<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of
The Securities Exchange Act of 1934
FOR QUARTER ENDED: COMMISSION FILE NUMBER
March 31, 2000 333-26389
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AFFINITY GROUP HOLDING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-2922099
(State of incorporation or organization) (I.R.S. Employer Identification No.)
64 Inverness Drive East (303) 792-7284
Englewood, CO 80112 (Registrant's telephone
(Address of principal executive offices) number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
11% Senior Notes Due 2007
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 X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AS OF
CLASS MAY 9, 2000
- ----- ------------
Common Stock, $.01 par value 100
DOCUMENTS INCORPORATED BY REFERENCE:
NONE
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AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. Financial Information
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets 1
As of March 31, 2000 and December 31, 1999
Consolidated Statements of Operations 2
For the three months ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows 3
For the three months ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements 4
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF 7
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. Other Information 13
SIGNATURES 14
</TABLE>
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<TABLE>
<CAPTION>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
(In Thousands)
(Unaudited)
3/31/00 12/31/99
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,424 $ 4,211
Accounts receivable, less allowance for doubtful 22,989 20,938
accounts
Inventories 38,109 34,631
Prepaid expenses and other assets 13,118 9,282
----------- ------------
Total current assets 80,640 69,062
PROPERTY AND EQUIPMENT 75,077 73,693
NOTES FROM AFFILIATES 23,005 22,443
INTANGIBLE ASSETS 189,441 188,745
DEFERRED TAX ASSETS 8,178 7,861
OTHER ASSETS 5,084 5,137
----------- ------------
$ 381,425 $ 366,941
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 28,378 $ 19,185
Accrued interest 8,746 4,936
Accrued income taxes 950 1,631
Accrued liabilities 22,161 23,638
Deferred revenues 59,326 56,846
Deferred tax liability 3,389 3,381
Current portion of long-term debt 9,692 8,885
----------- ------------
Total current liabilities 132,642 118,502
DEFERRED REVENUES 32,289 33,764
LONG-TERM DEBT 292,229 284,673
OTHER LONG-TERM LIABILITIES 4,783 4,470
COMMITMENTS AND CONTINGENCIES - -
----------- ------------
461,943 441,409
----------- ------------
STOCKHOLDER'S DEFICIT:
Common stock, $.01 par value, 1,000 shares
authorized, 100 shares issued and
outstanding 1 1
Additional paid-in capital 12,021 12,021
Accumulated deficit (92,540) (86,490)
----------- ------------
Total stockholder's deficit (80,518) (74,468)
----------- ------------
$ 381,425 $ 366,941
----------- ------------
----------- ------------
</TABLE>
See notes to consolidated financial statements.
1
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<TABLE>
<CAPTION>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)
THREE MONTHS ENDED
---------------------------
3/31/00 3/31/99
------------ -------------
<S> <C> <C>
REVENUES:
Membership services $ 28,968 $ 28,626
Publications 16,118 12,991
Merchandise 45,938 43,099
-------- --------
91,024 84,716
COSTS APPLICABLE TO REVENUES:
Membership services 18,220 17,426
Publications 11,402 9,863
Merchandise 30,251 28,702
-------- --------
59,873 55,991
GROSS PROFIT 31,151 28,725
OPERATING EXPENSES:
Selling, general and administrative 20,719 18,877
Depreciation and amortization 4,299 3,940
-------- --------
25,018 22,817
-------- --------
INCOME FROM OPERATIONS 6,133 5,908
NON-OPERATING ITEMS:
Interest expense, net (6,848) (7,300)
Other non-operating income, net 124 51
-------- --------
(6,724) (7,249)
-------- --------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES (591) (1,341)
INCOME TAX CREDIT 291 933
-------- --------
LOSS FROM CONTINUING OPERATIONS (300) (408)
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of applicable
income tax expense of $240 in 1999 - (78)
-------- --------
NET LOSS $ (300) $ (486)
======== ========
</TABLE>
See notes to consolidated financial statements.
2
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<TABLE>
<CAPTION>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
THREE MONTHS ENDED
---------------------------
3/31/00 3/31/99
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($300) ($486)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Deferred tax benefit (291) (933)
Depreciation and amortization 4,299 3,940
Provision for losses on accounts receivable 673 98
Deferred compensation 350 250
Loss on disposal of property and equipment 4 13
Changes in operating assets and liabilities (net of purchased
businesses):
Accounts receivable (2,580) 2,696
Inventories (3,478) (1,838)
Prepaid expenses and other assets (3,661) (1,244)
Accounts payable 9,070 5,452
Accrued and other liabilities 1,561 4,790
Deferred revenues 964 1,089
Net assets and liabilities of discontinued operations - 78
------------- ------------
Net cash provided by operating activities 6,611 13,905
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,428) (1,998)
Proceeds from sale of property and equipment - 78
Net changes in intangible assets (1) (259)
Loans receivable (562) (60)
Acquisitions (2,220) -
------------- ------------
Net cash used in investing activities (6,211) (2,239)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (5,750) -
Borrowings on long-term debt 44,263 15,475
Principal payments of long-term debt (36,700) (21,608)
------------- ------------
Net cash provided by (used in) financing activities 1,813 (6,133)
------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,213 5,533
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,211 2,863
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,424 $ 8,396
------------- ------------
------------- ------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 3,629 $ 3,453
Income taxes 1,789 150
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The financial statements included herein include the accounts of Affinity Group
Holding, Inc. ("AGHI"), its wholly-owned subsidiary, Affinity Group, Inc.
("AGI"), and AGI's subsidiaries (collectively the "Company") without audit, in
accordance with generally accepted accounting principles, and pursuant to the
rules and regulations of the Securities and Exchange Commission. These interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes in the Company's 10-K report for the
year ended December 31, 1999 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) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. The
Company currently has only one item related to SFAS 133, the income/loss from
the interest floor and cap transaction agreement. This SFAS will be implemented
by January 1, 2001. The adoption by the Company of SFAS 133 is not expected to
have a material effect on its results of operations or on its financial
position.
(3) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
The Company's three principal lines of business are Membership Services,
Publications, and Retail. The Membership Services segment operates the Good Sam
Club, Coast to Coast Club, and Camping World's President's Club for RV owners,
campers and outdoor vacationers, and the Golf Card Club for golf enthusiasts.
These membership clubs form a receptive audience to which the Company markets
its products and services. The Publications segment publishes a variety of
publications for selected markets in the recreation and leisure industry,
including general circulation
4
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(3) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
(CONTINUED)
periodicals, club magazines, directories and RV industry trade magazines. The
Retail segment sells specialty retail merchandise and services for RV
enthusiasts primarily through retail supercenters, mail order catalogs, and
websites. The Company evaluates performance based on profit or loss from
operations before interest, income taxes, depreciation and amortization.
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.
Most of the businesses were acquired as a unit, and the management at the time
of acquisition was retained.
The Company does not allocate depreciation, amortization, interest, income taxes
or unusual items to segments. Financial information by reportable business
segment is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Membership
Services Publications Retail Consolidated
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<S> <C> <C> <C> <C>
QUARTER ENDED MARCH 31, 2000
Revenues from external customers $ 28,968 $ 16,118 $ 45,930 $ 91,024
Segment operating profit 9,024 4,102 2,061 15,187
QUARTER ENDED MARCH 31, 1999
Revenues from external customers $ 28,626 $ 12,991 $ 43,099 $ 84,716
Segment operating profit 9,286 2,442 2,291 14,019
</TABLE>
The following is a summary of the reportable segment reconciliations to the
Company's consolidated financial statements for the three months ended March 31,
2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
3/31/00 3/31/99
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<S> <C> <C>
INCOME FROM OPERATIONS BEFORE DEPRECIATION
AND AMORTIZATION
Total profit for reportable segments $ 15,187 $ 14,019
Unallocated G & A expense (4,755) (4,171)
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Income from operations before
depreciation and amortization $ 10,432 $ 9,848
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</TABLE>
5
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(4) DISCONTINUED OPERATIONS
During the fourth quarter of 1998, the Company's Board of Directors adopted a
plan to sell the stock of Affinity Bank ("AB"), subject to regulatory approval,
to an affiliate of the Company at its net book value, which in the opinion of
management approximated market value. As a result, the operations of AB are
classified as a discontinued operation in the accompanying financial statements.
The Company received regulatory approval to sell AB and subsequently closed the
transaction on September 30, 1999.
Information relating to the operations of AB for the three months ended March
31, 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
3/31/99
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<S> <C>
Revenues $ 3,628
Costs applicable to revenues 3,416
-----------
Gross profit 212
Operating expenses 50
-----------
Income from operations 162
Income expense (240)
-----------
Loss from discontinued operations $ (78)
===========
</TABLE>
The tax expense for the period ended March 31, 1999 differs from the statutory
rate due primarily to non-deductible reserves and valuation allowances.
6
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AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ITEM 2:
The following table is derived from the Company's Consolidated Statements of
Operations and expresses the results from operations as a percentage of revenues
and reflects the net increase (decrease) between periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
3/31/00 3/31/99 Inc/(Dec)
------------ ----------- --------------
<S> <C> <C> <C>
REVENUES:
Membership services 31.8% 33.8% 1.2%
Publications 17.7% 15.3% 24.1%
Merchandise 50.5% 50.9% 6.6%
------------ ----------- --------------
100.0% 100.0% 7.4%
COSTS APPLICABLE TO REVENUES:
Membership services 20.1% 20.6% 4.6%
Publications 12.5% 11.6% 15.6%
Merchandise 33.2% 33.9% 5.4%
------------ ----------- --------------
65.8% 66.1% 6.9%
------------ ----------- --------------
GROSS PROFIT 34.2% 33.9% 8.4%
OPERATING EXPENSES:
Selling, general and administrative 22.8% 22.2% 9.8%
Depreciation and amortization 4.7% 4.7% 9.1%
------------ ----------- --------------
27.5% 26.9% 9.6%
------------ ----------- --------------
INCOME FROM OPERATIONS 6.7% 7.0% 3.8%
NON-OPERATING ITEMS:
Interest expense, net (7.4%) (8.7%) (6.2%)
Other non-operating income, net 0.1% 0.1% 143.1%
------------ ----------- --------------
(7.3%) (8.6%) (7.2%)
------------ ----------- --------------
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES (0.6%) (1.6%) 55.9%
INCOME TAX CREDIT 0.3% 1.1% (68.8%)
------------ ----------- --------------
LOSS FROM CONTINUING OPERATIONS (0.3%) (0.5%) 26.5%
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of
applicable income taxes --- (0.1%) 100.0%
------------ ----------- --------------
NET LOSS (0.3%) (0.6%) 38.3%
------------ ----------- --------------
------------ ----------- --------------
</TABLE>
7
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
COMPARED WITH THREE MONTHS ENDED MARCH 31, 1999
REVENUES
Revenues of $91.0 million for the first quarter of 2000 increased by
approximately $6.3 million or 7.4% from the comparable period in 1999.
Membership services revenues of $29.0 million for the first quarter of 2000
increased by approximately $0.3 million or 1.2% from the comparable period in
1999. This revenue increase was largely attributable to a $0.6 million increase
in fee income recognized on vehicle insurance products, $0.2 million in
additional marketing fee income generated from an increase in sales of health
and life insurance policies, $0.2 million in additional Good Sam emergency road
service revenue as a result of increased enrollment, and $0.2 million in
additional revenue from Good Sam Club membership growth, partially offset by a
$0.9 million revenue decrease from the extended vehicle warranty program. The
decrease in revenue from the extended vehicle warranty program is due to the
decision of the insurer to eliminate multi-year extended vehicle warranty
contracts, thus limiting sales to annual renewable contracts.
Publication revenue of $16.1 million for the first quarter of 2000 increased by
$3.1 million or 24.1% from the comparable period in 1999 largely due to a $1.6
million increase in TRAILER LIFE CAMPGROUND/RV PARK AND SERVICES DIRECTORY
sales, a $0.7 million increase in Ehlert publications, which primarily relates
to the revenue associated with motorcycle titles acquired through the
acquisition of Thunder Press, Inc. in January 2000, and a $0.8 million
increase in advertising revenue throughout the other publication titles.
Merchandise revenue of $45.9 million increased $2.8 million or 6.6% over the
first quarter of 1999. This increase was attributable to a $1.8 million increase
in retail showroom sales, which includes a $1.2 million increase related to the
addition of one new store and a $0.6 million or 2.0% same store growth over the
first quarter of 1999. In addition, mail order sales increased $0.5 million, and
installation fees and other supplies and services increased $0.2 million over
1999. In March 2000, the Company acquired a recreational vehicle (RV)
dealership in San Antonio, Texas and began selling RV's at its Camping World
location in New Braunfels, Texas. Revenue during the period totaled $0.3
million.
8
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COSTS APPLICABLE TO REVENUES
Costs applicable to revenues totaled $59.9 million for the first quarter of
2000, an increase of $3.9 million or 6.9% over the comparable period in 1999.
Membership services costs and expenses increased by approximately $0.8
million or 4.6% to $18.2 million in the first quarter of 2000 compared to
$17.4 million in 1999. This increase was due to a $1.1 million increase in
membership services expenses, primarily associated with Coast to Coast Club
and President's Club, and $0.3 million in enhancements to the RVSEARCH and
Online programs, partially offset by a $0.6 million expense decrease
associated with the decline in sales of extended warranty policies.
Publication costs and expenses of $11.4 million for the first quarter of 2000
increased approximately $1.5 million or 15.6% compared to the first quarter of
1999. This increase was primarily due to increased directory expenses as a
result of increased sales, and the newly acquired operations of Thunder Press,
Inc.
Merchandise costs applicable to revenues of $30.3 million increased $1.5
million or 5.4% from the first quarter of 1999 primarily attributable to the
6.6% increase in merchandise sales. The gross profit margin increased by $1.3
million from 33.4% in the first quarter of 1999 to 34.1% for the same period
in 2000.
OPERATING EXPENSES
Selling, general and administrative expenses of $20.7 million for the first
quarter of 2000 were $1.8 million over the first quarter of 1999 primarily
related to the addition of one new Camping World store and variable labor
increases associated with increased retail sales and other wage and related
benefits. Depreciation and amortization expenses of $4.3 million were $0.4
million over the first quarter of 1999. This variance is primarily associated
with an increase in depreciation expense attributable to increased capital
expenditures, including the expenditures associated with the new retail store.
INCOME FROM OPERATIONS
Income from operations for the first quarter of 2000 increased by $0.2 million
or 3.8% to $6.1 million compared to $5.9 million for the first quarter of 1999.
This increase was due to increased gross profit from the publications segment
and the merchandise segment of $1.6 million and $1.3 million, respectively,
partially offset by increased operating expenses of $2.2 million and a $0.5
million reduction in gross profit from the membership services segment.
9
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NON-OPERATING EXPENSES
Non-operating expenses were $6.7 million for the first quarter of 2000, compared
to $7.2 million for the same period in 1999. This decrease is primarily due to
accrued interest income recognized on the $18.6 million note receivable from
Affinity Bank Holdings LLC ("ABH"), an affiliate.
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
Loss from continuing operations before income taxes in the first quarter of 2000
was approximately $0.6 million compared to a loss of $1.3 million for the first
quarter of 1999. This $0.7 million improvement over the prior period was
principally due to the increase in income from operations reflected above,
combined with higher interest income, as noted above.
INCOME TAX CREDIT
In the first quarter of 2000, the Company recognized a $0.3 million tax credit
compared to $0.9 million tax credit in the first quarter of 1999.
DISCONTINUED OPERATIONS
As further described in Note 4 to the consolidated financial statements, the
Company adopted a plan to dispose of the assets of AB. The net loss from the
discontinued operations was $78,000 for the first quarter of 1999.
NET LOSS
The net loss in the first quarter of 2000 was $0.3 million compared to $0.5
million for the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
AGHI is a holding company whose primary assets are the capital stock of AGI. AGI
and its subsidiaries provide the operating cash flow necessary to service its
debt as well as that of AGHI.
The Company has two primary debt obligations. On April 2, 1997, AGHI issued a
total of $130.0 million of 11.0% senior notes maturing on April 1, 2007 ("AGHI
Senior Notes"). On November 13, 1998, AGI entered into a $200.0 million
revolving credit and term loan facility ("AGI Revolving Credit and Term Loan
Facility") consisting of two term loans ("Term A" and "Term B") aggregating
$130.0 million and a revolving credit facility of $70.0 million. The interest on
borrowings under the AGI Revolving Credit and Term Loan Facility is at variable
rates based on the ratio of total cash flow to outstanding
10
<PAGE>
indebtedness (as defined). Interest rates float with prime and the London
Interbank Offered Rates ("LIBOR"), plus an applicable margin ranging from 1.625%
to 3.625% over the stated rates. As of March 31, 2000, the average interest
rates on the term loans and revolving credit facility were 9.189% and 8.737%,
respectively, and permitted borrowings under the undrawn revolving line were
$21.3 million. AGI also pays a commitment fee of 0.5% per annum on the unused
amount of the revolving credit line. The term loans have quarterly scheduled
payments of $2.15 million in 2000. The revolving credit facility matures on
December 31, 2004, and the Term A and Term B loans mature on December 31, 2004
and June 30, 2006, respectively. The AGI Revolving Credit and Term Loan Facility
is secured by virtually all the assets and a pledge of the stock of AGI.
Effective November 1, 1998, AGI entered into an interest rate floor and cap
transaction agreement ("AGI Interest Rate Collar") at no cost. The notional
amount of the AGI Interest Rate Collar is $75.0 million with a cap rate of 6.0%
and a floor rate of 5.585% over the three-month LIBOR index. The floating rate
is adjusted quarterly and was 6.049% at March 31, 2000. This facility has a
maturity date of November 1, 2001. The AGI Interest Rate Collar protects the
Company against a rise in the LIBOR base rate over 6% on $75.0 million of the
AGI Revolving Credit and Term Loan Facility.
The AGI Revolving Credit and Term Loan Facility allows for, among other things,
the distribution of payments by AGI to AGHI to service the semi-annual interest
due on the AGHI Senior Notes and the annual amounts due under the Camping World
Management Incentive Agreements. Such distributions are subject to AGI's
compliance with certain restrictive covenants, including, but not limited to, an
interest coverage ratio, fixed charge coverage ratio, minimum operating cash
flow, and limitations on capital expenditures and total indebtedness. For the
year ended December 31, 1999, AGI generated $17.4 million of Excess Cash Flow,
as defined which, in accordance with the terms of the AGI Revolving Credit and
Term Loan Facility, sixty-five percent of which was used to prepay the term
loans and the balance was distributed to AGHI as a restricted junior payment.
The AGHI indenture pursuant to which the AGHI Senior Notes were issued and the
AGI Revolving Credit and Term Loan Facility individually 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, payment of dividends, and minimum coverage ratios pertaining to
interest expense, fixed charges, levels of consolidated cash flow and cash flow
leverage ratio. Under the terms of the indenture, AGHI is permitted to make
dividend payments subject to certain limitations. In compliance therewith, AGHI
declared and paid a dividend to its sole shareholder, AGI Holding Corp., in the
first quarter of 2000 equal to $5.75 million. The Company was in compliance with
all debt covenants at March 31, 2000.
11
<PAGE>
During the first quarter of 2000, payments under the terms of several phantom
stock agreements totaled $1.0 million. Additional phantom stock payments of $0.7
million are scheduled to be made over the next twelve months.
Capital expenditures for the first quarter of 2000 totaled $3.4 million compared
to capital expenditures of $2.0 million for the first quarter of 1999. Capital
expenditures are anticipated to total approximately $9.5 million for 2000,
primarily for Camping World supercenter equipment and property improvements,
continued enhancements to membership marketing databases, computer hardware
upgrades and replacements, and computer software upgrades and enhancements.
During the fourth quarter of 1998, the Company's Board of Directors adopted a
plan to sell the stock of AB, subject to regulatory approval, to ABH, an
affiliate of the Company, at its net book value, which in the opinion of
management approximated market value. As a result, the operations of AB are
classified as a discontinued operation in the accompanying financial statements.
The Company received regulatory approval to sell AB and subsequently closed the
transaction on September 30, 1999. In consideration for the stock of AB,
Affinity Group Thrift Holding Corpporation ("AGTHC") received 17,100 shares of
Series A Convertible Preferred stock of the purchaser, ABH, valued at
$18,631,000. In the fourth quarter of 1999, AGTHC agreed to convert and exchange
the preferred stock for a Capital Note. The Capital Note principal balance was
equal to the preference amount of the preferred stock as of the conversion date
and accrues interest at the rate of 11% per annum until maturity on October 1,
2014. In addition, AGTHC, although required to be consolidated with the Company,
is recognized as an "unrestricted" or non-guarantying subsidiary under the terms
of the AGHI Senior Notes.
Management believes that funds generated by operations together with available
borrowings under its revolving credit line will be sufficient to satisfy the
Company's operating cash needs, debt obligations and capital requirements of its
existing operations during the next twelve months.
12
<PAGE>
PART II: OTHER INFORMATION
Items 1-6: Not Applicable
13
<PAGE>
SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AFFINITY GROUP HOLDING, INC.
/s/ Mark J. Boggess
--------------------------
Date: May 9, 2000 Mark J. Boggess
Senior Vice President
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,424
<SECURITIES> 0
<RECEIVABLES> 24,607
<ALLOWANCES> (1,618)
<INVENTORY> 38,109
<CURRENT-ASSETS> 80,640
<PP&E> 108,697
<DEPRECIATION> (33,620)
<TOTAL-ASSETS> 381,425
<CURRENT-LIABILITIES> 132,642
<BONDS> 130,000
0
0
<COMMON> 1
<OTHER-SE> (80,519)
<TOTAL-LIABILITY-AND-EQUITY> 381,425
<SALES> 45,938
<TOTAL-REVENUES> 91,024
<CGS> 30,251
<TOTAL-COSTS> 59,873
<OTHER-EXPENSES> 24,221
<LOSS-PROVISION> 673
<INTEREST-EXPENSE> (6,848)
<INCOME-PRETAX> (591)
<INCOME-TAX> 291
<INCOME-CONTINUING> (300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (300)
<EPS-BASIC> (3,000)
<EPS-DILUTED> (3,000)
</TABLE>