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
June 30, 2003		333-26389

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 Englewood, CO 80112		(303) 792-7284
(Address of principal executive offices)		(Registrant’s telephone number, including area code)

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

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

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 ý NO o

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

Class		Outstanding as of August 7, 2003
Common Stock, $.01 par value		100

DOCUMENTS INCORPORATED BY REFERENCE: None

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

INDEX

			Page
Part I. Financial Information

	Item 1: Financial Statements

		Consolidated Balance Sheets As of June 30, 2003 and December 31, 2002	1

		Consolidated Statements of Income For the three months ended June 30, 2003 and 2002	2

		Consolidated Statements of Income For the six months ended June 30, 2003 and 2002	3

		Consolidated Statements of Cash Flows For the six months ended June 30, 2003 and 2002	4

		Notes to Consolidated Financial Statements	5

	Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations		11

	Item 3: Quantitative and Qualitative Disclosures about Market Risk		21

	Item 4: Control and Procedures		21

Part II. Other Information			22

Signatures			23

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2003 AND DECEMBER 31, 2002

(In Thousands, Except Share Amounts)

	6/30/03			12/31/02
	(unaudited)			(audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	15,462		$	1,730
Accounts receivable, less allowance for doubtful accounts of $1,423 in 2003 and $1,202 in 2002	22,398			25,082
Inventories	39,748			31,806
Prepaid expenses and other assets	12,284			9,307
Deferred tax assets	5,596			5,596
Total current assets	95,488			73,521

PROPERTY AND EQUIPMENT, net	25,636			22,935
NOTES FROM AFFILIATES	9,008			8,911
INTANGIBLE ASSETS, net	21,301			20,830
GOODWILL	151,210			151,210
DEFERRED TAX ASSETS	21,269			20,885
OTHER ASSETS	2,373			4,344
	$	326,285		$	302,636
LIABILITIES AND STOCKHOLDER’S DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	21,173		$	11,048
Accrued interest	3,593			3,900
Accrued income taxes	3,613			3,014
Accrued liabilities	29,345			31,276
Deferred revenues and gains	58,899			54,827
Deferred tax liabilities	1,223			1,223
Current portion of long-term debt	1,438			8,053
Total current liabilities	119,284			113,341

DEFERRED REVENUES AND GAINS	40,404			39,648
LONG-TERM DEBT, net of current portion	238,250			214,948
DEFERRED TAX LIABILITIES	15,453			15,453
OTHER LONG-TERM LIABILITIES	7,310			6,794
	420,701			390,184

COMMITMENTS AND CONTINGENCIES	—			—

STOCKHOLDER’S DEFICIT:
Common stock, $.01 par value, 1,000 shares authorized, 100 shares issued and outstanding	1			1
Additional paid-in capital	—			2,021
Accumulated deficit	(94,417		)	(89,570		)
Total stockholder’s deficit	(94,416		)	(87,548		)
	$	326,285		$	302,636

See notes to consolidated financial statements.

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands)

(Unaudited)

	THREE MONTHS ENDED
	6/30/2003			6/30/2002
REVENUES:
Membership services	$	35,399		$	33,815
Publications	14,298			13,110
Retail	65,961			74,827
	115,658			121,752

COSTS APPLICABLE TO REVENUES:
Membership services	22,146			20,592
Publications	10,086			9,132
Retail	38,765			50,240
	70,997			79,964

GROSS PROFIT	44,661			41,788

OPERATING EXPENSES:
Selling, general and administrative	27,104			26,660
Restructuring charge	302			952
Depreciation and amortization	2,252			2,473
	29,658			30,085

INCOME FROM OPERATIONS	15,003			11,703

NON-OPERATING ITEMS:
Interest expense, net	(4,602		)	(4,162		)
Debt extinguishment expense	(1,709		)	—
Other non-operating items, net	77			72
	(6,234		)	(4,090		)

INCOME BEFORE TAXES	8,769			7,613

INCOME TAX EXPENSE	(3,225		)	(2,560		)

NET INCOME	$	5,544		$	5,053

See notes to consolidated financial statements.

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands)

(Unaudited)

	SIX MONTHS ENDED
	6/30/2003			6/30/2002
REVENUES:
Membership services	$	65,200		$	62,637
Publications	29,428			27,866
Retail	113,509			128,109
	208,137			218,612

COSTS APPLICABLE TO REVENUES:
Membership services	39,468			37,072
Publications	20,490			20,091
Retail	67,215			85,332
	127,173			142,495

GROSS PROFIT	80,964			76,117

OPERATING EXPENSES:
Selling, general and administrative	51,362			49,653
Restructuring charge	302			952
Depreciation and amortization	4,852			5,004
	56,516			55,609

INCOME FROM OPERATIONS	24,448			20,508

NON-OPERATING ITEMS:
Interest expense, net	(9,080		)	(8,465		)
Debt extinguishment expense	(1,709		)	—
Other non-operating items, net	144			186
	(10,645		)	(8,279		)

INCOME BEFORE TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE	13,803			12,229

INCOME TAX EXPENSE	(5,160		)	(4,358		)

INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE	8,643			7,871

CUMULATIVE EFFECT OF ACCOUNTING CHANGE	—			(1,742		)

NET INCOME	$	8,643		$	6,129

See notes to consolidated financial statements.

AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	SIX MONTHS ENDED
	6/30/2003			6/30/2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	8,643		$	6,129
Adjustments to reconcile net income to net cash provided by operating activities:
Cumulative effect of accounting change	—			1,742
Debt extinguishment expense	1,709			—
Deferred tax benefit	(384		)	(6		)
Depreciation and amortization	4,852			5,004
Provision for losses on accounts receivable	916			964
Deferred compensation	1,200			2,000
Gain on sale of property and equipment	(30		)	(4		)
Changes in operating assets and liabilities:
Accounts receivable	1,768			(580		)
Inventories	(7,942		)	(2,149		)
Prepaid expenses and other assets	(2,817		)	(3,770		)
Accounts payable	10,125			6,082
Accrued and other liabilities	(2,323		)	(1,707		)
Deferred revenues and gains	4,828			5,352
Net cash provided by operating activities	20,545			19,057

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(5,775		)	(2,551		)
Net proceeds from sale of property and equipment	55			4
Increase in intangible assets	(3,983		)	(104		)
Loans receivable	(97		)	(1,189		)
Net cash used in investing activities	(9,800		)	(3,840		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid	(13,700		)	—
Borrowings on long-term debt	151,975			61,560
Principal payments of long-term debt	(135,288		)	(78,475		)
Net cash provided by (used in) financing activities	2,987			(16,915		)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	13,732			(1,698		)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	1,730			3,180

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	15,462		$	1,482

See notes to consolidated financial statements.

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 accounting principles generally accepted in the United States, 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, 2002 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

Accounting for Asset Retirement Obligations – Statement of Financial Accounting Standards (“SFAS”) No. 143 was issued in June 2001. SFAS No. 143 establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company adopted this standard on January 1, 2003. The adoption of SFAS No. 143 had no significant impact on the Company’s financial statements.

Accounting for Costs Associated with Exit or Disposal Activities – In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 nullifies the guidance in EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. Under EITF No. 94-3, an entity recognizes a liability for an exit cost on the date that the entity committed itself to an exit plan. In SFAS No. 146, the FASB acknowledges that an entity’s commitment to a plan does not, by itself, create a present obligation to the other parties that meets the definition of a liability and requires that a liability for a cost that is associated with an exit or disposal activities be recognized when the liability is incurred. It also establishes that fair value is the objective for the initial measurement of the liability. SFAS No. 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this standard had no significant impact on the Company’s financial statements.

Rescission of SFAS Nos. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections – In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. This statement eliminates accounting treatment for reporting gains or losses on debt extinguishments and amends certain other existing accounting pronouncements. The adoption of this standard did not have a material impact on the Company’s financial statements.

Guarantor’s Accounting and Disclosure Requirements for Guarantees – During November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34” (“FIN 45”). FIN 45 elaborates on the existing disclosure requirements for a guarantor in its interim and annual financial statements regarding its obligations under guarantees issued. It also clarifies that at the time a guarantee is issued, the guarantor must recognize an initial liability for the fair value of the obligations it assumes under the guarantee and must disclose that information in its financial statements. The initial recognition and measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements apply to guarantees outstanding as of December 31, 2002. The Company adopted the provisions of FIN 45 as of January 1, 2003 and it did not have a material impact on the Company’s consolidated financial statements.

Consolidation of Variable Interest Entities – In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities. FIN No. 46 addresses the consolidation and financial reporting of variable interest entities. FIN No. 46 is effective for financial statements of interim or annual periods beginning after June 15, 2002 for variable interest entities created before February 1, 2003, or immediately for variable interest entities created after February 1, 2003. The adoption of this interpretation is not expected to have a material effect on the Company’s consolidated financial position or results of operations.

(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. The Publications segment publishes a variety of publications for selected markets in the recreation and leisure industry, including general circulation periodicals, club magazines, directories and RV industry trade magazines. 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 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.

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):

	Membership Services		Publications		Retail		Consolidated
QUARTER ENDED JUNE 30, 2003
Revenues from external customers	$	35,399	$	14,298	$	65,961	$	115,658
Segment operating profit	11,470		3,792		7,258		22,520

QUARTER ENDED JUNE 30, 2002
Revenues from external customers	$	33,815	$	13,110	$	74,827	$	121,752
Segment operating profit	10,825		3,599		6,151		20,575

	Membership Services		Publications		Retail		Consolidated
SIX MONTHS ENDED JUNE 30, 2003
Revenues from external customers	$	65,200	$	29,428	$	113,509	$	208,137
Segment operating profit	22,145		8,111		9,410		39,666

SIX MONTHS ENDED JUNE 30, 2002
Revenues from external customers	$	62,637	$	27,866	$	128,109	$	218,612
Segment operating profit	21,000		7,006		8,664		36,670

The following is a summary of the reportable segment reconciliations to the Company’s consolidated financial statements for the three and six months ended June 30, 2003 and 2002 (in thousands):

	THREE MONTHS ENDED						SIX MONTHS ENDED
	6/30/03			6/30/02			6/30/03			6/30/02

Income From Operations Before Depreciation and Amortization
Total profit for reportable segments	$	22,520		$	20,575		$	39,666		$	36,670
Unallocated G & A expense	(5,265		)	(6,399		)	(10,366		)	(11,158		)
Income from operations before depreciation and amortization	$	17,255		$	14,176		$	29,300		$	25,512

(4) STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information the six months ended June 30 (in thousands):

	2003		2002
Cash paid during the period for:
Interest	$	9,767	$	10,252
Income taxes	5,109		3,415

Concurrent with the AGI debt refinancing (see Note 6), AGI distributed its interest in life insurance policies insuring the life of Stephen Adams, the Company Chairman. This $1.8 million non-cash dividend was distributed on June 24, 2003 from AGI to AGHI and from AGHI to its sole shareholder.

(5) GOODWILL AND INTANGIBLE ASSETS

In January 2002, Affinity Group Holding, Inc. adopted SFAS No. 142, which requires companies to stop amortizing goodwill and certain intangible assets with an indefinite useful life. Instead, SFAS No. 142 requires that goodwill and intangible assets deemed to have an indefinite useful life be reviewed for impairment upon adoption of SFAS No. 142 (January 1, 2002) and annually thereafter. The Company performs its annual impairment review during the fourth quarter.

No changes were made in the carrying amount of the Company’s goodwill during the first half of 2003. The following is a summary of changes in the Company’s goodwill by business segment, for the six months ended June 30, 2003 and 2002 (in thousands):

	Membership Services			Publications		Retail		Consolidated

Balance as of January 1, 2003	$	54,288		$	48,181	$	48,741	$	151,210
Impairments	—			—		—		—
Balance as of June 30, 2003	$	54,288		$	48,181	$	48,741	$	151,210

Balance as of January 1, 2002	$	56,030		$	48,181	$	48,741	$	152,952
Impairments	(1,742		)	—		—		(1,742		)
Balance as of June 30, 2002	$	54,288		$	48,181	$	48,741	$	151,210

Finite lived intangible assets and related accumulated amortization consisted of the following at June 30, 2003 (in thousands):

	Gross		Accumulated Amortization			Net

Membership and customer lists	$	4,263	$	(2,116	)	$	2,147
Resort and golf course participation agreements	13,555		(9,319		)	4,236
Non-compete and deferred consulting agreements	17,880		(8,722		)	9,158
Deferred financing and organization costs costs	8,929		(3,169		)	5,760
	$	44,627	$	(23,326	)	$	21,301

(6) DEBT RESTRUCTURING AND SENIOR NOTES REDEMPTION

On June 24, 2003, Affinity Group Holding, Inc.’s wholly owned subsidiary, Affinity Group, Inc. (“AGI”), entered into an Amended and Restated Credit Agreement and a Senior Secured Floating Rate Note Purchase Agreement (“AGI Credit Facility”) providing for term loans (“Term B1” and “Term B2”) in the aggregate of $140.0 million and a revolving credit facility of $35.0 million. Proceeds from the restructured AGI Credit Facility were used to refinance the existing senior secured indebtedness, pay a dividend of $13.7 million to AGI’s ultimate parent, AGI Holding Corp. and to redeem $30.0 million of the AGHI 11% Senior Notes as of July 24, 2003. The funds available under the AGI Revolving Credit line may be utilized for borrowings or letters of credit; however, a maximum of $12.5 million may be allocated to such letters of credit. Re-borrowings under the Term Loans are not permitted. The interest on borrowings under the new AGI Credit Facility is at variable rates based on the ratio of total cash flow to outstanding indebtedness (as defined). Interest rates float with prime and the London Interbank Offered Rates (“LIBOR”), plus an applicable margin ranging from 1.50% to 4.0% over the stated rates. AGI also pays a commitment fee of 0.5% per annum on the unused amount of the revolving credit line. The AGI Credit Facility is secured by virtually all the assets and a pledge of the stock of AGI. As of the refinancing date, AGI incurred a $1.7 million debt extinguishment charge representing the write-off of unamortized deferred financing cost on the prior financing facility.

As of June 30, 2003, $9.9 million and $99.8 million were outstanding under the Term B1 and B2 loans, respectively. As of June 30, 2003, the average interest rates on the term loans were 5.15%, and permitted borrowings under the undrawn revolving line were $29.5 million. The Company had standby letters of credit in the amount of $5.5 million outstanding as of June 30, 2003. The aggregate quarterly scheduled payments on the term loans are $0.35 million. The revolving credit facility matures on June 24, 2008, and the Term B1 and B2 loans mature on June 24, 2009. The AGI Credit Facility permits the Company to refinance the existing AGHI Senior Notes. In the event the indebtedness incurred to refinance the AGHI Senior Notes has a maturity dated prior to December 24,

2008, then the maturity dates of the AGI Credit Facility are adjusted to the date six months prior to the new indebtedness maturity date.

AGHI also announced on June 24, 2003 that notice was given on same date, to note holders of record, to redeem $30.0 million of its 11.0% Senior Notes due 2007. The redemption date is July 24, 2003. The notes will be redeemed at 103.667% of par plus accrued interest to the date of redemption. The redemption will be funded by borrowings under the AGI Credit Facility. The bond redemption premium and the pro rata amount of unamortized deferred financing costs in the amount of $1.1 million and $0.4 million, respectively, will be recognized as of the redemption date.

(7) CONTINGENCIES

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

The Insurance Commissioner of the state of California, by order dated April 23, 2002, directed GSS Enterprises, Inc. (“GSS”), one of the Company’s subsidiaries, to cease and desist from engaging in certain insurance and motor club services without requisite licensing, advising such subsidiary that the Commissioner may impose certain fines if GSS fails to be licensed. The order provides GSS the right to a hearing on the matter. The order issued by the Insurance Commissioner of the state of California applies only to operations of GSS within the state of California. If sustained, the order could materially limit certain activities of GSS within the state of California. GSS operates in all 50 states, a majority of which have regulations comparable to those of the state of California. To the Company’s knowledge, there is no similar pending investigation by any other state. The Company and the Department of Insurance of the state of California are in the process of resolving the cease and desist order through clarifications in the Company’s marketing materials and clarifications of applicable California laws. Toward that end, revisions to applicable California statutes were signed into law in July, 2003.

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 Income and expressed the results from operations as a percentage of revenues and reflects the net increase (decrease) between periods:

	THREE MONTHS ENDED
	6/30/2003		6/30/2002		Inc/(Dec)

REVENUES:
Membership services	30.6	%	27.8	%	4.7	%
Publications	12.4	%	10.8	%	9.1	%
Retail	57.0	%	61.4	%	(11.8	)%
	100.0	%	100.0	%	(5.0	)%

COSTS APPLICABLE TO REVENUES:
Membership services	19.1	%	16.9	%	7.5	%
Publications	8.7	%	7.5	%	10.4	%
Retail	33.6	%	41.3	%	(22.8	)%
	61.4	%	65.7	%	(11.2	)%

GROSS PROFIT	38.6	%	34.3	%	6.9	%

OPERATING EXPENSES:
Selling, general and administrative	23.4	%	21.9	%	1.7	%
Restructuring charge	0.3	%	0.8	%	(68.3	)%
Depreciation and amortization	1.9	%	2.0	%	(8.9	)%
	25.6	%	24.7	%	(1.4	)%

INCOME FROM OPERATIONS	13.0	%	9.6	%	28.2	%

NON-OPERATING ITEMS:
Interest expense, net	(4.0	)%	(3.4	)%	10.6	%
Debt extinguishment expense	(1.5	)%	—		—
Other non-operating items, net	0.1	%	0.1	%	6.9	%
	(5.4	)%	(3.3	)%	52.4	%

INCOME BEFORE INCOME TAXES	7.6	%	6.3	%	15.2	%

INCOME TAX EXPENSE	(2.8	)%	(2.1	)%	26.0	%

NET INCOME	4.8	%	4.2	%	9.7	%

	SIX MONTHS ENDED
	6/30/2003		6/30/2002		Inc/(Dec)

REVENUES:
Membership services	31.3	%	28.7	%	4.1	%
Publications	14.1	%	12.7	%	5.6	%
Retail	54.6	%	58.6	%	(11.4	)%
	100.0	%	100.0	%	(4.8	)%

COSTS APPLICABLE TO REVENUES:
Membership services	19.0	%	17.0	%	6.5	%
Publications	9.8	%	9.2	%	2.0	%
Retail	32.3	%	39.0	%	(21.2	)%
	61.1	%	65.2	%	(10.8	)%

GROSS PROFIT	38.9	%	34.8	%	6.4	%

OPERATING EXPENSES:
Selling, general and administrative	24.8	%	22.7	%	3.4	%
Restructuring charge	0.1	%	0.4	%	(68.3	)%
Depreciation and amortization	2.3	%	2.3	%	(3.0	)%
	27.2	%	25.4	%	1.6	%

INCOME FROM OPERATIONS	11.7	%	9.4	%	19.2	%

NON-OPERATING ITEMS:
Interest expense, net	(4.4	)%	(3.9	)%	7.3	%
Debt extinguishment expense	(0.8	)%	—		—
Other non-operating items, net	0.1	%	0.1	%	(22.6	)%
	(5.1	)%	(3.8	)%	28.6	%

INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE	6.6	%	5.6	%	12.9	%

INCOME TAX EXPENSE	(2.4	)%	(2.0	)%	18.4	%

INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE	4.2	%	3.6	%	9.8	%

CUMULATIVE EFFECT OF ACCOUNTING CHANGE	—		(0.8	)%	—

NET INCOME	4.2	%	2.8	%	41.0	%

RESULTS OF OPERATIONS

Three Months Ended June 30, 2003

Compared With Three Months Ended June 30, 2002

Revenues

Revenues of $115.7 million for the second quarter of 2003 decreased by approximately $6.1 million, or 5.0%, from the comparable period in 2002.

Membership services revenues of $35.4 million for the second quarter of 2003 increased by approximately $1.6 million, or 4.7%, from the comparable period in 2002. This revenue increase was largely attributable to $0.9 million increase in extended vehicle warranty program revenue due to continued growth in the sales of one-year warranty products, a $0.7 million increase in marketing fee income recognized on sales of vehicle insurance and RV financing products, $0.7 million from increased participation in member events and $0.3 million from increased emergency road service revenue as a result of increased enrollment. These increases were partially offset by a $0.6 million decrease in member services revenue primarily relating to reduced Coast to Coast enrollment and a $0.4 million reduction in marketing fees from the sale of health and life insurance products.

Publication revenues of $14.3 million for the second quarter of 2003 increased $1.2 million, or 9.1%, from the comparable period in 2002 primarily due to the addition of Boating Industry magazine in the second half of 2002, an additional issue of Power Sports Business, ATV Sport and Rev magazines, a new all-terrain vehicle television program commencing April 2003 and additional advertising, subscription and newsstand revenue from the recreational vehicle titles.

Retail revenues of $66.0 million decreased $8.9 million, or 11.8%, over the second quarter of 2002. This variance consisted of an $8.1 million, or 11.3%, decrease in Camping World merchandise sales and an $0.8 million, or 21.5%, decrease in recreational vehicle sales. Store merchandise sales decreased $1.9 million, equating to a same store sales decrease of 5.3%. The remaining net decrease in merchandise sales was attributable to a $7.7 million decrease in mail order sales as a result of reducing the catalog circulation by strategically promoting to specific profitable market segments, partially offset by a $1.5 million increase in installation fees and other supplies and services revenue.

Costs Applicable to Revenues

Costs applicable to revenues totaled $71.0 million for the second quarter of 2003, a decrease of $9.0 million, or 11.2%, from the comparable period in 2002.

Membership services costs and expenses of $22.1 million increased approximately $1.5 million from the second quarter of 2002. This increase consisted of costs associated with the increased extended vehicle warranty program revenue, marketing fee income from vehicle insurance and RV financing products, increased member events participation and

emergency road service enrollment increases mentioned above, partially offset by reduced marketing costs for Camping World’s President’s Club.

Publication costs and expenses of $10.1 million for the second quarter of 2003 increased $1.0 million from the comparable period in 2002 primarily due to $0.8 million in costs associated with additional issues of ATV Sport, REV Magazine, and the initial issues of Boating Industry magazine, combined with costs associated with the new television program, and a $0.2 million of additional marketing expenses for books.

Retail costs applicable to revenues decreased $11.5 million, or 22.8%, to $38.8 million primarily due to reduced same store sales, decreased RV sales, and improved gross margin. The retail gross profit margin of 41.2% for the second quarter of 2003 increased from 32.9% from the comparable period in 2002. This gross margin increase was primarily attributable to the recognition of a $1.9 million increase in vendor purchase rebates, a reduction in customer discounts from 14.8% to 10.6%, and a 21.5% decrease in recreational vehicles sales which have a lower profit margin.

Operating Expenses

Selling, general and administrative expenses of $27.1 million for the second quarter of 2003 increased $0.4 million compared to the second quarter of 2002 primarily due to increased retail selling expenses of approximately $1.2 million partially offset by an $0.8 million reduction in deferred executive compensation. Depreciation and amortization expenses of $2.3 million decreased slightly over the prior year.

Income from Operations

Income from operations for the second quarter of 2003 increased $3.3 million, or 28.2%, to $15.0 million compared to $11.7 million for the second quarter of 2002. This increase was primarily due to improved gross profit from the retail, publications and membership services operations of $2.6 million, $0.2 million and $0.1 million, respectively, and decreased operating expenses of $0.4 million.

Non-Operating Items

Non-operating expenses were $6.2 million for the second quarter of 2003, compared to $4.1 million for the same period in 2002. This $2.1 million increase was primarily due to a $0.6 million reduction in interest income on certain Notes from Affiliates which were contributed to AGI Holding Corp in the form of a dividend during various times in 2002, a $0.2 million decrease in expense due to lower interest rates, and a $1.7 million debt restructuring charge associated with refinancing the AGI Credit Facility on June 24, 2003.

Income before Income Taxes

Income before income taxes for the second quarter of 2003 was $8.8 million, or 15.2% above the second quarter of 2002. This $1.2 million increase from the prior period was principally due to the $3.3 million increase in income from operations partially offset by a

$1.7 million of debt restructuring expense and a $0.4 million increase in net interest expense.

Income Tax Expense

The Company recognized approximately $3.2 million of tax expense for the second quarter of 2003 compared to $2.6 million for the second quarter of 2002.

Net Income

The net income in the second quarter of 2003 was $5.5 million compared to $5.1 million for the same period in 2002.

Six Months Ended June 30, 2003

Compared With Six Months Ended June 30, 2002

Revenues

Revenues of $208.1 million for the first six months of 2003 decreased by approximately $10.5 million, or 4.8%, from the comparable period in 2002.

Membership services revenues of $65.2 million for the first six months of 2003 increased by approximately $2.6 million, or 4.1%, from the comparable period in 2002. This revenue increase was largely attributable to a $1.6 million increase in marketing fee income recognized on sales of vehicle insurance and RV financing products, $1.1 million increase in extended vehicle warranty program revenue primarily due to the continued growth in the sales of one-year warranty products, $0.9 million from increased participation in member events and tours, and a $0.5 million revenue increase in emergency road service programs due to increased enrollment. These increases were partially offset by a $0.9 million reduction in marketing fees associated with the sale of health and life insurance products and a $0.6 million reduction in membership services revenue primarily associated with reduced enrollment in the Coast to Coast club.

Publication revenues of $29.4 million for the first six months of 2003 increased by approximately $1.5 million, or 5.6%, from the comparable period in 2002 primarily due to the purchase of Boating Industry magazine in the second half of 2002, an additional issue of Power Sports Business, ATV Sport and Rev magazines, a new all-terrain vehicle television program commencing April 2003, and additional advertising, subscription and newsstand revenue from the recreational vehicle titles.

Retail revenues of $113.5 million decreased $14.6 million, or 11.4%, over the first six months of 2002. This variance consisted of a $12.1 million, or 10.0%, decrease in Camping World merchandise sales and a $2.5 million, or 31.8%, decrease in recreational vehicle sales. Camping World store sales decreased $4.2 million, equating to a same store sales decrease of 5.9%. The remaining net decrease in merchandise sales was attributable to a $10.1 million decrease in mail order sales, primarily as a result of reducing the catalog circulation by strategically promoting the catalogs to specific profitable market

segments, partially offset by a $2.2 million increase in installation fees and other supplies and services revenue.

Costs Applicable to Revenues

Costs applicable to revenues totaled $127.2 million for the first six months of 2003, a decrease of $15.3 million, or 10.8%, from the comparable period in 2002.

Membership services costs and expenses of $39.5 million increased $2.4 million from the first six months of 2002. This increase consisted of $2.6 million of expenses primarily associated with revenue increases for the extended vehicle warranty program revenue, emergency road service programs, vehicle insurance products and member events revenue, a $0.7 million increase in membership operating costs, primarily membership database fees, and increased expenses of $0.4 million associated with website maintenance and member promotional programs. These increases were partially offset by a $1.3 million reduction in membership services costs primarily due to reduced direct mail promotion for the President’s Club.

Publication costs and expenses of $20.5 million for the first six months of 2003 increased $0.4 million from the comparable period in 2002 primarily due to increased costs associated with the initial issues of Boating Industry magazine, and an additional issue of Power Sports Business, ATV Sport and Rev magazines combined with costs associated with a new television program. These increases were partially offset by reduced annual publication costs.

Retail costs applicable to revenues decreased $18.1 million, or 21.2%, to $67.2 million primarily due to reduced same store sales, decreased RV sales, and improved gross margin. The retail gross profit margin of 40.8% for the first six months in 2003 increased from 33.4% from the comparable period in 2002. This gross margin increase was primarily attributable to a $3.7 million increase in vendor purchase rebates, a reduction in customer discounts from 14.9% to 11.7%, and a 31.8% drop in sales of recreational vehicles that have lower profit margins.

Operating Expenses

Selling, general and administrative expenses of $51.4 million for the first six months of 2003 increased $1.7 million compared to the first six months of 2002 primarily due to increased retail labor and other retail general and administrative expenses partially offset by a reduction in deferred executive compensation. Depreciation and amortization expenses of $4.9 million decreased $0.1 million over the first six months of 2002.

Income from Operations

Income from operations for the first six months of 2003 increased $3.9 million, or 19.2%, to $24.4 million compared to $20.5 million for the first six months of 2002. This increase was due to combined gross profit from the retail, publications and membership services operations of $4.8 million, partially offset by increased operating expenses of $0.9 million.

Non-Operating Items

Non-operating expenses were $10.6 million for the first six months of 2003, compared to $8.3 million for the same period in 2002 primarily due to a net increase in interest expense due to a $1.2 million reduction in interest on certain Notes from Affiliates which were contributed to AGI Holding Corp. in the form of a dividend during various times in 2002, $0.5 million of decreased interest expense due to lower interest rates, and a $1.7 million debt restructuring charge associated with refinancing the AGI Credit Facility on June 24, 2003.

Income before Income Taxes and Cumulative Effect of Accounting Change

Income before income taxes and cumulative effect of accounting change for the first six months of 2003 was $13.8 million, or 12.9% over the first six months of 2002. This $1.6 million increase from the prior period was principally due to the $3.9 million increase in income from operations combined with the $1.7 million debt restructuring charge and the $0.6 million increase in net interest expense.

Income Tax Expense

The Company recognized approximately $5.2 million of tax expense for the first six months of 2003 versus $4.4 million for the first six months of 2002.

Cumulative Effect of Accounting Change

In accordance with the transition provisions of SFAS No. 142, Goodwill and Other Intangible Assets, the Company recorded a one-time non-cash charge of approximately $1.7 million in 2002 to reduce the carrying value of the goodwill associated solely with the Golf Card Club, which is included within the Membership Services segment. This charge is reflected as a cumulative effect of an accounting change in the accompanying Consolidated Statement of Income.

Net Income

The net income in the first six months of 2003 was $8.6 million compared to $6.1 million for the same period in 2002.

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 historically operated with a working capital deficit. The working capital deficit as of June 30, 2003 and December 31, 2002 was $23.8 million and $39.8 million, respectively. The primary reason for the working capital deficit is the deferred revenue and gains reported under current liabilities in the amount of $58.9 million and $54.8 million as of

June 30, 2003 and December 31, 2002, respectively. Deferred revenue is primarily comprised of cash collected for club memberships in advance, which is deferred over the life of the membership. The Company uses this deferred membership revenue to lower its long-term borrowings. The Company generated net cash from operations of $20.5 million and $19.1 million for the first six months of 2003 and 2002, respectively. Management believes that funds generated by operations together with available borrowings under its revolving credit line will be sufficient to meet all of its debt service requirements and capital requirements over the next twelve months.

The following table reflects the Company’s contractual obligations and commercial commitments at June 30, 2003, in thousands.

	Payments Due by Period
(in thousands)	Total		Balance of 2003		2004 and 2005		2006 and 2007		Thereafter

Long-term debt	$	239,688	$	721	$	2,817	$	102,800	$	133,350
Operating lease obligations	135,530		5,892		22,478		18,805		88,355
Deferred compensation	7,600		900		2,800		3,900		—

Other commercial commitments - Standby letters of credit	5,481		2,865		2,616		—		—
Grand total	$	388,299	$	10,378	$	30,711	$	125,505	$	221,705

The Company has two primary debt obligations. On April 2, 1997, AGHI issued a total of $130.0 million of 11.0% senior notes under an Indenture dated April 2, 1997 (the “Indenture”) maturing on April 1, 2007 (“AGHI Senior Notes”). On June 24, 2003, Affinity Group Holding, Inc.’s wholly owned subsidiary, Affinity Group, Inc. (“AGI”), entered into an Amended and Restated Credit Agreement and a Senior Secured Floating Rate Note Purchase Agreement (“AGI Credit Facility”) providing for term loans (“Term B1” and “Term B2”) in the aggregate of $140.0 million and a revolving credit facility of $35.0 million. Proceeds from the restructured AGI Credit Facility were used to refinance the existing senior secured indebtedness, pay a dividend of $13.7 million to AGI’s ultimate parent, AGI Holding Corp. and to redeem $30.0 million of the AGHI 11% Senior Notes. As of June 30, 2003, $9.9 million and $99.8 million were outstanding under the Term B1 and B2 loans, respectively. No borrowings were outstanding on the revolving credit facility as of June 30, 2003. Re-borrowings under the Term Loans are not permitted. The interest on borrowings under the new AGI Credit Facility is at variable rates based on the ratio of total cash flow to outstanding indebtedness (as defined). Interest rates float with prime and the London Interbank Offered Rates (“LIBOR”), plus an applicable margin ranging from 1.50% to 4.0% over the stated rates. As of June 30, 2003, the average interest rates on the term loans were 5.15%, and permitted borrowings under the undrawn revolving line were $29.5 million. AGI also pays a commitment fee of 0.5% per annum on the unused amount of the revolving credit line. The aggregate quarterly scheduled payments on the term loans are $0.35 million. The revolving credit facility matures on June 24, 2008, and the Term B1 and B2 loans mature on June 24, 2009. The AGI Credit Facility permits the Company to refinance the existing AGHI Senior Notes. In the event the indebtedness incurred to

refinance the AGHI Senior Notes has a maturity dated prior to December 24, 2008, then the maturity dates of the AGI Credit Facility are adjusted to the date six months prior to the new indebtedness maturity date. The funds available under the AGI Revolving Credit line may be utilized for borrowings or letters of credit; however, a maximum of $12.5 million may be allocated to such letters of credit. As of June 30, 2003, the Company had standby letters of credit in the amount of $5.5 million outstanding. The AGI Credit Facility is secured by virtually all the assets and a pledge of the stock of AGI.

AGHI also announced on June 24, 2003 that notice was given on same date to redeem $30.0 million of its 11.0% Senior Notes due 2007. The redemption date is July 24, 2003. The notes will be redeemed at 103.667% of par plus accrued interest to the date of redemption. The redemption is being funded by borrowings under the AGI Credit Facility.

The AGI Credit 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. Also, from time to time, AGI may distribute funds to AGHI to purchase the AGHI Senior Notes in the open market. 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.

The AGHI indenture pursuant to which the AGHI Senior Notes were issued contains 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 June 30, 2003.

For the six months ended June 30, 2003, the Company incurred deferred executive compensation expense of $1.2 million under the phantom stock agreements. The earned incentives under these agreements are scheduled to be paid at various times over the next five years. Phantom stock payments of $0.9 million are scheduled tobe made over the remainder of the calendar year.

Capital expenditures for the first six months of 2003 totaling $5.8 million increased $3.2 million from the first six months of 2002 primarily due to the new Camping World retail store opened May, 2003 in Amsterdam, New York. Additional capital expenditures of $8.9 million are anticipated for the balance of 2003, primarily for new Camping World stores and equipment, information technology and database enhancements, computer hardware upgrades and replacements, and computer software upgrades and enhancements.

CRITICAL ACCOUNTING POLICIES

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s 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 the Company 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, the Company evaluates its estimates, including those related to membership programs and incentives, bad debts, inventories, intangible assets, employee health insurance benefits, income taxes, restructuring, and contingencies and litigation. The Company bases its 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.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

Some of the membership revenue is generated from lifetime memberships. The revenue and expense associated with these memberships are deferred and amortized over an 18-year period, which is the actuarially determined estimated fulfillment period. 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.

Accounts Receivable

The Company estimates the collectibility of its 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 environment.

Inventory

The Company states inventories at the lower of cost or market. In assessing the ultimate realization of inventories, the Company is required to make judgments as to future demand requirements and compare that with the current or committed inventory levels. The Company has 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.

Restructuring

The Company recorded reserves in connection with the restructuring program primarily within the retail segment of the Company. These reserves include estimates pertaining to employee separation costs and the settlements of contractual obligations resulting from our actions. Although the Company does not anticipate significant changes, the actual costs may differ from these estimates.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risks

Refer to the disclosure in our 2002 Annual Report on Form 10-K. We do not believe that the risk we face related to interest rate changes is materially different than it was at the date of the Annual Report.

Credit Risks

Refer to the disclosure in our 2002 Annual Report on Form 10-K. We do not believe that the risk we face related to credit risk is materially different than it was at the date of the Annual Report.

ITEM 4: CONTROL AND PROCEDURES

Within 90 days prior to the filing of this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and the Company’s Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Regulation 13a-14 under the Securities Exchange Act of 1934. Based upon that evaluation, the Company’s President and Chief Executive Officer along with the Company’s Vice President and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date the Company carried out its evaluation.

PART II: OTHER INFORMATION

Items 1 through 5 have been omitted since no events occurred with respect to these items.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

Exhibit 99.1 and 99.2. Officers Certifications

(b) Reports on Form 8-K

On June 24, 2003, Affinity Group Holding, Inc.’s wholly owned subsidiary, Affinity Group, Inc., entered into an Amended and Restated Credit Agreement and a Senior Secured Floating Rate Note Purchase Agreement. Further, Affinity Group Holding, Inc. announced on June 24, 2003 notice was given on same date to redeem $30.0 million of its 11.0% Senior Notes due 2007. Disclosure documents and exhibits were filed with the Securities and Exchange Commission on June 24, 2003 under Form 8-K and are thereby incorporated by reference herein.

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: August 7, 2003		Mark J. Boggess
		Senior Vice President
		Chief Financial Officer

CERTIFICATION

I, Joe McAdams, President and Chief Executive Officer of Affinity Group Holding, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Affinity Group Holding, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies (if any) in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: August 7, 2003		/s/ Joe McAdams
		Joe McAdams
		President and Chief
		Executive Officer

CERTIFICATION

I, Mark J. Boggess, Vice President and Chief Financial Officer of Affinity Group Holding, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Affinity Group Holding, Inc.;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: August 7, 2003		/s/ Mark J. Boggess
		Mark J. Boggess
		Vice President and Chief
		Financial Officer

AFFINITY GROUP HOLDING INC 10-Q