**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-K**

** **
| **x** | ** ** | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|------------|-----------------------------------------------------------------------------------------------------|

 

**For the fiscal year ended December 31,2008**    **OR**

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

 

**For the transition period from              to             **

 

**Commission File Number**    **333-124109**

 

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**AFFINITY GROUP HOLDING, INC.**

(Exact name of registrantas specified in its charter)

 
| **Delaware**                              | ** ** | **20-2428068**                        |
|-------------------------------------------|------------|---------------------------------------|
| (State of incorporation  or organization) |       | (I.R.S. Employer  Identification No.) |

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

 

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

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OFTHE ACT:  **10-7/8%Senior Notes Due 2012**

 

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

YES o     NO x

 

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

YES o     NO x

 

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

 

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

 

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

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

 

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

 

Indicate the number of shares outstanding ofeach of the issuer’s classes of common stock, as of the latest practicabledate.

 

| ** **                    | ** ** | **Outstanding as of** |
|-------------------------------|------------|---------------------------------|
| **Class**                     | ** ** | **June 5, 2009**      |
| Common stock, $.01 par  value |       | 100                             |

 

 

** **

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**PART I**

 

**ITEM 1: BUSINESS**

 

**General**

 

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

 

Affinity Group Holding, Inc. is a holding company and the directparent of Affinity Group, Inc.  Weare an indirect 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.

 

Thereare approximately 1.8 million dues paying members enrolled in our clubs.  We currently have approximately 4.6 millionin aggregate circulation and 1.0 million paid circulation across our 37publications.  For the year ended December 31,2008, our revenue, operating loss and net loss were $526.1 million, $88.4million and $125.3 million, respectively.

 

**Competitive Strengths**

 

We believe that our key competitive strengthsare as follows:

 

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

 

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

 

We believe our significant size relative to our competition is ameaningful advantage that provides us greater leverage to negotiate benefitsand discounts with third-party service providers for our members andconsequently enhances the value of our product and service offerings.  Additionally, these negotiating and pricingadvantages allow us to increase membership dues without risking the loss ofmembers, who are compensated by additional savings and attract other productand service offerings.  Our 1.8 millionclub members and the 8.1 million consumers in our proprietary database serve asa unique, captive audience for direct marketing, which we believe significantlylowers customer acquisition costs relative to our competitors and facilitatescost-effective cross-selling.

 

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*Membership Services Segment remains stable-* Our operating performance has felt theeffects of the current economic downturn but we believe that our membershipsegment will not experience the downturn to the same extent as our other businesssegments.  While competition is intensefor consumer expenditures, we believe that consumers value the annual savingsof club membership.  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 vacations necessitatingplane or train travel and hotel accommodations, which would drive increasedsales of our products.

 

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

 

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

 

**Our Strategy**

 

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

 

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

 

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

 

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

 

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

 

*Camping World Penetration -*We continuedthe controlled expansion of our Camping World supercenter network by developingCamping World stores alongside or within independent RV dealerships, includingRV dealerships owned and operated by our affiliates, which provides acompetitive advantage by creating a means of increasing retail customertraffic.  In 2008, we opened 6 newCamping World stores, all of which are adjacent to or within RV dealershipsowned or operated by affiliates, and in 2009 we intend to open one additionalCamping World store which will be located adjacent to an RV dealershipaffiliated with us through common ownership with our Chairman, Stephen Adams.  In addition to generating increased cashflows from the sale of merchandise, a larger network of geographically diverseCamping World stores will enhance our ability to market our portfolio ofmembership clubs, publications and product and service offerings to a significantlylarger customer base.

 

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**RV Industry**

 

The use of RVs and the demand for club memberships and related productsand services may be influenced by a number of factors including generaleconomic conditions, consumer credit availability, the availability and priceof propane and gasoline, and the total number of RVs.  We believe that both the installed base ofRVs and the type of RV owned (full service vehicles excluding van conversions)are the most important factors affecting the demand for our membership clubs,merchandise, products and services. Based on the RV Survey, the number of households owning RVs is projectedto increase from 7.9 million in 2005 to nearly 8.5 million in 2010.  The RV Survey also indicates that thepercentage of households owning RVs during this period will rise slightly from8.0% to 8.2%.

 

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

 

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

 

**Membership Clubs**

** **

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

 

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

 
| ** **               | ** ** | **Number of Members**                  | ** ** | ** **                   | ** ** | **Average Renewal** | ** ** |
|--------------------------|------------|--------------------------------------------------|------------|------------------------------|------------|--------------------------|------------|
| **Membership Club** | ** ** | **at December 31, 2008 (1)** | ** ** | **Annual Fee (2)** | ** ** | **Rate (3)**        | ** ** |
| Good Sam Club            |       | 952,200                                          |       | $12 - $30                    |       | 63                       | %          |
| President’s Club    |       | 718,500                                          |       | $15 - $20                    |       | 71                       | %          |
| Coast to Coast  Club     |       | 60,200                                           |       | $90 - $140                   |       | 71                       | %          |
| Other Clubs:             |       |                                             |       |                         |       |                     |       |
| Golf Card Club           |       | 31,700                                           |       | $49 - $59                    |       | 51                       | %          |
| Camp Club USA  (4)       |       | 41,200                                           |       | $40 - $50                    |       | —                   |       |

 

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(1)  Also includesmulti-year and lifetime members.

(2)  For a singlemember, subject to special discounts and promotions.

(3)  Excludesmembers having lifetime memberships.

(4)  Camp Club USAwas launched in 2006 so renewal data is not yet available.

 

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

 

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reduced membership costs and a strengthenedmember commitment.

 

*Good Sam Club*

 

The Good Sam Club,a membership organization for RV owners, is the largest RV organizationworldwide with approximately 952,200 member families.  As of December 31, 2008, there were1,640 local chapters throughout the United States and Canada.  The average renewal rate for Good Sam Clubmembers was approximately 63% during the period 2004 through 2008.  The renewal rate was approximately 58% in2008.

 

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

 

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

 

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

 

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

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

 

*President’s Club*

 

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

 

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

 

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

 

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

 

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

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

 

*Coast to Coast Club*

 

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

 

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

 

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

 

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America can be an important complement to local resort membership.  Based on typical use patterns, we estimatethat Coast to Coast Club members realize estimated annual savings from these discountsof approximately $117.  The averageannual renewal rate for members of the Coast to Coast Club after the initialone-year membership (which is generally paid by the member resort not the clubmember) was approximately 71% during the period 2004 through 2008.

 

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

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

 

##### *Golf Card Club*

##### * *

The Golf Card Club, founded in 1974, had approximately 31,700 membersat December 31, 2008.  The majorattraction for membership is the financial savings which members receive whenplaying at any of the approximately 2,820 participating golf courses locatedthroughout the US and Canada. The annual membership fee varies with the lengthand type (single or double) of membership. We believe that the participating golf courses providing playing privilegesto club members 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 Card Club members receive a variety of benefits, including:  a minimum of two rounds annually of free ordiscounted golf at participating golf courses; discounted vacation packages at133 “Stay and Play” resorts; discounts on golf practice at 43 driving ranges;savings on golf merchandise purchases at select member golf courses; car rentaldiscounts from National and Alamo; an annual subscription to the *Golf Traveler* member publication, published three times peryear in print and twelve times electronically; the annual directory listingparticipating golf courses and resorts; chances to win free golf merchandise inquarterly member giveaways; access to 71 local Grasshopper Clubs 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 coursesparticipate in the Golf Card program. The program is attractive to participating courses because it buildstraffic and helps fill empty tee times during off-peak hours.  In addition, participating courses receivepromotion of their golf course in the *Golf Traveler* memberpublication, the Annual Directory, and the club website.  Members also purchase other merchandise orservices when exercising their playing privileges.  In this manner, Golf Card members tend toprovide incremental revenue to the golf courses.  Based on surveys conducted by us, membersrealize savings on green fees ranging from $150 to $250 annually, whichsignificantly exceed the cost of membership.

 

The standard annual membership fee is $49 for a single membership and$89 for a twosome membership.  Multi-yearmemberships range from a single two-year membership for $118, to a 

 

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three-year twosome membership for $267. The average renewal rate for Golf Card Club members was approximately51% for the period from 2004 to 2008. The membership decline in Golf Card Club since 2004 resulted frommanagement’s decision to cease acquisition marketing due to lack of affinity toour other clubs.

 

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

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

 

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

 

*Camp Club USA*

 

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

 

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

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

 

**Membership Products and Services**

 

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

 

*Emergency Road Service*

 

TheCompany developed Emergency Road Service (“ERS”) initially for Good Sam Clubmembers in

 

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

 

The table below sets forth the total enrollment in thevarious ERS programs for 2004 through 2008:

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

 

Enrollment in the various ERS programs grew consistentlythrough 2007, however declined by 34,100 members, or 8.8%, in 2008 due to softmarket conditions resulting in reduced acquisition members.  Expanded marketing efforts are underway toimprove enrollment in 2009.

 

*Vehicle Insurance Programs*

 

We provide our customers with several property and casualtyinsurance products, including two specialized RV insurance programs, amotorcycle insurance program and a homeowner’s insurance program.  The two core brands are the Vehicle InsuranceProgram (“VIP”) and the Motor Vehicle Program (“MVP”); each of these productsis promoted to the Company’s database through various direct marketingchannels.  At December 31, 2008, thetwo programs had approximately 184,100 policyholders, which represented a 13.5%and 5.3% penetration, respectively, of the Good Sam Club and the President’sClub.  During the period 2004 to 2008,the average renewal rate of members participating in these insurance programswas 90%.  We have a marketing arrangementwith a third party 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.

 

The following provides detail of the total number of policiesin force, the dollar amount of written premiums generated on the book ofbusiness, and the marketing fees generated for 2004 through 2008:

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

 

The reduction inpolicies in force from 2007 to 2008 resulted from consumers increasingly buyingtravel trailers instead of motorhomes, and reduced marketing efforts beginningin mid 2008 because of lower response rates. New competitive insurance products are currently being developed tobetter address 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.

 

9

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Our ContinuedService Plan (“CSP”), a private label extended vehicle warranty program for RVs,had total net revenue for 2008 of $30.6 million, increasing 5% over 2007. Theprogram had approximately 44,000 policies in force as of December 31,2008.  Sales of new policies were derivedfrom direct mail marketing, print ads in our magazines, Internet and e-mailsolicitations, and retail kiosks in Camping World stores.  Policy renewals represented 58% of the totalrevenue in 2008.  We now offer CSPthrough our Authorized RV Dealer Program. As of December 31, 2008, there were 69 dealer locations authorizedto sell extended vehicle warranty and other products and services offered bythe Company.

 

Our RV financing programis administered by a third party financial institution.  The number of RV loans extended to our clubmembers in 2008 increased by 33% from 2007. This increase in loans can be directly attributed to a new third-partyfinancing partnership allowing our members access to more competitive interestrates.

 

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

 

**Publications**

** **

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

 

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The following chart sets forth the circulation and frequencyof our publications:

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

 

----

*(1)**      *Paid circulation, may include supplementalqualified controlled circulation.

*(2)**      *Trade publication distributed toindustry-specific groups.

*(3)**      *Qualified and limited paid circulation.

*(4)**      *Includes limited paid circulation.

*(5)**      *Distribution to RV outlets, includingcampgrounds and dealerships.

*(6)**      *Limited to club members and promotionalcopies.  The magazine is included withthe membership.

*(7)**      *Only one magazine is issued when two membersare from the same household.

 

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*PaidCirculation Magazines*

 

*American Rider*,introduced in November 1993, is targeted to owners and operators ofHarley-Davidson motorcycles.

 

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

 

*Bass andWalleye Boats* is dedicated to freshwater fishing boat ownerswho demand top performance from their boats, engines and accessories.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

#### *Controlled CirculationMagazines- Business*

#### * *

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

 

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

 

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

 

*PowerSports Business DealerDirectory* is a supplier directory for each of the ATV,snowmobile and watercraft markets.  Thisdirectory features hundreds of manufacturers and suppliers of parts, services,apparel and much more, complete with detailed company information.

 

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

 

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

 

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

##### * *

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

 

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

 

*WatercraftWorld* is targeted to avid personal watercraft enthusiasts andprovides detailed critiques of watercraft, in-depth gear and accessoryevaluations, technical tips and racing information.

 

#### *Free Distribution Publications*

#### * *

###### *ThunderPress*newspapers arepublished monthly in three separate editions to reach the country’smotorcycling public and are available primarily through motorcycledealers.  This tell-it-like-it-ismagazine is designed for the ultra-active motorcycle enthusiast who feelspassionate about the lifestyle.

###### * *

*Woodall’s Specials*are annual publications geared around specific events, such as the beginning ofthe camping season and the beginning of the snowbird season.  Its editorial content is aimed at seasonalevents and the ads are largely from regional campgrounds.

 

*Woodall’s Regional News Tabloids*publications 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 annual publication which provides information about new and modifiedcruisers with features embracing the motorcycle cruiser lifestyle.

 

*Trailer Life RV Parks, Campground &Services Directory*, initially published in 1972, is anannually updated directory which provides comprehensive information onapproximately 11,600 public and private campgrounds, over 860 RV servicecenters, and over 875 tourist attractions in North America.  It is the official directory of the Good SamClub and is the premier source to find all the Good Sam discountlocations.  This directory is soldprimarily to Good Sam Club members and RV enthusiasts via direct mail,e-commerce, at RV dealerships, RV Parks and in bookstores.

 

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

 

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

 

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

 

*Woodall’sBuyer’s Guide* isan annual publication distributed mainly through bookstores and newsstands,which provides photos, floor plans and specifications of the new model yearRVs.  The buyer’s guide was firstpublished in 1978.

 

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

 

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

 

#### *Club or Trade Magazines andBooks*

#### * *

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

 

#### *Consumer Shows*

#### * *

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

 

#### *Guest Services CampgroundGuides*

#### * *

Weproduce local campground guides distributed free of charge to approximately 370campgrounds across the U.S., with limited distribution in Canada.  These guides include paid advertisements forlocal attractions, restaurants and services and also include a site map of thecampground.

 

**Retail**

 

Camping World is anational specialty retailer of merchandise and services for RV owners.  With the opening of our six newest CampingWorld supercenters in 2008, we currently operate 78 Camping World retaillocations in 31 states.  These storesaccounted for approximately 89% of the 2008 total 

 

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retail revenue, whileapproximately 11% was derived from catalog and Internet sales.  Five under-performing retail stores wereclosed in 2008.

 

In the RV accessoryindustry, we believe that Camping World has a high level of name recognition,an effective triple channel distribution strategy (store, catalog, andInternet), and a commitment to offer a broad selection of specialized RVproducts and services at competitive prices combined with technical assistanceand on-site installation.  Camping Worldoffers approximately 10,600 SKUs, most of which are not regularly available ingeneral merchandise stores.  The CampingWorld supercenters provide installation and repair services for RV products,which are also not available at general merchandise stores.  Products sold by Camping World includespecialty-sized refrigerators, housewares and other appliances, bedding andfurniture, generators and hydraulic leveling systems, awnings, folding boats,chairs, ladders, cleaning and maintenance products, bicycles, hitch-towing,sanitation products, automotive electronics and lifestyle products.  Some Camping World stores feature resourcecenters, staffed with licensed insurance agents who market such products andservices as vehicle insurance, extended warranty and ERS.  Camping World’s supercenters are designed toprovide one-stop shopping by combining broad product selection, technicalassistance and on-site installation services. We strategically locate Camping World supercenters in areas where manyRV owners live, along major Interstates, and/or in proximity to destinationsfrequented by RV users.

 

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

 

The retailsupercenters are periodically reset to enhance the customers’ 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’ssupercenters generally range in size from approximately 10,000 to 64,000 squarefeet.  Approximately 40% of eachsupercenter is devoted to a retail sales floor, a customer service area, and atechnical information counter; 40% is comprised of the installation facility,which contains 4 to 16 drive-through installation bays; and 20% is allocated tooffice and warehouse space.  Largeparking areas provide sufficient space and facilitate maneuvering of RVs.  By combining broad product selection,technical assistance, installation and repair services, Camping World’ssupercenters provide one-stop shopping for RV owners.  Camping World maintains toll-free telephonenumbers for customers to schedule installation and repair appointments.  Most supercenters are open seven days a week.

 

Camping Worldcontinued its controlled expansion of their supercenter store network whilesimultaneously developing dealer partnerships across North America.  This marketing strategy provides 

 

15

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an expanded numberof customers with access to the vast array of products and services that weoffer 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 alliance programunder which we sublease space in an existing RV dealership where we operate aCamping World store or operate the Camping World store adjacent to the RVdealership.  Currently, we operate 60Camping World stores alongside or within RV dealerships, including 52 CampingWorld stores that are part of our dealer alliance program.  Of these 60 Camping World stores that arealongside or within RV dealerships, 45 are located alongside or withindealerships indirectly owned or operated by FreedomRoads Holding LLC and itssubsidiaries (collectively “FreedomRoads”). FreedomRoads is indirectly owned and controlled by Stephen Adams, ourChairman and principal owner of our parent company.

 

#### *On March 6,2006, Camping World, Inc., an indirect wholly-owned subsidiary thatoperates the Camping World stores, entered into a joint venture agreement withFreedomRoads.  The joint ventureagreement provides that Camping World and FreedomRoads will 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 under the agreement.*

#### * *

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

 

Camping World initiatedits catalog operations in 1967.  CampingWorld currently has a proprietary mailing list of approximately 2.3 million RVowners, all of whom have made a purchase or requested a catalog from CampingWorld within the prior 60 months. Camping World maintains a database of these names, which includesinformation such as order frequency, size of order, date of most recent orderand type of merchandise purchased. Camping World analyzes its database to determine those customers mostlikely to order from Camping World’s catalogs. As a result, Camping World is able to target catalog mailings more effectivelythan direct marketers of catalogs offering general merchandise.  Camping World continually expands itsproprietary mailing list through in-store subscriptions and requests forcatalogs in response to advertisements in regional publications directed to RVowners.  In addition, Camping World rentsmailing lists of RV owners from third parties.

 

During 2008, CampingWorld distributed 4.8 million catalogs, 3.9 million of which were mailed ineight separate mailings, and the remaining 900,000 catalogs were distributed insupercenters, at campgrounds and other RV locations, and as packageinserts.  During the same period, CampingWorld processed approximately 242,000 catalog orders at an average net ordersize of $115, excluding postage and handling charges.  Camping World distributed eight high-quality,full-color catalogs during 2008, consisting of seven catalogs plus a MasterCatalog in the spring of 2008.

 

**Internet**

 

#### *The Internet has proven to be a significant, low-cost sourcefor new club members, subscriptions and*other ancillary product sales.  We maintain fifty-two Internet web sites,which are accessible directly

 

16

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orthrough *http://www.rv.net*.  In 2000, our club operations commenced alow-cost marketing strategy through e-mail membership acquisitioncampaigns.  Members added in 2008 underthese programs represented over 10% of all new club members.  E-mail acquisition campaigns and Internetonline advertising generated $36.1 million of revenue in 2008.

 

**Marketing**

 

We market our club memberships and related products andservices through direct mail, e-mail, inserts, ride-alongs, spaceadvertisements, promotional events, point of sale, member-get-a-membercampaigns, and telemarketing.  Directresponse marketing efforts account for approximately 39% of new enrollmentswith the remaining 61% derived from other sources.  We use a variety of commercially availablemailing lists of RV owners in our direct mail efforts.  Currently, the most widely used list databasesare provided by three commercial list compilers, and direct response lists arefrom RV industry participants, RV consumer surveys, and proprietary in-houselists.

 

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

 

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

 

**Operations**

** **

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

 

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

 

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

 

**Information Support Services**

 

We utilize integrated computer systems to support ourmembership club and publishing operations. A database containing all customer activity across our variousbusinesses and programs has been integrated into our web sites and callcenters.  Comprehensive information oneach member, including a profile of the purchasing activities of members, isavailable to customer service representatives when responding to memberrequests and when marketing our products and services.  We employ publishing software for publicationmakeup and content, and for advertising to support our publications operations.  A wide-area network facilitates communicationwithin and between our offices.  We alsoutilize information technology, including list segmentation, merge and purgeprograms, and advanced data base analysis and modeling techniques to selectprospects for direct mail solicitations and other direct marketing efforts.

 

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

 

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

 

**Regulation**

 

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

 

**Competition**

 

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

 

**Employees**

 

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

 

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**Trademarks and Copyrights**

 

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

 

**ITEM1A:  RISK FACTORS**

 

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

 

**Risks Relating to our Debt**

 

*Our substantial indebtedness could adversely affect our financialhealth.*

 

We have a significant amount of indebtedness.  As of December 31, 2008, our total debtand total stockholder’s deficit were $403.9 million and $298.0 million,respectively.  We are a holding companyand do not have any operations.  We aredependent on our operating subsidiaries for cash flow in the form of dividenddistributions.  However, our subsidiariesare and may in the future be restricted from making dividend distribution tous.  In the future, we intend to use cashgenerated by operations of our subsidiaries that is distributed to us as adividend to reduce our indebtedness. However, we may from time to time, subject to restrictions imposed bythe terms of our indebtedness, pay dividends or find it more advantageous toemploy cash generated by operations for capital investments and acquisitions.

 

The AGI SeniorCredit Facility matures on March 31, 2010. As of December 31, 2008, there was $135.5 million outstanding under theAGI Senior Credit Facility and it is secured by a lien on all of the AGI’sassets and a pledge of the AGI’s stock and the stock of its subsidiaries.  Although AGI is currently seeking torefinance or replace the AGI Senior Credit Facility and has received a numberof proposals from prospective lenders, there can be no assurance that the AGISenior Credit Facility will be refinanced or replaced prior to itsmaturity.  The availability of financingis limited due to the current uncertainties in the capital markets.  In addition, the current general conditionsin the U.S. economy had an adverse impact on the Company’s operations becauseconsumers are reducing discretionary spending, including spending on the recreationalactivities offered by the Company, and businesses are reducing advertising andmarketing expenditures which have adversely affected the advertising revenuesreceived by the Company.  As a result, itmay be even more difficult for the AGI to refinance or replace the AGI SeniorCredit Facility due to the current deterioration in the Company’s operatingresults.  If AGI is not able to refinanceor replace the AGI Senior Credit Facility prior to its maturity on March 31,2010, the lenders will be entitled to exercise their remedies to sell thecollateral securing the repayment of the AGI Senior Credit Facility, includingAGI’s assets, the stock of AGI and the stock of the its subsidiaries.  Since the indebtedness owed under the AGISenior Credit Facility is secured, it would be repaid before any of theunsecured or subordinated obligations of AGI and its subsidiaries.  It is also possible that the interest ratepayable on a new credit facility will be higher than the interest rates underthe current AGI Senior Credit Facility as amended June 5, 2009 which willadversely affect the Company’s cash flow and profitability (or increaselosses).

 

Our ability to satisfy our debt service obligations depends primarilyon our operating performance. Future debt repayments by us, including theprincipal amount of the notes, may require funds in excess of our availablecash flow.  We cannot assure ourinvestors that we will be able to raise additional funds, if necessary, throughfuture financings.  The indentures pursuantto which our wholly-owned subsidiary, Affinity Group, Inc. (“AGI”) issuedits 9% Senior Subordinated Notes due 2012 (“AGI Senior Notes”) and we issuedour 10-7/8% AGHI Senior Notes due 2012 (“AGHI Notes”) impose severalrestrictions upon our subsidiary or us, including restrictions on the abilityto incur additional indebtedness, pledge assets and make dividends anddistributions.

 

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

 

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

 

Despite our current level of debt, we or our subsidiaries may be ableto incur substantial additional debt in the future.  AGI’s Amended and Restated Credit Agreement (“AGISenior Credit Facility”) will permit total borrowings of up to $187.0 million.  Although the terms of the AGI Senior CreditFacility, the indenture governing the AGI Senior Notes (the “AGI Indenture”)and the indenture governing our

 

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AGHI Notes (the “AGHI Indenture”) restrict us and our restrictedsubsidiaries from incurring additional debt, these restrictions are subject toimportant exceptions and qualifications. If we or our subsidiaries incuradditional debt, the risks that we and they now face as result of our leveragecould increase.

 

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

 

*Because we are a holding company and substantially all of ouroperations are conducted by our subsidiaries, our obligations under the AGHINotes effectively are subordinated to the obligations of our subsidiaries.*

 

We currently conduct substantially all of our operations through oursubsidiaries, and our subsidiaries generate substantially all of our operatingincome and cash flow.  Our ability to payour obligations under the AGHI Notes and any other direct indebtedness dependson our ability to obtain cash dividends or other cash payments or obtain loansfrom our subsidiaries.  Thesesubsidiaries are separate and distinct legal entities that will have noobligations to pay any dividends or to lend or advance us funds and may berestricted from doing so by contract, including other financing arrangements,charter provisions or applicable legal or regulatory requirements, and ourability may also depend on the financial condition and regulatory requirementsof these subsidiaries.  In addition,because we are a holding company, except to the extent that we have priority orequal claims against our subsidiaries as a creditor, our obligations under ourAGHI Notes will be effectively subordinated to the obligations of oursubsidiaries.  Currently, the AGI SeniorCredit Facility and the AGI Indenture impose limitations on the ability of oursubsidiaries to make dividend distributions or loans to us.

 

*Our operations are substantially restricted by the terms of the AGHINotes, the terms of the AGI Senior Notes and the terms of the AGI Senior CreditFacility which could adversely affect us and increase our credit risk.*

 

The AGHI Indenture, AGI Indenture, and the credit agreement for the AGISenior Credit Facility include a number of significant restrictivecovenants.  These covenants restrict,among other things, our ability to: (i) incur more debt, (ii) paydividends 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 sellassets.

 

The AGI Senior Credit Facility contains additional and more restrictivecovenants than the terms of the AGI Indenture, including financial covenantsthat require us to achieve certain financial and operating results and maintaincompliance with specified financial ratios. Our ability to comply with these covenants and requirements may beaffected by events beyond our control, and we may have to curtail some of ouroperations and growth plans to maintain compliance.

 

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

 

If we are not able to comply with the covenants and other requirementscontained in the AGHI Indenture, the AGI Indenture, the AGI Senior CreditFacility or our other debt instruments, an event of default under the relevantdebt instrument could occur.  Our abilityto comply with the provisions of the indentures, the AGI Senior Credit Facilityand the agreements or indentures governing other debt we may incur in thefuture could be affected by events beyond our control and, therefore, we mightbe unable to meet those ratios and conditions. If an event of default doesoccur, it could trigger a 

 

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default under our other debt instruments, we could be prohibited fromaccessing additional borrowings, and the holders of the defaulted debt coulddeclare amounts outstanding with respect to that debt to be immediately due andpayable.  We cannot assure our investorsthat our assets or cash flow would be sufficient to fully repay borrowingsunder our outstanding debt instruments or that we would be able to refinance orrestructure the payments of these debt instruments. Even if we were able to secureadditional financing, it may not be available on terms favorable to us.

 

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

 

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

 

We cannot assure our investors that our business will generatesufficient cash flow from operations or that future borrowings will beavailable to us under the AGI Senior Credit Facility in an amount sufficient toenable us to pay our indebtedness, including the AGI Senior Credit Facility andthe AGI Senior Notes, as it becomes due or to fund our other liquidityneeds.  If our future cash flow fromoperations and other capital resources are insufficient to pay our obligationsas they mature or to fund our liquidity needs, we may be forced to reduce ordelay our business activities and capital expenditures, sell assets, selladditional shares of capital stock or restructure or refinance all or a portionof our debt, including the notes, on or before its maturity.  We cannot assure our investors that we willbe able to refinance any of our indebtedness, including the AGI Senior CreditFacility, the AGI Senior Notes and the AGHI Notes, on satisfactory terms or atall.

 

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

 

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

 

Upon the occurrence of certain specific kinds of change of controlevents, we will be required to offer to repurchase all outstanding AGHI Notesat 101% of the principal amount thereof plus accrued and unpaid interest andliquidated damages, if any, to the date of repurchase.  However, it is possible that we may not havesufficient funds at the time of the change of control to make any requiredrepurchases or that the AGI Senior Credit Facility or AGI Indenture will notallow such repurchases or permit the dividend or loan of sufficient funds to usto make the required repurchases.  If wedo not repay all borrowings under the AGI Senior Credit Facility and the AGIIndenture or obtain the consent of AGI’s lenders and holders of the AGI Notesto permit distribution of funds to us to repurchase the AGHI Notes, we will beprohibited from purchasing the AGHI Notes. Our failure to purchase tendered notes would constitute a default underthe indenture governing the AGHI Notes. In addition, certain important corporate events relating to our capitalstructure would not constitute a “change of control” under the indenture.

 

**Risks Relating to Our Business**

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Our activities relate significantly to the amount of leisure time andthe amount of disposable income available to users of our products andservices.  Our business, therefore, maybe sensitive to general economic conditions affecting the willingness ofconsumers to purchase club memberships and related products and services and ofadvertisers to place advertisements in our publications.  In particular, during the gasoline shortagesand resulting price increases in 1973, 1980 and 1990, there was a reduction inadvertising revenues for our publications. In addition, the success of the membership club portion of our businessdepends on our members’ use of certain RV sites and/or golf courses or thepurchase of goods through participating merchants.  If the economy slows, our members mayperceive that they have less disposable income to permit them to pursue leisureactivities.  As a consequence, they maytravel less frequently, spend less when they travel and use the benefits oftheir club memberships less often, if at all. Any decline in program usagewould hurt our business. In addition, 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 

 

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of merchants entering bankruptcy rise, the number of uncollectibleaccounts would also rise.  This wouldhave an adverse effect on our business and financial results.

 

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

 

We are an indirect wholly-owned subsidiary of AGI Holding Corp. (“AGHC”),a privately held company.  Stephen Adams,our Chairman, owns 100% of the outstanding shares of AGI Intermediate Holdco,LLC (“AGII”).  Accordingly, Mr. Adamswill be able to elect our Board of Directors and to control matters submittedto the vote of our shareholders. Circumstances may occur in which the interests of Mr. Adams couldbe in conflict with the interests of the holders of our debt instruments andlenders.  For example, Mr. Adams mayhave an interest in pursuing acquisitions, divestitures or other transactionsthat, in his judgment, could enhance the value of his equity investment, eventhough such transactions may involve risks to the holders of our debtinstruments and lenders.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

**ITEM2:  PROPERTIES**

 

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

 
| ** **                                                                                 | ** ** | **Square  Feet** | ** ** | **Acres**  | ** ** | **Lease  Expiration** | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------------|------------|------------|------------|-----------------------|------------|
| **Corporate  Headquarters:**                                                               | ** ** | ** **       | ** ** | ** ** | ** ** | ** **            | ** ** |
| Ventura, CA                                                                                |       | 74,100           |       |       |       | 2039                  |       |
|                                                                                       |       |             |       |       |       |                  |       |
| **Other  Office Facilities:**                                                              |       |             |       |       |       |                  |       |
| Carson, CA  (regional publication office)                                                  |       | 10,048           |       |       |       | 2012                  |       |
| Denver, CO  (customer service, warehousing fulfillment, and information system functions). |       | 60,000           |       |       |       | 2039                  |       |
| Bowling Green,  KY (retail administrative headquarters and mail order operations)          |       | 31,278           |       |       |       | 2039                  |       |
| Seattle, WA  (regional publication sales office)                                           |       | 912              |       | ** ** |       | 2009                  |       |
| Chesterfield, VA  (shows sales office)                                                     |       | 5,900            |       | ** ** |       | 2011                  |       |
| Maple Grove, MN  (Ehlert Publications Group, Inc. headquarters)                       |       | 17,496           |       | ** ** |       | 2010                  |       |
| Las Vegas, NV  (regional shows sales office)                                               |       | 2,809            |       |       |       | 2009                  |       |
| Scotts Valley,  CA (regional publication office)                                           |       | 3,905            |       |       |       | 2011                  |       |
| Bowling Green,  KY (database and online media support)                                     |       | 5,952            |       |       |       | 2015                  |       |
| Port Angeles, WA  (regional shows sales office)                                            |       | 3,300            |       |       |       | 2012                  |       |
| ** **                                                                                 |       |             |       |       |       |                  |       |
| **Distribution  Centers:**                                                                 |       |             |       |       |       |                  |       |
| Bakersfield,  California                                                                   |       | 164,747          |       | 14.827     |       | 2037                  |       |
| Franklin,  Kentucky                                                                        |       | 250,000          |       | 33.000     |       | 2035                  |       |
|                                                                                       |       |             |       |       |       |                  |       |
| **Camping  World Supercenter Locations:**                                                  |       |             |       |       |       |                  |       |
| Dothan, AL (1)                                                                             |       | 18,906           |       | 11.275     |       | 2025                  |       |
| Oxford, AL (2)                                                                             |       | 11,828           |       | 23.940     |       | 2027                  |       |
| Robertsdale, AL(1)                                                                         |       | 19,670           |       | 18.360     |       | 2026                  |       |
| North Little  Rock, AR (3)                                                                 |       | 20,592           |       | 10.000     |       | 2042                  |       |
| Earnhardt, AZ  (1)                                                                         |       | 2,000            |       | 24.000     |       | 2017                  |       |
| Tucson, AZ (2)                                                                             |       | 12,145           |       | 2.000      |       | 2018                  |       |
| Mesa, AZ                                                                                   |       | 27,500           |       | 3.140      |       | 2010                  |       |
| Bakersfield, CA (1)                                                                        |       | 23,325           |       | 9.940      |       | 2023                  |       |
| Fresno, CA (2)                                                                             |       | 6,932            |       | 21.010     |       | 2037                  |       |
| La Mirada, CA                                                                              |       | 33,479           |       | 5.501      |       | 2037                  |       |
| San Marcos, CA                                                                             |       | 25,522           |       | 2.212      |       | 2027                  |       |

 

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| ** **                                          | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|-----------------------------------------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| **Camping  World Supercenter Locations continued:** |       |             |       |      |       |                  |       |
| Fairfield, CA                                       |       | 43,434           |       | 3.780     |       | 2009                  |       |
| Rocklin, CA                                         |       | 29,085           |       | 4.647     |       | 2037                  |       |
| San Bernardino,  CA                                 |       | 18,126           |       | 1.665     |       | 2012                  |       |
| San Martin, CA                                      |       | 29,486           |       | 5.000     |       | 2023                  |       |
| Valencia, CA (3)                                    |       | 64,410           |       | 9.231     |       | 2037                  |       |
| Colorado  Springs, CO (1)                           |       | 11,672           |       | 26.430    |       | 2027                  |       |
| Denver, CO                                          |       | 27,085           |       | 4.132     |       | 2037                  |       |
| Longmont, CO (1)                                    |       | 5,003            |       | 6.750     |       | 2026                  |       |
| Ft. Myers, FL                                       |       | 22,886           |       | 4.217     |       | 2012                  |       |
| Gulf Breeze, FL (1)                                 |       | 5,747            |       | 13.897    |       | 2026                  |       |
| Kissimmee, FL (3)                                   |       | 58,382           |       | 6.043     |       | 2037                  |       |
| St. Augustine,  FL (1)                              |       | 21,875           |       | 20.000    |       | 2026                  |       |
| Tampa, FL                                           |       | 40,334           |       | 3.711     |       | 2026                  |       |
| Tallahassee, FL (1)                                 |       | 8,494            |       | 12.630    |       | 2024                  |       |
| Byron, GA (3)                                       |       | 23,400           |       | 7.000     |       | 2042                  |       |
| Oakwood, GA (1)                                     |       | 4,510            |       | 7.681     |       | 2026                  |       |
| Savannah, GA (1)                                    |       | 6,285            |       | 4.898     |       | 2026                  |       |
| Woodstock, GA (1)                                   |       | 4,510            |       | 7.715     |       | 2026                  |       |
| Boise, ID (1)                                       |       | 6,033            |       | 12.690    |       | 2018                  |       |
| Island Lake, IL (1)                                 |       | 2,540            |       | 17.028    |       | 2026                  |       |
| Council Bluffs,  IA (3)                             |       | 23,620           |       | 5.770     |       | 2023                  |       |
| Indianapolis, IN  (1)                               |       | 7,690            |       | 30.000    |       | 2027                  |       |
| Bowling Green,  KY                                  |       | 37,615           |       | 2.750     |       | 2037                  |       |
| Hammond, LA (2)                                     |       | 27,096           |       | 68.454    |       | 2034                  |       |
| Belleville, MI                                      |       | 44,248           |       | 7.260     |       | 2037                  |       |
| Grand Rapids, MI  (2)                               |       | 4,618            |       | 9.180     |       | 2037                  |       |
| Houghton Lake,  MI (1)                              |       | 6,840            |       | 9.500     |       | 2018                  |       |
| Rogers, MN                                          |       | 24,700           |       | 6.303     |       | 2025                  |       |
| Strafford, MO (3)                                   |       | 20,592           |       | 8.510     |       | 2042                  |       |
| Colfax, NC (1)                                      |       | 6,371            |       | 8.094     |       | 2026                  |       |
| Statesville, NC (1)                                 |       | 39,050           |       | 7.412     |       | 2024                  |       |
| Chichester, NH (1)                                  |       | 10,447           |       | 1.572     |       | 2026                  |       |
| Bridgeport, NJ                                      |       | 24,581           |       | 6.920     |       | 2031                  |       |
| Lakewood, NJ (1)                                    |       | 3,800            |       | 9.912     |       | 2027                  |       |
| Albuquerque, NM (1)                                 |       | 20,412           |       | 31.434    |       | 2026                  |       |
| Henderson, NV                                       |       | 25,850           |       | 4.400     |       | 2025                  |       |
| Las Vegas, NV (1)                                   |       | 5,000            |       | 15.840    |       | 2027                  |       |
| Bath, NY (1)                                        |       | 4,356            |       | 5.500     |       | 2026                  |       |
| Amsterdam, NY (2)                                   |       | 13,420           |       | 28.000    |       | 2033                  |       |
| Churchville, NY (1)                                 |       | 7,193            |       | 10.380    |       | 2026                  |       |
| Syracuse, NY (1)                                    |       | 12,242           |       | 8.190     |       | 2026                  |       |
| Akron, OH (1)                                       |       | 3,865            |       | 9.622     |       | 2026                  |       |
| Oklahoma City,  OK (2)                              |       | 12,500           |       | 8.219     |       | 2023                  |       |
| Junction City,  OR (2)                              |       | 21,401           |       | 1.970     |       | 2036                  |       |
| Wilsonville, OR                                     |       | 32,850           |       | 4.653     |       | 2016                  |       |
| Wood Village, OR  (1)                               |       | 6,495            |       | 11.070    |       | 2027                  |       |
| Columbia, SC (1)                                    |       | 23,450           |       | 4.140     |       | 2017                  |       |
| Myrtle Beach, SC                                    |       | 38,962           |       | 5.410     |       | 2037                  |       |
| Myrtle Beach, SC  (1)                               |       | 2,298            |       | 18.940    |       | 2026                  |       |
| North  Charleston, SC (1)                           |       | 13,142           |       | 7.690     |       | 2027                  |       |
| Spartanburg, SC (1)                                 |       | 11,900           |       | 19.263    |       | 2033                  |       |

 

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| ** **                                          | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|-----------------------------------------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| **Camping  World Supercenter Locations continued:** |       |             |       |      |       |                  |       |
| Chattanooga, TN (1)                                 |       | 9,400            |       | 10.840    |       | 2024                  |       |
| Knoxville, TN (2)                                   |       | 10,763           |       | 24.580    |       | 2037                  |       |
| Nashville, TN (2)                                   |       | 34,478           |       | 3.238     |       | 2037                  |       |
| Anthony, TX (1)                                     |       | 7,061            |       | 32.000    |       | 2025                  |       |
| Denton, TX                                          |       | 22,984           |       | 6.887     |       | 2037                  |       |
| Fort Worth, TX (2)                                  |       | 11,102           |       | 16.000    |       | 2026                  |       |
| Katy, TX (1)                                        |       | 25,913           |       | 38.861    |       | 2025                  |       |
| Mission, TX                                         |       | 23,094           |       | 3.430     |       | 2015                  |       |
| New Braunfels,  TX (3)                              |       | 43,397           |       | 19.100    |       | 2035                  |       |
| Draper, UT                                          |       | 27,675           |       | 8.031     |       | 2026                  |       |
| Kaysville, UT (1)                                   |       | 6,033            |       | 16.200    |       | 2027                  |       |
| Roanoke, VA (3)                                     |       | 35,796           |       | 7.690     |       | 2023                  |       |
| Winchester, VA                                      |       | 19,400           |       | 4.120     |       | 2042                  |       |
| Burlington, WA (1)                                  |       | 23,033           |       | 6.500     |       | 2025                  |       |
| Fife, WA                                            |       | 35,659           |       | 5.840     |       | 2032                  |       |
| Madison, WI (3)                                     |       | 20,400           |       | 4.866     |       | 2023                  |       |

 

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

(2)            Thissupercenter is located with an RV dealership (other than a FreedomRoadsdealership) and the acreage reflects the total dealership property. The squarefootage reported is the portion of the building leased by Camping World, Inc.

(3)            Thesupercenter is co-located with a FreedomRoads dealership wherein Camping World, Inc.and the dealership are co-tenants or the dealership subleases space fromCamping World, Inc.  The squarefootage reported is the portion of the building leased by Camping World, Inc.

 

We also lease a body shopof 10,500 square feet on approximately 0.7 acres in Denver, Colorado, a bodyshop of 12,000 square feet on approximately 1.9 acres in Bellville, Michiganand other miscellaneous office equipment. In addition, we own 12.439 acres of unimproved land adjacent to the NewBraunfels, Texas Camping World Supercenter.

 

**ITEM 3:  LEGAL PROCEEDINGS**

** **

Fromtime to time, the Company is involved in litigation arising in the normalcourse of business operations.   TheCompany does not believe it is involved in any litigation that will have amaterial adverse effect on the results of operations or financial position.

 

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

 

None.

 

**PART II**

 

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

 

Not Applicable

 

26

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**ITEM 6: SELECTED FINANCIAL DATA**

 

The selected financial data of our company for each of thefive years ended December 31 are derived from our audited consolidatedfinancial statements.  In November 2007, AGI Holding Corp., (“AGHC”), formed a holding company, AGI Intermediate Holdco, LLC (“AGII”),at which time AGHC contributed 100% of the outstanding shares of common stockof AGHI to AGII.  AGII is the directparent of AGHI.  AGHI was formed on March 2, 2005, at which time all ofthe stock of Affinity Group, Inc, (“AGI”) was contributed to AGHI from itsparent, AGHC, a privately-owned corporation. On April 27, 2004, AGI’s previous parent, Affinity Group Holding, Inc.(“AGH”) merged into AGI, with AGI being the surviving entity after themerger.  The merger was accounted for asa combination of entities under common control using historical costs.  Prior to April 27, 2004, AGI was awholly-owned subsidiary of Affinity Group Holding, Inc. (“AGH”).  The results of operations of AGI and AGH in2004 have been restated to reflect the April 27, 2004 merger.  Our selected financial data should be read inconjunction with “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and our Consolidated Financial Statements and thenotes thereto included herein.

 
| ** **                                         | ** ** | **Year ended**                  | ** ** |
|----------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                         | ** ** | **(dollars in thousands)** | ** ** |
| **Statement of Operations Data:**                  | ** ** | **2008**                             | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| REVENUES:                                          |       |                                 |       |   |   |   |   |   |   |   |   |
| Membership  services                               |       | $                                    | 152,643    |   | $ | 149,937 |   | $ | 137,394 |   | $ | 133,756 |   | $ | 131,608 |   |
| Media                                              |       | 82,424                               |       | 90,537 |   | 86,742 |   | 79,122 |   | 77,977 |   |
| Retail                                             |       | 291,070                              |       | 321,730 |   | 290,422 |   | 272,682 |   | 255,094 |   |
|                                               |       | 526,137                              |       | 562,204 |   | 514,558 |   | 485,560 |   | 464,679 |   |
|                                               |       |                                 |       |   |   |   |   |   |   |   |   |
| COSTS APPLICABLE  TO REVENUES:                     |       |                                 |       |   |   |   |   |   |   |   |   |
| Membership  services                               |       | 90,758                               |       | 94,840 |   | 87,407 |   | 85,551 |   | 84,231 |   |
| Media                                              |       | 61,126                               |       | 62,258 |   | 58,302 |   | 53,855 |   | 53,042 |   |
| Retail                                             |       | 170,911                              |       | 194,940 |   | 175,015 |   | 162,363 |   | 151,196 |   |
|                                               |       | 322,795                              |       | 352,038 |   | 320,724 |   | 301,769 |   | 288,469 |   |
|                                               |       |                                 |       |   |   |   |   |   |   |   |   |
| GROSS PROFIT                                       |       | 203,342                              |       | 210,166 |   | 193,834 |   | 183,791 |   | 176,210 |   |
|                                               |       |                                 |       |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                                |       |                                 |       |   |   |   |   |   |   |   |   |
| Selling, general  and administrative               |       | 142,798                              |       | 145,619 |   | 133,193 |   | 121,353 |   | 116,137 |   |
| Restructuring  charge                              |       | —                               |       | — |   | 93 |   | — |   | — |   |
| Goodwill  impairment                               |       | 47,601                               |       | — |   | — |   | 4,344 |   | — |   |
| Impairment of  investment in affiliate             |       | 81,005                               |       | — |   | — |   | — |   | — |   |
| Depreciation and  amortization                     |       | 20,304                               |       | 19,453 |   | 19,162 |   | 15,919 |   | 13,893 |   |
|                                               |       | 291,708                              |       | 165,072 |   | 152,448 |   | 141,616 |   | 130,030 |   |
|                                               |       |                                 |       |   |   |   |   |   |   |   |   |
| (LOSS) INCOME  FROM OPERATIONS                     |       | (88,366                              | )          | 45,094 |   | 41,386 |   | 42,175 |   | 46,180 |   |
|                                               |       |                                 |       |   |   |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                              |       |                                 |       |   |   |   |   |   |   |   |   |
| Interest  expense, net                             |       | (36,409                              | )          | (36,248 | ) | (35,555 | ) | (32,240 | ) | (23,239 | ) |
| Loss on  derivative instrument (1)                 |       | (2,394                               | )          | — |   | — |   | — |   | — |   |
| Debt  extinguishment expense                       |       | —                               |       | (775 | ) | (835 | ) | — |   | (5,035 | ) |
| Other non-operating  income (expense), net         |       | (323                                 | )          | (149 | ) | 9 |   | (5 | ) | 420 |   |
|                                               |       | (39,126                              | )          | (37,172 | ) | (36,381 | ) | (32,245 | ) | (27,854 | ) |
|                                               |       |                                 |       |   |   |   |   |   |   |   |   |
| (LOSS) INCOME  FROM OPERATIONS BEFORE INCOME TAXES |       | (127,492                             | )          | 7,922 |   | 5,005 |   | 9,930 |   | 18,326 |   |
|                                               |       |                                 |       |   |   |   |   |   |   |   |   |
| INCOME TAX  BENEFIT (EXPENSE) (2)                  |       | 2,213                                |       | (1,583 | ) | (22,268 | ) | (4,291 | ) | (8,075 | ) |
|                                               |       |                                 |       |   |   |   |   |   |   |   |   |
| NET (LOSS)  INCOME                                 |       | $                                    | (125,279   | ) | $ | 6,339 |   | $ | (17,263 | ) | $ | 5,639 |   | $ | 10,251 |   |

 

27

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| ** **                           | ** ** | **December 31,**                | ** ** |
|--------------------------------------|------------|--------------------------------------|------------|
| ** **                           | ** ** | **(dollars in thousands)** | ** ** |
| ** **                           | ** ** | **2008**                             | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Balance Sheet  Data (at period end): |       |                                 |       |   |   |   |   |   |   |   |   |
| Working capital  (deficiency)        |       | $                                    | (15,013    | ) | $ | (20,908 | ) | $ | (35,764 | ) | $ | (6,446 | ) | $ | (10,813 | ) |
| Total assets                         |       | 296,158                              |       | 423,962 |   | 410,897 |   | 418,895 |   | 320,222 |   |
| Deferred  revenues and gains (3)     |       | 96,424                               |       | 104,390 |   | 100,089 |   | 98,920 |   | 99,130 |   |
| Total debt                           |       | 403,878                              |       | 396,959 |   | 388,781 |   | 412,664 |   | 314,336 |   |
| Total  stockholders’ deficit    |       | (298,005                             | )          | (171,274 | ) | (173,019 | ) | (152,469 | ) | (158,108 | ) |
|                                      |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

(1) Loss on deferred instrument pertains to the changein value of the $35.0 million interest rate swap agreement effective April 30,2008.

 

(2) Effective January 1, 2006 the Company changedits tax status from a Subchapter C corporation to a Subchapter S corporation,upon receiving approval from the Internal Revenue Service.  The election to change included the Companyand all its subsidiaries, with the exception of Camping World, Inc. andits wholly-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 2008, 2007,2006, 2005, and 2004 also include deferred gains of $8.9 million, $9.3 million,$9.8 million, $10.3 million, and $10.8 million, respectively, from the realestate sale-leaseback transactions which occurred in December 2001.

 

28

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

 

The following tables set forth the components of thestatements of operations for the years ended December 31, 2008, 2007, and2006 as a percentage of total revenues, and the comparison of those componentsfrom period to period.  The followingdiscussion is based on our Consolidated Financial Statements included elsewhereherein.  Our revenues are derivedprincipally from membership services, including club membership dues andmarketing fees paid to us for services provided by third parties, frompublications, including subscriptions and advertising, and from retail sales.

 
| ** **                                          | ** ** | ** **              | ** ** | **Percentage Increase/** | ** ** |
|-----------------------------------------------------|------------|-------------------------|------------|-------------------------------|------------|
| ** **                                          | ** ** | **Percentage of**  | ** ** | **(Decrease)**                | ** ** |
| ** **                                          | ** ** | **Total Revenues** | ** ** | **Year 2008**            | ** ** | **Year 2007** | ** ** |
| ** **                                          | ** ** | **2008**                | ** ** | **2007**                      | ** ** | **2006** | ** ** | **over 2007** | ** ** | **over 2006** | ** ** |
|                                                |       |                    |       |                          |       |   |   |   |   |   |   |
| REVENUES:                                           |       |                    |       |                          |       |   |   |   |   |   |   |
| Membership  services                                |       | 29.0                    | %          | 26.7                          | %          | 26.7 | % | 1.8 | % | 9.1 | % |
| Media                                               |       | 15.7                    | %          | 16.1                          | %          | 16.9 | % | (9.0 | )% | 4.4 | % |
| Retail                                              |       | 55.3                    | %          | 57.2                          | %          | 56.4 | % | (9.5 | )% | 10.8 | % |
|                                                |       | 100.0                   | %          | 100.0                         | %          | 100.0 | % | (6.4 | )% | 9.3 | % |
|                                                |       |                    |       |                          |       |   |   |   |   |   |   |
| COSTS APPLICABLE  TO REVENUES:                      |       |                    |       |                          |       |   |   |   |   |   |   |
| Membership  services                                |       | 17.2                    | %          | 16.9                          | %          | 17.0 | % | (4.3 | )% | 8.5 | % |
| Media                                               |       | 11.6                    | %          | 11.1                          | %          | 11.3 | % | (1.8 | )% | 6.8 | % |
| Retail                                              |       | 32.6                    | %          | 34.6                          | %          | 34.0 | % | (12.3 | )% | 11.4 | % |
|                                                |       | 61.4                    | %          | 62.6                          | %          | 62.3 | % | (8.3 | )% | 9.8 | % |
|                                                |       |                    |       |                          |       |   |   |   |   |   |   |
| GROSS PROFIT                                        |       | 38.6                    | %          | 37.4                          | %          | 37.7 | % | (3.2 | )% | 8.4 | % |
|                                                |       |                    |       |                          |       |   |   |   |   |   |   |
| OPERATING  EXPENSES:                                |       |                    |       |                          |       |   |   |   |   |   |   |
| Selling, general  and administrative                |       | 27.1                    | %          | 25.9                          | %          | 26.0 | % | (1.9 | )% | 9.3 | % |
| Restructuring  charge                               |       | —                  |       | —                        |       | — |   | — |   | (100.0 | )% |
| Goodwill  impairment                                |       | 9.0                     | %          | —                        |       | — |   | 100.0 | % | — |   |
| Impairment of  investment in affiliate              |       | 15.4                    | %          | —                        |       | — |   | 100.0 | % | — |   |
| Depreciation and  amortization                      |       | 3.9                     | %          | 3.5                           | %          | 3.7 | % | 4.4 | % | 1.5 | % |
|                                                |       | 55.4                    | %          | 29.4                          | %          | 29.7 | % | 76.7 | % | 8.3 | % |
|                                                |       |                    |       |                          |       |   |   |   |   |   |   |
| (LOSS) INCOME  FROM OPERATIONS                      |       | (16.8                   | )%         | 8.0                           | %          | 8.0 | % | (296.0 | )% | 9.0 | % |
|                                                |       |                    |       |                          |       |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                               |       |                    |       |                          |       |   |   |   |   |   |   |
| Interest income                                     |       | 0.1                     | %          | 0.1                           | %          | 0.2 | % | (2.2 | )% | (46.9 | )% |
| Interest expense                                    |       | (7.0                    | )%         | (6.6                          | )%         | (7.0 | )% | 0.4 | % | 0.5 | % |
| Loss on  derivative instrument                      |       | (0.5                    | )%         | —                        |       | — |   | 100.0 | % | — |   |
| Debt  extinguishment expense                        |       | —                  |       | (0.1                          | )%         | (0.2 | )% | (100.0 | )% | (7.2 | )% |
|                                                |       | (7.4                    | )%         | (6.6                          | )%         | (7.0 | )% | 5.3 | % | 2.2 | % |
| (LOSS) INCOME  FROM OPERATIONS BEFORE INCOME  TAXES |       | (24.2                   | )%         | 1.4                           | %          | 1.0 | % | (1709.3 | )% | 58.3 | % |
|                                                |       |                    |       |                          |       |   |   |   |   |   |   |
| INCOME TAX  BENEFIT (EXPENSE)                       |       | 0.4                     | %          | (0.3                          | )%         | (4.4 | )% | (239.8 | )% | (92.9 | )% |
|                                                |       |                    |       |                          |       |   |   |   |   |   |   |
| NET (LOSS)  INCOME                                  |       | (23.8                   | )%         | 1.1                           | %          | (3.4 | )% | (2076.3 | )% | 136.7 | % |

 

29

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

 

*Revenues*

 

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

 

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

 

Mediarevenues for 2008 of $82.4 million decreased by $8.1 million or 9.0% from2007.  This decrease was primarilyattributable to a $4.3 million revenue decrease from our outdoor power sportsmagazine group due to decreased number of issues published and decreasedadvertising revenue, a $3.3 million reduction in annual directory andcampground guide revenue, and a $2.9 million revenue decrease for the RVmagazine group primarily due to decreased advertising revenue.  These decreases were partially offset by a$2.4 million increase in consumer show revenue.

 

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

 

*Costs Applicable to Revenues*

 

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

 

Membership services costsand expenses decreased by $4.1 million or 4.3% to $90.8 million for 2008.  This decrease was attributable to a $3.0million reduction of marketing and program costs associated with the Good SamClub, the Coast Club and the Golf Card Club, a $1.0 million reduction inmarketing and programs costs associated with the extended vehicle warrantyprogram, a $0.6 million reduction in vehicle insurance costs associated withlower revenue, and a $0.5 million cost reduction for emergency road 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 attributableto a $1.6 million cost reduction in the outdoor power sports magazinesprimarily related to a reduction in the number of issues published, a $0.9million reduction 

 

30

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in production and advertisingcosts of the RV magazines, and $0.6 million of reduced costs associated withreduced annual directory revenue, partially offset by $2.0 million ofadditional costs associated with the recently acquired consumer shows.

 

Retailcosts applicable to revenues decreased $24.0 million or 12.3% to $170.9 millionprimarily due to reduced same 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.

 

*Operating Expenses*

 

Selling,general and administrative expenses of $142.8 million for 2008 decreased $2.8million or 1.9% from 2007.  This decreasewas largely 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.  These decreases werepartially offset by increased retail selling and general and administrativeexpenses of $0.6 million consisting of increased rent expense partially offsetby decreased wages and travel.

 

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

 

Depreciationand amortization expenses of $20.3 million were $0.9 million higher than in2007 due primarily to increased amortization of intangible assets associatedwith the recent acquisitions and depreciation associated with new stores.

 

*(Loss) Income from Operations*

 

Lossfrom operations for 2008 was $88.4 million versus income from operations of$45.1 million for 2007.  This decrease ofapproximately $133.4 million decrease, or 296.0%, was attributable to increasedoperating expenses of $126.7 million, and reduced gross profit in the media andretail operations of $7.0 million and $6.6 million, respectively, partially offsetby $6.8 million of increased gross profit for membership services operations.

 

*Non-Operating Items*

 

Netnon-operating items for 2008 were $39.1 million, an increase of approximately$1.9 million from 2007.  This increasewas primarily attributable to a $2.4 million loss on derivative instrumentrecorded in the fourth quarter of 2008 related to the ineffective portion ofthe loss in fair value of our $35.0 million interest rate swap, $0.2 million ofadditional loss on sale of equipment and a $0.1 million increase in interestexpense in 2008 resulting from increased borrowings, partially offset by an$0.8 million reduction in debt extinguishment expense.

 

31

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*(Loss) Income before Income Taxes*

 

Lossbefore income taxes for 2008 was $127.5 million versus income of $7.9 millionin 2007.  This decrease from the prioryear of approximately $135.3 million was attributable to approximately $133.4million decrease in income from operations mentioned above, partially offset bythe $1.9 million increase in non-operating items.

 

*Income Tax Benefit (Expense)*

 

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

 

*Net (Loss) Income*

 

Netloss for 2008 was $125.3 million compared to net income of $6.3 million for2007mainly due to the reasons discussed above.

 

*Segment (Loss) Profit*

 

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

 

Membershipservices segment profit of $51.7 million in 2008 increased by $1.2 million, or2.4% from 2007.  This increase wasprimarily attributable to a $5.0 million brand licensing fee charged toFreedomRoads, a $1.8 million increase in segment profit related to extendedwarranty programs, a $1.0 million increase in profit associated with reducedmarketing and program costs in the Coast to Coast Club and the Golf Card Club,and a $0.7 million increase in segment profit related to health and 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.

 

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

 

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

 

32

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

 

*Revenues*

 

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

 

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

 

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

 

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

 

*Costs Applicable to Revenues*

 

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

 

Membership services costsand expenses increased by $7.4 million or 8.5% to $94.8 million for 2007.  This increase was attributable to $5.1million of additional costs associated with increased extended vehicle warrantyprogram revenue, including incremental marketing and overhead costs associatedwith the expansion of our Good Sam authorized dealer network, $0.9 million of additional emergency roadservice costs attributable to increased enrollment, $0.9 million of netadditional membership services costs associated with increased membership inthe Camping World President’s Club and Camp Club USA, partially offset byreduced membership in the Coast to Coast Club and the Golf Card 

 

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Club, $0.7 million ofadditional dealer program marketing costs, and $0.7 million of additionalprogram costs associated with increased marketing fee revenue from health andlife insurance products.  These increaseswere partially offset by $0.9 million of reduced costs resulting from theelimination of the RV Today television program.

 

Media costs and expenses of $62.3 million for 2007 increased$4.0 million or 6.8% compared to 2006.  This increase was attributableto $2.7 million of incremental costs from the recently acquired Affinity GuestServices Group, $1.6 million of costs associated with the recently acquiredconsumer shows, $0.7 million of additional costs associated with increasedannual directory revenue, and $0.3 million of additional advertising expensesfor the RV magazine group.  Theseincreases were partially offset by a $0.7 million reduction in costs related tothe elimination of *Cruising Rider*magazine, reduced campground atlas costs of $0.3 million resulting from reducedsales, and reduced costs of $0.3 million associated with fewer issues of *Snow Week* magazine.

 

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

 

*Operating Expenses*

 

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

 

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

 

*Income from Operations*

 

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

 

*Non-Operating Items*

 

Netnon-operating items for 2007 were $37.2 million, a $0.8 million increase from 2006.  This increase was primarily attributable to a$0.5 million decrease in interest income, a $0.2 million increase in interestexpense in 2007 resulting from increased debt, and a $0.1 million loss on saleof equipment.

 

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*Income before Income Taxes*

 

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

 

*Income Tax Expense*

 

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

 

*Net Income (Loss)*

 

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

 

*Segment Profit*

 

Segmentprofit of $59.9 million for 2007 (before unallocated depreciation andamortization, general and administrative, interest, debt restructuring andincome tax expense) increased approximately $5.5 million, or 10.0%, from 2006.

 

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

 

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

 

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

 

**Liquidity and Capital Resources**

 

We have historically operated with a working capitaldeficit.  The working capital deficit asof December 31, 2008 and 2007 was $15.0 million and $20.9 million,respectively.  The primary reason for theworking capital deficit is deferred revenue and gains reported under currentliabilities 

 

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were$60.6 million and $65.9 million as of December 31, 2008 and 2007,respectively.  Deferred revenue isprimarily comprised of cash collected for club memberships in advance ofservices to be provided which is deferred and recognized as revenue over thelife of the membership.  We use netproceeds from this deferred membership revenue to lower our long-termborrowings and finance our working capital needs.  We generated net cash**from operations of $15.5million and $13.4 million, in 2008and 2007, respectively.

 

*ContractualObligations and Commercial Commitments*

 

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

 
| ** **                    | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------|------------|-------------------------------------------|------------|
| **(in thousands)**       | ** ** | **Total**                                 | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **Thereafter** | ** ** |
|                          |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt                |       | $                                         | 509,128    |   | $ | 48,221 |   | $ | 181,109 |   | $ | 26,161 |   | $ | 253,637 |   | $ | — |   | $ | — |   |
| Operating lease  obligations  |       | 228,070                                   |       | 22,227 |   | 21,782 |   | 20,351 |   | 18,496 |   | 16,288 |   | 128,926 |   |
| Deferred  compensation        |       | 1,400                                     |       | 1,400 |   |   |   |   |   |   |   |   |   |   |   |
| Other commercial  commitments |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Letters of  credit            |       | 7,467                                     |       | 7,467 |   | — |   | — |   | — |   | — |   | — |   |
|                          |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Grand total                   |       | $                                         | 746,065    |   | $ | 79,315 |   | $ | 202,891 |   | $ | 46,512 |   | $ | 272,133 |   | $ | 16,288 |   | $ | 128,926 |   |

 

On June 24, 2003,our wholly-owned subsidiary, Affinity Group, Inc. (“AGI”) entered into theAmended and Restated Credit Agreement and a Senior Secured Floating Rate NotePurchase Agreement (“AGI Senior Credit Facility”) providing for term loans (“TermLoans”) in the aggregate of $140.0 million and a revolving credit facility of$35.0 million.  As of December 31,2008, $127.0 million was outstanding under the Term Loans and $8.5 million wasoutstanding on the revolving credit facility. Reborrowings under the Term Loans are not permitted.  The interest on borrowings under the AGISenior 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, orLIBOR, plus an applicable margin ranging from 1.50% to 2.50% over the statedrates.  As of December 31, 2008, theaverage interest rate on the Term Loans was 7.27%, and permitted borrowingsunder the undrawn revolving facility were $27.5 million.  We also pay a commitment fee of 0.5% perannum on the unused amount of the revolving credit facility.  The aggregate quarterly scheduled payments onthe Term Loans are $0.4 million.  Therevolving credit facility and the Term Loans mature on June 24, 2009.  The funds available under the AGI SeniorCredit Facility may be utilized for borrowings or letters of credit; however, amaximum of $7.5 million may be allocated to such letters of credit.  As of December 31, 2008, we had lettersof credit in the aggregate amount of $7.5 million outstanding.  The AGI Senior Credit Facility is secured byvirtually all of our assets and a pledge of our stock and the stock of oursubsidiaries.  Further, the AGI SeniorCredit Facility requires the loans to be prepaid in an amount equal to 75% ofthe excess cash flow, as defined.  As of December 31,2008, the Company has no excess cash flow as defined.

 

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

 

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On June 5, 2009, AGI entered into an amendment to its AGI Senior CreditFacility pursuant to which the maturity date was extended from June 24, 2009 toMarch 31, 2010, the revolving credit portion of the facility was reduced by$10.0 million to $25.0 million, the outstanding term loan borrowings wererepaid by $8.0 million, the financial covenants in effect through the extendedmaturity date were revised and the borrowing rate was increased to prime rateplus 7.0% or LIBOR plus 8.0% with a LIBOR floor of 2.75%.  As a condition to the amendment, theshareholder of the ultimate parent of the Company, was required to arrange forthe purchase of approximately $26.6 million in principal amount of the termportion of the AGI Senior Credit Facility by new lenders, enhance the yield tosuch new lenders, purchase AGHI Notes held by one of such new lenders at apremium to the most recent market price, contribute $5.0 million in capital andguarantee two required principal payments on the term loans under the AGISenior Credit Facility, aggregating $15.0 million.  In consideration of such support, AGI enteredinto an option agreement with the shareholder of the ultimate parent of theCompany pursuant to which AGI granted such shareholder or his assigns anoption, exercisable on or before March 1, 2010, to purchase the Company’sCamping World subsidiary for $55.0 million, being the fair value of suchsubsidiary as determined by an appraisal of Houlihan Smith & Company, Inc.dated as of March 1, 2009.  AGI alsoagreed to pay the shareholder of the ultimate parent, upon successfulrefinancing of AGI’s secured debt, including the AGI Senior Credit Facility, asuccess fee equal in amount to the fair value, as determined by an independentfinancial advisor of such credit support, taking into account the fair value ofthe option to purchase Camping World.  Inthe event the fair value of the Camping World purchase option exceeds the fairvalue of such credit support, the shareholder will pay the amount of suchexcess to AGI. 

 

Concurrent with the amendment to the AGI Senior Credit Facility, AGIobtained a $9.7 million 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. 

 

In addition, AGI agreed to use its best efforts to secure anasset-based loan of at least $18.5 million secured by the inventory andreceivables of its subsidiary, Camping World, Inc. (the “Camping WorldFinancing”), the proceeds of which would be used to further reduce the amountsoutstanding under the AGI Senior Credit Facility.  The senior lenders agreed to subordinatetheir liens to such financing.  If aCamping World Financing has not been consummated by September 15, 2009, theborrowing rate on revolving credit loans, swing loans and terms loans increaseto prime rate plus 9.0% or LIBOR plus 10.0%. 

 

The amended AGI Senior Credit Facility also revised AGI’s financialcovenants in effect through the extended maturity date.  The Company’s forecast for 2009 anticipatescompliance with all required covenants throughout 2009.  Significant cost reductions have beenimplemented in 2008, including the elimination of personnel, suspension of401(k) employer contributions, salary cutbacks, hiring and capital expenditurespending freezes, satellite office closures, and magazine size and frequencyreductions.  Further cost reductions areset to be unveiled in 2009.  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, 2010. 

 

The accompanying financial statements have been prepared on the basisthat the Company will continue as a going concern.  For the year ended December 31, 2008, theCompany incurred a loss from operations of $88.4 million, which included $128.6million of non-cash impairment charges. Prior to recently amending its AGI Senior Credit Facility, as ofDecember 31, 2008, the Company had a working capital deficiency of $141.3million, a stockholder’s deficit of $298.0 million and $135.5 million of debtoutstanding under its AGI Senior Credit Facility which was scheduled to matureon June 24, 2009.  In addition, theCompany was forecasting that in 2009 it would be out of compliance with itsprior financial covenants under its AGI Senior Credit Facility.  

 

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

 

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

 

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

 

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

 

On March 24, 2005 ina private placement, the Company issued $88.2 million principal amount of its10-7/8% senior notes due 2012 (the “AGHI Notes”) at a $3.2 million originalissue discount.  The Company completed aregistered exchange of the AGHI Notes under the Securities Act of 1933 on June 8,2005.  The AGHI Notes are unsecuredobligations of AGHI, and neither AGI nor its subsidiaries have guaranteedpayment of principal or interest on the AGHI Notes.  Interest on the AGHI Notes is payablesemi-annually on February 15 and August 15 commencing August 15,2005 and the entire $88.2 million principal amount of the AGHI Notes are due infull on February 15, 2012.  Forinterest payments on and prior to February 15, 2008, the Company had theelection to pay interest on the AGHI Notes in cash or by the issuance ofadditional notes of the same tenor as the AGHI Notes.  Any additional AGHI Notes issued in paymentof interest are due in full on or before March 15, 2010.  As of December 31, 2008, approximately$111.8 million of AGHI Notes remain outstanding, including $25.4 million due onMarch 15, 2010.  The AGHI Notescould not be redeemed prior to February 15, 2008.  Although the only source of the cash paymentof the AGHI Notes is dividends from AGI, there are certain restrictions on thepayment of dividends under the AGI Senior Credit Facility and the AGIIndenture.  Currently, the AGI SeniorCredit Facility and the AGI Indenture impose limitations on the ability ofsubsidiaries of AGHI to make dividend distributions or loans to AGHI to payinterest on the AGHI Notes.  The August15, 2009 interest payment is expected to be paid from proceeds of capitalcontributions made by AGHC.

 

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

 

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contribution that CWI received from CampingWorld.  CWFR used the proceeds from theequity capital contribution to acquire a preferred membership interest inFreedomRoads.

 

Thepreferred membership interest acquired by CWFR has a face amount of $88.2million and is entitled to receive a preferred payment from FreedomRoads at10-7/8% per annum when and as declared by the Board of Governors ofFreedomRoads from any source legally available therefor.  Any portion of the preferred payment not paidwill accumulate and will be compounded semi-annually until paid.  FreedomRoads may redeem the preferredmembership interest upon the payment of $88.2 million plus the accrued andunpaid preferred return to the date of redemption.  FreedomRoads will be required to redeem thepreferred membership interest at that same redemption price if there is a saleor reorganization of the membership interests of FreedomRoads Holding or a saleof substantially all of the assets of FreedomRoads.  According to the terms of the preferredmembership interest, FreedomRoads cannot make distributions with respect tomembership interests other than (a) distributions with respect to thepreferred membership interest, (b) distributions for the members’estimated tax liabilities from earnings of FreedomRoads and (c) distributionsin the aggregate not to exceed 50% of the amount of (i) FreedomRoads’ netprofit for the period from January 1, 2005 through the end of the fiscalquarter next preceding the distribution date less (ii) the aggregate amountof tax distributions made during the period from January 1, 2005 throughthe end of the fiscal quarter next preceding the distribution date.  CWFR may not sell, pledge or otherwisetransfer the preferred membership interest. The preferred membership interest does not provide CWFR with any votingrights in FreedomRoads.

 

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

 

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

 

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

 

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

 

On October 15, 2007,the Company entered into a five-year interest rate swap agreement with anotional amount of $100.0 million from which it will receive periodic paymentsat the 3 month LIBOR-based variable rate (3.42% percent at December 31,2008 based upon the October 31, 2008 reset 

 

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

 

Due to the potential saleof Camping World, a highly effective hedge on the $35.0 million outstandingdebt by the $35.0 million notional amount interest rate swap agreement isdeemed to be no longer probable and is now deemed to be reasonablypossible.  As a result, changes in thevalue of the $35.0 million interest rate swap agreement are included inearnings beginning on October 1, 2008. Change in value from October 1, 2008 to December 31, 2008 was$2.4 million.  Included in othercomprehensive loss is $0.5 million related to the $35.0 million interest rateswap which will be included in earnings when the underlying transaction beinghedged is probable not occur.  Ahighly-effective hedge on the $100.0 million outstanding debt by the $100.0million notional amount of interest rate swap agreement is still deemed to beprobable as the Company will maintain its LIBOR-based debt at a minimum of$100.0 million until the interest swap expire date of October 31, 2012.

 

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

 

Capital expenditures for2008 totaled $11.8 million compared to capital expenditures of $19.7 million in2007.  Capital expenditures areanticipated to be approximately $4.0 million for 2009, primarily for one new CampingWorld store and equipment, software enhancements, information technologyupgrades, and further website development.

 

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**FactorsAffecting Future Performance**

 

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

 

**Seasonality**

 

Ourcash flow is highest in the summer months due to the seasonal nature of theretail segment, membership renewals and advertising prepayments for the annualdirectories.

 

**CriticalAccounting Policies**

 

*General*

 

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

 

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

 

*RevenueRecognition*

 

Merchandiserevenue is recognized when products are sold in the retail stores, shipped formail and Internet orders, or when services are provided to customers.  Emergency 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 

 

41

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deferredand amortized over the membership period. For lifetime memberships, an 18-year period is used, which is theactuarially determined estimated fulfillment period.  Promotional expenses, consisting primarily ofdirect mail advertising, are deferred and expensed over the period of expectedfuture benefit, typically three months based on historical actual responserates.  Renewal expenses are expensed atthe time related materials are mailed. Recognized revenues and profit are subject to revisions as themembership progresses to completion. Revisions to membership period estimates would change the amount ofincome and expense amortized in future accounting periods.

 

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

 

*AccountsReceivable*

 

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

 

*Inventory*

 

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

 

*Long-Lived Assets*

 

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

 

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

 

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vehicles.  We determined there were no indicators ofimpairment of long-lived assets as of December 31, 2008.

 

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

 

*Indefinite Lived IntangibleAssets*

 

Effective January 1,2002, we adopted new accounting standards SFAS 141 “Business Combinations” andSFAS 142 “Goodwill and Other Intangible Assets.”  In accordance with these new standards,goodwill and intangible assets with indefinite lives are no longer amortizedbut instead are measured for impairment at least annually or when eventsindicate that an impairment exists.  Asrequired by the new standards, the impairment tests for goodwill and otherindefinite-lived intangible assets are assessed for impairment using fair valuemeasurement techniques.  Specifically,goodwill impairment is determined using a two-step process.  The first step of the goodwill impairmenttest is used to identify potential impairment by comparing the fair value of areporting unit with the net book value (or carrying amount), includinggoodwill.  If the fair value of the reportingunit exceeds the carrying amount, goodwill of the reporting unit is considerednot impaired and the second step of the impairment test is unnecessary.  If the carrying amount of the reporting unitexceeds the fair value, the second step of the goodwill impairment test isperformed to 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.  The impairment test for other intangibleassets consists of a comparison of the fair value of the intangible asset withits carrying value.  If the carrying valueof the intangible asset exceeds its fair value, an impairment loss is recognizedin an amount equal to that excess.

 

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

 

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

 

43

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

 

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

 

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

 

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

 

*Accumulated Other ComprehensiveLoss*

 

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

 

*Derivative Financial Instruments*

 

TheCompany accounts for derivative instruments and hedging activities inaccordance with SFAS No. 133, “Accounting for Derivative Instruments andHedging Activities” (“SFAS 133”).  Allderivatives are recognized on the balance sheet at their fair value.  On the date that the Company enters into aderivative contract, management formally documents all relationships betweenhedging instruments and hedged items, as well as risk management objectives andstrategies for undertaking various hedge transactions.

 

Changes in the fair value of a derivative that ishighly effective and that is designated and qualifies as a cash flow hedge (a “swap”),to the extent that the hedge is effective, are recorded in accumulated othercomprehensive loss, until earnings are affected by the variability of cashflows of the hedged transaction.  TheCompany measures effectiveness of the swap at each quarter end using theHypothetical Derivative Method.  Underthis method, hedge effectiveness is measured based on a comparison of thechange in fair value of the actual swap designated as the hedging instrumentand the change in fair value of the hypothetical swap which would have theterms that identically match the critical terms of the hedged cash flows fromthe anticipated debt issuance.  Theamount of ineffectiveness, if any, recorded in earnings would be equal to theexcess of the cumulative change in 

 

44

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the fair value of the swap over the cumulativechange in the fair value of the plain vanilla swap lock, as defined in theaccounting literature.  Once a swap issettled, the effective portion is amortized over the estimated life of thehedge item.

 

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

 

Dueto the potential sale of Camping World, a highly effective hedge on the $35.0million outstanding debt by the $35.0 million notional amount interest 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 October 1, 2008. A highly-effective hedge on the $100.0 million outstanding debt by the$100.0 million notional amount of interest rate swap agreement is still deemedto be probable as the Company will maintain its LIBOR-based debt at a minimumof $100.0 million until the interest swap expire date of October 31, 2012.

 

*Income Taxes*

 

The Company recognizes deferred tax assets andliabilities based on the liability method, which requires an adjustment to thedeferred tax asset or liability to reflect income tax rates currently ineffect. When income tax rates increase or decrease, a corresponding adjustmentto income tax expense is recorded by applying the rate change to the cumulativetemporary differences.

 

*Restructuring*

 

In2006, we recorded reserves in connection with the restructuring program primarilywithin our membership segment.  Thesereserves included estimates pertaining to employee separation costs and thesettlements of contractual obligations resulting from our actions.  We do not anticipate significant changes.

 

**New Accounting Standards**

###### * *

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

 

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

 

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method investments,accounts payable, guarantees, issued debt and firm commitments.  If elected, SFAS 159 would be effective forfiscal years beginning after November 15, 2007.  The Company has not elected to use the fairvalue option to measure any eligible items under SFAS 159.

 

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

 

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

 

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

 

**ITEM7A:  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

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

 

The following information discusses the sensitivity to ourearnings.  The range of changes chosenfor this analysis reflects our view of changes which are reasonably possibleover a one-year period.  Theseforward-looking disclosures are selective in nature and only address thepotential impacts from financial instruments. They do not include other potential effects which could impact ourbusiness as a result of these interest rate fluctuations.

#### * *

#### *Interest RateSensitivity Analysis*

#### * *

At December 31,2008, we had debt totaling $403.9 million, comprised of $0.4 million ofvariable rate debt and $403.5 million of fixed rate debt, comprised of $135.0million of debt fixed through the interest rate swap agreement, $152.4 millionof Senior Notes, approximately $111.8 million of AGHI Notes and $4.3 million ofpurchase debt.  Holding other variablesconstant (such as debt levels), 

 

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the earnings andcash flow impact of a one-percentage point increase/ decrease in interest rateswould have an unfavorable/ favorable impact 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 Regarding Forward Looking Statements**

###### * *

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

 

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

 

**Index to Financial Statements**

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

 

All financialstatement schedules have been omitted since the required information isincluded in the consolidated financial statements, the notes thereto or becausesuch information is not applicable.

 

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

TheBoard of Directors of Affinity Group Holding, Inc.

 

We have audited theaccompanying consolidated balance sheets of Affinity Group Holding, Inc.and its subsidiaries (the “Company”), as of December 31, 2008 and 2007,and the related consolidated statements of operations, stockholder’s deficitand cash flows for each of the three years in the period ended December 31,2008.  These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

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

 

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

 

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

 

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

**CONSOLIDATED BALANCE SHEETS**

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

 
| ** **                                                                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| **ASSETS**                                                                                       |       |     |       |     |       |
| CURRENT ASSETS:                                                                                  |       |     |       |     |       |
| Cash and cash  equivalents                                                                       |       | $        | 10,777     |     | $          | 8,566 |   |
| Accounts  receivable, less allowance for doubtful accounts of $2,147 in 2008 and $1,473  in 2007 |       | 40,191   |       | 33,330   |       |
| Inventories                                                                                      |       | 57,137   |       | 64,209   |       |
| Prepaid expenses  and other assets                                                               |       | 13,547   |       | 14,431   |       |
| Total current  assets                                                                            |       | 121,652  |       | 120,536  |       |
|                                                                                             |       |     |       |     |       |
| PROPERTY AND  EQUIPMENT, net                                                                     |       | 44,077   |       | 44,307   |       |
| INVESTMENT IN  AFFILIATE                                                                         |       | —   |       | 81,005   |       |
| NOTE FROM  AFFILIATE                                                                             |       | 4,608    |       | 4,650    |       |
| INTANGIBLE  ASSETS, net                                                                          |       | 22,389   |       | 25,836   |       |
| GOODWILL                                                                                         |       | 96,828   |       | 144,429  |       |
| DEFERRED TAX  ASSETS, net                                                                        |       | 4,569    |       | 1,220    |       |
| OTHER ASSETS                                                                                     |       | 2,035    |       | 1,979    |       |
| Total assets                                                                                     |       | $        | 296,158    |     | $          | 423,962 |   |
|                                                                                             |       |     |       |     |       |
| **LIABILITIES  AND STOCKHOLDER’S DEFICIT**                                                  |       |     |       |     |       |
| CURRENT  LIABILITIES:                                                                            |       |     |       |     |       |
| Accounts payable                                                                                 |       | $        | 23,950     |     | $          | 27,171 |   |
| Accrued interest                                                                                 |       | 11,581   |       | 6,700    |       |
| Accrued income  taxes                                                                            |       | 1,165    |       | 1,189    |       |
| Accrued  liabilities                                                                             |       | 27,009   |       | 36,123   |       |
| Deferred  revenues and gains                                                                     |       | 60,569   |       | 65,855   |       |
| Current portion  of long-term debt                                                               |       | 12,391   |       | 4,406    |       |
| Total current  liabilities                                                                       |       | 136,665  |       | 141,444  |       |
|                                                                                             |       |     |       |     |       |
| DEFERRED  REVENUES AND GAINS                                                                     |       | 35,855   |       | 38,535   |       |
| LONG-TERM DEBT,  net of current portion                                                          |       | 391,487  |       | 392,553  |       |
| OTHER LONG-TERM  LIABILITIES                                                                     |       | 30,156   |       | 22,704   |       |
|                                                                                             |       | 594,163  |       | 595,236  |       |
|                                                                                             |       |     |       |     |       |
| 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                                                                      |       | 12,041   |       | 5,861    |       |
| Accumulated  deficit                                                                             |       | (299,710 | )          | (172,431 | )          |
| Accumulated  other comprehensive loss                                                            |       | (10,337  | )          | (4,705   | )          |
| Total  stockholder’s deficit                                                                |       | (298,005 | )          | (171,274 | )          |
| Total  liabilities and stockholder’s deficit                                                |       | $        | 296,158    |     | $          | 423,962 |   |

 

See notes toconsolidated financial statements.

 

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**AFFINITYGROUP HOLDING, INC. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**FOR THEYEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 (IN THOUSANDS)**

 
| ** **                                         | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                               |       |     |       |     |       |     |       |
| REVENUES:                                          |       |     |       |     |       |     |       |
| Membership  services                               |       | $        | 152,643    |     | $          | 149,937  |       | $ | 137,394 |   |
| Media                                              |       | 82,424   |       | 90,537   |       | 86,742   |       |
| Retail                                             |       | 291,070  |       | 321,730  |       | 290,422  |       |
|                                               |       | 526,137  |       | 562,204  |       | 514,558  |       |
|                                               |       |     |       |     |       |     |       |
| COSTS APPLICABLE  TO REVENUES:                     |       |     |       |     |       |     |       |
| Membership  services                               |       | 90,758   |       | 94,840   |       | 87,407   |       |
| Media                                              |       | 61,126   |       | 62,258   |       | 58,302   |       |
| Retail                                             |       | 170,911  |       | 194,940  |       | 175,015  |       |
|                                               |       | 322,795  |       | 352,038  |       | 320,724  |       |
|                                               |       |     |       |     |       |     |       |
| GROSS PROFIT                                       |       | 203,342  |       | 210,166  |       | 193,834  |       |
|                                               |       |     |       |     |       |     |       |
| OPERATING  EXPENSES:                               |       |     |       |     |       |     |       |
| Selling, general  and administrative               |       | 142,798  |       | 145,619  |       | 133,193  |       |
| Restructuring  charge                              |       | —   |       | —   |       | 93       |       |
| Goodwill  impairment                               |       | 47,601   |       | —   |       | —   |       |
| Impairment of  investment in affiliate             |       | 81,005   |       | —   |       | —   |       |
| Depreciation and  amortization                     |       | 20,304   |       | 19,453   |       | 19,162   |       |
|                                               |       | 291,708  |       | 165,072  |       | 152,448  |       |
|                                               |       |     |       |     |       |     |       |
| (LOSS) INCOME  FROM OPERATIONS                     |       | (88,366  | )          | 45,094   |       | 41,386   |       |
|                                               |       |     |       |     |       |     |       |
| NON-OPERATING  ITEMS:                              |       |     |       |     |       |     |       |
| Interest income                                    |       | 579      |       | 592      |       | 1,115    |       |
| Interest expense                                   |       | (36,988  | )          | (36,840  | )          | (36,670  | )          |
| Loss on  derivative instrument                     |       | (2,394   | )          | —   |       | —   |       |
| Debt  extinguishment expense                       |       | —   |       | (775     | )          | (835     | )          |
| Other non-operating  (expense) income, net         |       | (323     | )          | (149     | )          | 9        |       |
|                                               |       | (39,126  | )          | (37,172  | )          | (36,381  | )          |
|                                               |       |     |       |     |       |     |       |
| (LOSS) INCOME  FROM OPERATIONS BEFORE INCOME TAXES |       | (127,492 | )          | 7,922    |       | 5,005    |       |
|                                               |       |     |       |     |       |     |       |
| INCOME TAX  BENEFIT (EXPENSE)                      |       | 2,213    |       | (1,583   | )          | (22,268  | )          |
|                                               |       |     |       |     |       |     |       |
| NET (LOSS)  INCOME                                 |       | $        | (125,279   | )        | $          | 6,339    |       | $ | (17,263 | ) |

 

See notes toconsolidated financial statements.

 

51

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**AFFINITYGROUP HOLDING, INC. AND SUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF STOCKHOLDER’S DEFICIT**

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

**(INTHOUSANDS, EXCEPT SHARE AMOUNTS)**

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

 

See notes toconsolidated financial statements.

 

52

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**AFFINITYGROUP HOLDING, INC. AND SUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**FORTHE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 (IN THOUSANDS)**

 
| ** **                                                                                | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                      |       |     |       |     |       |     |       |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                    |       |     |       |     |       |     |       |
| Net (loss)  income                                                                        |       | $        | (125,279   | )        | $          | 6,339    |       | $ | (17,263 | ) |
| Adjustments to reconcile  net (loss) income to net cash provided by operating activities: |       |     |       |     |       |     |       |
| Deferred tax  provision                                                                   |       | (3,349   | )          | 443      |       | 22,136   |       |
| Depreciation                                                                              |       | 11,670   |       | 9,933    |       | 10,333   |       |
| Amortization                                                                              |       | 8,634    |       | 9,520    |       | 8,829    |       |
| Impairment loss  on goodwill                                                              |       | 47,601   |       | —   |       | —   |       |
| Impairment loss  on investment in affiliate                                               |       | 81,005   |       | —   |       | —   |       |
| Provision for  losses on accounts receivable                                              |       | 1,493    |       | 1,373    |       | 745      |       |
| Deferred  compensation                                                                    |       | (311     | )          | 350      |       | 1,070    |       |
| Loss (gain) on  sale of property and equipment                                            |       | 321      |       | 150      |       | (16      | )          |
| Loss on early  extinguishment of debt                                                     |       | —   |       | 775      |       | 835      |       |
| Non-cash  interest on AGHI Notes                                                          |       | 1,465    |       | 5,785    |       | 10,690   |       |
| Accretion of  original issue discount                                                     |       | 481      |       | 375      |       | 272      |       |
| Changes in  operating assets and liabilities (net of purchased businesses):               |       |     |       |     |       |     |       |
| Accounts  receivable                                                                      |       | (8,354   | )          | (7,504   | )          | (1,436   | )          |
| Inventories                                                                               |       | 7,072    |       | (11,506  | )          | (5,664   | )          |
| Prepaid expenses  and other assets                                                        |       | 1,249    |       | (1,418   | )          | (1,489   | )          |
| Accounts payable                                                                          |       | (3,221   | )          | (5,406   | )          | 19,894   |       |
| Accrued and  other liabilities                                                            |       | 4,054    |       | 732      |       | (1,422   | )          |
| Deferred  revenues and gains                                                              |       | (9,027   | )          | 3,495    |       | (460     | )          |
| Net cash  provided by operating activities                                                |       | 15,504   |       | 13,436   |       | 47,054   |       |
|                                                                                      |       |     |       |     |       |     |       |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                    |       |     |       |     |       |     |       |
| Capital  expenditures                                                                     |       | (11,782  | )          | (19,708  | )          | (15,245  | )          |
| Net proceeds  from sale of property and equipment                                         |       | 22       |       | 178      |       | 126      |       |
| Cash paid on  loans to affiliate                                                          |       | 42       |       | 38       |       | 34       |       |
| Acquisitions,  net of cash received                                                       |       | (3,409   | )          | (304     | )          | (2,868   | )          |
| Net cash used in  investing activities                                                    |       | (15,127  | )          | (19,796  | )          | (17,953  | )          |
|                                                                                      |       |     |       |     |       |     |       |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                    |       |     |       |     |       |     |       |
| Cash  contribution                                                                        |       | —   |       | 5,861    |       | —   |       |
| Dividends paid                                                                            |       | (2,000   | )          | (5,750   | )          | (3,287   | )          |
| Borrowings on  long-term debt                                                             |       | 33,000   |       | 64,300   |       | —   |       |
| Payment of debt  issue costs                                                              |       | (271     | )          | (291     | )          | (12      | )          |
| Principal  payments of long-term debt                                                     |       | (28,895  | )          | (64,432  | )          | (35,625  | )          |
| Net cash  provided by (used in) financing activities                                      |       | 1,834    |       | (312     | )          | (38,924  | )          |
|                                                                                      |       |     |       |     |       |     |       |
| NET INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS                                     |       | 2,211    |       | (6,672   | )          | (9,823   | )          |
|                                                                                      |       |     |       |     |       |     |       |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF YEAR                                           |       | 8,566    |       | 15,238   |       | 25,061   |       |
|                                                                                      |       |     |       |     |       |     |       |
| CASH AND CASH  EQUIVALENTS AT END OF YEAR                                                 |       | $        | 10,777     |     | $          | 8,566    |       | $ | 15,238 |   |

 

See notes toconsolidated financial statements.

 

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**AFFINITYGROUP HOLDING, INC. AND SUBSIDIARIES**

** **

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

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

 

1.                           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

*Basis for Presentation**—***Theaccompanying financial statements have been prepared on the basis that theCompany will continue as a going concern.  For the year ended December 31,2008, the Company incurred a loss from operations of $88.4 million, whichincluded $128.6 million of non-cash impairment charges.  Prior to therecent amendment to the AGI Senior Credit Facility, as of December 31,2008, the Company had a working capital deficiency of $141.3 million and astockholder’s deficit of $298.0 million and AGI had $135.5 million of debtoutstanding under the AGI Senior Credit Facility which was scheduled to matureon June 24, 2009.  In addition, AGI was forecasting that in 2009 itwould be out of compliance with financial covenants under the AGI Senior CreditFacility.  With respect to the AGHINotes, AGI has not paid any dividends to AGHI to fund payment of interest onthe AGHI Notes.  Currently, the AGISenior Credit Facility and the AGI Indenture impose limitations on the abilityof subsidiaries of AGHI to make dividend distributions or loans to AGHI to payinterest on the AGHI Notes.  AGHI madethe interest payments due on August 15, 2005, February 15, 2006, August 15,2006, February 15, 2007, and February 15, 2008 through the issuanceof additional notes and AGHI paid the interest on the AGHI Notes due August 15,2007 and 2008 from proceeds of capital contributions made by AGHI’s parent,AGHC.  The August 15, 2009 interestpayment is expected to be paid from proceeds of capital contributions made byAGHC.

 

OnJune 5, 2009, AGI entered into an amendment to its AGI Senior Credit Facilitypursuant to which the maturity date was extended from June 24, 2009 to March31, 2010, the revolving credit portion of the facility was reduced by $10.0million to $25.0 million, the outstanding term loan borrowings were repaid by$8.0 million, the financial covenants in effect through the extended maturitydate were revised and the borrowing rate was increased to prime rate plus 7.0%or LIBOR plus 8.0% with a LIBOR floor of 2.75%. Concurrent with the amendment to the AGI Senior Credit Facility, AGIobtained a $9.7 million 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. See Long Term Debt Note #6.

 

Theamended AGI Senior Credit Facility also revised the Company’s financialcovenants in effect through the extended maturity date.  The Company’s forecast for 2009 anticipatescompliance with all required covenants throughout 2009.  Significant cost reductions have beenimplemented in 2008, including the elimination of personnel, suspension of401(k) employer contributions, salary cutbacks, hiring and capital expenditurespending freezes, satellite office closures, and magazine size and frequencyreductions.  Further cost reductions areset to be unveiled in 2009.  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, 2010.

 

*Description of the Business*—**The Company is a membership-based direct marketing companywhich sells club memberships, products, services, and publications to selectedaffinity groups primarily in North America.** The Company markets club memberships,merchandise and services to RV owners, and camping and golf enthusiasts.  In addition, the Company operates 78 retailoutlets and a mail order business selling RV accessories, supplies and servicesthrough its wholly-owned subsidiary, Camping World, Inc. (“Camping World”).  The stores are

 

54

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1.                           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

locatedthroughout the United States.  TheCompany also publishes magazines, directories and books.

 

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

 

*Fair value measurement*—The Company adopted the provisions of the Financial Accounting Standards Board’s(“FASB’s”) Statement of Financial Accounting Standards (“SFAS”) No. 157, “*Fair Value Measurements*” (“SFAS 157”), effective January 1,2008, for its financial assets and liabilities. The FASB delayed the effective date of SFAS 157 until January 1,2009, with respect to the fair value measurement requirements for non-financialassets and liabilities that are not re-measured on a recurring basis.  Under this standard, fair value is defined asthe price that would be received to sell an asset or paid to transfer aliability (i.e., the “exit price”) in an orderly transaction between marketparticipants at the measurement date.

 

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

 

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

 

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

 

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

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

 

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 whenimpairment indicators are present (See Note 3). The finite-lived intangible assets consisting of membership customerlists, resort and golf course agreements, non-compete and deferred consultingagreements, and deferred financing costs have weighted average useful lives ofapproximately 6 years, 4 years, 15 years and 7 years, respectively.

 

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

 

55

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1.                           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

*Long-term Debt**—* The fair value of the Company’slong-term debt is estimated based on the quoted market prices for the same orsimilar issues or on the current rates offered for debt of the same or similarremaining maturities.  The fair value ofthe Company’s long-term debt was $260.8 million as of December 31, 2008.

 

*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.

 

Membershiprevenue is generated from annual, multi-year and lifetime memberships.  The revenue and expenses associated withthese memberships are deferred and amortized over the membership period.  For lifetime memberships, an 18-year periodis used, which is the actuarially determined estimated fulfillment period.  Promotional expenses, consisting primarily ofdirect mail advertising, are deferred and expensed over the period of expectedfuture benefit, typically three months based on historical actual responserates.  Renewal expenses are expensed atthe time related materials are mailed. Recognized revenues and profit are subject to revisions as themembership progresses to completion. Revisions to membership period estimates would change the amount ofincome and expense amortized in future accounting periods.  At December 31, 2008 and 2007, $6.8million and $7.0 million of advertising expenses have been capitalized asdirect-response advertising, of which $4.2 million and $4.4 million,respectively, were reported as assets and $2.6 million and $2.6 million,respectively, were reported net of related deferred revenue.  Advertising expenses for 2008, 2007 and 2006were $37.3 million, $39.1 million, and $32.8 million, respectively.

 

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

 

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

 

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

 

56

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1.                           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

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

 

Changes in the fair valueof a derivative that is highly effective and that is designated and qualifiesas a cash flow hedge (a “swap”), to the extent that the hedge is effective, arerecorded in accumulated other comprehensive loss, until earnings are affectedby the variability of cash flows of the hedged transaction.  The Company measures effectiveness of theswap at each quarter end using the Hypothetical Derivative Method.  Under this method, hedge effectiveness ismeasured based on a comparison of the change in fair value of the actual swapdesignated as the hedging instrument and the change in fair value of thehypothetical swap which would have the terms that identically match the criticalterms of the hedged cash flows from the anticipated debt issuance.  The amount of ineffectiveness, if any,recorded in earnings would be equal to the excess of the cumulative change inthe fair value of the swap over the cumulative change in the fair value of theplain 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 utilizesderivative financial instruments to manage its exposure to interest raterisks.  The Company does not enter intoderivative financial instruments for trading purposes.

 

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

 

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

 

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

 

57

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1.                           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

excludingCamping World, Inc. and its wholly owned subsidiaries, were revalued toaccount for the tax effect for the change to the S corporation status.

 

*Major Customers*— Included in the Membership ServicesSegment is revenue in the amount of $18.5 million, $19.9 million, and $20.3million, for the years 2008, 2007 and 2006, respectively, which was receivedunder contracts from one customer of the Company.

 

*RecentAccounting Pronouncements:*

 

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

 

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

 

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

 

In December 2007,the FASB issued SFAS No. 160, “Accounting and Reporting of Non-controllingInterests in Consolidated Financial Statements — an amendment of AccountingResearch Bulletin No. 51” (“SFAS 160”). This standard will significantly change the accounting and reporting forbusiness combination transactions and non-controlling (minority) interests inconsolidated financial statements, including capitalizing at the acquisitiondate the fair value

 

58

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1.                           SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

acquired from in-processresearch and development, and re-measuring and writing down these assets, ifnecessary, in subsequent periods during their development.  This new standard will be applied forbusiness combinations that occur on or after January 1, 2009 andpresentation and disclosure requirements of SFAS 160 shall be appliedretrospectively.

 

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

 

2.                           PROPERTYAND EQUIPMENT

 

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

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

 

3.                           GOODWILLAND INTANGIBLE ASSETS

 

The following is a summary of changes inthe Company’s goodwill by business segment, for the years ended December 31,2008 and 2007 (in thousands):

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

 

59

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3.                           GOODWILLAND INTANGIBLE ASSETS (continued)

 

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

 
| ** **                                       | ** ** | **2008**   | ** ** |
|--------------------------------------------------|------------|------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Gross**  | ** ** | **Amortization** | ** ** | **Net** | ** ** |
|                                             |       |       |       |   |   |   |   |
| Membership and  customer lists                   |       | $          | 36,384     |   | $ | (22,182 | ) | $ | 14,202 |   |
| Resort and golf  course participation agreements |       | 13,385     |       | (13,375 | ) | 10 |   |
| Non-compete and  deferred consulting agreements  |       | 18,830     |       | (15,103 | ) | 3,727 |   |
| Deferred  financing costs                        |       | 14,227     |       | (9,777 | ) | 4,450 |   |
|                                             |       | $          | 82,826     |   | $ | (60,437 | ) | $ | 22,389 |   |

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

 

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

 
| 2009  |   | $     | 7,386  |   |
|-------|--------|-------|--------|--------|
| 2010  |   | 6,190 |   |
| 2011  |   | 5,672 |   |
| 2012  |   | 3,025 |   |
| 2013  |   | 116   |   |
| Total |   | $     | 22,389 |   |

 

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

 

In the third quarter of2008, the Company noted continued reduction in same store sales at CampingWorld, Inc. (“Camping World”) as well as deterioration of general economicconditions

 

60

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3.                           GOODWILLAND INTANGIBLE ASSETS (continued)

 

and consumerconfidence.  Based on the above, theCompany determined that there were identified indicators of impairment withinthe Camping World reporting unit.

 

The results of a thirdparty valuation report (“Valuation Report”) prepared in the third quarter of 2008 byHoulihan Smith and Company Inc., a nationally recognized firm, inanticipation of the potential sale of Camping World, indicated that theestimated fair value of the Camping World reporting unit was less than bookvalue.  The excess of the carrying valueover the estimated fair value of the Camping World reporting unit of wasprimarily due to the decline in the recreational vehicle and camping retailmarkets leading to lower expected future cash flows for the business and lowermarket comparables. In determining the fair value, the Company used a weightedaverage of 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.

 

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

 

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

 

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

 

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

 

The total costs of theacquisitions have been allocated to the assets acquired and the liabilitiesassumed based on their respective fair values in accordance with SFAS No. 141,“Business Combinations.”  The allocationsof the purchase price to assets and liabilities include various finite-livedassets and no additional goodwill.  Theresults of operations for each respective acquisition have been included in theCompany’s results of operations from the date of the acquisitions.  Proforma results of operations for each yearin which an acquisition occurred, assuming the acquisitions took place at thebeginning of the year, would not differ significantly from the actual reportedresults.

 

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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% by the Stephen Adams Living Trust, which alsoindirectly owns 100.0% of the outstanding capital stock of AGHC and indirectlyAGI.

 

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

 

5.                           ACCRUEDLIABILITIES

 

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

 
| ** **                 | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
|                       |       |     |       |     |       |
| Compensation and  benefits |       | $        | 9,549      |     | $          | 14,511 |   |
| Other accruals             |       | 17,460   |       | 21,612   |       |
|                       |       | $        | 27,009     |     | $          | 36,123 |   |

 

6.                           LONG-TERMDEBT

 

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

 
| ** **                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|
|                                       |       |     |       |     |       |
| AGI Senior  Credit Facility: Term Loans    |       |     |       |     |       |
| Term Loans                                 |       | $        | 126,955    |     | $          | 128,605 |   |
| Revolving credit  facility                 |       | 8,500    |       | —   |       |
| AGI 9% Senior  Subordinated Notes due 2012 |       | 152,399  |       | 152,399  |       |
| AGHI 10 7/8%  Notes due 2012               |       | 111,732  |       | 105,390  |       |
| Accrued interest  on AGHI 10 7/8% Notes    |       | —   |       | 4,396    |       |
| Other long-term  obligations               |       | 4,292    |       | 6,169    |       |
|                                       |       | 403,878  |       | 396,959  |       |
| Less: current  portion                     |       | (12,391  | )          | (4,406   | )          |
|                                       |       | $        | 391,487    |     | $          | 392,553 |   |

 

*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 (“AGI Senior

 

62

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6.                           LONG-TERMDEBT (continued)

 

Credit Facility”) providingfor term loans (“Term Loans”) in the aggregate of $140.0 million and arevolving credit facility of $35.0 million. The funds available under the revolving credit line of the AGI SeniorCredit Facility may be utilized for borrowings or letters of credit; however, amaximum of $7.5 million may be allocated to such letters of credit.  Re-borrowings under the Term Loans are notpermitted.  The interest on borrowingsunder the AGI Senior Credit Facility is at variable rates based on the ratio oftotal cash flow to outstanding indebtedness (as defined).  Interest rates float with prime and theLondon Interbank Offered Rates (“LIBOR”), plus an applicable margin rangingfrom 1.50% to 2.50% over the stated rates. AGI also pays a commitment fee of 0.5% per annum on the unused amount ofthe revolving credit line.  Further, theAGI Senior Credit Facility requires the loans to be prepaid in an amount equalto 75% of the excess cash flow, as defined. As of December 31, 2008, the Company had no excess cash flow, asdefined.  The AGI Senior Credit Facilityis secured by substantially all the assets and a pledge of the stock of AGI.

 

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

 

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

 

As of December 31,2008, $127.0 million was outstanding under the Term Loans and $8.5 million wasoutstanding under the revolving credit facility.  The average interest rate on the Term Loanswas 7.27%.  As of December 31, 2008,permitted borrowings under the undrawn revolving line were $27.5 million.  The Company had commercial and standbyletters of credit in the aggregate amount of $7.5 million outstanding as of December 31,2008.  The aggregate quarterly scheduledpayments on the Term Loans are $0.4 million. The revolving credit facility and the Term Loans mature on June 24,2009.

 

OnJune 5, 2009, AGI entered into an amendment to its AGI Senior Credit Facilitypursuant to which the maturity date was extended from June 24, 2009 to March31, 2010, the revolving credit portion of the facility was reduced by $10.0million to $25.0 million, the outstanding term loan borrowings were repaid by$8.0 million, the financial covenants in effect through the extended maturitydate were revised and the borrowing rate was increased to prime rate plus 7.0%or LIBOR plus 8.0% with a LIBOR floor of 2.75%. As a condition to the amendment, the shareholder of the ultimate parentof the Company, was required to arrange for the purchase of approximately $26.6million in principal amount of the term portion of the AGI Senior CreditFacility by new lenders, enhance the yield to such new lenders, purchase AGHINotes held by one of such new lenders at a premium to the most recent marketprice, contribute $5.0 million in capital and guarantee two required principalpayments on the term loans under the AGI Senior Credit Facility, aggregating$15.0 million.  In consideration of suchsupport, AGI entered into an option agreement with the shareholder of theultimate parent of the Company pursuant to which AGI granted such shareholderor his assigns an option, exercisable on or before March 1, 2010, to purchasethe Company’s Camping World subsidiary for $55.0 million, being the fair valueof such subsidiary as determined by an appraisal of Houlihan Smith &Company, Inc. dated as of March 1, 2009. AGI also agreed to pay the shareholder of the ultimate parent, uponsuccessful refinancing of AGI’s secured debt, including the AGI Senior CreditFacility, a success fee equal in amount to the fair value, as determined by anindependent financial advisor of such credit support, taking into account thefair value of the option to purchase Camping World.  In the event the fair value of the CampingWorld purchase option exceeds the fair value of such credit support, the shareholderwill pay the amount of such excess to AGI. 

 

Concurrentwith the amendment to the AGI 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. 

 

Inaddition, AGI agreed to use its best efforts to secure an asset-based loan ofat least $18.5 million secured by the inventory and receivables of itssubsidiary, Camping World, Inc. (the “Camping World Financing”), the proceedsof which would be used to further reduce the amounts outstanding under the AGISenior Credit Facility.  The seniorlenders agreed to subordinate their liens to such financing.  If a Camping World Financing has not beenconsummated by September 15, 2009, the borrowing rate on revolving creditloans, swing loans and terms loans increase to prime rate plus 9.0% or LIBORplus 10.0%.  

 

63

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6.                           LONG-TERMDEBT (continued)

 

Theamended AGI Senior Credit Facility also revised the Company’s financialcovenants in effect through the extended maturity date.  The Company’s forecast for 2009 anticipatescompliance with all required covenants throughout 2009.  Significant cost reductions have beenimplemented in 2008, including the elimination of personnel, suspension of401(k) employer contributions, salary cutbacks, hiring and capital expenditurespending freezes, satellite office closures, and magazine size and frequencyreductions.  Further cost reductions areset to be unveiled in 2009.  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, 2010.

 

*AGI Senior Subordinated Notes -*On February 18, 2004, AGI issued $200.0million of 9% AGI Senior Subordinated Notes due 2012 (the “AGI Senior Notes”).  Interest is payable on the AGI Senior Notestwice a year on each February 15 and August 15, beginning August 15,2004, and the AGI Senior Notes mature on February 15, 2012.  On June 8, 2006, AGI amended its AGISenior Credit Facility to permit AGI to purchase up to $30.0 million of the AGISenior Notes from time to time as and when the Company determines.  During 2006, AGI purchased $29.9 million ofthe AGI Senior Notes.  The Senior Notespurchases were made with available cash and the notes purchased have beenretired.

 

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 underthe February 27, 2007 amendment to the AGI 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 AGI SeniorCredit Facility.  AGI also incurred an$0.8 million debt extinguishment charge representing the pro rata unamortizeddeferred finance costs associated with the prepayment of the AGI SeniorNotes.  As of December 31, 2008,$152.4 million of AGI Senior Notes remain outstanding.

 

*AGHINotes -*On March 24, 2005, in a private placement, theCompany issued $88.2 million principal amount of its 10-7/8% senior notes due2012 (the “AGHI Notes”) at a $3.2 million original issue discount.  The Company completed a registered exchangeof the AGHI Notes under the Securities Act of 1933 on June 8, 2005.  The AGHI Notes are unsecured obligations ofthe Company, and AGI and its subsidiaries have not guaranteed payment ofprincipal or interest on the AGHI Notes. Interest on the AGHI Notes is payable semi-annually on February 15and August 15 commencing August 15, 2005 and the entire $88.2 millionprincipal amount of the AGHI Notes are due in full on February 15,2012.  For interest payments on andbefore February 15, 2008, AGHI had the election to pay interest on theAGHI Notes in cash or by the issuance of additional notes of the same tenor asthe AGHI Notes.  Any additional AGHINotes issued in payment of interest are due in full on or before March 15,2010.  AGI has not paid any dividends toAGHI to fund payment of interest on the AGHI Notes and AGHI made the interestpayments due on August 15, 2005, February 15, 2006, August 15,2006, February 15, 2007, and February 15, 2008 through the issuanceof additional notes.  AGHI paid theinterest on the AGHI Notes due August 15, 2007 and 2008 from proceeds ofcapital contributions made by AGHI’s parent, AGHC, in the amount of $5.9million and $6.2 million, respectively. As of December 31, 2008, approximately $111.8 million of AGHI Notesremain outstanding, including $25.4 million of AGHI Notes due March 15,2010.  Currently, the AGI Senior CreditFacility and the AGI Indenture impose limitations on the ability ofsubsidiaries of AGHI to make dividend distributions or loans to AGHI to payinterest on the AGHI Notes.

 

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

 

The AGI Senior Credit Facility, the AGIIndenture and the indenture governing our AGHI Notes contain certainrestrictive covenants relating to, but not limited to, mergers, changes in thenature of the business, acquisitions, additional indebtedness, sale of assetsand investments,

 

64

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6.                           LONG-TERMDEBT (continued)

 

and the payment of dividends subject tocertain limitations and minimum operating covenants.  The Company was in compliance with all debtcovenants at December 31, 2008.

 

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

 
| 2009  |   | $       | 12,391  |   |
|-------|--------|---------|---------|--------|
| 2010  |   | 152,721 |    |
| 2011  |   | 82      |    |
| 2012  |   | 238,684 |    |
| Total |   | $       | 403,878 |   |

 

7.                           INCOMETAXES

 

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

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

 

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

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

 

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7.                           INCOMETAXES (continued)

 

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

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

 

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

 

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

 

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7.                           INCOMETAXES (continued)

 

The following tablesummarizes the activity related to unrecognized tax benefits:

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

 

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

 

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

 

8.                           INTERESTRATE SWAP AGREEMENTS

 

On October 15,2007, AGI entered into a five-year interest rate swap agreement with a notionalamount of $100.0 million from which it will receive periodic payments at the 3month LIBOR-based variable rate (3.42% at December 31, 2008 based upon theOctober 31, 2008 reset date) and make periodic payments at a fixed rate of5.135%, with settlement and rate reset dates every January 31, April 30,July 31, and October 31.  Thefair value of the swap was zero at inception. Theinterest rate swap agreement was effective beginning October 31, 2007 andexpires on October 31, 2012.  AGIentered into the interest rate swaps to limit the effect of increases on ourfloating rate debt.  Theinterest rate swap is designated as a cash flow hedge of the variable rateinterest payments due on $100 million of the Term Loans issued June 24,2003, and accordingly, gains and losses on the fair value of the interest swapagreement are reported in accumulated other comprehensive loss and reclassifiedto earnings in the same period in which the hedged interest payment affectsearnings.  The interest rate swapagreement expires on October 31, 2012.

 

On March 19,2008, the AGI entered into a 4.5 year interest rate swap agreement effective April 30,2008, with a notional amount of $35.0 million from which it will receiveperiodic payments at the 3 month LIBOR-based variable rate (3.42% at December 31,2008 based upon the October 31, 2008 reset date) and make periodic paymentsat 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.  Gains and losses on the fair value of theinterest swap agreement are reported in accumulated other comprehensive lossand reclassified to earnings in the same period in which the hedged interestpayment affects earnings.

 

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8.                           INTERESTRATE SWAP AGREEMENTS (continued)

 

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

 

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

 

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

 

9.                           FAIRVALUE

 

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

 

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

 

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

 

The Companyrecorded an impairment charge of $81.0 million in the third quarter of 2008that wrote down to zero the carrying value of the preferred interest (the “FreedomRoadsPreferred Interest”) held by an indirect subsidiary of Camping World in FreedomRoadsHolding Company, LLC (“FreedomRoads”), a holding company whose subsidiariessell and service new and used recreational vehicles.  The fair value of the FreedomRoads PreferredInterest was based on the Valuation Report and was recorded as a result ofdeclining performance of the recreational vehicle industry driven by overallweakening of the economy and a significant decline in consumer confidence, inaddition to limited credit available to consumers interested in purchasingrecreational vehicles.  Therefore, theCompany has categorized the FreedomRoads Preferred Interest as Level 3.

 

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9.                           FAIRVALUE (continued)

 

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

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

 

10.                     COMMITMENTS,CONTINGENCIES

 

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

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

 

During 2008, 2007 and 2006, respectively,approximately $21.7 million, $17.9 million and $14.6 million of rent expensewas charged to costs and expenses.

 

OnDecember 5, 2001, the Company sold eleven real estate properties to elevenseparate wholly-owned subsidiaries of AGRP Holding Corp., a wholly-ownedsubsidiary of the Company’s parent, AGI Holding Corp., for $52.3 million incash and a note receivable.  Theproperties have been leased back to the Company on a triple net basis.  Both the sales price and lease rates werebased on market rates determined by third party independent appraisers engagedby the mortgage lender and approved by the AGI Senior Credit Facility agentbank.  These leases have an initial termof 25 to 27 years with two five-year options at the then current market rent.

 

The leases areclassified as operating leases in accordance with SFAS No. 13 “Accountingfor Leases.”  Land and buildings with anet book value totaling $45.8 million have been removed from the balancesheet.  The transaction resulted in a netgain of $6.1 million consisting of a $12.1 million gain on certain propertiesand a $6.0 million loss on other properties. In accordance with accounting principles generally accepted in theUnited States, the $6.0 million loss was recognized upon the date of sale in2001 in the statement of operations and the $12.1 million gain was deferred andwill be credited to income as rent expense adjustments over the leaseterms.  The average net annual leasepayments over the lives of the leases are $3.4 million.  As of December 31, 2008, $8.9 milliongain remains and will be recognized over the future lease terms.

 

*NASCAR Agreement*— Pursuant to the terms of a certain Series Entitlement andSponsorship Agreement dated as of January 1, 2009, by and between NationalAssociation for Stock Car

 

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10.                     COMMITMENTS,CONTINGENCIES (continued)

 

AutoRacing, Inc. (“NASCAR”) and FreedomRoads, LLC (“FR”), a wholly ownedsubsidiary of FreedomRoads, and CWI, Inc. (“CWI”), a wholly ownedsubsidiary of Camping World, Inc. (the “NASCAR Sponsorship Agreement”),CWI and FR obtained rights as the title sponsor of the NASCAR TruckSeries.  The NASCAR Sponsorship Agreementprovides for a term of seven years, commencing January 1, 2009 andterminating December 31, 2015, and requires the payment of annual rightsfees in exchange for the rights granted to FR and CWI.  The obligations of FR and CWI under theSponsorship Agreement are joint and several in nature, provided that theliability of CWI for the annual rights fees during the term of the NASCARSponsorship Agreement is capped at an aggregate of $6,500,000.

 

*Litigation*—**From time to time, theCompany is involved in litigation arising in the normal course of businessoperations.  The Company does not believeit is involved in any litigation that will have a material adverse effect onits results of operations or financial position.

 

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

 

*JointVenture Agreement* — On March 6, 2006, Camping Worldentered 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

 

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

 

In connection with oureffort to expand the number of Camping World stores by developing retailalliances with RV dealerships across North America, the Company has established45 Camping World stores alongside or within RV dealerships owned byFreedomRoads, which is controlled by the Chairman of our Board of Directors,Stephen Adams, and we expect additional Camping World stores alongside orwithin such RV dealerships in the future. At December 31, 2008, the Company leased 37 properties fromFreedomRoads, sub-leased six properties to FreedomRoads, and Camping World andFreedomRoads are joint tenants under six leases.  Total payments by the Company to FreedomRoadsunder these leased properties for 2008 and 2007 were approximately $4.2 millionand $3.7 million, respectively, and future commitments under these leases totalapproximately $36.3 million.  The leasesexpire at various dates from August 2013 through September 2018.  For 2008 and 2007, lease payments receivedfrom FreedomRoads for the six subleased properties were approximately $0.7million and $0.9 million, respectively, and future payments to be receivedunder these subleases total approximately $4.5 million.  The Company paid FreedomRoads approximately$7.7 million and $9.4 million for 2008 and 2007, respectively, and FreedomRoadspaid the Company approximately $27.7 million, and $17.5 million in 2008 and

 

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11.        RELATED-PARTYTRANSACTIONS (continued)

 

2007, respectively, underthe product marketing and sales agreements. In addition to the $5.0 million receivable under the CooperativeResources Agreement discussed below, Camping World’s outstanding accounts receivablebalance to FreedomRoads was $1.1 million, consisting of $5.8 million inaccounts receivable and $4.7 million in accounts payable, at December 31,2008.

 

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

 

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

 

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

 

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

 

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

 

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

 

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12.        STATEMENTSOF CASH FLOWS

 

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

 
| ** **                                 | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash paid  (received) during the year for: |       |     |       |     |       |     |       |
| Interest                                   |       | $        | 30,162     |     | $          | 29,916   |       | $ | 26,669 |   |
| Income taxes                               |       | (5       | )          | (195     | )          | (1,138   | )          |
|                                            |            |          |            |          |            |          |            |  |  |  |

 

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

 

**2008:**

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

 

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

 

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

 

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

 

**2007:**

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

 

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

 

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

 

**2006:**

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

 

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

 

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

 

13.       BENEFITPLAN

 

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

 

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13.       BENEFITPLAN (continued)

 

Affinity Group, Inc.

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

 

Camping World, Inc.

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

 

14.       DEFERREDPHANTOM STOCK COMPENSATION

 

The Company has deferredcompensation agreements with certain officers. The agreements provide for payment to the officers upon theirtermination, death, disability, or sale of the Company, and other agreed uponevents.  Deferred compensation isincluded in other long-term liabilities except for amounts expected to be paidin 2009, which have been classified in current liabilities.  This deferred compensation is subject tovesting under the terms of the individual agreements.  Vesting periods range from 33% per year overa three-year period to immediate vesting upon entering an agreement.  The Company incurred deferred compensationbenefit of $0.3 million for 2008 and expense of $0.4 million and $1.1 millionfor 2007 and 2006, respectively, due to changes in the cumulative amount dueunder the plan.

 

15.       SEGMENT INFORMATION

 

The Company’s threeprincipal lines 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 RVand powersports industry trade magazines. In addition, the Media segment operates 49 consumer outdoor recreationshows primarily focused on RV and powersports markets.  The Retail segment sells specialty retailmerchandise and services for RV owners primarily through

 

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15.       SEGMENT INFORMATION (continued)

 

retail supercenters andmail order catalogs.  The Companyevaluates performance based on profit or loss from operations before incometaxes.

 

The reportable segmentsare strategic business units that offer different products and services.  They are managed separately because eachbusiness requires different technology, management expertise and marketingstrategies.

 

The Company does notallocate income taxes or unusual items to segments.  Financial information by reportable businesssegment is summarized as follows (in thousands):

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

 

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15.       SEGMENT INFORMATION (continued)

 

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

 
| ** **                                                   | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **(Loss)  gain on Sale of Property and Equipment**           |       |     |       |     |       |     |       |
| Total (loss)  gain on sale for reportable segments           |       | $        | (321       | )        | $          | (211     | )          | $ | 16 |   |
| Other  non-allocated gain                                    |       | —   |       | 61       |       | —   |       |
| Total (loss)  gain on sale of property and equipment         |       | $        | (321       | )        | $          | (150     | )          | $ | 16 |   |
|                                                         |       |     |       |     |       |     |       |
| **Interest  Income**                                         |       |     |       |     |       |     |       |
| Total interest  income for reportable segments               |       | $        | 3,618      |     | $          | 9,605    |       | $ | 6,491 |   |
| Elimination of  intersegment interest income                 |       | (3,589   | )          | (9,521   | )          | (6,485   | )          |
| Other  non-allocated interest income                         |       | 550      |       | 508      |       | 1,109    |       |
| Total interest  income                                       |       | $        | 579        |     | $          | 592      |       | $ | 1,115 |   |
|                                                         |       |     |       |     |       |     |       |
| **Interest  Expense**                                        |       |     |       |     |       |     |       |
| Total interest  expense for reportable segments              |       | $        | 16,334     |     | $          | 15,660   |       | $ | 14,038 |   |
| Elimination of  intersegment interest expense                |       | (15,612  | )          | (15,026  | )          | (13,525  | )          |
| Other  non-allocated interest expense                        |       | 36,266   |       | 36,206   |       | 36,157   |       |
| Total interest  expense                                      |       | $        | 36,988     |     | $          | 36,840   |       | $ | 36,670 |   |
|                                                         |       |     |       |     |       |     |       |
| **Depreciation  and Amortization**                           |       |     |       |     |       |     |       |
| Total  depreciation and amortization for reportable segments |       | $        | 17,737     |     | $          | 16,498   |       | $ | 16,240 |   |
| Unallocated  depreciation and amortization expense           |       | 2,567    |       | 2,955    |       | 2,922    |       |
| Total consolidated  depreciation and amortization            |       | $        | 20,304     |     | $          | 19,453   |       | $ | 19,162 |   |
|                                                         |       |     |       |     |       |     |       |
| **(Loss)  Income From Operations Before Taxes**              |       |     |       |     |       |     |       |
| Total (loss) profit  for reportable segments                 |       | $        | (3,771     | )        | $          | 59,852   |       | $ | 54,404 |   |
| Unallocated  depreciation and amortization expense           |       | (2,567   | )          | (2,955   | )          | (2,922   | )          |
| Unallocated  G & A expense                          |       | (14,062  | )          | (17,113  | )          | (17,541  | )          |
| Unallocated  interest expense, net                           |       | (35,716  | )          | (35,698  | )          | (35,048  | )          |
| Unallocated gain  on sale of property and equipment          |       | —   |       | 61       |       | —   |       |
| Unallocated debt  restructure expense                        |       | —   |       | (775     | )          | (835     | )          |
| Unallocated  restructuring charge                            |       | —   |       | —   |       | (93      | )          |
| Unallocated  arbitration expense                             |       | —   |       | (955     | )          | —   |       |
| Unallocated loss  on derivative instrument                   |       | (2,394   | )          | —   |       | —   |       |
| Unallocated  impairment of investment in affiliate           |       | (81,005  | )          | —   |       | —   |       |
| Elimination of  intersegment interest expense, net           |       | 12,023   |       | 5,505    |       | 7,040    |       |
| (Loss) Income  from operations before income taxes           |       | $        | (127,492   | )        | $          | 7,922    |       | $ | 5,005 |   |
|                                                         |       |     |       |     |       |     |       |
| **Assets**                                                   |       |     |       |     |       |     |       |
| Total assets for  reportable segments                        |       | $        | 420,327    |     | $          | 539,382  |       | $ | 480,639 |   |
| Capitalized  finance costs not allocated to segments         |       | 5,836    |       | 7,489    |       | 10,836   |       |
| Corporate  unallocated assets                                |       | 3,237    |       | 3,544    |       | 6,596    |       |
| Elimination of  intersegment receivable                      |       | (133,242 | )          | (126,453 | )          | (87,174  | )          |
| Consolidated  total assets                                   |       | $        | 296,158    |     | $          | 423,962  |       | $ | 410,897 |   |
|                                                         |       |     |       |     |       |     |       |
| **Capital  Expenditures**                                    |       |     |       |     |       |     |       |
| Total  expenditures for assets for reportable segments       |       | $        | 11,598     |     | $          | 19,638   |       | $ | 14,743 |   |
| Other asset  expenditures                                    |       | 184      |       | 70       |       | 502      |       |
| Total capital  expenditures                                  |       | $        | 11,782     |     | $          | 19,708   |       | $ | 15,245 |   |

 

75

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16.       SELECTED QUARTERLY INFORMATION(UNAUDITED)

 

The following is a summary of selected quarterly informationfor the years ended December 31, 2008, 2007 and 2006 (in thousands):

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

 
| ** **         | ** ** | **March 31,** | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------|------------|--------------------|------------|-------------------|------------|------------------------|------------|-----------------------|------------|
| ** **         | ** ** | **2006**           | ** ** | **2006**          | ** ** | **2006**               | ** ** | **2006**              | ** ** |
|               |       |               |       |              |       |                   |       |                  |       |
| Total revenue      |       | $                  | 116,870    |              | $          | 139,003                |       | $                     | 130,040    |   | $ | 128,645 |   |
| Gross profit       |       | 44,776             |       | 51,294            |       | 48,735                 |       | 49,029                |       |
| Net income  (loss) |       | 560                |       | (20,335           | )          | (1,041                 | )          | 3,553                 |       |
|                    |            |                    |            |                   |            |                        |            |                       |            |  |  |  |  |

 

17.       VALUATION AND QUALIFYING ACCOUNTS

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

 

----

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

 

18.         SUBSEQUENTEVENT

 

On June 5, 2009, AGI entered into anamendment to its AGI Senior Credit Facility pursuant to which the maturity datewas extended from June 24, 2009 to March 31, 2010, the revolvingcredit portion of the facility was reduced by $10.0 million to $25.0 million,the outstanding term loan borrowings were repaid by $8.0 million, the financialcovenants in effect through the extended maturity date were revised and the borrowingrate was increased to prime rate plus 7.0% or LIBOR plus 8.0% with a LIBORfloor of 2.75%.  As a condition to theamendment, the shareholder of the ultimate parent of the Company, was requiredto arrange for the purchase of approximately $26.6 million in principal amountof the term portion of the AGI Senior Credit Facility by new lenders, enhancethe yield to such new lenders, purchase AGHI Notes held by one of such newlenders at a premium to the most recent market price, contribute $5.0 million incapital and guarantee two required principal payments on the term loans underthe AGI Senior Credit Facility, aggregating $15.0 million.  In consideration of such support, AGI enteredinto an option agreement with the shareholder of the ultimate parent of theCompany pursuant to which AGI granted such shareholder or his assigns anoption, exercisable on or before March 1, 2010, to purchase the Company’sCamping World subsidiary for $55.0 million, being the fair value of suchsubsidiary as determined by an appraisal of Houlihan Smith & Company, Inc.dated as of March 1, 2009.  AGI alsoagreed to pay the shareholder of the ultimate parent, upon successfulrefinancing of AGI’s secured debt, including the AGI Senior Credit Facility, asuccess fee equal in amount to the fair value, as determined by an independentfinancial advisor of such credit support, taking into account the fair value ofthe option to purchase Camping World.  Inthe event the fair value of the Camping World purchase option exceeds the fairvalue of such credit support, the shareholder will pay the amount of suchexcess to AGI.

 

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

 

76

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18.       SUBSEQUENTEVENT (continued)

 

In addition, AGI agreed to use its bestefforts to secure an asset-based loan of at least $18.5 million secured by theinventory and receivables of its subsidiary, Camping World, Inc. (the“Camping World Financing”), the proceeds of which would be used to furtherreduce the amounts outstanding under the AGI Senior Credit Facility.  The senior lenders agreed to subordinatetheir liens to such financing.  If aCamping World Financing has not been consummated by September 15, 2009,the borrowing rate on revolving credit loans, swing loans and terms loansincrease to prime rate plus 9.0% or LIBOR plus 10.0%.

 

In the event the Camping World purchaseoption is exercised and, subject to the consent of the lenders under the AGISenior Credit Facility, the sale of Camping World consummated, AGI would intendto use the net cash proceeds from the sale of Camping World to repayindebtedness outstanding under the AGI Senior Credit Facility, as amended.  As of December 31, 2008, an aggregate of$127.0 million was outstanding under the term loans and $8.5 million wasoutstanding under the revolving credit facility of the AGI Senior CreditFacility.

 

The financial statements for Camping Worldare different from the segment reporting in Footnote 3 because the CampingWorld President’s Club and other related ancillary products are included aspart of the membership services segment in the segment reporting.

 

The following unaudited pro forma condensedconsolidated balance sheet as of December 31, 2008 and December 31,2007 and the statement of operations for the years ended December 31, 2008 and2007 reflect the reclassification adjustments associated with the proposeddisposal/sale of Camping World to the shareholder of the ultimate parent of theCompany.  The pro forma adjustmentsrelated to the disposal are presented since the disposition did not meet thediscontinued operations reporting requirements pursuant to SFAS Statement No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets,” (SFAS 144) asof December 31, 2008, but will meet such requirements in 2010 when thetransaction is completed.  Since thetransaction is a sale to an entity under common ownership with AGI suchlong-lived assets are considered disposed of when they are exchanged ordistributed in accordance with SFAS 144. The pro forma adjustments reflect the reclassification of assets andliabilities associated with Camping World to current assets and liabilities tobe disposed of in accordance with SFAS 144 as if the reporting requirements hadbeen met at December 31, 2008.  Inaddition, the historical operating results have also been reclassified toreflect discontinued operations.

 

Corporate Expenses - The allocation toCamping World of expenses for certain Affinity Group, Inc. corporatefunctions historically provided to Camping World are done in accordance withStaff Accounting Bulletin No. 55, “Allocation of Expenses and RelatedDisclosures in Subsidiaries’ Financial Statements”, (“SAB 55”).  Such allocations were made on a specificidentification basis to the extent possible and otherwise based on relativepercentages, as compared to the Company’s other businesses, of headcount orother appropriate methods depending on the nature of each item of cost to beallocated.

 

Interest Expense - The interest expenseincluded in discontinued operations below reflects the interest allocated toCamping World based upon debt required to be repaid upon consummation of thistransaction.

 

77

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18.       SUBSEQUENTEVENT (continued)

 

The unaudited pro formabalance sheet of AGHI reclassifying Camping World as of December 31, 2008to assets and liabilities of discontinued operations is as follows (inthousands except shares and par value):

 
| ** **                                                                                | ** ** | ** **     | ** ** | **Reclassification of** | ** ** | ** **    | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|------------|
| ** **                                                                                | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** | ** ** |
| **ASSETS**                                                                                |       |           |       |                    |       |          |       |
| CURRENT ASSETS:                                                                           |       |           |       |                    |       |          |       |
| Cash and cash  equivalents                                                                |       | $              | 10,777     |                    | $          | (842          | )          | $ | 9,935 |   |
| Accounts  receivable, net                                                                 |       | 40,191         |       | (9,084                  | )          | 31,107        |       |
| Inventories                                                                               |       | 57,137         |       | (55,908                 | )          | 1,229         |       |
| Prepaid expenses  and other assets                                                        |       | 13,547         |       | (2,476                  | )          | 11,071        |       |
| Assets of  discontinued operations                                                        |       | —         |       | 110,964                 |       | 110,964       |       |
| Total current  assets                                                                     |       | 121,652        |       | 42,654                  |       | 164,306       |       |
|                                                                                      |       |           |       |                    |       |          |       |
| PROPERTY AND  EQUIPMENT, net                                                              |       | 44,077         |       | (34,022                 | )          | 10,055        |       |
| NOTE FROM  AFFILIATE                                                                      |       | 4,608          |       | —                  |       | 4,608         |       |
| INTANGIBLE  ASSETS, net                                                                   |       | 22,389         |       | (3,391                  | )          | 18,998        |       |
| GOODWILL                                                                                  |       | 96,828         |       | —                  |       | 96,828        |       |
| DEFERRED TAX  ASSETS, net                                                                 |       | 4,569          |       | (4,569                  | )          | —        |       |
| OTHER ASSETS                                                                              |       | 2,035          |       | (672                    | )          | 1,363         |       |
| Total assets                                                                              |       | $              | 296,158    |                    | $          | —        |       | $ | 296,158 |   |
|                                                                                      |       |           |       |                    |       |          |       |
| **LIABILITIES  AND STOCKHOLDER’S DEFICIT**                                           |       |           |       |                    |       |          |       |
| CURRENT  LIABILITIES:                                                                     |       |           |       |                    |       |          |       |
| Accounts payable                                                                          |       | $              | 23,950     |                    | $          | (19,383       | )          | $ | 4,567 |   |
| Accrued interest                                                                          |       | 11,581         |       | —                  |       | 11,581        |       |
| Accrued income  taxes                                                                     |       | 1,165          |       | 372                     |       | 1,537         |       |
| Accrued  liabilities                                                                      |       | 27,009         |       | (10,864                 | )          | 16,145        |       |
| Deferred  revenues and gains                                                              |       | 60,569         |       | (7,254                  | )          | 53,315        |       |
| Current portion  of long-term debt                                                        |       | 12,391         |       | —                  |       | 12,391        |       |
| Liabilities of  discontinued operations                                                   |       | —         |       | 59,536                  |       | 59,536        |       |
| Total current  liabilities                                                                |       | 136,665        |       | 22,407                  |       | 159,072       |       |
|                                                                                      |       |           |       |                    |       |          |       |
| DEFERRED  REVENUES AND GAINS                                                              |       | 35,855         |       | (8,500                  | )          | 27,355        |       |
| LONG-TERM DEBT,  net of current portion                                                   |       | 391,487        |       | —                  |       | 391,487       |       |
| OTHER LONG-TERM  LIABILITIES                                                              |       | 30,156         |       | (13,907                 | )          | 16,249        |       |
|                                                                                      |       | 594,163        |       | —                  |       | 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                                                               |       | 12,041         |       | —                  |       | 12,041        |       |
| Accumulated  deficit                                                                      |       | (299,710       | )          | —                  |       | (299,710      | )          |
| Accumulated  other comprehensive income                                                   |       | (10,337        | )          | —                  |       | (10,337       | )          |
| Total  stockholder’s deficit                                                         |       | (298,005       | )          | —                  |       | (298,005      | )          |
| Total  liabilities and stockholder’s deficit                                         |       | $              | 296,158    |                    | $          | —        |       | $ | 296,158 |   |

 

78

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18.       SUBSEQUENTEVENT (continued)

 

The unaudited pro formabalance sheet of AGHI reclassifying Camping World as of December 31, 2007to assets and liabilities of discontinued operations is as follows (inthousands except shares and par value):

 
| ** **                                                                                | ** ** | ** **     | ** ** | **Reclassification of** | ** ** | ** **    | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|------------|
| ** **                                                                                | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** | ** ** |
| **ASSETS**                                                                                |       |           |       |                    |       |          |       |
| CURRENT ASSETS:                                                                           |       |           |       |                    |       |          |       |
| Cash and cash  equivalents                                                                |       | $              | 8,566      |                    | $          | (3,315        | )          | $ | 5,251 |   |
| Accounts receivable,  net                                                                 |       | 33,330         |       | (7,150                  | )          | 26,180        |       |
| Inventories                                                                               |       | 64,209         |       | (63,336                 | )          | 873           |       |
| Prepaid expenses  and other assets                                                        |       | 14,431         |       | (2,741                  | )          | 11,690        |       |
| Assets of  discontinued operations                                                        |       | —         |       | 246,472                 |       | 246,472       |       |
| Total current  assets                                                                     |       | 120,536        |       | 169,930                 |       | 290,466       |       |
|                                                                                      |       |           |       |                    |       |          |       |
| PROPERTY AND  EQUIPMENT, net                                                              |       | 44,307         |       | (35,232                 | )          | 9,075         |       |
| INVESTMENT IN  AFFILIATE                                                                  |       | 81,005         |       | (81,005                 | )          | —        |       |
| NOTE FROM  AFFILIATE                                                                      |       | 4,650          |       | —                  |       | 4,650         |       |
| INTANGIBLE  ASSETS, net                                                                   |       | 25,836         |       | (4,484                  | )          | 21,352        |       |
| GOODWILL                                                                                  |       | 144,429        |       | (47,601                 | )          | 96,828        |       |
| DEFERRED TAX  ASSETS, net                                                                 |       | 1,220          |       | (1,220                  | )          | —        |       |
| OTHER ASSETS                                                                              |       | 1,979          |       | (388                    | )          | 1,591         |       |
| Total assets                                                                              |       | $              | 423,962    |                    | $          | —        |       | $ | 423,962 |   |
|                                                                                      |       |           |       |                    |       |          |       |
| **LIABILITIES  AND STOCKHOLDER’S DEFICIT**                                           |       |           |       |                    |       |          |       |
| CURRENT  LIABILITIES:                                                                     |       |           |       |                    |       |          |       |
| Accounts payable                                                                          |       | $              | 27,171     |                    | $          | (23,072       | )          | $ | 4,099 |   |
| Accrued interest                                                                          |       | 6,700          |       | —                  |       | 6,700         |       |
| Accrued income  taxes                                                                     |       | 1,189          |       | 206                     |       | 1,395         |       |
| Accrued  liabilities                                                                      |       | 36,123         |       | (14,866                 | )          | 21,257        |       |
| Deferred  revenues and gains                                                              |       | 65,855         |       | (7,677                  | )          | 58,178        |       |
| Current portion  of long-term debt                                                        |       | 4,406          |       | —                  |       | 4,406         |       |
| Liabilities of  discontinued operations                                                   |       | —         |       | 67,282                  |       | 67,282        |       |
| Total current  liabilities                                                                |       | 141,444        |       | 21,873                  |       | 163,317       |       |
|                                                                                      |       |           |       |                    |       |          |       |
| DEFERRED  REVENUES AND GAINS                                                              |       | 38,535         |       | (8,952                  | )          | 29,583        |       |
| LONG-TERM DEBT,  net of current portion                                                   |       | 392,553        |       | —                  |       | 392,553       |       |
| OTHER LONG-TERM  LIABILITIES                                                              |       | 22,704         |       | (12,921                 | )          | 9,783         |       |
|                                                                                      |       | 595,236        |       | —                  |       | 595,236       |       |
|                                                                                      |       |           |       |                    |       |          |       |
| 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                                                               |       | 5,861          |       | —                  |       | 5,861         |       |
| Accumulated  deficit                                                                      |       | (172,431       | )          | —                  |       | (172,431      | )          |
| Accumulated  other comprehensive income                                                   |       | (4,705         | )          | —                  |       | (4,705        | )          |
| Total  stockholder’s deficit                                                         |       | (171,274       | )          | —                  |       | (171,274      | )          |
| Total  liabilities and stockholder’s deficit                                         |       | $              | 423,962    |                    | $          | —        |       | $ | 423,962 |   |

 

79

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18.       SUBSEQUENTEVENT (continued)

 

Unaudited proforma information relating to the operations of AGHI reclassifying CampingWorld for the year ended December 31, 2008 to discontinued operations isas follows (in thousands):

 
| ** **                                                                                | ** ** | **2008**       | ** ** | **Reclassification of** | ** ** | **2008**      | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|------------|
| ** **                                                                                | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** | ** ** |
| REVENUES:                                                                                 |       |           |       |                    |       |          |       |
| Membership  services                                                                      |       | $              | 152,643    |                    | $          | (18,013       | )          | $ | 134,630 |   |
| Media                                                                                     |       | 82,424         |       | —                  |       | 82,424        |       |
| Retail                                                                                    |       | 291,070        |       | (291,070                | )          | —        |       |
|                                                                                      |       | 526,137        |       | (309,083                | )          | 217,054       |       |
|                                                                                      |       |           |       |                    |       |          |       |
| COSTS APPLICABLE  TO REVENUES:                                                            |       |           |       |                    |       |          |       |
| Membership  services                                                                      |       | 90,758         |       | (3,792                  | )          | 86,966        |       |
| Media                                                                                     |       | 61,126         |       | —                  |       | 61,126        |       |
| Retail                                                                                    |       | 170,911        |       | (170,911                | )          | —        |       |
|                                                                                      |       | 322,795        |       | (174,703                | )          | 148,092       |       |
|                                                                                      |       |           |       |                    |       |          |       |
| GROSS PROFIT                                                                              |       | 203,342        |       | (134,380                | )          | 68,962        |       |
|                                                                                      |       |           |       |                    |       |          |       |
| OPERATING  EXPENSES:                                                                      |       |           |       |                    |       |          |       |
| Selling, general  and administrative                                                      |       | 142,798        |       | (123,812                | )          | 18,986        |       |
| Impairment of  goodwill                                                                   |       | 47,601         |       | (47,601                 | )          | —        |       |
| Impairment of  long-lived assets                                                          |       | 81,005         |       | (81,005                 | )          | —        |       |
| Depreciation and  amortization                                                            |       | 20,304         |       | (8,565                  | )          | 11,739        |       |
|                                                                                      |       | 291,708        |       | (260,983                | )          | 30,725        |       |
|                                                                                      |       |           |       |                    |       |          |       |
| (LOSS) INCOME  FROM OPERATIONS                                                            |       | (88,366        | )          | 126,603                 |       | 38,237        |       |
|                                                                                      |       |           |       |                    |       |          |       |
| NON-OPERATING  ITEMS:                                                                     |       |           |       |                    |       |          |       |
| Interest income                                                                           |       | 579            |       | (29                     | )          | 550           |       |
| Interest expense                                                                          |       | (36,988        | )          | 4,097                   |       | (32,891       | )          |
| Loss on  derivative instrument                                                            |       | (2,394         | )          | —                  |       | (2,394        | )          |
| Other  non-operating items                                                                |       | (323           | )          | 321                     |       | (2            | )          |
|                                                                                      |       | (39,126        | )          | 4,389                   |       | (34,737       | )          |
|                                                                                      |       |           |       |                    |       |          |       |
| (LOSS) INCOME FROM  CONTINUING OPERATIONS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS |       | (127,492       | )          | 130,992                 |       | 3,500         |       |
|                                                                                      |       |           |       |                    |       |          |       |
| INCOME TAX  BENEFIT (EXPENSE)                                                             |       | 2,213          |       | (2,530                  | )          | (317          | )          |
|                                                                                      |       |           |       |                    |       |          |       |
| (LOSS) INCOME FROM  CONTINUING OPERATIONS                                                 |       | (125,279       | )          | 128,462                 |       | 3,183         |       |
|                                                                                      |       |           |       |                    |       |          |       |
| DISCONTINUED  OPERATIONS                                                                  |       |           |       |                    |       |          |       |
| Loss from  operations of discontinued Camping World, Inc.                            |       | —         |       | (130,992                | )          | (130,992      | )          |
| Income tax  benefit                                                                       |       | —         |       | 2,530                   |       | 2,530         |       |
| Loss on  discontinued operations                                                          |       | —         |       | (128,462                | )          | (128,462      | )          |
|                                                                                      |       |           |       |                    |       |          |       |
| NET LOSS                                                                                  |       | $              | (125,279   | )                       | $          | —        |       | $ | (125,279 | ) |

 

80

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18.       SUBSEQUENTEVENT (continued)

 

Unaudited pro formainformation relating the operations of AGHI reclassifying Camping World for theyear ended December 31, 2007 to discontinued operations is as follows (inthousands):

 
| ** **                                                                         | ** ** | **2007**       | ** ** | **Reclassification of** | ** ** | **2007**      | ** ** |
|------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|------------|
| ** **                                                                         | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** | ** ** |
|                                                                               |       |           |       |                    |       |          |       |
| REVENUES:                                                                          |       |           |       |                    |       |          |       |
| Membership  services                                                               |       | $              | 149,937    |                    | $          | (18,215       | )          | $ | 131,722 |   |
| Media                                                                              |       | 90,537         |       | —                  |       | 90,537        |       |
| Retail                                                                             |       | 321,730        |       | (321,730                | )          | —        |       |
|                                                                               |       | 562,204        |       | (339,945                | )          | 222,259       |       |
|                                                                               |       |           |       |                    |       |          |       |
| COSTS APPLICABLE  TO REVENUES:                                                     |       |           |       |                    |       |          |       |
| Membership  services                                                               |       | 94,840         |       | (4,029                  | )          | 90,811        |       |
| Media                                                                              |       | 62,258         |       | —                  |       | 62,258        |       |
| Retail                                                                             |       | 194,940        |       | (194,940                | )          | —        |       |
|                                                                               |       | 352,038        |       | (198,969                | )          | 153,069       |       |
|                                                                               |       |           |       |                    |       |          |       |
| GROSS PROFIT                                                                       |       | 210,166        |       | (140,976                | )          | 69,190        |       |
|                                                                               |       |           |       |                    |       |          |       |
| OPERATING  EXPENSES:                                                               |       |           |       |                    |       |          |       |
| Selling, general  and administrative                                               |       | 145,619        |       | (123,246                | )          | 22,373        |       |
| Depreciation and  amortization                                                     |       | 19,453         |       | (7,754                  | )          | 11,699        |       |
|                                                                               |       | 165,072        |       | (131,000                | )          | 34,072        |       |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM OPERATIONS                                                             |       | 45,094         |       | (9,976                  | )          | 35,118        |       |
|                                                                               |       |           |       |                    |       |          |       |
| NON-OPERATING  ITEMS:                                                              |       |           |       |                    |       |          |       |
| Interest income                                                                    |       | 592            |       | (84                     | )          | 508           |       |
| Interest expense                                                                   |       | (36,840        | )          | 4,503                   |       | (32,337       | )          |
| Debt  extinguishment expense                                                       |       | (775           | )          | —                  |       | (775          | )          |
| Other  non-operating items                                                         |       | (149           | )          | 216                     |       | 67            |       |
|                                                                               |       | (37,172        | )          | 4,635                   |       | (32,537       | )          |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM  CONTINUING OPERATIONS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS |       | 7,922          |       | (5,341                  | )          | 2,581         |       |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME TAX  EXPENSE                                                                |       | (1,583         | )          | 1,258                   |       | (325          | )          |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM  CONTINUING OPERATIONS                                                 |       | 6,339          |       | (4,083                  | )          | 2,256         |       |
|                                                                               |       |           |       |                    |       |          |       |
| DISCONTINUED  OPERATIONS                                                           |       |           |       |                    |       |          |       |
| Income from  operations of discontinued Camping World, Inc.                   |       | —         |       | 5,341                   |       | 5,341         |       |
| Income tax  expense                                                                |       | —         |       | (1,258                  | )          | (1,258        | )          |
| Income from  discontinued operations                                               |       | —         |       | 4,083                   |       | 4,083         |       |
|                                                                               |       |           |       |                    |       |          |       |
| NET INCOME                                                                         |       | $              | 6,339      |                    | $          | —        |       | $ | 6,339 |   |

 

81

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18.    SUBSEQUENT EVENT (continued)

 

Unaudited pro formainformation relating the operations of AGHI reclassifying Camping World for theyear ended December 31, 2006 to discontinued operations is as follows (inthousands):

 
| ** **                                                                         | ** ** | **2006**       | ** ** | **Reclassification of** | ** ** | **2006**      | ** ** |
|------------------------------------------------------------------------------------|------------|----------------|------------|-------------------------|------------|---------------|------------|
| ** **                                                                         | ** ** | **Historical** | ** ** | **Camping World**       | ** ** | **Pro Forma** | ** ** |
|                                                                               |       |           |       |                    |       |          |       |
| REVENUES:                                                                          |       |           |       |                    |       |          |       |
| Membership  services                                                               |       | $              | 137,394    |                    | $          | (15,520       | )          | $ | 121,874 |   |
| Media                                                                              |       | 86,742         |       | —                  |       | 86,742        |       |
| Retail                                                                             |       | 290,422        |       | (290,422                | )          | —        |       |
|                                                                               |       | 514,558        |       | (305,942                | )          | 208,616       |       |
|                                                                               |       |           |       |                    |       |          |       |
| COSTS APPLICABLE  TO REVENUES:                                                     |       |           |       |                    |       |          |       |
| Membership  services                                                               |       | 87,407         |       | (4,015                  | )          | 83,392        |       |
| Media                                                                              |       | 58,302         |       | —                  |       | 58,302        |       |
| Retail                                                                             |       | 175,015        |       | (175,015                | )          | —        |       |
|                                                                               |       | 320,724        |       | (179,030                | )          | 141,694       |       |
|                                                                               |       |           |       |                    |       |          |       |
| GROSS PROFIT                                                                       |       | 193,834        |       | (126,912                | )          | 66,922        |       |
|                                                                               |       |           |       |                    |       |          |       |
| OPERATING  EXPENSES:                                                               |       |           |       |                    |       |          |       |
| Selling, general  and administrative                                               |       | 133,193        |       | (112,454                | )          | 20,739        |       |
| Restructuring  charge                                                              |       | 93             |       | —                  |       | 93            |       |
| Depreciation and  amortization                                                     |       | 19,162         |       | (8,217                  | )          | 10,945        |       |
|                                                                               |       | 152,448        |       | (120,671                | )          | 31,777        |       |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM  OPERATIONS                                                            |       | 41,386         |       | (6,241                  | )          | 35,145        |       |
|                                                                               |       |           |       |                    |       |          |       |
| NON-OPERATING  ITEMS:                                                              |       |           |       |                    |       |          |       |
| Interest income                                                                    |       | 1,115          |       | (6                      | )          | 1,109         |       |
| Interest expense                                                                   |       | (36,670        | )          | 4,318                   |       | (32,352       | )          |
| Debt  extinguishment expense                                                       |       | (835           | )          | —                  |       | (835          | )          |
| Other  non-operating items                                                         |       | 9              |       | 624                     |       | 633           |       |
|                                                                               |       | (36,381        | )          | 4,936                   |       | (31,445       | )          |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME FROM  CONTINUING OPERATIONS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS |       | 5,005          |       | (1,305                  | )          | 3,700         |       |
|                                                                               |       |           |       |                    |       |          |       |
| INCOME TAX  EXPENSE                                                                |       | (22,268        | )          | (238                    | )          | (22,506       | )          |
|                                                                               |       |           |       |                    |       |          |       |
| LOSS FROM  CONTINUING OPERATIONS                                                   |       | (17,263        | )          | (1,543                  | )          | (18,806       | )          |
|                                                                               |       |           |       |                    |       |          |       |
| DISCONTINUED  OPERATIONS                                                           |       |           |       |                    |       |          |       |
| Loss from  operations of discontinued Camping World, Inc.                          |       | —         |       | 1,305                   |       | 1,305         |       |
| Income tax  benefit                                                                |       | —         |       | 238                     |       | 238           |       |
| Loss on  discontinued operations                                                   |       | —         |       | 1,543                   |       | 1,543         |       |
|                                                                               |       |           |       |                    |       |          |       |   |   |   |
| NET LOSS                                                                           |       | $              | (17,263    | )                       | $          | —        |       | $ | (17,263 | ) |

 

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

 

None

 

**ITEM 9A:CONTROLS AND PROCEDURES**

 

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

 

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

 

Managementassessed the effectiveness of the Company’s internal control over financialreporting as of December 31, 2008. In making this assessment, managementused the criteria set forth by the Committee of Sponsoring Organizations of theTreadway Commission in Internal Control-Integrated 

 

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Framework.Based on our assessment, management believes that the Company maintainedeffective internal control over financial reporting as of December 31,2008, based on those criteria.

 

Thisannual report does not include an audit report of the company’s independentregistered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to audit by the company’sindependent registered public accounting firm pursuant to temporary rules ofthe Securities and Exchange Commission that permit the company to provide onlymanagement’s report in this annual report.

 

**ITEM 9B:OTHER INFORMATION**

 

None

 

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**PART III**

** **

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

 

Our executive officers anddirectors are as follows:

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

**Board Functions as Audit Committee**

** **

Our securities are notlisted on any national securities exchange and we are not required to maintain aseparate audit committee of the Board nor are we subject to the audit committeeindependence requirements set forth in Rule 10A-3 of the SecuritiesExchange Act of 1934, as amended.  On February 22,2006, the Board of Directors of the Company disbanded the Audit Committee andassumed its oversight of the integrity of our financial statements; ourcompliance with legal and regulatory requirements; the retention, independenceand qualifications of our independent auditor; and the responsibilities, budgetand performance of our independent auditor. The Board of Directors recognizes Mr. Frith-Smith as an “Audit

 

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

 

**Code ofProfessional Conduct**

** **

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

 

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

·                  Then, click on “Code ofConduct.”

 

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

 

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

 

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

 

**ITEM 11:  EXECUTIVE COMPENSATION**

 

**Compensation Discussion and Analysis**

** **

***Overview***

*** ***

Thefollowing discussion and analysis describes the Company’s compensationobjectives and policies as applied to the named executive officers appearing inthe Summary Compensation Table below (the “Executive Officers”).  This section is intended to provide a frameworkwithin which to understand the actual compensation awarded to, earned or heldby each Executive Officer during 2008, 2007 and 2006 as reported in thecompensation tables and accompanying narrative sections appearing on pages 95to 104 of this annual report on Form 10-K.

 

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

 

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***Compensation Objectives***

* *

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

 

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

 

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

 

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

 

***Determining Compensation***

 

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

 

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

 

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

 

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

 

***Elements of Compensation***

 

AnnualCompensation

 

**BaseSalary**

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

 

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

 

**AnnualIncentive Awards**

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

 

*2008 —Non-Equity Incentive Awards:*

* *

For2008, Messrs. Schneider and Wolfe received their annual incentive awardsbased on the actual performance of the Company as measured under the parametersof the annual incentive award program. The amount of the annual incentive award for Messrs. Schneider andWolfe was based on 1.0% and 0.25%, respectively, of the Company’s income fromoperations excluding depreciation, amortization, phantom stock expense, othernon-recurring expense, and the operations of Camping World, Inc. (the “2008Value”).  The 2008 Value was $44.7million.  This amount was paid on a prorata basis every two weeks, in connection with the regular payroll cycle, basedon estimated Company performance.  Afinal measurement of Company performance under the parameters of the 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

 

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

 

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

 

*2007 —Non-Equity Incentive Awards:*

* *

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

 

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

 

*2006 —Non-Equity Incentive Awards:*

 

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

 

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

 

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

 

Long-TermCompensation/Phantom Stock Agreements

 

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

 

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

 

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

 

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

 

OtherElements of Compensation

 

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

 

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

 

**401(k) Savingsand Profit Plan**

 

AffinityGroup, Inc.

TheCompany sponsors a deferred savings and profit sharing plan (the “401(k) Plan”)qualified under Section 401(a) and 401(k) of the InternalRevenue Service Code of 1986, as amended (the “Code”).  All employees over age twenty-one, includingthe Executive Officers, are eligible to participate in the 401(k) Plan.  Employees who have completed one year ofservice (minimum of 1,000 hours) are eligible for matching contributions.  For the plan year 2008, the Company electedSafe Harbor Matching Contribution for the employer match and set the employermatch, which vests upon contribution, at an amount equal to 100% of the first 4%of the employee’s contribution through July 2, 2008.  Effective July 3, 2008, the companysuspended the employer matching contributions. Employees may defer up to 60% of their eligible compensation up toInternal Revenue Service limits electing pre-tax contributions or post-taxcontributions (Roth contributions). Employer Matching Contributions for allAffinity employees totaled $521,115 in 2008. The amounts of 401(k) Plan matching contributions by the Companyduring 2008 are reflected in the All Other Compensation column of the SummaryCompensation Table below.

 

CampingWorld, Inc.

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

 

**KEYSOP**

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

 

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** **

**Other Benefit Plans**

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

 

**Perquisites**

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

** **

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

 

**Compensation Committee Report**

 

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

 

StephenAdams

AndrisA. Baltins

DavidFrith-Smith

J.Kevin Gleason

GeorgePransky

TownsendC. Smith

MichaelA. Schneider

 

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** **

**Summary Compensation Table**

** **

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

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

 

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(1)                                  Includes dollar amountsrecognized for financial statement reporting purposes for the fiscal year endedDecember 31, 2008, 2007 and 2006 pursuant to the phantom stock agreementsand thus may include awards granted in and prior to 2008.  These amounts differ from the actual paymentsdescribed under Long-Term Compensation/ Phantom Stock Agreements as the amountsdescribed in that section include amounts of phantom stock awards earned inprior years.

 

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

 

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(3)                                  Includes $5,600, $3,650,$5,640, $4,600 and $5,500 for 2008 and $8,857, $0, $4,133, $8,857 and $6,889for 2007, and $8,587, $0, $0, $8,673 and $6,520 for 2006, of Company matchingcontributions under the 401(k) Plan for Messrs. Schneider, Sirpilla,Patel, Wolfe and Daquino, respectively. In addition, includes $2,034 and $173 for 2008 and $2,751 and $0 for2007, and $0 and $0 for 2006, of Company-paid life insurance premiums for Mr. Schneiderand Mr. Sirpilla, respectively. Also includes $25,955 for automobile allowance for Mr. Sirpilla for2008.

 

**Grants of Plan-Based Awards in2008**

 

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

 

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

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

 

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(1)                                  Represents award under theCompany’s annual incentive award program. The amounts in column (d) reflect the actual payout to each of Messrs. Schneiderand Wolfe under the annual incentive award program based upon Companyperformance in 2008, 2007 and 2006, a portion of which was paid in the yearearned with the remainder paid the following year.  These amounts are also reflected in column (f) ofthe Summary Compensation Table for each Executive Officer, as applicable.  The annual incentive award program does not includethreshold or maximum target amounts.  Theannual

 

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incentiveawards paid to Messrs. Patel and Daquino for 2008, 2007 and 2006performance were discretionary and thus are not included in the foregoingtable.  Mr. Sirpilla did not receivean annual incentive award.  The terms ofthe Company’s annual incentive award program for 2008, 2007 and 2006 aredescribed in more detail under the section entitled “*CompensationDiscussion and Analysis—Elements of Compensation—Annual Compensation—AnnualIncentive Awards*” above.

 

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

 

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

 

**Option Exercises and Stock Vested in 2008**

 

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

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

 

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(1)                                 The ExecutiveOfficers’ interests under the phantom stock agreements are denominated as apercentage of increases in the value over a multiple-year measurement period,as described in more detail under the section entitled “*CompensationDiscussion and*

 

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*Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above.  Theamounts set forth in this column reflect the dollar amount of that percentageinterest, as calculated upon vesting.

 

(2)                                 Represents thedollar value of Messrs. Schneider’s, Patel’s and Wolfe’s percentageincrease in the value during 2008 and 2007 pursuant to their respective phantomstock agreements dated January 1, 2007, as described in more detail underthe section entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above.  Asdescribed in that section, this amount, if any, will be paid out in three equalannual installments, the first of which will be distributed during the secondquarter of 2010.

 

(3)                                 Represents thedollar value of Messrs. Schneider’s, Wolfe’s and Patel’s percentageincrease in the value during 2006 pursuant to their respective phantom stockagreements dated January 1, 2004, as described in more detail under thesection entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*” above.  As describedin that section, this amount will be paid out in three equal annualinstallments, the first of which was distributed during the second quarter of2007.

 

(4)                                 Mr. Sirpilladid not earn any interests under the phantom stock agreements during 2008, 2007or 2006 and is not party to a phantom stock agreement.

 

(5)                                 Mr. Daquinodid not earn any interest under the phantom stock agreements until January 1,2007.  This amount will be paid, if any,in three equal annual installments, the first of which will be distributedduring the second quarter of 2010.

 

(6)                                 As described inmore detail under the section entitled, “*Compensation Discussionand Analysis—Elements of Compensation—Long-Term Compensation/Phantom StockAgreements*,” this amount will be paid out in three equal annualinstallments, the first of which was distributed during the second quarter of2007.

 

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

 

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**Nonqualified Deferred Compensation in Fiscal 2008**

 

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

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

 

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

 

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

 

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

 

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

 

·                                          Without causeby the Company; or

 

·                                          Without causeby the Company or with good reason by the Executive Officer in connection witha change in control.

 

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

 

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

 

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

 

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

 

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

 

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

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

 

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

 

(2)                                 Represents anamount equal to Mr. Schneider’s base salary and annual incentive award asof December 31, 2008, divided by 52 weeks, times 87 weeks.   As of December 31, 

 

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2008, Mr. Schneider had been employed with the Company for 31years.  The annual base salary and annualincentive award in effect for Mr. Schneider as of December 31, 2008is reflected in the Salary column and Non-Equity Incentive Plan Compensationcolumn, respectively, of the Summary Compensation Table above.

 

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

 

(4)                                 Represents anamount equal to eight months of base salary and annual incentive award for Mr. Patelas of December 31, 2008.  The annualbase salary and annual incentive award in affect as of December 31, 2008is reflected in the Salary column and Bonus column, respectively, of theSummary Compensation Table above.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

For purposes of calculating the potential payments set forth in thetable below, we have assumed that the date of termination was December 31,2008.  The amounts of basic compensationand accrued but unpaid annual incentive award would be paid in a lump sumwithin 30 days after the determination of the amount of the accrued annualincentive award.

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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other employees.  The term of the phantom stock agreementexpires on December 31, 2009.

 

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

 

**Director Compensation in 2008**

 

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

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

 

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

 

(2)                 In addition tothe amount set forth in this table, Mr. Gleason received $5,400 in 2006 aspayment for his service as a member of the Board of Directors from October throughDecember of 2005.

 

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

 

**Compensation Committee Interlocks and Insider Participation**

 

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

 

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

 

TheCompany is an indirect wholly-owned subsidiary of AGHC, a privately-ownedcorporation.  The following table setsforth, as of December 31, 2008, certain information with respect to thebeneficial ownership of the Common Stock of AGHC by each shareholder who isknown to us to beneficially own more than 5% of the outstanding shares, eachdirector, each executive officer listed in the Summary Compensation Table andall of our executive officers and directors as a group.

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

 

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

 

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

 

**Certain Relationships and Related PersonTransactions**

 

Review and Approval of Related PersonTransactions

 

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

 

RelatedParty Transactions

 

Inconnection with our effort to expand the number of Camping World stores bydeveloping retail alliances with RV dealerships across North America, we haveestablished 45 Camping World stores alongside or within RV dealerships owned byFreedomRoads, which is controlled by the Chairman of our Board of Directors,Stephen Adams, and we expect to open additional Camping World stores alongsideor within such RV dealerships in the future. At December 31,2008, the Company leased 37 properties from FreedomRoads, sub-leased sixproperties to FreedomRoads, and Camping World and FreedomRoads are joint tenantsunder six leases.  Total payments by theCompany to FreedomRoads under these leased properties for 2008 and 2007 wereapproximately $4.2 million and $3.7 million, respectively, and futurecommitments 

 

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under these leases totalapproximately $36.3 million.  The leasesexpire at various dates from August 2013 through September 2018.  For 2008 and 2007, lease payments receivedfrom FreedomRoads for the six sub-leased properties were approximately $0.7million and $0.9 million, respectively, and future payments to be receivedunder these subleases total approximately $4.5 million.  The Company paid FreedomRoads approximately$7.7 million and $9.4 million in 2008 and 2007, respectively and FreedomRoadspaid the Company approximately $27.7 million and $17.5 million in 2008 and2007, respectively, under the product marketing and sales agreements.

 

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

 

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

 

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

 

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

 

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

 

Director Independence

 

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

 

106

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**ITEM14: PRINCIPAL ACCOUNTING FEES AND SERVICES**

 

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

 

**AuditFees**

 

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

 

**Audit-RelatedFees**

 

Therewere no audit-related fees in 2008 or 2007.

 

**Tax Fees**

 

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

 

**All Other Fees**

 

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

 

**Pre-ApprovalRequirements**

 

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

 

107

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**PART IV**

 

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

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

 

108

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant has duly caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized, inthe City of Ventura, State of California on June 5, 2009.

 

 

AFFINITY GROUP HOLDING,INC.

 

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

 

 

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

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

 

109

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

 

 

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

 

110

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**AFFINITYGROUP HOLDING, INC.**

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

 

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

 
| ** **                                                                                                                                                                                                        | ** ** | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|-------------------------------|
| ** **                                                                                                                                                                                                        | ** ** | ** **                                         | ** ** | ** **                    |
| Certificate of Incorporation of Affinity Group  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                                               |       |                          |

 

111

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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                                              |       |                          |

 

112

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| ** **                                                                                                                                                                                                                                                                                                                                                                                                     | ** ** | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page 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                                              |       |                          |

 

113

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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 ad documentation agent.      |       | 10.31                                              |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Second  Lien Note Purchase Agreement dated June 5, 2009 among Affinity Group, Inc.,  the guarantors party hereto, the note purchasers party hereto, and New York  Life Investment Management LLC as Administrative Agent                                                                                                                                 |       | 10.32                                              |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Option  Agreement dated June 5, 2009 between Affinity Group, Inc. and The Stephen  Adams Living Trust                                                                                                                                                                                                                                                    |       | 10.33                                              |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Statement of Computation of Ratio of Earnings to  Fixed Charges (1)                                                                                                                                                                                                                                                                                      |       | 12.1                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Subsidiaries  of the Registrant                                                                                                                                                                                                                                                                                                                          |       | 21                                                 |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Powers  of Attorney                                                                                                                                                                                                                                                                                                                                      |       | 24.1                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Statement of Eligibility of Trustee, The Bank of  New York, on Form T-1 (1)                                                                                                                                                                                                                                                                         |       | 25.1                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Certification  of President and Chief Executive Officer                                                                                                                                                                                                                                                                                                  |       | 31.1                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Certification  of Senior Vice President and Chief Financial Officer                                                                                                                                                                                                                                                                                      |       | 31.2                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Appointment  of Directors (9)                                                                                                                                                                                                                                                                                                                            |       | 31.3                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Appointment  of Principal Officers (12)                                                                                                                                                                                                                                                                                                                  |       | 31.4                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Statement  Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                                       |       | 32.1                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Statement  Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                                       |       | 32.2                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Affinity  Group Code of Professional Conduct (1)                                                                                                                                                                                                                                                                                                         |       | 99.1                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Form of Letter of Transmittal (1)                                                                                                                                                                                                                                                                                                                   |       | 99.2                                               |       |                          |
|                                                                                                                                                                                                                                                                                                                                                     |       |                                               |       |                          |
| Form of Notice of Guarantee Delivery (1)                                                                                                                                                                                                                                                                                                            |       | 99.3                                               |       |                          |

 

114

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----

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(15) Filed with the Company’sReport on Form 8-K dated September 8, 2008 and incorporated by referenceherein.

 

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

 

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