Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30 , 2017


[ ]	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	(I.R.S. Employer
incorporation or organization	Identification No.)

250 Parkway Drive, Suite 270

Lincolnshire, IL 60069

Telephone: (847) 808-3000

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 ☐
(Do not check if a 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 August 8, 2017, the registrant had 29,419,813 shares of Class A common stock, 57,031,184 shares of Class B common stock and one share of Class C common stock outstanding.

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Camping World Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended June 30, 2017

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		Page


PART I. FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	5
	Unaudited Condensed Consolidated Balance Sheets – June 30, 2017 and December 31, 2016	5
	Unaudited Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2017 and 2016	6
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity (Deficit) – Six Months Ended June 30, 2017	7
	Unaudited Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2017 and 2016	8
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4	Controls and Procedures	52

PART II. OTHER INFORMATION
Item 1	Legal Proceedings	52
Item 1A	Risk Factors	53
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3	Defaults Upon Senior Securities	53
Item 4	Mine Safety Disclosures	53
Item 5	Other Information	53
Item 6	Exhibits	53

Signatures		54
Exhibit Index		55

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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,” 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, 2016 filed with the Securities and Exchange Commission (“SEC”) on March 13, 2017.

“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 IPO and the Reorganization Transactions (each as defined in Note 1 – Summary of Significant Accounting Policies to our 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 Equity Owners” refers to those Original Equity Owners controlled by Crestview Partners II GP, L.P. that have exchanged their direct or indirect ownership interests in CWGS, LLC for shares of our Class A common stock in connection with the consummation of our IPO.

“Former Profit Unit Holders” refers collectively to our named executive officers (excluding Marcus Lemonis), Andris A. Baltins and K. Dillon Schickli, who are members of our board of directors, and certain other current and former 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 Lemonis.

“ML Related Parties” refers to ML Acquisition and its permitted transferees of common units.

“ML RV Group” refers to ML RV Group, LLC, a Delaware limited liability company, wholly owned by our Chairman and Chief Executive Officer, Marcus Lemonis.

“Original Equity Owners” refers to the direct and certain indirect owners of interests in CWGS, LLC, collectively, prior to the Reorganization Transactions and Recapitalization (as defined in Note 1 – Summary of Significant Accounting Policies and Note 13 – Stockholders’ Equity to our consolidated financial statements included in Part I, Item 1 of this Form 10-Q, respectively) which includes ML Acquisition, funds controlled by Crestview Partners II GP, L.P. and the Former Profit Unit Holders.

“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.

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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, business strategy and plans and objectives of management for future operations, including, among others, statements regarding expected new retail location openings, including greenfield locations and acquired locations; profitability of new retail locations; future capital expenditures and debt service obligations; refinancing, retirement or exchange of outstanding debt; expectations regarding consumer behavior and growth; our comparative advantages and our plans and ability to expand our consumer base; our ability to respond to changing business and economic conditions; volatility in sales; our ability to drive growth; anticipated impact of the acquisition of Gander Mountain Company (“Gander Mountain”) and its Overton’s boating business (the “Gander Mountain Acquisition”); the number of Gander Mountain locations the Company expects to operate; expectations regarding assumption and rejection of leases for the locations acquired under the Gander Mountain Acquisition; and expectations regarding increase of certain expenses 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.

Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these important factors include, but are not limited to, the following:

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;

general economic conditions in our markets, and ongoing economic and financial uncertainties;

our ability to attract and retain customers;

competition in the market for services, protection plans, products and resources targeting the RV lifestyle or RV enthusiast;

our expansion into new, unfamiliar markets 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;

fluctuations in our same store sales and whether they will be a meaningful indicator of future performance;

the cyclical and seasonal nature of our business;

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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 in our Senior Secured Credit Facilities and Floor Plan Facility;

our reliance on three fulfillment and distribution centers for our retail, e-commerce and catalog businesses;

natural disasters, whether or not caused by climate change, unusual weather condition, 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;

whether third party lending institutions and insurance companies will continue to provide financing for RV purchases;

our inability to retain senior executives and attract and retain other qualified employees;

our ability to meet our labor needs;

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;

regulations applicable to the sale of extended service contracts;

our dealerships’ susceptibility to termination, non-renewal or renegotiation of dealer agreements if state dealer laws are repealed or weakened;

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;

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 and may approve or disapprove substantially all transactions and other matters requiring approval by our stockholders, including, but not limited to, the election of directors;

the exemptions from certain corporate governance requirements that we will qualify for, and intend to 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; and

the other factors set forth under ‘‘Risk Factors’’ in Item 1A of Part I of our Annual Report.

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We qualify all of our forward-looking statements by these cautionary statements. The forward-looking statements in this Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. For a further discussion of the risks relating to our business, see “Item 1A—Risk Factors” in Part I of our Annual Report.

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Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In Thousands Except Per Share Amounts)


	June 30,		December 31,
	2017		2016
Assets
Current assets:
Cash and cash equivalents	$	252,161	$	114,196
Contracts in transit		86,114		29,012
Accounts receivable, net		73,164		58,488
Inventories, net		1,106,098		909,254
Prepaid expenses and other assets		24,189		21,755
Total current assets		1,541,726		1,132,705
Property and equipment, net		151,965		130,760
Deferred tax assets, net		243,185		125,878
Intangibles assets, net		21,785		3,386
Goodwill		289,884		153,105
Other assets		17,871		17,931
Total assets	$	2,266,416	$	1,563,765
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable	$	142,236	$	68,655
Accrued liabilities		115,374		78,044
Deferred revenues and gains		69,920		68,643
Current portion of capital lease obligations		985		1,224
Current portion of tax receivable agreement liability		6,469		991
Current portion of long-term debt		7,400		6,450
Notes payable – floor plan, net		780,905		625,185
Other current liabilities		24,812		16,745
Total current liabilities		1,148,101		865,937
Capital lease obligations, net of current portion		389		841
Right to use liability		10,270		10,343
Tax receivable agreement liability, net of current portion		86,857		18,190
Long-term debt, net of current portion		710,649		620,303
Deferred revenues and gains		56,301		52,210
Other long-term liabilities		31,688		24,156
Total liabilities		2,044,255		1,591,980
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, par value $0.01 per share – 20,000,000 shares authorized; none issued and outstanding as of June 30, 2017 and December 31, 2016		—		—
Class A common stock, par value $0.01 per share – 250,000,000 shares authorized; 29,061,464 issued and 29,061,420 outstanding as of June 30, 2017 and 18,935,916 issued and outstanding as of December 31, 2016		291		189
Class B common stock, par value $0.0001 per share – 75,000,000 shares authorized; 69,066,445 issued; and 57,031,184 outstanding as of June 30, 2017 and 62,002,729 outstanding as of December 31, 2016		6		6
Class C common stock, par value $0.0001 per share – one share authorized, issued and outstanding as of June 30, 2017 and December 31, 2016		—		—
Additional paid-in capital		153,071		74,239
Retained earnings		20,068		544
Total stockholders' equity attributable to Camping World Holdings, Inc.		173,436		74,978
Non-controlling interests		48,725		(103,193)
Total stockholders' equity (deficit)		222,161		(28,215)
Total liabilities and stockholders' equity (deficit)	$	2,266,416	$	1,563,765

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

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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,
	2017		2016		2017		2016
Revenue:
Consumer services and plans	$	48,103	$	45,428	$	98,349	$	90,426
Retail
New vehicles		762,876		578,289		1,267,462		987,765
Used vehicles		196,522		216,526		342,993		395,289
Parts, services and other		174,196		157,742		290,419		271,226
Finance and insurance, net		100,970		69,870		167,259		120,897
Subtotal		1,234,564		1,022,427		2,068,133		1,775,177
Total revenue		1,282,667		1,067,855		2,166,482		1,865,603
Costs applicable to revenue (exclusive of depreciation and amortization shown separately below):
Consumer services and plans		20,560		19,237		41,707		39,118
Retail
New vehicles		650,850		495,159		1,088,998		846,007
Used vehicles		143,497		170,934		254,640		316,022
Parts, services and other		94,951		83,041		156,546		142,676
Subtotal		889,298		749,134		1,500,184		1,304,705
Total costs applicable to revenue		909,858		768,371		1,541,891		1,343,823
Operating expenses:
Selling, general, and administrative		228,444		190,323		403,934		350,711
Depreciation and amortization		7,584		6,034		14,437		11,925
Loss (gain) on sale of assets		31		(224)		(287)		(248)
Total operating expenses		236,059		196,133		418,084		362,388
Income from operations		136,750		103,351		206,507		159,392
Other income (expense):
Floor plan interest expense		(6,587)		(5,387)		(11,889)		(10,529)
Other interest expense, net		(10,557)		(12,577)		(19,961)		(25,325)
Other income		—		(2)		17		(2)
		(17,144)		(17,966)		(31,833)		(35,856)
Income before income taxes		119,606		85,385		174,674		123,536
Income tax expense		(14,284)		(1,979)		(19,911)		(2,350)
Net income	$	105,322		83,406		154,763		121,186
Less: net income attributable to non-controlling interests		(85,917)		—		(127,905)		—
Net income attributable to Camping World Holdings, Inc.	$	19,405	$	83,406	$	26,858	$	121,186

Earnings per share of Class A common stock (1):
Basic	$	0.84			$	1.28
Diluted	$	0.84			$	1.24
Weighted average shares of Class A common stock outstanding (1):
Basic		22,977				20,973
Diluted		22,977				84,673

Dividends declared per share	$	0.1532			$	0.3064

(1)

Basic and diluted earnings per Class A common stock is applicable only for periods after the Company’s IPO. See Note 16 — Earnings Per Share.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

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Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statement of Stockholders' Equity (Deficit )

(In Thousands)


										Additional				Non-
	Class A Common Stock			Class B Common Stock			Class C Common Stock			Paid-In		Retained		Controlling
	Shares	Amounts		Shares	Amounts		Shares	Amounts		Capital		Earnings		Interest		Total
Balance at January 1, 2017	18,936		189	62,003		6	—		—		74,239		544		(103,193)		(28,215)
Issuance of Class A common stock sold in a public offering, net of underwriting discounts, commissions and offering costs	4,600		46	—		—	—		—		121,425		—		—		121,471
Non-controlling interest adjustment for purchase of common units from CWGS, LLC with proceeds from a public offering	—		—	—		—	—		—		(53,648)		—		87,203		33,555
Equity-based compensation	—		—	—		—	—		—		1,588		—		—		1,588
Vesting of restricted stock units	—		—	—		—	—		—		—		—		—		—
Repurchases of Class A common stock	—		—	—		—	—		—		—		—		—		—
Redemption of LLC common units for Class A common stock	5,525		56	(4,972)		—	—		—		55,623		—		6,014		61,693
Distributions to holders of LLC common units	—		—	—		—	—		—		—		—		(69,335)		(69,335)
Dividends	—		—	—		—	—		—		—		(7,334)		—		(7,334)
Deferred tax adjustments related to tax receivable agreement	—		—	—		—	—		—		(45,750)		—		—		(45,750)
Non-controlling interest adjustment	—		—	—		—	—		—		(405)		—		130		(275)
Net income	—		—	—		—	—		—		—		26,858		127,905		154,763
Balance at June 30, 2017	29,061	$	291	57,031	$	6	—	$	—	$	153,072	$	20,068	$	48,724	$	222,161

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

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Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)


	Six Months Ended June 30,
	2017		2016
Operating activities
Net income	$	154,763	$	121,186

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,437		11,925
Equity-based compensation		1,588		60
Gain on sale of assets		(287)		(248)
Provision for losses on accounts receivable		(45)		506
Accretion of original issue discount		481		606
Non-cash interest		2,188		2,498
Deferred income taxes		6,281		1,472
Gain on remeasurement of tax receivable agreement		(17)		—
Change in assets and liabilities, net of acquisitions:
Receivables and contracts in transit		(70,211)		(47,874)
Inventories		(103,906)		(41,964)
Prepaid expenses and other assets		(3,695)		(8,164)
Checks in excess of bank balance		—		(7,478)
Accounts payable and other accrued expenses		113,636		77,478
Payment pursuant to tax receivable agreement		(203)		—
Accrued rent for cease-use locations		72		(148)
Deferred revenue and gains		5,368		3,627
Other, net		6,753		943
Net cash provided by operating activities		127,203		114,425

Investing activities
Purchases of property and equipment		(23,164)		(17,217)
Purchase of real property		(11,113)		(10,350)
Proceeds from the sale of real property		6,000		2,844
Purchases of businesses, net of cash acquired		(252,092)		(60,251)
Proceeds from sale of property and equipment		414		2,852
Net cash used in investing activities	$	(279,955)	$	(82,122)

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Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)


	Six Months Ended June 30,
	2017		2016

Financing activities
Proceeds from long-term debt	$	94,762	$	—
Payments on long-term debt		(3,700)		(31,885)
Net borrowings on notes payable – floor plan, net		155,720		25,151
Borrowings on revolver		—		12,000
Payments on revolver		—		(12,000)
Payments of principal on capital lease obligations		(691)		(762)
Payments of principal on right to use liability		(73)		(113)
Payment of debt issuance costs		(1,176)		—
Proceeds from issuance of Class A common stock sold in a public offering net of underwriter discounts and commissions		122,544		—
Dividends on Class A common stock		(7,334)		—
Members' distributions		(69,335)		(77,653)
Net cash provided by (used in) financing activities		290,717		(85,262)

Increase (decrease) in cash		137,965		(52,959)
Cash at beginning of the period		114,196		92,025
Cash at end of the period	$	252,161	$	39,066

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

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Camping World Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2017

1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Camping World Holdings, Inc. (“CWH”) and its subsidiaries (collectively, the “Company”), 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 Securities and Exchange Commission (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 significant 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, 2017 are unaudited. The condensed consolidated balance sheet as of December 31, 2016 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, 2016 (the “Annual Report”) filed with the SEC on March 13, 2017. Operating results for the 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 initial public offering (the “IPO”) and other related transactions in order to carry on the business of CWGS Enterprises, LLC (“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 (the “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. Despite its position as sole managing member of CWGS, LLC, CWH has a minority economic interest in CWGS, LLC. As of June 30, 2017, CWH owned 32.9% of CWGS, LLC. Accordingly, the Company consolidates the financial results of CWGS, LLC and reports a non-controlling interest in its consolidated financial statements. As the Reorganization Transactions are considered transactions between entities under common control, the financial statements for the periods prior to the IPO and related Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes.

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

Description of the Business

CWGS, LLC is a holding company and operates through its subsidiaries. The operations of the Company consist of two primary businesses: (i) Consumer Services and Plans, and (ii) Retail. The Company provides consumer services and plans offerings through its Good Sam brand and the Company primarily provides its retail offerings through its Camping World brand. Within the Consumer Services and Plans segment, the Company primarily derives revenue from the sale of the following offerings: emergency roadside assistance; property and casualty insurance programs; travel assist programs; extended vehicle service contracts; co-branded credit cards; vehicle financing and refinancing; club memberships; and publications and directories. Within the Retail segment, the Company primarily derives revenues from the sale of the following products: new vehicles; used vehicles; parts and service, including recreational vehicle (“RV”) accessories and supplies; camping, hunting, fishing, marine and watersport equipment and supplies; and

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finance and insurance. The Company primarily operates in various regions throughout the United States and markets its products and services to RV owners and outdoor enthusiasts. At June 30, 2017, the Company operated 137 Camping World retail locations, of which 120 locations sell new and used RVs, and offer financing, ancillary services, protection plans, and other products for the RV purchasers and outdoor enthusiasts, and two Overton’s locations offering marine and watersports products.

Use of Estimates

The preparation of these unaudited 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 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 unaudited condensed consolidated financial statements include certain assumptions related to accounts receivable, inventory, goodwill, intangible assets, long lived assets, assets held for sale, program cancellation reserves, and accruals related to self-insurance programs, estimated tax liabilities and other liabilities.

Recently Adopted Accounting Pronouncements

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). The amendments in the accounting standard replace the lower of cost or market test with a lower of cost and net realizable value test. The amendments in this ASU should be applied prospectively and are effective for interim and annual periods beginning after December 15, 2016. The Company adopted the amendments of this ASU as of January 1, 2017 and the adoption did not materially impact its consolidated financial statements or results of operations.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This ASU amends guidance on the classification and measurement of financial instruments. Although ASU 2016-01 retains many current requirements, it significantly revises an entity’s accounting related to investments in equity securities, excluding those accounted for under the equity method of accounting or those that result in the consolidation of the investee. The guidance also amends certain disclosure requirements associated with the fair value of financial instruments. One of the amendments eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The standard will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company early adopted the amendments of this ASU as of January 1, 2017, which eliminated the disclosure requirements discussed above, and the adoption did not materially impact its consolidated financial statements or results of operations.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”). The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU do not provide a definition of restricted cash or restricted cash equivalents. The standard will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company early adopted the amendments of this ASU as of

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January 1, 2017 and the adoption did not materially impact its consolidated financial statements or results of operations.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). This ASU clarifies the definition of a business to exclude gross assets acquired (or disposed of) that have substantially all of their fair value concentrated in a single identifiable asset or group of similar identifiable assets. The ASU also updates the definition of the term “output” to be consistent with Accounting Standards Codification (“ASC”) Topic No. 606. The ASU is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. The Company early adopted the amendments of this ASU as of January 1, 2017 and the adoption did not materially impact its consolidated financial statements or results of operations.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). This ASU eliminates Step 2 of the goodwill impairment test and requires a goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and must be applied prospectively. The Company early adopted the amendments of this ASU as of January 1, 2017 and the adoption did not materially impact its consolidated financial statements or results of operations.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The FASB has subsequently issued several related ASUs that clarified the implementation guidance for certain aspects of ASU 2014-09, which are effective upon the adoption of ASU 2014-09. This ASU sets forth a five-step model for determining when and how revenue is recognized. Under the model, an entity will be required to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. The amendments in this accounting standard update are effective for interim and annual reporting periods beginning after December 15, 2017. The standard can be adopted either retrospectively to each reporting period presented or as a cumulative effect adjustment as of the date of adoption. To assess the impact of the ASU, the Company established an internal implementation team to review its current accounting policies and practices, identify all material revenue streams, assess the impact of the ASU on its material revenue streams and identify potential differences with current policies and practices. The Company’s internal implementation team is in the process of performing its initial review of the likely impacts that the application of the amendments in this ASU will have on its consolidated financial statements. The team has identified the Company’s material revenue streams to be the sale of new and used vehicles; the sale of parts, RV accessories, and supplies; the performance of vehicle maintenance and repair services; the arrangement of associated vehicle financing; the sale of insurance and emergency roadside assistance contracts; and the sale of club memberships. The team has begun its review of a sample of associated contracts and other related documents, but currently, has not quantified and estimated impact of changes, if any, to its current revenue recognition policies and practices. The Company’s implementation team is in the preliminary stages of evaluating the additional disclosure requirements of the ASU, as well as the change, if any, to the Company’s underlying accounting and financial reporting systems and processes necessary to support the recognition and disclosure requirements. The Company expects to identify and implement the necessary changes, if any, during 2017. The Company currently expects to adopt the amendments of this ASU as of January 1, 2018, as a cumulative effect adjustment as of the date of adoption, but will not make a final decision on the adoption method until later in 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The amendments in this ASU relate to the accounting for leasing transactions. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. In addition, this standard requires both lessees and lessors to disclose certain key information about lease transactions. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is in the process of evaluating the impact that adoption will have on its consolidated balance sheet and statement of income. However, the Company expects that the adoption of the provisions of the ASU will have a significant impact

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on its consolidated balance sheet, as currently most of its real estate is leased via operating leases. Adoption of this ASU is required to be done using a modified retrospective approach.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The amendment addresses several specific cash flow issues with the objective of reducing the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of the provisions of the ASU will have on its consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). The amendments in ASU 2017-09 require entities to apply modification accounting in Topic 718 only when changes to the terms or conditions of a share-based payment award result in changes to fair value, vesting conditions or the classification of the award as equity or liability. The standard will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The guidance will be applied prospectively upon adoption. The Company does not expect the adoption will have a material impact on its consolidated financial statements or results of operations; however, the amount of the impact to equity-based compensation expense will depend on the terms specified in any new changes to the equity-based payment awards, if any. The Company plans to early adopt this ASU on October 1, 2017.

2. Inventories, Net and Floor Plan Payable

Inventories consisted of the following (in thousands):


	June 30,		December 31,
	2017		2016
New RV vehicles	$	903,834	$	727,634
Used RV vehicles		75,826		78,787
Parts, accessories and miscellaneous		126,438		102,833
	$	1,106,098	$	909,254

New and used vehicles included in retail inventories are primarily financed by floor plan arrangements through a syndication of banks. The floor plan notes are collateralized by substantially all of the assets of FreedomRoads, LLC (“FR”), a wholly owned subsidiary of FreedomRoads, which operates the Camping World dealerships, and bear interest at one month London Interbank Offered Rate (“LIBOR”) plus 2.15% as of June 30, 2017 and 2.05% as of December 31, 2016. LIBOR, as defined, was 1.05% at June 30, 2017 and 0.62% as of December 31, 2016. Principal is due upon the sale of the related vehicle.

In August 2015, FR entered into a Sixth Amended and Restated Credit Agreement for floor plan financing (“Floor Plan Facility”) to extend the maturity date to August 2018. On July 1, 2016, FR entered into Amendment No. 1 to the Sixth Amended and Restated Credit Agreement for the Floor Plan Facility to, among other things, increase the available amount under the Floor Plan Facility from $880.0 million to $1.18 billion, amend the applicable borrowing rate margin on LIBOR and base rate loans ranging from 2.05% to 2.50% and 0.55% and 1.00%, respectively, based on the consolidated current ratio at FR, and extend the maturity date to June 30, 2019. The letter of credit commitment within the Floor Plan Facility remained at $15.0 million. The Floor Plan Facility includes an offset account that allows the Company to transfer cash as an offset to the payable under the Floor Plan Facility. These transfers reduce the amount of liability outstanding under the floor plan notes payable that would otherwise accrue interest, while retaining the ability to transfer amounts from the offset account into the Company’s operating cash accounts. When the Company uses the floor plan offset account, the Company experiences a reduction in floor plan interest expense in its consolidated statements of income. The credit agreement governing the Floor Plan Facility contains certain financial covenants. FR was in compliance with all debt covenants at June 30, 2017 and December 31, 2016.

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At June 30, 2017 and December 31, 2016, the principal amount outstanding under the Floor Plan Facility was $780.9 million and $625.2 million, respectively, which was net of the floor plan offset account of $86.5 million and $68.5 million, respectively.

3. Goodwill and Intangible Assets

Goodwill

The following is a summary of changes in the Company’s goodwill by reportable segments for the six months ended June 30, 2017 (in thousands):


	Consumer
	Services and
	Plans		Retail		Consolidated
Balance as of December 31, 2016	$	49,944	$	103,161	$	153,105
Acquisitions (1)		—		136,779		136,779
Balance as of June 30, 2017	$	49,944	$	239,940	$	289,884

⁽¹⁾

See Note 9 — Acquisitions.

The Company evaluates goodwill for impairment on an annual basis during 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 the 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.

Intangible Assets

Finite-lived intangible assets and related accumulated amortization consisted of the following at June 30, 2017 and December 31, 2016 (in thousands):


	June 30, 2017
	Cost or		Accumulated
	Fair Value		Amortization		Net
Trademarks and trade names	$	17,900	$	(115)	$	17,785
Membership and customer lists		10,808		(6,808)		4,000
	$	28,708	$	(6,923)	$	21,785


	December 31, 2016
	Cost or		Accumulated
	Fair Value		Amortization		Net
Membership and customer lists	$	9,485	$	(6,099)	$	3,386
	$	9,485	$	(6,099)	$	3,386

The trademarks and trade names have a useful life of fifteen years. The membership and customer lists have weighted-average useful lives of approximately six years.

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4. Long-Term Debt

Long-term debt consists of the following (in thousands):


	June 30,		December 31,
	2017		2016
Term Loan Facility (1)	$	718,049	$	626,753
Less: current portion		(7,400)		(6,450)
	$	710,649	$	620,303

⁽¹⁾

Net of $6.1 million and $6.3 million of original issue discount at June 30, 2017 and December 31, 2016, respectively, and $12.1 million and $11.9 million of finance costs at June 30, 2017 and December 31, 2016, respectively.

Existing Senior Secured Credit Facilities

On November 8, 2016, CWGS Group, LLC, a wholly owned subsidiary of CWGS, LLC, entered into a new $680.0 million senior secured credit facility (“Existing Senior Secured Credit Facilities”) and used the proceeds to repay its previous senior secured credit facilities (“Previous Senior Secured Credit Facilities”). The Existing Senior Secured Credit Facilities consists of a seven-year $645.0 million Term Loan Facility (“Existing Term Loan Facility”) and a five-year $35.0 million revolving credit facility (“Existing Revolving Credit Facility”). On March 17, 2017, CWGS Group, LLC entered into an amendment to the Existing Senior Secured Credit Facilities to increase the Existing Term Loan Facility by $95.0 million to $740.0 million. The net proceeds from the additional borrowings are intended to be used by FreedomRoads to purchase dealerships. No other terms of the credit agreement governing our Existing Senior Secured Credit Facilities were amended in connection with the amendment. The Existing Term Loan Facility includes mandatory amortization at 1% per annum in equal quarterly installments.

Interest on the Existing Term Loan Facility floats at the Company’s option at a) LIBOR multiplied by the statutory reserve rate (such product, the “Adjusted LIBOR Rate”), subject to a 0.75% floor, plus an applicable margin of 3.75%, or b) an Alternate Base Rate (“ABR”) equal to 2.75% per annum plus the greater of: (i) the prime rate published by The Wall Street Journal (the “WSJ Prime Rate”), (ii) federal funds effective rate plus 0.50%, or (iii) on-month Adjusted LIBOR Rate plus 1.00%, subject to a 1.75% floor. Interest on borrowings under the Existing Revolving Credit Facility is at the Company’s option of a) 3.25% to 3.50% per annum subject to a 0.75% floor in the case of a Eurocurrency loan, or b) 2.25% to 2.50% per annum plus the greater of the WSJ Prime Rate, federal funds effective rate plus 0.50%, or one-month Adjusted LIBOR Rate plus 1.00% in the case of an ABR loan, based on the Company’s total leverage ratio as defined in the Existing Senior Secured Credit Facilities. The Company also pays a commitment fee of 0.5% per annum on the unused amount of the Existing Senior Secured Credit Facility. Reborrowings under the Existing Term Loan Facility are not permitted.

Following the end of each fiscal year, commencing with the fiscal year ending December 31, 2017, the Company is required to prepay the term loan borrowings in an aggregate amount equal to 50% of excess cash flow, as defined in the Existing Senior Secured Credit Facilities, for such fiscal year. The required percentage prepayment of excess cash flow is reduced to 25% if the total leverage ratio, as defined, is 1.50 to 1.00 or greater but less than 2.00 to 1.00. If the total leverage ratio is less than 1.50 to 1.00, no prepayment of excess cash flow is required.

The Existing Revolving Credit Facility matures on November 8, 2021, and the Existing Term Loan Facility matures on November 8, 2023. The funds available under the Existing Revolving Credit Facility may be utilized for borrowings or letters of credit; however, a maximum of $15.0 million may be allocated to such letters of credit. As of June 30, 2017, the interest rate on the term debt was 4.84%. As of June 30, 2017 and December 31, 2016, the Company had available borrowings of $31.8 million and $31.8 million, respectively, and letters of credit in the aggregate amount of $3.2 million and $3.2 million outstanding, respectively, under the Existing Revolving Credit Facility. As of June 30, 2017 and December 31, 2016, the principal balance of $736.3 million and $645.0 million, respectively, was outstanding under the Existing Term Loan Facility and no amounts were outstanding on the Existing Revolving Credit Facility.

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CWGS, LLC and CWGS Group, LLC have no revenue-generating operations of their own. Their ability to meet the financial obligations associated with the Existing Senior Secured Credit Facilities is dependent on the earnings and cash flows of its operating subsidiaries, primarily Good Sam Enterprises, LLC and FR, and their ability to upstream dividends. The Existing 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 FR and its subsidiaries. The Existing Senior Secured Credit Facilities contain certain restrictive covenants including, 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. The Company was in compliance with all debt covenants at June 30, 2017 and December 31, 2016.

5. Right to Use Liabilities

The Company leases operating facilities throughout the United States. The Company analyzes all leases in accordance with Accounting Standards Codification (“ASC”) 840 — Leases. The Company has included the right to use assets in property and equipment, net, as follows (in thousands):


	June 30,		December 31,
	2017		2016
Right to use assets	$	10,673	$	10,673
Accumulated depreciation		(796)		(667)
	$	9,877	$	10,006

The following is a schedule by year of the future changes in the right to use liabilities as of June 30, 2017 (in thousands):


2017	$	436
2018		583
2019		486
2020		486
2021		487
Thereafter (1)		13,813
Total minimum lease payments		16,291
Amounts representing interest		(6,021)
Present value of net minimum right to use liability payments	$	10,270

⁽¹⁾

Includes $5.0 million of scheduled derecognition of right to use liabilities upon the reduction in lease deposits to less than two months’ rent.

6. 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.

For cash and cash equivalents; accounts receivable; other current assets; accounts payable; notes payable — floor plan, net; and other current liabilities the amounts reported in the accompanying Unaudited Condensed Consolidated Balance Sheets approximate fair value due to their short-term nature or the existence of variable interest rates that approximate prevailing market rates.

There have been no transfers of assets or liabilities between the fair value measurement levels and there were no material re-measurements to fair value during 2017 and 2016 of assets and liabilities that are not measured at fair value on a recurring basis.

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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 Existing Term Loan Facility and Previous Term Loan Facility, as applicable, are based on quoted prices in the inactive market for identical assets (Level 2).


	Fair Value	6/30/2017				12/31/2016
($ in thousands)	Measurement	Carrying Value		Fair Value		Carrying Value		Fair Value
Term Loan Facility	Level 2	$	718,049	$	739,061	$	626,753	$	649,838

7. Commitments and Contingencies

The Company holds certain property and equipment under rental agreements and operating leases that have varying expiration dates. A majority of its operating facilities are leased from unrelated parties throughout the United States.

From time to time, the Company is involved in litigation arising in the normal course of business operations. The Company does not believe it is involved in any litigation that requires disclosure or will have a material adverse effect on its results of operations or financial position.

8. Statement of Cash Flows

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


	Six Months Ended
	June 30,		June 30,
	2017		2016
Cash paid (received) during the period for:
Interest	$	30,454	$	33,833
Income taxes		13,538		880
Non-cash investing activities:
Derecognized property and equipment for leases that qualified as operating leases after completion of construction		—		(15,390)
Property and equipment acquired through third-party capital lease arrangements				2,007
Leasehold improvements paid by lessor		857		—
Vehicles transferred to property and equipment from inventory		1,238		433
Non-cash financing activities:
Derecognized right to use liabilities for leases that qualified as operating leases after completion of construction		—		(15,393)
Third-party capital lease arrangements to acquire property and equipment				2,007
Non-cash distribution of equity interest in AutoMatch USA, LLC, an indirect wholly-owned subsidiary of the Company				(38,838)
Class A common stock issued in exchange for common units in CWGS, LLC		56		—
Class A common stock issued for vested restricted stock units		—		—

9. Acquisitions

Dealerships and Consumer Shows

During the six months ended June 30, 2017 and 2016, subsidiaries of the Company acquired the assets of multiple dealership locations and consumer shows. The Company used a combination of cash, floor plan financing, and additional borrowing on the Existing Term Loan Facility in March 2017 (see Note 4 — Long-term Debt) to complete the acquisitions. 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.

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For the six months ended June 30, 2017, concurrent with the acquisition of dealership businesses, the Company purchased real properties for $11.1 million from related parties of the sellers and sold a real property to a third party in a sale-leaseback transaction for $6.0 million. For the six months ended June 30, 2016, concurrent with the acquisition of dealership businesses, the Company purchased real properties for $10.4 million from related parties of the sellers. For the six months ended June 30, 2016, the Company sold other real properties to a third party in sale-leaseback transactions for $2.8 million.

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


	Six Months Ended June 30,				Estimated
($ in thousands)	2017		2016		Life
Tangible assets (liabilities) acquired (assumed):
Accounts receivable	$	1,522	$	944
Inventory		84,211		25,663
Property and equipment		792		635
Other assets		46		142
Accrued liabilities		(2,872)		(2,277)
Total tangible net assets acquired		83,699		25,107
Intangible assets acquired:
Membership and customer lists		793		1,349	4-7 years
Total intangible assets acquired		793		1,349
Goodwill		132,119		33,795
Purchase price		216,611		60,251
Inventory purchases financed via floor plan		(71,124)		(22,265)
Cash payment net of floor plan financing	$	145,487	$	37,986

The fair values above 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. All of the acquired goodwill was deductible for tax purposes for the six months ended June 30, 2017 and 2016. Included in the six months ended June 30, 2017 and 2016 consolidated financial results were $117.7 million and $48.0 million of revenue, respectively, and $7.8 million and $1.3 million of pre-tax income, respectively, of the acquired dealerships from the applicable acquisition dates .

Gander Mountain and Overton’s

On May 26, 2017, CWI, Inc. (“CWI”), an indirect subsidiary of the Company, completed the acquisition of certain assets of the Gander Mountain Company (“Gander Mountain”) and its Overton’s, Inc. (“Overton’s”) boating business through a bankruptcy auction that took place in April 2017 for $35.4 million in cash and $1.0 million of contingent consideration. Prior to the acquisition, Gander Mountain operated 160 retail locations and an ecommerce business that serviced the hunting, camping, fishing, shooting sports, and outdoor markets. Overton’s operates two retail locations and an ecommerce business that services the marine and watersports markets. The Company believes these businesses are complementary to its existing businesses and will allow for cross marketing of the Company’s consumer services and plans to a wider customer base.

The assets acquired include the right to designate any real estate leases for assignment to CWI or other third parties (the “Designation Rights”), other agreements CWI elects to assume, intellectual property rights, operating systems and platforms, certain distribution center equipment, the Gander Mountain and Overton’s ecommerce businesses and fixtures and equipment for Overton’s two retail locations and corporate operations. Furthermore, CWI has committed to exercise Designation Rights and take an assignment of no fewer than 15 Gander Mountain retail leases on or before October 6, 2017, in addition to the two Overton’s retail leases assumed at the closing of the acquisition. The Designation Rights expire on October 6, 2017. CWI also assumed certain liabilities, such as cure costs for leases and other agreements it elects to assume, accrued time off for employees retained by CWI and retention bonuses payable to certain key Gander Mountain employees retained by CWI. The cure costs for the minimum 15 Gander Mountain leases to be

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assumed under the Designation Rights after the acquisition date, but no later than October 6, 2017, have been estimated at $1.0 million and recorded as contingent consideration.

The estimated fair values of the assets acquired and liabilities assumed for the acquisition of Gander Mountain and Overton’s consist of the following:


	Estimated		Estimated
($ in thousands)	Fair Value		Life
Tangible assets (liabilities) acquired (assumed):
Inventory	$	9,965
Prepaid expenses and other assets		42
Property and equipment		3,780
Accrued liabilities		(373)
Total tangible net assets acquired		13,414
Intangible assets acquired:
Trademarks and trade names		17,900	15 years
Membership and customer lists		500	6 years
Total intangible assets acquired		18,400
Goodwill		4,660
Purchase price		36,474
Contingent consideration unpaid at June 30, 2017		(1,025)
Cash paid for acquisition	$	35,449

The fair values above 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. The amount of acquired goodwill that was deductible for tax purposes was $4.7 million. Included in the six months ended June 30, 2017 consolidated financial results were $8.4 million of revenue and $1.6 million of pre-tax loss of Gander Mountain and Overton’s from the applicable acquisition dates .

10. Exit Activities

The Company closed certain retail locations in previous periods and, in March 2017, the Company subleased a portion of a lease that is adjacent to an existing retail location. The Company remains obligated under the terms of these leases for rent and other costs associated with these leases, and has no plan to occupy them in the future. In accordance with ASC 420, Accounting for Costs Associated with Exit or Disposal Activities, the Company recorded a charge to rent expense to recognize the costs of exiting the space. The liability was equal to the fair value of rent less the fair value of the amount of rent received by the Company from a tenant under a sublease over the remainder of the lease terms, which expire on various dates through 2032. The change in the estimated fair value of these amounts was recognized in income as part of income from operations. The current portion of the liability was $0.3 million and $0.3 million as of June 30, 2017 and December 31, 2016, respectively, and is included in other current liabilities. The liability outstanding was $2.8 million and $2.8 million as of June 30, 2017 and December 31, 2016, respectively.

11. Income Taxes

CWH is organized as a Subchapter C corporation and, on October 6, 2016, as part of the Company’s IPO, became a 22.6% owner of CWGS, LLC (see Note 13 — Stockholders’ Equity). CWGS, LLC is organized as a limited liability company and treated as a partnership for federal tax purposes, with the exception of Americas Road and Travel Club, Inc., Camping World, Inc. (“CW”), and FreedomRoads RV, Inc. (“FRRV”) and their wholly-owned subsidiaries, which are Subchapter C corporations.

For the three months ended June 30, 2017 and 2016, the Company’s effective income tax rate was 12% and 2%, respectively. For the six months ended June 30, 2017 and 2016, the Company’s effective income tax rate was 11% and 2%, respectively. The amount of income tax expense and the effective income tax rate increased in 2017 primarily because CWH was also subject to U.S. federal, state and local taxes on its allocable share of taxable income or loss generated by CWGS, LLC subsequent to the Company’s IPO,

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and also partially to the increased profitability of FRRV. The Company's effective tax rate is significantly less than the federal statutory rate of 35.0% primarily because no federal income taxes are payable by the Company for the non-controlling interests' share of CWGS, LLC’s taxable income due to CWGS, LLC’s pass-through structure for federal and most state and local income tax reporting, with the exception of the Subchapter C corporations noted above.

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, 2017 and December 31, 2016, the Company determined that all of its deferred tax assets, except those of CW, are more likely than not to be realized. The Company maintains a full valuation allowance against the deferred tax assets of CW, since it was determined that it would have insufficient taxable income in the current or carryforward periods under the tax laws to realize the future tax benefits of its deferred tax assets.

The provision for income tax for the entities subject to federal income tax has been included in the consolidated financial statements. The income tax is based on the amount of taxes due on their tax returns plus deferred taxes computed based on the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities, using expected tax rates.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements on a particular tax position are measured based on the largest benefit that has a greater than a 50% likelihood of being realized upon settlement. The amount of unrecognized tax benefits is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. As of June 30, 2017 and December 31, 2016, the Company had no uncertain tax positions. The Company did not recognize any interest or penalties relating to income taxes for the three and six months ended June 30, 2017 and 2016.

On October 6, 2016, the Company entered into a tax receivable agreement (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. CWGS intends to make an election under Section 754 of the Internal Revenue Code effective for each tax year in which a redemption or exchange (including a deemed exchange) of common units for cash or stock occur. These tax benefit payments are not conditioned upon one or more of the Continuing Equity Owners or Crestview Partners II GP, L.P. maintaining a continued ownership interest in CWGS, LLC. In general, the Continuing Equity Owners’ or Crestview Partners II GP, L.P.’s rights under the Tax Receivable Agreement are assignable, including to transferees of its common units in CWGS, LLC (other than the Company as transferee pursuant to a redemption or exchange of common units in CWGS, LLC). The Company expects to benefit from the remaining 15% of the tax benefits, if any, which may be realized. As part of the IPO 1,698,763 common units in CWGS, LLC were exchanged for Class A common stock by Crestview Partners II GP, L.P., subject to the provisions of the Tax Receivable Agreement. During the three and six months ended June 30, 2017, 5,515,362 and 5,525,362 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, 2017 and December 31, 2016, the amount of Tax Receivable Agreement payments due under the Tax Receivable Agreement was $93.3 million and $19.2 million, respectively, of which $6.5 million and $1.0

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million, respectively, were included in current portion of the Tax Receivable Agreement liability in the Consolidated Balance Sheets.

12. Related Party Transactions

Monitoring Agreement

Crestview Advisors, L.L.C. and Stephen Adams (together, the “Managers” and each, a “Manager”) and the Company were parties to a monitoring agreement relating to each Manager’s monitoring of its (or its affiliate’s) investment in CWGS, LLC. Pursuant to the monitoring agreement, CWGS, LLC agreed to pay each of the Managers an aggregate per annum monitoring fee equal to $1.0 million, payable in quarterly installments of $250,000. In addition, the Company agreed to reimburse each Manager and its affiliates, employees and agents for up to an aggregate per annum amount of $250,000 for all reasonable fees and expenses incurred in connection with such Manager’s monitoring of its (or its affiliate’s) investment in CWGS, LLC. CWGS, LLC also agreed to indemnify each Manager and its respective affiliates from and against all losses, claims, damages and liabilities arising out of the performance by such Managers’ monitoring of its (or its affiliate’s) investment in CWGS, LLC. For the three and six months ended June 30, 2016, pursuant to the monitoring agreement, the Company incurred monitoring fees of $0.5 million and $1.0 million, respectively, and reimbursed fees and expenses of $0.1 and $0.3 million, respectively. The monitoring agreement was terminated upon the consummation of the Company’s IPO.

Transactions with Directors, Equity Holders and Executive Officers

FreedomRoads leases various retail locations from managers and officers. During the three months ended June 30, 2017 and 2016, the related party lease expense for these locations was $0.5 million and $0.4 million, respectively. During the six months ended June 30, 2017 and 2016, the related party lease expense for these locations was $0.9 million and $0.7 million, respectively.

In January 2012, FreedomRoads entered into a lease (the “Original Lease”) with respect to the Company’s Lincolnshire, Illinois offices, which was amended in March 2013 in connection with the Company’s leasing of additional premises within the same office building (the “Expansion Lease”). The Original Lease is payable in 132 monthly payments of base rent equal to approximately $29,000, commencing April 2013, subject to annual increases. The Expansion Lease is payable in 132 monthly payments of base rent equal to approximately $2,500, commencing May 2013, subject to annual increases. Marcus Lemonis, the Company’s Chairman and Chief Executive Officer, has personally guaranteed both leases. During the three months ended June 30, 2017 and 2016, we made payments of approximately $176,000 and $168,000, respectively, in connection with the Original Lease, which includes approximately $79,000 and $72,000, respectively, for common area maintenance charges on the Original Lease, and we made payments of approximately $8,000 and $8,000, respectively, in connection with the Expansion Lease. During the six months ended June 30, 2017 and 2016, we made payments of approximately $352,000 and $336,000, respectively, in connection with the Original Lease, which includes approximately $158,000 and $145,000, respectively, for common area maintenance charges on the Original Lease, and we made payments of approximately $17,000 and $16,000, respectively, in connection with the Expansion 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, LLC (“Precise Graphix”). Mr. Lemonis has a 33% economic interest in Precise Graphix and the Company paid Precise Graphix $0.9 million and $0.8 million for the three months ended June 30, 2017 and 2016, respectively, and the Company paid Precise Graphix $1.2 million and $1.4 million for the six months ended June 30, 2017 and 2016, respectively.

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13. Stockholders’ Equity

Reorganization Transactions

In connection with the IPO on October 6, 2016, the Company completed the following Reorganization Transactions:

The Company amended and restated its certificate of incorporation which, among other things, authorized preferred stock and three 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;

CWGS, LLC amended and restated the limited liability company agreement of CWGS, LLC (the “LLC Agreement” and the “Recapitalization”), which among other things, (i) provided for a new single class of common membership interests in CWGS, LLC, the common units, and (ii) exchanged all of the then-existing membership interests in CWGS, LLC to common units. The holders of the common units 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 no consideration on a one-for-one basis with the number of common units so redeemed or exchanged; and

The Company acquired, by merger, an entity that was owned by former indirect members of CWGS, LLC (the “Former Equity Owners”), for which the Company issued 7,063,716 shares of Class A common stock as merger consideration (the “CWH BR Merger”). The only significant asset held by the merged entity prior to the CWH BR Merger was 7,063,716 common units of CWGS, LLC and a corresponding number of shares of CWH Class B common stock. Upon consummation of the CWH BR Merger, the Company canceled the 7,063,716 shares of Class B common stock and recognized the 7,063,716 of common units of CWGS, LLC at carrying value, as the CWH BR Merger was considered to be a transaction between entities under common control.

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).

Immediately following the completion of the Reorganization Transactions and IPO, CWH owned 22.6% of CWGS, LLC and the remaining 77.4% of CWGS, LLC was owned by the Continuing Equity Owners (see Note 14 — Non-Controlling Interests). As a result of the Reorganization Transactions, CWH became the sole managing member of CWGS, LLC and, although CWH had a minority economic interest in CWGS, LLC, CWH had the sole voting power in, and controlled 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.

As the Reorganization Transactions are considered transactions between entities under common control, the financial statements for periods prior to the IPO and Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes. See the Company’s Annual Report for further details.

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2017 Public Offering

On May 31, 2017, the Company completed a public offering (the “2017 Public Offering”) in which the Company sold 4,000,000 shares of the Company’s Class A common stock at a public offering price of $27.75 per share. The Company received $106.6 million in proceeds, net of underwriting discounts and commissions, which were used to purchase 4,000,000 newly-issued common units from CWGS, LLC at a price per unit equal to the public offering price per share of Class A common stock in the 2017 Public Offering, less underwriting discounts and commissions. In addition, on June 5, 2017, the underwriters exercised their option to purchase an additional 600,000 shares of Class A common stock. On June 9, 2017, the Company closed on the purchase of the additional 600,000 shares of Class A common stock and received $16.0 million in additional proceeds, net of underwriting discounts and commissions, which were used to purchase 600,000 newly-issued common units from CWGS, LLC at a price per unit equal to the public offering price per share of Class A common stock in the 2017 Public Offering, less underwriting discounts and commissions.

In the same 2017 Public Offering, CVRV Acquisition LLC and CVRV Acquisition II LLC (“Selling Stockholders”), each affiliates of Crestview, sold 5,500,000 shares of the Company’s Class A common stock at the same public offering price of $27.75 per share. The Selling Stockholders redeemed 4,323,083 common units of CWGS, LLC for 4,323,083 shares of Class A common stock, which they sold in the 2017 Public Offering along with 1,176,917 shares of Class A shares that they already held as a result of the Reorganization Transactions. Pursuant to the terms of the LLC Agreement, 4,323,083 shares of the Company’s Class B common stock registered in the name of the Selling Stockholders were cancelled for no consideration on a one-for-one basis with the number of common units redeemed. In addition, on June 5, 2017, the underwriters exercised their option to purchase an additional 825,000 shares of Class A common stock from the Selling Stockholders, in conjunction with their exercise of their option to purchase the additional 600,000 shares from the Company as described above. On June 9, 2017, the Selling Stockholders closed on the sale of the additional 825,000 shares of Class A common stock. The Selling Stockholders redeemed 648,462 common units of CWGS, LLC for 648,462 shares of Class A common stock, which they sold in the 2017 Public Offering along with 176,538 shares of Class A shares that they already held as a result of the Reorganization Transactions. Pursuant to the terms of the LLC Agreement, 648,462 shares of the Company’s Class B common stock registered in the name of the Selling Stockholders were cancelled for no consideration on a one-for-one basis with the number of common units redeemed. The Company did not receive any proceeds relating to the sale of the Selling Stockholders’ shares.

14. Non-Controlling Interests

In connection with the Reorganization Transactions, described in Note 13 — Stockholders’ Equity, CWH became 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 June 30, 2017 and December 31, 2016, CWGS, LLC had positive and negative net assets, respectively, which resulted in positive and negative non-controlling interest amounts, respectively, on the Unaudited Condensed Consolidated Balance Sheets.

As of June 30, 2017 and December 31, 2016, there were 88,371,972 and 83,771,830 common units of CWGS, LLC outstanding, respectively, of which CWH owned 29,061,420 and 18,935,916 common units of CWGS, LLC, respectively, representing 32.9% and 22.6% ownership interests in CWGS, LLC, respectively, and the Continuing Equity Owners owned 59,310,552 and 64,835,914 common units of CWGS, LLC, respectively, representing 67.1% and 77.4% ownership interests in CWGS, LLC, respectively.

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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)	2017		2016		2017		2016
Net income attributable to Camping World Holdings, Inc.	$	19,405	$	83,406	$	26,858	$	121,186
Transfers to non-controlling interests:
Decrease in additional paid-in capital as a result of the purchase of common units from CWGS, LLC		(53,648)		—		(53,648)		—
Decrease in additional paid-in capital as a result of the vesting of restricted stock units		—		—		—		—
Increase in additional paid-in capital as a result of the redemption of common units of CWGS, LLC		55,508		—		55,623		—
Change from net income attributable to Camping World Holdings, Inc. and transfers to non-controlling interests	$	21,265	$	83,406	$	28,833	$	121,186

15. 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)	2017		2016		2017		2016
Equity-based compensation expense:
Costs applicable to revenue	$	81	$	—	$	173	$	—
Selling, general, and administrative		788		60		1,415		60
Total equity-based compensation expense	$	869	$	60	$	1,588	$	60

The following table summarizes stock option activity for the six months ended June 30, 2017:


	Stock Options
	(in thousands)
Outstanding at December 31, 2016		1,118
Granted		—
Exercised		—
Forfeited		(45)
Cancelled		—
Outstanding at June 30, 2017		1,073

The following table summarizes restricted stock unit activity for the six months ended June 30, 2017:


	Restricted
	Stock Units
	(in thousands)
Outstanding at December 31, 2016		144
Granted		223
Vested		—
Forfeited		(4)
Cancelled		—
Outstanding at June 30, 2017		363

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16. 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.

As described in Note 13 — Stockholders’ Equity, on October 6, 2016, the LLC Agreement was amended and restated to, among other things, (i) provide for a new single class of common membership interests, the common units of CWGS, LLC, and (ii) exchange all of the then-existing membership interests of the Original Equity Owners for common units of CWGS, LLC. This Recapitalization changed the relative membership rights of the Original Equity Owners such that retroactive application of the Recapitalization to periods prior to the IPO for the purposes of calculating earnings per share would not be appropriate.

Prior to the IPO, the CWGS, LLC membership structure included membership units, preferred units, and Profits Units. During the period of September 30, 2014 to October 6, 2016, there were 70,000 preferred units outstanding that received a total preferred return of $2.1 million per quarter in addition to their proportionate share of distributions made to all members of CWGS, LLC. The Company analyzed the calculation of earnings per unit for periods prior to the IPO using the two-class method and determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements. Therefore, earnings per share information has not been presented for periods prior to the IPO on October 6, 2016.

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		Six Months
	Ended		Ended
	June 30,		June 30,
(In thousands except per share amounts)	2017		2017
Numerator:
Net income	$	105,322	$	154,763
Less: net income attributable to non-controlling interests		(85,917)		(127,905)
Net income attributable to Camping World Holdings, Inc. — basic		19,405		26,858
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		—		78,193
Net income attributable to Camping World Holdings, Inc. — diluted	$	19,405	$	105,051
Denominator:
Weighted-average shares of Class A common stock outstanding — basic		22,977		20,973
Dilutive common units of CWGS, LLC that are convertible into Class A common stock		—		63,700
Weighted-average shares of Class A common stock outstanding — diluted		22,977		84,673

Earnings per share of Class A common stock — basic	$	0.84	$	1.28
Earnings per share of Class A common stock — diluted	$	0.84	$	1.24

For the three and six months ended June 30, 2017, 1.1 million stock options and 0.2 million restricted stock units were excluded from the weighted-average in the computation of diluted earnings per share of Class A common stock because the effect would have been anti-dilutive. For the three months ended June 30, 2017, 62.6 million common units of CWGS, LLC were also excluded from the weighted-average in the computation of diluted earnings per share of Class A common stock because the effect would have been anti-dilutive.

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.

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17. Segments Information

We have two reportable segments: (1) Consumer Services and Plans, and (2) Retail. The Company’s Consumer Services and Plans segment is comprised of emergency roadside assistance; property and casualty insurance programs; travel assist programs; extended vehicle service contracts; co-branded credit cards; vehicle financing and refinancing; membership clubs; and publications and directories. The Company’s Retail segment is comprised of new vehicles; used vehicles; parts and service; finance and insurance; and marine and watersports products. Corporate and other is comprised of the corporate operations of the Company.

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 its Chief Executive Officer.

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


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
($ in thousands)	2017		2016		2017		2016
Revenue:
Consumer Services and Plans	$	48,103	$	45,428	$	98,349	$	90,426
Retail		1,234,564		1,022,427		2,068,133		1,775,177
Total consolidated revenue	$	1,282,667	$	1,067,855	$	2,166,482	$	1,865,603


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
($ in thousands)	2017		2016		2017		2016
Segment income (1):
Consumer Services and Plans	$	23,959	$	22,503	$	50,212	$	44,101
Retail		117,271		82,204		163,267		118,016
Total segment income		141,230		104,707		213,479		162,117
Corporate & other		(3,483)		(711)		(4,424)		(1,329)
Depreciation and amortization		(7,584)		(6,034)		(14,437)		(11,925)
Other interest expense, net		(10,557)		(12,577)		(19,961)		(25,325)
Other income (expense), net		—		—		17		(2)
Income from operations before income taxes	$	119,606	$	85,385	$	174,674	$	123,536

(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)	2017		2016		2017		2016
Depreciation and amortization:
Consumer Services and Plans	$	1,005	$	932	$	2,001		1,851
Retail		6,464		5,102		12,321		10,074
Total		7,469		6,034		14,322		11,925
Corporate & other		115		—		115		—
Total depreciation and amortization	$	7,584	$	6,034	$	14,437	$	11,925

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	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
($ in thousands)	2017		2016		2017		2016
Other interest expense, net:
Consumer Services and Plans	$	2	$	4	$	4	$	8
Retail		1,360		1,376		2,952		2,768
Total		1,362		1,380		2,956		2,776
Corporate & other		9,195		11,197		17,005		22,549
Total interest expense	$	10,557	$	12,577	$	19,961	$	25,325


	June 30,		December 31,
($ in thousands)	2017		2016
Assets:
Consumer Services and Plans	$	116,233	$	152,689
Retail		1,762,936		1,235,250
Total		1,879,169		1,387,939
Corporate & other		387,247		175,826
Total assets	$	2,266,416	$	1,563,765

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. 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, “Cautionary Note Regarding Forward-Looking Statements” 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, 2017, our most recently completed fiscal quarter. Additionally, references herein to the approximately 9 million U.S. households that own a recreational vehicle ("RV") are based on The RV Consumer in 2011, an industry report published by the University of Michigan in 2011 (the "RV Survey"), which we believe to be the most recent such survey.

Overview

We believe we are the only provider of a comprehensive portfolio of services, protection plans, products, and resources for RV enthusiasts. Approximately 9 million households in the United States own an RV, and of that installed base, we had approximately 3.5 million Active Customers at June 30, 2017, excluding the impact of the acquisition of Gander Mountain and Overton’s in May 2017 (“Gander Mountain Acquisition”). As of the date of consummation of the Gander Mountain Acquisition, Gander Mountain and Overton’s had an additional 2.5 million unique Active Customers that do not overlap with the 3.5 million Active Customers noted above. We expect to operate significantly fewer retail locations than Gander Mountain operated prior to its bankruptcy. Therefore, we would anticipate that the favorable impact on our Active Customer count from the Gander Mountain Acquisition over time would be approximately 0.7 million to 1.5 million. We generate recurring revenue by providing RV owners and outdoor enthusiasts the full spectrum of services, protection plans, products, and resources that we believe are essential to operate, maintain, and protect their RV and to enjoy the RV and outdoor lifestyles. We provide these offerings through our two iconic

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brands, Good Sam and Camping World, and following the Gander Mountain Acquisition, Gander Mountain and Overton’s.

We believe our Good Sam branded offerings provide the industry’s broadest and deepest range of services, protection plans, products, and resources, including: extended vehicle service contracts and insurance protection plans, roadside assistance, membership clubs, and financing products. A majority of these programs are on a multi‑year or annually renewable basis.

Our Camping World brand operates the largest national network of RV‑centric retail locations in the United States through our 137 retail locations in 36 states, as of June 30, 2017, and through our e‑commerce platforms. We believe we are significantly larger in scale than our next largest competitor. We provide new and used RVs, repair parts, RV accessories and supplies, RV repair and maintenance services, protection plans, travel assistance plans, RV financing, and lifestyle products and services for new and existing RV owners. Our retail locations are staffed with knowledgeable local team members, providing customers access to extensive RV expertise. Our Overton’s brand operates two stores in one state and provides marine and watersport accessories and supplies. Our Camping World retail locations are strategically located in key national RV markets.

We attract new customers primarily through our retail locations, e‑commerce platforms, and direct marketing. Once we acquire our customers through a transaction, they become part of our customer database where we leverage customized customer relationship management (“CRM”) tools and analytics to actively engage, market, and sell multiple products and services. Our goal is to consistently grow our customer database through our various channels to increasingly cross‑sell our products and services.

Segments

We identify our reporting segments based on the organizational units used by management to monitor performance and make operating decisions. We have identified two reporting segments: (a) Consumer Services and Plans and (b) Retail. We provide our consumer services and plans offerings through our Good Sam brand and we provide our retail offerings through our Camping World brand. Within the Consumer Services and Plans segment, we primarily derive revenue from the sale of the following offerings: emergency roadside assistance; property and casualty insurance programs; travel assist programs; extended vehicle service contracts; co‑branded credit cards; vehicle financing and refinancing; club memberships; and publications and directories. Within the Retail segment, we primarily derive revenue from the sale of the following products: new vehicles; used vehicles; parts and service, including RV accessories and supplies; finance and insurance; and marine and watersports products. See Note 17 — Segment Information to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

Growth Strategies and Outlook

We believe the savings RVs offer on a variety of vacation costs, an increase in the pool of potential RV customers due to an aging baby boomer demographic, and the increased RV ownership among younger consumers should continue to grow the installed base of RV owners, and will have a positive impact on RV usage.

We plan to take advantage of these positive trends in RV usage to pursue the following strategies to continue to grow our revenue and profits:

Grow our Active Base of Customers. We believe our strong brands, leading market position, ongoing investment in our service platform, broad product portfolio, and full suite of resources will continue to provide us with competitive advantages in targeting and capturing a larger share of consumers with whom we do not currently transact in addition to the growing number of new RV

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and outdoor enthusiasts that are expected to enter the market. We expect to continue to grow the Active Customer base primarily through three strategies:

Targeted Marketing: We continuously work to attract new customers to our existing retail and online locations through targeted marketing, attractive introductory offerings, and access to our wide array of resources for RV and outdoor enthusiasts.

Greenfield Retail Locations: We establish retail locations in new and existing markets to expand our customer base. Target markets and locations are identified by employing proprietary data and analytical tools.

Retail Location Acquisitions: The RV dealership industry is highly fragmented with a large number of independent RV dealers. We use acquisitions of independent dealers as a fast and capital efficient alternative to new retail location openings to expand our business and grow our customer base.

Cross‑Sell Products and Services. We believe our customer database of over 18 million unique contacts, including the impact of the Gander Mountain Acquisition, provides us with the opportunity to continue our growth through the cross‑selling of our products and services. We use our customized CRM system and database analytics to proactively market and cross‑sell to Active Customers. We also seek to increase the penetration of our customers who exhibit higher multi‑product attachment rates.

New Products and Vertical Acquisitions. Introduction of new products enhances our cross‑selling effort, both by catering to evolving customer demands and by bringing in new customers. Through relationships with existing suppliers and through acquisitions, we will look to increase the new products we can offer to our customers. Similarly, an opportunistic vertical acquisition strategy allows us to earn an increased margin on our services, protection plans, and products, and we evaluate such acquisitions that can allow us to capture additional sales from our customers at attractive risk‑adjusted returns.

As discussed in Note 9 — Acquisitions to our unaudited consolidated financial statements included in Part I, Item 1 of this Form 10-Q, we have committed to exercise Designation Rights and take an assignment of no fewer than 15 Gander Mountain retail leases on or before the Designation Rights expire on October 6, 2017, in addition to the two Overton’s retail leases assumed at the closing of the Gander Mountain Acquisition. Contingent on our final lease negotiations, our current plan is to open the initial 15 to 20 Gander Mountain stores, which will be rebranded as Gander Outdoors, by the end of 2017, another 15 to 20 stores in the first few months of 2018, and an additional 15 to 30 stores during the balance of 2018, with measured growth thereafter. We currently expect to assume 15 Gander Mountain leases through the exercise of Designation Rights and entering into new leases for the other locations following the rejection of leases by Gander Mountain. As a result, we will begin to incur meaningful incremental expenses without the benefit of the full revenue as we begin to ramp the Gander Outdoors business and open stores.

As discussed below under “— Liquidity and Capital Resources,” we believe that our sources of liquidity and capital will be sufficient to take advantage of these positive trends in RV usage and finance our growth strategy, including the Gander Mountain Acquisition. However, the operation of our business, the rate of our expansion and our ability to respond to changing business and economic conditions depend on the availability of adequate capital, which in turn typically depends on cash flow generated by our business and, if necessary, the availability of equity or debt capital. In addition, as we grow, we will face the risk that our existing resources and systems, including management resources, accounting and finance personnel, and operating systems, may be inadequate to support our growth. Any inability to generate sufficient cash flows from operations or raise additional equity or debt capital or retain the personnel or make the other changes in our systems that may be required to support our growth could have a material adverse effect on our business, financial condition and results of operations. See “Risk Factors — Risks Related to our Business — Our ability to operate and expand our business and to respond to changing business and economic conditions will depend on the availability of adequate capital” and “Risk Factors — Risks Related to our Business — Our expansion into new, unfamiliar markets presents increased risks that may prevent us from being profitable in

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these new markets. Delays in opening or acquiring new retail locations could have a material adverse effect on our business, financial condition and results of operations” included in Part I, Item 1A of our Annual Report.

How We Generate Revenue

Revenue across each of our two reporting segments is impacted by the following key revenue drivers:

Number of Active Customers. As of June 30, 2017 and December 31, 2016, we had approximately 3.5 million and 3.3 million Active Customers, respectively, excluding the impact of the Gander Mountain Acquisition. As discussed above, we estimate that the favorable impact on our Active Customer count from the Gander Mountain Acquisition over time will be approximately 0.7 million to 1.5 million. Our Active Customer base is an integral part of our business model and has a significant effect on our revenue. We attract new customers to our business primarily through our retail locations. Once we acquire our customers through a transaction, they become part of our customer database where we use CRM tools to cross‑sell Active Customers additional products and services.

Consumer Services and Plans. The majority of our consumer services and plans, such as our roadside assistance, extended service contracts, insurance programs, travel assist, and our Good Sam and Coast to Coast clubs, are built on a recurring revenue model. A majority of these programs are on a multi‑year or annually renewable basis and have annualized fees typically ranging from $20 to $5,200. We believe that many of these products and services are essential for our customers to operate, maintain and protect their RVs, and to enjoy the RV lifestyle, resulting in attractive annual retention rates. As we continue to grow our consumer services and plans business, we expect to further enhance our visibility with respect to revenue and cash flow, and increase our overall profitability. As of June 30, 2017 and December 31, 2016, we had 1.8 million and 1.8 million club members in our Good Sam and Coast to Coast clubs, respectively.

Retail Locations. We open new retail locations through organic growth and acquisitions. Our new retail locations are one of the primary ways in which we attract new customers to our business. Our retail locations typically offer our full array of products and services, including new and used RVs, RV financing, protection plans, a selection of OEM and aftermarket repair parts, RV accessories, RV maintenance products, supplies, and outdoor lifestyle products. For the three months ended June 30, 2017 and 2016, we opened one and zero greenfield, acquired ten and zero retail locations, and acquired two and zero Overton’s locations, respectively. For the six months ended June 30, 2017 and 2016, we opened one and one greenfield location, acquired fourteen and four retail locations, and acquired two and zero Overton’s locations, respectively.

Same store sales. Same store sales measure the performance of a retail location during the current reporting period against the performance of the same retail location in the corresponding period of the previous year. Same store sales calculations for a given period include only those stores that were open both at the end of corresponding period and at the beginning of the preceding fiscal year.

Same store sales growth is driven by increases in the number of transactions and the average transaction price. In addition to attracting new customers and cross‑selling our consumer services and plans, we also drive our sales through new product introductions, including our private label offerings. Although growth in same store sales drives our overall revenue, we have and will continue to experience volatility in same store sales from period to period, mainly due to changes in our product sales mix. Our product mix in any period is principally impacted by the number and mix of new or used RVs that we sell due to the high price points of these products compared to our other retail products and the range of price points among the types of RVs sold.

As of June 30, 2017 and 2016, we had, respectively, a base of 115 and 107 same stores, of which 17 of those same stores did not include dealerships. For the three months ended June 30, 2017 and 2016, our aggregate same store sales were $1,057.4 million and $956.0 million, respectively. For the six months ended June 30, 2017 and 2016, our aggregate same store sales were $1,829.0 million and $1,659.8 million,

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respectively. As of June 30, 2017 and 2016, we had, respectively, a total of 137 and 120 Camping World retail locations and two and zero Overton’s locations.

Other Key Performance Indicators

Gross Profit and Gross Margins. Gross profit is our total revenue less our total costs applicable to revenue. Our total costs applicable to revenue primarily consists of the cost of goods and cost of sales. Gross margin is gross profit as a percentage of revenue.

Our gross profit is variable in nature and generally follows changes in our revenue. While gross margins for our Retail segment are lower than our gross margins for our Consumer Services and Plans segment, our Retail segment generates significant gross profit and is a primary means of acquiring new customers, to which we then cross‑sell our higher margin products and services with recurring revenue. We believe the overall growth of our Retail segment will allow us to continue to drive growth in gross profits due to our ability to cross‑sell our consumer services and plans to our increasing Active Customer base. For the three months ended June 30, 2017 and 2016, gross profit was $27.5 million and $26.2 million, respectively, and gross margin was 57.3% and 57.7%, respectively, for our Consumer Services and Plans segment, and gross profit was $345.3 million and $273.3 million, respectively, and gross margin was 28.0% and 26.7%, respectively, for our Retail segment. For the six months ended June 30, 2017 and 2016, gross profit was $56.6 million and $51.3 million, respectively, and gross margin was 57.6% and 56.7%, respectively, for our Consumer Services and Plans segment, and gross profit was $567.9 million and $470.5 million, respectively, and gross margin was 27.5% and 26.5%, respectively, for our Retail segment.

SG&A as a percentage of Gross Profit. Selling, general and administrative (“SG&A”) expenses as a percentage of gross profit allows us to monitor our expense control over a period of time. SG&A consists primarily of wage‑related expenses, selling expenses related to commissions and advertising, lease expenses and corporate overhead expenses. We calculate SG&A expenses as a percentage of gross profit by dividing SG&A expenses for the period by total gross profit. For the three months ended June 30, 2017 and 2016, SG&A as a percentage of gross profit was 61.3% and 63.6%, respectively. For the six months ended June 30, 2017 and 2016, SG&A as a percentage of gross profit was 64.7% and 67.2%, respectively. We expect SG&A expenses to increase as we open new retail locations through organic growth and acquisitions, which we also expect will drive increases in revenue and gross profit. Additionally, we expect that our SG&A expenses will increase in future periods in part due to additional legal, accounting, insurance and other expenses that we expect to incur as a result of being a public company, including compliance with the Sarbanes‑Oxley Act and the related rules and regulations.

Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin are some of the primary metrics management uses to evaluate the financial performance of our business. Adjusted EBITDA and Adjusted EBITDA Margin are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry. We use Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance as follows:

as a measurement of operating performance to assist us in comparing the operating performance of our business on a consistent basis, and remove the impact of items not directly resulting from our core operations;

for planning purposes, including the preparation of our internal annual operating budget and financial projections;

to evaluate the performance and effectiveness of our operational strategies; and

to evaluate our capacity to fund capital expenditures and expand our business.

We define Adjusted EBITDA as net income before other interest expense (excluding floor plan interest expense), provision for income taxes, depreciation and amortization, loss (gain) and expense on debt restructure, loss (gain) on sale of assets and disposition of stores, monitoring fees, equity-based compensation, an adjustment to rent on right to use assets and other unusual or one‑time items. We calculate

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Adjusted EBITDA Margin by dividing Adjusted EBITDA by total revenue for the period. Adjusted EBITDA and Adjusted EBITDA Margin are not GAAP measures of our financial performance and should not be considered as alternatives to net income or net income margin, respectively, as measures of financial performance, or any other performance measure derived in accordance with GAAP. Adjusted EBITDA and Adjusted EBITDA Margin should not be construed as an inference that our future results will be unaffected by unusual or non‑recurring items. Additionally, Adjusted EBITDA and Adjusted EBITDA Margin are not intended to be a measure of discretionary cash to invest in the growth of our business, as it does not reflect tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future, including, among other things, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. Management compensates for these limitations by relying on our GAAP results in addition to using Adjusted EBITDA and Adjusted EBITDA Margin supplementally. Our measure of Adjusted EBITDA is not necessarily comparable to similarly titled captions of other companies due to different methods of calculation. For a reconciliation of Adjusted EBITDA to net income, a reconciliation of Adjusted EBITDA Margin to net income margin, and a further discussion of how we utilize this non-GAAP financial measure, see “Non-GAAP Financial Measures” below.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”), we use the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Pro Forma Net Income, and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share (collectively the "Non-GAAP Financial Measures"). We believe that these Non-GAAP Financial Measures, when used in conjunction with GAAP financial measures, provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to the key metrics we use in our financial and operational decision making. These non-GAAP measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and they should not be construed as an inference that the Company’s future results will be unaffected by any items adjusted for in these non-GAAP measures. In evaluating these non-GAAP measures, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of those adjusted in this presentation. The Non-GAAP Financial Measures that we use are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

We define “EBITDA” as net income before other interest expense (excluding floor plan interest expense), provision for income taxes and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA further adjusted for the impact of certain non‑cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, loss (gain) and expense on debt restructure, loss (gain) on sale of assets and disposition of stores, gain on derivative instruments, monitoring fees, equity-based compensation, an adjustment to rent on right to use assets, loss (gain) on remeasurement of Tax Receivable Agreement, acquisition related transaction expenses and pre-opening costs, and other unusual or one‑time items. We define “Adjusted EBITDA Margin” as Adjusted EBITDA as a percentage of total revenue. We caution investors that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin in the same manner. We present EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these Non‑GAAP Financial Measures as a reasonable basis for comparing our ongoing results of operations.

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The following table reconciles EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin to the most directly comparable GAAP financial performance measures, which are net income, net income, and net income margin, respectively:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
($ in thousands)	2017		2016		2017		2016
EBITDA:
Net income	$	105,322	$	83,406	$	154,763	$	121,186
Other interest expense, net		10,557		12,577		19,961		25,325
Depreciation and amortization		7,584		6,034		14,437		11,925
Income tax expense		14,284		1,979		19,911		2,350
Subtotal EBITDA		137,747		103,996		209,072		160,786
Loss (gain) on sale of assets (a)		31		(222)		(287)		(246)
Monitoring fee (b)		—		625		—		1,250
Equity-based compensation (c)		869		60		1,588		60
Gain on remeasurement of Tax Receivable Agreement (d)		—		—		(17)		—
Acquisitions - transaction expense (e)		2,100		—		2,100		—
Acquisitions - pre-opening costs (f)		1,351		—		1,351		—
Adjusted EBITDA	$	142,098	$	104,459	$	213,807	$	161,850


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(as percentage of total revenue)	2017		2016		2017		2016
EBITDA margin:
Net income margin		8.2%		7.8%		7.1%		6.5%
Other interest expense, net		0.8%		1.2%		0.9%		1.4%
Depreciation and amortization		0.6%		0.6%		0.7%		0.6%
Income tax expense		1.1%		0.2%		0.9%		0.1%
Subtotal EBITDA margin		10.7%		9.7%		9.7%		8.6%
Loss (gain) on sale of assets (a)		0.0%		(0.0%)		(0.0%)		(0.0%)
Monitoring fee (b)		—		0.1%		—		0.1%
Equity-based compensation (c)		0.1%		0.0%		0.1%		0.0%
Gain on remeasurement of Tax Receivable Agreement (d)		—		—		(0.0%)		—
Acquisition transaction expense (e)		0.2%		—		0.1%		—
Acquisitions - pre-opening costs (f)		0.1%		—		0.1%		—
Adjusted EBITDA margin		11.1%		9.8%		9.9%		8.7%

(a)

Represents an adjustment to eliminate the losses and gains on sales of various assets.

(b)

Represents monitoring fees paid pursuant to a monitoring agreement to Crestview and Stephen Adams. The monitoring agreement was terminated on October 6, 2016 in connection with our initial public offering (our “IPO”).

(c)

Represents non-cash equity-based compensation expense relating to employees and directors of the Company.

(d)

Represents an adjustment to eliminate the gains on remeasurement of the Tax Receivable Agreement primarily due to changes in our effective income tax rate.

(e)

Represents transaction expenses, primarily legal costs, associated with acquisitions into new or complimentary markets, including the Gander Mountain Acquisition. This amount excludes transaction expenses relating to the acquisition of RV dealerships and consumer shows.

(f)

Represents pre-opening store costs, including payroll costs, associated with the Gander Mountain Acquisition.

Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share

We define “Adjusted Pro Forma Net Income” as net income attributable to Camping World Holdings, Inc. adjusted for the reallocation of income attributable to non-controlling interests from the assumed exchange of all outstanding common units in CWGS, LLC (or the common unit equivalent of membership interests in CWGS, LLC for periods prior to the IPO) for shares of newly-issued Class A common stock of Camping World Holdings, Inc. and further adjusted for the impact of certain non‑cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, loss (gain) on debt restructure, loss (gain) and expense on sale of assets and disposition of stores, gain on derivative instruments, monitoring fees, equity-based compensation, an adjustment to rent on right to use assets, loss (gain) on remeasurement of Tax Receivable Agreement, interest expense on our Series B notes, acquisition related transaction expenses and pre-opening costs, other unusual or one‑time items, and the income tax expense effect of (i) these adjustments and (ii) the pass-through entity taxable income as if the

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parent company was a subchapter C corporation in periods prior to the IPO. We define “Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share” as Adjusted Pro Forma Net Income divided by the weighted-average shares of Class A common stock outstanding, assuming (i) the full exchange of all outstanding common units in CWGS, LLC (or the common unit equivalent of membership interests in CWGS, LLC for periods prior to the IPO) for newly-issued shares of Class A common stock of Camping World Holdings, Inc., (ii) the Class A common stock issued in connection with the IPO was outstanding as of January 1 of each year presented, and (iii) the dilutive effect of stock options and restricted stock units, if any. We present Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share because we consider them to be important supplemental measures of our performance and we believe that investors’ understanding of our performance is enhanced by including these Non‑GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.

The following table reconciles Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share to the most directly comparable GAAP financial performance measure, which is net income attributable to Camping World Holdings, Inc. and weighted-average shares of Class A common stock outstanding — diluted:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(In thousands except per share amounts)	2017		2016		2017		2016
Numerator:
Net income attributable to Camping World Holdings, Inc.	$	19,405	$	83,406	$	26,858	$	121,186
Adjustments:
Reallocation of net income attributable to non-controlling interests from the assumed exchange of common units of CWGS, LLC (a)		85,917		—		127,905		—
Loss (gain) on sale of assets (b)		31		(222)		(287)		(246)
Monitoring fee (c)		—		625		—		1,250
Equity-based compensation expense (d)		869		60		1,588		60
Gain on remeasurement of Tax Receivable Agreement (e)		—		—		(17)		—
Acquisitions - transaction expense (f)		2,100		—		2,100		—
Acquisitions - pre-opening costs (g)		1,351		—		1,351		—
Income tax expense (h)		(31,963)		(29,000)		(50,212)		(45,778)
Adjusted pro forma net income	$	77,710	$	54,869	$	109,286	$	76,472
Denominator:
Weighted-average Class A common shares outstanding - diluted		22,977		—		84,673		—
Adjustments:
Assumed exchange of pre-IPO common unit equivalent of membership interests in CWGS, LLC (i)		—		71,924		—		72,288
Assumed issuance of Class A common stock in connection with IPO (j)		62,586		11,872		—		11,872
Dilutive options to purchase Class A common stock		56		—		101		—
Dilutive restricted stock units		61		—		59		—
Adjusted pro forma fully exchanged weighted average Class A common shares outstanding - diluted		85,680		83,796		84,833		84,160
Adjusted pro forma earnings per fully exchanged and diluted share	$	0.91	$	0.65	$	1.29	$	0.91

(a)

Represents the reallocation of net income attributable to non-controlling interests from the assumed exchange of common units of CWGS, LLC in periods where income was attributable to non-controlling interests.

(b)

Represents an adjustment to eliminate the losses and gains on sales of various assets.

(c)

Represents monitoring fees paid pursuant to a monitoring agreement to Crestview and Stephen Adams. The monitoring agreement was terminated on October 6, 2016 in connection with our IPO.

(d)

Represents non-cash equity-based compensation expense relating to employees and directors of the Company.

(e)

Represents an adjustment to eliminate the gains on remeasurement of the Tax Receivable Agreement primarily due to changes in our effective income tax rate.

(f)

(g)

Represents pre-opening store costs, including payroll costs, associated with the Gander Mountain Acquisition.

(h)

Represents the income tax expense effect of (i) the above adjustments and (ii) the pass-through entity taxable income as if the parent company was a subchapter C corporation in periods prior to the IPO. This assumption uses an effective tax rate of 38.5% for the adjustments and the pass-through entity taxable income in periods prior to the IPO.

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(i)

Represents the assumed exchange of pre-IPO membership interests in CWGS, LLC at their common unit equivalent amount.

(j)

Represents the assumption that the shares of Class A common stock issued in connection with the IPO were outstanding as of January 1 of each period.

Uses and Limitations of Non-GAAP Financial Measures

Management and our board of directors use the Non-GAAP Financial Measures:

as a measurement of operating performance because they assist us in comparing the operating performance of our business on a consistent basis, as they remove the impact of items not directly resulting from our core operations;

for planning purposes, including the preparation of our internal annual operating budget and financial projections;

to evaluate the performance and effectiveness of our operational strategies; and

to evaluate our capacity to fund capital expenditures and expand our business.

By providing these Non‑GAAP Financial Measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. In addition, our Existing Senior Secured Credit Facilities use EBITDA to measure our compliance with covenants such as consolidated leverage ratio. The Non-GAAP Financial Measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to or a substitute for, net income or other financial statement data presented in our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q as indicators of financial performance. Some of the limitations are:

such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

such measures do not reflect changes in, or cash requirements for, our working capital needs;

some of such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

some of such measures do not reflect our tax expense or the cash requirements to pay our taxes;

although depreciation and amortization are non‑cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and

other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.

Due to these limitations, the Non-GAAP Financial Measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these Non‑GAAP Financial Measures only supplementally. As noted in the tables above, certain of the Non-GAAP Financial Measures include adjustments for loss (gain) on debt restructure, loss (gain) on sale of assets and disposition of stores, gain on derivative instruments, monitoring fees, equity-based compensation, an adjustment to rent on right to use assets, loss (gain) on remeasurement of Tax Receivable Agreement, acquisition related transaction expenses and pre-opening costs, other unusual or one‑time items, and the income tax expense effect described above, as applicable. It is reasonable to expect that certain of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our

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internal operating results and operating results of other companies over time. In addition, these certain Non-GAAP Financial Measures adjust for other items that we do not expect to regularly record in periods after the IPO, including monitoring fees. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation tables above help management with a measure of our core operating performance over time by removing items that are not related to day‑to‑day operations.

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Results of Operations

Three and Six Months Ended June 30, 2017 Compared to Three and Six Months Ended June 30, 2016

The following table sets forth information comparing the components of net income for the three and six months ended June 30, 2017 and 2016:


	Three Months Ended									Six Months Ended
	June 30, 2017			June 30, 2016						June 30, 2017			June 30, 2016
			Percent of			Percent of	Favorable/ (Unfavorable)					Percent of			Percent of	Favorable/ (Unfavorable)
($ in thousands)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%

Revenue:
Consumer Services and Plans	$	48,103	3.8%	$	45,428	4.3%	$	2,675	5.9%	$	98,349	4.5%	$	90,426	4.8%	$	7,923	8.8%
Retail
New vehicles		762,876	59.5%		578,289	54.2%		184,587	31.9%		1,267,462	58.5%		987,765	52.9%		279,697	28.3%
Used vehicles		196,522	15.3%		216,526	20.3%		(20,004)	-9.2%		342,993	15.8%		395,289	21.2%		(52,296)	-13.2%
Parts, services and other		174,196	13.6%		157,742	14.8%		16,454	10.4%		290,419	13.4%		271,226	14.5%		19,193	7.1%
Finance and insurance, net		100,970	7.9%		69,870	6.5%		31,100	44.5%		167,259	7.7%		120,897	6.5%		46,362	38.3%
Subtotal		1,234,564	96.2%		1,022,427	95.7%		212,137	20.7%		2,068,133	95.5%		1,775,177	95.2%		292,956	16.5%
Total revenue		1,282,667	100.0%		1,067,855	100.0%		214,812	20.1%		2,166,482	100.0%		1,865,603	100.0%		300,879	16.1%

Gross profit (exclusive of depreciation and amortization shown separately below):
Consumer Services and Plans		27,543	2.1%		26,191	2.5%		1,352	5.2%		56,642	2.6%		51,308	2.8%		5,334	10.4%
Retail
New vehicles		112,026	8.7%		83,130	7.8%		28,896	34.8%		178,464	8.2%		141,758	7.6%		36,706	25.9%
Used vehicles		53,025	4.1%		45,592	4.3%		7,433	16.3%		88,353	4.1%		79,267	4.2%		9,086	11.5%
Parts, services and other		79,245	6.2%		74,701	7.0%		4,544	6.1%		133,873	6.2%		128,550	6.9%		5,323	4.1%
Finance and insurance, net		100,970	7.9%		69,870	6.5%		31,100	44.5%		167,259	7.7%		120,897	6.5%		46,362	38.3%
Subtotal		345,266	26.9%		273,293	25.6%		71,973	26.3%		567,949	26.2%		470,472	25.2%		97,477	20.7%
Total gross profit		372,809	29.1%		299,484	28.0%		73,325	24.5%		624,591	28.8%		521,780	28.0%		102,811	19.7%

Operating expenses:
Selling, general and administrative expenses		228,444	17.8%		190,323	17.8%		(38,121)	-20.0%		403,934	18.6%		350,711	18.8%		(53,223)	-15.2%
Depreciation and amortization		7,584	0.6%		6,034	0.6%		(1,550)	-25.7%		14,437	0.7%		11,925	0.6%		(2,512)	-21.1%
Gain on asset sales		31	0.0%		(224)	0.0%		(255)	-113.8%		(287)	0.0%		(248)	0.0%		39	15.7%
Income from operations		136,750	10.7%		103,351	9.7%		33,399	32.3%		206,507	9.5%		159,392	8.5%		47,115	29.6%
Other income (expense):
Floor plan interest expense		(6,587)	-0.5%		(5,387)	-0.5%		(1,200)	-22.3%		(11,889)	-0.5%		(10,529)	-0.6%		(1,360)	-12.9%
Other interest expense, net		(10,557)	-0.8%		(12,577)	-1.2%		2,020	16.1%		(19,961)	-0.9%		(25,325)	-1.4%		5,364	21.2%
Other income, net		—	0.0%		(2)	0.0%		2	-100.0%		17	0.0%		(2)	0.0%		19	-950.0%
		(17,144)	-1.3%		(17,966)	-1.7%		822	4.6%		(31,833)	-1.5%		(35,856)	-1.9%		4,023	11.2%
Income before income taxes		119,606	9.3%		85,385	8.0%		34,221	40.1%		174,674	8.1%		123,536	6.6%		51,138	41.4%
Income tax expense		(14,284)	-1.1%		(1,979)	-0.2%		(12,305)	-621.8%		(19,911)	-0.9%		(2,350)	-0.1%		(17,561)	-747.3%
Net income		105,322	8.2%		83,406	7.8%		21,916	26.3%		154,763	7.1%		121,186	6.5%		33,577	27.7%
Less: net income attributable to non-controlling interests		(85,917)	-6.7%		—	0.0%		(85,917)	-100.0%		(127,905)	-5.9%		—	0.0%		(127,905)	-100.0%
Net income attributable to Camping World Holdings, Inc.	$	19,405	1.5%	$	83,406	7.8%	$	(64,001)	-76.7%	$	26,858	1.2%	$	121,186	6.5%	$	(94,328)	-77.8%

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Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Total revenue was $1,282.7 million for the three months ended June 30, 2017, an increase of $214.8 million, or 20.1%, as compared to $1,067.9 million for the three months ended June 30, 2016. The increase was primarily driven by the 38.2% increase in new vehicle unit sales in our Retail segment, partially offset by an 8.4% decrease in used vehicle unit sales primarily due to reduced inventory availability, resulting from fewer trades on new vehicle unit sales, and the distribution of the AutoMatch business in the three months ended June 30, 2016, as described below.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Total revenue was $2,166.5 million for the six months ended June 30, 2017, an increase of $300.9 million, or 16.1%, as compared to $1,865.6 million for the six months ended June 30, 2016. The increase was primarily driven by the 35.3% increase in new vehicle unit sales in our Retail segment, partially offset by a 13.1% decrease in used vehicle unit sales primarily due to reduced inventory availability, resulting from fewer trades on new vehicle unit sales, and the distribution of the AutoMatch business in the three months ended June 30, 2016, as described below.

Consumer Services and Plans

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Consumer Services and Plans revenue was $48.1 million for the three months ended June 30, 2017, an increase of $2.7 million, or 5.9%, as compared to $45.4 million for the three months ended June 30, 2016. The increased revenue was attributable to a $1.5 million increase from our vehicle insurance and Good Sam TravelAssist programs primarily due to increased policies in force; an $0.8 million increase from the roadside assistance programs due to increased policies in force; and $0.4 million of other increases.

Consumer Services and Plans gross profit was $27.5 million for the three months ended June 30, 2017, an increase of $1.4 million, or 5.2%, as compared to $26.2 million for the three months ended June 30, 2016. This increase was primarily due to an increase from our vehicle insurance and Good Sam TravelAssist programs of $1.8 million primarily due to increased policies in force; increased roadside assistance contracts in force and reduced claims, together resulting in a gross profit increase of $0.5 million; partially offset by a decrease from our consumer magazine group of $0.6 million, and a $0.3 million decrease from other ancillary products. Gross margin decreased 40 basis points to 57.3% primarily due to reduced gross margin from consumer magazines partially offset by an increase from the vehicle insurance and Good Sam TravelAssist programs.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Consumer Services and Plans revenue was $98.3 million for the six months ended June 30, 2017, an increase of $7.9 million, or 8.8%, as compared to $90.4 million for the six months ended June 30, 2016. The increased revenue was attributable to a $2.9 million increase from our vehicle insurance and Good Sam TravelAssist programs primarily due to increased policies in force; a $2.3 million increase from our clubs and roadside assistance programs primarily due to increased file size; a $1.5 million increase in consumer show exhibit and admissions revenue resulting from the acquisition of five shows in the fourth quarter of 2016 and our new Good Sam RV Super Show introduced in February 2017; and $1.2 million of other increases.

Consumer Services and Plans gross profit was $56.6 million for the six months ended June 30, 2017, an increase of $5.3 million, or 10.4%, as compared to $51.3 million for the six months ended June 30, 2016. This increase was primarily due to an increase from our vehicle insurance and Good Sam TravelAssist programs of $3.1 million primarily due to increased policies in force; increased roadside assistance contracts in force and reduced claims, together resulting in a gross profit increase of $1.7 million; and an increase from our consumer shows of $0.6 million resulting from the five acquired shows and one new show; partially offset by a $0.1 million decrease from other ancillary products. Gross margin increased 85 basis points to 57.6%

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primarily due to increases from the vehicle insurance programs, and increased contracts in force with reduced program costs for the roadside assistance programs.

Retail:

New Vehicles


	Three Months Ended									Six Months Ended
	June 30, 2017			June 30, 2016			Favorable/			June 30, 2017			June 30, 2016			Favorable/
($ in thousands,			Percent of			Percent of	(Unfavorable)					Percent of			Percent of	(Unfavorable)
except per vehicle data)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%

Revenue	$	762,876	100.0%	$	578,289	100.0%	$	184,587	31.9%	$	1,267,462	100.0%	$	987,765	100.0%	$	279,697	28.3%

Gross profit		112,026	14.7%		83,130	14.4%		28,896	34.8%		178,464	14.1%		141,758	14.4%		36,706	25.9%

New vehicle unit sales		21,930			15,874			6,056	38.2%		35,693			26,385			9,308	35.3%

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

New vehicle revenue was $762.9 million for the three months ended June 30, 2017, an increase of $184.6 million, or 31.9%, as compared to $578.3 million for the three months ended June 30, 2016. The increase was primarily due to a 38.2% increase in new vehicle unit sales primarily attributable to a same store sales increase of 18.6% driven by increases in travel trailers, fifth wheels and Class C motorhome units. The balance of the increase was from new greenfield and acquired locations.

New vehicle gross profit was $112.0 million for the three months ended June 30, 2017, an increase of $28.9 million, or 34.8%, as compared to $83.1 million for the three months ended June 30, 2016. The increase was primarily due to the 38.2% increase in new vehicle unit sales partially offset by a 2.5% decrease in average gross profit per unit resulting from a product mix shift toward lower priced towable units. Gross margin increased to 14.7% from 14.4% in the three months ended June 30, 2016.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

New vehicle revenue was $1,267.5 million for the six months ended June 30, 2017, an increase of $279.7 million, or 28.3%, as compared to $987.8 million for the six months ended June 30, 2016. The increase was primarily due to a 35.3% increase in new vehicle unit sales primarily attributable to a same store sales increase of 18.4% driven by increases in travel trailers, fifth wheels and Class C motorhome units. The balance of the increase was from new greenfield and acquired locations.

New vehicle gross profit was $178.5 million for the six months ended June 30, 2017, an increase of $36.7 million, or 25.9%, as compared to $141.8 million for the six months ended June 30, 2016. The increase was primarily due to the 35.3% increase in new vehicle unit sales partially offset by a 6.9% decrease in average gross profit per unit from a product mix shift toward lower priced towable units. Gross margin decreased to 14.1% from 14.4% for the six months ended June 30, 2016.

Used Vehicles


	Three Months Ended									Six Months Ended
	June 30, 2017			June 30, 2016			Favorable/			June 30, 2017			June 30, 2016			Favorable/
($ in thousands,			Percent of			Percent of	(Unfavorable)					Percent of			Percent of	(Unfavorable)
except per vehicle data)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%

Revenue	$	196,522	100.0%	$	216,526	100.0%	$	(20,004)	-9.2%	$	342,993	100.0%	$	395,289	100.0%	$	(52,296)	-13.2%

Gross profit		53,025	27.0%		45,592	21.1%		7,433	16.3%		88,353	25.8%		79,267	20.1%		9,086	11.5%

Used vehicle unit sales		9,073			9,910			(837)	-8.4%		15,589			17,932			(2,343)	-13.1%

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Used vehicle revenue was $196.5 million for the three months ended June 30, 2017, a decrease of $20.0 million, or 9.2%, as compared to $216.5 million for the three months ended June 30, 2016. The decrease was primarily due to reduced inventory availability, resulting from fewer trades on new vehicle unit

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sales, and the elimination of the automobile unit business as a result of the distribution of the AutoMatch business during the three months ended June 30, 2016, driving an 8.4% decrease in used vehicle unit sales. Same store sales decreased by 10.3% with the remaining decrease driven by the disposition of the AutoMatch business.

Used vehicle gross profit was $53.0 million for the three months ended June 30, 2017, an increase of $7.4 million, or 16.3%, as compared to $45.6 million for the three months ended June 30, 2016. The increase was primarily attributable to increases for nearly all product types and elimination of lower margin auto sales upon the disposition of the AutoMatch business during the second quarter of 2016, resulting in a 27.0% increase in gross profit per unit and a gross margin increase of 593 basis points, partially offset by an 8.4% decrease in vehicle unit sales.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Used vehicle revenue was $343.0 million for the six months ended June 30, 2017, a decrease of $52.3 million, or 13.2%, as compared to $395.3 million for the six months ended June 30, 2016. The decrease was primarily due to reduced inventory availability, resulting from fewer trades on new vehicle unit sales, and the elimination of the automobile unit business as a result of the distribution of the AutoMatch business during the six months ended June 30, 2016, driving a 13.1% decrease in used vehicle unit sales. Same store sales decreased by 10.4% with the remaining decrease driven by the disposition of the AutoMatch business.

Used vehicle gross profit was $88.4 million for the six months ended June 30, 2017, an increase of $9.1 million, or 11.5%, as compared to $79.3 million for the six months ended June 30, 2016. The increase was primarily attributable to increases for nearly all product types and elimination of lower margin auto sales upon the disposition of the AutoMatch business during the second quarter of 2016, resulting in a 28.2% increase in gross profit per unit and a gross margin increase of 571 basis points, partially offset by a 13.1% decrease in vehicle unit sales.

Parts, Services and Other


	Three Months Ended									Six Months Ended
	June 30, 2017			June 30, 2016			Favorable/			June 30, 2017			June 30, 2016			Favorable/
			Percent of			Percent of	(Unfavorable)					Percent of			Percent of	(Unfavorable)
($ in thousands)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%

Revenue	$	174,196	100.0%	$	157,742	100.0%	$	16,454	10.4%	$	290,419	100.0%	$	271,226	100.0%	$	19,193	7.1%

Gross profit		79,245	45.5%		74,701	47.4%		4,544	6.1%		133,873	46.1%		128,550	47.4%		5,323	4.1%

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Parts, services and other revenue was $174.2 million for the three months ended June 30, 2017, an increase of $16.5 million, or 10.4%, as compared to $157.7 million for the three months ended June 30, 2016. The increase was primarily attributable to $8.4 million of revenue from the Overton’s acquisition, increased revenue from the internet and the wholesale channel, increased sales and service hours, related to increased volume of RV units sold, partially offset by a 2.4% decrease in same store sales.

Parts, services and other gross profit was $79.2 million for the three months ended June 30, 2017, an increase of $4.5 million, or 6.1 %, as compared to $74.7 million for the three months ended June 30, 2016. The gross profit increase was primarily due to increased revenue. Gross margin decreased 186 basis points to 45.5% primarily due to merchandise markdowns in the internet business and increased distribution and supply costs.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Parts, services and other revenue was $290.4 million for the six months ended June 30, 2017, an increase of $19.2 million, or 7.1%, as compared to $271.2 million for the six months ended June 30, 2016. The increase was primarily attributable to related to $8.4 million of revenue from the Overton’s acquisitions,

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increased revenue from the internet, the wholesale channel, increased volume of RV units sold, partially offset by a 1.9% decrease in same store sales.

Parts, services and other gross profit was $133.9 million for the six months ended June 30, 2017, an increase of $5.3 million, or 4.1%, as compared to $128.6 million for the six months ended June 30, 2016. The gross profit increase was primarily due to increased revenue. Gross margin decreased 130 basis points to 46.1%. primarily due to merchandise markdowns in the internet business and increased distribution and supply costs.

Finance and Insurance, net


	Three Months Ended									Six Months Ended
	June 30, 2017			June 30, 2016			Favorable/			June 30, 2017			June 30, 2016			Favorable/
			Percent of			Percent of	(Unfavorable)					Percent of			Percent of	(Unfavorable)
($ in thousands)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%

Revenue	$	100,970	100.0%	$	69,870	100.0%	$	31,100	44.5%	$	167,259	100.0%	$	120,897	100.0%	$	46,362	38.3%

Gross profit		100,970	100.0%		69,870	100.0%		31,100	44.5%		167,259	100.0%		120,897	100.0%		46,362	38.3%

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Finance and insurance, net revenue and gross profit were each $101.0 million for the three months ended June 30, 2017, an increase of $31.1 million, or 44.5%, as compared to $69.9 million for the three months ended June 30, 2016. The increase was primarily due to incremental vehicle finance contracts assigned due to higher vehicle unit sales and higher finance and insurance sales penetration rates of travel trailer buyers resulting from a 31.5% increase in same store sales and the remainder from new greenfield and acquired locations. Finance and insurance, net revenue as a percentage of total new and used vehicle revenue increased to 10.5% for the three months ended June 30, 2017 from 8.8% for the comparable period in 2016.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Finance and insurance, net revenue and gross profit were each $167.3 million for the six months ended June 30, 2017, an increase of $46.4 million, or 38.3%, as compared to $120.9 million for the six months ended June 30, 2016. The increase was primarily due to incremental vehicle finance contracts assigned due to higher vehicle unit sales and higher finance and insurance sales penetration rates of travel trailer buyers resulting from a 29.2% increase in same store sales and the remainder from new greenfield and acquired locations. Finance and insurance, net revenue as a percentage of total new and used vehicle revenue increased to 10.4% for the six months ended June 30, 2017 from 8.7% for the comparable period in 2016.

Selling, general and administrative expenses

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Selling, general and administrative expenses were $228.4 million for the three months ended June 30, 2017, an increase of $38.1 million, or 20.0%, as compared to $190.3 million for the three months ended June 30, 2016. The increase was due to increases of $20.1 million of wage-related expenses, primarily attributable to increased vehicle unit sales and the additional greenfield and acquired locations; $6.4 million of additional variable selling expense; $5.8 million of store and corporate overhead expenses; $2.1 million of transaction expenses associated with the acquisitions into new or complementary markets, including the Gander Mountain Acquisition; $1.8 million of additional lease expense; $1.4 million of pre-opening and payroll costs associated with the Gander Mountain acquisition; and $0.5 million of additional professional and service fees. Selling, general and administrative expenses as a percentage of total gross profit was 61.5% for the three months ended June 30, 2017, compared to 63.6% for the three months ended June 30, 2016, a decrease of 207 basis points.

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Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Selling, general and administrative expenses were $403.9 million for the six months ended June 30, 2017, an increase of $53.2 million, or 15.2%, as compared to $350.7 million for the six months ended June 30, 2016. The increase was due to increases of $29.3 million of wage-related expenses, primarily attributable to increased vehicle unit sales and the additional greenfield and acquired locations; $9.0 million of additional variable selling expense; $7.4 million of store and corporate overhead expenses; $3.3 million of additional lease expense; $2.1 million of transaction expenses associated with the acquisitions into new or complementary markets, including the Gander Mountain Acquisition; $1.4 million of pre-opening and payroll costs associated with the Gander Mountain acquisition; and $0.7 million of additional professional and service fees. Selling, general and administrative expenses as a percentage of total gross profit was 64.8% for the six months ended June 30, 2017, compared to 67.2% for the six months ended June 30, 2016, a decrease of 242 basis points.

Depreciation and amortization

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Depreciation and amortization was $7.6 million for the three months ended June 30, 2017, an increase of $1.6 million, or 25.7%, as compared to $6.0 million for the three months ended June 30, 2016 primarily due to the addition of new greenfield and acquired locations.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Depreciation and amortization was $14.4 million for the six months ended June 30, 2017, an increase of $2.5 million, or 21.1%, as compared to $11.9 million for the six months ended June 30, 2016 primarily due to the addition of new greenfield and acquired locations.

Floor plan interest expense

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Floor plan interest expense was $6.6 million for the three months ended June 30, 2017, an increase of $1.2 million, or 22.3%, as compared to $5.4 million for the three months ended June 30, 2016. The increase was primarily due to increased average outstanding amount payable under our Floor Plan Facility for the three months ended June 30, 2017 compared to the three months ended June 30, 2016, primarily resulting from an increased inventory level due to new dealership locations, and locations expecting higher unit sales, partially offset by a 6 basis point decrease in the average floor plan borrowing rate.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Floor plan interest expense was $11.9 million for the six months ended June 30, 2017, an increase of $1.4 million, or 12.9%, as compared to $10.5 million for the six months ended June 30, 2016. The increase was primarily due to increased average outstanding amount payable under our Floor Plan Facility for the six months ended June 30, 2017 compared to the six months ended June 30, 2016, primarily resulting from an increased inventory level due to new dealership locations, and locations expecting higher unit sales, and a 17 basis point increase in the average floor plan borrowing rate.

Other interest expense, net

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Other interest expense, net was $10.6 million for the three months ended June 30, 2017, a decrease of $2.0 million, or 16.1%, as compared to $12.6 million for the three months ended June 30, 2016. The decrease was primarily due to a decrease in interest expense attributable to a decrease in average debt outstanding, and a 91 basis point decrease in the average interest rate.

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Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Other interest expense, net was $20.0 million for the six months ended June 30, 2017, a decrease of $5.4 million, or 21.2%, as compared to $25.3 million for the six months ended June 30, 2016. The decrease was primarily due to a decrease in interest expense attributable to a decrease in average debt outstanding, and a 106 basis point decrease in the average interest rate.

Segment results

The following table sets forth a reconciliation of total segment income to consolidated income from operations before income taxes for each of our segments for the period presented:


	Three Months Ended									Six Months Ended
	June 30, 2017			June 30, 2016			Favorable/			June 30, 2017			June 30, 2016			Favorable/
			Percent of			Percent of	(Unfavorable)					Percent of			Percent of	(Unfavorable)
($ in thousands)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%
Revenue:
Consumer Services and Plans	$	48,103	3.8%	$	45,428	4.3%	$	2,675	5.9%	$	98,349	4.5%	$	90,426	4.8%	$	7,923	8.8%
Retail		1,234,564	96.2%		1,022,427	95.7%		212,137	20.7%		2,068,133	95.5%		1,775,177	95.2%		292,956	16.5%
Total consolidated revenue		1,282,667	100.0%		1,067,855	100.0%		214,812	20.1%		2,166,482	100.0%		1,865,603	100.0%		300,879	16.1%
Segment income: (1)
Consumer Services and Plans		23,959	1.9%		22,503	2.1%		1,456	6.5%		50,212	2.3%		44,101	2.4%		6,111	13.9%
Retail		117,271	9.1%		82,204	7.7%		35,067	42.7%		163,267	7.5%		118,016	6.3%		45,251	38.3%
Total segment income		141,230	11.0%		104,707	9.8%		36,523	34.9%		213,479	9.9%		162,117	8.7%		51,362	31.7%
Corporate & other		(3,483)	-0.3%		(711)	-0.1%		(2,772)	-389.9%		(4,424)	-0.2%		(1,329)	-0.1%		(3,095)	-232.9%
Depreciation and amortization		(7,584)	-0.6%		(6,034)	-0.6%		(1,550)	-25.7%		(14,437)	-0.7%		(11,925)	-0.6%		(2,512)	-21.1%
Other interest expense, net		(10,557)	-0.8%		(12,577)	-1.2%		2,020	16.1%		(19,961)	-0.9%		(25,325)	-1.4%		5,364	21.2%
Other non-operating expense, net		—	0.0%		—	0.0%		—	-100.0%		17	0.0%		(2)	0.0%		19	-100.0%
Income from operations before income taxes	$	119,606	9.3%	$	85,385	8.0%	$	34,221	40.1%	$	174,674	8.1%	$	123,536	6.6%	$	51,138	41.4%

⁽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.

Consumer Services and Plans segment revenue

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Consumer Services and Plans segment revenue was $48.1 million for the three months ended June 30, 2017, an increase of $2.7 million, or 5.9%, as compared to $45.4 million for the three months ended June 30, 2016. The increased revenue was attributable to a $1.5 million increase from our vehicle insurance and Good Sam TravelAssist programs primarily due to increased policies in force; an $0.8 million increase from the roadside assistance programs due to increased policies in force; and $0.4 million of other increases.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Consumer Services and Plans segment revenue was $98.3 million for the six months ended June 30, 2017, an increase of $7.9 million, or 8.8%, as compared to $90.4 million for the six months ended June 30, 2016. The increased revenue was attributable to a $2.9 million increase from our vehicle insurance and Good Sam TravelAssist programs primarily due to increased policies in force; a $2.3 million increase from our clubs and roadside assistance programs primarily due to increased file size; a $1.5 million increase in consumer show exhibit and admissions revenue resulting from the acquisition of five shows in the fourth quarter of 2016 and our new Good Sam RV Super Show introduced in February 2017; and $1.2 million of other increases.

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Retail segment revenue

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Retail segment revenue was $1,234.6 million for the three months ended June 30, 2017, an increase of $212.1 million, or 20.7%, as compared to $1,022.4 million for the three months ended June 30, 2016. The increase was primarily due to the 38.2% increase in new vehicle unit volume which resulted from a 10.6% increase in same store sales, as described below, and the addition of the new greenfield and acquired locations.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Retail segment revenue was $2,068.1 million for the six months ended June 30, 2017, an increase of $293.0 million, or 16.5%, as compared to $1,775.2 million for the six months ended June 30, 2016. The increase was primarily due to the 35.3% increase in new vehicle unit volume which resulted from a 10.2% increase in same store sales, as described below, and the addition of the new greenfield and acquired locations.

Same store sales

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Same store sales were $1,057.4 million for the three months ended June 30, 2017, an increase of $101.3 million, or 10.6%, as compared to $956.0 million for the three months ended June 30, 2016. The increase was primarily due to the increased volume of new towable units sold, and, to a lesser extent, the revenue increase from finance and insurance, partially offset by a decrease in same store sales from used vehicle units sold.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Same store sales were $1,829.0 million for the six months ended June 30, 2017, an increase of $169.2 million, or 10.2%, as compared to $1,659.8 million for the six months ended June 30, 2016. The increase was primarily due to the increased volume of new towable units sold, and, to a lesser extent, the revenue increase from finance and insurance, net, partially offset by a decrease in same store sales from used vehicle units sold.

Total segment income

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Total segment income was $141.2 million for the three months ended June 30, 2017, an increase of $36.5 million, or 34.9%, as compared to $104.7 million for the three months ended June 30, 2016. The increase was primarily due to gross profit increases from finance and insurance and new vehicles, partially offset by increases in variable selling, general and administrative expenses. Total segment income margin increased 121 basis points to 11.0%.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Total segment income was $213.5 million for the six months ended June 30, 2017, an increase of $51.4 million, or 31.7%, as compared to $162.1 million for the six months ended June 30, 2016. The increase was primarily due to gross profit increases from finance and insurance and new vehicles, partially offset by increases in variable selling, general and administrative expenses. Total segment income margin increased 116 basis points to 9.9%.

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Consumer Services and Plans segment income

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Consumer Services and Plans segment income was $24.0 million for the three months ended June 30, 2017, an increase of $1.5 million, or 6.5%, as compared to $22.5 million for the three months ended June 30, 2016. The segment income increase was attributable to an increase from our vehicle insurance and Good Sam TravelAssist programs of $1.8 million primarily due to increased policies in force; increased roadside assistance contracts in force and reduced claims, together resulting in a gross profit increase of $0.5 million; and a $0.1 million reduction in selling, general and administrative expenses; partially offset by a decrease from our consumer magazine group of $0.6 million resulting from increased marketing costs; and a $0.3 million decrease from other ancillary products. Consumer Services and Plans segment income margin increased 27 basis points to 49.8%, primarily due to reduced selling, general and administrative expenses, partially offset by a 40 basis point reduction in Consumer Services and Plans gross margin resulting primarily from reduced gross margin from the consumer magazines partially offset by an increase from the vehicle insurance and Good Sam TravelAssist programs.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Consumer Services and Plans segment income was $50.2 million for the six months ended June 30, 2017, an increase of $6.1 million, or 13.9%, as compared to $44.1 million for the six months ended June 30, 2016. The segment income increase was attributable to an increase from our vehicle insurance and Good Sam TravelAssist programs of $3.1 million primarily due to increased policies in force; increased roadside assistance contracts in force and reduced claims, together resulting in a gross profit increase of $1.7 million; an increase from our consumer shows of $0.6 million resulting from the five acquired shows and one new show; and an $0.8 million reduction in selling, general and administrative expenses due to reduced advertising and sponsorships; partially offset by a $0.1 million decrease from other ancillary products. Consumer Services and Plans segment income margin increased 228 basis points to 51.1%, primarily due to an 85 basis point increase in Consumer Services and Plans gross margin resulting from increased volume of contracts sold and reduced program costs for roadside assistance and increases from the vehicle insurance programs; in addition to an $0.8 million decrease in selling, general and administrative expenses due to reduced advertising and sponsorships.

Retail segment income

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Retail segment income was $117.3 million for the three months ended June 30, 2017, an increase of $35.1 million, or 42.7%, as compared to $82.2 million for the three months ended June 30, 2016. The increase was primarily due to increased segment gross profit of $72.0 million primarily due to higher revenue and sales penetration of finance and insurance products, an increase of $28.9 million primarily from increased new vehicle unit volume of 6,056 units for the three months ended June 30, 2017 compared to the three months ended June 30, 2016, an increase of $7.4 million from used vehicles, and an increase of $4.5 million from parts, services and other; partially offset by increased selling, general and administrative expenses of $35.5 million primarily relating to increased variable wages relating to increased revenue, increased variable selling and services expenses; $0.2 million of reduced gain on asset sales; and a $1.2 million increase in floor plan interest expense relating to an increase in the average floor plan balance. Retail segment income margin increased 146 basis points to 9.5%, primarily due to increased penetration of the finance and insurance products to 10.5% of total new and used revenue, from 8.8% for the comparable prior year period, increased used vehicle gross margin of 593 basis points, and decreased selling, general and administrative expenses as a percentage of segment gross profit of 391 basis points.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Retail segment income was $163.3 million for the six months ended June 30, 2017, an increase of $45.3 million, or 38.3%, as compared to $118.0 million for the six months ended June 30, 2016. The increase was primarily due to increased segment gross profit of $97.5 million primarily due to higher revenue and sales

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penetration of finance and insurance products, an increase of $36.7 million primarily from increased new vehicle unit volume of 9,308 units for the six months ended June 30, 2017 compared to the six months ended June 30, 2016, an increase of $9.1 million from used vehicles, and an increase of $5.3 million from parts, services and other; partially offset by increased selling, general and administrative expenses of $50.9 million primarily relating to increased variable wages relating to increased revenue, increased variable selling expense and increased rent relating to new stores; and a $1.3 million increase in floor plan interest expense relating to an increase in the average floor plan balance. Retail segment income margin increased 125 basis points to 7.9%, primarily due to increased penetration of the finance and insurance products to 10.4% of total new and used revenue, from 8.7% for the comparable prior year period, increased used vehicle gross margin of 571 basis points, and decreased selling, general and administrative expenses as a percentage of segment gross profit of 352 basis points.

Corporate and other expenses

Three Months Ended June 30, 2017 compared to Three Months Ended June 30, 2016

Corporate and other expenses were $3.5 million for the three months ended June 30, 2017, an increase of 389.9%, as compared to $0.7 million for the three months ended June 30, 2016. The $2.8 million increase was primarily due to $2.1 million of transaction expenses associated with the acquisitions into new or complementary markets, including the Gander Mountain Acquisition; and $0.7 million of other professional fees.

Six Months Ended June 30, 2017 compared to Six Months Ended June 30, 2016

Corporate and other expenses were $4.4 million for the six months ended June 30, 2017, an increase of 232.9%, as compared to $1.3 million for the six months ended June 30, 2016. The $3.1 million increase was primarily due to $2.1 million of transaction expenses associated with the acquisitions into new or complementary markets, including the Gander Mountain Acquisition; and $1.0 million of other professional fees.

Liquidity and Capital Resources

General

Our primary requirements for liquidity and capital have been working capital, inventory management, acquiring and building new retail locations, including pre-opening expenses, the improvement and expansion of existing retail locations, debt service, distributions to holders of equity interests in CWGS, LLC and our Class A common stock, and general corporate needs. These cash requirements have been met through cash provided by operating activities, cash and cash equivalents, proceeds from our IPO, proceeds from the 2017 Public Offering, borrowings under our Existing Senior Secured Credit Facilities or previously under our Previous Senior Secured Credit Facilities, and borrowings under our Floor Plan Facility.

As a public company, additional liquidity needs include public company costs, the payment of regular and special cash dividends, the redemption right held by the Continuing Equity Owners that they may exercise from time to time (should we elect to exchange such common units for a cash payment), payments under the Tax Receivable Agreement, and state and federal taxes to the extent not sheltered as a result of the Tax Receivable Agreement. The Continuing Equity Owners may exercise such redemption right for as long as their common units remain outstanding. Although the actual timing and amount of any payments that may be made under the Tax Receivable Agreement will vary, we expect that the payments that we will be required to make to the Continuing Equity Owners and Crestview Partners II GP, L.P. will be significant. Any payments made by us to Continuing Equity Owners and Crestview Partners II GP, L.P. under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us or to CWGS, LLC and, to the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid by us; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore may accelerate payments due

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under the Tax Receivable Agreement. For a discussion of the Tax Receivable Agreement, see Note 11 — Income Taxes to our unaudited consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

CWGS, LLC intends to make a regular quarterly cash distribution to its common unit holders, including us, of approximately $0.08 per common unit and we intend to use all of the proceeds from such distribution on our common units to pay a regular quarterly cash dividend of approximately $0.08 per share on our Class A common stock, subject to our discretion as the sole managing member of CWGS, LLC and the discretion of our board of directors. During the six months ended June 30, 2017, we paid two regular quarterly cash dividends of $0.08 per share of our Class A common stock. CWGS, LLC shall make cash distributions in accordance with the CWGS LLC Agreement in an amount sufficient for us to pay any expenses incurred by us in connection with the regular quarterly cash dividend, along with any of our other operating expenses and other obligations. In addition, we currently intend to pay a special cash dividend of all or a portion of the Excess Tax Distribution (as defined under “Dividend Policy” included in Part II, Item 5 of our Annual Report) to the holders of our Class A common stock from time to time subject to the discretion of our board of directors as described under “Dividend Policy.” During the six months ended June 30, 2017, we paid two special cash dividends of $0.0732 per share of our Class A common stock.

Notwithstanding our obligations under the Tax Receivable Agreement, we believe that our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy, including the Gander Mountain Acquisition, regular quarterly cash dividends (as described above) and additional expenses we expect to incur as a public company for at least the next twelve months. However, we cannot assure you that our cash provided by operating activities, cash and cash equivalents or cash available under our Existing Revolving Credit Facility or our Floor Plan Facility will be sufficient to meet our future needs. If we are unable to generate sufficient cash flows from operations in the future, and if availability under our Existing Revolving Credit Facility or our Floor Plan Facility is not sufficient, we may have to obtain additional financing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all. See “Risk Factors — Risks Related to our Business — Our ability to operate and expand our business and to respond to changing business and economic conditions will depend on the availability of adequate capital” included in Part I, Item 1A of our Annual Report.

As of June 30, 2017 and December 31, 2016, we had working capital of $393.6 million and $266.8 million, respectively, including $252.2 million and $114.2 million, respectively, of cash and cash equivalents. Our working capital reflects the cash provided by deferred revenue and gains reported under current liabilities of $69.9 million and $68.6 million as of June 30, 2017 and December 31, 2016, respectively, which reduces working capital. Deferred revenue primarily consists of cash collected for club memberships in advance of services to be provided, which is deferred and recognized as revenue over the life of the membership. We use net proceeds from this deferred membership revenue to lower our long-term borrowings and finance our working capital needs.

Seasonality

We have experienced, and expect to continue to experience, variability in revenue, net income, and cash flows as a result of annual seasonality in our business. Because RVs are used primarily by vacationers and campers, demand for services, protection plans, products, and resources generally declines during the winter season, while sales and profits are generally highest during the spring and summer months. In addition, unusually severe weather conditions in some geographic areas may impact demand.

We generate a disproportionately higher amount of our annual revenue in our second and third fiscal quarters, respectively, which include the spring and summer months. We incur additional expenses in the second and third fiscal quarters due to higher purchase volumes, increased staffing in our retail locations and program costs. If, for any reason, we miscalculate the demand for our products or our product mix during the second and third fiscal quarters, our sales in these quarters could decline, resulting in higher labor costs as a percentage of sales, lower margins and excess inventory, which could cause our annual results of operations to suffer and our stock price to decline.

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Additionally, SG&A expenses as a percentage of gross profit tend to be higher in the first and fourth quarters due to the timing of acquisitions and the seasonality of our business. We prefer to acquire new retail locations in the first and fourth quarters of each year in order to provide time for the location to be re‑modeled and to ramp up operations ahead of the spring and summer months. The timing of our acquisitions in the first and fourth quarters, coupled with generally lower revenue in these quarters has resulted in SG&A expenses as a percentage of gross profit being higher in these quarters.

Cash Flow

The following table shows summary cash flows information for the six months ended June 30, 2017 and 2016:


	Six Months Ended
	June 30,
(In thousands)	2017		2016
Net cash provided by operating activities	$	127,203	$	114,425
Net cash used in investing activities		(279,955)		(82,122)
Net cash provided by (used in) financing activities		290,717		(85,262)
Net increase (decrease) in cash and cash equivalents	$	137,965	$	(52,959)

Operating activities. Our cash flows from operating activities are primarily collections from contracts in transit and customers following the sale of new and used vehicles, as well as from the sale of retail parts, services and consumer services and plans. Contracts in transit represent amounts due from third-party lenders from whom pre-arranged agreements have been determined, and to whom the retail installment sales contracts have been assigned. Our primary uses of cash from operating activities are repayments of vehicle floor plan payables, payments to retail product suppliers, personnel-related expenditures, payments related to leased property, advertising, and various consumer services program costs.

Net cash provided by operating activities was $127.2 million for the six months ended June 30, 2017, an increase of $12.8 million from $114.4 million net cash used in operating activities for the six months ended June 30, 2016. The increase was primarily due to a $36.2 million increase in accounts payable and accrued liabilities, $5.0 million of other net favorable changes, and a $33.6 million increase in net income, partially offset by $61.9 million from increased growth in inventories.

Investing activities. Our investment in business activities primarily consists of expanding our operations through organic growth and the acquisition of retail locations. Substantially all of our new retail locations and capital expenditures have been financed using cash provided by operating activities and borrowings under our Existing Senior Secured Credit Facilities.

The table below summarizes our capital expenditures for the six months ended June 30, 2017 and 2016:


	Six Months Ended
	June 30,
(In thousands)	2017		2016
IT hardware and software	$	2,455	$	4,232
Greenfield and acquired retail locations		9,296		2,798
Existing retail locations		10,085		8,166
Corporate and other		1,328		2,021
Total capital expenditures	$	23,164	$	17,217

Our capital expenditures consist primarily of investing in greenfield and acquired retail locations, existing retail locations, information technology, hardware, and software. There were no material commitments for capital expenditures as of June 30, 2017.

Net cash used in investing activities was $280.0 million for the six months ended June 30, 2017. The $280.0 million of cash used in investing activities included $252.1 million for the acquisition of sixteen retail locations and two consumer shows, comprised of $94.3 million of inventory, $136.7 million of goodwill, $19.2

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million of intangibles, $4.6 million of property and equipment, $1.5 million of accounts receivable and contracts in transit, less $3.2 million of accrued liabilities and customer deposits, and $1.0 million of contingent consideration, in addition to $23.2 million of capital expenditures and $11.1 for the purchase of real property, partially offset by proceeds of $6.0 million from the purchase of real property and $0.4 million from the sale of property and equipment.

Net cash used in investing activities was $82.1 million for the six months ended June 30, 2016. The $82.1 million of cash used in investing activities included $60.3 million for the acquisition of four retail locations and five show acquisitions comprised of approximately $1.0 million of accounts receivable, $26.0 million of inventory, $34.8 million of goodwill, $0.6 million of property and equipment, and $0.2 million of other assets, less $2.3 million of accrued liabilities and customer deposits, in addition to $17.2 million of capital expenditures and $10.3 million for the purchase of real property, partially offset by proceeds from the sale and leaseback of real property and property and equipment of approximately $2.8 million and $2.9 million, respectively.

Financing activities. Our financing activities primarily consist of proceeds from the issuance of debt and the repayment of principal and debt issuance costs .

Our net cash provided by financing activities was $290.7 million for the six months ended June 30, 2017. The $290.7 million of cash provided by financing activities was primarily due to $155.7 million of borrowings under the Floor Plan Facility, $122.5 million of proceeds we received from the 2017 Public Offering, and $93.6 million of net proceeds from long-term debt, partially offset by $69.3 million of non-controlling interest member distributions, $7.3 million of dividends paid on Class A common stock, $3.7 million of principal payments under the Existing Term Loan Facility, and other financing uses of $0.8 million during the six months ended June 30, 2017.

Our net cash used in financing activities was $85.3 million for the six months ended June 30, 2016. The $85.3 million of cash used in financing activities was primarily due to $77.7 million of member distributions, $31.9 million of principal payments under the Previous Senior Secured Credit Facilities, and other financing uses of $0.9 million, partially offset by $25.2 of borrowings under the Floor Plan Facility during the six months ended June 30, 2016.

Description of Senior Secured Credit Facilities and Floor Plan Facility

As of June 30, 2017 and December 31, 2016, we had outstanding debt in the form of our credit agreement that included a $736.3 million and $645.0 million term loan (the ‘‘Existing Term Loan Facility’’), respectively, and $35.0 million of commitments for revolving loans (the ‘‘Existing Revolving Credit Facility’’ and, together with the Existing Term Loan Facility, the ‘‘Existing Senior Secured Credit Facilities’’) and our floor plan financing facility with $1.165 billion in maximum borrowing availability and a letter of credit commitment of $15.0 million (the ‘‘Floor Plan Facility’’). We may from time to time seek to refinance, retire or exchange our outstanding debt. Such refinancings, repayments or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. In the past, we have used interest rate swap derivatives to diversify our debt portfolio between fixed and variable rate instruments. For additional information regarding our interest rate risk and interest rate hedging instruments, see “Quantitative and Qualitative Disclosures About Market Risk” in Part I, Item 3 of this Form 10-Q.

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Existing Senior Secured Credit Facilities

The following table details the outstanding amounts and available borrowings under our Existing Senior Secured Credit Facilities as of June 30, 2017 and December 31, 2016 (in thousands):


	June 30,		December 31,
	2017		2016
Existing Senior Secured Credit Facilities:
Existing Term Loan Facility:
Principal amount of borrowings	$	740,000	$	645,000
Less: cumulative principal payments		(3,700)		—
Less: unamortized original issue discount		(6,106)		(6,349)
Less: finance costs		(12,145)		(11,898)
		718,049		626,753
Less: current portion		(7,400)		(6,450)
Long-term debt, net of current portion	$	710,649	$	620,303
Existing Revolving Credit Facility:
Total commitment	$	35,000	$	35,000
Less: outstanding letters of credit		(3,237)		(3,237)
Additional borrowing capacity	$	31,763	$	31,763

On March 17, 2017, CWGS Group, LLC (the “Borrower”), a wholly-owned subsidiary of CWGS, LLC, entered into a First Amendment (the “First Amendment”) to the Credit Agreement, dated as of November 8, 2016 (as amended, the "Existing Credit Agreement"). Per the terms of the First Amendment, the Borrower’s $645.0 million term loan facility was increased by $95.0 million to $740.0 million. The proceeds from the additional borrowings were and are intended to be used to purchase dealerships within FreedomRoads. No other terms of the Credit Agreement were amended.

See our Annual Report for a further discussion of the terms of the Existing Senior Secured Credit Facilities.

Floor Plan Facility

The following table details the outstanding amounts and available borrowings under our Floor Plan Facility as of June 30, 2017 and December 31, 2016 (in thousands):


	June 30,		December 31,
	2017		2016
Floor Plan Facility:
Notes payable — floor plan:
Total commitment	$	1,165,000	$	1,165,000
Less: borrowings		(780,905)		(625,185)
Additional borrowing capacity	$	384,095	$	539,815
Letters of credits:
Total commitment	$	15,000	$	15,000
Less: outstanding letters of credit		(8,020)		(8,020)
Additional borrowing capacity	$	6,980	$	6,980

See our Annual Report for a further discussion of the terms of the Floor Plan Facility.

Sale/Leaseback Arrangements

We have in the past and may in the future enter into sale‑leaseback transactions to finance certain property acquisitions and capital expenditures, pursuant to which we sell property and/or leasehold improvements to third parties and agree to lease those assets back for a certain period of time. Such sales generate proceeds which vary from period to period.

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Deferred Revenue and Gains

Deferred revenue and gains consist of our sales for products not yet recognized as revenue at the end of a given period and deferred gains on sale-leaseback and derecognition of right to use asset transactions. Our deferred revenue and deferred gains as of June 30, 2017 were $114.4 million and $11.8 million, respectively. Deferred revenue is expected to be recognized as revenue and deferred gains are expected to be recognized ratably over the lease terms as an offset to rent expense.

Off-Balance Sheet Arrangements

As of June 30, 2017, we did not have any off-balance sheet arrangements, except for operating leases entered into in the normal course of business.

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in accordance with GAAP, and in doing so, we have to make estimates, assumptions and judgments affecting the reported amounts of assets, liabilities, revenues and expenses, as well as the related disclosure of contingent assets and liabilities. We base our estimates, assumptions and judgments on historical experience and on various other factors we believe to be reasonable under the circumstances. Different assumptions and judgments would change estimates used in the preparation of our condensed consolidated financial statements, which, in turn, could change our results from those reported. We evaluate our critical accounting estimates, assumptions and judgments on an ongoing basis.

There has been no material change in our critical accounting policies from those previously reported and disclosed in our Annual Report.

Recent Accounting Pronouncements

See Note 1 to our unaudited condensed consolidated financial statements in Item 1 of Part I of this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in inflation and interest rates. All of these market risks arise in the normal course of business, as we do not engage in speculative trading activities. The following analysis provides quantitative information regarding these risks.

Impact of Inflation

We believe that inflation over the last three fiscal years has not had a significant impact on our operations; however, we cannot assure you there will be no such effect in the future. Our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases. Additionally, the cost of remodeling acquired retail locations and constructing new retail locations is subject to inflationary increase in the costs of labor and material, which results in higher rent expense on new retail locations. Finally, we finance substantially all of our inventory through various revolving floor plan arrangements with interest rates that vary based on various benchmarks. Such rates have historically increased during periods of increasing inflation.

Interest Rate Risk

Our operating results are subject to risk from interest rate fluctuations on our Existing Senior Secured Credit Facilities and our Floor Plan Facility, which carries variable interest rates. Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Our Existing Senior Secured Credit Facilities includes the Existing Term Loan Facility and the Existing Revolving Credit Facility with advances tied to a borrowing base and which bear interest at variable rates. Additionally, under our Floor Plan Facilities we have the ability to draw on revolving floor plan arrangements,

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which bear interest at variable rates. Because our Existing Senior Secured Credit Facilities and Floor Plan Facility bear interest at variable rates, we are exposed to market risks relating to changes in interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. As of June 30, 2017, we had no outstanding borrowings under our Existing Revolving Credit Facility aside from letters of credit in the aggregate amount of $3.2 million outstanding under the Existing Revolving Credit Facility, $718.0 million of variable rate debt outstanding under our Existing Term Loan Facility, net of $6.1 million of unamortized original issue discount and $12.1 million of finance costs, and $780.9 million in outstanding borrowings under our Floor Plan Facility. Based on June 30, 2017 debt levels, an increase or decrease of 1% in the effective interest rate would cause an increase or decrease in interest expense under our Existing Term Loan Facility of $7.4 million and $3.5 million, respectively, over the next 12 months and an increase or decrease of 1% in the effective rate would cause an increase or decrease in interest under our Floor Plan Facility of approximately $7.8 million over the next 12 months. We do not use derivative financial instruments for speculative or trading purposes, but this does not preclude our adoption of specific hedging strategies in the future.

Item 4. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2017.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control performed during the fiscal quarter ended June 30, 2017, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1: Legal Proceedings

We are engaged in various legal actions, claims and proceedings arising in the ordinary course of business, including claims related to employment-related matters, breach of contracts, products liabilities, consumer protection and intellectual property matters resulting from our business activities. We do not believe that the ultimate resolution of these pending claims will have a material adverse effect on our business, financial condition or results of operations. However, litigation is subject to many uncertainties, and the outcome of certain individual litigated matters may not be reasonably predictable and any related damages may not be estimable. Some litigation matters could result in an adverse outcome to us, and any such adverse outcome could have a material adverse effect on our business, financial condition and results of operations.

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Item 1A. Risk Factors

There have been no material changes to our risk factors as previously disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on March 13, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Other Information

None.

Item 6: Exhibits

See the Exhibits Index immediately following the signature page of this Quarterly Report on Form 10‑Q.

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SIGNATURE

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

	Camping World Holdings, Inc .

Date: August 10, 2017	By:	/s/ Thomas F. Wolfe
		Thomas F. Wolfe
		Chief Financial Officer and Secretary

		(Authorized Officer and Principal Financial Officer)

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Exhibits Index

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed/
Furnished
Herewith

3.1

Amended and Restated Certificate of Incorporation of Camping World Holdings, Inc.

10-Q

001-37908

3.1

11/10/16

3.2

Amended and Restated Bylaws of Camping World Holdings, Inc.

10-Q

001-37908

3.2

11/10/16

4.1

Specimen Stock Certificate evidencing the shares of Class A common stock

S-1/A

333‑211977

4.1

9/13/16

10.1

Asset Purchase Agreement dated as of May 4, 2017 by and among CWI, Inc. and Gander Mountain Company and the other parties signatory hereto

8-K

001-37908

10.1

5/8/17

10.2

New Form of Employee Restricted Stock Unit Agreement

10.3

New Form of Director Restricted Stock Unit Agreement

31.1

Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer

31.2

Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer

32.1

Section 1350 Certification of Chief Executive Officer

32.2

Section 1350 Certification of Chief Financial Officer

101.INS

XBRL Instance Document

***

101.SCH

XBRL Taxonomy Extension Schema Document

***

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

***

101.DEF

XBRL Extension Definition Linkbase Document

***

101.LAB

XBRL Taxonomy Label Linkbase Document

***

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Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed/
Furnished
Herewith

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

***

* Filed herewith

** Furnished herewith

*** Submitted electronically herewith

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