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CWH Camping World

Filed: 4 Aug 21, 6:13am

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

or

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

For the transition period from _____________ to _______________

Commission file number: 001-37908

CAMPING WORLD HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

81-1737145

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

250 Parkway Drive, Suite 270

Lincolnshire, IL 60069

(Address of registrant’s principal executive offices) (Zip Code)

Telephone: (847) 808-3000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock,

$0.01 par value per share

CWH

New York Stock Exchange

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    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No  

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

Large accelerated filer  

Accelerated filer                   

Non-accelerated filer    

Smaller reporting company  

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

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

As of July 29, 2021, the registrant had 45,561,829 shares of Class A common stock, 42,007,663 shares of Class B common stock and 1 share of Class C common stock outstanding.

BASIS OF PRESENTATION

As used in this Quarterly Report on Form 10-Q (this “Form 10-Q”), unless the context otherwise requires, references to:

“we,” “us,” “our,” “CWH,” the “Company,” “Camping World” and similar references refer to Camping World Holdings, Inc., and, unless otherwise stated, all of its subsidiaries, including CWGS Enterprises, LLC, which we refer to as “CWGS, LLC” and, unless otherwise stated, all of its subsidiaries.
“Annual Report” refers to our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021.
“Continuing Equity Owners” refers collectively to ML Acquisition, funds controlled by Crestview Partners II GP, L.P. and the Former Profit Unit Holders and each of their permitted transferees that continue to own common units in CWGS, LLC after the initial public offering (“IPO”) of our stock and the related reorganization transactions (each as discussed in Note 1 – Summary of Significant Accounting Policies to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q) and who may redeem at each of their options their common units for, at our election (determined solely by our independent directors within the meaning of the rules of the New York Stock Exchange who are disinterested), cash or newly issued shares of our Class A common stock.
“Crestview” refers to Crestview Advisors, L.L.C., a registered investment adviser to private equity funds, including funds affiliated with Crestview Partners II GP, L.P.
“CWGS LLC Agreement” refers to CWGS, LLC’s amended and restated limited liability company agreement, as amended to date.
“Former Profit Unit Holders” refers collectively to Brent L. Moody, Karin L. Bell, and Tamara R. Ward, who are named executive officers; Andris A. Baltins and K. Dillon Schickli, who are members of our board of directors; and certain other current and former executive and non-executive employees and former directors, in each case, who held existing common units in CWGS, LLC pursuant to CWGS, LLC’s equity incentive plan that was in existence prior to our IPO and who received common units of CWGS, LLC in exchange for their profit units in connection with our IPO.
“ML Acquisition” refers to ML Acquisition Company, LLC, a Delaware limited liability company, indirectly owned by each of Stephen Adams and our Chairman and Chief Executive Officer, Marcus A. Lemonis.
“Tax Receivable Agreement” refers to the tax receivable agreement that the Company entered into with CWGS, LLC, each of the Continuing Equity Owners and Crestview Partners II GP, L.P. in connection with the Company’s IPO.

1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained in this Form 10-Q may be forward-looking statements. Statements regarding our future results of operations and financial position; the impact of the novel coronavirus (“COVID-19”) pandemic on our business, results of operations and financial position; business strategy and plans and objectives of management for future operations; the timeline for and benefits of our 2019 Strategic Shift (as defined below); expected new retail location openings and closures, including greenfield locations and acquired locations; our sources of liquidity and capital and any potential need for additional financing or refinancing, retirement or exchange of outstanding debt; our stock repurchase program; future capital expenditures and debt service obligations; expectations regarding industry trends and consumer behavior and growth; our ability to capture positive industry trends and pursue growth; expectations regarding our pending litigation, and our plans related to dividend payments, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’ ‘‘could,’’ ‘‘intends,’’ ‘‘targets,’’ ‘‘projects,’’ ‘‘contemplates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential’’ or ‘‘continue’’ or the negative of these terms or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including, but not limited to, the following:

risks related to the COVID-19 pandemic and related impacts on our business;
our ability to execute and achieve the expected benefits of our 2019 Strategic Shift and costs and impairment charges incurred in connection with the 2019 Strategic Shift may be materially higher than expected or anticipated;
the availability of financing to us and our customers;
fuel shortages, or high prices for fuel;
the well-being, as well as the continued popularity and reputation for quality, of our manufacturers;
trends in the RV industry;
general economic conditions in our markets, and ongoing economic and financial uncertainties;
changes in consumer preferences or our failure to gauge those preferences;
competition in the market for services, protection plans, products and resources targeting the RV lifestyle or RV enthusiast;
our expansion into new, unfamiliar markets, businesses, or product lines or categories, as well as delays in opening or acquiring new retail locations;
unforeseen expenses, difficulties, and delays frequently encountered in connection with expansion through acquisitions;
our failure to maintain the strength and value of our brands;
our ability to successfully order and manage our inventory to reflect consumer demand in a volatile market and anticipate changing consumer preferences and buying trends;

2

fluctuations in our same store revenue and whether such revenue will be a meaningful indicator of future performance;
the cyclical and seasonal nature of our business;
our ability to operate and expand our business and to respond to changing business and economic conditions, which depends on the availability of adequate capital;
the restrictive covenants imposed by our Senior Secured Credit Facilities and Floor Plan Facility;
our reliance on six fulfillment and distribution centers for our retail, RV furniture distribution, e-commerce and catalog businesses;
the impact of ongoing class action lawsuits against us and certain of our officers and directors, as well as any potential future class action litigation;
natural disasters, whether or not caused by climate change, unusual weather conditions, epidemic outbreaks, terrorist acts and political events;
our dependence on our relationships with third party providers of services, protection plans, products and resources and a disruption of these relationships or of these providers’ operations;
any delays, new or increased tariffs, increased cost or quality control deficiencies in the importation of our products manufactured abroad;
whether third party lending institutions and insurance companies will continue to provide financing for RV purchases;
our ability to retain senior executives and attract and retain other qualified employees;
risks associated with leasing substantial amounts of space, including our inability to maintain the leases for our retail locations or locate alternative sites for our stores in our target markets and on terms that are acceptable to us;
our business being subject to numerous federal, state and local regulations;
changes in government policies and firearms legislation;
our failure to comply with certain environmental regulations;
climate change legislation or regulations restricting emission of ‘‘greenhouse gases’’;
a failure in our e-commerce operations, security breaches and cybersecurity risks;
our inability to enforce our intellectual property rights and accusations of our infringement on the intellectual property rights of third parties;
our inability to maintain or upgrade our information technology systems or our inability to convert to alternate systems in an efficient and timely manner;
disruptions to our information technology systems or breaches of our network security;
risk of product liability claims if people or property are harmed by the products we sell and other litigation risks;

3

risks related to our pending litigation;
risks associated with our private brand offerings;
possibility of future asset impairment charges for goodwill, intangible assets or other long-lived assets;
potential litigation relating to products we sell as a result of recent acquisitions, including firearms and ammunitions;
Marcus Lemonis, through his beneficial ownership of our shares directly or indirectly held by ML Acquisition Company, LLC and ML RV Group, LLC, has substantial control over us including matters requiring approval by our stockholders;
the exemptions from certain corporate governance requirements that we qualify for, and rely on, due to the fact that we are a ‘‘controlled company’’ within the meaning of the New York Stock Exchange, or NYSE, listing requirements;
whether we are able to realize any tax benefits that may arise from our organizational structure and any redemptions or exchanges of CWGS Enterprises, LLC common units for cash or stock;
other risks relating to our organizational structure and to ownership of shares of our Class A common stock; and
the other factors set forth under ‘‘Risk Factors’’ in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020 and in our other filings with the SEC.

These risks may cause our actual results, performance or achievements to differ materially and adversely from those expressed or implied by the forward-looking statements.

Any forward-looking statements made herein speak only as of the date of this Form 10-Q, and you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future effects, results, performance, or achievements reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Form 10-Q or to conform these statements to actual results or revised expectations.

4

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In Thousands Except Share and Per Share Amounts)

June 30, 

December 31, 

  

2021

    

2020

Assets

Current assets:

Cash and cash equivalents

$

191,507

$

166,072

Contracts in transit

150,919

48,175

Accounts receivable, net

95,854

83,422

Inventories

1,196,705

1,136,345

Prepaid expenses and other assets

55,307

60,211

Total current assets

1,690,292

1,494,225

Property and equipment, net

456,406

367,898

Operating lease assets

795,895

769,487

Deferred tax assets, net

223,248

165,708

Intangible assets, net

30,769

30,122

Goodwill

483,295

413,123

Other assets

16,917

15,868

Total assets

$

3,696,822

$

3,256,431

Liabilities and stockholders' equity (deficit)

Current liabilities:

Accounts payable

$

261,696

$

148,462

Accrued liabilities

212,391

137,688

Deferred revenues

94,448

88,213

Current portion of operating lease liabilities

62,961

62,405

Current portion of finance lease liabilities

2,619

2,240

Current portion of Tax Receivable Agreement liability

12,330

8,089

Current portion of long-term debt

11,283

12,174

Notes payable – floor plan, net

485,645

522,455

Other current liabilities

78,749

53,795

Total current liabilities

1,222,122

1,035,521

Operating lease liabilities, net of current portion

830,408

804,555

Finance lease liabilities, net of current portion

36,529

27,742

Tax Receivable Agreement liability, net of current portion

167,521

137,845

Revolving line of credit

20,885

20,885

Long-term debt, net of current portion

1,069,702

1,122,675

Deferred revenues

69,868

61,519

Other long-term liabilities

64,312

54,920

Total liabilities

3,481,347

3,265,662

Commitments and contingencies

Stockholders' equity (deficit):

Preferred stock, par value $0.01 per share – 20,000,000 shares authorized; NaN issued and outstanding as of June 30, 2021 and December 31, 2020

Class A common stock, par value $0.01 per share – 250,000,000 shares authorized; 47,264,560 issued and 45,478,698 outstanding as of June 30, 2021 and 43,083,008 issued and 42,226,389 outstanding as of December 31, 2020

470

428

Class B common stock, par value $0.0001 per share – 75,000,000 shares authorized; 69,066,445 issued as of June 30, 2021 and December 31, 2020; and 42,007,663 and 45,999,132 outstanding as of June 30, 2021 and December 31, 2020

4

5

Class C common stock, par value $0.0001 per share – 1 share authorized, issued and outstanding as of June 30, 2021 and December 31, 2020

Additional paid-in capital

93,509

63,342

Treasury stock, at cost; 1,501,690 and 572,447 shares as of June 30, 2021 and December 31, 2020

(54,783)

(15,187)

Retained earnings (deficit)

127,783

(21,814)

Total stockholders' equity attributable to Camping World Holdings, Inc.

166,983

26,774

Non-controlling interests

48,492

(36,005)

Total stockholders' equity (deficit)

215,475

(9,231)

Total liabilities and stockholders' equity (deficit)

$

3,696,822

$

3,256,431

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

5

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In Thousands Except Per Share Amounts)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2021

    

2020

    

2021

    

2020

Revenue:

Good Sam Services and Plans

$

46,902

$

44,519

$

87,773

$

91,727

RV and Outdoor Retail

New vehicles

1,058,778

898,175

1,880,754

1,395,492

Used vehicles

460,137

274,910

754,394

481,575

Products, service and other

305,554

231,172

556,824

403,795

Finance and insurance, net

177,685

147,318

315,939

239,774

Good Sam Club

12,751

10,651

23,904

21,655

Subtotal

2,014,905

1,562,226

3,531,815

2,542,291

Total revenue

2,061,807

1,606,745

3,619,588

2,634,018

Costs applicable to revenue (exclusive of depreciation and amortization shown separately below):

Good Sam Services and Plans

17,180

15,234

31,604

37,093

RV and Outdoor Retail

New vehicles

758,108

752,570

1,401,788

1,179,012

Used vehicles

334,829

208,829

558,022

372,622

Products, service and other

189,952

139,341

344,098

249,610

Good Sam Club

1,895

2,133

3,739

4,380

Subtotal

1,284,784

1,102,873

2,307,647

1,805,624

Total costs applicable to revenue

1,301,964

1,118,107

2,339,251

1,842,717

Operating expenses:

Selling, general, and administrative

432,249

271,591

769,283

539,247

Debt restructure expense

9,031

9,031

Depreciation and amortization

13,044

12,567

25,745

26,645

Long-lived asset impairment

536

1,082

6,569

Lease termination

868

1,756

1,452

(Gain) loss on disposal of assets

10

272

(89)

783

Total operating expenses

454,870

285,298

806,808

574,696

Income from operations

304,973

203,340

473,529

216,605

Other income (expense):

Floor plan interest expense

(3,371)

(5,098)

(6,761)

(13,702)

Other interest expense, net

(11,789)

(14,547)

(24,012)

(29,205)

Loss on debt restructure

(1,390)

(1,390)

Tax Receivable Agreement liability adjustment

0

0

(3,520)

0

Other income, net

0

0

45

0

Total other expense

(16,550)

(19,645)

(35,638)

(42,907)

Income before income taxes

288,423

183,695

437,891

173,698

Income tax expense

(42,347)

(20,473)

(44,390)

(24,605)

Net income

246,076

163,222

393,501

149,093

Less: net income attributable to non-controlling interests

(136,888)

(105,145)

(221,991)

(99,176)

Net income attributable to Camping World Holdings, Inc.

$

109,188

$

58,077

$

171,510

$

49,917

Earnings per share of Class A common stock:

Basic

$

2.37

$

1.54

$

3.83

$

1.33

Diluted

$

2.33

$

1.54

$

3.74

$

1.32

Weighted average shares of Class A common stock outstanding:

Basic

45,983

37,635

44,790

37,585

Diluted

47,550

89,689

90,422

89,578

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

6

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders' Equity (Deficit)

(In Thousands)

Additional

Non-

Class A Common Stock

Class B Common Stock

Class C Common Stock

Paid-In

Treasury Stock

Retained

Controlling

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Capital

  

Shares

  

Amounts

  

Earnings (Deficit)

  

Interest

  

Total

Balance at December 31, 2020

42,799

$

428

45,999

$

5

0

$

0

$

63,342

(572)

$

(15,187)

$

(21,814)

$

(36,005)

$

(9,231)

Equity-based compensation

0

0

0

0

0

0

6,109

0

0

0

0

6,109

Exercise of stock options

0

0

0

0

0

0

(417)

91

2,407

0

0

1,990

Non-controlling interest adjustment for capital contribution of proceeds from the exercise of stock options

0

0

0

0

0

0

(1,012)

0

0

0

1,012

0

Vesting of restricted stock units

0

0

0

0

0

0

(1,220)

49

1,318

0

(98)

0

Repurchases of Class A common stock for withholding taxes on vested RSUs

0

0

0

0

0

0

(25)

(7)

(189)

0

0

(214)

Redemption of LLC common units for Class A common stock

3,029

30

(2,848)

(1)

0

0

22,926

0

0

0

2,336

25,291

Distributions to holders of LLC common units

0

0

0

0

0

0

0

0

0

0

(16,926)

(16,926)

Dividends(1)

0

0

0

0

0

0

0

0

0

(10,353)

0

(10,353)

Establishment of liabilities under the Tax Receivable Agreement and related changes to deferred tax assets associated with that liability

0

0

0

0

0

0

(19,441)

0

0

0

0

(19,441)

Non-controlling interest adjustment

0

0

0

0

0

0

(1,053)

0

0

0

1,053

0

Net income

0

0

0

0

0

0

0

0

0

62,322

85,103

147,425

Balance at March 31, 2021

45,828

$

458

43,151

$

4

0

$

0

$

69,209

(439)

$

(11,651)

$

30,155

$

36,475

$

124,650

Equity-based compensation

0

0

0

0

0

0

6,047

0

0

0

0

6,047

Exercise of stock options

0

0

0

0

0

0

(135)

25

674

0

0

539

Non-controlling interest adjustment for capital contribution of proceeds from the exercise of stock options

0

0

0

0

0

0

(257)

0

0

0

257

0

Vesting of restricted stock units

0

0

0

0

0

0

(1,645)

64

1,707

0

(62)

0

Repurchases of Class A common stock for withholding taxes on vested RSUs

0

0

0

0

0

0

(31)

(2)

(43)

0

0

(74)

Repurchases of Class A common  stock to treasury stock

0

0

0

0

0

0

22,127

(1,150)

(45,470)

0

(22,127)

(45,470)

Redemption of LLC common units for Class A common stock

1,152

12

(1,144)

0

0

0

11,785

0

0

0

(376)

11,421

Distributions to holders of LLC common units

0

0

0

0

0

0

0

0

0

0

(106,921)

(106,921)

Dividends(1)

0

0

0

0

0

0

0

0

0

(11,560)

0

(11,560)

Establishment of liabilities under the Tax Receivable Agreement and related changes to deferred tax assets associated with that liability

0

0

0

0

0

0

(9,233)

0

0

0

0

(9,233)

Non-controlling interest adjustment

0

0

0

0

0

0

(4,358)

0

0

0

4,358

0

Net income

0

0

0

0

0

0

0

0

0

109,188

136,888

246,076

Balance at June 30, 2021

46,980

$

470

42,007

$

4

0

$

0

$

93,509

(1,502)

$

(54,783)

$

127,783

$

48,492

$

215,475

(1)The Company declared dividends per share of Class A common stock of $0.23 and $0.25 for the three months ended March 31, 2021 and June 30, 2021, respectively.

7

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders' Equity (Deficit)

(In Thousands)

Additional

Non-

Class A Common Stock

Class B Common Stock

Class C Common Stock

Paid-In

Treasury Stock

Retained

Controlling

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Capital

  

Shares

  

Amounts

  

Deficit

  

Interest

  

Total

Balance at December 31, 2019

37,489

$

375

50,707

$

5

0

0

$

50,152

0

0

$

(83,134)

$

(126,634)

$

(159,236)

Equity-based compensation

0

0

0

0

0

0

3,312

0

0

0

0

3,312

Vesting of restricted stock units

47

0

0

0

0

0

82

0

0

0

(82)

0

Repurchases of Class A common stock for withholding taxes on vested RSUs

(16)

0

0

0

0

0

(212)

0

0

0

0

(212)

Redemption of LLC common units for Class A common stock

20

0

0

0

0

0

4

0

0

0

49

53

Distributions to holders of LLC common units

0

0

0

0

0

0

0

0

0

0

(8,410)

(8,410)

Dividends(2)

0

0

0

0

0

0

0

0

0

(5,752)

0

(5,752)

Establishment of liabilities under the Tax Receivable Agreement and related changes to deferred tax assets associated with that liability

0

0

0

0

0

0

(44)

0

0

0

0

(44)

Non-controlling interest adjustment

0

0

0

0

0

0

(1,698)

0

0

0

1,698

0

Net loss

0

0

0

0

0

0

0

0

0

(8,160)

(5,969)

(14,129)

Balance at March 31, 2020

37,540

$

375

50,707

$

5

0

$

0

$

51,596

0

$

0

$

(97,046)

$

(139,348)

$

(184,418)

Equity-based compensation

0

0

0

0

0

0

4,182

0

0

0

0

4,182

Exercise of stock options

7

0

0

0

0

0

159

0

0

0

0

159

Non-controlling interest adjustment for capital contribution of proceeds from the exercise of stock options

0

0

0

0

0

0

(105)

0

0

0

105

0

Vesting of restricted stock units

153

2

0

0

0

0

(10)

0

0

0

8

0

Repurchases of Class A common stock for withholding taxes on vested RSUs

(17)

0

0

0

0

0

(347)

0

0

0

0

(347)

Redemption of LLC common units for Class A common stock

90

1

0

0

0

0

58

0

0

0

245

304

Distributions to holders of LLC common units

0

0

0

0

0

0

0

0

0

0

(47,015)

(47,015)

Dividends(2)

0

0

0

0

0

0

0

0

0

(5,785)

0

(5,785)

Establishment of liabilities under the Tax Receivable Agreement and related changes to deferred tax assets associated with that liability

0

0

0

0

0

0

(241)

0

0

0

0

(241)

Non-controlling interest adjustment

0

0

0

0

0

0

(2,545)

0

0

0

2,545

0

Net income

0

0

0

0

0

0

0

0

0

58,077

105,145

163,222

Balance at June 30, 2020

37,773

$

378

50,707

$

5

0

$

0

$

52,747

0

$

0

$

(44,754)

$

(78,315)

$

(69,939)

(2)The Company declared dividends per share of Class A common stock of $0.15 for the three months ended March 31 and June 30, 2020.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

8

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)

Six Months Ended June 30, 

    

2021

    

2020

Operating activities

Net income

$

393,501

$

149,093

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

25,745

26,645

Equity-based compensation

12,156

7,494

Loss on lease termination

1,756

1,452

Loss on debt restructure

1,390

0

Long-lived asset impairment

1,082

6,569

(Gain) loss on disposal of assets

(89)

783

Provision for losses on accounts receivable

606

531

Non-cash lease expense

29,974

28,638

Accretion of original debt issuance discount

563

531

Non-cash interest

1,735

2,104

Deferred income taxes

(11,017)

4,068

Tax Receivable Agreement liability adjustment

3,520

0

Change in assets and liabilities, net of acquisitions:

Receivables and contracts in transit

(115,302)

(129,725)

Inventories

(34,676)

306,428

Prepaid expenses and other assets

4,816

1,214

Accounts payable and other accrued expenses

161,331

139,913

Payment pursuant to Tax Receivable Agreement

(8,089)

(6,563)

Deferred revenue

14,585

1,042

Operating lease liabilities

(32,152)

(34,379)

Other, net

8,694

10,075

Net cash provided by operating activities

460,129

515,913

Investing activities

Purchases of property and equipment

(47,184)

(13,660)

Proceeds from sale of property and equipment

1,788

491

Purchase of real property

(48,318)

0

Proceeds from the sale of real property

1,360

0

Purchases of businesses, net of cash acquired

(99,016)

0

Purchase of other investments

(350)

0

Purchases of intangible assets

(2,580)

(150)

Net cash used in investing activities

$

(194,300)

$

(13,319)

9

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)

Six Months Ended June 30, 

    

2021

    

2020

Financing activities

Proceeds from long-term debt

$

115,893

$

Payments on long-term debt

(171,328)

(16,634)

Net proceeds (payments) on notes payable – floor plan, net

7,414

(316,492)

Payments on revolving line of credit

(20,000)

Payments on finance leases

(1,629)

(1,725)

Payment of debt issuance costs

(1,746)

Dividends on Class A common stock

(21,913)

(11,537)

Proceeds from exercise of stock options

2,517

159

RSU shares withheld for tax

(285)

(559)

Repurchases of Class A common stock to treasury stock

(45,470)

Distributions to holders of LLC common units

(123,847)

(55,425)

Net cash used in financing activities

(240,394)

(422,213)

Increase in cash and cash equivalents

25,435

80,381

Cash and cash equivalents at beginning of the period

166,072

147,521

Cash and cash equivalents at end of the period

$

191,507

$

227,902

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

10

Camping World Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of Camping World Holdings, Inc. and its subsidiaries, and are presented in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All intercompany accounts and transactions of the Company and its subsidiaries have been eliminated in consolidation.

The condensed consolidated financial statements as of and for the three and six months ended June 30, 2021 are unaudited. The condensed consolidated balance sheet as of December 31, 2020 has been derived from the audited financial statements at that date but does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 26, 2021. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

CWH was formed on March 8, 2016 as a Delaware corporation for the purpose of facilitating an IPO and other related transactions in order to carry on the business of CWGS, LLC. CWGS, LLC was formed in March 2011 when it received, through contribution from its then parent company, all of the membership interests of Affinity Group Holding, LLC and FreedomRoads Holding Company, LLC (“FreedomRoads”). The IPO and related reorganization transactions that occurred on October 6, 2016 resulted in CWH as the sole managing member of CWGS, LLC, with CWH having sole voting power in and control of the management of CWGS, LLC (see Note 14 — Stockholders’ Equity). Despite its position as sole managing member of CWGS, LLC, CWH had a minority economic interest in CWGS, LLC through March 11, 2021. As of June 30, 2021 and December 31, 2020, CWH owned 51.6% and 47.4%, respectively, of CWGS, LLC. Accordingly, the Company consolidates the financial results of CWGS, LLC and reports a non-controlling interest in its condensed consolidated financial statements.

The Company does not have any components of other comprehensive income recorded within its condensed consolidated financial statements, and, therefore, does not separately present a statement of comprehensive income in its condensed consolidated financial statements.

COVID-19

A novel strain of coronavirus was declared a pandemic by the World Health Organization in March 2020. To date, COVID-19 has surfaced in nearly all regions of the world and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. Many affected areas have made significant progress with the easing of restrictions and reopening certain businesses often under new operating guidelines, although new waves of infection or the spread of new variants may lead to an increase in such restrictions or closures.

In conjunction with the initial stay-at-home and shelter-in-place restrictions enacted in many areas, the Company saw significant sequential declines in its overall customer traffic levels and its overall revenues from the mid-March to mid-to-late April 2020 timeframe. In the latter part of April 2020, the Company began to see a significant improvement in its online web traffic levels and number of electronic leads, and in early May 2020, the Company began to see improvements in its overall revenue levels. As the stay-at-home restrictions began to ease across certain areas of the country, the Company experienced significant acceleration in its in-store

11

and online traffic, lead generation, and revenue trends in May 2020 continuing into the quarter ended June 30, 2021.

In order to offset the initially expected adverse impact of COVID-19 and better align expenses with reduced sales in the middle of March 2020 and early April 2020, the Company reduced marketing expenses and temporarily reduced salaries and hours throughout the business, including for its executive officers, and implemented headcount and other cost reductions. Most of these temporary salary and hourly reductions ended in May 2020 as the adverse economic impacts of the pandemic began to decline. The Company has also taken steps to add new private label lines, expand its relationships with smaller recreational vehicle (“RV”) manufacturers, and acquire used inventory to help manage risks in its supply chain.

Throughout the pandemic, the majority of the Company’s retail locations have continued to operate as essential businesses and the Company has continued to operate its e-commerce business. Annually, most of the Company’s consumer shows and events take place during the first quarter. As a consequence of COVID-19, the Company held no in-person consumer shows in the first six months of 2021 and held fewer in-person consumer shows and events during 2020 than in 2019. Since March 2020, the Company has implemented preparedness plans to keep its employees and customers safe, which include social distancing, providing employees with face coverings and/or other protective clothing as required, implementing additional cleaning and sanitization routines, and work-from-home directives for a significant portion of the Company’s workforce. In July 2021, the Company began transitioning many of its employees from work-from-home schedules to a return to the Company’s offices.

Description of the Business

Camping World Holdings, Inc., together with its subsidiaries, is America’s largest retailer of RVs and related products and services. As noted above, CWGS, LLC is a holding company and operates through its subsidiaries. The Company has the following 2 reportable segments: (i) Good Sam Services and Plans and (ii) RV and Outdoor Retail. See Note 18 – Segments Information to the condensed consolidated financial statements for further information about the Company’s segments. Within the Good Sam Services and Plans segment, the Company primarily derives revenue from the sale of the following offerings: emergency roadside assistance plans; property and casualty insurance programs; travel assist programs; extended vehicle service contracts; vehicle financing and refinancing assistance; consumer shows and events; and consumer publications and directories. Within the RV and Outdoor Retail segment, the Company primarily derives revenue from the sale of new and used RVs; commissions on the finance and insurance contracts related to the sale of RVs; the sale of RV service and collision work; the sale of RV parts, accessories, and supplies; the sale of outdoor products, equipment, gear and supplies; business to business distribution of RV furniture; and the sale of Good Sam Club memberships and co-branded credit cards. The Company operates a national network of RV dealerships and service centers as well as a comprehensive e-commerce platform primarily under the Camping World and Gander RV & Outdoors brands, and markets its products and services primarily to RV and outdoor enthusiasts.

In 2019, the Company made a strategic decision to refocus its business around its core RV competencies, and on September 3, 2019, the board of directors approved a strategic plan to shift the business away from locations that did not have the ability or where it was not feasible to sell and/or service RVs (the “2019 Strategic Shift”) (see Note 4 – Restructuring and Long-lived Asset Impairment).

A summary of the retail store openings, closings, divestitures, conversions and number of locations from June 30, 2020 to June 30, 2021, are in the table below:

RV

RV Service &

Other

Dealerships

Retail Centers

Retail Stores

Total

Number of store locations as of June 30, 2020

152

10

2

164

Opened

22

22

Closed / divested

(1)

(1)

Temporarily closed(1)

(1)

(1)

Re-opened

3

3

Number of store locations as of June 30, 2021

176

10

1

187

(1)These locations were temporarily closed for facility modification.

12

Reclassifications of Prior Period Amounts

Certain prior-period amounts have been reclassified to conform to the current period presentation. Specifically, the current and noncurrent portions of finance lease liabilities have been reclassified to be presented separately from current and noncurrent portions of long-term debt, respectively, in the accompanying condensed consolidated balance sheet as of December 31, 2020. Additionally, the payments on finance leases have been reclassified to be presented separately from payments on long-term debt in the accompanying condensed consolidated statement of cash flows for the six months ended as of June 30, 2020.

Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. The Company bases its estimates and judgments on historical experience and other assumptions that management believes are reasonable. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties, including those uncertainties arising from COVID-19, and, as a result, actual results could differ materially from these estimates. The Company periodically evaluates estimates and assumptions used in the preparation of the financial statements and makes changes on a prospective basis when adjustments are necessary. Significant estimates made in the accompanying condensed consolidated financial statements include certain assumptions related to accounts receivable, inventory, goodwill, intangible assets, long lived assets, long-lived asset impairments, program cancellation reserves, chargebacks, and accruals related to estimated tax liabilities, product return reserves, and other liabilities.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This standard reduces complexity by removing specific exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. This standard also simplifies accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The Company adopted ASU 2019-12 as of January 1, 2021 and the adoption did not materially impact its condensed consolidated financial statements.

2. Revenue

Contract Assets

As of June 30, 2021 and December 31, 2020, a contract asset of $11.5 million and $8.1 million, respectively, relating to RV service revenues was included in accounts receivable in the accompanying condensed consolidated balance sheets.

Deferred Revenues

As of June 30, 2021, the Company has unsatisfied performance obligations primarily relating to multi-year plans for its roadside assistance, Good Sam Club memberships, Coast to Coast memberships, the annual campground guide, and magazine publication revenue streams. The total unsatisfied performance obligation

13

for these revenue streams at June 30, 2021 and the periods during which the Company expects to recognize the amounts as revenue are presented as follows (in thousands):

    

As of

    

June 30, 2021

2021

    

$

59,893

2022

53,741

2023

25,338

2024

12,421

2025

6,633

Thereafter

6,290

Total

$

164,316

3. Inventories and Floor Plan Payables

Inventories consisted of the following (in thousands):

June 30, 

December 31, 

    

2021

    

2020

Good Sam services and plans

$

18

$

109

New RVs

645,670

691,114

Used RVs

259,511

178,336

Products, parts, accessories and other

291,506

266,786

$

1,196,705

$

1,136,345

New RV inventory, included in the RV and Outdoor Retail segment, is primarily financed by a floor plan credit agreement with a syndication of banks. The borrowings under the floor plan credit agreement are collateralized by substantially all of the assets of FreedomRoads, LLC (“FR”), a wholly-owned subsidiary of FreedomRoads, which operates the RV dealerships, and bear interest at one-month LIBOR plus 2.05% as of June 30, 2021 and December 31, 2020. LIBOR was 0.09% at June 30, 2021 and 0.15% as of December 31, 2020. The floor plan borrowings are tied to specific vehicles and principal is due upon the sale of the related vehicle or upon reaching certain aging criteria.

As of June 30, 2021 and December 31, 2020, FR maintained floor plan financing through the Seventh Amended and Restated Credit Agreement (“Floor Plan Facility”). The applicable borrowing rate margin on LIBOR and base rate loans ranges from 2.05% to 2.50% and 0.55% and 1.00%, respectively, based on the consolidated current ratio at FR. The Floor Plan Facility at June 30, 2021 allowed FR to borrow (a) up to $1.38 billion under a floor plan facility, (b) up to $15.0 million under a letter of credit facility and (c) up to a maximum amount outstanding of $42.0 million under the revolving line of credit, which maximum amount outstanding further decreases by $3.0 million on the last day of each fiscal quarter. The maturity date of the Floor Plan Facility is March 15, 2023.

On May 12, 2020, FR entered into a Third Amendment to the Seventh Amended and Restated Credit Agreement (“Third Amendment”) that provided FR with a one-time option to request a temporary four-month reduction of the minimum consolidated current ratio at any time during 2020 and the first seven days of 2021. FR did not exercise that option. Effective May 12, 2020 through July 31, 2020, FR was not allowed to draw further Revolving Credit Loans (as defined in the Floor Plan Facility).

The Floor Plan Facility includes a flooring line aggregate interest reduction (“FLAIR”) offset account that allows the Company to transfer cash as an offset to the payables under the Floor Plan Facility. These transfers reduce the amount of liability outstanding under the floor plan borrowings that would otherwise accrue interest, while retaining the ability to transfer amounts from the FLAIR offset account into the Company’s operating cash accounts. As a result of using the FLAIR offset account, the Company experiences a reduction in floor plan interest expense in its consolidated statements of operations. As of June 30, 2021 and December 31, 2020, FR had $130.2 million and $133.6 million, respectively, in the FLAIR offset account. The Third Amendment raised the maximum FLAIR percentage of outstanding floor plan borrowings from 20% to 30% for the period of May 12, 2020 through August 31, 2020 before returning to 20%.

14

Management has determined that the credit agreement governing the Floor Plan Facility includes subjective acceleration clauses, which could impact debt classification. Management has determined that no events have occurred at June 30, 2021 that would trigger a subjective acceleration clause. Additionally, the credit agreement governing the Floor Plan Facility contains certain financial covenants. FR was in compliance with all debt covenants at June 30, 2021 and December 31, 2020.

The following table details the outstanding amounts and available borrowings under the Floor Plan Facility as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 

December 31, 

    

2021

    

2020

Floor Plan Facility

Notes payable - floor plan:

Total commitment

$

1,379,750

$

1,379,750

Less: borrowings, net

(485,645)

(522,455)

Less: flooring line aggregate interest reduction account

(130,160)

(133,639)

Additional borrowing capacity

763,945

723,656

Less: accounts payable for sold inventory

(73,203)

(28,980)

Less: purchase commitments

(65,602)

(39,121)

Unencumbered borrowing capacity

$

625,140

$

655,555

Revolving line of credit:

$

42,000

$

48,000

Less: borrowings

(20,885)

(20,885)

Additional borrowing capacity

$

21,115

$

27,115

Letters of credit:

Total commitment

$

15,000

$

15,000

Less: outstanding letters of credit

(11,732)

(11,732)

Additional letters of credit capacity

$

3,268

$

3,268

4. Restructuring and Long-lived Asset Impairment

Restructuring

On September 3, 2019, the board of directors of CWH approved a plan to strategically shift its business away from locations where the Company does not have the ability or where it is not feasible to sell and/or service RVs at a sufficient capacity (the “Outdoor Lifestyle Locations”). Of the Outdoor Lifestyle Locations in the RV and Outdoor Retail segment operating at September 3, 2019, the Company has closed or divested 39 Outdoor Lifestyle Locations, 3 distribution centers, and 20 specialty retail locations relating to the 2019 Strategic Shift. NaN of the aforementioned closed distribution centers was reopened during the three months ended June 2020. As of December 31, 2020, the Company had completed the store closures and divestitures relating to the 2019 Strategic Shift. As part of the 2019 Strategic Shift, the Company evaluated the impact on its supporting infrastructure and operations, which included rationalizing inventory levels and composition, closing certain distribution centers, and realigning other resources. The Company had a reduction of headcount and labor costs for those locations that were closed or divested, and the Company incurred material charges associated with the activities contemplated under the 2019 Strategic Shift.

The Company currently estimates the total restructuring costs associated with the 2019 Strategic Shift to be in the range of $92.6 million to $112.6 million. The breakdown of the estimated restructuring costs are as follows:

one-time employee termination benefits relating to retail store or distribution center closures/divestitures of $1.2 million, all of which has been incurred through December 31, 2020;

15

lease termination costs of $18.0 million to $35.0 million, of which $13.5 million has been incurred through June 30, 2021;
incremental inventory reserve charges of $42.4 million, all of which has been incurred through December 31, 2020; and
other associated costs of $31.0 million to $34.0 million, of which $27.2 million has been incurred through June 30, 2021.

Through June 30, 2021, the Company has incurred $27.2 million of such other associated costs primarily representing labor, lease, and other operating expenses incurred during the post-close wind-down period for the locations related to the 2019 Strategic Shift. The additional amount of $3.8 million to $6.8 million represents similar costs that may be incurred in the year ending December 31, 2021 for locations that continue in a wind-down period, primarily comprised of lease costs accounted for under ASC 842, Leases, prior to lease termination. The Company intends to negotiate terminations of these leases where prudent and pursue sublease arrangements for the remaining leases. Lease costs may continue to be incurred after December 31, 2021 on these leases if the Company is unable to terminate the leases under acceptable terms or offset the lease costs through sublease arrangements. The foregoing lease termination cost estimate represents the expected cash payments to terminate certain leases, but does not include the gain or loss from derecognition of the related operating lease assets and liabilities, which is dependent on the particular leases that will be terminated.

The following table details the costs incurred during the three and six months ended June 30, 2021 and 2020 associated with the 2019 Strategic Shift (in thousands):

Three Months Ended

Six Months Ended

June 30, 2021

    

June 30, 2020

    

June 30, 2021

    

June 30, 2020

Restructuring costs:

One-time termination benefits(1)

$

$

51

$

$

231

Lease termination costs(2)

656

1,431

1,245

Incremental inventory reserve charges(3)

57

543

Other associated costs(4)

3,010

4,483

6,077

10,099

Total restructuring costs

$

3,010

$

5,247

$

7,508

$

12,118

(1)These costs incurred in the first six months of 2020 were primarily included in costs applicable to revenues – products, service and other in the condensed consolidated statements of operations.
(2)These costs were included in lease termination charges in the condensed consolidated statements of operations. This reflects termination fees paid, net of any gain from derecognition of the related operating lease assets and liabilities.
(3)These costs were included in costs applicable to revenue – products, service and other in the condensed consolidated statements of operations.
(4)Other associated costs primarily represent labor, lease, and other operating expenses incurred during the post-close wind-down period for the locations related to the 2019 Strategic Shift. For the three and six months ended June 30, 2021, costs of approximately $3.0 million and $6.1 million, respectively, were included in selling, general, and administrative expenses in the condensed consolidated statements of operations. For the three and six months ended June 30, 2020, costs of approximately $0.1 million and $0.4 million, respectively, were included in costs applicable to revenue – products, service and other and $4.4 million and $9.7 million, respectively, were included in selling, general, and administrative expenses in the condensed consolidated statements of operations.

16

The following table details changes in the restructuring accrual associated with the 2019 Strategic Shift (in thousands):

    

One-time

    

Lease

    

Other

    

    

Termination

    

Termination

    

Associated

    

    

Benefits

    

Costs (1)

    

Costs

    

Total

Balance at June 30, 2019

$

$

$

$

Charged to expense

1,008

1,350

4,321

6,679

Paid or otherwise settled

(286)

(1,350)

(4,036)

(5,672)

Balance at December 31, 2019

722

285

1,007

Charged to expense

231

10,532

16,835

27,598

Paid or otherwise settled

(953)

(10,532)

(16,346)

(27,831)

Balance at December 31, 2020

774

774

Charged to expense

1,650

6,077

7,727

Paid or otherwise settled

(1,650)

(5,522)

(7,172)

Balance at June 30, 2021

$

$

$

1,329

$

1,329

(1)Lease termination costs exclude the $1.3 million, $6.1 million and $0.2 million of gains from the derecognition of the operating lease assets and liabilities relating to the terminated leases as part of the 2019 Strategic Shift for the six months ended December 31, 2019, for the year ended December 31, 2020 and for the six months ended June 30, 2021, respectively.

The Company evaluated the requirements of ASC No. 205-20, Presentation of Financial Statements – Discontinued Operations relative to the 2019 Strategic Shift and determined that discontinued operations treatment is not applicable. Accordingly, the results of operations of the locations impacted by the 2019 Strategic Shift are reported as part of continuing operations in the accompanying condensed consolidated financial statements.

Long-lived Asset Impairment

During the three months ended March 31, 2020, the Company had indicators of impairment of the long-lived assets for certain of its locations. For locations that failed the recoverability test based on an analysis of undiscounted cash flows, the Company estimated the fair value of the locations based on a discounted cash flow analysis. After performing the long-lived asset impairment test for these locations, the Company determined that certain locations within the RV and Outdoor Retail segment had long-lived assets that were impaired. The long-lived asset impairment charge, subject to limitations described below, was calculated as the amount that the carrying value of the locations exceeded the estimated fair value. The calculated long-lived asset impairment charge was allocated to each of the categories of long-lived assets at each location pro rata based on the long-lived assets’ carrying values, except that individual assets cannot be impaired below their individual fair values when that fair value can be determined without undue cost and effort. For most of these locations, the operating lease right-of-use assets and furniture and equipment were written down to their individual fair values and the remaining impairment charge was allocated to the remaining long-lived assets up to the fair value estimated on these assets based on liquidation value estimates.

During the three months ended June 30, 2020, there were no indicators of impairment of long-lived assets and recorded no long-lived asset impairment charges. During the six months ended June 30, 2020, the Company recorded long-lived asset impairment charges relating to leasehold improvements, furniture and equipment, and operating lease right-of-use assets of $2.4 million, $2.6 million, and $1.6 million, respectively. Of the $6.6 million long-lived asset impairment charge during the six months ended June 30, 2020, $6.5 million related to the 2019 Strategic Shift discussed above.

During the three and six months ended June 30, 2021 the Company had indicators of impairment of long-lived assets for certain operating lease right-of-use assets relating to the 2019 Strategic Shift that had been partially impaired in a previous period. During the three and six months ended June 30, 2021, the Company recorded an additional impairment charge of $0.5 million and $1.1 million, respectively, on these operating lease right-of-use assets.

17

5. Goodwill and Intangible Assets

Goodwill

The following is a summary of changes in the Company’s goodwill by segment for the six months ended June 30, 2021 (in thousands):

Good Sam

Services and

RV and

    

Plans

    

Outdoor Retail

    

Consolidated

Balance as of December 31, 2020 (excluding impairment charges)

$

70,713

$

584,247

$

654,960

Accumulated impairment charges

(46,884)

(194,953)

(241,837)

Balance as of December 31, 2020

23,829

389,294

413,123

Acquisitions

70,172

70,172

Balance as of June 30, 2021

$

23,829

$

459,466

$

483,295

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

During the three months ended March 31, 2020, the Company determined that a triggering event for an interim goodwill impairment test of its RV and Outdoor Retail reporting unit had occurred as a result of the decline in the market price of the Company’s Class A common stock and the potential impact of COVID-19 on the Company’s business. As a result of the interim goodwill impairment test, the Company determined that the fair value of the RV and Outdoor Retail reporting unit was substantially above its respective carrying amount, therefore, 0 goodwill impairment was recorded. For the six months ended June 30, 2021, the Company determined that there were no triggering events for an interim goodwill impairment test of its reporting units.

Intangible Assets

Finite-lived intangible assets and related accumulated amortization consisted of the following at June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021

Cost or

Accumulated

   

Fair Value

    

Amortization

    

Net

Good Sam Services and Plans:

Membership and customer lists

$

9,140

(8,692)

$

448

Websites

2,500

(74)

2,426

RV and Outdoor Retail:

Customer lists and domain names

3,476

(2,114)

1,362

Supplier lists

1,696

(254)

1,442

Trademarks and trade names

29,564

(7,666)

21,898

Websites

6,220

(3,027)

3,193

$

52,596

$

(21,827)

$

30,769

18

December 31, 2020

Cost or

Accumulated

    

Fair Value

    

Amortization

    

Net

Good Sam Services and Plans:

Membership and customer lists

$

9,140

$

(8,568)

$

572

RV and Outdoor Retail:

Supplier lists

3,476

(1,930)

1,546

Customer lists and domain names

1,696

(85)

1,611

Trademarks and trade names

29,564

(6,681)

22,883

Websites

6,140

(2,630)

3,510

$

50,016

$

(19,894)

$

30,122

6. Long-Term Debt

Outstanding long-term debt consisted of the following (in thousands):

June 30, 

December 31, 

    

2021

    

2020

Term Loan Facility (1)(2)

$

1,076,634

$

1,130,356

Real Estate Facility (3)

4,351

4,493

Subtotal

1,080,985

1,134,849

Less: current portion

(11,283)

(12,174)

Total

$

1,069,702

$

1,122,675

(1)Amounts as of June 30, 2021 relate to the New Term Loan Facility and amounts as of December 31, 2020 relate to the Previous Term Loan Facility, as defined below.
(2)Net of $13.3 million and $3.2 million of original issue discount at June 30, 2021 and December 31, 2020, respectively, and $7.3 million and $7.9 million of finance costs at June 30, 2021 and December 31, 2020, respectively.
(3)Finance costs at June 30, 2021 and December 31, 2020 were not significant.

Senior Secured Credit Facilities

As of June 30, 2021 and December 31, 2020, CWGS Group, LLC (the “Borrower”), a wholly-owned subsidiary of CWGS, LLC, was party to separate credit agreements (the “New Credit Agreement” as of June 30, 2021 and, as amended from time to time, the “Previous Credit Agreement” as of December 31, 2020) for senior secured credit facilities (the “New Senior Secured Credit Facilities” as of June 30, 2021, the “Previous Senior Secured Credit Facilities” as of December 31, 2020, and collectively the “Senior Secured Credit Facilities”). The New Senior Secured Credit Facilities consist of a $1.100 billion term loan facility (the “New Term Loan Facility”) and a $65.0 million revolving credit facility (the “New Revolving Credit Facility”). The Previous Senior Secured Credit Facilities consisted of a $1.195 billion term loan facility (the “Previous Term Loan Facility”) and a $35.0 million revolving credit facility (the “Previous Revolving Credit Facility”). On June 3, 2021, concurrently with the closing of the New Credit Agreement, the Company repaid and extinguished the Previous Senior Secured Credit Facilities with the proceeds from borrowing the full amount available under the New Term Loan Facility and paying an additional $61.4 million from cash on hand, resulting in an overall reduction of outstanding principal of $38.6 million. During the three months ended June 30, 2021, loss and expense on debt restructure of $10.4 million was comprised of $0.4 million in extinguishment of the original issue discount, $1.0 million in extinguishment of capitalized finance costs related to the Previous Term Loan Facility, and $9.0 million in legal and other expenses related to the New Term Loan Facility.

The funds available under the New Revolving Credit Facility may be utilized for borrowings or letters of credit; however, a maximum of $25.0 million may be allocated to such letters of credit compared to a maximum of $15.0 million that may have been allocated to such letters of credit under the Previous Revolving Credit Facility. The New Revolving Credit Facility matures on June 3, 2026, and the New Term Loan Facility matures on June 3, 2028. The New Term Loan Facility requires mandatory principal payments in equal quarterly installments of $2.8 million, which commenced on June 30, 2021, compared to equal quarterly installments of $3.0 million under the Previous Term Loan Facility. Additionally, the Company is required to prepay the term

19

loan borrowings in an aggregate amount up to 50% of excess cash flow, as defined in the New Credit Agreement, for such fiscal year depending on the total net leverage ratio beginning with the year ended December 31, 2022. The Company is not subject to an additional excess cash flow payment relating to 2021 under the New Term Loan Facility and was not required to make an additional excess cash flow payment relating to 2020 under the Previous Term Loan Facility.

Under the New Senior Secured Credit Facilities, the Company has the ability to increase the amount of term loans or revolving loans in an aggregate amount not to exceed the greater of (a) a “fixed” amount set at $725.0 million and (b) 100% of consolidated EBITDA for the most recent four consecutive fiscal quarters on a pro forma basis (as defined in the New Credit Agreement). The lenders under the New Senior Secured Credit Facilities are not under any obligation to provide commitments in respect of any such increase.

As of June 30, 2021, the average interest rate on the New Term Loan Facility was 3.25%. The following table details the outstanding amounts and available borrowings under the Senior Secured Credit Facilities as of (in thousands):

June 30, 

December 31, 

    

2021(1)

    

2020(2)

Senior Secured Credit Facilities:

Term Loan Facility:

Principal amount of borrowings

$

1,100,000

$

1,195,000

Less: cumulative principal payments

(2,750)

(53,459)

Less: unamortized original issue discount

(13,273)

(3,241)

Less: finance costs

(7,343)

(7,944)

1,076,634

1,130,356

Less: current portion

(11,000)

(11,891)

Long-term debt, net of current portion

$

1,065,634

$

1,118,465

Revolving Credit Facility:

Total commitment

$

65,000

$

35,000

Less: outstanding letters of credit

(4,930)

(5,930)

Additional borrowing capacity

$

60,070

$

29,070

(1)Amounts relate to the New Senior Secured Credit Facilities.
(2)Amounts relate to the Previous Senior Secured Credit Facilities.

The New Senior Secured Credit Facilities are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by each of the Company’s existing and future domestic restricted subsidiaries with the exception of FreedomRoads Intermediate Holdco, LLC, the direct parent of FR, and FR, and its subsidiaries. The New Credit Agreement contains certain restrictive covenants pertaining to, but not limited to, mergers, changes in the nature of the business, acquisitions, additional indebtedness, sales of assets, investments, and the prepayment of dividends subject to certain limitations and minimum operating covenants. Additionally, management has determined that the New Senior Secured Credit Facilities include subjective acceleration clauses, which could impact debt classification. Management has determined that no events have occurred at June 30, 2021 that would trigger a subjective acceleration clause.

The New Credit Agreement requires the Borrower and its subsidiaries to comply on a quarterly basis with a maximum total net leverage ratio (as defined in the New Credit Agreement), which covenant is in effect only if, as of the end of each calendar quarter, the aggregate amount of borrowings under the revolving credit facility (including swingline loans), letters of credit and unreimbursed letter of credit disbursements outstanding at such time is greater than 35% of the total commitment on the New Revolving Credit Facility (excluding (i) up to $15.0 million attributable to any outstanding undrawn letters of credit and (ii) any cash collateralized or backstopped letters of credit), as defined in the New Credit Agreement. As of June 30, 2021, the Company was not subject to this covenant as borrowings under the Revolving Credit Facility did not exceed the 35% threshold. The Company was in compliance with all applicable debt covenants at June 30, 2021 and December 31, 2020.

20

Real Estate Facility

As of June 30, 2021 and December 31, 2020, Camping World Property, Inc. (the ‘‘Real Estate Borrower’’), an indirect wholly-owned subsidiary of CWGS, LLC, and CIBC Bank USA (“Lender”), were party to a loan and security agreement for a real estate credit facility with an aggregate maximum principal capacity of $21.5 million (“Real Estate Facility”). Borrowings under the Real Estate Facility are guaranteed by CWGS Group, LLC, a wholly-owned subsidiary of CWGS, LLC. The Real Estate Facility may be used to finance the acquisition of real estate assets. The Real Estate Facility is secured by first priority security interest on the real estate assets acquired with the proceeds of the Real Estate Facility (“Real Estate Facility Properties”). The Real Estate Facility matures on October 31, 2023.

As of June 30, 2021, a principal balance of $4.4 million was outstanding under the Real Estate Facility, and the interest rate was 2.93% with a commitment fee of 0.50% of the aggregate unused principal amount of the Real Estate Facility. As of June 30, 2021, the Company had 0 available capacity under the Real Estate Facility.

Management has determined that the credit agreement governing the Real Estate Facility includes subjective acceleration clauses, which could impact debt classification. Management has determined that no events have occurred at June 30, 2021 that would trigger a subjective acceleration clause. Additionally, the Real Estate Facility is subject to certain cross default provisions, a debt service coverage ratio, and other customary covenants. The Company was in compliance with all debt covenants at June 30, 2021 and December 31, 2020.

7. Lease Obligations

The following presents certain information related to the costs for leases (in thousands):

Three Months Ended June 30, 

Six Months Ended June 30, 

2021

    

2020

    

2021

    

2020

Operating lease cost

$

28,974

$

30,017

$

58,133

$

61,017

Finance lease cost:

Amortization of finance lease assets

1,013

1,048

1,941

1,048

Interest on finance lease liabilities

572

407

1,063

407

Short-term lease cost

474

390

959

879

Variable lease cost

5,859

6,028

11,833

11,056

Sublease income

(468)

(455)

(934)

(867)

Net lease costs

$

36,424

$

37,435

$

72,995

$

73,540

As of June 30, 2021 and December 31, 2020, finance lease assets of $37.9 million and $29.8 million, respectively, were included in property and equipment, net in the accompanying condensed consolidated balance sheets.

The following presents supplemental cash flow information related to leases (in thousands):

Six Months Ended June 30, 

2021

    

2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

$

58,614

$

61,248

Operating cash flows for finance leases

1,027

267

Financing cash flows for finance leases

1,642

1,725

Lease assets obtained in exchange for lease liabilities:

New, remeasured, and terminated operating leases

57,464

12,140

New finance leases

10,102

29,522

21

8. Fair Value Measurements

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

There have been 0 transfers of assets or liabilities between the fair value measurement levels and there were 0 material re-measurements to fair value during 2021 and 2020 of assets and liabilities that are 0t measured at fair value on a recurring basis.

The following table presents the reported carrying value and fair value information for the Company’s debt instruments. The fair values shown below for the Term Loan Facility, as applicable, are based on quoted prices in the inactive market for identical assets (Level 2), and the fair values shown below for the Floor Plan Facility, the Revolving Line of Credit, and the Real Estate Facility are estimated by discounting the future contractual cash flows at the current market interest rate that is available based on similar financial instruments.

Fair Value

June 30, 2021

December 31, 2020

($ in thousands)

    

Measurement

    

Carrying Value

    

Fair Value

    

Carrying Value

    

Fair Value

Term Loan Facility

Level 2

$

1,076,634

$

1,088,362

$

1,130,356

$

1,132,979

Floor Plan Facility Revolving Line of Credit

Level 2

20,885

20,907

20,885

20,791

Real Estate Facility

Level 2

4,351

4,270

4,493

4,600

9. Commitments and Contingencies

Litigation

On October 19, 2018, a purported stockholder of the Company filed a putative class action lawsuit, captioned Ronge v. Camping World Holdings, Inc. et al., in the United States District Court for the Northern District of Illinois against the Company, certain of its officers and directors, and Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. (the “Ronge Complaint”). On October 25, 2018, a different purported stockholder of the Company filed a putative class action lawsuit, captioned Strougo v. Camping World Holdings, Inc. et al., in the United States District Court for the Northern District of Illinois against the Company, certain of its officers and directors, and Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. (the “Strougo Complaint”).

On March 5, 2019, a shareholder derivative suit styled Hunnewell v. Camping World Holdings, Inc., et al., was filed in the Court of Chancery of the State of Delaware, alleging breaches of fiduciary duty for alleged failure to implement effective disclosure controls and internal controls over financial reporting and to properly oversee certain acquisitions and for alleged insider trading (the “Hunnewell Complaint”).

On April 17, 2019, a shareholder derivative suit styled Lincolnshire Police Pension Fund v. Camping World Holdings, Inc., et al., was filed in the Court of Chancery of the State of Delaware, alleging breaches of fiduciary duty for alleged failure to implement effective disclosure controls and internal controls over financial reporting and to properly oversee certain acquisitions and for alleged insider trading and unjust enrichment for compensation received during that time (the “LPPF Complaint”). The LPPF Complaint names the Company as nominal defendant, and names certain of the Company’s officers and directors, among others, as defendants and seeks compensatory damages, extraordinary equitable and/or injunctive relief, restitution and disgorgement, attorneys’ fees and costs, and any other and further relief the court deems just and proper. On May 30, 2019, the Court granted the parties’ joint motion to consolidate the Hunnewell and LPPF Complaints (as well as any future filed actions relating to the subject matter) and stay the newly consolidated action pending the resolution of defendants’ motion to dismiss in the Ronge action. Following the Ronge court’s approval of settlement and entry of a final judgment and order dismissing the Ronge action with prejudice, on August 31, 2020, the parties filed a stipulation and proposed order designating the LPPF Complaint as the operative

22

complaint in the consolidated action, and setting forth a schedule for defendants to respond to that Complaint, which the Court granted. On October 30, 2020, the Company, along with the other defendants, moved to dismiss this action. On December 30, 2020, the Court granted the parties’ stipulated schedule for Plaintiffs to file an amended complaint. On January 7, 2021, Plaintiffs filed an Amended Complaint, alleging substantially same claims and seeking the same relief. On March 8, 2021, the Company, along with the other defendants, moved to dismiss the Amended Complaint.  Plaintiffs filed their opposition to Defendants’ motion to dismiss on June 4, 2021.  Defendants filed their reply in further support of their motion to dismiss on July 23, 2021.  

On August 6, 2019, 2 shareholder derivative suits, styled Janssen v. Camping World Holdings, Inc., et al., and Sandler v. Camping World Holdings, Inc. et al., were filed in the U.S. District Court of Delaware.  Both actions name the Company as a nominal defendant, and name certain of the Company’s officers and directors, Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. as defendants, and allege: (i) violations of Section 14(a) of the Securities Exchange Act for issuing proxy statements that allegedly omitted material information and allegedly included materially false and misleading financial statements; (ii) violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, seeking contribution for causing the Company to issue allegedly false and misleading statements and/or allegedly omit material information in public statements and/or the Company’s filings concerning the Company’s financial performance, the effectiveness of internal controls to ensure accurate financial reporting, and the success and profitability of the integration and rollout of Gander Outdoors (now Gander RV) stores; (iii) breaches of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement for allegedly causing or allowing the Company to disseminate to Camping World shareholders materially misleading and inaccurate information through the Company’s SEC filings; and (iv) breach of fiduciary duties for alleged insider selling and misappropriation of information (together, the “Janssen and Sandler Complaints”). The Janssen and Sandler Complaints seek restitutionary and/or compensatory damages, injunctive relief, disgorgement of all profits, benefits, and other compensation obtained by certain of the Company’s officers and directors, attorneys’ fees and costs, and any other and further relief the court deems just and proper. On September 25, 2019, the Court granted the parties’ joint motion to consolidate the action and stay the action pending resolution of defendants’ motion to dismiss in the Ronge action. Following the Ronge court’s approval of settlement and entry of a final judgment and order dismissing the Ronge action with prejudice, the case remains stayed while the parties confer regarding the schedule for further proceedings in the action.

On May 28, 2020, Kamela Woodings (“Woodings”), in her representative capacity under the Private Attorney General Action (“Woodings PAGA Complaint”) filed a lawsuit styled Woodings v. FreedomRoads, LLC in Los Angeles County Superior Court against FreedomRoads, LLC in which she alleged that she and the putative class members often performed off-the-clock work for which they were not adequately compensated, and alleged the following causes of action: Violation of California Labor Code Sections 2698, et seq, (Private Attorney General Act of 2004), which includes allegations of (1) Failure to Pay Minimum Wage, (2) Failure to Pay Overtime, (3) Failure to Provide Meal Periods, (4) Failure to Provide Rest Breaks, (5) Failure to Timely Pay Wage Upon Termination, (6) Failure to Timely Pay Wages During Employment, (7) Failure to Provide Complete And Accurate Wage Statements, and (8) Failure to Keep Accurate Business Records (the “PAGA Complaint”). The Woodings PAGA Complaint seeks civil penalties and attorneys’ fees and costs pursuant to California Labor Code Section 2699.

On June 25, 2020, Woodings filed a class action complaint styled Woodings v. FreedomRoads, LLC in Los Angeles County Superior Court against FreedomRoads, LLC in which Woodings alleged that she and the putative class members, all of FreedomRoads, LLC’s non-exempt California employees, were not appropriately compensated for all wages earned in the form of commission, and that she and the putative class members often performed off-the-clock work for which they were not adequately compensated. Woodings also alleged the following causes of action: (1) Violation of California Labor Code §§ 1194, 1197, and 1197.1 (unpaid minimum wages); (2) Violation of California Labor Code §§ 1198 (unpaid overtime); (3) Violation of California Labor Code § 226.7 (unpaid meal period premiums); (4) Violation of California Labor Code § 226.7 (unpaid rest period premiums); (5) Violation of California Labor Code §§ 201 and 202 (final wages not timely paid); (6) Violation of California Labor Code § 226(a) (non-compliant wage statements); (7) Fraud; (8) Negligent Misrepresentation; (9) Breach of Contract; (10) Accounting; and (11) Violation of California Business and Professions Code §§ 17200, et seq., with the following sub-claims of (a) Failure to Pay Overtime, (b) Failure to Provide Meal Periods, (c) Failure to Provide Rest Periods, (d) Failure to Pay Minimum Wages, (e) Failure to Timely Wage Upon Termination, (f) Failure to Timely Pay Wages During Employment, (g) Failure to Keep

23

Complete and Accurate Payroll Records, and (h) Failure to Pay Commissions, seeking certification as a class action, monetary damages including general unpaid wages, unpaid wages at overtime wage rates, premium wages for meal and rest breaks not provided, general and special damages, actual, consequential and incidental losses and damages, statutory wage penalties, punitive damages, pre-judgment interest, attorneys’ fees and costs, liquidated damages, and non-monetary damages including an accounting of FreedomRoads, LLC’s revenues, costs and profits in connection with each sale of goods made by the putative class members and the appointment of a receiver to receive, manage and distribute any funds disgorged from FreedomRoads, LLC as may be determined to have been wrongly acquired by FreedomRoads, LLC, and any other and further relief the court deems just and proper (“Woodings Class Action”).

On August 6, 2020, the Woodings Class Action was removed to the U.S. District Court for the Central District of California. On August 27, 2020, Woodings amended the Woodings Class Action to add a second plaintiff, Jodi Dormaier, representing a Washington subclass of all non-exempt FreedomRoads, LLC employees, in an amended lawsuit styled Kamela Woodings and Jodi Dormaier v. FreedomRoads, LLC (the “Amended Woodings Class Action”). The Amended Woodings Class Action alleged the following additional causes of action: Violation of Wash. Rev. Code §§ 49.46.090 and 49.46.090 (failure to pay minimum wage); Violation of Wash. Rev. Code § 49.46.130 (failure to pay overtime); Violation of Wash. Rev. Code §§ 49.12.020 (failure to provide meal breaks); Violation of Wash. Rev. Code §§ 49.12.020 (failure to provide rest breaks); Violation of Wash. Rev. Code §§ 49.48.010 (payment of wages upon termination); and Violation of Wash. Rev. Code §§ 49.52.050 (willful exemplary damages) seeking class certification, damages and restitution for all unpaid wages and other injuries to Woodings, Dormaier, and the putative class, pre-judgment interest, declaratory judgment establishing a violation of California Labor Code, California Business and Professional Code §§ 17200, et seq., Revised Code of Washington and other laws of the States of California and Washington, and public policy, compensatory damages including lost wages, earnings, liquidated damages, and other employee benefits together with interest, restitution, recovery of all money, actual damages and all other sums of money owed to Woodings, Dormaier, and the putative class members, together with interest, an accounting of FreedomRoads, LLC’s revenues, costs, and profits in connection with each sale of goods and services made by Woodings, Dormaier, and the putative class, and reasonable attorneys’ fees and costs, and any other and further relief the court deems just and proper.

On January 18, 2021, the parties entered into a preliminary agreement to settle the Amended Woodings Class Action and the Woodings PAGA Complaint subject to the terms of a long-form settlement agreement to be executed by the parties and approval by the courts. On July 26, 2021, the parties executed the long-form settlement agreement and filed a motion seeking preliminary approval of the settlement from the court. As of June 30, 2021, the Company had a reserve totaling $4.0 million for estimated losses related to this matter, which is consistent with the preliminary settlement amount.

No assurance can be made that these or similar suits will not result in a material financial exposure in excess of insurance coverage, which could have a material adverse effect upon the Company’s financial condition and results of operations.

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

24

10. Statement of Cash Flows

Supplemental disclosures of cash flow information for the following periods (in thousands) were as follows:

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

Cash paid during the period for:

Interest

$

30,656

$

35,059

Income taxes

56,151

783

Non-cash investing activities:

Leasehold improvements paid by lessor

91

24

Vehicles transferred to property and equipment from inventory

820

161

Capital expenditures in accounts payable and accrued liabilities

12,660

1,372

Non-cash financing activities:

Par value of Class A common stock issued in exchange for common units in CWGS, LLC

42

1

Par value of Class A common stock issued for vested restricted stock units

2

Cost of treasury stock issued for vested restricted stock units

3,025

11. Acquisitions

During the six months ended June 30, 2020, the Company did not acquire any businesses. During the six months ended June 30, 2021, subsidiaries of the Company acquired the assets of 12 RV dealerships that constituted businesses under accounting rules. The Company used cash to complete the acquisitions. The Company considers acquisitions of independent dealerships to be a fast and capital efficient alternative to opening new retail locations to expand its business and grow its customer base. The acquired businesses were recorded at their estimated fair values under the acquisition method of accounting. The balance of the purchase prices in excess of the fair values of net assets acquired were recorded as goodwill.

During the six months ended June 30, 2021, the RV and Outdoor Retail segment acquired the assets of various RV dealerships comprised of 12 locations for an aggregate purchase price of approximately $99.0 million. Additionally, during the six months ended June 30, 2021, the Company purchased real property of $48.3 million of which $31.4 million related to the sellers of the acquired businesses.

The estimated fair values of the assets acquired and liabilities assumed for the acquisitions of dealerships consist of the following:

Six Months Ended June 30, 

($ in thousands)

    

2021

    

2020

Tangible assets (liabilities) acquired (assumed):

Accounts receivable, net

$

847

$

Inventories, net

26,523

(108)

Prepaid expenses and other assets

126

Property and equipment, net

1,348

Operating lease assets

1,222

Current portion of operating lease liabilities

(195)

Operating lease liabilities, net of current portion

(1,027)

Total tangible net assets acquired

28,844

(108)

Goodwill

70,172

108

Cash paid for acquisitions

99,016

Inventory purchases financed via floor plan

(19,537)

Cash payment net of floor plan financing

$

79,479

$

25

The fair values above for the six months ended June 30, 2021 are preliminary as they are subject to measurement period adjustments for up to one year from the date of acquisition as new information is obtained about facts and circumstances that existed as of the acquisition date relating to the valuation of the acquired assets, primarily the acquired inventories. For the six months ended June 30, 2020, the fair values above represent measurement period adjustments for valuation of acquired inventories relating to dealership acquisitions during the year ended December 31, 2019. The primary items that generated the goodwill are the value of the expected synergies between the acquired businesses and the Company and the acquired assembled workforce, neither of which qualify for recognition as a separately identified intangible asset. For the six months ended June 30, 2021 and 2020, acquired goodwill of $70.2 million and $0.0 million, respectively, is expected to be deductible for tax purposes. Included in the six months ended June 30, 2021 condensed consolidated financial results were $33.5 million of revenue, and $2.3 million of pre-tax income, respectively of the acquired dealerships from the applicable acquisition dates. Pro forma information on these acquisitions has not been included, because the Company has deemed them to not be individually or cumulatively material.

12. Income Taxes

CWH is organized as a Subchapter C corporation and, as of June 30, 2021, is a 51.6% owner of CWGS, LLC (see Note 14 — Stockholders’ Equity and Note 15 — Non-Controlling Interests). CWGS, LLC is organized as a limited liability company and treated as a partnership for U.S. federal and most applicable state and local income tax purposes and as such, is generally not subject to any U.S. federal entity-level income taxes with the exception of Americas Road and Travel Club, Inc., Camping World, Inc. (“CW”), and FreedomRoads RV, Inc. and their wholly-owned subsidiaries, which are Subchapter C corporations.

As further described in Note 1 — Summary of Significant Accounting Policies — COVID-19, in response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of income tax and payroll tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. For the six months ended June 30, 2021, there were no material tax impacts to the Company’s condensed consolidated financial statements as it relates to COVID-19 measures other than the deferral of non-income-based payroll taxes under the CARES Act of $29.2 million as of June 30, 2021, of which $14.6 million were included in other long-term liabilities in the condensed consolidated balance sheets. The Company will continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others. Furthermore, on March 11, 2021 the American Rescue Plan Act, a $1.9 trillion tax-and-spending package aimed at addressing the continuing economic and health impacts of the coronavirus pandemic, was enacted.  The American Rescue Plan Act provisions do not have a material impact on the Company’s income tax expense and effective tax rate.

For the six months ended June 30, 2021, the Company's effective income tax rate was 10.1%, which differed from the federal statutory rate of 21.0% primarily due to a portion of the Company’s earnings being attributable to non-controlling interests in limited liability companies, which are not subject to corporate level taxes, income tax benefits of $14.8 million recorded in the six months ended June 30, 2021 related to the release of the valuation allowance on deferred tax assets at CW that can now be included in state combined unitary income tax returns and $4.1 million for the revaluation of deferred tax assets as a result of increased state tax rates. For the six months ended June 30, 2020, the Company’s effective income tax rate was 14.2% due to a portion of the Company’s earnings being attributable to non-controlling interests in limited liability companies, which are not subject to corporate level taxes and due to CW losses for which an income tax benefit could not be recognized as a result of the full valuation allowance on its deferred tax assets during that period.

The Company evaluates its deferred tax assets on a quarterly basis to determine if they can be realized and establishes valuation allowances when it is more likely than not that all or a portion of the deferred tax assets may not be realized. At June 30, 2021 and December 31, 2020, the Company determined that all of its deferred tax assets (except those of CW and the Outside Basis Deferred Tax Asset discussed below) are more likely than not to be realized. The Company maintains a valuation allowance against the deferred tax assets of CW, excluding certain state deferred tax assets included in the state combined unitary income tax returns, since

26

it was determined that it is more likely than not, based on available objective evidence, that CW  would have insufficient taxable income in the current or carryforward periods under the tax laws to realize the future tax benefits for this portion of its deferred tax assets. The Company maintains a valuation allowance against the Outside Basis Deferred Tax Asset pertaining to the portion that is not amortizable for tax purposes, since the Company would likely only realize the non-amortizable portion of the Outside Basis Deferred Tax Asset if the investment in CWGS, LLC was divested.

The Company is party to the Tax Receivable Agreement that provides for the payment by the Company to the Continuing Equity Owners and Crestview Partners II GP, L.P. of 85% of the amount of tax benefits, if any, the Company actually realizes, or in some circumstances is deemed to realize, as a result of (i) increases in the tax basis from the purchase of common units from Crestview Partners II GP, L.P. in exchange for Class A common stock in connection with the consummation of the IPO and the related transactions and any future redemptions that are funded by the Company and any future redemptions or exchanges of common units by Continuing Equity Owners as described above and (ii) certain other tax benefits attributable to payments made under the Tax Receivable Agreement. During the six months ended June 30, 2021 and 2020, 4,181,552 and 110,000 common units in CWGS, LLC, respectively, were exchanged for Class A common stock subject to the provisions of the Tax Receivable Agreement. The Company recognized a liability for the Tax Receivable Agreement payments due to those parties that redeemed common units, representing 85% of the aggregate tax benefits the Company expects to realize from the tax basis increases related to the exchange, after concluding it was probable that the Tax Receivable Agreement payments would be paid based on estimates of future taxable income. As of June 30, 2021 and December 31, 2020, the amount of Tax Receivable Agreement payments due under the Tax Receivable Agreement was $179.9 million and $145.9 million, respectively, of which $12.3 million and $8.1 million at June 30, 2021 and December 31, 2020, respectively, was included in the current portion of the Tax Receivable Agreement liability in the condensed consolidated balance sheets.

The Tax Receivable Agreement liability and the related Deferred Tax Assets for the Tax Receivable Agreement liability and the investment in CWGS, LLC increased $38.5 million and $45.3 million, respectively, as a result of Continuing Equity Owner’s, primarily Crestview Partners II GP, L.P., combined redemption of 4.0 million common units in CWGS, LLC for 4.0 million shares of the Company’s Class A common stock during the six months ended June 30, 2021 and were recorded to additional paid-in capital (see the condensed consolidated statements of stockholders’ equity (deficit)). Payments pursuant to the Tax Receivable Agreement relating to these redemptions would begin during the year ended December 31, 2022.

13. Related Party Transactions

Transactions with Directors, Equity Holders and Executive Officers

FreedomRoads leases various retail locations from managers and officers. During the three months ended June 30, 2021 and 2020, the related party lease expense for these locations were each $0.5 million. During the six months ended June 30, 2021 and 2020, the related party lease expense for these locations were each $1.0 million.

In January 2012, FreedomRoads entered into a lease for the offices in Lincolnshire, Illinois, which was amended in March 2013 and November 2019 (the “Lincolnshire Lease”). For the three months ended June 30, 2021 and 2020, rental payments for the Lincolnshire Lease, including common area maintenance charges, were each $0.2 million. For the six months ended June 30, 2021 and 2020, rental payments for the Lincolnshire Lease, including common area maintenance charges, were each $0.4 million. The Company’s Chairman and Chief Executive Officer has personally guaranteed the Lincolnshire Lease.

Other Transactions

The Company does business with certain companies in which Mr. Lemonis has a direct or indirect material interest. The Company purchased fixtures for interior store sets at the Company’s retail locations from Precise Graphix. Mr. Lemonis has had a 67% economic interest in Precise Graphix, which is currently in dispute. The Company is not a party to the dispute. The Company paid Precise Graphix $0 and $0.1 million for the three months ended June 30, 2021 and June 30, 2020, respectively. The Company received refunds from

27

Precise Graphix totaling $0.2 million for the six months ended June 30, 2021 and paid $0.3 million for the six months ended June 30, 2020.

The Company paid Kaplan, Strangis and Kaplan, P.A., of which Andris A. Baltins is a member, and a member of the Company’s board of directors, $0.2 million and $0.1 million during the six months ended June 30, 2021 and 2020, respectively, for legal services.

14. Stockholders’ Equity

CWH has authorized preferred stock and 3 classes of common stock. The Class A common stock entitles the holders to receive dividends; distributions upon the liquidation, dissolution, or winding up of the Company; and have voting rights. The Class B common stock and Class C common stock entitles the holders to voting rights, which in certain cases are disproportionate to the voting rights of the Class A common stock; however, the holders of Class B common stock and Class C common stock are not entitled to receive dividends or distributions upon the liquidation, dissolution, or winding up of the Company.

CWH is the sole managing member of CWGS, LLC and, although CWH had a minority economic interest in CWGS, LLC through March 11, 2021, CWH has had and continues to have the sole voting power in, and controls the management of, CWGS, LLC. Accordingly, the Company consolidated the financial results of CWGS, LLC and reported a non-controlling interest in its consolidated financial statements.

In accordance with the amended and restated limited liability company agreement of CWGS, LLC (the “LLC Agreement”), the Continuing Equity Owners with common units in CWGS, LLC may elect to exchange or redeem the common units for newly-issued shares of the Company’s Class A common stock or cash at the Company’s election, subject to certain restrictions. If the redeeming or exchanging party also holds Class B common stock, then simultaneously with the payment of cash or newly-issued shares of Class A common stock, as applicable, in connection with a redemption or exchange of common units, a number of shares of the Company’s Class B common stock will be cancelled for 0 consideration on a one-for-one basis with the number of common units so redeemed or exchanged. As required by the LLC Agreement, the Company must, at all times, maintain a one-to-one ratio between the number of outstanding shares of Class A common stock and the number of common units of CWGS, LLC owned by CWH (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities).

Stock Repurchase Program

On October 30, 2020, the Company’s Board of Directors authorized a stock repurchase program for the repurchase of up to $100.0 million of the Company’s Class A common stock, expiring on October 31, 2022. Repurchases under the program are subject to any applicable limitations on the availability of funds to be distributed to the Company by CWGS, LLC to fund repurchases and may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. Open market repurchases will be structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. This program does not obligate the Company to acquire any particular amount of Class A common stock and the program may be extended, modified, suspended or discontinued at any time at the Board’s discretion. The Company expects to fund the repurchases using cash on hand.

During the six months ended June 30, 2021, the Company repurchased 1,149,742 shares of Class A common stock under this program for approximately $45.5 million, including commissions paid, at a weighted average price per share of $39.55, which is recorded as treasury stock on the condensed consolidated balance sheets. Class A common stock held as treasury stock is not considered outstanding. During the six months ended June 30, 2021, the Company reissued 220,499 shares of Class A common stock from treasury stock to settle the exercises of stock options and vesting of restricted stock units. As of June 30, 2021, the remaining approved amount for repurchases of Class A common stock under the share repurchase program was approximately $33.0 million.

28

On August 3, 2021, the Company’s Board of Directors authorized an increase and extension of the stock repurchase program for the repurchase of up to an additional $125.0 million of the Company’s Class A common stock, expiring on August 31, 2023.

15. Non-Controlling Interests

As described in Note 14 — Stockholders’ Equity, CWH is the sole managing member of CWGS, LLC and, as a result, consolidates the financial results of CWGS, LLC. The Company reports a non-controlling interest representing the common units of CWGS, LLC held by Continuing Equity Owners. Changes in CWH’s ownership interest in CWGS, LLC while CWH retains its controlling interest in CWGS, LLC will be accounted for as equity transactions. As such, future redemptions or direct exchanges of common units of CWGS, LLC by the Continuing Equity Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when CWGS, LLC has positive or negative net assets, respectively. At December 31, 2020, CWGS, LLC had negative net assets, which resulted in negative non-controlling interest amounts on the condensed consolidated balance sheets. At the end of each period, the Company will record a non-controlling interest adjustment to additional paid-in capital such that the non-controlling interest on the condensed consolidated balance sheet is equal to the non-controlling interest’s ownership share of the underlying CWGS, LLC net assets (see the condensed consolidated statement of stockholders’ equity (deficit)).

As of June 30, 2021 and December 31, 2020, there were 88,113,933 and 89,043,176 common units of CWGS, LLC outstanding, respectively, of which CWH owned 45,478,698 and 42,226,389 common units of CWGS, LLC, respectively, representing 51.6% and 47.4% ownership interests in CWGS, LLC, respectively, and the Continuing Equity Owners owned 42,635,235 and 46,816,787 common units of CWGS, LLC, respectively, representing 48.4% and 52.6% ownership interests in CWGS, LLC, respectively.

During the six months ended June 30, 2021, Crestview redeemed 4.0 million common units of CWGS, LLC in exchange for 4.0 million shares of the Company’s Class A common stock, which also resulted in the cancellation of 4.0 million shares of the Company’s Class B common stock that was previously held by Crestview with no additional consideration provided.

The following table summarizes the effects of changes in ownership in CWGS, LLC on the Company’s equity:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

($ in thousands)

2021

   

2020

   

2021

   

2020

Net income attributable to Camping World Holdings, Inc.

$

109,188

$

58,077

$

171,510

$

49,917

Transfers to non-controlling interests:

Decrease in additional paid-in capital as a result of the purchase of common units from CWGS, LLC with proceeds from the exercise of stock options

(257)

(105)

(1,269)

(105)

(Decrease) increase in additional paid-in capital as a result of the vesting of restricted stock units

(1,645)

(10)

(2,865)

72

Decrease in additional paid-in capital as a result of repurchases of Class A common stock for withholding taxes on vested RSUs

(31)

(347)

(56)

(559)

Increase in additional paid-in capital as a result of repurchases of Class A common stock for treasury stock

22,127

22,127

Increase in additional paid-in capital as a result of the redemption of common units of CWGS, LLC

11,785

58

34,711

62

Change from net income attributable to Camping World Holdings, Inc. and transfers to non-controlling interests

$

141,167

$

57,673

$

224,158

$

49,387

29

16. Equity-based Compensation Plans

The following table summarizes the equity-based compensation that has been included in the following line items within the consolidated statements of operations during:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

June 30, 

June 30, 

($ in thousands)

2021

    

2020

    

2021

    

2020

Equity-based compensation expense:

Costs applicable to revenue

$

165

$

191

$

323

$

347

Selling, general, and administrative

5,882

3,991

11,833

7,147

Total equity-based compensation expense

$

6,047

$

4,182

$

12,156

$

7,494

The following table summarizes stock option activity for the six months ended June 30, 2021:

Stock Options

    

(in thousands)

Outstanding at December 31, 2020

470

Exercised

(115)

Forfeited

(5)

Outstanding at June 30, 2021

350

Options exercisable at June 30, 2021

350

The following table summarizes restricted stock unit activity for the six months ended June 30, 2021:

Restricted

Stock Units

    

(in thousands)

Outstanding at December 31, 2020

3,392

Granted

386

Vested

(114)

Forfeited

(124)

Outstanding at June 30, 2021

3,540

During the six months ended June 30, 2021, the Company granted 386,471 RSUs to employees and non-employee directors with an aggregate grant date fair value of $13.9 million and weighted-average grant date fair value of $35.95, which will be recognized, net of forfeitures, over a vesting period of four to five years for employees and a vesting period of one year for non-employee directors.

17. Earnings Per Share

Basic earnings per share of Class A common stock is computed by dividing net income available to Camping World Holdings, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to Camping World Holdings, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

30

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

(In thousands except per share amounts)

2021

    

2020

    

2021

    

2020

Numerator:

Net income

$

246,076

$

163,222

$

393,501

$

149,093

Less: net income attributable to non-controlling interests

(136,888)

(105,145)

(221,991)

(99,176)

Net income attributable to Camping World Holdings, Inc. basic

$

109,188

$

58,077

171,510

49,917

Add: reallocation of net income attributable to non-controlling interests from the assumed dilutive effect of stock options and RSUs

1,772

Add: reallocation of net income attributable to non-controlling interests from the assumed exchange of common units of CWGS, LLC for Class A common stock

79,603

166,495

68,383

Net income attributable to Camping World Holdings, Inc. diluted

$

110,960

$

137,680

$

338,005

$

118,300

Denominator:

Weighted-average shares of Class A common stock outstanding — basic

45,983

37,635

44,790

37,585

Dilutive options to purchase Class A common stock

169

167

Dilutive restricted stock units

1,398

434

1,177

359

Dilutive common units of CWGS, LLC that are convertible into Class A common stock

51,620

44,288

51,634

Weighted-average shares of Class A common stock outstanding — diluted

47,550

89,689

90,422

89,578

Earnings per share of Class A common stock — basic

$

2.37

$

1.54

$

3.83

$

1.33

Earnings per share of Class A common stock — diluted

$

2.33

$

1.54

$

3.74

$

1.32

Weighted-average anti-dilutive securities excluded from the computation of diluted earnings per share of Class A common stock:

Stock options to purchase Class A common stock

715

726

Restricted stock units

14

620

8

658

Common units of CWGS, LLC that are convertible into Class A common stock

43,057

Shares of the Company’s Class B common stock and Class C common stock do not share in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock or Class C common stock under the two-class method has not been presented.

18. Segments Information

The Company has the following 2 reportable segments: (i) Good Sam Services and Plans, and (ii) RV and Outdoor Retail. Within the Good Sam Services and Plans segment, the Company primarily derives revenue from the sale of the following offerings: emergency roadside assistance plans; property and casualty insurance programs; travel assist programs; extended vehicle service contracts; vehicle refinancing and refinancing assistance; consumer shows and events; and consumer publications and directories. Within the RV and Outdoor Retail segment, the Company primarily derives revenue from the sale of new and used RVs; commissions on the finance and insurance contracts related to the sale of RVs; the sale of RV service and collision work; the sale of RV parts, accessories, and supplies; the sale of outdoor products, equipment, gear and supplies; business to business distribution of RV furniture; and the sale of Good Sam Club memberships and co-branded credit cards.

The reportable segments identified above are the business activities of the Company for which discrete financial information is available and for which operating results are regularly reviewed by the Company’s chief operating decision maker to allocate resources and assess performance. The Company’s chief operating decision maker is a group comprised of the Chief Executive Officer and the President. Segment revenue includes intersegment revenue. Segment income includes intersegment allocations for subsidiaries and shared resources.

31

Reportable segment revenue; segment income; floor plan interest expense; depreciation and amortization; other interest expense, net; and total assets are as follows:

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

Good Sam

RV and

Good Sam

RV and

Services

Outdoor

Intersegment

Services

Outdoor

Intersegment

($ in thousands)

and Plans

Retail

Eliminations

Total

    

and Plans

Retail

Eliminations

Total

Revenue:

Good Sam services and plans

$

46,955

$

$

(53)

$

46,902

$

44,692

$

$

(173)

$

44,519

New vehicles

1,060,982

(2,204)

1,058,778

900,245

(2,070)

898,175

Used vehicles

461,217

(1,080)

460,137

275,699

(789)

274,910

Products, service and other

306,127

(573)

305,554

231,512

(340)

231,172

Finance and insurance, net

182,305

(4,620)

177,685

150,194

(2,876)

147,318

Good Sam Club

12,751

12,751

10,651

10,651

Total consolidated revenue

$

46,955

$

2,023,382

$

(8,530)

$

2,061,807

$

44,692

$

1,568,301

$

(6,248)

$

1,606,745

Six Months Ended June 30, 2021

Six Months Ended June 30, 2020

Good Sam

RV and

Good Sam

RV and

Services

Outdoor

Intersegment

Services

Outdoor

Intersegment

($ in thousands)

and Plans

Retail

Eliminations

Total

    

and Plans

Retail

Eliminations

Total

Revenue:

Good Sam services and plans

$

87,867

$

$

(94)

$

87,773

$

93,384

$

$

(1,657)

$

91,727

New vehicles

1,884,757

(4,003)

1,880,754

1,398,641

(3,149)

1,395,492

Used vehicles

756,246

(1,852)

754,394

482,932

(1,357)

481,575

Products, service and other

557,717

(893)

556,824

404,524

(729)

403,795

Finance and insurance, net

323,925

(7,986)

315,939

244,642

(4,868)

239,774

Good Sam Club

23,904

23,904

21,655

21,655

Total consolidated revenue

$

87,867

$

3,546,549

$

(14,828)

$

3,619,588

$

93,384

$

2,552,394

$

(11,760)

$

2,634,018

Three Months Ended

Six Months Ended

June 30, 

June 30, 

June 30, 

June 30, 

($ in thousands)

2021

   

2020

   

2021

   

2020

Segment income:(1)

Good Sam Services and Plans

$

23,202

$

24,591

$

44,385

$

45,931

RV and Outdoor Retail

302,613

188,383

461,649

188,511

Total segment income

325,815

212,974

506,034

234,442

Corporate & other

(2,138)

(2,165)

(4,490)

(4,894)

Depreciation and amortization

(13,044)

(12,567)

(25,745)

(26,645)

Other interest expense, net

(11,789)

(14,547)

(24,012)

(29,205)

Tax Receivable Agreement liability adjustment

(3,520)

Loss and expense on debt restructure

(10,421)

(10,421)

Other income, net

45

Income before income taxes

$

288,423

$

183,695

$

437,891

$

173,698

(1)Segment income is defined as income from operations before depreciation and amortization plus floor plan interest expense.

Three Months Ended

Six Months Ended

June 30, 

June 30, 

June 30, 

June 30, 

($ in thousands)

 

2021

    

2020

    

2021

    

2020

Depreciation and amortization:

Good Sam Services and Plans

$

760

$

768

$

1,569

1,524

RV and Outdoor Retail

12,284

11,799

24,176

25,121

Total depreciation and amortization

$

13,044

$

12,567

$

25,745

$

26,645

Three Months Ended

Six Months Ended

June 30, 

June 30, 

June 30, 

June 30, 

($ in thousands)

    

2021

    

2020

    

2021

    

2020

Other interest expense, net:

Good Sam Services and Plans

$

$

$

$

RV and Outdoor Retail

1,907

2,082

3,709

3,974

Subtotal

1,907

2,082

3,709

3,974

Corporate & other

9,882

12,465

20,303

25,231

Total other interest expense, net

$

11,789

$

14,547

$

24,012

$

29,205

32

June 30, 

December 31, 

($ in thousands)

2021

    

2020

Assets:

Good Sam Services and Plans

$

88,092

$

140,825

RV and Outdoor Retail

3,310,560

2,881,637

Subtotal

3,398,652

3,022,462

Corporate & other

298,170

233,969

Total assets  

$

3,696,822

$

3,256,431

33

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included in Part I, Item 1 of this Form 10-Q, as well as our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Annual Report”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various important factors, including those set forth under “Risk Factors” included in Part I, Item 1A of our Annual Report, Part II, Item 1A of this Form 10-Q, the “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-Q and in other parts of this Form 10-Q. Except to the extent that differences among reportable segments are material to an understanding of our business taken as a whole, we present the discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations on a consolidated basis.

For purposes of this Form 10-Q, we define an "Active Customer" as a customer who has transacted with us in any of the eight most recently completed fiscal quarters prior to the date of measurement. Unless otherwise indicated, the date of measurement is June 30, 2021, our most recently completed fiscal quarter.  

Overview

Camping World Holdings, Inc. (together with its subsidiaries) is America’s largest retailer of recreational RVs and related products and services. Our vision is to build a long-term legacy business that makes RVing fun and easy, and our Camping World and Good Sam brands have been serving RV consumers since 1966. We strive to build long-term value for our customers, employees, and shareholders by combining a unique and comprehensive assortment of RV products and services with a national network of RV dealerships, service centers and customer support centers along with the industry’s most extensive online presence and a highly-trained and knowledgeable team of associates serving our customers, the RV lifestyle, and the communities in which we operate. We also believe that our Good Sam organization and family of programs and services uniquely enables us to connect with our customers as stewards of the RV lifestyle. On June 30, 2021, we operated a total of 187 retail locations, with 186 of these selling and/or servicing RVs. See Note 1 – Summary of Significant Accounting Policies to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

With the COVID-19 crisis (see “COVID-19” below) causing many state and local governments to issue “stay-at-home” and “shelter-in-place” restrictions in mid-to-late March 2020, sales and traffic levels across the RV industry declined significantly in March 2020. In response to the COVID-19 pandemic, many RV manufacturers, including Thor Industries, Forest River, Inc., and Winnebago Industries, temporarily suspended production from late March to mid-May 2020. This led to a 44.6% decrease in wholesale shipments of new RVs for the three month period of March, April, and May 2020, according to the RV Industry Association’s survey of manufacturers. The Company had taken steps to add new private label lines, expand its relationships with smaller RV manufacturers, and acquire used inventory to help manage risks in its supply chain. In conjunction with the stay-at-home and shelter-in-place restrictions enacted in many areas, the Company saw significant sequential declines in its overall customer traffic levels and its overall revenues from the mid-March to mid-to-late April 2020 timeframe. In the latter part of April 2020, the Company began to see significant improvements in its online web traffic levels and number of electronic leads, and in early May 2020, the Company began to see improvements in its overall revenue levels. As the stay-at-home restrictions began to ease across certain areas of the country, the Company experienced significant acceleration in its in-store and online traffic, lead generation, and revenue trends in May 2020 continuing into the quarter ended June 30, 2021.

On September 15, 2020, we announced a number of initiatives heading into 2021, including plans to launch a peer-to-peer RV rental marketplace, and a mobile RV technician marketplace, as well as plans to acquire RV dealerships. These initiatives continue to keep RVs as the focal point while expanding our value proposition to the customer and, in particular, to our 2.2 million active Good Sam members. See “Liquidity and

34

Capital Resources” in Part I, Item 2 of this Form 10-Q for a discussion of the expected cash requirements in 2021 for dealership acquisitions. The cash expenditures relating to the development of the peer-to-peer RV rental marketplace and mobile RV technician marketplace are not expected to be material.

The peer-to-peer RV rental marketplace, which is branded as Good Sam RV Rentals, can be accessed at RVRentals.com. The platform will seamlessly connect owners and renters to maximize the owner’s return on investment while allowing the renter to pay less money and experience the RV lifestyle first-hand. The website soft launched with full functionality to book and rent RVs in July 2021 and the full nationwide launch is expected during the quarter ended September 30, 2021.

Segments

We have the following two reportable segments: (i) Good Sam Services and Plans, and (ii) RV and Outdoor Retail. See Note 18 — Segment Information to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

COVID-19

As discussed in Note 1 — Summary of Significant Accounting Policies — COVID-19 to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q, the COVID-19 pandemic adversely impacted our business from mid-March through much of April 2020, but shifted to a favorable impact beginning primarily in May 2020.

In response to the pandemic, we implemented preparedness plans to keep our employees and customers safe, which include social distancing, providing employees with face coverings and/or other protective clothing as required, implemented additional cleaning and sanitization routines, and work-from-home orders for a significant portion of our workforce. The majority of our retail locations continued to operate as essential businesses and consequently remained open to serve our customers through the pandemic, and we continued to operate our e-commerce business. In addition to reducing marketing expenses, we temporarily reduced salaries and hours throughout the Company, including for our executive officers, and implemented headcount and other cost reductions primarily from the middle of March 2020 through the middle of May 2020. Most of these temporary salary and hourly reductions ended in May 2020 as the adverse economic impacts of the pandemic began to decline. In July 2021, we began transitioning many of our employees from work-from-home schedules to a return to our offices.

In conjunction with the stay-at-home and shelter-in-place restrictions enacted in many areas, we saw significant sequential declines in overall customer traffic levels and overall revenues from the mid-March to mid-to-late April 2020 timeframe. In the latter part of April 2020, we began to see a significant improvement in online web traffic levels, and in early May 2020, we began to see improvements in overall revenue levels. As the stay-at-home restrictions began to ease across certain areas of the country, we experienced significant acceleration in our in-store traffic and revenue trends in May of 2020 continuing into the quarter ended June 30, 2021.

We have been implementing marketing and operational plans to optimize our leadership position through the pandemic, regardless of the ultimate timing and slope of the recovery curve. We have adapted our sales practices to accommodate customers’ safety concerns in this COVID-19 environment, such as offering virtual tours of RVs and providing home delivery options. Historically, most of our consumer shows and events took place during the first quarter. As a consequence of COVID-19, we held no in-person consumer shows during the first six months of 2021, held fewer in-person consumer shows and events during 2020 than in 2019 and we debuted our first virtual show in 2020.

35

As other modes of transportation and vacation options recover from the impact of COVID-19, the increased demand for our products may not be sustained. We are unable to accurately quantify the future impact that COVID-19 may have on our business, results of operations and liquidity due to numerous uncertainties, including the impact of COVID-19 variants; the duration of the pandemic, including additional waves of infection or the spread of new variants; the effectiveness of vaccines against COVID-19 variants and the willingness of a sufficient proportion of the public to receive the vaccine; the economic impact of the pandemic; actions that may be taken by governmental authorities; and other as yet unanticipated consequences. In addition, there could be weakening demand for items that are not basic goods, and our supply chain could be disrupted in the future as a result of the outbreak, such as if Thor Industries, Inc. were to again close its North American production facilities as it did from late March to early May 2020. Any of these events could have a materially adverse impact on our operating results.

Industry Trends

After several years of strong growth, the overall RV industry experienced decelerating demand for new vehicles in 2018 and 2019. Along with the decelerating demand trends, wholesale shipments of new RV vehicles declined 16.0% in 2019 according to the RV Industry Association’s survey of manufacturers. In late 2019, the demand for new RVs across the overall RV industry began improving. Wholesale shipments of new RVs increased 13.2% in the first two months of 2020 according to the RV Industry Association’s survey of manufacturers. With the COVID-19 crisis causing many state and local governments to issue “stay-at-home” and “shelter-in-place” restrictions in mid-to-late March, sales and traffic levels across the RV industry declined significantly in April 2020. In response to the COVID-19 pandemic, many RV manufacturers, including Thor Industries, Forest River, Inc., and Winnebago Industries, temporarily suspended production from late March to mid-May. This led to a 44.6% decrease in wholesale shipments of new RVs for the three month period of March, April, and May 2020, according to the RV Industry Association’s survey of manufacturers.

The RV industry posted record shipments in both the third and fourth quarters of 2020, according to the RV Industry Association. Wholesale shipments of RVs for the second half of 2020 increased 34.2% over the comparable period in 2019. For the year ended December 31, 2020 total RV shipments increased 6.0% versus the comparable period in 2019, with the travel trailer group showing the largest increase. Wholesale shipments for the second quarter of 2021 were 151,760 units, a new record for RV shipments for any quarter. Shipments for the six months ended June 30, 2021 increased 70.5% over the six months ended June 30, 2020.

Thor Industries, our largest supplier of RVs, announced in their Form 10-Q for the three months ended April 30, 2021 filed with the Securities and Exchange Commission on June 8, 2021 that their North American RV order backlog had increased substantially, and also announced that they had experienced supply constraints and shortages of various RV component parts as a result of the current market conditions and the COVID-19 pandemic, which they attempt to minimize, when possible, by identifying alternate suppliers. These potential supply constraints are not unique to Thor Industries as suppliers in the RV industry attempt to meet the high demand for RV products, as described above, in the midst of the COVID-19 pandemic, which has created a shortage of RV new unit inventory. In light of this shortage, as discussed above, we have taken steps to add new private label lines, expand our relationships with smaller RV manufacturers, and increased our focus on acquiring used inventory to help manage risks in our supply chain.

Strategic Shift

In 2019, we made a strategic decision to refocus our business around our core RV competencies. See Note 4 — Restructuring and Long-lived Asset Impairment to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

Our Corporate Structure Impact on Income Taxes

Our corporate structure is commonly referred to as an “Up-C” structure and typically results in a different relationship between income (loss) before income taxes and income tax expense than would be experienced by most public companies with a more traditional corporate structure. More traditional structures are typically comprised predominately of Subchapter C corporations and/or lacking significant non-controlling interests with holdings through limited liability companies or partnerships. Typically, most of our income tax expense is

36

recorded at the CWH level, our public holding company, based on its allocation of taxable income from CWGS, LLC.

More specifically, as discussed in Note 12 — Income Taxes to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q, CWH is organized as a Subchapter C corporation and, as of June 30, 2021, is a 51.6% owner of CWGS, LLC (see Note 14 — Stockholders’ Equity and Note 15 — Non-Controlling Interests to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q). CWGS, LLC is organized as a limited liability company and treated as a partnership for U.S. federal and most applicable state and local income tax purposes and, as such is generally not subject to any U.S. federal entity-level income taxes (“Pass-Through”), with the exception of Americas Road and Travel Club, Inc., Camping World, Inc. (“CW”), and FreedomRoads RV, Inc. and their wholly-owned subsidiaries, which are Subchapter C corporations (“C-Corp”) embedded within the CWGS, LLC structure.

CWH receives an allocation of its share of the net income (loss) of CWGS, LLC based on CWH’s weighted-average ownership of CWGS, LLC for the period. CWH recognizes income tax expense on its pre-tax income including its portion of this income allocation from CWGS, LLC primarily relating to Pass-Through entities. The income tax relating to the net income (loss) of CWGS, LLC allocated to CWH that relates to separately taxed C-Corp entities is recorded at CWGS, LLC. No income tax expense is recognized by the Company for the portion of net income (loss) of CWGS, LLC allocated to non-controlling interest other than income tax expense recorded by CWGS, LLC. Rather, tax distributions are paid to the non-controlling interest holders which are recorded as distributions to holders of LLC common units in the condensed consolidated statements of cash flows. CWH is subject to U.S. federal, state and local income taxes with respect to its allocable share of any taxable income of CWGS, LLC and is taxed at the prevailing corporate tax rates. For the six months ended June 30, 2021 and 2020, the Company used effective income tax rate assumptions of 25.5% and 25.0%, respectively, for income adjustments applicable to CWH when calculating the adjusted net income (loss) attributable to Camping World Holdings, Inc. ─ basic and diluted (see “Non-GAAP Financial Measures” in Part I, Item 2 of this Form 10-Q). CWGS, LLC may be liable for various other state and local taxes.

The following table presents the allocation of CWGS, LLC’s net income (loss) to CWH between C-Corp and Pass-Through, the allocation of CWGS, LLC’s net income (loss) to non-controlling interests, income tax expense recognized by CWH, and other items:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

($ in thousands)

   

2021

   

2020

   

2021

   

2020

C-Corp portion of CWGS, LLC net income (loss) allocated to CWH

$

2,237

$

2,171

$

4,406

$

(17,433)

Pass-Through portion of CWGS, LLC net income allocated to CWH

143,951

74,490

223,243

89,756

CWGS, LLC net income allocated to CWH

146,188

76,661

227,649

72,323

CWGS, LLC net income  allocated to noncontrolling interests

136,888

105,145

221,991

99,176

CWGS, LLC net income

283,076

181,806

449,640

171,499

Tax Receivable Agreement liability adjustment

(3,520)

Income tax expense recorded by CWH

(37,010)

(18,598)

(52,688)

(22,471)

Other incremental CWH net income

10

14

69

65

Net income

$

246,076

$

163,222

$

393,501

$

149,093

The following table presents further information on income tax expense:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

($ in thousands)

   

2021

   

2020

   

2021

   

2020

Income tax expense recorded by CWH

$

(37,010)

$

(18,598)

$

(52,688)

$

(22,471)

Income tax expense recorded by CWGS, LLC

(5,337)

(1,875)

8,298

(2,134)

Income tax expense

$

(42,347)

$

(20,473)

$

(44,390)

$

(24,605)

37

Results of Operations

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

The following table sets forth information comparing the components of net income (loss) for the three months ended June 30, 2021 and 2020:

Three Months Ended

June 30, 2021

June 30, 2020

Percent of

Percent of

Favorable/ (Unfavorable)

($ in thousands)

    

Amount

    

Revenue

    

Amount

    

Revenue

    

$

    

%

Revenue:  

Good Sam Services and Plans

$

46,902

2.3%

$

44,519

2.8%

$

2,383

5.4%

RV and Outdoor Retail:

New vehicles

1,058,778

51.4%

898,175

55.9%

160,603

17.9%

Used vehicles

460,137

22.3%

274,910

17.1%

185,227

67.4%

Products, service and other

305,554

14.8%

231,172

14.4%

74,382

32.2%

Finance and insurance, net

177,685

8.6%

147,318

9.2%

30,367

20.6%

Good Sam Club

12,751

0.6%

10,651

0.7%

2,100

19.7%

Subtotal

2,014,905

97.7%

1,562,226

97.2%

452,679

29.0%

Total revenue

2,061,807

100.0%

1,606,745

100.0%

455,062

28.3%

 

Gross profit (exclusive of depreciation and amortization shown separately below):

Good Sam Services and Plans

29,722

1.4%

29,285

1.8%

437

1.5%

RV and Outdoor Retail:

New vehicles

300,670

14.6%

145,605

9.1%

155,065

106.5%

Used vehicles

125,308

6.1%

66,081

4.1%

59,227

89.6%

Products, service and other

115,602

5.6%

91,831

5.7%

23,771

25.9%

Finance and insurance, net

177,685

8.6%

147,318

9.2%

30,367

20.6%

Good Sam Club

10,856

0.5%

8,518

0.5%

2,338

27.4%

Subtotal

730,121

35.4%

459,353

28.6%

270,768

58.9%

Total gross profit  

759,843

36.9%

488,638

30.4%

271,205

55.5%

 

Operating expenses:

Selling, general and administrative expenses

432,249

21.0%

271,591

16.9%

(160,658)

(59.2)%

Debt restructure expense

9,031

0.4%

(9,031)

n/m

Depreciation and amortization  

13,044

0.6%

12,567

0.8%

(477)

(3.8)%

Long-lived asset impairment

536

0.0%

(536)

n/m

Lease termination

868

0.1%

868

n/m

Loss on disposal of assets

10

0.0%

272

0.0%

262

96.3%

Total operating expenses

454,870

22.1%

285,298

17.8%

(169,572)

(59.4)%

Income from operations

304,973

14.8%

203,340

12.7%

101,633

50.0%

Other income (expense):

Floor plan interest expense

(3,371)

(0.2)%

(5,098)

(0.3)%

1,727

33.9%

Other interest expense, net

(11,789)

(0.6)%

(14,547)

(0.9)%

2,758

19.0%

Loss on debt restructure

(1,390)

(0.1)%

(1,390)

n/m

Total other expense

(16,550)

(0.8)%

(19,645)

(1.2)%

3,095

15.8%

Income before income taxes

288,423

14.0%

183,695

11.4%

104,728

57.0%

Income tax expense

(42,347)

(2.1)%

(20,473)

(1.3)%

(21,874)

(106.8)%

Net income

246,076

11.9%

163,222

10.2%

82,854

50.8%

Less: net income attributable to non-controlling interests

(136,888)

(6.6)%

(105,145)

(6.5)%

(31,743)

(30.2)%

Net income attributable to Camping World Holdings, Inc.

$

109,188

5.3%

$

58,077

3.6%

$

51,111

88.0%

n/m – not meaningful

38

Supplemental Data

Three Months Ended June 30, 

Increase

Percent

2021

    

2020

    

(decrease)

    

Change

Unit sales

    

    

    

    

New vehicles

26,181

27,168

(987)

(3.6)%

Used vehicles

14,319

11,618

2,701

23.2%

Total

40,500

38,786

1,714

4.4%

Average selling price

New vehicles

$

40,441

$

33,060

$

7,381

22.3%

Used vehicles

$

32,135

$

23,662

$

8,472

35.8%

Same store unit sales(1)

New vehicles

23,541

26,840

(3,299)

(12.3)%

Used vehicles

13,061

11,501

1,560

13.6%

Total

36,602

38,341

(1,739)

(4.5)%

Same store revenue(1) ($ in 000's)

New vehicles

$

958,142

$

886,778

$

71,364

8.0%

Used vehicles

425,396

271,825

153,571

56.5%

Products, service and other

214,041

171,451

42,590

24.8%

Finance and insurance, net

162,922

145,882

17,040

11.7%

Total

$

1,760,501

$

1,475,936

$

284,565

19.3%

Average gross profit per unit

New vehicles

$

11,484

$

5,359

$

6,125

114.3%

Used vehicles

$

8,751

$

5,688

$

3,063

53.9%

Finance and insurance, net per vehicle unit

$

4,387

$

3,798

$

589

15.5%

Total vehicle front-end yield(2)

$

14,905

$

9,256

$

5,649

61.0%

Gross margin

Good Sam Services and Plans

63.4%

65.8%

(241)

bps

New vehicles

28.4%

16.2%

1,219

bps

Used vehicles

27.2%

24.0%

320

bps

Products, service and other

37.8%

39.7%

(189)

bps

Finance and insurance, net

100.0%

100.0%

unch.

bps

Good Sam Club

85.1%

80.0%

516

bps

Subtotal RV and Outdoor Retail

36.2%

29.4%

683

bps

Total gross margin

36.9%

30.4%

644

bps

Inventories ($ in 000's)

New vehicles

$

645,670

$

711,164

$

(65,494)

(9.2)%

Used vehicles

259,511

126,687

132,824

104.8%

Products, parts, accessories and misc.

291,506

214,357

77,149

36.0%

Total RV and Outdoor Retail inventories

$

1,196,687

$

1,052,208

$

144,479

13.7%

Vehicle inventory per location ($ in 000's)

New vehicle inventory per dealer location

$

3,669

$

4,679

$

(1,010)

(21.6)%

Used vehicle inventory per dealer location

$

1,474

833

$

641

76.9%

Vehicle inventory turnover(3)

New vehicle inventory turnover

3.9

2.3

1.6

66.7%

Used vehicle inventory turnover

5.0

4.7

0.3

5.6%

Retail locations

RV dealerships

176

152

24

15.8%

RV service & retail centers

10

10

0.0%

Subtotal

186

162

24

14.8%

Other retail stores

1

2

(1)

(50.0)%

Total

187

164

23

14.0%

Other data

Active Customers(4)

5,482,640

5,220,367

262,273

5.0%

Good Sam Club members

2,215,227

2,067,253

147,974

7.2%

Finance and insurance gross profit as a % of total vehicle revenue

11.7%

12.6%

(86)

bps

n/a

Same store locations

158

n/a

n/a

n/a

39

(1)Our same store revenue and units calculations for a given period include only those stores that were open both at the end of the corresponding period and at the beginning of the preceding fiscal year.
(2)Front end yield is calculated as gross profit from new vehicles, used vehicles and finance and insurance (net), divided by combined new and used retail units sold.
(3)Inventory turnover calculated as vehicle costs applicable to revenue divided by average quarterly ending vehicle inventory over the last twelve months.
(4)An Active Customer is a customer who has transacted with us in any of the eight most recently completed fiscal quarters prior to the date of measurement.

Total revenue was $2.1 billion for the three months ended June 30, 2021, an increase of $455.1 million, or 28.3%, from $1.6 billion for the three months ended June 30, 2020. The increase in total revenue was driven by a $452.7 million, or 29.0%, increase in RV and Outdoor Retail revenue, and a $2.4 million, or 5.4%, increase in Good Sam Services and Plans revenue.

Total gross profit was $759.8 million for the three months ended June 30, 2021, an increase of $271.2 million, or 55.5%, from $488.6 million for the three months ended June 30, 2020. The increase in total gross profit was driven by a $270.8 million, or 58.9%, increase in RV and Outdoor Retail gross profit, and a $0.4 million, or 1.5%, increase in Good Sam Services and Plans gross profit.

Income from operations was $305.0 million for the three months ended June 30, 2021, an increase of $101.6 million from a $203.3 million income from operations for the three months ended June 30, 2020. The increase was primarily driven by a $271.2 million increase in gross profit, a $0.9 million decrease in lease termination expense, and a $0.3 million decrease in loss on disposal of assets, partially offset by a $160.7 million increase in selling, general and administrative expenses, a $9.0 million increase in debt restructure expense, an increase in long-lived asset impairment of $0.5 million, and a $0.5 million increase in depreciation and amortization.

Total other expenses were $16.6 million for the three months ended June 30, 2021, a decrease of $3.1 million, or 15.8%, from $19.6 million for the three months ended June 30, 2020. The decrease in other expenses was primarily driven by a $1.7 million decrease in floor plan interest expense and a $2.8 million decrease in other interest expense, partially offset by a $1.4 million loss on debt restructure.

As a result of the above factors, income before income taxes was $288.4 million for the three months ended June 30, 2021 compared to a $183.7 million income before income taxes for the three months ended June 30, 2020. Income tax expense was $42.3 million for the three months ended June 30, 2021, an increase of $21.9 million from $20.5 million for the three months ended June 30, 2020. As a result, net income was $246.1 million for the three months ended June 30, 2021 compared to net income of $163.2 million for the three months ended June 30, 2020.

Good Sam Services and Plans

Good Sam Services and Plans revenue increased 5.4%, or $2.4 million, to $46.9 million in the three months ended June 30, 2021, from $44.5 million in the three months ended June 30, 2020. The increase was primarily attributable to a $1.8 million increase from roadside assistance programs primarily resulting from increased contracts in force, a $1.3 million increase in Good Sam TravelAssist revenue primarily resulting from increased contracts in force, a $0.8 million increase from our Good Sam Insurance Agency primarily resulting from increased contracts in force, and a $0.2 million increase from other services and plans, partially offset by a $1.0 million decrease from the extended warranty insurance programs primarily due to elimination of low margin programs, and $0.7 million from reduced magazine and directory ad sales.

Good Sam Services and Plans gross profit increased 1.5%, or $0.4 million, to $29.7 million in the three months ended June 30, 2021, from $29.3 million in the three months ended June 30, 2020, and gross margin decreased to 63.4% from 65.8% in the same respective periods. The increase was due to a $1.0 million increase from the Good Sam TravelAssist programs and a $0.6 million increase from the Good Sam Insurance Agency, both primarily due to increased contracts in force, partially offset by a $0.8 million decrease from our magazine and directory group, and a $0.4 million increase from other overhead costs. Gross margin decreased 241 basis points to 63.4% primarily due to increased roadside assistance claims costs in 2021 resulting from reduced travel in the second quarter of 2020 due to COVID-19 and increased expenditure for wages and

40

marketing costs in 2021 resulting from management’s decision to curtail marketing and salary expense during April and May of 2020 (see “COVID-19” in Part I, Item 2 of this Form 10-Q).

RV and Outdoor Retail

New Vehicles

New vehicle revenue increased 17.9%, or $160.6 million, to $1.1 billion in the three months ended June 30, 2021 from $898.2 million in the three months ended June 30, 2020. The increase was primarily due to a 22.3% increase in average selling price per vehicle sold, driven by price increases in all product types due to continued record demand outpacing manufacturer production, partially offset by a 3.6% decrease in new vehicles sold. On a same store basis, new vehicle revenue increased 8.0% to $958.1 million and new vehicle units decreased 12.3% in the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

New vehicle gross profit increased 106.5%, or $155.1 million, to $300.7 million in the three months ended June 30, 2021 from $145.6 million in the three months ended June 30, 2020. The increase was due to a 114.3% increase in average gross profit per vehicle sold, partially offset by a 3.6% decrease in vehicles sold. New vehicle gross margin increased 1,219 basis points to 28.4% in the three months ended June 30, 2021 from 16.2% in the three months ended June 30, 2020. The increase was due to a sale mix shift towards higher margin towable units, along with average sales price increases driven by record demand.

Used Vehicles

Used vehicle revenue increased 67.4%, or $185.2 million, to $460.1 million in the three months ended June 30, 2021 from $274.9 million in the three months ended June 30, 2020. The increase was primarily due to a 35.8% increase in average selling price per vehicle and a 23.2% increase in vehicles sold, driven by increases in nearly all product types as lower new vehicle inventory levels have driven an increase in demand for used vehicles. On a same store basis, used vehicle revenue increased 56.5% to $425.4 million and used vehicle units increased 13.6% in the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Used vehicle gross profit increased 89.6%, or $59.2 million, to $125.3 million in the three months ended June 30, 2021 from $66.1 million in the three months ended June 30, 2020. The increase was due to a 53.9% increase in average gross profit per vehicle, and a 23.2% increase in vehicle units sold. Used vehicle gross margin increased 320 basis points to 27.2% in the three months ended June 30, 2021 from 24.0% in the three months ended June 30, 2020. The increase was driven by strong demand in the used vehicle market across nearly all product types, and our focus on sourcing used inventory to meet that demand.

Products, service and other

Products, service and other revenue increased 32.2%, or $74.4 million, to $305.6 million in the three months ended June 30, 2021, from $231.2 million in the three months ended June 30, 2020. The increase was primarily attributable to increased vehicle sales, which resulted in an increase in RV parts and accessory sales. On a same store basis, products, service and other revenue increased 24.8% to $214.0 million for the three months ended June 30, 2021 from $171.5 million in the three months ended June 30, 2020.

Products, service and other gross profit increased 25.9%, or $23.8 million, to $115.6 million in the three months ended June 30, 2021 from $91.8 million in the three months ended June 30, 2020. The increase was driven by increased volume of products sold and improved margins. Products, service and other gross margin decreased 189 basis points to 37.8% in the three months ended June 30, 2021 from 39.7% in the three months ended June 30, 2020. The decrease was primarily due to promotions and discounts within certain product categories due to a change in product mix.

41

Finance and Insurance, net

Finance and insurance revenue and gross profit is recorded net, since the Company is acting as an agent in the transaction, and commission is recognized when a finance and insurance product contract payment has been received or financing has been arranged. Finance and insurance, net revenue increased 20.6%, or $30.4 million, to $177.7 million in the three months ended June 30, 2021 from $147.3 million in the three months ended June 30, 2020 primarily due to increased used vehicles sold. Finance and insurance, net as a percentage of new and used vehicle revenue decreased to 11.7% for the three months ended June 30, 2021 from 12.6% for the three months ended June 30, 2020, driven by the increase in average RV sales prices as a percent of total loan value. On a same store basis, finance and insurance, net increased 11.7%, or $17.0 million, to $162.9 million versus the three months ended June 30, 2020.

Good Sam Club

Good Sam Club revenue increased 19.7%, or $2.1 million, to $12.8 million in the three months ended June 30, 2021 from $10.7 million in the three months ended June 30, 2020. The increase primarily resulted from a $1.2 million increase in revenue from Good Sam Club memberships, and a $0.9 million increase in marketing fee revenue from Good Sam Club co-branded credit cards resulting from increased open accounts.

Good Sam Club gross profit increased 27.4%, or $2.3 million, to $10.9 million in the three months ended June 30, 2021 from $8.5 million in the three months ended June 30, 2020. The increase was primarily due to increased Good Sam Club memberships, increased marketing fee revenue from Good Sam Club co-branded credit cards and reduced marketing expenses for the Good Sam Club. Good Sam Club gross margin increased to 85.1% in the three months ended June 30, 2021 from 80.0% in the three months ended June 30, 2020 primarily due to a shift in product mix to more higher margin credit card revenue and Good Sam Club margin improvement.

Selling, general and administrative expenses

Selling, general and administrative expenses increased 59.2%, or $160.7 million, to $432.2 million in the three months ended June 30, 2021 from $271.6 million in the three months ended June 30, 2020. The $160.7 million increase was primarily due to a $121.0 million increase in wage-related expenses attributable in large part to variable pay on increased gross profit for the three months ended June 30 2021 and the reduction in salaries relating to our initial response to COVID-19 during the three months ended June 30, 2020 (see “COVID-19” in Part I, Item 2 of this Form 10-Q), a $20.8 million increase in selling expenses mainly driven by increased advertising versus the prior year, a $10.6 million increase in other store and corporate overhead expenses, a $6.0 million increase in occupancy expenses, and a $2.3 million increase in professional fees. Selling, general and administrative expenses as a percentage of total gross profit increased to 56.9% in the three months ended June 30, 2021, from 55.6% in the three months ended June 30, 2020.

Depreciation and amortization

Depreciation and amortization increased 3.8%, or $0.5 million, to $13.0 million in the three months ended June 30, 2021 from $12.6 million in the three months ended June 30, 2020 due primarily to increased purchases of property and equipment.

Long-lived asset impairment

As discussed in Note 4 – Restructuring and Long-lived Asset Impairment to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q, we recognized $0.5 million of long-lived asset impairments during the three months ended June 30, 2021 which related to the 2019 Strategic Shift discussed above.

Lease termination

Lease termination expense of $0 million and $0.9 million in the three months ended June 30, 2021 and June 30, 2020, respectively, related primarily to the 2019 Strategic Shift discussed above.

42

Floor plan interest expense

Floor plan interest expense decreased 33.9%, or $1.7 million, to $3.4 million in the three months ended June 30, 2021 from $5.1 million in the three months ended June 30, 2020. The decrease was primarily due to a 48 basis point decrease in the average floor plan borrowing rate, and a 19.3% decrease in average floor plan borrowings driven by lower average new unit inventory levels.

Other interest expense, net

Other interest expense decreased 19.0%, or $2.8 million, to $11.8 million in the three months ended June 30, 2021 from $14.5 million in the three months ended June 30, 2020. The decrease was primarily due to a 80 basis point decrease in the Term Loan Facility average interest rate, and to a lesser extent, reduced borrowing.

Loss and expense on debt restructure

During the three months ended June 30, 2021, loss and expense on debt restructure of $10.4 million was comprised of $0.4 million in extinguishment of the original issue discount related to the Previous Term Loan Facility, $1.0 million in extinguishment of capitalized finance costs related to the Previous Term Loan Facility, and $9.0 million in legal and other expenses related to the New Term Loan Facility.

Income tax expense

Income tax expense increased $21.9 million to $42.3 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase was primarily due to both higher income generated and an increase in ownership interest in CWGS, LLC for which the Company is subject to U.S. federal and state taxes on its allocable share and lower operating losses recorded by CW for which limited tax benefit can be recognized.

Net income

Net income increased $82.9 million to a net income of $246.1 million for the three months ended June 30, 2021 from a net income of $163.2 million for the three months ended June 30, 2020. The change was primarily due to the items mentioned above.

Segment results

The following tables sets forth a reconciliation of total segment income to consolidated income before income taxes for each of our segments for the periods presented:

Three Months Ended

June 30, 2021

June 30, 2020

Favorable/

Percent of

Percent of

(Unfavorable)

($ in thousands)

  

Amount

  

Revenue

  

Amount

  

Revenue

  

$

  

%

Revenue:

Good Sam Services and Plans

$

46,955

2.3%

$

44,692

2.8%

$

2,263

5.1%

RV and Outdoor Retail

2,023,382

98.1%

1,568,301

97.6%

455,081

29.0%

Elimination of intersegment revenue

(8,530)

(0.4)%

(6,248)

(0.4)%

(2,282)

(36.5)%

Total consolidated revenue

2,061,807

100.0%

1,606,745

100.0%

455,062

28.3%

Segment income:(1)

Good Sam Services and Plans

23,202

1.1%

24,591

1.5%

(1,389)

(5.6)%

RV and Outdoor Retail

302,613

14.7%

188,383

11.7%

114,230

60.6%

Total segment income

325,815

15.8%

212,974

13.3%

112,841

53.0%

Corporate & other

(2,138)

(0.1)%

(2,165)

(0.1)%

27

1.2%

Depreciation and amortization

(13,044)

(0.6)%

(12,567)

(0.8)%

(477)

(3.8)%

Other interest expense, net

(11,789)

(0.6)%

(14,547)

(0.9)%

2,758

19.0%

Loss and expense on debt restructure

(10,421)

(0.5)%

(10,421)

n/m

Income before income taxes

$

288,423

14.0%

$

183,695

11.4%

$

104,728

(57.0)%

Same store revenue- RV and Outdoor Retail(2)

$

1,760,501

$

1,475,936

$

284,565

19.3%

n/m – not meaningful

43

(1)Segment income represents income for each of our reportable segments and is defined as income from operations before depreciation and amortization, plus floor plan interest expense.
(2)Same store revenue definition not applicable to the Good Sam Services and Plans segment.

Good Sam Services and Plans

Good Sam Services and Plans segment revenue increased 5.1%, or $2.3 million, to $47.0 million in the three months ended June 30, 2021, from $44.7 million in the three months ended June 30, 2020. The increase was primarily attributable to a $1.8 million increase from roadside assistance programs primarily resulting from increased contracts in force, a $1.3 million increase in Good Sam TravelAssist revenue primarily resulting from increased contracts in force, a $0.8 million increase from our Good Sam Insurance Agency primarily resulting from increased contracts in force, and a $0.2 million increase from other services and plans, partially offset by a $1.0 million decrease from the extended warranty insurance programs primarily due to elimination of low margin programs, and an $0.8 million reduction in magazine and directory ad sales.

Good Sam Services and Plans segment income decreased 5.6%, or $1.4 million, to $23.2 million in the three months ended June 30, 2021, from $24.6 million in the three months ended June 30, 2020. The decrease was primarily attributable to a $1.8 million increase in selling general and administrative expenses, a $0.8 million gross profit decrease from our magazine and directory group, and increased other overhead costs of $0.4 million, partially offset by a $1.0 million gross profit increase from the Good Sam TravelAssist programs, and a $0.6 million increase from the Good Sam Insurance Agency, both primarily due to increased contracts in force. Segment income margin net of intersegment revenue elimination decreased 577 basis points to 49.5% primarily due to increased roadside assistance claims costs in 2021 resulting from reduced travel in the second quarter of 2020 due to COVID-19, and increased expenditure for wages and marketing costs in 2021 resulting from management’s decision to curtail marketing and salary expense during April and May of 2020 (see “COVID-19” in Part I, Item 2 of this Form 10-Q).

RV and Outdoor Retail

RV and Outdoor Retail segment revenue increased 29.0%, or $455.1 million, to $2.0 billion in the three months ended June 30, 2021 from $1.6 billion in the three months ended June 30, 2020. The increase was primarily driven by a $185.5 million, or 67.3%, increase in used vehicle revenue, a $160.8 million, or 17.9%, increase in new vehicle revenue, a $74.6 million, or 32.2%, increase in products, service and other revenue, a $32.1 million, or 21.4%, increase in finance and insurance, net revenue, and a $2.1 million, or 19.7%, increase in Good Sam Club revenue.

RV and Outdoor Retail segment income increased 60.6%, or $114.2 million, to a segment income of $302.6 million in the three months ended June 30, 2021 from a segment income of $188.4 million in the three months ended June 30, 2020. The increase was primarily related to increased segment gross profit of $270.8 million primarily due to increased volume of used vehicles sold, increased revenue per vehicle sold and increased gross profit per vehicle sold, a $1.7 million reduction in floor plan interest expense, a $0.8 million reduction in lease termination expense, and a $0.3 million reduction in loss on asset disposal, partially offset by a $158.9 million increase in selling, general and administrative expenses, and a $0.5 million increase in long-lived asset impairment. RV and Outdoor Retail segment margin increased to 15.0% in the three months ended June 30, 2021 from 12.1% in the three months ended June 30, 2020.

Corporate and other expenses

Corporate and other expenses decreased 1.2%, or less than $0.1 million, to $2.1 million in the three months ended June 30, 2021 from $2.2 million in the three months ended June 30, 2020 primarily from reduced professional fees.

44

Results of Operations

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

The following table sets forth information comparing the components of net income for the six months ended June 30, 2021 and 2020:

Six Months Ended

June 30, 2021

June 30, 2020

Percent of

Percent of

Favorable/ (Unfavorable)

($ in thousands)

    

Amount

    

Revenue

    

Amount

    

Revenue

    

$

    

%

Revenue:  

Good Sam Services and Plans

$

87,773

2.4%

$

91,727

3.5%

$

(3,954)

(4.3)%

RV and Outdoor Retail:

New vehicles

1,880,754

52.0%

1,395,492

53.0%

485,262

34.8%

Used vehicles

754,394

20.8%

481,575

18.3%

272,819

56.7%

Products, service and other

556,824

15.4%

403,795

15.3%

153,029

37.9%

Finance and insurance, net

315,939

8.7%

239,774

9.1%

76,165

31.8%

Good Sam Club

23,904

0.7%

21,655

0.8%

2,249

10.4%

Subtotal

3,531,815

97.6%

2,542,291

96.5%

989,524

38.9%

Total revenue

3,619,588

100.0%

2,634,018

100.0%

985,570

37.4%

 

Gross profit (exclusive of depreciation and amortization shown separately below):

Good Sam Services and Plans

56,169

1.6%

54,634

2.1%

1,535

2.8%

RV and Outdoor Retail:

New vehicles

478,966

13.2%

216,480

8.2%

262,486

121.3%

Used vehicles

196,372

5.4%

108,953

4.1%

87,419

80.2%

Products, service and other

212,726

5.9%

154,185

5.9%

58,541

38.0%

Finance and insurance, net

315,939

8.7%

239,774

9.1%

76,165

31.8%

Good Sam Club

20,165

0.6%

17,275

0.7%

2,890

16.7%

Subtotal

1,224,168

33.8%

736,667

28.0%

487,501

66.2%

Total gross profit  

1,280,337

35.4%

791,301

30.0%

489,036

61.8%

 

Operating expenses:

Selling, general and administrative expenses

769,283

21.3%

539,247

20.5%