, apparel and much more, complete with detailed companyinformation.

 

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

 

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

##### * *

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

 

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

 

*Watercraft World* is targeted to avid personal watercraftenthusiasts and provides detailed critiques of watercraft, in-depth gear andaccessory evaluations, technical tips and racing information.

 

#### *Free Distribution Publications*

#### * *

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

###### * *

*Woodall’s Specials* 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’s Regional News Tabloids* publications aredesigned to appeal to the prospective or first-time RV owner.  Stories in these publications cover areacampgrounds and RV dealerships, as well as new vehicles on the market and newproducts within the industry.  Thepublications are primarily distributed at campgrounds and RV parks, as well asat RV shows and state welcome centers.

 

#### *Annual Publications*

#### * *

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

 

*Touring Rider* is an annual publication which is devoted exclusivelyto touring – from bikes and gear to touring tips, adventures and road maps.

 

*Trailer Life Campground/ RV Park & ServicesDirectory*,initially published in 1972, is an annually updated directory which providesinformation on and ratings for approximately 11,700 public and privatecampgrounds, over 800 RV service centers, and over 800 tourist attractions inNorth America along with color maps of the areas covered.  The publication features Good Sam Parks thatoffer discounts on overnight camping fees to our club members.  This directory is sold primarily by directmail to Good Sam Club members, at RV dealerships and in bookstores.

 

13

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

 

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

 

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

 

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

 

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

 

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

 

*Woodall’s Go & Rent...Rent & Go*is an annual catalog providing information on where to find on-site lodging andcabin rentals at RV Parks & Campgrounds and “Over-the-Road” RVRentals, 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 or Trade Magazines andBooks*

#### * *

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

 

#### *Consumer Shows*

#### * *

We operate 36 consumer outdoor recreationshows primarily focused on RV and powersports markets.  Twelve of the shows were acquired from RoyalProductions, Inc. in December 2005, six consumer shows were purchased from H & SProductions, LLC in February 2006, four RV shows were purchasedfrom Apple Rock Advertising and Promotions, Inc. in September 2006,one show was acquired from MAC Events, LLC in January 2007, and five showswere acquired from Industrial Expositions, Inc. in February 2007.  These shows provide us with the opportunityto reach new customers and interact with them on a face-to-face basis.  Revenues are recognized from the sale ofexhibitor booth space and admission fees.

 

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#### * *

#### *Campground Guides*

#### * *

We currently produce local campground guidesdistributed free of charge to over 380 campgrounds across the country.  These guides include paid listings for localattractions, restaurants and services and a map of the campground.

 

**Retail**

 

#### *Camping World Supercenters*

#### * *

Camping World is a national specialty retailer ofmerchandise and services for RV owners. With the opening of our two newest Camping World supercenters in thefourth quarter of 2007, we currently operate 77 Camping World retail locationsin 28 states.  These stores accounted forapproximately 87% of the 2007 total retail revenue, while approximately 13% wasderived from catalog and Internet sales.

 

In the RV accessory industry, we believe thatCamping World has a high level of name recognition, an effective triple channeldistribution strategy (store, catalog, and Internet), and a commitment to offera broad selection of specialized RV products and services at competitive pricescombined with technical assistance and on-site installation.  Camping World offers approximately 12,000SKUs, most of which are not regularly available in general merchandisestores.  The Camping World supercentersprovide installation and repair services for RV products, which are notavailable at general merchandise stores. Products sold by Camping World include specialty-sized refrigerators,housewares and other appliances, bedding and furniture, generators andhydraulic leveling systems, awnings, folding boats, chairs, ladders, cleaningand maintenance products, bicycles, hitch-towing, sanitation products,automotive electronics and lifestyle products. Some Camping World stores feature resource centers, staffed withlicensed insurance agents who market such products and services as vehicleinsurance, extended warranty and ERS. Camping World’s supercenters are designed to provide one-stop shoppingby combining broad product selection, technical assistance and on-siteinstallation services.  We strategicallylocate Camping World supercenters in areas where many RV owners live, alongmajor Interstates, and/or in proximity to destinations frequented by RV users.

 

Camping World sources its products fromapproximately 1,100 vendors.  CampingWorld attends regional, national and international trade shows to determine theproducts it will offer.  The purchasingactivities of Camping World are focused on RV parts and accessories,electronics, housewares, hardware, automotive, crafts, clothing, homefurnishings, gifts, camping and sporting goods. Camping World uses an automated “plan-o-gram” system to develop andmaintain merchandising plans unique to each supercenter and an inventoryreplenishment system for its operations to improve in stock rates on keyitems.  Camping World believes that thevolume of merchandise it purchases from domestic and international suppliersand its ability to buy direct from manufacturers enables them to obtainmerchandise at costs which compare favorably to local RV dealers 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 takeadvantage of the state-of-the art performance centers staffed with expert RVtechnical consultants and equipped with demonstrable merchandise to assist ineducating customers about RV performance products.  The resource centers provide an opportunityto promote service offerings in a more interactive and consultative sellingenvironment.  They are staffed withprofessionals marketing insurance products, extended warranties, roadsideservice, club memberships, and RV financing, which product offerings add to thedepth of services that Camping World customers have become accustomed toreceiving at our supercenters.  Finally,store dress, promotional signage and directional signage are periodicallyrefreshed to further enhance our customers’ shopping experience at CampingWorld’s supercenters.

 

15

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Camping World’s supercenters generally range insize from approximately 10,000 to 64,000 square feet.  Approximately 40% of each supercenter isdevoted to a retail sales floor, a customer service area, and a technicalinformation counter; 40% is comprised of the installation facility, whichcontains 4 to 16 drive-through installation bays; and 20% is allocated tooffice and warehouse space.  Largeparking areas provide sufficient space and facilitate maneuvering of RVs.  By combining broad product selection,technical assistance, installation and repair services, Camping World’ssupercenters provide one-stop shopping for RV owners.  Camping World maintains toll-free telephonenumbers for customers to schedule installation and repair appointments.  Most supercenters are open seven days a week.

 

Camping World intends to continue the controlled expansion of theirsupercenter store network while simultaneously developing dealer partnershipsacross North America.  We plan toestablish additional Camping World stores alongside or within new and existingRV dealerships.  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 dealerpartners by marketing locally, regionally and nationally our extensive partsand accessories business.  In 2003, weinitiated the dealer alliance program under which we sublease space in anexisting RV dealership where we operate a Camping World store or operate theCamping World store adjacent to the RV dealership.  Currently, we operate 59 Camping World storesalongside or within RV dealerships, including 49 Camping World stores that arepart of our dealer alliance program.  Ofthese 59 Camping World stores that are alongside or within RV dealerships, 45are located alongside or within dealerships indirectly owned or operated byFreedomRoads Holding LLC and its subsidiaries (collectively “FreedomRoads”).  FreedomRoads is indirectly owned andcontrolled by Stephen Adams, our Chairman and principal owner of our parentcompany and owns and operates RV dealerships at 56 locations across the UnitedStates as of December 31, 2007.

 

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

#### * *

Camping World initiated its catalog operations in1967.  Camping World currently has aproprietary mailing list of approximately 2.5 million RV owners, all of whomhave made a purchase or requested a catalog from Camping World within the prior60 months.  Camping World maintains adatabase of these names, which includes information such as order frequency,size of order, date of most recent order and type of merchandise purchased.  Camping World analyzes its database todetermine those customers most likely to order from Camping World’scatalogs.  As a result, Camping World isable to target catalog mailings more effectively than direct marketers ofcatalogs offering general merchandise. Camping World continually expands its proprietary mailing list throughin-store subscriptions and requests for catalogs in response to advertisementsin regional publications directed to RV owners. In addition, Camping World rents mailing lists of RV owners from thirdparties.

 

During 2007, Camping World distributed 7.4 millioncatalogs, 6.3 million of which were mailed in fourteen separate mailings, andthe remaining 1.1 million catalogs were distributed in supercenters, atcampgrounds and other RV locations, and as package inserts.  During the same period, Camping Worldprocessed approximately 305,000 catalog orders at an average net order size of$113, excluding postage and handling charges. Camping World distributed fourteen high-quality, full-color catalogsduring 2007, consisting of thirteen catalogs plus a Master Catalog in thespring of 2007.

 

16

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**Internet**

 

The Internet has proven to be a significant,low-cost source for new club members, subscriptions and other ancillary productsales.  We maintain fifty-five Internetweb 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 2007 under these programsrepresented approximately 12.7% of all new club members.  E-mail acquisition campaigns and Internetonline revenue totaled approximately $36.3 million in 2007.

 

**Marketing**

 

Wemarket our club memberships and related products and services through directmail, e-mail, inserts, ride-alongs, space advertisements, promotional events,point of sale, member-get-a-member campaigns, and telemarketing.  Direct response marketing efforts account forapproximately 49% of new enrollments with the remaining 51% derived from othersources.  We use a variety ofcommercially available mailing lists of RV owners in our direct mailefforts.  Currently, the most widely usedlist databases are provided by three commercial list compilers, and directresponse lists are from RV industry participants, RV consumer surveys, andproprietary in-house lists.

 

Our publications segment solicits advertisements through an internalsales force and by paying commissions to advertising agencies and independentcontractors who place advertisements. Many advertisers are repeat customers with whom we have long standingrelationships.

 

We market our retail products through mail order catalogs, direct mailretail flyers, advertisements in national and regional industry publications,vendor co-op advertising programs, promotional events, the President’s Clubdirect mailings and personal solicitations and referrals. Camping World’sprincipal marketing strategy is to capitalize on its broad name recognitionamong RV owners.

 

**Operations**

** **

Our customer service operations are located in Denver, Colorado andBowling Green, Kentucky.  The primaryfocus of these groups is to manage our customers’ expectations and relationshipwith the organization.  These memberservice operations processed approximately 1.3 million telephone calls in 2007.Approximately forty percent of the calls originated from the marketing effortsof catalog mailings, membership acquisition, membership renewals and associatedancillary products and events.  All suchefforts use toll-free numbers as a response mechanism.

 

Camping World’s catalog, Internet and fulfillment operations arelocated in Franklin, Kentucky and Bakersfield, California.  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 are based in Minnesota and California.  We develop the layout for publications andoutsource printing to third parties.

 

**Information Support Services**

 

Weutilize integrated computer systems to support our membership club andpublishing operations.  A databasecontaining all customer activity across our various businesses and programs hasbeen 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 

 

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supportour publications operations.  A wide-areanetwork facilitates communication within and between our offices.  We also utilize information technology,including list segmentation, merge and purge programs, and advanced data baseanalysis and modeling techniques to select prospects for direct mailsolicitations and other direct marketing efforts.

 

CampingWorld’s management information systems and electronic data processing systemsconsist of an extensive range of retail, mail order, financial andmerchandising systems, including purchasing, inventory distribution andcontrol, sales reporting, accounts payable and merchandise management.  Camping World’s management information systemincludes point-of-sale registers that are equipped with bar code readers ineach supercenter.  These registers arepolled nightly by a central computer. With this point-of-sale information and the information from CampingWorld’s on-line distribution centers, Camping World compiles comprehensivedata, including detailed sales volume and inventory information by product,merchandise transfers and receipts, special orders, supply orders and returnsof product purchases to vendors.  Inconjunction with its nightly polling, Camping World’s central computer sendsprice changes to registers at the point of sale.  The registers capture President’s Club membernumbers and associated sales and references to specific promotionalcampaigns.  Management monitors theperformance of each supercenter and mail order operation to evaluate inventorylevels, determine markdowns and analyze gross profit margins by product.

 

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

 

**Regulation**

 

Our operations are subject to varying degrees of federal, state andlocal regulation.  Specifically, ouroutbound telemarketing, direct mail, and ERS, as well as certain servicesprovided by third parties, including insurance, RV financing, and extendedwarranty programs, are currently subject to certain regulation, and may besubjected to increased regulation in the future.  We do not believe that such federal, stateand local regulations currently have a material impact on our operations.  However, new regulatory efforts impacting ouroperations may be proposed from time to time in the future at the federal,state and local level.  There can be noassurance that such regulatory efforts will not have a material adverse effecton our ability to operate our businesses or on our results of operations.

 

**Competition**

 

In general, our membership clubs, retail and catalog operations andpublications compete with numerous organizations in the recreation industry fordisposable income spent on leisure activities. By offering significant membership benefits at a reasonable cost andactively marketing to club members, we believe that we have been able tomaintain a loyal following for our membership organizations as evidenced by thehigh renewal rates of our membership clubs. The products and services marketed by us compete with similar productsand services offered by other providers. However, management believes that we are able to use the large volume ofpurchases by our club members to secure attractive pricing for the products andservices marketed by us.

 

**Employees**

 

As of December 31, 2007, we had 1,997 full-time and 206 part-timeor seasonal employees, consisting of 9 executives, 1,421 employees in retailoperations, 492 employees in administrative and club operations, 222 employeesin publishing and advertising sales, 6 employees in resort services 

 

18

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and 53 employees in marketing. No employees are covered by a collective bargaining agreement.  We believe that our employee relations aregood.

 

**Trademarks and Copyrights**

 

We own a variety of registered trademarks and service marks for thenames of our clubs, magazines and other publications.  We also own the copyrights to certainarticles in our publications.  We believethat our trademark and copyrights have significant value and are important toour marketing efforts.

 

**ITEM 1A:  RISK FACTORS**

 

Therisks 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 we currentlydeem to be immaterial, may also materially adversely affect our businessoperations.

 

**RisksRelating to our Debt**

 

*Oursubstantial indebtedness could adversely affect our financial health.*

 

Wehave a significant amount of indebtedness. As of December 31, 2007, our total debt and total stockholder’sdeficit were $397.0 million and $171.3 million, respectively.  We are a holding company and do not have anyoperations.  We are dependent on ouroperating subsidiaries for cash flow in the form of dividend distributions.  However, our subsidiaries are and may in thefuture be restricted from making dividend distribution to us.  In the future, we intend to use cashgenerated by operations of our subsidiaries that is distributed to us as adividend to reduce our indebtedness. However, we may from time to time, subject to restrictions imposed bythe terms of our indebtedness, pay dividends or find it more advantageous toemploy cash generated by operations for capital investments and acquisitions.

 

Ourability to satisfy our debt service obligations depends primarily on ouroperating performance. Future debt repayments by us, including the principalamount of the notes, may require funds in excess of our available cashflow.  We cannot assure our investorsthat we will be able to raise additional funds, if necessary, through futurefinancings.  The indentures pursuant towhich our wholly-owned subsidiary, Affinity Group, Inc. (“AGI”) issued its9% Senior Subordinated Notes due 2012 (“AGI Senior Notes”) and we issued our10-7/8% AGHI Senior Notes due 2012 (“AGHI Notes”) were issued impose severalrestrictions upon our subsidiary or us, including restrictions on the abilityto incur additional indebtedness, pledge assets and make dividends anddistributions.

 

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

 

*Despitecurrent indebtedness levels and restrictive covenants, we still may be able toincur substantially more debt in the future.*

 

Despiteour current level of debt, we or our subsidiaries may be able to incursubstantial additional 

 

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debtin the future.  AGI’s Amended andRestated Credit Agreement (“AGI Senior Credit Facility”) will permit totalborrowings of up to $188.6 million. Although the terms of the AGI Senior Credit Facility, the indenturegoverning the AGI Senior Notes (the “AGI Indenture”) and the indenturegoverning our AGHI Notes (the “AGHI Indenture”) restrict us and our restrictedsubsidiaries from incurring additional debt, these restrictions are subject toimportant exceptions and qualifications. If we or our subsidiaries incuradditional debt, the risks that we and they now face as result of our leveragecould increase.

 

Ifour financial condition and operating results deteriorate, our relationshipswith our creditors, including the holders of the AGI Senior Notes, the lendersunder the AGI Senior Credit Facility and our suppliers, may be adverselyaffected.

 

*Becausewe are a holding company and substantially all of our operations are conductedby our subsidiaries, our obligations under the AGHI Notes effectively aresubordinated to the obligations of our subsidiaries.*

 

Wecurrently conduct substantially all of our operations through our subsidiaries,and our subsidiaries generate substantially all of our operating income andcash flow.  Our ability to pay ourobligations under the AGHI Notes and any other direct indebtedness depends onour ability to obtain cash dividends or other cash payments or obtain loansfrom our subsidiaries, which are separate and distinct legal entities that willhave no obligations to pay any dividends or to lend or advance us funds andthat may be restricted from doing so by contract, including other financingarrangements, charter provisions or applicable legal or regulatoryrequirements, and our ability may also depend on the financial condition andregulatory requirements of our subsidiaries. In addition, because we are a holding company, except to the extent thatwe have priority or equal claims against our subsidiaries as a creditor, ourobligations under our AGHI Notes will be effectively subordinated to theobligations of our subsidiaries. Currently, the AGI Senior Credit Facility and the AGI Indenture imposelimitations on the ability of our subsidiaries to make dividend distributionsor loans to us.

 

*Ouroperations are substantially restricted by the terms of the AGHI Notes, theterms of the AGI Senior Notes and the terms of the AGI Senior Credit Facilitywhich could adversely affect us and increase our credit risk.*

 

TheAGHI Indenture, AGI Indenture, and the credit agreement for the AGI SeniorCredit Facility include a number of significant restrictive covenants.  These covenants restrict, among other things,our ability to: (i) incur more debt, (ii) pay dividends or make otherdistributions, (iii) make investments, (iv) issue stock ofsubsidiaries, (v) repurchase stock, (vi) create liens, (vii) enterinto transactions with affiliates, (viii) enter into sale-leasebacktransactions, (ix) merge or consolidate, and (x) transfer and sellassets.

 

Thesecovenants could limit our ability to plan for or react to market conditions orto meet our capital needs.  Thesecovenants are subject to certain important exceptions.

 

TheAGI Senior Credit Facility contains additional and more restrictive covenantsthan the terms of the AGI Indenture, including financial covenants that requireus to achieve certain financial and operating results and maintain compliancewith specified financial ratios.  Ourability to comply with these covenants and requirements may be affected byevents beyond our control, and we may have to curtail some of our operationsand growth plans to maintain compliance.

 

Ifwe are not able to comply with the covenants and other requirements containedin the AGHI Indenture, the AGI Indenture, the AGI Senior Credit Facility or ourother debt instruments, an event of default under the relevant debt instrumentcould occur.  Our ability to comply withthe provisions of the indentures, the AGI Senior Credit Facility and the agreementsor indentures governing other debt 

 

20

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wemay incur in the future could be affected by events beyond our control and,therefore, we might be unable to meet those ratios and conditions. If an eventof default does occur, it could trigger a default under our other debtinstruments, we could be prohibited from accessing additional borrowings, andthe holders of the defaulted debt could declare amounts outstanding withrespect to that debt to be immediately due and payable.  We cannot assure our investors that ourassets or cash flow would be sufficient to fully repay borrowings under ouroutstanding 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.

 

*Toservice our indebtedness, we will require a significant amount of cash, theavailability of which depends on many factors beyond our control.*

 

Ourability to make payments on and to refinance our indebtedness and theindebtedness of our subsidiaries, and to fund planned capital expenditures ofour subsidiaries will depend on our ability to generate cash in the future. Toa certain extent, this is subject to general economic, financial, competitive,legislative, regulatory and other factors that are beyond our control.

 

Wecannot assure our investors that our business will generate sufficient cashflow from operations or that future borrowings will be available to us underthe AGI Senior Credit Facility in an amount sufficient to enable us to pay ourindebtedness, including the AGI Senior Credit Facility and the AGI SeniorNotes, 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, including the notes, on or before its maturity.  We cannot assure our investors that we willbe able to refinance any of our indebtedness, including the AGI Senior CreditFacility, the AGI Senior Notes and the AGHI Notes, on satisfactory terms or atall.

 

Ourfailure to comply with our obligations under the AGI Indenture, the AGHIIndenture or the credit agreement for the AGI Senior Credit Facility may resultin an event of default under those debt instruments.  A default, if not cured or waived, may permitacceleration of our other indebtedness. We cannot be certain that we will have funds available to remedy thesedefaults. If our indebtedness is accelerated, we cannot be certain that we willhave sufficient funds available to pay the accelerated indebtedness or that wewill have the ability to refinance the accelerated indebtedness on termsfavorable to us or at all.

 

*We maynot have the ability to raise the funds necessary to repurchase the AGHI Notesupon a change of control.*

 

Uponthe occurrence of certain specific kinds of change of control events, we willbe required to offer to repurchase all outstanding AGHI Notes at 101% of theprincipal amount thereof plus accrued and unpaid interest and liquidateddamages, if any, to the date of repurchase. However, it is possible that we may not have sufficient funds at thetime of the change of control to make any required repurchases or that the AGISenior Credit Facility or AGI Indenture will not allow such repurchases orpermit the dividend or loan of sufficient funds to us to make the requiredrepurchases.  If we do not repay allborrowings under the AGI Senior Credit Facility and the AGI Indenture or obtainthe consent of AGI’s lenders and holders of the AGI Notes to permitdistribution of funds to us to repurchase the AGHI Notes, we will be prohibitedfrom purchasing the AGHI Notes.  Ourfailure to purchase tendered notes would constitute a default under theindenture governing the AGHI Notes.  Inaddition, certain important corporate events relating to our capital structurewould not constitute a “change of control” under the indenture.

 

21

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**Risks Relating to Our Business**

 

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

 

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

 

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

 

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

 

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

 

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

 

In general, our membership clubs, retail and catalog operations andpublications compete with numerous organizations in the recreation industry fordisposable income spent on leisure merchandise and activities.  The products and services we market competewith similar products, services, publications and retail businesses offered byother providers.  Increased competitionfrom these and other sources could require us to respond to competitive pressuresby establishing pricing, marketing and other programs or seeking out additionalstrategic alliances or acquisitions that may be less favorable to us than wecould 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 

 

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the benefits of their club memberships less often, if at all. Anydecline in program usage would hurt our business. In addition, a decline in thenational economy could cause some of the merchants who participate in ourprograms to go out of business. It is likely that, should the number ofmerchants entering bankruptcy rise, the number of uncollectible accounts wouldalso rise.  This would have an adverseeffect on our business and financial results.

 

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

 

We are an indirect wholly-owned subsidiary of AGI Holding Corp. (“AGHC”),a privately held company.  Stephen Adams,our Chairman, owns approximately 98.2% of the outstanding shares of AGII.  Accordingly, Mr. Adams will be able toelect our Board of Directors and to control matters submitted to the vote ofour shareholders.  Circumstances mayoccur in which the interests of Mr. Adams could be in conflict with theinterests of the holders of our debt instruments and lenders.  For example, Mr. Adams may have aninterest in pursuing acquisitions, divestitures or other transactions that, inhis judgment, could enhance the value of his equity investment, even thoughsuch transactions may involve risks to the holders of our debt instruments andlenders.

 

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

 

Our operations are subject to varying degrees of federal, state andlocal regulation.  Our outboundtelemarketing, direct mail, ERS program, insurance and thrift and loanactivities are currently subject to regulation. Specifically, a principalsource of leads for our direct response marketing efforts was new vehicleregistrations provided by motor vehicle departments in various states.  Currently, all states restrict access tomotor vehicle registration information.

 

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

 

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

 

*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.

 

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*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.

 

**ITEM2:  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  Feet** | ** ** | **Acres**  | ** ** | **Lease  Expiration** | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------------|------------|------------|------------|-----------------------|------------|
| **Corporate  Headquarters:**                                                                | ** ** | ** **       | ** ** | ** ** | ** ** | ** **            | ** ** |
| Ventura, CA                                                                                 |       | 74,100           |       |       |       | 2039                  |       |
|                                                                                        |       |             |       |       |       |                  |       |
| **Other  Office Facilities:**                                                               |       |             |       |       |       |                  |       |
| Carson, CA  (regional publication office)                                                   |       | 10,048           |       |       |       | 2012                  |       |
| Denver, CO  (customer service, warehousing fulfillment, and information system  functions). |       | 60,000           |       |       |       | 2039                  |       |
| Bowling Green,  KY (retail administrative headquarters and mail order operations)           |       | 31,278           |       |       |       | 2039                  |       |
| Seattle, WA  (regional publication sales office)                                            | ** ** | 912              |       |       |       | 2009                  |       |
| 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                  |       |
| Fort Lauderdale,  FL (regional publication sales office)                                    |       | 528              |       |       |       | 2009                  |       |
| Port Angeles, WA  (regional shows sales office)                                             |       | 3,300            |       |       |       | 2012                  |       |
|                                                                                        |       |             |       |       |       |                  |       |
| **Distribution  Centers:**                                                                  |       |             |       |       |       |                  |       |
| Bakersfield,  California                                                                    |       | 164,747          |       | 14.827     |       | 2037                  |       |
| Franklin,  Kentucky                                                                         |       | 250,000          |       | 33.000     |       | 2035                  |       |
|                                                                                        |       |             |       |       |       |                  |       |
| **Camping  World Supercenter Locations:**                                                   |       |             |       |       |       |                  |       |
| Dothan, AL (1)                                                                              |       | 18,906           |       | 11.275     |       | 2025                  |       |
| Oxford, AL (2)                                                                              |       | 11,828           |       | 23.940     |       | 2027                  |       |
| Robertsdale, AL(1)                                                                          |       | 19,670           |       | 18.360     |       | 2026                  |       |
| North Little  Rock, AR (3)                                                                  |       | 20,592           |       | 10.000     |       | 2042                  |       |
| Tucson, AZ (2)                                                                              |       | 12,145           |       | 2.000      |       | 2018                  |       |
| Mesa, AZ                                                                                    |       | 27,500           |       | 3.140      |       | 2010                  |       |
| Bakersfield, CA (1)                                                                         |       | 23,325           |       | 9.940      |       | 2023                  |       |

 

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| ** **                | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|---------------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| Fresno, CA (2)            |       | 6,932            |       | 21.010    |       | 2037                  |       |
| La Mirada, CA             |       | 33,479           |       | 5.501     |       | 2037                  |       |
| San Marcos, CA            |       | 25,522           |       | 2.212     |       | 2027                  |       |
| Fairfield, CA             |       | 43,434           |       | 3.780     |       | 2009                  |       |
| Rocklin, CA               |       | 29,085           |       | 4.647     |       | 2037                  |       |
| San Bernardino,  CA       |       | 18,126           |       | 1.665     |       | 2012                  |       |
| San Martin, CA            |       | 29,486           |       | 5.000     |       | 2023                  |       |
| Valencia, CA (3)          |       | 64,410           |       | 9.231     |       | 2037                  |       |
| Colorado  Springs, CA (1) |       | 11,672           |       | 26.430    |       | 2027                  |       |
| Denver, CO                |       | 27,085           |       | 4.132     |       | 2037                  |       |
| Longmont, CO (1)          |       | 5,003            |       | 6.750     |       | 2026                  |       |
| Ft. Myers, FL             |       | 22,886           |       | 4.217     |       | 2012                  |       |
| Gulf Breeze, FL (1)       |       | 5,747            |       | 13.897    |       | 2026                  |       |
| Kissimmee, FL (3)         |       | 58,382           |       | 6.043     |       | 2037                  |       |
| St. Augustine,  FL (1)    |       | 21,875           |       | 20.000    |       | 2026                  |       |
| Tampa, FL                 |       | 40,334           |       | 3.711     |       | 2026                  |       |
| Tallahassee, FL (1)       |       | 8,494            |       | 12.630    |       | 2024                  |       |
| Byron, GA (3)             |       | 23,400           |       | 7.000     |       | 2042                  |       |
| Oakwood, GA (1)           |       | 4,510            |       | 7.681     |       | 2026                  |       |
| Savannah, GA (1)          |       | 6,285            |       | 4.898     |       | 2026                  |       |
| Snellville, GA (1)        |       | 12,376           |       | 5.923     |       | 2026                  |       |
| Woodstock, GA (1)         |       | 4,510            |       | 7.715     |       | 2026                  |       |
| Bolingbrook, IL (3)       |       | 25,126           |       | 5.299     |       | 2035                  |       |
| Island Lake, IL (1)       |       | 2,540            |       | 17.028    |       | 2026                  |       |
| Indianapolis, IN  (1)     |       | 7,690            |       | 30.000    |       | 2027                  |       |
| Bowling Green,  KY        |       | 37,615           |       | 2.750     |       | 2037                  |       |
| Hammond, LA (2)           |       | 27,096           |       | 68.454    |       | 2034                  |       |
| Belleville, MI (3)        |       | 44,248           |       | 7.260     |       | 2037                  |       |
| Grand Rapids, MI  (2)     |       | 4,618            |       | 9.180     |       | 2037                  |       |
| Rogers, MN                |       | 24,700           |       | 6.303     |       | 2025                  |       |
| Strafford, MO (3)         |       | 20,592           |       | 8.510     |       | 2042                  |       |
| Colfax, NC (1)            |       | 6,371            |       | 8.094     |       | 2026                  |       |
| Statesville, NC (1)       |       | 39,050           |       | 7.412     |       | 2024                  |       |
| Bridgeport, NJ            |       | 24,581           |       | 6.920     |       | 2031                  |       |
| Lakewood, NJ (1)          |       | 3,800            |       | 9.912     |       | 2027                  |       |
| Albuquerque, NM (1)       |       | 20,412           |       | 31.434    |       | 2026                  |       |
| Henderson, NV (3)         |       | 25,850           |       | 4.400     |       | 2025                  |       |
| Las Vegas, NV (1)         |       | 5,000            |       | 15.840    |       | 2027                  |       |
| Bath, NY (1)              |       | 4,356            |       | 5.500     |       | 2026                  |       |
| Amsterdam, NY (2)         |       | 13,420           |       | 28.000    |       | 2033                  |       |
| Churchville, NY (1)       |       | 7,193            |       | 10.380    |       | 2026                  |       |
| 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                  |       |
| Wood Village, OR  (1)     |       | 6,495            |       | 11.070    |       | 2027                  |       |

 

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| ** **                | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|---------------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| Columbia, SC (1)          |       | 23,450           |       | 4.140     |       | 2017                  |       |
| Myrtle Beach, SC  (3)     |       | 38,962           |       | 5.410     |       | 2037                  |       |
| Myrtle Beach, SC  (1)     |       | 2,298            |       | 18.940    |       | 2026                  |       |
| North  Charleston, SC (1) |       | 13,142           |       | 7.690     |       | 2027                  |       |
| Spartanburg, SC (1)       |       | 11,900           |       | 19.263    |       | 2033                  |       |
| Chattanooga, TN (1)       |       | 9,400            |       | 10.840    |       | 2024                  |       |
| Knoxville, TN (2)         |       | 10,763           |       | 24.580    |       | 2037                  |       |
| Nashville, TN (2)         |       | 34,478           |       | 3.238     |       | 2037                  |       |
| Anthony, TX (1)           |       | 7,061            |       | 32.000    |       | 2025                  |       |
| Denton, TX                |       | 22,984           |       | 6.887     |       | 2037                  |       |
| Fort Worth, TX (2)        |       | 11,102           |       | 16.000    |       | 2026                  |       |
| Katy, TX (1)              |       | 25,913           |       | 38.861    |       | 2025                  |       |
| Mission, TX               |       | 23,094           |       | 3.430     |       | 2015                  |       |
| New Braunfels,  TX (3)    |       | 43,397           |       | 19.100    |       | 2035                  |       |
| Draper, UT                |       | 27,675           |       | 8.031     |       | 2026                  |       |
| Kaysville, UT (1)         |       | 6,033            |       | 16.200    |       | 2027                  |       |
| Manassas, VA (2)          |       | 16,348           |       | 9.754     |       | 2018                  |       |
| Winchester, VA            |       | 19,400           |       | 4.120     |       | 2042                  |       |
| Burlington, WA (1)        |       | 23,033           |       | 6.500     |       | 2025                  |       |
| Fife, WA                  |       | 35,659           |       | 5.840     |       | 2032                  |       |

 

----

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

(2)            This supercenter is located with an RV dealership(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.

(3)            The supercenter is co-located with a FreedomRoadsdealership wherein Camping World, Inc. and the dealership are co-tenantsor the dealership subleases space from Camping World, Inc.  The square footage reported is the portion ofthe building leased 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 miscellaneous office equipment.  In addition, we own 12.439 acres ofunimproved land adjacent to the New Braunfels, Texas Camping World Supercenter.

 

**ITEM 3:  LEGAL PROCEEDINGS**

** **

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

 

26

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**ITEM 6: 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.  In November 2007, AGI Holding Corp., (“AGHC”), formed a holding company, AGI Intermediate Holdco, LLC (“AGII”),at which time AGHC contributed 100% of the outstanding shares of common stockof AGHI to AGII.  AGII is the directparent of AGHI.  AGHI was formed on March 2, 2005, at which time all ofthe stock of Affinity Group, Inc, (“AGI”) was contributed to AGHI from itsparent, AGHC, a privately-owned corporation. On April 27, 2004, AGI’s previous parent, Affinity Group Holding, Inc.(“AGH”) was merged into AGI, with AGI being the surviving entity after themerger.  The merger was accounted for asa combination of entities under common control using historical costs.  Prior to April 27, 2004, AGI was awholly-owned subsidiary of Affinity Group Holding, Inc. (“AGH”).  All periods have been restated to reflect theresults of operations of AGI and AGH, prior to the April 27, 2004merger.  Our selected financial datashould be read in conjunction with “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” and our Consolidated FinancialStatements and the notes thereto included herein.

 
| ** **                                       | ** ** | **December 31,**                | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                       | ** ** | **(dollars in thousands)** | ** ** |
| **Statement of Operations Data:** | ** ** | **2007**                             | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| REVENUES:                                        |       |                                 |       |   |   |   |   |   |   |   |   |
| Membership services                              |       | $                                    | 149,937    |   | $ | 137,394 |   | $ | 133,756 |   | $ | 131,608 |   | $ | 128,664 |   |
| Publications                                     |       | 90,537                               |       | 86,742 |   | 79,122 |   | 77,977 |   | 71,436 |   |
| Retail                                           |       | 321,730                              |       | 290,422 |   | 272,682 |   | 255,094 |   | 225,306 |   |
|                                             |       | 562,204                              |       | 514,558 |   | 485,560 |   | 464,679 |   | 425,406 |   |
|                                             |       |                                 |       |   |   |   |   |   |   |   |   |
| COSTS APPLICABLE  TO REVENUES:                   |       |                                 |       |   |   |   |   |   |   |   |   |
| Membership  services                             |       | 94,840                               |       | 87,407 |   | 85,551 |   | 84,231 |   | 79,500 |   |
| Publications                                     |       | 62,258                               |       | 58,302 |   | 53,855 |   | 53,042 |   | 48,392 |   |
| Retail                                           |       | 194,940                              |       | 175,015 |   | 162,363 |   | 151,196 |   | 136,137 |   |
|                                             |       | 352,038                              |       | 320,724 |   | 301,769 |   | 288,469 |   | 264,029 |   |
|                                             |       |                                 |       |   |   |   |   |   |   |   |   |
| GROSS PROFIT                                     |       | 210,166                              |       | 193,834 |   | 183,791 |   | 176,210 |   | 161,377 |   |
|                                             |       |                                 |       |   |   |   |   |   |   |   |   |
| OPERATING  EXPENSES:                             |       |                                 |       |   |   |   |   |   |   |   |   |
| Selling, general  and administrative             |       | 145,619                              |       | 133,193 |   | 121,353 |   | 116,137 |   | 104,066 |   |
| Restructuring  charge                            |       | —                               |       | 93 |   | — |   | — |   | 1,210 |   |
| Goodwill  impairment                             |       | —                               |       | — |   | 4,344 |   | — |   | — |   |
| Depreciation and  amortization                   |       | 19,453                               |       | 19,162 |   | 15,919 |   | 13,893 |   | 10,298 |   |
|                                             |       | 165,072                              |       | 152,448 |   | 141,616 |   | 130,030 |   | 115,574 |   |
|                                             |       |                                 |       |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS                           |       | 45,094                               |       | 41,386 |   | 42,175 |   | 46,180 |   | 45,803 |   |
|                                             |       |                                 |       |   |   |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                            |       |                                 |       |   |   |   |   |   |   |   |   |
| Interest  expense, net                           |       | (36,248                              | )          | (35,555 | ) | (32,240 | ) | (23,239 | ) | (18,123 | ) |
| Debt  extinguishment expense                     |       | (775                                 | )          | (835 | ) | — |   | (5,035 | ) | (3,218 | ) |
| Other  non-operating income (expense), net       |       | (149                                 | )          | 9 |   | (5 | ) | 420 |   | 201 |   |
|                                             |       | (37,172                              | )          | (36,381 | ) | (32,245 | ) | (27,854 | ) | (21,140 | ) |
|                                             |       |                                 |       |   |   |   |   |   |   |   |   |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES      |       | 7,922                                |       | 5,005 |   | 9,930 |   | 18,326 |   | 24,663 |   |
|                                             |       |                                 |       |   |   |   |   |   |   |   |   |
| INCOME TAX  EXPENSE (1)                          |       | (1,583                               | )          | (22,268 | ) | (4,291 | ) | (8,075 | ) | (9,275 | ) |
|                                             |       |                                 |       |   |   |   |   |   |   |   |   |
| NET INCOME  (LOSS)                               |       | $                                    | 6,339      |   | $ | (17,263 | ) | $ | 5,639 |   | $ | 10,251 |   | $ | 15,388 |   |

 

27

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**SELECTEDFINANCIAL DATA (continued)**

 
| ** **                           | ** ** | **December 31,**                | ** ** |
|--------------------------------------|------------|--------------------------------------|------------|
| ** **                           | ** ** | **(dollars in thousands)** | ** ** |
| ** **                           | ** ** | **2007**                             | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Balance Sheet  Data (at period end): |       |                                 |       |   |   |   |   |   |   |   |   |
| Working capital  (deficiency)        |       | $                                    | (16,986    | ) | $ | (34,764 | ) | $ | (6,446 | ) | $ | (10,813 | ) | $ | (25,770 | ) |
| Total assets                         |       | 426,664                              |       | 410,897 |   | 418,895 |   | 320,222 |   | 302,862 |   |
| Deferred  revenues and gains (2)     |       | 104,390                              |       | 100,089 |   | 98,920 |   | 99,130 |   | 98,410 |   |
| Total debt                           |       | 396,959                              |       | 388,781 |   | 412,664 |   | 314,336 |   | 240,127 |   |
| Total  stockholders’ deficit    |       | (171,274                             | )          | (173,019 | ) | (152,469 | ) | (158,108 | ) | (88,905 | ) |
|                                      |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

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

 

(2) Deferred revenuesrepresent cash received by us in advance of the recognition of revenues inaccordance with accounting principles generally accepted in the UnitedStates.  Deferred revenues primarilyreflect club membership dues, annual ERS fees, advances on third party creditcard fee revenues and publication subscriptions.  These revenues are recognized at the time thegoods or services are provided or over the membership period, which averagesapproximately 17 months.  The deferred revenuebalance for 2007, 2006, 2005, 2004, and 2003 also include deferred gains of$9.3 million, $9.8 million, $10.3 million, $10.8 million, and $11.3 million,respectively, from the real estate sale-leaseback transactions which occurredin 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, 2007, 2006, and2005 as a percentage of total revenues, and the comparison of those componentsfrom period to period.  The followingdiscussion is based on our Consolidated Financial Statements included elsewhereherein.  Our revenues are derived principallyfrom membership services, including club membership dues and marketing feespaid to us for services provided by third parties, from publications, includingsubscriptions and advertising, and from retail sales.

 
| ** **                                   | ** ** | **Percentage of  Total Revenues** | ** ** | **Percentage Increase/  (Decrease)** | ** ** |
|----------------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                   | ** ** | ** **                                  | ** ** | ** **                                | ** ** | ** ** | ** ** | **Year 2007** | ** ** | **Year 2006** | ** ** |
| ** **                                   | ** ** | **2007**                                    | ** ** | **2006**                                  | ** ** | **2005** | ** ** | **over 2006** | ** ** | **over 2005** | ** ** |
|                                         |       |                                        |       |                                      |       |   |   |   |   |   |   |
| REVENUES:                                    |       |                                        |       |                                      |       |   |   |   |   |   |   |
| Membership  services                         |       | 26.7                                        | %          | 26.7                                      | %          | 27.5 | % | 9.1 | % | 2.7 | % |
| Publications                                 |       | 16.1                                        | %          | 16.9                                      | %          | 16.3 | % | 4.4 | % | 9.6 | % |
| Retail                                       |       | 57.2                                        | %          | 56.4                                      | %          | 56.2 | % | 10.8 | % | 6.5 | % |
|                                         |       | 100.0                                       | %          | 100.0                                     | %          | 100.0 | % | 9.3 | % | 6.0 | % |
|                                         |       |                                        |       |                                      |       |   |   |   |   |   |   |
| COSTS APPLICABLE  TO REVENUES:               |       |                                        |       |                                      |       |   |   |   |   |   |   |
| Membership  services                         |       | 16.9                                        | %          | 17.0                                      | %          | 17.6 | % | 8.5 | % | 2.2 | % |
| Publications                                 |       | 11.1                                        | %          | 11.3                                      | %          | 11.1 | % | 6.8 | % | 8.3 | % |
| Retail                                       |       | 34.6                                        | %          | 34.0                                      | %          | 33.4 | % | 11.4 | % | 7.8 | % |
|                                         |       | 62.6                                        | %          | 62.3                                      | %          | 62.1 | % | 9.8 | % | 6.3 | % |
|                                         |       |                                        |       |                                      |       |   |   |   |   |   |   |
| GROSS PROFIT                                 |       | 37.4                                        | %          | 37.7                                      | %          | 37.9 | % | 8.4 | % | 5.5 | % |
|                                         |       |                                        |       |                                      |       |   |   |   |   |   |   |
| OPERATING  EXPENSES:                         |       |                                        |       |                                      |       |   |   |   |   |   |   |
| Selling, general  and administrative         |       | 25.9                                        | %          | 26.0                                      | %          | 25.0 | % | 9.3 | % | 9.8 | % |
| Restructuring  charge                        |       | —                                      |       | —                                    |       | — |   | — |   | — |   |
| Goodwill  impairment                         |       | —                                      |       | —                                    |       | 0.9 | % | 100.0 | % | (100.0 | )% |
| Depreciation and  amortization               |       | 3.5                                         | %          | 3.7                                       | %          | 3.3 | % | 1.5 | % | 20.4 | % |
|                                         |       | 29.4                                        | %          | 29.7                                      | %          | 29.2 | % | 8.3 | % | 7.6 | % |
|                                         |       |                                        |       |                                      |       |   |   |   |   |   |   |
| INCOME FROM  OPERATIONS                      |       | 8.0                                         | %          | 8.0                                       | %          | 8.7 | % | 9.0 | % | (1.9 | )% |
|                                         |       |                                        |       |                                      |       |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                        |       |                                        |       |                                      |       |   |   |   |   |   |   |
| Interest income                              |       | 0.1                                         | %          | 0.2                                       | %          | 0.2 | % | (46.9 | )% | 5.1 | % |
| Interest expense                             |       | (6.6                                        | )%         | (7.0                                      | )%         | (6.9 | )% | 0.5 | % | 10.1 | % |
| Debt  extinguishment expense                 |       | (0.1                                        | )%         | (0.2                                      | )%         | — |   | (7.2 | )% | — |   |
|                                         |       | (6.6                                        | )%         | (7.0                                      | )%         | (6.7 | )% | 2.2 | % | 12.8 | % |
| INCOME FROM  OPERATIONS BEFORE INCOME  TAXES |       | 1.4                                         | %          | 1.0                                       | %          | 2.0 | % | 58.3 | % | (49.6 | )% |
|                                         |       |                                        |       |                                      |       |   |   |   |   |   |   |
| INCOME TAX  EXPENSE                          |       | (0.3                                        | )%         | (4.4                                      | )%         | (0.8 | )% | (92.9 | )% | 418.9 | % |
|                                         |       |                                        |       |                                      |       |   |   |   |   |   |   |
| NET INCOME  (LOSS)                           |       | 1.1                                         | %          | (3.4                                      | )%         | 1.2 | % | 136.7 | % | (406.1 | )% |

 

29

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

 

*Revenues*

 

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

 

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

 

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

 

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

 

*Costs Applicable to Revenues*

 

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

 

Membership services costsand expenses increased by $7.4 million or 8.5% to $94.8 million for 2007.  This increase was attributable to $5.1million of additional costs associated with increased extended vehicle warrantyprogram revenue, including incremental marketing and overhead costs associatedwith the expansion of our of Good Sam authorized dealer network, $0.9 million of additional emergency roadservice costs attributable to increased enrollment, $0.9 million of netadditional

 

30

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membership services costsassociated with increased membership in the Camping World President’s Club andCamp Club USA, partially offset by reduced membership in the Coast Club and theGolf Card Club, $0.7 million of additional dealer program marketing costs, and$0.7 million of additional program costs associated with increased marketingfee revenue from health and life insurance products.  These increases were partially offset by $0.9million of reduced costs resulting from the elimination of the RV Todaytelevision program.

 

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

 

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

 

*Operating Expenses*

 

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

 

Depreciationand amortization expenses of $19.5 million were $0.3 million higher than in2006 due primarily to increased amortization of intangible assets associatedwith the recent acquisitions and depreciation associated with new stores.

 

*Income from Operations*

 

Incomefrom operations of $45.1 million for 2007 increased $3.7 million or 9.0%compared to 2006.  This increase wasattributable to increased gross profit in the retail and membership servicesoperations of $11.4 million and $5.1 million, respectively, partially offset byincreased operating expenses of $12.6 million and reduced gross profit forpublications operations of $0.2 million.

 

31

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*Non-Operating Items*

 

Netnon-operating items for 2007 were $37.2 million, a $0.8 million increase from2006.  This increase was primarilyattributable to a $0.5 million decrease in interest income, a $0.2 millionincrease in interest expense in 2007 resulting from increased debt, and a $0.1million loss on sale of equipment.

 

*Income before Income Taxes*

 

Incomebefore income taxes for 2007 was $7.9 million, or 58.3% more than 2006.  This $2.9 million increase from the prioryear was attributable to the $3.7 million increase in income from operationsmentioned above, partially offset by and an $0.8 million increase innon-operating items.

 

*Income Tax Expense*

 

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

 

*Net Income (Loss)*

 

Netincome for 2007 was $6.3 million compared to a net loss of $17.3 million for2006mainly due to the reasons discussed above.

 

*Segment Profit*

 

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

 

Membershipservices segment profit of $50.5 million in 2007 increased by $5.8 million, or 13.0%from 2006.  This increase was primarilyattributable to a $3.9 million increase in profit associated with increasedenrollment and increased interest income for the ERS programs, a $1.3 millionincrease in profit in the extended vehicle warranty program and a $0.6 millionincrease in profit from Camp Club USA.

 

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

 

Retailsegment loss for 2007 of $8.1 million decreased by $2.0 million from 2006.  This reduced segment loss resulted primarilyfrom a $14.2 million increase in gross profit and a $0.5 million

 

32

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decreasein depreciation and amortization expense partially offset by a $10.8 millionincrease in selling, general and administrative expenses primarily related tothe increase in new stores, a $1.7 million increase in net interest expense anda $0.2 million loss on sale of equipment.

 

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

 

Revenuesof $514.6 million for 2006 increased by $29.0 million or 6.0% from thecomparable period in 2005.

 

Membershipservices revenues for 2006 of $137.4 million increased by approximately $3.6million or 2.7% from 2005.  This revenueincrease was largely attributable to a $3.4 million increase in extendedvehicle warranty program revenue due to continued growth in the sales ofone-year renewable warranty products, an $0.8 million increase in ERS revenueattributable to increased enrollment, a $0.5 million revenue increase from therollout of our new discount camping club, Camp Club USA, and a $0.2 millionincrease in advertising revenue for *Highways m*agazine.  These increases were partially offset by a$1.3 million decrease in dealer marketing program revenue.

 

Publicationsrevenues for 2006 of approximately $86.8 million increased by approximately$7.6 million or 9.6% from 2005.  Thisincrease was primarily attributable to a $6.8 million increase associated withthe acquisition of consumer shows, acquired from Royal Productions, Inc.in December 2005, Plus Events shows in February 2006, and RV showspurchased from Apple Rock Advertising and Promotions, Inc. in September 2006,a $0.9 million revenue increase in the boating group primarily associated withthe acquisition of *Powerboat Magazine*in May 2005, a $0.5 million increase in revenue from the updated editionof the campground atlas, a $0.6 million revenue increase resulting from thepurchase of the publishing assets of American Guide Services, Inc. in August 2006,and a $0.5 million revenue increase for the powersports group titles due toincreased issues published.  Theserevenue increases were partially offset by a $0.9 million decrease in the snowgroup titles primarily due to discontinuing *Snowmobile Magazine*in 2006 and four fewer issues of *Snow Week* in2006, and a $0.8 million decrease in advertising and circulation revenue forthe RV-related titles.

 

Retailrevenue for 2006 of $290.4 million increased approximately $17.8 million or6.5% from 2005.  Store merchandise salesincreased $18.0 million over 2005 primarily due to a $24.9 million revenueincrease from the addition of twenty-four new stores over the past twoyears.  Same store sales decreased $6.9million, or 3.5%, compared to a 2.1% increase in 2005.  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 $0.9 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.

 

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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 were partiallyoffset by a $0.5 million decrease in costs within the snow group due todecreased issues published, and a $0.5 million decrease in costs related to theRV publications.

 

Retailcosts applicable to revenues increased $12.7 million or 7.8% to $175.0 millionprimarily due to the opening of 24 new stores over the past two years.  The retail gross profitincreased by $5.1 million but the gross margin as a percent of revenuesdecreased from 40.5% in 2005 to 39.7% in 2006 due primarily to vendor priceincreases and increased international freight charges as our import programcontinues to grow.

 

*Operating Expenses*

 

Selling,general and administrative expenses of $133.2 million for 2006 increased $11.8million or 9.8% over 2005.  The increasein selling, general and administrative expenses resulted primarily fromincreased retail selling, labor and other general and administrative expensesof $11.9 million related to the opening of 24 new stores over the past twoyears, and a $1.2 million increase in expense related to the consumer showacquisitions, partially offset by a $1.1 million decrease in executivecompensation and a $0.2 million reduction in other corporate general andadministrative expenses.  The Companyincurred restructuring charges of $0.1 million in 2006 which was primarilyattributable to an operating management restructuring in the membershipsegment.

 

Depreciationand amortization expenses of $19.2 million were $3.2 million higher than in2005 due primarily to increased capital expenditures at Camping World, and theamortization of intangible assets associated with the purchase of consumershows and *Powerboat Magazine*.

 

*Income from Operations*

 

Incomefrom operations of $41.4 million for 2006 decreased $0.8 million or 1.9%compared to 2005.  This decrease wasattributable to increased operating expenses of $10.9 million, partially offsetby increased gross profit in the retail, publications and membership servicesoperations of $5.1 million, $3.2 million and $1.8 million, respectively.  For 2005, income from operations included a$4.3 million non-cash goodwill impairment charge.

 

*Non-Operating Items*

 

Net non-operating items for 2006 were $36.4 million, a $4.1 millionincrease from 2005.  This increase iscomprised of $3.3 million of additional interest expense in 2006 due to higherinterest rates and the issuance of AGHI Notes, and $0.8 million of debt extinguishmentexpense relating to the purchase and retirement of $29.9 million of the Company’sSenior Subordinated Notes.

 

*Income before Income Taxes*

 

Incomebefore income taxes for 2006 was $5.0 million, or 49.6% less than 2005.  This $4.9 million decrease from the prioryear was attributable to an $0.8 million decrease in income from operationsmentioned above, $3.3 million of additional interest expense, and $0.8million of debt extinguishment expense.

 

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*Income Tax Expense*

 

TheCompany recorded $22.3 million of income tax expense for 2006, an increase of$18.0 million from 2005.  The increasewas primarily due to AGHC’s S corporation change of tax status electioneffective for 2006, which included AGHI and all its subsidiaries with theexception of Camping World, Inc. and its wholly-owned subsidiaries whichremain Subchapter C corporations.  As aresult, all deferred assets and liabilities were revalued based on Scorporation rates with the exception of those related to Camping World, Inc.and its wholly-owned subsidiaries which remained Subchapter Ccorporations.  As a result, $22.3 millionof tax expense was recorded.  Deferredtax liabilities related to Camping World, Inc. and its wholly-ownedsubsidiaries which remained Subchapter C corporations were approximately $12.9million.  As a result of the Company’schange in tax status to an S corporation, a deferred tax liability related to aSubchapter S corporation of approximately $2.8 million was recorded on thefinancial statements for a potential tax liability in prior C corporationyears.  The deferred tax assets of $3.2million are related solely to Camping World, Inc.

 

*Net Income (Loss)*

 

Netloss for 2006 was $17.3 million compared to net income of $5.6 million for2005.

 

*Segment Profit*

 

Segmentprofit of $54.4 million for 2006 (before unallocated depreciation andamortization, general and administrative, interest, debt restructuring andincome tax expense) decreased by $3.8 million, or 6.6%, from 2005.

 

Membershipservices segment profit of $44.7 million in 2006 increased by $7.0 million, or18.6% from $37.7 million in 2005.  Thisincrease was primarily attributable to the $4.3 million goodwill impairmentcharge in 2005, a $2.1 million increase in profit associated with increasedenrollment and increased interest income for the ERS programs, a $1.5 millionincrease in profit in the extended vehicle warranty program, partially offsetby a $0.9 million decrease in profit associated with the start-up of our newclub, Camp Club USA.

 

Publicationsegment profit for 2006 of $19.8 million decreased by $0.1 million, or 0.3%from $19.9 million in 2005.  The $0.1million decrease in gross profit margin was primarily due to reduced grossprofit from the RV-related titles of $0.5 million partially offset by increasedprofit related to 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 and administrativeexpenses primarily related to the increase in new stores, a $3.4 millionincrease in interest expense and a $1.1 million increase in depreciation andamortization expense partially offset by a $5.7 million increase in grossprofit.

 

**Liquidityand Capital Resources**

 

We have historically operated with a working capitaldeficit.  The working capital deficit asof December 31, 2007 and 2006 was $17.0 million and $34.8 million,respectively.  The primary reason for theworking capital deficit is the deferred revenue and gains reported undercurrent liabilities in the amount of $65.9 million and $62.9 million as of December 31,2007 and 2006, respectively.  Deferredrevenue is primarily comprised of cash collected for club memberships inadvance which is deferred and recognized as revenue over the life of themembership.  We use net proceeds fromthis deferred membership revenue to lower our long-term borrowings and financeour working capital needs.  The primaryreason for the fluctuation in working capital is an increase

 

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ininventory balances related to new store openings.  We generated netcash**fromoperations of $13.4 million and $47.1 million, in 2007 and 2006,respectively.

 

*ContractualObligations and Commercial Commitments*

 

Thefollowing table reflects our contractual obligations and commercial commitmentsat December 31, 2007, in thousands. The table below includes principal and future interest due under ourdebt agreements based on interest rates as of December 31, 2007 andassumes debt obligations will be held to maturity.

 
| ** **                    | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------|------------|-------------------------------------------|------------|
| **(in thousands)**       | ** ** | **Total**                                 | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **Thereafter** | ** ** |
|                          |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt                |       | $                                         | 531,284    |   | $ | 40,097 |   | $ | 160,400 |   | $ | 50,989 |   | $ | 26,161 |   | $ | 253,637 |   | $ | — |   |
| Operating lease  obligations  |       | 191,449                                   |       | 18,289 |   | 17,236 |   | 16,596 |   | 15,248 |   | 13,722 |   | 110,358 |   |
| Deferred  compensation        |       | 3,487                                     |       | 1,757 |   | 1,380 |   | 117 |   | 117 |   | 116 |   | — |   |
| Other commercial  commitments |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Letters of  credit            |       | 6,686                                     |       | 6,186 |   | 500 |   | — |   | — |   | — |   | — |   |
|                          |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Grand total                   |       | $                                         | 732,906    |   | $ | 66,329 |   | $ | 179,516 |   | $ | 67,702 |   | $ | 41,526 |   | $ | 267,475 |   | $ | 110,358 |   |

 

On June 24, 2003,our wholly-owned subsidiary, Affinity Group, Inc. (“AGI”) entered into theAmended and Restated Credit Agreement and a Senior Secured Floating Rate NotePurchase Agreement (“AGI Senior Credit Facility”) providing for term loans (“TermLoans”) in the aggregate of $140.0 million and a revolving credit facility of$35.0 million.  As of December 31,2007, $128.6 million was outstanding under the Term Loans.  No borrowings were outstanding on therevolving credit facility as of December 31, 2007.  Reborrowings under the Term Loans are notpermitted.  The interest on borrowingsunder the AGI Senior Credit Facility is at variable rates based on the ratio oftotal cash flow to outstanding indebtedness (as defined).  Interest rates float with prime and theLondon Interbank Offered Rates, or LIBOR, plus an applicable margin rangingfrom 1.50% to 2.50% over the stated rates. As of December 31, 2007, the average interest rate on the TermLoans was 7.57%, and permitted borrowings under the undrawn revolving facilitywere $28.3 million.  We also pay acommitment fee of 0.5% per annum on the unused amount of the revolving creditfacility.  The aggregate quarterlyscheduled payments on the Term Loans are $0.4 million.  The revolving credit facility and the TermLoans mature on June 24, 2009.  Thefunds available under the AGI Senior Credit Facility may be utilized forborrowings or letters of credit; however, a maximum of $12.5 million may beallocated to such letters of credit.  Asof December 31, 2007, we had letters of credit in the aggregate amount of$6.7 million outstanding.  The AGI SeniorCredit Facility is secured by virtually all of our assets and a pledge of ourstock and the stock of our subsidiaries. Further the AGI Senior Credit Facility requires the loans to be prepaidin an amount equal to 75% of the excess cash flow, as defined.  As of December 31, 2007, the Company hasno excess cash flow as defined.

 

On March 3, 2006,AGI amended its Senior Credit Facility to revise the definition of ConsolidatedFixed Charges Ratio and Permitted Tax Distributions.  This amendment allows AGI to distribute taxesto its ultimate parent based on its stand-alone tax obligation rather than thetax obligation of its parent, AGHI, until such time that AGHI pays interest onits 10 7/8% Senior Notes in cash instead of by the issuance of additionalnotes.  For the year ended December 31,2007, AGHI has distributed $5.8 million in the form of a dividend to AGHC inexcess of the Company’s tax obligations.

 

In February 2004,AGI issued $200.0 million aggregate principal amount of 9% Senior SubordinatedNotes due 2012 (the “AGI Senior Subordinated Notes”).  The Company completed a registered exchangeof the AGI Senior Notes under the Securities Act of 1933 in August 2004.  On June 8, 2006, AGI amended its SeniorCredit Facility to permit AGI to purchase up to $30.0 million of AGI’s SeniorSubordinated Notes from time to time as and when the Company determines.  AGI

 

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purchased $29.9 millionof the AGI Senior Subordinated Notes at various times from June 2006through August 2006 with its available cash.  On February 27, 2007, the Companyamended the AGI Senior Credit Facility to extend the maturity of the revolvingcredit facility from June 24, 2008 to June 24, 2009, increase theconsolidated senior leverage ratio from 1.9 to 3.5 times EBITDA, as defined,and fix the consolidated total leverage ratio at 5.0 times EBITDA, asdefined.  Further, the amendment permitsthe Company to repurchase up to an additional $50.0 million of the SeniorSubordinated Notes from time to time as and when the Company determines throughthe issuance of additional term loans of up to $50.0 million.  Any loan amounts not used for the repurchaseof the Senior Subordinated Notes may be used for acquisitions or repayrevolving credit loans. On March 8, 2007, the Company purchased $17.7million of the Senior Subordinated Notes. The Company funded the purchase through the issuance of the $25.0million in additional incremental term loans as permitted under the February 27,2007 amendment to the Senior Credit Facility. The balance of the $25.0 million issued was used to pay down the Company’srevolving credit facility by $6.5 million and to pay associated loan fees andtransaction expenses.  The terms on theadditional incremental loans are consistent with the remaining term loanoutstanding under the Senior Credit Facility. As of December 31, 2007, $152.4 million of AGI Senior SubordinatedNotes remained outstanding.

 

The AGI Senior CreditFacility and the AGI Indenture contain certain restrictive covenants relatingto, but not limited to, mergers, changes in the nature of the business,acquisitions, additional indebtedness, sale of assets, investments, and thepayment of dividends subject to certain limitations and minimum operatingcovenants.  We were in compliance withall debt covenants at December 31, 2007.

 

On March 24, 2005 ina private placement, the Company issued $88.2 million principal amount of its10-7/8% senior notes due 2012 (the “AGHI Notes”) at a $3.2 million originalissue discount.  The Company completed aregistered exchange of the AGHI Notes under the Securities Act of 1933 on June 8,2005.  The AGHI Notes are unsecuredobligations of AGHI, and neither AGI nor its subsidiaries have 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 the entire $88.2 million principal amount of the AGHI Notes are due infull on February 15, 2012.  Forinterest payments on and prior to February 15, 2008, the Company may electto pay interest on the AGHI Notes in cash or by the issuance of additionalnotes of the same tenor as the AGHI Notes. Any additional AGHI Notes issued in payment of interest are due in full onor before March 15, 2010.  The AGHINotes cannot be redeemed prior to February 15, 2008.  Although the only source of the cash paymentof the AGHI Notes is dividends from AGI, there are certain restrictions on thepayment of dividends under the AGI Senior Credit Facility and the AGIIndenture.

 

The Company contributed the net proceeds fromthe issuance of the AGHI Notes, approximately $81.0 million, to AGI and inturn, AGI made an equity contribution to its wholly-owned subsidiary, CampingWorld, Inc. (“Camping World”). Camping World then made an equity capital contribution in the sameamount to its wholly-owned subsidiary, CWI, Inc. (“CWI”).  In 2005, CWI created a new wholly-ownedsubsidiary named CWFR Capital Corp., a Delaware corporation (“CWFR”) which isan “unrestricted subsidiary” as defined under the AGHI Notes and the AGIIndenture.  Since CWFR is an unrestrictedsubsidiary, its operations are not restricted by either the AGI Indenture orthe AGHI Notes.  CWI made an equitycapital contribution to CWFR in an equal amount to the capital contributionthat CWI received from Camping World. CWFR used the proceeds from the equity capital contribution to acquire apreferred membership interest in FreedomRoads.

 

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

 

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paymentof $88.2 million plus the accrued and unpaid preferred return to the date ofredemption.  FreedomRoads will berequired to redeem the preferred membership interest at that same redemptionprice if there is a sale or reorganization of the membership interests ofFreedomRoads Holding or a sale of substantially all of the assets ofFreedomRoads.  According to the terms ofthe preferred membership interest, FreedomRoads cannot make distributions withrespect to membership interests other than (a) distributions with respectto the preferred membership interest, (b) distributions for the members’estimated tax liabilities from earnings of FreedomRoads and (c) distributionsin the aggregate not to exceed 50% of the amount of (i) FreedomRoads’ netprofit for the period from January 1, 2005 through the end of the fiscalquarter next preceding the distribution date less (ii) the aggregateamount of tax distributions made during the period from January 1, 2005through the end of the fiscal quarter next preceding the distributiondate.  CWFR may not sell, pledge orotherwise transfer the preferred membership interest.  The preferred membership interest does notprovide CWFR with any voting rights in FreedomRoads.  The preferred membership interest inFreedomRoads is being carried at cost and is reviewed periodically forimpairment.

 

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

 

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

 

On October 15, 2007,the AGI entered into a five-year interest rate swap agreement with a notionalamount of $100.0 million from which it will receive periodic payments at the 3month LIBOR-based variable rate (4.96% percent at December 31, 2007 basedupon the October 31, 2007 reset date) and make periodic payments at afixed rate of 5.135% percent, with settlement and rate reset dates every January 31,April 30, July 31, and October 31.  The fair value of the swap was zero atinception. AGI entered into the interest rate swap to limit the effect ofincreases on our floating rate debt.  Theinterest rate swap is designated as a cash flow hedge of the variable rateinterest payments due on $100 million of the Term Loans issued June 24,2003, and accordingly, gains and losses on the fair value of the interest rateswap agreement are reported in accumulated other comprehensive loss andreclassified to earnings in the same period in which the hedged interestpayment affects earnings.  The interestrate swap agreement expires on October 31, 2012.  The fair value of this swap is included inother accrued liabilities and was $4.7 million as of December 31, 2007.

 

On April 16, 2007,the Company entered into a stock purchase agreement with FreedomRoads HoldingCompany, LLC (“FreedomRoads”), an entity under common ownership with theCompany’s ultimate parent corporation, pursuant to which the Company agreed,subject to satisfaction of certain conditions, to sell all of the outstandingstock of its wholly-owned subsidiary Camping World, Inc. (“Camping World”)to FreedomRoads for $175.8 million subject to certain adjustments. Thetransactions contemplated by the purchase agreement were not consummated withinthe time periods contemplated by the purchase agreement because the uncertaintyin the capital markets prevented FreedomRoads from achieving a desirablecapital structure to effect the acquisition. Although Freedom Roads and the Company may enter into a new purchaseagreement on

 

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substantially the sameterms if the capital markets become more favorable, no assurance can beprovided that the appropriate financing will be obtained or such new agreementmade.

 

During 2007, we incurred$0.4 million of deferred executive compensation expense under our phantom stockagreements and made payments of $3.2 million on mature phantom stockagreements.  The earned incentives underthese agreements are scheduled to be paid at various times over the next fiveyears.  Phantom stock payments of $1.8million are scheduled to**be made during2008.

 

Capital expenditures for2007 totaled $19.7 million compared to capital expenditures of $15.2 million in2006.  Capital expenditures areanticipated to be approximately $14.2 million for 2008, primarily for 6 newCamping World stores and equipment, software enhancements, informationtechnology upgrades, existing store upgrades, and a retail supply chainexecution project.

 

Managementbelieves that funds generated by operations, together with available borrowingsunder our revolving credit line, will be sufficient to meet all of ouranticipated cash requirements for the foreseeable future.

 

**FactorsAffecting Future Performance**

 

Although increases inoperating costs could adversely affect our operations, management does notbelieve that inflation has had a material effect on operating profit during thepast several years.  However, fuelshortages and substantial increases in propane and gasoline costs could have asignificant impact on our travel-related membership services and publicationsrevenues.  Historically such events havecaused declines in advertisements but have not significantly affected clubmembership enrollment.  We are unable topredict at what point fluctuating fuel prices may begin to adversely impactrevenues or cash flow.  We believe wewill be able to partially offset any cost increases with price increases to ourmembers and certain cost reducing measures.

 

**Seasonality**

 

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

 

**CriticalAccounting Policies**

 

*General*

 

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

 

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

 

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*RevenueRecognition*

 

Merchandiserevenue is recognized when products are sold in the retail stores, shipped formail and Internet orders, or when services are provided to customers.  Emergency Road Service (“ERS”) revenues aredeferred 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 timerelated materials are mailed.  Recognizedrevenues and profit are subject to revisions as the membership progresses tocompletion.  Revisions to membershipperiod estimates would change the amount of income and expense amortized infuture accounting periods.

 

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

 

*AccountsReceivable*

 

We estimate thecollectability of our trade receivables. A considerable amount of judgment is required in assessing the ultimaterealization of these receivables including the current credit-worthiness of eachcustomer.  Changes in required reserveshave been recorded in recent periods and may occur in the future due to themarket 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 requiredinventory reserves may continue to occur in the future due to the marketconditions.

 

*Long-Lived Assets*

 

Purchased intangibleassets with finite lives are amortized using the straight-line method over theestimated economic lives of the assets, ranging from one to 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 ofLong-Lived Assets.”  We assess the fairvalue of the assets based on the future cash flow the assets are expected togenerate and recognize an impairment loss when estimated undiscounted futurecash flow expected to result from the use of the asset plus net proceeds expectedfrom disposition 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

 

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value based on adiscounted cash flow approach or, when available and appropriate, comparablemarket values.  We determined there wereno indicators of impairment of long-lived assets as of December 31, 2007.

 

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

 

*Indefinite Lived IntangibleAssets*

 

Effective January 1,2002, we adopted new accounting standards 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.

 

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Based on the results ofthe annual impairment tests, we determined that no indicators of goodwillimpairment existed as of December 31, 2007.  However, future goodwill impairments testscould result in a charge to earnings.  Wewill continue to evaluate goodwill on an annual basis and whenever events andchanges in circumstances indicate that there may be a potential impairment.

 

*Accumulated Other ComprehensiveLoss*

 

Accumulated other comprehensive lossconsists of unrealized losses on cash flow hedges.  At December 31, 2007, accumulated other comprehensiveloss was $4.7 million.

 

*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 increase or decrease, a corresponding adjustmentto income tax expense is recorded by applying the rate change to the cumulativetemporary differences.

 

*Restructuring*

 

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

 

**ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK**

 

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

 

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

 

#### *Interest Rate SensitivityAnalysis*

#### * *

At December 31,2007, we had debt totaling $397.0 million, comprised of $28.6 million ofvariable rate debt, and $368.4 million of fixed rate debt, comprised of $100.0million of debt fixed through the interest rate swap agreement, $152.4 millionof Senior Notes, $109.8 million of AGHI Notes and $6.2 million of purchasedebt.  Holding other variables constant(such as debt levels), the earnings and cash flow impact of a one-percentagepoint increase/ decrease in interest rates would have an unfavorable/ favorableimpact of approximately $0.3 million.

 

#### *Credit Risk*

#### * *

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

 

42

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

###### * *

In September 2006,the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “FairValue Measurements” (“SFAS 157”) which defines fair value, establishes aframework and gives guidance regarding the method used for measuring fairvalue, and expands disclosures about fair value measurements.  SFAS 157 requires companies to disclose thefair value of their financial instruments according to a fair value hierarchy,as defined, and may require companies to provide additional disclosures basedon that hierarchy.  SFAS 157 is effectivefor financial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years.  The Company is currently assessing the impactthat SFAS 157 may have on its consolidated financial statements.

 

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

 

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

 

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

 

43

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Thefollowing table summarizes the activity related to unrecognized tax benefits:

 
| Balance at  January 1, 2007                                                         |   | $      | 14,184 |   |
|------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Gross increases in  unrecognized tax benefits due to prior year positions                |   | — |   |
| Gross decreases in  unrecognized tax benefits due to prior year positions                |   | — |   |
| Gross increases in  unrecognized tax benefits due to current year positions              |   | — |   |
| Gross decreases in  unrecognized tax benefits due to current year positions              |   | — |   |
| Gross decreases in  unrecognized tax benefits due to settlements with taxing authorities |   | — |   |
| Gross decreases in  unrecognized tax benefits due to statute expirations                 |   | — |   |
| Other                                                                                    |   | 206    |   |
| Unrecognized tax  benefits at December 31, 2007                                     |   | $      | 14,390 |   |

 

 

TheCompany accrues interest and penalties related to unrecognized tax benefits inits income tax provision.  The Companyrecorded interest and penalties of $0.9 million related to unrecognized taxbenefits during 2007 and in total, as of December 31, 2007, the Companyrecorded a total liability for penalties and interest of $1.6 million, whichwas included in other long-term liabilities. The Company does not expect its unrecognized tax benefits to change significantlyover the next twelve months.

 

TheCompany and its subsidiaries file income tax returns in the U.S. and variousstates.  With few exceptions, the Companyis no longer subject to U.S. federal, state, and local income tax examinationsby tax authorities for years before 2005.

 

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 onthe effects 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 Regarding ForwardLooking Statements***

###### * *

This filing contains statements that are “forward looking statements,”and includes, among other things, discussions of our business strategy andexpectations concerning market position, future operations, margins,profitability, liquidity and capital resources, as well as statementsconcerning the integrations of acquired operations and the achievement offinancial benefits and operational efficiencies in connection withacquisitions.  Forward looking statementsare included in “Business- General,” “Business- Competitive Strengths,” “Business-Our Strategy,” “Business- RV Industry,” “Business- Membership Clubs,” “Business-Membership Products and Services,” “Business- Publications,” “Business- Retail,”“Business- Marketing,” “Business- Operations,” “Business- Information SupportServices,” “Business- Regulation,” “Business- Competition,” “Risk Factors,” “LegalProceedings,” and in “Management’s Discussion and Analysis of FinancialCondition and Results of Operations.” Although we believe that the expectations reflected in such forwardlooking statements are reasonable, we can give no assurance that such expectationswill prove to have been correct. Generally, these statements relate to business plans or strategies,projected or anticipated benefits or other consequences of such plans orstrategies, the number of acquisitions and projected or anticipated benefitsfrom acquisitions made by or to be made by us, or projections involvinganticipated revenues, expenses, earnings, levels of capital expenditures orother aspects of operating results.  Allphases of our operations of are subject to a number of uncertainties, risks andother influences, including consumer spending, fuel prices, general economicconditions, regulatory changes, changes in interest rates, availability of debtfinancing in capital markets and competition, many of which are outside our control,any one of which, or a combination of which, could materially affect theresults of our operations and whether the forward looking statements made by usultimately prove to be accurate.

 

44

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** **

**ITEM8:  FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

** **

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

 
| ** **                                                                                                        | **Page** |
|-------------------------------------------------------------------------------------------------------------------|----------|
| Report of Independent  Registered Public Accounting Firm                                                          | 46       |
|                                                                                                              |     |
| Consolidated Balance Sheets  as of December 31, 2007 and 2006                                                | 47       |
|                                                                                                              |     |
| Consolidated Statements of  Operations for the years ended December 31, 2007, 2006 and 2005                  | 48       |
|                                                                                                              |     |
| Consolidated Statements of  Stockholders’ Deficit for the years ended December 31, 2007, 2006 and  2005 | 49       |
|                                                                                                              |     |
| Consolidated Statements of  Cash Flows for the years ended December 31, 2007, 2006 and 2005                  | 50       |
|                                                                                                              |     |
| Notes  to Consolidated Financial Statements                                                                       | 51       |
|                                                                                                              |     |

 

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.

 

45

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** **

**REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

 

TheBoard of Directors of Affinity Group Holding, Inc.

 

We have audited the accompanying consolidated balance sheets ofAffinity Group Holding, Inc. and its subsidiaries (the “Company”), as of December 31,2007 and 2006, and the related consolidated statements of operations,stockholders’ deficit and cash flows for each of the three years in the periodended December 31, 2007.  Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour 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 were not engaged to perform an audit ofthe Company’s internal control over financial reporting.  Our audits 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, the financial statements referred to above presentfairly, in all material respects, the consolidated financial position ofAffinity Group Holding, Inc. and subsidiaries at December 31, 2007and 2006, and the consolidated results of their operations and their cash flowsfor each of the three years in the period ended December 31, 2007, inconformity with U.S. generally accepted accounting principles.

 

 
|                        | /s/ Ernst & Young LLP |
|-----------------------------|--------------------------------|
|                        |
| March 4, 2008          |
| Woodland  Hills, California |

 

46

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**AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER31, 2007 AND 2006 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)**

 
| ** **                                                                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| **ASSETS**                                                                                      |       |     |       |     |       |
| CURRENT ASSETS:                                                                                 |       |     |       |     |       |
| Cash and cash equivalents                                                                       |       | $        | 8,566      |     | $          | 15,238 |   |
| Accounts receivable, less allowance for  doubtful accounts of $1,473 in 2007 and $1,193 in 2006 |       | 33,330   |       | 27,199   |       |
| Inventories                                                                                     |       | 64,209   |       | 52,703   |       |
| Prepaid expenses and other assets                                                               |       | 14,431   |       | 13,006   |       |
| Deferred tax assets, net                                                                        |       | 3,922    |       | 3,203    |       |
| Total current assets                                                                            |       | 124,458  |       | 111,349  |       |
|                                                                                            |       |     |       |     |       |
| PROPERTY AND EQUIPMENT, net                                                                     |       | 44,307   |       | 34,765   |       |
| INVESTMENT IN AFFILIATE                                                                         |       | 81,005   |       | 81,005   |       |
| NOTE FROM AFFILIATE                                                                             |       | 4,650    |       | 4,688    |       |
| INTANGIBLE ASSETS, net                                                                          |       | 25,836   |       | 32,957   |       |
| GOODWILL                                                                                        |       | 144,429  |       | 144,429  |       |
| OTHER ASSETS                                                                                    |       | 1,979    |       | 1,704    |       |
| Total assets                                                                                    |       | $        | 426,664    |     | $          | 410,897 |   |
|                                                                                            |       |     |       |     |       |
| **LIABILITIES AND STOCKHOLDER’S DEFICIT**                                                  |       |     |       |     |       |
| CURRENT LIABILITIES:                                                                            |       |     |       |     |       |
| Accounts payable                                                                                |       | $        | 27,171     |     | $          | 32,577 |   |
| Accrued interest                                                                                |       | 6,700    |       | 5,936    |       |
| Accrued income taxes                                                                            |       | 1,189    |       | 1,736    |       |
| Accrued liabilities                                                                             |       | 36,123   |       | 35,687   |       |
| Deferred revenues and gains                                                                     |       | 65,855   |       | 62,906   |       |
| Current portion of long-term debt                                                               |       | 4,406    |       | 7,271    |       |
| Total current liabilities                                                                       |       | 141,444  |       | 146,113  |       |
|                                                                                            |       |     |       |     |       |
| DEFERRED REVENUES AND GAINS                                                                     |       | 38,535   |       | 37,183   |       |
| LONG-TERM DEBT, net of current portion                                                          |       | 392,553  |       | 381,510  |       |
| DEFERRED TAX LIABILITY                                                                          |       | 2,702    |       | 15,724   |       |
| OTHER LONG-TERM LIABILITIES                                                                     |       | 22,704   |       | 3,386    |       |
|                                                                                            |       | 597,938  |       | 583,916  |       |
|                                                                                            |       |     |       |     |       |
| COMMITMENTS AND CONTINGENCIES                                                                   |       |     |       |     |       |
|                                                                                            |       |     |       |     |       |
| STOCKHOLDERS’ DEFICIT :                                                                    |       |     |       |     |       |
| Common stock, $.01 par value, 3,000 shares  authorized, 100 shares issued and outstanding       |       | 1        |       | 1        |       |
| Additional paid-in capital                                                                      |       | 5,861    |       | —   |       |
| Accumulated deficit                                                                             |       | (172,431 | )          | (173,020 | )          |
| Accumulated other comprehensive loss                                                            |       | (4,705   | )          | —   |       |
| Total stockholders’ deficit                                                                |       | (171,274 | )          | (173,019 | )          |
| Total liabilities and stockholders’ deficit                                                |       | $        | 426,664    |     | $          | 410,897 |   |

 

Seenotes to consolidated financial statements.

 

47

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**AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE YEARS ENDED DECEMBER 31,2007, 2006, AND 2005 (IN THOUSANDS)**

 
| ** **                                 | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                       |       |     |       |     |       |     |       |
| REVENUES:                                  |       |     |       |     |       |     |       |
| Membership services                        |       | $        | 149,937    |     | $          | 137,394  |       | $ | 133,756 |   |
| Publications                               |       | 90,537   |       | 86,742   |       | 79,122   |       |
| Retail                                     |       | 321,730  |       | 290,422  |       | 272,682  |       |
|                                       |       | 562,204  |       | 514,558  |       | 485,560  |       |
|                                       |       |     |       |     |       |     |       |
| COSTS APPLICABLE TO REVENUES:              |       |     |       |     |       |     |       |
| Membership services                        |       | 94,840   |       | 87,407   |       | 85,551   |       |
| Publications                               |       | 62,258   |       | 58,302   |       | 53,855   |       |
| Retail                                     |       | 194,940  |       | 175,015  |       | 162,363  |       |
|                                       |       | 352,038  |       | 320,724  |       | 301,769  |       |
|                                       |       |     |       |     |       |     |       |
| GROSS PROFIT                               |       | 210,166  |       | 193,834  |       | 183,791  |       |
|                                       |       |     |       |     |       |     |       |
| OPERATING EXPENSES:                        |       |     |       |     |       |     |       |
| Selling, general and administrative        |       | 145,619  |       | 133,193  |       | 121,353  |       |
| Restructuring charge                       |       | —   |       | 93       |       | —   |       |
| Goodwill impairment                        |       | —   |       | —   |       | 4,344    |       |
| Depreciation and amortization              |       | 19,453   |       | 19,162   |       | 15,919   |       |
|                                       |       | 165,072  |       | 152,448  |       | 141,616  |       |
|                                       |       |     |       |     |       |     |       |
| INCOME FROM OPERATIONS                     |       | 45,094   |       | 41,386   |       | 42,175   |       |
|                                       |       |     |       |     |       |     |       |
| NON-OPERATING ITEMS:                       |       |     |       |     |       |     |       |
| Interest income                            |       | 592      |       | 1,115    |       | 1,061    |       |
| Interest expense                           |       | (36,840  | )          | (36,670  | )          | (33,301  | )          |
| Debt extinguishment expense                |       | (775     | )          | (835     | )          | —   |       |
| Other non-operating income (expense), net  |       | (149     | )          | 9        |       | (5       | )          |
|                                       |       | (37,172  | )          | (36,381  | )          | (32,245  | )          |
|                                       |       |     |       |     |       |     |       |
| INCOME FROM OPERATIONS BEFORE INCOME TAXES |       | 7,922    |       | 5,005    |       | 9,930    |       |
|                                       |       |     |       |     |       |     |       |
| INCOME TAX EXPENSE                         |       | (1,583   | )          | (22,268  | )          | (4,291   | )          |
|                                       |       |     |       |     |       |     |       |
| NET INCOME (LOSS)                          |       | $        | 6,339      |     | $          | (17,263  | )          | $ | 5,639 |   |

 

See notes to consolidated financialstatements.

 

48

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*** ***

**AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES**

** **

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT**

**FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005**

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

 
| ** **                            | ** ** | **Common Stock** | ** ** | **Additional  Paid-in** | ** ** | **Accumulated** | ** ** | **Accumulated  Other  Comprehensive** | ** ** | ** ** | ** ** |
|---------------------------------------|------------|-----------------------|------------|-------------------------|------------|-----------------|------------|---------------------------------------|------------|------------|------------|
| ** **                            | ** ** | **Shares**            | ** ** | **Amount**              | ** ** | **Capital**     | ** ** | **Deficit**                           | ** ** | **Loss**   | ** ** | **Total** | ** ** |
| ** **                            | ** ** | ** **            | ** ** | ** **              | ** ** | ** **      | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| BALANCES AT JANUARY 1, 2005           |       | 100                   |       | $                       | 1          |            | $          | —                                |       | $          | (158,109   | ) | $ | — |   | $ | (158,108 | ) |
|                                  |       |                  |       |                    |       |            |       |                                  |       |       |       |   |   |
| Net income                            |       | —                |       | —                  |       | —          |       | 5,639                                 |       | —     |       | 5,639 |   |
| BALANCES AT DECEMBER 31, 2005         |       | 100                   |       | 1                       |       | —          |       | (152,470                              | )          | —     |       | (152,469 | ) |
|                                  |       |                  |       |                    |       |            |       |                                  |       |       |       |   |   |
| Dividends                             |       | —                |       | —                  |       | —          |       | (3,287                                | )          | —     |       | (3,287 | ) |
| Net loss                              |       | —                |       | —                  |       | —          |       | (17,263                               | )          | —     |       | (17,263 | ) |
| BALANCES AT DECEMBER 31, 2006         |       | 100                   |       | 1                       |       | —          |       | (173,020                              | )          | —     |       | (173,019 | ) |
|                                  |       |                  |       |                    |       |            |       |                                  |       |       |       |   |   |
| Dividends                             |       | —                |       | —                  |       | —          |       | (5,750                                | )          | —     |       | (5,750 | ) |
| Contribution                          |       | —                |       | —                  |       | 5,861           |       | —                                |       |       |       | 5,861 |   |
|                                  |       |                  |       |                    |       |            |       |                                  |       |       |       |   |   |
| Unrealized loss on interest rate swap |       |                  |       | —                  |       | —          |       |                                  |       | (4,705     | )          | (4,705 | ) |
| Net income                            |       | —                |       | —                  |       | —          |       | 6,339                                 |       | —     |       | 6,339 |   |
| Total comprehensive income            |       |                  |       |                    |       |            |       |                                  |       |       |       | 1,634 |   |
|                                  |       |                  |       |                    |       |            |       |                                  |       |       |       |   |   |   |   |   |   |   |
| BALANCES AT DECEMBER 31, 2007         |       | 100                   |       | $                       | 1          |            | $          | 5,861                                 |       | $          | (172,431   | ) | $ | (4,705 | ) | $ | (171,274 | ) |

 

See notes to consolidated financial statements.                                                 

 

49

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**AFFINITYGROUP HOLDING, INC. AND SUBSIDIARIES**

** **

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**FOR THEYEARS ENDED DECEMBER 31, 2007, 2006, AND 2005 (IN THOUSANDS)**

 
| ** **                                                                                | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                      |       |     |       |     |       |     |       |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                     |       |     |       |     |       |     |       |
| Net income (loss)                                                                         |       | $        | 6,339      |     | $          | (17,263  | )          | $ | 5,639 |   |
| Adjustments to reconcile net income (loss)  to net cash provided by operating activities: |       |     |       |     |       |     |       |
| Deferred tax provision (benefit)                                                          |       | 443      |       | 22,136   |       | (2,677   | )          |
| Depreciation                                                                              |       | 9,933    |       | 10,333   |       | 9,194    |       |
| Amortization                                                                              |       | 9,520    |       | 8,829    |       | 6,725    |       |
| Goodwill impairment                                                                       |       | —   |       | —   |       | 4,344    |       |
| Provision for losses on accounts receivable                                               |       | 1,373    |       | 745      |       | 521      |       |
| Deferred compensation                                                                     |       | 350      |       | 1,070    |       | 2,200    |       |
| Loss (gain) on sale of property and  equipment                                            |       | 150      |       | (16      | )          | (2       | )          |
| Loss on early extinguishment of debt                                                      |       | 775      |       | 835      |       | —   |       |
| Non-cash interest on AGHI Notes                                                           |       | 5,785    |       | 10,690   |       | 7,507    |       |
| Accretion of original issue discount                                                      |       | 375      |       | 272      |       | 152      |       |
| Changes in operating assets and liabilities  (net of purchased businesses):               |       |     |       |     |       |     |       |
| Accounts receivable                                                                       |       | (7,504   | )          | (1,436   | )          | (2,765   | )          |
| Inventories                                                                               |       | (11,506  | )          | (5,664   | )          | (4,475   | )          |
| Prepaid expenses and other assets                                                         |       | (1,418   | )          | (1,489   | )          | 442      |       |
| Accounts payable                                                                          |       | (5,406   | )          | 19,894   |       | (3,828   | )          |
| Accrued and other liabilities                                                             |       | 732      |       | (1,422   | )          | (3,456   | )          |
| Deferred revenues and gains                                                               |       | 3,495    |       | (460     | )          | (2,454   | )          |
| Net cash provided by operating activities                                                 |       | 13,436   |       | 47,054   |       | 17,067   |       |
|                                                                                      |       |     |       |     |       |     |       |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                     |       |     |       |     |       |     |       |
| Capital expenditures                                                                      |       | (19,708  | )          | (15,245  | )          | (11,371  | )          |
| Net proceeds from sale of property and  equipment                                         |       | 180      |       | 126      |       | 33       |       |
| Change in intangible assets                                                               |       | (2       | )          | —   |       | (45      | )          |
| Investment in affiliate                                                                   |       | —   |       | —   |       | (81,005  | )          |
| Cash paid on loans to affiliate                                                           |       | 38       |       | 34       |       | 30       |       |
| Acquisitions, net of cash received                                                        |       | (304     | )          | (2,868   | )          | (3,620   | )          |
| Net cash used in investing activities                                                     |       | (19,796  | )          | (17,953  | )          | (95,978  | )          |
|                                                                                      |       |     |       |     |       |     |       |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                     |       |     |       |     |       |     |       |
| Cash contribution                                                                         |       | 5,861    |       | —   |       | —   |       |
| Dividends paid                                                                            |       | (5,750   | )          | (3,287   | )          | —   |       |
| Borrowings on long-term debt                                                              |       | 64,300   |       | —   |       | 85,005   |       |
| Payment of debt issue costs                                                               |       | (291     | )          | (12      | )          | (3,806   | )          |
| Principal payments of long-term debt                                                      |       | (64,432  | )          | (35,625  | )          | (1,791   | )          |
| Net cash provided by (used in) financing  activities                                      |       | (312     | )          | (38,924  | )          | 79,408   |       |
|                                                                                      |       |     |       |     |       |     |       |
| NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                                     |       | (6,672   | )          | (9,823   | )          | 497      |       |
|                                                                                      |       |     |       |     |       |     |       |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF  YEAR                                           |       | 15,238   |       | 25,061   |       | 24,564   |       |
|                                                                                      |       |     |       |     |       |     |       |
| CASH AND CASH EQUIVALENTS AT END OF YEAR                                                  |       | $        | 8,566      |     | $          | 15,238   |       | $ | 25,061 |   |

 

See notes to consolidatedfinancial statements.

 

50

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**AFFINITYGROUP HOLDING, INC. AND SUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**YEARSENDED DECEMBER 31, 2007, 2006 AND 2005**

 

1.                                       SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

*Principles of Consolidation*–The consolidated financial statements included herein include the accounts ofAffinity Group Holding, Inc. (“AGHI”), its wholly-owned subsidiary,Affinity Group, Inc. (“AGI”), and AGI’s subsidiaries (collectively the “Company”).  AGHI was formed on March 2, 2005, atwhich time all of the stock of AGI was contributed to AGHI from its parent, AGIHolding Corp. (“AGHC”) a privately-owned corporation.  In November 2007, AGHC formed a holdingcompany, AGI Intermediate Holdco, LLC (“AGII”), at which time AGHC contributed100% of the outstanding shares of common stock of AGHI to AGII.

 

*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 services to RV owners, and camping and golf enthusiasts.  In addition, the Company operates 77 retailoutlets and a mail order business selling RV accessories, supplies and servicesthrough its wholly-owned subsidiary, Camping World, Inc. (“Camping World”).  The stores are located throughout the UnitedStates.  The Company also publishesmagazines, directories and books.

 

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

 

*Cash and Cash Equivalents*–**The Company considers all short-term, highly liquidinvestments purchased with a maturity date of three months or less to be cashequivalents.  The carrying amountapproximates fair value because of the short maturity of these instruments.

 

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

 

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

 

*Property and Equipment*–**Property and equipment are recorded at cost.  Depreciation of property and equipment isprovided using the straight-line method over the following estimated usefullives of the assets:

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

 

Leasehold improvements are amortized overtheir useful lives or the remaining term of the respective lease, whichever isshorter.

 

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1.                                       SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

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

 

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

 

*Long-term Debt**–* The fair value of the Company’slong-term debt is estimated based on the quoted market prices for the same orsimilar issues or on the current rates offered for debt of the same or similarremaining maturities.  The fair value ofthe Company’s long-term debt was $383.7 million as of December 31, 2007.

 

*Revenue Recognition –*Merchandiserevenue is recognized when products are sold in the retail stores, shipped formail and Internet orders, or when services are provided to customers.* *Emergency RoadService (“ERS”) revenues are deferred and recognized over the life of themembership.  ERS claim expenses arerecognized when incurred.  Royaltyrevenue is earned under the terms of an arrangement with a third party creditcard provider based on a percentage of the Company’s outstanding credit cardbalances with such third party credit card provider.

 

Membership revenue 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. At December 31, 2007 and 2006, $7.0 million and $6.0 million ofadvertising expenses have been capitalized as direct-response advertising, ofwhich $4.4 million and $3.5 million, respectively, were reported as assets and$2.6 million and 2.5 million, respectively, were reported net of relateddeferred revenue.  Advertising expensesfor 2007, 2006 and 2005 were $39.1 million, $32.8 million, and $27.4 million,respectively.

 

*AccumulatedOther Comprehensive Loss –*Accumulated othercomprehensive loss consists of unrealized losses on cash flow hedges.  At December 31, 2007, accumulated other comprehensiveloss was $4.7 million.

 

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1.                                       SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

*Publications Revenue and Expense –*Newsstand sales of publications andrelated expenses are recorded at the time of delivery, net of estimatedprovision for returns.  Subscriptionsales of publications are reflected in income over the lives of thesubscriptions.  The related sellingexpenses are expensed as incurred. Advertising revenues and related expenses are recorded at the time ofdelivery.  Subscription and newsstandrevenues and expenses related to annual publications are deferred until thepublications are distributed.  Revenuesand related expenses for consumer shows are recognized when the show occurs.

 

*VendorAllowances* – The Company receivesrebates from vendors pursuant to several different types of programs.  Vendor consideration is accounted for as areduction of the inventory cost and related cost of sales when the inventory issold.

 

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

 

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

 

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

 

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

 

*IncomeTaxes**–***The Companyrecognizes deferred tax assets and liabilities based on the liability method,which requires an adjustment to the deferred tax asset or liability to reflectincome tax rates currently in effect. When income tax rates increase or decrease, a corresponding adjustmentto income tax expense is recorded by applying the rate change to the cumulativetemporary differences.

 

In the second quarter of2006, AGHC received approval from the Internal Revenue Service to change itstax status from a Subchapter C corporation to a Subchapter S corporation (“Scorporation”) to be effective as of January 1, 2006.  The election for change in tax status to an Scorporation included AGHC and all of its subsidiaries with the exception ofCamping World, Inc. and its wholly-owned subsidiaries, which are to remainSubchapter C corporations.  Pursuant to SFASNo. 109, “Accounting for Income Taxes”, a change in tax status resultingfrom an S

 

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1.                                       SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

corporation electionrequires that all deferred tax accounts be revalued upon formal approval of theS corporation status.  Accordingly, alldeferred tax accounts of AGHC and its subsidiaries, excluding Camping World, Inc.and its wholly owned subsidiaries, were revalued to account for the tax effectfor the change to the S corporation status.

 

*MajorCustomers*– Includedin the Membership Services Segment is revenue in the amount of $19.9 million,$20.3 million, and $20.0 million, for the years 2007, 2006 and 2005,respectively, which was received under contracts from one customer of theCompany.

 

*RecentAccounting Pronouncements:*

 

In September 2006,the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “FairValue Measurements” (“SFAS 157”) which defines fair value, establishes aframework and gives guidance regarding the method used for measuring fairvalue, and expands disclosures about fair value measurements.  SFAS 157 requires companies to disclose thefair value of their financial instruments according to a fair value hierarchy,as defined, and may require companies to provide additional disclosures basedon that hierarchy.  SFAS 157 is effectivefor financial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years.  The Company is currently assessing the impactthat SFAS 157 may have on its consolidated financial statements.

 

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

 

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

 

The Companyadopted the provisions of Financial Accounting Standards Board (“FASB”)Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in IncomeTaxes,” on January 1, 2007.  At thedate of adoption, the Company had $14.2 million of unrecognized taxbenefits.  Accounting for the unrecognizedtax benefits had no affect on current period earnings or retained earnings asthe liability had been previously recorded and was reclassified from long-term

 

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1.                                       SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

deferred taxliabilities to other long-term liabilities. There would be no affect on the effective tax rate if the unrecognizedtax benefits were recognized.  TheCompany did not have any material increases in unrecognized tax benefits in thecurrent period and does not anticipate any material increases over the nexttwelve months.

 

2.                                       PROPERTYAND EQUIPMENT

 

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

 
| ** **                                        | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|
|                                              |       |     |       |     |       |
| Land                                              |       | $        | 477        |     | $          | 477 |   |
| Building and improvements                         |       | 16,100   |       | 12,134   |       |
| Furniture and equipment                           |       | 61,950   |       | 51,479   |       |
| Software                                          |       | 25,402   |       | 20,538   |       |
| Systems development and construction in  progress |       | 5,930    |       | 6,180    |       |
|                                              |       | 109,859  |       | 90,808   |       |
| Less: accumulated depreciation and  amortization  |       | (65,552  | )          | (56,043  | )          |
|                                              |       | $        | 44,307     |     | $          | 34,765 |   |

 

3.                                       GOODWILLAND OTHER INTANGIBLE ASSETS

 

There were no changes in thecarrying amount of goodwill in 2007 or 2006.

 
| ** **                           | ** ** | **Membership  Services** | ** ** | **Publications** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
|--------------------------------------|------------|--------------------------|------------|------------------|------------|------------|------------|------------------|------------|
|                                 |       |                     |       |             |       |       |       |             |       |
| Balance as of January 1, 2006   |       | $                        | 49,944     |             | $          | 46,884     |       | $                | 47,601     |   | $ | 144,429 |   |
| Impairment                           |       | —                   |       | —           |       | —     |       | —           |       |
| Balance as of December 31, 2006 |       | 49,944                   |       | 46,884           |       | 47,601     |       | 144,429          |       |
| Impairment                           |       | —                   |       | —           |       | —     |       | —           |       |
| Balance as of December 31, 2007 |       | $                        | 49,944     |             | $          | 46,884     |       | $                | 47,601     |   | $ | 144,429 |   |

 

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3.        GOODWILL AND OTHER INTANGIBLE ASSETS(continued)

 

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

 
| ** **                                       | ** ** | **2007**   | ** ** |
|--------------------------------------------------|------------|------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Gross**  | ** ** | **Amortization** | ** ** | **Net** | ** ** |
|                                             |       |       |       |   |   |   |   |
| Membership and  customer lists                   |       | $          | 31,466     |   | $ | (16,705 | ) | $ | 14,761 |   |
| Resort and golf  course participation agreements |       | 13,410     |       | (13,383 | ) | 27 |   |
| Non-compete and  deferred consulting agreements  |       | 18,830     |       | (13,885 | ) | 4,945 |   |
| Deferred  financing costs                        |       | 13,956     |       | (7,853 | ) | 6,103 |   |
|                                             |       | $          | 77,662     |   | $ | (51,826 | ) | $ | 25,836 |   |

 
| ** **                                       | ** ** | **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                        |       | 14,311     |       | (5,879 | ) | 8,432 |   |
|                                             |       | $          | 75,567     |   | $ | (42,610 | ) | $ | 32,957 |   |

 

 

The aggregate future five-year amortizationof finite-lived intangibles at December 31, 2007 is as follows (inthousands):

 
| 2008       |   | $     | 7,762  |   |
|------------|--------|-------|--------|--------|
| 2009       |   | 6,275 |   |
| 2010       |   | 5,123 |   |
| 2011       |   | 4,605 |   |
| 2012       |   | 2,034 |   |
| Thereafter |   | 37    |   |
| Total      |   | $     | 25,836 |   |
|            |        |       |        |        |  |

 

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

 

The Company performed itsannual impairment test of its goodwill and intangible assets during the fourthquarter of 2007.  Based on this test, theCompany concluded that no impairment existed as of December 31, 2007.

 

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3.        GOODWILL AND OTHER INTANGIBLE ASSETS(continued)

 

In February 2006,AGI Productions, Inc. acquired the consumer shows and related assets of H &S Productions, LLC for $2.5 million.  Theacquisition price was allocated primarily to membership and customerlists.  In August 2006, the Company’ssubsidiary TL Enterprises, Inc. acquired the consumer park guides andrelated assets of American Guide Services, Inc. for $1.0 million.  The acquisition price was allocated primarilyto membership and customer lists.  In September 2006,AGI Productions, Inc. acquired the consumer shows and related assets ofApple Rock Advertising and Promotions, Inc. for $1.5 million.  In January 2007, AGI Productions, Inc.acquired a consumer show from MAC Events, Inc. for $0.5 million.  As part of the purchase, the Company assumed$0.3 million of liabilities.  In February 2007,AGI Productions, Inc. acquired consumer shows from Industrial ExpositionInc. for $1.9 million.  As part of thepurchase, the Company issued $1.5 million of debt and assumed $0.6 million ofliabilities.  The cost of theacquisitions were allocated primarily to membership and customer lists.

 

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

 

4.                             ACCRUEDLIABILITIES

 

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

 
| ** **                 | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
|                       |       |     |       |     |       |
| Compensation and  benefits |       | $        | 14,511     |     | $          | 15,341 |   |
| Other accruals             |       | 21,612   |       | 20,346   |       |
|                       |       | $        | 36,123     |     | $          | 35,687 |   |

 

5.                             LONG-TERMDEBT

 

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

 
| ** **                                 | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|
|                                       |       |     |       |     |       |
| AGI Senior  Credit Facility: Term Loans    |       | $        | 128,605    |     | $          | 108,475 |   |
| AGI 9% Senior  Subordinated Notes due 2012 |       | 152,399  |       | 170,094  |       |
| AGHI 10 7/8%  Notes due 2012               |       | 105,390  |       | 99,457   |       |
| Accrued interest  on AGHI 10 7/8% Notes    |       | 4,396    |       | 4,169    |       |
| Other long-term  obligations               |       | 6,169    |       | 6,586    |       |
|                                       |       | 396,959  |       | 388,781  |       |
| Less: current  portion                     |       | (4,406   | )          | (7,271   | )          |
|                                       |       | $        | 392,553    |     | $          | 381,510 |   |

 

On June 24, 2003, AGI entered into an Amended andRestated Credit Agreement and a Senior Secured Floating Rate Note PurchaseAgreement (“AGI Senior Credit Facility”) providing for term loans (“Term Loans”)in the aggregate of $140.0 million and a revolving credit facility of $35.0million.  The funds available under therevolving credit line of the AGI Senior Credit Facility may be utilized forborrowings or letters of credit; however,a maximum of $12.5 million

 

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5.      LONG-TERMDEBT (continued)

 

may be allocated to such letters of credit.  Re-borrowings under the Term Loans are notpermitted.  The interest on borrowingsunder the AGI Senior Credit Facility is at variable rates based on the ratio oftotal cash flow to outstanding indebtedness (as defined).  Interest rates float with prime and theLondon Interbank Offered Rates (“LIBOR”), plus an applicable margin rangingfrom 1.50% to 2.50% over the stated rates. AGI also pays a commitment fee of 0.5% per annum on theunused amount of the revolving credit line. Further, the AGI Senior Credit Facility requires the loans to be prepaidin an amount equal to 75% of the excess cash flow, as defined.  As of December 31, 2007, the Company hadno excess cash flow, as defined.  TheSenior Credit Facility is secured by substantially all the assets and a pledgeof the stock of AGI.

 

On March 3, 2006,AGI amended the AGI Senior Credit Facility to revise the definition ofConsolidated Fixed Charges Ratio and Permitted Tax Distributions.  This amendment allows AGI to distribute taxesto its ultimate parent based on its stand-alone tax obligation rather than thetax obligation of its parent, AGHI, until such time that AGHI pays interest onits 10 7/8% Senior Notes in cash instead of by the issuance of additionalnotes.  For the year ended December 31,2007, AGHI has distributed $5.8 million cash in the form of a dividend to AGHCin excess of the Company’s tax obligations. Further, AGI amended the AGI Senior Credit Facility’s covenantrestrictions with affiliates to permit a joint venture arrangement betweenCamping World, Inc. and FreedomRoads Holding LLC and itssubsidiaries, (collectively “FreedomRoads”) an affiliate of the Company.

 

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.  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.

 

On March 8, 2007,AGI purchased $17.7 million of the Senior Subordinated Notes.  AGI funded the purchase through the issuanceof the $25.0 million in additional incremental term loans as permitted underthe February 27, 2007 amendment to the Senior Credit Facility.  The balance of the $25.0 million incrementalloan was used to pay down AGI’s revolving credit facility by $6.5 million andto pay associated loan fees and transaction expenses.  The terms on the additional incremental loansare consistent with the remaining term loan outstanding under the Senior CreditFacility.  AGI also incurred an $0.8million debt extinguishment charge representing the pro rata unamortizeddeferred finance costs associated with the prepayment of the SeniorSubordinated Notes.  As of December 31,2007, $152.4 million of Senior Subordinated Notes remain outstanding.

 

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

 

As of December 31, 2007, $128.6 million wasoutstanding under the Term Loans and the average interest rate on the TermLoans was 7.57%.  As of December 31,2007 permitted borrowings under the undrawn revolving line were $28.3million.  The Company had commercial andstandby letters of credit in the aggregate amount of $6.7 million outstandingas of

 

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5.      LONG-TERM DEBT (continued)

 

December 31, 2007.  The aggregate quarterly scheduled payments onthe Term Loans are $0.4 million.  Therevolving credit facility and the Term Loans mature on June 24, 2009.

 

On October 15, 2007,the AGI entered into a five-year interest rate swap agreement with a notionalamount of $100.0 million from which it will receive periodic payments at the 3month LIBOR-based variable rate (4.96% percent at December 31, 2007 basedupon the October 31, 2007 reset date) and make periodic payments at afixed rate of 5.135% percent, with settlement and rate reset dates every January 31,April 30, July 31, and October 31.  The fair value of the swap was zero atinception. AGI entered into the interest rate swap to limit the effect ofincreases on our floating rate debt.  Theinterest rate swap is designated as a cash flow hedge of the variable rateinterest payments due on $100 million of the Term Loans issued June 24,2003, and accordingly, gains and losses on the fair value of the interest swapagreement are reported in accumulated other comprehensive loss and reclassifiedto earnings in the same period in which the hedged interest payment affects earnings.  The interest rate swap agreement expires on October 31,2012.  The fair value of this swap isincluded in other accrued liabilities and was $4.7 million as of December 31,2007.

 

On February 18, 2004, the AGI issued$200.0 million of 9% Senior Subordinated 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, and the AGI Senior Notes mature on February 15, 2012.

 

On March 24, 2005 ina private placement, the Company issued $88.2 million principal amount of its10-7/8% senior notes due 2012 (the “AGHI Notes”) at a $3.2 million originalissue discount.  The Company completed aregistered exchange of the AGHI Notes under the Securities Act of 1933 on June 8,2005.  The AGHI Notes are unsecuredobligations of the Company, and 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 the entire $88.2 million principal amount of the AGHI Notes are due infull on February 15, 2012.  Forinterest payments on and prior to February 15, 2008, AGHI may elect to payinterest on the AGHI Notes in cash or by the issuance of additional notes ofthe same tenor as the AGHI Notes.  Anyadditional AGHI Notes issued in payment of interest are due in full on orbefore March 15, 2010.  The Companymade the interest payments due August 15, 2005, February 15, 2006, August 15,2006, and February 15, 2007 through the issuance of additional notes.  The Company paid the interest on the notesdue August 15, 2007 from proceeds of a $5.9 million contribution made bythe Company’s parent, AGHC.  The AGHINotes cannot be redeemed prior to February 15, 2008.  If the source of the cash payment of the AGHINotes is dividends from its subsidiary, there are certain restrictions on thepayment of dividends under the AGI Senior Credit Facility and the indenturegoverning the terms of the AGI Senior Notes (the “AGI Indenture”).  The Company expects to issue additional notesof the same tenor as the AGHI Notes on February 15, 2008 to pay intereston the AGHI Notes when and as such interest is due.  After February 15, 2008, the Companymust rely on dividends from AGI to fund the interest payments due under theAGHI Notes.

 

The Company contributed the net proceeds from theissuance of the AGHI Notes, approximately $81.0 million, to AGI and in turn,AGI made an equity contribution to its wholly-owned subsidiary, Camping World, Inc.(“Camping World”).  Camping World thenmade an equity capital contribution in the same amount to its wholly-ownedsubsidiary, CWI, Inc. (“CWI”).  In2005, CWI created a new wholly-owned subsidiary named CWFR Capital Corp., aDelaware corporation (“CWFR”) which is an “unrestricted subsidiary” as definedunder the AGHI Notes and the AGI Indenture. Since CWFR is an unrestricted subsidiary, its operations are not

 

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5.      LONG-TERM DEBT (continued)

 

restricted by either the AGI Indenture or the AGHINotes.  CWI made an equity capitalcontribution to CWFR in an equal amount to the capital contribution that CWIreceived from Camping World.  CWFR usedthe proceeds from the equity capital contribution to acquire a preferredmembership interest in FreedomRoads, a Minnesota limited liabilitycompany owned 90% byThe Stephen Adams Living Trust which also indirectly owns 98.2% of theoutstanding capital stock of AGHC and indirectly AGHI.

 

The preferred membership interest acquired by CWFR hasa face amount of $88.2 million and is entitled to receive a preferred paymentfrom FreedomRoads at 10-7/8% per annum when and as declared by the Board ofGovernors of FreedomRoads 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 preferred membershipinterest upon the payment of $88.2 million plus the accrued and unpaidpreferred return to the date of redemption. FreedomRoads will be required to redeem the preferred membershipinterest at that same redemption price if there is a sale or reorganization ofthe membership interests ofFreedomRoads or a sale of substantially all of theassets 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 thepreferred membership interest, (b) distributions for the members’estimated tax liabilities from earnings of  FreedomRoads and (c) distributions in theaggregate not to exceed 50% of the amount of (i) FreedomRoads’ net profitfor the period from January 1, 2005 through the end of the fiscal quarternext preceding the distribution date less (ii) the aggregate amount of taxdistributions made during the period from January 1, 2005 through the endof the fiscal quarter next preceding the distribution date.  CWFR may not sell, pledge or otherwisetransfer the preferred membership interest. The preferred membership interest does not provide CWFR with any votingrights in FreedomRoads.  The preferredmembership interest FreedomRoads is being carried at cost and is reviewedperiodically for impairment.

 

On March 6, 2006,Camping World entered into a Joint Venture Agreement with FreedomRoads.  FreedomRoads is indirectly owned andcontrolled by Stephen Adams, the Chairman and indirect controlling shareholderof AGHI.  FreedomRoads, through its wholly-ownedsubsidiaries, owns and operates RV dealerships, currently operating across theUnited States.  The Joint VentureAgreement provides that Camping World and FreedomRoads are to act cooperativelywith a view to maximizing synergies and to locate, establish and utilizemutually beneficial relationships that are available only to the parties actingtogether that would not otherwise be available to either partyindependently.  There are no capitalrequirements or sharing of income and expenses.

 

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.  The Company was in compliance with all debtcovenants at December 31, 2007.

 

60

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5.      LONG-TERM DEBT (continued)

 

Theaggregate future maturities of long-term debt at December 31, 2007 are asfollows (in thousands):

 
| 2008  |   | $       | 4,406   |   |
|-------|--------|---------|---------|--------|
| 2009  |   | 129,392 |    |
| 2010  |   | 24,876  |    |
| 2011  |   | 82      |    |
| 2012  |   | 238,203 |    |
| Total |   | $       | 396,959 |   |

 

 

6.                             INCOMETAXES

 

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

 
| ** **          | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------|------------|----------|------------|----------|------------|----------|------------|
| Current:            |       |     |       |     |       |     |       |
| Federal             |       | $        | —     |     | $          | —   |       | $ | 6,122 |   |
| State               |       | 16       |       | 12       |       | 846      |       |
| Deferred            |       |     |       |     |       |     |       |
| Federal             |       | 1,443    |       | 19,549   |       | (2,352   | )          |
| State               |       | 124      |       | 2,707    |       | (325     | )          |
| Income tax  expense |       | $        | 1,583      |     | $          | 22,268   |       | $ | 4,291 |   |

 

A reconciliation ofincome tax expense from operations to the federal statutory rate for the yearended December 31 is as follows (in thousands):

 
| ** **                                       | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                             |       |     |       |     |       |     |       |
| Income taxes  computed at federal statutory rate |       | $        | (992       | )        | $          | (2,830   | )          | $ | 3,475 |   |
| State income  taxes - net of federal benefit     |       | (85      | )          | (243     | )          | 299      |       |
| Other  differences:                              |       |     |       |     |       |     |       |
| Deferred taxes  upon change in tax status        |       | —   |       | 23,097   |       | —   |       |
| Goodwill written  off                            |       | —   |       | —   |       | 1,651    |       |
| Increase  (decrease) of valuation allowance      |       | 2,724    |       | 2,459    |       | (964     | )          |
| Other                                            |       | (64      | )          | (215     | )          | (170     | )          |
| Income tax  expense                              |       | $        | 1,583      |     | $          | 22,268   |       | $ | 4,291 |   |

 

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6.                             INCOMETAXES (continued)

 

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

 
| ** **                                       | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
| **Deferred  tax liabilities:**                   |       |     |       |     |       |
| Management  incentive                            |       | $        | (3,349     | )        | $          | (3,349 | ) |
| Accelerated  depreciation                        |       | (1,251   | )          | (7,181   | )          |
| Prepaid expenses                                 |       | (313     | )          | (254     | )          |
| Basis difference  on building and land           |       | —   |       | (8,861   | )          |
| Other                                            |       | (790     | )          | (662     | )          |
|                                             |       | (5,703   | )          | (20,307  | )          |
|                                             |       |     |       |     |       |
| **Deferred  tax assets:**                        |       |     |       |     |       |
| Gift cards                                       |       | 799      |       | —   |       |
| Deferred  revenues                               |       | 148      |       | 630      |       |
| Accrual for  employee benefits and severance     |       | 615      |       | 1,033    |       |
| Accrual for  deferred phantom stock compensation |       | 59       |       | 59       |       |
| Net operating  loss carryforward                 |       | 4,569    |       | 2,459    |       |
| Claims reserves                                  |       | 1,250    |       | 1,649    |       |
| Intangible  assets                               |       | 216      |       | 225      |       |
| Deferred book  gain                              |       | 2,521    |       | 2,652    |       |
| Other reserves                                   |       | 1,929    |       | 1,538    |       |
|                                             |       | 12,106   |       | 10,245   |       |
|                                             |       |     |       |     |       |
| Valuation  allowance                             |       | (5,183   | )          | (2,459   | )          |
|                                             |       |     |       |     |       |
| Net deferred tax  (liabilities) assets           |       | $        | 1,220      |     | $          | (12,521 | ) |

 

Effective January 1,2006, the Company received approval from the Internal Revenue Service for achange in tax status to an S corporation which included AGHC and all itssubsidiaries with the exception of Camping World, Inc. and itswholly-owned subsidiaries, which are to remain Subchapter C corporations.  At December 31, 2007, Camping World, Inc.and its subsidiaries had a net operating loss carryforward of approximately$12.0 million, which will be able to offset future taxable income.  If not used, the net operating losscarryforward will expire between 2026 and 2027. The valuation allowance for deferred taxes was increased by $2.7 millionas it was determined that the Company would have insufficient taxable income inthe current, or carryforward periods under the tax laws to realize the futuretax benefits of its deferred tax assets.

 

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

 

62

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6.                           INCOMETAXES (continued)

 

The following tablesummarizes the activity related to unrecognized tax benefits:

 

| Balance at  January 1, 2007                                                         |   | $      | 14,184 |   |
|------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Gross increases in  unrecognized tax benefits due to prior year positions                |   | — |   |
| Gross decreases in  unrecognized tax benefits due to prior year positions                |   | — |   |
| Gross increases in  unrecognized tax benefits due to current year positions              |   | — |   |
| Gross decreases in  unrecognized tax benefits due to current year positions              |   | — |   |
| Gross decreases in  unrecognized tax benefits due to settlements with taxing authorities |   | — |   |
| Gross decreases in  unrecognized tax benefits due to statute expirations                 |   | — |   |
| Other                                                                                    |   | 206    |   |
| Unrecognized tax  benefits at December 31, 2007                                     |   | $      | 14,390 |   |

 

 

The Company accruesinterest and penalties related to unrecognized tax benefits in its income taxprovision.  The Company recorded interestand penalties of $0.9 million related to unrecognized tax benefits during 2007and in total, as of December 31, 2007, the liability for penalties andinterest was $1.6 million.  This amountwas included in other long-term liabilities. The Company does not expect its unrecognized tax benefits to changesignificantly over the next twelve months.

 

The Company and itssubsidiaries file income tax returns in the U.S. and various states.  With few exceptions, the Company is no longersubject to U.S. federal, state, and local income tax examinations by tax authoritiesfor years before 2002.

 

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 December 31,2007 are as follows (in thousands):

 
| ** ** | ** ** | **Third Party** | ** ** | **Related Party** | ** ** | **Total** | ** ** |
|------------|------------|----------------------|------------|------------------------|------------|-----------|------------|
| 2008       |       | $                    | 10,277     |                   | $          | 8,012     |       | $ | 18,289 |   |
| 2009       |       | 9,239                |       | 7,997                  |       | 17,236    |       |
| 2010       |       | 8,542                |       | 8,054                  |       | 16,596    |       |
| 2011       |       | 7,193                |       | 8,055                  |       | 15,248    |       |
| 2012       |       | 5,667                |       | 8,055                  |       | 13,722    |       |
| Thereafter |       | 36,571               |       | 73,787                 |       | 110,358   |       |
| Total      |       | $                    | 77,489     |                   | $          | 113,960   |       | $ | 191,449 |   |

 

During 2007, 2006 and2005, respectively, approximately $17.9 million, $14.6 million, and $13.1million of rent expense was charged to costs and expenses.

 

OnDecember 5, 2001, the Company sold eleven real estate properties to elevenseparate wholly-owned subsidiaries of AGRP Holding Corp., a wholly-ownedsubsidiary of the Company’s parent, AGI Holding Corp., for $52.3 million incash and a note receivable.  Theproperties have been leased back to the Company on a triple net basis.  Both the sales price and lease rates werebased on market rates determined by third party independent appraisers engagedby the mortgage lender and approved by the AGI Senior Credit Facility agentbank.  These leases have an initial termof 25 to 27 years with two five-year options at the then current market rent.  The leases are classified as operating leasesin accordance with SFAS No. 13 “Accounting for Leases.”  Land and buildings with a net book valuetotaling $45.8 million have been removed

 

63

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7.        COMMITMENTS, CONTINGENCIES (continued)

 

from the balancesheet.  The transaction resulted in a netgain of $6.1 million consisting of a $12.1 million gain on certain propertiesand a $6.0 million loss on other properties. In accordance with accounting principles generally accepted in theUnited States, the $6.0 million loss was recognized upon the date of sale in2001 in the statement of operations and the $12.1 million gain was deferred andwill be credited to income as rent expense adjustments over the leaseterms.  The average net annual leasepayments over the lives of the leases are $3.4 million.  As of December 31, 2007, $9.4 milliongain remains and will be recognized over the future lease terms.

 

*Litigation*—**From time totime, the Company is involved in litigation arising in the normal course ofbusiness operations.  The Company doesnot believe it is involved in any litigation that will have a material adverseeffect on its results of operations or financial position.

 

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

 

8.        RELATED-PARTY TRANSACTIONS

 

Inconjunction with the sale of real estate properties to an affiliate on December 5,2001, (see Note 7), the Company accepted $4.8 million of the purchase price inthe form of a ten-year balloon note receivable yielding 11% per annum, withmonthly payments of approximately $46,000.  Such amount isincluded in Note 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, 2007, 2006 and 2005, paymentsunder these leases were approximately $4.1 million, $4.3 million, and $6.7million, respectively.  Future commitmentsunder these leases total approximately $81.4 million.  The leases expire at various dates from December 2020through July 2029, subject to the Company’s right to exercise renewaloptions.

 

In connection with oureffort to expand the number of Camping World stores by developing retailalliances with RV dealerships across North America, the Company has established45 Camping World stores alongside or within RV dealerships owned byFreedomRoads, which is controlled by the Chairman of our Board of Directors,Stephen Adams, and we expect to open additional Camping World stores alongsideor within such RV dealerships in the future. At December 31, 2007, the Company leased 35 properties fromFreedomRoads, sub-leased seven properties to FreedomRoads, and Camping Worldand FreedomRoads are joint tenants under three leases.  Total payments by the Company to FreedomRoads under these leased properties for 2007 and 2006 were approximately $3.7million and $1.7 million, respectively, and future commitments under theseleases total approximately $30.3 million. The leases expire at various dates from August 2013 through May 2017.  For 2007 and 2006, lease payments receivedfrom FreedomRoads for the seven subleased properties were approximately $0.9million and $1.0 million, respectively, and future payments to be receivedunder these subleases total approximately $4.5 million.  The Company paid FreedomRoads approximately$9.4 million in 2007 and FreedomRoads paid the Company approximately $17.5million, $5.5 million and $3.2 million in 2007, 2006 and 2005, respectively,under the product marketing and sales agreements.  The outstanding accounts receivable balanceto FreedomRoads was $3.7 million at December 31, 2007.

 

64

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8.        RELATED-PARTY TRANSACTIONS (continued)

 

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 2007, 2006 and 2005 KSK received$257,000 million, $198,000 and $917,000 in legal fees from the Company,respectively.

 

The consulting firm ofPransky and Associates, P.S. (“PA”) provides ongoing consulting services to theCompany and certain subsidiaries.  GeorgePransky, a member of the Board of Directors, is a director of thatcompany.  During 2007 and 2006, PAreceived $86,000 and $37,000 in fees from the Company, respectively.

 

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

 

9.                         STATEMENTSOF CASH FLOWS

 

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

 
| ** **                                 | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash paid  (received) during the year for: |       |     |       |     |       |     |       |
| Interest                                   |       | $        | 29,916     |     | $          | 26,669   |       | $ | 25,602 |   |
| Income taxes                               |       | (195     | )          | (1,138   | )          | 9,633    |       |
|                                            |            |          |            |          |            |          |            |  |  |  |

 

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

 

**2007:**

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

 

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

 

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

 

**2006:**

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

 

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

 

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

 

65

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9.                         STATEMENTSOF CASH FLOWS (continued)

 

**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$6.0 million of debt in the acquisition from Royal Productions, Inc.

 

10.      BENEFIT PLAN

 

The Company’s totalcontribution to a deferred savings and profit sharing plan (the “401(k) Plan”)totaled approximately $1.7 million, $1.9 million, and $1.7 million for 2007,2006, and 2005, respectively.

 

Affinity Group, Inc.

The Company sponsors a401(k) Plan qualified under Section 401(a) and 401(k) ofthe Internal Revenue Service Code of 1986, as amended (the “Code”).  All employees over age twenty-one, includingthe Executive Officers, are eligible to participate in the 401(k) Plan.  Employees who have completed one year ofservice (minimum of 1,000 hours) are eligible for matching contributions.  For the plan year 2007, the Company elected aSafe Harbor Matching Contribution for the employer match and set the employermatch, which vests upon contribution, at an amount equal to 100% of the first4% of the employee’s contribution. Employees may defer up to 60% of their eligible compensation up toInternal Revenue Service limits electing pre-tax contributions or post-taxcontributions (Roth contributions). The Company’s contributions to the plantotaled approximately $0.9 million for 2007.

 

Camping World, Inc.

Beginning January 1,2007 Camping World elected to no longer participate in the Affinity Group 401(k) Planand began participating in the Freedom Roads 401(k) Defined ContributionPlan, Freedom Rewards 401(k) Plan, qualified under Section 401(a) and401(k) of the Internal Revenue Service Code of 1986, as amended (the “Code”).  All employees over the age of eighteen,including the Executive Officers are eligible to participate in the 401(k) Plan.  Employees who have completed twelve months ofconsecutive service are eligible for company match.  For the plan year 2007, the matchingcontribution schedule is 50% up to the first 6% of eligible compensation.  Company matching contributions follow a six (6) yeargraded vesting schedule.  Non-highlycompensated employees may defer up to 75% of their eligible compensation up tothe Internal Revenue Service limits. Highly compensated employees may defer up to 15% of their eligiblecompensation up to the Internal Revenue Service limits.  The Company’s contributions to the plantotaled approximately $0.8 million in 2007.

 

11.      DEFERRED PHANTOM STOCK COMPENSATION

 

The Company has deferredcompensation agreements with certain officers. The agreements provide for payment to the officers upon theirtermination, death, disability, or sale of the Company, and other agreed uponevents.  Deferred compensation isincluded in other long-term liabilities except for amounts expected to be paidin 2008, which have been classified in current liabilities.  This deferred compensation is subject tovesting 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 $0.4 million, $1.1 million, and $2.2 million for 2007, 2006, and2005, respectively.

 

66

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12.         SEGMENT INFORMATION

 

The Company’s threeprincipal lines of business are Membership Services, Publications, andRetail.  The Membership Services segment operates the Good Sam Club, the Coast toCoast Club, the President’s Club, Camp Club USA and assorted membershipproducts and services for RV owners, campers and outdoor vacationers, and theGolf Card Club for golf enthusiasts.  ThePublications segment publishes a variety of publications for selected marketsin the recreation and leisure industry, including general circulationperiodicals, club magazines, directories and RV and powersports industry trademagazines.  In addition, the Publicationssegment operates 36 consumer outdoor recreation shows primarily focused on RVand powersports markets.  The Retailsegment sells specialty retail merchandise and services for RV owners primarilythrough retail supercenters and mail order catalogs.  The Company evaluates performance based onprofit or loss from operations before income taxes.

 

Thereportable segments are strategic business units that offer different productsand services.  They are managedseparately because each business requires different technology, managementexpertise and marketing strategies.

 

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

 
| ** **                                     | ** ** | **Membership** | ** ** | ** **       | ** ** | ** ** | ** ** | ** **       | ** ** |
|------------------------------------------------|------------|----------------|------------|------------------|------------|------------|------------|------------------|------------|
| ** **                                     | ** ** | **Services**   | ** ** | **Publications** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| **YEAR  ENDED DECEMBER 31, 2007**              | ** ** | ** **     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **       | ** ** |
| Revenues from  external customers              |       | $              | 149,937    |             | $          | 90,537     |       | $                | 321,730    |   | $ | 562,204 |   |
| Gain (loss) on  sale of property and equipment |       | —         |       | 5                |       | (216       | )          | (211             | )          |
| Interest income                                |       | 9,521          |       | —           |       | 84         |       | 9,605            |       |
| Interest expense                               |       | —         |       | 258              |       | 15,402     |       | 15,660           |       |
| Depreciation and  amortization                 |       | 3,620          |       | 5,124            |       | 7,754      |       | 16,498           |       |
| Segment profit  (loss)                         |       | 50,491         |       | 17,497           |       | (8,136     | )          | 59,852           |       |
| Segment assets                                 |       | 203,836        |       | 89,074           |       | 249,174    |       | 542,084          |       |
| Expenditures for  segment assets               |       | 2,744          |       | 1,244            |       | 15,650     |       | 19,638           |       |
|                                           |       |           |       |             |       |       |       |             |       |
| **YEAR  ENDED DECEMBER 31, 2006**              | ** ** | ** **     | ** ** | ** **       | ** ** | ** ** | ** ** | ** **       | ** ** |
| Revenues from  external customers              |       | $              | 137,394    |             | $          | 86,742     |       | $                | 290,422    |   | $ | 514,558 |   |
| Gain on sale of  property and equipment        |       | —         |       | 5                |       | 11         |       | 16               |       |
| Interest income                                |       | 6,485          |       | —           |       | 6          |       | 6,491            |       |
| Interest expense                               |       | —         |       | 329              |       | 13,709     |       | 14,038           |       |
| Depreciation and  amortization                 |       | 3,658          |       | 4,365            |       | 8,217      |       | 16,240           |       |
| Segment profit  (loss)                         |       | 44,695         |       | 19,837           |       | (10,128    | )          | 54,404           |       |
| Segment assets                                 |       | 167,837        |       | 87,122           |       | 225,680    |       | 480,639          |       |
| Expenditures for  segment assets               |       | 2,263          |       | 1,171            |       | 11,309     |       | 14,743           |       |
|                                           |       |           |       |             |       |       |       |             |       |
| **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           |       |

 

67

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12.         SEGMENT INFORMATION(continued)

 

The following is a summary of the reconciliations of reportablesegments to the consolidated financial statements for the years ended December 31,2007, 2006 and 2005 (in thousands):

 
| ** **                                                   | ** ** | **2007**   | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **Gain on  Sale of Property and Equipment**                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total gain on  sale for reportable segments                  |       | $          | (211       | )          | $          | 16         |       | $ | 2 |   |
| Other  non-allocated gain                                    |       | 61         |       | —     |       | —     |       |
| Total gain on  sale of property and equipment                |       | $          | (150       | )          | $          | 16         |       | $ | 2 |   |
|                                                         |       |       |       |       |       |       |       |
| **Interest  Income**                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total interest  income for reportable segments               |       | $          | 9,605      |       | $          | 6,491      |       | $ | 5,014 |   |
| Elimination of  intersegment interest income                 |       | (9,521     | )          | (6,485     | )          | (4,994     | )          |
| Other  non-allocated interest income                         |       | 508        |       | 1,109      |       | 1,041      |       |
| Total interest  income                                       |       | $          | 592        |       | $          | 1,115      |       | $ | 1,061 |   |
|                                                         |       |       |       |       |       |       |       |
| **Interest  Expense**                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total interest  expense for reportable segments              |       | $          | 15,660     |       | $          | 14,038     |       | $ | 10,648 |   |
| Elimination of  intersegment interest expense                |       | (15,026    | )          | (13,525    | )          | (10,534    | )          |
| Other  non-allocated interest expense                        |       | 36,206     |       | 36,157     |       | 33,187     |       |
| Total interest  expense                                      |       | $          | 36,840     |       | $          | 36,670     |       | $ | 33,301 |   |
|                                                         |       |       |       |       |       |       |       |
| **Depreciation  and Amortization**                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total  depreciation and amortization for reportable segments |       | $          | 16,498     |       | $          | 16,240     |       | $ | 13,032 |   |
| Unallocated  depreciation and amortization expense           |       | 2,955      |       | 2,922      |       | 2,887      |       |
| Total  consolidated depreciation and amortization            |       | $          | 19,453     |       | $          | 19,162     |       | $ | 15,919 |   |
|                                                         |       |       |       |       |       |       |       |
| **Income  From Operations Before Taxes**                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total profit for  reportable segments                        |       | $          | 59,852     |       | $          | 54,404     |       | $ | 58,239 |   |
| Unallocated  depreciation and amortization expense           |       | (2,955     | )          | (2,922     | )          | (2,887     | )          |
| Unallocated  G & A expense                          |       | (17,113    | )          | (17,541    | )          | (18,816    | )          |
| Unallocated  interest expense, net                           |       | (35,698    | )          | (35,048    | )          | (32,146    | )          |
| Unallocated gain  on sale of property and equipment          |       | 61         |       | —     |       | —     |       |
| Unallocated debt  restructure expense                        |       | (775       | )          | (835       | )          | —     |       |
| Unallocated  restructuring charge                            |       | —     |       | (93        | )          | —     |       |
| Unallocated  arbitration expense                             |       | (955       | )          | —     |       | —     |       |
| Elimination of  intersegment interest expense, net           |       | 5,505      |       | 7,040      |       | 5,540      |       |
| Income from  operations before income taxes                  |       | $          | 7,922      |       | $          | 5,005      |       | $ | 9,930 |   |
|                                                         |       |       |       |       |       |       |       |
| **Assets**                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total assets for  reportable segments                        |       | $          | 542,084    |       | $          | 480,639    |       | $ | 459,402 |   |
| Capitalized  finance costs not allocated to segments         |       | 7,489      |       | 10,836     |       | 12,720     |       |
| Corporate  unallocated assets                                |       | 3,544      |       | 6,596      |       | 16,659     |       |
| Elimination of  intersegment receivable                      |       | (126,453   | )          | (87,174    | )          | (69,886    | )          |
| Consolidated  total assets                                   |       | $          | 426,664    |       | $          | 410,897    |       | $ | 418,895 |   |
|                                                         |       |       |       |       |       |       |       |
| **Capital  Expenditures**                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total  expenditures for assets for reportable segments       |       | $          | 19,638     |       | $          | 14,743     |       | $ | 11,095 |   |
| Other asset  expenditures                                    |       | 70         |       | 502        |       | 276        |       |
| Total capital  expenditures                                  |       | $          | 19,708     |       | $          | 15,245     |       | $ | 11,371 |   |

 

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13.         SELECTED QUARTERLYINFORMATION (UNAUDITED)

 

The following is a summary of selectedquarterly information for the years ended December 31, 2007, 2006 and 2005(in thousands):

 
| ** **         | ** ** | **March 31,** | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------|------------|--------------------|------------|-------------------|------------|------------------------|------------|-----------------------|------------|
| ** **         | ** ** | **2007**           | ** ** | **2007**          | ** ** | **2007**               | ** ** | **2007**              | ** ** |
|               |       |               |       |              |       |                   |       |                  |       |
| Total revenue      |       | $                  | 127,807    |              | $          | 153,864                |       | $                     | 146,428    |   | $ | 134,105 |   |
| Gross profit       |       | 48,527             |       | 57,234            |       | 53,505                 |       | 50,900                |       |
| Net income  (loss) |       | (532               | )          | 4,390             |       | (3,840                 | )          | 6,321                 |       |
|                    |            |                    |            |                   |            |                        |            |                       |            |  |  |  |  |

 
| ** **        | ** ** | **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) |       | 560                |       | (20,335           | )          | (1,041                 | )          | 3,553                 |       |
|                   |            |                    |            |                   |            |                        |            |                       |            |  |  |  |  |

 
| ** **    | ** ** | **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    |       | 1,677              |       | 3,534             |       | 122                    |       | 306                   |       |
|               |            |                    |            |                   |            |                        |            |                       |            |  |  |  |  |

 

14.         VALUATION AND QUALIFYINGACCOUNTS

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

 

(a)   Accounts determined to be uncollectable andcharged against allowance account, net of collection on accounts previouslycharged against allowance account.

 

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**ITEM 9: CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS 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 carriedout an evaluation, under the supervision and with the participation of ourmanagement, including our President and Chief Executive Officer and our SeniorVice President and Chief Financial Officer, of the effectiveness of the designand operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) ofthe Securities Exchange Act of 1934, as amended) as of the end of the periodcovered by this report.  Based upon thatevaluation, our President and Chief Executive Officer, along with our SeniorVice President and Chief Financial Officer, concluded that our disclosurecontrols and procedures are effective in timely alerting them to materialinformation relating to our Company (including our consolidated subsidiaries)required to be included in our periodic SEC filings.  No changes have occurred during the periodcovered by this report or since the evaluation date that would have a materialeffect on the disclosure controls and procedures.

 

Management of the Company is responsible for establishing andmaintaining adequate internal control over financial reporting, as such term isdefined in Rule 13a-15(f) under the Securities Exchange Act of 1934. TheCompany’s internal control over financial reporting is designed to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles in the United States. However, allinternal control systems, no matter how well designed, have inherentlimitations. Therefore, even those systems determined to be effective canprovide only reasonable assurance with respect to financial statementpreparation and reporting. 

 

Management assessed theeffectiveness of the Company’s internal control over financial reporting as ofDecember 31, 2007. In making this assessment, management used the criteria setforth by the Committee of Sponsoring Organizations of the Treadway Commissionin Internal Control-Integrated Framework. Based on our assessment, managementbelieves that the Company maintained effective internal control over financialreporting as of December 31, 2007, based on those criteria.

 

This annual report doesnot include an audit report of the company’s registered public accounting firmregarding internal control over financial reporting. Management’s report wasnot subject to audit by the company’s registered public accounting firmpursuant to temporary rules of the Securities and Exchange Commission thatpermit the company to provide only management’s report in this annual report.

 

**ITEM 9B:OTHER INFORMATION**

 

None

 

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**PART III**

** **

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

 

Our executive officers anddirectors are as follows:

 
| **Name**             | ** ** | **Age** | ** ** | **Position**                                                                                 |
|----------------------|------------|---------|------------|----------------------------------------------------------------------------------------------|
| Michael A. Schneider |       | 53      |       | President,  Chief Executive Officer and Director                                             |
| Marcus Lemonis       |       | 34      |       | Chief  Executive Officer and President of Camping World, Inc.                           |
| Mark J. Boggess      |       | 52      |       | Chief  Operating Officer of Camping World, Inc.                                         |
| Thomas F. Wolfe      |       | 46      |       | Senior  Vice President and Chief Financial Officer                                           |
| Laura A. James       |       | 51      |       | Senior  Vice President/ Human Resources                                                      |
| Kenneth Marshall     |       | 48      |       | President  of E-Commerce of Camping World, Inc.                                         |
| Brent Moody          |       | 46      |       | Senior  Vice President/ General Counsel and Business Development of Camping World, Inc. |
| Prabhuling Patel     |       | 61      |       | Senior  Vice President                                                                       |
| Stephen Adams        |       | 70      |       | Chairman  of the Board of Directors                                                          |
| Andris A. Baltins    |       | 62      |       | Director                                                                                     |
| David Frith-Smith    |       | 62      |       | Director                                                                                     |
| J. Kevin Gleason     |       | 56      |       | Director                                                                                     |
| George Pransky       |       | 67      |       | Director                                                                                     |

 

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

 

MarcusA. Lemonis was appointed President and Chief Executive Officer of Camping World, Inc.(“Camping World”) effective September 13, 2006.  Mr. Lemonis also currently serves and,since 2003, has served as Chief Executive Officer and President of FreedomRoadsHolding Company LLC and its subsidiaries (“FreedomRoads”).  FreedomRoads operates RV dealerships acrossthe United States (53 dealerships as of December 31, 2006) and iscontrolled by Mr. Adams.  From 2001to 2003, Mr. Lemonis served as President, Chief Executive Officer andChairman of the Board of Directors of Holiday RV Superstores, Inc.  Holiday RV Superstores, Inc. filed forbankruptcy on October 18, 2003.

 

MarkJ. Boggess became the Chief Operating Officer of Camping World effective September 2006.  Mr. Boggess served as the President andChief Executive Officer of our Camping World subsidiary as of January 2004through September 2006.  Prior tothat time, Mr. Boggess had been our Senior Vice President and ChiefFinancial Officer since June 1993. From June 1992 through May 1993, Mr. Boggess was VicePresident and Chief Financial Officer of Hypro Corporation, a privately ownedmanufacturer of fluid transfer pumps. From June 1989 through June 1992, Mr. Boggess wasTreasurer of Adams Communications Corporation, a holding 

 

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companycontrolled by Stephen Adams which owned television and radio station operationsthroughout the United States.

 

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

 

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

 

KennethMarshall became President of E-Commerce of Camping World as of April 1,2007.  Prior to that, he served asExecutive Vice President of Finance and Information Technology, Vice Presidentof Finance and Controller and Senior Vice President of Finance/InformationTechnology and Distribution since joining Camping World in 2002.  Prior to that time and since 2000, Mr. Marshallserved as Chief Information Officer of Harwood International, a real estatedevelopment company in Dallas, Texas. From 1995 to 2000, Mr. Marshall served as Chief Financial Officer/ChiefOperating Officer and was a shareholder of Virtual Solutions, Inc., atechnology 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 asthe Executive Vice President Business Development and General Counsel ofFreedomRoads, a position he has held since September 1, 2006.** **Prior to that timeand since 1998, Mr. Moody was a shareholder of the law firm of GreenbergTraurig, P.A.  From 1996 to 1998, Mr. Moodyserved as Vice President and Assistant General Counsel for Blockbuster, Inc.

 

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

 

StephenAdams has been the Chairman of our Board of Directors since December 1988.  Mr. Adams is also chairman and 90% ownerof FreedomRoads which operates RV dealerships (56 dealerships as of December 31,2007) throughout the United States.  Inaddition, Mr. Adams is the chairman of the board of directors and thecontrolling shareholder of AOA.  Mr. Adamsis also the chairman and 95% owner of ABH, which operates through itssubsidiary, a national bank.

 

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AndrisA. Baltins has been a member of the law firm of Kaplan, Strangis and Kaplan,P.A. since 1979.  Mr. Baltins is amember of the board of Polaris Industries Inc., a manufacturer of snowmobiles,all-terrain vehicles, motorcycles and related products, and serves as the Chairof its Corporate Governance and Nominating Committee and is also a member ofits Compensation Committee.  He alsoserves as a director of various private and non-profit corporations.  Mr. Baltins joined the Board ofDirectors in February 2006.  Mr. Baltins’law firm provides legal services to the Company and its subsidiaries.  Mr. Baltins also serves as a director ofFreedomRoads and of AOA, both of which are controlled by Stephen Adams.

 

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

 

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

 

GeorgePransky, Ph.D. has been in private practice as co-director of Pransky 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. Pranskyjoined 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**

 

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

 

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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:

 

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

·           Then, click on “Code of Conduct.”

 

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

 

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

 

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

 

**ITEM 11:  EXECUTIVE COMPENSATION**

 

**Compensation Discussion and Analysis**

 

***Overview***

 

Thefollowing discussion and analysis describes the Company’s compensationobjectives and policies as applied to the named executive officers appearing inthe Summary Compensation Table below (the “Executive Officers”).  This section is intended to provide aframework within which to understand the actual compensation awarded to, earnedor held by each Executive Officer during 2006 and 2007 as reported in thecompensation tables and accompanying narrative sections appearing on pages 82to 91 of this annual report on Form 10-K.

 

Inconnection with our joint marketing agreement with FreedomRoads, some of ourofficers also perform services for FreedomRoads.  Messrs. Boggess, Moody and Marshall, whowere officers 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,President and Chief Executive Officer of FreedomRoads before the jointmarketing agreement was implemented and receives his primary compensation fromFreedomRoads, except for $100,000 in annual salary paid by Camping World.  Accordingly, Mr. Lemonis is not includedin the Summary Compensation Table below or the following discussion.

 

***Compensation Objectives***

 

Ourexecutive compensation program is tied closely to our performance and aimed atenabling us to attract and retain the best possible executive talent.  In addition, the total compensation 

 

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opportunitiesprovided to Executive Officers reflect both the responsibility of each position(internal equity) and competitive market levels (external competitiveness).

 

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 only15-20% of the total compensation opportunity for the President and ChiefExecutive Officer of the Company, Mr. Schneider, and the Chief OperatingOfficer of our Camping World subsidiary, Mr. Boggess, and 50-60% of thetotal compensation opportunity for the other Executive Officers.  The remaining balance of each ExecutiveOfficer’s total compensation opportunity is dependent upon short-term andlong-term increases in Company financial performance and operating profit andis comprised of:

 

·                                In the case of Messrs. Schneider, Wolfeand Patel in 2006 and 2007, an annual incentive award that is based on anassigned percentage of income from operations in excess of $2.8 million,excluding depreciation, amortization, phantom stock expense and othernon-recurring expenses;

 

·                                In the case of Mr. Marshall in 2006 and2007, and Mr. Boggess in 2007, the annual discretionary incentive awardwas determined and valued by Mr. 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 ExecutiveOfficer.

 

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 stockagreement opportunities for all of the Executive Officers.  The Chairman of the Board of Directors alsoprovides Mr. Schneider and Mr. Lemonis with parameters regarding thecompensation opportunities to be provided to the remaining ExecutiveOfficers.  Mr. Schneider ultimatelydetermines the amount of compensation opportunities provided to Messrs. Wolfeand Patel within the scope of 

 

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authorityprovided by the Chairman of the Board of Directors.  In addition, Mr. Lemonis ultimatelydetermines the amount of compensation opportunities provided to Messrs. Boggess,and Marshall within the scope of authority provided by the Chairman of theBoard of Directors.  The Chairman of theBoard of Directors or the Chief Executive Officer of either the Company orCamping World, as the case may be, considers the annual and long-term financialperformance of the Company or Camping World in determining the forms andamounts of compensation paid to each Executive Officer.

 

TheCompany does not employ a compensation consultant, nor does it engage in anyformal market analysis in determining the levels of total compensationopportunity (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 40-50% 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. Schneiderand Boggess, as compared to the other Executive Officers, is tied to Companyperformance because each is the leader of his respective business operationsand thus is in a more unique position to influence the performance of theCompany.  However, the Company believesthat the total compensation opportunities of all the Executive Officers providea substantial incentive to each of them to drive the performance of the Company—bothin the short and long-term.

 

TheCompany, which is a wholly-owned subsidiary of AGII, does not grant shares ofCompany stock or stock options to the Executive Officers.  The long-term incentive awards in the form ofphantom stock agreements are intended to provide Executive Officers with a cashequivalent to the increase in value of the Company or Camping World that wouldotherwise be realized in stock or option awards of a company with publiclytraded equity securities.

 

***Elements of Compensation***

 

AnnualCompensation

 

**BaseSalary**

EachExecutive Officer receives a minimum level of fixed compensation in the form ofbase salary.  The Company does not reviewthe base salaries of the Executive Officers on a regular basis; however, it hasadjusted base salary levels from time to time on a discretionary basis basedupon factors such as an increase in the responsibilities or duties of aparticular Executive Officer.  In 2006,the Company exercised its discretion and increased the amount of base salarypaid to each of Mr. Marshall in recognition of increased duties assumed byeach in connection with the joint marketing arrangement entered into betweenCamping World and FreedomRoads, which is described under Item 13 of this AnnualReport on Form 10-K.  The Companyprovided nominal cost of living increases to Messrs. Wolfe, Marshall andPatel, but no increase for Messrs. Schneider and Boggess.

 

Theamount of base salary paid to each of the Executive Officers for 2007 and 2006is reflected in the Salary column of the Summary Compensation Table below.

 

**AnnualIncentive Awards**

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

 

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*2007 –Non-Equity Incentive Awards:*

 

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

 

For2007, Messrs. Boggess, Marshall and Patel participated in discretionaryannual incentive award programs.  Theannual incentive award for Messrs. Boggess and Marshall was based upon thereview and evaluation of Mr. Lemonis. In the fourth quarter of 2007, Mr. Lemonis determined that theamount of annual incentive awards payable to Messrs. Boggess and Marshallshould be $450,000 and $135,000, respectfully. The 2007 annual incentive award for Messrs. Boggess and Marshallwas paid pro-rata every two weeks, in connection with the regular payrollcycle, based on estimated Company performance. Mr. Patel’s annual incentive award was based on the performance ofspecific subsidiaries and programs of the Company as determined by Mr. Schneider.  The amount of annual incentive award for Mr. Patelwas $132,350 for 2007 and paid in the first quarter of 2008.  These amounts are reflected in the Bonuscolumn of the Summary Compensation table.

 

*2006 –Non-Equity Incentive Awards:*

 

For2006, Messrs. Schneider, Boggess and Wolfe received their annual incentiveawards based on the actual performance of the Company as measured under theparameters of the annual incentive award program.  The amount of the annual incentive award for Messrs. Schneider,Boggess and Wolfe was based on 1.0%, 1.0% and 0.2%, respectively, of theCompany’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.  This amount was paid on a pro rata basisevery two weeks, in connection with the regular payroll cycle, based onestimated Company performance.  A finalmeasurement of Company performance under the parameters of the annual incentiveaward is made following the end of the fiscal year.  These amounts are reflected in the Non-EquityIncentive Compensation column of the Summary Compensation table.

 

For2006, Messrs. Marshall and Patel participated in discretionary annualincentive award programs.  The annualincentive award for Mr. Marshall was based upon the review and evaluationof Mr. Lemonis.  In the fourthquarter of 2006, Mr. Lemonis determined that the amount of annualincentive award for Mr. Marshall was $123,000 which was paid in March 

 

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2007. Mr. Patel’s annual incentive awardwas based on the performance of specific subsidiaries and programs of theCompany as determined by Mr. Schneider. The amount of annual incentive award for Mr. Patel was $108,250 for2006 and paid in the first quarter of 2007. These amounts are reflected in theBonus column of the Summary Compensation table.

 

Long-TermCompensation/Phantom Stock Agreements

 

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

 

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

 

*Mr. Schneider*:  Mr. Schneiderentered into a phantom stock agreement with the Company, dated January 1,2000, pursuant to which Mr. Schneider received 1.8% of the Increase inCompany Value as measured over the period beginning January 1, 2000 until December 31,2003.  The value of such earnings werepaid in three equal annual installments of $43,326.  The last payment under the 2000 phantom stockagreement was made to Mr. Schneider in January 2006.

 

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

 

*Messrs. Schneider,Wolfe and Patel*:  Messrs. Schneider, Wolfe and Patel havealso each entered into phantom stock agreements with the Company.  The agreements for Messrs. Schneider andWolfe are dated January 1, 2007, and the agreement for Mr. Patel isdated April 1, 2004 pursuant to which Mr. Schneider will receive5.0%, Mr. Wolfe will receive 0.66% and Mr. Patel will receive 0.25%of the increase in Company value as measured over the period beginning as pertheir respective agreements and ending December 31, 2009.  The phantom stock payout under the 2009agreements will be paid in three equal annual installments starting in 2010.

 

*Mr. Boggess*:  Mr. Boggessdid not earn any awards under any phantom stock agreements during 2006.  The last phantom stock agreement entered intobetween Mr. Boggess and the Company, dated July 1, 2003, which wasamended March 1, 2006 to freeze the measurement period under suchagreement effective as of December 31, 2005 as a result of various changesin corporate structure, organization and administration affecting CampingWorId, including the joint marketing arrangement between Camping World andFreedomRoads.  The amount of 

 

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phantomstock payments earned by Mr. Boggess under this agreement will be paid inthree equal annual installments of $382,209 in each January of 2007, 2008and 2009.

 

*Mr. Marshall*:  Mr. Marshalldid not earn any awards under any phantom stock agreements during 2006 or2007.  Mr. Marshall is party to aphantom stock agreement with the Company dated June 30, 2002, as amended July 31,2003.  On March 1, 2006, the Companydecided to freeze the measurement period under such agreements effective as of December 31,2005 as a result of various changes in corporate structure, organization andadministration affecting Camping World, including the joint marketingarrangement between Camping World and FreedomRoads.  The amount of phantom stock payments earnedby Mr. Marshall under this phantom stock agreement was paid in one lumpsum of $463,883 on January 2, 2007.

 

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 comparable companies.

 

**401(k) Savingsand Profit Plan**

 

AffinityGroup, Inc.

TheCompany sponsors a deferred savings and profit sharing plan (the “401(k) Plan”)qualified under Section 401(a) and 401(k) of the InternalRevenue Service Code of 1986, as amended (the “Code”).  All employees over age twenty-one, includingthe Executive Officers, are eligible to participate in the 401(k) Plan.  Employees who have completed one year ofservice (minimum of 1,000 hours) are eligible for matching contributions.  For the plan year 2007, the Company elected aSafe Harbor Matching Contribution for the employer match and set the employermatch, which vests upon contribution, at an amount equal to 100% of the first4% of the employee’s contribution. Employees may defer up to 60% of their eligible compensation up toInternal Revenue Service limits electing pre-tax contributions or post-taxcontributions (Roth contributions).  2007Employer Matching Contributions for all Affinity employees totaled $884,448.  The amounts of 401(k) Plan matchingcontributions by the Company during 2007 are reflected in the All OtherCompensation column of the Summary Compensation Table below.

 

CampingWorld, Inc.

BeginningJanuary 1, 2007 Camping World was no longer a participating employer inthe Affinity Group 401(k) Plan and elected to begin participating in theFreedom Roads 401(k) Defined Contribution Plan, Freedom Rewards 401(k) Plan,qualified under Section 401(a) and 401(k) of the InternalRevenue Service Code of 1986, as amended (the “Code”).  All employees over the age of 18, includingthe Executive Officers are eligible to participate in the 401(k) Plan.  Employees who have completed twelve months ofconsecutive service are eligible for company match.  For the plan year 2007, the matchingcontribution schedule is 50% up to the first 6% of eligible compensation.  Company matching contributions follow a six (6) yeargraded vesting schedule.  Non-highlycompensated employees may defer up to 75% of their eligible compensation up tothe Internal Revenue Service limits. Highly compensated employees may defer up to 15% of their eligiblecompensation up to the Internal Revenue Service limits.  Employer Matching Contributions for allAffinity employees totaled $812,500.  Theamounts of 401(k) Plan matching contributions by the Company during 2007are reflected in the All Other Compensation column of the Summary CompensationTable below.

 

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**KEYSOP**

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

 

 

**Other Benefit Plans**

Employeesof the Company, including the Executive Officers, receive certain medical anddental benefits during their employment. One of the Company’s predecessors also provided eligible employees withmedical, dental and life insurance coverage after retirement.  The estimated future costs associated withsuch coverage to retirees are reserved as a liability in the Company’s consolidatedfinancial statements.  Current employeesare not provided medical and 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. Schneiderand Boggess.  In addition, Mr. Marshallreceives an annual car allowance of approximately $9,000.  To the extent that such aggregate incrementalcost to the Company of providing these perquisites to each Executive Officer isequal to or greater than $10,000, such amount is included in the All OtherCompensation column of the Annual Compensation Table.

 

PhantomStock Agreements:  Asdescribed in the section entitled “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above, the Company has entered into phantom stockagreements with each of the Executive Officers. The phantom stock agreements also include the terms of employment forsuch Executive Officers, which are described in more detail in the sectionentitled “*Potential Payments upon Termination or Change inControl—Employment Terms in Phantom Stock Agreements*” below.  The terms of the phantom stock agreements forMessrs. Schneider, Wolfe, and Patel end on December 31, 2009.

 

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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.

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

 

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** **

**Summary Compensation Table**

 

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

 

**SUMMARY COMPENSATION TABLE**

** **
| **Name and Principal Position** | ** ** | **Year** | ** ** | **Salary  ($)** | ** ** | **Bonus  ($)** | ** ** | **Stock Awards  ($)(1)** | ** ** | **Non-Equity  Incentive  Plan  Compen-  sation  ($)(2)** | ** ** | **Change in  Pension  Value and  Non-qualified   Deferred  Compensation   Earnings  ($)(3)** | ** ** | **All  Other  Compen-  sation  $((4)** | ** ** | **Total  ($)** | ** ** |
|------------------------------------------------|------------|----------|------------|-----------------|------------|----------------|------------|--------------------------|------------|----------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|----------------|------------|
| **(a)**                                        | ** ** | **(b)**  | ** ** | **(c)**         | ** ** | **(d)**        | ** ** | **(e)**                  | ** ** | **(g)**                                                  | ** ** | **(h)**                                                                                                | ** ** | **(i)**                                | ** ** | **(j)**        | ** ** |
|                                           |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
| Michael A.  Schneider                          |       | 2007     |       | $               | 100,000    |           | —     |                     | $          | 236,167                                                  |       | $                                                                                                      | 481,850    |                                   | $          | 248,070        |       | $ | 11,608 |   | $ | 1,077,695 |   |
| President,                                     |       | 2006     |       | 100,000         |       | —         |       | 936,011                  |       | 590,050                                                  |       | 519,133                                                                                                |       | 8,587                                  |       | 2,153,781      |       |
| Chief Executive  Officer                       |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
|                                           |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
| Mark J. Boggess                                |       | 2007     |       | 100,000         |       | 450,000        |       | —                   |       | —                                                   |       | 488,570                                                                                                |       | 28,745                                 |       | 1,067,315      |       |
| Chief Operating                                |       | 2006     |       | 101,923         |       | —         |       | —                   |       | 590,050                                                  |       | 368,723                                                                                                |       | 21,006                                 |       | 1,081,702      |       |
| Officer of  Camping                            |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
| World, Inc.                                    |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
|                                           |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
| Thomas F. Wolfe                                |       | 2007     |       | 190,769         |       | —         |       | 31,174                   |       | 120,463                                                  |       | 23,284                                                                                                 |       | 8,857                                  |       | 374,547        |       |
| Senior Vice  President                         |       | 2006     |       | 185,000         |       | —         |       | 122,985                  |       | 118,010                                                  |       | 41,080                                                                                                 |       | 8,673                                  |       | 475,748        |       |
| Chief Financial  Officer                       |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
|                                           |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
| Kenneth Marshall                               |       | 2007     |       | 200,000         |       | 135,000        |       | —                   |       | —                                                   |       | —                                                                                                 |       | 26,387                                 |       | 361,387        |       |
| President of                                   |       | 2006     |       | 191,346         |       | 123,000        |       | —                   |       | —                                                   |       | —                                                                                                 |       | 8,700                                  |       | 323,046        |       |
| E-Commerce of                                  |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
| Camping World,  Inc.                           |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
|                                           |       |     |       |            |       |           |       |                     |       |                                                     |       |                                                                                                   |       |                                   |       |           |       |
| Prabhuling Patel                               |       | 2007     |       | 179,808         |       | 132,350        |       | 11,808                   |       | —                                                   |       | 19,309                                                                                                 |       | 4,133                                  |       | 347,408        |       |
| Senior Vice  President                         |       | 2006     |       | 175,000         |       | 108,250        |       | 40,155                   |       | —                                                   |       | 13,989                                                                                                 |       | 4,000                                  |       | 341,394        |       |
|                                                |            |          |            |                 |            |                |            |                          |            |                                                          |            |                                                                                                        |            |                                        |            |                |            |  |  |  |  |  |  |

 

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(1)           Includes dollaramounts recognized for financial statement reporting purposes for the fiscalyear ended December 31, 2006 and 2007 pursuant to the phantom stockagreements and thus may include awards granted in and prior to 2007.  These amounts differ from the actual paymentsdescribed under Long-Term Compensation/ Phantom Stock Agreements as the amountsdescribed in that section include amounts of phantom stock awards earned inprior years.

 

(2)           Mr. Boggessdeferred $407,582 of the annual incentive awards otherwise payable to himduring 2006 under the terms of the KEYSOP.

 

(3)           The amount ofearnings on amounts deferred under the KEYSOP is dependent upon the particularinvestment choices of the participant, which may include privateinvestments.  The Company does notinfluence or have any involvement in the earnings under the KEYSOP.  The amounts shown in the table reflect theaggregate earnings on each Executive Officer’s account during 2006 and 2007(including earnings that are at or below market).  Messrs. Moody and Marshall elected notto participate in the

 

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KEYSOP.  The Company does not maintain any pensionplans.  In addition, the ExecutiveOfficers do not receive above-market or preferential earnings on compensationthat is deferred pursuant to the 401(k) Plan.

 

(4)           Includes$8,857, $6,750, $8,857, $6,750 and $4,133 for 2007, and $8,587, $8,407, $8,673$8,700, and $0 for 2006, of Company matching contributions under the 401(k) Planfor Messrs. Schneider, Boggess, Wolfe, Marshall, and Patel,respectively.  In addition, includes$2,751 and $2,221 for 2007, and $0 and $3,290 for 2006, of Company-paid lifeinsurance premiums for Mr. Schneider and Mr. Boggess,respectively.  Also includes $19,394 and$19,637 for 2007, and $9,307 and $0 for 2006 of automobile allowance for Mr. Boggessand Mr. Marshall, respectively.

 

**Grants of Plan-Based Awards in2007**

 

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

 

Thefollowing table reflects the actual payout to Messrs. Schneider, Boggessand Wolfe pursuant to the annual incentive award program based on Companyperformance in 2006 and 2007, a portion of which were paid the year earned withthe remainder paid the following year. As noted in footnote 1 to the following table, the annual incentiveawards paid to Messrs. Marshall and Patel for 2006 and 2007 and Mr. Boggessin 2007 were discretionary and thus are not reflected in this table.

 
| **Name**                                        | ** ** | **Year**   | ** ** | **Estimated Future Payouts Under Non-  Equity Incentive Plan Awards  Target ($)(1)** | ** ** |
|-------------------------------------------------|------------|------------|------------|------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | ** ** | ** ** | ** **                                                                                                                   | ** ** |
| Michael A. Schneider                            |       | 2007       |       | $ 481,350                                                                                                               |       |
| President, Chief  Executive Officer             |       | 2006       |       |   590,050                                                                                                          |       |
| Mark J. Boggess                                 |       | 2007       |       | —                                                                                                                       |       |
| Chief Operating  Officer of Camping World, Inc. |       | 2006       |       |   590,050                                                                                                          |       |
| Thomas F. Wolfe                                 |       | 2007       |       |   120,463                                                                                                          |       |
| Senior Vice  President, Chief Financial Officer |       | 2006       |       |   118,010                                                                                                          |       |
| Kenneth Marshall                                |       | 2007       |       | —                                                                                                                       |       |
| President of  E-Commerce of Camping World, Inc. |       | 2006       |       | —                                                                                                                       |       |
| Prabhuling Patel                                |       | 2007       |       | —                                                                                                                       |       |
| Senior Vice  President                          |       | 2006       |       | —                                                                                                                       |       |

 

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(1)           Representsaward under the Company’s annual incentive award program.  The amounts in column (d) reflect theactual payout to each of Messrs. Schneider, Boggess and Wolfe under theannual incentive award program based upon Company performance in 

 

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2006and 2007 a portion of which was paid in the year earned with the remainder paidthe following year.  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. Marshall and Patel for 2006 and 2007 performance and Mr. Boggessfor 2007 performance were discretionary and thus are not included in theforegoing table.  The terms of theCompany’s annual incentive award program for 2006 and 2007 are described inmore detail under the section entitled “*Compensation Discussionand Analysis—Elements of Compensation—Annual Compensation—Annual IncentiveAwards*” above.

 

**Outstanding Equity Awards at 2007 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 agreementsentered into before January 1, 2007 were earned or vested as of December 31,2007.

 

**Option Exercises and Stock Vested in 2007**

 

The following table gives information concerning the vesting of theExecutive Officers’ interests under phantom stock agreements during 2006 and2007.  The Company, which is awholly-owned subsidiary of AGHI, does not grant option awards to the ExecutiveOfficers.

 
| ** **                                      | ** ** | ** ** | ** ** | **Stock Awards**                                        | ** ** |
|-------------------------------------------------|------------|------------|------------|--------------------------------------------------------------|------------|
| **Name**                                        | ** ** | **Year**   | ** ** | **Number of Shares  Acquired on Vesting   (#)(1)** | ** ** | **Value Realized  on Vesting  ($)** | ** ** |
| ** **                                      | ** ** | ** ** | ** ** | ** **                                                   | ** ** | ** ** | ** ** | ** ** |
| Michael A.  Schneider                           |       | 2007       |       | $                                                            | 236,167    | (2) | $ 236,167(6) |   |
| President, Chief  Executive Officer             |       | 2006       |       | 936,011                                                      | (3)        |    936,011(5) |   |
| Mark J. Boggess                                 |       | 2007       |       | —                                                       | (4)        | — |   |
| Chief Operating  Officer of Camping World, Inc. |       | 2006       |       | —                                                       | (4)        | — |   |
| Thomas F. Wolfe                                 |       | 2007       |       | 31,174                                                       | (2)        |     31,174(6) |   |
| Senior Vice  President, Chief Financial Officer |       | 2006       |       | 122,985                                                      | (3)        |    122,985(5) |   |
| Kenneth Marshall                                |       | 2007       |       | —                                                       | (4)        | — |   |
| President of  E-Commerce of Camping World, Inc. |       | 2006       |       | —                                                       | (4)        | — |   |
| Prabhuling Patel                                |       | 2007       |       | 11,808                                                       | (2)        |     11,808(6) |   |
| Senior Vice  President                          |       | 2006       |       | 40,155                                                       | (3)        |     40,155(5) |   |

 

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(1)           The Executive Officers’interests under the phantom stock agreements are denominated as a percentage ofincreases in the value over a multiple-year measurement period, as 

 

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described in more detail under the section entitled “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*” above.  The amounts set forth in this column reflectthe dollar amount of that percentage interest, as calculated upon vesting.

 

(2)           Represents the dollar valueof Messrs. Schneider’s and Wolfe’s percentage increase in the value during2007 pursuant to their respective phantom stock agreements dated January 1,2007, as described in more detail under the section entitled, “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/ Phantom Stock Agreements*” above.  As described in that section, this amountwill be paid out in three equal annual installments, the first of which weredistributed during the second quarter of 2009.

 

(3)           Represents the dollar valueof Messrs. Schneider’s, Wolfe’s and Patel’s percentage increase in thevalue during 2006 pursuant to their respective phantom stock agreements dated January 1,2004, as described in more detail under the section entitled, “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*” above.  As described in that section, this amountwill be paid out in three equal annual installments, the first of which will bedistributed during the second quarter of 2007.

 

(4)           None of Messrs. Boggessor Marshall earned any interests under the phantom stock agreements during2006.  As described in more detail underthe section entitled “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above, each of Messrs. Boggess and Marshall areparties to phantom stock agreements which were deemed to be vested as of December 31,2005 as a result of various changes in corporate structure, organization andadministration affecting Camping World, including the joint marketingarrangement between Camping World and FreedomRoads.  Also, as explained in that section, theamount of phantom stock interest earned by Messrs. Moody and Marshall asof December 31, 2005 was distributed to each of them in one lump-sumpayment on January 2, 2007.  Theamount of phantom stock interest earned by Mr. Boggess as of December 31,2005 is to be paid out in three equal annual installments in 2007, 2008 and2009.

 

(5)           As described in more detailunder the section entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*,” this amount will be paid out in three equal annualinstallments, the first of which will be distributed during the second quarterof 2007.

 

(6)           As described in more detailunder the section entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*,” this amount represents the phantom stock interestearned in 2007 under the agreements entered into on January 1, 2007 with adetermination date of December 31, 2009.

 

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** **

**Nonqualified Deferred Compensation in Fiscal 2007**

 

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

 
| ** **                                      | ** ** | ** ** | ** ** | **Executive**            | ** ** | **Registrant**           | ** ** | **Aggregate**            | ** ** | **Aggregate**     | ** ** | **Aggregate**             | ** ** |
|-------------------------------------------------|------------|------------|------------|--------------------------|------------|--------------------------|------------|--------------------------|------------|-------------------|------------|---------------------------|------------|
| ** **                                      | ** ** | ** ** | ** ** | **Contribution**         | ** ** | **Contributions**        | ** ** | **Earnings**             | ** ** | **Withdrawals/**  | ** ** | **Balance**               | ** ** |
| ** **                                      | ** ** | ** ** | ** ** | **In Last FY** | ** ** | **in Last FY** | ** ** | **in Last FY** | ** ** | **Distributions** | ** ** | **at Last FYE** | ** ** |
| **Name**                                        | ** ** | **Year**   | ** ** | **($)**                  | ** ** | **($)**                  | ** ** | **($)**                  | ** ** | **($)**           | ** ** | **($)**                   | ** ** |
| **(a)**                                         | ** ** | ** ** | ** ** | **(b)**                  | ** ** | **(c)**                  | ** ** | **(d)**                  | ** ** | **(e)**           | ** ** | **(f)**                   | ** ** |
| Michael A.  Schneider                           |       | 2007       |       | —                   |       | —                   |       | $                        | 248,070    |              | $          | 2,816,304                 |       | $ | 2,231,598 |   |
| President, Chief  Executive Officer             |       | 2006       |       | —                   |       | —                   |       | 519,133                  |       | —            |       | 4,799,832                 |       |
| Mark J. Boggess                                 |       | 2007       |       | —                   |       | —                   |       | 488,570                  |       | —            |       | 4,328,448                 |       |
| Chief Operating  Officer of Camping World, Inc. |       | 2006       |       | $                        | 407,582    |                     | —     |                     | 368,723    |              | —     |                      | 3,839,878  |   |
| Thomas F. Wolfe                                 |       | 2007       |       | —                   |       | —                   |       | 23,284                   |       | —            |       | 279,046                   |       |
| Senior Vice  President, Chief Financial Officer |       | 2006       |       | —                   |       | —                   |       | 41,080                   |       | —            |       | 255,762                   |       |
| Kenneth  Marshall(1)                            |       | 2007       |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
| President of  E-Commerce of Camping World, Inc. |       | 2006       |       | —                   |       | —                   |       | —                   |       | —            |       | —                    |       |
| Prabhuling Patel                                |       | 2007       |       | 102,722                  |       | —                   |       | 19,309                   |       | —            |       | 242,723                   |       |
| Senior Vice  President                          |       | 2006       |       | 106,703                  |       | —                   |       | 13,989                   |       | —            |       | 120,692                   |       |
|                                                 |            |            |            |                          |            |                          |            |                          |            |                   |            |                           |            |  |  |  |  |

 

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(1)                                  Mr. Marshallelected not to participate in the KEYSOP.

 

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

 

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

 

Overview:  The tablesbelow reflect the estimated amount of compensation that would be payable toeach Executive Officer under the terms of his phantom stock agreement in theevent of termination of such Executive Officer’s employment under any one ofthe following scenarios:

 

·      Without cause by theCompany; or

 

·      Without cause by the Companyor with good reason by the Executive Officer in connection with a change incontrol.

 

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An Executive Officer is not entitled to a severance payment upon (i) terminationof the phantom stock agreement or employment at any time by the ExecutiveOfficer (other than termination with good reason in connection with a change incontrol); (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:  The phantom stock agreements provide forseverance payments to the Executive Officers in the event the Companyterminates their employment without “cause.” “Cause” includes, but is not limited to:

 

·      The Executive Officer’sbreach of the terms of the phantom stock agreement or any other legalobligation of the Company; or

 

·      The Executive Officer’sfraud, dishonesty, negligence, misconduct or other deliberate action whichcauses injury to the Company or any of its subsidiaries or to their respectivereputations or an act of the Executive involving moral turpitude or a seriouscrime.

 

For purposes of calculating the potential payments set forth in thetable below, we have assumed that the date of termination was December 31,2007.  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. Wolfe** | ** ** | **Mr. Marshall** | ** ** | **Mr. Patel** | ** ** |
|------------------------------------------------|------------|------------------------|------------|----------------------|------------|--------------------|------------|-----------------------|------------|--------------------|------------|
| Basic  Compensation                            |       | $                      | 973,480    |                 | —     | (3)                | $          | 311,232               | (4)        | —             | (3)        | $ | 208,105 | (5) |
|                                           |       |                   |       |                 |       |               |       |                  |       |               |       |
| Accrued and  unpaid annual incentive award (1) |       | 31,850                 |       | —               |       | 30,462             |       | —                |       | 132,350            |       |
| Total                                          |       | $                      | 1,005,330  |                 | —     |               | $          | 341,694               |       | —             |       | $ | 340,455 |   |

 

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(1)           Represents an amount equalto each Executive Officer’s accrued but unpaid annual incentive award as of December 31,2007.

 

(2)           Represents an amount equalto Mr. Schneider’s base salary and annual incentive award as of December 31,2007, divided by 52 weeks, times 87 weeks.  As of December 31, 2007, Mr. Schneider had been employed withthe Company for 30 years.  The annualbase salary and annual incentive award in effect for Mr. Schneider as of December 31,2007 is reflected in the Salary column and Non-Equity Incentive PlanCompensation column, respectively, of the Summary Compensation Table above.

 

(3)           Messrs. Boggess andMarshall are not participants in a current phantom stock agreement and are notentitled to any payments upon termination or change of control.

 

(4)           Represents an amount equalto one full year of the base salary and annual incentive award to Mr. Wolfeas of December 31, 2007.  The annualbase salary and annual incentive award in effect as of December 31, 2007is reflected in the Salary column and

 

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the Non-Equity Incentive Plan Compensation column, respectively, of theSummary Compensation Table above.

 

(5)           Represents an amount equalto eight months of base salary and annual incentive award for Mr. Patel asof December 31, 2007.  The annualbase salary and annual incentive award in affect as of December 31, 2007is reflected in the Salary column and Bonus column, respectively, of theSummary Compensation Table.

 

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

 

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

 

·      There is a consolidation ormerger of the Company or its parent, AGHI (or such other entity that holds inexcess of 80% of the issued and outstanding equity securities of AGHI) (the “Parent”),in which 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 ortransfer of all or substantially all of the assets of the Company or the Parentto any person or group; or

 

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

 

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 ExecutiveOfficer’s duties, authorities or any other responsibilities (including status,offices, titles and reporting requirements);

 

·      A reduction in base salaryor annual incentive award compensation; or

 

·      A relocation of the ExecutiveOfficer outside the same metropolitan area as the Executive Officer’s currentoffice location.

 

The phantom stock agreements entered into by Mr. Marshall do notprovide for payments upon termination in connection with a change in control.

 

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For purposes of calculating the potential payments set forth in thetable below, we have assumed that the date of termination was December 31,2007.  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. Wolfe** | ** ** | **Mr. Marshall** | ** ** | **Mr. Patel** | ** ** |
|------------------------------------------------|------------|------------------------|------------|----------------------|------------|--------------------|------------|-----------------------|------------|--------------------|------------|
| Basic  Compensation                            |       | $                      | 973,480    | (3)                  | —     | (4)                | $          | 311,232               | (5)        | —             | (4)        | $ | 208,105 | (6) |
| *(base  salary*                                |       |                   |       |                 |       |               |       |                  |       |               |       |
| *and  annual*                                  |       |                   |       |                 |       |               |       |                  |       |               |       |
| *incentive  award)*                            |       |                   |       |                 |       |               |       |                  |       |               |       |
|                                           |       |                   |       |                 |       |               |       |                  |       |               |       |
| Accrued and  unpaid annual incentive award (1) |       | 31,850                 |       | —               |       | 30,462             |       | —                |       | 132,350            |       |
|                                           |       |                   |       |                 |       |               |       |                  |       |               |       |
| Life and Health                                |       | 52,947                 |       | —               |       | 44,694             |       | —                |       | 36,711             |       |
| Insurance                                      |       |                   |       |                 |       |               |       |                  |       |               |       |
| Benefits (2)                                   |       |                   |       |                 |       |               |       |                  |       |               |       |
| Total                                          |       | $                      | 1,058,277  |                 | —     |               | $          | 386,388               |       | —             |       | $ | 377,166 |   |

 

----

(1)           Represents an amount equalto each Executive Officer’s accrued but unpaid annual incentive award as of December 31,2007.

 

(2)           Represents the value ofhealth benefits for a three year period following termination based on amonthly premium of $1,241 for Messrs. Schneider and Wolfe and $1,020 for Mr. Patel.  In the case of Mr. Schneider, also includesthe value of life insurance benefits for a period of three years followingtermination based on a monthly premium of $229.

 

(3)           Represents an amount equalto Mr. Schneider’s base salary and annual incentive award as of December 31,2007, divided by 52 weeks, times 87 weeks. The annual base salary and annual incentive award in effect for Mr. Schneideras of December 31, 2007 is reflected in the Salary column and Non-EquityIncentive Plan Compensation column, respectively, of the Summary CompensationTable above.

 

(4)           Messrs. Boggess andMarshall are not participants in a current phantom stock agreement and are notentitled to any payments upon termination or change of control.

 

(5)           Represents an amount equalto one full year of the base salary and annual incentive award of Mr. Wolfeas of December 31, 2007.  The annualbase salary and annual incentive award in effect as of December 31, 2007is reflected in the Salary column and the Non-Equity Incentive PlanCompensation column, respectively, of the Summary Compensation Table above.

 

(6)           Represents an amount equalto eight months of base salary and annual incentive award for Mr. Patel asof December 31, 2007.  The annualbase salary and annual incentive award in affect as of December 31, 2007is reflected in the salary column, respectively, of the Summary CompensationTable.

 

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

 

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

 

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

 

·      *Mr. Boggess*:  Mr. Boggess’ phantom stock agreement,dated January 1, 2005, provides that he will be employed as the Presidentand Chief Executive Officer of Camping World. In September 2006, Mr. Boggess was appointed to his currentposition as the Chief Operating Officer of Camping World and Mr. Lemonisassumed the role of President and Chief Executive Officer of Camping World inconnection with various changes in corporate structure, organization andadministration affecting Camping World, including the joint marketingarrangement between Camping World and FreedomRoads.  The other terms of Mr. Boggess’employment remained the same following such restructuring.  Accordingly, Mr. Boggess continues to beentitled to receive a base salary and annual incentive award in accordance withsuch practices and procedures as are generally applicable to otheremployees.  The term of the phantom stockagreement expired on December 31, 2006.

 

·      *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.  In April 2007,Mr. Marshall was appointed to his current position as President ofE-Commerce 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. Marshallreceived an increase in base salary to $200,000.  The other terms of Mr. Marshall’semployment remained unchanged.  The termof the phantom stock agreement expired on December 31, 2006.

 

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

 

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

 

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

 

**Director Compensation in 2007**

 

The Company pays its non-management directors a monthly director’s feeof $1,800 per month.  The Company doesnot compensate Messrs. Adams or Schneider for their service on the Boardof Directors.  The Company does notprovide any other compensation or benefits to the members of its Board ofDirectors.  During 2007, the followingfees were earned or paid in cash to the respective director:

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

 

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

 

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

 

**Compensation Committee Interlocks and Insider Participation**

 

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

 

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** **

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

 

TheCompany is a wholly-owned subsidiary of AGHC, a privately-ownedcorporation.  The following table setsforth, as of December 31, 2007, certain information with respect to thebeneficial ownership of the Common Stock of AGHC by each shareholder who isknown to us to beneficially own more than 5% of the outstanding shares, eachdirector, each executive officer listed in the Summary Compensation Table andall of our executive officers and directors as a group.

 
| **Name and Address of Beneficial Owner**         | ** ** | **Number of Shares  of Stock Owned (1)** | ** ** | **Percent of  Common Stock** | ** ** |
|---------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|----------------------------------------|------------|
|                                                                      |       |                                                              |       |                                   |       |
| Stephen Adams,  Director   2575 Vista Del Mar Drive   Ventura, CA 93001   |       | 1,407.7                                                           | (2)        | 98.23                                  | %          |
| Michael A.  Schneider   President, Chief Executive Officer and   Director |       | 0                                                                 |       | 0                                      |       |
| Mark J. Boggess   Chief Operating Officer of Camping World, Inc.          |       | 0                                                                 |       | 0                                      |       |
| Kenneth Marshall    President of E-Commerce of   Camping World, Inc. |       | 0                                                                 |       | 0                                      |       |
| Thomas F. Wolfe   Senior Vice President, Chief Financial   Officer        |       | 0                                                                 |       | 0                                      |       |
| Prabuhling Patel    Senior Vice President                                 |       | 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 (10 persons)             |       | 1,407.7                                                           |       | 98.23                                  | %          |

 

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

 

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

 

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

 

**Certain Relationships and Related PersonTransactions**

 

Review and Approval of Related PersonTransactions

 

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

 

RelatedParty Transactions

 

Inconnection with our effort to expand the number of Camping World stores bydeveloping retail alliances with RV dealerships across North America, we haveestablished 45 Camping World stores alongside or within RV dealerships owned byFreedomRoads, which is controlled by the Chairman of our Board of Directors,Stephen Adams, and we expect to open additional Camping World stores alongsideor within such RV dealerships in the future. At December 31, 2007, the Company leased 35 properties fromFreedomRoads, sub-leased seven properties to FreedomRoads, and Camping Worldand FreedomRoads are joint tenants under three leases.  Total payments by the Company to FreedomRoads under these leased properties for 2007 and 2006 were approximately $3.7million and $1.7 million, respectively, and future commitments under theseleases total approximately $30.3 million. The leases expire at various dates from August 2013 through May 2017.  For 2007 and 2006, lease payments receivedfrom FreedomRoads for the seven subleased properties were approximately $0.9 million and $1.0 million, respectively,and future payments to be received under these subleases total approximately$4.5 million.  The Company paid FreedomRoadsapproximately $9.4 million in 2007 and FreedomRoads paid the Companyapproximately $17.5 million, $5.5 million, and $3.2 million in 2007, 2006 and2005, respectively, under the product marketing and sales agreements.

 

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

 

Mr. Boggess, Chief Operating Officer ofCamping World, is a partner in a partnership that leases one facility under along-term lease to Camping World, Inc. in 2007.  In prior years other related-party leasesexisted with executives who are no longer with the Company.  For the years ended December 31, 2007,2006 and 2005, payments under these leases were approximately $0.6 million,$0.9 million, and $3.3 million, respectively. This lease expires December 2020, subject to the right of CampingWorld to exercise renewal options.

 

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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.

 

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.  During2007, 2006 and 2005 KSK received $257,000 million, $198,000 and $917,000 inlegal fees from the Company, respectively.

 

The consulting firm ofPransky and Associates, P.S. (“PA”) provides ongoing consulting services to theCompany and certain subsidiaries.  GeorgePransky, a member of the Board of Directors, is a director of thatcompany.  During 2007 and 2006, PAreceived $86,000 and $37,000 in fees from the Company, respectively.

 

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

 

Director Independence

 

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

 

**ITEM14: PRINCIPAL ACCOUNTING FEES AND SERVICES**

 

The Board of Directors engaged Ernst & Young LLP as anindependent Registered Public Accounting Firm to examine our accounts for thefiscal year ending December 31, 2007.

 

**AuditFees**

 

Theaggregate audit fees paid to Ernst & Young LLP for the fiscal yearsended December 31, 2007 and 2006 were $366,045 and $435,118,respectively.  These fees include amountsfor the audit of the Company’s consolidated annual financial statements, standalone audits of certain subsidiaries, and the reviews of the consolidatedfinancial statements included in the Company’s Quarterly Reports on Form 10-Q,including assistance with and review of documents filed with the SEC.

 

**Audit-RelatedFees**

 

Theaggregate audit-related fees paid to Ernst & Young LLP for the fiscalyears ended December 31, 2007 and 2006 were $0, and $16,000,respectively.  These fees related to****

 

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specificanalysis of accounting treatments and general assistance with theimplementation of the SEC rules pursuant to the Sarbanes-Oxley Act of2002.

 

**Tax Fees**

 

The aggregate fees billed by Ernst & Young LLP for taxservices rendered for the fiscal years ended December 31, 2007 and 2006were $11,000 and $47,900, respectively. The fees paid in each of those years primarily related to tax planningand compliance services.

 

**All Other Fees**

 

There were no other fees paid to Ernst & Young LLP for theyears ended December 31, 2007 and 2006. The consulting firm of Pransky and Associates, P.S. (“PA”) providesongoing consulting services to the Company and certain subsidiaries.

 

**Pre-ApprovalRequirements**

 

TheBoard of Directors has the sole authority to review in advance and grant anypre-approvals of (i) all auditing services to be provided by theindependent Registered Public Accounting Firm, (ii) all significantnon-audit services to be provided by the independent auditors as permitted by Section 10Aof the Securities Exchange Act of 1934, and (iii) all fees and the termsof engagement with respect to such services. All audit and non-audit services performed by Ernst & Young LLPduring fiscal 2007 were pre-approved pursuant to the procedures outlined above.

 

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** **

**PART IV**

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

 

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** **

**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant has duly caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized, inthe City of Ventura, State of California on March 14, 2007.

 

 

AFFINITY GROUP HOLDING,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 14, 2008 |
|----------------------------------|--------|-----------------------------------------------|--------|---------------------|
| Thomas F. Wolfe                  |   | Chief Financial Officer                       |   |                |
|                             |   | (Principal Financial  and Accounting Officer) |   |                |
|                             |   |                                          |   |                |
| *                                |   | Director                                      |   | March 14, 2008 |
| Stephen Adams                    |   |                                          |   |                |
|                             |   |                                          |   |                |
|                             |   |                                          |   |                |
| *                                |   | Director                                      |   | March 14, 2008 |
| Andris A. Baltins                |   |                                          |   |                |
|                             |   |                                          |   |                |
|                             |   |                                          |   |                |
| *                                |   | Director                                      |   | March 14, 2008 |
| David Frith-Smith                |   |                                          |   |                |
|                             |   |                                          |   |                |
|                             |   |                                          |   |                |
| *                                |   | Director                                      |   | March 14, 2008 |
| J. Kevin Gleason                 |   |                                          |   |                |
|                             |   |                                          |   |                |
|                             |   |                                          |   |                |
| *                                |   | Director                                      |   | March 14, 2008 |
| George Pransky                   |   |                                          |   |                |

 

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| *By:   | /s/ Thomas F. Wolfe     |   |   |   | March 14, 2008 |
|--------|-------------------------|--------|--------|--------|---------------------|
|   |  (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 Holding, Inc. on behalf of each of such officers and directors inthe capacities in which the names of each appear above.

 

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**AFFINITYGROUP HOLDING, INC.**

 

**EXHIBIT INDEX TO ANNUAL REPORT**

 

**ON FORM 10-K**

 

**ForFiscal Year Ended December 31, 2007**

 
| ** **                                                                                                                                                                                                        | ** ** | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------------|------------|
| Certificate of  Incorporation of Affinity Group Holding, Inc. (1)                                                                                                                                            |       | 3.1                                                |       |                          |       |
| Bylaws of  Affinity Group Holding, Inc. (1)                                                                                                                                                                  |       | 3.2                                                |       |                          |       |
| 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)  |       | 4.1                                                |       |                          |       |
| 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)                           |       | 4.2                                                |       |                          |       |
| Purchase  Agreement dated as of February 6, 2004 among CIBC World Markets Corp.,  Affinity Group, Inc. and the Guarantors named therein (1)                                                             |       | 4.3                                                |       |                          |       |
| Form of 9%  Senior Subordinate Note (1)                                                                                                                                                                      |       | 4.4                                                |       |                          |       |
| Indenture  (including form of 107/8% Senior Notes due 2012) dated as of  March 24, 2005 among Affinity Group Holding, Inc. and The Bank of  New York, as Trustee (1)                                    |       | 4.5                                                |       |                          |       |
| First  Supplemental Indenture (including amended form of 107/8% Senior  Notes due 2012) effective as of March 24, 2005, between Affinity Group  Holding, Inc. and The Bank of New York, as Trustee. (1) |       | 4.6                                                |       |                          |       |
| Purchase  Agreement dated as of March 24, 2005 among CIBC World Markets Corp. and  Affinity Group Holding, Inc. (1)                                                                                     |       | 4.7                                                |       |                          |       |
| Registration  Rights Agreement dated March 24, 2005 between Affinity Group  Holding, Inc. and CIBC World Markets Corp., as Initial Purchaser (1)                                                        |       | 4.8                                                |       |                          |       |
| Form of Old  Note (1)                                                                                                                                                                                        |       | 4.9                                                |       |                          |       |
| Form of New  Note (1)                                                                                                                                                                                        |       | 4.10                                               |       |                          |       |
| Opinion of  Kaplan, Strangis and Kaplan, P.A. (1)                                                                                                                                                                 |       | 5.1                                                |       |                          |       |
| Tax Sharing  Agreement among Affinity Group Holding, Inc., Affinity Group, Inc.  and its subsidiaries (1)                                                                                               |       | 10.1                                               |       |                          |       |

 

99

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| ** **                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **Regulation  S-K Exhibit  Table   Reference** | ** ** | **Sequential  Page No.** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------|------------|-------------------------------|------------|
| 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 upon  completion of the offering and amendment thereto (1)                                                                                                                                                                                                                                                               |       | 10.8                                           |       |                          |       |
| Capital Note of  AGRP Holding Corp., dated December 5, 2001 (1)                                                                                                                                                                                                                                                                                                                                          |       | 10.9                                           |       |                          |       |
| Amended and  Restated Marketing Agreement, dated March 15, 2002 by and between  Camping World, Inc. and National General Insurance Company (1)                                                                                                                                                                                                                                                      |       | 10.10                                          |       |                          |       |
| Amended and  Restated Credit Agreement dated as of June 24, 2003 among Affinity  Group, Inc., the guarantors party thereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Fleet National  Bank, as administrative agent, and General Electric Capital Corporation, as  documentation agent (1)                                                              |       | 10.11                                          |       |                          |       |
| 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                                          |       |                          |       |

 

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| ** **                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **Regulation   S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------|------------|-------------------------------|------------|
| Second Amendment  to Credit Agreement dated as of June 30, 2004 among Affinity  Group, Inc., the guarantors party thereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Canadian Imperial Bank  of Commerce, as administrative agent and successor to Fleet National Bank,  and General Electric Capital Corporation, as documentation agent (2)           |       | 10.15                                          |       |                          |       |
| Second Amendment  to Note Purchase Agreement dated as of June 30, 2004 among Affinity  Group, Inc., the guarantors party thereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Canadian Imperial  Bank of Commerce, as administrative agent and successor to Fleet National  Bank, and General Electric Capital Corporation, as documentation agent (2)    |       | 10.16                                          |       |                          |       |
| Third Amendment  to Credit Agreement dated as of November 12, 2004 among Affinity  Group, Inc., the guarantors party thereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Canadian Imperial  Bank of Commerce, as administrative agent and successor to Fleet National  Bank, and General Electric Capital Corporation, as documentation agent (4)        |       | 10.17                                          |       |                          |       |
| Third Amendment  to Note Purchase Agreement dated as of November 12, 2004 among Affinity  Group, Inc., the guarantors party thereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Canadian Imperial  Bank of Commerce, as administrative agent and successor to Fleet National  Bank, and General Electric Capital Corporation, as documentation agent (4) |       | 10.18                                          |       |                          |       |
| Agreement with  Cross Country Motor Club, Inc. dated September 7, 2004 (3)                                                                                                                                                                                                                                                                                                                          |       | 10.19                                          |       |                          |       |
| Lease Agreement  for distribution center in Franklin, Kentucky (5)                                                                                                                                                                                                                                                                                                                                            |       | 10.20                                          |       |                          |       |
| Fourth Amendment  to Credit Agreement dated as of March 24, 2005 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 (6)                                                              |       | 10.21                                          |       |                          |       |
| Fourth Amendment  to Note Purchase Agreement dated as of March 24, 2005 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 (6)                                                    |       | 10.22                                          |       |                          |       |
| Preferred  Membership Interest Unit Subscription Agreement, dated March 24, 2005  between FreedomRoads Holding Company, LLC and CWFR Capital Corp. (6)                                                                                                                                                                                                                                                   |       | 10.23                                          |       |                          |       |

 

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| ** **                                                                                                                                                                                                                                                                                                                                          | ** ** | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------------|------------|
| Fifth Amendment  to Credit Agreement dated November 13, 2005 among Affinity Group, Inc,  the guarantors party hereto, the lenders party thereto, Canadian Imperial  Bank of Commerce, as syndication agent, Canadian Imperial Bank of Commerce as  administrative agent, and General Electric Capital Corporation as  documentation agent. (7) |       | 10.24                                              |       |                          |       |
| Second Amendment  to Tax Sharing Agreement among Affinity Group Holding, Inc., Affinity  Group, Inc. and its subsidiaries (8)                                                                                                                                                                                                             |       | 10.25                                              |       |                          |       |
| Sixth Amendment  to Credit Agreement dated March 3, 2006 among Affinity Group, Inc, the  guarantors party hereto, the lenders party thereto, Canadian Imperial Bank of  Commerce, as syndication agent, Canadian Imperial Bank of Commerce as  administrative agent, and General Electric Capital Corporation as  documentation agent. (10)    |       | 10.26                                              |       |                          |       |
| Seventh  Amendment to Credit Agreement dated June 8, 2006 among Affinity Group,  Inc, the guarantors party hereto, the lenders party thereto, Canadian  Imperial Bank of Commerce, as syndication agent, Canadian Imperial Bank of  Commerce as administrative agent, and General Electric Capital Corporation as  documentation agent. (11)   |       | 10.27                                              |       |                          |       |
| Agreement with  Brickell Financial Services Motor Club, Inc. dated September 28,  2007 (13)                                                                                                                                                                                                                                               |       | 10.28                                              |       |                          |       |
| Form of  Phantom Stock Agreement between certain executives and Affinity  Group, Inc. (14)                                                                                                                                                                                                                                                |       | 10.29                                              |       |                          |       |
| Statement of  Computation of Ratio of Earnings to Fixed Charges (1)                                                                                                                                                                                                                                                                                 |       | 12.1                                               |       |                          |       |
| Subsidiaries of  the Registrant                                                                                                                                                                                                                                                                                                                     |       | 21                                                 |       |                          |       |
| Powers of  Attorney                                                                                                                                                                                                                                                                                                                                 |       | 24.1                                               |       |                          |       |
| Statement of  Eligibility of Trustee, The Bank of New York, on Form T-1 (1)                                                                                                                                                                                                                                                                    |       | 25.1                                               |       |                          |       |
| Certification of  President and Chief Executive Officer                                                                                                                                                                                                                                                                                             |       | 31.1                                               |       |                          |       |
| Certification of  Senior Vice President and Chief Financial Officer                                                                                                                                                                                                                                                                                 |       | 31.2                                               |       |                          |       |
| Appointment of  Directors (9)                                                                                                                                                                                                                                                                                                                       |       | 31.3                                               |       |                          |       |
| Appointment of  Principal Officers (12)                                                                                                                                                                                                                                                                                                             |       | 31.4                                               |       |                          |       |
| Statement  Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                                  |       | 32.1                                               |       |                          |       |
| Statement  Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                                  |       | 32.2                                               |       |                          |       |
| Affinity Group  Code of Professional Conduct (1)                                                                                                                                                                                                                                                                                                    |       | 99.1                                               |       |                          |       |
| Form of  Letter of Transmittal (1)                                                                                                                                                                                                                                                                                                             |       | 99.2                                               |       |                          |       |
| Form of  Notice of Guarantee Delivery (1)                                                                                                                                                                                                                                                                                                      |       | 99.3                                               |       |                          |       |

 

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(1) Filed with the Company’sRegistration Statement No. 333-113982 and incorporated by referenceherein.

 

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(2) Filed with the Company’sReport on Form 10-Q for the quarter ended June 30, 2004 andincorporated by reference herein.

 

(3) Filed with the Company’sReport on Form 8-K dated September 9, 2004 and incorporated byreference herein.

 

(4) Filed with the Company’sReport on Form 8-K dated November 16, 2004 and incorporated byreference herein.

 

(5) Filed with the Company’sReport on Form 8-K dated December 31, 2004 and incorporated byreference herein.

 

(6) Filed with the Company’sReport on Form 8-K dated March 25, 2005 and incorporated by referenceherein.

 

(7) Filed with the Company’sReport on Form 8-K dated November 13, 2005 and incorporated byreference herein.

 

(8) Filed with the Company’sReport on Form 10-K dated December 31, 2006 and incorporated byreference herein.

 

(9) Filed with the Company’sReport on Form 8-K dated February 21, 2006 and incorporated byreference herein.

 

(10) Filed with theCompany’s Report on Form 8-K dated March 9, 2006 and incorporated byreference herein.

 

(11) Filed with the Company’sReport on Form 8-K dated June 8, 2006 and incorporated by referenceherein.

 

(12) Filed with the Company’sReport on Form 8-K dated September 13, 2006 and incorporated byreference herein.

 

(13) Filed with the Company’sReport on Form 10-Q dated September 30, 2007 and incorporated byreference herein.

 

(14) Filed with the Company’sReport on Form 10-K dated December 31, 2007 and incorporated byreference herein.

 

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

 

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