Good Sam Enterprises 10Q 2013 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2013

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: 000-22852

GOOD SAM ENTERPRISES, LLC

(Exact name of registrant as specified in its charter)

Delaware		13-3377709
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization		Identification No.)

250 Parkway Drive, Suite 270
Lincolnshire, IL		60069
(Address of principal executive offices)		(Zip Code)

(847) 229-6720

(Registrant’s telephone number, including area code)

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 o No o

*The registrant has filed all Exchange Act reports for the preceding 12 months.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o
Non-accelerated filer x		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

GOOD SAM ENTERPRISES, LLC AND SUBSIDIARIES

INDEX

	Page

Part I. Financial Information

Item 1: Financial Statements

Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012	1

Unaudited Consolidated Statements of Income for the three months ended September 30, 2013 and 2012	2

Unaudited Consolidated Statements of Income for the nine months ended September 30, 2013 and 2012	3

Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012	4

Notes to Unaudited Consolidated Financial Statements	5

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3: Quantitative and Qualitative Disclosures About Market Risk	37

Item 4: Controls and Procedures	38

Part II. Other Information	39

Signatures	40

Index to Exhibits	41

GOOD SAM ENTERPRISES, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2013 and December 31, 2012

(In thousands except shares and par value)

	9/30/2013			12/31/2012
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	33,573		$	19,946
Accounts receivable, less allowance for doubtful accounts of $2,723 in 2013 and $2,553 in 2012	36,551			31,523
Note from affiliate	2,500			—
Inventories	79,266			65,221
Prepaid expenses and other assets	15,579			13,730
Total current assets	167,469			130,420

PROPERTY AND EQUIPMENT, net	24,700			23,998
AFFILIATE NOTES AND INVESTMENTS	4,934			5,075
INTANGIBLE ASSETS, net	10,938			12,365
GOODWILL	49,944			49,944
DEFERRED TAX ASSETS, net	107			79
OTHER ASSETS	5,640			8,480
Total assets	$	263,732		$	230,361

LIABILITIES AND MEMBER’S DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	21,750		$	17,004
Accrued interest	12,376			3,016
Accrued income taxes	2,401			2,725
Accrued liabilities	32,213			26,929
Deferred revenues and gains	65,978			54,583
Current portion of long-term debt	10,000			10,000
Total current liabilities	144,718			114,257

DEFERRED REVENUES AND GAINS	37,333			34,316
LONG-TERM DEBT, net of current portion	311,385			322,470
OTHER LONG-TERM LIABILITIES	2,264			3,114
	495,700			474,157

COMMITMENTS AND CONTINGENCIES

MEMBER’S DEFICIT:
Membership units, 2,000 units issued and outstanding	1			1
Member contributions	78,825			78,825
Accumulated deficit	(310,794		)	(322,622		)
Total member’s deficit	(231,968		)	(243,796		)
Total liabilities and member’s deficit	$	263,732		$	230,361

See notes to consolidated financial statements.

GOOD SAM ENTERPRISES, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands)

(Unaudited)

	THREE MONTHS ENDED
	9/30/2013			9/30/2012
REVENUES:
Membership services	$	46,457		$	44,254
Retail	102,463			95,359
	148,920			139,613

COSTS APPLICABLE TO REVENUES:
Membership services	27,359			25,622
Retail	63,033			59,031
	90,392			84,653

GROSS PROFIT	58,528			54,960

OPERATING EXPENSES:
Selling, general and administrative	38,425			38,129
Depreciation and amortization	3,120			3,791
	41,545			41,920

INCOME FROM OPERATIONS	16,983			13,040

NON-OPERATING ITEMS:
Interest income	197			215
Interest expense	(9,758		)	(11,191		)
Gain on derivative instrument	—			1,259
Loss on sale of assets or businesses	(95		)	(2		)
	(9,656		)	(9,719		)

INCOME BEFORE INCOME TAXES	7,327			3,321

INCOME TAX EXPENSE	(70		)	(57		)

NET INCOME	$	7,257		$	3,264

See notes to consolidated financial statements.

GOOD SAM ENTERPRISES, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands)

(Unaudited)

	NINE MONTHS ENDED
	9/30/2013			9/30/2012
REVENUES:
Membership services	$	146,350		$	140,661
Retail	273,479			255,344
	419,829			396,005

COSTS APPLICABLE TO REVENUES:
Membership services	85,336			82,326
Retail	168,812			156,477
	254,148			238,803

GROSS PROFIT	165,681			157,202

OPERATING EXPENSES:
Selling, general and administrative	106,942			107,329
Depreciation and amortization	9,331			10,623
	116,273			117,952

INCOME FROM OPERATIONS	49,408			39,250

NON-OPERATING ITEMS:
Interest income	597			651
Interest expense	(29,322		)	(33,552		)
Gain on derivative instrument	—			3,448
Loss on debt restructure	—			(440		)
Gain on sale of assets or businesses	1,728			1,257
	(26,997		)	(28,636		)

INCOME BEFORE INCOME TAXES	22,411			10,614

INCOME TAX EXPENSE	(182		)	(168		)

NET INCOME	$	22,229		$	10,446

See notes to consolidated financial statements.

GOOD SAM ENTERPRISES, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	NINE MONTHS ENDED
	9/30/2013			9/30/2012

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	22,229		$	10,446
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	6,570			6,443
Amortization	2,761			4,180
Gain on derivative instrument	—			(3,448		)
Loss on debt extinguishment	—			440
Provision for losses on accounts receivable	688			713
Deferred tax benefit	(28		)	—
Gain on sale of assets or businesses	(1,728		)	(1,257		)
Accretion of original issue discount	787			703
Changes in operating assets and liabilities:
Accounts receivable	(5,726		)	(1,244		)
Inventories	(14,045		)	(16,965		)
Prepaid expenses and other assets	(1,873		)	(4,980		)
Accounts payable	4,746			4,764
Accrued and other liabilities	13,449			8,227
Deferred revenues and gains	16,197			9,505
Net cash provided by operating activities	44,027			17,527

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(7,399		)	(8,695		)
Net proceeds from sale of assets or businesses	606			764
Intangible domain names acquisition	(746		)	(376		)
Net cash used in investing activities	(7,539		)	(8,307		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid	(10,401		)	(3,800		)
Contribution from parent	—			3,025
Borrowings on debt	8,609			10,541
Principal payments on debt	(20,481		)	(20,450		)
Payment of debt issue costs	(588		)	—
Net cash used in financing activities	(22,861		)	(10,684		)

NET CHANGE IN CASH AND CASH EQUIVALENTS	13,627			(1,464		)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	19,946			20,275

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	33,573		$	18,811

See notes to consolidated financial statements.

GOOD SAM ENTERPRISES, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(1) BASIS OF PRESENTATION

Principles of Consolidation — The consolidated financial statements include the accounts of Good Sam Enterprises, LLC (“GSE”), and its subsidiaries (collectively the “Company”), presented in accordance with U.S. generally accepted accounting principles, (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission. Affinity Group Holding, LLC (“AGHI” or “Parent”), a Delaware limited liability company, is the parent of Good Sam Enterprises, LLC. The ultimate parent company of AGHI is AGI Holding Corp. (“AGHC”), a privately-owned corporation. Certain prior period amounts shown within prior period financial statements have been reclassified to conform to the current period presentation.

These interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2012 and notes thereto included in the Company’s Form 10-K as filed with the Securities and Exchange Commission. In the opinion of management of the Company, these consolidated financial statements contain all adjustments of a normal recurring nature necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.

(2) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

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

Due to the sale, in the first quarter of 2013, of the Company’s remaining non-RV publications operated in the Membership Services — Media segment, the Company made a change in its reportable segments by consolidating the Membership Services — Media segment with the Membership Services segment. The remaining publication and show operating units share common management with and cater to the same RV customer base as the Membership Services segment. Accordingly, the Company has two reportable segments: (i) Membership Services, and (ii) Retail.

The change in disclosure of reportable segment information reflects the manner in which the Company is currently managing its operations as the Company no longer evaluates them as separate businesses. The Company recast the disclosure of historical results into the new business segments for all prior periods included in this report. While this financial data reflects the change in the Company’s reportable segments described above, the Company has not in any way revised or restated its historical financial statements for any period.

(2) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (continued)

The Membership Services segment operates the Good Sam Club and the Coast to Coast Club and assorted products and services, publications and shows for RV owners, campers and outdoor vacationers. The President’s Club was merged into the Good Sam Club on January 1, 2012, the Golf Card Club was sold on March 1, 2012, and the seven remaining outdoor powersports magazine titles, two powersports shows and two conferences were sold in March 2013, as described in more detail in Note 3 — Statements of Cash Flows. The Retail segment sells specialty retail merchandise and services for RV owners primarily through retail supercenters and mail order catalogs. The Company evaluates performance based on profit or loss from operations before income taxes and unusual items because it believes that such measure is useful in evaluating the income and expenses of each segment that are controllable by management of that segment. In addition, segment profit as presented herein excludes intercompany fees by which interest expense attributable to the Company’s 11.5% senior secured notes due 2016 (the “Senior Secured Notes”) is allocated to such segments as management evaluates the performance of its lines of business before such allocation and this interest expense is evaluated on a consolidated level.

(2) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (continued)

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

	Membership
	Services			Retail			Combined
THREE MONTHS ENDED SEPTEMBER 30, 2013
Revenues from external customers	$	46,457		$	102,463		$	148,920
Depreciation and amortization	504			1,866			2,370
Loss on sale of property and equipment	(1		)	(94		)	(95		)
Interest income	562			—			562
Interest expense	26			526			552
Segment operating profit	16,770			4,368			21,138

THREE MONTHS ENDED SEPTEMBER 30, 2012
Revenues from external customers	$	44,254		$	95,359		$	139,613
Depreciation and amortization	1,046			1,822			2,868
Gain (loss) on sale of property and equipment	1			(3		)	(2		)
Interest income	641			—			641
Interest expense	25			643			668
Segment operating profit	14,724			3,230			17,954

NINE MONTHS ENDED SEPTEMBER 30, 2013
Revenues from external customers	146,350			273,479			419,829
Depreciation and amortization	1,656			5,530			7,186
Gain (loss) on sale of property and equipment	1,833			(105		)	1,728
Interest income	1,746			—			1,746
Interest expense	89			1,641			1,730
Segment operating profit	55,552			7,609			63,161

NINE MONTHS ENDED SEPTEMBER 30, 2012
Revenues from external customers	140,661			255,344			396,005
Depreciation and amortization	2,965			5,259			8,224
Gain (loss) on sale of property and equipment	1,302			(45		)	1,257
Interest income	1,977			—			1,977
Interest expense	25			1,896			1,921
Segment operating profit	47,839			5,902			53,741

(2) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (continued)

The following is a reconciliation of operating profit for reportable segments to the Company’s consolidated income before taxes for the three months and nine months ended September 30, 2013 and 2012 (in thousands):

	THREE MONTHS ENDED						NINE MONTHS ENDED
	9/30/2013			9/30/2012			9/30/2013			9/30/2012

Income Before Income Taxes
Total operating profit for reportable segments	$	21,138		$	17,954		$	63,161		$	53,741
Unallocated G & A expense	(3,490		)	(4,020		)	(9,864		)	(10,779		)
Unallocated depreciation and amortization expense	(750		)	(923		)	(2,145		)	(2,399		)
Unallocated gain on derivative instrument	—			1,259			—			3,448
Unallocated loss on debt repayment	—			—			—			(440		)
Elimination of intercompany interest income	(365		)	(426		)	(1,149		)	(1,326		)
Unallocated interest expense, net of intercompany elimination	(9,206		)	(10,523		)	(27,592		)	(31,631		)
Income before income taxes	$	7,327		$	3,321		$	22,411		$	10,614

The following is a reconciliation of assets of reportable segments to the Company’s consolidated total assets as of September 30, 2013 and December 31, 2012 (in thousands):

	9/30/2013			12/31/2012
Membership Services segment	$	310,317		$	297,012
Retail segment	119,550			101,047
Total assets for reportable segments	429,867			398,059
Intangible assets not allocated to segments	7,885			8,851
Corporate unallocated assets	8,755			8,625
Elimination of intersegment receivable	(182,775		)	(185,174		)
Total assets	$	263,732		$	230,361

(3) STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information for the nine months ended September 30 (in thousands):

	2013		2012
Cash paid during the period for:
Interest	$	19,175	$	23,561
Taxes	576		276

In March 2013, the Company completed the asset sale of seven outdoor powersports magazine titles, two powersports shows and two conferences to EPG Media, LLC for $0.6 million cash and the assumption of certain liabilities and assets, resulting in a gain of $1.8 million. The sale included prepaid assets of $0.5 million, accounts receivable of $0.1 million and the assumption of subscription liabilities totaling $1.8 million. EPG Media, LLC is controlled by Mark Adams, the son of the Chairman of the Company’s Board of Directors, Stephen Adams. The sale was unanimously approved by the Company’s board of directors, including its independent directors, as fair and on terms no less favorable to the Company than available from an independent third party.

(3) STATEMENTS OF CASH FLOWS (continued)

On March 1, 2013, the Company received the requisite consents from noteholders of the Senior Secured Notes to amend (a) the Indenture relating to the outstanding Senior Secured Notes (the “Senior Secured Notes Indenture”) and (b) the Intercreditor Agreement among the Company, the administrative agent under the credit agreement of Camping World, Inc. (“Camping World”) and its subsidiaries dated March 1, 2010 (as amended, “CW Credit Facility”), the collateral agent under the Senior Secured Notes Indenture and certain guarantor subsidiaries of the Company (the “Intercreditor Agreement”), in each case to allow the CW Credit Facility to increase from $25.0 million to $35.0 million. An aggregate fee in the amount of $0.3 million was paid to the consenting noteholders in addition to a $0.3 million amendment fee paid to the current lender of the CW Credit Facility. See Note 5 — Debt.

Effective August 1, 2012, the Company acquired the Good Sam TravelAssist Program (“GSTA”) from a current marketing partner. GSTA provides travel assistance services, including emergency medical assistance and evacuation assistance services to its members. The acquisition provides the Company full control of the marketing strategies for the program. The results of the GSTA operations have been included in the consolidated financial statements since that date. Prior to the acquisition, the Company had a pre-existing relationship with the marketing partner and received a marketing fee for each membership contract sold to our marketing database. The contingent consideration arrangement requires the Company to pay an agreed upon percentage of acquisition and renewal revenue over a five year period ending on July, 31, 2017 and will be paid monthly. The preliminary fair value of the contingent consideration arrangement at the acquisition date was $3.0 million. We estimated the fair value of the contingent consideration using a discounted cash flow model. The contingent consideration approximates the projected amount that would have been received by the marketing partner over the next five years if the prior marketing agreement was extended. This fair value measurement was based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. As of September 30, 2013, there were no significant changes in estimated contingent consideration recognized as a result of the acquisition. The purchase price was allocated to intangible customer lists and was assigned a life of 5 years.

For the nine months ended September 30, 2012, the Company recorded an adjustment to the fair value of the interest rate swap resulting in a non-cash gain on derivative instruments of $3.4 million in the Statement of Income for the nine months ended September 30, 2012.

(3) STATEMENTS OF CASH FLOWS (continued)

In June 2012, the Company completed the sale of various home and garden shows for approximately $0.6 million, resulting in a gain of $0.7 million. Included in the sale was $0.1 million of prepaid deposits related to the home and garden shows.

In March 2012, the Company completed the sale of the Golf Card Club for approximately $0.2 million, of which $0.1 million was paid at closing date, resulting in a gain of approximately $0.5 million. Included in the sale was $0.3 million of deferred revenue related to the Golf Card Club.

On February 27, 2012, and in accordance with the provisions of the Senior Secured Notes Indenture pursuant to which the Company issued its Senior Secured Notes, the Company completed an excess cash flow offer to purchase of $7.4 million in principal amount of the Senior Secured Notes. These Senior Secured Notes were purchased by the Company and retired on February 27, 2012. See Note 5 - Debt. The loss on debt extinguishment includes a $0.1 million premium, $0.1 million of unamortized original issue discount and $0.2 million of capitalized finance expense related to the $7.4 million in principal purchased on February 27, 2012. On July 31, 2012, the Company completed an excess cash flow offer to purchase up to $4.95 million in principal amount of the Senior Secured Notes. The amount of Senior Secured Notes tendered was $4,000. These Senior Secured Notes were purchased by the Company and retired on August 7, 2012.

(4) GOODWILL AND INTANGIBLE ASSETS

The Company reviews goodwill and indefinite-lived intangible assets for impairment at least annually and more often when impairment indicators are present. The Company performs its annual impairment test during the fourth quarter. Under the accounting guidance for goodwill and other intangible assets, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value.

The Company’s reporting units are generally consistent with the operating segments underlying the reporting segments identified in Note 2 — Disclosures about Segments of an Enterprise and Related Information.

Finite-lived intangible assets, related accumulated amortization and weighted average useful life consisted of the following at September 30, 2013 (in thousands, except as noted):

	Weighted
	Average Useful			Accumulated
	Life (in years)	Gross		Amortization			Net

Membership and customer lists	5	$	34,679	$	(31,312	)	$	3,367
Deferred financing costs	6	15,692		(8,121		)	7,571
		$	50,371	$	(39,433	)	$	10,938

(5) DEBT

Senior Secured Notes

On November 30, 2010, the Company issued $333.0 million principal amount of the Senior Secured Notes at an original issue discount of $6.9 million, or 2.1%. Interest on the Senior Secured Notes at a rate of 11.5% per annum is due each December 1 and June 1 commencing June 1, 2011. The Senior Secured Notes mature on December 1, 2016. The Company used the net proceeds of $326.0 million from the issuance of the Senior Secured Notes: (i) to irrevocably redeem or otherwise retire all of the outstanding 9% senior subordinated notes due 2012 in an approximate amount (including accrued interest through but not including November 30, 2010) of $142.5 million; (ii) to permanently repay all of the outstanding indebtedness under our existing senior secured credit facility in an approximate amount (including call premium and accrued interest through but not including November 30, 2010) of $153.4 million; (iii) to make a $19.6 million distribution to the Company’s Parent to enable it, together with other funds contributed to the Parent, to redeem, repurchase or otherwise acquire for value and satisfy and discharge all of its outstanding 10 7/8% senior notes due 2012; and (iv) to pay related fees and expenses in connection with the foregoing transactions and to provide for general corporate purposes. As of September 30, 2013, an aggregate of $325.6 million of Senior Secured Notes remain outstanding.

The Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by each of the Company’s existing and future domestic restricted subsidiaries. All of the Company’s subsidiaries other than CWFR Capital Corp. (“CWFR”) are designated as restricted subsidiaries, and CWFR constitutes our only “unrestricted subsidiary”. In the event of a bankruptcy, liquidation or reorganization of an unrestricted subsidiary, holders of the indebtedness of an unrestricted subsidiary and their trade creditors are generally entitled to payment of their claims from the assets of an unrestricted subsidiary before any assets are made available for distribution to us. As a result, with respect to assets of unrestricted subsidiaries, the Senior Secured Notes are structurally subordinated to the prior payment of all of the debts of such unrestricted subsidiaries.

The Senior Secured Notes Indenture limits the Company’s ability to, among other things, incur more debt, pay dividends or make other distributions to the Company’s Parent, redeem stock, make certain investments, create liens, enter into transactions with affiliates, merge or consolidate, transfer or sell assets and make capital expenditures.

Subject to certain conditions, the Company is required to offer to redeem Senior Secured Notes each June 30, and December 31 beginning December 31, 2011 at 101% of principal amount tendered for redemption in an aggregate amount of the Excess Cash Flow Amount (as defined in the Senior Secured Indenture) for the respective period. For the calendar year ended December 31, 2011, the Excess Cash Flow Amount was the greater of $7.5 million or 75% of the Excess Cash Flow. For each six month period ending on June 30 beginning June 30, 2012, the minimum Excess Cash Flow Amount is $5.0 million if the then outstanding aggregate principal amount of the Senior Secured Notes exceeds $233.0 million or $1.0 million if the then outstanding aggregate principal

(5) DEBT (continued)

amount of the Senior Secured Notes is $233.0 million or less (such amount called the “Minimum Excess Cash Flow”). For the calendar years commencing with the calendar year ended December 31, 2012, the Excess Cash Flow Amount is the greater of (i) the Minimum Excess Cash Flow Amount, or (ii) (x) 75% of Excess Cash Flow for such annual period, minus (y) the Minimum Excess Cash Flow Amount for the immediately preceding six months period ending on June 30. On February 27, 2012, the Company completed an excess cash flow offer to purchase $7.4 million in principal amount of the Company’s outstanding Senior Secured Notes. The Senior Secured Notes were purchased by the Company and retired on February 27, 2012, resulting in a $0.4 million loss on debt extinguishment. On July 31, 2012, the Company completed an excess cash flow offer to purchase up to $4.95 million in principal amount of the Senior Secured Notes. The amount of Senior Secured Notes tendered was $4,000. These Senior Secured Notes were purchased by the Company and retired on August 7, 2012. On each of April 10, 2013 and July 29, 2013, the Company completed excess cash flow offers to purchase $4.95 million in principal amount of the Senior Secured Notes. No Senior Secured Notes were tendered in either offer.

The Senior Secured Notes and the related guarantees are the Company’s and the guarantors’ senior secured obligations. The Senior Secured Notes (i) rank senior in right of payment to all of our and the guarantors’ existing and future subordinated indebtedness, (ii) rank equal in right of payment with all of the Company’s and the guarantors’ existing and future senior indebtedness other than the obligations of Camping World and its subsidiaries under the CW Credit Facility and future replacements of that facility, (iii) are structurally subordinated to all future indebtedness of the Company’s subsidiaries that are not guarantors of the Senior Secured Notes and (iv) are effectively subordinated to the CW Credit Facility and any future credit facilities in replacement thereof to the extent of the value of the collateral securing indebtedness under such facilities.

CW Credit Facility

On March 1, 2010, our wholly-owned subsidiary Camping World entered into the CW Credit Facility providing for an asset based lending facility of up to $22.0 million, of which $10.0 million is available for letters of credit and $12.0 million is available for revolving loans. Interest rates on the revolving loans under the CW Credit Facility floated at either 3.25% over the base rate (defined as the greater of the prime rate, federal funds rate plus 50 basis points or 1 month LIBOR) for borrowings whose interest is based on the prime rate or 3.25% over the LIBOR rate (defined as the LIBOR rate applicable to the period of the respective LIBOR borrowings) for borrowings whose interest is based on LIBOR. On December 30, 2010, the CW Credit Facility was amended to extend the maturity to September 1, 2014, to decrease the interest rate margin to 2.75%, to remove the 1% LIBOR floor, to increase the revolving loan commitment amount from $12.0 million to $20.0 million, with a $5.0 million sublimit for letters of credit, and to decrease the letters of credit commitment from $10.0 million to $5.0 million. On April 23, 2012, the Company amended the CW Credit Facility to (a) increase borrowing availability by reducing the collateral availability block from $5.0 million to $2.5 million from October 1st

(5) DEBT (continued)

of each year through the last day of February of the immediately following year, (b) eliminate any restrictions on the number of new store openings during the year, and (c) increase the interest rate margin from 2.75% to 3.25%. On July 23, 2012, Camping World amended the CW Credit Facility to provide that capital expenditures may be incurred in excess of $5.0 million if during such fiscal year (a) the holders of Camping World’s equity interest make a cash common equity contribution to Camping World in an amount at least equal to such excess, or (b) Camping World or its subsidiaries receive proceeds from asset sales (other than inventory sold in the ordinary course of business) in an amount at least equal to such excess.

On March 1, 2013, the Company received the requisite consents from noteholders of the Senior Secured Notes to amend the Indenture relating to the Senior Secured Notes outstanding and the Company’s Intercreditor Agreement to allow the CW Credit Facility to increase from $25.0 million to $35.0 million. An aggregate fee in the amount of $0.3 million was paid to the consenting noteholders. Consequently, Camping World, Inc. amended its agreement with the current lender of the CW Credit Facility to increase the facility to $35.0 million, reduce the interest rate margin to 2.50%, and extend the maturity to the earlier of March 1, 2018 or 180 days prior to the maturity of the Senior Secured Notes or any notes issued or exchanged to refinance the Senior Secured Notes. The Company paid a $0.3 million fee to the current lender of the CW Credit Facility for the amendment.

The CW Credit Facility contains affirmative covenants, including financial covenants, and negative covenants. Borrowings under the CW Credit Facility are guaranteed by the direct and indirect subsidiaries of Camping World and are secured by a pledge on the stock of Camping World and its direct and indirect subsidiaries and liens on the assets of Camping World and its direct and indirect subsidiaries. Borrowings under the CW Credit Facility are based on the borrowing base of eligible inventory and accounts receivable of Camping World and its subsidiaries. The administrative agent under the CW Credit Facility, the collateral agent under the Senior Secured Notes Indenture, the Company, and certain guarantor subsidiaries of the Company entered into the Intercreditor Agreement that governs their rights to the collateral pledged to secure the respective indebtedness of the Company and the guarantors pursuant to the CW Credit Facility and the Senior Secured Notes Indenture. As of September 30, 2013, there were no borrowings under the revolver and $5.3 million of letters of credit were issued.

The Senior Secured Notes Indenture and the CW Credit Facility contain certain restrictive covenants relating to, but not limited to, mergers, changes in the nature of the business, acquisitions, additional indebtedness, sale of assets, investments, and the payment of dividends subject to certain limitations and minimum operating covenants. The Company was in compliance with all debt covenants at September 30, 2013.

(6) NOTES OFFERING, GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

In November 2010, the Company completed an offering of $333.0 million principal amount of the Senior Secured Notes. See Note 5 - Debt. The Company’s present and future restricted subsidiaries guarantee the Senior Secured Notes with unconditional guarantees of payment.

All of the Company’s restricted subsidiaries have jointly and severally guaranteed the indebtedness under the Senior Secured Notes. Full financial statements of the Guarantors have not been included because, pursuant to their respective guarantees, the Guarantors are jointly and severally liable with respect to the Senior Secured Notes. The Company’s unrestricted subsidiary, CWFR Capital Corp. is a not a guarantor of the Senior Secured Notes.

(6) NOTES OFFERING, GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (continued)

The following are summarized statements setting forth certain financial information concerning the Guarantor Subsidiaries as of and for the nine months ended September 30, 2013 (in thousands).

	GSE			GUARANTORS			NON- GUARANTOR		ELIMINATIONS			GSE CONSOLIDATED

Cash & cash equivalents	$	24,380		$	9,193		$	—	$	—		$	33,573
Accounts receivable - less allowance for doubtful accounts	4,122			215,204					(182,775		)	36,551
Note from affiliate	2,500			—					—			2,500
Inventories	—			79,266			—		—			79,266
Prepaid expenses and other assets	1,290			14,289			—		—			15,579
Total current assets	32,292			317,952			—		(182,775		)	167,469

Property and equipment, net	3,336			21,364			—		—			24,700
Affiliate note and investments	40,000			4,934			—		(40,000		)	4,934
Intangible assets, net	7,885			3,053			—		—			10,938
Goodwill	49,944			—			—		—			49,944
Investment in subsidiaries	838,741			—			—		(838,741		)	—
Deferred tax assets, net	—			107					—			107
Other assets	3,741			1,899			—		—			5,640
Total assets	$	975,939		$	349,309		$	—	$	(1,061,516	)	$	263,732

Accounts payable	$	245		$	21,505		$	—	$	—		$	21,750
Accrued and other liabilities	17,179			29,811			—		—			46,990
Deferred revenue and gains	1,270			64,708			—		—			65,978
Current portion of long-term debt	192,775			40,000			—		(222,775		)	10,000
Total current liabilities	211,469			156,024					(222,775		)	144,718

Deferred revenue and gains	1,829			35,504			—		—			37,333
Long-term debt, net of current portion	311,385			—			—		—			311,385
Other long-term liabilities	683,224			(680,960		)	—		—			2,264
Total liabilities	1,207,907			(489,432		)			(222,775		)	495,700

Interdivisional equity	—			838,741			—		(838,741		)	—
Member’s deficit	(231,968		)	—			—		—			(231,968		)
Total liabilities & member’s deficit	$	975,939		$	349,309		$	—	$	(1,061,516	)	$	263,732

							NON-					GSE
	GSE			GUARANTORS			GUARANTOR		ELIMINATIONS			CONSOLIDATED
Revenue	$	4,239		$	416,892		$	—	$	(1,302	)	$	419,829
Costs applicable to revenues	(3,370		)	(252,080		)	—		1,302			(254,148		)
Operating expenses	(12,151		)	(104,122		)	—		—			(116,273		)
Interest expense, net	(28,741		)	16			—		—			(28,725		)
Income from investment in consolidated subsidiaries	42,510			—			—		(42,510		)	—
Other non operating income (expenses)	19,754			(18,026		)	—		—			1,728
Income tax expense	(12		)	(170		)	—		—			(182		)
Net income	$	22,229		$	42,510		$	—	$	(42,510	)	$	22,229

Cash flows from operations	$	2,961		$	41,066		$	—	$	—		$	44,027
Cash flows used in investing activites	(1,955		)	(5,584		)	—		—			(7,539		)
Cash flows provided by (used in) financing activities	20,195			(43,056		)	—		—			(22,861		)
Cash at beginning of year	3,179			16,767			—		—			19,946
Cash at end of period	$	24,380		$	9,193		$	—	$	—		$	33,573

(6) NOTES OFFERING, GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (continued)

The following are summarized statements setting forth certain financial information concerning the Guarantor Subsidiaries as of and for the three months ended September 30, 2013 (in thousands).

							NON-					GSE
	GSE			GUARANTORS			GUARANTOR		ELIMINATIONS			CONSOLIDATED
Revenue	$	973		$	148,246		$	—	$	(299	)	$	148,920
Costs applicable to revenues	(586		)	(90,105		)	—		299			(90,392		)
Operating expenses	(4,260		)	(37,285		)	—		—			(41,545		)
Interest expense, net	(9,571		)	10			—		—			(9,561		)
Income from investment in consolidated subsidiaries	14,221			—			—		(14,221		)	—
Other non operating income (expenses)	6,484			(6,579		)	—		—			(95		)
Income tax expense	(4		)	(66		)	—		—			(70		)
Net income	$	7,257		$	14,221		$	—	$	(14,221	)	$	7,257

The following are summarized balance sheet statements setting forth certain financial information concerning the Guarantor Subsidiaries as of December 31, 2012 (in thousands).

							NON-					GSE
	GSE			GUARANTORS			GUARANTOR		ELIMINATIONS			CONSOLIDATED
Cash & cash equivalents	$	3,179		$	16,767		$	—	$	—		$	19,946
Accounts receivable - less allowance for doubtful accounts	3,308			213,617					(185,402		)	31,523
Inventories	—			65,221			—		—			65,221
Prepaid expenses and other assets	881			12,849			—		—			13,730
Total current assets	7,368			308,454			—		(185,402		)	130,420

Property and equipment, net	2,701			21,297			—		—			23,998
Affiliate note and investments	40,000			5,075			—		(40,000		)	5,075
Intangible assets, net	8,851			3,514			—		—			12,365
Goodwill	49,944			—			—		—			49,944
Investment in subsidiaries	796,231			—			—		(796,231		)	—
Deferred tax assets, net	—			79			—		—			79
Other assets	6,257			2,223			—		—			8,480
Total assets	$	911,352		$	340,642		$	—	$	(1,021,633	)	$	230,361

Accounts payable	$	631		$	16,373		$	—	$	—		17,004
Accrued and other liabilities	8,596			24,074			—		—			32,670
Deferred revenue and gains	126			54,457			—		—			54,583
Current portion of long-term debt	195,402			40,000			—		(225,402		)	10,000
Total current liabilities	204,755			134,904					(225,402		)	114,257

Deferred revenue and gains	1,922			32,394			—		—			34,316
Long-term debt, net of current portion	310,598			11,872			—		—			322,470
Other long-term liabilities	637,873			(634,759		)	—		—			3,114
Total liabilities	1,155,148			(455,589		)			(225,402		)	474,157

Interdivisional equity	—			796,231			—		(796,231		)	—
Member’s deficit	(243,796		)	—			—		—			(243,796		)
Total liabilities & member’s deficit	$	911,352		$	340,642		$	—	$	(1,021,633	)	$	230,361

(6) NOTES OFFERING, GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (continued)

The following are summarized statements setting forth certain financial information concerning the Guarantor Subsidiaries for the nine months ended September 30, 2012 (in thousands).

							NON-					GSE
	GSE			GUARANTORS			GUARANTOR		ELIMINATIONS			CONSOLIDATED
Revenue	$	6,499		$	395,213		$	—	$	(5,707	)	$	396,005
Costs applicable to revenues	(8,026		)	(236,484		)	—		5,707			(238,803		)
Operating expenses	(13,329		)	(104,623		)	—		—			(117,952		)
Interest expense, net	(32,957		)	56			—		—			(32,901		)
Income from investment in consolidated subsidiaries	36,991			—			—		(36,991		)	—
Other non operating income (expenses)	21,410			(17,145		)	—		—			4,265
Income tax expense	(142		)	(26		)	—		—			(168		)
Net income	$	10,446		$	36,991		$	—	$	(36,991	)	$	10,446

Cash flows from operations	$	(43,863	)	$	59,365		$	—	$	2,025		$	17,527
Cash flows provided by (used in) investing activities	(1,607		)	(6,700		)	—		—			(8,307		)
Cash flows provided (used in) by financing activities	52,414			(61,073		)	—		(2,025		)	(10,684		)
Cash at beginning of year	7,749			12,526			—		—			20,275
Cash at end of period	$	14,693		$	4,118		$	—	$	—		$	18,811

The following are summarized statements setting forth certain financial information concerning the Guarantor Subsidiaries for the three months ended September 30, 2012 (in thousands).

							NON-					GSE
	GSE			GUARANTORS			GUARANTOR		ELIMINATIONS			CONSOLIDATED
Revenue	$	1,297		$	139,569		$	—	$	(1,253	)	$	139,613
Costs applicable to revenues	(1,314		)	(84,592		)	—		1,253			(84,653		)
Operating expenses	(4,991		)	(36,929		)	—		—			(41,920		)
Interest expense, net	(10,949		)	(27		)	—		—			(10,976		)
Income from investment in consolidated subsidiaries	11,847			—			—		(11,847		)	—
Other non operating income (expenses)	7,405			(6,148		)	—		—			1,257
Income tax expense	(31		)	(26		)	—		—			(57		)
Net income	$	3,264		$	11,847		$	—	$	(11,847	)	$	3,264

(7) INTEREST RATE SWAP AGREEMENTS

The Company is exposed to certain risks related to its business operations. The primary risks that the Company managed by using derivatives was interest rate risk. The Company used financial instruments, including interest rate swap agreements, to reduce the Company’s risk to this exposure. The Company does not use derivatives for speculative trading purposes and is not a party to leveraged derivatives. The Company recognized all of its derivative instruments as either assets or liabilities at fair value.

(7) INTEREST RATE SWAP AGREEMENTS (continued)

Fair value was determined in accordance with the accounting guidance for Fair Value Measurements. See Note 8 — Fair Value Measurements. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. For derivatives designated as hedges under the accounting guidance for derivative instruments and hedging activities, the Company formally assesses, both at inception and periodically thereafter, whether the hedging derivatives are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. The Company’s derivatives that are not designated and do not qualify as hedges under the accounting guidance for derivative instruments and hedging activities were adjusted to fair value through current earnings.

On October 15, 2007, the Company entered into a five-year interest rate swap agreement with a notional amount of $100.0 million from which it received periodic payments at the 3 month LIBOR-based variable rate and made periodic payments at a fixed rate of 5.135%, with settlement and rate reset dates every January 31, April 30, July 31, and October 31. The interest rate swap agreement was effective beginning October 31, 2007 and expired on October 31, 2012. On March 19, 2008, the Company entered into a 4.5 year interest rate swap agreement effective April 30, 2008 with a notional amount of $35.0 million from which it received periodic payments at the 3 month LIBOR-based variable rate and made periodic payments at a fixed rate of 3.430%, with settlement and rate reset dates every January 31, April 30, July 31, and October 31. The interest rate swap was effective beginning April 30, 2008 and expired on October 31, 2012. The fair value of the swap agreements were zero at inception. The Company entered into the interest rate swap agreements to limit the effect of variable interest rates on the Company’s floating rate debt. The interest rate swap agreements were originally designated as cash flow hedges of the variable rate interest payments due on $135.0 million of the term loans and the revolving credit facility issued June 24, 2003, and accordingly, the effective portion of gains and losses on the fair value of the interest rate swap agreements were previously reported in accumulated other comprehensive loss and reclassified to earnings in the same period in which the hedged interest payment affected earnings.

On October 31, 2012, the Company’s remaining interest rate swap agreements expired. The Company is currently not a party to any interest rate swap agreements.

(7) INTEREST RATE SWAP AGREEMENTS (continued)

The following is the location and amount of gains and losses on derivative instruments in the statement of operations for the nine months ended September 30, 2013 and 2012 (in thousands):

	Interest Rate Swap Agreements
	9/30/2013		9/30/2012
Derivatives not designated as hedging instruments:
Amount of Gain recognized in income on Statement of Operations	$	—	$	3,448

Location of Gain recognized in Statement of Operations	Gain on derivative instrument

(8) FAIR VALUE MEASUREMENTS

Accounting guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of September 30, 2013 and December 31, 2012, the Company holds contingent consideration that is required to be measured at fair value on a recurring basis. The contingent consideration arrangement involves the purchase of the Good Sam Travel- Assist program from a current marketing partner which requires the Company to pay an agreed upon percentage of acquisition and renewal revenue over a five year period ending on July 31, 2017. The contingent consideration approximates the projected amount that would have been received by the marketing partner over the next five years if the prior marketing agreement was extended. This fair value measurement was based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820.

The Company’s liability at September 30, 2013 and December 31, 2012, measured at fair value on a recurring basis subject to the disclosure requirements from accounting guidance, was as follows:

			Fair Value Measurements at Reporting Date Using
(in thousands)			Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs	Significant Unobservable Inputs
Description	Amount		(Level 1)	(Level 2)	(Level 3)

As of September 30, 2013:
Contingent consideration	(1,961	)	—	—	(1,961	)

As of December 31, 2012:
Contingent consideration	(2,693	)	—	—	(2,693	)

(8) FAIR VALUE MEASUREMENTS (continued)

The fair value of the contingent consideration was calculated using a discounted cash flow model.

There have been no transfers of assets or liabilities between the fair value measurement levels and there were no material re-measurements to fair value during 2013 and 2012 of assets and liabilities that are not measured at fair value on a recurring basis.

The following table presents the reported carrying value and fair value information for the Company’s Senior Secured Notes and the CW Credit Facility. The fair values shown below for the Senior Secured Notes is based on quoted prices in the market for identical assets (Level 1), and the CW Credit Facility is based on indirect observable inputs (Level 2) (in thousands):

	9/30/2013				12/31/2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Senior Secured Notes	$	321,385	$	349,992	$	320,598	$	348,364
CW Credit Facility	—		—		11,872		11,872

(9) SUBSEQUENT EVENTS

The Company has completed an evaluation of all subsequent events through the filing date and concluded that, other than noted below, no other subsequent events have occurred that would require recognition in the Company’s Consolidated Financial Statements or disclosed in the Notes to the Consolidated Financial Statements.

On November 5, 2013, the Company announced that an intermediate parent, CWGS Group, LLC, a Delaware limited liability company (the “CWGS”), which also owns the outstanding equity interests of its affiliate FreedomRoads Holding Company, LLC that operates RV dealerships throughout the United States, is seeking commitments for a privately arranged senior secured financing (the “Refinancing”). As part of the Refinancing, on November 5, 2013 the Company launched a tender offer, to purchase for cash any and all its outstanding Senior Secured Notes (the “Tender Offer”), subject to the consummation of the Refinancing on terms satisfactory to the Company and CWGS. The complete terms and conditions of the Tender Offer are set forth in an Offer to Purchase sent to holders of the Senior Secured Notes.

ITEM 2:

GOOD SAM ENTERPRISES, LLC AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following table is derived from the Company’s Consolidated Statements of Income and expresses the results from operations as a percentage of revenues and reflects the net increase (decrease) between periods:

	THREE MONTHS ENDED
	9/30/2013		9/30/2012		Inc/(Dec)

REVENUES:
Membership services	31.2	%	31.7	%	5.0	%
Retail	68.8	%	68.3	%	7.4	%
	100.0	%	100.0	%	6.7	%

COSTS APPLICABLE TO REVENUES:
Membership services	18.4	%	18.4	%	6.8	%
Retail	42.3	%	42.2	%	6.8	%
	60.7	%	60.6	%	6.8	%

GROSS PROFIT	39.3	%	39.4	%	6.5	%

OPERATING EXPENSES:
Selling, general and administrative	25.8	%	27.4	%	0.8	%
Depreciation and amortization	2.1	%	2.7	%	(17.7	)%
	27.9	%	30.1	%	(0.9	)%

INCOME FROM OPERATIONS	11.4	%	9.3	%	30.2	%

NON-OPERATING ITEMS:
Interest income	0.1	%	0.2	%	(8.4	)%
Interest expense	(6.5	)%	(8.0	)%	(12.8	)%
Gain on derivative instrument	—		0.9	%	(100.0	)%
Loss on sale of assets or businesses	(0.1	)%	—		nm
	(6.5	)%	(6.9	)%	(0.6	)%

INCOME BEFORE INCOME TAXES	4.9	%	2.4	%	120.6	%

INCOME TAX EXPENSE	—		(0.1	)%	22.8	%

NET INCOME	4.9	%	2.3	%	122.3	%

nm = not material

GOOD SAM ENTERPRISES, LLC AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

	NINE MONTHS ENDED
	9/30/2013		9/30/2012		Inc/(Dec)

REVENUES:
Membership services	34.9	%	35.5	%	4.0	%
Retail	65.1	%	64.5	%	7.1	%
	100.0	%	100.0	%	6.0	%

COSTS APPLICABLE TO REVENUES:
Membership services	20.3	%	20.8	%	3.7	%
Retail	40.2	%	39.5	%	7.9	%
	60.5	%	60.3	%	6.4	%

GROSS PROFIT	39.5	%	39.7	%	5.4	%

OPERATING EXPENSES:
Selling, general and administrative	25.5	%	27.1	%	(0.4	)%
Depreciation and amortization	2.2	%	2.7	%	(12.2	)%
	27.7	%	29.8	%	(1.4	)%

INCOME FROM OPERATIONS	11.8	%	9.9	%	25.9	%

NON-OPERATING ITEMS:
Interest income	0.1	%	0.2	%	(8.3	)%
Interest expense	(7.0	)%	(8.5	)%	(12.6	)%
Gain on derivative instrument	—		0.9	%	(100.0	)%
Loss on debt restructure	—		(0.1	)%	100.0	%
Gain on sale of assets or businesses	0.4	%	0.3	%	37.5	%
	(6.5	)%	(7.2	)%	(5.7	)%

INCOME BEFORE INCOME TAXES	5.3	%	2.7	%	111.1	%

INCOME TAX EXPENSE	—		(0.1	)%	8.3	%

NET INCOME	5.3	%	2.6	%	112.8	%

RESULTS OF OPERATIONS

Three Months Ended September 30, 2013

Compared With Three Months Ended September 30, 2012

Revenues

Revenues of $148.9 million for the third quarter of 2013 increased $9.3 million, or 6.7%, from the comparable period in 2012.

Membership Services revenues of $46.5 million for the third quarter of 2013 increased $2.2 million, or 5.0%, from the comparable period in 2012. This revenue increase was largely attributable to a $2.6 million increase from the extended vehicle warranty programs due to an increase in average revenue per contract and increased contracts in force, a $1.2 million increase from the roadside assistance programs primarily due to increased contracts in force, a $1.0 million increase in revenue from the Good Sam TravelAssist program acquired in 2012, a $0.4 million increase from additional online advertising revenue in the Good Sam RV Travel Guide & Campground Directory, and a $0.3 million increase in revenue from the marketing of vehicle insurance products. These increases were partially offset by a $2.3 million reduction from the outdoor powersports magazine group primarily due to the sale of its remaining magazine titles and shows in March 2013, and a $1.0 million revenue reduction resulting from merging the President’s Club into the Good Sam Club.

Retail revenues of $102.5 million for the third quarter of 2013 increased by $7.1 million, or 7.4%, from the comparable period in 2012. Store merchandise sales increased $5.9 million from the third quarter of 2012 due to a same store sales increase of $2.1 million, or 3.3%, and a $5.4 million increase from the opening of twenty-one new stores over the last twenty-one months, which were partially offset by a $1.6 million decrease in revenue from four discontinued stores that were closed in the last twenty-one months in order to consolidate operations within specific geographic areas. Further, catalog and internet revenue increased $1.2 million. Same store sale calculations for a given period include only those stores that were open both at the end of that period and at the beginning of the preceding fiscal year.

Costs Applicable to Revenues

Costs applicable to revenues totaled $90.4 million for the third quarter of 2013, an increase of $5.7 million, or 6.8%, from the comparable period in 2012.

Membership Services costs applicable to revenues of $27.4 million for the third quarter of 2013 increased $1.7 million, or 6.8%, from the comparable period in 2012. This increase consisted of higher program expenses for the extended vehicle warranty programs of $1.7 million primarily relating to increased revenue, increased program and fulfillment expenses for the roadside assistance programs of $1.3 million, $0.8 million of additional marketing expenses for the vehicle insurance programs, $0.5 million of additional expenses relating to the travel assist program acquired in 2012, and $0.4 million of additional campground directory advertising expenses, relating to increased online

revenue. These increases were partially offset by a $1.9 million decrease relating to the sale of the outdoor powersports magazines and shows in March 2013, and a $1.1 million decrease in Good Sam Club marketing and fulfillment expenses primarily the result of merging the President’s Club into the Good Sam Club.

Retail costs applicable to revenues for the third quarter of 2013 increased $4.0 million, or 6.8%, to $63.0 million. The retail gross profit margin of 38.5% for the third quarter of 2013 increased from 38.1% for the comparable period in 2012 primarily due to increased merchandise product margins resulting from recent retail price increases.

Operating Expenses

Selling, general and administrative expenses of $38.4 million for the third quarter of 2013 increased $0.3 million compared to the third quarter of 2012. This increase was primarily due to a $1.7 million increase in retail selling, general and administrative expenses, mainly related to increased labor in connection with the opening of twenty-one new stores in the last twenty-one months, partially offset by a $1.4 million reduction in club branding and legal expenses.

Depreciation and amortization expense of $3.1 million for the third quarter of 2013 decreased $0.7 million from the prior year primarily due to the completed amortization of customer lists related to consumer show purchases.

Income from Operations

Income from operations for the third quarter of 2013 totaled $17.0 million compared to $13.0 million for the third quarter of 2012. As described in more detail under “Revenues,” “Costs Applicable to Revenues” and “Operating Expenses” above, this increase of $3.9 million was primarily the result of the increases in gross profit for the Retail and Membership Services segments of $3.1 million and $0.4 million, respectively, and a $0.4 million decrease in operating expenses for the third quarter of 2013.

Non-Operating Items

Non-operating expenses of $9.7 million for the third quarter of 2013 decreased $0.1 million compared to the third quarter of 2012 due a $1.4 million decrease in interest expense primarily due to the expiration of the interest rate swap agreements in October 2012, partially offset by a decrease in gain on derivative instruments of approximately $1.2 million related to the interest rate swap agreements which expired in October 2012, and a $0.1 million loss on sale of retail assets in 2013.

Income before Income Tax

Income before income tax for the third quarter of 2013 was $7.3 million, compared to $3.3 million for the third quarter of 2012. This $4.0 million favorable change was attributable to the $3.9 million increase in income from operations in the third quarter of 2013 and the decrease in non-operating items of $0.1 million mentioned above.

Income Tax Expense

The Company recorded income tax expense of approximately $0.1 million for the third quarter of 2013, which was flat compared to the third quarter of 2012.

Net Income

Net income was $7.3 million for the third quarter of 2013 and $3.3 million for the third quarter of 2012. This $4.0 million increase was mainly due to the income from operations improvement noted above.

Segment Profit (Loss)

Due to the sale, in the first quarter of 2013, of the Company’s remaining non-RV publications operated in the Membership Services — Media segment, the Company made a change in its reportable segments by consolidating the Membership Services — Media segment with the Membership Services segment. The remaining publication and show operating units share common management with and cater to the same RV customer base as the Membership Services segment. Accordingly, there are currently two reportable segments: (i) Membership Services and (ii) Retail.

The Membership Services segment operates the Good Sam Club and the Coast to Coast Club and assorted products and services, publications and shows for RV owners, campers and outdoor vacationers. The President’s Club was merged into the Good Sam Club on January 1, 2012, the Golf Card Club was sold on March 1, 2012, and the seven remaining outdoor powersports magazine titles, two powersports shows and two conferences were sold in March 2013, as described under “Revenues” above. The Retail segment sells specialty retail merchandise and services for RV owners primarily through retail supercenters and mail order catalogs. The Company evaluates performance based on profit or loss from operations before income taxes and unusual items because it believes that such measure is useful in evaluating the income and expenses of each segment that are controllable by management of that segment. In addition, segment operating profit as presented herein excludes intercompany fees by which interest expense attributable to the Senior Secured Notes is allocated to such segments as management evaluates its lines of business performance before such allocation and this interest expense is evaluated on a consolidated level. See Note 2 of Notes to Unaudited

Consolidated Financial Statements - Disclosures about Segments of an Enterprise and Related Information for a reconciliation of segment operating profit to income before income taxes.

Membership Services segment operating profit of $16.8 million for the third quarter of 2013 increased $2.0 million, or 13.9%, from the comparable period in 2012. This increase was attributable to a $1.0 million increase from the extended vehicle warranty programs due to an increased number of policies in force, a $0.7 million increase from the operations of the consumer show group, a $0.6 million reduction in club branding expense, and a $0.4 million increase from the travel assist program acquired in 2012. These positive effects on operating profit were partially offset by a $0.5 million reduction in other club and media operating profit, and a $0.2 million decrease from the roadside assistance products due to increased program costs.

Retail segment operating profit of $4.4 million for the third quarter of 2013 increased $1.1 million, or 35.2% from the comparable period in 2012 due to a $2.9 million increase in gross profit partially offset by a $1.7 million increase in selling, general and administrative expenses primarily due to the opening of new stores, and a $0.1 million increase in depreciation and amortization expense.

Nine Months Ended September 30, 2013

Compared With Nine Months Ended September 30, 2012

Revenues

Revenues of $419.8 million for the first nine months of 2013 increased $23.8 million, or 6.0%, from the comparable period in 2012.

Membership Services revenues of $146.4 million for the first nine months of 2013 increased $5.7 million, or 4.0%, from the comparable period in 2012. This revenue increase was largely attributable to a $8.6 million increase from the extended vehicle warranty programs due to an increase in average revenue per contract and increased contracts in force, a $2.8 million increase in revenue from the travel assist program acquired in 2012, a $2.3 million increase from the roadside assistance programs primarily due to increased contracts in force, and a $1.6 million increase in the campground directory revenue, mostly related to online revenues. These increases were partially offset by a $5.3 million reduction in the outdoor powersports magazine group primarily due to the sale of its remaining magazine titles and shows in March 2013, a $2.2 million reduction primarily from an additional member rally which occurred in the first quarter of 2012, and a $2.1 million revenue reduction resulting from merging the President’s Club into the Good Sam Club.

Retail revenues of $273.5 million for the first nine months of 2013 increased by $18.1 million, or 7.1%, from the comparable period in 2012. Store merchandise sales increased $18.9 million from the first nine months of 2012 due to a same store sales increase of $7.1 million, or 4.1%, and a $15.8 million increase from the opening of twenty-one new stores over the last twenty-one months, which were partially offset by a $4.0 million decrease in revenue from four discontinued stores that were closed in the

last twenty-one months in order to consolidate operations within specific geographic areas. Further, mail order and internet revenue increased $1.1 million, supplies and other revenue increased $0.4 million, and installation and service fees decreased $2.3 million. Same store sale calculations for a given period include only those stores that were open both at the end of that period and at the beginning of the preceding fiscal year.

Costs Applicable to Revenues

Costs applicable to revenues totaled $254.1 million for the first nine months of 2013, an increase of $15.3 million, or 6.4%, from the comparable period in 2012.

Membership Services costs applicable to revenues of $85.3 million for the first nine months of 2013 increased $3.0 million, or 3.7%, from the comparable period in 2012. This increase consisted of higher program and marketing expenses for the extended vehicle warranty and roadside assistance of $5.6 million and $2.6 million, respectively, primarily relating to increased revenue, $1.1 million of additional expenses relating to the travel assist program acquired in 2012, and $0.9 million of additional campground directory advertising expenses, relating to increased online revenue. These increases were partially offset by expense decreases of $4.8 million, primarily relating to the sale of the outdoor power sports magazines and shows in March 2013, and $2.4 million primarily from an additional annual rally in the first quarter of 2012.

Retail costs applicable to revenues for the first nine months of 2013 increased $12.3 million, or 7.9%, to $168.8 million. The retail gross profit margin of 38.3% for the first nine months of 2013 decreased from 38.7% for the comparable period in 2012 primarily due to a change in sales mix away from the higher margin install and service fee revenue and increased distribution expenses.

Operating Expenses

Selling, general and administrative expenses of $106.9 million for the first nine months of 2013 decreased $0.4 million compared to the first nine months of 2012. This decrease was primarily due to a reduction of legal and club branding expenses of $2.6 million, and reduced other general and administrative expenses of $0.7 million, partially offset by a $2.9 million increase in retail selling, general and administrative expenses, mainly related to increased labor in connection with the opening of twenty-one new retail stores in the last twenty-one months.

Depreciation and amortization expense of $9.3 million decreased $1.3 million from the prior year primarily due to the completed amortization of customer lists related to consumer show purchases.

Income from Operations

Income from operations for the first nine months of 2013 totaled $49.4 million compared to $39.2 million for the first nine months of 2012. As described in more detail under “Revenues,” “Costs Applicable to Revenues” and “Operating Expenses” above, this

increase of $10.2 million was primarily the result of increases in gross profit for the Retail and Membership Services segments of $5.8 million and $2.7 million, respectively, and a $1.7 million decrease in operating expenses for the first nine months of 2013.

Non-Operating Items

Non-operating expenses of $27.0 million for the first nine months of 2013 decreased $1.6 million compared to the first nine months of 2012 due to a $4.1 million decrease in net interest expense primarily due to the expiration of the interest rate swap agreements in October 2012, a net gain on sale of businesses of $0.5 million ($1.7 million on sale of the powersports magazine titles, shows and conferences in 2013 compared to a gain of approximately $1.2 million in the first nine months of 2012, primarily relating to the sale of the Golf Card Club and consumer shows), and a $0.4 million reduction in loss on debt instruments, partially offset by a $3.4 million decrease in gain on derivative instruments related to the interest rate swap agreements which expired October 2012.

Income before Income Tax

Income before income tax for the first nine months of 2013 was $22.4 million, compared to $10.6 million for the first nine months of 2012. This $11.8 million favorable change was attributable to the $10.2 million increase in income from operations in the first nine months of 2013 and the decrease in non-operating items of $1.6 million mentioned above.

Income Tax Expense

The Company recorded income tax expense of approximately $0.2 million for the first nine months of 2013, which remained unchanged from the first nine months of 2012.

Net Income

Net income for the first nine months of 2013 was $22.2 million versus $10.4 million for the first nine months of 2012. This $11.8 million increase was mainly due to the income from operations improvement noted above.

Segment Profit (Loss)

Due to the sale, in the first quarter of 2013, of the Company’s remaining non-RV publications operated in the Membership Services — Media segment, the Company made a change in its reportable segments by consolidating the Membership Services — Media segment with the Membership Services segment. The remaining publication and show operating units share common management with and cater to the same RV customer base as the Membership Services segment. Accordingly, there are currently two reportable segments: (i) Membership Services and (ii) Retail.

The Membership Services segment operates the Good Sam Club and the Coast to Coast Club and assorted products and services, publications and shows for RV owners, campers and outdoor vacationers. The President’s Club was merged into the Good Sam Club on January 1, 2012, the Golf Card Club was sold on March 1, 2012, and the seven remaining outdoor powersports magazine titles, two powersports shows and two conferences were sold in March 2013, as described under “Revenues” above. The Retail segment sells specialty retail merchandise and services for RV owners primarily through retail supercenters and mail order catalogs. The Company evaluates performance based on profit or loss from operations before income taxes and unusual items because it believes that such measure is useful in evaluating the income and expenses of each segment that are controllable by management of that segment. In addition, segment operating profit as presented herein excludes intercompany fees by which interest expense attributable to the Senior Secured Notes is allocated to such segments as management evaluates its lines of business performance before such allocation and this interest expense is evaluated on a consolidated level. See Note 2 of Notes to Unaudited Consolidated Financial Statements - Disclosures about Segments of an Enterprise and Related Information for a reconciliation of segment operating profit to income before income taxes.

Membership Services segment operating profit of $55.6 million for the first nine months of 2013 increased $7.7 million, or 16.1%, from the comparable period in 2012. This increase was attributable to a $3.2 million increase from the extended vehicle warranty programs due to an increased number of policies in force, a $2.1 million increased from the operations of the consumer show group, a $1.6 million reduction in club branding expense, a $1.2 million increase from the travel assist program acquired in 2012, a $0.8 million increase from the campground directory and a $0.6 million net gain on sale of assets or businesses ($1.8 million in 2013 for outdoor powersports group, $0.7 million in 2012 for consumer shows, and $0.5 million in 2012 for Golf Card Club). These positive effects on operating profit were partially offset by a $1.1 million reduction in other club operating profit, and a $0.7 million decrease from the roadside assistance products due to increased program costs.

Retail segment operating profit of $7.6 million for the first nine months of 2013 increased $1.7 million, or 28.9% from the comparable period in 2012 due to a $4.7 million increase in gross profit and a $0.2 million decrease in interest expense, partially offset by a $2.9 million increase in selling, general and administrative expenses, and a $0.3 million increase in depreciation and amortization expense.

LIQUIDITY AND CAPITAL RESOURCES

We had working capital of $22.8 million and $16.2 million as of September 30, 2013 and December 31, 2012, respectively. The primary reason for the low levels of working capital is the deferred revenue and gains reported under current liabilities of $66.0 million and $54.6 million as of September 30, 2013 and December 31, 2012, respectively, which reduces working capital. Deferred revenue is primarily comprised of cash collected for club memberships in advance of services to be provided which is deferred and recognized as revenue over the life of the membership. We use net proceeds from this deferred membership revenue to lower our long-term borrowings and meet our working capital needs.

Contractual Obligations and Commercial Commitments

The following table summarizes our commitments to make long-term debt, lease, deferred compensation and letter of credit payments at September 30, 2013. This table includes principal and future interest due under our debt agreements based on interest rates as of September 30, 2013 and assumes debt obligations will be held to maturity.

	Payments Due by Period
(in thousands)	Total		Balance of 2013		2014 and 2015		2016 and 2017		Thereafter

Debt and future interest	$	451,586	$	18,721	$	92,677	$	340,188	$	—
Operating lease obligations	244,562		6,288		47,826		37,764		152,684
Deferred compensation	500		257		243		—		—
Standby letters of credit	5,286		925		4,361		—		—
Grand total	$	701,934	$	26,191	$	145,107	$	377,952	$	152,684

11.5% Senior Secured Notes due 2016

On November 30, 2010, the Company issued $333.0 million principal amount of 11.5% senior secured notes due 2016 (the “Senior Secured Notes”) at an original issue discount of 2.1%. Interest on the Senior Secured Notes at a rate of 11.5% per annum is due each December 1 and June 1 commencing June 1, 2011. The Senior Secured Notes mature on December 1, 2016. The Company used the net proceeds of $326.0 million from the issuance of the Senior Secured Notes: (i) to irrevocably redeem or otherwise retire all of the 9% senior subordinated notes due 2012 in an approximate amount (including accrued interest through but not including November 30, 2010) of $142.5 million; (ii) to permanently repay all of the outstanding indebtedness under our existing senior secured credit facility in an approximate amount (including call premium and accrued interest through but not including November 30, 2010) of $153.4 million; (iii) to make a $19.6 million distribution to our direct parent, Affinity Group Holding, LLC (“Parent”), to enable it, together with other funds contributed to the Parent, to redeem, repurchase or otherwise acquire for value and satisfy and discharge all of its outstanding 10 7/8% senior notes due 2012; and (iv) to pay related fees and expenses in connection with the foregoing transactions and to provide for general corporate

purposes. As of September 30, 2013, an aggregate of $325.6 million of Senior Secured Notes remain outstanding.

The Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by each of our existing and future domestic restricted subsidiaries. All of the Company’s subsidiaries other than CWFR Capital Corp. (“CWFR”) are designated as restricted subsidiaries, and CWFR constitutes our only “unrestricted subsidiary”. In the event of a bankruptcy, liquidation or reorganization of the unrestricted subsidiary, holders of the indebtedness of the unrestricted subsidiary and their trade creditors are generally entitled to payment of their claims from the assets of the unrestricted subsidiary before any assets are made available for distribution to us. As a result, with respect to assets of unrestricted subsidiaries, the Senior Secured Notes are structurally subordinated to the prior payment of all of the debts of such unrestricted subsidiaries.

The indenture (the “Senior Secured Notes Indenture”) governing the Senior Secured Notes limits the Company’s ability to, among other things, incur more debt, pay dividends or make other distributions to our Parent, redeem stock, make certain investments, create liens, enter into transactions with affiliates, merge or consolidate, transfer or sell assets and make capital expenditures.

Subject to certain conditions, we must make an offer to purchase some or all of the Senior Secured Notes with the excess cash flow offer amount (as defined in the Senior Secured Notes Indenture) determined for each applicable period, commencing with the annual period ending December 31, 2011, and each June 30 and December 31 thereafter, at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. On February 27, 2012, the Company completed an excess cash flow offer to purchase $7.4 million in principal amount of the Senior Secured Notes. These Senior Secured Notes were purchased by the Company and retired on February 27, 2012. On July 31, 2012, the Company completed an excess cash flow offer to purchase up to $4.95 million in principal amount of the Senior Secured Notes. The amount of Senior Secured Notes tendered was $4,000. These Senior Secured Notes were purchased by the Company and retired on August 7, 2012. On April 10, 2013 and July 29, 2013, the Company completed excess cash flow offers to purchase $4.95 million in principal amount of the Senior Secured Notes. No Senior Secured Notes were tendered in either offer.

The Senior Secured Notes and the related guarantees are our and the guarantors’ senior secured obligations. The Senior Secured Notes (i) rank senior in right of payment to all of our and the guarantors’ existing and future subordinated indebtedness, (ii) rank equal in right of payment with all of our and the guarantors’ existing and future senior indebtedness other than the obligations of our wholly-owned subsidiary, Camping World, Inc. (“Camping World”), and its subsidiaries under the credit agreement dated March 1, 2010 as amended (“CW Credit Facility”) and future replacements of that facility, (iii) are structurally subordinated to all future indebtedness of our subsidiaries that are not guarantors of the Senior Secured Notes and (iv) are effectively subordinated to the CW Credit Facility and any future credit facilities in

replacement thereof to the extent of the value of the collateral securing indebtedness under such facilities.

CW Credit Facility

Our wholly-owned subsidiary, Camping World is party to the CW Credit Facility that currently provides for an asset based lending facility of up to $20.0 million for revolving loans and up to $10.0 million for letters of credit, and matures on September 1, 2014. Interest rates on the revolving loans under the CW Credit Facility float at either 3.25% over the base rate (defined as the greater of the prime rate, federal funds rate plus 50 basis points or 1 month LIBOR) for borrowings whose interest is based on the prime rate or 3.25% over the LIBOR rate (defined as LIBOR rate applicable to the period of the respective LIBOR borrowings) for borrowings whose interest is based on LIBOR. Borrowings under the CW Credit Facility are based on the borrowing base of eligible inventory and accounts receivable of Camping World and its subsidiaries. On July 23, 2012, Camping World amended the CW Credit Facility to provide that capital expenditures may be incurred in excess of $5.0 million if during such fiscal year (a) the holders of Camping World’s equity interest make a cash common equity contribution to Camping World in an amount at least equal to such excess, or (b) Camping World or its Subsidiaries receive proceeds from asset sales (other than inventory sold in the ordinary course of business) in an amount at least equal to such excess.

On March 1, 2013, the Company received the requisite consents from noteholders of the Senior Secured Notes to amend the Senior Secured Notes Indenture and the Company’s intercreditor agreement related to the Senior Secured Notes and CW Credit Facility to increase the amount of indebtedness that may be incurred pursuant to the Credit Facilities (as defined in the Senior Secured Notes Indenture) from $25.0 million to $35.0 million. An aggregate fee in the amount of $0.3 million was paid to the consenting noteholders. Subsequently, the CW Credit Facility was amended to increase the facility to $35.0 million, reduce the interest rate margin to 2.50%, and extend the maturity to the earlier of March 1, 2018 or 180 days prior to the maturity of the Senior Secured Notes or any notes issued or exchanged to refinance the Senior Secured Notes. The Company paid a $0.3 million fee to the current lender of the CW Credit Facility for the amendment.

The CW Credit Facility contains affirmative covenants, including financial covenants, and negative covenants. Borrowings under the CW Credit Facility are guaranteed by the direct and indirect subsidiaries of Camping World and are secured by a pledge on the stock of Camping World and its direct and indirect subsidiaries and liens on the assets of Camping World and its direct and indirect subsidiaries. The administrative agent under the CW Credit Facility, the collateral agent under the Senior Secured Notes Indenture, the Company, and certain guarantor subsidiaries of the Company have entered into an intercreditor agreement that governs their rights to the collateral pledged to secure the respective indebtedness of the Company and the guarantors pursuant to the CW Credit Facility and the Senior Secured Notes Indenture. As of September 30, 2013, there were no borrowings under the revolver and $5.3 million of letters of credit were issued.

The Senior Secured Notes Indenture and the CW Credit Facility contain certain restrictive covenants relating to, but not limited to, mergers, changes in the nature of the business,

acquisitions, additional indebtedness, sale of assets, investments, and the payment of dividends subject to certain limitations and minimum operating covenants. We were in compliance with all debt covenants at September 30, 2013.

Interest Rate Swap Agreements

Other Contractual Obligations and Commercial Commitments

For the nine months ended September 30, 2013, the Company made payments of $0.8 million on mature deferred compensation plans. The Company expects to pay an additional $0.3 million on the mature deferred compensation plans in 2013.

Capital expenditures for the nine months ended September 30, 2013 totaling $7.4 million decreased $1.3 million from the first nine months of 2012. The decrease was primarily due to reduced expenditures for a point-of sale system replacement and reduced new store openings. Additional capital expenditures of approximately $3.0 million are anticipated for the balance of 2013, primarily for information technology upgrades and leasehold improvements relating to new and existing retail stores. We expect to finance these capital expenditures through cash from operations, proceeds from the sale of assets and/or capital contributions.

CRITICAL ACCOUNTING POLICIES

General

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those 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 on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Merchandise revenue is recognized when products are sold in the retail stores, shipped for mail and Internet orders, or when services are provided to customers. Roadside assistance (“RA”) revenues are deferred and recognized over the life of the membership. RA claim expenses are recognized when incurred. Royalty revenue is earned under the terms of an arrangement with a third party credit card provider based on a percentage of the Company’s outstanding credit card balances with such third party credit card provider. Membership revenue is generated from annual, multi-year and lifetime memberships. The revenue and expenses associated with these memberships are deferred and amortized over the membership period. For lifetime memberships, an 18-year period is used, which is the actuarially determined estimated fulfillment period. Promotional expenses, consisting primarily of direct mail advertising, are deferred and expensed over the period of expected future benefit, typically three months based on historical actual response rates. Renewal expenses are expensed at the time related materials are mailed. Recognized revenues and profit are subject to revisions as the membership progresses to completion. Revisions to membership period estimates would change the amount of income and expense amortized in future accounting periods.

Newsstand sales of publications and related expenses are recorded at the time of delivery, net of estimated provision for returns. Subscription sales of publications are reflected in income over the lives of the subscriptions. The related selling expenses are expensed as incurred. Advertising revenues and related expenses are recorded at the time of delivery. Subscription and newsstand revenues and expenses related to annual publications are deferred until the publications are distributed. Revenues and related expenses for consumer shows are recognized when the show occurs.

Accounts Receivable

We estimate the collectability of our trade receivables. A considerable amount of judgment is required in assessing the ultimate realization of these receivables including the current credit-worthiness of each customer. Changes in required reserves have been

recorded in recent periods and may occur in the future due to the market conditions and the economic environment.

Inventory

We state inventories at the lower of cost or market. In assessing the ultimate realization of inventories, we are required to make judgments as to future demand requirements and compare that with the current or committed inventory levels. We have recorded changes in required reserves in recent periods due to changes in strategic direction, such as discontinuances of product lines as well as changes in market conditions due to changes in demand requirements. It is possible that changes in required inventory reserves may continue to occur in the future due to the market conditions.

Long-Lived Assets

Purchased intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, ranging from one to six years.

Long-lived assets, such as property, plant and equipment and purchased intangible assets with finite lives are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with accounting guidance on accounting for the impairment or disposal of long-lived assets. We assess the fair value of the assets based on the future cash flow the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flow expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment is identified, we reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, comparable market values.

We have evaluated the remaining useful lives of our finite-lived purchased intangible assets to determine if any adjustments to the useful lives were necessary or if any of these assets had indefinite lives and were therefore not subject to amortization. We determined that no adjustments to the useful lives of our finite-lived purchased intangible assets were necessary. The finite-lived purchased intangible assets consist of membership customer lists and deferred financing costs which have weighted average useful lives of approximately 5 and 6 years, respectively.

Indefinite-Lived Intangible Assets

The Company evaluates goodwill and indefinite-lived intangible assets for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the Company’s goodwill or indefinite-lived intangible assets might be impaired. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then it is required to perform the first step of a two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the

carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then the Company is required to perform the second step of the two-step goodwill impairment test to measure the amount of the impairment loss.

Self-insurance Program

Self-insurance accruals for workers compensation and general liability programs are calculated by outside actuaries and are based on claims filed and include estimates for claims incurred but not yet reported. Projections of future loss are inherently uncertain because of the random nature of insurance claims occurrences and could be substantially affected if future occurrences and claims differ significantly from these assumptions and historical trends.

Derivative Financial Instruments

The Company accounts for derivative instruments and hedging activities in accordance with accounting guidance for accounting for derivative instruments and hedging activities. All derivatives are recognized on the balance sheet at their fair value. On the date that the Company enters into a derivative contract, management formally documents all relationships between hedging instruments and hedged items, as well as risk management objectives and strategies for undertaking various hedge transactions.

Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge (a “swap”), to the extent that the hedge is effective, are recorded in accumulated other comprehensive loss, until earnings are affected by the variability of cash flows of the hedged transaction. The Company measures effectiveness of the swap at each quarter end using the Hypothetical Derivative Method. Under this method, hedge effectiveness is measured based on a comparison of the change in fair value of the actual swap designated as the hedging instrument and the change in fair value of the hypothetical swap which would have the terms that identically match the critical terms of the hedged cash flows from the anticipated debt issuance. The amount of ineffectiveness, if any, recorded in earnings would be equal to the excess of the cumulative change in the fair value of the swap over the cumulative change in the fair value of the plain vanilla swap lock, as defined in the accounting literature. Once a swap is settled, the effective portion is amortized over the estimated life of the hedge item.

The Company utilizes derivative financial instruments to manage its exposure to interest rate risks. The Company does not enter into derivative financial instruments for trading purposes. The interest rate swap agreements expired on October 31, 2012. The Company is currently not a party to any interest rate swap agreements.

Income Taxes

Significant judgment is required in determining the Company’s tax provision and in evaluating its tax positions. The Company establishes accruals for certain tax contingencies when, despite the belief that the Company’s tax return positions are fully supported, the Company believes that certain positions may be challenged and that the

Company’s positions may not be fully sustained. The tax contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, case law and emerging legislation. The Company’s tax provision includes the impact of tax contingency accruals and changes to the accruals, including related interest and penalties, as considered appropriate by management.

Disclosure Regarding Forward Looking Statements

This quarterly report on Form 10-Q contains statements that are “forward looking statements,” and includes, among other things, discussions of our business strategy and expectations concerning market position, future operations, margins, liquidity and capital resources, as well as statements concerning the integrations of acquired operations and the achievement of financial benefits and operational efficiencies in connection with acquisitions. Such statements may be identified by such words or phrases as “are anticipated to be,” “will be,” “will benefit,” “estimate,” “project,” “management believes,” “we expect”, and other expressions related to future periods. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such statements and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events.

Although we believe that the expectations reflected in such forward looking statements are reasonable, certain factors could cause the Company’s actual results to differ materially from those expressed or implied in any forward looking statements contained herein. Such factors include those discussed in our annual report on Form 10-K, Item 1A, “Risk Factors.” It is not possible to foresee all such factors and, accordingly, these factors should not be seen as complete or exhaustive.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

The following information discusses the interest rate sensitivity to our earnings. The range of changes chosen for this analysis reflects our view of changes which are reasonably possible over a one-year period. These forward-looking disclosures are selective in nature and only address the potential impacts from financial instruments. They do not include other potential effects which could impact our business as a result of these interest rate fluctuations.

Interest Rate Sensitivity Analysis

At September 30, 2013, we had debt totaling $321.4 million, net of $4.2 million in original issue discount, comprised of 100% fixed rate debt. Holding other variables constant (such as debt levels), the earnings and cash flow impact of a one-percentage point increase/ decrease in interest rates would have no impact.

Credit Risk

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

ITEM 4: CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer (principal executive officer) and the Executive Vice President and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15e under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, the President and Chief Executive Officer along with the Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2013.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer (principal executive officer) and our Executive Vice President and Chief Financial Officer (principal financial officer).

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the third quarter of 2013 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

None

ITEM 1A: RISK FACTORS

There were no material changes in risk factors for the Company in the quarter covered by this report. You should carefully consider the risks and risk factors included under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The Company’s business, financial condition or results of operations could be materially affected by any of these risks.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable

ITEM 5: OTHER INFORMATION

None

ITEM 6: EXHIBITS

See Index to Exhibits on page 41 of this report.

SIGNATURES:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GOOD SAM ENTERPRISES, LLC


	/s/ Thomas F. Wolfe
Date: November 12, 2013	Thomas F. Wolfe
	Executive Vice President and
	Chief Financial Officer

GOOD SAM ENTERPRISES, LLC

INDEX TO EXHIBITS

FOR FORM 10-Q

Exhibit Number		Description
31.1#		Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2#		Certification of Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1#		Statement of President and Chief Executive Officer pursuant to 18 U.S.C. § 1350

32.2#		Statement of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. § 1350

101.INS#		XBRL Instance Document

101.SCH#		XBRL Taxonomy Extension Schema Document

101.CAL#		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF#		XBRL Taxonomy Extension Definition Linkbase

101.LAB#		XBRL Taxonomy Extension Label Linkbase Document

101.PRE#		XBRL Taxonomy Extension Presentation Linkbase Document

# Filed herein.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. junior Avg

Good Sam Enterprises Inactive 10-Q2013 Q3 Quarterly report

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