Feature Story


Just About Everything in the World You Would Ever Want to Know About Affinity Group’s Acquisition of Camping World

        On April 2, 1997, Affinity Group, Inc. (AGI), acquired the common stock of Camping World, Inc. from principal shareholders David B. Garvin, Thomas A. Donnelly, William L. Johnson, Stephen L. Snodgrass, Murray Coker, Dean Ewing, James Schumm, Rick Matar, John Holland and Ron Chance, for approximately $89 million, including debt repayment upon acquisition. Also, certain Camping World executives entered into non-competition and consulting agreements pursuant to which AGI paid $19 million at closing. In addition, at closing AGI and certain members of Camping World management entered into incentive compensation agreements pursuant to which an additional $15 million will be paid subsequent to the closing of which $1 million is payable annually on the first four anniversaries after the closing date with the balance, $11 million, due on the fifth anniversary of the closing date.

        As a result of the acquisition, David B. Garvin, chairman and founder of Camping World, and Thomas A. Donnelly, president of Camping World, have joined AGI’s parent company, Affinity Group Holding, Inc., board of directors.

        The Camping World acquisition was financed through a $130 million bond offering by Affinity Group Holdings, Inc.
        Including the Camping World acquisition, AGI now has over 1.7 million paying members enrolled in its recreational affinity clubs, including approximately 465,000 Camping World President’s Club members, and will have over 3.9 million names in its proprietary database targeted to the recreational activities of AGI’s club members, including approximately a million new names from Camping World.

AGI’s Benefits of Acquiring
        AGI’s management believes that the acquisition of Camping World will further its business strategy and enhance its competitive prospects by providing the following benefits:
        1. Opportunities to cross sell club memberships between AGIÕs Good Sam Club and Camping World’s President’s Club through both Camping World’s supercenters and catalog operations as well as AGI’s direct mail operations.
        2. Access to Camping World’s retail and mail order catalog distribution channels to increase the penetration of AGI’s products and services, such as its emergency road service program and the recently introduced extended vehicle warranty program, and access to Camping World’s RV merchandise which will be marketed to AGI's Good Sam Club members.
        3. Opportunities to reduce membership, products and services solicitation costs resulting from AGI’s ability to:


a. Market through Camp-ing World’s retail and catalog distribution channels,


b. Capitalize on the overlap of the Good Sam Club and the President’s Club memberships, and


c. Consolidate the administrative support for certain products and services.

        AGI believes that these opportunities will enable it to eliminate workforce redundancies and to reduce printing, paper, fulfillment and mailing costs.
        AGI’s business strategy is to:
        1. enhance the enrollment of its clubs through internal growth and acquisitions;
        2. increase the sales of its products and services by marketing to club members through the most effective distribution channels and by developing and enhancing its product and service offerings; and
        3. expand the circulation of its publications by introducing new magazines and acquiring publications which are complementary to the company's recreational market niches.

The Cast
        Stephen Adams has been chairman of Affinity Group Holding, Inc., since its inception and of AGI since its acquisition in December, 1988. Since the 1970’s, Adams has served as chairman of privately-owned banking, bottling, publishing, outdoor advertising, television and radio companies in which he holds a controlling ownership interest. Adams is also chairman and the controlling shareholder of Adams Outdoor Advertising, Inc., the managing general partner of Adams Out-door Advertising Limited Partnership.
        In 1992, Radio Group Corporation and Adams Radio of Charlotte, Inc., entities in which Stephen Adams was the chairman and controlling shareholder, consented to the appointment of receivers to effect a transfer of control of the radio operations of such entities as part of a consensual restructuring of the debt of such entities. In 1993, Adams Outdoor of Atlanta, Inc. (“Adams Atlanta”), a corporation controlled by Stephen Adams, entered into a consensual foreclosure agreement with its lenders. Adams Atlanta was acquired in 1988 in a leveraged transaction, and ownership was transferred to its secured lender in July 1993. In addition, in July 1993, a party whose claim was being disputed filed an involuntary bankruptcy petition against Adams Atlanta. The petition was withdrawn and dismissed three days after the filing.

        Joe McAdams has been president and CEO of AGI since its inception. Prior to that and since December 1988, McAdams was president of Adams Publishing Corporation, a newspaper and magazine publishing company controlled by Adams. From October, 1987, through November, 1988, McAdams was president and publisher of Southern California Publishing Co.

        Michael Schneider has been chief operating officer of AGI since 1996. Prior to that Schneider served as senior vice president and general counsel of AGI and was responsible for administrative areas, development of new corporate ventures, portions of the RV publication business and the advertising and sales departments. Schneider has held a variety of senior management positions in TL Enterprises’ publication business since 1977.

        David B. Garvin founded Camping World in 1966 and served as president of Camping World from 1966 to 1986 and as its chairman of the board of directors since 1986.

       Thomas A. Donnelly has served as president of Camping World since 1986 and as its CEO since 1988. Donnelly joined Camping World in 1971 and served in various management positions until 1984, at which time he was promoted to senior vice president, operations.
        Donnelly and Garvin are first cousins.

What is Affinity Group, Inc.?
        AGI is a wholly-owned subsidiary of Affinity Group Holding, Inc., a privately-held company. Stephen Adams, the chairman of AGI, owns approximately 96 percent of the outstanding shares of Affinity Group Holding, Inc.
        AGI describes itself as a member-based direct marketing organization primarily engaged in selling club memberships to selected recreational affinity groups principally comprised of recreational vehicle owners, campers, outdoor vacationers and, to a lesser extent, golfers. AGI’s club members form a receptive audience to which it sells products and services, merchandise and publications targeted to the recreational interests of such members. AGI’s three principal lines of business are:
        1. Club memberships and related products, services and club magazines
        2. Specialty retail merchandise distributed primarily through retail supercenters and mail order catalogs
        3. Subscription magazines and other publications including directories.
        For the year ended December 31, 1996, AGI generated revenues of $140.0 million.

AGI’s Programs
        Approximately 1.3 million members are currently enrolled in AGI’s clubs and AGI maintains a proprietary mailing list. AGI believes that its average annual club renewal rate of approximately 72 percent during the period 1992 to 1996 compares favorably with other for-profit subscription-based businesses.

        AGI’s publication business provides an additional revenue source and serves as the primary vehicle to promote its membership clubs and to market its products and services.

        AGI’s club membership revenues, which include revenues from club dues, products, services and advertising in club magazines, were $98.9 million in 1996. AGI’s clubs consist of the Good Sam Club and Coast to Coast clubs, which are targeted to RV owners, campers and outdoor vacationers, and the Golf Card club, which is targeted to golf enthusiasts. Members of each club pay dues, which varies by club, length of enrollment and available club benefits.
        Good Sam Club membership provides discounts for overnight stays at participating RV parks and campgrounds and discounts on membership-sponsored products and services.
        Coast to Coast membership provides reciprocal-use privileges and discounts for overnight stays at approximately 82 percent of the private RV resorts nationwide and discounts on membership-sponsored products and services.
        AGI’s club members provide a focused and receptive group of customers to which it markets products and services. The products and services either address special needs arising from the activities of club members or are generally appealing to consumers with demographic characteristics similar to club members.
        The two most established programs marketed by AGI are its emergency road service (ERS) and its vehicle insurance program (VIP).
        Other products and services marketed by AGI include vehicle financing, supplemental health and life insurance, credit cards and the recently introduced extended vehicle warranty program.
        These products and services are generally provided to club members by third parties that pay AGI a marketing fee and assume all fulfillment obligations and underwriting risk.
        AGI is the leading publisher for the RV industry in the United States and Canada. AGI’s revenues from publishing operations were $41.1 million in 1996. AGI’s monthly magazines, Trailer Life and Motorhome, have a combined paid circulation exceeding 415,000 copies per issue. Distribution of AGIÕs annual directories, the Trailer Life Campgrounds/RV Parks and Service Directory and the Woodall Campground Directory, approximated 320,000 and 284,000 copies, respectively, in 1996. In addition, AGI publishes separate magazines for its membership clubs, trade publications targeted to the RV industry, specialty magazines targeted to motorcycle enthusiasts and other special interest publications.

What is Camping World?
        Camping World is the only national specialty retailer of merchandise and services for RV owners. For its fiscal year ended September 30, 1996, Camping World generated total revenues of $169.8 million. The 26 Camping World retail supercenters which are located in 17 states, accounted for approximately 66 percent of fiscal 1996 revenues while approximately 21 percent were derived from catalog sales and approximately 13 percent were derived from fees or non-merchandise revenues. Ap-proximately 86 percent of Camping World’s revenues were derived from sales to its President’s Club buying group.
        AGI believes that Camping World’s leading position in the RV accessory industry results from a high level of name recognition, an effective dual channel distribution strategy and a commitment to offer a broad selection of specialized RV products and services at competitive prices combined with technical assistance and on-site installation.

Overview of Camping World
        Camping World’s supercenters offer over 8,000 SKUs, approximately 80 percent of which are not regularly available in general merchandise stores. In addition, general merchandise stores do not provide installation or repair services for RV products. Camping World also markets emergency road service and vehicle insurance products similar to the products offered by AGI. Camping World supercenters are strategically located in areas where many RV owners live or in proximity to destinations frequented by RV users. Camping World’s supercenters are designed to provide one-stop shopping by combining broad product selection, technical assistance and on-site installation services.

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

The Catalog
        Camping World initiated its mail order operations in 1967. Camping World currently has a proprietary mailing list of approximately 1.7 million RV owners, all of whom have made a purchase or requested a catalog from Camping World within the prior 60 months. Camping World maintains a database of these names, which includes information such as order frequency, size of order, date of most recent order and type of merchandise purchased. Camping World analyzes its database to determine those customers most likely to order from Camping World’s catalogs. As a result, Camping World is able to target catalog mailings more effectively than direct marketers of catalogs offering general merchandise. From fiscal 1992 to fiscal 1996, Camping World’s catalog mailing response rate has increased from 4.1 percent to 4.6 percent as a result of more effective target marketing. Camping World continually expands its proprietary mailing list through in-store subscriptions and requests for catalogs in response to advertisements in regional publications directed to RV owners. In addition, Camping World rents mailing lists of RV owners from third parties including AGI.

        During fiscal 1996, Camping World distributed 9.1 million catalogs, of which 7.6 million were mailed in 12 separate mailings, and the remaining 1.4 million catalogs were distributed in supercenters, at campgrounds, by request and as package inserts. In fiscal 1996, Camping World processed over 420,000 catalog orders at an average net order size of $84, excluding postage and handling charges. The average net order size has increased over 15 percent since fiscal 1992. Camping World distributes seven major high quality, full color catalogs each year: master, spring, fall, holiday, two sale editions and a prospecting catalog. Camping World also distributes specialty catalogs direc-ted to targeted customers in order to develop market niches.
        Camping World’s mail order operations, located at its headquarters in Bowling Green, Kentucky, offer toll-free customer service seven days a week 24 hours a day. Camping World has established a sales training program for its customer service personnel and also provides experienced technical advisors to answer specific questions by telephone. Orders are usually processed and shipped within 24 hours of receipt.
        Camping World’s mail order operations generate significant revenues and enhance retail sales by serving as the primary advertising vehicle for the supercenters and by increasing Camping World’s name recognition among RV owners nationwide. AGI believes that Camping World has the leading share of the mail order catalog segment for specialty RV products. Camping World’s mail order catalog sales complement its retail sales by targeting customers with limited access to its retail supercenters and by facilitating purchases of higher turnover items by regular supercenter customers.
        In addition, Camping World recently unveiled an on line version of its catalog on its web site (www.campingworld.com) where consumers can order products on line.

The President’s Club
        Camping World established its President’s Club in 1986 as a means of building customer loyalty and revenues. President’s Club members pay a membership fee, which varies with the length of membership, and receive a 10 percent discount on merchandise purchased from Camping World as well as special mailings including newsletters and flyers offering selected products and services at reduced prices. Of the approximately 465,000 members of the President’s Club, approximately 250,000 were also Good Sam Club members. The average annual renewal rate for the PresidentÕs Club for the five year period ended September 30, 1996 was 60.7 percent.
        In fiscal 1996, President’s Club members accounted for approximately 86.0 percent of Camping World’s merchandise sales and service revenues. The average order size was $124 for President’s Club members as compared to $23 for non-club members.
        Recently, Camping World upgraded its point-of-sale system to sell President’s Club memberships and renewals at the check-out register and to capture names of prospective club members.

The Supercenters
        Camping World’s supercenters generally range in size from approximately 18,000 to 36,000 square feet. Approxi-mately 40 percent of each supercenter is devoted to a retail sales floor, a customer service area, and a technical information counter; 40 percent comprises the installation facility which contains 4 to 16 drive- through installation bays; and 20 percent is allocated to office and warehouse space. Large parking areas provide sufficient space and facilitate maneuvering of RVs. By combining broad product selection, technical assistance and installation and repair services, Camping World’s supercenters provide one-stop shopping for RV owners. Camping World maintains toll-free telephone numbers for customers to schedule installation and repair appointments. All supercenters are open seven days a week.
        Camping World intends to continue the controlled, limited expansion of its supercenter store network. Camping World’s expansion strategy is based on a comprehensive process which analyzes the sales trends and travel patterns of existing and potential customers as well as the sales patterns of RV vehicles. Camping World researches the travel routes used by RV owners and the location of camping areas in order to ensure the convenient location of its supercenters. Sales and shipment of new RVs together with analysis of demographic data derived from its customer database and mail order shipments and RV ownership lists from other sources are used to identify high concentrations of RV owners. Once an area has been identified, Camping World surveys its customers to select specific locations for a new supercenter. Camping World credits this detailed analytical approach with the fact that it has closed only one store since inception. Camping World does not plan to open a new supercenter in 1997.
        The aggregate cost to construct and open an 18,000 square foot supercenter (the anticipated typical size of new supercenters) is estimated to be $2,750,000. It typically takes six months to complete construction of a store.
        Camping World leases seven facilities under long-term leases with partnerships in which David B. Garvin, the founder and chairman of Camping World, and Thomas A. Donnelly, president of Camping World, are partners.

The Products
        Camping World sources over 8,000 products from approximately 800 vendors. Camping World attends regional, national and international trade shows to determine the products it will offer. The purchasing activities of Camping World are focused on RV parts and accessories, electronics, housewares, hardware, automotive, crafts, clothing, home furnishings, gifts, camping and sporting goods. Camping World has developed an automated plan-o-gram system to provide merchandising plans to each supercenter and a minimum/maximum inventory system for its operations to improve fulfillment rates on key items. Camping World believes that the volume of merchandise it purchases and its ability to buy direct from manufacturers to-gether with the utilization of its transportation fleet enables Camping World to obtain merchandise at costs which compare favorably to local RV dealers and retailers. Camping World does not enter into material long-term contracts or commitments with its vendors. Camping World’s largest vendor, a supplier of awnings, refrigerators and air conditioners, accounted for approximately 12 percent to 13 percent of Camping World’s total purchases during the last two fiscal years.

The Future
        AGI plans to achieve operating efficiencies by selectively acquiring and developing recreational affinity groups which enable AGI to increase membership enrollment and to realize cost savings. AGI also plans to enhance its importance with third party providers of products and services by maintaining high membership enrollment levels in such programs, thereby increasing the fees it receives from such vendors. Where appropriate, AGI may consider directly providing certain products and services which had been provided by third parties.
        AGI believes the experience it has accumulated in managing its existing recreational affinity groups is applicable to the management of other recreational activity organizations. In 1990, AGI acquired the Golf Card club and has successfully grown membership by approximately 47 percent since its acquisition. As a result, AGI conducts ongoing evaluations for developing or acquiring affinity groups for which it can build membership enrollment and to which it can market products and services. AGI expects to concentrate its efforts over the near term on integrating the operations of the Camping World President’s Club with AGI’s Good Sam Club.
        AGI plans to expand its presence as a leading publisher in select recreational niches through the introduction of new magazine formats and the acquisition of other publications in its market or in complementary recreational market niches.
        Publications in complementary niches may also provide AGI with the opportunity to launch new membership clubs, to market its products and services to members of the new clubs and to develop other products and services which meet the special needs of such members.

        AGI believes overall circulation of its magazines is an important factor in determining the amount of revenues it can obtain from advertisers. In addition, since paper and printing costs are a significant part of operating expenses, management also believes that AGI will achieve improved economies of scale when purchasing these items following the acquisitions.

        AGI plans to increase the sale of its products and services due to their profitability and the favorable impact such programs have on club membership growth and retention. Manage-ment believes that a substantial opportunity exists to market its products and services through the national network of Camping World supercenters and mail order catalogs.
        A significant percentage of Good Sam Club members currently subscribe to one or more of its products and services, such as the emergency road service program and the recently introduced extended vehicle warranty program.

        Management believes it can successfully market such products and services to Camping World President’s Club members who have interests and demographic characteristics similar to those of Good Sam Club members and for whom there is limited penetration of such products and services.

        AGI regularly studies the feasibility of introducing new products and services. For example, in 1995, AGI introduced its extended vehicle warranty program which had approximately 1,600 policies in force as of December 31, 1996.
        Management also believes that the Good Sam Club members who are not currently President’s Club members represent a focused group of customers to which it can sell Camping World’s RV accessory merchandise.

        And that’s just about everything you would ever want to know about Affinity Group, Camping World, and their plans for the future.



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