**UNITEDSTATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-K**

** **

(Mark One)
| **ý**                                                                                                                                                                                                                                                    | ** ** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE  SECURITIES EXCHANGE ACT OF 1934**     |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                          |       |                                                                                           |   |   |
| **For the  fiscal year ended December 31, 2005      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  Ventura, CA   93001** | ** ** | **(805)  667-4100**                                        |
| (Address of principal  executive offices)                    |       | (Registrant’s telephone  number including area code.) |

 

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

 

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

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

 

Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the
| Securities Act. |   | YES  o | NO  ý |
|-----------------|--------|------------------|----------------------|

 

Indicate by check mark if the registrant is not required to file reportspursuant to Section 13 or Section 15(d) of 
| the Act. |   | YES  o | NO  ý |
|----------|--------|------------------|----------------------|

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15 (d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.
|   |   | YES  ý | NO  o |
|--------|--------|-----------------------|-----------------|

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K (§ 2229405 of this chapter) is not contained herein,and will not be contained, to the best of registrant's knowledge, in definitiveproxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K
| Act). |   | YES  o | NO  ý |
|-------|--------|------------------|----------------------|

 

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

 

Indicate by check mark whether the registrant is a large acceleratedfilter, an accelerated filer, or non-accelerated filer. See definition of"accelerated filer and large accelerated filer" in Rule 12b-2 of theExchange Act (Check one):
|   | Accelerated filer  o | Large accelerated filer   o | Non-accelerated filer  ý |
|--------|--------------------------------|---------------------------------------|-----------------------------------------|

 

 

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

 

| **Class**                     | ** ** | **Outstanding  as of  March 3, 2006** |
|-------------------------------|------------|---------------------------------------|
| 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” means AffinityGroup Holding, Inc. and its predecessors and subsidiaries.

 

Affinity Group Holding, Inc. is a holding company and the direct parentof Affinity Group, Inc. We are a wholly-owned subsidiary of AGI Holding Corp (“AGHC”),a privately-owned corporation. We are a member-based direct marketingorganization targeting North American recreational vehicle (“RV”) owners andoutdoor enthusiasts. Our club members form a receptive audience to which wesell products, services, merchandise and publications targeted to theirspecific recreational interests. In addition, we are a specialty retailer ofRV-related products. We operate through three principal lines of business, consistingof (i) club memberships and related products and services, (ii)subscription magazines and other publications including directories, and (iii) specialtymerchandise sold primarily through our 44 Camping World retail stores, mail ordercatalogs and the Internet.

 

There areapproximately 1.8 million dues paying members enrolled in our clubs. Wecurrently have approximately 5.7 million in aggregate circulation and 1.0million paid circulation across our 37 publications. For the year ended December31, 2005, our revenue, operating income and net income were $485.6 million, $42.2million and $5.6 million, respectively.

 

**Competitive Strengths**

 

We believe that our key competitive strengthsare as follows:

 

*Stable, Recurring Cash Flow Stream -*Approximately 85% of our operating income, net of non-cash charges, isgenerated through our membership club, subscription-based products and servicesand publications businesses, which historically have provided a recurringincome stream through a core base of customers. Our four membership clubs havea historical average renewal rate of 66%, which we believe compares favorablyto other subscription-based businesses. Similarly, our subscription-basedproducts and services have historically also experienced high renewal rates,averaging over 85% over the past four years for our largest product and serviceofferings, Emergency Road Service (“ERS”), RV vehicle insurance and extendedwarranty.

 

*Established Market Positions* - Weare a member-based direct marketing organization targeting North American RVowners and outdoor enthusiasts with comprehensive targeted product offerings. TheGood Sam Club, which was founded in 1966, and the President’s Club are bothlong-established RV membership clubs in North America. Camping World is along-established national specialty retailer of merchandise accessories andservices for RV owners and camping enthusiasts.

 

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 pricing advantages allow us to increase membership dueswithout risking the loss of members, who are compensated by additional savings.These advantages compound as new customers are drawn to the higher savingsearned by our club members. Our 1.8 million club members and the 7.6 millionconsumers in our proprietary database serve as a unique, captive audience fordirect marketing, which significantly lowers customer acquisition costsrelative to our

 

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competitors and facilitates cost-effective cross-selling.

 

*Largely Recession Resistant -* Webelieve the characteristics of our business mitigate the effects of economicdownturns on our operating performance. While the sale of new RVs is generallyinfluenced by economic conditions, our financial performance has historicallyshown little correlation to changes in the Gross Domestic Product, gas pricesor even new RV shipments. We believe this is partially due to the small cost ofour products and services relative to the cost of purchasing an RV and the factthat our clubs provide average annual savings in excess of the annual dues. Wemarket our clubs, products and services to a sizable existing installed base of7.9 million RV owners, which affords us the ability to continue to attract newcustomers irrespective of new RV sales. We believe RV owners may be more likelyto take vacations utilizing RVs during an economic downturn, because they aregenerally less expensive than vacations necessitating plane or train travel andhotel accommodations, which would drive increased sales of our products.

 

*Favorable Demographic Trends* -Favorable demographic trends, in particular the aging of the “baby boomers,”indicate that RV ownership should increase during the next five years. OverallRV ownership rates have historically been highest, with 10% penetration, in the55-64 age bracket, an age group that is expected to grow 20.1% by 2010,according to the National Survey of the RV Consumer by the University ofMichigan in 2005 (the “RV Survey”). Furthermore, the 45-54 age bracket, whichmaintains the second highest ownership rate of RVs, is expected to grow 6.3% by2010. The growth in these age groups is expected to generate dramatic growth inthe pool of potential RV consumers. Also, according to the RV Survey, this agegroup shift will drive the number of households that own at least one RV from 7.9million in 2005 to 8.5 million in 2010. In addition, RV owners have householdincomes that generally exceed the national average. These demographics areattractive for advertisers and third-party providers of products and services.

 

*Experienced and Incentivized Management Team -*Our executive management team has extensive publishing, direct marketing andretail experience with significant expertise in the RV industry. With anaverage of 14 years with us, the team has developed substantial experience inincreasing our target customer base, using strategic alliances to bolsterproduct offerings that create value for our customers and increasingcross-selling opportunities for our high margin product offerings. Ourconsistent operating performance, to a great extent, is attributable to oursenior managers who are responsible for developing and implementing ourbusiness strategy and focusing on increasing profitability. Our executivemanagement team is compensated both through an annual salary and through amanagement incentive program that is directly tied to our financialperformance.

 

**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 strategy is to develop strong membership loyalty byproviding an attractive value proposition for club members and offering add-onproducts specifically targeted to meet their needs as reflected by our strongcustomer renewal rates. Each of our four membership clubs provides our customerswith tangible savings over and above the membership fee. On average, clubmembers realize savings five times greater than the cost of their annualmembership dues as the result of being able to purchase products and servicesat discounts made available through our clubs. We believe that theparticipation levels and renewal rates of club members reflect the benefitsderived from their membership. As such, in order to maximize customer renewalrates, we constantly evaluate member

 

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satisfaction and actively respond to changingmember preferences through the enhancement or introduction of new membershipbenefits including products and services.

 

*Efficiently Acquire New Customers-*We believeefficient customer acquisition and a sizeable database population are criticalto driving our growth and profitability. Camping World and its discount buyer’sclub, President’s Club, together, account for approximately 40% of our newcustomer database entries. In addition to being a highly valuable customerloyalty program, President’s Club allows us to capture specific informationabout each customer including RV type and usage, as well as information on thecustomer’s age, income, net worth and interests, while adding virtually noincremental customer acquisition costs. We are able to customize our directmarketing offers based upon our customers’ profiles. Other methods of customeracquisition include purchasing lists from data providers and placing ourpublications at campgrounds and dealerships. We then manage our database andtarget our offers to the customers most likely to purchase more than one of ourproduct offerings.

 

*Cross-Sell Products and Servicesto Existing Customers -*Weproactively cross-sell our products and services across our customer base. Forexample, we use our existing customer database to cost-efficiently marketCamping World products through catalogs. Conversely, Camping World supercentersprovide direct customer referrals to our membership clubs, products andservices 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. Our magazines contain relevant content aswell as various forms of advertisements for our membership clubs, products andservices.

 

*Expand Niche RecreationalPublications -*Webelieve aggregate circulation of our magazines is an important factor indetermining the amount of revenue we can obtain from advertisers. Consequently,we seek to expand our presence as a publisher in select recreational nichesthrough the introduction of new magazine titles and the acquisition of otherpublications or businesses in our markets or in complementary recreationalmarket niches. Publications in complementary niches may also provide theopportunity to launch new membership clubs, to market our products and servicesto new customers and to develop other products and services, which meet thespecial needs of these customers. For example, our acquisition of thepublishing assets of Nordskog Publications, Inc. in May 2005 allowed us toexpand our presence in the recreational boat market niche. In addition, weacquired 18 consumer outdoor recreation shows over the past two years whichprovide an expanded face-to-face forum for acquiring new customers.

 

*Increase Camping WorldPenetration -*Weintend to continue the controlled expansion of our Camping World supercenternetwork by developing Camping World stores alongside or within independent RVdealerships, including RV dealerships owned and operated by our affiliates,which provides a competitive advantage by creating a means of increasing retailcustomer traffic. In 2005 we opened five new Camping World stores, and in 2006we intend to open seven new Camping World stores as a part of our dealeralliance program. In addition to generating increased cash flows from the saleof merchandise, a larger network of geographically diverse Camping World storeswill enhance our ability to market our portfolio of membership clubs,publications and product and service offerings to a significantly largercustomer base.

 

**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, the availability and price of propane and gasoline, andthe total number of RVs. We believe that both the installed base of RVs and thetype of RV owned (full service vehicles excluding van conversions) are the mostimportant factors affecting the demand for our membership clubs, merchandise,products and services. Based on the RV Survey, the number of households owningRVs is projected to increase from 7.9 million in

 

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2005 to nearly 8.5 million in 2010. The RV Survey also indicates thatthe percentage of households owning RVs during this period will rise slightlyfrom 8.0% to 8.2%.

 

According to the RV Survey, the average RV owner is 49 years old. RVownership also increases with age reaching its highest percentage level amongthose 55 to 64 years old. Households in this age group are projected toincrease from 18.2 million in 2005 to 21.6 million in 2010. RV ownership alsois concentrated in the western United States, an area in which the populationgrowth rate continues to be greater than the national average. The RV Surveyalso indicates that RV ownership is associated with higher than average annualhousehold income, which among RV owners was approximately $68,000 per annum ascompared to the national average of $43,000 per annum.

 

The average age and annual household income of our club members in 2001were 57 years and $57,000, respectively, based on member survey data compiledby us. We believe that the demographic trend towards an aging population willhave a favorable impact on RV ownership. The demographic profile of our typicalclub member follows that of the general population and thus we believe thiswill also have a favorable impact on demand for our club memberships andrelated products and services.

 

**Membership Clubs**

** **

Weoperate the Good Sam Club, President’s Club, and Coast to Coast Club for RVowners, campers and outdoor vacationers, and the Golf Card Club for golfenthusiasts. The membership clubs form a receptive audience to which we marketour products and services.

 

Thefollowing table sets forth the number of members at December 31, 2005, annualmembership dues and average annual renewal rates during the period of 2001 to2005 for each club:

 
| **Membership Club** | ** ** | **Number of Members  at December 31, 2005 (1)** | ** ** | **Annual Fee (2)** | ** ** | **Average Renewal  Rate (3)** | ** ** |
|---------------------|------------|-------------------------------------------------|------------|--------------------|------------|-------------------------------|------------|
|                |       |                                            |       |               |       |                          |       |
| Good Sam Club       |       | 984,100                                         |       | $ 12 - $25    |       | 66                            | %          |
|                |       |                                            |       |               |       |                          |       |
| President's Club    |       | 643,100                                         |       | $ 15 - $20    |       | 66                            | %          |
|                |       |                                            |       |               |       |                          |       |
| Coast to Coast Club |       | 85,200                                          |       | $ 90 - $140   |       | 70                            | %          |
|                |       |                                            |       |               |       |                          |       |
| Golf Card Club      |       | 57,800                                          |       | $ 49 - $65    |       | 57                            | %          |

 

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(1)          Also includes multi-yearand lifetime members.

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

(3)          Excludes members havinglifetime memberships.

 

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

 

*Good Sam Club*

 

The Good Sam Club, founded in 1966, is a membership organization for RVowners. The Good Sam Club is the largest RV organization worldwide withapproximately 984,100 member families. As of December 31, 2005, there were1,800 local chapters throughout the United States and Canada. The averagerenewal rate for Good Sam Club members was approximately 66% during the period 2001through 2005.

 

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TheGood Sam Club is widely recognized as an essential part of the RV ownershipexperience. By delivering value to members through information, support andbenefits, including 10% discounts at 1,580 RV parks across the U.S. and Canada,members save money, come together to share experiences and more thoroughlyenjoy RVing. Other benefits include discounts on the purchase of RV suppliesand accessories at select RV service centers; an annual subscription to *Highways*, the club’s regular news magazine; discounts on ourother publications; trip routing and mail-forwarding; and access to productsand services developed for club members. Based on typical usage patterns, weestimate that Good Sam Club members realize estimated annual savings fromdiscounts of approximately $91.

 

TheGood Sam Club establishes quality standards for RV parks and campgrounds participatingin its discount program. Campgrounds and parks participating in the Good SamClub program benefit from increased occupancy and sales of camping-relatedproducts. We believe that we have established considerable penetration of thosefor-profit RV parks and campgrounds that meet our quality standards forparticipation in the discount program. We monitor our affiliated campgroundsand remove substandard facilities from our program to ensure that our brandimage and reputation are not diluted.

 

In1992, the Good Sam Club began selling lifetime memberships. In 2005, theaverage price for a life membership was $245 with 136,100 members registered asof December 31, 2005. Based on an actuarial analysis of the life members, weexpect the average length of a lifetime membership to be 18 years.

 

Thefollowing table lists the number of club members and RV parks and campgroundsfrom 2001 through 2005 at which discounts for members were available atDecember 31st of the respective year:

 
| ** **                                                        | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|-------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of Good  Sam memberships                                   |       | 984,100  |       | 971,000  |       | 958,000  |       | 960,600  |       | 946,800  |       |
|                                                              |       |     |       |     |       |     |       |     |       |     |       |
| Lifetime members  included above                                  |       | 136,100  |       | 131,900  |       | 127,700  |       | 121,400  |       | 119,000  |       |
|                                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of RV  campgrounds offering  discounts to Good Sam members |       | 1,580    |       | 1,750    |       | 1,750    |       | 1,650    |       | 1,650    |       |

 

*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, 2005, the President’s Club had 643,100members. The primary benefit offered to members of the President’s Club is a10% discount on all retail merchandise at Camping World stores. The President’sClub offers us an extremely cost effective and powerful method of acquiringcustomers who are likely to be receptive to our product and service offerings. Weuse the significant amount of information gathered when a customer signs up formembership in the President’s Club to tailor product offers to his or herlikely needs and interests. Additionally, we believe that the President’s Club,much like a traditional customer loyalty program, serves to bolster sales atour Camping World supercenters.

 

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. Typically, we use the President’s Clubbrand in the marketing of our products and services to these customers.

 

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’sClub member realizes annual savings of

 

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approximately$43. The average renewal rate for members of the President’s Club was 66%during the period from 2001 to 2005.

 

Thefollowing table sets forth the number of President’s Club members and number ofretail stores at year-end for 2001 through 2005:

 
| ** **                                     | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                           |       |     |       |     |       |     |       |     |       |     |       |
| Camping World's  President's Club  memberships |       | 643,100  |       | 596,700  |       | 598,200  |       | 626,000  |       | 596,500  |       |
|                                           |       |     |       |     |       |     |       |     |       |     |       |
| Number of stores                               |       | 44       |       | 39       |       | 33       |       | 30       |       | 30       |       |

 

*Coast to Coast Club*

 

The Coast to Coast Club operates a long-established reciprocal usenetwork of private RV resorts in North America. We offer a series of membershipbenefits depending upon pricing and program type under the Coast to Coast Club name.Members of the Coast to Coast Club belong to a private RV resort owned andoperated by parties unrelated to us. Our club members may use the other resortsin the Coast to Coast Club network on a reservation or space available basisand obtain discounts from other non-private campgrounds. At December 31, 2005,there were approximately 85,200 member families in the Coast to Coast Clubwhich had nationwide access to approximately 301 private RV resorts and anetwork of approximately 225 public affiliated campgrounds that participated inthe Coast to Coast Club reciprocal use programs. These private resorts aredesigned primarily for RV owners, but typically provide camping or lodgingfacilities, comprised of RVs, cabins, park models, and condominiums. For aninitial membership fee plus annual maintenance fees, both paid by the customerto the resort, the private resorts provide an RV site with water, sewer andelectrical hook-ups and recreational amenities, such as swimming, tennis orfishing, or proximity to theme parks or other recreational activities. We haveestablished quality criteria for resorts to join and remain in the Coast toCoast Club networks.

 

For standard annual renewal dues from $89.95 for a single yearmembership to $179.95 for a multiple-year membership, Coast to Coast Club membersreceive the following benefits: discounts for overnight stays at participatingresorts and campgrounds; an annual subscription to *Coast toCoast Magazine;*the*Coast to Coast Directory*providinginformation on the participating resorts; discounts on our other publications;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 Club networksview access to reciprocating member resorts as an incentive for their customersto join their resort. Because a majority of Coast to Coast Club members ownRVs, access to participating resorts throughout North America can be animportant complement to local resort membership. Based on typical use patterns,we estimate that Coast to Coast Club members realize estimated annual savingsfrom these discounts of approximately $131. The average annual renewal rate formembers of the Coast to Coast Club after the initial one-year membership (whichis generally paid by the member resort not the club member) was approximately 70%during the period 2001 through 2005.

 

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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 2001through 2005:

 
| ** **                                  | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                        |       |     |       |     |       |     |       |     |       |     |       |
| Number of Coast  to Coast Club  memberships |       | 85,200   |       | 98,700   |       | 117,300  |       | 139,800  |       | 157,200  |       |
|                                        |       |     |       |     |       |     |       |     |       |     |       |
| Participating  private resorts              |       | 301      |       | 309      |       | 329      |       | 383      |       | 360      |       |
| Participating  public resorts               |       | 225      |       | 176      |       | 220      |       | 572      |       | 624      |       |

 

Thereduction in the number of participating public resorts in the Coast to Coast Clubreciprocal use program prior to 2005 resulted primarily from the operationalchanges in the system which were implemented by the Coast to Coast Club during2003 to improve the quality of the system for Coast to Coast Club members. Byraising the overall quality of the parks in our system, we have been able toattract more quality public resorts to our network in 2005.

 

##### *Golf Card Club*

##### * *

The Golf Card Club, founded in 1974, had approximately 57,800 membersat December 31, 2005. The major attraction for membership is the financialsavings which members receive when playing at any of the 3,600 participatinggolf courses located throughout the US and Canada. The annual membership feevaries with the length and type (single or double) of membership. We believethat the participating golf courses providing playing privileges to clubmembers represent the largest number of golf courses participating in adiscount program in North America. None of the participating golf courses areowned 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 at175 “Stay and Play” resorts; discounts on golf practice at 63 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 110 local Grasshopper Clubs fortournaments and social activities; an opportunity to play in member-guesttournaments; an opportunity to test (and keep) select golf products; a chanceto win a free golf lesson from a participating Golf Card pro; and access to theclub web site (www.golfcard.com) including member-only features such ashandicap tracking, course reviews, and trip routing.

 

Municipal,daily-fee, semi-private, and resort golf courses participate in the Golf Cardprogram. The program is attractive to participating courses because it buildstraffic and helps fill empty tee times during off-peak hours. In addition,participating courses receive promotion of their golf course in the *Golf Traveler* member publication, the Annual Directory, andthe club website. Members also purchase other merchandise or services whenexercising their playing privileges. In this manner, Golf Card members tend toprovide incremental revenue to the golf courses. Based on surveys conducted byus, members realize savings on green fees, ranging from $150 to $250 annually,which significantly exceed the cost of membership.

 

The standard annual membership fee is $59 for a single membership and $99for a twosome membership. Multi-year memberships range from a single two-year membershipfor $118, to a three-year twosome membership for $267. The average renewal ratefor Golf Card Club members was approximately 57% for the period from 2001 to2005.

 

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

 
| ** **                                        | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of Golf  Card Club  memberships (1)        |       | 57,800   |       | 67,200   |       | 77,400   |       | 79,400   |       | 82,300   |       |
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of  Participating Golf Courses             |       | 3,600    |       | 3,650    |       | 3,800    |       | 3,800    |       | 3,300    |       |
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Number of  "Stay and Play" Golf Resorts |       | 175      |       | 200      |       | 220      |       | 225      |       | 241      |       |

 

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

 

**Membership Products and Services**

 

Our approximately1.8 million club members form a receptive audience to which we sell productsand services targeted to the recreational interests of our club members. Wepromote products and services which either address special needs arising in theactivities of our club members or appeal generally to persons with thedemographic characteristics of our club members. The two most establishedproducts are the emergency road service (“ERS”) and the vehicle insuranceprograms. Most of our products and services are provided by third parties whopay us a marketing fee, with the exception of ERS where we assume the risk ofincurred claims. We believe it is important to target the diversified marketniches with identifiable products that offer a full range of benefits. Wecurrently market these products through direct mail, advertising inpublications, campground directories, space ads, Internet, telemarketing anddirect sales.

 

*Emergency Road Service (ERS)*

 

Wepromote various ERS products to our existing membership clubs, as well as tonon-club members. The ERS programs provide towing and roadside assistance forsubscribers with annual dues ranging from $79.95 to $99.95. We developed ERS initiallyfor Good Sam members in 1984, and 31% of the Good Sam Club membership iscurrently enrolled in the Good Sam ERS program.

 

Thetable below sets forth the total enrollment in the various ERS programs for 2001through 2005:

 
| ** **     | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|----------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|           |       |     |       |     |       |     |       |     |       |     |       |
| ERS Enrollment |       | 369,900  |       | 360,900  |       | 354,400  |       | 348,400  |       | 345,100  |       |

 

For theeighth year in a row, enrollment in the various ERS programs has grown throughpromotional and marketing efforts which have attracted new members and improvedrenewal rates. Combined enrollment in the programs has increased by 24,800members or approximately 7.2% since 2001.

 

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*Vehicle Insurance Programs*

 

Weoffer two vehicle insurance programs that offer cost-effective collision andliability insurance suitable to the demographic characteristics and vehicleusage patterns of our various club members. Both the Vehicle Insurance Program(“VIP”) and the Motor Vehicle Program (“MVP”) are marketed to various segmentsof the customer database. For 2005, the two programs had approximately 205,800 policyholders,which represented a 13.7%, 6.4%, and 2.8% penetration, respectively, of the GoodSam Club, the President’s Club and the Coast to Coast Club. During the period 2001to 2005, the average renewal rate of members participating in these insuranceprograms was 91%. Our marketing fee revenue is based on the amount of writtenpremiums and the insurance provider assumes all claim risks.

 

The followingsets forth the total number of policies in force, the dollar amount of writtenpremiums paid to insurance providers, and the marketing fees generated for 2001through 2005:

 
| ** **                                               | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                                     |       |     |       |     |       |     |       |     |       |     |       |
| Total policies  in force                                 |       | 205,800  |       | 208,000  |       | 213,400  |       | 230,600  |       | 234,600  |       |
|                                                     |       |     |       |     |       |     |       |     |       |     |       |
| Written premiums  paid to insurance providers (millions) |       | $        | 251        |     | $          | 253      |       | $        | 254        |     | $          | 249 |   | $ | 240 |   |
|                                                     |       |     |       |     |       |     |       |     |       |     |       |
| Marketing fees  (millions)                               |       | $        | 20         |     | $          | 20       |       | $        | 20         |     | $          | 19 |   | $ | 18 |   |

 

*Other Products and Services*

 

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

 

In 1996, we launched theContinued Service Plan, a private label extended vehicle warranty program forRVs. Total net revenue for 2005 increased 29% over 2004, to a total of $20.5million. The program had 34,105 policies in force as of December 31, 2005. Salesof new policies were derived from direct mail marketing, print ads in ourmagazines, Internet and e-mail solicitations, and retail kiosks in CampingWorld stores. Policy renewals represented 42% of the total sales in 2005.

 

The RV financing program is administered by GEMB Lending Inc., asubsidiary of GE Money Bank. The number of GEMB RV loans to our club membersdecreased by 64% from 2004 to 2005. The decrease in loans can be directlyattributed to the current rising interest rate environment and the fact thatmost RV loans outstanding have already been refinanced at the current lowerrate.

 

In addition, we evaluate other products and services that club membersmay find attractive. When introducing new products and services, we concentrateon products and services provided by third parties, which we can market withoutsignificant capital investment by us, and for which we receive a marketing feefrom the service provider based on sales volume. We seek to utilize thepurchasing power of our club members to obtain products and services atattractive prices.

 

9

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**Publications**

 

We produce and distribute a variety of publications for select marketsin the recreation and leisure industry, including general circulationperiodicals, club magazines, directories, and RV and powersports industry trademagazines. Revenues are recognized from the sale of advertising, subscriptionsand direct sales of some of the publications. We believe that the focusedaudience of each publication is an important factor in attracting advertisers.

 

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

 

| **Publication**                                           | ** ** | **2005  Circulation** | ** ** | **Issues Published  Annually** | ** ** |
|-----------------------------------------------------------|------------|-----------------------|------------|--------------------------------|------------|
| ** **                                                |       |                  |       |                           |       |
| **PAID CIRCULATION MAGAZINES (1)**                        |       |                  |       |                           |       |
| American Rider                                            |       | 60,111                |       | 6                              |       |
| ATV Sport                                                 |       | 48,557                |       | 10                             |       |
| Bass &  Walleye Boats                                 |       | 65,351                |       | 9                              |       |
| Camping Life                                              |       | 84,617                |       | 7                              |       |
| MotorHome                                                 |       | 143,198               |       | 12                             |       |
| Powerboat                                                 |       | 25,299                |       | 11                             |       |
| Rider                                                     |       | 125,458               |       | 12                             |       |
| SnowGoer                                                  |       | 64,810                |       | 7                              |       |
| Snow Week                                                 |       | 19,582                |       | 14                             |       |
| Trailer Boats                                             |       | 100,037               |       | 11                             |       |
| Trailer Life                                              |       | 271,059               |       | 12                             |       |
|                                                      |       |                  |       |                           |       |
| **CONTROLLED CIRCULATION- Business (2)**                  |       |                  |       |                           |       |
| Boating Industry                                          |       | 23,520                |       | 10                             |       |
| Campground  Management                                    |       | 14,317                |       | 12                             |       |
| PowerSports  Business                                     |       | 11,046                |       | 16                             |       |
| PowerSports  Business Directory/Market Data Book          |       | 13,358                |       | 1                              |       |
| RV Business                                               |       | 18,008                |       | 12                             |       |
|                                                      |       |                  |       |                           |       |
| **CONTROLLED CIRCULATION- Consumer (3)**                  |       |                  |       |                           |       |
| ATV Magazine                                              |       | 237,616               |       | 6                              |       |
| Cruising Rider                                            |       | 76,992                |       | 6                              |       |
| Snowmobile                                                |       | 475,490               |       | 1                              |       |
| Watercraft World                                          |       | 74,259                |       | 6                              |       |
|                                                      |       |                  |       |                           |       |
| **FREE DISTRIBUTION (4)**                                 |       |                  |       |                           |       |
| Thunder Press-  North                                     |       | 33,512                |       | 12                             |       |
| Thunder Press-  East                                      |       | 27,445                |       | 12                             |       |
| Thunder Press-  West                                      |       | 51,481                |       | 12                             |       |
| Woodall's  Specials                                       |       | 45,000                |       | 1                              |       |
| Woodall's  Regional News Tabloids                         |       | 92,703                |       | 12                             |       |
|                                                      |       |                  |       |                           |       |
| **ANNUALS (1)**                                           |       |                  |       |                           |       |
| Trailer Life  Campground/RV Park & Services Directory |       | 256,410               |       | 1                              |       |
| Trailer Life's  RV Buyers Guide                           |       | 107,045               |       | 1                              |       |
| Towing Guide                                              |       | 668,400               |       | 1                              |       |
| Ultimate  Snowmobile Buyers Guide                         |       | 153,912               |       | 1                              |       |
| Woodall's  Buyer's Guide                                  |       | 56,220                |       | 1                              |       |
| Woodall's  Campground Directory                           |       | 317,278               |       | 1                              |       |
| Woodall's  Tenting Directory                              |       | 30,496                |       | 1                              |       |
| Woodall's Go  & Rent Rent & Go (4)                |       | 102,000               |       | 1                              |       |
|                                                      |       |                  |       |                           |       |
| **CLUB MAGAZINES (6)**                                    |       |                  |       |                           |       |
| Coast to Coast  Magazine                                  |       | 114,196               |       | 8                              |       |
| Golf Traveler  (7)                                        |       | 58,329                |       | 4                              |       |
| Highways                                                  |       | 948,395               |       | 11                             |       |
| RV View                                                   |       | 612,236               |       | 4                              |       |

 

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*(1)**                              *Paid circulation, may include supplemental qualifiedcontrolled 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 promotional copies.The price is included in the membership fee.

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

 

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*Paid Circulation Magazines*

 

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

 

*ATV Sport* was introduced in May1998 and targets recreational and racing sport quad riders.

 

*Bass and Walleye Boats*is dedicated to freshwater fishing boat owners who demand top performance fromtheir boats, engines and accessories.

 

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

 

*MotorHome* is 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 a leadingperformance boating magazine which was founded in 1968 and acquired by us in2005. This magazine focuses on performance boats, engines, as well as racecoverage. The magazine is well known for its “Performance Trials,” regarded asone of the industry’s most comprehensive and authoritative testing programswhile boasting some of the marine industry’s finest photography and writing.

 

*Rider* is a monthly magazine formotorcycle touring enthusiasts and has been published since 1974. Each issuefocuses on motorcycles, personalities, technical subjects, travel notes andother features of interest to this recreational affinity group.

 

*SnowGoer* is designed for highlyactive snowmobiling participants and provides detailed equipment and productcritiques, and maintenance tips.

 

*Snow Week* is the central sourceof information for the competition and high-performance snowmobiling marketsegment. The publication provides timely, year-round articles on racing,performance enhancing products, technical assistance, new productintroductions, and general industry information.

 

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

 

*Trailer Life*, initially publishedin 1941, is the leading consumer magazine for the RV industry, featuringarticles on subjects including product tests, travel and tourist attractions.

 

#### *Controlled CirculationMagazines- Business*

#### * *

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

 

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

 

*PowerSports Business*is anindustry trade magazine, introduced in January 1998, which combines the previouslyissued *Snowmobile Business* and *Watercraft Business* with a motorcycle and ATV businesssection. Distribution is to dealers servicing these industries, which innumerous cases have combined operations to service more than one of thesesegments.

 

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*PowerSports Directories* aresupplier directories for each of the ATV, snowmobile and watercraft markets. Thesedirectories feature hundreds of manufacturers and suppliers of parts, services,apparel and much more, complete with detailed company information.

 

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

 

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

##### * *

*ATV Magazine’s*first issue was published in October 1995. The publication is designed toreach large numbers of active ATV owners with comprehensive product informationduring the peak periods when equipment is purchased.

 

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

 

*Snowmobile*magazine delivers broad-based editorial and snowmobile-related information toits audience of active snowmobile enthusiasts.

 

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

 

#### *Free Distribution Publications*

#### * *

###### *Thunder Press*newspapers are published monthly in three separateeditions to reach the country’s motorcycling public and are available primarilythrough motorcycle dealers. This tell-it-like-it-is magazine is designed forthe ultra-active motorcycle enthusiast who feels passionate about thelifestyle.

###### * *

*Woodall’s Specials* are annualpublications geared around specific events, such as the beginning of thecamping season and the beginning of the snowbird season. Its editorial contentis aimed at seasonal events and the ads are largely from regional campgrounds.

 

*Woodall’s Regional News Tabloids*publications are designed to appeal to the prospective or first-time RV owner. Storiesin these publications cover area campgrounds and RV dealerships, as well as newvehicles on the market and new products within the industry. The publicationsare primarily distributed at campgrounds and RV parks, as well as at RV showsand state welcome centers.

 

#### *Annual Publications*

#### * *

*Trailer Life Campground/ RV Park & ServicesDirectory*, initially published in 1972, is an annuallyupdated directory which provides information on and ratings for approximately 12,000public and private campgrounds, approximately 800 RV service centers, and almost800 tourist attractions in North America along with color maps of the areascovered. The publication features Good Sam Parks that offer discounts onovernight camping fees to our club members. This directory is sold primarily bydirect mail to Good Sam Club members, at RV dealerships and in bookstores. In2000, we began issuing a version of the directory on CD-ROM.

 

*Trailer Life’s RV Buyers Guide*, issued annually, features more than 400listings with photos, floor plans and specifications on new RVs includingtravel trailers, fifth-wheel trailers, folding camping trailers, motorhomes andpickup campers. The publication is sold at newsstands and by mail order frommagazine advertisements.

 

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The*TowingGuide*is a booklet dedicated to meeting the needs of all camping andboating enthusiasts that are towing a trailer. This booklet serves as astep-by-step tutorial for newcomers and a refresher course for trailer-towingveterans to ensure that maximum enjoyment of their trailer by making informeddecisions.

 

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

 

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

 

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

 

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

 

*Woodall’s Go & Rent... Rent& Go* is anannual catalog providing information on where to find on-site lodging and cabinrentals at RV Parks & Campgrounds and “Over-the-Road” RV Rentals, as wellas fully equipped campsites throughout the U.S.A. and Canada. This bookfeatures “turn-key” camping experiences for those who want to try camping, renta cabin, or rent a fully-equipped campsite.

 

#### *Club or Trade Magazines andBooks*

#### * *

Each of our membership clubs has its own publication which providesinformation on club activities and events, feature stories and other articles. Wepublish *Highways* for the Good Sam Club, *Coast to Coast Magazine* for the Coast to Coast Club, *The Golf Traveler* for the Golf Card Club, and*RV View* for the President’s Club. We also periodicallypublish books targeted to our club membership which address the RV lifestyle.

 

#### *Consumer Shows*

#### * *

We currently operate 18 consumer outdoorrecreation shows primarily focused on RV and powersports markets. Three of theshows were acquired with the purchase of ARU, Inc. in 2004 and twelve wereacquired from Royal Productions, Inc. in December 2005. These shows provide uswith the opportunity to reach new customers and interact with them on aface-to-face basis. Revenues are recognized from the sale of exhibitor boothspace and admission fees.

 

**Retail**

 

#### *Camping World Supercenters*

#### * *

Camping World is a national specialty retailer of merchandise andservices for RV owners. With the opening of our two newest Camping Worldsupercenters in the fourth quarter of 2005, we currently operate 44 CampingWorld retail locations in 24 states. These stores accounted for approximately74% of the 2005 total retail revenue in merchandise revenues, whileapproximately 16% were derived from catalog and Internet sales andapproximately 10% were derived from non-merchandise revenues such as shop fees,and supplies.

 

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In the RV accessory industry, we believe that Camping World has a highlevel of name recognition, an effective triple channel distribution strategy(store, catalog, and Internet), and a commitment to offer a broad selection ofspecialized RV products and services at competitive prices combined withtechnical assistance and on-site installation. Camping World’s supercentersoffer approximately 8,000 SKUs, most of which are not regularly available ingeneral merchandise stores. The Camping World supercenters also provideinstallation and repair services for RV products, which are not available atgeneral 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. ManyCamping World stores feature resource centers, staffed with licensed insuranceagents who market such products and services as vehicle insurance, extendedwarranty and ERS. Camping World’s supercenters are designed to provide one-stopshopping by combining broad product selection, technical assistance and on-siteinstallation services. We strategically locate Camping World supercenters inareas where many RV owners live, along major Interstates, and/or in proximityto destinations frequented by RV users.

 

Camping World sources its products from approximately 1,100 vendors. CampingWorld attends regional, national and international trade shows to determine theproducts it will offer. The purchasing activities of Camping World are focusedon RV parts and accessories, electronics, housewares, hardware, automotive,crafts, clothing, home furnishings, gifts, camping and sporting goods. CampingWorld uses an automated “plan-o-gram” system to develop and maintainmerchandising plans unique to each supercenter and an inventory replenishmentsystem for its operations to improve in stock rates 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. Camping World does not enter into material long-termcontracts or commitments with their vendors.

 

The retail supercentersare periodically reset to enhance the customers shopping experience as well asto maximize merchandise category offerings. New products and services areintroduced in order to keep pace with the advances of the RV industry and tosatisfy our customers’ needs. Customers take advantage of the state-of-the artperformance centers staffed with expert RV technical consultants and equippedwith demonstrable merchandise to assist in educating customers about RVperformance products. The resource centers provide an opportunity to promoteservice offerings in a more interactive and consultative selling environment. Theyare staffed with professionals marketing insurance products, extendedwarranties, roadside service, club memberships, and RV financing, which productofferings add to the depth of services that Camping World customers have becomeaccustomed to receiving at our supercenters. Finally, store dress, promotionalsignage and directional signage are periodically refreshed to further enhanceour customers’ shopping experience at Camping World’s supercenters.

 

Camping World’s supercenters generally range in size from approximately10,000 to 64,000 square feet. Approximately 40% of each supercenter is devotedto a retail sales floor, a customer service area, and a technical informationcounter; 40% is comprised of the installation facility, which contains 4 to 16drive-through installation bays; and 20% is allocated to office and warehousespace. Large parking areas provide sufficient space and facilitate maneuveringof RVs. By combining broad product selection, technical assistance,installation and repair services, Camping World’s supercenters provide one-stopshopping for RV owners. Camping World maintains toll-free telephone numbers forcustomers to schedule installation and repair appointments. All supercentersare open seven days a week.

 

Camping World intends tocontinue the controlled expansion of their supercenter store network while atthe same time develop dealer partnerships across North America. We plan to establishadditional Camping World stores alongside or within existing RV dealerships. Thismarketing strategy will provide an expanded number of customers with access tothe vast array of products and services that we offer

 

14

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and generate traffic forour dealer partners by marketing locally, regionally and nationally ourextensive parts and accessories business. Currently we operate 25 Camping Worldstores alongside or within RV dealerships, including 17 Camping World storesthat are part of our dealer alliance program. Of the Camping World stores thatare part of our dealer alliance program, 14 are located within dealershipsindirectly owned or operated by FreedomRoads, LLC, (“FreedomRoads”). FreedomRoadsis indirectly owned and controlled by Stephen Adams, our Chairman.

 

#### *Mail Order Operations andInternet*

#### * *

Camping World initiated its catalog operations in 1967. Camping Worldcurrently has a proprietary mailing list of approximately 2.4 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 thesenames, which includes information such as order frequency, size of order, dateof most recent order and type of merchandise purchased. Camping World analyzesits database to determine those customers most likely to order from CampingWorld’s catalogs. As a result, Camping World is able to target catalog mailingsmore effectively than direct marketers of catalogs offering general merchandise.Camping World continually expands its proprietary mailing list through in-storesubscriptions and requests for catalogs in response to advertisements inregional publications directed to RV owners. In addition, Camping World rentsmailing lists of RV owners from third parties.

 

During 2005, Camping World distributed 7.1 million catalogs, 5.9million of which were mailed in twelve separate mailings, and the remaining 1.2million catalogs were distributed in supercenters, at campgrounds and other RVlocations, and as package inserts. During the same period, Camping Worldprocessed approximately 336,000 catalog orders at an average net order size of$113, excluding postage and handling charges. Camping World distributed elevenhigh-quality, full-color catalogs during 2005, consisting of ten catalogs plusa Master Catalog in the Spring of 2005.

 

The Internet has proven to be a significant,low-cost source for new club members, subscriptions and other ancillary productsales. We maintain thirty-nine Internet web sites, which are accessible through*http://www.rv.net*, and are experiencingsignificant growth. In 2000, our club operations commenced a low-cost marketingstrategy through e-mail membership acquisition campaigns. Members added in 2005under these programs represented approximately 20.3% of all new club members. E-mailacquisition campaigns and Internet online revenue totaled approximately $32.1million in 2005, an increase of 23.6% over prior year.

 

**Marketing**

 

Wemarket our club memberships and related products and services through directmail, e-mail, inserts, ride-alongs, space advertisements, promotional events,point of sale, member-get-a-member campaigns, and telemarketing. Directresponse marketing efforts account for approximately 48% of new enrollmentswith the remaining 52% derived from other sources. We use a variety ofcommercially available mailing lists of RV owners in our direct mail efforts. Currently,the most widely used list databases are provided by three commercial listcompilers, and direct response lists are from RV industry participants, RVconsumer surveys, and proprietary in-house lists.

 

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

 

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

 

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**Operations**

** **

Our customer service operations are located in Denver, Colorado andBowling Green, Kentucky. The primary focus of these groups is to manage ourcustomers’ expectations and relationship with the organization. On average,these member service operations process approximately 6,900 telephone callsdaily. Approximately fifty percent of the calls originate from the marketingefforts of catalog mailings, membership acquisition, membership renewals andassociated ancillary products and events. All such efforts use toll-freenumbers as a response mechanism.

 

Camping World’s catalog, internet and fulfillment operations arelocated in Franklin, Kentucky. Fulfillment operations involve the processing oforders and checks principally received by mail. Orders are usually processedand shipped within 24 hours of receipt. Certain fulfillment operations areperformed by third parties. Our publication operations develop the layout forpublications and outsource printing to third parties.

 

**Information Support Services**

 

Weutilize integrated computer systems to support our membership club andpublishing operations. A database containing all customer activity across ourvarious businesses and programs has been integrated into our web sites and callcenters. Comprehensive information on each member, including a profile of thepurchasing activities of members, is available to customer servicerepresentatives when responding to member requests and when marketing ourproducts and services. We employ publishing software for publication makeup andcontent, and for advertising to support our publications operations. Awide-area network facilitates communication within 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.

 

CampingWorld’s management information systems and electronic data processing systemsconsist of an extensive range of retail, mail order, financial andmerchandising systems, including purchasing, inventory distribution andcontrol, sales reporting, accounts payable and merchandise management. CampingWorld’s management information system includes point-of-sale registers that areequipped with bar code readers in each supercenter. These registers are pollednightly by a central computer. With this point-of-sale information and theinformation from Camping World’s on-line distribution centers, Camping Worldcompiles comprehensive data, including detailed sales volume and inventoryinformation by product, merchandise transfers and receipts, special orders,supply orders and returns of product purchases to vendors. In conjunction withits nightly polling, Camping World’s central computer sends price changes toregisters at the point of sale. The registers capture President’s Club membernumbers and associated sales and references to specific promotional campaigns. Managementmonitors the performance of each supercenter and mail order operation toevaluate inventory levels, determine markdowns and analyze gross profit marginsby product.

 

CampingWorld’s catalog operations also utilize a computerized management systemallowing on-line desktop access to information which previously required manualretrieval. Screen prompts that provide product, promotional, and revenuepotential information have allowed Camping World to maintain high servicelevels during seasonal sales peaks.

 

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**Regulation**

 

Our operations are subject to varying degrees of federal, state andlocal 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, are currently subject to certain regulation,and may be subjected to increased regulation in the future. We do not believethat such federal, state and local regulations currently have a material impacton our operations. However, new regulatory efforts impacting our operations maybe proposed from time to time in the future at the federal, state and locallevel. There can be no assurance that such regulatory efforts will not have amaterial adverse effect on our ability to operate our businesses or on ourresults of operations.

 

**Competition**

 

In general, our membership clubs, retail and catalog operations andpublications compete with numerous organizations in the recreation industry fordisposable income spent on leisure activities. By offering significantmembership benefits at a reasonable cost and actively marketing to clubmembers, we believe that we have been able to maintain a loyal following for ourmembership organizations as evidenced by the high renewal rates of ourmembership clubs. The products and services marketed by us compete with similarproducts and services offered by other providers. However, management believesthat we are able to use the large volume of purchases by our club members tosecure attractive pricing for the products and services marketed by us.

 

**Employees**

 

As of December 31, 2005, we had 1,705 full-time and 137 part-time orseasonal employees, consisting of 8 executives, 1,174 employees in retailoperations, 391 employees in administrative and club operations, 218 employeesin publishing and advertising sales, 11 employees in resort services and 40employees in marketing. No employees are covered by a collective bargainingagreement. We believe that our employee relations are good.

 

**Trademarks and Copyrights**

 

We own a variety of registered trademarks and service marks for thenames of our clubs, magazines and other publications. We also own thecopyrights to certain articles in our publications. We believe that ourtrademark and copyrights have significant value and are important to ourmarketing efforts.

 

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**ITEM 1A:  RISK FACTORS**

 

Therisks described below are not the only risks we face. Any of the followingrisks could materially adversely affect our business, financial condition orresults of operations. Additional risks and uncertainties not currently knownto us, or that we currently deem to be immaterial, may also materiallyadversely affect our business operations.

 

**RisksRelating to our Debt**

 

*Oursubstantial indebtedness could adversely affect our financial health.*

 

Wehave a significant amount of indebtedness. As of December 31, 2005, our totaldebt  and total stockholder’s deficitwere $412.7 million and $152.5 million, respectively. We are a holding companyand do not have any operations. We are dependent on our operating subsidiariesfor cash flow in the form of dividend distributions. However, our subsidiariesare and may in the future be restricted from making dividend distribution to us.In the future, we intend to use cash generated by operations of oursubsidiaries that is distributed to us as a dividend to reduce our indebtedness.However, we may from time to time, subject to restrictions imposed by the termsof our indebtedness, pay dividends or find it more advantageous to employ cashgenerated by operations for capital investments and acquisitions.

 

Ourability to satisfy our debt service obligations depends primarily on ouroperating performance. Future debt repayments by us, including the principalamount of the notes, may require funds in excess of our available cash flow. Wecannot assure our investors that we will be able to raise additional funds, ifnecessary, through future financings. The indentures pursuant to which the 9%Senior Subordinated Notes due 2012 (“AGI Senior Notes”) and the 10-7/8% AGHISenior Notes due 2012 (“AGHI Notes”) were issued impose several restrictionsupon us, including restrictions on our ability to incur additional indebtednessand pledge assets.

 

Oursubstantial indebtedness could have important consequences to our investors. Forexample, it could: (i) increase our vulnerability to general adverse economicand industry conditions, (ii) require us to dedicate a substantial portion ofour cash flow from operations to payments on our indebtedness, thereby reducingthe availability of our cash flow to fund working capital, capitalexpenditures, expansion through acquisitions and other general corporatepurposes, (iii) limit our flexibility in planning for, or reacting to, changesin our business and the industry in which we operate, (iv) place us at acompetitive disadvantage compared to our competitors that have less debt, and(v) limit our ability, among other things, to borrow additional funds.

 

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

 

Despiteour current level of debt, we or our subsidiaries may be able to incursubstantial additional debt in the future. AGI’s Amended and Restated CreditAgreement (“AGI Senior Credit Facility”) will permit total borrowings of up to$138.7 million. Although the terms of the indenture governing the terms of theAGI Senior Credit Facility, the indenture governing the AGI Senior Notes (the “AGIIndenture”) and the indenture governing our AGHI Notes (the “AGHI Indenture”)will restrict us and our restricted subsidiaries from incurring additional debt,these restrictions are subject to important exceptions and qualifications. Ifwe or our subsidiaries incur additional debt, the risks that we and they nowface as result of our leverage could increase.

 

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

 

18

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

 

Wecurrently conduct substantially all of our operations through our subsidiaries,and our subsidiaries generate substantially all of our operating income andcash flow. Our ability to pay our obligations under the AGHI Notes and anyother direct indebtedness depends on our ability to obtain cash dividends orother cash payments or obtain loans from our subsidiaries, which are separateand distinct legal entities that will have no obligations to pay any dividendsor to lend or advance us funds and that may be restricted from doing so bycontract, including other financing arrangements, charter provisions orapplicable legal or regulatory requirements, and our ability may also depend onthe financial condition and regulatory requirements of our subsidiaries. Inaddition, because we are a holding company, except to the extent that we havepriority or equal claims against our subsidiaries as a creditor, ourobligations under our AGHI Notes will be effectively subordinated to theobligations of our subsidiaries. Currently, the AGI Senior Credit Facility andthe AGI Indenture impose limitations on the ability of our subsidiaries to makedividend distributions or loans to us.

 

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

 

TheAGHI Indenture, AGI Indenture, and the credit agreement for the AGI Senior CreditFacility include a number of significant restrictive covenants. These covenantsrestrict, among other things, our ability to: (i) incur more debt, (ii) paydividends or make other distributions, (iii) make investments, (iv) issue stockof subsidiaries, (v) repurchase stock, (vi) create liens, (vii) enter intotransactions with affiliates, (viii) enter into sale-leaseback transactions,(ix) merge or consolidate, and (x) transfer and sell assets.

 

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

 

TheAGI Senior Credit Facility contains additional and more restrictive covenantsthan the terms of the AGI Indenture, including financial covenants that requireus to achieve certain financial and operating results and maintain compliancewith specified financial ratios. Our ability to comply with these covenants andrequirements may be affected by events beyond our control, and we may have tocurtail some of our operations and growth plans to maintain compliance.

 

Ifwe are not able to comply with the covenants and other requirements containedin the AGHI Indenture, the AGI Indenture, the AGI Senior Credit Facility or ourother debt instruments, an event of default under the relevant debt instrumentcould occur. Our ability to comply with the provisions of the indentures, theAGI Senior Credit Facility and the agreements or indentures governing otherdebt we may incur in the future could be affected by events beyond our controland, therefore, we might be unable to meet those ratios and conditions. If anevent of default does occur, it could trigger a default under our other debtinstruments, we could be prohibited from accessing additional borrowings, andthe holders of the defaulted debt could declare amounts outstanding with respectto that debt to be immediately due and payable. We cannot assure our investorsthat our assets or cash flow would be sufficient to fully repay borrowingsunder our outstanding debt instruments or that we would be able to refinance orrestructure the payments of these debt instruments. Even if we were able tosecure additional financing, it may not be available on terms favorable to us.

 

19

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

 

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

 

Wecannot assure our investors that our business will generate sufficient cashflow from operations or that future borrowings will be available to us under theAGI Senior Credit Facility in an amount sufficient to enable us to pay ourindebtedness, including the notes, as it becomes due or to fund our other liquidityneeds. If our future cash flow from operations and other capital resources areinsufficient to pay our obligations as they mature or to fund our liquidityneeds, we may be forced to reduce or delay our business activities and capitalexpenditures, sell assets, sell additional shares of capital stock orrestructure or refinance all or a portion of our debt, including the notes, onor before its maturity. We cannot assure our investors that we will be able torefinance any of our indebtedness, including the AGI Senior Credit Facility, theAGI Senior Notes and the AGHI Notes, on satisfactory terms or at all.

 

Ourfailure to comply with our obligations under the AGI Indenture, the AGHIIndenture or the credit agreement for the AGI Senior Credit Facility may resultin an event of default under those debt instruments. A default, if not cured orwaived, may permit acceleration of our other indebtedness. We cannot be certainthat we will have funds available to remedy these defaults. If our indebtednessis accelerated, we cannot be certain that we will have sufficient fundsavailable to pay the accelerated indebtedness or that we will have the abilityto refinance the accelerated indebtedness on terms favorable to us or at all.

 

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

 

Uponthe occurrence of certain specific kinds of change of control events, we willbe required to offer to repurchase all outstanding AGHI Notes at 101% of theprincipal amount thereof plus accrued and unpaid interest and liquidateddamages, if any, to the date of repurchase. However, it is possible that wewill not have sufficient funds at the time of the change of control to make anyrequired repurchases or that the AGI Senior Credit Facility or AGI Indenturewill not allow such repurchases or permit the dividend or loan of sufficientfunds to us to make the required repurchases. If we do not repay all borrowingsunder the AGI Senior Credit Facility and the AGI Indenture or obtain theconsent of AGI’s lenders and holders of the AGI Notes to permit distribution offunds to us to repurchase the AGHI Notes, we will be prohibited from purchasingthe AGHI Notes. Our failure to purchase tendered notes would constitute adefault under the indenture governing the AGHI Notes. In addition, certainimportant corporate events relating to our capital structure would notconstitute a “change of control” under the indenture.

 

**RisksRelating to Our Business**

 

*Wedepend on our ability to attract and retain active members.*

 

Ourfuture success depends in large part upon continued demand for our membershipclub programs by consumers. Any number of factors could affect the frequencywith which consumers participate in our programs or whether they enroll in amembership club at all. These factors include (1) consumer taste preferences,(2) the frequency with which members participate in club activities, (3)general economic conditions, (4) weather conditions, and (5) the availabilityof alternative discount programs in the region in which consumers live and work.Any significant decline in usage or increase in

 

20

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programcancellations, without a corresponding increase in new member enrollments,could have a material adverse effect on our business.

 

Ourfuture growth depends upon continued demand for our membership clubs fromconsumers we serve or seek to serve. A significant downturn in leisure travelor in any of the other areas served by our membership clubs would have amaterial adverse effect on our business, financial condition and results ofoperations.

 

*Wedepend on our relationships with our marketing partners and a disruption ofthese relationships or of our marketing partners’ operations could have anadverse effect on our business and results of operations.*

 

Ourbusiness depends in part on developing and maintaining productive relationshipswith providers of products and services that we offer to our customers. Manyfactors outside our control may harm these relationships. For example,financial difficulties that some of our marketing partners may face mayadversely affect our marketing program with them. A disruption of ourrelationships with our marketing partners or a disruption in our marketingpartners’ operations could have a material adverse effect on our business andresults of operations.

 

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

 

Ingeneral, our membership clubs, retail and catalog operations and publicationscompete with numerous organizations in the recreation industry for disposableincome spent on leisure merchandise and activities. The products and services wemarket compete with similar products, services, publications and retailbusinesses offered by other providers. Increased competition from these andother sources could require us to respond to competitive pressures byestablishing pricing, marketing and other programs or seeking out additionalstrategic alliances or acquisitions that may be less favorable to us than wecould otherwise establish or obtain.

 

*Ourbusiness could be adversely affected by deteriorating general economicconditions.*

 

Ouractivities relate significantly to the amount of leisure time and the amount ofdisposable income available to users of our products and services. Ourbusiness, therefore, may be sensitive to general economic conditions affectingthe willingness of consumers to purchase club memberships and related productsand services and of advertisers to place advertisements in our publications. Inparticular, during the gasoline shortages and resulting price increases in1973, 1980 and 1990, there was a reduction in advertising revenues for ourpublications. In addition, the success of the membership club portion of ourbusiness depends on our members’ use of certain RV sites and/or golf courses orthe purchase of goods through participating merchants. If the economy slows,our members may perceive that they have less disposable income to permit themto pursue leisure activities. As a consequence, they may travel lessfrequently, spend less when they travel and use the benefits of their clubmemberships less often, if at all. Any decline in program usage would hurt ourbusiness. In addition, a decline in the national economy could cause some ofthe merchants who participate in our programs to go out of business. It islikely that, should the number of merchants entering bankruptcy rise, thenumber of uncollectible accounts would also rise. This would have an adverseeffect on our business and financial results.

 

*Theinterests of our principal shareholder may conflict with the interests ofholders of the debt instruments.*

 

Weare a wholly-owned subsidiary of AGI Holding Corp. (“AGHC”), a privately heldcompany.

 

21

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StephenAdams, our Chairman, owns approximately 97.4% of the outstanding shares of AGHC.Accordingly, Mr. Adams will be able to elect our Board of Directors and tocontrol matters submitted to the vote of our shareholders. Circumstances mayoccur in which the interests of Mr. Adams could be in conflict with theinterests of the holders of our debt instruments and lenders. For example, Mr.Adams may have an interest in pursuing acquisitions, divestitures or othertransactions that, in his judgment, could enhance the value of his equityinvestment, even though such transactions may involve risks to the holders of ourdebt instruments and lenders.

 

*We aresubject to varying degrees of federal, state and local regulations which mayaffect our operations.*

 

Ouroperations are subject to varying degrees of federal, state and localregulation. Our outbound telemarketing, direct mail, ERS program, insurance andthrift and loan activities are currently subject to regulation. Specifically, aprincipal source of leads for our direct response marketing efforts was newvehicle registrations provided by motor vehicle departments in various states. Currently,all states restrict access to motor vehicle registration information. California,the state with the largest number of members of our clubs, discontinuedproviding access to motor vehicle registration information in 1989. Directresponse marketing costs could significantly increase as a result of this legislation.

 

Inaddition to the existing regulatory framework, new regulatory efforts affectingour operations may be proposed from time to time in the future at the federal,state and local level. There can be no assurance that such regulatory effortswill not have a material adverse effect on our ability to operate ourbusinesses or our results of operations.

 

Ourdirect marketing operations are subject to various federal and state “do notcall” list requirements. The Federal Trade Commission has created a national “donot call” registry. Under these federal regulations, consumers may have theirphone numbers added to the national “do not call” registry. Generally, we areprohibited from calling anyone on that registry. In September 2003,telemarketers were granted access to the registry and are now required tocompare their call lists against the national “do not call” registry at leastonce every 90 days. We also are required to pay a fee to access the registry ona quarterly basis. Enforcement of the “do not call” provisions began in late2003, and the rule provides for fines of up to $11,000 per violation and otherpossible penalties. These rules limit our ability to market our products andservices to new customers. Furthermore, we may incur penalties if we do notconduct our marketing activities in compliance with these rules.

 

*Increasein paper costs, postage costs and shipping costs may have an adverse impact onour future financial results.*

 

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

 

*If weare unable to retain senior executives and attract and retain other qualifiedemployees, our business might be adversely affected.*

 

Oursuccess depends in part on our ability to attract, hire, train and retainqualified managerial, sales and marketing personnel. Competition for thesetypes of personnel is high. We may be unsuccessful in attracting and retainingthe personnel we require to conduct our operations successfully and, in such anevent, our business could be materially and adversely affected. Our

 

22

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successalso depends to a significant extent on the continued service and performanceof our senior management team. The loss of any member of our senior managementteam could impair our ability to execute our business plan and could thereforehave a material adverse effect on our business, results of operations andfinancial condition.

 

**ITEM 2:  PROPERTIES**

 

We lease all of the realproperties where we have operations. Our real property leases generally providefor fixed monthly rentals with annual escalation clauses. The table below setsforth certain information concerning our properties and the lease expirationdate 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           |       |       |       | 2006                  |       |
| 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                  |       |
| Bowling Green  Headquarters Annex                                                           | ** ** | 4,100            |       |       |       | 2006                  |       |
| Seattle, WA  (regional publication sales office)                                            | ** ** | 912              |       |       |       | 2007                  |       |
| Elkhart, IN  (regional publication sales office)                                            | ** ** | 4,076            |       |       |       | 2008                  |       |
| Chesterfield, VA  (shows sales office)                                                      | ** ** | 5,900            |       |       |       | 2008                  |       |
| Maple Grove, MN  (Ehlert Publications Group, Inc. headquarters)                             | ** ** | 17,496           |       |       |       | 2010                  |       |
| Earth City, MO  (information systems functions)                                             |       | 1,769            |       |       |       | 2006                  |       |
|                                                                                        |       |             |       |       |       |                  |       |
| **Distribution  Centers:**                                                                  |       |             |       |       |       |                  |       |
| Bakersfield,  California                                                                    |       | 85,747           |       | 14.827     |       | 2037                  |       |
| Franklin,  Kentucky                                                                         |       | 175,000          |       | 33.000     |       | 2035                  |       |
|                                                                                        |       |             |       |       |       |                  |       |
| **Camping  World Supercenter Locations:**                                                   |       |             |       |       |       |                  |       |
| Dothan, AL (1)                                                                              |       | 18,906           |       | 11.275     |       | 2025                  |       |
| Tucson, AZ                                                                                  |       | 12,145           |       | 2.000      |       | 2018                  |       |
| Mesa, AZ                                                                                    |       | 27,500           |       | 3.140      |       | 2010                  |       |
| Bakersfield, CA (2)                                                                         |       | 23,325           |       | 9.940      |       | 2023                  |       |
| La Mirada, CA                                                                               |       | 33,479           |       | 5.501      |       | 2037                  |       |
| San Marcos, CA                                                                              |       | 25,522           |       | 2.212      |       | 2027                  |       |
| Fairfield, CA                                                                               |       | 43,434           |       | 3.780      |       | 2009                  |       |
| Rocklin, CA                                                                                 |       | 29,085           |       | 4.647      |       | 2037                  |       |
| San Bernardino,  CA                                                                         |       | 18,126           |       | 1.665      |       | 2012                  |       |
| San Martin, CA                                                                              |       | 29,486           |       | 5.000      |       | 2023                  |       |
| Valencia, CA                                                                                |       | 64,410           |       | 9.231      |       | 2037                  |       |
| Denver, CO                                                                                  |       | 27,085           |       | 4.132      |       | 2037                  |       |
| Ft. Myers, FL                                                                               |       | 22,886           |       | 4.217      |       | 2012                  |       |
| Kissimmee, FL..                                                                             |       | 58,382           |       | 6.043      |       | 2037                  |       |
| Tampa, FL                                                                                   |       | 40,334           |       | 3.711      |       | 2026                  |       |
| Tallahassee, FL (1)                                                                         |       | 8,494            |       | 12.630     |       | 2024                  |       |
| Bolingbrook, IL                                                                             |       | 25,126           |       | 5.299      |       | 2035                  |       |

 

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| ** **             | ** ** | **Square  Feet** | ** ** | **Acres** | ** ** | **Lease  Expiration** | ** ** |
|------------------------|------------|------------------|------------|-----------|------------|-----------------------|------------|
| Clarksville, IN (2)    |       | 19,480           |       | 6.291     |       | 2034                  |       |
| Elkhart, IN (1).       |       | 25,953           |       | 2.500     |       | 2034                  |       |
| Bowling Green,  KY     |       | 37,615           |       | 2.750     |       | 2037                  |       |
| Hammond, LA (2)        |       | 27,096           |       | 68.454    |       | 2034                  |       |
| Belleville, MI.        |       | 44,248           |       | 7.260     |       | 2037                  |       |
| Rogers, MN             |       | 24,700           |       | 3.606     |       | 2025                  |       |
| Statesville, NC (1)    |       | 39,050           |       | 7.412     |       | 2024                  |       |
| Bridgeport, NJ         |       | 24,581           |       | 6.920     |       | 2031                  |       |
| Amsterdam, NY (2)      |       | 13,420           |       | 28.000    |       | 2033                  |       |
| Hamburg, NY (1)        |       | 13,095           |       | 6,553     |       | 2025                  |       |
| Henderson, NV          |       | 25,850           |       | 4.400     |       | 2025                  |       |
| Brunswick, OH (1)      |       | 23,233           |       | 4.087     |       | 2038                  |       |
| Oklahoma City,  OK (2) |       | 12,500           |       | 8.219     |       | 2023                  |       |
| Wilsonville, OR        |       | 32,850           |       | 4.653     |       | 2016                  |       |
| Myrtle Beach, SC       |       | 38,962           |       | 5.410     |       | 2037                  |       |
| Spartanburg, SC (1)    |       | 11,900           |       | 19.263    |       | 2033                  |       |
| Chattanooga, TN (1)    |       | 9,400            |       | 10.840    |       | 2024                  |       |
| Nashville, TN          |       | 34,478           |       | 3.238     |       | 2037                  |       |
| Anthony, TX (1)        |       | 7,061            |       | 32.000    |       | 2035                  |       |
| Denton, TX             |       | 22,984           |       | 6.887     |       | 2037                  |       |
| Katy, TX (1)           |       | 25,913           |       | 38.861    |       | 2025                  |       |
| New Braunfels,  TX (1) |       | 43,397           |       | 19.100    |       | 2035                  |       |
| Mission, TX            |       | 23,094           |       | 3.430     |       | 2015                  |       |
| Draper, UT             |       | 27,675           |       | 8.031     |       | 2026                  |       |
| Manassas, VA (2)       |       | 16,348           |       | 9.754     |       | 2018                  |       |
| Burlington, WA (1)     |       | 23,033           |       | 6.500     |       | 2025                  |       |
| Fife, WA               |       | 35,659           |       | 5.840     |       | 2032                  |       |

 

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(1)            This supercenter is leasedfrom a FreedomRoads dealership and the acreage reflects the total dealershipproperty.

 

(2)            This supercenter islocated with an RV dealership (other than a FreedomRoads dealership) and theacreage reflects the total dealership property.

 

We also lease a body shop of 10,500 square feet on approximately 0.7acres in Denver, Colorado, a body shop of 12,000 square feet on approximately1.9 acres in Bellville, Michigan and other miscellaneous office equipment. Inaddition, we own 12.439 acres of unimproved land adjacent to the New Braunfels,Texas Camping World Supercenter.

 

**ITEM 3:  LEGAL PROCEEDINGS**

** **

From time to time, the Company is involved inlitigation arising in the normal course of business operations.

 

In September 2004, the Company’s subsidiary,CWI, Inc., was sued in California state court by Privacy Rights Clearinghouseand Benjamin Greene (the “Plaintiffs”) in a suit alleging that CWI, Inc. wasrecording personal identification information from retail customers inviolation of certain California statutes. The plaintiff sought injunctiverelief preventing CWI, Inc. from engaging in any act or practice constitutingunfair competition under the statutes and for statutory penalties and damages. CWI,Inc. responded to the suit and denied that its practices violate the statutes. Withoutadmitting liability or wrongdoing, CWI, Inc. and the Plaintiffs entered into aSettlement Agreement which was given final approval by the court on December16, 2005.

24

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The terms of the Settlement Agreement were not material.

 

**ITEM4:  SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS**

 

None.

 

**PART II**

 

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

 

Not Applicable

 

25

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**ITEM 6: SELECTED FINANCIAL DATA**

 

Theselected financial data of our company for each of the five years endedDecember 31 are derived from our audited consolidated financial statements. AGHIwas formed on March 2, 2005, at which time all of the stock of Affinity Group,Inc, (“AGI”) was contributed to AGHI from its parent, AGI Holding Corp. (“AGHC”),a privately-owned corporation. On April 27, 2004, AGI’s previous parent,Affinity Group Holding, Inc. (“AGH”) was merged into AGI, with AGI being thesurviving entity after the merger. The merger was accounted for as acombination of entities under common control using historical costs. Prior toApril 27, 2004, AGI was a wholly-owned subsidiary of Affinity Group Holding,Inc. (“AGH”). All periods have been restated to reflect the results ofoperations of AGI and AGH, prior to the April 27, 2004 merger. Our selectedfinancial data should be read in conjunction with “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” and our ConsolidatedFinancial Statements and the notes thereto included herein.

 
| ** **                                                                             | ** **   | **December 31,**           | ** **   |
|----------------------------------------------------------------------------------------|--------------|----------------------------|--------------|
| *** ***                                                                           | *** *** | **(dollars in thousands)** | *** *** |
| **Statement of Operations Data:**                                                      | ** **   | **2005**                   | ** **   | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| REVENUES:                                                                              |         |                       |         |   |   |   |   |   |   |   |   |
| Membership  services                                                                   |         | $                          | 133,756      |   | $ | 131,608 |   | $ | 128,664 |   | $ | 124,546 |   | $ | 119,958 |   |
| Publications                                                                           |         | 79,122                     |         | 77,977 |   | 71,436 |   | 66,654 |   | 65,150 |   |
| Retail                                                                                 |         | 272,682                    |         | 255,094 |   | 225,306 |   | 239,922 |   | 220,264 |   |
|                                                                                   |         | 485,560                    |         | 464,679 |   | 425,406 |   | 431,122 |   | 405,372 |   |
| COSTS APPLICABLE  TO REVENUES:                                                         |         |                       |         |   |   |   |   |   |   |   |   |
| Membership  services                                                                   |         | 85,551                     |         | 84,231 |   | 79,500 |   | 74,097 |   | 72,944 |   |
| Publications                                                                           |         | 53,855                     |         | 53,042 |   | 48,392 |   | 45,351 |   | 46,175 |   |
| Retail                                                                                 |         | 162,363                    |         | 151,196 |   | 136,137 |   | 158,265 |   | 148,244 |   |
|                                                                                   |         | 301,769                    |         | 288,469 |   | 264,029 |   | 277,713 |   | 267,363 |   |
|                                                                                   |         |                       |         |   |   |   |   |   |   |   |   |
| GROSS PROFIT                                                                           |         | 183,791                    |         | 176,210 |   | 161,377 |   | 153,409 |   | 138,009 |   |
|                                                                                   |         |                       |         |   |   |   |   |   |   |   |   |
| OPERATING  EXPENSES:                                                                   |         |                       |         |   |   |   |   |   |   |   |   |
| Selling, general  and administrative                                                   |         | 121,353                    |         | 116,137 |   | 104,066 |   | 101,608 |   | 86,050 |   |
| Restructuring  charge                                                                  |         | —                     |         | — |   | 1,210 |   | 2,269 |   | — |   |
| Goodwill  impairment                                                                   |         | 4,344                      |         | — |   | — |   | — |   | — |   |
| Depreciation and  amortization                                                         |         | 15,919                     |         | 13,893 |   | 10,298 |   | 9,893 |   | 16,404 |   |
|                                                                                   |         | 141,616                    |         | 130,030 |   | 115,574 |   | 113,770 |   | 102,454 |   |
|                                                                                   |         |                       |         |   |   |   |   |   |   |   |   |
| INCOME FROM  OPERATIONS                                                                |         | 42,175                     |         | 46,180 |   | 45,803 |   | 39,639 |   | 35,555 |   |
|                                                                                   |         |                       |         |   |   |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                                                                  |         |                       |         |   |   |   |   |   |   |   |   |
| Interest  expense, net                                                                 |         | (32,240                    | )            | (23,239 | ) | (18,123 | ) | (16,862 | ) | (24,234 | ) |
| Debt  extinguishment expense                                                           |         | —                     |         | (5,035 | ) | (3,218 | ) | — |   | (71 | ) |
| Other  non-operating income (expense), net                                             |         | (5                         | )            | 420 |   | 201 |   | (44 | ) | (6,574 | ) |
|                                                                                   |         | (32,245                    | )            | (27,854 | ) | (21,140 | ) | (16,906 | ) | (30,879 | ) |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE |         | 9,930                      |         | 18,326 |   | 24,663 |   | 22,733 |   | 4,676 |   |
|                                                                                   |         |                       |         |   |   |   |   |   |   |   |   |
| INCOME TAX  EXPENSE                                                                    |         | (4,291                     | )            | (8,075 | ) | (9,275 | ) | (9,032 | ) | (4,110 | ) |
|                                                                                   |         |                       |         |   |   |   |   |   |   |   |   |
| INCOME FROM  OPERATIONS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE                  |         | 5,639                      |         | 10,251 |   | 15,388 |   | 13,701 |   | 566 |   |
|                                                                                   |         |                       |         |   |   |   |   |   |   |   |   |
| CUMULATIVE  EFFECT OF ACCOUNTING CHANGE                                                |         | —                     |         | — |   | — |   | (1,742 | ) | — |   |
|                                                                                   |         |                       |         |   |   |   |   |   |   |   |   |
| NET INCOME                                                                             |         | $                          | 5,639        |   | $ | 10,251 |   | $ | 15,388 |   | $ | 11,959 |   | $ | 566 |   |

 

26

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| ** **                           | ** **   | **December 31,**           | ** **   |
|--------------------------------------|--------------|----------------------------|--------------|
| *** ***                         | *** *** | **(dollars in thousands)** | *** *** |
| ** **                           | ** **   | **2005**                   | ** **   | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| Balance Sheet  Data (at period end): |         |                       |         |   |   |   |   |   |   |   |   |
| Working capital  (deficiency)        |         | $                          | (6,448       | ) | $ | (10,813 | ) | $ | (25,770 | ) | $ | (39,820 | ) | $ | (55,585 | ) |
| Total assets                         |         | 418,895                    |         | 320,222 |   | 302,862 |   | 285,960 |   | 305,622 |   |
| Deferred  revenues and gains (1)     |         | 98,920                     |         | 99,130 |   | 98,410 |   | 94,475 |   | 96,162 |   |
| Total debt                           |         | 412,664                    |         | 314,336 |   | 240,127 |   | 223,001 |   | 228,316 |   |
| Total stockholder's  deficit         |         | (152,469                   | )            | (158,108 | ) | (88,905 | ) | (87,548 | ) | (76,349 | ) |
|                                      |              |                            |              |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)Deferred revenues represent cash received by us in advance of the recognitionof revenues in accordance with accounting principles generally accepted in theUnited States. Deferred revenues primarily reflect club membership dues, annualERS fees, advances on third party credit card fee revenues and publicationsubscriptions. These revenues are recognized at the time the goods or servicesare provided or over the membership period, which averages approximately 18months. The deferred revenue balance for 2005, 2004, 2003, 2002 and 2001 alsoinclude deferred gains of $10.3 million, $10.8 million, $11.3 million, $11.8million and $12.1 million, respectively, from the real estate sale-leasebacktransactions which occurred in December 2001.

 

27

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**ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATION**

 

Thefollowing tables set forth the components of the statements of operations forthe years ended December 31, 2005, 2004, and 2003 as a percentage of totalrevenues, and the comparison of those components from period to period. Thefollowing discussion is based on our Consolidated Financial Statements includedelsewhere herein. Our revenues are derived principally from membershipservices, including club membership dues and marketing fees paid to us forservices provided by third parties, from publications, including subscriptionsand advertising, and from retail sales.

 
| ** **                                  | ** ** | **Percentage of  Total Revenues** | ** ** | **Percentage Increase/  (Decrease)** | ** ** |
|---------------------------------------------|------------|-----------------------------------|------------|--------------------------------------|------------|
| ** **                                  | ** ** | **2005**                          | ** ** | **2004**                             | ** ** | **2003** | ** ** | **Year 2005  over 2004** | ** ** | **Year 2004  over 2003** | ** ** |
| REVENUES:                                   |       |                              |       |                                 |       |   |   |   |   |   |   |
| Membership  services                        |       | 27.5                              | %          | 28.3                                 | %          | 30.2 | % | 1.6 | % | 2.3 | % |
| Publications                                |       | 16.3                              | %          | 16.8                                 | %          | 16.8 | % | 1.5 | % | 9.2 | % |
| Retail                                      |       | 56.2                              | %          | 54.9                                 | %          | 53.0 | % | 6.9 | % | 13.2 | % |
|                                        |       | 100.0                             | %          | 100.0                                | %          | 100.0 | % | 4.5 | % | 9.2 | % |
| COSTS APPLICABLE  TO REVENUES:              |       |                              |       |                                 |       |   |   |   |   |   |   |
| Membership  services                        |       | 17.6                              | %          | 18.1                                 | %          | 18.7 | % | 1.6 | % | 6.0 | % |
| Publications                                |       | 11.1                              | %          | 11.4                                 | %          | 11.4 | % | 1.5 | % | 9.6 | % |
| Retail                                      |       | 33.4                              | %          | 32.6                                 | %          | 32.0 | % | 7.4 | % | 11.1 | % |
|                                        |       | 62.1                              | %          | 62.1                                 | %          | 62.1 | % | 4.6 | % | 9.3 | % |
| GROSS PROFIT                                |       | 37.9                              | %          | 37.9                                 | %          | 37.9 | % | 4.3 | % | 9.2 | % |
|                                        |       |                              |       |                                 |       |   |   |   |   |   |   |
| OPERATING  EXPENSES:                        |       |                              |       |                                 |       |   |   |   |   |   |   |
| Selling, general  and administrative        |       | 25.0                              | %          | 25.0                                 | %          | 24.4 | % | 4.5 | % | 11.6 | % |
| Restructuring  charge                       |       | —                            |       | —                               |       | 0.3 | % | — |   | (100.0 | )% |
| Goodwill  impairment                        |       | 0.9                               | %          | —                               |       | — |   | 100.0 | % | — |   |
| Depreciation and  amortization              |       | 3.3                               | %          | 3.0                                  | %          | 2.4 | % | 14.6 | % | 34.9 | % |
|                                        |       | 29.2                              | %          | 28.0                                 | %          | 27.1 | % | 8.9 | % | 12.5 | % |
| INCOME FROM  OPERATIONS                     |       | 8.7                               | %          | 9.9                                  | %          | 10.8 | % | (8.7 | )% | 0.8 | % |
|                                        |       |                              |       |                                 |       |   |   |   |   |   |   |
| NON-OPERATING  ITEMS:                       |       |                              |       |                                 |       |   |   |   |   |   |   |
| Interest income                             |       | 0.2                               | %          | 0.2                                  | %          | 0.2 | % | 40.5 | % | (6.7 | )% |
| Interest  expense, net                      |       | (6.9                              | )%         | (5.2                                 | )%         | (4.4 | )% | 38.8 | % | 26.7 | % |
| Debt  extinguishment expense                |       | —                            |       | (1.1                                 | )%         | (0.8 | )% | (100.0 | )% | 56.5 | % |
| Other  non-operating (expense) income, net  |       | —                            |       | 0.1                                  | %          | — |   | (101.2 | )% | 109.0 | % |
|                                        |       | (6.7                              | )%         | (6.0                                 | )%         | (5.0 | )% | 15.8 | % | 31.8 | % |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES |       | 2.0                               | %          | 3.9                                  | %          | 5.8 | % | (45.8 | )% | (25.7 | )% |
|                                        |       |                              |       |                                 |       |   |   |   |   |   |   |
| INCOME TAX  EXPENSE                         |       | (0.8                              | )%         | (1.7                                 | )%         | (2.2 | )% | (46.9 | )% | (12.9 | )% |
|                                        |       |                              |       |                                 |       |   |   |   |   |   |   |
| NET INCOME                                  |       | 1.2                               | %          | 2.2                                  | %          | 3.6 | % | (45.0 | )% | (33.4 | )% |

 

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

 

*Revenues*

 

Revenuesof $485.6 million for 2005 increased by approximately $20.9 million or 4.5%from the comparable period in 2004.

 

Membershipservices revenues for 2005 of $133.8 million increased by approximately $2.2million or 1.6% from 2004. This revenue increase was largely attributable to a$4.6 million increase in extended vehicle warranty program revenue due tocontinued growth in the sales of one-year renewable warranty products, and a$1.3 million increase in ERS revenue attributable to increased enrollment,partially offset by a $1.5 million reduction in membership services revenueprimarily associated with reduced enrollment in the Coast to Coast Club andGolf Card Club, a $1.4 million reduction in marketing fee income recognized onRV financing products, and a $0.8 million decrease in dealer marketing programrevenue.

 

Publicationsrevenues for 2005 of $79.1 million increased by approximately $1.1 million or1.5% from 2004. This increase was primarily attributable to a $1.4 millionrevenue increase due to the acquisition of *Powerboat Magazine*in May 2005, a $1.4 million increase associated with the acquisition of threeconsumer shows, acquired through the acquisition of ARU Inc. (“ARU”) inDecember 2004, and a $0.7 million increase in advertising revenue for therecreational vehicle related titles, partially offset by a $2.0 million revenuereduction due to the disposition of archery-related publication titles in thethird quarter of 2004, and a $0.4 million decrease due to a reduction in thenumber of issues of *Snowmobile Magazine*.

 

Retailrevenue for 2005 of $272.7 million increased $17.6 million or 6.9% from 2004. Storemerchandise sales increased $17.9 million over 2004 primarily due to a $14.1million revenue increase from the addition of eleven new stores over the pasttwo years. Same store sales increased $3.8 million, or 2.1%, compared to an11.0% increase in 2004. Same store sale calculations for a given period includeonly those stores that were open both at the end of that period and at thebeginning of the preceding fiscal year. In addition, installation fees, suppliesand service revenue increased by $0.8 million from 2004 to 2005. Theseincreases were partially offset by a $1.1 million decrease in mail order sales.

 

*Costs Applicable to Revenues*

 

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

 

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

 

Publication costs and expenses of $53.9 million for 2005increased $0.8 million or 1.5% compared to 2004. This increase was primarilyattributable to the recently acquired operations of the *PowerboatMagazine* and ARU consumer shows. This increase was partially offsetby a reduction in costs due to the sale of archery-related publication titlesin the third quarter of 2004.

 

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

 

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*Operating Expenses*

 

Selling,general and administrative expenses of $121.4 million for 2005 increased $5.2million or 4.5% over 2004. The increased selling, general and administrativeexpenses resulted primarily from increased retail selling, labor and othergeneral and administrative expenses of $6.0 million, partially offset by a $0.5million decrease in executive compensation and a $0.3 million decrease in othercorporate general and administrative expenses. The $4.3 million non-cashgoodwill impairment charge was based on the estimate of the fair value of theGolf Card Club primarily using projected discounted cash flows as determined inconjunction with the Company’s impairment review of goodwill in the fourthquarter of 2005. Depreciation and amortization expenses of $15.9 million were$2.0 million higher than in 2004 due primarily to increased capitalexpenditures at Camping World, the amortization of intangible assets associatedwith the purchase of ARU and Powerboat magazine and the amortization offinancing costs associated with the AGHI Notes.

 

*Income from Operations*

 

Incomefrom operations of $42.2 million for 2005 decreased $4.0 million or 8.7%compared to 2004. This decrease was attributable to increased operatingexpenses of $11.6 million, which included the $4.3 million non-cash goodwillimpairment charge, partially offset by increased gross profit in the retail,membership services and publications operations of $6.4 million, $0.9 millionand $0.3 million, respectively.

 

*Non-Operating Items*

 

Netnon-operating items for 2005 were approximately $32.2 million, a $4.4 millionincrease from 2004. This increase was primarily attributable to $9.3 million ofadditional interest expense from higher interest rates and higher loan balancesassociated with the issuance of the $200.0 million in 9% senior subordinatednotes in 2004 and the AGHI Notes in March 2005, and a $0.4 million reduction innet gains on sales of various assets partially offset by $5.0 million reductionin debt extinguishment expense associated with the redemption in 2004 of theAffinity Group Holding, Inc. (“AGH”) Senior Notes and a $0.3 million increasein interest income.

 

*Income before Income Taxes*

 

Incomebefore income taxes for 2005 was $9.9 million, or 45.8% less than 2004. This$8.4 million decrease from the prior year was attributable to the $4.0 milliondecrease in income from operations mentioned above, the increase in netinterest expense of approximately $9.0 million and the $0.4 million reduction in net gain on salesof various assets, partiallyoffset by the $5.0 million decrease in debt extinguishment expenses.

 

*Income Tax*

 

Incometaxes for 2005 of $4.3 million decreased $3.8 million from 2004 primarily dueto lower pretax income. The effective tax rates for 2005 and 2004 were 43.2%and 44.1%, respectively. The effective tax rate for 2005 is higher than thestatutory rate due primarily to state sales taxes, and a permanent differencecreated as a result of the goodwill impairment charge. These increases werepartially offset by a reduction in the valuation allowance due to the ultimaterealization of the asset related to the charitable contribution carryover. Theeffective tax rate for 2004 was higher than the statutory rate due to statetaxes and the permanent differences created as a result of the write-off ofbook goodwill on the sale of archery-related publication assets in August 2004.

 

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*Net Income*

 

Thenet income for 2005 was $5.6 million compared to $10.3 million for 2004.

 

*Segment Profit*

 

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

 

Membership services segment profit of $37.7million in 2005 decreased by $2.1 million, or 5.4% from $39.8 million in 2004. Thisdecrease was primarily attributable to a $4.0 million reduction in profit inthe Golf Card Club primarily related to the goodwill impairment, a $1.4 milliondecrease in profit from a reduction in marketing fee income from RV financingproducts, a $1.2 million increase in new product and club development efforts,a $0.2 million reduction in profit in the Good Sam Club member publication, *Highways Magazine*, due to increased production costs and a$0.2 million decrease in dealer program marketing profit. These decreases werepartially offset by a $2.6 million increase in profit associated with increasedenrollment and increased interest income for the ERS programs, a $1.4 millionincrease in profit in the extended vehicle warranty program and a $0.9 millionincrease in profit in the Coast to Coast Club primarily due to expensereductions.

 

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

 

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

 

**Year Ended December 31, 2004Compared with Year Ended December 31, 2003**

 

*Revenues*

 

Revenuesof $464.7 million for 2004 increased by approximately $39.3 million or 9.2%from the comparable period in 2003.

 

Membershipservices revenues for 2004 of $131.6 million increased by approximately $2.9million or 2.3% from 2003. This revenue increase was largely attributable to a$2.2 million increase in extended vehicle warranty program revenue due to continuedgrowth in the sales of one-year renewable warranty products, a $1.7 millionincrease in ERS revenue due to increased enrollment, and a $1.6 millionincrease in dealer marketing program revenue, partially offset by a $1.7million reduction in membership services revenue, primarily associated withreduced enrollment in the Coast to Coast Club and Golf Card Club, and a $0.9million reduction in marketing fee income recognized on RV financing products.

 

Publicationsrevenues for 2004 of $78.0 million increased by approximately $6.6 million or9.2% from 2003. This increase was primarily attributable to a $5.5 millionrevenue increase due to the acquisition of three publication titles from PoolePublications, Inc. in October 2003, a $0.9 million increase in sales ofthe annual RV directories, a $0.7 million increase in other ancillary productrevenue including ATV-related television revenues and other outdoor eventrevenues, and additional advertising revenue of approximately $0.5 million fromRV-related magazines. These increases were partially offset by a $1.0 millionrevenue reduction due to the sale of archery-related publication titles in thethird quarter of 2004.

 

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Retailrevenue for 2004 of $255.1 million increased $29.8 million or 13.2% from 2003. Thisincrease consisted of a $38.9 million increase in Camping World merchandisesales revenues partially offset by a $9.1 million decrease in RV sales. Theincrease in Camping World merchandise sales resulted primarily from a samestore sales increase of $16.5 million or 11.0%, and $12.5 million due to theaddition of six new retail stores. Same store sale calculations for a givenperiod include only those stores that were open both at the end of that period andat the beginning of the preceding fiscal year. The remaining net increase inmerchandise sales was attributable to a $5.9 million increase in mail ordersales and a $4.0 million increase in other installation fees, supplies andservices revenue. The $9.1 million decrease in RV sales is due to thedisposition of Camping World RV Sales, Inc. (“CWRV”) which was distributed tothe Company’s ultimate parent in the form of a non-cash dividend in October2003.

 

*Costs Applicable to Revenues*

 

Costs applicable to revenues totaled $288.5million in 2004, an increase of $24.4 million or 9.3% from 2003.

 

Membership services costs and expenses increased by approximately $4.7million or 6.0% to $84.2 million for 2004 compared to $79.5 million in 2003. This increase consisted of $1.5 million ofmarketing and program expenses associated with the increased enrollment in theextended vehicle warranty programs and ERS programs and a $0.8 million increasein membership services costs primarily associated with the introduction ofenhanced Coast to Coast Club member benefits including an online reservationsystem. In addition, dealer marketing program costs increased by $1.2 millionin conjunction with increased revenue, new business development expensesincreased $0.4 million, and other marketing expenses increased $0.8 millionprimarily due to marketing database enhancements and membership supportexpenses.

 

Publication costs and expenses of $53.0 million for 2004increased $4.6 million or 9.6% compared to 2003. This increase was primarilyattributable to the operations of the newly acquired publications**,** and costs associated withincreased annual directory revenues, the ATV-related television program andoutdoor events. These increases were partially offset by a reduction in costsdue to the sale of archery-related publication titles in the third quarter of2004 and the discontinuation of *REV* magazine in2003.

 

Retailcosts applicable to revenues increased $15.1 million or 11.1% to $151.2 milliondue to the increased store and mail order sales. The retail gross profit margin increased by$14.7 million, to 40.7% in 2004 from 39.6% in 2003 due primarily to theelimination of lower margin recreation vehicle sales as a result of thedivesture of CWRV in the fourth quarter of 2003.

 

*Operating Expenses*

 

Selling,general and administrative expenses of $116.1 million for 2004 increased $12.1million or 11.6% over 2003. The increased selling, general and administrativeexpenses resulted primarily from increased retail selling, labor and othergeneral and administrative expenses of $13.1 million, a $2.3 million increasein deferred executive compensation, and a $0.9 million increase in othercorporate general and administrative expenses. These increases were partiallyoffset by a $2.8 million reduction in executive compensation and reduced RVsales expenses of $1.4 million as a result of the divestiture of CWRV. Themanagement restructuring expense of $1.2 million in 2003 related to the retailsegment. Depreciation and amortization expenses of $13.9 million were $3.6million higher than in 2003 due primarily to increased capital expenditures atCamping World, and amortization of intangible assets associated with theacquisition of three titles from Poole Publications, Inc.

 

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*Income from Operations*

 

Incomefrom operations of $46.2 million for 2004 increased $0.4 million or 0.8%compared to 2003. This increase was attributable to increased gross profit inthe retail and publications operations of $14.7 million and $1.9 million,respectively, partially offset by reduced gross profit in the membershipservices operations of $1.8 million and increased operating expenses of $14.4million.

 

*Non-Operating Items*

 

Netnon-operating items for 2004 were approximately $27.9 million compared to $21.1million for 2003. This $6.7 million increase was primarily attributable to $5.1million of additional interest expense from higher loan balances associatedwith the issuance of the $200.0 million in 9% Senior Subordinated Notes onFebruary 18, 2004, and a $1.8 million increase in debt extinguishment expenseassociated with the redemption of the AGH Senior Notes due 2007 (“AGH Notes”),partially offset by a net gain of $0.2 million on sales of various assets.

 

*Income before Income Taxes*

 

Incomebefore income taxes for 2004 was $18.3 million, or 25.7% less than 2003. This$6.3 million decrease from the prior period was attributable to the increase innet interest expense of $5.1 million, a $1.8 million increase in debtextinguishment expenses, partially offset by the $0.4 million increase inincome from operations mentioned above and a net gain of $0.2 million on sales of variousassets.

 

*Income Tax*

 

Incometaxes for 2004 of $8.1 million decreased $1.2 million from 2003. The effectivetax rates for 2004 and 2003 were 44.1% and 37.6%, respectively. The effectivetax rate for 2004 is higher than the statutory rate due to state taxes and thepermanent differences created as a result of the write-off of book goodwill onthe sale of publication assets in August 2004. The effective tax rate for 2003is higher than the statutory rate due primarily to state taxes.

 

*Net Income*

 

Thenet income for 2004 was $10.3 million compared to $15.4 million for 2003.

 

*Segment Profit*

 

Segment profit of $60.0 million for 2004(before unallocated depreciation and amortization, general and administrative,interest, debt restructuring and income tax expense) increased by $0.8 million,or 0.1%, from 2003.

 

Membership services segment profit of $39.8million in 2004 decreased by $1.6 million, or 3.8% from $41.4 million in 2003. Thisdecrease was primarily attributable to a $2.7 million reduction in profit inthe Coast to Coast Club, a $0.9 million decrease in profit due to a reductionin marketing fee income from RV financing products, and a $0.6 million increasein database and new business development expenses. These decreases werepartially offset by a $1.6 million increase in profit associated with increasedenrollment and lower program expenses in the ERS programs, and a $1.0 millionincrease in profit in the extended vehicle warranty program.

 

Publication segment profit for 2004 of $19.9million increased by $0.9 million, or 4.8% from 2003. This increase wasprimarily attributable to the acquisition of three publication titles fromPoole Publications, Inc. in October 2003.

 

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Retail segment profit for 2004 of $0.3million increased by $1.4 million, or 123.2%, over 2003. The increased segmentprofit resulted primarily from a $14.7 million increase in gross profit marginpartially offset by an $11.7 million increase in selling, general andadministrative expenses and a $1.6 million increase in depreciation expense.

 

**Liquidity and Capital Resources**

 

We have historically operated witha working capital deficit. The working capital deficit as of December 31, 2005and 2004 was $6.4 million and $10.8 million, respectively. The primary reasonfor the working capital deficit is the deferred revenue and gains reportedunder current liabilities in the amount of $61.0 million and $57.7 million asof December 31, 2005 and 2004, respectively. Deferred revenue is primarilycomprised of cash collected for club memberships in advance which is deferredand recognized as revenue over the life of the membership. We use net proceedsfrom this deferred membership revenue to lower our long-term borrowings andfinance our working capital needs. We generated net cash**from operations of$17.1 million and $38.4 million, in2005 and 2004, respectively.

 

*Contractual Obligations andCommercial Commitments*

 

The following table reflects our contractualobligations and commercial commitments at December 31, 2005, in thousands. Thetable below includes principal and future interest due under our debtagreements based on interest rates as of December 31, 2005 and assumes debtobligations will be held to maturity.

 
| ** **                                      | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------------------|------------|----------------------------|------------|
| **(in thousands)**                              | ** ** | **Total**                  | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** |
| Long-term debt                                  |       | $                          | 629,188    |   | $ | 30,787 |   | $ | 29,262 |   | $ | 40,643 |   | $ | 142,265 |   | $ | 63,121 |   | $ | 323,110 |   |
| Operating lease  obligations                    |       | 137,379                    |       | 12,614 |   | 11,461 |   | 9,583 |   | 8,795 |   | 8,457 |   | 86,469 |   |
| Deferred  compensation                          |       | 5,999                      |       | 611 |   | 1,731 |   | 1,754 |   | 1,660 |   | 133 |   | 110 |   |
|                                            |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Other commercial  commitments Letters of credit |       | 7,523                      |       | 7,073 |   | 450 |   | — |   | — |   | — |   | — |   |
|                                            |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Grand total                                     |       | $                          | 780,089    |   | $ | 51,085 |   | $ | 42,904 |   | $ | 51,980 |   | $ | 152,720 |   | $ | 71,711 |   | $ | 409,689 |   |

 

On June 24, 2003, our wholly-owned subsidiary, Affinity Group, Inc. (“AGI”)entered into the Amended and Restated Credit Agreement and a Senior SecuredFloating Rate Note Purchase Agreement (“AGI Senior Credit Facility”) providingfor term loans (“Term Loans”) in the aggregate of $140.0 million and a revolvingcredit facility of $35.0 million. The AGI Senior Credit Facility provides for arevolving credit facility of $35.0 million and Term Loans of $140.0 million. InJune 2003, proceeds from the AGI Senior Credit Facility were used to refinancethe existing senior secured indebtedness, pay a dividend of $13.7 million toour ultimate parent AGI Holding Corp. and redeem $30.0 million principal amountof the AGH Notes at 103.667% of par in 2003. As of December 31, 2005, $111.2million was outstanding under the Term Loans. No borrowings were outstanding onthe revolving credit facility as of December 31, 2005. Reborrowings under theTerm Loans are not permitted. The interest on borrowings under the AGI SeniorCredit Facility is at variable rates based on the ratio of total cash flow tooutstanding indebtedness (as defined). Interest rates float with prime and theLondon Interbank Offered Rates, or LIBOR, plus an applicable margin rangingfrom 0.75% to 2.75% over the stated rates. As of December 31, 2005, the averageinterest rate on the Term Loans was 6.97%, and permitted borrowings under theundrawn revolving facility were $27.5 million. We also pay a

 

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commitment fee of 0.5% per annum on the unused amount of the revolvingcredit facility. The aggregate quarterly scheduled payments on the Term Loansare $350,000. The revolving credit facility matures on June 24, 2008, and theTerm 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 $12.5 million may be allocated to such letters of credit. As ofDecember 31, 2005, we had letters of credit in the aggregate amount of $7.5million outstanding. The AGI Senior Credit Facility is secured by virtually allof our assets and a pledge of our stock and the stock of our subsidiaries. Furtherthe AGI Senior Credit Facility requires the loans to be prepaid in an amountequal to 75% of the excess cash flow, as defined. The balance of the excesscash flow would be available for distribution. As of December 31, 2005, theCompany generated $1.7 million of excess cash flow, as defined and will prepaythe Term Loans in the first quarter of 2006, on a pro-rata basis, in inverseorder of maturity, per the agreement.

 

In February 2004, AGI issued $200.0 million aggregate principal amountof 9% Senior Subordinated Notes due 2012 (the “AGI Senior Notes”). The Companycompleted a registered exchange of the AGI Senior Notes under the SecuritiesAct of 1933 in August 2004. The proceeds from the sale of the AGI Senior Noteswere used to fund the tender offer and defeasance of the remaining $100.0million outstanding principal amount of the AGH Notes, prepay $25.0 million ofthe Term Loans under the AGI Senior Credit Facility, pay a $60.0 milliondividend distribution, create a $15.0 million segregated cash account, paycertain prepayment and transaction costs and for general corporate purposes. Theamount held in this segregated account, including any earnings thereon, wasavailable to pay stockholder dividends upon satisfaction of a leverage testspecified in the AGI Senior Credit Facility. In August and November of 2004, wesatisfied the specific leverage test and paid $3.6 million and $11.5 million individends, respectively.

 

In November 2004, we amended the AGI Senior Credit Facility dated June24, 2003. The interest rates on the Term Loans were reduced by 1.00%. Theapplicable interest margin was reduced from 4.00% to 3.00% and 3.00% to 2.00%for the LIBOR and Prime Rate loans, respectively. On November 13, 2005, wefurther amended the AGI Senior Credit Facility dated June 24, 2003 andterminated the Senior Secured Floating Rate Note Purchase Agreement dated as ofJune 24, 2003. All Term Loans under the Senior Secured Floating Rate NotePurchase Agreement were converted into Term Loans under the Credit Agreement. Inaddition, the interest rates on the Term Loans have been reduced by 0.50% andthe amendment provides for a further reduction of 0.25% at any time when theconsolidated total leverage ratio, as defined, for any period is less that 4.25to 1. The amendment also reduces the applicable interest margin from 3.00% to2.50% and 2.00% to 1.50% for the LIBOR and Prime Rate loans, respectively.

 

The AGI Senior Credit Facility and the AGI Indenture contain certainrestrictive covenants relating to, but not limited to, mergers, changes in thenature of the business, acquisitions, additional indebtedness, sale of assets,investments, and the payment of dividends subject to certain limitations andminimum operating covenants. We were in compliance with all debt covenants atDecember 31, 2005.

 

In August 2004, Ehlert Publishing Group, Inc., a subsidiary of theCompany, sold certain publication assets for $4.2 million. We paid $0.2 millionin transaction fees and recorded a $3.6 million reduction in goodwill. As aresult of the sale, we reported a net gain of $0.4 million.

 

In December 2004, Ehlert Publishing Group, Inc. acquired the stock ofARU, Inc., a producer of consumer outdoor recreation shows. As part of thepurchase, the Company issued $0.7 million of purchase debt and assumed $0.4million of liabilities. Goodwill in the amount of $2.3 million was recordedupon the acquisition.

 

On March 24, 2005 in a private placement, the Company issued $88.2million principal amount of its 10-7/8% senior notes due 2012 (the “AGHI Notes”)at a $3.2 million original issue discount. The

 

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Company completed a registered exchange of the AGHI Notes under theSecurities 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 Notesis payable semi-annually on February 15 and August 15 commencing August 15,2005 and the entire $88.2 million principal amount of the AGHI Notes are due infull on February 15, 2012. For interest payments on and prior to February 15,2008, the Company may elect to pay interest on the AGHI Notes in cash or by theissuance of additional notes of the same tenor as the AGHI Notes. Anyadditional AGHI Notes issued in payment of interest are due in full on orbefore March 15, 2010. The AGHI Notes cannot be redeemed prior to February 15,2008. Although the only source of the cash payment of the AGHI Notes isdividends from AGI, there are certain restrictions on the payment of dividendsunder the AGI Senior Credit Facility and the AGI Indenture.

 

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 capitalcontribution in the same amount to its wholly-owned subsidiary, CWI, Inc. (“CWI”).CWI created a new wholly-owned subsidiary named CWFR Capital Corp., a Delawarecorporation (“CWFR”) which is an “unrestricted subsidiary” as defined under theAGHI Notes and the AGI Indenture. Since CWFR is an unrestricted subsidiary, itsoperations are not restricted by either the AGI Indenture or the AGHI Notes. CWImade an equity capital contribution to CWFR in an equal amount to the capitalcontribution that CWI received from Camping World. CWFR used the proceeds fromthe equity capital contribution to acquire a preferred membership interest inFreedomRoads Holding Company, LLC (“FreedomRoads Holding”), a Minnesota limitedliability company owned 90%by The Stephen Adams Living Trust which also indirectly owns 97.4% of theoutstanding capital stock of AGHC and indirectly AGI.

 

The preferred membership interest acquired byCWFR has a face amount of $88.2 million and is entitled to receive a preferredpayment from FreedomRoads Holding at 10-7/8% per annum when and as declared bythe Board of Governors of FreedomRoads from any source legally availabletherefor. Any portion of the preferred payment not paid will accumulate andwill be compounded semi-annually until paid. FreedomRoads Holding may redeemthe preferred membership interest upon the payment of $88.2 million plus theaccrued and unpaid preferred return to the date of redemption. FreedomRoadsHolding will be required to redeem the preferred membership interest at thatsame redemption price if there is a sale or reorganization of the membershipinterests of FreedomRoads Holding or a sale of substantially all of the assetsof FreedomRoads Holding. According to the terms of the preferred membershipinterest, FreedomRoads Holding cannot make distributions with respect tomembership interests other than (a) distributions with respect to the preferredmembership interest, (b) distributions for the members’ estimated taxliabilities from earnings of FreedomRoads Holding and (c) distributions in theaggregate not to exceed 50% of the amount of (i) FreedomRoads Holding’s netprofit for the period from January 1, 2005 through the end of the fiscalquarter next preceding the distribution date less (ii) the aggregate amount oftax distributions made during the period from January 1, 2005 through the endof the fiscal quarter next preceding the distribution date. CWFR may not sell,pledge or otherwise transfer the preferred membership interest. The preferredmembership interest does not provide CWFR with any voting rights inFreedomRoads Holding. The preferred membership interest in FreedomRoads Holdingis being carried at cost and is reviewed periodically for impairment.

 

In April 2005, Camping World, Inc. acquired the assets of a mail ordercatalog retailer specializing in recreational vehicle merchandise for $0.6million. In May 2005, the Ehlert Publishing Group, Inc. acquired the *Powerboat Magazine* title and related assets from NordskogPublishing, Inc. for $4.0 million. As part of the purchase, we issued $1.5million of debt and assumed $0.5 million of liabilities. In December 2005, AGIProductions, Inc., a subsidiary of Ehlert Publishing Group, Inc., acquired theconsumer outdoor recreation show assets of Royal Productions, Inc. for $8.5million. As part of the purchase, we issued $6.0 million of debt and assumed$1.8 million of liabilities.

 

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During 2005, we incurred $2.2 million of deferred executivecompensation expense under our phantom stock agreements and made payments of$1.5 million on mature phantom stock agreements. The earned incentives underthese agreements are scheduled to be paid at various times over the next sixyears. Phantom stock payments of $0.6 million are scheduled to**be made during 2006.

 

Capital expenditures for 2005 totaled $11.4 million compared to capitalexpenditures of $8.9 million in 2004. Capital expenditures are anticipated tobe approximately $10.8 million for 2006, primarily for new Camping World storesand equipment, information technology and databases enhancements, existingstore upgrades, inventory system replacement, and computer software upgradesand enhancements.

 

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

 

**Factors Affecting Future Performance**

 

Although increases in operating costs could adversely affect our operations,management does not believe that inflation has had a material effect onoperating profit during the past several years. However, fuel shortages andsubstantial increases in propane and gasoline costs could have a significantimpact on our travel-related membership services and publications revenues. Historicallysuch events have caused declines in advertisements but have not significantlyaffected club membership enrollment. We are unable to predict at what pointfluctuating fuel prices may begin to adversely impact revenues or cash flow. Webelieve we will be able to partially offset any cost increases with priceincreases to our members and certain cost reducing measures.

 

**Seasonality**

 

Our cash flow is highest in the summer months due to the seasonalnature of the retail segment, membership renewals and advertising prepaymentsfor the annual directories.

 

**Critical Accounting Policies**

 

*General*

 

Our discussion and analysis of our financial condition and results ofoperations is based upon our consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in theUnited States. The preparation of these financial statements requires us tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assetsand liabilities. On an on-going basis, we evaluate our estimates, includingthose related to membership programs and incentives, bad debts, inventories,intangible assets, employee health insurance benefits, income taxes,restructuring, contingencies and 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 theseestimates under different assumptions or conditions.

 

We believe the following critical accounting policies affect our moresignificant judgments and estimates used in the preparation of our consolidatedfinancial statements.

 

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*Revenue Recognition*

 

Merchandise revenue is recognized whenproducts are sold in the retail stores, shipped for mail and Internet orders,or when services are provided to customers. Emergency Road Service (“ERS”)revenues are deferred and recognized over the life of the membership. ERS claimexpenses are recognized when incurred. Royalty revenue is earned under theterms of an arrangement with a third party credit card provider based on apercentage of the Company’s outstanding credit card balances with such thirdparty credit card provider. Membership revenue is generated from annual,multi-year and lifetime memberships. The revenue and expenses associated withthese memberships are deferred and amortized over the membership period. Forlifetime memberships, an 18-year period is used, which is the actuariallydetermined estimated fulfillment period. Promotional expenses, consistingprimarily of direct mail advertising, are deferred and expensed over the periodof expected future benefit, typically three months based on historical actualresponse rates. Renewal expenses are expensed at the time related materials aremailed. Recognized revenues and profit are subject to revisions as themembership progresses to completion. Revisions to membership period estimateswould change the amount of income and expense amortized in future accountingperiods.

 

Newsstand sales of publications and relatedexpenses are recorded at the time of delivery, net of estimated provision forreturns. Subscription sales of publications are reflected in income over thelives of the subscriptions. The related selling expenses are expensed asincurred. Advertising revenues and related expenses are recorded at the time ofdelivery. Subscription and newsstand revenues and expenses related to annualpublications are deferred until the publications are distributed. Revenues andrelated expenses for consumer shows are recognized when the show occurs.

 

*Accounts Receivable*

 

We estimate the collectability of our trade receivables. A considerableamount of judgment is required in assessing the ultimate realization of thesereceivables including the current credit-worthiness of each customer. Changesin required reserves have been recorded in recent periods and may occur in thefuture due to the market environment.

 

*Inventory*

 

We state inventories at the lower of cost or market. In assessing theultimate realization of inventories, we are required to make judgments as tofuture demand requirements and compare that with the current or committedinventory levels. We have recorded changes in required reserves in recentperiods due to changes in strategic direction, such as discontinuances ofproduct lines as well as changes in market conditions due to changes in demandrequirements. It is possible that changes in required inventory reserves maycontinue to occur in the future due to the market conditions.

 

*Long-Lived Assets*

 

Purchased intangible assets with finite lives are amortized using thestraight-line method over the estimated economic lives of the assets, rangingfrom one to twenty-three years.

 

Long-lived assets, such as property, plant and equipment and purchasedintangible assets with finite lives are evaluated for impairment wheneverevents or changes in circumstances indicate the carrying value of an asset maynot be recoverable in accordance with SFAS No. 144, “Accounting for theImpairment or Disposal of Long-Lived Assets.” We assess the fair value of the assets based on the future cash flow theassets are expected to generate and recognize an impairment loss when estimatedundiscounted future cash flow expected to result from the use of the asset plusnet proceeds expected from disposition of the asset (if any) are less than thecarrying value of the asset. When an impairment is identified, we reduce thecarrying amount of the asset to its estimated fair value based on a

 

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discounted cash flow approach or, when available and appropriate,comparable market values. We determined there were no indicators of impairmentof long-lived assets as of December 31, 2005.

 

We have evaluated the remaining useful lives of our finite-livedpurchased intangible assets to determine if any adjustments to the useful liveswere necessary or if any of these assets had indefinite lives and weretherefore not subject to amortization. We determined that no adjustments to theuseful lives of our finite-lived purchased intangible assets were necessary. Thefinite-lived purchased intangible assets consist of membership customer lists,resort and golf course agreements, non-compete and deferred consultingagreements and deferred financing costs which have weighted average usefullives of approximately 6 years, 23 years, 15 years and 7 years, respectively.

 

*Indefinite Lived Intangible Assets*

 

Effective January 1, 2002, we adopted new accounting standards on “BusinessCombinations” and “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. As required by the new standards, theimpairment tests for goodwill and other indefinite-lived intangible assets areassessed for impairment using fair value measurement techniques. Specifically,goodwill impairment is determined using a two-step process. The first step ofthe goodwill impairment test is used to identify potential impairment bycomparing the fair value of a reporting unit with the net book value (orcarrying amount), including goodwill. If the fair value of the reporting unitexceeds the carrying amount, goodwill of the reporting unit is considered notimpaired and the second step of the impairment test is unnecessary. If thecarrying amount of the reporting unit exceeds the fair value, the second stepof the goodwill impairment test is performed to measure the amount ofimpairment loss, if any. The second step of the goodwill impairment testcompares the implied fair value of the reporting unit’s goodwill with thecarrying amount of that goodwill. If the carrying amount of the reporting unit’sgoodwill exceeds the implied fair value of that goodwill, an impairment loss isrecognized in an amount equal to that excess. The implied fair value 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. Theimpairment test for other intangible assets consists of a comparison of thefair value of the intangible asset with its carrying value. If the carrying valueof the intangible asset exceeds its fair value, an impairment loss isrecognized in an amount equal to that excess.

 

Determining the fair value of a reporting unit under the first step ofthe goodwill impairment test and determining the fair value of individualassets and liabilities of a reporting unit under the second step of thegoodwill impairment test is judgmental in nature and often involves the use ofsignificant estimates and assumptions. These estimates and assumptions couldhave a significant impact on whether or not an impairment charge is recognizedand 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 changesmay result in impairment charges recorded in future periods.

 

The fair value of our reporting units is annually determined using acombination of the income approach and the market approach. Under the incomeapproach, the fair value of a reporting unit is calculated based on the presentvalue of estimated future cash flows. Future cash flows are estimated by usunder the market approach, fair value is estimated based on market multiples ofrevenue or earnings for comparable companies.

 

Based on the results of the annual impairment tests, we recorded animpairment charge of $4.3 million in 2005 related to Golf Card InternationalCorp., which is included in the membership services segment.  During the current year, the number of Golf CardClub memberships decreased by approximately 10,000 members, consistent with theloss in members in 2004.  In 2004 weplanned to reduce the costs associated with the Golf Card Club to stabilize theoverall earnings.  In 2005 we determinedthat based on the reduced projected future cash flows as a result of reducedmembership, combined with the increasing incremental costs necessary to acquirenew members, the goodwill relating to Golf Card Club was impaired.

 

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Future goodwill impairment tests could result in an additional chargeto earnings. We will continue to evaluate goodwill on an annual basis andwhenever events and changes in circumstances indicate that there may be apotential impairment.

 

*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*

 

In2003, we recorded reserves in connection with the restructuring programprimarily within our retail segment. These reserves included estimatespertaining to employee separation costs and the settlements of contractualobligations resulting from our actions.

 

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

 

We are exposed to market risks relating to fluctuations in interestrates. Our objective of financial risk management is to minimize the negativeimpact of interest rate fluctuations on our earnings and cash flows. Interestrate risk is managed through the use of a combination of fixed and variableinterest debt as well as the periodic use of interest rate collar contracts.

 

The following informationdiscusses the sensitivity to our earnings. The range of changes chosen for thisanalysis reflects our view of changes which are reasonably possible over aone-year period. These forward-looking disclosures are selective in nature andonly address the potential impacts from financial instruments. They do notinclude other potential effects which could impact our business as a result ofthese interest rate fluctuations.

 

#### *Interest Rate SensitivityAnalysis*

#### * *

At December 31, 2005, we had debt totaling $412.7 million, comprised of$111.2 million of variable rate debt and $301.5 million of fixed rate debt. Holdingother variables constant (such as debt levels), the earnings and cash flowimpact of a one-percentage point increase/ decrease in interest rates wouldhave an unfavorable/ favorable impact of approximately $1.1 million.

 

#### *Credit Risk*

#### * *

We are exposed to credit risk on accounts receivable. We provide creditto customers in the ordinary course of business and perform ongoing creditevaluations. Concentrations of credit risk with respect to trade receivablesare limited due to the number of customers comprising our customer base. Wecurrently believe our allowance for doubtful accounts is sufficient to covercustomer credit risks.

 

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

 

*Statement of Cash Flows* - OnDecember 16, 2004, the FASB issued SFAS No. 123(R), which is a revision of SFASNo. 123. SFAS No. 123(R) supersedes APB No. 25, and amends SFAS No. 95, “Statementof Cash Flows.”  Generally the approachin SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However,SFAS No. 123(R) requires all share-based payments to employees, includinggrants of employee stock options, to be recognized in the income statement

 

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based on their fair values. Pro forma disclosure is no longer analternative. The statement will not impact the Company.

 

*Accounting Changes and Error Corrections*- In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and ErrorCorrections.”  SFAS No. 154 requiresretrospective application to prior periods’ financial statements of a voluntarychange in accounting principle and that a change in method of depreciation,amortization, or depletion for long-lived, nonfinancial assets be accounted foras a change in accounting estimate that is effected by a change in accountingprinciple. SFAS No. 154 is effective for accounting changes and corrections oferrors made in fiscal years beginning after December 15, 2005. We do notbelieve the adoption of SFAS No. 154 will have a material impact on our resultsof operations or financial condition.

 

*Accounting for Rental Costs Incurred during aConstruction Period* - On October 6, 2005, the FASB StaffPosition (“FSP”) issued FSP FAS 13-1, “Accounting for Rental Costs Incurredduring a Construction Period.”  FSP FAS13-1 requires rental costs associated with ground or building leases that areincurred during a construction period to be recognized as rental expense andincluded in income from continuing operations. The lessee shall allocate rentalcosts over the lease term following the guidance in SFAS No. 13, “Accountingfor Leases,” and FASB Technical Bulletin No. 85-3, “Accounting for OperatingLeases with Scheduled Rent Increases,” starting with the beginning of the leaseterm. FSP FAS 13-1 will become effective for us beginning in fiscal year 2006. Wedo not believe the adoption of FSP FAS 13-1 will have a material impact on ourresults of operations or financial condition.

 

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

 

Thisfiling contains statements that are “forward looking statements,” and includes,among other things, discussions of our business strategy and expectationsconcerning market position, future operations, margins, profitability,liquidity and capital resources, as well as statements concerning theintegrations of acquired operations and the achievement of financial benefitsand operational efficiencies in connection with 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 to business plans or strategies, projected oranticipated benefits or other consequences of such plans or strategies, thenumber of acquisitions and projected or anticipated benefits from acquisitionsmade by or to be made by us, or projections involving anticipated revenues,expenses, earnings, levels of capital expenditures or other aspects ofoperating results. All phases of our operations of are subject to a number ofuncertainties, risks and other influences, including consumer spending, fuelprices, general economic conditions, regulatory changes and competition, manyof which are outside our control, any one of which, or a combination of which,could materially affect the results of our operations and whether the forwardlooking statements made by us ultimately prove to be accurate.

 

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**ITEM8:  FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

 

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

 
|   | Report of Independent  Registered Public Accounting Firm                                                     |   |
|--------|--------------------------------------------------------------------------------------------------------------|--------|
|   |                                                                                                         |   |
|   | Consolidated  Balance Sheets as of December 31, 2005 and 2004                                                |   |
|   |                                                                                                         |   |
|   | Consolidated  Statements of Operations for the years ended December 31, 2005, 2004 and 2003                  |   |
|   |                                                                                                         |   |
|   | Consolidated  Statements of Stockholder’s Deficit for the years ended December 31, 2005,  2004 and 2003 |   |
|   |                                                                                                         |   |
|   | Consolidated  Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003                  |   |
|   |                                                                                                         |   |
|   | Notes to  Consolidated Financial Statements                                                                  |   |

 

All financial statementschedules have been omitted since the required information is included in theconsolidated financial statements, the notes thereto or because suchinformation is not applicable.

 

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**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

 
| To Board of Directors        |
|------------------------------|
| Affinity Group Holding, Inc. |

 

We have audited the accompanying consolidated balance sheets ofAffinity Group Holding, Inc. and its subsidiaries as of December 31, 2005 and2004, and the related consolidated statements of operations, stockholder’sdeficit and cash flows for each of the three years in the period ended December31, 2005. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted ouraudits in accordance with the standards of the Public Company AccountingOversight 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. An audit includes considerationof internal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Company’s internal controlover financial reporting. Accordingly, we express no such opinion. An auditalso includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, and evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, the financial statements referred to above presentfairly, in all material respects, the consolidated financial position ofAffinity Group Holding, Inc. and subsidiaries at December 31, 2005 and 2004,and the consolidated results of their operations and their cash flows for eachof the three years in the period ended December 31, 2005, in conformity withU.S. generally accepted accounting principles.

 
| February 10, 2006          | /s/ Ernst & Young LLP |   |
|----------------------------|---------------------------|--------|
| Woodland Hills, California |                      |

 

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**AFFINITYGROUP HOLDING, INC. AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

**DECEMBER31, 2005 AND 2004 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)**

 
| ** **                                                                                   | ** ** | **2005**   | ** ** | **2004**     | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------|------------|--------------|------------|
| ** **                                                                                   | ** ** | ** ** | ** ** | **(Note 1)** | ** ** |
| **ASSETS**                                                                                   | ** ** | ** ** | ** ** | ** **   | ** ** |
| CURRENT ASSETS:                                                                              |       |       |       |         |       |
| Cash and cash  equivalents                                                                   |       | $          | 25,061     |         | $          | 24,564 |   |
| Accounts  receivable, less allowance for doubtful accounts of $952 in 2005 and $810 in  2004 |       | 26,508     |       | 24,228       |       |
| Inventories                                                                                  |       | 47,039     |       | 42,463       |       |
| Prepaid expenses  and other assets                                                           |       | 11,218     |       | 11,383       |       |
| Deferred tax  assets, net                                                                    |       | 4,995      |       | 6,615        |       |
| Total current  assets                                                                        |       | 114,821    |       | 109,253      |       |
|                                                                                         |       |       |       |         |       |
| PROPERTY AND  EQUIPMENT, net                                                                 |       | 29,843     |       | 27,642       |       |
| INVESTMENT IN  AFFILIATE                                                                     |       | 81,005     |       | -            |       |
| NOTE FROM  AFFILIATE                                                                         |       | 4,722      |       | 4,752        |       |
| INTANGIBLE  ASSETS, net                                                                      |       | 37,724     |       | 27,716       |       |
| GOODWILL                                                                                     |       | 144,429    |       | 148,773      |       |
| DEFERRED TAX  ASSETS, net                                                                    |       | 4,620      |       | 323          |       |
| OTHER ASSETS                                                                                 |       | 1,731      |       | 1,763        |       |
| Total assets                                                                                 |       | $          | 418,895    |         | $          | 320,222 |   |
|                                                                                         |       |       |       |         |       |
| **LIABILITIES  AND STOCKHOLDER'S DEFICIT**                                                   |       |       |       |         |       |
| CURRENT  LIABILITIES:                                                                        |       |       |       |         |       |
| Accounts payable                                                                             |       | $          | 12,683     |         | $          | 16,511 |   |
| Accrued interest                                                                             |       | 6,897      |       | 6,857        |       |
| Accrued income  taxes                                                                        |       | 465        |       | 3,131        |       |
| Accrued  liabilities                                                                         |       | 34,094     |       | 34,230       |       |
| Deferred  revenues and gains                                                                 |       | 60,994     |       | 57,661       |       |
| Current portion  of long-term debt                                                           |       | 6,136      |       | 1,676        |       |
| Total current  liabilities                                                                   |       | 121,269    |       | 120,066      |       |
|                                                                                         |       |       |       |         |       |
| DEFERRED  REVENUES AND GAINS                                                                 |       | 37,926     |       | 41,469       |       |
| LONG-TERM DEBT,  net of current portion                                                      |       | 406,528    |       | 312,660      |       |
| OTHER LONG-TERM  LIABILITIES                                                                 |       | 5,641      |       | 4,135        |       |
|                                                                                         |       | 571,364    |       | 478,330      |       |
| COMMITMENTS AND  CONTINGENCIES                                                               |       |       |       |         |       |
|                                                                                         |       |       |       |         |       |
| STOCKHOLDER'S  DEFICIT :                                                                     |       |       |       |         |       |
| Common stock,  $.01 par value, 3,000 shares authorized, 100 shares issued and outstanding    |       | 1          |       | 1            |       |
| Accumulated  deficit                                                                         |       | (152,470   | )          | (158,109     | )          |
| Total  stockholder's deficit                                                                 |       | (152,469   | )          | (158,108     | )          |
| Total  liabilities and stockholder's deficit                                                 |       | $          | 418,895    |         | $          | 320,222 |   |

 

See notes toconsolidated financial statements.

 

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

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003 (IN THOUSANDS)**

 
| ** **                                  | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                        |       |     |       |     |       |     |       |
| REVENUES:                                   |       |     |       |     |       |     |       |
| Membership  services                        |       | $        | 133,756    |     | $          | 131,608  |       | $ | 128,664 |   |
| Publications                                |       | 79,122   |       | 77,977   |       | 71,436   |       |
| Retail                                      |       | 272,682  |       | 255,094  |       | 225,306  |       |
|                                        |       | 485,560  |       | 464,679  |       | 425,406  |       |
| COSTS APPLICABLE  TO REVENUES:              |       |     |       |     |       |     |       |
| Membership  services                        |       | 85,551   |       | 84,231   |       | 79,500   |       |
| Publications                                |       | 53,855   |       | 53,042   |       | 48,392   |       |
| Retail                                      |       | 162,363  |       | 151,196  |       | 136,137  |       |
|                                        |       | 301,769  |       | 288,469  |       | 264,029  |       |
|                                        |       |     |       |     |       |     |       |
| GROSS PROFIT                                |       | 183,791  |       | 176,210  |       | 161,377  |       |
|                                        |       |     |       |     |       |     |       |
| OPERATING  EXPENSES:                        |       |     |       |     |       |     |       |
| Selling, general  and administrative        |       | 121,353  |       | 116,137  |       | 104,066  |       |
| Restructuring  charge                       |       | —   |       | —   |       | 1,210    |       |
| Goodwill  impairment                        |       | 4,344    |       | —   |       | —   |       |
| Depreciation and  amortization              |       | 15,919   |       | 13,893   |       | 10,298   |       |
|                                        |       | 141,616  |       | 130,030  |       | 115,574  |       |
|                                        |       |     |       |     |       |     |       |
| INCOME FROM  OPERATIONS                     |       | 42,175   |       | 46,180   |       | 45,803   |       |
|                                        |       |     |       |     |       |     |       |
| NON-OPERATING  ITEMS:                       |       |     |       |     |       |     |       |
| Interest income                             |       | 1,061    |       | 755      |       | 809      |       |
| Interest expense                            |       | (33,301  | )          | (23,994  | )          | (18,932  | )          |
| Debt  extinguishment expense                |       | —   |       | (5,035   | )          | (3,218   | )          |
| Other  non-operating income (expense), net  |       | (5       | )          | 420      |       | 201      |       |
|                                        |       | (32,245  | )          | (27,854  | )          | (21,140  | )          |
|                                        |       |     |       |     |       |     |       |
| INCOME FROM  OPERATIONS BEFORE INCOME TAXES |       | 9,930    |       | 18,326   |       | 24,663   |       |
|                                        |       |     |       |     |       |     |       |
| INCOME TAX  EXPENSE                         |       | (4,291   | )          | (8,075   | )          | (9,275   | )          |
|                                        |       |     |       |     |       |     |       |
| NET INCOME                                  |       | $        | 5,639      |     | $          | 10,251   |       | $ | 15,388 |   |

 

See notes toconsolidated financial statements.

 

45

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

** **

**CONSOLIDATED STATEMENTS OF STOCKHOLDER’S DEFICIT**

**FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003**

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

 
| ** **                     | ** ** | **Common Stock** | ** ** | **Additional  Paid-in** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
|--------------------------------|------------|-----------------------|------------|-------------------------|------------|-----------------|------------|-------------|------------|
| ** **                     | ** ** | **Shares**            | ** ** | **Amount**              | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Total** | ** ** |
|                           |       |                  |       |                    |       |            |       |        |       |   |   |
| BALANCES AT  JANUARY 1, 2003   |       | 100                   |       | $                       | 1          |            | $          | 2,021       |       | $ | (89,570 | ) | $ | (87,548 | ) |
| Dividends                      |       | —                |       | —                  |       | (2,021          | )          | (14,724     | )          | (16,745 | ) |
| Net income                     |       | —                |       | —                  |       | —          |       | 15,388      |       | 15,388 |   |
| BALANCES AT  DECEMBER 31, 2003 |       | 100                   |       | 1                       |       | —          |       | (88,906     | )          | (88,905 | ) |
| Dividends                      |       | —                |       | —                  |       | —          |       | (79,454     | )          | (79,454 | ) |
| Net income                     |       | —                |       | —                  |       | —          |       | 10,251      |       | 10,251 |   |
| BALANCES AT  DECEMBER 31, 2004 |       | 100                   |       | 1                       |       | —          |       | (158,109    | )          | (158,108 | ) |
|                           |       |                  |       |                    |       |            |       |        |       |   |   |
| Net income                     |       | —                |       | —                  |       | —          |       | 5,639       |       | 5,639 |   |
| BALANCES AT  DECEMBER 31, 2005 |       | 100                   |       | $                       | 1          |            | $          | —      |       | $ | (152,470 | ) | $ | (152,469 | ) |

 

Seenotes to consolidated financial statements.

 

46

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

** **

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003 (INTHOUSANDS)**

 
| ** **                                                                         | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                             |       |     |       |     |       |     |       |
| Net income                                                                         |       | $        | 5,639      |     | $          | 10,251   |       | $ | 15,388 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |     |       |     |       |     |       |
| Goodwill  impairment                                                               |       | 4,344    |       | —   |       | —   |       |
| Deferred tax  provision (benefit)                                                  |       | (2,677   | )          | 2,274    |       | (122     | )          |
| Depreciation                                                                       |       | 9,194    |       | 8,433    |       | 6,380    |       |
| Amortization                                                                       |       | 6,725    |       | 5,460    |       | 3,918    |       |
| Provision for  losses on accounts receivable                                       |       | 521      |       | 585      |       | 1,611    |       |
| Deferred  compensation                                                             |       | 2,200    |       | 2,950    |       | 700      |       |
| Gain on sale of  property and equipment                                            |       | (2       | )          | (435     | )          | (210     | )          |
| Loss on early  extinguishment of debt                                              |       | —   |       | 5,035    |       | 3,218    |       |
| Non—cash  interest on AGHI Notes                                              |       | 7,507    |       | —   |       | —   |       |
| Accretion of  original issue discount                                              |       | 152      |       | —   |       | —   |       |
| Changes in  operating assets and liabilities (net of purchased businesses):        |       |     |       |     |       |     |       |
| Accounts  receivable                                                               |       | (2,765   | )          | 547      |       | (1,765   | )          |
| Inventories                                                                        |       | (4,475   | )          | (5,624   | )          | (5,033   | )          |
| Prepaid expenses  and other assets                                                 |       | 442      |       | (427     | )          | (1,060   | )          |
| Accounts payable                                                                   |       | (3,828   | )          | 3,800    |       | 1,663    |       |
| Accrued and  other liabilities                                                     |       | (3,456   | )          | 4,774    |       | (5,242   | )          |
| Deferred  revenues and gains                                                       |       | (2,454   | )          | 743      |       | 2,404    |       |
| Net cash  provided by operating activities                                         |       | 17,067   |       | 38,366   |       | 21,850   |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                             |       |     |       |     |       |     |       |
| Capital  expenditures                                                              |       | (11,371  | )          | (8,869   | )          | (10,810  | )          |
| Net proceeds  from sale of property and equipment                                  |       | 33       |       | 420      |       | 294      |       |
| Change in  intangible assets                                                       |       | (45      | )          | (22      | )          | (66      | )          |
| Investment in  affiliate                                                           |       | (81,005  | )          | —   |       | —   |       |
| Loans receivable—  affiliate                                                  |       | 30       |       | (8       | )          | (192     | )          |
| Sale of  publication assets                                                        |       | —   |       | 3,939    |       | —   |       |
| Acquisitions,  net of cash received                                                |       | (3,620   | )          | (2,599   | )          | (3,733   | )          |
| Net cash used in  investing activities                                             |       | (95,978  | )          | (7,139   | )          | (14,507  | )          |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                             |       |     |       |     |       |     |       |
| Dividends paid                                                                     |       | —   |       | (75,096  | )          | (13,700  | )          |
| Borrowings on  long-term debt                                                      |       | 85,005   |       | 200,000  |       | 181,976  |       |
| Payment of debt  issue costs                                                       |       | (3,806   | )          | (7,777   | )          | (4,107   | )          |
| Principal  payments of long-term debt                                              |       | (1,791   | )          | (129,905 | )          | (167,127 | )          |
| Net cash  provided by (used in) financing activities                               |       | 79,408   |       | (12,778  | )          | (2,958   | )          |
|                                                                               |       |     |       |     |       |     |       |
| NET INCREASE IN  CASH AND CASH EQUIVALENTS                                         |       | 497      |       | 18,449   |       | 4,385    |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF YEAR                                    |       | 24,564   |       | 6,115    |       | 1,730    |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH AND CASH  EQUIVALENTS AT END OF YEAR                                          |       | $        | 25,061     |     | $          | 24,564   |       | $ | 6,115 |   |

 

See notes toconsolidated financial statements.

 

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

** **

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

**YEARSENDED DECEMBER 31, 2005, 2004 AND 2003**

** **

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, AffinityGroup, Inc. (“AGI”), and AGI’s subsidiaries (collectively the “Company”), inaccordance with U.S. generally accepted accounting principles, and pursuant tothe rules and regulations of the Securities and Exchange Commission. AGHI wasformed on March 2, 2005, at which time all of the stock of AGI was contributedto AGHI from its parent, AGI Holding Corp. (“AGHC”) a privately-ownedcorporation. On April 27, 2004, AGI’s previous parent, Affinity Group Holding,Inc. (“AGH”) was merged into AGI, with AGI being the surviving entity after themerger. The merger was accounted for as a combination of entities under commoncontrol using historical costs. The balance sheet as of December 31, 2004 isthat of AGI prior to the formation of AGHI on March 2, 2005.

 

*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 clubmemberships, merchandise and services to RV owners, and camping and golfenthusiasts. In addition, the Company operates 44 retail outlets and a mailorder business selling RV accessories, supplies and services. The stores arelocated throughout the United States. The Company 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 could differ from those estimates.

 

*Cash and Cash Equivalents*–**The Company considers all short-term, highly liquid investmentspurchased with a maturity date of three months or less to be cash equivalents. Thecarrying amount approximates fair value because of the short maturity of theseinstruments.

 

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

 

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

 

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*Property and Equipment*–**Property and equipment are recorded at cost. Depreciationof property and equipment is provided using the straight—line method over thefollowing estimated useful lives of the assets:

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

 

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

 

*Goodwill and Other IntangibleAssets* – Goodwill is reviewedat least annually for impairment, and more often when impairment indicators arepresent (See Note 3). The finite-lived intangible assets consisting ofmembership customer lists, resort and golf course agreements, non-compete anddeferred consulting agreements, and deferred financing costs have weightedaverage useful lives of approximately 6 years, 23 years, 15 years and 7 years,respectively.

 

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

 

*Self-insurance program*- We maintain a self-insurance program covering our costs, up to a deductiblelevel, for our California workers’ compensation exposures. The amounts inexcess of the deductible level are fully insured. We maintain fully-insuredprograms that guarantee the payment of all costs for workers’ compensationexposures in the states of operation outside of California. We maintain variousinsurance programs covering our costs, up to various deductible levels, for ourgeneral liability exposures for all of our operations. Amounts in excess ofdeductibles are fully insured. Self-insurance accruals for these programs arecalculated by outside actuaries and are based on claims filed and includeestimates for claims incurred but not yet reported. Projections of future lossare inherently uncertain because of the random nature of insurance claims occurrencesand could be substantially affected if future occurrences and claims differsignificantly from these assumptions and historical trends

 

*Long-term Debt**–* The fair value of the Company’s long-termdebt is estimated based on the quoted market prices for the same or similarissues or on the current rates offered for debt of the same or similarremaining maturities. The fair value of the Company’s long-term debt was $409.0million as of December 31, 2005.

 

*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. EmergencyRoad Service (“ERS”) revenues are deferred and recognized over the life of themembership. ERS claim expenses are recognized when incurred. Royalty revenue isearned under the terms of an arrangement with a third party credit cardprovider based on a percentage of the Company’s outstanding credit cardbalances with such third party credit card provider. Membership revenue isgenerated from annual, multi-year and lifetime memberships. The revenue andexpenses associated with these memberships are deferred and amortized over themembership period. For lifetime memberships, an 18-year period is used, whichis the actuarially determined estimated fulfillment period. Promotionalexpenses, consisting primarily of direct mail advertising, are deferred andexpensed over the period of expected future benefit, typically three monthsbased on historical actual response rates. Renewal expenses are expensed at thetime

 

49

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related materials are mailed. Recognizedrevenues and profit are subject to revisions as the membership progresses tocompletion. Revisions to membership period estimates would change the amount ofincome and expense amortized in future accounting periods. At December 31, 2005 and 2004, $5.8 millionand $5.3 million of advertising expenses have been capitalized as direct-responseadvertising, of which $3.3 million and $2.8 million, respectively, werereported as assets and $2.5 million in each year were reported net of relateddeferred revenue. Advertising expenses for 2005, 2004, and 2003 were $27.4million, $28.1 million, and $27.3 million, respectively.

 

*Publications Revenue and Expense –*Newsstand sales of publications andrelated expenses are recorded at the time of delivery, net of estimatedprovision for returns. Subscription sales of publications are reflected inincome over the lives of the subscriptions. The related selling expenses areexpensed as incurred. Advertising revenues and related expenses are recorded atthe time of delivery. Subscription and newsstand revenues and expenses relatedto annual publications are deferred until the publications are distributed. Revenuesand related expenses 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 is accounted for as a reduction of theinventory cost and related cost of sales when the inventory is sold.

 

*Shipping andHandling Fees and Costs –*TheCompany reports shipping and handling costs billed to customers as a componentof revenues, and related costs are reported as a component of cost applicableto revenues.

 

*Income Taxes**–***The Company recognizes deferred tax assetsand liabilities based on the liability method, which requires an adjustment tothe deferred 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.

 

*Major Customers*– Included in theMembership Services Segment is revenue in the amount of $20.0 million, $20.2million, and $20.3 million, for the years 2005, 2004 and 2003, respectively, whichwas received under contracts from one customer of the Company.

 

*RestructuringCharge –*TheCompany incurred restructuring charges of $1.2 million in 2003. which wasprimarily attributable to a management restructuring in the retail segment.

 

Thefollowing is a summary of the restructuring accrual activity for the yearsended December 31, 2005 and 2004 (in thousands)

 
| ** **                | ** ** | **Years ended December 31,** | ** ** |
|---------------------------|------------|---------------------------------------------|------------|
| ** **                | ** ** | **2005**                                    | ** ** | **2004** | ** ** |
| Opening balance           |       | $                                           | 83         |   | $ | 83 |   |
| Additions                 |       | —                                      |       | — |   |
| Charges against  reserves |       | (83                                         | )          | — |   |
| Ending balance            |       | $                                           | —     |   | $ | 83 |   |

 

50

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Asummary of the severance activity for the years ended December 31, 2005, 2004and 2003 follows (dollar amounts in thousands):

 
| ** **            | ** ** | **Years ended December 31,** | ** ** |
|-----------------------|------------|---------------------------------------------|------------|
| ** **            | ** ** | **2005**                                    | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **            | ** ** | **# of**                               | ** ** | ** ** | ** ** | **# of** | ** ** | ** ** | ** ** | **# of** | ** ** | ** ** | ** ** |
| ** **            | ** ** | **Employees**                               | ** ** | **Amount** | ** ** | **Employees** | ** ** | **Amount** | ** ** | **Employees** | ** ** | **Amount** | ** ** |
| Opening balance       |       | 1                                           |       | $ | 83 |   | 1 |   | $ | 83 |   | 10 |   | $ | 560 |   |
| Planned  terminations |       | —                                      |       | — |   | — |   | — |   | 19 |   | 1,210 |   |
| Actual  terminations  |       | (1                                          | )          | (83 | ) | — |   | — |   | (28 | ) | (1,687 | ) |
| Ending balance        |       | —                                      |       | $ | — |   | 1 |   | $ | 83 |   | 1 |   | $ | 83 |   |

 

*RecentAccounting Pronouncements:*

 

*Statementof Cash Flows* - On December 16, 2004, the FASB issued SFASNo. 123(R), which is a revision of SFAS No. 123. SFAS No. 123(R) supersedes APBNo. 25, and amends SFAS No. 95, “Statement of Cash Flows.”  Generally the approach in SFAS No. 123(R) issimilar to the approach described in SFAS No. 123. However, SFAS No. 123(R)requires all share-based payments to employees, including grants of employeestock options, to be recognized in the income statement based on their fairvalues. Pro forma disclosure is no longer an alternative. The statement willnot impact the Company.

 

*AccountingChanges and Error Corrections* - In May 2005, the FASB issuedSFAS No. 154, “Accounting Changes and Error Corrections.”  SFAS No. 154 requires retrospectiveapplication to prior periods’ financial statements of a voluntary change inaccounting principle and that a change in method of depreciation, amortization,or depletion for long-lived, nonfinancial assets be accounted for as a changein accounting estimate that is effected by a change in accounting principle. SFASNo. 154 is effective for accounting changes and corrections of errors made infiscal years beginning after December 15, 2005. We do not believe the adoptionof SFAS No. 154 will have a material impact on our results of operations orfinancial condition.

 

*Accountingfor Rental Costs Incurred during a Construction Period* - OnOctober 6, 2005, the FASB Staff Position (“FSP”) issued FSP FAS 13-1, “Accountingfor Rental Costs Incurred during a Construction Period.”  FSP FAS 13-1 requires rental costs associatedwith ground or building leases that are incurred during a construction periodto be recognized as rental expense and included in income from continuingoperations. The lessee shall allocate rental costs over the lease termfollowing the guidance in SFAS No. 13, “Accounting for Leases,” and FASBTechnical Bulletin No. 85-3, “Accounting for Operating Leases with ScheduledRent Increases,” starting with the beginning of the lease term. FSP FAS 13-1will become effective for us beginning in fiscal year 2006. We do not believethe adoption of FSP FAS 13-1 will have a material impact on our results ofoperations or financial condition.

 

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2.                 PROPERTY ANDEQUIPMENT

 

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

 
| ** **                                        | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|
| Land                                              |       | $        | 477        |     | $          | 477 |   |
| Building and  improvements                        |       | 7,969    |       | 6,906    |       |
| Furniture and  equipment                          |       | 45,250   |       | 39,930   |       |
| Software                                          |       | 18,000   |       | 15,128   |       |
| Systems  development and construction in progress |       | 4,117    |       | 2,068    |       |
|                                              |       | 75,813   |       | 64,509   |       |
| Less:  accumulated depreciation                   |       | (45,970  | )          | (36,867  | )          |
|                                              |       | $        | 29,843     |     | $          | 27,642 |   |

 

3.                 GOODWILLAND OTHER INTANGIBLE ASSETS

 

A summary of changes in the carrying amountof goodwill by business segment consisted of the following at December 31 (inthousands):

 
| ** **                       | ** ** | **Membership  Services** | ** ** | **Publications** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
|----------------------------------|------------|--------------------------|------------|------------------|------------|------------|------------|------------------|------------|
| Balance as of  January 1, 2004   |       | $54,288                  |       | $48,181          |       | $47,601    |       | $150,070         |       |
| Acquisitions                     |       | —                   |       | 2,256            |       | —     |       | 2,256            |       |
| Dispositions                     |       | —                   |       | (3,553           | )          | —     |       | (3,553           | )          |
| Balance as of  December 31, 2004 |       | 54,288                   |       | 46,884           |       | 47,601     |       | 148,773          |       |
| Impairments                      |       | (4,344                   | )          | —           |       | —     |       | (4,344           | )          |
| Balance as of  December 31, 2005 |       | $49,944                  |       | $46,884          |       | $47,601    |       | $144,429         |       |

 

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

 

| ** **                                       | ** ** | ** ** | ** ** | **2005**         | ** ** | ** ** | ** ** |
|--------------------------------------------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | **Accumulated**  | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Gross**  | ** ** | **Amortization** | ** ** | **Net**    | ** ** |
| Membership and  customer lists                   |       | $          | 24,514     |             | $          | (7,007     | )          | $ | 17,507 |   |
| Resort and golf  course participation agreements |       | 13,539     |       | (11,622          | )          | 1,917      |       |
| Non-compete and  deferred consulting agreements  |       | 18,455     |       | (11,492          | )          | 6,963      |       |
| Deferred  financing costs                        |       | 15,392     |       | (4,055           | )          | 11,337     |       |
|                                             |       | $          | 71,900     |             | $          | (34,176    | )          | $ | 37,724 |   |

 

| ** **                                       | ** ** | ** ** | ** ** | **2004**         | ** ** | ** ** | ** ** |
|--------------------------------------------------|------------|------------|------------|------------------|------------|------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | **Accumulated**  | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Gross**  | ** ** | **Amortization** | ** ** | **Net**    | ** ** |
| Membership and  customer lists                   |       | $12,133    |       | $(4,404          | )          | $7,729     |       |
| Resort and golf  course participation agreements |       | 13,548     |       | (10,710          | )          | 2,838      |       |
| Non-compete and  deferred consulting agreements  |       | 17,955     |       | (10,391          | )          | 7,564      |       |
| Deferred  financing costs                        |       | 11,587     |       | (2,002           | )          | 9,585      |       |
|                                             |       | $55,223    |       | $(27,507         | )          | $27,716    |       |

 

The aggregate future five-year amortizationof finite lived intangibles at December 31, 2005 is as follows (in thousands):

 

| 2006       |   | $     | 8,413  |   |
|------------|--------|-------|--------|--------|
| 2007       |   | 8,255 |   |
| 2008       |   | 6,598 |   |
| 2009       |   | 5,112 |   |
| 2010       |   | 4,004 |   |
| Thereafter |   | 5,342 |   |
| Total      |   | $     | 37,724 |   |

 

Under SFAS No. 142, Goodwilland Other Intangible Assets, (“SFAS No. 142”) goodwill impairment is deemed toexist if the net book value of a reporting unit exceeds its estimated fairvalue. The Company’s reporting units are generally consistent with theoperating segments underlying the reporting segments identified in Note 12 -SegmentInformation.

 

The Company performed itsannual impairment test of its goodwill and intangible assets during the fourthquarter of 2005. Based on this test, the Company recorded an impairment chargeof $4.3 million related to the Golf Card Club which is included in theMembership Services segment. During the current year, the number of Golf Card Clubmemberships decreased by approximately 10,000 members, consistent with the lossin members in 2004.  In 2004 we plannedto reduce the costs associated with the Golf Card Club to stabilize the overallearnings.  In 2005 we determined thatbased on the reduced projected future cash flows as a result of reduced membership,combined with the increasing incremental costs necessary to acquire newmembers, the goodwill relating to Golf Card Club was impaired.

 

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In August 2004, the Company’s subsidiaryEhlert Publishing Group, Inc. sold certain publication assets for $4.2 millionin cash. The Company paid $0.2 million in transaction fees related to the salesand recorded a $3.6 million reduction in goodwill. As a result of the sale, theCompany recorded a net gain of $0.4 million. Approximately $3.6 million ofgoodwill was allocated to this reporting unit and was therefore a part of thecarrying amount of the net assets disposed of in determining the gain.

 

In December 2004, Ehlert Publishing Group,Inc. acquired the stock of ARU, Inc., a producer of consumer outdoor recreationshows. As part of the purchase, the Company issued $0.7 million of purchasedebt and assumed $0.4 million of liabilities. Goodwill in the amount of $2.3million was recorded upon the acquisition.

 

In April 2005, Camping World, Inc. acquiredthe assets of an RV catalog retailer for $0.6 million. The acquisition pricewas allocated to inventory and membership and customer lists. In May 2005,Ehlert Publishing Group, Inc. acquired the publishing assets of NordskogPublishing, Inc. for $4.0 million. The acquisition price was allocatedprimarily to membership and customer lists and non-compete agreements. InDecember 2005, Ehlert Publishing Group, Inc., through its wholly-ownedsubsidiary, AGI Productions, Inc., acquired the consumer outdoor recreation showassets of Royal Productions, Inc. for $8.5 million. The acquisition price wasallocated primarily to membership and customer lists.

 

4.                             ACCRUEDLIABILITIES

 

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

 

| ** **                 | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
| Compensation and  benefits |       | $        | 12,911     |     | $          | 12,018 |   |
| Other accruals             |       | 21,183   |       | 22,212   |       |
|                       |       | $        | 34,094     |     | $          | 34,230 |   |

 

5.                             LONG-TERMDEBT

 

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

 

| ** **                                 | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|
| AGI 9% Senior  Subordinated Notes due 2012 |       | $        | 200,000    |     | $          | 200,000 |   |
| AGI Senior  Credit Facility:               |       |     |       |     |       |
| Term Loans                                 |       | 111,150  |       | 112,550  |       |
| AGHI 10 7/8%  Notes                        |       | 85,157   |       | —   |       |
| Accrued interest  on AGHI Notes            |       | 7,507    |       | —   |       |
| Other long—term  obligations          |       | 8,850    |       | 1,786    |       |
|                                       |       | 412,664  |       | 314,336  |       |
| Less: current  portion                     |       | (6,136   | )          | (1,676   | )          |
|                                       |       | $        | 406,528    |     | $          | 312,660 |   |

 

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On June 24, 2003, AGI entered into an Amended andRestated Credit Agreement and a Senior Secured Floating Rate Note PurchaseAgreement (“AGI Senior Credit Facility”) providing for term loans (“Term Loans”)in the aggregate of $140.0 million and a revolving credit facility of $35.0million. Proceeds from the AGI Senior Credit Facility were used to refinancethe existing senior secured indebtedness, pay dividends of $13.7 million to AGI’sparent, AGI Holding Corp., and redeem $30.0 million of AGH Notes at103.667% of par as of July 24, 2003. The funds available under the revolvingcredit line of the AGI Senior Credit Facility may be utilized forborrowings or letters of credit; however,a maximum of $12.5 million may be allocated to such letters of credit. Re-borrowingsunder 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 primeand the London Interbank Offered Rates (“LIBOR”), plus an applicable marginranging from 0.75% to 2.75% over the stated rates. AGI also pays acommitment fee of 0.5% per annum on the unused amount of the revolving creditline. Further, the AGI Senior Credit Facility requires the loans to be prepaidin an amount equal to 75% of the excess cash flow, as defined. The balance ofthe excess cash flow would be available for distribution. As of December 31,2005, the Company generated $1.7 million of excess cash flow, as defined andwill prepay the Term Loans in the first quarter of 2006, on a pro-rata basis,in inverse order of maturity, per the agreement. The AGI Senior Credit Facilityis secured by substantially all the assets and a pledge of the stock of AGI. Asof the refinancing date, the Company incurred a $1.7 million debtextinguishment charge representing the write-off of unamortized deferredfinancing cost associated with the prior financing facility.

 

The Company also announced on June 24, 2003 thatnotice was given on the same date, to note holders of record, to redeem $30.0million of the AGH Notes. The redemption date was July 24, 2003. The noteswere redeemed at 103.667% of par plus accrued interest to the date ofredemption. The redemption was funded by borrowings under the AGI Senior CreditFacility. The bond redemption premium and the pro rata amount of unamortizeddeferred financing costs in the amount of $1.1 million and $0.4 million,respectively, were recognized as of the redemption date.

 

As of December 31, 2005, $111.2 million wasoutstanding under the Term Loans and the average interest rate on the TermLoans was 6.97%. As of December 31, 2005 permitted borrowings under the undrawnrevolving line were $27.5 million. The Company had commercial and standbyletters of credit in the aggregate amount of $7.5 million outstanding as ofDecember 31, 2005. The aggregate quarterly scheduled payments on the Term Loansare $0.35 million. The revolving credit facility matures on June 24, 2008, andthe Term Loans mature on June 24, 2009.

 

On February 18, 2004, the AGI issued$200.0 million of 9% Senior Subordinated Notes due 2012 (the “AGI Senior Notes”).AGI completed a registered exchange of the AGI Senior Notes in August 2004under the Securities Act of 1933. Interest is payable on the AGI Senior Notestwice a year on each February 15 and August 15, beginning August 15, 2004, andthe AGI Senior Notes mature on February 15, 2012. The proceeds of the issuancewere used to fund the tender offer and defeasance of the remaining $100.0million outstanding principal amount of the AGH Notes. The Company used theremaining proceeds from the issuance of the AGI Senior Notes to prepay $25.0million of the AGI Senior Credit Facility, pay a $60.0 million dividend, createa $15.0 million segregated cash account, pay certain prepayment and transactioncosts and for general corporate purposes. The bond redemption premium, consentfee and the unamortized deferred financing costs in the amount of $1.7 million,$1.7 million, and $1.1 million, respectively, were recognized as of theredemption date. The Company also incurred a $0.5 million debt extinguishmentcharge representing the pro rata unamortized deferred financing costsassociated with the prepayment of the AGI Senior Credit Facility.

 

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In November 2004, theCompany amended the AGI Senior Credit Facility dated June 24, 2003 to reducethe interest rates on the Term Loans in both agreements by 1.00%. Theamendments reduced the applicable interest margin from 4.00% to 3.00% and 3.00% to 2.00%for the LIBOR and Prime Rate loans, respectively. On November 13, 2005, wefurther amended the AGI Senior Credit Facility dated June 24, 2003 andterminated the Senior Secured Floating Rate Note Purchase Agreement dated as ofJune 24, 2003. All Term Loans under the Senior Secured Floating Rate NotePurchase Agreement were converted into Term Loans under the Credit Agreement. Inaddition, the interest rates on the Term Loanshave been reduced by 0.50% and the amendment provides for a further reductionof 0.25% at any time when the consolidated total leverage ratio, as defined,for any period is less than 4.25 to 1. The amendment reduces the applicableinterest margin from 3.00% to 2.50% and 2.00% to 1.50% for the LIBOR and PrimeRate loans, respectively.

 

On March 24, 2005 in a private placement, the Companyissued $88.2 million principal amount of its 10-7/8% senior notes due 2012 (the“AGHI Notes”) at a $3.2 million original issue discount. The Company completeda registered exchange of the AGHI Notes under the Securities Act of 1933 onJune 8, 2005. The AGHI Notes are unsecured obligations of the Company, and AGIand its subsidiaries have not guaranteed payment of principal or interest onthe AGHI Notes. Interest on the AGHI Notes is payable semi-annually on February15 and 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. Forinterest payments on and prior to February 15, 2008, AGHI may elect to payinterest on the AGHI Notes in cash or by the issuance of additional notes ofthe same tenor as the AGHI Notes. Any additional AGHI Notes issued in paymentof interest are due in full on or before March 15, 2010. The AGHI Notes cannotbe redeemed prior to February 15, 2008. Although the only source of the cashpayment of the AGHI Notes is dividends from its subsidiary, there are certainrestrictions on the payment of dividends under the AGI Senior Credit Facilityand the indenture governing the terms of the AGI Senior Notes (the “AGIIndenture”). The Company expects to issue additional notes of the same tenor asthe AGHI Notes through February 15, 2008 to pay interest on the AGHI Notes whenand as such interest is due. After February 15, 2008, the Company must rely ondividends from AGI to fund the interest payments due under the AGHI Notes.

 

The Company contributed the net proceeds from theissuance of the AGHI Notes, approximately $81.0 million, to AGI and in turn,AGI made an equity contribution to its wholly-owned subsidiary, Camping World,Inc. (“Camping World”). Camping World then made an equity capital contributionin the same amount to its wholly-owned subsidiary, CWI, Inc. (“CWI”). CWIcreated a new wholly-owned subsidiary named CWFR Capital Corp., a Delawarecorporation (“CWFR”) which is an “unrestricted subsidiary” as defined under theAGHI Notes and the AGI Indenture. Since CWFR is an unrestricted subsidiary, itsoperations are not restricted by either the AGI Indenture or the AGHI Notes. CWImade an equity capital contribution to CWFR in an equal amount to the capitalcontribution that CWI received from Camping World. CWFR used the proceeds fromthe equity capital contribution to acquire a preferred membership interest inFreedomRoads Holding Company, LLC (“FreedomRoads Holding”), a Minnesota limitedliability company owned 90% by The Stephen Adams Living Trust which alsoindirectly owns 97.4% of the outstanding capital stock of AGHC and indirectlyAGHI.

 

The preferred membership interest acquired by CWFR hasa face amount of $88.2 million and is entitled to receive a preferred paymentfrom FreedomRoads Holding at 10-7/8% per annum when and as declared by theBoard of Governors of FreedomRoads from any source legally available therefor. Anyportion of the preferred payment not paid will accumulate and will becompounded semi-annually until paid. FreedomRoads Holding may redeem thepreferred membership interest

 

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upon the payment of $88.2 million plus the accrued andunpaid preferred return to the date of redemption. FreedomRoads Holding will berequired to redeem the preferred membership interest at that same redemptionprice if there is a sale or reorganization of the membership interests ofFreedomRoads Holding or a sale of substantially all of the assets ofFreedomRoads Holding. According to the terms of the preferred membershipinterest, FreedomRoads Holding cannot make distributions with respect tomembership interests other than (a) distributions with respect to the preferredmembership interest, (b) distributions for the members’ estimated taxliabilities from earnings of FreedomRoads Holding and (c) distributions in theaggregate not to exceed 50% of the amount of (i) FreedomRoads Holding’s netprofit for the period from January 1, 2005 through the end of the fiscalquarter next preceding the distribution date less (ii) the aggregate amount oftax distributions made during the period from January 1, 2005 through the endof the fiscal quarter next preceding the distribution date. CWFR may not sell,pledge or otherwise transfer the preferred membership interest. The preferredmembership interest does not provide CWFR with any voting rights inFreedomRoads Holding. The preferred membership interest FreedomRoads Holding isbeing carried at cost and is reviewed periodically for impairment.

 

TheAGI Senior Credit Facility, the AGI Indenture and the indenture governing ourAGHI Notes contain certain restrictive covenants relating to, but not limitedto, mergers, changes in the nature of the business, acquisitions, additionalindebtedness, sale of assets and investments, and the payment of dividendssubject to certain limitations and minimum operating covenants. The Company wasin compliance with all debt covenants at December 31, 2005.

 

Theaggregate future maturities of long-term debt at December 31, 2005 are asfollows (in thousands):

 

| 2006       |   | $       | 6,136   |   |
|------------|--------|---------|---------|--------|
| 2007       |   | 3,511   |    |
| 2008       |   | 3,671   |    |
| 2009       |   | 106,236 |    |
| 2010       |   | 7,952   |    |
| Thereafter |   | 285,158 |    |
| Total      |   | $       | 412,664 |   |

 

6.                             INCOMETAXES

 

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

 
| ** **         | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------|------------|----------|------------|----------|------------|----------|------------|
| Current:           |       |     |       |     |       |     |       |
| Federal            |       | $        | 6,122      |     | $          | 5,090    |       | $ | 8,249 |   |
| State              |       | 846      |       | 711      |       | 1,148    |       |
| Deferred           |       | (2,677   | )          | 2,274    |       | (122     | )          |
| Income tax expense |       | $        | 4,291      |     | $          | 8,075    |       | $ | 9,275 |   |

 

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6.                             INCOMETAXES

 

A reconciliationof income tax expense from operations to the federal statutory rate for theyear ended December 31 is as follows (in thousands):

 
| ** **                                       | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                             |       |     |       |     |       |     |       |
| Income taxes  computed at federal statutory rate |       | $        | 3,475      |     | $          | 6,413    |       | $ | 8,633 |   |
| State income  taxes - net of federal benefit     |       | 299      |       | 550      |       | 740      |       |
| Permanent  difference:                           |       |     |       |     |       |     |       |
| Disposition of  book goodwill                    |       | —   |       | 1,334    |       | —   |       |
| Goodwill written  off                            |       | 1,651    |       | —   |       | —   |       |
| Reduction of  valuation allowance                |       | (964     | )          | —   |       | —   |       |
| Other                                            |       | (170     | )          | (222     | )          | (98      | )          |
| Income tax  expense                              |       | $        | 4,291      |     | $          | 8,075    |       | $ | 9,275 |   |

 

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 items comprising the net deferred tax asset atDecember 31 are (in thousands):

 

| ** **                                       | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
| **Deferred  tax liabilities:**                   |       |     |       |     |       |
| Management  Incentive                            |       | $        | (3,254     | )        | $          | (3,254 | ) |
| Accelerated  depreciation                        |       | (2,236   | )          | (2,194   | )          |
| Prepaid expenses                                 |       | (3,051   | )          | (3,046   | )          |
| Intangible  assets                               |       | (1,996   | )          | (1,901   | )          |
| Basis difference  on building and land           |       | (11,868  | )          | (13,286  | )          |
| Other                                            |       | (271     | )          | (285     | )          |
|                                             |       | (22,676  | )          | (23,966  | )          |
| **Deferred  tax assets:**                        |       |     |       |     |       |
| Intangible  assets                               |       | 1,163    |       | 434      |       |
| Deferred  revenues                               |       | 8,957    |       | 7,765    |       |
| Accrual for  employee benefits and severance     |       | 1,720    |       | 2,895    |       |
| Accrual for  deferred phantom stock compensation |       | 2,280    |       | 1,995    |       |
| Charitable  contribution carryforward            |       | —   |       | 1,512    |       |
| Claims reserves                                  |       | 2,996    |       | 3,447    |       |
| Reserve for  resort cards/points                 |       | 1,162    |       | 1,382    |       |
| Deferred  compensation                           |       | 9,704    |       | 9,251    |       |
| Bad debt reserve                                 |       | 1,103    |       | 832      |       |
| Other reserves                                   |       | 3,206    |       | 2,427    |       |
|                                             |       | 32,291   |       | 31,940   |       |
| Valuation  allowance                             |       | —   |       | (1,036   | )          |
| Net deferred tax  assets                         |       | $        | 9,615      |     | $          | 6,938 |   |

 

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The Company and itssubsidiaries are parties to a tax-sharing agreement with the Company’s ultimateparent; however, taxes are determined on a separate company basis. As part ofthe tax-sharing agreement, AGHC is compensated for its usable share of separatecompany federal tax losses. As such, accrued income taxes on the balance sheetare due AGHC. The accrued taxes due AGHI under the tax sharing agreement arereported under other long-term liabilities as they will not be paid within thenext 12 months in accordance with the AGI Senior Credit Facility. Accrued taxesdue AGHI as of December 31, 2005 was $3.1 million. At December 31, 2005, thevaluation allowance was eliminated as the Company determined that the deferredtax asset related to the charitable contribution carryforward would be fullyrealized.

 

7.                 COMMITMENTS,CONTINGENCIES

 

*Leases*— The Company holds certain property and equipment under rental agreements andoperating leases which have varying expiration dates. Future minimum annualfixed rentals under operating leases having an original term of more than oneyear as of December 31, 2005, are as follows (in thousands):

 

| 2006       |   | $      | 12,614  |   |
|------------|--------|--------|---------|--------|
| 2007       |   | 11,461 |    |
| 2008       |   | 9,583  |    |
| 2009       |   | 8,795  |    |
| 2010       |   | 8,457  |    |
| Thereafter |   | 86,469 |    |
| Total      |   | $      | 137,379 |   |

 

During 2005, 2004 and2003, respectively, approximately $13.1 million, $12.5 million, and $11.8million of rent expense was charged to costs and expenses.

 

OnDecember 5, 2001, the Company sold eleven real estate properties to elevenseparate wholly–owned subsidiaries of AGRP Holding Corp., a wholly–ownedsubsidiary of the Company’s parent, AGI Holding Corp., for $52.3 million incash and a note receivable. The properties have been leased back to the Companyon a triple net basis. Both the sales price and lease rates were based onmarket rates determined by third party independent appraisers engaged by themortgage lender and approved by the AGI Senior Credit Facility agent bank. Theseleases have an initial term of 25 to 27 years with two five–year options at thethen current market rent. The leases are classified as operating leases inaccordance with SFAS No. 13 “Accounting for Leases.”  Land and buildings with a net book valuetotaling $45.8 million have been removed from the balance sheet. Thetransaction resulted in a net gain of $6.1 million consisting of a $12.1million gain on certain properties and a $6.0 million loss on other properties.In accordance with accounting principles generally accepted in the UnitedStates, the $6.0 million loss has been recognized upon the date of sale in thestatement of operations and the $12.1 million gain has been deferred and willbe credited to income as rent expense adjustments over the lease terms. Theaverage net annual lease payments over the lives of the leases are $3.4million.

 

*Litigation*—From time to time, the Company is involved in litigation arising in thenormal course of business operations.

 

InSeptember 2004, the Company’s subsidiary, CWI, Inc., was sued in Californiastate court by Privacy Rights Clearinghouse and Benjamin Greene (the “Plaintiffs”)in a suit alleging that CWI, Inc. was recording personal identificationinformation from retail customers in violation of certain California statutes. Theplaintiff sought injunctive relief preventing CWI, Inc. from engaging in any

 

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act or practiceconstituting unfair competition under the statutes and for statutory penaltiesand damages. CWI, Inc. responded to the suit and denied that its practicesviolate the statutes. Without admitting liability or wrongdoing, CWI, Inc. andthe Plaintiffs entered into a Settlement Agreement which was given finalapproval by the court on December 16, 2005. The terms of the Settlement Agreement were not material. 

 

*EmploymentAgreements*— The Company has employment agreements withcertain officers. The agreements include, among other things, approximately oneyear’s severance pay beyond the termination date.

 

8.                 RELATED-PARTYTRANSACTIONS

 

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

 

Certain directors of the Company are partners in partnerships andshareholders of corporations that lease facilities to the Company underlong-term leases. For the years ended December 31, 2005, 2004 and 2003,payments under these leases were approximately $6.7 million, $7.1 million, and $7.0million, respectively. Future commitments under these leases totalapproximately $102.2 million. The leases expire at various dates from September2007 through July 2029, subject to the Company’s right to exercise renewaloptions.

 

The Company has enteredinto various agreements with FreedomRoads, LLC, which is owned by entitiescontrolled by the Company’s Chairman. These agreements include facility leasesand product marketing and sales agreements. At December 31, 2005, the Companyleased ten properties from FreedomRoads and sub-leased four properties toFreedomRoads. Total payments received under the ten leased properties for 2005and 2004 were approximately $0.7 million and $0.2 million, respectively, andfuture commitments under these leases total approximately $6.6 million. Theleases expire at various dates from August 2013 through October 2015. For 2005and 2004, lease payments received from FreedomRoads for the four subleased propertieswere approximately $0.7 million and $0.6 million, respectively, and futurepayments to be received under these subleases total approximately $5.3 million.Payments under the product marketing and sales agreements were approximately $3.2million, $3.7 million and $0.1 million for 2005, 2004 and 2003 respectively.

 

In March 2002, theCompany received a royalty payment of $1.5 million from Holiday RV Superstores,Inc., doing business as Recreation USA, (“Recreation USA”). This non-refundablepayment granted Recreation USA a limited non-exclusive license to use the GoodSam trademarks. When the Company entered into the agreement with RecreationUSA, the Chairman beneficially owned, through entities controlled by him,approximately 57% of the then outstanding common stock of Recreation USA aftertaking into account conversion and exercise of his beneficially ownedsecurities in Recreation USA. The Company was recording the royalty paymentinto income in a level amount ratably over the three-year term of the license. Theagreement with Recreation USA terminated in October 2003 and, as a result, theunamortized balance of the royalty agreement was recognized as revenue in thefourth quarter of 2003.

 

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9.                 STATEMENTSOF CASH FLOWS

 

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

 

| ** **                      | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash paid during  the year for: |       |     |       |     |       |     |       |
| Interest                        |       | $        | 25,602     |     | $          | 21,236   |       | $ | 18,733 |   |
| Income taxes                    |       | 9,633    |       | 5,552    |       | 9,569    |       |
|                                 |            |          |            |          |            |          |            |  |  |  |

 

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

 

**2005:**

In May 2005, the Companyassumed $0.5 million of liabilities and issued $1.5 million of debt in theacquisition of the Powerboat magazine title and related assets from NordskogPublishing, Inc.

 

In December 2005, theCompany assumed $1.8 million of liabilities and issued $6.0 million of debt inthe acquisition of Royal Productions, Inc.

 

**2004:**

In February 2004, theCompany declared and distributed a $4.4 million non-cash dividend consisting ofthe Adams Insurance Holding LLC notes receivable.

 

In December 2004, theCompany assumed $0.4 million in liabilities and issued $0.7 million of purchasedebt in the acquisition of ARU, Inc.

 

**2003:**

The Company declared andmade the following non-cash dividend distributions; 1) split-dollar lifeinsurance policies valued at $1.8 million, which approximated the cashsurrender value of the policies, and 2) stock of Camping World RV Sales, Inc.,totaling $1.2 million representing its then net book value which approximatedfair market value.

 

The Company assumed $1.6million of liabilities and issued $1.2 million of purchase debt in theacquisition of the publishing assets of Poole Publications, Inc.

 

10.           BENEFITPLAN

 

The Company sponsors adeferred savings and profit sharing plan (the “401(k) Plan”) qualified underSection 401(a) and 401(k) of the Internal Revenue Codes of 1986, as amended(the “Code”). All employees over age 21 are eligible to join the 401(k) Plan onthe first day of each month following their date of employment. Eligible employeesmay contribute up to 15% of their salary subject to an annual maximumestablished under the Code. In 2005, the Company elected a Safe Harbor MatchingContribution for the employer match and set the employer match, which vestsupon contribution, at an amount equal to 100% of the first 4% of the employee’scontribution. Employees may defer up to 60% of their eligible compensation upto IRS limits. The Company’s contributions to the plan totaled approximately $1.7million, $1.5 million, and $1.3 million for 2005, 2004, and 2003, respectively.

 

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11.           DEFERREDPHANTOM STOCK COMPENSATION

 

The Company has deferredcompensation agreements with certain officers. The agreements provide forpayment to the officers upon their termination, death, disability, or sale of theCompany. Deferred compensation is included in other long-term liabilitiesexcept for amounts expected to be paid in 2006, which have been classified incurrent liabilities. This deferred compensation is subject to vesting under theterms of the individual agreements. Vesting periods range from 20% per yearover a five-year period to immediate vesting upon entering an agreement. TheCompany incurred deferred compensation expense of $2.2 million, $3.0 million, and$0.7 million for 2005, 2004, and 2003, respectively.

 

12.           SEGMENT INFORMATION

 

TheCompany’s three principal lines of business are Membership Services,Publications, and Retail. The Membership Services segment operates the Good SamClub, the Coast to Coast Club, and the President’s Club for RV owners, campersand outdoor vacationers, and the Golf Card Club for golf enthusiasts. ThePublications segment publishes a variety of publications for selected marketsin the recreation and leisure industry, including general circulationperiodicals, club magazines, directories and RV and powersports industry trademagazines. The Retail segment sells specialty retail merchandise and servicesfor RV owners primarily through retail supercenters and mail order catalogs. TheCompany evaluates performance based on profit or loss from operations beforeincome taxes.

 

Thereportable segments are strategic business units that offer different productsand services. They are managed separately because each business requiresdifferent technology, management expertise and marketing strategies. Most ofthe businesses were acquired as a unit, and the management at the time ofacquisition was retained.

 

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12.           SEGMENT INFORMATION

 

TheCompany does not allocate income taxes or unusual items to segments. Financialinformation by reportable business segment is summarized as follows (inthousands):

 
| ** **                                     | ** ** | **Membership** | ** ** | ** **       | ** ** | ** ** | ** ** | ** **       | ** ** |
|------------------------------------------------|------------|----------------|------------|------------------|------------|------------|------------|------------------|------------|
| ** **                                     | ** ** | **Services**   | ** ** | **Publications** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| **YEAR  ENDED DECEMBER 31, 2005**              |       |           |       |             |       |       |       |             |       |
| Revenues from  external customers              |       | $133,756       |       | $79,122          |       | $272,682   |       | $485,560         |       |
| Gain (loss) on  sale of property and equipment |       | —         |       | (5               | )          | 7          |       | 2                |       |
| Interest income                                |       | 5,000          |       | —           |       | 14         |       | 5,014            |       |
| Interest expense                               |       | —         |       | 273              |       | 10,375     |       | 10,648           |       |
| Depreciation and  amortization                 |       | 3,546          |       | 2,401            |       | 7,085      |       | 13,032           |       |
| Segment profit                                 |       | 37,685         |       | 19,894           |       | 660        |       | 58,239           |       |
| Segment assets                                 |       | 162,562        |       | 89,104           |       | 207,736    |       | 459,402          |       |
| Expenditures for  segment assets               |       | 2,241          |       | 849              |       | 8,005      |       | 11,095           |       |
| **YEAR  ENDED DECEMBER 31, 2004**              |       |           |       |             |       |       |       |             |       |
| Revenues from  external customers              |       | $131,608       |       | $77,977          |       | $255,094   |       | $464,679         |       |
| Gain on sale of  property and equipment        |       | —         |       | 13               |       | 22         |       | 35               |       |
| Interest income                                |       | 2,831          |       | —           |       | 4          |       | 2,835            |       |
| Interest expense                               |       | —         |       | 674              |       | 10,221     |       | 10,895           |       |
| Depreciation and  amortization                 |       | 3,643          |       | 1,811            |       | 6,243      |       | 11,697           |       |
| Segment profit                                 |       | 39,822         |       | 19,881           |       | 269        |       | 59,972           |       |
| Segment assets                                 |       | 170,270        |       | 75,731           |       | 124,325    |       | 370,326          |       |
| Expenditures for  segment assets               |       | 1,455          |       | 1,228            |       | 6,091      |       | 8,774            |       |
| **YEAR ENDED  DECEMBER 31, 2003**              |       |           |       |             |       |       |       |             |       |
| Revenues from  external customers              |       | $128,664       |       | $71,436          |       | $225,306   |       | $425,406         |       |
| Gain on sale of  property and equipment        |       | —         |       | —           |       | 185        |       | 185              |       |
| Interest income                                |       | 2,640          |       | —           |       | 3          |       | 2,643            |       |
| Interest expense                               |       | —         |       | 1,138            |       | 9,642      |       | 10,780           |       |
| Depreciation and  amortization                 |       | 3,365          |       | 725              |       | 4,404      |       | 8,494            |       |
| Segment profit  (loss)                         |       | 41,407         |       | 18,968           |       | (1,158     | )          | 59,217           |       |
| Segment assets                                 |       | 145,233        |       | 77,101           |       | 118,450    |       | 340,784          |       |
| Expenditures for  segment assets               |       | 2,003          |       | 979              |       | 7,567      |       | 10,549           |       |

 

63

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Thefollowing is a summary of the reconciliations of reportable segments to theconsolidated financial statements for the years ended December 31, 2005, 2004and 2003 (in thousands):

 
| ** **                                                   | ** ** | **2005** | ** **   | **2004** | ** ** | **2003**     | ** ** |
|--------------------------------------------------------------|------------|----------|--------------|----------|------------|--------------|------------|
| **Gain on  Sale of Property and Equipment**                  |       |     |         |     |       |         |       |
| Total gain on  sale for reportable segments                  |       | $        | 2            |     | $          | 35           |       | $ | 185 |   |
| Other  non—allocated gain                               |       | —   |         | 397      |       | 25           |       |
| Total gain on  sale of property and equipment                |       | $        |  2      |     | $          |  432    |       | $ |  210 |   |
|                                                         |       |     |         |     |       |         |       |   |   |   |
| **Interest  Income**                                         |       |     |         |     |       |         |       |
| Total interest  income for reportable segments               |       | $        | 5,014        |     | $          | 2,835        |       | $ | 2,643 |   |
| Elimination of  intersegment interest income                 |       | (4,994   | )            | (2,829   | )          | (2,638       | )          |
| Other  non—allocated interest income                    |       | 1,041    |         | 749      |       | 804          |       |
| Total interest  income                                       |       | $        |  1,061  |     | $          |  755    |       | $ |  809 |   |
|                                                         |       |     |         |     |       |         |       |
| **Interest  Expense**                                        |       |     |         |     |       |         |       |
| Total interest  expense for reportable segments              |       | $        | 10,648       |     | $          | 10,895       |       | $ | 10,780 |   |
| Elimination of  intersegment interest expense                |       | (10,534  | )            | (10,843  | )          | (10,764      | )          |
| Other  non—allocated interest expense                   |       | 33,187   |         | 23,942   |       | 18,916       |       |
| Total interest  expense                                      |       | $        |  33,301 |     | $          |  23,994 |       | $ |  18,932 |   |
|                                                         |       |     |         |     |       |         |       |
| **Depreciation  and Amortization**                           |       |     |         |     |       |         |       |
| Total  depreciation and amortization for reportable segments |       | $        | 13,032       |     | $          | 11,697       |       | $ | 8,494 |   |
| Unallocated  depreciation and amortization expense           |       | 2,887    |         | 2,196    |       | 1,804        |       |
| Total  consolidated depreciation and amortization            |       | $        | 15,919       |     | $          | 13,893       |       | $ | 10,298 |   |
|                                                         |       |     |         |     |       |         |       |
| **Income  From Operations Before Income Taxes**              |       |     |         |     |       |         |       |
| Total profit for  reportable segments                        |       | $        | 58,239       |     | $          | 59,972       |       | $ | 59,217 |   |
| Unallocated  depreciation and amortization expense           |       | (2,887   | )            | (2,196   | )          | (1,804       | )          |
| Unallocated G  & A expense                               |       | (18,816  | )            | (19,633  | )          | (19,571      | )          |
| Unallocated  interest expense, net                           |       | (32,146  | )            | (23,193  | )          | (18,112      | )          |
| Unallocated gain  on sale of property and equipment          |       | —   |         | 397      |       | 25           |       |
| Unallocated debt  restructure expense                        |       | —   |         | (5,035   | )          | (3,218       | )          |
| Elimination of  intersegment interest expense, net           |       | 5,540    |         | 8,014    |       | 8,126        |       |
| Income from  operations before income taxes                  |       | $        | 9,930        |     | $          | 18,326       |       | $ | 24,663 |   |
|                                                         |       |     |         |     |       |         |       |
| **Assets**                                                   |       |     |         |     |       |         |       |
| Total assets for  reportable segments                        |       | $        | 459,402      |     | $          | 370,326      |       | $ | 340,784 |   |
| Capitalized  finance costs not allocated to segments         |       | 12,720   |         | 10,951   |       | 6,313        |       |
| Corporate  unallocated assets                                |       | 16,659   |         | 13,705   |       | 21,198       |       |
| Elimination of  intersegment receivable                      |       | (69,886  | )            | (74,760  | )          | (65,433      | )          |
| Consolidated  total                                          |       | $        | 418,895      |     | $          | 320,222      |       | $ | 302,862 |   |
|                                                         |       |     |         |     |       |         |       |
| **Capital  Expenditures**                                    |       |     |         |     |       |         |       |
| Total  expenditures for assets for reportable segments       |       | $        | 11,095       |     | $          | 8,774        |       | $ | 10,549 |   |
| Other asset  expenditures                                    |       | 276      |         | 95       |       | 261          |       |
| Total capital  expenditures                                  |       | $        | 11,371       |     | $          | 8,869        |       | $ | 10,810 |   |

 

64

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13.                      SELECTEDQUARTERLY INFORMATION (UNAUDITED)

 

Thefollowing is a summary of selected quarterly information for the years endedDecember 31, 2005, 2004 and 2003 (in thousands):

 

| ** **    | ** ** | **March 31,  2005** | ** ** | **June 30,  2005** | ** ** | **September 30,  2005** | ** ** | **December 31,  2005** | ** ** |
|---------------|------------|---------------------|------------|--------------------|------------|-------------------------|------------|------------------------|------------|
| Total revenue |       | $                   | 108,687    |               | $          | 133,212                 |       | $                      | 124,717    |   | $ | 118,944 |   |
| Gross profit  |       | 42,671              |       | 50,575             |       | 44,627                  |       | 45,918                 |       |
| Net income    |       | 1,677               |       | 3,534              |       | 122                     |       | 306                    |       |
|               |            |                     |            |                    |            |                         |            |                        |            |  |  |  |  |

 

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

 

| ** **    | ** ** | **March 31,  2003** | ** ** | **June 30,  2003** | ** ** | **September 30,  2003** | ** ** | **December 31,  2003** | ** ** |
|---------------|------------|---------------------|------------|--------------------|------------|-------------------------|------------|------------------------|------------|
| Total revenue |       | $                   | 92,479     |               | $          | 115,658                 |       | $                      | 110,099    |   | $ | 107,170 |   |
| Gross profit  |       | 36,303              |       | 44,661             |       | 39,940                  |       | 40,473                 |       |
| Net income    |       | 3,099               |       | 5,544              |       | 1,221                   |       | 5,524                  |       |
|               |            |                     |            |                    |            |                         |            |                        |            |  |  |  |  |

 

14.                      VALUATIONAND QUALIFYING ACCOUNTS

 
| **(in thousands)**                          | ** ** | **Balance at  Beginning  of Period** | ** ** | **Additions  Charged to  Costs and  Expenses** | ** ** | **Deductions** | ** ** | **Balance at  End  of Period** | ** ** |
|---------------------------------------------|------------|--------------------------------------|------------|------------------------------------------------|------------|----------------|------------|--------------------------------|------------|
| Description:                                |       |                                 |       |                                           |       |           |       |                           |       |
|                                        |       |                                 |       |                                           |       |           |       |                           |       |
| Year ended December 31, 2005:               |       |                                 |       |                                           |       |           |       |                           |       |
| Allowance for  doubtful accounts receivable |       | $                                    | 810        |                                           | $          | 521            |       | $                              | 379        | (a) | $ | 952 |   |
| Year ended December 31, 2004:               |       |                                 |       |                                           |       |           |       |                           |       |
| Allowance for  doubtful accounts receivable |       | 1,039                                |       | 585                                            |       | 814            | (a)        | 810                            |       |
| Year ended December 31, 2003:               |       |                                 |       |                                           |       |           |       |                           |       |
| Allowance for  doubtful accounts receivable |       | 1,202                                |       | 1,611                                          |       | 1,774          | (a)        | 1,039                          |       |
|                                             |            |                                      |            |                                                |            |                |            |                                |            |  |  |  |  |

 

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

65

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**ITEM 9: CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

None

 

**ITEM 9A: CONTROLS AND PROCEDURES**

 

Within90 days prior to the filing of this Annual Report on Form 10-K, we carried outan evaluation, under the supervision and with the participation of ourmanagement, including our President and Chief Executive Officer and our SeniorVice President and Chief Financial Officer, of the effectiveness of the designand operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)of the Securities Exchange Act of 1934, as amended) as of the end of the periodcovered by this report. Based upon that evaluation, our President and ChiefExecutive Officer, along with our Senior Vice President and Chief FinancialOfficer, concluded that our disclosure controls and procedures are effective intimely alerting them to material information relating to our Company (includingour consolidated subsidiaries) required to be included in our periodic SECfilings. No changes have occurred during the period covered by this report orsince the evaluation date that would have a material effect on the disclosurecontrols and procedures.

 

**ITEM 9B: OTHER INFORMATION**

 

None

 

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**PARTIII**

** **

**ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THEREGISTRANT**

 

Ourexecutive officers and directors are as follows:

 
| **Name**               | ** ** | **Age** | ** ** | **Position**                                                     |
|------------------------|------------|---------|------------|------------------------------------------------------------------|
| Michael A. Schneider   |       | 51      |       | President, Chief  Executive Officer and Director                 |
| Mark J. Boggess        |       | 49      |       | President, Chief  Executive Officer of Camping World, Inc.       |
| Thomas F. Wolfe        |       | 44      |       | Senior Vice President  and Chief Financial Officer               |
| Michael Blumer         |       | 60      |       | Senior Vice President                                            |
| Murray S. Coker        |       | 65      |       | Senior Vice President                                            |
| Laura A. James         |       | 49      |       | Senior Vice President/  Human Resources and Administration       |
| Brent Moody            |       | 44      |       | Senior Vice President/  General Counsel and Business Development |
| Prabhuling Patel       |       | 59      |       | Senior Vice President                                            |
| Stephen Adams          |       | 68      |       | Chairman of the Board  of Directors                              |
| Andris A. Baltins      |       | 60      |       | Director                                                         |
| David Frith—Smith |       | 60      |       | Director                                                         |
| J. Kevin Gleason       |       | 54      |       | Director                                                         |
| George Pransky         |       | 65      |       | Director                                                         |

 

Michael A. Schneiderbecame our President and Chief Executive Officer as of January 1, 2004. Priorto that time, Mr. Schneider had been our Chief Operating Officer since 1996.Prior thereto, Mr. Schneider served as our Senior Vice President and GeneralCounsel since January 1993 and was responsible for administrative areas,development of new corporate ventures and portions of the RV publicationbusiness and the advertising and sales departments. Prior to January 1993 andsince 1977, Mr. Schneider has held a variety of senior management positions inour publication business. Mr. Schneider also serves as a director of AdamsOutdoor Advertising Inc., the managing general partner of Adams OutdoorAdvertising Partnership, which is controlled by Stephen Adams.

 

Mark J. Boggess becamethe President and Chief Executive Officer of our Camping World subsidiary as ofJanuary 1, 2004. Prior to that time, Mr. Boggess had been our Senior VicePresident and Chief Financial Officer since June 1993. From June 1992 throughMay 1993, Mr. Boggess was Vice President and Chief Financial Officer of HyproCorporation, a privately owned manufacturer of fluid transfer pumps. From June1989 through June 1992, Mr. Boggess was Treasurer of Adams CommunicationsCorporation, a holding company controlled by Stephen Adams which ownedtelevision and radio station operations throughout the United States. Mr.Boggess is also an owner of a small percentage interest in FreedomRoadsHolding.

 

Thomas F. Wolfe becameour Senior Vice President and Chief Financial Officer as of January 1, 2004.Prior to that time, Mr. Wolfe had been our Vice President and Controller since1997. From 1991 to 1997, Mr. Wolfe was Vice President of Finance of ConvenienceManagement Group, a privately owned distributor of petroleum products andequipment. From 1989 to 1991, Mr. Wolfe was Vice President and Controller ofFirst City Properties, Inc. Prior to 1989, and since 1983, Mr. Wolfe held a varietyof staff and management positions at Deloitte & Touche LLP.

 

Michael Blumer has beenour Senior Vice President since January 1998. Prior to 1998 and since 1996, Mr.Blumer served as Chief Information Officer at Primedia, Inc. and prior to thatpost he served as Senior Vice President of Information Technology at TheHamilton Group from 1992 to 1996. Prior to 1992, he also served in informationtechnology management positions at The Franklin Mint, American Express and theFederal Reserve Bank of New York.

 

67

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Murray S. Coker was ourSenior Vice President-Marketing and oversees the marketing of all of ourproducts, services and clubs. He joined Camping World in 1978 and has served invarious management positions including Vice President-Mail Order, VicePresident-Direct Marketing and Senior Vice President-Marketing. Prior tojoining Camping World, Mr. Coker was a consultant specializing in retailsystems for Management Design Associates and Deloitte & Touche LLP. He wasthe Data Systems Product Line Manager for Pitney Bowes’ Monarch MarketingSystems Division and a Systems Engineer for IBM Corporation. Mr. Coker retiredeffective December 31, 2005.

 

Laura A. James became ourSenior Vice President/ Human Resources and Administration as of January 1,2004. Prior to that time, Ms. James served as Vice President/ Human Resourcesand Administration since 1996. Ms. James also served as interim Vice President/Finance from December 1996 to September 1997. Prior to 1996, Ms. James servedin various management and staff positions at the Company.

 

Brent Moody became ourSenior Vice President/ General Counsel and Business Development as of January1, 2004. He joined Camping World in 2002 and since that time had served CampingWorld as Vice President and General Counsel and Senior Vice President/ GeneralCounsel and Business Development. Prior to that time and since 1998, Mr. Moodywas a shareholder of the law firm of Greenberg Traurig, P.A. From 1996 to 1998,Mr. Moody served as Vice President and Assistant General Counsel forBlockbuster, Inc.

 

Prabhuling Patel wasappointed Senior Vice President of Products & Services as of May 1, 2004.Mr. Patel was the Senior Vice President & General Manager of theoutsourcing business of Message Media, Inc., an email marketing company, from2000 to 2002. Prior to 2000 he was President of the Telecommunications, Energy& Cable Division of Experian, a credit bureau and direct marketing servicescompany. He served in senior executive positions running various businesses atMetromail Corporation which was in the direct marketing services business. Mr.Patel also held a number of executive level positions in marketing, finance,IT, business development, and business strategy at Citigroup, Cigna, HouseholdInternational and Montgomery Ward.

 

Stephen Adams has beenthe Chairman of our Board of Directors since December 1988. Mr. Adams is alsoChairman of the Board of Directors and a 90% owner of FreedomRoads Holdingwhich, through its 100% owned affiliates, operates RV dealerships throughoutthe United States. In addition, Mr. Adams is the Chairman of the Board ofDirectors and the controlling shareholder of Adams Outdoor Advertising, Inc.,the managing general partner of Adams Outdoor Advertising Limited Partnership.Mr. Adams also holds a 95% interest in Affinity Bank Holdings, Inc.

 

Andris A. Baltins hasbeen a member of the law firm of Kaplan, Strangis and Kaplan, P.A. since 1979.Mr. Baltins is a member of the board of Polaris Industries, Inc., amanufacturer of snowmobiles, all-terrain vehicles, motorcycles and relatedproducts, and serves as the Chair of its Corporate Governance and NominatingCommittee and is also a member of its Compensation Committee. He also serves asa director of various private and non-profit corporations. Mr. Baltins joinedthe Board of Directors in February 2006. Mr. Baltins’ law firm provides legalservices to the Company and its subsidiaries. Mr. Baltins also serves as adirector of Adams Outdoor Advertising Inc., the managing general partner ofAdams Outdoor Advertising Partnership, which is controlled by Stephen Adams.

 

David Frith-Smith hasserved as managing partner of Biller, Frith-Smith & Archibald, CertifiedPublic Accountants since 1988. Mr. Frith-Smith was a principal with MaidyBiller Frith-Smith & Brenner, Certified Public Accountants from 1984 to1988, and with Maidy and Lederman, Certified Public Accountants from 1980 to1984. Mr. Frith-Smith has been a member of our Board of Directors sinceNovember 1996. Mr. Frith-Smith is also a director of Adams Outdoor AdvertisingInc., the managing general partner of Adams Outdoor Advertising LimitedPartnership, which is controlled by Stephen Adams, and various private and non-profitcorporations.

 

68

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J. Kevin Gleason hasserved as the Chief Executive Officer and President of Adams OutdoorAdvertising, LP, an entity controlled by Mr. Adams, since 1991. Prior to thattime, Mr. Gleason was Executive Vice President and General Manager since 1987.Mr. Gleason served as General Manager of Naegele Outdoor Advertising ofSouthern California from 1985 to 1987. He has served as vice chair marketing,and Chairman of the Outdoor Advertising Association of America as well as a boardmember of the Traffic Audit Bureau. Mr. Gleason joined the Board of Directorsin October 2005.

 

George Pransky, Ph.D. hasbeen in private practice as co-director of Pransky and Associates in La Conner,Washington since 1988. He is a frequent consultant for government and privateagencies and has been a contract faculty member for a number of educationalinstitutions, including the University of Washington, the University of Oregonand Antioch College. Dr. Pransky has trained management groups in team building,stress elimination and leadership development for twenty-five years. Dr.Pransky joined the Board of Directors in February 2006 and he also serves as adirector of Adams Outdoor Advertising, Inc.

 

Directors are elected forterms of one year or until their successors have been duly elected. There areno family relationships between any of the directors and/or executive officers.

 

**BoardFunctions as Audit Committee**

 

Our securities are not listed on any nationalsecurities exchange and we are not required to maintain a separate AuditCommittee of the Board nor are we subject to the audit committee independencerequirements set forth in Rule 10A-3 of the Securities Exchange Act of 1934, asamended. On February 22, 2006, the Board of Directors of the Company disbandedthe Audit Committee and assumed its oversight of the integrity of our financialstatements; our compliance with legal and regulatory requirements; theretention, independence and qualifications of our independent auditor; and theresponsibilities, budget and performance of our independent auditor.

 

**Code ofProfessional Conduct**

 

We have adopted a Code ofProfessional Conduct that applies to our Principal Executive Officer, PrincipalFinancial Officer, Principal Accounting Officer and all other employees. ThisCode of Professional Conduct is posted on our website at www.affinitygroup.comand may be found as follows:

 

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

 

•                  Then,click on “Code of Conduct.”

 

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**ITEM 11:  EXECUTIVE COMPENSATION**

 

**ExecutiveCompensation**

 

The following tableprovides certain summary information concerning the compensation paid by us toour Chief Executive Officer and each of the****four otherhighest compensated executive officers who were officers at December 31, 2005,for the fiscal years ending December 31, 2005, 2004, and 2003.

 

**SUMMARY COMPENSATION TABLE**

** **
| ** **                      | ** ** | ** ** | ** ** | **Annual Compensation** | ** ** | **Other Annual** | ** ** | **All Other**           | ** ** |
|---------------------------------|------------|------------|------------|-------------------------|------------|------------------|------------|-------------------------|------------|
| **Name and Principal Position** | ** ** | **Year**   | ** ** | **Salary**              | ** ** | **Bonus (1)**    | ** ** | **Compensation (1)(2)** | ** ** | **Compensation (3)** | ** ** |
|                            |       |       |       |                    |       |             |       |                    |       |   |   |
| Michael A. Schneider            |       | 2005       |       | $                       | 100,000    |             | $          | 662,510                 |       | $ | 492,702 | (4) | $ | 8,485 |   |
| President,                      |       | 2004       |       | 100,000                 |       | 645,080          |       | 492,702                 | (5)        | 8,764 |   |
| Chief Executive  Officer        |       | 2003       |       | 210,000                 |       | 290,055          |       |                    |       | 8,660 |   |
|                            |       |       |       |                    |       |             |       |                    |       |   |   |
| Mark J. Boggess                 |       | 2005       |       | 100,000                 |       | 658,206          |       | 563,870                 | (4)        | 104,676 |   |
| President, Chief  Executive     |       | 2004       |       | 100,000                 |       | 646,521          |       | 563,870                 | (5)        | 8,564 |   |
| Officer of  Camping World       |       | 2003       |       | 155,140                 |       | 362,569          |       |                    |       | 8,580 |   |
|                            |       |       |       |                    |       |             |       |                    |       |   |   |
| Murray S. Coker                 |       | 2005       |       | 203,538                 |       | 204,742          |       | 315,371                 | (4)        | 6,203 |   |
| Senior Vice  President          |       | 2004       |       | 196,000                 |       | 198,990          |       | 315,371                 | (5)        | 9,305 |   |
|                            |       | 2003       |       | 196,000                 |       | 191,436          |       |                    |       | 9,028 |   |
|                            |       |       |       |                    |       |             |       |                    |       |   |   |
| Thomas F. Wolfe                 |       | 2005       |       | 185,000                 |       | 166,039          |       |                    |       | 7,796 |   |
| Senior Vice  President          |       | 2004       |       | 181,132                 |       | 167,353          |       |                    |       | 8,364 |   |
| Chief Financial  Officer        |       | 2003       |       | 151,358                 |       | 40,608           |       |                    |       | 7,696 |   |
|                            |       |       |       |                    |       |             |       |                    |       |   |   |
| Peter Klein                     |       | 2005       |       | 210,000                 |       | 100,507          |       |                    |       | 8,400 |   |
| Senior Vice  President          |       | 2004       |       | 218,000                 |       | 96,029           |       |                    |       | 6,668 |   |
| of Camping World                |       | 2003       |       | 192,212                 |       | 64,418           |       |                    |       | 1,991 |   |
|                                 |            |            |            |                         |            |                  |            |                         |            |  |  |  |  |  |  |

 

----

(1)          Compensationdefined as “Bonus” and “Other Annual Compensation” is eligible, at the electionof the employee, to be contributed to the AGHC Key Employee Security OptionPlan (“KEYSOP”). See “Agreements with Executive Officers.”

 

(2)          Personalbenefits are the lesser of (i) 10% of total annual salary and bonus(ii) $50,000, except as described in Note (3) below.

 

(3)          Representscompany contributions to 401(k), split dollar life insurance economic benefitand personal use of Company assets. Further, the Company incurred $96,166 ofemployee relocation expense for Mr. Boggess.

 

(4)          Under theterms of the phantom stock agreements, Mr. Schneider received $492,702, Mr.Boggess received $563,870, and Mr. Coker received $315,371 in 2005. Payments toMr. Schneider and Mr. Coker were contributed to the KEYSOP.

 

(5)          Under theterms of the phantom stock agreements, Mr. Schneider received $492,702, Mr.Boggess received $563,870, and Mr. Coker received $315,371 in 2004. All paymentswere contributed to the KEYSOP.

 

We do not have anyoutstanding stock options or restricted stock grants. We have phantom stockagreements and a non-qualified deferred compensation plan for certain of itsofficers. See “Agreements with Executive Officers.”

 

70

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**Agreements with ExecutiveOfficers**

 

Until December 31, 2003, theCompany and Mr. Adams were parties to an amended employment agreement providingfor his employment as the Chairman of our Board of Directors. That agreementterminated effective December 31, 2003, following issuance of the AGI Senior Notes.

 

EffectiveJanuary 1999, the Company introduced the KEYSOP for key employees of AGI andits subsidiaries. This non-qualified deferred compensation plan allows keyemployees the option to contribute specific compensation, including bonuses,incentive compensation, and phantom stock payments to the KEYSOP. Contributionsto the KEYSOP from AGI employees totaled $1.3 million, $4.0 million, and $4.6million in 2005, 2004 and 2003, respectively.

 

In January 1992, we introduced aphantom stock incentive program for key employees. Since that time, certainemployees have been granted awards at various interest levels and over varyingvesting periods. The value of the phantom stock interest is based on the increasein the value of the Company over the base value at the award date. Inaccordance with the formula set forth in the agreements, which formulaapproximates a multiple of operating profits and is intended to approximate thefair market value of the Company, earned incentives are paid in three annualinstallments following the earlier of termination of employment, sale of theCompany, or five years after the initial grant of the phantom stock interest. Thephantom stock agreements also set forth the terms of employment for theexecutive.

 

As of December 31, 2005, theaggregate accrued liability under the phantom stock incentive program was $6.0million, of which $0.6 million has been reflected as current in the financialstatements. The earned incentives under these agreements are scheduled to bepaid at various times over the next two years. During 2005, we incurreddeferred executive compensation expense of $2.2 million under the phantom stockagreements. Phantom stock payments of $1.5 million were made during the 2005.

 

The following table sets forth thecurrent awards outstanding under the Company’s phantom stock incentive programas of December 31, 2005. 

 
| **Officer/Director**                 | ** ** | **Full  Interest** | ** ** | **Vested  Amount** | ** ** |
|--------------------------------------|------------|--------------------|------------|--------------------|------------|
| Michael A. Schneider                 |       | 2.50               | %          | 2.50               | %          |
| Mark J. Boggess                      |       | 2.50               | %          | 2.50               | %          |
| Murray S. Coker                      |       | 1.00               | %          | 1.00               | %          |
| Thomas F. Wolfe                      |       | 0.33               | %          | 0.13               | %          |
| Laura A. James                       |       | 0.10               | %          | 0.04               | %          |
| Prabhuling Patel                     |       | 0.10               | %          | 0.02               | %          |
| Other officers and key employees:    |       |               |       |               |       |
| Camp Coast to  Coast Inc. subsidiary |       |               | (1)        |               | (1)        |
| Camping World,  Inc. subsidiary      |       |               | (2)        |               | (2)        |

 

----

(1)                                  The phantom stock interest relatesto four executives in our Camp Coast to Coast, Inc. subsidiary. The fullinterest for each executive ranges from 0.35% of the increase in thatsubsidiary’s value to 15.00% of the increase in that subsidiary’s valuedepending upon the level of the increase. The full interest vests in equalportions over a five year period.

 

(2)                                  The phantom stock interest relatesto four executives in our Camping World, Inc. subsidiary. The full interest foreach executive ranges from 1.45% of the increase in that subsidiary’s value to2.25% of the increase in that subsidiary’s value depending upon the level ofthe increase. The full interest vests in equal portions over a five yearperiod.

 

71

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The executives’ base salary andannual bonus are determined from time to time by the Board of Directors. In theevent the executive’s employment is terminated without cause, the phantom stockagreements provide for severance benefits of up to one year’s base salary plusthe accrued bonus for the year in which such termination occurs.

 

**Compensation Committee Interlockand Insider Participation**

 

The Company’s Board ofDirectors determines the compensation of the executive officers. Michael A.Schneider, President, serves on the Board of Directors.

 

Messrs. Boggess, Cokerand Blumer are partners in various partnerships that lease nine facilitiesunder long-term leases to Camping World. For the years ended December 31, 2005,2004 and 2003, payments under these leases were approximately $3.3 million,$3.7 million, and $3.6 million, respectively. The leases expire between September2007 and December 2020, subject to the right of Camping World to exerciserenewal options. We believe that such leases contain lease terms as favorableas lease terms that would be obtained from independent third parties.

 

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. The properties have been leased back to the Companyon a triple net basis. Both the sales price and lease rates were based onmarket rates determined by third party independent appraisers engaged by themortgage lender and approved by the AGI Senior Credit Facility agent bank. Theseleases have an initial term of 25 to 27 years with two five-year options at thethen current market rent*.*Paymentsunder these leases were $3.4 million in 2005.

 

**Bonus Plan**

 

We annually adopt bonus programs foremployees. Bonus payments are made based on achievement of specified operatingresults and/or objectives.

 

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

 

We sponsor a deferredsavings and profit sharing plan (the “401(k) Plan”) qualified under Section401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”).All employees over age 21 who have completed one year of service (minimum of1,000 hours) are eligible to participate in the 401(k) Plan. For the plan year2005, we elected a Safe Harbor Matching Contribution for the employer match andset the employer match, which vests upon contribution, at an amount equal to100% of the first 4% of the employee’s contribution. Employees may defer up to60% of their eligible compensation up to IRS limits.

 

**Other Benefit Plan**

 

Our employees receive certain medicaland dental benefits during their employment. One of our predecessors alsoprovided eligible employees with medical, dental and life insurance coverageafter retirement. The estimated future costs associated with such coverage toretirees are reserved as a liability in our consolidated financial statements. Currentemployees are not provided medical and dental benefits upon retirement.

 

**Director Compensation**

 

We pay directors who are notemployees (Messrs. Baltins, Frith-Smith, Gleason and Pransky) director fees of$1,800 per month.

 

72

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**Report on Executive Compensation**

 

Our executive compensation program istied closely to our performance and aimed at enabling us to attract and retainthe best possible executive talent. Accordingly, the Board of Directors seeksto significantly correlate the level of executive compensation, when taken as awhole, with the level of our performance, and it seeks to compensate itsexecutives in a manner that is reasonably competitive with that available toexecutives in comparable companies, including membership services companies andother highly leveraged companies with comparable operating income. These goalsare accomplished through the use of a combination of annual bonus payments andphantom stock grants in conjunction with base compensation.

 

Michael A. Schneiderbecame our President and Chief Executive Officer as of January 1, 2004. Mr.Schneider’s compensation package was determined by the Board based onnegotiations with Mr. Schneider taking into account the compensation packagesof chief executive officers of similarly situated companies and our performanceobjectives. For 2005, Mr. Schneider received a base salary and he received abonus based on his assigned percentage of our operating income and theachievement of specified operating results. In addition, Mr. Schneider has beengranted phantom stock interests in order to provide him with an incentive toenhance our long-term value. See a description of the phantom stock incentiveprogram for key employees under “Agreements with Executive Officers.”  Standard employee medical and dental benefitsand participation in the 401(k) Plan are also available to Mr. Schneider.

 

Our other executiveofficers received base salaries for 2005 which the Board has set at levelswhich are believed by the Board to be reasonably competitive with the salarylevel of executives in comparable companies. The executive officers alsoreceived bonuses based on their respective assigned percentages of ouroperating income or the operations in which the executive is employed. Thepercentage assigned to each executive officer depends upon the level of his orher responsibilities. In addition, the other executive officers receivedphantom stock grants, standard employee medical and dental benefits andparticipation in the 401(k) Plan.

 

73

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**ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT**

 

Our company is awholly-owned subsidiary of AGI Holding Corp. (“AGHC”), a privately-ownedcorporation. The following table sets forth, as of December 31, 2005, certaininformation with respect to the beneficial ownership of the Common Stock ofAGHC by each shareholder who is known to us to beneficially own more than 5% ofthe outstanding shares, each executive officer and the current sole director ofAGHC, and all of our executive officers and directors as a group.

 
| **Name and Address of Beneficial Owner**                      | ** ** | **Number of Shares  of Stock Owned (1)** | ** ** | **Percent of  Common Stock** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------|------------|------------------------------|------------|
| ** **                                                    | ** ** | ** **                               | ** ** | ** **                   | ** ** |
| Stephen Adams 2575 Vista Del Mar Drive Ventura,  CA93001      |       | 1,407.7                                  | (2)        | 97.41                        | %          |
| All executive officers and directors as a group (15  persons) |       | 1,407.7                                  |       | 97.41                        | %          |

 

----

(1)  Except as otherwiseindicated, the beneficial owners have sole voting and investment power withrespect to the shares in the table.

(2)  Does not include 37.5 sharesowned by members of the Adams’ family who do not reside with him and as towhich Mr. Adams disclaims beneficial ownership.

 

**ITEM 13:  CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS**

 

Certain members of ourBoard of Directors, including the Chairman of the Board, are partners inpartnerships and shareholders of corporations that lease facilities to us underlong-term leases. For the years ended December 31, 2005, 2004 and 2003,payments under these leases were approximately $6.7 million, $7.1 million, and $7.0million, respectively. Future commitments under these leases totalapproximately $102.2 million. The leases expire at various dates from September2007 through July 2029, subject to our right to exercise renewal options.

 

In connection with oureffort to expand the number of Camping World stores by developing retailalliances with RV dealerships across North America, we have established fourteenCamping World stores alongside or within RV dealerships owned through entitiescontrolled by the Chairman of our Board of Directors, Stephen Adams, and weexpect to open additional Camping World stores alongside or within such RVdealerships in the future. At December 31, 2005, the Company leased tenproperties from FreedomRoads and sub-leased four properties to FreedomRoads. Totalpayments received under these ten leased properties for 2005 and 2004 wereapproximately $0.7 million and $0.2 million, respectively, and futurecommitments under these leases total approximately $6.6 million. The leasesexpire at various dates from August 2013 through October 2015. For 2005 and2004, lease payments received from FreedomRoads for the four subleased propertieswere approximately $0.7 million and $0.6 million, respectively, and futurepayments to be received under these subleases total approximately $5.3 million.Payments under the product marketing and sales agreements were approximately$3.2 million, $3.7 million and $0.1 million for 2005, 2004 and 2003respectively.

 

74

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On December 5, 2001, wesold eleven real estate properties to eleven separate wholly-owned subsidiariesof AGRP Holding Corp, a wholly-owned subsidiary of our parent, AGHC, which isowned 97.4% by Mr. Adams, for $52.3 million in cash and a $4.8 million notereceivable. The properties have been leased back to us on a triple net basis.These leases are classified as operating leases and the average net annuallease payments over the lives of the leases are $3.4 million. The $4.8 millionnote receivable yields 11% per annum, with monthly payments of $46,000 and aten-year balloon due December 2011.

 

In March 2002, wereceived a royalty payment of $1.5 million from Holiday RV Superstores, Inc.,doing business as Recreation USA, (“Recreation USA”). This non-refundable paymentgrants Recreation USA a limited non-exclusive license to use the Company’s GoodSam trademarks. When the Company entered into the agreement with RecreationUSA, our Chairman beneficially owned, through entities controlled by him,approximately 57% of the then outstanding common stock of Recreation USA aftertaking into account conversion and exercise of his beneficially-ownedsecurities in Recreation USA. We recorded the royalty payment into income in alevel amount ratably over the three-year term of the license. The agreementwith Recreation USA was terminated in October 2003 and, as a result, theunamortized balance of the royalty agreement was recognized as revenue in thefourth quarter of 2003.

 

For a description of theemployment, consulting, non-competition, management incentive and phantom stockagreements with the Company and persons serving as an executive officer ordirector of the Company see “Executive Compensation - Agreements with ExecutiveOfficers” and “Executive Compensation - Committee Interlock and InsiderParticipation.”

 

For a description ofleases which our subsidiaries have with partnerships in which a director of ourcompany has a partnership interest, see “Executive Compensation - CompensationCommittee Interlock and Insider Participation.”

 

The law firm of Kaplan,Strangis and Kaplan, P.A. (“KSK”) provides ongoing legal services to theCompany and certain subsidiaries in connection with various matters. Andris A.Baltins, a member of the Board of Directors, is a member of that firm. During2005, KSK received $0.9 million in legal fees from the Company.

 

**ITEM 14:****PRINCIPAL ACCOUNTING FEES ANDSERVICES**

 

The Audit Committee of the Board of Directors engaged Ernst & YoungLLP as independent auditors to examine our accounts for the fiscal year endingDecember 31, 2005.

 

**Audit Fees**

 

Theaggregate audit fees paid to Ernst & Young LLP for the fiscal years endedDecember 31, 2005, 2004 and 2003, were $433,460, $256,680 and $311,140,respectively. These fees include amounts for the audit of the Company’sconsolidated annual financial statements, stand alone audits of certainsubsidiaries, and the reviews of the consolidated financial statements includedin the Company’s Quarterly Reports on Form 10-Q, including assistance with andreview of documents filed with the SEC.

 

**Audit-RelatedFees**

 

Theaggregate audit-related fees paid to Ernst & Young LLP for the fiscal yearsended December 31, 2005, 2004 and 2003 were $3,400, $17,700 and $0,respectively. These fees related to****specific analysisof accounting treatments and general assistance with the implementation of theSEC rules pursuant to the Sarbanes-Oxley Act of 2002.

 

75

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**TaxFees**

 

Theaggregate fees billed by Ernst & Young LLP for tax services rendered forthe fiscal years ended December 31, 2005, 2004 and 2003 were $99,300, $27,374and $33,848, respectively. The fees paid in each of those years primarilyrelated to tax planning and compliance services.

 

**AllOther Fees**

 

Therewere no other fees paid to Ernst & Young LLP for the years ended December31, 2005, 2004 and 2003.

 

**Pre-ApprovalRequirements**

 

TheBoard of Directors has the sole authority to review in advance and grant anypre-approvals of (i) all auditing services to be provided by the independentauditor, (ii) all significant non-audit services to be provided by theindependent auditors as permitted by Section 10A of the Securities Exchange Actof 1934, and (iii) all fees and the terms of engagement with respect to suchservices. All audit and non-audit services performed by Ernst & Young LLPduring fiscal 2005 were pre-approved pursuant to the procedures outlined above.

 

76

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**PART IV**

 

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

 

(a) (1)                 Consolidatedfinancial statements are included in Item 8 hereto.

 

(a) (2)                 Consolidatedfinancial statement schedules are included in Item 8 hereto.

 

(a) (3)                 Listingof Exhibits:

 

The exhibits required tobe a part of this report are listed in the Index to Exhibits which follows thesignature page.

 

(b)                                 Exhibits:

 

Included in Item 15 (a)(3) above.

 

(c)                                  FinancialStatement Schedules

 

Included in Item 15 (a)(2) above.

 

77

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**SIGNATURES**

 

 

Pursuant to the requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized, in the City of Ventura, State of California on March 3, 2006.

 

 

AFFINITY GROUP HOLDING,INC.

 

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

 

 

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

 

 
| /s/  Thomas F. Wolfe |   | Senior Vice President  and                    | March 3, 2006 |
|----------------------|--------|-----------------------------------------------|---------------|
| Thomas F. Wolfe      |   | Chief Financial Officer                       |          |
|                 |   | (Principal Financial  and Accounting Officer) |          |
|                 |   |                                          |          |
|                 |   |                                          |          |
| *                    |   | Director                                      | March 3, 2006 |
| Stephen Adams        |   |                                          |          |
|                 |   |                                          |          |
|                 |   |                                          |          |
| *                    |   | Director                                      | March 3, 2006 |
| Andris A. Baltins    |   |                                          |          |
|                 |   |                                          |          |
|                 |   |                                          |          |
| *                    |   | Director                                      | March 3, 2006 |
| David Frith-Smith    |   |                                          |          |
|                 |   |                                          |          |
|                 |   |                                          |          |
| *                    |   | Director                                      | March 3, 2006 |
| J. Kevin Gleason     |   |                                          |          |
|                 |   |                                          |          |
|                 |   |                                          |          |
| *                    |   | Director                                      | March 3, 2006 |
| George Pransky       |   |                                          |          |

 

78

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| *By:   | /s/ Thomas F. Wolfe |   | March 3, 2006 |
|--------|---------------------|--------|---------------|
|   | (Thomas F. Wolfe    |   |
|   | Attorney-in-Fact)   |   |

 

 

Thomas F. Wolfe, pursuantto Powers of Attorney executed by each of the officers and directors listedabove whose name is marked by an “*” and filed as an exhibit hereto, by signinghis name hereto does hereby sign and execute this Report of Affinity GroupHolding, Inc. on behalf of each of such officers and directors in thecapacities in which the names of each appear above.

 

79

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**AFFINITY GROUP HOLDING, INC.**

 

**EXHIBIT INDEX TO ANNUAL REPORT**

**ON FORM 10-K**

 

**For Fiscal Year Ended December 31, 2005**

 
| **Item**                                                                                                                                                                                                       | ** ** | **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 10(7)/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 10(7)/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                                          |       |                     |

 

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| **Item**                                                                                                                                                                                                                                                                                                                                                                                             | ** ** | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                           | ** ** | ** **                                    | ** ** | ** **               |
| Form  of Phantom Stock Agreement between certain executives and Affinity Group,  Inc. (1)                                                                                                                                                                                                                                                                                                            |       | 10.2                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Form  of Phantom Stock Agreements between certain executives and CWI, Inc. (1)                                                                                                                                                                                                                                                                                                                       |       | 10.3                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Form  of Phantom Stock Agreements between certain executives and Camp Coast to  Coast, Inc. (1)                                                                                                                                                                                                                                                                                                      |       | 10.4                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Working  Agreements and Service Agreements with National General Insurance Contract,  as amended (1)                                                                                                                                                                                                                                                                                                 |       | 10.6                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| 401(k)  Savings and Investment Plan (1)                                                                                                                                                                                                                                                                                                                                                              |       | 10.7                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Form of Indemnification Agreement for persons  consenting to serve as directors upon completion of the offering and  amendment thereto (1)                                                                                                                                                                                                                                                           |       | 10.8                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Capital Note of AGRP Holding Corp., dated December  5, 2001 (1)                                                                                                                                                                                                                                                                                                                                      |       | 10.9                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Amended  and Restated Marketing Agreement, dated March 15, 2002 by and between Camping  World, Inc. and National General Insurance Company (1)                                                                                                                                                                                                                                                       |       | 10.10                                         |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Amended  and Restated Credit Agreement dated as of June 24, 2003 among Affinity Group,  Inc., the guarantors party thereto, the lenders party thereto, Canadian  Imperial Bank of Commerce, as syndication agent, Fleet National Bank, as  administrative agent, and General Electric Capital Corporation, as  documentation agent (1)                                                               |       | 10.11                                         |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Senior  Secured Floating Rate Note Purchase Agreement dated as of June 24, 2003 among  Affinity Group, Inc., the guarantors party thereto, the noteholders party  thereto, Canadian Imperial Bank of Commerce, as syndication agent, Fleet  National Bank, as administrative agent and General Electric Capital  Corporation, as documentation agent (1)                                             |       | 10.12                                         |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| First  Amendment to Credit Agreement dated as of February 18, 2004 among Affinity  Group, Inc., the guarantors party thereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Canadian Imperial  Bank of Commerce, as administrative agent and successor to Fleet National  Bank, and General Electric Capital Corporation, as documentation agent (1)         |       | 10.13                                         |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| First  Amendment to Note Purchase Agreement dated as of February 18, 2004 among  Affinity Group, Inc., the guarantors party thereto, the lenders party  thereto, Canadian Imperial Bank of Commerce, as syndication agent, Canadian  Imperial Bank of Commerce, as administrative agent and successor to Fleet  National Bank, and General Electric Capital Corporation, as documentation  agent (1) |       | 10.14                                         |       |                     |

 

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| ** **                                                                                                                                                                                                                                                                                                                                                                                           | ** ** | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Second  Amendment to Credit Agreement dated as of June 30, 2004 among Affinity Group,  Inc., the guarantors party thereto, the lenders party thereto, Canadian  Imperial Bank of Commerce, as syndication agent, Canadian Imperial Bank of  Commerce, as administrative agent and successor to Fleet National Bank, and  General Electric Capital Corporation, as documentation agent (1)            |       | 10.15                                         |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Second  Amendment to Note Purchase Agreement dated as of June 30, 2004 among Affinity  Group, Inc., the guarantors party thereto, the lenders party thereto,  Canadian Imperial Bank of Commerce, as syndication agent, Canadian Imperial  Bank of Commerce, as administrative agent and successor to Fleet National  Bank, and General Electric Capital Corporation, as documentation agent (1)     |       | 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 (1)         |       | 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 (1) |       | 10.18                                         |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Agreement  with Cross Country Motor Club, Inc. dated September 7, 2004 (1)                                                                                                                                                                                                                                                                                                                           |       | 10.19                                         |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Lease  Agreement for distribution center in Franklin, Kentucky (1)                                                                                                                                                                                                                                                                                                                                   |       | 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 (1)                                                                |       | 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 (1)                                                      |       | 10.22                                         |       |                     |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                                          |       |                     |
| Preferred Membership Interest Unit Subscription  Agreement, dated March 24, 2005 between FreedomRoads Holding Company, LLC and  CWFR Capital Corp. (2)                                                                                                                                                                                                                                               |       | 10.23                                         |       |                     |

 

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| ** **                                                                                                                                                                                                                                                                                                                                    | ** ** | **Regulation  S-K Exhibit  Table  Reference** | ** ** | **Sequential  Page No.** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------|
| ** **                                                                                                                                                                                                                                                                                                                                    | ** ** | ** **                                    | ** ** | ** **               |
| Fifth Amendment to Credit Agreement dated November  13, 2005 among Affinity Group, Inc, the guarantors party hereto, the lenders  party thereto, Canadian Imperial Bank of Commerce, as syndication agent,  Canadian Imperial Bank of Commerce as administrative agent, and General  Electric Capital Corporation as documentation agent. (3) |       | 10.24                                         |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Second Amendment to Tax  Sharing Agreement among Affinity Group Holding, Inc., Affinity Group, Inc.  and its subsidiaries (1)                                                                                                                                                                                                                 |       | 10.25                                         |       | 84                       |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Statement of Computation  of Ratio of Earnings to Fixed Charges (1)                                                                                                                                                                                                                                                                           |       | 12.1                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                |       | 21                                            |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Consent of Kaplan,  Strangis and Kaplan, P.A.(1)                                                                                                                                                                                                                                                                                              |       | 23.1                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Consent of Ernst &  Young LLP, Independent Registered Public Accounting Firm, addressed to  Affinity Group, Inc. (1)                                                                                                                                                                                                                      |       | 23.2                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| 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                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Statement Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                                  |       | 32.1                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Statement Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                                                  |       | 32.2                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Affinity Group Code of Professional Conduct (1)                                                                                                                                                                                                                                                                                               |       | 99.1                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Form of Letter of  Transmittal (1)                                                                                                                                                                                                                                                                                                            |       | 99.2                                          |       |                     |
|                                                                                                                                                                                                                                                                                                                                          |       |                                          |       |                     |
| Form of Notice of  Guarantee Delivery (1)                                                                                                                                                                                                                                                                                                     |       | 99.3                                          |       |                     |

 

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(1)          Filed with the Company’sRegistration Statement No. 333-124109 and incorporated by reference herein.

 

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

 

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

 

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

 

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