Camping World Holdings, Inc. - Quarter Report: 2018 June (Form 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, 2018


[ ]	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 7, 2018, the registrant had 37,008,005 shares of Class A common stock, 50,706,629 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, 2018

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		Page


PART I. FINANCIAL INFORMATION

Item 1	Financial Statements (unaudited)	5
	Unaudited Condensed Consolidated Balance Sheets – June 30, 2018 and December 31, 2017	5
	Unaudited Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2018 and 2017	6
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity – Six Months Ended June 30, 2018	7
	Unaudited Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2018 and 2017	8
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4	Controls and Procedures	58

PART II. OTHER INFORMATION

Item 1	Legal Proceedings	60
Item 1A	Risk Factors	60
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3	Defaults Upon Senior Securities	60
Item 4	Mine Safety Disclosures	60
Item 5	Other Information	60
Item 6	Exhibits	60

Signatures		62

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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, 2017 filed with the Securities and Exchange Commission (“SEC”) on March 13, 2018.

“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 A. 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 A. 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 A. 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 14 – 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; the completion of the accounting to reflect the effect of the 2017 Tax Act (as defined below); sufficiency of our sources of liquidity and capital and potential need for additional financing; future capital expenditures and debt service obligations; refinancing, retirement or exchange of outstanding debt; expectations regarding industry trend and consumer behavior and growth; our ability to capture positive industry trends and pursue growth; our plans to increase new products offered to our customers and grow our businesses to enhance our visibility with respect to revenue and cash flow, and to increase our overall profitability; volatility in sales and potential impact of miscalculating the demand for our products or our product mix; remediation of material weaknesses; anticipated impact of the acquisition of Gander Mountain Company (“Gander Mountain”, and upon acquisition and rebranding, “Gander Outdoors” ) and its Overton’s boating business (the “Gander Mountain Acquisition”); anticipated Gander Outdoors location openings, expectations regarding increase of certain expenses in connection with our growth; and our plans related to dividend payments, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’ ‘‘could,’’ ‘‘intends,’’ ‘‘targets,’’ ‘‘projects,’’ ‘‘contemplates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential’’ or ‘‘continue’’ or the negative of these terms or other similar expressions.

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, businesses, or product lines or categories, as well as delays in opening or acquiring new retail locations;

unforeseen expenses, difficulties, and delays frequently encountered in connection with expansion through acquisitions;

our failure to maintain the strength and value of our brands;

our ability to successfully order and manage our inventory to reflect consumer demand in a volatile market and anticipate changing consumer preferences and buying trends;

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

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the cyclical and seasonal nature of our business;

our ability to operate and expand our business and to respond to changing business and economic conditions, which depends on the availability of adequate capital;

the restrictive covenants imposed by our Senior Secured Credit Facilities and Floor Plan Facility;

our reliance on three RV retail and four outdoor and active sports 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;

risks associated with leasing substantial amounts of space, including our inability to maintain the leases for our retail locations or locate alternative sites for our stores in our target markets and on terms that are acceptable to us;

our business being subject to numerous federal, state and local regulations;

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;

potential impact of material weaknesses in our internal control over financial reporting;

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;

feasibility, delays, and difficulties in opening of Gander Outdoors retail locations;

realization of anticipated benefits and cost savings related to recent acquisitions;

potential litigation relating to products we sell as a result of recent acquisitions, including firearms and ammunitions;

Marcus Lemonis, through his beneficial ownership of our shares directly or indirectly held by ML Acquisition Company, LLC and ML RV Group, LLC, has substantial control over us and may

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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 and Item 1A of Part II of this Form 10-Q.

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 and “Item 1A—Risk Factors” in Part II of this Form 10-Q.

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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 Share and Per Share Amounts)


	June 30,		December 31,
	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	212,442	$	224,163
Contracts in transit		124,427		46,227
Accounts receivable, net		96,507		79,881
Inventories		1,486,736		1,415,915
Prepaid expenses and other assets		46,841		32,721
Total current assets		1,966,953		1,798,907
Property and equipment, net		363,212		198,022
Deferred tax assets, net		147,077		155,551
Intangibles assets, net		36,789		38,707
Goodwill		388,545		348,387
Other assets		21,474		21,903
Total assets	$	2,924,050	$	2,561,477
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	233,398	$	125,616
Accrued liabilities		150,617		101,929
Deferred revenues and gains		82,433		77,669
Current portion of capital lease obligations		389		844
Current portion of Tax Receivable Agreement liability		9,457		8,093
Current portion of long-term debt		11,991		9,465
Notes payable – floor plan, net		854,588		974,043
Other current liabilities		30,879		22,510
Total current liabilities		1,373,752		1,320,169
Capital lease obligations, net of current portion		—		23
Right to use liability		10,115		10,193
Tax Receivable Agreement liability, net of current portion		121,994		129,596
Revolving line of credit		24,403		—
Long-term debt, net of current portion		1,148,447		907,437
Deferred revenues and gains		68,047		64,061
Other long-term liabilities		59,220		39,161
Total liabilities		2,805,978		2,470,640
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.01 per share – 20,000,000 shares authorized; none issued and outstanding as of June 30, 2018 and December 31, 2017		—		—
Class A common stock, par value $0.01 per share – 250,000,000 shares authorized; 37,016,786 issued and 37,007,619 outstanding as of June 30, 2018 and 36,758,233 issued and 36,749,072 outstanding as of December 31, 2017		370		367
Class B common stock, par value $0.0001 per share – 75,000,000 shares authorized; 69,066,445 issued; and 50,706,629 outstanding as of June 30, 2018 and 50,836,629 outstanding as of December 31, 2017		5		5
Class C common stock, par value $0.0001 per share – one share authorized, issued and outstanding as of June 30, 2018 and December 31, 2017		—		—
Additional paid-in capital		43,152		49,941
Retained earnings		27,387		6,192
Total stockholders' equity attributable to Camping World Holdings, Inc.		70,914		56,505
Non-controlling interests		47,158		34,332
Total stockholders' equity		118,072		90,837
Total liabilities and stockholders' equity	$	2,924,050	$	2,561,477

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,
	2018		2017		2018		2017
Revenue:
Consumer services and plans	$	52,748	$	48,103	$	106,556	$	98,349
Retail
New vehicles		807,519		760,806		1,387,029		1,264,110
Used vehicles		210,646		195,615		382,737		341,434
Parts, services and other		250,203		174,196		414,511		290,419
Finance and insurance, net		124,060		100,306		215,909		166,349
Subtotal		1,392,428		1,230,923		2,400,186		2,062,312
Total revenue		1,445,176		1,279,026		2,506,742		2,160,661
Costs applicable to revenue (exclusive of depreciation and amortization shown separately below):
Consumer services and plans		20,832		20,560		43,557		41,707
Retail
New vehicles		697,694		646,009		1,201,578		1,081,071
Used vehicles		162,506		144,926		296,799		256,828
Parts, services and other		147,980		94,951		243,868		156,546
Subtotal		1,008,180		885,886		1,742,245		1,494,445
Total costs applicable to revenue		1,029,012		906,446		1,785,802		1,536,152
Operating expenses:
Selling, general, and administrative		284,295		228,444		529,409		403,934
Debt restructure expense		(44)		—		380		—
Depreciation and amortization		11,628		7,584		21,028		14,437
Loss (gain) on sale of assets		59		31		144		(287)
Total operating expenses		295,938		236,059		550,961		418,084
Income from operations		120,226		136,521		169,979		206,425
Other income (expense):
Floor plan interest expense		(10,202)		(6,587)		(20,945)		(11,889)
Other interest expense, net		(16,107)		(10,557)		(28,946)		(19,961)
Loss on debt restructure		—		—		(1,676)		—
Tax Receivable Agreement liability adjustment		—		—		—		17
		(26,309)		(17,144)		(51,567)		(31,833)
Income before income taxes		93,917		119,377		118,412		174,592
Income tax expense		(12,102)		(14,284)		(19,321)		(19,876)
Net income		81,815		105,093		99,091		154,716
Less: net income attributable to non-controlling interests		(53,784)		(85,749)		(67,879)		(127,850)
Net income attributable to Camping World Holdings, Inc.	$	28,031	$	19,344	$	31,212	$	26,866

Earnings per share of Class A common stock:
Basic	$	0.76	$	0.84	$	0.85	$	1.28
Diluted	$	0.72	$	0.84	$	0.81	$	1.24
Weighted average shares of Class A common stock outstanding:
Basic		36,964		22,977		36,890		20,973
Diluted		88,764		22,977		88,956		84,673

Dividends declared per share	$	0.1532	$	0.1532	$	0.4596	$	0.3064

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

(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 December 31, 2017	36,749		367	50,837		5	—		—		49,941		6,192		34,332		90,837
Adoption of accounting standard (see Note 1 — Summary of Significant Accounting Policies)	—		—	—		—	—		—		—		1,310		2,476		3,786
Equity-based compensation	—		—	—		—	—		—		6,347		—		—		6,347
Exercise of stock options	6		—	—		—	—		—		142		—		—		142
Non-controlling interest adjustment for capital contribution of proceeds from the exercise of stock options	—		—	—		—	—		—		(82)		—		82		—
Vesting of restricted stock units	79		1	—		—	—		—		29		—		(30)		—
Disgorgement of short-swing profits by Section 16 officer	—		—	—		—	—		—		557		—		—		557
Redemption of LLC common units for Class A common stock	173		2	(130)		—	—		—		1,847		—		(116)		1,733
Distributions to holders of LLC common units	—		—	—		—	—		—		—		—		(71,680)		(71,680)
Dividends	—		—	—		—	—		—		—		(11,327)		—		(11,327)
Establishment of liabilities under the Tax Receivable Agreement and related changes to deferred tax assets associated with that liability	—		—	—		—	—		—		(1,414)		—		—		(1,414)
Non-controlling interest adjustment	—		—	—		—	—		—		(14,215)		—		14,215		—
Net income	—		—	—		—	—		—		—		31,212		67,879		99,091
Balance at June 30, 2018	37,007	$	370	50,707	$	5	—	$	—	$	43,152	$	27,387	$	47,158	$	118,072

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,
	2018		2017

Operating activities
Net income	$	99,091	$	154,716

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,028		14,437
Equity-based compensation		6,347		1,588
Loss on debt restructure		1,676		—
Loss (gain) on sale of assets		144		(287)
Provision for (recovery of) losses on accounts receivable		883		(45)
Accretion of original debt issuance discount		494		481
Amortization of deferred financing costs		2,628		2,188
Deferred income taxes		2,959		6,246
Tax Receivable Agreement liability adjustment		—		(17)
Change in assets and liabilities, net of acquisitions:
Receivables and contracts in transit		(89,379)		(70,211)
Inventories		(30,441)		(104,734)
Prepaid expenses and other assets		(8,703)		(3,695)
Accounts payable and other accrued expenses		99,699		74,637
Payment pursuant to Tax Receivable Agreement		(8,100)		(203)
Accrued rent for cease-use locations		(547)		72
Deferred revenue and gains		6,322		6,278
Other, net		1,894		6,753
Net cash provided by operating activities		105,995		88,204

Investing activities
Purchases of property and equipment		(80,574)		(20,792)
Purchase of real property		(81,330)		(11,113)
Proceeds from the sale of real property		—		6,000
Purchases of businesses, net of cash acquired		(80,203)		(252,060)
Proceeds from sale of property and equipment		630		414
Purchase of intangible assets		—		(32)
Net cash used in investing activities	$	(241,477)	$	(277,583)

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Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)


	Six Months Ended June 30,
	2018		2017
Financing activities
Proceeds from long-term debt	$	319,913	$	94,762
Payments on long-term debt		(76,709)		(3,700)
Net (payments) borrowings on notes payable – floor plan, net		(68,049)		192,347
Borrowings on revolver		24,403		—
Payments of principal on capital lease obligations		(478)		(691)
Payments of principal on right to use liability		(78)		(73)
Payment of debt issuance costs		(3,120)		(1,176)
Proceeds from issuance of Class A common stock sold in a public offering net of underwriter discounts, commissions and offering expenses		—		122,544
Dividends on Class A common stock		(11,327)		(7,334)
Proceeds from exercise of stock options		146		—
Disgorgement of short-swing profits by Section 16 officer		557		—
Members' distributions		(61,497)		(69,335)
Net cash provided by financing activities		123,761		327,344

(Decrease) increase in cash		(11,721)		137,965
Cash at beginning of the period		224,163		114,196
Cash at end of the period	$	212,442	$	252,161

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, 2018

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, 2018 are unaudited. The condensed consolidated balance sheet as of December 31, 2017 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, 2017 (the “Annual Report”) filed with the SEC on March 13, 2018. 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, 2018, CWH owned 41.7% of CWGS, LLC. Accordingly, the Company consolidates the financial results of CWGS, LLC and reports a non-controlling interest in its consolidated financial statements.

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 and used recreational vehicles (“RV”); parts and service, including RV accessories and supplies; camping, hunting, fishing, skiing, snowboarding, bicycling, skateboarding, marine and watersport equipment and supplies; and 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

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enthusiasts. At June 30, 2018, the Company operated 147 Camping World retail locations, of which 132 locations sell new and used RVs, and offer financing, ancillary services, protection plans, and other products for the RV purchaser and outdoor enthusiasts; 54 Gander Outdoors locations offering outdoor products and services; two Overton’s locations offering marine and watersports products; two TheHouse.com locations offering skiing, snowboarding, bicycling, and skateboarding products; two W82 locations offering skiing, snowboarding, and skateboarding products; and five Uncle Dan’s locations offering outdoor products and services. In addition, on January 30, 2018 we acquired certain assets of EARTH SPORTS LLC, dba Erehwon Mountain Outfitter (“Erehwon”), a leading Midwest specialty retailer of outdoor gear and apparel with four retail locations. On April 19, 2018 we acquired Rock Creek Outfitters (“Rock Creek”), a specialty outdoor retailer of outdoor gear for kayaking, rock climbing, camping and hiking with seven retail locations. In the first six months of 2018 we closed three Camping World non-dealer locations (Rogers, Minnesota; Winter Garden, FL; and Cleburne, TX). We closed one Overton’s location in January 2018 and opened one in our Rogers, Minnesota location which previously was a Camping World non-dealer location.

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, program cancellation reserves, and accruals related to self-insurance programs, estimated tax liabilities and other liabilities.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No. 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 is 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 Company adopted the amendments of this ASU on January 1, 2018, and the adoption did not materially impact its consolidated financial statements or results of operations (see Note 2 — Revenue for further details).

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”). This ASU 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 Company adopted the amendments of this ASU on January 1, 2018, and the adoption did not materially impact its consolidated financial statements or results of operations.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The FASB has subsequently issued several related ASUs that clarified the implementation guidance for certain aspects of ASU 2016-02, which are effective upon the adoption of ASU 2016-02. The amendments in this ASU relate to the accounting for leasing transactions. This standard requires a lessee to record on the

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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. In July 2018, the FASB made targeted improvements to the standard, including providing an additional and optional transition method. Under this method, an entity initially applies the standard at the adoption date, including the election of certain transition reliefs, and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has created a project plan, identified a software solution, and is in the process of evaluating the impact that the adoption will have on its consolidated balance sheet and statement of income. However, the Company expects that the adoption of the provisions of this ASU will have a significant impact on its consolidated balance sheet by reporting a right-to-use lease asset and corresponding lease obligation, as currently most of its real estate is leased via operating leases.

Immaterial Corrections

Certain immaterial corrections have been made to the statements of cash flows, which reduced net cash provided by operating activities and decreased net cash used in investing activities by $2.4 million for the six months ended June 30, 2017. These corrections had no other impact on the previously-reported consolidated balance sheets, statements of operations, or statements of stockholders' equity.

2. Revenue

Adoption of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers

On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historical accounting under ASC 605.

The following table details the cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet for the adoption of ASC 606 (in thousands):


	Balance at		Adjustments		Balance at
	December 31,		Due to		January 1,
	2017		ASU 2014-09		2018
Assets
Accounts receivable, net	$	79,881	$	6,130	$	86,011
Inventories		1,415,915		(5,142)		1,410,773
Prepaid expenses and other assets		32,721		4,508		37,229
Deferred tax assets, net		155,551		(303)		155,248
Liabilities
Accrued liabilities		101,929		1,021		102,950
Deferred revenues and gains, current		77,669		857		78,526
Deferred revenues and gains, non-current		64,061		(471)		63,590
Equity
Retained earnings		6,192		1,310		7,502
Non-controlling interests		34,332		2,476		36,808

The adjustments above related primarily to i) the deferral of sales commissions expenses relating to multiyear consumer services and plans and the recording of such expenses over the same period as the recognition of the related revenues, ii) adjustment of recognition period of RV service revenue from point-in-time to over time, iii) adjustment of capitalized direct-response advertising to expense when the advertising is mailed instead of over the expected benefit period, iv) reclassification of estimated product returns from inventory to prepaid expenses and other assets, v) reclassification of expected refunds previously included in

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deferred revenues and gains to accrued liabilities, and vi) reclassification and adjustment of the point obligation for the Coast to Coast service from accrued liabilities to deferred revenues and gains.

The following table details the impact of the adoption of ASC 606 on the consolidated balance sheet as of June 30, 2018 (in thousands):


	June 30, 2018
	As		Balances Without		Effect of Change
	Reported		Adoption of ASC 606		Higher/(Lower)
Assets
Accounts receivable, net	$	96,507	$	90,551	$	5,956
Inventories		1,486,736		1,491,807		(5,071)
Prepaid expenses and other assets		46,841		41,873		4,968
Deferred tax assets, net		147,077		147,380		(303)
Liabilities
Accrued liabilities		150,617		149,570		1,047
Deferred revenues and gains, current		82,433		81,495		938
Deferred revenues and gains, non-current		68,047		68,662		(615)
Equity
Retained earnings		27,387		25,940		1,447
Non-controlling interests		47,158		44,425		2,733

The following table details the impact of the adoption of ASC 606 on the consolidated statement of operations for the three and six months ended June 30, 2018 (in thousands):


	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
			Balances Without		Effect of				Balances Without		Effect of
	As Reported		Adoption of ASC 606		Change Higher/(Lower)		As Reported		Adoption of ASC 606		Change Higher/(Lower)
Revenue
Consumer services and plans	$	52,748	$	52,769	$	(21)	$	106,556	$	106,591	$	(35)
Parts, services and other		250,203		250,334		(131)		414,511		414,642		(131)
Costs applicable to revenue
Consumer services and plans		20,832		21,005		(173)		43,557		43,717		(160)
Parts, services and other		147,980		148,062		(82)		243,868		243,950		(82)
Operating and income tax expenses
Selling, general, and administrative		284,295		284,368		(73)		529,409		529,773		(364)
Income tax expense		12,102		12,084		18		19,321		19,275		46
Net income
Net income		81,815		81,657		158		99,091		98,697		394
Less: net income attributable to non-controlling interests		(53,784)		(53,681)		(103)		(67,879)		(67,622)		(257)
Net income attributable to Camping World Holdings, Inc.		28,031		27,976		55		31,212		31,075		137

For the three and six months ended June 30, 2018, the adoption of ASC 606 had no impact on basic or diluted earnings per share of Class A common stock.

Revenue Recognition

Revenues are recognized by the Company when control of the promised goods or services is transferred to its customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales and other taxes collected from the customer concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company presents disaggregated revenue on its consolidated statements of operations.

Consumer Services and Plans revenue consists of revenue from membership clubs, publications, consumer shows, and marketing and royalty fees from various consumer services and plans. Certain Consumer Services and Plans revenue is generated from annual, multiyear and lifetime memberships. The

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revenue and expenses associated with these memberships are deferred and amortized over the membership period. Unearned revenue and profit are subject to revisions as the membership progresses to completion. Revisions to membership period estimates would change the amount of income and expense amortized in future accounting periods. For lifetime memberships, an 18 year period is used, which is the actuarially determined estimated fulfillment period. Roadside Assistance (“RA”) revenues are deferred and recognized over the contractual life of the membership. RA claim expenses are recognized when incurred.

Royalty revenue is earned under the terms of an arrangement with a third-party credit card provider based on a percentage of the Company’s co-branded credit card portfolio retail spending with such third-party credit card provider and for acquiring new cardholders.

Marketing fees for finance, insurance, extended service and other similar products are recognized as variable consideration, net of estimated cancellations, if applicable, when a product contract payment has been received or financing has been arranged.

Promotional expenses consist primarily of direct mail advertising expenses and renewal expenses and are expensed at the time related materials are mailed.

Newsstand sales of publications and related expenses are recorded as variable consideration at the time of delivery, net of estimated returns. Subscription sales of publications are reflected in income over the lives of the subscriptions. The related selling expenses are expensed as incurred. Advertising revenues and related expenses are recorded at the time of delivery.

Revenue and related expenses for consumer shows are recognized when the show occurs.

Retail revenue consists of sales of new and used recreational vehicles, commissions on related finance and insurance contracts, and sales of parts, services and other products. Revenue from the sale of recreational vehicles is recognized upon completion of the sale to the customer. Conditions to completing a sale include having an agreement with the customer, including pricing, whereby the sales price must be reasonably expected to be collected and having control transferred to the customer. Revenue from parts, services and other products sales is recognized over time as work is completed, and when parts are delivered to our customers. For service and parts revenues recorded over time, we utilize a method that considers total costs incurred to date and the applicable margin in relation to total expected efforts to complete our performance obligation in order to determine the appropriate amount of revenue to recognize over time. E-commerce sales are recognized when the product is shipped.

Finance and insurance revenue is recognized when a finance and insurance product contract payment has been received or financing has been arranged. The proceeds the Company receives for arranging financing contracts, and selling insurance and service contracts, are subject to chargebacks if the customer terminates the respective contract earlier than a stated period. These proceeds are recorded as variable consideration, net of estimated chargebacks.

The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers or using the adjusted market assessment approach.

As of June 30, 2018 and January 1, 2018, a contract asset of $6.2 million and $6.3 million, respectively, relating to RV service revenues was included in accounts receivable in the accompanying unaudited condensed consolidated balance sheet.

Deferred Revenues

The Company records deferred revenues when cash payments are received or due in advance of the Company’s performance, net of estimated refunds that are presented separately as a component of accrued liabilities. The decrease in the deferred revenue balance for the six months ended June 30, 2018 was primarily driven by $48.6 million of revenues recognized that were included in the deferred revenue balance

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at the beginning of the period, partially offset by cash payments received or due in advance of satisfying the Company’s performance obligations.

As of June 30, 2018, the Company has unsatisfied performance obligations relating to multiyear plans for its Good Sam Club, RA, Coast to Coast memberships, and magazine publication revenue streams. The total unsatisfied performance obligation for these revenue streams at June 30, 2018 and the periods during which the Company expects to recognize the amounts as revenue are presented as follows (in thousands):


	As of
	June 30, 2018
2018	$	50,856
2019		47,385
2020		18,616
2021		9,205
2022		5,123
Thereafter		8,378
Total	$	139,563

The Company’s payment terms vary by the type and location of its customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.

Practical Expedients and Exemptions

The Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period of time between payment and transfer of the promised goods or services will be one year or less.

The Company expenses sales commissions when incurred in cases where the amortization period of those otherwise capitalized sales commissions would have been one year or less.

We do not disclose the value of unsatisfied performance obligations for revenue streams for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

3. Inventories and Floor Plan Payable

Inventories consisted of the following (in thousands):


	June 30,		December 31,
	2018		2017
New RV vehicles	$	971,647	$	1,113,178
Used RV vehicles		105,738		106,210
Parts, accessories and miscellaneous		409,351		196,527
	$	1,486,736	$	1,415,915

New and used vehicles included in retail inventories are primarily financed by floor plan arrangements through a syndication of banks. The arrangements 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 bore interest at one-month London Interbank Offered Rate (“LIBOR”) plus 2.15% as of June 30, 2018 and December 31, 2017. LIBOR, as defined, was 1.98% at June 30, 2018 and 1.36% as of

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December 31, 2017. Borrowings are tied to specific vehicles and 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 (as further amended, “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. On December 12, 2017, FR entered into a Seventh Amended and Restated Credit Agreement (the “Floor Plan Facility Amendment”), which amended the previous credit agreement governing our Floor Plan Facility and allows FR to borrow (a) up to $1.415 billion under a floor plan facility, (b) up to $15.0 million under a letter of credit facility and (c) up to a maximum amount outstanding of $35.0 million under the revolving line of credit, which maximum amount outstanding will decrease by $1.75 million on the last day of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2019. In addition, the maturity of the Floor Plan Facility was extended to December 12, 2020. 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. As a result of using 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, 2018 and December 31, 2017.

The following table details the outstanding amounts and available borrowings under the Floor Plan Facility as of June 30, 2018 and December 31, 2017 (in thousands):


	June 30,		December 31,
	2018		2017
Floor Plan Facility
Notes payable - floor plan:
Total commitment	$	1,415,000	$	1,415,000
Less: borrowings, net		(854,588)		(974,043)
Less: flooring line aggregate interest reduction account		(87,342)		(106,055)
Additional borrowing capacity		473,070		334,902
Less: accounts payable for sold inventory		(82,717)		(31,311)
Less: purchase commitments		(21,655)		(77,144)
Unencumbered borrowing capacity	$	368,698	$	226,447

Revolving line of credit:	$	35,000	$	35,000
Less borrowings		(24,403)		—
Additional borrowing capacity	$	10,597	$	35,000

Letters of credit:
Total commitment	$	15,000	$	15,000
Less: outstanding letters of credit		(9,369)		(9,369)
Additional letters of credit capacity	$	5,631	$	5,631

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4. Property and Equipment, net

Property and equipment consisted of the following at (in thousands):


	June 30,		December 31,
	2018		2017
Land	$	57,263	$	12,243
Buildings and improvements		46,811		17,791
Leasehold improvements - inclusive of right to use assets		142,961		106,681
Furniture and equipment		163,794		115,429
Software		83,416		73,310
Systems development and construction in progress		40,756		34,382
		535,001		359,836
Less: accumulated depreciation and amortization		(171,789)		(161,814)
Property and equipment, net	$	363,212	$	198,022

5. 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, 2018 (in thousands):


	Consumer
	Services and
	Plans		Retail		Consolidated
Balance as of December 31, 2017	$	49,944	$	298,443	$	348,387
Acquisitions (1)		—		40,158		40,158
Balance as of June 30, 2018	$	49,944	$	338,601	$	388,545

⁽¹⁾

See Note 11 — 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. The Company did not record any impairments of goodwill during the six months ended June 30, 2018 and 2017.

Intangible Assets

Finite-lived intangible assets and related accumulated amortization consisted of the following at June 30, 2018 and December 31, 2017 (in thousands):


	June 30, 2018
	Cost or		Accumulated
	Fair Value		Amortization		Net
Trademarks and trade names	$	14,505	$	(786)	$	13,719
Membership and customer lists		28,988		(9,745)		19,243
Websites		4,174		(347)		3,827
	$	47,667	$	(10,878)	$	36,789

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	December 31, 2017
	Cost or		Accumulated
	Fair Value		Amortization		Net
Trademarks and trade names	$	14,187	$	(312)	$	13,875
Membership and customer lists		28,988		(8,194)		20,794
Websites		4,174		(136)		4,038
	$	47,349	$	(8,642)	$	38,707

The trademarks and trade names have useful lives of fifteen years. The membership and customer lists have weighted-average useful lives of approximately five years. The websites have useful lives of ten years.

6. Long-Term Debt

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


	June 30,		December 31,
	2018		2017
Term Loan Facility (1)	$	1,160,438	$	916,902
Less: current portion		(11,991)		(9,465)
	$	1,148,447	$	907,437

⁽¹⁾

Net of $5.9 million and $6.0 million of original issue discount at June 30 ,2018 and December 31, 2017, respectively, and $14.8 million and $14.2 million of finance costs at June 30, 2018 and December 31, 2017, respectively.

Senior Secured Credit Facilities

On November 8, 2016, CWGS Group, LLC (the “Borrower”), a wholly owned subsidiary of CWGS, LLC, entered into a credit agreement (as amended from time to time, the “Credit Agreement”) for a new $680.0 million senior secured credit facility (the “Senior Secured Credit Facilities”) and used the proceeds to repay its previous senior secured credit facilities. The Senior Secured Credit Facilities, prior to the amendments described below, consisted of a seven-year $645.0 million Term Loan Facility (the “Term Loan Facility”) and a five-year $35.0 million revolving credit facility (the “Revolving Credit Facility”). On March 17, 2017, the borrower entered into a First Amendment to the Credit Agreement to increase the Term Loan Facility by $95.0 million to $740.0 million. The Term Loan Facility included mandatory amortization at 1.00% per annum in equal quarterly installments. On October 6, 2017, the Borrower entered into a Second Amendment (the “Second Amendment”) to the Credit Agreement. The Second Amendment, among other things, (i) increased the Borrower’s Term Loan Facility by $205.0 million to an outstanding principal amount of $939.5 million, (ii) amended the applicable margin to 2.00% from 2.75% per annum, in the case of base rate loans, and to 3.00% from 3.75% per annum, in the case of LIBOR loans, and (iii) increased the quarterly amortization payment to $2.4 million. On March 28, 2018, the Borrower entered into a Third Amendment (the “Third Amendment”) to the Credit Agreement. The Third Amendment, among other things, (i) reduced the applicable interest margin by 25 basis points to 1.75% from 2.00% per annum, in the case of base rate loans, and to 2.75% from 3.00% per annum, in the case of LIBOR loans, effective on April 6, 2018, (ii) increased the Borrower’s term loan facility by $250 million to a principal amount of $1.19 billion outstanding as of March 28, 2018, and (iii) increased the quarterly amortization payment to $3.0 million.

The Term Loan Facility includes mandatory amortization at 1.01% per annum in equal quarterly installments. Interest on the Term Loan Facility effective April 6, 2018 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 2.75%, or b) an Alternate Base Rate (“ABR”) equal to 1.75% 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) one-month Adjusted LIBOR Rate plus 1.00%, subject to a 1.75% floor. Interest on borrowings under the 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 Senior Secured Credit Facilities. The Company also pays a commitment fee of 0.5% per annum on the

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unused amount of the Senior Secured Credit Facility. Reborrowings under the Term Loan Facility are not permitted. The Term Loan Facility requires mandatory principal payments in equal quarterly installments of $1.9 million starting March 31, 2017 through September 30, 2017, $2.4 million on December 31, 2017 and $3.0 million thereafter.

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 Credit Agreement, for such fiscal year. The required percentage prepayment of excess cash flow is reduced to 25% if the total leverage ratio, as defined in the Credit Agreement, 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 Revolving Credit Facility matures on November 8, 2021, and the Term Loan Facility matures on November 8, 2023. The funds available under the 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, 2018, the average interest rate on the term loan debt was 4.61%. As of June 30, 2018 and December 31, 2017, the Company had available borrowings of $32.2 million and $31.8 million, respectively, and letters of credit in the aggregate amount of $2.8 million and $3.2 million outstanding, respectively, under the Revolving Credit Facility. As of June 30, 2018 and December 31, 2017, the principal balance of $1,181.1 million and $937.1 million, respectively, was outstanding under the Term Loan Facility and no amounts were outstanding on the Revolving Credit Facility in either period.

CWGS, LLC and CWGS Group, LLC have no revenue-generating operations of their own. Their ability to meet the financial obligations associated with the 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 Senior Secured Credit Facilities are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by each of the Company’s existing and future domestic restricted subsidiaries with the exception of FreedomRoads Intermediate Holdco, LLC, the direct parent of FR, and FR and its subsidiaries. The Credit Agreement contains 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, 2018 and December 31, 2017.

7. Right to Use Assets and Liabilities

The Company leases operating facilities throughout the United States. The Company analyzes all leases in accordance with 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,
	2018		2017
Right to use assets	$	10,673	$	10,673
Accumulated depreciation		(1,055)		(926)
	$	9,618	$	9,747

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The following is a schedule by year of the future changes in the right to use liabilities as of June 30, 2018 (in thousands):


2018	$	436
2019		486
2020		486
2021		487
2022		487
Thereafter (1)		13,260
Total minimum lease payments		15,642
Amounts representing interest		(5,527)
Present value of net minimum right to use liability payments	$	10,115

⁽¹⁾

Includes $4.8 million of scheduled derecognition of right to use liabilities upon the reduction in lease deposits to less than two months’ rent.

8. Fair Value Measurements

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

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 2018 and 2017 of assets and liabilities that are not measured at fair value on a recurring basis.

The following table presents the reported carrying value and fair value information for the Company’s debt instruments. The fair values shown below for the Term Loan Facility, as applicable, are based on quoted prices in the inactive market for identical assets (Level 2).


	Fair Value	6/30/2018				12/31/2017
($ in thousands)	Measurement	Carrying Value		Fair Value		Carrying Value		Fair Value
Term Loan Facility	Level 2	$	1,160,438	$	1,180,063	$	916,902	$	953,269

9. 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.

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10. Statement of Cash Flows

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


	Six Months Ended
	June 30,		June 30,
	2018		2017
Cash paid during the period for:
Interest	$	45,077	$	30,454
Income taxes		16,942		13,538
Non-cash investing activities:
Vehicles transferred to property and equipment from inventory		104		1,238
Landlord paid tenant improvements on behalf of the Company		25,617		857
Derecognition of non-tenant improvements		6,476		—
Capital expenditures in accounts payable and accrued liabilities		9,827		5,176
Non-cash financing activities:
Class A common stock issued in exchange for common units in CWGS, LLC		2		56

11. Acquisitions

Dealerships and Consumer Shows

During the six months ended June 30, 2018 and 2017, subsidiaries of the Company acquired the assets of multiple dealership locations and consumer shows. The Company used a combination of cash, floor plan financing, proceeds from the May 2017 Public Offering (defined and described in Note 14 — Stockholders’ Equity), and additional borrowings on the Term Loan Facility in March 2017 and 2018 (see Note 6 — Long-term Debt) to complete the acquisitions. The Company considers acquisitions of independent dealerships to be a fast and capital efficient alternative to opening new retail locations to expand its business and grow its customer base. The Company acquires consumer shows as another channel for increasing its customer base. Additionally, the Company believes that its experience and scale allow it to operate these acquired dealerships and consumer shows more efficiently. 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.

Separately from the business combinations, for the six months ended June 30, 2018 and 2017, the Company purchased real property of $54.7 million and $11.1 million, respectively, of which $23.5 million was from parties related to the sellers of the dealership businesses.

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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,
($ in thousands)	2018		2017
Tangible assets (liabilities) acquired (assumed):
Cash and cash equivalents	$	2,648	$	—
Contracts in transit		102		880
Accounts receivable		102		642
Inventory		35,551		84,211
Prepaid expenses and other assets		22		46
Property and equipment		293		792
Other assets		48		—
Accrued liabilities		(711)		(2,872)
Other liabilities		(412)		—
Total tangible net assets acquired		37,643		83,699
Intangible assets acquired:
Membership and customer lists		—		793
Total intangible assets acquired		—		793
Goodwill		36,578		132,119
Purchase price		74,221		216,611
Cash and cash equivalents acquired		(2,648)		—
Cash paid for acquisition, net of cash acquired		71,573		216,611
Inventory purchases financed via floor plan		(29,365)		(71,124)
Cash payment net of floor plan financing	$	42,208	$	145,487

The fair values above are preliminary relating to the six months ended June 30, 2018 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. For the six months ended June 30, 2018 and 2017, acquired goodwill of $20.2 million and $132.1 million, respectively, is expected to be deductible for tax purposes. Included in the six months ended June 30, 2018 and 2017 consolidated financial results were $25.9 million and $117.7 million of revenue, respectively, and $1.9 million of pre-tax loss and $7.8 million of pre-tax income, respectively, of the acquired dealerships and consumer shows from the applicable acquisition dates.

Outdoor and Active Sports Retail

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 e-commerce business that serviced the hunting, camping, fishing, shooting sports, and outdoor markets. Overton’s operates two retail locations and an e-commerce business that services the marine and watersports markets.

The assets acquired included the right to designate any real estate leases for assignment to CWI or other third parties (the “Designation Rights”), other agreements CWI could elect to assume, intellectual property rights, operating systems and platforms, certain distribution center equipment, Overton’s inventory, the Gander Mountain and Overton’s e-commerce businesses, and fixtures and equipment for Overton’s two retail locations and corporate operations. Furthermore, CWI had 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 expired on October 6, 2017, which was immediately after CWI assumed the minimum 15 additional Gander Mountain retail leases. CWI also assumed certain liabilities, such as cure costs for leases and other agreements it elected 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

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Gander Mountain leases assumed under the Designation Rights were $1.0 million and recorded as contingent consideration.

On January 30, 2018 and April 19, 2018, indirect subsidiaries of the Company acquired substantially all of the assets of Earth Sports LLC, dba Erehwon Mountain Outfitters (“Erehwon”) and Rock Creek Outfitters, Inc. (“Rock Creek”), respectively, for $3.5 million and $5.2 million in cash, respectively. These businesses are specialty retailers of outdoor gear and apparel.

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 estimated fair values of the assets acquired and liabilities assumed for the acquisition of outdoor and active sports retail businesses consist of the following:


	Six Months Ended June 30,
($ in thousands)	2018		2017
Tangible assets (liabilities) acquired (assumed):
Inventory	$	4,599	$	9,965
Prepaid expenses and other assets		76		42
Property and equipment		416		3,780
Accrued liabilities		(359)		(373)
Other liabilities		—		—
Total tangible net assets acquired		4,732		13,414
Intangible assets acquired:
Trademarks and trade names		318		17,900
Membership and customer lists		—		500
Total intangible assets acquired		318		18,400
Goodwill		3,580		4,660
Purchase price		8,630		36,474
Contingent consideration unpaid at June 30, 2017		—		(1,025)
Cash paid for acquisition, net of cash acquired	$	8,630	$	35,449

The fair values above are preliminary relating to the six months ended June 30, 2018 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. For the six months ended June 30, 2018 and 2017, acquired goodwill of $3.6 million and $4.7 million, respectively, is expected to be deductible for tax purposes. Included in the six months ended June 30, 2018 and 2017 consolidated financial results were $3.0 million and $8.4 million of revenue, respectively, and $0.1 million and $1.6 million of pre-tax loss, respectively, of the acquired outdoor and active sports retail locations from the applicable acquisition dates.

12. Income Taxes

CWH is organized as a Subchapter C corporation and, as of June 30, 2018, is a 41.7% owner of CWGS, LLC (see Note 14 — Stockholders’ Equity and Note 15 — Non-Controlling Interests). CWGS, LLC is organized as a limited liability company and treated as a partnership for federal tax purposes, with the exception of Americas Road and Travel Club, Inc., Camping World and FreedomRoads RV, Inc. (“FRRV”) and their wholly-owned subsidiaries, which are Subchapter C corporations.

On December 22, 2017, the U.S. enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“2017 Tax Act”). The 2017 Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21% and eliminating certain deductions. The 2017 Tax Act also enhanced and extended through 2026 the option to claim accelerated depreciation deductions on qualified property. As of June 30, 2018, the Company had not completed its

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accounting for the tax effects of the enactment of the 2017 Tax Act on its tax accruals. However, the Company has reasonably estimated the effects of the 2017 Tax Act and recorded provisional amounts in its financial statements as of June 30, 2018 and December 31, 2017. The final impact of the 2017 Tax Act may differ from these estimates, due to, among other things, changes in interpretations, analysis and assumptions made by management, additional guidance that may be issued by the U.S. Department of the Treasury and the Internal Revenue Service, and any updates or changes to estimates the Company has utilized to calculate the transition impact. Pursuant to the SEC Staff Accounting Bulletin No. 118 (“SAB 118”), the Company's measurement period for implementing the accounting changes required by the 2017 Tax Act will close before December 22, 2018 and the Company anticipates completing the accounting under ASC Topic 740, Income Taxes, in a subsequent reporting period within the measurement period.

Shortly after the 2017 Tax Act was enacted, the SEC staff issued SAB 118 to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. In accordance with SAB 118, the Company has determined that the $118.4 million of the deferred tax expense recorded in connection with the remeasurement of certain deferred tax assets and liabilities during the three months ended December 31, 2017 was a provisional amount and a reasonable estimate at December 31, 2017. At June 30, 2018, this amount was decreased by $2.6 million as a result of a tax return true-up related to the allocation of taxable income to non-controlling interests. As the Company completes its analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, the Company may make adjustments to the provisional amounts. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete.

For the three months ended June 30, 2018 and 2017, the Company’s effective income tax rate was 12.9% and 12.0%, respectively. For the six months ended June 30, 2018 and 2017, the Company’s effective income tax rate was 16.3% and 11.4%, respectively. The amount of income tax expense and the effective income tax rate increased in 2018 partially due to operating losses recorded by its retail segment for which no tax benefit was recognized on account of the valuation allowance recorded against such losses, and partially due to an increased ownership percentage of CWGS, LLC for which the Company is subject to U.S., federal and state taxes on its allocable share of income of CWGS, LLC. The Company's effective tax rate for the three months ended June 30, 2018 was lower than the federal statutory rate of 21.0% primarily due to a portion of the Company’s earnings being attributable to non-controlling interests in limited liability companies which are not subject to corporate level taxes. For the three and six months ended June 30, 2018, the $2.6 million measurement period adjustment discussed above decreased the effective income tax rate by 273 basis points and 216 basis points, respectively. The Company's effective tax rate for the three months ended June 30, 2017 was significantly lower than the federal statutory rate of 35.0% primarily due to a portion of the Company’s earnings being attributable to non-controlling interests in limited liability companies which are not subject to corporate level taxes.

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, 2018 and December 31, 2017, the Company determined that all of its deferred tax assets, except those pertaining to Camping World and the direct investment in CWGS, LLC, are more likely than not to be realized. The Company maintains a full valuation allowance against the deferred tax assets of Camping World, 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 Company also maintains a valuation allowance against the portion of the deferred tax asset pertaining to its direct investment in CWGS, LLC.

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 related to 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

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an examination. As of June 30, 2018, the Company recorded $0.2 million of uncertain tax positions and none at December 31, 2017. The Company recorded $0.1 million of interest and penalties relating to income taxes for the three months ended June 30, 2018, and none for the three months ended June 30, 2017.

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. During the six months ended June 30, 2018 and 2017, 173,286 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, 2018 and December 31, 2017, the amount of Tax Receivable Agreement payments due under the Tax Receivable Agreement was $131.5 million and $137.7 million, respectively, of which $9.5 million and $8.1 million, respectively, were included in current portion of the Tax Receivable Agreement liability in the Condensed Consolidated Balance Sheets.

13. Related Party Transactions

Transactions with Directors, Equity Holders and Executive Officers

FreedomRoads leases various retail locations from managers and officers. During the three months ended June 30, 2018 and 2017, the related party lease expense for these locations was $0.5 million and $0.5 million, respectively. During the six months ended June 30, 2018 and 2017, the related party lease expense for these locations was $0.9 million and $0.9 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 A. Lemonis, the Company’s Chairman and Chief Executive Officer, has personally guaranteed both leases. During the three months ended June 30, 2018 and 2017, we made payments of approximately $154,000 and $176,000, respectively, in connection with the Original Lease, which included approximately $79,000 and $79,000, 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, 2018 and 2017, we made payments of approximately $332,000 and $352,000, respectively, in connection with the Original Lease, which included approximately $157,000 and $158,000, respectively, for common area maintenance charges on the Original Lease, and we made payments of approximately $17,000 and $17,000, respectively, in connection with the Expansion Lease.

The Company paid Kaplan, Strangis and Kaplan, P.A., of which Andris A. Baltins is a member, $0.1 million and $0 during the six months ended June 30, 2018 and 2017, respectively, for legal services.

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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 $2.1 million and $0.9 million for the three months ended June 30, 2018 and 2017, respectively, and $3.7 million and $1.2 million for the six months ended June 30, 2018 and 2017, respectively. The Company purchased point of purchase and visual merchandise displays from JD Custom Design (“JD Custom”) for use in Camping World’s retail store operations. Mr. Lemonis is a holder of 52% of the combined voting power in JD Custom and the Company paid JD Custom $0.3 million and $0 for the six months ended June 30, 2018 and 2017, respectively.

The Company does business with certain companies in which Stephen Adams, a member of the Company’s board of directors, has a direct or indirect material interest. The Company from time to time purchases advertising services from Adams Radio of Fort Wayne LLC (“Adams Radio”), in which Mr. Adams has an indirect 90% interest. The Company paid Adams Radio $0.1 million and $0 for the three months ended June 30, 2018 and 2017, respectively and $0.2 million and $0 for the six months ended June 30, 2018 and 2017, respectively.

14. 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.

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As required by the CWGS LLC Agreement, the Company must, at all times, maintain a one-to-one ratio between the number of outstanding shares of Class A common stock and the number of common units of CWGS, LLC owned by CWH (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities).

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 15 — 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.

May 2017 Public Offering

On May 31, 2017, the Company completed a public offering (the “May 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 May 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 May 2017 Public Offering, less underwriting discounts and commissions.

In connection with the May 2017 Public Offering, CVRV Acquisition LLC and CVRV Acquisition II LLC (“May 2017 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. CVRV Acquisition LLC redeemed 4,323,083 common units of CWGS, LLC for 4,323,083 shares of Class A common stock, which it sold in the May 2017 Public Offering along with 1,176,917 shares of Class A shares that CVRV Acquisition II LLC 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 CVRV Acquisition LLC 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 May 2017 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 May 2017 Selling Stockholders closed on the sale of the additional 825,000 shares of Class A common stock. CVRV Acquisition LLC redeemed 648,462 common units of CWGS, LLC for 648,462 shares of Class A common stock, which it sold in the May 2017 Public Offering along with 176,538 shares of Class A shares that CVRV Acquisition II LLC 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 CVRV Acquisition LLC 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 May 2017 Selling Stockholders’ shares.

October 2017 Public Offering

On October 30, 2017, the Company completed a public offering (the “October 2017 Public Offering”) in which, CVRV Acquisition LLC, CVRV Acquisition II LLC and Crestview Advisors, LLC, each affiliates of Crestview, and CWGS Holding, LLC, a wholly owned subsidiary of ML Acquisition Company, LLC, which is indirectly owned by each of Stephen Adams, a member of Camping World’s board of directors, and Marcus Lemonis, Camping World’s Chairman and Chief Executive Officer (“October 2017 Selling Stockholders”) sold 6,700,000 shares of the Company’s Class A common stock at a public offering price of $40.50 per share. CVRV Acquisition LLC redeemed 4,715,529 common units of CWGS, LLC for 4,715,529 newly-issued shares of Class

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A common stock, which it sold in the October 2017 Public Offering along with 1,283,756 and 715 shares of Class A shares that CVRV Acquisition II LLC and Crestview Advisors, LLC, respectively, already held as a result of the Reorganization Transactions. Additionally, CWGS Holding, LLC redeemed 700,000 common units of CWGS, LLC for 700,000 shares of Class A common stock, which it sold in the October 2017 Public Offering. Pursuant to the terms of the LLC Agreement, 4,715,529 and 700,000 shares of the Company’s Class B common stock registered in the names of CVRV Acquisition LLC and CWGS Holding, LLC, respectively, were cancelled for no consideration on a one-for-one basis with the number of common units redeemed. In addition, the underwriters exercised their option to purchase an additional 963,799 shares of Class A common stock from the October 2017 Selling Stockholders, in conjunction with their exercise of their option to purchase up to an additional 1,005,000 shares from the October 2017 Selling Stockholders. On November 1, 2017, the October 2017 Selling Stockholders closed on the sale of the additional 963,799 shares of Class A common stock. CVRV Acquisition LLC and CWGS Holding, LLC redeemed 678,331 and 100,695 common units of CWGS, LLC, for 678,331 and 100,695 newly issued shares of Class A common stock, respectively, which they sold in the October 2017 Public Offering along with 184,669 and 104 shares of Class A shares that CVRV Acquisition II LLC and Crestview Advisors, LLC, respectively, already held as a result of the Reorganization Transactions. Pursuant to the terms of the LLC Agreement, 678,331 and 100,695 shares of the Company’s Class B common stock registered in the names of CVRV Acquisition LLC and CWGS Holding, LLC, respectively, 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 October 2017 Public Offering.

Short-Swing Profit Disgorgement

In May 2018, the Company received an aggregate of $557,000 from short-swing profit disgorgement remitted by ML Acquisition Company, LLC, of which Marcus A. Lemonis, Chairman and Chief Executive Officer of the Company, is the sole director, which is included as an increase to additional paid-in capital in the unaudited condensed consolidated statement of stockholders’ equity and as a financing activity in the unaudited condensed consolidated statement of cash flows.

15. Non-Controlling Interests

In connection with the Reorganization Transactions, described in Note 14 — 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 the amount recorded as non-controlling interest and increase additional paid-in capital.

As of June 30, 2018 and December 31, 2017, there were 88,724,828 and 88,639,567 common units of CWGS, LLC outstanding, respectively, of which CWH owned 37,007,619 and 36,749,072 common units of CWGS, LLC, respectively, representing 41.7% and 41.5% ownership interests in CWGS, LLC, respectively, and the Continuing Equity Owners owned 51,717,209 and 51,890,495 common units of CWGS, LLC, respectively, representing 58.3% and 58.5% 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)	2018		2017		2018		2017

Net income attributable to Camping World Holdings, Inc.	$	28,031	$	19,344	$	31,212	$	26,866
Transfers to non-controlling interests:
Decrease in additional paid-in capital as a result of the purchase of common units from CWGS, LLC with proceeds from a public offering		—		(87,203)		—		(87,203)
Decrease in additional paid-in capital as a result of the purchase of common units from CWGS, LLC with proceeds from the exercise of stock options		(5)		—		(82)		—
Increase in additional paid-in capital as a result of the vesting of restricted stock units		29		—		29		—
Increase in additional paid-in capital as a result of the redemption of common units of CWGS, LLC		—		53,430		1,847		53,580
Change from net income attributable to Camping World Holdings, Inc. and transfers to non-controlling interests	$	28,055	$	(14,429)	$	33,006	$	(6,757)

16. Equity-based Compensation Plans

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


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
($ in thousands)	2018		2017		2018		2017
Equity-based compensation expense:
Costs applicable to revenue	$	172	$	81	$	347	$	173
Selling, general, and administrative		2,957		788		6,000		1,415
Total equity-based compensation expense	$	3,129	$	869	$	6,347	$	1,588

The following table summarizes stock option activity for the six months ended June 30, 2018:




	Stock Options
	(in thousands)
Outstanding at December 31, 2017		953
Exercised		(7)
Forfeited		(33)
Outstanding at June 30, 2018		913
Options exercisable at June 30, 2018		175

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The following table summarizes restricted stock unit activity for the six months ended June 30, 2018:


	Restricted
	Stock Units
	(in thousands)
Outstanding at December 31, 2017		1,247
Granted		33
Vested		(79)
Forfeited		(44)
Outstanding at June 30, 2018		1,157

17. Earnings Per Share

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

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands except per share amounts)	2018		2017		2018		2017
Numerator:
Net income	$	81,815	$	105,093	$	99,091	$	154,716
Less: net income attributable to non-controlling interests		(53,784)		(85,749)		(67,879)		(127,850)
Net income attributable to Camping World Holdings, Inc. — basic		28,031		19,344		31,212		26,866
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		36,156		—		40,508		78,160
Net income attributable to Camping World Holdings, Inc. — diluted	$	64,187	$	19,344	$	71,720	$	105,026
Denominator:
Weighted-average shares of Class A common stock outstanding — basic		36,964		22,977		36,890		20,973
Dilutive options to purchase Class A common stock		—		—		157		—
Dilutive restricted stock units		83		—		136		—
Dilutive common units of CWGS, LLC that are convertible into Class A common stock		51,717		—		51,773		63,700
Weighted-average shares of Class A common stock outstanding — diluted		88,764		22,977		88,956		84,673

Earnings per share of Class A common stock — basic	$	0.76	$	0.84	$	0.85	$	1.28
Earnings per share of Class A common stock — diluted	$	0.72	$	0.84	$	0.81	$	1.24

Weighted-average anti-dilutive securities excluded from the computation of diluted earnings per share of Class A common stock:
Stock options to purchase Class A common stock		920		1,083		462		1,097
Restricted stock units		896		226		450		187
Common units of CWGS, LLC that are convertible into Class A common stock		—		62,586		—		—

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

18. Segments Information

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

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Retail segment is comprised of new and used RVs; parts and service; finance and insurance; and skiing, snowboarding, bicycling, skateboarding, camping, fishing, hunting, hiking, rock climbing, 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)	2018		2017		2018		2017
Revenue:(1)
Consumer Services and Plans	$	52,748	$	48,103	$	106,556	$	98,349
Retail		1,392,428		1,230,923		2,400,186		2,062,312
Total consolidated revenue	$	1,445,176	$	1,279,026	$	2,506,742	$	2,160,661


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
($ in thousands)	2018		2017		2018		2017
Segment income:(2)
Consumer Services and Plans	$	27,590	$	23,959	$	55,714	$	50,212
Retail		95,498		117,042		117,692		163,185
Total segment income		123,088		141,001		173,406		213,397
Corporate & other		(1,480)		(3,483)		(2,964)		(4,424)
Depreciation and amortization		(11,628)		(7,584)		(21,028)		(14,437)
Other interest expense, net		(16,107)		(10,557)		(28,946)		(19,961)
Tax Receivable Agreement liability adjustment		—		—		—		17
Loss and expense on debt restructure		44		—		(2,056)		—
Income from operations before income taxes	$	93,917	$	119,377	$	118,412	$	174,592

⁽¹⁾

Represents revenue net of intersegment revenue of $15.1 million and $10.8 million for the three months ended June 30, 2018 and 2017, respectively, and $26.1 million and $19.2 million for the six months ended June 30, 2018 and 2017, respectively.

⁽²⁾

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)	2018		2017		2018		2017
Depreciation and amortization:
Consumer Services and Plans	$	823	$	1,005	$	1,595		2,001
Retail		10,805		6,464		19,433		12,321
Subtotal		11,628		7,469		21,028		14,322
Corporate & other		—		115		—		115
Total depreciation and amortization	$	11,628	$	7,584	$	21,028	$	14,437

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	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
($ in thousands)	2018		2017		2018		2017
Other interest expense, net:
Consumer Services and Plans	$	(1)	$	2	$	(2)	$	4
Retail		1,004		1,360		2,823		2,952
Subtotal		1,003		1,362		2,821		2,956
Corporate & other		15,104		9,195		26,125		17,005
Total interest expense	$	16,107	$	10,557	$	28,946	$	19,961


	June 30,		December 31,
($ in thousands)	2018		2017

Assets:
Consumer Services and Plans	$	143,141	$	180,295
Retail		2,555,741		2,078,535
Subtotal		2,698,882		2,258,830
Corporate & other		225,168		302,647
Total assets	$	2,924,050	$	2,561,477

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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 and Part II, Item 1A of this Form 10-Q, “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, 2018, 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 3.7 million RV-related Active Customers at June 30, 2018, excluding the impact of the acquisition of certain assets of Gander Mountain Company (“Gander Mountain,” and upon acquisition and rebranding, “Gander Outdoors”) and its Overton’s, Inc. business (“Overton’s”) in May 2017 (“Gander Mountain Acquisition”), further described below. 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 primarily through our two iconic brands, Good Sam and Camping World.

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 multiyear or annually renewable basis.

Our Camping World brand operates the largest national network of RV‑centric retail locations in the United States through our 147 retail locations in 36 states, as of June 30, 2018, 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 RV 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 retail locations are strategically located in key national RV markets.

In 2017, we expanded our products and services focus to outdoor sports and retail to include an array of outdoor products, apparel and gear and active sportswear and gear to target the broader group of outdoor and active sports enthusiasts. On May 26, 2017, we acquired certain assets of Gander Mountain, which specialized in the hunting, camping, fishing, shooting sports, and outdoor markets, and its Overton’s marine and watersports business through a bankruptcy auction. On August 17, 2017, we acquired Active Sports, Inc. which included TheHouse.com, (an online retail component of the business) specializing in biking, sailboarding, skateboarding, wakeboarding, snowboarding and outdoor gear. On September 22, 2017, we

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acquired EIGHTEEN0THREE LLC, dba W82 (“W82”), which specializes in snowboarding, skateboarding, longboarding, swimwear, footwear, apparel and accessories. On October 19, 2017, we acquired Uncle Dan's LTD, a specialty retailer of outdoor gear, apparel and camping supplies. In addition, on January 30, 2018, we acquired Erehwon, a leading Midwest specialty retailer of outdoor gear and apparel with four retail locations. On April 19, 2018 we acquired Rock Creek Outfitters (“Rock Creek”), a specialty outdoor retailer of outdoor gear for kayaking, rock climbing, camping and hiking with seven retail locations.

As of June 30, 2018, we operated a total of 223 locations which consisted of the following: 147 Camping World retail locations, 54 Gander Outdoors locations, two Overton’s locations, two TheHouse.com locations, two W82 locations, five Uncle Dan’s locations, four Erehwon locations and seven Rock Creek locations. Of the 223 locations, 132 sold recreational vehicles.

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 primarily through our Camping World, Gander Outdoors, Overton’s, TheHouse.com, W82, Uncle Dan’s, Erehwon and Rock Creek brands. 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 skiing, snowboarding, bicycling, skateboarding, camping, fishing, hunting, hiking, rock climbing, marine and watersports products. See Note 18 — 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 increase in the number of light-weight towable RVs offered by the manufactures, the increase in the number of pickup trucks and sport utility vehicles (“SUV’s) in operation, the ease of towing and the affordability of many of the light-weight RVs, 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 comprehensive portfolio of RV products, services and protection plans, growing base of locations, strong brands, leading market position, ongoing investment in our service platform, and full suite of resources will continue to provide us with competitive advantages in targeting and capturing a larger share of RV and outdoor related consumers with whom we do not currently transact. We expect to continue to grow the Active Customer base primarily through three strategies:

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.

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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.

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.

Cross‑Sell Products and Services. We believe our customer database of over 23 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 products to 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 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 above, while we have traditionally focused on the RV-centric outdoor enthusiasts, we believe there is significant opportunity for us to offer our comprehensive portfolio of services, protection plans, products and resources beyond the traditional RV enthusiasts to a broader group of outdoor and active sports enthusiasts who enjoy skiing, snowboarding, bicycling, skateboarding, camping, fishing, hunting, hiking, rock climbing, marine and watersports, and other outdoor active sports and activities. By expanding our array of products and services to include outdoor products, apparel and gear, and active sportswear and gear to target this broader group of outdoor and active sports enthusiasts, and by enhancing the benefits of membership in our Good Sam Club to provide additional benefits and savings to this broader group of outdoor and active sports enthusiasts, we believe we have the opportunity to expand our base of Active Customers and enhance the long-term value of the Good Sam consumer services and plans. With the increasing ease of use and affordability of RV vehicles, we also believe there is an opportunity to sell RVs to the outdoor and active sports enthusiasts who enjoy skiing, snowboarding, bicycling, skateboarding, non-RV camping, fishing, hunting, hiking, rock climbing, and marine and water sports and activities. We made several strategic acquisitions in the retail space in 2017 and early 2018, including Gander Mountain, and Overton’s, Active Sports, Inc., W82, Uncle Dan’s Outfitters, Erehwon and Rock Creek.

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 anticipated opening of Gander Outdoors store locations. 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 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.

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How We Generate Revenue

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

Number of Active Customers. Approximately 9 million households in the United States own an RV, and of the installed base, we had approximately 3.7 million and 3.5 million RV-related Active Customers, as of June 30, 2018 and 2017, respectively, excluding the impact of the acquisition of Gander Mountain and Overton’s in May 2017. Gander Outdoors and Overton’s Active Customers were approximately 209,000 and 240,000, respectively, at June 30, 2018. 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, e-commerce platforms, and direct marketing. 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 multiyear 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, 2018 and December 31, 2017, we had 2.0 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 other outdoor lifestyle products. For the six months ended June 30, 2018 and 2017, we opened eight and fourteen acquired RV retail locations, respectively, and opened zero and one greenfield location, respectively. In addition, in the six months ended June 30, 2018 we opened fifty-two Gander Outdoors locations and one Overton’s location, and acquired four Erehwon locations, and seven Rock Creek locations. (see Note 11 — Acquisitions to our unaudited consolidated financial statements included in Part I, Item 1 of this Form 10-Q).

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 the 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, 2018 and 2017, we had, respectively, a base of 120 and 115 same stores. For the six months ended June 30, 2018 and 2017, our aggregate same store sales were $1.94 billion and $1.92 billion, respectively. As of June 30, 2018, we had a total of 223 locations consisting of 147 Camping World retail locations, 54 Gander Outdoor locations, two Overton’s locations, two W82 locations, two TheHouse.com locations, 5 Uncle Dan’s locations, 4 Erehwon, and 7 Rock Creek locations, compared to 137 Camping World retail locations at June 30, 2017. In the first six months of 2018 we closed three Camping World non-dealer locations (Rogers, Minnesota, Winter Garden, Florida, and Cleburne, Texas). We closed one Overton’s

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location in January 2018 and opened one in our Rogers, Minnesota location which previously was a Camping World non-dealer location.

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, exclusive of depreciation and amortization. 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, 2018 and 2017, gross profit was $31.9 million and $27.5 million, respectively, and gross margin was 60.5% and 57.3%, respectively, for our Consumer Services and Plans segment, and gross profit was $384.2 million and $345.0 million, respectively, and gross margin was 27.6% and 28.0%, respectively, for our Retail segment. For the six months ended June 30, 2018 and 2017, gross profit was $63.0 million and $56.6 million, respectively, and gross margin was 59.1% and 57.6%, respectively, for our Consumer Services and Plans segment, and gross profit was $657.9 million and $567.9 million, respectively, and gross margin was 27.4% and 27.5%, 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, 2018 and 2017, SG&A as a percentage of gross profit was 68.3% and 61.3%, respectively. For the six months ended June 30, 2018 and 2017, SG&A as a percentage of gross profit was 73.4% and 64.7%, 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.

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, net (excluding floor plan interest expense), provision for income tax expense, depreciation and amortization, loss and expense on debt restructure, loss (gain) on sale of assets, equity-based compensation, Tax Receivable Agreement liability adjustment, transaction expenses related to acquisitions, Gander Outdoors pre-opening costs, and other unusual or one‑time items. We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA by total

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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 United States (“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, net (excluding floor plan interest expense), provision for income tax expense 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 and expense on debt restructure, loss (gain) on sale of assets, equity-based compensation, Tax Receivable Agreement liability adjustment, transaction expenses related to acquisitions, Gander Outdoors 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)	2018		2017		2018		2017
EBITDA:
Net income	$	81,815	$	105,093	$	99,091	$	154,716
Other interest expense, net		16,107		10,557		28,946		19,961
Depreciation and amortization		11,628		7,584		21,028		14,437
Income tax expense		12,102		14,284		19,321		19,876
Subtotal EBITDA		121,652		137,518		168,386		208,990
Loss and expense on debt restructure (a)		(44)		—		2,056		—
Loss (gain) on sale of assets (b)		59		31		144		(287)
Equity-based compensation (c)		3,129		869		6,347		1,588
Tax Receivable Agreement liability adjustment (d)		—		—		—		(17)
Acquisitions - transaction expense (e)		—		2,100		—		2,100
Gander Outdoors pre-opening costs (f)		15,355		1,351		35,006		1,351
Adjusted EBITDA	$	140,151	$	141,869	$	211,939	$	213,725


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(as percentage of total revenue)	2018		2017		2018		2017
EBITDA margin:
Net income margin		5.7%		8.2%		4.0%		7.2%
Other interest expense, net		1.1%		0.8%		1.2%		0.9%
Depreciation and amortization		0.8%		0.6%		0.8%		0.7%
Income tax expense		0.8%		1.1%		0.8%		0.9%
Subtotal EBITDA margin		8.4%		10.8%		6.7%		9.7%
Loss and expense on debt restructure (a)		(0.0%)		—		0.1%		—
Loss (gain) on sale of assets (b)		0.0%		0.0%		0.0%		(0.0%)
Equity-based compensation (c)		0.2%		0.1%		0.3%		0.1%
Tax Receivable Agreement liability adjustment (d)		—		—		—		(0.0%)
Acquisitions - transaction expense (e)		—		0.2%		—		0.1%
Gander Outdoors pre-opening costs (f)		1.1%		0.1%		1.4%		0.1%
Adjusted EBITDA margin		9.7%		11.1%		8.5%		9.9%

(a)

Represents the loss and expense incurred on debt restructure and financing expense incurred from the Third Amendment to the Credit Agreement in 2018.

(b)

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

(c)

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

(d)

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

(e)

Represent transaction expenses, primarily legal costs, associated with acquisitions into new or complementary markets, including the Gander Mountain Acquisition.

(f)

Represents pre-opening store costs associated with opening Gander Outdoors retail stores.

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 net income attributable to non-controlling interests from the assumed exchange of all outstanding common units in CWGS, LLC 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) and expense on debt restructure, loss (gain) on sale of assets, equity-based compensation, Tax Receivable Agreement liability adjustment, transaction expenses related to acquisitions, Gander Outdoors pre-opening costs, other unusual or one‑time items, and the income tax expense effect of these adjustments. 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 the full exchange of all outstanding common units in CWGS, LLC for newly-issued shares of Class A common stock of Camping World Holdings, Inc., and (ii) the dilutive effect of stock options and restricted

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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)	2018		2017		2018		2017
Numerator:
Net income attributable to Camping World Holdings, Inc.	$	28,031	$	19,344	$	31,212	$	26,866
Adjustments:
Reallocation of net income attributable to non-controlling interests from the assumed exchange of common units in CWGS, LLC (a)		53,784		85,749		67,879		127,850
Loss and expense on debt restructure (b)		(44)		—		2,056		—
Loss (gain) on sale of assets (c)		59		31		144		(287)
Equity-based compensation (d)		3,129		869		6,347		1,588
Tax Receivable Agreement liability adjustment (e)		—		—		—		(17)
Acquisitions - transaction expense (f)		—		2,100		—		2,100
Gander Outdoors pre-opening costs (g)		15,355		1,351		35,006		1,351
Income tax expense (h)		(14,691)		(32,028)		(20,080)		(50,320)
Adjusted pro forma net income	$	85,623	$	77,416	$	122,564	$	109,131
Denominator:
Weighted-average Class A common shares outstanding - diluted		88,764		22,977		88,956		84,673
Adjustments:
Assumed exchange of post-IPO common units in CWGS, LLC for shares of Class A common stock (i)		—		62,586		—		—
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		88,764		85,680		88,956		84,833
Adjusted pro forma earnings per fully exchanged and diluted share	$	0.96	$	0.90	$	1.38	$	1.29

(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 the loss and expense incurred on debt restructure and financing expense incurred from the Third Amendment to the Credit Agreement in 2018.

(c)

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

(d)

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

(e)

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

(f)

Represents transaction expenses, primarily legal costs, associated with acquisitions into new or complementary markets, including the Gander Mountain Acquisition.

(g)

Represents pre-opening store costs associated with the Gander Outdoors store openings.

(h)

Represents the income tax expense effect of the above adjustments. This assumption uses effective tax rates of 25.3% and 38.5% for the adjustments for 2018 and 2017, respectively.

(i)

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;

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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 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 reallocation of net income attributable to non-controlling interests, loss and expense on debt restructure, loss (gain) on sale of assets, equity-based compensation, Tax Receivable Agreement liability adjustment, transaction expenses related to acquisitions, Gander Outdoors 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 internal operating results and operating results of other companies over time. 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, 2018 Compared to Three and Six Months Ended June 30, 2017

The following table sets forth information comparing the components of net income for the three and six months ended June 30, 2018 and 2017:


	Three Months Ended									Six Months Ended
	June 30, 2018			June 30, 2017						June 30, 2018			June 30, 2017
			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	$	52,748	3.6%	$	48,103	3.8%	$	4,645	9.7%	$	106,556	4.3%	$	98,349	4.6%	$	8,207	8.3%
Retail
New vehicles		807,519	55.9%		760,806	59.5%		46,713	6.1%		1,387,029	55.3%		1,264,110	58.5%		122,919	9.7%
Used vehicles		210,646	14.6%		195,615	15.3%		15,031	7.7%		382,737	15.3%		341,434	15.8%		41,303	12.1%
Parts, services and other		250,203	17.3%		174,196	13.6%		76,007	43.6%		414,511	16.5%		290,419	13.4%		124,092	42.7%
Finance and insurance, net		124,060	8.6%		100,306	7.8%		23,754	23.7%		215,909	8.6%		166,349	7.7%		49,560	29.8%
Subtotal		1,392,428	96.4%		1,230,923	96.2%		161,505	13.1%		2,400,186	95.7%		2,062,312	95.4%		337,874	16.4%
Total revenue		1,445,176	100.0%		1,279,026	100.0%		166,150	13.0%		2,506,742	100.0%		2,160,661	100.0%		346,081	16.0%

Gross profit (exclusive of depreciation and amortization shown separately below):
Consumer Services and Plans		31,916	2.2%		27,543	2.2%		4,373	15.9%		62,999	2.5%		56,642	2.6%		6,357	11.2%
Retail
New vehicles		109,825	7.6%		114,797	9.0%		(4,972)	-4.3%		185,451	7.4%		183,039	8.5%		2,412	1.3%
Used vehicles		48,140	3.3%		50,689	4.0%		(2,549)	-5.0%		85,938	3.4%		84,606	3.9%		1,332	1.6%
Parts, services and other		102,223	7.1%		79,245	6.2%		22,978	29.0%		170,643	6.8%		133,873	6.2%		36,770	27.5%
Finance and insurance, net		124,060	8.6%		100,306	7.8%		23,754	23.7%		215,909	8.6%		166,349	7.7%		49,560	29.8%
Subtotal		384,248	26.6%		345,037	27.0%		39,211	11.4%		657,941	26.2%		567,867	26.3%		90,074	15.9%
Total gross profit		416,164	28.8%		372,580	29.1%		43,584	11.7%		720,940	28.8%		624,509	28.9%		96,431	15.4%

Operating expenses:
Selling, general and administrative expenses		284,295	19.7%		228,444	17.9%		(55,851)	-24.4%		529,409	21.1%		403,934	18.7%		(125,475)	-31.1%
Debt restructure expense		(44)	0.0%		—	0.0%		44	-100.0%		380	0.0%		—	0.0%		(380)	-100.0%
Depreciation and amortization		11,628	0.8%		7,584	0.6%		(4,044)	-53.3%		21,028	0.8%		14,437	0.7%		(6,591)	-45.7%
Gain on asset sales		59	0.0%		31	0.0%		(28)	90.3%		144	0.0%		(287)	0.0%		(431)	-150.2%
Income from operations		120,226	8.3%		136,521	10.7%		(16,295)	-11.9%		169,979	6.8%		206,425	9.6%		(36,446)	-17.7%
Other income (expense):
Floor plan interest expense		(10,202)	-0.7%		(6,587)	-0.5%		(3,615)	-54.9%		(20,945)	-0.8%		(11,889)	-0.6%		(9,056)	-76.2%
Other interest expense, net		(16,107)	-1.1%		(10,557)	-0.8%		(5,550)	-52.6%		(28,946)	-1.2%		(19,961)	-0.9%		(8,985)	-45.0%
Tax Receivable Agreement liability adjustment		—	0.0%		—	0.0%		—	0.0%		—	0.0%		17	0.0%		(17)	-100.0%
Loss on debt restructure		—	0.0%		—	0.0%		—	-100.0%		(1,676)	-0.1%		—	0.0%		(1,676)	-100.0%
		(26,309)	-1.8%		(17,144)	-1.3%		(9,165)	-53.5%		(51,567)	-2.1%		(31,833)	-1.5%		(19,734)	-62.0%
Income before income taxes		93,917	6.5%		119,377	9.3%		(25,460)	-21.3%		118,412	4.7%		174,592	8.1%		(56,180)	-32.2%
Income tax expense		(12,102)	-0.8%		(14,284)	-1.1%		2,182	15.3%		(19,321)	-0.8%		(19,876)	-0.9%		555	2.8%
Net income		81,815	5.7%		105,093	8.2%		(23,278)	-22.1%		99,091	4.0%		154,716	7.2%		(55,625)	-36.0%
Less: net income attributable to non-controlling interests		(53,784)	-3.7%		(85,749)	-6.7%		31,965	-37.3%		(67,879)	-2.7%		(127,850)	-5.9%		59,971	-100.0%
Net income attributable to Camping World Holdings, Inc.	$	28,031	1.9%	$	19,344	1.5%	$	8,687	44.9%	$	31,212	1.2%	$	26,866	1.2%	$	4,346	16.2%

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Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Total revenue increased 13.0%, or $166.2 million, to $1.4 billion in the three months ended June 30, 2018 from $1.3 billion in the three months ended June 30, 2017. The increase was driven by a 9.7% increase in Consumer Services and Plans revenue to $52.7 million, and a 13.1% increase in the Retail revenue to $1.4 billion in the three months ended June 30, 2018, from $48.1 million and $1.2 billion, respectively, in the three months ended June 30, 2018. Same store sales decreased 0.5% for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Total revenue increased 16.0%, or $346.1 million, to $2.5 billion in the six months ended June 30, 2018, from $2.2 billion in the six months ended June 30, 2017. The increase was driven by an 8.3% increase in Consumer Services and Plans revenue to $106.6 million and a 16.4% increase in Retail revenue to $2.4 billion in the six months ended June 30, 2018 from $98.3 million and $2.1 billion, respectively, in the six months ended June 30, 2017. Same store sales increased 1.3% for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017.

Consumer Services and Plans

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Consumer Services and Plans revenue increased 9.7%, or $4.6 million, to $52.7 million in the three months ended June 30, 2018, from $48.1 million in the three months ended June 30, 2017. The increase was primarily attributable to $1.8 million from additional Good Sam Club memberships, $1.4 million from the additional contracts in force from our roadside assistance programs, $0.8 million from additional policies in force for our vehicle insurance products, $0.4 million from increased policies in force in the Good Sam TravelAssist programs, and $0.2 million from various other ancillary products, services and protection plans.

Consumer Services and Plans gross profit increased 15.9%, or $4.4 million, to $31.9 million in the three months ended June 30, 2018, from $27.5 million in the three months ended June 30, 2017. The increase was primarily attributable to $2.9 million from additional contracts in force from our roadside assistance programs, vehicle insurance and Good Sam Travel/Assist programs, $1.1 million from increased membership and reduced marketing costs in the Good Sam Club, and $0.4 million from various other ancillary products, services and protection plans. Consumer Services and Plans gross margin increased to 60.5% in the three months ended June 30, 2018 from 57.3% in the three months ended June 30, 2017.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Consumer Services and Plans revenue increased 8.3%, or $8.2 million, to $106.6 million in the six months ended June 30, 2018, from $98.3 million in the six months ended June 30, 2017. The increase was primarily attributable to $2.5 million from additional Good Sam Club memberships, $2.3 million from the additional contracts in force from our roadside assistance programs, $1.2 million from additional policies in force for our vehicle insurance products, $0.9 million from increased policies in force in the Good Sam TravelAssist programs, $0.8 million primarily from seven additional consumer shows, and $0.5 million from various other ancillary products, services and protection plans.

Consumer Services and Plans gross profit increased 11.2%, or $6.4 million, to $63.0 million in the six months ended June 30, 2018, from $56.6 million in the six months ended June 30, 2017. The increase was primarily attributable to $4.4 million from increased policies in force from the roadside assistance, vehicle insurance, and Good Sam TravelAssist programs, $1.8 million from additional Good Sam Club memberships, $0.6 million from additional consumer shows, and $0.3 million from other ancillary products, services and protection plans, partially offset by a $0.7 million decrease from extended warranty products. Consumer Services and Plans gross margin increased to 59.1% in the six months ended June 30, 2018 from 57.6% in the six months ended June 30, 2017.

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Retail:

New Vehicles


	Three Months Ended									Six Months Ended
	June 30, 2018			June 30, 2017			Favorable/			June 30, 2018			June 30, 2017			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	$	807,519	100.0%	$	760,806	100.0%	$	46,713	6.1%	$	1,387,029	100.0%	$	1,264,110	100.0%	$	122,919	9.7%
Gross profit	$	109,825	13.6%	$	114,797	15.1%	$	(4,972)	-4.3%	$	185,451	13.4%	$	183,039	14.5%	$	2,412	1.3%
Vehicle unit sales		24,442			21,930			2,512	11.5%		40,738			35,693			5,045	14.1%
Average selling price per vehicle	$	33,038		$	34,692		$	(1,654)	-4.8%	$	34,048		$	35,416		$	(1,369)	-3.9%
Average gross profit per vehicle	$	4,493		$	5,235		$	(741)	-14.2%	$	4,552		$	5,128		$	(576)	-11.2%

Same store sales data:
Same store sales	$	682,415		$	701,351		$	(18,936)	-2.7%	$	1,186,458		$	1,197,438		$	(10,980)	-0.9%
Same store unit sales		20,636			20,154			482	2.4%		34,654			33,627			1,027	3.1%
Same store average selling price per vehicle	$	33,069		$	34,800		$	(1,730)	-5.0%	$	34,237		$	35,609		$	(1,372)	-3.9%

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

New vehicle revenue increased 6.1%, or $46.7 million, to $807.5 million in the three months ended June 30, 2018 from $760.8 million in the three months ended June 30, 2017. The increase was primarily due to an 11.5% increase in new vehicle unit sales, driven by a 6.7% same store increase of travel trailers units, and the 27 acquired and greenfield RV dealership locations added over the last eighteen months, partially offset by a 4.8% decrease in the average sales price per unit resulting from a product mix shift toward lower priced towable units.

New vehicle gross profit decreased 4.3%, or $5.0 million, to $109.8 million in the three months ended June 30, 2018 from $114.8 million in the three months ended June 30, 2017. The decrease was primarily due to a 14.2% decrease in average gross profit per unit, partially offset by an 11.5% increase in new vehicle unit sales. New vehicle gross margin decreased to 13.6% in the three months ended June 30, 2018 from 15.1% in the three months ended June 30, 2017.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

New vehicle revenue increased 9.7%, or $122.9 million, to $1.4 billion in six months ended June 30, 2018 from $1.3 billion in the six months ended June 30, 2017. The increase was primarily due to a 14.1% increase in new vehicle unit sales, driven primarily by increased sales of travel trailers units and the 27 acquired and greenfield RV dealership locations added over the last eighteen months, partially offset by a 3.9% decrease in the average sales price per unit resulting from a product mix shift toward lower priced towable units.

New vehicle gross profit increased 1.3%, or $2.4 million to $185.5 million in the six months ended June 30, 2018 from $183.0 million in the six months ended June 30, 2017. The increase was primarily due to the 14.1% increase in new vehicle unit sales, partially offset by a 11.2% decrease in average gross profit per unit. New vehicle gross margin decreased to 13.4% in the six months ended June 30, 2018 from 14.5% in the six months ended June 30, 2017.

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Used Vehicles


	Three Months Ended									Six Months Ended
	June 30, 2018			June 30, 2017			Favorable/			June 30, 2018			June 30, 2017			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	$	210,646	100.0%	$	195,615	100.0%	$	15,031	7.7%	$	382,737	100.0%	$	341,434	100.0%	$	41,303	12.1%
Gross profit	$	48,140	22.9%	$	50,689	25.9%	$	(2,549)	-5.0%	$	85,938	22.5%	$	84,606	24.8%	$	1,332	1.6%
Vehicle unit sales		9,195			9,073			122	1.3%		17,446			15,589			1,857	11.9%
Average selling price per vehicle	$	22,909		$	21,560		$	1,349	6.3%	$	21,938		$	21,902		$	36	0.2%
Average gross profit per vehicle	$	5,235		$	5,587		$	(351)	-6.3%	$	4,926		$	5,427		$	(501)	-9.2%

Same store sales data:
Same store sales	$	181,894		$	182,492		$	(598)	-0.3%	$	333,300		$	326,195		$	7,105	2.2%
Same store unit sales		8,073			8,438			(365)	-4.3%		14,906			14,822			84	0.6%
Same store average selling price per vehicle	$	22,531		$	21,627		$	904	4.2%	$	22,360		$	22,007		$	353	1.6%

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Used vehicle revenue increased 7.7%, or $15.0 million, to $210.6 million in the three months ended June 30, 2018 from $195.6 million in the three months ended June 30, 2017. The increase was primarily due to a 1.3% increase in used vehicle unit sales, driven primarily by the 27 acquired and greenfield RV dealership locations added over the last eighteen months, and a 6.3% increase in the average price per unit. .

Used vehicle gross profit decreased 5.0%, or $2.5 million, to $48.1 million in the three months ended June 30, 2018 from $50.7 million in the three months ended June 30, 2017. The decrease was primarily from a 6.3% decrease in average gross profit per unit, partially offset by a 1.3% increase in unit volume. Used vehicle gross margin decreased to 22.9% in the three months ended June 30, 2018 from 25.9% in the three months ended June 30, 2017.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Used vehicle revenue increased 12.1%, or $41.3 million, to $382.7 million in the six months ended June 30, 2018 from $341.4 million in the six months ended June 30, 2017. The increase was primarily due to an 11.9% increase in used vehicle unit sales, driven primarily by the 27 acquired and greenfield RV dealership locations added over the last eighteen months, and a 0.2% increase in the average price per unit.

Used vehicle gross profit increased 1.6%, or $1.3 million, to $85.9 million in the six months ended June 30, 2018 from $84.6 million in the six months ended June 30, 2017. The increase was primarily from an 11.9% increase in unit volume, partially offset by a 9.2% decrease in gross profit per unit. Used vehicle gross margin decreased to 22.5% in the six months ended June 30, 2018 from 24.8% in the six months ended June 30, 2017.

Parts, Services and Other


	Three Months Ended									Six Months Ended
	June 30, 2018			June 30, 2017			Favorable/			June 30, 2018			June 30, 2017			Favorable/
			Percent of			Percent of	(Unfavorable)					Percent of			Percent of	(Unfavorable)
($ in thousands)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%

Revenue	$	250,203	100.0%	$	174,196	100.0%	$	76,007	43.6%	$	414,511	100.0%	$	290,419	100.0%	$	124,092	42.7%

Gross profit		102,223	40.9%		79,245	45.5%		22,978	29.0%		170,643	41.2%		133,873	46.1%		36,770	27.5%

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Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Parts, services and other revenue increased 43.6%, or $76.0 million, to $250.2 million in the three months ended June 30, 2018 from $174.2 million in the three months ended June 30, 2017. The increase was primarily attributable to increased revenue from the 27 acquired and greenfield RV dealership locations opened over the last eighteen months and the outdoor and active sports businesses acquired over the last twelve months. Revenue related to the outdoor and active sports businesses was $79.5 million in the three months ended June 30, 2018 compared to $8.4 million in the three months ended June 30, 2017. Parts, service and other same store sales increased 1.7% for the three months ended June 30, 2018 versus the comparable period in 2017.

Parts, services and other gross profit increased 29.0%, or $23.0 million, to $102.2 million in the three months ended June 30, 2018 from $79.2 million in the three months ended June 30, 2017. The increase was primarily due to increased revenue. Parts, services and other gross margin decreased to 40.9% in the three months ended June 30, 2018 from 45.5% in the three months ended June 30, 2017 primarily from the addition of the outdoor retail businesses acquired over the last twelve months.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Parts, services and other revenue increased 42.7%, or $124.1 million, to $414.5 million in the six months ended June 30, 2018 from $290.4 million in the six months ended June 30, 2017. The increase was primarily attributable to increased revenue from the 27 acquired and greenfield RV dealership locations added over the last eighteen months and the outdoor and active sports businesses acquired over the past twelve months. Revenue related to the outdoor and active sports businesses was $118.7 million in the six months ended June 30, 2018 compared to $8.4 million in the six months ended June 30, 2017. Parts, service and other same store sales increased 1.4% for the six months ended June 30, 2018 versus the comparable period in 2017.

Parts, services and other gross profit increased 27.5%, or $36.8 million, to $170.6 million in the six months ended June 30, 2018 from $133.9 million in the six months ended June 30, 2017. The increase was primarily due to increased revenue. Parts, services and other gross margin decreased to 41.2% in the six months ended June 30, 2018 from 46.1% in the six months ended June 30, 2017 primarily due to the addition of the outdoor retail businesses acquired over the last twelve months.

Finance and Insurance, net


	Three Months Ended									Six Months Ended
	June 30, 2018			June 30, 2017			Favorable/			June 30, 2018			June 30, 2017			Favorable/
			Percent of			Percent of	(Unfavorable)					Percent of			Percent of	(Unfavorable)
($ in thousands)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%

Revenue	$	124,060	100.0%	$	100,306	100.0%	$	23,754	23.7%	$	215,909	100.0%	$	166,349	100.0%	$	49,560	29.8%

Gross profit		124,060	100.0%		100,306	100.0%		23,754	23.7%		215,909	100.0%		166,349	100.0%		49,560	29.8%

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Finance and insurance, net revenue and gross profit each increased 23.7%, or $23.8 million, $124.1 million in the three months ended June 30, 2018 from $100.3 million in the three months ended June 30, 2017. The increase was primarily due to an increase in the number of vehicle finance contracts from higher vehicle unit sales and an increase in our finance and insurance sales penetration rates. Finance and insurance, net same store sales increased 11.9% in the three months ended June 30, 2018 versus the comparable period in 2017 and revenue as a percentage of total new and used vehicle revenue increased to 12.2% in the three months ended June 30, 2018 from 10.5% in the three months ended June 30, 2017.

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Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Finance and insurance, net revenue and gross profit each increased 29.8%, or $49.6 million, to $215.9 million in the six months ended June 30, 2018 from $166.3 million in the six months ended June 30, 2017. The increase was primarily due to an increase in the number of vehicle finance contracts from higher vehicle unit sales and an increase in our finance and insurance sales penetration rates. Finance and insurance, net same store sales increased 16.0% in the six months ended June 30, 2018 versus the comparable period in 2017 and revenue as a percentage of total new and used vehicle revenue increased to 12.2% for the six months ended June 30, 2018 from 10.4% in the six months ended June 30, 2017.

Selling, general and administrative expenses

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Selling, general and administrative increased 24.4%. or $55.9 million, to $284.3 million in the three months ended June 30, 2018 from $228.4 million in the three months ended June 30, 2017. The increase was primarily due to increases of $24.6 million of variable wage-related expenses, primarily attributable to the acquired and greenfield RV dealership locations opened over the last eighteen months, the acquired businesses, and increased vehicle unit sales; $11.7 million of additional real and personal property expense; $8.4 million of additional variable selling expense; $7.3 million of store and corporate overhead expenses; and $3.9 million of additional variable occupancy expense. Included in these variances is $15.4 million of pre-opening costs associated with the Gander Outdoors store openings. Selling, general and administrative expenses as a percentage of total gross profit increased to 68.3% in the three months ended June 30, 2018, from 61.3% in the three months ended June 30, 2017.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Selling, general and administrative expenses increased 31.1%, or $125.5 million, to $529.4 million in the six months ended June 30, 2018 from $403.9 million in the six months ended June 30, 2017. The increase was primarily due to increases of $62.5 million of variable wage-related expenses, primarily attributable to the acquired and greenfield RV dealership locations opened over the last eighteen months, the acquired businesses, and increased vehicle unit sales; $21.5 million of additional real and personal property expense; $17.0 million of store and corporate overhead expenses; $16.7 million of additional variable selling expense; and $7.8 million of additional variable occupancy expense. Included in these variances is $35.0 million of pre-opening costs associated with the Gander Outdoors store openings. Selling, general and administrative expenses as a percentage of total gross profit increased to 73.4% in the six months ended June 30, 2018, from 64.7% in the six months ended June 30, 2017.

Depreciation and amortization

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Depreciation and amortization increased 53.3%, or $4.0 million, to $11.6 million in the three months ended June 30, 2018 from $7.6 million in the three months ended June 30, 2017 primarily due to the addition of the acquired businesses.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Depreciation and amortization increased 45.7%, or $6.6 million, to $21.0 million in the six months ended June 30, 2018 from $14.4 million in the six months ended June 30, 2017 primarily due to the addition of the acquired businesses.

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Debt restructure expense

Debt restructure expense was $0.4 million in the six months ended June 30, 2018and was related to the Third Amendment to the Credit Agreement entered into in March 2018.

Floor plan interest expense

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Floor plan interest expense increased 54.9%, or $3.6 million, to $10.2 million in the three months ended June 30, 2018 from $6.6 million in the three months ended June 30, 2017. The increase was primarily due to higher average floor plan borrowings primarily from an higher average inventory levels from the 27 acquired and greenfield RV dealership locations added over the last eighteen months and a 106 basis point increase in the average floor plan borrowing rate.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Floor plan interest expense increased 76.2%, or $9.1 million, to $20.9 million in the six months ended June 30, 2018 from $11.9 million in the six months ended June 30, 2017. The increase was primarily due to higher average floor plan borrowings from higher average inventory levels from the 27 acquired and greenfield RV dealership locations added over the last eighteen months and a 101 basis point increase in the average floor plan borrowing rate.

Other interest expense, net

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Other interest expense increased 52.6%, or $5.5 million, to $16.1 million in the three months ended June 30, 2018 from $10.6 million in the three months ended June 30, 2017. The increase was primarily due to increased average debt outstanding primarily to finance the acquisition of RV dealerships, and outdoor and active sports businesses, and Gander Outdoor store openings, partially offset by a 9 basis point decrease in the average interest rate.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Other interest expense increased 45.0%, or $9.0 million, to $28.9 million in the six months ended June 30, 2018 from $20.0 million in the six months ended June 30, 2017. The increase was primarily due to increased average debt outstanding partially offset by an 8 basis point decrease in the average interest rate.

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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, 2018			June 30, 2017			Favorable/			June 30, 2018			June 30, 2017			Favorable/
			Percent of			Percent of	(Unfavorable)					Percent of			Percent of	(Unfavorable)
($ in thousands)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%
Revenue:(1)
Consumer Services and Plans	$	52,748	3.6%	$	48,103	3.8%	$	4,645	9.7%	$	106,556	4.3%	$	98,349	4.6%	$	8,207	8.3%
Retail		1,392,428	96.4%		1,230,923	96.2%		161,505	13.1%		2,400,186	95.7%		2,062,312	95.4%		337,874	16.4%
Total consolidated revenue		1,445,176	100.0%		1,279,026	100.0%		166,150	13.0%		2,506,742	100.0%		2,160,661	100.0%		346,081	16.0%
Segment income:(2)
Consumer Services and Plans		27,590	1.9%		23,959	1.9%		3,631	15.2%		55,714	2.2%		50,212	2.3%		5,502	11.0%
Retail		95,498	6.6%		117,042	9.2%		(21,544)	-18.4%		117,692	4.7%		163,185	7.6%		(45,493)	-27.9%
Total segment income		123,088	8.5%		141,001	11.0%		(17,913)	-12.7%		173,406	6.9%		213,397	9.9%		(39,991)	-18.7%
Corporate & other		(1,480)	-0.1%		(3,483)	-0.3%		2,003	57.5%		(2,964)	-0.1%		(4,424)	-0.2%		1,460	33.0%
Depreciation and amortization		(11,628)	-0.8%		(7,584)	-0.6%		(4,044)	-53.3%		(21,028)	-0.8%		(14,437)	-0.7%		(6,591)	-45.7%
Tax Receivable Agreement liability adjustment		—	0.0%		—	0.0%		—	0.0%		—	0.0%		17	0.0%		(17)	-100.0%
Other interest expense, net		(16,107)	-1.1%		(10,557)	-0.8%		(5,550)	-52.6%		(28,946)	-1.2%		(19,961)	-0.9%		(8,985)	-45.0%
Loss and expense on debt restructure		44	0.0%		—	0.0%		44	100.0%		(2,056)	-0.1%		—	0.0%		(2,056)	-100.0%
Income from operations before income taxes	$	93,917	6.5%	$	119,377	9.3%	$	(25,460)	-21.3%	$	118,412	4.7%	$	174,592	8.1%	$	(56,180)	-32.2%

⁽¹⁾

⁽²⁾

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.

Total segment income

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Total segment income decreased 12.7%, or $17.9 million, to $123.1 million in the three months ended June 30, 2018, from $141.0 million in the three months ended June 30, 2017. The decrease was driven by an 18.4% decrease in the Retail segment to $95.5 million from $117.0 million, partially offset by a 15.2% increase in the Consumer Services and Plans segment to $27.6 million in the three months ended June 30, 2018 compared to $24.0 million in the three months ended June 30, 2017. Total segment income margin decreased 251 basis points to 8.5%.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Total segment income decreased 18.7%, or $40.0 million, to $173.4 million in the six months ended June 30, 2018, from $213.4 million in the six months ended June 30, 2017. The decrease was driven by a 27.9% decrease in Retail segment income to $117.7 million, from $163.2 million in the six months ended June 30, 2017, partially offset by an 11.0% increase in Consumer Services and Plans segment income to $55.7 million in the six months ended June 30, 2018 from $50.2 million in the six months ended June 30, 2017. Total segment income margin decreased 296 basis points to 6.9%.

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Consumer Services and Plans segment revenue

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Consumer Services and Plans segment revenue increased 9.7%, or $4.6 million, to $52.7 million in the three months ended June 30, 2018, from $48.1 million in the three months ended June 30, 2017. The increase was primarily attributable to $1.8 million from additional Good Sam Club memberships, $1.4 million from the additional contracts in force from our roadside assistance programs, $0.8 million from additional policies in force for our vehicle insurance products, $0.4 million from increased policies in force in the Good Sam TravelAssist programs, and $0.2 million from various other ancillary products, services and protection plans.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Consumer Services and Plans segment revenue was increased 8.3%, or $8.2 million, to $106.6 million in the six months ended June 30, 2018, from $98.3 million in the six months ended June 30, 2017. The increase was primarily attributable to $2.5 million from additional Good Sam Club memberships, $2.3 million from the additional contracts in force from our roadside assistance programs, $1.2 million from additional policies in force for our vehicle insurance products, $0.9 million from increased policies in force in the Good Sam TravelAssist programs, $0.8 million primarily from seven additional consumer shows, and $0.5 million from various other ancillary products, services and protection plans.

Retail segment revenue

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Retail segment revenue increased 13.1%, or $161.5 million, to $1.4 billion in the three months ended June 30, 2018 from $1.2 billion in the three months ended June 30, 2017. The increase was primarily driven by a 6.1% increase in new vehicle revenue, a 7.7% increase in used vehicle revenue, a 43.6% increase in parts, services and other revenue, and a 23.7% increase in finance and insurance revenue.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Retail segment revenue increased 16.4%, or $337.9 million, to $2.4 billion in the six months ended June 30, 2018 from $2.1 billion in the six months ended June 30, 2017. The increase was primarily driven by a 9.7% increase in new vehicle revenue, a 12.1% increase in used vehicle revenue, a 42.7% increase in parts, services and other revenue and a 29.8% increase in finance and insurance revenue.

Same store sales

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Same store sales were $1.1 billion in the three months ended June 30, 2018, a decrease of $6.1 million, or 0.5%, as compared to $1.1.billion in the three months ended June 30, 2017. The decrease was primarily due to reduced same store new vehicle revenue, partially offset by increased penetration of finance and insurance products.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Same store sales were $1.9 billion in the six months ended June 30, 2018, an increase of $25.1 million, or 1.3%, as compared to $1.9 billion in the six months ended June 30, 2017. The increase was primarily due to increased penetration of finance and insurance products.

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Consumer Services and Plans segment income

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Consumer Services and Plans segment income increased 15.2%, or $3.6 million, to $27.6 million in the three months ended June 30, 2018, from $24.0 million in the three months ended June 30, 2017. The increase was primarily attributable to $2.9 million from additional contracts in force from our roadside assistance programs, vehicle insurance and Good Sam Travel/Assist programs, $1.1 million from increased membership in the Good Sam Club and reduced marketing costs and $0.3 million from various other ancillary products, partially offset by a $0.7 million increase in selling, general and administrative expenses. Consumer Services and Plans segment income margin increased 250 basis points to 52.3% in the three months ended June 30, 2018 from 49.8% in the three months ended June 30, 2017.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Consumer Services and Plans segment income increased 11.0%, or $5.5 million, to $55.7 million in the six months ended June 30, 2018, from $50.2 million in the six months ended June 30, 2017. The increase was primarily attributable to $4.4 million from increased policies in force from the roadside assistance programs, vehicle insurance, and Good Sam TravelAssist programs, an increase of $1.8 million from increased Good Sam Club memberships, an increase of $0.6 million from the additional consumer shows, and an increase of $0.3 million from other ancillary products, partially offset by a $0.9 million increase in selling, general and administrative expenses, and a $0.7 million decrease from the extended warranty products. Consumer Services and Plans segment income margin increased 123 basis points to 52.3% in the six months ended June 30, 2018 from 51.1% in the six months ended June 30, 2017.

Retail segment income

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Retail segment income decreased 18.4%, or $21.5 million, to $95.5 million in the three months ended June 30, 2018 from $117.0 million in the three months ended June 30, 2017. The decrease was primarily related to lower gross margins and higher operating costs, including $15.4 million of Gander Outdoors pre-opening costs, from the ramp-up of the outdoor and active sports businesses and additional floor plan interest. Retail segment income margin decreased 265 basis points to 6.9% from 9.5% in the comparable prior year period primarily due the ramp-up of the acquired businesses.

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Retail segment income decreased 27.9%, or $45.5 million, to $117.7 million in the six months ended June 30, 2018 from $163.2 million in the six months ended June 30, 2017. The decrease was primarily related to the lower gross margins and higher operating costs, including $35.0 million of Gander Outdoors pre-opening costs, from the ramp-up of the outdoor and active sports businesses and additional floor plan interest. Retail segment income margin decreased 301 basis points to 4.9% from 7.9% for the comparable prior year period primarily due the ramp-up of the acquired businesses.

Corporate and other expenses

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

Corporate and other expenses decreased 57.5%, or $2.0 million, to $1.5 million in the three months ended June 30, 2018 from $3.5 million in the three months ended June 30, 2017 primarily from reduced professional fees.

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Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

Corporate and other expenses decreased 33.0%. or $1.5 million, to $3.0 million in the six months ended June 30, 2018 from $4.4 million in the six months ended June 30, 2017 primarily from reduced 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 Gander Outdoors 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, May 2017 Public Offering and October 2017 Public Offering, borrowings under our Senior Secured Credit Facilities or our previous senior secured credit facilities, and borrowings under our Floor Plan Facility.

As a public company, additional liquidity needs include public company costs, payment of regular and special cash dividends, any exercise of the redemption right by the Continuing Equity Owners from time to time (should we elect to exchange 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 under the Tax Receivable Agreement. For a discussion of the Tax Receivable Agreement, see Note 12 — 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, 2018, we paid two regular quarterly cash dividends of $0.08 per share of our Class A common stock. CWGS, LLC is required to 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, 2018, 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 anticipated opening of Gander Outdoors store locations, 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

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cash available under our 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 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 impose 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, 2018 and December 31, 2017, we had working capital of $593.2 million and $478.7 million, respectively, including $212.4 million and $224.2 million, respectively, of cash and cash equivalents. Our working capital reflects the cash provided by deferred revenue and gains reported under current liabilities of $82.4 million and $77.7 million as of June 30, 2018 and December 31, 2017, 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.

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, 2018 and 2017:


	Six Months Ended
	June 30,
(In thousands)	2018		2017
Net cash provided by operating activities	$	105,995	$	88,204
Net cash used in investing activities		(241,477)		(277,583)
Net cash provided by financing activities		123,761		327,344
Net (decrease) increase in cash and cash equivalents	$	(11,721)	$	137,965

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

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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, which includes the $35.0 million of Gander Outdoors pre-opening costs in the first six months of 2018, 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 $106.0 million in the six months ended June 30, 2018, an increase of $17.8 million from $88.2 million net cash provided by operating activities in the six months ended June 30, 2017. The increase was primarily due to $74.3 million from decreases in inventory balances, and a $31.6 million increase in accounts payable and accrued liabilities, partially offset by a $55.6 million decrease in net income, a $19.2 million increase in receivables, and $13.3 million of other net unfavorable changes

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 Senior Secured Credit Facilities.

The table below summarizes our capital expenditures for the six months ended June 30, 2018 and 2017:


	Six Months Ended
	June 30,
(In thousands)	2018		2017
IT hardware and software	$	6,100	$	2,455
Greenfield and acquired retail locations		62,853		6,917
Existing retail locations		9,639		10,085
Corporate and other		1,966		1,335
Total capital expenditures	$	80,558	$	20,792

Our capital expenditures consist primarily of investing in acquired and greenfield outdoor and RV dealership retail locations, existing retail locations, information technology, hardware, and software. There were no material commitments for capital expenditures as of June 30, 2018.

Net cash used in investing activities was $241.5 million for the six months ended June 30, 2018. The $241.5 million of cash used in investing activities was composed of $80.6 million of capital expenditures primarily for the buildout of the Gander Outdoors locations, $80.2 million for the acquisition of eight RV dealership locations, four Erehwon locations and seven Rock Creek locations (see Note 11 — Acquisitions to our unaudited consolidated financial statements included in Part I, Item 1 of this Form 10-Q), and $81.3 million for the purchase of real property, partially offset by proceeds of $0.6 million from the sale of property and equipment.

Net cash used in investing activities was $277.6 million for the six months ended June 30, 2017. The $277.6 million of cash used in investing activities included $252.1 million for the acquisition of sixteen RV dealership locations and two consumer shows (see Note 11 – Acquisitions to our unaudited consolidated financial statements include in Part 1, Item 1 of this form 10-Q), in addition to $20.8 million of capital expenditures and $11.1 million 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.

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 $123.7 million for the six months ended June 30, 2018. The $123.7 million of cash provided by financing activities was primarily due to $319.9 million of net proceeds from long-term debt, and $24.4 million of proceeds from our Revolving Credit Facility, partially offset by $76.7 million of payment on long-term debt, $68.0 million of borrowings under the Floor Plan Facility, $61.5

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million of non-controlling interest member distributions, $11.3 million of dividends paid on Class A common stock, and other financing uses of $3.1 million during the six months ended June 30, 2018.

Our net cash provided by financing activities was $327.3 million for the six months ended June 30, 2017. The $327.3 million of cash provided by financing activities was primarily due to $192.3 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 Term Loan Facility, and other financing uses of $0.8 million during the six months ended June 30, 2017.

Description of Senior Secured Credit Facilities and Floor Plan Facility

As of June 30, 2018 and December 31, 2017, we had outstanding debt in the form of our credit agreement (as amended from time to time, the “Credit Agreement”) that included a $1,181.1 million and $937.1 million term loan (the ‘‘Term Loan Facility’’), respectively, and $35.0 million of commitments for revolving loans (the ‘‘Revolving Credit Facility’’ and, together with the Term Loan Facility, the ‘‘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.

Senior Secured Credit Facilities

The following table details the outstanding amounts and available borrowings under our Senior Secured Credit Facilities as of June 30, 2018 and December 31, 2017 (in thousands):


	June 30,		December 31,
	2018		2017
Senior Secured Credit Facilities:
Term Loan Facility:
Principal amount of borrowings	$	1,195,000	$	945,000
Less: cumulative principal payments		(13,912)		(7,916)
Less: unamortized original issue discount		(5,898)		(6,029)
Less: finance costs		(14,752)		(14,153)
		1,160,438		916,902
Less: current portion		(11,991)		(9,465)
Long-term debt, net of current portion	$	1,148,447	$	907,437
Revolving Credit Facility:
Total commitment	$	35,000	$	35,000
Less: outstanding letters of credit		(2,839)		(3,237)
Additional borrowing capacity	$	32,161	$	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. 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 used to purchase dealerships within FreedomRoads. No other terms of the Credit Agreement were amended.

On October 6, 2017, the Borrower further amended our Credit Agreement. This amendment, among other things, (i) increased our Term Loan Facility by $205.0 million to an outstanding principal amount of $939.5 million, (ii) amended the applicable margin to 2.00% from 2.75% per annum, in the case of base rate

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loans, and to 3.00% from 3.75% per annum, in the case of LIBOR loans and, (iii) increased the quarterly amortization payment to $2.4 million.

On March 28, 2018, the Borrower entered into a Third Amendment to the Credit Agreement. The Third Amendment, among other things, (i) reduced the interest rate by 25 basis points with a reduction in the applicable interest margin to 1.75% from 2.00% per annum, in the case of base rate loans, and to 2.75% from 3.00% per annum, in the case of LIBOR loans, effective on April 6, 2018, (ii) increased the Borrower’s term loan facility by $250 million to a principal amount of $1.19 billion outstanding as of March 28, 2018, and (iii) increased the quarterly amortization payment to $3.0 million.

See our Annual Report for a further discussion of the terms of the 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, 2018 and December 31, 2017 (in thousands):


	June 30,		December 31,
	2018		2017
Floor Plan Facility:
Notes payable — floor plan:
Total commitment	$	1,415,000	$	1,415,000
Less: borrowings, net		(854,588)		(974,043)
Less: flooring line aggregate interest reduction account		(87,342)		(106,055)
Additional borrowing capacity		473,070		334,902
Less: accounts payable for sold inventory		(82,717)		(31,311)
Less: purchase commitments		(21,655)		(77,144)
Unencumbered borrowing capacity	$	368,698	$	226,447

Revolving line of credit	$	35,000	$	35,000
Less borrowings		(24,403)		—
Additional borrowing capacity	$	10,597	$	35,000

Letters of credit:
Total commitment	$	15,000	$	15,000
Less: outstanding letters of credit		(9,369)		(9,369)
Additional letters of credit capacity	$	5,631	$	5,631

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.

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, 2018 were $139.6 million and $10.9 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.

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Off-Balance Sheet Arrangements

As of June 30, 2018, 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. See Note 2 to our unaudited condensed consolidated financial statements in Item 1 of Part I of this Form 10-Q for discussion of the critical accounting policy for revenue recognition after the adoption of ASC 606.

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 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. Advances under our Senior Secured Credit Facilities, which include the Term Loan Facility and the Revolving Credit Facility, is tied to a borrowing base and bear interest at variable rates. Additionally, under our Floor Plan Facilities we have the ability to draw on revolving floor plan arrangements, which bear interest at variable rates. Because our 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, 2018, we had no outstanding borrowings under our Revolving Credit Facility aside from letters of credit in the aggregate amount of $2.8 million outstanding under the Revolving Credit Facility, $1,160.4 million of variable rate debt outstanding under our Term Loan Facility,

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net of $5.9 million of unamortized original issue discount and $14.8 million of finance costs, and $937.3 million in outstanding borrowings under our Floor Plan Facility. Based on June 30, 2018 debt levels, an increase or decrease of 1% in the effective interest rate would cause an increase or decrease in interest expense under our term Loan Facility of $12.0 million and $12.0 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 expense under our Floor Plan Facility of approximately $8.5 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 (“CEO”) and Chief Financial Officer (“CFO”), evaluated 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) as of June 30, 2018. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2018 as a result of the material weaknesses described in our Annual Report on Form 10-K and below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the preparation of our consolidated financial statements for the year ended December 31, 2017, we identified errors in certain of our prior period consolidated financial statements that caused us to restate and amend the Company’s previously issued condensed consolidated financial statements and related financial information for the interim periods of 2017 and the year ended December 31, 2016. Further, in connection with the preparation of our condensed consolidated financial statements for the quarter ended June 30, 2018, we identified and corrected certain errors in the allocation of income tax-related balances between the Continuing Equity Owners and the Company which impacted the recorded amounts of current and deferred income taxes of the Company. While these amounts were immaterial to the condensed consolidated financial statements for all the applicable periods, they are further indicators of the existence of a material weakness in our income tax processes and controls.

As a result, the following material weaknesses have been identified, i) our management review control process to ensure the completeness and accuracy of the determination of our income tax liabilities and related deferred income tax balances, including the realization of deferred tax assets, were not designed or operating effectively, ii) certain accounting policies and procedures related to corporate accounting functions within FreedomRoads, which operates our RV dealerships, were not sufficiently documented and/or executed to be considered effective in providing reasonable assurance that accounting transactions are consistently recorded in accordance with generally accepted accounting principles and communication to those executing transactions and performing corporate review functions at FreedomRoads was not sufficiently performed to ensure internal control responsibilities were properly reinforced, and iii) certain of our transaction level and management review controls over the valuation of trade-in unit inventory were not effective.

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Management’s Remediation Efforts

We have re-evaluated our remediation plan and efforts to date and have identified the steps to be taken, some of which we have begun to implement, as further described below, in order to remediate the material weaknesses described in this Item 4 and to enhance our overall control environment and control activities. Although we intend to complete the remediation process as promptly as possible, we cannot at this time estimate how long it will take to remediate these material weaknesses, and our remediation plan may not prove to be successful. We will not consider the material weaknesses remediated until our enhanced controls are operational for a sufficient period of time and tested, enabling management to conclude that the enhanced controls are operating effectively.

Our remediation plan includes, but is not limited to, the following measures:

Improving the design of our existing income tax controls to include additional review of the analysis to determine the amount of our income tax liabilities and related deferred income tax balances, and the ability to realize deferred tax assets. Implementing changes to the computation processes to adopt more streamlined and systematic steps for the determination of the allocation of basis between the Continuing Equity Owners and the Company. The management review of the analysis will employ specialized resources over the basis allocations and the related computations surrounding our income tax liabilities and related deferred income tax balances. Further the reviewer will verify that the analysis identifies the positive evidence being relied upon is allowed to be considered under the authoritative accounting guidance contained within ASC 740 related to the recognition and measurement of deferred tax assets. To improve the effectiveness of the tax controls, the reviewer will also perform additional review procedures when a tax-planning strategy is involved in the determination of the amount of valuation allowance, if any, applied against deferred tax assets;

Improving documentation of accounting policies and procedures to support our internal control infrastructure;

Communicating policy and procedure updates to new and existing personnel to ensure internal control responsibilities assigned and/or delegated are properly reinforced; and

Enhancing our procedures surrounding information produced by the entity within used trade-in unit inventory valuation monitoring controls. This includes testing completeness and accuracy of key inputs and spreadsheets used to monitor and manage used trade-in inventory valuation.

While the foregoing measures are intended to effectively remediate the material weaknesses described in this Item 4, it is possible that additional remediation steps will be necessary. As such, as we continue to evaluate and implement our plan to remediate the material weaknesses, our management may decide to take additional measures to address the material weaknesses or modify the remediation steps described above. Until these material weaknesses are remediated, we plan to continue to perform additional analyses and other procedures to help ensure that our consolidated financial statements are prepared in accordance with GAAP.

Changes in Internal Control over Financial Reporting

We are taking actions to remediate the material weaknesses relating to our internal controls over financial reporting, as described above. Except as discussed above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that occurred during the six months ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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.

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, 2017 filed with the Securities and Exchange Commission on March 13, 2018.

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

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

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Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed/
Furnished
Herewith

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

***

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

***

* Filed herewith

** Furnished herewith

*** Submitted electronically herewith

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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 9, 2018	By:	/s/ Thomas F. Wolfe
		Thomas F. Wolfe
		Chief Financial Officer and Secretary

		(Authorized Officer and Principal Financial Officer)