**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

** **

**FORM 10-K**

** **

    **X**    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934

 

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

 

           TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                        to                        

 

Commission File Number    333-124109

 
|   |   |   |
|--------|--------|--------|

 

**AFFINITY GROUP HOLDING, INC.**

 

| **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(Address of principal executive  offices) |       | (Registrant’s telephone  number including area code.) |

 
|   |   |   |
|--------|--------|--------|

 

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

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

10-7/8% Senior Notes Due 2012

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Indicate the number of sharesoutstanding of each of the issuer’s classes of common stock, as of the latestpracticable date.

 

|                          |       | **Outstanding as of**   |
|-------------------------------|------------|-------------------------|
| **Class**                     | ** ** | **March 31, 2010** |
| 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. (“AGI”).  We are anindirect wholly-owned subsidiary of AGI Holding Corp (“AGHC”), aprivately-owned corporation.  We are amember-based direct marketing organization targeting North Americanrecreational vehicle (“RV”) owners and outdoor enthusiasts.  Our club members form a receptive audience towhich we sell products, services, merchandise and publications targeted totheir specific recreational interests. In addition, we are a specialty retailer of RV-related products.  We operate through three principal lines ofbusiness, consisting of (i) club memberships and related products andservices, (ii) subscription magazines and other publications includingdirectories, and (iii) specialty merchandise sold primarily through our 78Camping World retail stores, mail order catalogs and the Internet.

 

There are approximately 1.8 million dues paying membersenrolled in our clubs.  We currently haveapproximately 4.5 million in aggregate circulation and 0.8 million paidcirculation across our 35 publications.  Forthe year ended December 31, 2009, our revenue, operating loss and net losswere $471.8 million, $23.8 million and $52.8 million, respectively.

 

 

**Competitive Strengths**

 

We believe that our key competitivestrengths are as follows:

 

*RecurringCash Flow Stream -*Approximately 79% of our operating income, net of non-recurring, non-cashcharges, is generated through our non-retail-based business which historicallyhas provided a recurring income stream through a core base of customers.  Our four established membership clubs have anaverage renewal rate for the five calendar years ended 2009 of 66%, which webelieve compares favorably to other subscription-based businesses. Similarly,our membership-based products and services have historically also experiencedhigh renewal rates, averaging approximately 86% over the past five years forour largest product and service offerings, Emergency Road Service (“ERS”), RVvehicle insurance and extended warranty.

 

*EstablishedMarket Positions* - We area member-based direct marketing organization targeting North American RV ownersand outdoor enthusiasts with comprehensive targeted product offerings. The GoodSam Club, which was founded in 1966, and Camping World’s President’s Clubfounded in 1986 are the preeminent RV membership clubs in North America.  Camping World is a national specialtyretailer of merchandise accessories and services for RV owners and campingenthusiasts that has grown to 78 retail stores since it began business.

 

We believeour significant 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 attractive other product and serviceofferings.  Our 1.8 million club membersand the 8.1 million consumers in our proprietary database serve as a unique,captive audience for direct marketing, which we believe significantly 

 

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lowerscustomer acquisition costs relative to our competitors and facilitatescost-effective cross-selling.

 

*MembershipServices Segment remains stable-* Ourfinancial operating performance has felt the effects of the current economicdownturn but we believe that our Membership Services segment will notexperience the downturn to the same extent as our other business segments.  While competition is intense for consumerexpenditures, we believe that consumers value the annual savings of clubmembership.  We market our clubs,products and services to a sizable existing installed base of over 7.9 millionRV owners, which affords us the ability to continue to attract new customersirrespective of new RV sales.  We believeRV owners may be more likely to take vacations utilizing RVs during an economicdownturn, because they are generally less expensive than vacationsnecessitating plane or train travel and hotel accommodations, which couldincrease sales of our products.

 

*FavorableDemographic 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 experience a five-year growth of 20.1% by 2010, according to theNational Survey of the RV Consumer by the University of Michigan in 2005 (the “RVSurvey”).  Furthermore, the 45-54 agebracket, which maintains the second highest ownership rate of RVs, is expectedto experience a five-year growth of 6.3% by 2010.  The growth in these age groups is expected togenerate growth in the pool of potential RV consumers.  Also, according to the RV Survey, this agegroup shift will drive the number of households that own at least one RV from7.9 million in 2005 to 8.5 million in 2010. In addition, RV owners havehousehold incomes that generally exceed the national average.  These demographics are attractive foradvertisers and third-party providers of products and services.

 

*Experiencedand Incentivized Management Team -* Ourexecutive management team has extensive publishing, direct marketing and retailexperience with significant expertise in the RV industry.  With an average of fifteen years with ourCompany, the team has developed substantial experience in increasing our targetcustomer base, using strategic alliances to bolster product offerings thatcreate value for our customers and increasing cross-selling opportunities forour high margin product offerings.  Ourexecutive management team is compensated both through an annual salary andthrough a management incentive program that is directly tied to our financialperformance.

 

 

**Our Strategy**

 

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

 

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

 

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*Efficiently Acquire New Customers-*We believe efficient customer acquisition and a sizeabledatabase population are critical to driving our growth and profitability.  Camping World and its discount buyer’s club,President’s Club, together, account for approximately 53% of our new customerdatabase entries.  In addition to being ahighly valuable customer loyalty program, President’s Club allows us to capturespecific information about each customer including RV type and usage, as wellas information on the customer’s age, income, net worth and interests, whileadding virtually no incremental customer acquisition costs.  We are able to customize our direct marketingoffers based upon our customers’ profiles. Other methods of customer acquisition include purchasing lists from dataproviders and placing our publications at campgrounds and RV dealerships. Wethen manage our database and target our offers to the customers most likely topurchase more than one of our product offerings.

 

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

 

*Expand Presence in SpecialtyRecreation Niche -*We believe aggregate circulation ofour magazines is an important factor in determining the amount of revenue wecan obtain from advertisers. Consequently, we seek to expand our presence as a publisher in selectrecreational niches through the introduction of new magazine titles and theacquisition of other publications or businesses in our markets or incomplementary recreational market niches. Publications in complementary niches may also provide the opportunity tolaunch new membership clubs, to market our products and services to newcustomers and to develop other products and services, which meet the specialneeds of these customers.  For example,our acquisition of the publishing assets of Nordskog Publications, Inc. inMay 2005 allowed us to expand our presence in the recreational boat marketniche.  In addition, we now operate 40consumer outdoor recreation shows, most of which were acquired from RoyalProductions, Inc. in December 2005, Plus Events shows in February 2006,four shows purchased from Apple Rock Advertising and Promotions, Inc. in September 2006,five shows purchased from Industrial Expositions, Inc. in February 2007,nine shows were purchased from MAC Events, LLC in January 2008, and threeshows were purchased from Mid America Expositions, Inc. in February 2008.  These shows provide an expanded face-to-faceforum for acquiring new customers.

 

*Camping World Penetration -*We haveslowed the controlled expansion of our Camping World supercenter network.  In 2009, we opened one new Camping Worldstore, closed one under-performing store, and do not intend to open additionalretail stores in 2010.  In addition togenerating increased cash flows from the sale of merchandise, our large networkof geographically diverse Camping World stores enhances our ability to marketour portfolio of membership clubs, publications and product and serviceofferings to a significantly larger customer base.

 

**RV Industry**

 

The use ofRVs and the demand for club memberships and related products and services maybe influenced by a number of factors including general economic conditions,consumer credit availability, the availability and price of propane andgasoline, and the total number of RVs.  Webelieve that both

 

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theinstalled base of RVs and the type of RV owned (full service vehicles excludingvan conversions) are the most important factors affecting the demand for ourmembership clubs, merchandise, products and services.  Based on the RV Survey, the number ofhouseholds owning RVs is projected to increase from 7.9 million in 2005 tonearly 8.5 million in 2010.  The RVSurvey also indicates that the percentage of households owning RVs during thisperiod will rise slightly from 8.0% to 8.2%.

 

Accordingto the RV Survey, the average RV owner is 49 years old.  RV ownership also increases with age reachingits highest percentage level among those 55 to 64 years old.  Households in this age group are projected toincrease from 18.2 million in 2005 to 21.6 million in 2010.  RV ownership also is concentrated in thewestern United States, an area in which the population growth rate continues tobe greater than the national average. The RV Survey also indicates that RV ownership is associated with higherthan average annual household income, which among RV owners was approximately$68,000 per annum as compared to the national average of $43,000 perannum.  We believe that the demographictrend towards an aging population will have a favorable impact on RVownership.  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, Coastto Coast Club and Camp Club USA for RV owners, campers and outdoor vacationers,and the Golf Card Club for golf enthusiasts. The membership clubs form a receptive audience to which we market ourproducts and services.

 

The following table sets forth the number of members atDecember 31, 2009, annual membership dues and average annual renewal ratesduring the period of 2005 to 2009 for each club:

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

 

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(1)  Also includes multi-year and lifetime members.

(2)  For a single member, subject to special discounts andpromotions.

(3)  Excludes members having lifetime memberships.

(4)  Camp Club USA was launched in 2006; includes only two fullyears of renewal data.

 

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

 

*Good SamClub*

 

The Good Sam Club, a membership organization for RV owners,is the largest RV organization worldwide with approximately 930,000 memberfamilies.  As of December 31, 2009,there were 1,557 local chapters throughout the United States and Canada.  The average renewal rate for Good Sam

 

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Club members was approximately 62% during the period 2005through 2009. The renewal rate was approximately 58% in 2009.

 

The Good Sam Club is widely recognized as an essentialpart of the RV ownership experience.  Bydelivering value to members through information, support and benefits,including 10% discounts at 1,580 RV parks and service centers across the U.S.and Canada, members save money, come together to share experiences and morethoroughly enjoy RVing.  Other benefitsinclude a free annual subscription to *Highways*, theclub’s news magazine; discounts on the Company’s other publications; triprouting and mail-forwarding; and access to products and services developed forclub members.  Based on typical usagepatterns, we estimate that Good Sam Club members realize estimated annualsavings from discounts of approximately $110.

 

The Good Sam Club establishes quality standards for RVparks and campgrounds participating in its network.  Campgrounds and parks participating in theGood Sam Club program benefit from increased occupancy and sales ofcamping-related products.  We believethat we have established considerable penetration of those for-profit RV parksand campgrounds that meet our quality standards for participation in thediscount program.  We monitor ouraffiliated campgrounds and remove substandard facilities from our program toensure that our brand image and reputation are not diluted.

 

In 1992, the Good Sam Club began selling lifetimememberships.  In 2009, the average pricefor a life membership was $302 with approximately 157,700 members registered asof December 31, 2009.  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 membersand RV parks and campgrounds from 2005 through 2009 at which discounts formembers were available at December 31st of the respective year:

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

 

*President’s Club*

 

The President’s Club program, which was established in1986, is the discount buyer’s club for Camping World and the second largest RVclub worldwide (behind only our Good Sam Club). As of December 31, 2009, the President’s Club had approximately755,300 members.  The primary benefitoffered to members of the President’s Club is a 10% discount on all retailmerchandise at Camping World stores.  ThePresident’s Club offers us an extremely cost effective and powerful method ofacquiring new customers and retaining existing customers who are entering theRV lifestyle or have been in the lifestyle for some time.  We use the significant amount of informationgathered when a customer signs up for membership in the President’s Club totailor product offers that are most meaningful to the customer’s needs andinterests.  Additionally, we believe thatthe President’s Club, much like a traditional customer loyalty program, servesto bolster sales at our Camping World supercenters.

 

In addition to the 10% discount at Camping World stores,President’s Club members also receive *RV View*, theclub magazine, as well as special mailings, including newsletters and flyersoffering selected products and services at special prices.  The President’s Club brand is marketed inconjunction with the Camping World brand in the majority of our promotionalpieces directed at these customers related to

 

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our product and service offerings.

 

President’s Club memberships may initially be obtainedfor one, two or three years at a standard price of $20, $35 or $50,respectively.  We estimate that theaverage President’s Club member realizes annual savings of approximately$35.  The average renewal rate formembers of the President’s Club was 71% during the period from 2005 to 2009.

 

The following table sets forth the number of President’sClub members and number of retail stores at year-end for 2005 through 2009:

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

 

 

*Coast toCoast Club*

 

The Coastto Coast Club has operated a reciprocal use network of private RV resorts inNorth America since 1972.  The cluboffers a series of membership benefits depending upon pricing and program typeunder the Coast to Coast Club name. Members of the Coast to Coast Club belong to a private RV resort ownedand operated by parties unrelated to us. Our club members may use the other resorts in the Coast to Coast Clubnetwork on a reservation or space available basis and obtain discounts fromother non-private campgrounds.  At December 31,2009, there were approximately 53,700 member families in the Coast to CoastClub which had nationwide access to approximately 238 private RV resorts and anetwork of 189 public affiliated campgrounds that participated in the Coast toCoast Club reciprocal use programs. These private resorts are designed primarily for RV owners, buttypically provide camping or lodging facilities, comprised of RVs, cabins, parkmodels, and condominiums.  For an initialmembership fee plus annual maintenance fees, both paid by the customer to theresort, the private resorts provide an RV site with water, sewer and electricalhook-ups and recreational amenities, such as swimming, tennis or fishing, orproximity to theme parks or other recreational activities.  We have established quality criteria forresorts to join and remain in the Coast to Coast Club networks.

 

For standard annual renewal dues from $89.95 for a singleyear membership to $337.95 for a five-year membership, Coast to Coast Clubmembers receive the following benefits: discounts for overnight stays atparticipating resorts and campgrounds; an annual subscription to *Coast to Coast Magazine;*the*Coast toCoast Directory*providing information on the participating resorts;discounts on our other publications; access to discounted condo vacationgetaways and other discounted travel such as cruises; access to discount hotelsand travel services; and access to ancillary products and services developedfor our club members.

 

We believethat resorts participating in the Coast to Coast Club networks view access toreciprocating member resorts as an incentive for their customers to join theirresort.  Because a majority of Coast toCoast Club members own RVs, access to participating resorts throughout NorthAmerica can be an important complement to local resort membership.  Based on typical use patterns, we estimatethat Coast to Coast Club members realize estimated annual savings from thesediscounts of approximately $117.  Theaverage annual renewal rate for members of the Coast to Coast Club after theinitial one-year membership (which is generally paid by the member resort notthe club member) was approximately 69% during the period 2005 through 2009.

 

Thefollowing table sets forth the number of members in the Coast to Coast Club,resorts participating in the reciprocal use program, and the number of publicresorts extending discounts to

 

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Coast toCoast Club members for 2005 through 2009.  The membership decline in Coast to Coast Club results from our relianceon the private park network to promote and generate new park members, andultimately sell our product, a lack of new park development, and our exclusionof sub-standard parks from the network.

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

 

 

##### *Golf Card Club*

##### * *

The GolfCard Club, founded in 1974, had approximately 24,400 members at December 31,2009.  The major attraction formembership is the financial savings which members receive when playing at anyof the approximately 2,610 participating golf courses located throughout the USand Canada. The annual membership fee varies with the length and type (singleor double) of membership.  We believethat the participating golf courses providing playing privileges to clubmembers represent the largest number of golf courses participating in adiscount program in North America.  Noneof the participating golf courses are owned or operated by us.

 

Golf CardClub members receive a variety of benefits, including:  a minimum of two rounds annually of free ordiscounted golf at participating golf courses; discounted vacation packages at132 “Stay and Play” resorts; discounts on golf practice at 35 driving ranges;savings on golf merchandise purchases at select member golf courses; car rentaldiscounts from National and Alamo; an annual subscription to the *Golf Traveler* member publication, published three times peryear in print and twelve times electronically; the annual directory listingparticipating golf courses and resorts; chances to win free golf merchandise inquarterly member giveaways; access to 61 local Grasshopper Clubs fortournaments and social activities; an opportunity to play in member-guesttournaments; an opportunity to test (and keep) select golf products; a chanceto win a free golf lesson from a participating Golf Card pro; and access to theclub web site (www.golfcard.com) including member-only features such ashandicap tracking, course reviews, and trip routing.

 

Municipal, daily-fee,semi-private, and resort golf courses participate in the Golf Cardprogram.  The program is attractive toparticipating courses because it builds traffic and helps fill empty tee timesduring off-peak hours.  In addition,participating courses receive promotion of their golf course in the *Golf Traveler* member publication, the Annual Directory, andthe club website.  Members also purchaseother merchandise or services when exercising their playing privileges.  In this manner, Golf Card members tend toprovide incremental revenue to the golf courses.  Based on surveys conducted by us, membersrealize savings on green fees ranging from $150 to $250 annually, whichsignificantly exceed the cost of membership.

 

Thestandard annual membership fee is $49 for a single membership and $89 for atwosome membership.  Multi-yearmemberships range from a single two-year membership for $118, to a three-yeartwosome membership for $267.  The averagerenewal rate for Golf Card Club members was approximately 52% for the periodfrom 2005 to 2009.  The membershipdecline in Golf Card Club since 2004 resulted from management’s decision tocease acquisition marketing due to lack of affinity to our other clubs.

 

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The following table sets forth the number of Golf Card Clubmembers, participating golf courses and “Stay and Play” resorts at December 31stof each respective year:

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

 

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(1)  A singlemembership counts as one member and a double membership as two members.

 

*Camp Club USA*

 

Camp Club USA was launched January 2006 as a discountcamping club offering a 50% discount on campsites.  At December 31, 2009 we had approximately41,300 members.  Members receive a varietyof benefits, including 50% savings at 1,136 campgrounds, an annual directorywith maps, directions, amenities, monthly member giveaways, $50 cash forcamping and travel tips, and a monthly eNewsletter with campground updates,features and travel tips.  Based onsurveys conducted by us, members realize savings at campgrounds ranging from$100 to $150 annually, which significantly exceed the cost of membership.

 

The following table sets forth the number of Camp Club USAmembers and participating campgrounds at December 31st of each respective year:

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

 

**Membership Products andServices**

 

Ourapproximately 1.8 million club members form a receptive audience to which wesell products and services targeted to the recreational interests of our clubmembers.  We promote products andservices which either address special needs arising in the activities of ourclub members or appeal generally to persons with the demographiccharacteristics of our club members.  Thetwo most established products are the ERS and the vehicle insuranceprograms.  Most of our products andservices are provided by third parties who pay us a marketing fee, with theexception of ERS, where we assume the risk of incurred claims.  We believe it is important to target thediversified market niches with identifiable products that offer a full range ofbenefits.  We currently market theseproducts through direct mail, advertising in publications, campgrounddirectories, space ads, the Internet, telemarketing and direct sales.

 

*Emergency Road Service*

 

TheCompany developed ERS initially for Good Sam Club members in 1984, as anenhancement to their club membership. Since then, the Company has expanded the breadth of its programs and nowincludes club members as well as non-club members.  Currently 33% of the Good Sam Club membersare enrolled in the Good Sam ERS program. Specializing in RV towing, the Company targets diversified market nicheswith identifiable products that serve various service level objectives.  The Company markets its products throughdirect mail, but also through the internet, RV publication 

 

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advertising,space ads, promotional events, and telemarketing.  Annual subscriber dues range from $64.95 to$149.95 and benefits include specialized towing, roadside assistance, towing,and other travel-related benefits and services.

 

The tablebelow sets forth the total enrollment in the various ERS programs for 2005through 2009:

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

 

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

 

*Vehicle Insurance Programs*

 

We provideour customers with several property and casualty insurance products, includingtwo specialized RV insurance programs, a motorcycle insurance program and ahomeowner’s insurance program.  The twocore brands are the Vehicle Insurance Program (“VIP”) and the Motor VehicleProgram (“MVP”); each of these products is promoted to the Company’s databasethrough various direct marketing channels. At December 31, 2009, the two programs had approximately 168,200policyholders, which represented a 12.0% and 4.5% penetration, respectively, ofthe Good Sam Club and the President’s Club. During the period 2005 to 2009, the average renewal rate of membersparticipating in these insurance programs was 90%.  We have a marketing arrangement with a thirdparty licensed insurer that provides the vehicle insurance.  The Company receives revenue for both new andrenewing policyholders, while we share only in the acquisition marketingexpenses with the insurer.  All claimsrisk is carried by the third-party provider.

 

Thefollowing provides detail of the total number of policies in force, the dollaramount of written premiums generated on the book of business, and the marketingfees generated for 2005 through 2009:

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

 

The reduction inpolicies in force from 2008 to 2009 resulted from consumers increasingly buyingtravel trailers instead of motorhomes, which has traditionally been the bestresponding segment for our product.  Morecompetitive insurance pricing has been recently initiated to better appeal tonon-motorized/travel trailer needs.

 

*OtherProducts and Services*

 

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

 

Our ContinuedService Plan (“CSP”), a private label extended vehicle warranty program forRVs, had total net revenue for 2009 of $34.9 million, increasing 14% over2008.  The program had approximately47,700 policies in force as of December 31, 2009.  Sales of new policies were derived fromdirect mail marketing, print ads in our magazines, Internet and e-mailsolicitations, and retail 

 

9

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kiosks in CampingWorld stores.  Policy renewalsrepresented 59% of the total revenue in 2009. We also offer CSP through our Authorized RV Dealer Program.  As of December 31, 2009, there were 82 dealerlocations authorized to sell extended vehicle warranty and other products andservices offered by the Company.  Of the82 dealer locations, none are owned and operated by FreedomRoads Holding LLC orits subsidiaries (collectively “FreedomRoads”). FreedomRoads is indirectly owned and controlled by Stephen Adams, ourChairman and principal owner of our ultimate parent company.

 

Our RV financing program is administered by a third partyfinancial institution.  The number of RVloans extended to our club members in 2009 increased by 33% from 2008.  This increase in loans can be directlyattributed to our new third-party financing arrangement allowing our membersaccess to more competitive interest rates.

 

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

 

**Publications**

** **

We produce and distribute a variety of publications forselect markets in the recreation and leisure industry, including generalcirculation periodicals, club magazines, directories, and RV and power sportsindustry trade magazines.  Revenues arerecognized from the sale of advertising, subscriptions and direct sales of someof the publications.  We believe that thefocused audience of each publication is an important factor in attractingadvertisers.

 

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

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

 

----

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

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

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

*(4)**        *Includes limitedpaid circulation.

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

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

 

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*Paid Circulation Magazines*

 

*American Rider*, introduced in November1993, is targeted to owners and operators of Harley-Davidson motorcycles.

 

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

 

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

 

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

 

*MotorHome* is a monthly periodical for ownersand prospective buyers of motorhomes which has been published since 1968 andfeatures articles on subjects such as product tests, travel and touristattractions.

 

*Powerboat* is a leading performance boatingmagazine which was founded in 1968 and acquired by us in 2005.  This magazine focuses on performance boats,engines, as well as race coverage. The magazine is well known for its “PerformanceTrials,” regarded as one of the industry’s most comprehensive and authoritativetesting programs while boasting some of the marine industry’s finestphotography and writing.

 

*Rider* is a monthly magazine formotorcycle touring enthusiasts and has been published since 1974.  Each issue focuses on motorcycles,personalities, technical subjects, travel notes and other features of interestto this recreational affinity group.

 

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

 

*Trailer Boats*magazine, thecountry’s only trailer boating magazine, is dedicated to the hard-coreenthusiast of trailerable boats, marine propulsion, accessory installations anduse, maintenance and repair, tow vehicles, boat trailering, seamanship, watersports and cruising.

 

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

 

 

#### *Controlled Circulation Magazines- Business*

#### * *

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

 

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

 

*PowerSports Business*is anindustry trade magazine, introduced in January 1998, which combines thepreviously issued *Snowmobile Business* and *Watercraft Business* with a motorcycle and ATV business section.  Distribution is to dealers servicing theseindustries, which in numerous cases have combined operations to service morethan one of these segments.

 

*PowerSports Business Dealer Directory* is asupplier directory for each of the ATV, snowmobile and watercraft markets.  This directory features hundreds ofmanufacturers and suppliers of parts, services, apparel and much more, completewith detailed company information.

 

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*PowerSports Business Market Data Book* is anannual publication that provides industry sales trends for power sportsmanufacturers and dealers; dealer customer service and performance data;manufacturer stock performance updates; industry supplier information; andvarious industry research projects.

 

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

 

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

##### * *

*ATV Magazine’s* first issue was published in October1995.  The publication is designed toreach large numbers of active ATV owners with comprehensive product informationduring the peak periods when equipment is purchased.

 

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

 

#### *Free Distribution Publications*

#### * *

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

###### * *

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

 

#### *Annual Publications*

#### * *

*Cruiser Buyers Guide* is an annualpublication which provides information about new and modified cruisers withfeatures embracing the motorcycle cruiser lifestyle.

 

*Trailer Life RV Parks and Campgrounds Directory*, initiallypublished in 1972, is an annually updated directory which providescomprehensive information on approximately 11,650 public and privatecampgrounds, over 860 RV service centers, and over 875 tourist attractions inNorth America.  It is the officialdirectory of the Good Sam Club and is the premier source to find all the GoodSam discount locations.  This directoryis sold primarily to Good Sam Club members and RV enthusiasts via direct mail,e-commerce, at RV dealerships, RV Parks and in bookstores.

 

*Trailer Life’s RV Buyers Guide*, issuedannually, features more than 400 listings with photos, floorplans andspecifications on new RVs including travel trailers, fifth-wheel trailers,folding camping trailers, motorhomes and truck campers.  The publication is sold at newsstands and bymail order from magazine advertisements.

 

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

 

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

 

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reader to makeinformed purchases.

 

*Woodall’s Buyer’s Guide* is anannual publication distributed mainly through bookstores and newsstands, whichprovides photos, floor plans and specifications of the new model year RVs.  The buyer’s guide was first published in1978.

 

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

 

*Woodall’s Tenting Directory*is an annualdirectory distributed primarily through newsstands, which provides informationon both government and privately-owned campgrounds and the outdoor activitiesand attractions that are available near them.

 

#### *Club or Trade Magazines and Books*

#### * *

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

 

#### *Consumer Shows*

#### * *

We operate 40 consumer outdoor recreation shows primarilyfocused on RV and power sports markets. Twelve of the shows were acquired from Royal Productions, Inc. in December2005, six consumer shows were purchased from H & S Productions, LLC in February2006, four RV shows were purchased from Apple Rock Advertising and Promotions, Inc.in September 2006, one show was acquired from MAC Events, LLC in January 2007,five shows were acquired from Industrial Expositions, Inc. in February 2007,nine RV and boat shows were acquired from MAC Events, LLC in January 2008, andthree RV and boat shows were acquired from Mid America Expositions, Inc. in February2008.  These shows provide us with theopportunity to reach new customers and interact with them on a face-to-facebasis.  Revenues are recognized primarilyfrom the sale of exhibitor booth space and admission fees.

 

#### *Guest Services Campground Guides*

#### * *

We produce local campground guides distributed free ofcharge to approximately 350 campgrounds across the U.S., with limiteddistribution in Canada.  These guidesinclude paid advertisements for local attractions, restaurants and services andalso include a site map of the campground.

 

**Retail**

 

Camping World is a national specialty retailer ofmerchandise and services for RV owners. With the opening of one Camping World supercenter in 2009, we currentlyoperate 78 Camping World retail locations in 31 states.  These stores accounted for approximately 88%of the 2009 total retail revenue, while approximately 12% was derived fromcatalog and Internet sales.  Oneunder-performing retail store was closed in 2009.

 

In the RV accessory industry, we believe that Camping Worldhas a high level of name recognition, an effective triple channel distributionstrategy (store, catalog, and Internet), and a commitment to offer a broadselection of specialized RV products and services at competitive pricescombined with technical assistance and on-site installation.  Camping World offers approximately 10,600SKUs, most of which are not regularly available in general merchandise stores.  The Camping World supercenters provide

 

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

 

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

 

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

 

Camping World’s supercenters generally range in size fromapproximately 10,000 to 64,000 square feet. Approximately 40% of each supercenter is devoted to a retail salesfloor, a customer service area, and a technical information counter; 40% iscomprised of the installation facility, which contains 4 to 16 drive-throughinstallation bays; and 20% is allocated to office and warehouse space.  Large parking areas provide sufficient spaceand facilitate maneuvering of RVs.  Bycombining broad product selection, technical assistance, installation andrepair services, Camping World’s supercenters provide one-stop shopping for RVowners.  Camping World maintainstoll-free telephone numbers for customers to schedule installation and repairappointments.  Most supercenters are openseven days a week.

 

CampingWorld continued its controlled expansion of their supercenter store networkwhile simultaneously developing dealer alliances across North America.  This marketing strategy provides an expandednumber of customers with access to the vast array of products and services thatwe offer and generate traffic for our dealer partners by marketing locally,regionally and nationally our extensive parts and accessories business.  In 2003, we initiated the dealer allianceprogram under which we sublease space in an existing RV dealership where weoperate a Camping World store or operate the Camping World store adjacent tothe RV dealership.  Currently, we operate51 Camping World stores alongside or within RV dealerships, including 48Camping World stores that are part of our dealer alliance program.  Of these 51 Camping World stores that arealongside or within RV dealerships, 42 are located alongside or withindealerships indirectly owned or operated by FreedomRoads Holding LLC 

 

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

 

On March 6, 2006, Camping World entered into a Joint VentureAgreement with FreedomRoads. FreedomRoads is indirectly owned and controlled by Stephen Adams, theChairman and indirect controlling shareholder of 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.

 

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

 

On December 1, 2009, AGI entered intoan agreement  with FreedomRoads pursuantto which AGI acquired an option (“the “Option”) to purchase FreedomRoads’ “choicemodel” insurance business for the lesser of $5.0 million or seven times thebusiness’ EBITDA (as defined) during the four quarters immediately precedingthe closing date, and AGI paid FreedomRoads a $2.5 million deposit.  An additional deposit of $2.5 million is dueno later than December 15, 2011.  By theterms of the Option, FreedomRoads is required to implement such policies, practicesand procedures as AGI requests with respect to such business and apply thedeposited funds to pay such implementation costs.  The Option may be exercised by AGI on orafter May 15, 2012 but before May 15, 2013. In the event the Option is not exercised, AGI shall have the right toreturn of the deposits, less costs incurred by FreedomRoads to implement anypolicies, practices or procedures that AGI requests with respect to suchbusiness.  The $2.5 million deposit iscurrently reported in Other Assets on the accompanying balance sheet as of December31, 2009.

 

Camping World initiated its catalog operations in 1967.  Camping World currently has a proprietarymailing list of approximately 2.5 million RV owners, all of whom have made apurchase or requested a catalog from Camping World within the prior 60months.  Camping World maintains adatabase of these names, which includes information such as order frequency,size of order, date of most recent order and type of merchandisepurchased.  Camping World analyzes itsdatabase to determine those customers most likely to order from Camping World’scatalogs.  As a result, Camping World isable to target catalog mailings more effectively than direct marketers ofcatalogs offering general merchandise. Camping World continually expands its proprietary mailing list throughin-store subscriptions and requests for catalogs in response to advertisementsin regional publications directed to RV owners. In addition, Camping World rents mailing lists of RV owners from thirdparties.

 

During 2009, Camping World distributed 3.0 million catalogs,2.5 million of which were mailed in five separate mailings, and the remaining500,000 catalogs were distributed in supercenters, at campgrounds and other RVlocations, and as package inserts. During the same period, Camping World processed approximately 229,000catalog orders at an average net order size of $117, excluding 

 

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postage and handling charges.

 

On January 1, 2009, a Series Entitlement and SponsorshipAgreement was entered into by and between National Association for Stock CarAuto Racing, Inc. (“NASCAR”) and FreedomRoads, and CWI, Inc. (“CWI”), a whollyowned subsidiary of Camping World, Inc. (the “NASCAR Sponsorship Agreement”).  Pursuant to the terms of this agreement, CWIand FreedomRoads obtained rights as the title sponsor of the NASCAR TruckSeries.  The NASCAR Sponsorship Agreementprovides for a term of seven years, commencing January 1, 2009 and terminating December31, 2015, and requires the payment of annual rights fees in exchange for therights granted to FreedomRoads and CWI. The obligations of FreedomRoads and CWI under the Sponsorship Agreementare joint and several in nature, provided that the liability of CWI for theannual rights fees during the term of the NASCAR Sponsorship Agreement iscapped at an aggregate of $6.5 million. The amounts paid by CWI and allocated to FR are included in the paymentsto FreedomRoads as discussed in Item 13 —Certain Relationships and RelatedTransactions, and Director Independence.

 

**Internet**

 

The Internet has proven to be a significant, low-cost sourcefor new club members, subscriptions and other ancillary product sales.  We maintain fifty-three Internet web sites,which are accessible directly or through *http://www.rv.net*.  In 2000, our club operations commenced alow-cost marketing strategy through e-mail membership acquisitioncampaigns.  Members added in 2009 underthese programs represented over approximately 13% of all new club members.  E-mail acquisition campaigns and Internetonline advertising generated $38.2 million of revenue in 2009.

 

**Marketing**

 

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

 

Our Media segment solicits advertisements through aninternal sales force and by paying commissions to advertising agencies andindependent contractors who place advertisements.  Many advertisers are repeat customers withwhom we have long standing relationships.

 

We market our retail products through mail order catalogs,direct mail retail flyers, advertisements in national and regional industrypublications, vendor co-op advertising programs, promotional events, thePresident’s Club direct mailings and personal solicitations and referrals.Camping World’s principal marketing strategy is to capitalize on its broad namerecognition among RV owners.

 

**Operations**

** **

Our customer service operations are located in Denver, Coloradoand Bowling 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 in2009.  Over sixty percent of the callsoriginated from the marketing efforts of catalog mailings, membershipacquisition, membership renewals and associated ancillary products andevents.  All such efforts use toll-freenumbers as a response mechanism.

 

Camping World’s catalog, internet and fulfillment operationsare located in Franklin, Kentucky and Bakersfield, California.  Fulfillment operations involve the processingof orders and checks principally 

 

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received by mail. Orders are usually processed and shipped within 24 hours ofreceipt.  Certain fulfillment operationsare performed by third parties.

 

Our publication operations are based in Minnesota andCalifornia.  We develop the layout forpublications and outsource printing to third parties.

 

**Information SupportServices**

 

We utilizeintegrated computer systems to support our membership club and publishingoperations.  A database containing allcustomer activity across our various businesses and programs has been integratedinto our web sites and call centers. Comprehensive information on each member, including a profile of thepurchasing activities of members, is available to customer servicerepresentatives when responding to member requests and when marketing our productsand services.  We employ publishingsoftware for publication makeup and content, and for advertising to support ourpublications 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 aretrickle-polled throughout the day for “flash reporting” and a full polling ofdata is performed nightly at the close of business into the data center locatedin Bowling Green, KY.  With thispoint-of-sale information and the information from Camping World’s on-linedistribution centers, Camping World compiles comprehensive data, includingdetailed sales volume and inventory information by product, merchandisetransfers and receipts, special orders, supply orders and returns of productpurchases to vendors.  In conjunctionwith its nightly polling, Camping World’s central computer sends price changesto registers at the point of sale.  Theregisters capture President’s Club member numbers and associated sales andreferences to specific promotional campaigns. Management monitors the performance of each supercenter and mail orderoperation to evaluate inventory levels, determine markdowns and analyze grossprofit margins by product.

 

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 and local regulation. Specifically, our outbound telemarketing, direct mail, and ERS, as wellas certain services provided by third parties, including insurance, RVfinancing, and extended warranty programs, are currently subject to certainregulation, and may be subjected 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.

 

18

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**Competition**

 

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

 

**Employees**

 

As of December 31, 2009, we had 1,541 full-time and 96part-time or seasonal employees, consisting of 9 executives, 1,083 employees inretail operations, 327 employees in administrative and club operations, 166employees in publishing and advertising sales, 6 employees in resort servicesand 46 employees in marketing.  Noemployees 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 marksfor the names 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.

 

**ITEM1A:  RISK FACTORS**

 

The risks describedbelow are not the only risks we face. Any of the following risks could materially adversely affect ourbusiness, financial condition or results of operations. Additional risks anduncertainties not currently known to us, or that we currently deem to beimmaterial, may also materially adversely affect our business operations.

 

**RisksRelating to our Debt**

 

*Oursubstantial indebtedness could adversely affect our financial health.*

 

We have asignificant amount of indebtedness.  Asof December 31, 2009, our total debt and total stockholder’s deficit were$390.7 million and $338.8 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 dividenddistributions.  However, our subsidiariesare and may in the future be restricted from making dividend distribution tous.  Our total debt as of December 31,2009 primarily consisted of: (1) $128.9 million under the Amended and RestatedCredit Agreement and Senior Secured floating Rate Note Purchase Agreement due March31, 2010, (“Senior Credit Facility”), consisting of $110.8 million in termnotes due March 31, 2010 and $18.1 million under the revolving credit facilitydue March 31, 2010, (2) $137.8 million under the Company’s 9% SeniorSubordinated Notes due 2012 (“AGI Senior Notes”), (3) $9.7 million under asecond lien loan at 9% interest due July 31, 2010 (“the “Second Lien Loan”), (4)$1.0 million under loans from SA Holding, Inc., owned by our Chairman, StephenAdams due March 1, 2010 (5) $1.0 million under debt relating to publication andconsumer event acquisitions over the last six years within our Media segment,and (6) $112.3 million of AGHI’s 10-7/8% senior notes (“AGHI Notes”) due 2012outstanding as at December 31, 2009.  Inthe future, we intend to use cash generated by operations of our subsidiariesthat is distributed to us as a dividend to pay interest on the AGHI Notes andthen pay the principal of the AGHI Notes. 

 

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However, we mayfrom time to time, subject to restrictions imposed by the terms of ourindebtedness, pay dividends or find it more advantageous to employ cashgenerated by operations for capital investments and acquisitions.

 

The Senior CreditFacility matures on March 31, 2010.  Asof December 31, 2009, there was $128.9 million outstanding under the AGI SeniorCredit Facility and it is secured by a lien on all of the AGI’s assets and apledge of the AGI’s stock and the stock of its subsidiaries.  On March 1, 2010, AGI refinanced its existingSenior Credit Facility and its Second Lien Loan ($9.7 million outstanding on December31, 2009) due July 31, 2010 through and amendment and restatement of the SeniorCredit Facility (the “AGI New Senior Credit Facility”).  The AGI New Senior Credit Facility providesfor term loans aggregating $144.3 million, including an original issue discountof 2%, that are payable in quarterly installments of $360,750 beginning March 1,2011.  In addition, there are mandatoryprepayments of the term loans from excess cash flow (as defined) and from assetsales.  The term loans under the AGI NewSenior Credit Facility mature on the earlier of March 1, 2015 or 90 days priorto the maturity of either the AGI Senior Notes ($137.8 million principal amountoutstanding at December 31, 2009 and are due on February 15, 2012) or AGHI’s10-7/8% senior notes due 2012 ($113.6 million aggregate principal amountoutstanding as at December 31, 2009 and are due February 15, 2012).  The AGI New Senior Credit Facility alsoincludes several restrictions on us, including on our ability to incuradditional indebtedness, pledge assets, and make dividends and distributions.

 

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

 

AGHI had debt as ofDecember 31, 2009 consisting of $112.3 million principal amount of 10-7/8%senior notes due 2012 (“AGHI Notes”) which is net of $1.9 million unamortizedoriginal issue discount.  The AGHI Notesare unsecured obligations of AGHI, and neither AGI nor its subsidiaries haveguaranteed payment of principal or interest on the AGHI Notes.  Interest on the AGHI Notes is payablesemi-annually and the entire principal amount of the AGHI Notes is due in fullon February 15, 2012.  For interestpayments on and prior to February 15, 2008, the Company had the election to payinterest on the AGHI Notes in cash or by the issuance of additional notes ofthe same tenor as the AGHI Notes, except the maturity date is March 15,2010.  AGI has not paid any dividends toAGHI to fund payment of interest on the AGHI Notes and AGHI made the interestpayments due on August 15, 2005, February 15, 2006, August 15, 2006, February 15,2007, and February 15, 2008 through the issuance of additional notes.  AGHI paid the interest on the AGHI Notes due August15, 2007, August 16, 2008 and February 15, 2009 from proceeds of capitalcontributions made by AGHI’s parent, AGHC in the amount of $5.9 million, $6.2million, and $6.2 million, respectively. The interest payment due August 15, 2009 was paid in January 2010 with a$4.5 million cash payment (a 

 

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$2.8 millioncapital contribution from its shareholder, and $1.7 million of permitted taxdistributions from AGI), and the remaining $1.7 million was forgiven as thebonds were held by related entities. AGHI satisfied the interest payment due February 15, 2010 on March 5,2010 with $4.4 million in cash (funded, in part, from $2.5 million received byAGHI in connection with a waiver by AGHI of certain first refusal rightsrelated to AGI’s vehicle insurance business and the balance from AGI as apermitted tax distribution) and the remaining $1.8 million through forgivenessof interest on AGHI Notes held by entities indirectly controlled by the Company’ssole shareholder.  As of December 31,2009, $112.3 million of AGHI Notes remain outstanding, including $25.4 milliondue on March 15, 2010.  As part of therefinancing of the Senior Credit Facility on March 1, 2010, AGHI acquired the$25.4 million of AGHI Notes due on March 15, 2010 that were held by anaffiliate of AGHI and cancelled those notes.

 

As a result ofrestrictions in the AGI New Senior Credit Facility, AGI is blocked from makingdistributions to AGHI for the purpose of paying interest on the AGHINotes.  Recent interest payments havebeen made in whole or in part using the proceeds of capital contributions fromAGHI’s parent and there can be no assurance that AGHI’s parent will continue todo so.

 

The AGI New Senior Credit Facility, the AGI Indenture andthe indenture governing our AGHI Notes contain certain restrictive covenantsrelating to, but not limited to, mergers, changes in the nature of thebusiness, acquisitions, additional indebtedness, sale of assets and investments,and the payment of dividends subject to certain limitations and minimumoperating covenants.  The new loanagreement also has other significant obligations- observation rights, change incontrol, etc.  If we don’t providesatisfactory evidence regarding certain tax liabilities, etc., the loan can becalled early.

 

Our ability tosatisfy our debt service obligations depends primarily on our operatingperformance. Future debt repayments by us, including the principal amount ofthe notes, may require funds in excess of our available cash flow.  We cannot assure our stakeholders that wewill be able to raise additional funds, if necessary, through futurefinancings.  The indenture (the “AGIIndenture”) pursuant to which our wholly-owned subsidiary, AGI, issued its AGISenior Notes and we issued our AGHI Notes impose several restrictions upon oursubsidiary or us, including restrictions on the ability to incur additionalindebtedness, pledge assets and make dividends and distributions.

 

Our substantialindebtedness could have important consequences to stakeholders in theCompany.  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 our flexibilityin planning for, or reacting to, changes in our business and the industry inwhich we operate, (iv) place us at a competitive disadvantage compared to ourcompetitors that have less debt, and (v) limit our ability, 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.*

 

Despite our currentlevel of debt, we or our subsidiaries may be able to incur substantialadditional debt in the future.  The AGINew Senior Credit Facility and CW Credit Facility permit total borrowings of upto $166.3 million, including $144.3 million of term loans and an asset basedlending facility of up to $22.0 million, of which $10.0 million is availablefor letters of credit and $12.0 million is available for revolving loans.  Although the terms of the AGI New SeniorCredit Facility, the CW Credit Facility, the indenture governing the AGI SeniorNotes (the “AGI Indenture”), and the indenture governing our AGHI Notes (the “AGHIIndenture”) restrict us and our restricted subsidiaries from incurringadditional debt, these restrictions are subject to important exceptions andqualifications. If we or our subsidiaries incur additional debt, the risks thatwe and they now face as result of our leverage could increase.

 

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If ourfinancial condition and operating results deteriorate, our relationships withour creditors, including the lenders under our AGI New Senior Credit Facility,the holders of the AGI Senior Notes and the AGHI Notes, and our suppliers, maybe adversely affected.

 

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

 

We currentlyconduct substantially all of our operations through our subsidiaries, and oursubsidiaries generate substantially all of our operating income and cashflow.  Our ability to pay our obligationsunder the AGHI Notes and any other direct indebtedness depends on our abilityto obtain cash dividends or other cash payments or obtain loans from oursubsidiaries.  These subsidiaries areseparate and distinct legal entities that will have no obligations to pay anydividends or to lend or advance us funds and may be restricted from doing so bycontract, including other financing arrangements, charter provisions orapplicable legal or regulatory requirements, and our ability may also depend onthe financial condition and regulatory requirements of these subsidiaries.  In addition, because we are a holdingcompany, except to the extent that we have priority or equal claims against oursubsidiaries as a creditor, our obligations under our AGHI Notes will be effectivelysubordinated to the obligations of our subsidiaries.  Currently, the New Senior Credit Facility andthe AGI Indenture impose limitations on the ability of our subsidiaries to makedividend distributions or loans to us.

 

*Ouroperations are substantially restricted by the terms of the AGHI Notes, the AGINew Senior Credit Facility and the AGI Indenture which could adversely affectus and increase our credit risk.*

 

The AGI New SeniorCredit Facility, AGHI Indenture, and the AGI Indenture include a number ofsignificant restrictive covenants.  Thesecovenants restrict, among other things, our ability to: (i) incur more debt, (ii)pay dividends or make other distributions, (iii) make investments, (iv) issuestock of subsidiaries, (v) repurchase stock, (vi) create liens, (vii) enterinto transactions with affiliates, (viii) enter into sale-leasebacktransactions, (ix) merge or consolidate, and (x) transfer and sell assets.

 

The AGI New SeniorCredit Facility contains additional and more restrictive covenants than theterms of the AGI Indenture, including financial covenants that require us toachieve certain financial and operating results and maintain compliance withspecified financial ratios.  Our abilityto comply with these covenants and requirements may be affected by eventsbeyond our control, and we may have to curtail some of our operations andgrowth plans to maintain compliance.

 

These covenantscould limit our ability to plan for or react to market conditions or to meetour capital needs.  These covenants aresubject to certain important exceptions. AGHI was in compliance with its debt covenants at December 31, 2009.

 

If we are not ableto comply with the covenants and other requirements contained in the AGI NewSenior Credit Facility, the AGI Indenture or our other debt instruments, anevent of default under the relevant debt instrument could occur.  Our ability to comply with the provisions ofthe AGI New Senior Credit Facility, the indentures, and the agreements orindentures governing other debt we may incur in the future could be affected byevents beyond our control and, therefore, we might be unable to meet therequirements of those debt instruments, including operating ratios andconditions. If an event of default does occur, it could trigger a default underour other debt instruments, we could be prohibited from accessing additionalborrowings, and the holders of the defaulted debt could declare amountsoutstanding with respect to that debt to be immediately due and payable.  We cannot assure our stakeholders 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

 

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payments of these debtinstruments. Even if we were able to secure additional financing, it may not beavailable on terms favorable to us.

 

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

* *

Our ability to makepayments on and to refinance our indebtedness and the indebtedness of oursubsidiaries, and to fund planned capital expenditures will depend on ourability to generate cash in the future and our creditworthiness.  To a certain extent, this is subject togeneral economic, financial, competitive, legislative, regulatory and otherfactors that are beyond our control.

 

We cannot assure ourstakeholders that our business will generate sufficient cash flow from operationsor that future borrowings will be available to us under the AGI New Senior CreditFacility in an amount sufficient to enable us to pay our indebtedness,including the AGI New Senior Credit Facility and the AGI Senior Notes, as theybecome 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 AGI Senior Notes, on or before its maturity.  We cannot assure our stakeholders that we willbe able to refinance any of our indebtedness, including the New Senior Credit Facility,the AGI Senior Notes and the AGHI Notes, on satisfactory terms or at all.

 

Our failure to comply withour obligations under the AGI New Senior Credit Facility, the AGI Indenture orthe AGHI Indenture may result in an event of default under those debtinstruments.  A default, if not cured orwaived, may permit acceleration of our other indebtedness.  We cannot be certain that we will have fundsavailable to remedy these defaults. If our indebtedness is accelerated, wecannot be certain that we will have sufficient funds available to pay theaccelerated indebtedness or that we will have the ability to refinance theaccelerated indebtedness on terms favorable to us or at all.

 

*We may not have theability to raise the funds necessary to repurchase the AGHI Notes upon a changeof control.*

* *

Upon the occurrence ofcertain specific kinds of change of control events, we will be required tooffer to repurchase all outstanding AGHI Notes at 101% of the principal amountthereof plus accrued and unpaid interest and liquidated damages, if any, to thedate of repurchase.  However, it ispossible that we may not have sufficient funds at the time of the change ofcontrol to make any required repurchases or that the AGI New Senior Credit Facilityor AGI Indenture will not allow such repurchases or permit the dividend or loanof sufficient funds to us to make the required repurchases.  If we do not repay all borrowings under theAGI New Senior Credit Facility and the AGI Indenture or obtain the consent of AGI’slenders and holders of the AGI Notes to permit distribution of funds to us torepurchase the AGHI Notes, we will be prohibited from purchasing the AGHI Notes.  Our failure to purchase tendered notes wouldconstitute a default under the indenture governing the AGHI Notes.  In addition, certain important corporateevents relating to our capital structure would not constitute a "change ofcontrol" under the AGI indenture.

 

*The interests ofaffiliates of our senior lender may conflict with the interests of holders ofthe debt instruments.*

 

We understand that anaffiliate of a lender under the AGI New Senior Credit Facility may hold asignificant amount of AGHI Notes.  Theinterests of such affiliate may conflict with the interests of otherstakeholders in AGI, including holders of the Senior Notes, leading such lenderunder the AGI New Senior Credit Facility to take actions, or defer from takingactions, that a lender would have

 

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taken without suchaffiliate’s interest in the AGHI Notes.

 

**Risks Relating to OurBusiness**

** **

*We depend on ourability to attract and retain active members.*

* *

Our future success dependsin large part upon continued demand for our membership club programs byconsumers.  Any number of factors couldaffect the frequency with which consumers participate in our programs orwhether they enroll in a membership club at all.  These factors include (1) consumer tastepreferences, (2) the frequency with which members participate in clubactivities, (3) general economic conditions, (4) weather conditions, (5) theavailability of alternative discount programs in the region in which consumerslive and work, (6) significant increases in gasoline prices, and (7) thedisposable income of consumers available for discretionary expenditures.  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 dependsupon continued demand for our membership clubs from consumers we serve or seekto serve.  A significant downturn inleisure travel or in any of the other areas served by our membership clubswould have a material adverse effect on our business, financial condition andresults of operations.

 

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

* *

Our business depends inpart on developing and maintaining productive relationships with third partyproviders of products and services that we market to our customers. Manyfactors outside our control may harm these relationships.  For example, financial difficulties that someof our providers may face may adversely affect our marketing program withthem.  A disruption of our relationshipswith our marketing partners or a disruption in our marketing partners' operationscould have a material adverse effect on our business and results of operations.

 

*We face significantcompetition for disposable income spent on leisure merchandise and activities.*

* *

In general, our membershipclubs, retail and catalog operations and publications compete with numerousorganizations in the recreation industry for disposable income spent on leisuremerchandise and activities. The products and services we market compete withsimilar products, services, publications and retail businesses offered by otherproviders.  Increased competition fromthese and other sources could require us to respond to competitive pressures byestablishing 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 beadversely affected by deteriorating general economic conditions.*

* *

Our activities relatesignificantly to the amount of leisure time and the amount of disposable incomeavailable to users of our products and services.  Our business, therefore, is sensitive togeneral economic conditions affecting the willingness of consumers to purchaseclub memberships and related products and services and of advertisers to placeadvertisements in our publications.  Our2009 total revenue experienced a 10.3% drop from 2008 primarily as a result ofthe 2008/2009 recession.  In particular,during the gasoline shortages and resulting price increases in 1973, 1980 and1990, there was a reduction in advertising revenues for our publications.  In addition, the

 

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success of the membershipclub portion of our business depends on our members' use of certain RV sitesand/or golf courses or the purchase of goods through participating merchants.  If the economy slows, our members may perceivethat they have less disposable income to permit them to pursue leisureactivities.  As a consequence, they maytravel less frequently, spend less when they travel and use the benefits oftheir club memberships less often, if at all. Any decline in program usagewould hurt our business. In addition, the current decline in the nationaleconomy could cause some of the merchants who participate in our programs to goout of business.  It is likely that,should the number of merchants entering bankruptcy rise, the number ofuncollectible accounts would also rise.  Thiswould have an adverse effect on our business and financial results.

 

*Our business could beadversely affected by deteriorating economic condition of FreedomRoads.*

* *

Forty-two of our CampingWorld stores are co-located with RV dealerships owned and operated byFreedomRoads.  In virtually all of suchlocations, Camping World is a sub-tenant of FreedomRoads. Camping World’sbusiness and occupancy rights in such co-located stores is sensitive to theviability of FreedomRoads’ RV dealership businesses and performance byFreedomRoads of its obligations as tenant to its landlord. Closing ofdealerships in co-located stores or loss of occupancy rights by virtue ofFreedomRoad’s failure to perform its lease obligations would have an adverseeffect on our business and financial results.

 

*The interests of ourprincipal shareholder may conflict with the interests of holders of the debtinstruments.*

* *

We are an indirectwholly-owned subsidiary of AGI Holding Corp. (“AGHC”), a privately heldcompany.  Stephen Adams, our Chairman, owns100% of the outstanding shares of AGIIntermediate Holdco, LLC (“AGII”).  Accordingly, Mr. Adams will be able to electour Board of Directors and to control matters submitted to the vote of ourshareholders.  Circumstances may occur inwhich the interests of Mr. Adams could be in conflict with the interests of the holders of our debtinstruments and lenders.  For example,Mr. Adams may have an interest in pursuing acquisitions, divestitures or othertransactions that, in his judgment, could enhance the value of his equityinvestment, even though such transactions may involve risks to the holders of ourdebt instruments and lenders.

 

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

* *

Our operations are subjectto varying degrees of federal, state and local regulation.  Our outbound telemarketing, direct mail, ERSprogram, and insurance activities are currently subject to regulation. Specifically,a principal source of leads for our direct response marketing efforts was newvehicle registrations provided by motor vehicle departments in various states.  Currently, all states restrict access to motorvehicle registration information.

 

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

 

Our direct marketingoperations are subject to various federal and state "do not call"list requirements.  The Federal TradeCommission has created a national "do not call" registry.  Under these federal regulations, consumers mayhave their phone numbers added to the national "do not call"registry.  Generally, we are prohibitedfrom calling anyone on that registry.  InSeptember 2003, telemarketers were granted access to the registry and are nowrequired to compare their call lists 

 

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against 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.  Enforcementof the "do not call" provisions began in late 2003, and the ruleprovides for 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 donot conduct our marketing activities in compliance with these rules.

 

*Increase in papercosts, postage costs and shipping costs may have an adverse impact on ourfuture financial results.*

* *

The price of paper is asignificant expense relating to our publications and direct mail solicitations.Postage for publication distribution and direct mail solicitations is also asignificant expense.  In addition,shipping costs are a significant expense for our business.  Paper, postage and shipping costs have increasedin the past and may be expected to increase in the future.  Such increases could have an adverse effect onour business if we are unable to pass them on to our customers.

 

*If we are unable toretain senior executives and attract and retain other qualified employees, ourbusiness might be adversely affected.*

* *

Our success depends in parton our ability to attract, hire, train and retain qualified managerial, salesand marketing personnel.  Competition forthese types of personnel is high.  We maybe unsuccessful in attracting and retaining the personnel we require to conductour operations successfully and, in such an event, our business could bematerially and adversely affected.  Oursuccess also depends to a significant extent on the continued service andperformance of our senior management team.  The loss of any member of our seniormanagement team could impair our ability to execute our business plan and couldtherefore have a material adverse effect on our business, results of operationsand financial condition.

 

**ITEM 2:  PROPERTIES**

** **

We lease all of the real propertieswhere we have operations.  Our real propertyleases generally provide for fixed monthly rentals with annual escalationclauses.  The table below sets forthcertain information concerning our properties and the lease expiration dateincludes all stated option periods.

 
| ** **                                                                                 | **Square  Feet** | **Acres**  | **Lease  Expiration** |
|--------------------------------------------------------------------------------------------|------------------|------------|-----------------------|
| **Corporate  Headquarters:**                                                               | ** **       | ** ** | ** **            |
| Ventura, CA                                                                                | 74,100           |       | 2039

           |
| **Other  Office Facilities:**                                                              |             |       |                  |
| Carson, CA (regional  publication office)                                                  | 10,048           |       | 2010                  |
| Denver, CO (customer  service, warehousing fulfillment, and information system functions). | 60,000           |       | 2039                  |
| Bowling Green, KY (retail  administrative headquarters and mail order operations)          | 31,278           |       | 2039                  |
| Chesterfield, VA (shows  sales office)                                                     | 5,900            |       | 2011                  |
| Maple Grove, MN (Ehlert  Publications Group, Inc. headquarters)                            | 17,496           |       | 2010                  |
| Scotts Valley, CA  (regional publication office)                                           | 3,905            |       | 2011                  |
| Bowling Green, KY  (database and online media support)                                     | 5,952            |       | 2015                  |
|                                                                                       |             |       |                  |
| **Distribution  Centers:**                                                                 |             |       |                  |
| Bakersfield, California                                                                    | 164,747          | 14.827     | 2037                  |
| Franklin,  Kentucky                                                                        | 250,000          | 33.000     | 2035                  |

 

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| ** **                               | **Square  Feet** | **Acres** | **Lease  Expiration** |
|------------------------------------------|------------------|-----------|-----------------------|
| **Camping World Supercenter Locations:** |             |      |                  |
| Dothan,  AL (1)                          | 18,906           | 11.275    | 2025                  |
| Oxford,  AL (2)                          | 11,828           | 23.940    | 2027                  |
| Robertsdale,  AL(1)                      | 19,670           | 18.360    | 2026                  |
| North  Little Rock, AR                   | 20,592           | 10.000    | 2042                  |
| Earnhardt,  AZ (1)                       | 2,000            | 24.000    | 2017                  |
| Flagstaff,  AZ                           | 23,110           | 7.350     | 2024                  |
| Tucson,  AZ (2)                          | 12,145           | 2.000     | 2018                  |
| Mesa,  AZ(1)                             | 27,500           | 3.140     | 2010                  |
| Bakersfield,  CA (1)                     | 23,325           | 9.940     | 2023                  |
| La  Mirada, CA                           | 33,479           | 5.501     | 2037                  |
| San  Marcos, CA                          | 25,522           | 2.212     | 2027                  |
| Rocklin,  CA                             | 29,085           | 4.647     | 2037                  |
| San  Bernardino, CA                      | 18,126           | 1.665     | 2012                  |
| San  Martin, CA                          | 29,486           | 5.000     | 2023                  |
| Vacaville,  CA                           | 35,917           | 8.700     | 2024                  |
| Valencia,  CA ..                         | 64,410           | 9.231     | 2037                  |
| Colorado  Springs, CO (1)                | 11,672           | 26.430    | 2027                  |
| Denver,  CO                              | 27,085           | 4.132     | 2037                  |
| Longmont,  CO (1)                        | 5,003            | 6.750     | 2026                  |
| Ft.  Myers, FL                           | 22,886           | 4.217     | 2012                  |
| Gulf  Breeze, FL (1)                     | 5,747            | 13.897    | 2026                  |
| Kissimmee,  FL                           | 58,382           | 6.043     | 2037                  |
| St.  Augustine, FL (1)                   | 21,875           | 20.000    | 2026                  |
| Tampa, FL                                | 40,334           | 3.711     | 2026                  |
| Tallahassee, FL (1)                      | 8,494            | 12.630    | 2024                  |
| Byron, GA (3)                            | 23,400           | 7.000     | 2042                  |
| Oakwood, GA (1)                          | 4,510            | 7.681     | 2026                  |
| Savannah, GA (1)                         | 6,285            | 4.898     | 2026                  |
| Woodstock, GA (1)                        | 4,510            | 7.715     | 2026                  |
| Council Bluffs,  IA (3)                  | 23,620           | 5.770     | 2023                  |
| Boise, ID (1)                            | 6,033            | 12.690    | 2018                  |
| Island Lake, IL (1)                      | 2,540            | 17.028    | 2026                  |
| Indianapolis, IN  (1)                    | 7,690            | 30.000    | 2027                  |
| Bowling Green, KY                        | 37,615           | 2.750     | 2037                  |
| Hammond, LA (2)                          | 27,096           | 68.454    | 2034                  |
| Belleville, MI                           | 44,248           | 7.260     | 2037                  |
| Grand Rapids, MI  (2)                    | 4,618            | 9.180     | 2037                  |
| Houghton Lake,  MI (1)                   | 6,840            | 9.500     | 2018                  |
| Rogers, MN                               | 24,700           | 6.303     | 2025                  |
| Strafford, MO (3)                        | 20,592           | 8.510     | 2042                  |
| Colfax, NC (1)                           | 6,371            | 8.094     | 2026                  |
| Statesville, NC (1)                      | 39,050           | 7.412     | 2024                  |
| Chichester, NH (1)                       | 10,447           | 1.572     | 2026                  |
| Bridgeport, NJ                           | 24,581           | 6.920     | 2031                  |
| Lakewood, NJ (1)                         | 3,800            | 9.912     | 2027                  |
| Albuquerque, NM (1)                      | 20,412           | 31.434    | 2026                  |
| Henderson, NV                            | 25,850           | 4.400     | 2025                  |
| Las Vegas, NV (1)                        | 5,000            | 15.840    | 2027                  |
| Bath, NY (1)                             | 4,356            | 5.500     | 2026                  |
| Amsterdam, NY (2)                        | 13,420           | 28.000    | 2033                  |

 

27

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| ** **                                           | **Square  Feet** | **Acres** | **Lease  Expiration** |
|------------------------------------------------------|------------------|-----------|-----------------------|
| **Camping World Supercenter Locations (continued):** |             |      |                  |
| Churchville, NY (1)                                  | 7,193            | 10.380    | 2026                  |
| Syracuse, NY (1)                                     | 12,242           | 8.190     | 2026                  |
| Akron, OH (1)                                        | 3,865            | 9.622     | 2026                  |
| Oklahoma City,  OK (2)                               | 12,500           | 8.219     | 2023                  |
| Junction City,  OR (2)                               | 21,401           | 1.970     | 2036                  |
| Wilsonville, OR                                      | 32,850           | 4.653     | 2016                  |
| Wood Village, OR  (1)                                | 6,495            | 11.070    | 2027                  |
| Columbia, SC                                         | 23,450           | 4.140     | 2017                  |
| Myrtle Beach, SC                                     | 38,962           | 5.410     | 2037                  |
| Myrtle Beach, SC  (1)                                | 2,298            | 18.940    | 2026                  |
| North  Charleston, SC (1)                            | 13,142           | 7.690     | 2027                  |
| Spartanburg, SC (1)                                  | 11,900           | 19.263    | 2033                  |
| Chattanooga, TN (1)                                  | 9,400            | 10.840    | 2024                  |
| Knoxville, TN (2)                                    | 10,763           | 24.580    | 2037                  |
| Nashville, TN                                        | 34,478           | 3.238     | 2037                  |
| Anthony, TX (1)                                      | 7,061            | 32.000    | 2025                  |
| Denton, TX                                           | 22,984           | 6.887     | 2037                  |
| Fort Worth, TX (2)                                   | 11,102           | 16.000    | 2026                  |
| Katy, TX (1)                                         | 25,913           | 38.861    | 2025                  |
| Mission, TX                                          | 23,094           | 3.430     | 2015                  |
| New Braunfels,  TX (3)                               | 43,397           | 19.100    | 2035                  |
| Draper, UT                                           | 27,675           | 8.031     | 2026                  |
| Kaysville, UT (1)                                    | 6,033            | 16.200    | 2027                  |
| Roanoke, VA (3)                                      | 35,796           | 7.690     | 2023                  |
| Winchester, VA                                       | 19,400           | 4.120     | 2042                  |
| Burlington, WA (1)                                   | 23,033           | 6.500     | 2025                  |
| Fife, WA                                             | 35,659           | 5.840     | 2032                  |
| Madison, WI                                          | 20,400           | 4.866     | 2023                  |

 

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

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

(3)        The supercenter is co-located with aFreedomRoads dealership wherein Camping World, Inc. and the dealership areco-tenants or 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 12,000 square feet on approximately 1.9 acres in Bellville,Michigan and other miscellaneous office equipment.  In addition, we own 12.439 acres ofunimproved land adjacent to the New Braunfels, Texas Camping World Supercenter.

 

**ITEM 3: LEGAL PROCEEDINGS**

** **

From time to time, the Company is involved in litigationarising in the normal course of business operations.   The Company does not believe it is currentlyinvolved in any litigation that will have a material adverse effect on theCompany’s results of operations or financial position.

 

28

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**ITEM 4:  (RESERVED)**

 

**PART II**

** **

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

** **

NotApplicable

 

29

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**ITEM 6: SELECTED FINANCIAL DATA**

 

The selectedfinancial data of our company for each of the five years ended December 31 arederived from our audited consolidated financial statements.  In November 2007, AGI Holding Corp., (“AGHC”), formed aholding company, AGI Intermediate Holdco, LLC (“AGII”), at which time AGHCcontributed 100% of the outstanding shares of common stock of AGHI toAGII.  AGII is the direct parent ofAGHI.  Our selected financial data should be read inconjunction with "Management's Discussion and Analysis of FinancialCondition and Results of Operations" and our Consolidated FinancialStatements and the notes thereto included herein.

 
| ** **                                |   | Year ended               |    |
|-------------------------------------------|--------|--------------------------|---------|
| ** **                                |   | *(dollars in thousands)* |    |
| **Statement of Operations Data:**         |   | 2009                     |    | 2008 |   | 2007 |   | 2006 |   | 2005 |   |
| REVENUES:                                 |   |                     |    |   |   |   |   |   |   |   |   |
| Membership services                       |   | $                        | 142,147 |   | $ | 152,643 |   | $ | 149,937 |   | $ | 137,394 |   | $ | 133,756 |   |
| Media                                     |   | 59,061                   |    | 82,424 |   | 90,537 |   | 86,742 |   | 79,122 |   |
| Retail                                    |   | 270,573                  |    | 291,070 |   | 321,730 |   | 290,422 |   | 272,682 |   |
|                                      |   | 471,781                  |    | 526,137 |   | 562,204 |   | 514,558 |   | 485,560 |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |
| COSTS APPLICABLE TO REVENUES:             |   |                     |    |   |   |   |   |   |   |   |   |
| Membership services                       |   | 84,826                   |    | 90,758 |   | 94,840 |   | 87,407 |   | 85,551 |   |
| Media                                     |   | 46,079                   |    | 61,126 |   | 62,258 |   | 58,302 |   | 53,855 |   |
| Retail                                    |   | 164,510                  |    | 170,911 |   | 194,940 |   | 175,015 |   | 162,363 |   |
|                                      |   | 295,415                  |    | 322,795 |   | 352,038 |   | 320,724 |   | 301,769 |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |
| GROSS PROFIT                              |   | 176,366                  |    | 203,342 |   | 210,166 |   | 193,834 |   | 183,791 |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                       |   |                     |    |   |   |   |   |   |   |   |   |
| Selling, general and administrative       |   | 129,063                  |    | 142,798 |   | 145,619 |   | 133,193 |   | 121,353 |   |
| Restructuring charge                      |   | -                        |    | - |   | - |   | 93 |   | - |   |
| Goodwill impairment                       |   | 46,884                   |    | 47,601 |   | - |   | - |   | 4,344 |   |
| Impairment  of investment in affiliate    |   | -                        |    | 81,005 |   | - |   | - |   | - |   |
| Financing  expense                        |   | 2,607                    |    | - |   | - |   | - |   | - |   |
| Depreciation and amortization             |   | 21,582                   |    | 20,304 |   | 19,453 |   | 19,162 |   | 15,919 |   |
|                                      |   | 200,136                  |    | 291,708 |   | 165,072 |   | 152,448 |   | 141,616 |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |
| (LOSS) INCOME FROM OPERATIONS             |   | (23,770                  | )       | (88,366 | ) | 45,094 |   | 41,386 |   | 42,175 |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |
| NON-OPERATING ITEMS:                      |   |                     |    |   |   |   |   |   |   |   |   |
| Interest expense, net                     |   | (43,342                  | )       | (36,409 | ) | (36,248 | ) | (35,555 | ) | (32,240 | ) |
| Gain (loss) on derivative instrument (1)  |   | 745                      |    | (2,394 | ) | - |   | - |   | - |   |
| Gain (loss) on debt restructure           |   | 4,678                    |    | - |   | (775 | ) | (835 | ) | - |   |
| Other non-operating income (expense), net |   | (1,427                   | )       | (323 | ) | (149 | ) | 9 |   | (5 | ) |
|                                      |   | (39,346                  | )       | (39,126 | ) | (37,172 | ) | (36,381 | ) | (32,245 | ) |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |
| (LOSS) INCOME FROM OPERATIONS             |   |                     |    |   |   |   |   |   |   |   |   |
| BEFORE INCOME TAXES                       |   | (63,116                  | )       | (127,492 | ) | 7,922 |   | 5,005 |   | 9,930 |   |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |
| INCOME TAX BENEFIT (EXPENSE) (2)          |   | 10,366                   |    | 2,213 |   | (1,583 | ) | (22,268 | ) | (4,291 | ) |
|                                      |   |                     |    |   |   |   |   |   |   |   |   |
| NET (LOSS) INCOME                         |   | $                        | (52,750 | ) | $ | (125,279 | ) | $ | 6,339 |   | $ | (17,263 | ) | $ | 5,639 |   |

 

30

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**SELECTED FINANCIAL DATA (continued)**

 
|                                |     | December 31,             |     |
|-------------------------------------|----------|--------------------------|----------|
| * *                            | * * | *(dollars in thousands)* | * * |
|                                |     | 2009                     |     | 2008 |   | 2007 |   | 2006 |   | 2005 |   |
| Balance Sheet Data (at period end): |     |                     |     |   |   |   |   |   |   |   |   |
| Working capital (deficiency)        |     | $                        | (13,997  | ) | $ | (15,013 | ) | $ | (20,908 | ) | $ | (35,764 | ) | $ | (6,446 | ) |
| Total assets                        |     | 224,343                  |     | 296,158 |   | 423,962 |   | 410,897 |   | 418,895 |   |
| Deferred revenues and gains (3)     |     | 96,335                   |     | 96,424 |   | 104,390 |   | 100,089 |   | 98,920 |   |
| Total debt                          |     | 390,689                  |     | 403,878 |   | 396,959 |   | 388,781 |   | 412,664 |   |
| Total stockholders' deficit         |     | (338,789                 | )        | (298,005 | ) | (171,274 | ) | (173,019 | ) | (152,469 | ) |
|                                     |          |                          |          |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

(1) The 2009 gain on derivative instrument pertains tothe change in value of the $35.0 million interest rate swap agreement effectiveApril 30, 2008, and $20.0 million of the $100.0 million interest rate swapagreement effective October 15, 2007. The 2008 loss on derivative instrument pertains to change in value ofthe $35.0 million interest rate swap only.

 

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

 

(3) Deferred revenues represent cash received by us inadvance of the recognition of revenues in accordance with accounting principlesgenerally accepted in the United States. Deferred revenues primarily reflect club membership dues, annual ERSfees, advances on third party credit card fee revenues and publicationsubscriptions.  These revenues arerecognized at the time the goods or services are provided or over themembership period, which averages approximately 17 months.  The deferred revenue balance for 2009, 2008,2007, 2006 and 2005 also include deferred gains of $8.4 million, $8.9 million,$9.3 million, $9.8 million and $10.3 million, respectively, from the realestate sale-leaseback transactions which occurred in December 2001.

 

31

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

 

 

The followingtables set forth the components of the statements of operations for the yearsended December 31, 2009, 2008, and 2007 as a percentage of total revenues, andthe comparison of those components from period to period.  The following discussion is based on ourConsolidated Financial Statements included elsewhere herein.  Our revenues are derived principally frommembership services, including club membership dues and marketing fees paid tous for services provided by third parties, from publications, includingsubscriptions and advertising, and from retail sales.

 

 
|                                       |   | Percentage of  |   |   | Percentage  Increase/ |   |
|--------------------------------------------|--------|----------------|--------|--------|-----------------------|--------|
|                                       |   | Total Revenues |   |   | (Decrease)            |   |
|                                       |   |           |   |   |                  |   |
|                                       |   |           |   |   |                  |   |   |   | Year 2009 |   | Year 2008 |   |
|                                       |   | 2009           |   | 2008   |                  | 2007   |   |   | over 2008 |   | over 2007 |   |
|                                       |   |           |   |   |                  |   |   |   |   |   |   |   |
| REVENUES:                                  |   |           |   |   |                  |   |   |   |   |   |   |   |
| Membership  services                       |   | 30.1%          |   | 29.0%  |                  | 26.7%  |   |   | (6.9% | ) | 1.8% |   |
| Media                                      |   | 12.5%          |   | 15.7%  |                  | 16.1%  |   |   | (28.3% | ) | (9.0% | ) |
| Retail                                     |   | 57.4%          |   | 55.3%  |                  | 57.2%  |   |   | (7.0% | ) | (9.5% | ) |
|                                       |   | 100.0%         |   | 100.0% |                  | 100.0% |   |   | (10.3% | ) | (6.4% | ) |
|                                       |   |           |   |   |                  |   |   |   |   |   |   |   |
| COSTS  APPLICABLE TO REVENUES:             |   |           |   |   |                  |   |   |   |   |   |   |   |
| Membership  services                       |   | 18.0%          |   | 17.2%  |                  | 16.9%  |   |   | (6.5% | ) | (4.3% | ) |
| Media                                      |   | 9.8%           |   | 11.6%  |                  | 11.1%  |   |   | (24.6% | ) | (1.8% | ) |
| Retail                                     |   | 34.8%          |   | 32.6%  |                  | 34.6%  |   |   | (3.7% | ) | (12.3% | ) |
|                                       |   | 62.6%          |   | 61.4%  |                  | 62.6%  |   |   | (8.5% | ) | (8.3% | ) |
|                                       |   |           |   |   |                  |   |   |   |   |   |   |   |
| GROSS  PROFIT                              |   | 37.4%          |   | 38.6%  |                  | 37.4%  |   |   | (13.3% | ) | (3.2% | ) |
|                                       |   |           |   |   |                  |   |   |   |   |   |   |   |
| OPERATING  EXPENSES:                       |   |           |   |   |                  |   |   |   |   |   |   |   |
| Selling,  general and administrative       |   | 27.3%          |   | 27.1%  |                  | 25.9%  |   |   | (9.6% | ) | (1.9% | ) |
| Goodwill  impairment                       |   | 9.9%           |   | 9.0%   |                  | -      |   |   | (1.5% | ) | 100.0% |   |
| Impairment  of investment in affiliate     |   | -              |   | 15.4%  |                  | -      |   |   | (100.0% | ) | 100.0% |   |
| Financing  expense                         |   | 0.6%           |   | -      |                  | -      |   |   | 100.0% |   | - |   |
| Depreciation  and amortization             |   | 4.6%           |   | 3.9%   |                  | 3.5%   |   |   | 6.3% |   | 4.4% |   |
|                                       |   | 42.4%          |   | 55.4%  |                  | 29.4%  |   |   | (31.4% | ) | 76.7% |   |
|                                       |   |           |   |   |                  |   |   |   |   |   |   |   |
| (LOSS)  INCOME FROM OPERATIONS             |   | (5.0%          | )      | (16.8% | )                     | 8.0%   |   |   | (73.1% | ) | (296.0% | ) |
|                                       |   |           |   |   |                  |   |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                      |   |           |   |   |                  |   |   |   |   |   |   |   |
| Interest  income                           |   | 0.1%           |   | 0.1%   |                  | 0.1%   |   |   | (10.7% | ) | (2.2% | ) |
| Interest  expense                          |   | (9.3%          | )      | (7.0%  | )                     | (6.6%  | ) |   | 18.6% |   | 0.4% |   |
| Gain  (loss) on derivative instrument      |   | 0.2%           |   | (0.5%  | )                     | -      |   |   | (131.1% | ) | 100.0% |   |
| Gain  (loss) on debt restructure           |   | 1.0%           |   | -      |                  | (0.1%  | ) |   | 100.0% |   | (100.0% | ) |
| Other  non-operating (expense) income, net |   | (0.4%          | )      | 0.0%   |                  | (0.0%  | ) |   | 341.8% |   | - |   |
|                                       |   | (8.4%          | )      | (7.4%  | )                     | (6.6%  | ) |   | 0.6% |   | 5.3% |   |
| (LOSS)  INCOME FROM OPERATIONS             |   | ** **     |   |   |                  |   |   |   |   |   |   |   |
| BEFORE  INCOME TAXES                       |   | (13.4%         | )      | (24.2% | )                     | 1.4%   |   |   | 50.5% |   | (1709.3% | ) |
|                                       |   |           |   |   |                  |   |   |   |   |   |   |   |
| INCOME TAX  BENEFIT (EXPENSE)              |   | 2.2%           |   | 0.4%   |                  | (0.3%  | ) |   | 368.4% |   | (239.8% | ) |
|                                       |   |           |   |   |                  |   |   |   |   |   |   |   |
| NET (LOSS)  INCOME                         |   | (11.2%         | )      | (23.8% | )                     | 1.1%   |   |   | 57.9% |   | (2076.3% | ) |

 

32

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* *

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

* *

*Revenues*

* *

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

 

Membership services revenues for2009 of $142.1 million decreased by $10.5 million or 6.9% from 2008.  This revenue decrease was largelyattributable to a $5.0 million reduction in brand usage licensing fee chargedto FreedomRoads Holding LLC and its subsidiaries (collectively “FreedomRoads”)in 2008 and terminated by agreement in 2009, a $2.5 million decrease inadvertising revenue in *Highways Magazine*,the Good Sam Club publication, a $1.7 million revenue decrease in the Coast toCoast Club and Golf Club due to decreased enrollment, a $1.4 million reductionin dealer program marketing revenue, a $1.3 million reduction in member eventsrevenue, a $0.9 million decrease in Presidents’ Club revenue due to lowerpromotional pricing and reduced advertising revenue, a $0.7 million decrease infee income recognized on vehicle insurance products, a $0.5 million decrease inemergency road service revenue attributable to decreased average enrollment,and a $0.2 million reduction in other various ancillary products.  These decreases were partially offset by a$3.7 million increase in extended vehicle warranty program revenue due tocontinued policy growth and strong renewals.

 

Media revenues for 2009 of $59.1million decreased by $23.4 million or 28.3% from 2008.  This decrease was primarily attributable to a$9.1 million revenue decrease from our outdoor power sports magazine group dueto reduced advertising revenue and reduced published issues of boating and ATVmagazines, a $7.0 million revenue decrease for the RV magazine group primarilydue to decreased advertising revenue, a $4.9 million decrease in consumer showrevenue mainly due to reduced exhibitor contracts, a $2.1 million reduction inannual directory and campground guide revenue, and a $0.3 million revenuereduction due to the elimination of regional campground publications.

 

Retail revenue for 2009 of $270.6 milliondecreased approximately $20.5 million or 7.0% from 2008.  Store merchandise sales decreased $10.9million from 2008 primarily due to a same store sales decrease of $9.2 million,or 4.5%, compared to a 15.6% decrease in 2008, and decreased revenue fromdiscontinued stores of $5.9 million, was partially offset by a $4.2 millionrevenue increase from the addition of 7 new stores over the past twoyears.  Same store sale calculations fora given period include only those stores that were open both at the end of thatperiod and at the beginning of the preceding fiscal year.  In addition, supplies and other salesdecreased $6.2 million, catalog revenue decreased $2.4 million, installationand service fees decreased $0.8 million and product extended warranty salesdecreased $0.2 million.

 

*Costs Applicableto Revenues*

 

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

 

Membership services costs and expenses decreased by $5.9million or 6.5% to $84.8 million for 2009. This decrease consisted of a $2.2 million reduction in wage-relatedexpenses, a $1.2 million reduction in member publication costs, a $1.1 millionreduction in vehicle insurance costs associated with lower revenue, a $1.1million reduction in dealer program marketing costs related to reduced revenue,a $1.6 million reduction related to various other marketing, overhead andancillary product cost decreases, a $0.6 million decrease in member eventscosts related to reduced revenue, and a $0.3 million reduction of marketing andprogram costs associated with the Coast to Coast Club and the Golf CardClub.  These decreases were partiallyoffset by a $1.1 million increase associated with the 

 

33

----

 

extended vehicle warranty program primarily related toprogram costs, and a $1.1 million cost increase for emergency road serviceprograms primarily related to claims costs.

 

Media costs and expenses of$46.1 million for 2009 decreased approximately $15.1 million or 24.6% comparedto 2008.  This decrease was attributableto a $4.9 million reduction in wage-related expenses, a $4.0 million costreduction in the outdoor power sports magazines primarily related to a reductionin the number of issues published, a $2.3 million reduction related to consumershow costs, including reduced site rental, outside services and promotionexpense related to fewer exhibitors, a $2.0 million reduction in production andadvertising costs of the RV magazines, a $1.0 million reduction in costsassociated with reduced annual directory and campground guide revenue, a $0.3million reduction associated with the cancellation of regional campgroundpublications, and a $0.6 million reduction in other marketing and overheadexpenses.

 

Retail costs applicable to revenues decreased $6.4 millionor 3.7% to $164.5 million primarily due to reduced same store revenue.  The retail gross profit decreased by $14.1million, with gross margin as a percent of revenues deceasing from 41.3% in2008 to 39.2% in 2009 due primarily to a new, discounted “value pricing”strategy adopted on over 1,000 products and price increases from key vendors.

 

*Operating Expenses*

 

Selling, general and administrativeexpenses of $129.1 million for 2009 decreased $13.7 million or 9.6% from2008.  This decrease was largelyattributable to a $13.5 million decrease in retail general and administrativeexpenses primarily consisting of decreases in selling and labor expenses.  In addition, wage-related expense savingswere $1.5 million in the other two segments, the consumer shows group in theMedia segment had a $0.5 million reduction in general and administrativeexpenses related to discontinued consulting agreements and management fees, andother expenses were reduced $0.5 million. These decreases were partially offset by a $2.3 million increase inprofessional fees related primarily to the extension of the maturity date underthe Company’s Senior Credit Facility due March 31, 2010 and Second Lien Loandue July 31, 2010 which was completed in the first quarter of 2010.

 

The Company recorded a non-cashgoodwill impairment charge of $46.9 million in the third quarter of 2009related to our RV and powersports publications, which is part of the Mediasegment, based on managements’ evaluation that determined the carrying value ofthe goodwill associated with the Media segment exceeded its estimated fairvalue.  The Company recorded a non-cashgoodwill impairment charge of $47.6 million in the third quarter of 2008 basedon management’s evaluation, prepared in anticipation of the potential sale ofCamping World, that determined the carrying value of the goodwill associatedwith Camping World exceeded the estimated fair value of Camping World, whichencompasses the entire Retail segment, and to a lesser extent, part of theMembership Services segment.  The Companyfurther recorded an $81.0 million non-cash long-lived asset impairment chargein the third quarter of 2008 relating to the carrying value of the preferredinterest in FreedomRoads Holding Company, LLC, held by an indirect subsidiaryof Camping World, exceeding its estimated fair value.

 

The Company incurred financingexpense of $2.6 million in 2009 for legal and other costs associated with theamendment to the Senior Credit Facility dated in June, 2009, which wereexpensed in accordance with accounting guidance for debtors accounting for amodification or exchange of debt instruments.

 

Depreciation and amortizationexpenses of $21.6 million were approximately $1.2 million higher than in 2008due primarily to increased amortization related to the current Senior CreditFacility re-financing and increased depreciation associated with new retailstores, partially offset by reduced amortization of intangible assetsassociated with the recent acquisitions.

 

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*Loss from Operations*

*** ***

Loss from operations for 2009 was$23.8 million compared to a loss from operations of $88.4 million for2008.  This $64.6 million reduction inloss was primarily the result of the $81.0 million asset impairment charge in2008 and a $0.7 million net decrease in goodwill impairment charges from the2008 period to the 2009 period, partially offset by $2.6 million of financingexpense in 2009.  Operationally, theremaining loss resulted from reduced gross profit for the Retail, Media andMembership Services segments of $14.1 million, $8.3 million and $4.6 million,respectively, and increased depreciation and amortization expense of $1.2million, partially offset by reduced selling, general and administrativeexpenses of $13.7 million.

 

*Non-OperatingItems*

 

Net non-operating items for 2009were $39.3 million, an increase of approximately $0.2 million from 2008.  This expense increase was primarilyattributable to a $6.9 million increase in net interest expense resulting fromincreased average interest rates in 2009, $0.8 million of other non-operatingitems and a $0.3 million increase in loss on sale of equipment.  These increases were partially offset by a$4.7 million gain on purchase of the $14.6 million AGI Senior Notes in thesecond quarter of 2009, and a net gain on derivative interest rate swapagreements of $3.1 million.

* *

*Loss before Income Taxes*

*** ***

Loss before income taxes for 2009was $63.1 million compared to a loss before income taxes of $127.5 million in2008.  This decrease in loss ofapproximately $64.4 million from the prior year was attributable to the $64.6million reduction in loss from operations in 2009 from 2008, and a $0.2 millionincrease in non-operating items.

 

*Income Tax Expense*

 

The Company recorded $10.4 millionof income tax benefit for 2009, compared to a $2.2 million income tax benefitfor 2008.  The difference is due to thedecrease in previously unrecognized tax benefits, reversal of accrued interestand penalties related to the previously unrecognized tax benefits, and decreasein the valuation allowance against deferred tax assets.

* *

*Net Loss*

 

Net loss for 2009 was $52.8 millioncompared to $125.3 million for 2008mainly due to the reasons discussedabove.

* *

*Segment (Loss)Profit*

 

TheCompany’s three principal lines of business are Membership Services, Media andRetail.  The Membership Services segmentoperates the Good Sam Club, the Coast to Coast Club, the President’s Club, CampClub USA and assorted membership products and services for RV owners, campersand outdoor vacationers, and the Golf Card Club for golf enthusiasts.  The Media segment publishes a variety ofpublications for selected markets in the recreation and leisure industry,including general circulation periodicals, directories, and RV and powersportsindustry trade magazines.  In addition,the Media segment operates consumer outdoor recreation shows primarily focusedon RV and powersports markets.  TheRetail segment sells specialty retail merchandise and services for RV ownersprimarily through retail supercenters, mail order catalogs and internet.  The Company evaluates performance based onprofit or loss from operations before income taxes and unusual items.

 

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

 

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

 

Media segment loss for 2009 was$43.9 million compared to a $9.2 million segment profit in 2009.  This $53.1 million segment decrease, or575.7%, was primarily due to a non-cash goodwill impairment charge of $46.9million in the third quarter of 2009 related to our RV and powersportspublications, a $5.0 million decrease in segment profit from the RV-relatedpublications primarily attributable to reduced advertising revenue, a $1.4million decrease in segment profit from our consumer shows group primarilyrelated to reduced exhibitor revenue, and a $0.9 million decrease in segmentprofit from our outdoor powersports magazine group, primarily attributable toreduced advertising revenue and fewer issues published.  These decreases were partially offset by a$0.7 million reduction in overhead expenses and a $0.4 million segment profitincrease for annual directories.

 

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

 

 

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

 

*Revenues*

 

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

 

Membership servicesrevenues for 2008 of $152.6 million increased by $2.7 million or 1.8% from2007.  This revenue increase was largelyattributable to a $5.0 million brand licensing fee charged to FreedomRoadsHolding LLC and its subsidiaries (collectively “FreedomRoads”), a $1.6 millionincrease in marketing fee revenue from health and life insurance products, a$0.7 million increase in emergency road service revenue attributable toincreased average enrollment, and a $0.6 million increase in extended vehiclewarranty program revenue due to continued growth in the sales of one-yearrenewable warranty products including warranty sales through our growingnetwork of Good Sam dealers, partially offset by a $1.7 million revenue decreasein fee income from financial services, a $1.3 million decrease in fee incomerecognized on vehicle insurance products, a $1.1 million decrease 

 

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

 

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

 

Retail revenue for2008 of $291.1 million decreased approximately $30.7 million or 9.5% from2007.  Store merchandise sales decreased$26.8 million from 2007 primarily due to a $33.5 million, or 15.6%, same storesales decrease compared to a 6.8% decrease in 2007.  This was partially offset by a $6.7 millionrevenue increase from the addition of 23 new stores over the past twoyears.  Same store sale calculations fora given period include only those stores that were open both at the end of thatperiod and at the beginning of the preceding fiscal year.  In addition, catalog revenue decreased $8.6million, and product extended warranty sales decreased $0.4 million.  These decreases were partially offset by a$4.4 million increase in supplies and other sales, and a $0.7 million increasein installation and service fees.

 

*CostsApplicable to Revenues*

 

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

 

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

 

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

 

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

 

*OperatingExpenses*

 

Selling, generaland administrative expenses of $142.8 million for 2008 decreased $2.8 millionor 1.9% from 2007.  This decrease waslargely attributable to a $1.8 million reduction in executive wage-relatedexpenses and professional fees, a $0.9 million reduction in arbitrationexpenses in connection with our 2007 asserted claim to a right of first refusalin connection with the sale of the insurance provider for the RV vehicleinsurance offered by our Membership Services segment, which claim was rejectedby the arbitration panel, and a $0.7 million reduction in deferred executivecompensation.  

 

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These decreaseswere partially offset by increased retail selling and general andadministrative expenses of $0.6 million consisting of increased rent expensepartially offset by decreased wages and travel.

 

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

 

Depreciation andamortization expenses of $20.3 million were $0.9 million higher than in 2007due primarily to increased amortization of intangible assets associated withthe recent acquisitions and depreciation associated with new stores.

 

*(Loss) Income from Operations*

 

Loss from operations for 2008 was$88.4 million versus income from operations of $45.1 million for 2007.  This decrease of approximately $133.4 milliondecrease, or 296.0%, was attributable to increased operating expense of $126.7million, and reduced gross profit in the media and retail operations of $7.0million and $6.6 million, respectively, partially offset by $6.8 million ofincreased gross profit for membership services operations.

 

*Non-OperatingItems*

 

Net non-operatingitems for 2008 were $39.1 million, an increase of approximately $1.9 millionfrom 2007.  This increase was primarilyattributable to a $2.4 million loss on derivative instrument recorded in thefourth quarter of 2008 related to the ineffective portion of the loss in fairvalue of our $35.0 million interest rate swap, $0.2 million of additional losson sale of equipment and a $0.1 million increase in interest expense in 2008resulting from increased borrowings, partially offset by an $0.8 millionreduction in debt extinguishment expense.

 

*(Loss) Income before Income Taxes*

 

Loss before income taxes for 2008was $127.5 million versus income of $7.9 million in 2007.  This decrease from the prior year ofapproximately $135.3 million was attributable to approximately $133.4 milliondecrease in income from operations mentioned above, partially offset by the$1.9 million increase in non-operating items.

 

*IncomeTax Benefit (Expense)*

 

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

 

*Net(Loss) Income*

 

Net loss for 2008was $125.3 million compared to net income of $6.3 million for 2007 mainly dueto the reasons discussed above.

 

*Segment(Loss) Profit*

 

The Company’s three principal linesof business are Membership Services, Media and Retail.  The Membership Services segment operates theGood Sam Club, the Coast to Coast Club, the 

 

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President’s Club, Camp Club USA andassorted membership products and services for RV owners, campers and outdoorvacationers, and the Golf Card Club for golf enthusiasts.  The Media segment publishes a variety ofpublications for selected markets in the recreation and leisure industry,including general circulation periodicals, directories, and RV and powersportsindustry trade magazines.  In addition,the Media segment operates consumer outdoor recreation shows primarily focusedon RV and powersports markets.  TheRetail segment sells specialty retail merchandise and services for RV ownersprimarily through retail supercenters and mail order catalogs.  The Company evaluates performance based onprofit or loss from operations before income taxes and unusual items.

 

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

 

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

 

Media segment profit for 2008 of$9.2 million decreased by $8.3 million, or 47.3% from $17.5 million in2007.  The decrease in gross profitmargin was primarily due to a $2.3 million reduction in segment profit relatedto the outdoors power sports magazine group, a $2.5 million reduction insegment profit in annual directories and campground guides, a $2.0 millionreduction in segment profit from the RV-related titles, a $1.2 millionreduction in segment profit related to the consumer shows group, and a $0.3 millionreduction in other publishing areas.

 

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

 

 

**Liquidityand Capital Resources**

 

We have historically operated with a working capital deficit.  The working capital deficit as of December 31,2009 and 2008 was $14.0 million and $15.0 million, respectively.  The primary reason for the working capital deficitis the deferred revenue and gains reported under current liabilities of $60.7million and $60.6 million as of December 31, 2009 and 2008,respectively.  Deferred revenue isprimarily comprised of cash collected for club memberships in advance of servicesto be provided 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.  We generatednet cash**from operations of $18.9 million and$15.5 million, in 2009 and 2008, respectively. At December 31, 2009, $8.1 million of our cash was classified asrestricted as it was used to secure letters of credit and performance bonds.

 

The Companyand AGI have engaged a financial advisor to assist in the refinancing orrestructuring of the Senior Credit Facility ($128.9 million principaloutstanding as of December 31, 2009), the AGI Senior Notes due 2012($137.8 million principal outstanding as of December 31, 2009) and theAGHI 

 

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Notes due 2012($112.3 million principal outstanding as of December 31, 2009 of which$25.4 million was due March 2010 and which has been paid through thecancellation of AGHI Notes in that amount).

 

The Company and AGI have engaged in discussions with the holders of theAGHI Notes and the holders of other indebtedness of the Company regarding arefinancing or restructuring of the indebtedness of the Company and its parent,AGHI.  As part of those discussions, AGHIdeferred payment of the interest on the AGHI Notes that was due on August 15,2009.  The indenture governing the AGHINotes provides a 30 day grace period for the payment of interest.  Before the end of the grace period, AGHIreceived consent letters for extending such grace period from certaininstitutional holders of the AGHI Notes holding in the aggregate $65.8 millionprincipal amount of the AGHI Notes and from non-institutional holders holdingin the aggregate $46.6 million principal amount of the AGHI Notes and paid theinterest of the remaining AGHI Notes. The aggregate principal amount of the AGHI Notes outstanding was then$113.6 million so the holders executing the consents held 98.9% of theoutstanding principal amount of the AGHI Notes. Pursuant to the consent letters from the institutional holders, AGHIagreed to pay the legal fees for a law firm to represent the institutionalholders. In addition, AGHI paid a consent fee equal 1⁄4 of 1% of the principalamount to the institutional holders who signed a consent letter, or anaggregate of $164,600.  No consent feewas paid to the non-institutional holders. AGHI satisfied the August 15, 2009 interest payment inJanuary, 2010 with a $4.5 million in cash (funded, in part, from a $2.8 millioncapital contribution from its shareholder, and the balance from AGI as apermitted tax distributions), and the remaining $1.7 million throughforgiveness of interest on the AGHI Notes held by entities indirectlycontrolled by the Company’s sole shareholder. As a condition to funding of the AGI New Senior Credit Facility, AGHIacquired $25.4 million of AGHI Notes due on March 15, 2010 that were heldby an affiliate of AGHI and cancelled those notes, thereby reducing the  approximately $112.3 million of AGHI Notesoutstanding as of December 31, 2009 to $86.9 million as of March 1,2010.

 

*ContractualObligations and Commercial Commitments*

 

The followingtable reflects our contractual obligations and commercial commitments at December 31,2009, in thousands.  The table belowincludes principal and future interest due under our debt agreements based oninterest rates as of December 31, 2009 and assumes debt obligations willbe held to maturity.  The following tableexcludes the $25.4 million of AGHI Notes that were settled for zeroconsideration on March 1, 2010.

 
|                          |   | Payments  Due by Period |    |
|-------------------------------|--------|-------------------------|---------|
| *(in thousands)*              |   | Total                   |    | 2010 |   | 2011 |   | 2012 |   | 2013 |   | 2014 |   | Thereafter |   |
|                          |   |                    |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term  debt (1)           |   | $                       | 477,759 |   | $ | 54,814 |   | $ | 184,539 |   | $ | 238,406 |   | $ | - |   | $ | - |   | $ | - |   |
| Operating  lease obligations  |   | 221,576                 |    | 23,080 |   | 21,661 |   | 20,056 |   | 17,978 |   | 17,636 |   | 121,165 |   |
| Other  commercial commitments |   |                    |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Letters  of credit            |   | 5,770                   |    | 5,770 |   | - |   | - |   | - |   | - |   | - |   |
|                          |   |                    |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Grand  total                  |   | $                       | 705,105 |   | $ | 83,664 |   | $ | 206,200 |   | $ | 258,462 |   | $ | 17,978 |   | $ | 17,636 |   | $ | 121,165 |   |

 

(1) The long-term debt due in2011 includes the amount refinanced under the AGI New Senior Credit Facilitythat matures 90 days prior to the maturity of the AGI Senior Notes and AGHINotes but no later than March 1, 2015.

 

AGI Senior Credit Facility

On June 24, 2003, AGI enteredinto an Amended and Restated Credit Agreement and a Senior Secured FloatingRate Note Purchase Agreement (“Senior Credit Facility”).  The Senior Credit Facility was subsequentlyamended on March 3, 2006, June 8, 2006, February 27, 2007 and June 5,2009, and provides for term loans (“Term Loans”) in the aggregate of $140.0million and a revolving credit facility of $25.0 million.  The funds available under the revolvingcredit line of the Senior Credit Facility may be utilized for borrowings orletters of credit; however, a maximum of $7.5 million may be allocated to suchletters of credit.  Re-borrowings underthe Term Loans are not permitted.  The 

 

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interest on borrowings under theSenior Credit Facility is at variable rates based on the ratio of total cashflow to outstanding indebtedness (as defined). Interest rates float with prime and the London Interbank Offered Rates,(“LIBOR”), plus an applicable margin ranging from 9.00% to 10.00%,respectively, over the stated rates and a LIBOR floor of 2.75%.  AGI also pays a commitment fee of 1.0% perannum on the unused amount of the revolving credit facility.

 

The aggregate quarterly scheduledpayments on the term loans are $0.4 million. The funds available under the Senior Credit Facility may be utilized forborrowings or letters of credit, except a maximum of $7.5 million may beallocated to such letters of credit.  TheSenior Credit Facility is secured by virtually all of AGI’s assets and a pledgeof AGI’s stock and the stock of AGI’s subsidiaries.

 

As of December 31, 2009, $110.8million was outstanding under the Term Loans and after consideration of fixedrates under the interest rate swap agreements (discussed in Note 8 toConsolidated Financial Statements - Interest Rate Swap Agreements) the averageinterest rate on the Term Loans was 17.01%. As of December 31, 2009, permitted borrowings under the undrawnrevolving line were $19.2 million.  AGIhad commercial and standby letters of credit in the aggregate amount of $5.8million outstanding as of December 31, 2009.

 

Second Lien Loan

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

 

Shareholder Loans

The June 2009 Amendment to theSenior Credit Facility also requires the commitment of Stephen Adams, AGHI’sultimate shareholder, to cause loans to be made to AGI in amounts equal to thecash interest payments on $16.0 million in aggregate principal amount of theterm loans.  In connection with thatrequirement, on June 10, 2009, AGI entered into a loan agreement with SAHolding, LLC, (“SA Holding”), which is owned by Stephen Adams, pursuant towhich SA Holding agreed to loan to AGI (the “SA Loans”) amounts equal to thecash interest payments on $16.0 million in aggregate principal amount of termloans.  The interest rate on the SA Loansis equal to the interest rate payable on the Senior Credit Facility plus 2.0%per annum compounded monthly.  The SALoans mature on the date on which the indebtedness under the Senior CreditFacility is paid in full.  As of December 31,2009, $1.0 million of SA Loans were outstanding.  The Company’s indebtedness under the underthe Senior Credit Facility, Second Lien Loan, and SA Loans were repaid in fullon March 1, 2010 from proceeds of the AGI New Senior Credit Facilitydiscussed below.

 

AGI NewSenior Credit Facility

On March 1,2010, AGI entered into the second amended and restated credit agreement (the “AGINew Senior Credit Facility”) to refinance its existing senior credit facility($128.9 million aggregate principal amount outstanding as at December 31,2009) which was scheduled to mature on March 31, 2010, the Second LienLoan totaling $9.7 million due July 31, 2010, and the SA Loans.  The AGI New Senior Credit Facility providesfor term loans aggregating $144.3 million, including an original issue discountof 2%, that are payable in quarterly installments of $360,750 beginning March 1,2011.  In addition, there are mandatoryprepayments of the term loans from excess cash flow (as defined) of AGI andfrom asset sales.  The term loans underthe AGI New Senior Credit Facility mature on the earlier of March 1, 2015or 90 days prior to the maturity of either AGI’s 9% senior subordinated notesdue 2012 (“AGI Senior Notes”) ($137.8 million principal amount outstanding asat December 31, 2009) or the Company’s 10-7/8% senior notes due 2012 (the “AGHINotes”) ($113.6 million aggregate principal amount outstanding as at December 31,2009).  Interest on the term loans underthe AGI New Senior Credit Facility floats at either 8.75% over the base rate(defined as the greater of the prime rate, federal funds rate plus 50 basispoints or 5.25%) for borrowings whose interest is based 

 

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on the prime rateor 10.0% over the LIBOR rate (defined as the greater of the 3 months LIBOR rateor 3.0%) for borrowings whose interest is based on LIBOR.  The AGI New Senior Credit Facility containsaffirmative covenants, including financial covenants, and negative covenants,including a restriction on dividends or distributions by AGI to theCompany.  Borrowings under the AGI NewSenior Credit Facility are guaranteed by the direct and indirect subsidiariesof AGI and are secured by liens on the assets of AGI and its direct and indirectsubsidiaries.  From time to timeaffiliates of the Company have purchased and held AGHI Notes.  As a condition to the term loans under theAGI New Senior Credit Facility, $25.4 million of AGHI Notes due on March 15,2010 that were held by an affiliate of the Company were contributed to theCompany for zero consideration and the Company cancelled those notes.

 

CW CreditFacility

On March 1,2010, AGI’s wholly-owned subsidiary, Camping World, Inc. and indirectsubsidiary, CWI, Inc. (collectively, “Camping World”), as co-borrowers,and Camping World’s subsidiaries entered into a credit agreement (the “CWCredit Facility”) providing for an asset based lending facility of up to $22.0million, of which $10.0 million is available for letters of credit and $12.0million is available for revolving loans. The CW Credit Facility matures on the earlier of March 1, 2013, 60days prior to the date of maturity of the AGI New Senior Credit Facility, or120 days prior to the earlier date of maturity of the AGI Senior Notes and theAGHI Notes.  Interest under the revolvingloans under the CW Credit Facility floats at either 3.25% over the base rate(defined as the greater of the prime rate, federal funds rate plus 50 basispoints or 1 month LIBOR) for borrowings whose interest is based on the primerate or 3.25% over the LIBOR rate (defined as the greater of LIBOR rateapplicable to the period of the respective LIBOR borrowings or 1.0%) forborrowings whose interest is based on LIBOR. Borrowings under the CW Credit Facility are based on the borrowing baseof eligible inventory and accounts receivable of Camping World and itssubsidiaries.  The CW Credit Facilitycontains affirmative covenants, including financial covenants, and negativecovenants.  Borrowings under the CampingWorld Credit Agreement are guaranteed by the direct and indirect subsidiariesof Camping World and are secured by a pledge on the stock of Camping World andits direct and indirect subsidiaries and liens on the assets of Camping Worldand its direct and indirect subsidiaries. The lenders under the AGI New Senior Credit Facility and the CW CreditFacility have entered into an intercreditor agreement that governs their rightsin the collateral that is pledged to secure their respective loans.

 

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

 

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

 

AGI Senior Notes

In February 2004, AGI issued$200.0 million aggregate principal amount of 9% Senior Subordinated Notes due2012 (the “AGI Senior Notes”).  AGIcompleted a registered exchange of the AGI Senior Notes under the SecuritiesAct of 1933 in August 2004.  On June 8,2006, AGI amended its Senior Credit Facility to permit AGI to purchase up to$30.0 million of the AGI Senior Notes from time to time as and when the Companydetermines.  AGI purchased $29.9 millionof the Senior Notes at 

 

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various times from June 2006through August 2006.  The purchasesof Senior Notes were made with available cash and the notes purchased have beenretired.

 

On February 27, 2007, AGIamended the 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 permitsAGI to repurchase up to an additional $50.0 million of the AGI Senior Notesfrom time to time as and when AGI determines through the issuance of additionalterm loans of up to $50.0 million.  Anyloan amounts not used for the repurchase of the AGI Senior Notes may be usedfor acquisitions or repay revolving credit loans.

 

On March 8, 2007, AGI purchased$17.7 million of the AGI Senior Notes.  AGIfunded the purchase through the issuance of the $25.0 million in additionalincremental term loans as permitted under the February 27, 2007 amendmentto the Senior Credit Facility.  Thebalance of the $25.0 million issued was used to pay down AGI’s revolving creditfacility by $6.5 million and to pay associated loan fees and transactionexpenses.  The terms on the additionalincremental loans are consistent with the remaining term loan outstanding underthe Senior Credit Facility.  As of December 31,2009, $137.8 million of AGI Senior Notes remained outstanding.

 

AGHI Notes

On March 24,2005 in a private placement, the Company issued $88.2 million principal amountof its 10-7/8% senior notes due 2012 (the “AGHI Notes”) at a $3.2 millionoriginal issue discount.  The Companycompleted a registered exchange of the AGHI Notes under the Securities Act of1933 on June 8, 2005.  The AGHINotes are unsecured obligations of AGHI, and neither AGI nor its subsidiarieshave guaranteed payment 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.  As of December 31,2009, approximately $112.3 million of AGHI Notes were outstanding, including$25.4 million due on March 15, 2010. For interest payments on and prior to February 15, 2008, theCompany had the election to pay interest on the AGHI Notes in cash or by theissuance of additional notes of the same tenor as the AGHI Notes, except thematurity date is March 15, 2010. AGI has not paid any dividends to AGHI to fund payment of interest onthe AGHI Notes and AGHI made the interest payments due on August 15, 2005,February 15, 2006, August 15, 2006, February 15, 2007, and February 15,2008 through the issuance of additional notes. AGHI paid the interest on the AGHI Notes due August 15, 2007, August 15,2008, and due February 15, 2009 from proceeds of capital contributions madeby AGHI’s parent, AGHC, in the amount of $5.9 million, $6.2 million, and $6.2million, respectively.  The interest onthe AGHI Notes due on August 15, 2009 and February 15, 2010 wassatisfied as discussed above. As a condition to the funding under the AGI NewSenior Credit Facility, $25.4 million of AGHI Notes due on March 15, 2010that were held by an affiliate of AGHI were contributed to the Company for zeroconsideration and AGHI cancelled those notes, thereby reducing theapproximately $112.3 million of AGHI Notes outstanding as of December 31,2009 to $86.9 million as of March 1, 2010.

 

In 2005, the Company contributed the net proceedsfrom the 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 or theAGHI Notes.  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.

 

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

 

Interest Rate Swap Agreements

On October 15, 2007, AGIentered into a five-year interest rate swap agreement with a notional amount of$100.0 million from which it will receive periodic payments at the 3 monthLIBOR-based variable rate (0.281% percent at December 31, 2009 based uponthe October 31, 2009 reset date) and make periodic payments at a fixedrate of 5.135% percent, with settlement and rate reset dates every January 31,April 30, July 31, and October 31.  The fair value of the swap was zero atinception.  AGI entered into the interestrate swap to limit the effect of increases on our floating rate debt.  The interest rate swap is designated as acash flow hedge of the variable rate interest payments due on $100.0 million ofthe Term Loans issued June 24, 2003, and accordingly, gains and losses onthe fair value of the interest rate swap agreement are reported in accumulatedother comprehensive loss and reclassified to earnings in the same period inwhich the hedged interest payment affects earnings.  The interest rate swap agreement expires on October 31,2012.  On March 19, 2008, AGIentered into a 4.5 year interest rate swap agreement effective April 30,2008, with a notional amount of $35.0 million from which it will receiveperiodic payments at the 3 month LIBOR-based variable rate (0.281% at December 31,2009 based upon the October 31, 2009 reset date) and make periodicpayments at a fixed rate of 3.43%, with settlement and rate reset dates every January 31,April 30, July 31, and October 31.  The interest rate swap was effectivebeginning April 30, 2008 and expires on October 31, 2012.  The fair value of the swap contracts areincluded in other accrued liabilities, and totaled $8.1 million and $12.7million as of December 31, 2009 and December 31, 2008, respectively.

 

Due to the potential sale of CampingWorld in September 2008, a highly effective hedge on the $35.0 millionoutstanding debt by the $35.0 million notional amount interest rate swapagreement is deemed to be no longer probable and is now deemed to be reasonablypossible.  As a result, changes in thevalue of the $35.0 million interest rate swap agreement are included inearnings beginning on October 1, 2008. Change in value from October 1, 2008 to December 31, 2008 was$2.4 million.  On June 11, 2009, theCompany partially terminated the $35.0 million interest rate swap, subject to apartial termination fee of $0.6 million which was expensed.  The notional amount was reduced to $20.0million.  All other terms of the interestrate swap agreement remained unchanged. As a result, the amount included in other comprehensive income relatedto the $35.0 million interest rate swap was reduced prorata and included inearnings as a gain (loss) on derivative instrument.

 

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

 

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Other Contractual Obligations andCommercial Commitments

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

 

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

 

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

 

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

 

Capital expenditures for 2009totaled $3.2 million compared to capital expenditures of $11.8 million in2008.  Capital expenditures areanticipated to be approximately $5.1 million for 2010, primarily forinformation technology upgrades and software enhancements.

 

**Factors Affecting Future Performance**

 

Our financial operations have beenaffected by the current economic downturn. Other factors that could adversely affect our operations includeincreases in operating costs, fuel shortages and substantial increases inpropane and gasoline prices.  Such eventscould cause declines in advertisements, club enrollment and retailspending.  We are unable to predict atwhat point fluctuating fuel prices may begin to adversely impact revenues orcash flow.  We believe we will be able topartially offset any cost increases with price increases to our members alongwith certain cost reducing measures.

 

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**Seasonality**

 

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

 

**Critical Accounting Policies**

 

*General*

 

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

 

We believe the following criticalaccounting policies affect our more significant judgments and estimates used inthe preparation of our consolidated financial statements.

 

*Revenue Recognition*

 

Merchandise revenue is recognizedwhen products are sold in the retail stores, shipped for mail and Internetorders, 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.

 

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 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.

 

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*Accounts Receivable*

 

We estimate the collectability ofour trade receivables.  A considerableamount of judgment is required in assessing the ultimate realization of thesereceivables including the current credit-worthiness of each customer.  Changes in required reserves have beenrecorded in recent periods and may occur in the future due to the marketenvironment.

 

*Inventory*

 

We state inventories at the lower ofcost or market.  In assessing theultimate realization of inventories, we are required to make judgments as tofuture demand requirements and compare that with the current or committedinventory levels.  We have recordedchanges in required reserves in recent periods due to changes in strategicdirection, such as discontinuances of product lines as well as changes inmarket conditions due to changes in demand requirements.  It is possible that changes in requiredinventory reserves may continue to occur in the future due to the marketconditions.

 

*Long-Lived Assets*

 

Purchased intangible assets withfinite lives are amortized using the straight-line method over the estimatedeconomic lives of the assets, ranging from one to fifteen years.

 

Long-lived assets, such as property,plant and equipment and purchased intangible assets with finite lives areevaluated for impairment whenever events or changes in circumstances indicatethe carrying value of an asset may not be recoverable in accordance with SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets.”  We assess the fair value of the assets basedon the future cash flow the assets are expected to generate and recognize animpairment loss when estimated undiscounted future cash flow expected to resultfrom the use of the asset plus net proceeds expected from disposition of theasset (if any) are less than the carrying value of the asset.  When an impairment is identified, we reducethe carrying amount of the asset to its estimated fair value based on adiscounted cash flow approach or, when available and appropriate, comparablemarket values.  In the third quarter of2008, the Company recorded an impairment charge of $81.0 million that wrotedown to zero the carrying value of the preferred interest (the “FreedomRoadsPreferred Interest”) held by an indirect subsidiary of Camping World inFreedomRoads Holding Company, LLC (“FreedomRoads”), a holding company whosesubsidiaries sell and service new and used recreational vehicles.  Management was assisted in determining thenon-cash goodwill impairment charge by an independent third party valuation firm.  The $81.0 million impairment charge wasrecorded as a result of declining performance of the recreational vehicleindustry driven by overall weakening of the economy and a significant declinein consumer confidence, in addition to limited credit available to consumersinterested in purchasing recreational vehicles. We determined there were no indicators of impairment of long-livedassets as of December 31, 2009.

 

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

 

*Indefinite- Lived IntangibleAssets*

 

We evaluate indefinite-livedintangible assets for impairment at least annually or when events indicate thatan impairment exists.  The impairmenttests for goodwill and other indefinite-lived intangible assets are assessedfor impairment using fair value measurement techniques.  Specifically, goodwill 

 

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impairment is determined using atwo-step process.  The first step of thegoodwill impairment test is used to identify potential impairment by comparingthe fair value of a reporting unit with the net book value (or carryingamount), including goodwill.  If the fairvalue of the reporting unit exceeds the carrying amount, goodwill of thereporting unit is considered not impaired and the second step of the impairmenttest is unnecessary.  If the carryingamount of the reporting unit exceeds the fair value, or if another indicator ofimpairment exists, the second step of the goodwill impairment test is performedto measure the amount of impairment loss, if any.  The second step of the goodwill impairmenttest compares the implied fair value of the reporting unit’s goodwill with thecarrying amount of that goodwill.  If thecarrying amount of the reporting unit’s goodwill exceeds the implied fair valueof that goodwill, an impairment loss is recognized in an amount equal to thatexcess.  The implied fair value ofgoodwill is determined in the same manner as the amount of goodwill recognizedin a business combination, accordingly the fair value of the reporting unit isallocated to all of the assets and liabilities of that unit as if the reportingunit had been acquired in a business combination and the fair value of thereporting unit was the purchase price paid to acquire the reporting unit.

 

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

 

The fair value of our reportingunits is annually determined using a combination of the income approach and themarket approach.  Under the incomeapproach, the fair value of a reporting unit is calculated based on the presentvalue of estimated future cash flows. Future cash flows are estimated by us under the market approach, fairvalue is estimated based on market multiples of revenue or earnings forcomparable companies.

 

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

 

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

 

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

 

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In the third quarter of 2008, theCompany noted continued reduction in same store sales at Camping World, Inc.(“Camping World”) as well as deterioration of general economic conditions andconsumer confidence.  Based on the above,the Company determined that there were identified indicators of impairmentwithin the Camping World reporting unit.

 

Management was assisted indetermining that the estimated fair value of the Camping World reporting unitwas less than book value by an independent third party valuation firm.  The excess of carrying value over theestimated fair value of the Camping World reporting unit was primarily due tothe decline in the recreational vehicle and camping retail markets leading tolower expected future cash flows for the business and lower market comparables.In determining the fair value, the Company used a weighted average of theincome valuation approach and market valuation approaches.  The Company recorded an impairment charge of$47.6 million in the third quarter of 2008 related to Camping World, which ispart of the retail segment.  The Retailsegment goodwill was reduced to zero. See Long-Lived Assets under CriticalAccounting Policies.

 

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

 

*Self-insurance Program*

 

Self-insurance accruals forworkers compensation and general liability programs are calculated by outsideactuaries and are based on claims filed and include estimates for claimsincurred but not yet reported. Projections of future loss are inherently uncertain because of therandom nature of insurance claims occurrences and could be substantiallyaffected if future occurrences and claims differ significantly from theseassumptions and historical trends.

 

*Accumulated OtherComprehensive Loss*

 

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

 

*DerivativeFinancial Instruments*

 

As discussed inNote 8 to Consolidated Financial Statements – Interest  Rate Swap Agreement, the Company accounts forderivative instruments and hedging activities in accordance with new accountingguidance for accounting for derivative instruments and hedging activities.  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.

 

Changes in the fair value of a derivative that is highly effective andthat is designated and qualifies as a cash flow hedge (a “swap”), to the extentthat the hedge is effective, are recorded in accumulated other comprehensiveloss, until earnings are affected by the variability of cash flows of thehedged transaction.  The Company measureseffectiveness of the swap at each quarter end using the Hypothetical DerivativeMethod.  Under this method, hedgeeffectiveness is measured based on a comparison of the change in fair value ofthe actual swap designated as the hedging instrument and the change in fairvalue of the hypothetical swap which would have the terms that identicallymatch the critical terms of the hedged cash flows from the anticipated debtissuance.  The amount of ineffectiveness,if any, recorded in earnings would be equal to the excess of the cumulativechange in 

 

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the fair value of the swap over the cumulative change in the fair valueof the plain vanilla swap lock, as defined in the accounting literature.  Once a swap is settled, the effective portionis amortized over the estimated life of the hedge item.

 

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

 

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

 

Due to the potential sale of CampingWorld, in the fourth quarter of 2008 a highly effective hedge on the $35.0million outstanding debt by the $35.0 million notional amount interest rateswap agreement was deemed to be no longer probable and is now deemed to bereasonably possible.  As a result,changes in the value of the $35.0 million interest rate swap agreement areincluded in earnings beginning on October 1, 2008.  Included in other comprehensive loss is $0.4million related to the $35.0 million interest rate swap prior to October 1,2008 which will be amortized over the remaining life of the interest rate swapand included in earnings as a gain (loss) on derivative instrument.

 

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

 

*IncomeTaxes*

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

#### *Interest Rate Sensitivity Analysis*

 

At December 31,2009, we had debt totaling $390.7 million, comprised of $8.9 million ofvariable rate debt and $381.8 million of fixed rate debt, comprised of $120.0million of debt fixed through the interest rate swap agreement, $137.8 millionof AGI Senior Notes, $9.7 million of Second Lien Loan, $1.0 million of SA Debt,$112.3 million of AGHI Notes and $1.0 million of purchase debt.  Holding other variables constant (such asdebt levels), the earnings and cash flow impact of a one-percentage pointincrease/ decrease in interest rates would have an unfavorable/ favorableimpact of less than $0.1 million.

 

#### *Credit Risk*

 

We are exposed tocredit risk on accounts receivable.  Weprovide credit to customers in the ordinary course of business and performongoing credit evaluations. Concentrations of credit risk with respect to trade receivables arelimited due to the number of customers comprising our customer base.  We currently believe our allowance fordoubtful accounts is sufficient to cover customer credit risks.

 

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

 

This filing contains statements that are “forward lookingstatements,” and includes, among other things, discussions of our businessstrategy and expectations 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,” 

 

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“Business-Membership Clubs,” “Business- Membership Products and Services,” “Business-Publications,” “Business- Retail,” “Business- Marketing,” “Business- Operations,”“Business- Information Support Services,” “Business- Regulation,” “Business-Competition,” “Risk Factors,” “Legal Proceedings,” and in “Management’sDiscussion and Analysis of Financial Condition and Results of Operations.”  Although we believe that the expectationsreflected in such forward looking statements are reasonable, we can give noassurance that such expectations will prove to have been correct.  Generally, these statements relate tobusiness plans or strategies, projected or anticipated benefits or otherconsequences of such plans or strategies, the number of acquisitions andprojected or anticipated benefits from acquisitions made by or to be made byus, or projections involving anticipated revenues, expenses, earnings, levelsof capital expenditures or other aspects of operating results.  All phases of our operations of are subjectto a number of uncertainties, risks and other influences, including consumerspending, fuel prices, general economic conditions, regulatory changes, changesin interest rates, availability of debt financing in capital markets andcompetition, many of which are outside our control, any one of which, or acombination of which, could materially affect the results of our operations andwhether the forward looking statements made by us ultimately prove to beaccurate. Reference is made to Item 1A relating to Risk Factors applicable tous.

 

52

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

 

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

 
| ** **                                                                                                       | **Page** |
|------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                             |     |
| Report of Independent  Registered Public Accounting Firm                                                         | 54       |
|                                                                                                             |     |
|                                                                                                             |     |
| Consolidated Balance Sheets as of December 31,  2009 and 2008                                               | 55       |
|                                                                                                             |     |
|                                                                                                             |     |
| Consolidated  Statements of Operations for the years ended December 31, 2009, 2008 and  2007                | 56       |
|                                                                                                             |     |
|                                                                                                             |     |
| Consolidated Statements of Stockholder’s Deficit for  the years ended December 31, 2009, 2008 and 2007 | 57       |
|                                                                                                             |     |
|                                                                                                             |     |
| Consolidated Statements of Cash Flows for the years  ended December 31, 2009, 2008 and 2007                 | 58       |
|                                                                                                             |     |
|                                                                                                             |     |
| Notes to Consolidated Financial Statements                                                                       | 59       |

 

 

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.

 

53

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

 

The Board ofDirectors of Affinity Group Holding, Inc.

 

 

We have audited the accompanyingconsolidated balance sheets of Affinity Group Holding, Inc. and itssubsidiaries (the “Company”), as of December 31, 2009 and 2008, and therelated consolidated statements of operations, stockholder’s deficit and cashflows for each of the three years in the period ended December 31,2009.  These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

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

 

In our opinion, the financialstatements referred to above present fairly, in all material respects, theconsolidated financial position of Affinity Group Holding, Inc. andsubsidiaries at December 31, 2009 2008, and the consolidated results oftheir operations and their cash flows for each of the three years in the periodended December 31, 2009, in conformity with U.S. generally acceptedaccounting principles.

 

 

/s/ Ernst &Young LLP

 

March 31 2010

LosAngeles, California

 

54

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**AFFINITY GROUPHOLDING, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**
| **DECEMBER 31, 2009 AND 2008 (IN THOUSANDS,  EXCEPT SHARE AMOUNTS)** |
|----------------------------------------------------------------------|

 
| ** **                                                                                       | ** ** | 2009          |          | 2008          | ** ** |
|--------------------------------------------------------------------------------------------------|------------|---------------|---------------|---------------|------------|
| **ASSETS**                                                                                       |       |          |          |          |       |
| CURRENT  ASSETS:                                                                                 |       |          |          |          |       |
| Cash  and cash equivalents                                                                       |       | $             | 10,133   |          | $          | 10,777  |   |
| Restricted  cash                                                                                 |       | 8,058    |          | -        |       |
| Accounts  receivable, less allowance for doubtful accounts of $3,128 in 2009 and $2,147  in 2008 |       | 32,321   |          | 40,191   |       |
| Inventories                                                                                      |       | 49,921   |          | 57,137   |       |
| Prepaid  expenses and other assets                                                               |       | 13,219   |          | 13,547   |       |
| Total  current assets                                                                            |       | 113,652  |          | 121,652  |       |
|                                                                                             |       |          |          |          |       |
| PROPERTY  AND EQUIPMENT, net                                                                     |       | 34,276   |          | 44,077   |       |
| NOTE  FROM AFFILIATE                                                                             |       | 4,837    |          | 4,608    |       |
| INTANGIBLE  ASSETS, net                                                                          |       | 14,867   |          | 22,389   |       |
| GOODWILL                                                                                         |       | 49,944   |          | 96,828   |       |
| DEFERRED  TAX ASSETS, net                                                                        |       | -        |          | 4,569    |       |
| OTHER  ASSETS                                                                                    |       | 6,767    |          | 2,035    |       |
| Total  assets                                                                                    |       | $             | 224,343  |          | $          | 296,158  |   |
|                                                                                             |       |          |          |          |       |
| **LIABILITIES AND STOCKHOLDER’S DEFICIT**                                                   |       |          |          |          |       |
| CURRENT  LIABILITIES:                                                                            |       |          |          |          |       |
| Accounts  payable                                                                                |       | $             | 23,799   |          | $          | 23,950  |   |
| Accrued  interest                                                                                |       | 16,517   |          | 11,581   |       |
| Accrued  income taxes                                                                            |       | 1,598    |          | 1,165    |       |
| Accrued  liabilities                                                                             |       | 24,115   |          | 27,009   |       |
| Deferred  revenues and gains                                                                     |       | 60,728   |          | 60,569   |       |
| Current  portion of long-term debt                                                               |       | 892      |          | 12,391   |       |
| Total  current liabilities                                                                       |       | 127,649  |          | 136,665  |       |
|                                                                                             |       |          |          |          |       |
| DEFERRED  REVENUES AND GAINS                                                                     |       | 35,607   |          | 35,855   |       |
| LONG-TERM  DEBT, net of current portion                                                          |       | 389,797  |          | 391,487  |       |
| OTHER  LONG-TERM LIABILITIES                                                                     |       | 10,079   |          | 30,156   |       |
|                                                                                             |       | 563,132  |          | 594,163  |       |
|                                                                                             |       |          |          |          |       |
| COMMITMENTS  AND CONTINGENCIES                                                                   |       |          |          |          |       |
|                                                                                             |       |          |          |          |       |
| STOCKHOLDER’S  DEFICIT :                                                                    |       |          |          |          |       |
| Common  stock, $.01 par value, 3,000 shares authorized, 100 shares issued and  outstanding       |       | 1        |          | 1        |       |
| Additional  paid-in capital                                                                      |       | 23,220   |          | 12,041   |       |
| Accumulated  deficit                                                                             |       | (355,010)     |          | (299,710)     |       |
| Accumulated  other comprehensive loss                                                            |       | (7,000)       |          | (10,337)      |       |
| Total  stockholder’s deficit                                                                |       | (338,789)     |          | (298,005)     |       |
| Total  liabilities and stockholder’s deficit                                                |       | $             | 224,343  |          | $          | 296,158  |   |

 

See notes toconsolidated financial statements.

 

55

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**AFFINITY GROUPHOLDING, INC. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**
| **FOR THE YEARS ENDED DECEMBER 31, 2009,  2008, AND 2007 (IN THOUSANDS)** |
|---------------------------------------------------------------------------|

 
|                                               |   | 2009                      |          | 2008                      |   | 2007                      |   |
|----------------------------------------------------|--------|---------------------------|---------------|---------------------------|--------|---------------------------|--------|
| REVENUES:                                          |   |                      |          |                      |   |                      |   |
| Membership  services                               |   | $                         | 142,147  |                      | $      | 152,643              |   | $ | 149,937  |   |
| Media                                              |   | 59,061               |          | 82,424               |   | 90,537               |   |
| Retail                                             |   | 270,573              |          | 291,070              |   | 321,730              |   |
|                                               |   | 471,781              |          | 526,137              |   | 562,204              |   |
|                                               |   |                      |          |                      |   |                      |   |
| COSTS  APPLICABLE TO REVENUES:                     |   |                      |          |                      |   |                      |   |
| Membership  services                               |   | 84,826               |          | 90,758               |   | 94,840               |   |
| Media                                              |   | 46,079               |          | 61,126               |   | 62,258               |   |
| Retail                                             |   | 164,510              |          | 170,911              |   | 194,940              |   |
|                                               |   | 295,415              |          | 322,795              |   | 352,038              |   |
|                                               |   |                      |          |                      |   |                      |   |
| GROSS  PROFIT                                      |   | 176,366              |          | 203,342              |   | 210,166              |   |
|                                               |   |                      |          |                      |   |                      |   |
| OPERATING  EXPENSES:                               |   |                      |          |                      |   |                      |   |
| Selling,  general and administrative               |   | 129,063              |          | 142,798              |   | 145,619              |   |
| Goodwill  impairment                               |   | 46,884               |          | 47,601               |   | -     |   |
| Impairment  of investment in affiliate             |   | -     |          | 81,005               |   | -     |   |
| Financing  expense                                 |   | 2,607                |          | -     |   | -     |   |
| Depreciation  and amortization                     |   | 21,582               |          | 20,304               |   | 19,453               |   |
|                                               |   | 200,136              |          | 291,708              |   | 165,072              |   |
|                                               |   |                      |          |                      |   |                      |   |
| (LOSS)  INCOME FROM OPERATIONS                     |   | (23,770)                  |          | (88,366)                  |   | 45,094               |   |
|                                               |   |                      |          |                      |   |                      |   |
| NON-OPERATING  ITEMS:                              |   |                      |          |                      |   |                      |   |
| Interest  income                                   |   | 517                  |          | 579                  |   | 592                  |   |
| Interest  expense                                  |   | (43,859)                  |          | (36,988)                  |   | (36,840)                  |   |
| Gain  (loss) on derivative instrument              |   | 745                  |          | (2,394)                   |   | -     |   |
| Gain  (loss) on debt restructure                   |   | 4,678                |          | -     |   | (775)                     |   |
| Other  non-operating expense, net                  |   | (1,427)                   |          | (323)                     |   | (149)                     |   |
|                                               |   | (39,346)                  |          | (39,126)                  |   | (37,172)                  |   |
| (LOSS)  INCOME FROM OPERATIONS BEFORE INCOME TAXES |   | (63,116)                  |          | (127,492)                 |   | 7,922                |   |
|                                               |   |                      |          |                      |   |                      |   |
| INCOME  TAX BENEFIT (EXPENSE)                      |   | 10,366               |          | 2,213                |   | (1,583)                   |   |
|                                               |   |                      |          |                      |   |                      |   |
| NET  (LOSS) INCOME                                 |   |                      | ($52,750)     |                      |   | ($125,279)                |   |   | $6,339  |   |

 

See notes toconsolidated financial statements.

 

56

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

 

**CONSOLIDATEDSTATEMENTS OF STOCKHOLDER’S DEFICIT**

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

 
|                                   |       |          |       |       |       |        |       |          |       | Accumulated |       |         |       |
|----------------------------------------|------------|---------------|------------|------------|------------|-------------|------------|---------------|------------|-------------|------------|--------------|------------|
|                                   |       |          |       |       |       | Additional  |       |          |       | Other       |       |         |       |
|                                   |       | Common  Stock |       | Paid-in    |       | Accumulated |       | Comprehensive |       |        |       |
|                                   |       | Shares        |       | Amount     |       | Capital     |       | Deficit       |       | Loss        |       | Total        |       |
| ** **                             | ** ** | ** **    | ** ** | ** ** | ** ** | ** **  | ** ** | ** **    | ** ** | ** **  | ** ** | ** **   | ** ** |
| BALANCES  AT JANUARY 31, 2007          |       | 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)    |       |
|                                   |       |          |       |       |       |        |       |          |       |        |       |         |       |
| Dividends                              |       | -             |       | -          |       | -           |       | (2,000)       |       | -      |       | (2,000)      |       |
| Contribution                           |       | -             |       | -          |       | 6,180       |       | -        |       | -      |       | 6,180   |       |
|                                   |       |          |       |       |       |        |       |          |       |        |       |         |       |
| Unrealized  loss on interest rate swap |       | -             |       | -          |       | -           |       | -        |       | (5,632)     |       | (5,632)      |       |
| Net  loss                              |       | -             |       | -          |       | -           |       | (125,279)     |       | -      |       | (125,279)    |       |
| Total  comprehensive loss              |       |          |       |       |       |        |       |          |       |        |       | (130,911)    |       |
|                                   |       |          |       |       |       |        |       |          |       |        |       |         |       |
| BALANCES  AT DECEMBER 31, 2008         |       | 100           |       | 1          |       | 12,041      |       | (299,710)     |       | (10,337)    |       | (298,005)    |       |
|                                   |       |          |       |       |       |        |       |          |       |        |       |         |       |
| Dividends                              |       | -             |       | -          |       | -           |       | (2,550)       |       | -      |       | (2,550)      |       |
| Contribution                           |       | -             |       | -          |       | 11,179      |       | -        |       | -      |       | 11,179  |       |
|                                   |       |          |       |       |       |        |       |          |       |        |       |         |       |
| Unrealized  gain on interest rate swap |       | -             |       | -          |       | -           |       | -        |       | 3,337  |       | 3,337   |       |
| Net  loss                              |       | -             |       | -          |       | -           |       | (52,750)      |       | -      |       | (52,750)     |       |
| Total  comprehensive loss              |       |          |       |       |       |        |       |          |       |        |       | (49,413)     |       |
|                                   |       |          |       |       |       |        |       |          |       |        |       |         |       |
| BALANCES  AT DECEMBER 31, 2009         |       | 100           |       | $          | 1          |        | $          | 23,220        |       | $           | (355,010)  |         | $          | (7,000) |   | $ | (338,789) |   |

 

See notes toconsolidated financial statements.

 

57

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

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**
| **FOR THE YEARS ENDED DECEMBER 31, 2009,  2008, AND 2007 (IN THOUSANDS)** |
|---------------------------------------------------------------------------|

 
|                                                                                      |   | 2009         |         | 2008         |   | 2007         |   |
|-------------------------------------------------------------------------------------------|--------|--------------|--------------|--------------|--------|--------------|--------|
|                                                                                      |   |         |         |         |   |         |   |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                                    |   |         |         |         |   |         |   |
| Net  (loss) income                                                                        |   | $            | (52,750)     |         | $      | (125,279)    |   | $ | 6,339  |   |
| Adjustments  to reconcile net (loss) income to net cash provided by operating activities: |   |         |         |         |   |         |   |
| Deferred  tax provision                                                                   |   | 4,569   |         | (3,349)      |   | 443     |   |
| Depreciation                                                                              |   | 12,358  |         | 11,670  |   | 9,933   |   |
| Amortization                                                                              |   | 9,224   |         | 8,634   |   | 9,520   |   |
| Impairment  loss on goodwill                                                              |   | 46,884  |         | 47,601  |   | -       |   |
| Impairment  loss on investment in affiliate                                               |   | -       |         | 81,005  |   | -       |   |
| (Gain)  loss on derivative instrument                                                     |   | (745)        |         | 2,394   |   | -       |   |
| Provision  for losses on accounts receivable                                              |   | 2,945   |         | 1,493   |   | 1,373   |   |
| Deferred  compensation                                                                    |   | -       |         | (311)        |   | 350     |   |
| Loss  (gain) on sale of property and equipment                                            |   | 604     |         | 321     |   | 150     |   |
| (Gain)  loss on early extinguishment of debt                                              |   | (4,678)      |         | -       |   | 775     |   |
| Non-cash  interest on AGHI Notes                                                          |   | -       |         | 1,465   |   | 5,785   |   |
| Accretion  of original issue discount                                                     |   | 543     |         | 481     |   | 375     |   |
| Changes  in operating assets and liabilities (net of purchased businesses):               |   |         |         |         |   |         |   |
| Accounts  receivable                                                                      |   | 4,925   |         | (8,354)      |   | (7,504)      |   |
| Inventories                                                                               |   | 7,216   |         | 7,072   |   | (11,506)     |   |
| Prepaid  expenses and other assets                                                        |   | (4,404)      |         | 1,249   |   | (1,418)      |   |
| Accounts  payable                                                                         |   | (151)        |         | (3,221)      |   | (5,406)      |   |
| Accrued  and other liabilities                                                            |   | (7,570)      |         | 1,660   |   | 732     |   |
| Deferred  revenues and gains                                                              |   | (89)         |         | (9,027)      |   | 3,495   |   |
| Net  cash provided by operating activities                                                |   | 18,881  |         | 15,504  |   | 13,436  |   |
|                                                                                      |   |         |         |         |   |         |   |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                                    |   |         |         |         |   |         |   |
| Capital  expenditures                                                                     |   | (3,190)      |         | (11,782)     |   | (19,708)     |   |
| Net  proceeds from sale of property and equipment                                         |   | 29      |         | 22      |   | 178     |   |
| Cash  paid on loans to affiliate                                                          |   | -       |         | 42      |   | 38      |   |
| Acquisitions,  net of cash received                                                       |   | -       |         | (3,409)      |   | (304)        |   |
| Net  cash used in investing activities                                                    |   | (3,161)      |         | (15,127)     |   | (19,796)     |   |
|                                                                                      |   |         |         |         |   |         |   |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                                    |   |         |         |         |   |         |   |
| Cash  contribution                                                                        |   | 5,000   |         | -       |   | 5,861   |   |
| Dividends  paid                                                                           |   | (2,550)      |         | (2,000)      |   | (5,750)      |   |
| Restricted  cash                                                                          |   | (8,058)      |         | -       |   | -       |   |
| Borrowings  on long-term debt                                                             |   | 28,089  |         | 33,000  |   | 64,300  |   |
| Payment  of debt issue costs                                                              |   | (2,541)      |         | (271)        |   | (291)        |   |
| Principal  payments of long-term debt                                                     |   | (36,304)     |         | (28,895)     |   | (64,432)     |   |
| Net  cash provided by (used in) financing activities                                      |   | (16,364)     |         | 1,834   |   | (312)        |   |
|                                                                                      |   |         |         |         |   |         |   |
| NET  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     |   | (644)        |         | 2,211   |   | (6,672)      |   |
|                                                                                      |   |         |         |         |   |         |   |
| CASH  AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                           |   | 10,777  |         | 8,566   |   | 15,238  |   |
|                                                                                      |   |         |         |         |   |         |   |
| CASH  AND CASH EQUIVALENTS AT END OF YEAR                                                 |   | $            | 10,133  |         | $      | 10,777  |   | $ | 8,566  |   |

 

See notes toconsolidated financial statements.

 

58

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

 

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

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

 

1.      SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

*Principles of Consolidation*– Theconsolidated 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.  Certain balances in the prior yearconsolidated financial statements were reclassified to conform with the currentyear presentation.

 

*Basis for Presentation* –**The accompanying financial statements have been prepared onthe basis that the Company will continue as a going concern.  For the year ended December 31, 2009,the Company incurred a loss from operations of $23.8 million, which included$46.9 million of non-cash impairment charges. As of December 31, 2009, the Company has a working capitaldeficiency of $14.0 million and a stockholder’s deficit of $338.8 million.  With respect to the AGHI Notes, AGI has notpaid any dividends to AGHI to fund payment of interest on the AGHI Notes.  Currently, the Senior Credit Facility and theAGI Indenture impose limitations on the ability of subsidiaries of AGHI to makedividend distributions or loans to AGHI to pay interest on the AGHI Notes.  Interest on the AGHI Notes is payablesemi-annually on February 15 and August 15.  AGHI has made the interest payments through February 15,2010 through issuance of additional notes, from proceeds of capitalcontributions made by AGHI’s parent, AGHC, and from forgiven interest on bondsheld by a related party.  The August 15,2010 interest payment is expected to be paid from proceeds of a capitalcontributions made by AGHC.

 

On March 1, 2010, AGIrefinanced its existing Senior Credit Facility ($128.9 million aggregateprincipal amount outstanding as at December 31, 2009) and second liennotes totaling $9.7 million due July 31, 2010.  The AGI New Senior Credit Facility providesfor term loans aggregating $144.3 million, including an original issue discountof 2%, that are payable in quarterly installments of $360,750 beginning March 1,2011.  In addition, there are mandatoryprepayments of the term loans from excess cash flow (as defined) of AGI andfrom asset sales.  The term loans underthe AGI New Senior Credit Facility mature on the earlier of March 1, 2015or 90 days prior to the maturity of either AGI’s 9% senior subordinated notesdue 2012 (the “AGI Senior Notes”) ($137.8 million principal amount outstandingas at December 31, 2009) or the AGHI Notes ($113.6 million aggregate principal amount outstanding as at December 31,2009).

 

In addition, on March 1, 2010,Camping World entered into a credit agreement (the “CW Credit Facility”)providing for an asset based lending facility of up to $22.0 million, of which$10.0 million is available for letters of credit and $12.0 million is availablefor revolving loans.  The CW CreditFacility matures on the earlier of March 1, 2013, 60 days prior to thedate of maturity of the AGI New Senior Credit Facility, or 120 days prior tothe earlier date of maturity of the AGI Senior Notes and the AGHI Notes.  Interest under the revolving loans under theCW Credit Facility floats at either 3.25% over the base rate (defined as thegreater of the prime rate, federal funds rate plus 50 basis points or 1 monthLIBOR) for borrowings whose interest is

 

59

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1.                         SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (continued)

 

based on the prime rate or 3.25% over the LIBOR rate(defined as the greater of LIBOR rate applicable to the period of therespective LIBOR borrowings or 1.0%) for borrowings whose interest is based onLIBOR.  Borrowings under the CW CreditFacility are based on the borrowing base of eligible inventory and accountsreceivable of Camping World and its subsidiaries.

 

The Company’s forecast for 2010 anticipates compliance withall required covenants throughout 2010. Significant cost reductions have been implemented over the last eighteenmonths, including the elimination of personnel, suspension of401(k) employer contributions, salary cutbacks, hiring and capitalexpenditure spending freezes, satellite office closures, and magazine size andfrequency reductions.  The Companybelieves that the amended bank financing, new secured loans, as well asforecasted cash flow will provide the cash flow needed to continue as a goingconcern through at least January 1, 2011.

 

The following are the condensed balance sheet, statement ofoperations and statement of cash flows for the registrant as of and for theyear ended December 31, 2009.

 
|                                              |   | AGHI          |         |
|---------------------------------------------------|--------|---------------|--------------|
|                                              |   |          |         |
| Cash  and cash equivalents                        |   | $             | 1,493   |   |
| Other  current assets                             |   | 152      |         |
| Total  current assets                             |   | 1,645    |         |
|                                              |   |          |         |
| Intangible  assets                                |   | 1,129    |         |
| Investment  in subsidiaries                       |   | 8,500    |         |
| Total  assets                                     |   | $             | 11,274  |   |
|                                              |   |          |         |
| Accrued  interest                                 |   | $             | 10,829  |   |
| Accrued  and other liabilities                    |   | 59       |         |
| Current  portion of long-term debt                |   | -        |         |
| Total  current liabilities                        |   | 10,888   |         |
|                                              |   |          |         |
| Long-term  debt                                   |   | 112,275  |         |
| Other  long-term liabilities                      |   | (3,125)       |         |
| Total  liabilities                                |   | 120,038  |         |
|                                              |   |          |         |
| Stockholders’  deficit                       |   | (108,764)     |         |
|                                              |   |          |         |
| Total  liabilities and sotckholders’ deficit |   | $             | 11,274  |   |
|                                              |   |          |         |
| Revenue                                           |   | $             | -       |   |
| Costs  applicable to revenues                     |   | -        |         |
| Operating  expenses                               |   | 652      |         |
| Interest  expense, net                            |   | (12,986)      |         |
| Other  non operating income (expense)             |   | (164)         |         |
| Income  tax expense                               |   | -        |         |
| Net  loss                                         |   | $             | (13,802)     |   |
|                                              |   |          |         |
| Cash  flows from operations                       |   | $             | (526)        |   |
| Cash  flows used in investing activities          |   | (8,500)       |         |
| Cash  flows used in financing activities          |   | 10,350   |         |
| Cash  at beginning of year                        |   | 169      |         |
| Cash  at end of year                              |   | $             | 1,493   |   |

 

The Senior Credit Facility restricts distributions from AGIand its subsidiaries to AGHI in respect of any fiscal year to the amount basedon reasonable estimates of federal, state and local income taxes that theborrower would be required to pay with respect to such fiscal year calculatedas if, for such fiscal year, the Borrower treated as a “C corporation”.

 

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1.                         SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

*Use of Estimates –*Thepreparation of the Company’s consolidated financial statements in conformitywith accounting principles generally accepted in the United States requires theCompany’s management to make estimates and assumptions that affect the amountsreported in these financial statements and accompanying notes.  Actual results could differ from thoseestimates.

 

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

 

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

 

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

 

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

 

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1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)

 

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

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

 

Leaseholdimprovements are amortized over their useful lives of the assets or theremaining term of the respective lease, whichever is shorter.

 

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

 

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

 

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

 

*Long-term Debt* – Thefair value of the Company’s long-term debt is estimated based on the quotedmarket prices for the same or similar issues or on the current rates offeredfor debt of the same or similar remaining maturities.  The fair value of the Company’s long-termdebt was $272.8 million as of December 31, 2009.

 

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

 

Membership revenue is generated from annual, multi-year andlifetime memberships.  The revenue andexpenses associated with these memberships are deferred and amortized over themembership period.  For 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

 

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1.                       SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (continued)

 

estimates would change the amount of income and expenseamortized in future accounting periods. At December 31, 2009 and 2008, $6.2 million and $6.8 million ofadvertising expenses have been capitalized as direct-response advertising, ofwhich $3.5 million and $4.2 million, respectively, were reported as assets and$2.7 million and $2.6 million, respectively, were reported net of relateddeferred revenue.  Advertising expensesfor 2009, 2008 and 2007 were $25.1 million, $37.3 million and $39.1 million,respectively.

 

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

 

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

 

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

 

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

 

*DerivativeFinancial Instruments –***The Company accounts for derivativeinstruments and hedging activities in accordance with accounting guidance forderivative instruments and hedging activities, which states that allderivatives are recognized on the balance sheet at their fair value.  On the date that the Company enters into aderivative contract, management formally documents all relationships betweenhedging instruments and hedged items, as well as risk management objectives andstrategies for undertaking various hedge transactions.

 

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.  See Note 8 - Interest Rate SwapAgreements.

 

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

 

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1.                       SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (continued)

 

*Income Taxes –*The Company recognizes deferred tax assets and liabilities based on theliability method, which requires an adjustment to the deferred tax asset orliability to reflect income tax rates currently in effect.  When income tax rates increase or decrease, acorresponding adjustment to income tax expense is recorded by applying the ratechange to the cumulative temporary differences.

 

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

 

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

 

*Subsequent Events*

We have evaluatedsubsequent events through the date of issuance of our financial statements inthis Form 10-K.

 

*Recent Accounting Pronouncements:*

 

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

 

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

 

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2.      PROPERTYAND EQUIPMENT

 

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

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

 

3.      GOODWILL ANDINTANGIBLE ASSETS

 

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

 
|                                      |   | Membership  Services |         | Media        |   | Retail       |   | Consolidated  |         |
|-------------------------------------------|--------|----------------------|--------------|--------------|--------|--------------|--------|---------------|--------------|
|                                      |   |                 |         |         |   |         |   |          |         |
| Gross  goodwill                           |   | $                    | 56,030  |         | $      | 46,884  |   | $             | 47,601  |   | $ | 150,515  |   |
| Impairment  prior to January 1, 2008 |   | (6,086)              |         | -       |   | -       |   | (6,086)       |         |
| Balance  as of January 1, 2008       |   | 49,944          |         | 46,884  |   | 47,601  |   | 144,429  |         |
| Impairment                                |   | -               |         | -       |   | (47,601)     |   | (47,601)      |         |
| Balance  as of December 31, 2008     |   | 49,944          |         | 46,884  |   | -       |   | 96,828   |         |
| Impairment                                |   | -               |         | (46,884)     |   | -       |   | (46,884)      |         |
| Balance  as of December 31, 2009     |   | $                    | 49,944  |         | $      | -       |   | $             | -       |   | $ | 49,944  |   |

 

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3.      GOODWILL AND INTANGIBLEASSETS (continued)

 

Finite-livedintangible assets and related accumulated amortization consisted of thefollowing at December 31 (in thousands):

 
| ** **                                       |   |         |         | 2009         |   |        |   |
|--------------------------------------------------|--------|--------------|--------------|--------------|--------|-------------|--------|
|                                             |   |         |         | Accumulated  |   |        |   |
|                                             |   | Gross        |         | Amortization |   | Net         |   |
|                                             |   |         |         |         |   |        |   |
| Membership  and customer lists                   |   | $            | 35,724  |         | $      | (26,684)    |   | $ | 9,040  |   |
| Resort  and golf course participation agreements |   | 13,346  |         | (13,343)     |   | 3      |   |
| Non-compete  and deferred consulting agreements  |   | 18,830  |         | (16,322)     |   | 2,508  |   |
| Deferred  financing costs                        |   | 16,235  |         | (12,919)     |   | 3,316  |   |
|                                             |   | $            | 84,135  |         | $      | (69,268)    |   | $ | 14,867  |   |
|                                             |   |         |         |         |   |        |   |
| ** **                                       |   |         |         | 2008         |   |        |   |
|                                             |   |         |         | Accumulated  |   |        |   |
|                                             |   | Gross        |         | Amortization |   | Net         |   |
|                                             |   |         |         |         |   |        |   |
| Membership  and customer lists                   |   | $            | 36,384  |         | $      | (22,182)    |   | $ | 14,202  |   |
| Resort  and golf course participation agreements |   | 13,385  |         | (13,375)     |   | 10     |   |
| Non-compete  and deferred consulting agreements  |   | 18,830  |         | (15,103)     |   | 3,727  |   |
| Deferred  financing costs                        |   | 14,227  |         | (9,777)      |   | 4,450  |   |
|                                             |   | $            | 82,826  |         | $      | (60,437)    |   | $ | 22,389  |   |

 

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

 
| 2010  |   | $           | 6,591   |   |
|-------|--------|-------------|--------------|--------|
| 2011  |   | 5,436  |         |
| 2012  |   | 2,751  |         |
| 2013  |   | 89     |         |
| 2014  |   | -      |         |
| Total |   | $           | 14,867  |   |

 

Under accountingguidance for goodwill and other intangible assets, goodwill impairment isdeemed to exist if the carrying value of a reporting unit exceeds its estimatedfair value.  The Company’s reportingunits are generally consistent with the operating segments underlying thereporting segments identified in Note 12 - Segment Information.  The determination of fair value for areporting unit involves the use of assumptions and estimates such as the futureperformance of the operations of the reporting unit and discount rates used todetermine the current value of expected future cash flows of the reportingunit.  Any change in these assumptionsand estimates, and other factors such as inflation rates, competition andgeneral economic conditions, could cause the calculated fair value of theoperating unit to decrease significantly.

 

In the thirdquarter of 2009, the Company noted continued decline in advertising revenuecompared to historical trends, in the operations of our RV and powersportspublications, as well

 

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3.      GOODWILL ANDINTANGIBLE ASSETS (continued)

 

as flat to moderateprojected growth in future advertising revenue as a result of continueddeterioration of general economic conditions and consumer confidence.  Based on the above, the Company determined thatthere were identified interim indicators of impairment within these reportingunits in the Media segment.

 

The Companyperformed an impairment test of the goodwill and intangible assets of thereporting units of our RV and powersports publications.  The impairment test indicated that theestimated fair value of these reporting units were less than book value.  The excess of the carrying value over theestimated fair value of the these reporting units was primarily due to adecline in advertising revenue leading to lower expected future cash flows forthese reporting units. In determining the fair value, the Company used anincome valuation approach.

 

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

 

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

 

Management wasassisted in determining that the estimated fair value of the Camping Worldreporting unit was less than book value by an independent third party valuationfirm.  The excess of carrying value overthe estimated fair value of the Camping World reporting unit was primarily dueto the decline in the recreational vehicle and camping retail markets leadingto lower expected future cash flows for the business and lower marketcomparables. In determining the fair value, the Company used a weighted averageof the income valuation approach and market valuation approaches.  The Company recorded an impairment charge of$47.6 million in the third quarter of 2008 related to Camping World, which ispart of the retail segment.  The Retailsegment goodwill was reduced to zero. See Long-Lived Assets under CriticalAccounting Policies.

 

The Companyperformed an annual goodwill impairment test as required and there were nogoodwill impairment indicators for our other reporting units.  Based on the results of the annual impairmenttests, we determined that no indicators of goodwill impairment existed in theother reporting units as of December 31, 2009.  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.

 

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

 

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3.      GOODWILL ANDINTANGIBLE ASSETS (continued)

 

In January 2007,AGI Productions, Inc. acquired a consumer show from MAC Events, Inc.for $0.5 million.  As part of thepurchase, the Company assumed $0.3 million of liabilities.  In February 2007, AGI Productions, Inc.acquired consumer shows from Industrial Exposition Inc. for $1.9 million.  As part of the purchase, the Company issued$1.5 million of debt and assumed $0.6 million of liabilities.  The cost of the acquisitions was allocatedprimarily to membership and customer lists.

 

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

 

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

 

4.                         LONG-LIVEDASSETS

 

In 2005, theCompany issued $88.2 million principal amount of its 10-7/8% Senior Notes due2012 (the “AGHI Notes”) and contributed the net proceeds, approximately $81.0million, to the AGI and in turn, AGI made an equity contribution to CampingWorld.  Camping World then made an equitycapital contribution in the same amount to its wholly-owned subsidiary, CWI, Inc.that created a new wholly-owned subsidiary named CWFR Capital Corp. (“CWFR”)which is an “unrestricted subsidiary” under the AGHI Notes, and the AGIIndenture, and made an equity capital contribution to CWFR in an equal amountto the capital contribution that it received from Camping World.  Since CWFR is an unrestricted subsidiary, itsoperations are not restricted by either the AGI Indenture or the AGHINotes.  CWFR used the proceeds from theequity capital contribution to acquire the FreedomRoads PreferredInterest.  FreedomRoads is owned 90% bythe Stephen Adams Living Trust, which also indirectly owns 100.0% of theoutstanding capital stock of AGHC and indirectly AGHI.

 

In thethird quarter of 2008, the Company recorded an impairment charge of $81.0million that wrote down to zero the carrying value of the preferred interest(the “FreedomRoads Preferred Interest”) held by an indirect subsidiary ofCamping World in FreedomRoads Holding Company, LLC (“FreedomRoads”), a holdingcompany whose subsidiaries sell and service new and used recreationalvehicles.  Management was assisted indetermining the non-cash goodwill impairment charge by an independent thirdparty valuation firm.  The $81.0 millionimpairment charge was recorded as a result of declining performance of therecreational vehicle industry driven by overall weakening of the economy and asignificant decline in consumer confidence, in addition to limited creditavailable to consumers interested in purchasing recreational vehicles.

 

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5.   ACCRUEDLIABILITIES

 

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

 
|                       |   |   |   | 2009   |   |   |   | 2008   |   |   |
|----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                       |   |   |   |   |   |   |   |   |   |   |
| Compensation  and benefits |   |   |   | $      | 8,653  |   |   |   | $      | 9,549  |   |   |
| Other  accruals            |   |   |   | 15,462 |   |   |   | 17,460 |   |   |
|                       |   |   |   | $      | 24,115 |   |   |   | $      | 27,009 |   |   |

 

6.      LONG-TERM DEBT

 

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

 
|                                       |   |   | 2009    |    |   |   | 2008          |   |    |
|--------------------------------------------|--------|--------|---------|---------|--------|--------|---------------|--------|---------|
|                                       |   |   |    |    |   |   |          |   |    |
| AGI  Senior Credit Facility: Term Loans    |   |   |    |    |   |   |          |   |    |
| Term  Loans                                |   |   | $       | 110,797 |   |   |          | $      | 126,955 |   |   |
| Revolving  credit facility                 |   |   | 18,059  |    |   |   | 8,500         |   |    |
| AGI  9% Senior Subordinated Notes due 2012 |   |   | 137,824 |    |   |   | 152,399       |   |    |
| Second  Lien Loan Note                     |   |   | 9,717   |    |   |   | -   |   |    |
| SA  Debt                                   |   |   | 1,032   |    |   |   | -   |   |    |
| AGHI  10 7/8% Notes due 2012               |   |   | 112,275 |    |   |   | 111,732       |   |    |
| Other  long-term obligations               |   |   | 985     |    |   |   | 4,292         |   |    |
|                                       |   |   | 390,689 |    |   |   | 403,878       |   |    |
| Less:  current portion                     |   |   | (892    | )       |   |   | (12,391       | )      |    |
|                                       |   |   | $       | 389,797 |   |   |          | $      | 391,487 |   |   |

 

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

 

The aggregate quarterly scheduledpayments on the term loans are $0.4 million. The funds available under the Senior Credit Facility may be utilized forborrowings or letters of credit, except a maximum of $7.5 million may be allocatedto such letters of credit.  The SeniorCredit Facility is secured by virtually all of AGI’s assets and a pledge of AGI’sstock and the stock of AGI’s subsidiaries.

 

As of December 31, 2009, $110.8million was outstanding under the Term Loans and after consideration of fixedrates under the interest rate swap agreements (discussed in Note 8 InterestRate Swap Agreements) the average interest rate on the Term Loans was17.01%.  As of December 31, 2009,permitted borrowings under the undrawn revolving line were $19.2 million.  AGI had commercial and standby letters ofcredit in the aggregate amount of $5.8 million outstanding as of December 31,2009.

 

69

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6.                         LONG-TERMDEBT (continued)

 

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

 

Inconnection with the June 5, 2009 amendment to the Senior Credit Facility,the senior lenders required the commitment of Stephen Adams, the Company’sultimate shareholder, to cause loans to be made to the Company in amounts equalto the cash interest payments on $16.0 million in aggregate principal amount ofthe term loans under the Senior Credit Facility.  In connection with that requirement, on June 10,2009, the Company entered into a loan agreement with SA Holding, LLC, (“SAHolding”), which is owned by Stephen Adams, pursuant to which SA Holding agreedto loan to AGI (the “SA Loans”) amounts equal to the cash interest payments on$16.0 million in aggregate principal amount of term loans.  The interest rate on the SA Loans is equal tothe interest rate payable on the Senior Credit Facility plus 2.0% per annum compoundedmonthly.  The SA Loans mature on the dateon which the indebtedness under the Senior Credit Facility is paid infull.  As of December 31, 2009, $1.0million of SA Loans were outstanding.  OnMarch 1, 2010, the SA Loans were repaid in full with the proceeds from theAGI New Senior Credit Facility.

 

*AGI New Senior Credit Facility -*On March 1,2010, AGI, a wholly owned subsidiary of AGHI, entered into the Second Amendedand Restated Credit Agreement (the “AGI New Senior Credit Facility”) to refinanceits existing Senior Credit Facility ($128.9 million aggregate principal amountoutstanding as at December 31, 2009) which was scheduled to mature on March 31,2010 and second lien notes totaling $9.7 million due July 31, 2010.  The AGI New Senior Credit Facility providesfor term loans aggregating $144.3 million, including an original issue discountof 2%, that are payable in quarterly installments of $360,750 beginning March 1,2011.  In addition, there are mandatoryprepayments of the term loans from excess cash flow (as defined) of AGI andfrom asset sales.  The term loans underthe AGI New Senior Credit Facility mature on the earlier of March 1, 2015or 90 days prior to the maturity of either AGI’s 9% senior subordinated notesdue 2012 (“AGI Senior Notes”) ($137.8 million principal amount outstanding asat December 31, 2009) or AGHI’s 10-7/8% senior notes due 2012 (the “AGHINotes”) ($113.6 million aggregate principal amount outstanding as at December 31,2009).  Interest on the term loans underthe AGI New Senior Credit Facility floats at either 8.75% over the base rate(defined as the greater of the prime rate, federal funds rate plus 50 basispoints or 5.25%) for borrowings whose interest is based on the prime rate or10.0% over the LIBOR rate (defined as the greater of the 3 months LIBOR rate or3.0%) for borrowings whose interest is based on LIBOR.  The AGI New Senior Credit Facility containsaffirmative covenants, including financial covenants, and negative covenants,including a restriction on dividends or distributions by AGI to AGHI.  Borrowings under the AGI New Senior CreditFacility are guaranteed by the direct and indirect subsidiaries of AGI and aresecured by liens on the assets of AGI and its direct and indirectsubsidiaries.  From time to timeaffiliates of the Company have purchased and held AGHI Notes.  As a condition to the term loans under theAGI New Senior Credit Facility, $25.4 million of AGHI Notes due on March 15,2010 that were held by an affiliate of AGHI were contributed to the Company forzero consideration and the Company cancelled those notes.

 

Theinterest rate on the SA Loans is equal to the interest rate payable on theSenior Credit Facility plus 2.0% per annum compounded monthly.  The SA Loans mature on the date on which theindebtedness under the Senior Credit Facility is paid in full.  As of December 31, 2009, $1.0

 

70

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6.                       LONG-TERMDEBT (continued)

 

million of SA Loanswere outstanding.

 

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

 

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

 

On March 8,2007, AGI purchased $17.7 million of the AGI Senior Notes.  AGI funded the purchase through the issuanceof the $25.0 million in additional incremental term loans as permitted under theFebruary 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 AGI SeniorNotes.  As of December 31, 2009,$137.8 million of AGI Senior Notes remain outstanding.

 

The Senior CreditFacility and the indenture under which the AGI Senior Notes (the “AGI Indenture”)were issued 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, 2009.

 

*AGHI Notes -*On March 24, 2005, in a privateplacement, the Company issued $88.2 million principal amount of its 10-7/8%senior notes due 2012 (the “AGHI Notes”) at a $3.2 million

 

71

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6.                         LONG-TERMDEBT (continued)

 

original issuediscount.  The Company completed aregistered exchange of the AGHI Notes under the Securities Act of 1933 on June 8,2005.  The AGHI Notes are unsecuredobligations of the Company, and 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 before February 15, 2008, AGHI had the electionto pay interest on the AGHI Notes in cash or by the issuance of additionalnotes of the same tenor as the AGHI Notes. Any additional AGHI Notes issued in payment of interest are due in fullon or before March 15, 2010.  AGIhas not paid any dividends to AGHI to fund payment of interest on the AGHINotes and AGHI made the interest payments due on August 15, 2005, February 15,2006, August 15, 2006, February 15, 2007, and February 15, 2008through the issuance of additional notes. AGHI paid the interest on the AGHI Notes due August 15, 2007, August 15,2008 and February 15, 2009 from proceeds of capital contributions made byAGHI’s parent, AGHC, in the amount of $5.9 million, $6.2 million and $6.2million, respectively.  AGHI made theinterest payment due August 15, 2009 in January, 2010 with a $4.5 millioncash payment (a $2.8 million capital contribution from its shareholder, and$1.7 million of permitted tax distributions from AGI), and the remaining $1.7million was forgiven as the bonds are held by related entities.  As of December 31, 2009, approximately$112.3 million of AGHI Notes remain outstanding, including $25.4 million ofAGHI Notes due March 15, 2010. Currently, the AGI New Senior Credit Facility, CWI Revolver, and the AGIIndenture impose limitations on the ability of subsidiaries of AGHI to makedividend distributions or loans to AGHI to pay interest on the AGHI Notes.  On March 1, 2010, $25.4 million of theAGHI Notes due March 15, 2010 that were held by an affiliate of AGHI werecontributed to the Company for zero consideration and the Company cancelledthose notes.

 

The AGI New Senior CreditFacility, the AGI Indenture and the indenture governing our AGHI Notes containcertain restrictive covenants relating to, but not limited to, mergers, changesin the nature of the business, acquisitions, additional indebtedness, sale of assetsand investments, and the payment of dividends subject to certain limitationsand minimum operating covenants.

 

*Total Long-term Debt -*The aggregate future maturities oflong-term debt at December 31, 2009 were as follows (in thousands):

 
|   |   | 2010  |   | $       | 892     |   |   |   |   |
|--------|--------|-------|--------|---------|---------|--------|--------|--------|--------|
|   |   | 2011  |   | 139,698 |    |   |   |   |
|   |   | 2012  |   | 224,650 |    |   |   |   |
|   |   | Total |   | $       | 365,240 |   |   |   |   |

 

This tableexcludes the $25.4 million of AGHI Notes that were settled for zeroconsideration on March 1, 2010.

 

72

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7.                         INCOME TAXES

 

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

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

 

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

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

 

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7.      INCOME TAXES (continued)

 

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

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

 

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, 2009, Camping World, Inc.and its subsidiaries had a net operating loss carryforward of approximately$37.7 million, which will be able to offset future taxable income.  If not used, the net operating losscarryforward will expire between 2027 and 2029. The valuation allowance for deferred taxes was decreased by $2.7 millionas it was determined that the Company would have insufficient taxable income inthe current or carryforward periods under the tax laws to realize the futuretax benefits of its deferred tax assets.

 

TheCompany recognizes the tax benefit from an uncertain tax position only if it ismore likely than not that the tax position will be sustained on examination bythe taxing authorities based on the technical merits of the position.  The tax benefits recognized in the financialstatements on a particular tax position are measured based on the largestbenefit that has a greater than a 50% likelihood of being realized uponsettlement.  The amount of unrecognizedtax benefits (“UTBs”) is adjusted as appropriate for changes in facts andcircumstances, such as significant amendments to existing tax law, newregulations or interpretations by the taxing authorities, new informationobtained during a tax examination, or resolution of an examination.  We recognize both accrued interest and penalties,where

 

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7.                         INCOME TAXES(continued)

 

appropriate,related to UTBs in income tax expense. At the date of adoption, the Company had $14.2 million of unrecognizedtax benefits.  The Company reversed itsliability for unrecognized tax benefits in the third quarter of 2009 due tostatute expirations.

 

Thefollowing table summarizes the activity related to unrecognized tax benefits:

 
| Balance  at January 1, 2009                                                          |   |   | $       | 14,493 |   |   |
|-------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Gross  increases in unrecognized tax benefits due to prior year positions                 |   |   | -       |   |   |
| Gross  decreases in unrecognized tax benefits due to prior year positions                 |   |   | -       |   |   |
| Gross  increases in unrecognized tax benefits due to current year positions               |   |   | -       |   |   |
| Gross  decreases in unrecognized tax benefits due to current year positions               |   |   | -       |   |   |
| Gross  decreases in unrecognized tax beneifts due to settlements with taxing  authorities |   |   | -       |   |   |
| Gross  decreases in unrecognized tax benefits due to statute expirations                  |   |   | (13,154 | )      |   |
| Other                                                                                     |   |   | -       |   |   |
| Unrecognized  tax benefits at December 31, 2009                                      |   |   | $       | 1,339  |   |   |

 

The Company accrues interest andpenalties related to unrecognized tax benefits in its income taxprovision.  The Company reversed accruedinterest and penalties of $2.0 million related to decreases in unrecognized taxbenefits during 2009 due to statute expirations. As of December 31, 2009,the liability for penalties and interest was $0.5 million. The Company expectsits unrecognized tax benefits to decrease by $1.3 million over the next twelvemonths.

 

The Company and its subsidiariesfile income tax returns in the U.S. federal jurisdiction and variousstates.  With few exceptions, the Companyis no longer subject to U.S. federal and state examinations by tax authoritiesfor fiscal years prior to fiscal 2005 and 2005, respectively.  There currently is an Internal RevenueService examination that is scheduled to take place, but has not commenced, ofthe Company’s wholly owned subsidiary, Camping World, Inc., for fiscalyear 2008.

 

8.      INTEREST RATESWAP AGREEMENTS

 

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

 

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

 

75

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8.      INTEREST RATESWAP AGREEMENTS (continued)

 

Effective January 1, 2009,the Company adopted the provisions of the new accounting guidance forDisclosures about Derivative Instruments and Hedging Activities.  The guidance requires that the objectives forusing derivative instruments be disclosed to better convey the purpose ofderivative use in terms of the risks that the Company is intending tomanage.  This standard also requires disclosureof how derivatives and related hedged items are accounted for and how theyaffect the Company’s financial statements. The adoption of the new guidance did not have a material impact on ourcondensed consolidated results of operations, financial position or cash flows.

 

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

 

On March 19, 2008, the AGIentered into a 4.5 year interest rate swap agreement effective April 30,2008, with a notional amount of $35.0 million from which it will receiveperiodic payments at the 3 month LIBOR-based variable rate (0.281% at December 31,2009 based upon the October 31, 2009 reset date) and make periodicpayments at a fixed rate of 3.43%, with settlement and rate reset dates every January 31,April 30, July 31, and October 31.  The interest rate swap was effectivebeginning April 30, 2008 and expires on October 31, 2012.  The fair value of the swap agreements werezero at inception.  The Company enteredinto the interest rate swap agreements to limit the effect of increases on ourfloating rate debt.  The interest rateswap agreements are designated as a cash flow hedge of the variable rateinterest payments due on $135.0 million of the term loans and the revolvingcredit facility issued June 24, 2003, and accordingly, gains and losses onthe fair value of the interest rate swap agreements are reported in accumulatedother comprehensive loss and reclassified to earnings in the same period inwhich the hedged interest payment affects earnings.

 

Due to the potential sale ofCamping World, in the fourth quarter of 2008 a highly effective hedge on the$35.0 million outstanding debt by the $35.0 million notional amount interestrate swap agreement was deemed to be no longer probable and is now deemed to bereasonably possible.  As a result,changes in the value of the $35.0 million interest rate swap agreement areincluded in earnings as a gain (loss) on derivative instrument on October 1,2008.  Included in other comprehensiveloss at December 31, 2009 is $0.4 million related to changes in the fairvalue of the $35.0 million interest rate swap prior to October 1, 2008which will be amortized over the remaining life of the interest rate swap andincluded in earnings as a gain (loss) on derivative instrument.  On June 11, 2009, the Company partiallyterminated the $35.0 million interest rate swap, subject to a partialtermination fee of $0.6 million which was expensed.  The notional amount was reduced to $20.0million.  All other terms of the interestrate swap agreement remained unchanged. As a result, the amount included in other comprehensive income relatedto the $35.0 million interest rate swap was reduced prorata and included inearnings as a gain (loss) on derivative instrument.

 

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8.                         INTERESTRATE SWAP AGREEMENTS (continued)

 

Due to the issuance of an optionto the shareholder of the ultimate parent of the Company to purchase CampingWorld, in the second quarter of 2009, which option was subsequently terminated,a portion of the highly effective hedge on the $100.0 million outstanding debtby the $100.0 million notional amount interest rate swap agreement was deemedto be no longer probable and is now deemed to be reasonably possible.  As a result, changes in the value of the last$20.0 million of the $100.0 million interest rate swap agreement are includedin earnings beginning on June 5, 2009. Included in other comprehensive loss is $1.3 million related to the last$20.0 million of the $100.0 million interest rate swap which will be amortizedover the remaining life of the interest rate swap and included in earnings as again (loss) on derivative instrument.

 

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

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

 

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

 
| Derivatives  in Cash Flow Hedging Relationships:           |   | Interest  Rate Swap Agreements |       |
|------------------------------------------------------------|--------|--------------------------------|------------|
|                                                       |   |                           | 12/31/2009 |   |   |   | 12/31/2008 |   |   |
| Amount of Gain or (Loss)  recognized in OCI on Derivatives |   |                           | $          | (3,337 | ) |   |   | $ | (5,632 | ) |   |
|                                                            |        |                                |            |  |  |  |  |  |  |  |  |

 
| Location of Gain (Loss)  reclassified from Accumulated OCI into Statement of operations (Effective  Portion) |   | Gain  (loss) on derivative  Instrument |       |
|--------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|------------|
|                                                                                                         |   |                                   | 12/31/2009 |   |   |   | 12/31/2008 |   |   |
| Amount of Gain or (Loss)  reclassified from OCI into Statement of Operations (Effective portion)             |   |                                   | $          | (126 | ) |   |   | $ | (2,394 | ) |   |
|                                                                                                              |        |                                        |            |  |  |  |  |  |  |  |  |

 
| Location of Gain (Loss) recognized  in Statement of Operations on Derivatives (Ineffective portion and amount  excluded from Effectiveness testing) |   | Gain  (loss) on derivative  Instrument |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|------------|
|                                                                                                                                                |   |                                   | 12/31/2009 |   |   |   | 12/31/2008 |   |   |
| Amount of Gain or (Loss)  recognized in income on Derivatives (Ineffective portion and amount excluded  from Effectiveness testing)                 |   |                                   | $          | 871 |   |   |   | $ | -     |   |   |
|                                                                                                                                                     |        |                                        |            |  |  |  |  |  |  |  |  |

 

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

 

9.   FAIRVALUE MEASUREMENTS

 

Accounting guidance for fair valuemeasurements establishes a three-tier fair value hierarchy, which prioritizesthe inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such asquoted prices in active markets; Level 2, defined as inputs other than quoted pricesin active markets that are either directly or indirectly observable; and Level3,

 

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9.                       FAIR VALUEMEASUREMENTS (continued)

 

defined as unobservable inputs inwhich little or no market data exists, therefore requiring an entity to developits own assumptions.

 

As of December 31, 2009, theAGI holds interest rate swap contracts that are required to be measured at fairvalue on a recurring basis.  The Company’sinterest rate swap contracts are not traded on a public exchange.  See Note 8 Interest Rate Swap Agreements forfurther information on the interest rate swap contracts.  The fair value of these interest rate swapcontracts are determined based on inputs that are readily available in publicmarkets or can be derived from information available in publicly quotedmarkets.  Therefore, the Company hascategorized these swap contracts as Level 2.

 

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

 

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

 

Inthe third quarter of 2008, the Company noted continued reduction in same storesales at Camping World, Inc. (“Camping World”) as well as deterioration ofgeneral economic conditions and consumer confidence.  Based on the above, the Company determinedthat there were identified indicators of impairment within the Camping Worldreporting unit.  Management was assistedin determining that the estimated fair value of the Camping World reportingunit was less than book value by an independent third party valuationfirm.  The excess of carrying value overthe estimated fair value of the Camping World reporting unit was primarily dueto the decline in the recreational vehicle and camping retail markets leadingto lower expected future cash flows for the business and lower marketcomparables. In determining the fair value, the Company used a weighted averageof the income valuation approach and market valuation approaches.  The fair value of the goodwill in the Retailsegment is measured on a non-recurring basis, and therefore, the Company hascategorized this asset as Level 3.  TheCompany recorded an impairment charge of $47.6 million in the third quarter of2008 related to Camping World, which is part of the Retail segment.

 

Determining the fair value of areporting unit under the first step of the goodwill impairment test anddetermining the fair value of individual assets and liabilities of a reportingunit under the second step of the goodwill impairment test is judgmental innature and often involves the use of significant estimates and assumptions. Theseestimates and assumptions could have a significant impact on whether or not animpairment charge is recognized and also the extent of such charge. The Company’sestimates of fair value utilized in goodwill test may be based upon a number offactors, including assumptions about the projected future cash flows, discountrate, growth rate, determination of market comparables, economic conditions, orchanges to the

 

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9.                         FAIR VALUEMEASUREMENTS (continued)

 

Company’s business operations.Such changes may result in impairment charges recorded in future periods.

 

The Company recorded an impairmentcharge of $81.0 million in the third quarter of 2008 that wrote down to zerothe carrying value of the preferred interest (the “FreedomRoads PreferredInterest”) held by an indirect subsidiary of Camping World in FreedomRoadsHolding Company, LLC (“FreedomRoads”), a holding company whose subsidiariessell and service new and used recreational vehicles.  FreedomRoads is an affiliate under commonownership with the Company’s ultimate parent. Management was assisted in determining the fair value of the preferredinterest in FreedomRoads by an independent third party valuation firm.  In anticipation of the potential sale ofCamping World, the impairment charge was recorded as a result of decliningperformance of the recreational vehicle industry driven by overall weakening ofthe economy and a significant decline in consumer confidence, in addition tolimited credit available to consumers interested in purchasing recreationalvehicles.  Therefore, the Company hascategorized the FreedomRoads Preferred Interest as Level 3.  The impairment charge relating to theFreedomRoads Preferred Interest was allocated to the retail operating segment.

 

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

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

 

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

 

The following table presents the reported carrying value and fair valueinformation for the AGI Senior Notes, the Senior Credit Facility and the AGHINotes.  The fair values shown below forthe AGI Senior Notes, the Senior Credit Facility and the AGHI Notes are basedon quoted prices in the market for identical assets (Level 1), (in thousands):

 
|                    |   | 12/31/2009      |   | 12/31/2008       |   |            |
|-------------------------|--------|-----------------|--------|------------------|--------|-----------------|
|                    |   | Carrying  Value |   | Fair Value  |   | Carrying  Value |   | Fair Value |   |   |
| AGI  Senior Notes       |   | $137,824        |   | $93,893     |   | $152,399        |   | $80,771 |   |   |
| Senior  Credit Facility |   | 128,856         |   | 122,425     |   | 135,455         |   | 108,364 |   |   |
| AGHI  Notes             |   | 112,275         |   | 44,770      |   | 111,732         |   | 50,279 |   |   |

 

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10.    COMMITMENTS,CONTINGENCIES

 

*Leases* — TheCompany holds certain property and equipment under rental agreements andoperating leases which have varying expiration dates.  Future minimum annual fixed rentals underoperating leases having an original term of more than one year as of December 31,2009 are as follows (in thousands):

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

 

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

 

On December 5,2001, the Company sold eleven real estate properties to eleven separatewholly-owned subsidiaries of AGRP Holding Corp., a wholly-owned subsidiary ofthe Company’s ultimate parent, AGI Holding Corp., for $52.3 million in cash anda note receivable.  The properties havebeen 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 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 accounting guidance for accounting for leases.”  Land and buildings with a net book valuetotaling $45.8 million have been removed from the balance sheet.  The transaction resulted in a net gain of$6.1 million consisting of a $12.1 million gain on certain properties and a$6.0 million loss on other properties. In accordance with accounting principles generally accepted in theUnited States, the $6.0 million loss was recognized upon the date of sale in2001 in the statement of operations and the $12.1 million gain was deferred andwill be credited to income as rent expense adjustments over the leaseterms.  The average net annual leasepayments over the lives of the leases are $3.4 million.  As of December 31, 2009, an $8.4 milliongain remains and will be recognized over the future lease terms.

 

*NASCAR Agreement*— Pursuant to the terms of a certainSeries Entitlement and Sponsorship Agreement dated as of January 1,2009, by and between National Association for Stock Car Auto Racing, Inc.(“NASCAR”) and FreedomRoads, LLC (“FR”), a wholly owned subsidiary ofFreedomRoads, and CWI, Inc. (“CWI”), a wholly owned subsidiary of CampingWorld, Inc. (the “NASCAR Sponsorship Agreement”), CWI and FR obtainedrights as the title sponsor of the NASCAR Truck Series.  The NASCAR Sponsorship Agreement provides fora term of seven years, commencing January 1, 2009 and terminating December 31,2015, and requires the payment of annual rights fees in exchange for the rightsgranted to FR and CWI.  The obligationsof FR and CWI under the Sponsorship Agreement are joint and several in nature,provided that the liability of CWI for the annual rights fees during the termof the NASCAR Sponsorship Agreement is capped at an aggregate of $6.5 million.

 

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

 

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10.                COMMITMENTS,CONTINGENCIES (continued)

 

*EmploymentAgreements*— The Company has employment agreements with certainofficers.  The agreements include, amongother things, an annual bonus based on earnings before interest, taxes,depreciation and amortization, and up to one year’s severance pay beyondtermination date or three weeks of severance pay for every year of continuousemployment, whichever is greater.

 

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

 

11.    RELATED-PARTYTRANSACTIONS

 

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

 

In connection withour effort to expand the number of Camping World stores by developing retailalliances with RV dealerships across North America, the Company has established42 Camping World stores alongside or within RV dealerships owned byFreedomRoads, which is controlled by the Chairman of our Board of Directors,Stephen Adams, and we expect additional Camping World stores alongside orwithin such RV dealerships in the future. At December 31, 2009, the Company leased 35 properties fromFreedomRoads, sub-leased one property to FreedomRoads, and Camping World andFreedomRoads are joint tenants under six leases.  Total payments by the Company to FreedomRoadsunder these leased properties for 2009 and 2008 were approximately $5.7 millionand $4.2 million, respectively, and future commitments under these leases totalapproximately $35.1 million.  The leasesexpire at various dates from August 2013 through September 2018.  In 2009, FreedomRoads vacated threeproperties in which Camping World and FreedomRoads were joint tenants andCamping World took over the lease.  For2009 and 2008, lease payments received from FreedomRoads for the one subleasedproperty was approximately $0.4 million and $0.7 million, respectively, andfuture payments to be received under this sublease total approximately $2.5million.  The Company paid FreedomRoadsapproximately $18.6 million and $7.7 million in 2009 and 2008, respectively,and FreedomRoads paid the Company approximately $24.7 million and $27.7 millionin 2009 and 2008, respectively, under the product marketing and salesagreements.  Camping World’s outstandingaccounts receivable balance to FreedomRoads was $1.1 million, consisting of$5.8 million in accounts receivable and $4.7 million in accounts payable, at December 31,2009.

 

*Cooperative Resources Agreement* - Pursuant to theterms of the Amended and Restated Cooperative Resources Agreement (“CooperativeResources Agreement”) dated January 1, 2008, by and between the Companyand FreedomRoads Holding Company, Inc. (“FreedomRoads”) and Camping World, Inc.,FreedomRoads obtained the right to use the Camping World logos, trademarks, andtrade names (“CW Marks”).  TheCooperative

 

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11.    RELATED-PARTYTRANSACTIONS (continued)

 

Resources Agreementprovides for a term of twenty- five years, commencing January 1, 2008 andterminating December 31, 2032, and requires payment by FreedomRoads of anannual fee based on revenue, as defined, in exchange for the right to use theCW Marks granted by AGI.  The fee for2008 was $5.0 million and was paid by FreedomRoads to AGI in the first quarterof 2009.  On December 14, 2009, theSecond Amendment to the Amended and Restated Cooperative Resources Agreementeliminated the annual fee payment by FreedomRoads to AGI, provided thatFreedomRoads exclusively offer AGI products and services in point of salecustomer transactions, and FreedomRoads has agreed to purchase their parts fromCamping World.

 

OnJune 5, 2009, the Company entered into an option agreement with theshareholder of its ultimate parent to which the Company granted suchshareholder or his assigns an option, exercisable on or before March 1,2010, to purchase the Company’s Camping World subsidiary for $55.0 million. Inthe event the Camping World purchase option was exercised and, subject to theconsent of the lenders under the Senior Credit Facility, the sale of CampingWorld consummated, the Company intended to use the net cash proceeds from thesale of Camping World to repay indebtedness outstanding under the Senior CreditFacility, as amended.  On December 14,2009, a Termination of Option agreement was signed whereby the purchase optionwith the shareholder was terminated.

 

OnDecember 1, 2009, our parent company entered into an agreement whichgrants AGI the right and option (“the “Option”) to purchase FreedomRoads’ “choicemodel” insurance business for a $2.5 million deposit, paid by AGI, with $2.5million due on or before December 15, 2011.  The Option shall be exercised on or after May 15,2012 but before May 15, 2013.  Inthe event the Option is not exercised, AGI shall have the right to return ofthe deposit, less costs incurred. The $2.5 million deposit is reported in OtherNon-current Assets on the accompanying balance sheet as of December 31,2009.

 

OnDecember 14, 2009, the Company paid to FreedomRoads, by agreement, aone-time fee of $1.8 million for the non-exclusive license to access theFreedomRoads database for use in connection with the sale and promotion of RVproduces and services for ten years.  The$1.6 million of the access fee is reported in Other Non-current Assets and thecurrent portion of $180,000 in Prepaid expenses on the accompanying balancesheet as of December 31, 2009.

 

As a condition ofthe June 5, 2009 amendment to its Senior Credit Facility pursuant to whichthe maturity date was extended from June 24, 2009 to March 31, 2010,the shareholder of the ultimate parent of the Company was required to arrangefor the purchase of approximately $26.6 million in principal amount of the termportion of the Senior Credit Facility by new lenders, enhance the yield to suchnew lenders, purchase AGHI Notes held by one of such new lenders at a premiumto the most recent market price, contribute $8.5 million in capital to theCompany and guarantee two required principal payments on the term loans underthe Senior Credit Facility, aggregating $15.0 million.  In consideration of such support, the Companyentered into an option agreement with the shareholder of the ultimate parent ofthe Company pursuant to which the Company granted such shareholder or hisassigns an option, exercisable on or before March 1, 2010, to purchase theCompany’s Camping World subsidiary for $55.0 million.  The Company also agreed to pay theshareholder of the ultimate parent, upon successful refinancing of the Company’ssecured debt which is currently the New Senior Credit Facility, a success feeequal in amount to the fair value of such credit support, taking into accountthe fair value of the option to purchase Camping World.  Management was assisted in determining thefair value of Camping World by an independent third party valuation firm.  In the event the fair value of the CampingWorld purchase option exceeds the fair value of such credit support, theshareholder will pay the

 

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11.    RELATED-PARTYTRANSACTIONS (continued)

 

amount of suchexcess to the Company.  On December 14,2009, a Termination of Option agreement was signed whereby the purchase optionwith the shareholder was terminated and there would not be a credit for thevalue of the Camping World purchase option against value of such creditsupport.  In November 2009,management was assisted by an independent third party valuation firm indetermining that the value of the credit support was $26.8 million. Foraccounting purposes, any fee paid under this agreement will be treated, if andwhen paid, as a shareholder distribution.

 

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

 

The consulting firmof Pransky and Associates, P.S. (“PA”) provides ongoing consulting services tothe Company and certain subsidiaries. George Pransky, a member of the Board of Directors, is a director ofthat company.  During 2009 and 2008, PAreceived $2,500 and $0 in fees from the Company, respectively.

 

The accounting firmof Frith-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 2009 and 2008, FSA received $256,000 and $0 in fees from theCompany, respectively.

 

12.    STATEMENTS OFCASH FLOWS

 

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

 
|                                       |   | 2009                            |   | 2008                            |   | 2007   |                            |
|--------------------------------------------|--------|---------------------------------|--------|---------------------------------|--------|--------|---------------------------------|
| Cash  paid (received) during the year for: |   |                            |   |                            |   |   |                            |
| Interest                                   |   | $    38,380 |   | $    30,162 |   |   | $    29,916 |   |   |
| Income  taxes                              |   | 5                               |   | (5                              | )      |   | (195                            | ) |   |

 

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

** **

**2009:**

In February 2009,AGHC paid the interest on the AGHI Notes of $6.2 million representing acontribution from AGHC and a payment of interest on the notes.

 

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

 

**2008:**

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

 

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

 

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

 

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12.    STATEMENTS OFCASH FLOWS (continued)

 

In December 2008,the Company recorded an increase in the fair value of the interest rate swapsin Other Long-Term Liabilities of $8.0 million, an increase in AccumulatedOther Comprehensive Loss of $5.6 million, and ineffective portion in statementof operations of as a non-cash loss on derivative instruments of $2.4 million.

 

**2007:**

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

 

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

 

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

 

13.  BENEFIT PLAN

 

Affinity Group, Inc.

TheCompany sponsored a 401(k) Plan qualified under Section 401(a) and401(k) of the Internal Revenue Service Code of 1986, as amended (the “Code”).  All employees over age twenty-one, includingthe Executive Officers, are eligible to participate in the 401(k) Plan.  Employees who have completed one year ofservice (minimum of 1,000 hours) are eligible for matching contributions.  For the plan year 2008, the Company elected aSafe Harbor Matching Contribution for the employer match and set the employermatch, which vests upon contribution, at an amount equal to 100% of the first4% of the employee’s contribution through July 2, 2008.  Effective July 3, 2008 the Companysuspended the employer matching contributions. Employees may defer up to 60% of their eligible compensation up toInternal Revenue Service limits electing pre-tax contributions or post-taxcontributions (Roth contributions).  TheCompany’s contributions to the plan totaled approximately $0, $0.5 million and$0.9 million for 2009, 2008 and 2007, respectively.

 

Camping World, Inc.

Beginning January 1, 2007Camping World elected to no longer participate in the Affinity Group 401(k) Planand elected to begin participating in the FreedomRoads 401(k) Defined ContributionPlan, FreedomRewards 401(k) Plan, qualified under Section 401(a) and401(k) of the Internal Revenue Service Code of 1986, as amended (the “Code”).  All employees over the age of eighteen,including the Executive Officers are eligible to participate in the 401(k) Plan.  Employees who have completed twelve months ofconsecutive service are eligible for company match.  For the plan year 2008, the matchingcontribution schedule was 50% up to the first 6% of eligible compensation.  Company matching contributions followed a six(6) year graded vesting schedule. Effective June 6, 2008 the company suspended the employer matchingcontributions. Non-highly compensated employees may defer up to 75% of theireligible compensation up to the Internal Revenue Service limits.  Highly compensated employees may defer up to15% of their eligible compensation up to the Internal Revenue Servicelimits.  The Company’s contributions tothe plan totaled approximately $0, $0.4 million and $0.8 million for 2009, 2008and 2007, respectively.

 

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14.  DEFERRED PHANTOM STOCK COMPENSATION

 

The Company has deferredcompensation agreements with certain officers. The agreements provide for payment to the officers upon their termination,death, disability, or sale of the Company, and other agreed upon events.  Deferred compensation is included in otherlong-term liabilities except for amounts expected to be paid in 2010, whichhave been classified in current liabilities. This deferred compensation is subject to vesting under the terms of theindividual agreements.  Vesting periodsrange from 33% per year over a three-year period to immediate vesting uponentering an agreement.  The Companyincurred deferred compensation expense of $0.0 million for 2009, benefit of$0.3 million in 2008, and expense of $0.4 million for 2007, due to changes inthe cumulative amount due under the plan.

 

15.   SEGMENT INFORMATION

 

The Company’s three principallines of business are Membership Services, Media, and Retail.  The Membership Services segment operates theGood Sam Club, the Coast to Coast Club, the President’s Club, Camp Club USA andassorted membership products and services for RV owners, campers and outdoorvacationers, and the Golf Card Club for golf enthusiasts.  The Media segment publishes a variety ofpublications for selected markets in the recreation and leisure industry,including general circulation periodicals, club magazines, directories and RV andpowersports industry trade magazines.  Inaddition, the Media segment operates 40 consumer outdoor recreation showsprimarily focused on RV and powersports markets.  The Retail segment sells specialty retailmerchandise and services for RV owners primarily through retail supercentersand mail order catalogs.  The Companyevaluates performance based on profit or loss from operations before incometaxes.

 

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15.   SEGMENT INFORMATION(continued)

 

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

 

The Company does not allocate income taxes or unusualitems to segments.  Financial informationby reportable business segment is summarized as follows (in thousands):

 
|                                           |   | Membership     |   |   |                      |   |   |           |   |
|------------------------------------------------|--------|----------------|--------|--------|---------------------------|--------|--------|----------------|--------|
|                                           |   | Services       |   | Media  |                      | Retail |   | Consolidated   |   |
| **YEAR ENDED DECEMBER 31, 2009**               |   |           |   |   |                      |   |   |           |   |
| Revenues  from external customers              |   | $ 142,147 |   |   | $   59,061 |   |   | $ 270,573 |   |   | $ 471,781 |   |   |
| Loss  on sale of property and equipment        |   | -              |   |   | -                         |   |   | (558           | )      |   | (558 | ) |   |
| Interest  income                               |   | 3,370          |   |   | -                         |   |   | 4              |   |   | 3,374 |   |   |
| Interest  expense                              |   | -              |   |   | 80                        |   |   | 7,786          |   |   | 7,866 |   |   |
| Depreciation  and amortization                 |   | 3,077          |   |   | 5,307                     |   |   | 9,128          |   |   | 17,512 |   |   |
| Goodwill  impairment                           |   | -              |   |   | 46,884                    |   |   | -              |   |   | 46,884 |   |   |
| Segment  profit (loss)                         |   | 47,645         |   |   | (43,898                   | )      |   | (11,375        | )      |   | (7,628 | ) |   |
| Segment  assets                                |   | 237,597        |   |   | 26,876                    |   |   | 95,193         |   |   | 359,666 |   |   |
| Expenditures  for segment assets               |   | 379            |   |   | 62                        |   |   | 2,669          |   |   | 3,110 |   |   |
|                                           |   |           |   |   |                      |   |   |           |   |   |   |   |   |
| **YEAR ENDED DECEMBER 31, 2008**               |   |           |   |   |                      |   |   |           |   |   |   |   |   |
| Revenues  from external customers              |   | $ 152,643 |   |   | $   82,424 |   |   | $ 291,070 |   |   | $ 526,137 |   |   |
| Loss  on sale of property and equipment        |   | -              |   |   | -                         |   |   | (321           | )      |   | (321 | ) |   |
| Interest  income                               |   | 3,589          |   |   | -                         |   |   | 29             |   |   | 3,618 |   |   |
| Interest  expense                              |   | -              |   |   | 208                       |   |   | 16,126         |   |   | 16,334 |   |   |
| Depreciation  and amortization                 |   | 3,218          |   |   | 5,954                     |   |   | 8,565          |   |   | 17,737 |   |   |
| Goodwill  impairment                           |   | -              |   |   | -                         |   |   | 47,601         |   |   | 47,601 |   |   |
| Impairment  of investment in affiliate         |   | -              |   |   | -                         |   |   | 81,005         |   |   | 81,005 |   |   |
| Segment  profit (loss)                         |   | 51,679         |   |   | 9,228                     |   |   | (145,683       | )      |   | (84,776 | ) |   |
| Segment  assets                                |   | 221,262        |   |   | 88,101                    |   |   | 110,964        |   |   | 420,327 |   |   |
| Expenditures  for segment assets               |   | 2,531          |   |   | 2,464                     |   |   | 6,603          |   |   | 11,598 |   |   |
|                                           |   |           |   |   |                      |   |   |           |   |   |   |   |   |
| **YEAR ENDED DECEMBER 31, 2007**               |   |           |   |   |                      |   |   |           |   |   |   |   |   |
| Revenues  from external customers              |   | $ 149,937 |   |   | $   90,537 |   |   | $ 321,730 |   |   | $ 562,204 |   |   |
| Gain  (loss) on sale of property and equipment |   | -              |   |   | 5                         |   |   | (216           | )      |   | (211 | ) |   |
| Interest  income                               |   | 9,521          |   |   | -                         |   |   | 84             |   |   | 9,605 |   |   |
| Interest  expense                              |   | -              |   |   | 258                       |   |   | 15,402         |   |   | 15,660 |   |   |
| Depreciation  and amortization                 |   | 3,620          |   |   | 5,124                     |   |   | 7,754          |   |   | 16,498 |   |   |
| Segment  profit (loss)                         |   | 50,491         |   |   | 17,497                    |   |   | (8,136         | )      |   | 59,852 |   |   |
| Segment  assets                                |   | 203,836        |   |   | 89,074                    |   |   | 246,472        |   |   | 539,382 |   |   |
| Expenditures  for segment assets               |   | 2,744          |   |   | 1,244                     |   |   | 15,650         |   |   | 19,638 |   |   |

 

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15.               SEGMENTINFORMATION (continued)

 

The following is a summary of thereconciliations of reportable segments to the consolidated financial statementsfor the years ended December 31, 2009, 2008 and 2007 (in thousands):

 
|                                                         |   | 2009                      |    |   |   | 2008                      |   |     |   | 2007                      |   |
|--------------------------------------------------------------|--------|---------------------------|---------|--------|--------|---------------------------|--------|----------|--------|---------------------------|--------|
| **(Loss) gain on  Sale of Property and Equipment**           |   |                      |    |   |   |                      |   |     |   |                      |   |
| Total (loss) gain on sale for  reportable segments           |   | $                         | (558    | )      |   |                      | $      | (321     | )      |                      |   | $ | (211 | ) |
| Other non-allocated gain                                     |   | (46                       | )       |   |   | -     |   |     |   | 61                        |   |
| Total (loss) gain on sale of property  and equipment         |   | $                         | (604    | )      |   |                      | $      | (321     | )      |                      |   | $ | (150 | ) |
|                                                         |   |                      |    |   |   |                      |   |     |   |                      |   |
| **Interest  Income**                                         |   |                      |    |   |   |                      |   |     |   |                      |   |
| Total interest income for reportable  segments               |   | $                         | 3,374   |   |   |                      | $      | 3,618    |   |                      |   | $ | 9,605 |   |
| Elimination of intersegment interest  income                 |   | (3,370                    | )       |   |   | (3,589                    | )      |     |   | (9,521                    | )      |
| Other non-allocated interest income                          |   | 513                       |    |   |   | 550                       |   |     |   | 508                       |   |
| Total interest income                                        |   | $                         | 517     |   |   |                      | $      | 579      |   |                      |   | $ | 592 |   |
|                                                         |   |                      |    |   |   |                      |   |     |   |                      |   |
| **Interest  Expense**                                        |   |                      |    |   |   |                      |   |     |   |                      |   |
| Total interest expense for reportable  segments              |   | $                         | 7,866   |   |   |                      | $      | 16,334   |   |                      |   | $ | 15,660 |   |
| Elimination of intersegment interest  expense                |   | (7,071                    | )       |   |   | (15,612                   | )      |     |   | (15,026                   | )      |
| Other non-allocated interest expense                         |   | 43,064                    |    |   |   | 36,266                    |   |     |   | 36,206                    |   |
| Total interest expense                                       |   | $                         | 43,859  |   |   |                      | $      | 36,988   |   |                      |   | $ | 36,840 |   |
|                                                         |   |                      |    |   |   |                      |   |     |   |                      |   |
| **Depreciation  and Amortization**                           |   |                      |    |   |   |                      |   |     |   |                      |   |
| Total depreciation and amortization  for reportable segments |   | $                         | 17,512  |   |   |                      | $      | 17,737   |   |                      |   | $ | 16,498 |   |
| Unallocated depreciation and  amortization expense           |   | 4,070                     |    |   |   | 2,567                     |   |     |   | 2,955                     |   |
| Total consolidated depreciation and  amortization            |   | $                         | 21,582  |   |   |                      | $      | 20,304   |   |                      |   | $ | 19,453 |   |
|                                                         |   |                      |    |   |   |                      |   |     |   |                      |   |
| **(Loss) Income  From Operations Before Taxes**              |   |                      |    |   |   |                      |   |     |   |                      |   |
| Total (loss) income for reportable  segments                 |   | $                         | (7,628  | )      |   |                      | $      | (84,776  | )      |                      |   | $ | 59,852 |   |
| Unallocated depreciation and  amortization expense           |   | (4,070                    | )       |   |   | (2,567                    | )      |     |   | (2,955                    | )      |
| Unallocated G & A expense                           |   | (15,130                   | )       |   |   | (14,062                   | )      |     |   | (17,113                   | )      |
| Unallocated interest expense, net                            |   | (42,551                   | )       |   |   | (35,716                   | )      |     |   | (35,698                   | )      |
| Unallocated gain (loss) on sale of  property and equipment   |   | (46                       | )       |   |   | -     |   |     |   | 61                        |   |
| Unallocated debt restructure expense                         |   | 4,678                     |    |   |   | -     |   |     |   | (775                      | )      |
| Unallocated arbitration expense                              |   | -     |    |   |   | -     |   |     |   | (955                      | )      |
| Unallocated gain (loss) on derivative  instrument            |   | 745                       |    |   |   | (2,394                    | )      |     |   | -     |   |
| Unallocated financing expense                                |   | (1,997                    | )       |   |   | -     |   |     |   | -     |   |
| Unallocated other expense                                    |   | (818                      | )       |   |   | -     |   |     |   | -     |   |
| Elimination of intersegment interest  expense, net           |   | 3,701                     |    |   |   | 12,023                    |   |     |   | 5,505                     |   |
| (Loss) income from operations before  income taxes           |   | $                         | (63,116 | )      |   |                      | $      | (127,492 | )      |                      |   | $ | 7,922 |   |
|                                                         |   |                      |    |   |   |                      |   |     |   |                      |   |
| **Assets**                                                   |   |                      |    |   |   |                      |   |     |   |                      |   |
| Total assets for reportable segments                         |   | $                         | 359,666 |   |   |                      | $      | 420,327  |   |                      |   | $ | 539,382 |   |
| Restricted cash                                              |   | 8,058                     |    |   |   | -     |   |     |   | -     |   |
| Intangible assets not allocated to  segments                 |   | 3,314                     |    |   |   | 5,836                     |   |     |   | 7,489                     |   |
| Corporate unallocated assets                                 |   | 8,299                     |    |   |   | 3,237                     |   |     |   | 3,544                     |   |
| Elimination of intersegment  receivable                      |   | (154,994                  | )       |   |   | (133,242                  | )      |     |   | (126,453                  | )      |
| Consolidated total assets                                    |   | $                         | 224,343 |   |   |                      | $      | 296,158  |   |                      |   | $ | 423,962 |   |
|                                                         |   |                      |    |   |   |                      |   |     |   |                      |   |
| **Capital  Expenditures**                                    |   |                      |    |   |   |                      |   |     |   |                      |   |
| Total expenditures for assets for  reportable segments       |   | $                         | 3,110   |   |   |                      | $      | 11,598   |   |                      |   | $ | 19,638 |   |
| Other asset expenditures                                     |   | 80                        |    |   |   | 184                       |   |     |   | 70                        |   |
| Total capital expenditures                                   |   | $                         | 3,190   |   |   |                      | $      | 11,782   |   |                      |   | $ | 19,708 |   |

 

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16.               SELECTEDQUARTERLY INFORMATION (UNAUDITED)

 

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

 
|              |   | March 31, |    | June 30, |   | September 30, |   | December 31, |    |
|-------------------|--------|----------------|---------|---------------|--------|--------------------|--------|-------------------|---------|
|              |   | 2009           |    | 2009          |   | 2009               |   | 2009              |    |
|              |   |           |    |          |   |               |   |              |    |
| Total revenue     |   | $              | 105,053 |          | $      | 129,899            |   | $                 | 124,944 |   | $ | 111,885 |   |
| Gross profit      |   | 39,703         |    | 48,518        |   | 44,827             |   | 43,318            |    |
| Net income (loss) |   | (4,571         | )       | 1,563         |   | (41,499            | )      | (8,243            | )       |
|              |   |           |    |          |   |               |   |              |    |
|              |   | March 31, |    | June 30, |   | September 30, |   | December 31, |    |
|              |   | 2008           |    | 2008          |   | 2008               |   | 2008              |    |
|              |   |           |    |          |   |               |   |              |    |
| Total revenue     |   | $              | 124,985 |          | $      | 147,729            |   | $                 | 133,337 |   | $ | 120,086 |   |
| Gross profit      |   | 47,764         |    | 57,492        |   | 49,700             |   | 48,386            |    |
| Net income (loss) |   | (3,142         | )       | 2,629         |   | (129,460           | )      | 4,694             |    |
|              |   |           |    |          |   |               |   |              |    |
|              |   | 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             |    |

 

 

For the quarter ended June 30, 2009, the Companyrecorded a $4.7 million gain on purchase of the $14.6 million AGI Senior Notes.

 

For the quarter ended September 30,2009, the Company recorded an impairment charge of $46.9 million relating toMedia segment.  See Note 3- Goodwill and IntangibleAssets.

 

The Company incurred financing expense of $1.5 million, $0.4million and $0.7 million in the second, third and fourth quarters of 2009,respectively, for legal and other costs related to the amendment to the SeniorCredit Facility.

 

For the quarter ended September 30,2008, the Company recorded a goodwill impairment charge of $47.6 million and an intangible asset impairment charge of $81.0 million thatwrote down to zero the carrying value of the FreedomRoads Preferred Interest”held by an indirect subsidiary of Camping World in FreedomRoads.  Both charges related to the Retailsegment.  See Note 3- Goodwill andIntangible Assets and Note 3- Long-Lived Assets.

 

For the quarter ended the March 31, 2007, Companyincurred $0.8 million of debt extinguishment expense relating to the purchaseof AGI Senior Notes.

 

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17.               VALUATION ANDQUALIFYING ACCOUNTS

 
|                                        |   |       |   |   |   | Additions  |   |   |   |       |   |   |   |       |   |
|---------------------------------------------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|
|                                        |   | Balance at |   |   |   | Charged to |   |   |   |       |   |   |   | Balance at |   |
|                                        |   | Beginning  |   |   |   | Costs and  |   |   |   | Deductions |   |   |   | End        |   |
| *(in thousands)*                            |   | of Period  |   |   |   | Expenses   |   |   |   | (a)        |   |   |   | of Period  |   |
| Description:                                |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |
|                                        |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |
| Year ended December 31, 2009:          |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |
| Allowance for doubtful accounts  receivable |   | $          | 2,147  |   |   |       | $      | 2,945  |   |       |   | $      | 1,964  |       |   |   | $ | 3,128 |   |
|                                        |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |
| Year ended December 31, 2008:          |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |
| Allowance for doubtful accounts  receivable |   | $          | 1,473  |   |   |       | $      | 1,493  |   |       |   | $      | 819    |       |   |   | $ | 2,147 |   |
|                                        |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |
| Year ended December 31, 2007:          |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |
| Allowance for doubtful accounts receivable  |   | $          | 1,193  |   |   |       | $      | 1,373  |   |       |   | $      | 1,093  |       |   |   | $ | 1,473 |   |

 

 

(a)      Accountsdetermined to be uncollectable and charged against allowance account, net of collectionon accounts previously charged against allowance account.

 

18.                    SUBSEQUENT EVENTS

 

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

 

On March 1,2010, AGI entered into the second amended and restated credit agreement (the “AGINew Senior Credit Facility”) to refinance its existing senior credit facility($128.9 million aggregate principal amount outstanding as at December 31,2009) which was scheduled to mature on March 31, 2010 and second liennotes totaling $9.7 million due July 31, 2010.  The AGI New Senior Credit Facility providesfor term loans aggregating $144.3 million, including an original issue discountof 2%, that are payable in quarterly installments of $360,750 beginning March 1,2011.  In addition, there are mandatoryprepayments of the term loans from excess cash flow (as defined) of AGI andfrom asset sales.  The term loans underthe AGI New Senior Credit Facility mature on the earlier of March 1, 2015or 90 days prior to the maturity of either AGI’s 9% senior subordinated notesdue 2012 (“AGI Senior Notes”) ($137.8 million principal amount outstanding asat December 31, 2009) or the Company’s 10-7/8% senior notes due 2012 (the “AGHINotes”) ($113.6 million aggregate principal amount outstanding as at December 31,2009).  Interest on the term loans underthe AGI New Senior Credit Facility floats at either 8.75% over the base rate(defined as the greater of the prime rate, federal funds rate plus 50 basispoints or 5.25%) for borrowings whose interest is based on the prime rate or10.0% over the LIBOR rate (defined as the greater of the 3 months LIBOR rate or3.0%) for borrowings whose interest is based on LIBOR.  The AGI New Senior Credit Facility containsaffirmative covenants, including financial covenants, and negative covenants,including a restriction on dividends or distributions by AGI to theCompany.  Borrowings under the AGI NewSenior Credit Facility are guaranteed by the direct and indirect subsidiariesof AGI and are secured by liens on the assets of AGI and its direct andindirect subsidiaries.  From time totime affiliates of the Company have purchased and held AGHI Notes.  As a condition to the funding under the AGI New SeniorCredit Facility, the $25.4 million of AGHI Notes due on March 15, 2010that were held by an affiliate of AGHI were contributed to the Company for zeroconsideration and were cancelled by the Company on March 1, 2010. 

 

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19.     SUBSEQUENTEVENTS (continued)

 

In addition,on March 1, 2010, AGI’s wholly-owned subsidiary, Camping World, Inc.and indirect subsidiary, CWI, Inc. (collectively, “Camping World”), asco-borrowers, and Camping World’s subsidiaries entered into a credit agreement(the “CW Credit Facility”) providing for an asset based lending facility of upto $22 million, of which $10 million is available for letters of credit and $12million is available for revolving loans. The CW Credit Facility matures on the earlier of March 1, 2013, 60days prior to the date of maturity of the AGI New Senior Credit Facility, or120 days prior to the earlier date of maturity of the AGI Senior Notes and theAGHI Notes.  Interest under the revolvingloans under the CW Credit Facility floats at either 3.25% over the base rate(defined as the greater of the prime rate, federal funds rate plus 50 basispoints or 1 month LIBOR) for borrowings whose interest is based on the primerate or 3.25% over the LIBOR rate (defined as the greater of LIBOR rateapplicable to the period of the respective LIBOR borrowings or 1.0%) forborrowings whose interest is based on LIBOR. Borrowings under the CW Credit Facility are based on the borrowing baseof eligible inventory and accounts receivable of Camping World and itssubsidiaries.  The CW Credit Facilitycontains affirmative covenants, including financial covenants, and negative covenants.  Borrowings under the Camping World CreditAgreement are guaranteed by the direct and indirect subsidiaries of CampingWorld and are secured by a pledge on the stock of Camping World and its directand indirect subsidiaries and liens on the assets of Camping World and itsdirect and indirect subsidiaries.  Thelenders under the AGI New Senior Credit Facility and the CW Credit Facilityhave entered into an intercreditor agreement that governs their rights in thecollateral that is pledged to secure their respective loans.

 

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**ITEM 9: CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

None

 

 

**ITEM 9A:CONTROLS AND PROCEDURES**

 

Managements’ Reporton Internal Control over Financial Reporting

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 thedesign and operation of the Company’s disclosure controls and procedurespursuant to Regulation 13a-15(e) under the Securities Exchange Act of1934, as amended.  Based upon that evaluation, our President and ChiefExecutive Officer, along with our Senior Vice President and Chief FinancialOfficer, concluded that our disclosure controls and procedures are effective intimely alerting them to material information relating to the Company (includingour consolidated subsidiaries) required to be included in our periodic SECfilings.  Management determined that, as ofDecember 31, 2009, there have been no significant changes in the Company’sinternal control over financial reporting or in other factors that couldsignificantly affect these controls subsequent to the date the Company carriedout its evaluation.

 

Management of the Company isresponsible for establishing and maintaining adequate internal control overfinancial reporting, as such term is defined in Rule 13a-15(f) under theSecurities Exchange Act of 1934. The Company’s internal control over financialreporting is designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles in theUnited States. However, all internal control systems, no matter how welldesigned, have inherent limitations. Therefore, even those systems determinedto be effective can provide only reasonable assurance with respect to financialstatement preparation and reporting.

 

Management assessed theeffectiveness of the Company’s internal control over financial reporting as of December 31,2009. In making this assessment, management used the criteria set forth by theCommittee of Sponsoring Organizations of the Treadway Commission in InternalControl-Integrated Framework. Based on our assessment, management believes thatthe Company maintained effective internal control over financial reporting asof December 31, 2009, based on those criteria.

 

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

 

 

**ITEM 9B: OTHERINFORMATION**

 

None

 

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**PART III**

 

**ITEM 10:  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATEGOVERNANCE**

 

 

Ourexecutive officers and directors are as follows:

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

 

 

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. Schneideris also a director of the Company.  Mr. Schneider’sspecial contribution to the Board of Directors comes through his extensivemanagement experience in various aspects of the Company’s business through his30-plus-year tenure with the Company. The Company’s Chief Financial Officer reports to Mr. Schneider andhe reviews and analyses the financial and operational data on the Company’soperations on a frequent basis.

 

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

 

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

 

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

 

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

 

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

 

KennethW. Marshall is the Executive Vice President of Finance for Camping World.  Mr. Marshall has been with Camping Worldfor seven years and has served in the finance, accounting, IT, distribution andlogistics and Ecommerce areas of the business during his tenure with thecompany.  Prior to that time and since2000, Mr. Marshall served as Chief Information Officer of HarwoodInternational, a real estate development company in Dallas, Texas.  From 1995 to 2000, Mr. Marshall servedas Chief Financial Officer/Chief Operating Officer and was a shareholder ofVirtual Solutions, Inc., a technology consulting firm in Dallas, Texas.

 

BrentMoody joined Camping World in 2002 and since that time has served Camping Worldas Vice President and General Counsel and then Senior Vice President/ GeneralCounsel and Business Development as well as General Counsel of the Company from2004-2006.  Mr. Moody also serves 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

 

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

 

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.  Mr. Baltins’ special contribution comesfrom his 40-year legal career as advisor to numerous public and privatecompanies and his legal practice in the areas of mergers and acquisitions andcorporate law.  He has been a leader atBoard meetings and its strategic Board decisioning based on that experience incountless complex business transactions.

 

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 arenot listed on any national securities exchange and we are not required tomaintain a separate audit committee of the Board nor are we subject to theaudit committee independence requirements set forth in Rule 10A-3 of theSecurities Exchange Act of 1934, as amended. On February 22, 2006, the Board of Directors of the 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 does not have adirector that it had designated an “Audit Committee Financial Expert” as suchterm has been defined by the Securities and Exchange Commission because all ofthe board members have extensive practical experience in reviewing andevaluating financial statements, including those of the Company.  None of the directors are “independent” assuch term has been defined by the Securities and Exchange Commission.

 

**Code of Professional 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.comand may be found as follows:

 

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

·                                          Then, click on “Code of Conduct.”

 

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The Company intends to satisfy the disclosure requirementunder Item 5.05 of Form 8-K regarding an amendment to, or waiver from aprovision of, this Code of Professional Conduct by posting such information atthe address and location specified above under the heading “Waivers.”

 

**Section 16(a) BeneficialOwnership Reporting Compliance**

 

The Company is a voluntary filer pursuant to Section 15(d) ofthe Securities 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**

 

**CompensationDiscussion 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 2009, 2008 and 2007 as reported in thecompensation tables and accompanying narrative sections appearing on pages 103to 112 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. Sirpilla and Marshall wereofficers of our Camping World subsidiary prior to entering into the jointmarketing agreement with FreedomRoads, and are compensated by the Company.  Mr. Lemonis was, and currently is,President and Chief Executive Officer of FreedomRoads before the jointmarketing agreement was implemented and receives his primary compensation fromFreedomRoads, except for $100,000 in annual salary paid by Camping World.  Accordingly, Mr. Lemonis is not includedin the Summary Compensation Table below or the following discussion.

 

***Compensation Objectives***

 

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

 

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 50-75% of the totalcompensation opportunity for the other Executive Officers excluding Mr. Sirpillawho is paid only a base salary.  Theremaining balance of each Executive Officer’s total compensation opportunity isdependent upon short-term and long-term increases in Company financialperformance and operating profit.

 

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

 

Attractingand Retaining Executive Talent:  The Company has structured the incentiveopportunities under the annual incentive award programs and the phantom stockagreements to provide Executive Officers with a substantial upside in drivingthe value of the Company, which it views as a tool for attracting newtalent.  In addition, the phantom stock agreements,which are based on performance over a multiple-year period, provide ExecutiveOfficers 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 incentive awardopportunity provided to Mr. Schneider and the phantom stock agreementopportunities for all of the Executive Officers.  The Chairman of the Board of Directors alsoprovides Mr. Schneider and Mr. Lemonis with parameters regarding thecompensation opportunities to be provided to the remaining ExecutiveOfficers.  Mr. Schneider ultimatelydetermines the amount of compensation opportunities provided to Messrs. Wolfeand Patel within the scope of authority provided by the Chairman of the Boardof Directors.  In addition, Mr. Lemonisultimately determines the amount of compensation opportunities provided to Messrs. Sirpillaand Marshall within the scope of authority provided by the Chairman of theBoard of Directors.  The Chairman of theBoard of Directors or the Chief Executive Officer of either the Company orCamping World, as the case may be, considers the annual and long-term financialperformance of the Company or Camping World in determining the forms andamounts of compensation paid to each Executive Officer.

 

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 Mr. Schneider, and 30-50% ofthe total compensation opportunity provided to each of the other ExecutiveOfficers, excluding Messrs. Sirpilla and Marshall, dependent upon theCompany’s annual and long-term performance and value.  A higher proportion of the compensationopportunity provided to Mr. Schneider, as compared to the other ExecutiveOfficers, is tied to Company performance because he is the leader of theMembership Services and Media segments of the Company’s business operations andthus is in a more unique position to influence the performance of thosesegments of the Company.  However, theCompany believes that the total compensation opportunities of all the ExecutiveOfficers provide a substantial incentive to each of them to drive theperformance of the Company—both in the short and long-term.

 

TheCompany, which is a wholly-owned subsidiary of Affinity Group Holding, Inc.(“AGHI”), does not grant shares of Company stock or stock options to theExecutive Officers.  The long-term

 

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incentiveawards in the form of phantom stock agreements are intended to provideExecutive Officers with a cash equivalent to the increase in value of theCompany or Camping World that would otherwise be realized in stock or optionawards of a company with publicly traded equity securities.

 

***Elements of Compensation***

 

AnnualCompensation

 

**Base Salary**

EachExecutive Officer receives a minimum level of fixed compensation in the form ofbase salary.  The Company does not reviewthe base salaries of the Executive Officers on a regular basis; however, it hasadjusted base salary levels from time to time on a discretionary basis basedupon factors such as an increase in the responsibilities or duties of aparticular Executive Officer.  TheCompany provided nominal cost of living increases to Messrs. Wolfe andPatel, but no increase for Mr. Schneider in 2008 and 2007.  The Company reduced the salaries of Messrs. Schneider,Patel and Wolfe by 15% beginning in late January 2009.  In 2008, a portion of Mr. Marshall’ssalary was allocated to FreedomRoads and such portion is excluded from theSummary Compensation Table.

 

Theamount of base salary paid to each of the Executive Officers for 2009, 2008 and2007 is reflected in the Salary column of the Summary Compensation Table below.

 

**Annual Incentive Awards**

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

 

*2009 – Non-Equity Incentive Awards and Bonus:*

 

For2009, 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 “2009Value”).  The 2009 Value was $39.2million.  This amount was paid on a prorata basis every two weeks, in connection with the regular payroll cycle, basedon estimated Company performance.  Afinal measurement of Company performance under the parameters of the annualincentive award is made following the end of the fiscal year.  To the extent necessary after year-end,additional payments were made to each of Messrs. Schneider and Wolfe basedupon this final measurement in order that the aggregate amount of incentiveaward paid correlates with his assigned percentage of actual Companyperformance during the year.  The Companytakes a conservative position in estimating the pro rata amounts paid to Messrs. Schneiderand Wolfe throughout the year in connection with the regular payroll cycle and,to date, has not made any downward adjustments in the amount of incentive awardpaid based upon the final performance review. These amounts are reflected in the Non-Equity Incentive Compensationcolumn of the Summary Compensation table.

 

For2009, Mr. Patel participated in a discretionary annual incentive awardprogram.  The annual incentive awardswere 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

 

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was$161,678 for 2009 and was paid in the first quarter of 2010.  This amount is reflected in the Bonus columnof the Summary Compensation table.

 

For2009, Mr. Sirpilla did not receive an annual incentive award based onactual performance of the Company.

 

For2009, Mr. Marshall participated in a discretionary bonus program based onthe combined performance of FreedomRoads and CWI that includes a guaranteedminimum bonus payment based upon the review and evaluation by Mr. Lemonis.The amount of bonus paid to Mr. Marshall was $75,000 and was paid pro rataevery two weeks, in connection with the regular payroll cycle.  This amount is reflected in the Bonus columnof the Summary Compensation table.

 

*2008 – Non-Equity Incentive Awards and Bonus:*

 

For2008, Messrs. Schneider and Wolfe received their annual incentive awardsbased on the actual performance of the Company as measured under the parametersof the annual incentive award program. The amount of the annual incentive award for Messrs. Schneider andWolfe was based on 1.0% and 0.25%, respectively, of the Company’s income fromoperations excluding depreciation, amortization, phantom stock expense, othernon-recurring expense, and the operations of Camping World, Inc. (the “2008Value”).  The 2008 Value was $44.7million.  This amount was paid on a prorata basis every two weeks, in connection with the regular payroll cycle, basedon estimated Company performance.  Afinal measurement of Company performance under the parameters of the annualincentive award is made following the end of the fiscal year.  To the extent necessary after year-end,additional payments were made to each of Messrs. Schneider and Wolfe basedupon this final measurement in order that the aggregate amount of incentiveaward paid correlates with his assigned percentage of actual Companyperformance during the year.  The Companytakes a conservative position in estimating the pro rata amounts paid to Messrs. Schneiderand Wolfe throughout the year in connection with the regular payroll cycle and,to date, has not made any downward adjustments in the amount of incentive awardpaid based upon the final performance review. These amounts are reflected in the Non-Equity Incentive Compensationcolumn of the Summary Compensation table.

 

For2008, Mr. Patel participated in a discretionary annual incentive awardprogram.  This annual incentive award wasbased on the performance of specific subsidiaries and programs of the Companyas determined by Mr. Schneider.  Theamount of annual incentive award from the Company for Mr. Patel was$121,125 for 2008 and was paid in the first quarter of 2009.  The amount is reflected in the Bonus columnof the Summary Compensation table.

 

For2008, Mr. Sirpilla did not receive an annual incentive award based onactual performance of the Company.

 

For2008, Mr. Marshall participated in a discretionary bonus program based onthe combined performance of FreedomRoads and CWI that includes a guaranteedminimum bonus payment based upon the review and evaluation by Mr. Lemonis.The amount of bonus paid to Mr. Marshall was $44,635 and was paid pro rataevery two weeks, in connection with the regular payroll cycle.  This amount is reflected in the Bonus columnof the Summary Compensation table.

 

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For2008, Mr. Marshall participated in a discretionary annual incentive awardprogram to which the aggregate amount of the annual incentive award is basedupon the review and evaluation by Mr. Lemonis.  The incentive award was paid on a pro ratabasis every two weeks.

 

*2007 – Non-Equity Incentive Awards:*

 

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

 

For2007, Mr. Patel participated in a discretionary annual incentive awardprogram.  This annual incentive award wasbased on the performance of specific subsidiaries and programs of the Companyas determined by Mr. Schneider.  Theannual incentive award for Mr. Patel was $132,350 for 2007 and was paid inthe first quarter of 2008.  This amountis reflected in the Bonus column of the Summary Compensation table.

 

For2007, Mr. Sirpilla did not receive an annual incentive award based onactual performance of the Company.

 

For2007, Mr. Marshall participated in a discretionary bonus program based onthe combined performance of FreedomRoads and CWI based upon the review andevaluation by Mr. Lemonis. The amount of bonus paid to Mr. Marshallwas $135,000 and was paid pro rata every two weeks, in connection with theregular payroll cycle.  This amount isreflected in the Bonus column of the Summary Compensation table.

 

 

Long-TermCompensation/Phantom Stock Agreements

 

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

 

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Theamount of phantom stock expensed during 2009, 2008 and 2007 for each ExecutiveOfficer is included in the Stock Awards column of the Summary CompensationTable below.

 

*Messrs. Schneider, Wolfe and Patel*:  Messrs. Schneider,Wolfe and Patel have each entered into phantom stock agreements with the Companyin 2004.  The agreements for Messrs. Schneiderand Wolfe are dated January 1, 2004, and the agreement for Mr. Patelis dated April 1, 2004 pursuant to which Mr. Schneider will receive2.50%, Mr. Wolfe will receive 0.33% and Mr. Patel will receive 0.10%of the increase in Company value as measured over the period beginning as pertheir respective agreements and ending December 31, 2006.  The phantom stock payout under the 2004agreements were paid in three equal annual installments of $826,637, $109,116and $35,660 for Messrs. Schneider, Wolfe and Patel, respectively, thefirst of which was distributed during the second quarter of 2007 and theremaining payments were made in the first quarter of 2008 and 2009.

 

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

 

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

 

OtherElements of Compensation

 

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

 

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

 

AffinityGroup, Inc.

TheCompany sponsored 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 had completed one year ofservice (minimum of 1,000 hours) were eligible for matching contributions.  For the plan year 2008, the Company electedSafe Harbor Matching Contribution for the employer match and set the employermatch, which vested upon contribution, at an amount equal to 100% of the first4% of the employee’s contribution through July 2, 2008.  Effective July 3, 2008, the companysuspended the employer matching contributions. Employees may defer up to 60% of their eligible compensation up toInternal Revenue Service limits electing pre-tax contributions or post-tax contributions(Roth contributions).  The Company didnot pay Employer Matching Contributions for the Affinity employees in2009.  The amounts of 401(k) Planmatching contributions by the Company 

 

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duringthe past three years are reflected in the All Other Compensation column of theSummary Compensation Table below.

 

CampingWorld, Inc.

BeginningJanuary 1, 2007 Camping World was no longer a participating employer inthe Affinity Group 401(k) Plan and elected to begin participating in theFreedomRoads 401(k) Defined Contribution Plan, Freedom Rewards 401(k) Plan,qualified under Section 401(a) and 401(k) of the InternalRevenue Service Code of 1986, as amended (the “Code”).  All employees over the age of 18, includingthe Executive Officers are eligible to participate in the 401(k) Plan.  Employees who have completed twelve months ofconsecutive service are eligible for company match.  For the plan year 2008, the matchingcontribution schedule was 50% up to the first 6% of eligible compensation.  Company matching contributions followed a six(6) year graded vesting schedule. Effective June 6, 2008, the company suspended the employer matchingcontributions. Non-highly compensated employees may defer up to 75% of theireligible compensation up to the Internal Revenue Service limits.  Highly compensated employees may defer up to15% of their eligible compensation up to the Internal Revenue Service limits.  The Company did not pay Employer MatchingContributions for the Camping World employees in 2009.  The amounts of 401(k) Plan matchingcontributions by the Company during the past three years are reflected in theAll Other Compensation column of the Summary Compensation Table below.

 

**KEYSOP**

EffectiveJanuary 1999, the Company participated in AGHC’s KEYSOP, a non-qualifieddeferred compensation plan administered through RABBI trusts, for key employeesof the Company and its subsidiaries.  Messrs. Sirpillaand Marshall elected not to participate in the KEYSOP.  Through March 2007 participants couldcontribute all or a portion of their annual incentive awards and payout fromthe phantom stock awards to the KEYSOP. Beginning April 1, 2007 future contributions to the KEYSOP were nolonger allowed.  Trustees under the KEYSOPreceived such contributions and invest the deferred amounts based upon thespecific election of each participant. The Company does not make any matching contributions to the KEYSOP.  Payouts under the KEYSOP are based upon theelections of the specific participants and are subject to the rules andregulations governing the KEYSOP program. The remaining assets of the KEYSOP were distributed and the program wasdissolved in 2008.

 

**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’sconsolidated financial statements. Current employees are not provided medical and dental benefits uponretirement.

 

**Perquisites**

TheCompany provides its Executive Officers with very limited perquisites, which itbelieves are appropriate components of the compensation package for theparticular Executive Officer.  TheCompany pays the premiums on life insurance policies for Mr. Schneider.  In addition, Mr. Sirpilla received anannual car allowance of approximately $18,382. To the extent that such aggregate incremental cost to the Company ofproviding these perquisites to each Executive Officer is equal to or greaterthan $10,000, such amount is included in the All Other Compensation column ofthe Annual Compensation Table.

 

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PhantomStock Agreements:  As described in the section entitled “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*” above, the Company hasentered into phantom stock agreements with three Executive Officers, Messrs.Schneider, Wolfe and Patel.  The phantomstock agreements also include the terms of employment for such ExecutiveOfficers, which are described in more detail in the section entitled “*Potential Payments upon Termination or Change in Control—EmploymentTerms in Phantom Stock Agreements*” below.  The terms of the phantom stock agreements forMessrs. Schneider, Wolfe, and Patel ended on December 31, 2009. On December 31,2009, the term of the phantom stock agreement was extended (other than thelong-term compensation component) and will continue until such time as AGI andthe Executive have entered into an amended agreement or a replacement agreementon terms that are mutually acceptable to AGI and the Executive.

 

 

**Compensation Committee Report**

 

Oursecurities are not listed on a national securities exchange and we are notrequired to maintain a separate compensation committee of the Board ofDirectors.  The full Board of Directorsfunctions as the Compensation Committee. The Board of Directors has reviewed the Compensation Discussion andAnalysis and discussed that analysis with management.  Based on its review and discussions withmanagement, the Board of Directors has determined that the CompensationDiscussion and Analysis be included in the Company’s Annual Report on Form10-K.

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

 

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**Summary Compensation Table**

 

Thefollowing table shows, for the fiscal years completed December 31, 2009, 2008and 2007, the annual compensation paid to or earned by the Company’s Presidentand Chief Executive Officer, the Company’s Senior Vice President and ChiefFinancial Officer and the other three most highly compensated executiveofficers who served as executive officers as of December 31, 2009(collectively, the “Executive Officers”).

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

 

 

(1)        Includes dollar amounts recognized for financial statementreporting purposes for the fiscal year ended December 31, 2009, 2008 and 2007pursuant to the phantom stock agreements and thus may include awards granted inand prior to 2009.  These amounts differfrom the actual payments described under Long-Term Compensation/ Phantom StockAgreements as the amounts described in that section include amounts of phantomstock awards earned in prior years.

(2)        The amount of earnings on amounts deferred under the KEYSOP isdependent upon the particular investment choices of the participant, which mayinclude private investments.  The Companydoes not influence or have any involvement in the earnings under theKEYSOP.  The remainingassets of the KEYSOP were distributed and the program dissolved in 2008.  Theamounts shown in the table reflect the aggregate earnings on each ExecutiveOfficer’s account during 2009, 2008 and 2007 (including earnings that are at orbelow market).  Messrs.Sirpilla and Marshall elected not to participate in the KEYSOP.  TheCompany does not maintain any pension plans. In addition, the Executive Officers do not receive above-market orpreferential earnings on compensation that is deferred pursuant to the 401(k)Plan.

 

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(3)        In 2009 there were no Company matching contributions for the401(k).  Includes $5,600, $3,650, $5,640,$714 and $4,600 for 2008 and $8,857, $0, $4,133, $6,750, and $8,857 for 2007 ofCompany matching contributions under the 401(k) Plan for Messrs. Schneider,Sirpilla, Patel, Marshall and Wolfe, respectively.  In addition, includes $3,686 and $180 for2009; $2,034 and $173 for 2008; and $2,751 and $0 for 2007 of Company-paid lifeinsurance premiums for Mr. Schneider and Mr. Sirpilla, respectively.  Also includes $18,382 and $0 for 2009;$25,955 and $2,399 for 2008; and $0 and $19,637 for 2007 for automobile allowancefor Messrs. Sirpilla and Marshall, respectively.

(4)        The annual incentive award paid to Mr. Marshall includes a minimumguaranteed amount and is included in the Bonus column.

(5)        Does not include compensation paid by FreedomRoads.

 

**Grants of Plan-Based Awards in2009**

 

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.  Theseawards are described in the section entitled “*CompensationDiscussion and Analysis—Elements of Compensation—Long-Term Compensation/PhantomStock Agreements*” above.

 

Thefollowing table reflects the actual payout to Messrs. Schneider and Wolfepursuant to the annual incentive award program based on Company performance in2009, 2008 and 2007, a portion of which were paid the year earned with theremainder paid the following year.  Asnoted in footnote 1 to the following table, the annual incentive awards paid toMessrs. Sirpilla, Patel and Marshall for 2009, 2008 and 2007 were discretionaryand thus are not reflected in this table.

 
|                                |   | Estimated Future Payouts Under Non-  Equity Incentive Plan Awards |
|-------------------------------------|--------|-------------------------------------------------------------------|
| Name                                | Year   | Target ($)(1)                                                     |
| Michael  A. Schneider               | 2009   | $392,380                                                          |
| President,  Chief Executive Officer | 2008   | 447,000                                                           |
|                                | 2007   | 481,350                                                           |
|                                |   |                                                              |
| John  Sirpilla                      | 2009   | -                                                                 |
| President  Retail Operations of     | 2008   | -                                                                 |
| Camping  World, Inc.                | 2007   | -                                                                 |
|                                |   |                                                              |
| Prabhuling  Patel                   | 2009   | -                                                                 |
| Senior  Vice President              | 2008   | -                                                                 |
|                                | 2007   | -                                                                 |
|                                |   |                                                              |
| Ken  Marshall                       | 2009   | -                                                                 |
| Executive  Vice President           | 2008   | -                                                                 |
| of  Finance of Camping              | 2007   | -                                                                 |
| World,  Inc.                        | 2006   |                                                              |
|                                |   |                                                              |
| Thomas  F. Wolfe                    | 2009   | 97,500                                                            |
| Senior  Vice President              | 2008   | 111,750                                                           |
| Chief  Financial Officer            | 2007   | 120,463                                                           |
|                                |   |                                                              |

 

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(1)        Represents award under the Company’s annual incentive awardprogram.  The amounts in column (d)reflect the actual payout to each of Messrs. Schneider and Wolfe under theannual incentive award program based upon Company performance in 2009, 2008 and2007, a portion of which was paid in the year earned with the remainder paidthe following year.  These amounts arealso reflected in the Non-Equity Incentive Plan Compensation column of theSummary Compensation Table for the respective Executive Officer.  The annual incentive award program does notinclude threshold or maximum target amounts. The annual incentive awards paid to Messrs. Patel and Marshall for 2009,2008 and 2007 performance were discretionary and thus are not included in theforegoing table.  Mr. Sirpilla did notreceive an annual incentive award.  Theterms of the Company’s annual incentive award program for 2009, 2008 and 2007are described in more detail under the section entitled “*CompensationDiscussion and Analysis—Elements of Compensation—Annual Compensation—AnnualIncentive Awards*” above.

 

**Outstanding Equity Awards at 2009Fiscal Year-End**

 

AGI,which is a wholly-owned subsidiary of AGHI, does not grant shares of Companystock or stock options to the Executive Officers.  However, the Company has historically enteredinto phantom stock agreements with the Executive Officers, which are intendedto provide the Executive Officers with a cash equivalent to the increase invalue of the Company or Camping World that would otherwise be realized in stockor option awards of a public company.  Theseawards are described in the section entitled “*CompensationDiscussion and Analysis—Elements of Compensation—Long-Term Compensation/PhantomStock Agreements*” above.  Allprior awards to the Executive Officers pursuant to phantom stock agreementswere earned or vested as of December 31, 2009.

 

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**Option Exercises and Stock Vestedin 2009**

 

Thefollowing table gives information concerning the vesting of the ExecutiveOfficers’ interests under phantom stock agreements during 2009, 2008 and2007.  The Company, which is awholly-owned subsidiary of AGHI, does not grant option awards to the ExecutiveOfficers.

 
|                                 |   | Stock  Awards                                                                                                              |
|--------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------|
|                                 |   | Value of  Options                                                                                                          | Value  Realized |
|                                 |   | upon  Vesting                                                                                                              | on Vesting |
| Name                                 | Year   | (1)                                                                                                                        | ($) |
| Michael  A. Schneider                | 2009   | $                    - |   | $                 - |   |
| President,  Chief Executive Officer  | 2008   | -                                                                                                                          |   | - |   |
|                                 | 2007   | 236,167                                                                                                                    | (2) | 236,167 | (4) |
|                                 | 2006   | 936,011                                                                                                                    | (3) | 936,011 | (6) |
| John  Sirpilla (3)                   | 2009   | -                                                                                                                          |   | - |   |
| President  Retail Operations of      | 2008   | -                                                                                                                          |   | - |   |
| Camping  World, Inc.                 |   |                                                                                                                       |   |   |   |
|                                 |   |                                                                                                                       |   |   |   |
| Prabhuling  Patel                    | 2009   | -                                                                                                                          |   | - |   |
| Senior  Vice President               | 2008   | -                                                                                                                          |   | - |   |
|                                 | 2007   | 11,808                                                                                                                     | (2) | 11,808 | (4) |
|                                 | 2006   | 40,155                                                                                                                     | (3) | 40,155 | (6) |
| Kenneth  Marshall (3)                | 2009   | -                                                                                                                          |   | - |   |
| Executive  Vice President of Finance | 2008   | -                                                                                                                          |   | - |   |
| of  Camping World, Inc.              | 2007   | -                                                                                                                          |   | - |   |
|                                 |   |                                                                                                                       |   |   |   |
| Thomas  F. Wolfe                     | 2009   | -                                                                                                                          |   | - |   |
| Senior  Vice President               | 2008   | -                                                                                                                          |   | - |   |
| Chief  Financial Officer             | 2007   | 31,174                                                                                                                     | (2) | 31,174 | (4) |
|                                 |   |                                                                                                                       |   |   |   |

 

 

(1)        The Executive Officers’ interests under the phantom stockagreements are denominated as a percentage of increases in the value over amultiple-year measurement period, as described in more detail under the sectionentitled “*Compensation Discussion and Analysis—Elements ofCompensation—Long-Term Compensation/Phantom Stock Agreements*”above.  The amounts set forth in thiscolumn reflect the dollar amount of that percentage interest, as calculatedupon vesting.

** **

(2)        Represents the dollar value of Messrs. Schneider’s, Patel’s andWolfe’s percentage increase in the value during 2007, pursuant to theirrespective phantom stock agreements dated January 1, 2007, as described in moredetail under the section entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above. These amounts were not paid as there was no increasein the value over the three year period.

 

(3)        Messrs. Sirpilla and Marshall did not earn any interests under thephantom stock agreements during 2009, 2008 or 2007 and are not party to aphantom stock agreement.

 

(4)        As described in more detail under the section entitled, “*Compensation Discussion and Analysis—Elements of Compensation—Long-TermCompensation/Phantom Stock Agreements*,” this amount represents thephantom stock interest earned in 2007 under

 

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the agreements entered into on January 1, 2007 with adetermination date of December 31, 2009. These amounts were not paid as there was no increase in the value overthe three year period.

 

 

**Nonqualified Deferred Compensation in Fiscal 2009**

 

The followingtable sets forth information regarding the Executive Officers’ participation inthe KEYSOP.

 
|                         |   | Executive                                                                                                | Registrant                                                                                               | Aggregate                                                                              | Aggregate                                                                                                      | Aggregate    |
|------------------------------|--------|----------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|--------------|
|                         |   | Contribution                                                                                             | Contributions                                                                                            | Earnings                                                                               | Withdrawals/                                                                                                   | Balance      |
|                         |   | In Last FY                                                                                               | in Last FY                                                                                               | in Last FY                                                                             | Distributions                                                                                                  | at Last  FYE |
| Name                         | Year   | ($)                                                                                                      | ($)                                                                                                      | ($)                                                                                    | ($)                                                                                                            | ($)          |
| Michael  A. Schneider        | 2009   | $                 - | $                 - | $              - | $                  - | 0            |
| President,  Chief            | 2008   | -                                                                                                        | -                                                                                                        | 31,106                                                                            | 2,262,704                                                                                                      | -            |
| Executive  Officer           | 2007   | -                                                                                                        | -                                                                                                        | 248,070                                                                           | 2,816,304                                                                                                      | 2,231,598    |
| John  Sirpilla               | 2009   | -                                                                                                        | -                                                                                                        | -                                                                                 | -                                                                                                              | -            |
| President  Retail Operations | 2008   | -                                                                                                        | -                                                                                                        | -                                                                                 | -                                                                                                              | -            |
| of  Camping World, Inc. (1)  | 2007   | -                                                                                                        | -                                                                                                        | -                                                                                 | -                                                                                                              | -            |
| Prabhuling  Patel            | 2009   | -                                                                                                        | -                                                                                                        | -                                                                                 | -                                                                                                              | -            |
| Senior  Vice President       | 2008   | -                                                                                                        | -                                                                                                        | (9,306)                                                                                | 233,417                                                                                                        | -            |
|                         | 2007   | 102,722                                                                                                  | -                                                                                                        | 19,309                                                                            | -                                                                                                              | 242,723      |
| Kenneth  Marshall            | 2009   | -                                                                                                        | -                                                                                                        | -                                                                                 | -                                                                                                              | -            |
| Executive  Vice President    | 2008   | -                                                                                                        | -                                                                                                        | -                                                                                 | -                                                                                                              | -            |
| of  Finance of Camping       | 2007   | -                                                                                                        | -                                                                                                        | -                                                                                 | -                                                                                                              | -            |
| World,  Inc. (1)             |   |                                                                                                     |                                                                                                     |                                                                                   |                                                                                                           |         |
| Thomas  F. Wolfe             | 2009   | -                                                                                                        | -                                                                                                        | -                                                                                 | -                                                                                                              | -            |
| Senior  Vice President       | 2008   | -                                                                                                        | -                                                                                                        | (13,067)                                                                               | 265,979                                                                                                        | -            |
| Chief  Financial Officer     | 2007   | -                                                                                                        | -                                                                                                        | 23,284                                                                            | -                                                                                                              | 279,046      |

 

(1)                              Messrs. Sirpilla and Marshall elected not to participate in theKEYSOP.

 

Keyemployees of the Company, including the Executive Officers, were eligible toparticipate in the KEYSOP, the terms of which are described under the sectionentitled “*Compensation Discussion and Analysis—Elements ofCompensation—Other Elements of Compensation—KEYSOP*” above throughMarch 2007.  The eligible ExecutiveOfficers could elect to defer all or a portion of their annual incentive awardsand payout from the phantom stock awards to the KEYSOP.  Beginning April 1, 2007 future contributionsto the KEYSOP were no longer allowed. Trustees under the KEYSOP receive such contributions and invest thedeferred amounts based on the specific elections of each participant.  Participants may invest in a wide range ofproducts, excluding certificates of deposits and money market accounts.  The Company does not make matchingcontributions to the KEYSOP.  Theremaining assets of the KEYSOP were distributed and the program was dissolvedin 2008.

 

**Potential Payments upon Termination orChange-in-Control**

 

Overview:  The tables below reflectthe estimated amount of compensation that would be payable to each ExecutiveOfficer under the terms of his phantom stock agreement in the event oftermination of such Executive Officer’s employment under any one of thefollowing scenarios:

 

·                                          Without cause by the Company; or

 

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·                                          Without cause by the Company or with good reason by the ExecutiveOfficer in connection with a change in control.

 

AnExecutive 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 of theExecutive Officer.

 

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

** **

PotentialPayments Upon Termination Without Cause by the Company:  The phantom stockagreements provide for severance payments to the Executive Officers in theevent the Company terminates their employment without “cause.”  “Cause” includes, but is not limited to:

 

·                                          The Executive Officer’s breach of the terms of the phantom stockagreement or any other legal obligation of the Company; or

 

·                                          The Executive Officer’s fraud, dishonesty, negligence, misconductor other deliberate action which causes injury to the Company or any of itssubsidiaries or to their respective reputations or an act of the Executiveinvolving moral turpitude or a serious crime.

 

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

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

 

(1)                              Represents an amount equal to each Executive Officer’s accrued butunpaid annual incentive award as of December 31, 2009.

(2)                              Represents an amount equal to Mr. Schneider’s base salary andannual incentive award as of December 31, 2009, divided by 52 weeks, times 87weeks.   As of December 31, 2009, Mr.Schneider had been employed with the Company for 32 years.  The annual base salary and annual incentiveaward in effect for Mr. Schneider as of December 31, 2009 is reflected in theSalary column and Non-Equity Incentive Plan Compensation column, respectively,of the Summary Compensation Table above.

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

 

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(4)                              Represents an amount equal to eight months of base salary andannual incentive award for Mr. Patel as of December 31, 2009.  The annual base salary and annual incentiveaward in affect as of December 31, 2009 is reflected in the Salary column andBonus column, respectively, of the Summary Compensation Table above.

(5)                              Represents an amount equal to one full year of base salary for Mr.Marshall, as per his employment agreement. Mr. Marshall is not a participant in a current phantom stock agreement.

(6)                              Represents an amount equal to one full year of the base salary andannual incentive award to Mr. Wolfe as of December 31, 2009.  The annual base salary and annual incentiveaward in effect as of December 31, 2009 is reflected in the Salary column andthe Non-Equity Incentive Plan Compensation column, respectively, of the SummaryCompensation Table above.

Potential Payments Upon Termination by Executive Officer with GoodReason upon a Change in Control:  The phantom stock agreements entered into byMessrs. Schneider, Wolfe and Patel provide for severance payments in the eventtheir employment is terminated without “cause” by the Company (as defined inthe preceding section) or with “good reason” by the Executive Officer inconnection with a “change in control.”  A“change in control” will be deemed to have occurred under the phantom stockagreements at such time as:

·                  Stephen Adams, his spouse, lineal descendants and trusts for thebenefit of such persons cease to beneficially own (as defined under Rule 13d-3of the Act), directly or indirectly a majority of the voting equity interestsof the Company;

 

·                  There is a consolidation or merger of AGI or its parent, AGHI (orsuch other entity that holds in excess of 80% of the issued and outstandingequity securities of AGHI) (the “Parent”), in which the Company or the Parentis not the surviving entity or in which the holders of the voting equityinterests in the Company or the Parent, as the case may be, do not continue tohold at least a majority of the voting equity interests of the surviving entityfollowing the merger;

 

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

 

·                  The shareholders of the Company or the Parent shall approve a planor proposal for the liquidation or dissolution of the Company or the Parent, asthe case may be.

 

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

 

·                                              A change in the Executive Officer’s duties, authorities or anyother responsibilities (including status, offices, titles and reportingrequirements);

 

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

 

·                                              A relocation of the Executive Officer outside the samemetropolitan area as the Executive Officer’s current office location.

 

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

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

 

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

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

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

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

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

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

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

 

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

 

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

 

·                                          *Mr. Schneider*: Mr. Schneider’s phantom stock agreement, dated January 1,2007, provides that he will be employed as the President and Chief ExecutiveOfficer of the Company.  Mr. Schneideris entitled to receive a base salary and annual incentive award in accordancewith such practices and procedures as are generally applicable to otheremployees.  The term of the phantom stockagreement expired on December 31, 2009. On December 31, 2009, the term of the phantom stock agreement wasextended and will continue until such time as AGI and the Mr. Schneiderhave entered into an amended agreement or a replacement agreement on terms thatare mutually acceptable to AGI and the Executive.

 

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

 

·                                          *Mr. Wolfe*: Mr. Wolfe’s phantom stock agreement, dated January 1, 2007,provides that he will be employed as the Senior Vice President and ChiefFinancial Officer of the Company.  Mr. Wolfeis entitled to receive a base salary and annual incentive award in accordancewith such practices and procedures as are generally applicable to otheremployees.  The term of the phantom stockagreement expired on December 31, 2009. On December 31, 2009, the term of the phantom stock agreement wasextended and will continue until such time as AGI and the Mr. Wolfe haveentered into an amended agreement or a replacement agreement on terms that aremutually acceptable to AGI and the Executive.

 

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

 

EmploymentAgreements

Mr. Marshallhas an employment agreement with Camping World dated May 31, 2007 thatprovided for a base salary and a discretionary bonus program based on thecombined 

 

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performance ofFreedomRoads and Camping World that includes a guaranteed minimum bonus paymentbased upon the review and evaluation by Mr. Lemonis.  The agreement includes a two year covenantnot to compete and a one year non-solicitation covenant.

 

**Director Compensation in 2009**

 

The Company paidits non-management directors a monthly director’s fee of $1,800 per month for January andFebruary 2009 and $900 per month for the remainder of the year.  The Company does not compensate Messrs. Adamsor Schneider for their service on the Board of Directors.  The Company does not provide any othercompensation or benefits to the members of its Board of Directors.  During 2009, the following fees were earnedor paid in cash to the respective director:

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

 

(1)         Resigned asdirectors effective March 19, 2010.

(2)         Mr. Smithwas elected to the Board of Directors in March 2008.

 

**Compensation Committee Interlocks and InsiderParticipation**

 

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

 

 

**ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS**

 

The Company is anindirect wholly-owned subsidiary of AGHC, a privately-owned corporation.  The following table sets forth, as of December 31,2009, certain information with respect to the beneficial ownership of theCommon Stock of AGHC by each shareholder who is known to us 

 

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to beneficially ownmore than 5% of the outstanding shares, each director, each executive officerlisted in the Summary Compensation Table and all of our executive officers anddirectors as a group.

 

| Name and  Address of Beneficial Owner                                            | Number of Shares

of Stock Owned (1) | Percent of

Common Stock |
|----------------------------------------------------------------------------------|--------------------------------------|--------------------------|
|                                                                             |                                 |                     |
| Stephen Adams, Director  2575 Vista Del Mar Drive  Ventura, CA   93001 | 1,407.7                              | 100.0%                   |

 

----

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

 

 

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

**Certain Relationships and RelatedPerson Transactions**

 

Review andApproval of Related Person Transactions

 

TheCompany entered into an indenture in connection with the issuance of the AGISenior Notes, which requires the Board of Directors to approve any newtransaction or series of transactions entered into between the Company andother entities controlled by Mr. Adams subsequent to the date of the indenturewhich, either individually 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

In connection withour effort to expand the number of Camping World stores by developing retailalliances with RV dealerships across North America, the Company has established42 Camping World stores alongside or within RV dealerships owned byFreedomRoads, which is controlled by the Chairman of our Board of Directors,Stephen Adams, and we expect additional Camping World stores alongside orwithin such RV dealerships in the future. At December 31, 2009, the Company leased 35 properties fromFreedomRoads, sub-leased one property to FreedomRoads, and Camping World andFreedomRoads are joint tenants under six leases.  Total payments by the Company to FreedomRoadsunder these leased properties for 2009 and 2008 were approximately $5.7 millionand $4.2 million, respectively, and future commitments under these leases totalapproximately $35.1 million.  The leasesexpire at various dates from August 2013 through September 2018.  In 2009, FreedomRoads vacated threeproperties in which Camping World and FreedomRoads were joint tenants andCamping World took over the lease.  For2009 and 2008, lease payments received from FreedomRoads for the one subleasedproperty was approximately $0.4 million and $0.7 million, respectively, andfuture payments to be received under this sublease total approximately $2.5million.  The Company paid FreedomRoadsapproximately $18.6 million and $7.7 million in 2009 and 2008, respectively,and FreedomRoads paid the Company approximately $24.7 million and $27.7 millionin 2009 and 2008, respectively, under the product marketing and salesagreements.  In addition to the $5.0million receivable under the Cooperative Resources Agreement discussed 

 

113

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below, CampingWorld’s outstanding accounts receivable balance to FreedomRoads was $1.1million, consisting of $5.8 million in accounts receivable and $4.7 million inaccounts payable, at December 31, 2009.

 

OnJune 5, 2009, the Company entered into an option agreement with theshareholder of its ultimate parent to which the Company granted suchshareholder or his assigns an option, exercisable on or before March 1,2010, to purchase the Company’s Camping World subsidiary for $55.0 million. Inthe event the Camping World purchase option was exercised and, subject to theconsent of the lenders under the Senior Credit Facility, the sale of CampingWorld consummated, the Company intended to use the net cash proceeds from thesale of Camping World to repay indebtedness outstanding under the Senior CreditFacility, as amended.  On December 14,2009, a Termination of Option agreement was signed whereby the purchase optionwith the shareholder was terminated.

 

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

 

OnDecember 1, 2009, our parent company entered into an agreement whichgrants AGI the right and option (“the “Option”) to purchase FreedomRoads’ “choicemodel” insurance business for a $2.5 million deposit, paid by AGI, with $2.5million due on or before December 15, 2011.  The Option shall be exercised on or after May 15,2012 but before May 15, 2013.  Inthe event the Option is not exercised, AGI shall have the right to return ofthe deposit, less costs incurred.  The$2.5 million deposit is reported in Other Non-current Assets on theaccompanying balance sheet as of December 31, 2009.

 

OnDecember 14, 2009, the Company paid to FreedomRoads, by agreement, aone-time fee of $1.8 million for the non-exclusive license to access theFreedomRoads database for use in connection with the sale and promotion of RVproduces and services for ten years.  The$1.6 million access fee is reported in Other Non-current Assets and the currentportion of $180,000 in Prepaids on the accompanying balance sheet as of December 31,2009.

 

114

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On December 5,2001, we sold eleven real estate properties to eleven separate wholly-ownedsubsidiaries of AGRP Holding Corp, a wholly-owned subsidiary of our ultimateparent, AGHC, which is owned 98.2% by Mr. Adams, for $52.3 million in cashand a $4.8 million note receivable.  Theproperties have been leased back to us on a triple net basis. These leases areclassified as operating leases and the average net annual lease payments overthe lives of the leases are $3.4 million. These leases have an initial term of 25 to 27 years with two five-yearoptions at the then current market rent. The $4.8 million note receivable yields 11% per annum, with monthlypayments of approximately $46,000 and a ten-year balloon due December 2011.

 

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

 

The lawfirm of Kaplan, Strangis and Kaplan, P.A. (“KSK”) provides ongoing legalservices to the Company and certain subsidiaries in connection with variousmatters. Andris A. Baltins, a member of the Board of Directors, is a member ofthat firm.  During 2009, 2008 and 2007,KSK received $920,000, $201,000 and $257,000 in legal fees from the Company, respectively.

 

The consulting firmof Pransky and Associates, P.S. (“PA”) provides ongoing consulting services tothe Company and certain subsidiaries. George Pransky, a member of the Board of Directors until March 19,2010, is a director of that company. During 2009 and 2008, PA received $2,500 and $0 in fees from theCompany, respectively.

 

The accounting firmof Frith-Smith & Archibald, LLP (“FSA”), provides tax preparation andreview services to the Company and certain subsidiaries.  David Frith-Smith, a member of the Board ofDirectors until March 19, 2010, is a partner of that company.  During 2009 and 2008, FSA received $256,000and $0 in fees from the Company, respectively.

 

Director Independence

 

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

 

 

**ITEM 14: PRINCIPAL ACCOUNTING FEES ANDSERVICES**

 

The Board of Directors engaged Ernst & Young LLP asan independent Registered Public Accounting Firm to examine our accounts forthe fiscal years ending December 31, 2009 and 2008.

 

115

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**Audit Fees**

Theaggregate audit fees paid to Ernst & Young LLP for the fiscal yearsended December 31, 2009 and 2008 were $458,000 and $459,695,respectively.   These fees includeamounts for the audit of the Company’s consolidated annual financialstatements, stand alone audits of certain subsidiaries, and the reviews of theconsolidated financial statements included in the Company’s Quarterly Reportson Form 10-Q, including assistance with and review of documents filed withthe SEC.

 

**Audit-Related Fees**

Theaggregate audit-related fees paid to Ernst & Young LLP for the fiscalyear ended 2009 was $4,300.  There wereno audit-related fees paid to Ernst & Young LLP for the year ended December 31,2008.

 

**Tax Fees**

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

 

**All Other Fees**

Therewere no other fees paid to Ernst & Young LLP for the years ended December 31,2009 and 2008.

 

 

**Pre-Approval Requirements**

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 2009 were pre-approved pursuant to the procedures outlined above.

 

116

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**PART IV**

 

 

**ITEM15:  EXHIBITS, FINANCIAL STATEMENTSCHEDULES**

 

 

(a) (1)  Consolidated financial statements are includedin Item 8 hereto.

 

 

(a) (2)  Consolidated financial statement schedules areincluded in Item 8 hereto.

 

 

(a) (3)  Listing of Exhibits:

 

 

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

 

 

(b)         Exhibits:

 

 

Includedin Item 15 (a) (3) above.

 

 

(c)        Financial Statement Schedules

 

 

Includedin Item 15 (a) (2) above.

 

117

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**SIGNATURES**

 

 

Pursuant to the requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized, in the City of Ventura, State of California on March31, 2010.

 

 

AFFINITYGROUP HOLDING, INC.

 

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

 

 

Pursuantto the requirements of the Securities Act of 1934, this report has been signedbelow by the following persons on behalf of the registrant in the capacities and on the datesindicated.

 

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

 

 
| *By:   | /s/ Thomas F. Wolfe     |   | March  31, 2010 |
|--------|-------------------------|--------|-----------------|
|   |  (Thomas F. Wolfe  |   |            |
|   |  Attorney-in-Fact) |   |            |

 

 

Thomas F. Wolfe, pursuant to Powers of Attorney executed by eachof the officers and directors listed above whose name is marked by an"*" and filed as an exhibit hereto, by signing his name hereto doeshereby sign and execute this Report of Affinity Group Holding, Inc. on behalfof each of such officers and directors in the capacities in which the names ofeach appear above.

 

118

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**AFFINITY GROUP HOLDING, INC.**

**EXHIBIT INDEX TO ANNUAL REPORTON FORM 10-K**

 

**For Fiscal Year Ended December31, 2009**

 
|                                                                                                                                                                                                         |   | 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                                        |   |                 |
|                                                                                                                                                                                                         |   |                                        |   |                 |
| 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                                        |   |                 |

 

119

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

 

120

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| ** **                                                                                                                                                                                                                                                                                                                                                                                          |   | Regulation  S-K Exhibit  TableReference |   | SequentialPage No. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|--------------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                          |   |                                    |   |               |
| 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                                   |   |               |
|                                                                                                                                                                                                                                                                                                                                                                                                |   |                                    |   |               |
| 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                                   |   |               |

 

121

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|                                                                                                                                                                                                                                                                                                                                          |       | Regulation    S-K Exhibit   Table Reference |       | Sequential  Page No. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|----------------------|
| ** **                                                                                                                                                                                                                                                                                                                                    | ** ** | ** **                                  | ** ** | ** **           |
| Sixth Amendment to Credit Agreement dated  March 3, 2006 among Affinity Group, Inc, the guarantors party hereto, the  lenders party thereto, Canadian Imperial Bank of Commerce, as syndication  agent, Canadian Imperial Bank of Commerce as administrative agent, and  General Electric Capital Corporation as documentation agent. (10)    |       | 10.26                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Seventh Amendment to Credit Agreement dated  June 8, 2006 among Affinity Group, Inc, the guarantors party hereto, the  lenders party thereto, Canadian Imperial Bank of Commerce, as syndication  agent, Canadian Imperial Bank of Commerce as administrative agent, and  General Electric Capital Corporation as documentation agent. (11)   |       | 10.27                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Agreement  with Brickell Financial Services Motor Club, Inc. dated September 28, 2007  (13)                                                                                                                                                                                                                                                   |       | 10.28                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Form of Phantom Stock Agreement between  certain executives and Affinity Group, Inc. (14)                                                                                                                                                                                                                                                     |       | 10.29                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Ninth Amendment to Credit Agreement dated  September 8, 2008 among Affinity Group, Inc., the guarantors party hereto,  the lenders party hereto, Canadian Imperial Bank of Commerce as syndication  agent, Canadian Imperial Bank of Commerce as administrative agent, and  General Electric Capital Corporation ad documentation agent. (15) |       | 10.30                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Tenth Amendment to Credit Agreement dated  September 8, 2008 among Affinity Group, Inc., the guarantors party hereto,  the lenders party hereto, Canadian Imperial Bank of Commerce as syndication  agent, Canadian Imperial Bank of Commerce as administrative agent, and  General Electric Capital Corporation as documentation agent. (16) |       | 10.31                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Second  Lien Note Purchase Agreement dated June 5, 2009 among Affinity Group, Inc.,  the guarantors party hereto, the note purchasers party hereto, and New York  Life Investment Management LLC as Administrative Agent. (17)                                                                                                                |       | 10.32                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Option Agreement dated June 5, 2009 between  Affinity Group, Inc. and The Stephen Adams Living Trust (18)                                                                                                                                                                                                                                     |       | 10.33                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Loan  Agreement with SA Holding LLC dated June 10, 2009 (19)                                                                                                                                                                                                                                                                                  |       | 10.34                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Promissory  Note with SA Holding LLC dated June 10, 2009 (20)                                                                                                                                                                                                                                                                                 |       | 10.35                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Termination  of Option and Second Amendment to Amended and Restated Cooperative Resources  Agreement dated December 14, 2009 (21)                                                                                                                                                                                                             |       | 10.36                                       |       |                 |
|                                                                                                                                                                                                                                                                                                                                          |       |                                        |       |                 |
| Credit Agreement dated as of March 1, 2010,  among Camping World, Inc. and CWI, Inc., as Borrowers, the certain  Subsidiaries of Borrowers party hereto as Guarantors, the financial  institutions party hereto as the Lenders, SunTrust Bank, as the Issuing Bank,  and SunTrust Bank, as the Administrative Agent. (22)                     |       | 10.37                                       |       |                 |

 

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|                                                                                                                                                                                                               |   | Regulation    S-K Exhibit   Table Reference |   | Sequential  Page No. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|----------------------|
|                                                                                                                                                                                                               |   |                                        |   |                 |
| Second Amended and Restated Credit Agreement  dated as of March 1, 2010 among Affinity Group, Inc., the Guarantors party  hereto, the Lenders party hereto and Wilmington Trust FSB, as Administrative  Agent (22) |   | 10.38                                       |   |                 |
|                                                                                                                                                                                                               |   |                                        |   |                 |
| Form  of Phantom Stock Extension Agreement                                                                                                                                                                         |   | 10.39                                       |   | 125                  |
|                                                                                                                                                                                                               |   |                                        |   |                 |
| 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                                        |   |                 |
|                                                                                                                                                                                                               |   |                                        |   |                 |
| Departure of Directors (24)                                                                                                                                                                                        |   | 31.5                                        |   |                 |
|                                                                                                                                                                                                               |   |                                        |   |                 |
| Statement Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                       |   | 32.1                                        |   |                 |
|                                                                                                                                                                                                               |   |                                        |   |                 |
| Statement Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                       |   | 32.2                                        |   |                 |
|                                                                                                                                                                                                               |   |                                        |   |                 |
| Affinity Group Code of Professional Conduct  (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’s Registration Statement No. 333-113982 and incorporatedby reference herein.

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

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

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

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

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

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

(8)Filed with the Company’s Report on Form 10-K dated December 31, 2006 andincorporated by reference herein.

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(24)Filed with the Company’s Report on 8-K dated March 19, 2010 and incorporated byreference herein.

 

 

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

 

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