UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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, 2004    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     333-113982

 

AFFINITY GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

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

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

                                     9% Senior Subordinated Notes Due 2012

 

                                                Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ý        NO o

 

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES o        NO ý

Indicate the number of shares outstanding of each of the issuer’s classes of common

stock, as of the latest practicable date.

 

 

 

PART I

 

ITEM 1: BUSINESS

 

 

General

 

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

 

We are a wholly-owned subsidiary of AGI Holding Corp., a privately-owned corporation.  We are a member-based direct marketing organization targeting North American recreational vehicle (“RV”) owners and outdoor enthusiasts.  Our club members form a receptive audience to which we sell products, services, merchandise and publications targeted to their specific recreational interests.  In addition, we are a specialty retailer of RV-related products.  We operate through three principal lines of business, consisting of (i) club memberships and related products and services, (ii) subscription magazines and other publications including directories, and (iii) specialty merchandise sold primarily through our 39 Camping World retail stores, mail order catalogs and the Internet.

 

There are approximately 1.7 million dues paying members enrolled in our clubs.  We currently have approximately 5.9 million in aggregate circulation and 1.1 million paid circulation across our 37 publications.  For the year ended December 31, 2004, our revenue, operating income and net income were $464.7 million, $46.2 million and $10.3 million, respectively.

 

 

Competitive Strengths

 

We believe that our key competitive strengths are as follows:

 

Stable, Recurring Cash Flow Stream - Approximately 85% of our operating income is generated through our membership club, subscription-based products and services and publications businesses, which historically have provided a recurring income stream through a core base of customers. Our four membership clubs have a historical average renewal rate of 66%, which we believe compares favorably to other subscription-based businesses. Similarly, our subscription-based products and services have historically also experienced high renewal rates, averaging over 85% over the past four years for our largest product and service offerings, Emergency Road Service (“ERS”), RV vehicle insurance and extended warranty.

 

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

 

We believe our significant size relative to our competition is a meaningful advantage that provides us greater leverage to negotiate benefits and discounts with third-party service providers for our members and consequently enhances the value of our product and service offerings.  Additionally, these negotiating and pricing advantages allow us to increase membership dues without risking the loss of members, who are compensated by additional savings.  These advantages compound as new customers are drawn to the higher savings earned by our club members.  Our 1.7 million club members and the 6.8 million consumers in our proprietary database serve as a unique, captive audience for direct marketing, which significantly lowers customer acquisition costs relative to our competitors and facilitates cost-effective cross-selling.

 

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Largely Recession Resistant - We believe the characteristics of our business mitigate the effects of economic downturns on our operating performance.  While the sale of new RVs is generally influenced by economic conditions, our financial performance has historically shown little correlation to changes in the Gross Domestic Product, gas prices or even new RV shipments.  We believe this is partially due to the small cost of our products and services relative to the cost of purchasing an RV and the fact that our clubs provide average annual savings significantly in excess of the annual dues.  We market our clubs, products and services to a sizable existing installed base of 6.9 million RV owners, which affords us the ability to continue to attract new customers irrespective of new RV sales.  We believe RV owners may be more likely to take vacations utilizing RVs during an economic downturn, because they are generally less expensive than vacations necessitating plane or train travel and hotel 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 10 years.  Overall RV ownership rates have historically been highest, with 14% penetration, in the 55-64 age bracket, an age group that is expected to grow 45% by 2010, according to the National Survey of the RV Consumer by the University of Michigan in 2001 (the “RV Survey”).  Furthermore, the 45-54 age bracket, which maintains the second highest ownership rate of RVs, is expected to grow 15% by 2010.  The growth in these age groups is expected to generate dramatic growth in the pool of potential RV consumers.  Also, according to the RV Survey, this age group shift will drive the number of households that own at least one RV from 6.9 million in 2001 to 7.9 million in 2010. In addition, RV owners have household incomes that significantly exceed the national average.  These demographics are attractive for advertisers and third-party providers of products and services.

 

Experienced and Incentivized Management Team - Our executive management team has extensive publishing, direct marketing and retail experience with significant expertise in the RV industry. With an average of over 13 years with us, the team has developed substantial experience in increasing our target customer base, using strategic alliances to bolster product offerings that create value for our customers and increasing cross-selling opportunities for our high margin product offerings. Our consistent operating performance, to a great extent, is attributable to our senior managers who are responsible for developing and implementing our business strategy and focusing on increasing profitability. Our executive management team is compensated both through an annual salary and through a management incentive program that is directly tied to our financial performance.

 

 

Our Strategy

 

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

 

Maximize Customer Retention with Value-Added Product Offerings - A key aspect of our strategy is to maximize the value proposition of each of our product offerings, which contributes to strong customer renewal rates. Each of our four membership clubs provides our customers with tangible savings over and above the membership fee.  On average, club members realize savings five times greater than the cost of their annual membership dues as the result of being able to purchase products and services at discounts made available through our clubs.  We believe that the participation levels and renewal rates of club members reflect the benefits derived from their membership.  As such, in order to maximize customer renewal rates, we constantly evaluate member satisfaction and actively respond to changing member preferences through the enhancement or introduction of new membership benefits including products and services.

 

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Efficiently Acquire New Customers - - We believe efficient customer acquisition and a sizeable database population are critical to driving our growth and profitability.  Camping World and its discount buyer’s club, President’s Club, together, account for approximately 50% of our new customer database entries.  In addition to being a highly valuable customer loyalty program, President’s Club allows us to capture specific information about each customer including RV type and usage, as well as information on the customer’s age, income, net worth and interests, while adding virtually no incremental customer acquisition costs.  We are able to customize our direct marketing offers based upon our customers’ profiles.  Other methods of customer acquisition include purchasing lists from data providers and placing our publications at campgrounds and dealerships. We then manage our database and target our offers to the customers most likely to purchase more than one of our product offerings.

 

Cross-Sell Products and Services to Existing Customers - We proactively cross-sell our products and services across our customer base. For example, we use our existing customer database to cost-efficiently market Camping World products through catalogs.  Conversely, Camping World supercenters provide direct customer referrals to our membership clubs, products and services through their in-store kiosks.  In addition, we use our publications to communicate with our core customer base and to promote our other business segments to existing club members.  Our magazines contain relevant content as well as various forms of advertisements for our membership clubs, products and services.

 

Develop and Market Additional Product and Service Offerings and Additional Affinity Groups - We continually evaluate additional products and services that can be developed and offered to our customer base of RV owners and outdoor enthusiasts and we continually expand the variety of products and services that are attractive to our customer base.  When introducing new products and services, we concentrate on products and services provided by third parties, which we can market without significant capital investment or underwriting risk and for which we typically receive a marketing fee from the service provider based on sales volume.  We seek to utilize the purchasing power of our club members to obtain products and services at attractive prices.  Also, we believe that the experience we have accumulated in managing our existing recreational affinity groups is applicable to the management of other recreational interest organizations.  As a result, we conduct ongoing evaluations for developing or acquiring affinity groups for which we can build membership enrollment and to which we can market products and services.

 

Expand Niche Recreational Publications - We believe aggregate circulation of our magazines is an important factor in determining the amount of revenue we can obtain from advertisers.  Consequently, we seek to expand our presence as a publisher in select recreational niches through the introduction of new magazine titles and the acquisition of other publications in our markets or in complementary recreational market niches.  Publications in complementary niches may also provide the opportunity to launch new membership clubs, to market our products and services to new customers and to develop other products and services, which meet the special needs of these customers.  For example, our acquisition of the publishing assets of Poole Publications, Inc. in October 2003 allowed us to expand our presence in the recreational boat market niche.

 

Increase Camping World Penetration - We intend to continue the controlled expansion of our Camping World supercenter network by developing Camping World stores alongside or within independent RV dealerships, including RV dealerships owned and operated by our affiliates, which provides a competitive advantage by creating a means of increasing retail customer traffic.  In 2004 we opened six new Camping World stores, and in 2005 we intend to open ten new Camping World stores as a part of our dealer alliance program.  In addition to generating increased cash flows from the sale of merchandise, a larger network of geographically diverse Camping World stores will enhance our ability to market our portfolio of membership clubs, publications and product and service offerings to a significantly larger customer base.

 

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RV Industry

 

The use of RVs and the demand for club memberships and related products and services may be influenced by a number of factors including general economic conditions, the availability and price of propane and gasoline, and the total number of RVs.  We believe that both the installed base of RVs and the type of RV owned (full service vehicles excluding van conversions) are the most important factors affecting the demand for our membership clubs, merchandise, products and services.  Based on the RV Survey, the number of households owning RVs is projected to increase from 6.9 million in 2001 to nearly 7.9 million in 2010.  The RV Survey also indicates that the percentage of households owning RVs during this period will rise slightly from 7.6% to 7.8%.

 

According to the RV Survey, the average RV owner is 49 years old.  RV ownership also increases with age reaching its highest percentage level among those 55 to 64 years old.  Households in this age group are projected to increase from 14.3 million in 2001 to 20.7 million in 2010.  RV ownership also is concentrated in the western United States, an area in which the population growth rate continues to be greater than the national average.  The RV Survey also indicates that RV ownership is associated with higher than average annual household income, which among RV owners was approximately $56,000 per annum as compared to the national average of $40,000 per annum.

 

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

 

Membership Clubs

 

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

 

The following table sets forth the number of members at December 31, 2004, annual membership dues and average annual renewal rates during the period of 2000 to 2004 for each club:

 

		Number of Members				Average Renewal
Membership Club		at 2004 (1)		Annual Fee (2)		Rate (3)
Good Sam Club		971,000		$12 - $25		67	%
President’s Club		596,700		$15 - $20		65	%
Coast to Coast Club		98,700		$90 - $140		71	%
Golf Card Club		67,200		$49 - $65		60	%

 

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

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

(3)  Excludes members having lifetime memberships.

 

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

 

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Good Sam Club

 

The Good Sam Club, founded in 1966, is a membership organization for RV owners.  The Good Sam Club is the largest RV organization in North America with approximately 971,000 member families and almost 1,800 local chapters as of December 31, 2004.  The average renewal rate for Good Sam Club members was approximately 67% during the period 2000 through 2004.  We have focused on selling higher margin multi-year memberships which, among other advantages, reduces the cost of renewal membership.  The average length of time for participation in the Good Sam Club is almost six years with most club members purchasing annual memberships.

 

Membership fees range from $12 to $25, subject to the term and type (acquisition or renewal).  The benefits of club membership include: discounts for overnight stays at approximately 1,750 participating RV parks and campgrounds; discounts on the purchase of supplies and accessories for RVs at over 60 RV service centers; gas, fuel and food discounts at 80+ Love’s Travel Stops; a free annual subscription to Highways, the club’s regular news magazine; discounts on our other publications; trip routing and mail-forwarding; and access to products and services developed for club members.  Based on typical usage patterns, we estimate that Good Sam Club members realize estimated annual savings from discounts of approximately $100.

 

The Good Sam Club establishes quality standards for RV parks and campgrounds participating in its discount program.  Campgrounds and parks participating in the Good Sam Club program benefit from increased occupancy and sales of camping related products.  We believe we have established considerable penetration of those for-profit RV parks and campgrounds that meet our quality standards for participation in the discount program.  We monitor our affiliated campgrounds and remove substandard facilities from our program to ensure that our brand image and reputation are not diluted.

 

In 1992, we began selling lifetime memberships for the Good Sam Club.  In 2004, the average price for a lifetime membership was $272 with 131,900 members registered as of December 31, 2004.  Based on an actuarial analysis of the lifetime members, we expect the average length of a lifetime membership to be 18 years.

 

The following table lists the number of club members and RV parks and campgrounds from 2000 through 2004 at which discounts for members were available at December 31st of the respective year:

 

		2004		2003		2002		2001		2000
Number of Good Sam memberships		971,000		958,000		960,600		946,800		949,600
Lifetime members included above		131,900		127,700		121,400		119,000		114,800
Number of RV campgrounds offering discounts to Good Sam members		1,750		1,750		1,650		1,650		1,747

 

 

 

President’s Club

 

The President’s Club program, which was established in 1986, is the discount buyer’s club for Camping World and the second largest RV club worldwide (behind only our Good Sam Club).  As of December 31, 2004, the President’s Club had 596,700 members.  The primary benefit offered to members of the President’s Club is a 10% discount on all retail merchandise at Camping World stores.  The President’s Club offers us an extremely cost effective and powerful method of acquiring customers who are likely to be receptive to our product and service offerings.  We use the significant amount of information gathered when a customer signs up for membership in the President’s Club to tailor product offers to

 

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his or her likely needs and interests.  Additionally, we believe that the President’s Club, much like a traditional customer loyalty program, serves to bolster sales at our Camping World supercenters.

 

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

 

President’s Club memberships may initially be obtained for one, two or three years at a cost of $20, $35 or $50, respectively.  We estimate that the average President’s Club member realizes savings of approximately $41.  The average renewal rate for members of the President’s Club was 65% during the period from 2000 to 2004.

 

The following table sets forth the number of President’s Club members and number of retail stores at year-end for 2000 through 2004:

 

		2004		2003		2002		2001		2000
Camping World’s President’s Club memberships		596,700		598,200		626,000		596,500		581,700
Number of stores		39		33		30		30		30

 

 

 

Coast to Coast Club

 

The Coast to Coast Club operates a long-established reciprocal use network of private RV resorts in North America.  We offer a series of membership benefits 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 and operated by parties unrelated to us.  Our club members may use the other resorts in the Coast to Coast Club network on a reservation or space available basis and obtain discounts from other non-private campgrounds.  At December 31, 2004, there were approximately 98,700 member families in the Coast to Coast Club which had nationwide access to approximately 309 private RV resorts and a network of approximately 176 public affiliated campgrounds that participated in the Coast to Coast Club reciprocal use programs.  These private resorts are designed primarily for RV owners, but typically provide camping or lodging facilities, comprised of RVs, cabins, park models, and condominiums.  For an initial membership fee plus annual maintenance fees, both paid by the customer to the resort, the private resorts provide an RV site with water, sewer and electrical hook-ups and recreational amenities, such as swimming, tennis or fishing, or proximity to theme parks or other recreational activities.  We have established quality criteria for resorts to join and remain in the Coast to Coast Club networks.

 

For standard annual renewal dues from $89.95 for a single year membership to $179.95 for a multiple-year membership, Coast to Coast Club members receive the following benefits: discounts for overnight stays at participating resorts and campgrounds; an annual subscription to Coast to Coast Magazine; the Coast to Coast Directory providing information on the participating resorts; discounts on our other publications; access to discount hotels and travel services; and access to ancillary products and services developed for our club members.

 

We believe that resorts participating in the Coast to Coast Club networks view access to reciprocating member resorts as an incentive for their customers to join their resort.  Because a majority of Coast to Coast Club members own RVs, access to participating resorts throughout North America can be an important complement to local resort membership.  Based on typical use patterns, we estimate that Coast to Coast Club members realize estimated annual savings from these discounts of approximately $125.  The average annual renewal rate for members of the Coast

 

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to Coast Club after the initial one-year membership (which is generally paid by the member resort not the club member) was approximately 71% during the period 2000 through 2004.

 

The following table sets forth the number of members in the Coast to Coast Club, resorts participating in the reciprocal use program, and the number of public resorts extending discounts to Coast to Coast Club members for 2000 through 2004:

 

		2004		2003		2002		2001		2000
Number of Coast to Coast Club memberships		98,700		117,300		139,800		157,200		178,100
Participating private resorts		309		329		383		360		360
Participating public resorts		176		220		572		624		590

 

The reduction in the number of participating public resorts in the Coast to Coast Club reciprocal use program during 2003 and 2004 resulted primarily from the operational changes in the system which was implemented by the Coast to Coast Club during 2003 to improve the quality of the system for Coast to Coast Club members.  These changes increased the responsibilities of the public resorts.  Since the Coast to Coast Club system is a network for private resorts and their members, participation by public resorts is an ancillary benefit to the members and the reduction in participating public resorts does not materially affect the program.

 

 

Golf Card Club

 

The Golf Card Club, founded in 1974, had approximately 67,200 members at December 31, 2004.  The major attraction for membership is the financial savings which members receive when playing at any of the 3,650 participating golf courses located throughout the US and Canada. The annual membership fee varies with the length and type (single or double) of membership.  We believe that the participating golf courses providing playing privileges to club members represent the largest number of golf courses participating in a discount program in North America.  None of the participating golf courses are owned or operated by us.

 

Members of the Golf Card Club receive the following benefits:  (i) a minimum of two rounds annually of free or discounted golf at participating golf courses, (ii) discounted vacation packages at 200 “Stay and Play” resorts, (iii) savings on golf merchandise purchases at select member golf courses, (iv) car rental discounts from National and Alamo, (v) an annual subscription to the Golf Traveler member publication, published four times per year in print and eight times electronically, (vi) the Annual Directory of Affiliated Courses and Resorts (“Annual Directory”), (vii) a one-year Quest membership (hotel discount card), (viii) access to 120 local Grasshopper Clubs for tournaments and social activities, (ix) an opportunity to play in Member-Guest Tournaments, and (x) a chance to test (and keep) select golf products.

 

Daily-fee, semi-private resort and municipal golf courses participate in the Golf Card program.  The program is attractive to participating courses because it builds traffic 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, and the club website, www.golfcard.com.  Members also purchase other merchandise or services when exercising their playing privileges.  In this manner, the Golf Card Club members tend to provide incremental revenue to the golf courses.  Based on surveys conducted by us, members realize savings on green fees, ranging from $150 to $250 annually, which significantly exceed the cost of membership.

 

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The standard annual membership fee is $65 for a single membership and $110 for a double membership.  Multi-year memberships range from a single two-year membership for $118, to a three-year double membership for $267.  The average renewal rate for Golf Card Club members was approximately 60% for the period from 2000 to 2004.

 

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

 

 

		2004		2003		2002		2001		2000
Number of Golf Card Club memberships (1)		67,200		77,400		79,400		82,300		93,900
Number of Participating Golf Courses		3,650		3,800		3,800		3,300		3,300
Number of “Stay and Play” Golf Resorts		200		220		225		241		251

 

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

 

 

Membership Products and Services

 

Our approximately 1.7 million club members form a receptive audience to which we sell products and services targeted to the recreational interests of our club members.  We promote products and services which either address special needs arising in the activities of our club members or appeal generally to persons with the demographic characteristics of our club members.  The two most established products are the ERS and the vehicle insurance programs.  Most of our products and services are provided by third parties who pay us a marketing fee, with the exception of ERS where we assume the risk of incurred claims.

 

Emergency Road Service (ERS)

 

We promote various ERS products to our existing membership clubs, as well as to non-club members.  The ERS programs provide towing and roadside assistance for subscribers with annual dues ranging from $79.95 to $99.95.  We developed ERS initially for Good Sam members in 1984, and 29% of the Good Sam Club membership is currently enrolled in the Good Sam ERS program.  We believe it is important to target the diversified market niches with identifiable products that offer a full range of benefits.  We currently market these products through direct mail, advertising in publications, campground directories, space ads, Internet, telemarketing and direct sales.

 

The table below sets forth the total enrollment in the various ERS programs for 2000 through 2004:

 

 

		2004		2003		2002		2001		2000
ERS Enrollment		360,900		354,400		348,400		345,100		341,600

 

 

 

For the seventh year in a row, enrollment in the various ERS programs has grown through promotional and marketing efforts which have attracted new members and improved renewal rates.  Combined enrollment in the programs has increased by 19,300 members or approximately 5.6% since 2000.

 

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Vehicle Insurance Programs

 

We offer two vehicle insurance programs that offer cost-effective collision and liability insurance suitable to the demographic characteristics and vehicle usage patterns of our various club members.  The Vehicle Insurance Program (“VIP”) is marketed primarily to the members of Good Sam Club and Coast to Coast Club.  The Motor Vehicle Program (“MVP”) is marketed to President’s Club members.  For 2004, the two programs had approximately 208,000 members, which represented a 15.1%, 6.7% and 3.0% penetration, respectively, of the Good Sam Club, the President’s Club, and the Coast to Coast Club.  During the period 2000 to 2004, the average annual renewal rate of members participating in these insurance programs was over 90%.  Our marketing fee revenue is based on the amount of written premiums and the insurance provider assumes all claim risks.

 

The following sets forth the total number of policies in force, the dollar amount of written premiums paid to insurance providers, and the marketing fees generated for 2000 through 2004:

 

		2004		2003		2002		2001		2000
Total policies in force		208,000		213,400		230,600		234,600		231,200
Written premiums paid to insurance providers (millions)		$253		$254		$249		$240		$231
Marketing fees (millions)		$20		$20		$19		$18		$19

 

 

 

Other Products and Services

 

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

 

In 1996, we launched the Continued Service Plan, a private label extended vehicle warranty program for RVs.  Total marketing fees for 2004 increased 16% over 2003, to a total of $15.9 million.  The program had 31,800 policies in force as of December 31, 2004.  Sales of new policies were derived from direct mail marketing, print ads in our magazines, Internet and E-mail solicitations, and retail kiosks in Camping World stores.  Policy renewals represented 44% of the total sales in 2004.

 

The RV financing program is administered by E*TRADE Consumer Finance Corporation.  The number of E*TRADE RV loans to our club members decreased by 33.6% from 2003 to 2004.  The decrease in loans can be attributed to a changing interest rate environment and the fact that many with RV loans have already refinanced at a lower rate.  During the fourth quarter of 2003, the relationship with E*Trade expanded to include auto, truck, motorcycle, mortgage and home equity loans and brokerage and deposit services. The products were officially launched in January 2004.

 

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

 

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Publications

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

 

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The following chart sets forth the circulation and frequency of our publications:

		2004		Issues Published
Publication		Circulation		Annually
PAID CIRCULATION MAGAZINES (1)
American Rider		59,099		7
ATV Sport		54,446		10
Bass & Walleye Boats		71,324		9
Bowhunting World (2)		83,564		9
Camping Life		80,769		7
MotorHome		149,937		12
Rider		127,139		12
SnowGoer		63,577		6
Snow Week		20,033		15
Trailer Boats		105,125		11
Trailer Life		272,936		12
Woman Rider		43,282		1
CONTROLLED CIRCULATION- Business (3)
Archery Business (2)		11,000		7
Boating Industry		23,504		6
Campground Management		14,011		12
PowerSports Business		11,010		16
PowerSports Business Directory		9,372		4
RV Business		18,000		12
CONTROLLED CIRCULATION- Consumer (4)
ATV Magazine		238,589		6
Cruising Rider		141,572		4
Snowmobile		476,567		2
Watercraft World		108,128		6
FREE DISTRIBUTION (5)
Thunder Press- North		33,336		12
Thunder Press- East		25,451		12
Thunder Press- West		50,159		12
Woodall’s Specials (6)		59,880		1
Woodall’s Regional News Tabloids		146,422		12
ANNUALS (1)
Blacks Sporting Directories (2)
Archery		13,476		1
Wing and Clay		40,089		1
Trailer Life Campground/RV Park & Services Directory		257,051		1
Trailer Life’s RV Buyers Guide		113,374		1
Towing Guide		500,019		1
Ultimate Snowmobile Buyers Guide		170,990		1
Woodall’s Buyer’s Guide		59,758		1
Woodall’s Campground Directory		331,642		1
Woodall’s Tenting Directory		40,578		1
Woodall’s Go & Rent... Rent & Go (5)		123,717		1
CLUB MAGAZINES (7)
Coast to Coast Magazine		137,114		8
Golf Traveler (8)		77,750		6
Highways		955,668		11
RV View		577,015		4

 

(1)       Paid circulation, may include supplemental qualified controlled circulation.

(2)       These titles were divested in the third quarter of 2004.

(3)       Trade publication distributed to industry-specific groups.

(4)       Qualified and limited paid circulation.

(5)       Includes limited paid circulation.

(6)       Distribution to RV outlets, including campgrounds and dealerships.

(7)       Limited to club members and promotional copies.  The price is included in the membership fee.

(8)       Only one magazine is issued when two members are from the same household.

 

11

 

 

Paid Circulation Magazines

 

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

 

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

 

Bass and Walleye Boats is the only magazine dedicated exclusively to freshwater fishing boat owners who demand top performance from their boats, engines and accessories.

 

Bowhunting World is the archery equipment authority which provides information on new equipment reviews and maintenance techniques, and features articles which discuss ethical hunting, hunting rights, and pertinent legislative issues.  Bowhunting World was sold in the third quarter of 2004.

 

Camping life is dedicated to providing family-style campers and others with articles about destinations, products and activities to enhance their outdoor lifestyles.

 

MotorHome is a monthly periodical for owners and prospective buyers of motorhomes which has been published since 1968 and features articles on subjects such as product tests, travel and tourist attractions.

 

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

 

SnowGoer is designed for the sport’s highly active participants and provides detailed equipment and product critiques and maintenance tips.

 

Snow Week is the central source of information for the competition and high-performance snowmobiling market segment.  The publication provides timely, year-round articles on racing, performance enhancing products, technical assistance, new product introductions, and general industry information.

 

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

 

Trailer Life, initially published in 1941, is the leading consumer magazine for the RV industry, featuring articles on subjects including product tests, travel and tourist attractions.

 

Woman Rider was introduced in 2000 and filled an important void in motorcycle publications.  Readers learn about new products from the female point of view and discover more about the lifestyle of motorcycling.

 

12

 

 

Controlled Circulation Magazines- Business

 

Archery Business is a trade publication for archery dealers and presents a mix of industry news and trends, product reviews and sales tips designed to improve financial performance of archery product dealers.  Archery Business was sold in the third quarter of 2004.

 

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

 

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

 

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

 

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

 

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

 

Controlled Circulation Magazines- Consumer

 

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

 

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

 

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

 

Watercraft World is targeted to avid personal watercraft enthusiasts and provides detailed critiques of watercraft, in-depth gear and accessory evaluations, technical tips and racing information.  PWC Magazine was combined with Watercraft World in 2002.

 

Free Distribution Publications

 

Thunder Press newspapers are published monthly in three separate editions to reach the country’s motorcycling public and are available primarily through motorcycle dealers.  This tell-it-like-it-is magazine is designed for the ultra-active motorcycle enthusiast who feels passionate about the lifestyle.

 

Woodall’s Specials are annual publications geared around specific events, such as the beginning of the camping season and the beginning of the snowbird season.  Its editorial content is aimed at season 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.  Stories in these publications cover area campgrounds and RV dealerships, as well as new vehicles on the market and new products within the industry.  The publications are primarily distributed at campgrounds and RV parks, as well as at RV shows and state welcome centers.

 

13

 

Annual Publications

 

Blacks directories were purchased in 2002 and consist of three directories:  Archery/Bowhunting, Wing and Clay, and Fly Fishing.  The Archery/Bowhunting and Wing and Clay directories were produced in 2004 prior to our selling the Blacks directories in the third quarter of 2004.

 

Trailer Life Campground/ RV Park & Services Directory, initially published in 1972, is an annually updated directory which provides information on and ratings for approximately 12,100 public and private campgrounds, and approximately 800 RV service centers, including almost 800 tourist attractions in North America along with color maps of the areas covered.  The publication features Good Sam Parks that offer discounts on overnight camping fees to our club members.  This directory is sold primarily by direct mail to Good Sam Club members, at RV dealerships and in bookstores.  In 2000, we began issuing a version of the directory on CD-ROM.

 

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

 

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

 

The Ultimate Snowmobile Buyers Guide is an annual publication focusing on new snowmobiles introduced in the current year, along with accessories, providing competitive statistics to enable the reader to make informed purchases.

 

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

 

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

 

Woodall’s Tenting Directory is an annual directory distributed primarily through newsstands, which provides information on both government and privately-owned campgrounds and the outdoor activities and attractions that are available near them.

 

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

 

Club or Trade Magazines and Books

 

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

 

14

 

Retail

 

Camping World Supercenters

 

Camping World is a national specialty retailer of merchandise and services for RV owners.  With the opening of our two newest Camping World supercenters in the fourth quarter of 2004, we currently have thirty-nine Camping World retail locations, which are located in twenty-three states.  These stores accounted for approximately 72% of the 2004 total retail revenue in merchandise revenues, while approximately 17% were derived from catalog and Internet sales and approximately 11% were derived from non-merchandise revenues such as shop fees, and supplies.

 

In the RV accessory industry, we believe that Camping World has a high level of name recognition, an effective triple channel distribution strategy (store, catalog, and Internet), and a commitment to offer a broad selection of specialized RV products and services at competitive prices combined with technical assistance and on-site installation.  Camping World’s supercenters offer approximately 8,000 SKUs, of which we estimate approximately 70% are not regularly available in general merchandise stores.  In addition, general merchandise stores do not provide installation or repair services for RV products, which are available at Camping World’s supercenters.  Products sold by Camping World include specialty-sized refrigerators, housewares and other appliances, bedding and furniture, generators and hydraulic leveling systems, awnings, folding boats, chairs, ladders, cleaning and maintenance products, bicycles, hitch-towing, sanitation products, automotive electronics and lifestyle products.  Further, resource centers, staffed with licensed insurance agents at numerous locations, market such products and services as vehicle insurance, extended warranty and ERS.  Camping World’s supercenters are designed to provide one-stop shopping by combining broad product selection, technical assistance and on-site installation services.  We strategically locate Camping World supercenters in areas where many RV owners live, along major Interstates, and/or in proximity to destinations frequented by RV users.

 

Camping World sources its products from approximately 1,100 vendors.  Camping World attends regional, national and international trade shows to determine the products it will offer.  The purchasing activities of Camping World are focused on RV parts and accessories, electronics, housewares, hardware, automotive, crafts, clothing, home furnishings, gifts, camping and sporting goods.  Camping World uses an automated “plan-o-gram” system to develop and maintain merchandising plans unique to each supercenter and an inventory replenishment system for its operations to improve in stock rates on key items.  Camping World believes that the volume of merchandise it purchases from domestic and international suppliers and its ability to buy direct from manufacturers enables them to obtain merchandise at costs which compare favorably to local RV dealers and retailers.  Camping World does not enter into material long-term contracts or commitments with their vendors.

 

The retail supercenters are periodically reset to enhance the customers shopping experience as well as to maximize merchandise category offerings.  New products and services are introduced in order to keep pace with the advances of the RV industry and to satisfy our customers’ needs.  Customers take advantage of the state-of-the art performance centers staffed with expert RV technical consultants and equipped with demonstrable merchandise to assist in educating customers about RV performance products.  The resource centers provide a great opportunity to promote a more interactive and consultative selling environment.  They are staffed with professionals offering insurance products, extended warranties, roadside service, club memberships, and RV financing, allowing the enhanced resource centers to add to the depth of services to which Camping World customers have become accustomed.  Finally, store dress, promotional signage and directional signage are periodically refreshed to further enhance our customers’ shopping experience at Camping World’s supercenters.

 

Camping World’s supercenters generally range in size from approximately 10,000 to 64,000 square feet.  Approximately 40% of each supercenter is devoted to a retail sales floor, a customer service area, and a technical information counter; 40% is comprised of the installation facility, which contains 4 to 16 drive-through installation bays; and 20% is allocated to office and warehouse space.  Large parking

 

15

 

areas provide sufficient space and facilitate maneuvering of RVs.  By combining broad product selection, technical assistance, installation and repair services, Camping World’s supercenters provide one-stop shopping for RV owners.  Camping World maintains toll-free telephone numbers for customers to schedule installation and repair appointments.  All supercenters are open seven days a week.

 

Camping World intends to continue the controlled expansion of their supercenter store network while at the same time develop dealer partnerships across North America.  We plan to establish Camping World stores alongside or within existing RV dealerships.  This marketing strategy will provide an expanded number of customers with access to the vast array of products and services that we offer and generate traffic for our dealer partners by marketing locally, regionally and nationally our extensive parts and accessories business.  Camping World has established twenty such Camping World stores alongside or within RV dealerships, including thirteen Camping World stores that are part of our dealer alliance program.  Of the Camping World stores that are part of our dealer alliance program, seven are located within dealerships indirectly owned or operated by FreedomRoads, LLC, (“FreedomRoads”).  FreedomRoads is indirectly owned and controlled by Stephen Adams, our Chairman.

 

 

Mail Order Operations and Internet

 

Camping World initiated its catalog operations in 1967.  Camping World currently has a proprietary mailing list of approximately 2.6 million RV owners, all of whom have made a purchase or requested a catalog from Camping World within the prior 60 months.  Camping World maintains a database of these names, which includes information such as order frequency, size of order, date of most recent order and type of merchandise purchased.  Camping World analyzes its database to determine those customers most likely to order from Camping World’s catalogs.  As a result, Camping World is able to target catalog mailings more effectively than direct marketers of catalogs offering general merchandise.  Camping World continually expands its proprietary mailing list through in-store subscriptions and requests for catalogs in response to advertisements in regional publications directed to RV owners.  In addition, Camping World rents mailing lists of RV owners from third parties.

 

During 2004, Camping World distributed 7.6 million catalogs, 6.4 million of which were mailed in thirteen separate mailings, and the remaining 1.2 million catalogs were distributed in supercenters, at campgrounds and other RV locations, and as package inserts.  During the same period, Camping World processed approximately 342,000 catalog orders at an average net order size of $115, excluding postage and handling charges.  Camping World distributed thirteen high-quality, full-color catalogs during 2004, consisting of one catalog each month plus a Master Catalog in the Spring of 2004.

 

The Internet is proving to be a significant, low-cost source for new club members, subscriptions and other ancillary product sales.  We maintain thirty-three Internet web sites, which are accessible through http://www,rv,net, and are experiencing significant growth.  In 2000, our club operations commenced a low-cost marketing strategy through e-mail membership acquisition campaigns.  Members added in 2004 under these programs represented approximately 11.9% of all new club members.  E-mail acquisition campaigns and Internet online revenue totaled approximately $26.0 million in 2004, an increase of 43.6% over prior year.

 

 

Marketing

 

We market our club memberships and related products and services through direct mail, e-mail, inserts, ride-alongs, space advertisements, promotional events, point of sale, member-get-a-member campaigns, and telemarketing.  Direct response marketing efforts account for approximately 49% of new enrollments with the remaining 51% derived from other sources.  We use a variety of commercially available mailing lists of RV owners in our direct mail efforts.  Currently, the most widely

 

16

 

used list databases are provided by three commercial list compilers, and direct response lists are from RV industry participants, RV consumer surveys, and proprietary in-house lists.

 

Our publications segment solicits advertisements through an internal sales force and by paying commissions to advertising agencies and independent contractors who place advertisements.  Many advertisers are repeat customers with whom we have long standing relationships.

 

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

 

 

Operations

Our customer service operations are located in Denver, Colorado and Bowling Green, Kentucky.  The primary focus of these groups is to manage our customers’ expectations and relationship with the organization.  On average, these member service operations process approximately 6,100 telephone calls daily.  Approximately fifty percent of the calls into these centers originate from the marketing efforts of catalog mailings, membership acquisition, membership renewals and associated ancillary products and events.  All such efforts use toll-free numbers as a response mechanism.

 

Camping World’s catalog and Internet operations, located at its headquarters in Bowling Green, Kentucky, are supported by the customer contact center in the same location.  Orders are usually processed and shipped within 24 hours of receipt.

 

Fulfillment operations involve the processing of orders and checks principally received by mail.  Certain fulfillment operations are performed by third parties.  Our publication operations develop the layout for publications and outsource printing to third parties.

 

 

Information Support Services

 

We utilize integrated computer systems to support our membership club and publishing operations.  A database containing all customer activity across our various businesses and programs has been integrated into our web sites and call centers.  Comprehensive information on each member, including a profile of the purchasing activities of members, is available to customer service representatives when responding to member requests and when marketing our products and services.  We employ publishing software for publication makeup and content and for advertising to support our publications operations.  A wide-area network facilitates communication within and between our offices.  We also utilize information technology, including list segmentation and merge and purge programs, to select prospects for direct mail solicitations and other direct marketing efforts.

 

Camping World’s management information systems and electronic data processing systems consist of an extensive range of retail, mail order, financial and merchandising systems, including purchasing, inventory distribution and control, sales reporting, accounts payable and merchandise management.  Camping World’s management information system includes point-of-sale registers that are equipped with bar code readers in each supercenter.  These registers are polled nightly by a central computer.  With this point-of-sale information and the information from Camping World’s on-line distribution centers, Camping World compiles comprehensive data, including detailed sales volume and inventory information by product, merchandise transfers and receipts, special orders, supply orders and returns of product purchases to vendors.  In conjunction with its nightly polling, Camping World’s central computer sends price changes to registers at the point of sale.  The

 

17

 

registers capture President’s Club member numbers and associated sales and references to specific promotional campaigns.  Management monitors the performance of each supercenter and mail order operation to evaluate inventory levels, determine markdowns and analyze gross profit margins by product.

 

Camping World’s catalog operations also utilize a computerized management system allowing on-line desktop access to information which previously required manual retrieval.  Screen prompts that provide product, promotional, and revenue potential information have allowed Camping World to maintain high service levels during seasonal sales peaks.

 

Regulation

 

Our operations are subject to varying degrees of federal, state and local regulation.  Specifically, our outbound telemarketing, direct mail, and ERS, as 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 believe that such federal, state and local regulations currently have a material impact on our operations.  However, new regulatory efforts impacting our 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 efforts will not have a material adverse effect on our ability to operate our businesses or on our results of operations.

 

 

Competition

 

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

 

Employees

 

As of December 31, 2004, we had 1,631 full-time and 169 part-time or seasonal employees, consisting of 8 executives, 1,189 employees in retail operations, 345 employees in administrative and club operations, 210 employees in publishing and advertising sales, 12 employees in resort services and 36 employees in marketing.  No employees are covered by a collective bargaining agreement.  We believe that our employee relations are good.

 

Trademarks and Copyrights

 

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

 

18

 

 

ITEM 2:  PROPERTIES

 

The table below sets forth certain information concerning our properties.  The leased properties generally provide for fixed monthly rentals with annual escalation clauses and the lease expiration date includes all stated option periods.

 

 

		Square				Owned/		Lease
		Feet		Acres		Leased		Expiration
Corporate Headquarters:
Ventura, CA		74,100				Leased		2029
Other Office Facilities:
Carson, CA (regional publication office)		10,048				Leased		2006
Denver, CO (customer service, warehousing fulfillment, and information system functions)		60,000				Leased		2029
Bowling Green, KY (retail administrative headquarters and mail order operations)		31,278				Leased		2029
Bowling Green Headquarters Annex		4,100				Leased		2006
Seattle, WA (regional publication sales office)		912				Leased		2005
Elkhart, IN (regional publication sales office)		4,076				Leased		2005
Maple Grove, MN (Ehlert Publications Group, Inc. headquarters)		17,496				Leased		2010
Earth City, MO (information systems functions)		1,769				Leased		2006
Fort Lauderdale, Florida (regional publication office)		1,219				Leased		2005
Distribution Centers:
Bowling Green, Kentucky		104,000		6.780		Leased		2005
Bakersfield, California		85,747		14.827		Leased		2027
Franklin, Kentucky		175,000		33.000		Leased		2035
Camping World Supercenter Locations:
Tucson, AZ		12,145		2.000		Leased		2018
Mesa, AZ		27,500		3.140		Leased		2010
Bakersfield, CA (2)		23,325		9.940		Leased		2023
La Mirada, CA		33,479		5.501		Leased		2027
San Marcos, CA		25,522		2.212		Leased		2027
Fairfield, CA		43,434		3.780		Leased		2009
Rocklin, CA		29,085		4.647		Leased		2037
San Bernardino, CA		18,126		1.665		Leased		2012
San Martin, CA		29,486		5.000		Leased		2023
Valencia, CA		64,410		9.231		Leased		2027
Denver, CO		27,085		4.132		Leased		2037
Ft. Myers, FL		22,886		4.217		Leased		2012
Kissimmee, FL		58,382		6.043		Leased		2027
Tampa, FL		40,334		3.711		Leased		2026
Tallahassee, FL (1)		8,494		12.630		Leased		2024
Bolingbrook, IL		25,126		5.299		Leased		2035
Clarksville, IN (2)		19,480		6.291		Leased		2034
Elkhart, IN (1)		25,953		2.500		Leased		2034
Bowling Green, KY		37,615		2.750		Leased		2027
Hammond, LA (2)		27,096		68.454		Leased		2034

 

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Belleville, MI		44,248		7.260		Leased		2025
Rogers, MN		24,700		6.303		Leased		2025
Statesville, NC (1)		39,050		7.412		Leased		2024
Bridgeport, NJ		24,581		6.920		Leased		2031
Amsterdam, NY (2)		13,420		28.000		Leased		2032
Henderson, NV		25,850		4.400		Leased		2025
Brunswick, OH (1)		23,233		4.087		Leased		2037
Oklahoma City, OK (2)		12,500		8.219		Leased		2023
Wilsonville, OR		32,850		4.653		Leased		2016
Myrtle Beach, SC		38,962		5.410		Leased		2027
Spartanburg, SC (1)		11,900		19.263		Leased		2033
Chattanooga, TN (1)		9,400		10.840		Leased		2024
Nashville, TN		34,478		3.238		Leased		2027
Anthony, TX		7,061		32.000		Leased		2035
Denton, TX		22,984		6.887		Leased		2037
New Braunfels, TX (1)		43,397		19.100		Leased		2035
Mission, TX		23,094		3.430		Leased		2015
Draper, UT		27,675		8.031		Leased		2026
Manassas, VA (2)		16,348		9.754		Leased		2018
Fife, WA		35,659		5.840		Leased		2037

 

(1)            This supercenter is located with a FreedomRoads dealership and the acreage reflects the total dealership property.

(2)            This supercenter is located with an RV dealership (other than a FreedomRoads dealership) and the acreage reflects the total dealership property.

 

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

 

 

ITEM 3:  LEGAL PROCEEDINGS

 

From time to time, we are involved in litigation 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 Clearinghouse and Benjamin Greene in a suit alleging that CWI, Inc. was recording personal identification information from retail customers in violation of certain California statutes.  The plaintiff seeks injunctive relief preventing CWI, Inc. from engaging in any act or practice constituting unfair competition under the statutes and for statutory penalties and damages.  CWI, Inc. has responded to the suit and denies that its practices violate the statutes.  The Company has not recorded a provision for loss as of the date of the accompanying financial statements.  In the opinion of management, the likelihood of a material unfavorable outcome is not probable as of the date of the accompanying consolidated financial statements.

 

 

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None.

 

 

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PART II

 

 

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

Not Applicable

 

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ITEM 6:  SELECTED FINANCIAL DATA

The selected financial data of our company for each of the five years ended December 31 are derived from our audited consolidated financial statements.  Prior to April 27, 2004, AGI was a wholly-owned subsidiary of Affinity Group Holding, Inc. (“AGHI”).  On April 27, 2004, AGHI was merged into AGI, with AGI being the surviving entity after the merger.  The merger was accounted for as a combination of entities under common control using historical costs.  All periods have been restated to reflect the results of operations of AGI and AGHI, prior to the April 27, 2004 merger.  Our selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the notes thereto included herein.

		December 31,
Statement of Operations Data:		2004			2003			2002			2001			2000
		(dollars in thousands)
REVENUES:
Membership services		$	131,608		$	128,664		$	124,546		$	119,958		$	121,393
Publications		77,977			71,436			66,654			65,150			68,519
Retail		255,094			225,306			239,922			220,264			215,160
		464,679			425,406			431,122			405,372			405,072
COSTS APPLICABLE TO REVENUES:
Membership services		84,231			79,500			74,097			72,944			77,625
Publications		53,042			48,392			45,351			46,175			46,298
Retail		151,196			136,137			158,265			148,244			143,018
		288,469			264,029			277,713			267,363			266,941
GROSS PROFIT		176,210			161,377			153,409			138,009			138,131
OPERATING EXPENSES:
Selling, general and administrative		116,137			104,066			101,608			86,050			85,513
Restructuring charge		—			1,210			2,269			—			—
Depreciation and amortization		13,893			10,298			9,893			16,404			16,885
		130,030			115,574			113,770			102,454			102,398
INCOME FROM OPERATIONS		46,180			45,803			39,639			35,555			35,733
NON-OPERATING ITEMS:
Interest expense, net		(23,239		)	(18,123		)	(16,862		)	(24,234		)	(27,735		)
Debt extinguishment expense		(5,035		)	(3,218		)	—			(71		)	—
Other non-operating income (expense), net		420			201			(44		)	(6,574		)	5
		(27,854		)	(21,140		)	(16,906		)	(30,879		)	(27,730		)
INCOME FROM OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE		18,326			24,663			22,733			4,676			8,003
INCOME TAX EXPENSE		(8,075		)	(9,275		)	(9,032		)	(4,110		)	(4,700		)
INCOME FROM OPERATIONS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE		10,251			15,388			13,701			566			3,303
CUMULATIVE EFFECT OF ACCOUNTING CHANGE		—			—			(1,742		)	—			—
NET INCOME		$	10,251		$	15,388		$	11,959		$	566		$	3,303

 

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		December 31,
		2004			2003			2002			2001			2000
		(dollars in thousands)
Balance Sheet Data (at period end):
Working capital (deficiency)		$	(10,813	)	$	(25,770	)	$	(39,820	)	$	(55,585	)	$	(51,796	)
Total assets		320,222			302,862			285,960			305,622			358,374
Deferred revenues and gains (1)		99,130			98,410			94,475			96,162			89,968
Total debt		314,336			240,127			223,001			228,316			285,486
Total stockholder’s deficit		(158,108		)	(88,905		)	(87,548		)	(76,349		)	(76,915		)

 

(1) Deferred revenues represent cash received by us in advance of the recognition of revenues in accordance with accounting principles generally accepted in the United States.  Deferred revenues primarily reflect club membership dues, annual ERS fees, advances on third party credit card fee revenues and publication subscriptions.  These revenues are recognized at the time the goods or services are provided or over the membership period, which averages approximately 18 months.  The deferred revenue balance for 2004, 2003, 2002 and 2001 also include deferred gains of $10.8 million, $11.3 million, $11.8 million and $12.1 million, respectively, from the real estate sale-leaseback transactions which occurred in December 2001.

 

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