##### Table of Contents



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 March 31, 2002                                                 
|                                                                                              
|OR                                                                                            
|                                                                                              
|[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period of  to

Commission File Number 1-14645

THOUSAND TRAILS, INC.
(Exact Name of Registrant as Specified in Its Charter)

|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 75-2138671                       
|(State or Other Jurisdiction
of Incorporation or Organization) |  | (IRS Employer Identification No.)
|                                                               |  |                                  
|2711 LBJ Freeway, Suite 200, Dallas, Texas                     |  | 75234                            
|(Address of Principal Executive Office)                        |  | (Zip Code)                       

Registrants Telephone Number, Including Area Code: (972) 243-2228

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 X No

The number of shares of Common Stock, par value $.01, issued and outstanding as
of May 10, 2002, was 8,062,492.





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TABLE OF CONTENTS



|                                            |                                                                                               |                                                |  |  |  |  |  | 
|------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION              
|                                            | Item 1. Financial Statements                                                                 
|                                            |                                                                                               | Consolidated Balance Sheets                   
|                                            |                                                                                               | Consolidated Statements of Operations         
|                                            |                                                                                               | Consolidated Statements of Operations         
|                                            |                                                                                               | Consolidated Statement of Shareholders Equity
|                                            |                                                                                               | Consolidated Statements of Cash Flows         
|                                            |                                                                                               | Notes to Consolidated Financial Statements    
|                                            | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                            | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|Part II. OTHER INFORMATION                 
|                                            | Item 6. Exhibits and Reports on Form 8-K                                                     
|EX-10.1 - 1st Amendment to Loan Agreement  
|EX-11.1 - Computation of Per Share Earnings



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##### Table of Contents



Thousand Trails, Inc.

Index

|                              |                                                                                               |                                                                                                    |  |      |   | 
|----------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- |  | ---- | - | 
|                              |                                                                                               |                                                                                                    |  | Page
|                              |                                                                                               |                                                                                                    |  |     
|PART I. FINANCIAL INFORMATION |                                                                                               |                                                                                                    |  |     
|                              | Item 1. Financial Statements                                                                  |                                                                                                    |  |      |  
|                              |                                                                                               | Consolidated Balance Sheets as of March 31, 2002
and June 30, 2001                                 |  |      | 3 | 
|                              |                                                                                               | Consolidated Statements of Operations for the nine months ended
March 31, 2002 and March 31, 2001  |  |      | 4 | 
|                              |                                                                                               | Consolidated Statements of Operations for the three months ended
March 31, 2002 and March 31, 2001 |  |      | 5 | 
|                              |                                                                                               | Consolidated Statement of Shareholders Equity for the nine months
ended March 31, 2002            |  |      | 6 | 
|                              |                                                                                               | Consolidated Statements of Cash Flows for the nine months ended
March 31, 2002 and March 31, 2001  |  |      | 7 | 
|                              |                                                                                               | Notes to Consolidated Financial Statements                                                         |  |      | 9 | 
|                              | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                                                                    |  | 15   |  
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                    |  | 29   |  
|PART II. OTHER INFORMATION    |                                                                                               |                                                                                                    |  |     
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                    |  | 30   |  

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##### Table of Contents












PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Thousand Trails, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)

|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |        |  |  | 
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------ | ------ | ------ | ----------- | ------ | -------- | ------ |  |  | 
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        | March 31,   |        | June 30,
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        | 2002        |        | 2001    
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |         
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        | (Unaudited) |        |          |        | 
|                                           |                                                                                                                                                                                                            |                            |                                      | Assets |        |             |        |          |        |  |  | 
|Current Assets                             |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |         
|                                           | Cash and cash equivalents                                                                                                                                                                                  |                            | $                                    | 5,623  |        |             | $      | 9,016    |       
|                                           | Marketable securities                                                                                                                                                                                      |                            |                                      | 11,700 |        |             |        |         |       
|                                           | Current portion of receivables, net of allowance of $1.0 million                                                                                                                                           |                            |                                      | 2,753  |        |             |        | 2,096    |       
|                                           | Current portion of deferred membership selling expenses                                                                                                                                                    |                            |                                      | 4,370  |        |             |        | 2,886    |       
|                                           | Current portion of net deferred tax assets                                                                                                                                                                 |                            |                                      | 6,184  |        |             |        | 6,885    |       
|                                           | Inventories                                                                                                                                                                                                |                            |                                      | 969    |        |             |        | 1,221    |       
|                                           | Other current assets                                                                                                                                                                                       |                            |                                      | 680    |        |             |        | 765      |       
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |       
|                                           |                                                                                                                                                                                                            | Total Current Assets       |                                      |        | 32,279 |             |        |          | 22,869 | 
|                                           | Restricted cash                                                                                                                                                                                            |                            |                                      | 646    |        |             |        | 646      |       
|                                           | Receivables, net of allowances and discount of $1.4 million and
$1.3 million, respectively                                                                                                                 |                            |                                      | 5,870  |        |             |        | 5,492    |       
|                                           | Campground land                                                                                                                                                                                            |                            |                                      | 20,696 |        |             |        | 20,696   |       
|                                           | Buildings and equipment, net of accumulated depreciation of
$23.9 million and $21.8 million, respectively                                                                                                  |                            |                                      | 23,589 |        |             |        | 21,256   |       
|                                           | Assets held for sale                                                                                                                                                                                       |                            |                                      | 5,530  |        |             |        | 5,600    |       
|                                           | Deferred membership selling expenses                                                                                                                                                                       |                            |                                      | 6,943  |        |             |        | 6,030    |       
|                                           | Net deferred tax assets                                                                                                                                                                                    |                            |                                      | 665    |        |             |        | 995      |       
|                                           | Other assets                                                                                                                                                                                               |                            |                                      | 366    |        |             |        | 365      |       
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |       
|Total Assets                               |                                                                                                                                                                                                            | $                          | 96,584                               |        |        | $           | 83,949 |         
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |       
|                                           |                                                                                                                                                                                                            |                            | Liabilities and Shareholders Equity |        |        |             |        |          |        |  | 
|Current Liabilities                        |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |         
|                                           | Accounts payable                                                                                                                                                                                           |                            | $                                    | 1,433  |        |             | $      | 2,775    |       
|                                           | Other accrued liabilities                                                                                                                                                                                  |                            |                                      | 7,234  |        |             |        | 8,021    |       
|                                           | Accrued construction cost                                                                                                                                                                                  |                            |                                      | 1,888  |        |             |        | 1,888    |       
|                                           | Current portion of deferred revenue                                                                                                                                                                        |                            |                                      | 34,269 |        |             |        | 27,668   |       
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |       
|                                           |                                                                                                                                                                                                            | Total Current Liabilities  |                                      |        | 44,824 |             |        |          | 40,352 | 
|                                           | Deferred revenue                                                                                                                                                                                           |                            |                                      | 23,066 |        |             |        | 20,158   |       
|                                           | Other liabilities                                                                                                                                                                                          |                            |                                      | 937    |        |             |        | 1,004    |       
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |       
|                                           |                                                                                                                                                                                                            | Total Liabilities          |                                      |        | 68,827 |             |        |          | 61,514 | 
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |       
|Commitments and Contingencies              |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |         
|Shareholders Equity                       |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |         
|                                           | Preferred stock, $.01 par value, 1,500,000 shares authorized,
none issued or outstanding                                                                                                                   |                            |                                      |        |        |             |        |          |       
|                                           | Common stock, $.01 par value, 15,000,000 shares authorized,
8,062,492 and 8,167,123 shares issued and outstanding,
respectively, after deducting 326,336 and 206,705 shares held
in Treasury, respectively |                            |                                      | 81     |        |             |        | 82       |       
|                                           | Additional paid-in capital                                                                                                                                                                                 |                            |                                      | 20,427 |        |             |        | 21,132   |       
|                                           | Retained earnings                                                                                                                                                                                          |                            |                                      | 7,391  |        |             |        | 1,362    |       
|                                           | Accumulated other comprehensive loss                                                                                                                                                                       |                            |                                      | (142   | )      |             |        | (141     | )     
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |       
|                                           |                                                                                                                                                                                                            | Total Shareholders Equity |                                      |        | 27,757 |             |        |          | 22,435 | 
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |       
|Total Liabilities and Shareholders Equity |                                                                                                                                                                                                            | $                          | 96,584                               |        |        | $           | 83,949 |         
|                                           |                                                                                                                                                                                                            |                            |                                      |        |        |             |        |          |       

The accompanying notes are an integral part of these consolidated financial
statements.

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Thousand Trails, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars and shares in thousands, except per share amounts)
(Unaudited)

|                                               |                                      |                          |                |        |                                     |        |        |        |       |        | 
|---------------------------------------------- | ------------------------------------ | ------------------------ | -------------- | ------ | ----------------------------------- | ------ | ------ | ------ | ----- | ------ | 
|                                               |                                      |                          |                |        | For the nine months ended March 31,
|                                               |                                      |                          |                |        |                                    
|                                               |                                      |                          |                |        | 2002                                |        | 2001  
|                                               |                                      |                          |                |        |                                     |        |       
|Revenues                                       |                                      |                          |                |        |                                     |        |        |       
|                                               | Membership contracts originated      |                          | $              | 19,234 |                                     |        | $      | 14,601 |      
|                                               | Change in deferred revenue           |                          |                | (7,326 | )                                   |        |        | (7,977 | )    
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|                                               |                                      | Membership sales revenue |                |        | 11,908                              |        |        |        | 6,624 |       
|                                               | Membership dues                      |                          |                | 29,994 |                                     |        |        | 29,973 |      
|                                               | Other campground revenue             |                          |                | 13,350 |                                     |        |        | 12,848 |      
|                                               | Trails Management revenue            |                          |                | 3,417  |                                     |        |        | 1,989  |      
|                                               | RPI membership fees                  |                          |                | 2,689  |                                     |        |        | 2,709  |      
|                                               | Interest income                      |                          |                | 1,662  |                                     |        |        | 1,362  |      
|                                               | Gain on asset sales                  |                          |                | 144    |                                     |        |        | 146    |      
|                                               | Other income                         |                          |                | 1,815  |                                     |        |        | 2,090  |      
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|                                               |                                      |                          | Total Revenues |        |                                     | 64,979 |        |        |       | 57,741 | 
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|Expenses                                       |                                      |                          |                |        |                                     |        |        |       
|                                               | Campground operating expenses        |                          |                | 31,726 |                                     |        |        | 31,730 |      
|                                               | Membership origination costs         |                          |                | 9,136  |                                     |        |        | 6,717  |      
|                                               | Change in deferred origination costs |                          |                | (2,397 | )                                   |        |        | (2,445 | )    
|                                               | Marketing expenses                   |                          |                | 4,229  |                                     |        |        | 3,872  |      
|                                               | Trails Management expenses           |                          |                | 3,132  |                                     |        |        | 1,921  |      
|                                               | RPI membership expenses              |                          |                | 1,325  |                                     |        |        | 1,378  |      
|                                               | Corporate member services            |                          |                | 1,028  |                                     |        |        | 966    |      
|                                               | Interest expense and amortization    |                          |                | 27     |                                     |        |        | 773    |      
|                                               | General and administrative expenses  |                          |                | 7,545  |                                     |        |        | 6,982  |      
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|                                               |                                      |                          | Total Expenses |        |                                     | 55,751 |        |        |       | 51,894 | 
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|Income Before Income Taxes                     |                                      |                          | 9,228          |        |                                     |        | 5,847  |       
|Income Taxes                                  |                                      |                          |                |        |                                     |        |        |       
|                                               | Income tax provision  current       |                          |                | (2,168 | )                                   |        |        | (649   | )    
|                                               | Income tax provision  deferred      |                          |                | (1,031 | )                                   |        |        | (1,652 | )    
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|                                               |                                      |                          | (3,199         | )      |                                     |        | (2,301 | )     
|Net Income                                     |                                      | $                        | 6,029          |        |                                     | $      | 3,546  |       
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|Net Income per Share  Basic                   |                                      | $                        | .74            |        |                                     | $      | .43    |       
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|Net Income per Share  Diluted                 |                                      | $                        | .70            |        |                                     | $      | .41    |       
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|Shares Used to Calculate Net Income Per Share: |                                      |                          |                |        |                                     |        |        |       
|                                               | Basic                                |                          |                | 8,129  |                                     |        |        | 8,087  |      
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|                                               | Diluted                              |                          |                | 8,638  |                                     |        |        | 8,586  |      
|                                               |                                      |                          |                |        |                                     |        |        |        |      

The accompanying notes are an integral part of these consolidated financial
statements.

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Thousand Trails, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars and shares in thousands, except per share amounts)
(Unaudited)

|                                               |                                      |                          |                |        |                                      |        |       |        |       |        | 
|---------------------------------------------- | ------------------------------------ | ------------------------ | -------------- | ------ | ------------------------------------ | ------ | ----- | ------ | ----- | ------ | 
|                                               |                                      |                          |                |        | For the three months ended March 31,
|                                               |                                      |                          |                |        |                                     
|                                               |                                      |                          |                |        | 2002                                 |        | 2001 
|                                               |                                      |                          |                |        |                                      |        |      
|Revenues                                       |                                      |                          |                |        |                                      |        |       |       
|                                               | Membership contracts originated      |                          | $              | 6,297  |                                      |        | $     | 5,018  |      
|                                               | Change in deferred revenue           |                          |                | (1,952 | )                                    |        |       | (2,788 | )    
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|                                               |                                      | Membership sales revenue |                |        | 4,345                                |        |       |        | 2,230 |       
|                                               | Membership dues                      |                          |                | 9,921  |                                      |        |       | 9,837  |      
|                                               | Other campground revenue             |                          |                | 3,264  |                                      |        |       | 3,121  |      
|                                               | Trails Management revenue            |                          |                | 1      |                                      |        |       |       |      
|                                               | RPI membership fees                  |                          |                | 1,003  |                                      |        |       | 1,035  |      
|                                               | Interest income                      |                          |                | 632    |                                      |        |       | 518    |      
|                                               | Loss on asset sales                  |                          |                | (11    | )                                    |        |       | (8     | )    
|                                               | Other income                         |                          |                | 578    |                                      |        |       | 614    |      
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|                                               |                                      |                          | Total Revenues |        |                                      | 19,733 |       |        |       | 17,347 | 
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|Expenses                                       |                                      |                          |                |        |                                      |        |       |       
|                                               | Campground operating expenses        |                          |                | 9,267  |                                      |        |       | 9,501  |      
|                                               | Membership origination costs         |                          |                | 3,013  |                                      |        |       | 2,088  |      
|                                               | Change in deferred origination costs |                          |                | (692   | )                                    |        |       | (754   | )    
|                                               | Marketing expenses                   |                          |                | 1,167  |                                      |        |       | 1,224  |      
|                                               | Trails Management expenses           |                          |                | 149    |                                      |        |       | 130    |      
|                                               | RPI membership expenses              |                          |                | 426    |                                      |        |       | 487    |      
|                                               | Corporate member services            |                          |                | 294    |                                      |        |       | 290    |      
|                                               | Interest expense and amortization    |                          |                | 4      |                                      |        |       | 103    |      
|                                               | General and administrative expenses  |                          |                | 2,827  |                                      |        |       | 2,395  |      
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|                                               |                                      |                          | Total Expenses |        |                                      | 16,455 |       |        |       | 15,464 | 
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|Income Before Income Taxes                     |                                      |                          | 3,278          |        |                                      |        | 1,883 |       
|Income Taxes                                  |                                      |                          |                |        |                                      |        |       |       
|                                               | Income tax provision  current       |                          |                | (623   | )                                    |        |       | (179   | )    
|                                               | Income tax provision  deferred      |                          |                | (490   | )                                    |        |       | (537   | )    
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|                                               |                                      |                          | (1,113         | )      |                                      |        | (716  | )     
|Net Income                                     |                                      | $                        | 2,165          |        |                                      | $      | 1,167 |       
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|Net Income per Share  Basic                   |                                      | $                        | .27            |        |                                      | $      | .14   |       
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|Net Income per Share  Diluted                 |                                      | $                        | .25            |        |                                      | $      | .13   |       
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|Shares Used to Calculate Net Income Per Share: |                                      |                          |                |        |                                      |        |       |       
|                                               | Basic                                |                          |                | 8,062  |                                      |        |       | 8,166  |      
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|                                               | Diluted                              |                          |                | 8,699  |                                      |        |       | 8,602  |      
|                                               |                                      |                          |                |        |                                      |        |       |        |      

The accompanying notes are an integral part of these consolidated financial
statements.

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Thousand Trails, Inc. and Subsidiaries
Consolidated Statement of Shareholders Equity
For the Nine Months Ended March 31, 2002
(Dollars in thousands)
(Unaudited)

|                                                    |  |               |       |        |  |                 |    |          |  |               |        |       |  |   |       |  |  |                   |       |   |  |   |        |  
|--------------------------------------------------- |  | ------------- | ----- | ------ |  | --------------- | -- | -------- |  | ------------- | ------ | ----- |  | - | ----- |  |  | ----------------- | ----- | - |  | - | ------ | -
|                                                    |  |               |       |        |  |                 |    |          |  |               |        |       |  |   |       |  |  | Accumulated Other |       |   |  |  
|                                                    |  | Comprehensive |       | Common |  | Additional Paid |    | Retained |  | Comprehensive |        |       |  |  
|                                                    |  | Income        |       | Stock  |  | in Capital      |    | Earnings |  | Loss          |        | Total
|                                                    |  |               |       |        |  |                 |    |          |  |               |        |      
|Balance, June 30, 2001                              |  |               |      |        |  | $               | 82 |          |  | $             | 21,132 |       |  | $ | 1,362 |  |  |                   | ($141 | ) |  | $ | 22,435 |  
|Issuance of common stock                            |  |               |      |        |  |                 |   |          |  |               | 58     |       |  |   |      |  |  |                   |      |   |  |   | 58     |  
|Purchase of treasury stock                          |  |               |      |        |  |                 | (1 | )        |  |               | (763   | )     |  |   |      |  |  |                   |      |   |  |   | (764   | )
|Net income for the nine months
ended March 31, 2002 |  |               | 6,029 |        |  |                 |   |          |  |               |       |       |  |   | 6,029 |  |  |                   |      |   |  |   | 6,029  |  
|Other comprehensive loss                            |  |               | (1    | )      |  |                 |   |          |  |               |       |       |  |   |      |  |  |                   | (1    | ) |  |   | (1     | )
|                                                    |  |               |       |        |  |                 |    |          |  |               |        |       |  |   |       |  |  |                   |       |   |  |   |        |  
|Balance, March 31, 2002                             |  | $             | 6,028 |        |  | $               | 81 |          |  | $             | 20,427 |       |  | $ | 7,391 |  |  |                   | ($142 | ) |  | $ | 27,757 |  
|                                                    |  |               |       |        |  |                 |    |          |  |               |        |       |  |   |       |  |  |                   |       |   |  |   |        |  

The accompanying notes are an integral part of these consolidated financial
statements.

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Thousand Trails, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

|                                                 |                                                                |  |                                     |         |      |  |        |         |  
|------------------------------------------------ | -------------------------------------------------------------- |  | ----------------------------------- | ------- | ---- |  | ------ | ------- | -
|                                                 |                                                                |  | For the nine months ended March 31,
|                                                 |                                                                |  |                                    
|                                                 |                                                                |  | 2002                                |         | 2001
|                                                 |                                                                |  |                                     |         |     
|CASH FLOWS FROM OPERATING ACTIVITIES:            |                                                                |  |                                     |         |      |  |        |        
|                                                 | Collections of principal on receivables                        |  | $                                   | 4,098   |      |  | $      | 3,285   |  
|                                                 | Interest received                                              |  |                                     | 1,661   |      |  |        | 1,362   |  
|                                                 | Interest paid                                                  |  |                                     | (28     | )    |  |        | (773    | )
|                                                 | General and administrative and corporate member services costs |  |                                     | (9,128  | )    |  |        | (8,797  | )
|                                                 | Cash collected from operations, including deferred revenue     |  |                                     | 54,630  |      |  |        | 52,824  |  
|                                                 | Cash from sales of memberships                                 |  |                                     | 13,467  |      |  |        | 9,705   |  
|                                                 | Expenditures for property operations                           |  |                                     | (34,295 | )    |  |        | (32,545 | )
|                                                 | Expenditures for sales and marketing                           |  |                                     | (12,964 | )    |  |        | (10,038 | )
|                                                 | Expenditures for insurance premiums                            |  |                                     | (1,905  | )    |  |        | (2,271  | )
|                                                 | Payment of income taxes                                        |  |                                     | (2,162  | )    |  |        | (654    | )
|                                                 | Other, net                                                     |  |                                     |        |      |  |        | 85      |  
|                                                 |                                                                |  |                                     |         |      |  |        |         |  
|Net cash provided by operating activities        |                                                                |  | 13,374                              |         |      |  | 12,183 |        
|                                                 |                                                                |  |                                     |         |      |  |        |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:            |                                                                |  |                                     |         |      |  |        |        
|                                                 | Purchase of marketable securities                              |  |                                     | (11,700 | )    |  |        |        |  
|                                                 | Capital expenditures                                           |  |                                     | (4,711  | )    |  |        | (1,568  | )
|                                                 | Proceeds from asset sales                                      |  |                                     | 404     |      |  |        | 216     |  
|                                                 |                                                                |  |                                     |         |      |  |        |         |  
|Net cash used in investing activities            |                                                                |  | (16,007                             | )       |      |  | (1,352 | )      
|                                                 |                                                                |  |                                     |         |      |  |        |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:            |                                                                |  |                                     |         |      |  |        |        
|                                                 | Net (repayments) borrowings under Credit Agreement             |  |                                     |        |      |  |        | (9,614  | )
|                                                 | Purchase of treasury stock                                     |  |                                     | (764    | )    |  |        | (116    | )
|                                                 | Payment of notes                                               |  |                                     | (54     | )    |  |        | (68     | )
|                                                 | Issuance of common stock                                       |  |                                     | 58      |      |  |        | 170     |  
|                                                 |                                                                |  |                                     |         |      |  |        |         |  
|Net cash used in financing activities            |                                                                |  | (760                                | )       |      |  | (9,628 | )      
|                                                 |                                                                |  |                                     |         |      |  |        |         |  
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |                                                                |  | (3,393                              | )       |      |  | 1,203  |        
|CASH AND CASH EQUIVALENTS                        |                                                                |  |                                     |         |      |  |        |        
|                                                 | Beginning of period                                            |  |                                     | 9,016   |      |  |        | 2,420   |  
|                                                 |                                                                |  |                                     |         |      |  |        |         |  
|                                                 | End of period                                                  |  | $                                   | 5,623   |      |  | $      | 3,623   |  
|                                                 |                                                                |  |                                     |         |      |  |        |         |  

continued 

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Thousand Trails, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
(Unaudited)

|                                                                                   |                                                   |   |                                     |        |      |   |        |        |  
|---------------------------------------------------------------------------------- | ------------------------------------------------- | - | ----------------------------------- | ------ | ---- | - | ------ | ------ | -
|                                                                                   |                                                   |   | For the nine months ended March 31,
|                                                                                   |                                                   |   |                                    
|                                                                                   |                                                   |   | 2002                                |        | 2001
|                                                                                   |                                                   |   |                                     |        |     
|Reconciliation of net income to net cash provided by
operating activities:         |                                                   |   |                                     |        |      |   |        |       
|Net Income                                                                         |                                                   | $ | 6,029                               |        |      | $ | 3,546  |       
|                                                                                   |                                                   |   |                                     |        |      |   |        |       
|Adjustments to reconcile net income to net cash
provided by operating activities  |                                                   |   |                                     |        |      |   |        |       
|                                                                                   | Depreciation                                      |   |                                     | 2,188  |      |   |        | 2,034  |  
|                                                                                   | Bad debt provision                                |   |                                     | 633    |      |   |        | (146   | )
|                                                                                   | Increase in deferred sales revenue                |   |                                     | 7,326  |      |   |        | 7,977  |  
|                                                                                   | Increase in deferred membership origination costs |   |                                     | (2,397 | )    |   |        | (2,445 | )
|                                                                                   | Gain on asset sales                               |   |                                     | (144   | )    |   |        | (146   | )
|                                                                                   | Increase in deferred income tax provision         |   |                                     | 1,031  |      |   |        | 1,652  |  
|                                                                                   | Decrease in restricted cash                       |   |                                     |       |      |   |        | 85     |  
|                                                                                   | Increase in receivables                           |   |                                     | (1,669 | )    |   |        | (973   | )
|                                                                                   | Increase (decrease) in other assets               |   |                                     | 337    |      |   |        | (240   | )
|                                                                                   | Decrease in accounts payable                      |   |                                     | (1,342 | )    |   |        | (543   | )
|                                                                                   | Decrease in accrued interest                      |   |                                     |       |      |   |        | (83    | )
|                                                                                   | Increase in deferred dues                         |   |                                     | 2,099  |      |   |        | 2,250  |  
|                                                                                   | Decrease in other liabilities                     |   |                                     | (716   | )    |   |        | (783   | )
|                                                                                   | Other, net                                        |   |                                     | (1     | )    |   |        | (2     | )
|                                                                                   |                                                   |   |                                     |        |      |   |        |       
|Total adjustments                                                                  |                                                   |   | 7,345                               |        |      |   | 8,637  |       
|                                                                                   |                                                   |   |                                     |        |      |   |        |       
|Net cash provided by operating activities                                          |                                                   | $ | 13,374                              |        |      | $ | 12,183 |       
|                                                                                   |                                                   |   |                                     |        |      |   |        |       

The accompanying notes are an integral part of these consolidated financial
statements.

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Thousand Trails, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2002
(Unaudited)

NOTE 1  NATURE OF OPERATIONS

Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(collectively, the Company) own and operate 59 membership-based campgrounds
located in 17 states and British Columbia, Canada. In addition, the Company
provides a reciprocal use program for members of approximately 300 recreational
facilities and manages 241 public campgrounds for the U.S. Forest Service and
other entities. Operating revenues consist primarily of membership sales,
membership dues received from campground members, revenues from the campground
operations, fee revenue from members of the reciprocal use program, and
management fees from the campground management operations.

The accompanying consolidated financial statements include the accounts of
Thousand Trails, Inc. and the following wholly owned subsidiaries: Coast
Financial Services, Inc., Leisure Time Resorts of America, Inc. (Leisure
Time), National American Corporation and its subsidiaries (NACO), Resort
Parks International, Inc. (RPI), Thousand Trails (Canada), Inc., and Thousand
Trails Management Services, Inc. (Trails Management).

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
statements and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, these financial statements do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. The interim financial
information is unaudited, but in the opinion of management, it reflects all
adjustments necessary to present fairly, in all material respects, the
consolidated financial position and results of operations of the Company as of
the dates and for the periods presented. All such adjustments are of a normal
recurring nature.

This Quarterly Report on Form 10-Q should be read in conjunction with the
Companys Annual Report on Form 10-K for the year ended June 30, 2001, filed
with the Securities and Exchange Commission (the SEC) on September 26, 2001.

All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the nine and
three month periods ended March 31, 2002 and 2001, and in the consolidated
balance sheets as of June 30, 2001 and March 31, 2002.

Reclassification

Certain reclassifications have been made to prior period information to conform
to the current period presentation.

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NOTE 2  COMPREHENSIVE INCOME

Comprehensive income includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners, as well
as net income reported on the income statement. The Company lists items of
other comprehensive income by their nature in its financial statements and
presents the accumulated balance of such items separately from retained
earnings and additional paid-in capital in the equity section of its
consolidated balance sheet.

Currently, the Companys only item of other comprehensive income is its foreign
currency translation adjustment. The Company translates the balance sheet of
its Canadian subsidiary into U.S. Dollars at exchange rates in effect at the
balance sheet date. Profit and loss accounts are translated monthly at
exchange rates in effect at that time. There is no material tax effect on
items of other comprehensive income.

The following table provides statements of comprehensive income for the nine
and three months ended March 31, 2002 and 2001 (dollars in thousands):

|                                        |  |                           |       |                            |  |      |       |      |  |   |       |  |  |   |       | 
|--------------------------------------- |  | ------------------------- | ----- | -------------------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                        |  | For the nine months ended |       | For the three months ended
|                                        |  | March 31,                 |       | March 31,                 
|                                        |  |                           |       |                           
|                                        |  | 2002                      |       | 2001                       |  | 2002 |       | 2001
|                                        |  |                           |       |                            |  |      |       |     
|                                        |  | (Unaudited)               |       | (Unaudited)               
|Net Income                              |  | $                         | 6,029 |                            |  | $    | 3,546 |      |  | $ | 2,165 |  |  | $ | 1,167 | 
|Foreign Currency
Translation
Adjustment |  |                           | (1    | )                          |  |      | (2    | )    |  |   |      |  |  |   |      | 
|                                        |  |                           |       |                            |  |      |       |      |  |   |       |  |  |   |       | 
|Comprehensive Income                    |  | $                         | 6,028 |                            |  | $    | 3,544 |      |  | $ | 2,165 |  |  | $ | 1,167 | 
|                                        |  |                           |       |                            |  |      |       |      |  |   |       |  |  |   |       | 

NOTE 3  SEGMENT REPORTING

The Company has three reportable segments: campgrounds, RPI, and Trails
Management. The campground segment generates a majority of the Companys
operating revenues. Each segment is differentiated by the products or services
it offers.

The campgrounds segment consists of 59 membership-based campgrounds in 17
states and British Columbia, Canada. Operations within the campground segment
include (i) the sale of memberships entitling the member to use campground
facilities, (ii) the sale of undivided interests in campground facilities, and
(iii) net revenues earned from operations at the campgrounds. Separate
information regarding Canadian campground operations is not presented as
revenues and identifiable assets related to the Canadian operations are less
than 10% of the related consolidated amounts for the periods presented.

RPI sells memberships that allow members to use any of the approximately 300
recreational facilities participating in RPIs reciprocal use system, subject
to certain limitations. Operating revenue consists of annual membership fees
paid by members.

Trails Management manages 241 public campgrounds for the U.S. Forest Service
and other entities. Operating revenue consists of the campsite usage fees paid
by customers staying at the public campgrounds.

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The Company evaluates performance based upon the income before income taxes for
each business segment.

|                                  |  |                                  |        |     |  |            |       |           |  |              |       |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | -------------------------------- | ------ | --- |  | ---------- | ----- | --------- |  | ------------ | ----- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Nine months ended March 31, 2002
|                                  |  |                                 
|                                  |  |                                  |        |     |  |            |       |           |  | Trails       |       | Corporate |  |   |        |  
|                                  |  | Campgrounds                      |        | RPI |  | Management |       | and Other |  | Consolidated
|                                  |  |                                  |        |     |  |            |       |           |  |             
|Operating revenues                |  | $                                | 43,344 |     |  | $          | 2,689 |           |  | $            | 3,417 |           |  | $ | 62     |   |  | $ | 49,512 | 
|Membership sales
revenue          |  |                                  | 11,908 |     |  |            |      |           |  |              |      |           |  |   |       |   |  |   | 11,908 | 
|Income (loss)
before income taxes |  |                                  | 12,558 |     |  |            | 1,364 |           |  |              | 285   |           |  |   | (4,979 | ) |  |   | 9,228  | 

|                                  |  |                                  |        |     |  |            |       |           |  |              |       |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | -------------------------------- | ------ | --- |  | ---------- | ----- | --------- |  | ------------ | ----- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Nine months ended March 31, 2001
|                                  |  |                                 
|                                  |  |                                  |        |     |  |            |       |           |  | Trails       |       | Corporate |  |   |        |  
|                                  |  | Campgrounds                      |        | RPI |  | Management |       | and Other |  | Consolidated
|                                  |  |                                  |        |     |  |            |       |           |  |             
|Operating revenues                |  | $                                | 42,821 |     |  | $          | 2,709 |           |  | $            | 1,989 |           |  | $ | 138    |   |  | $ | 47,657 | 
|Membership sales
revenue          |  |                                  | 6,624  |     |  |            |      |           |  |              |      |           |  |   |       |   |  |   | 6,624  | 
|Income (loss)
before income taxes |  |                                  | 9,571  |     |  |            | 1,331 |           |  |              | 68    |           |  |   | (5,123 | ) |  |   | 5,847  | 

|                                  |  |                                   |        |     |  |            |       |           |  |              |      |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | --------------------------------- | ------ | --- |  | ---------- | ----- | --------- |  | ------------ | ---- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Three months ended March 31, 2002
|                                  |  |                                  
|                                  |  |                                   |        |     |  |            |       |           |  | Trails       |      | Corporate |  |   |        |  
|                                  |  | Campgrounds                       |        | RPI |  | Management |       | and Other |  | Consolidated
|                                  |  |                                   |        |     |  |            |       |           |  |             
|Operating revenues                |  | $                                 | 13,185 |     |  | $          | 1,003 |           |  | $            | 1    |           |  | $ | 18     |   |  | $ | 14,207 | 
|Membership sales
revenue          |  |                                   | 4,345  |     |  |            |      |           |  |              |     |           |  |   |       |   |  |   | 4,345  | 
|Income (loss)
before income taxes |  |                                   | 4,775  |     |  |            | 577   |           |  |              | (148 | )         |  |   | (1,926 | ) |  |   | 3,278  | 

|                                  |  |                                   |        |     |  |            |       |           |  |              |      |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | --------------------------------- | ------ | --- |  | ---------- | ----- | --------- |  | ------------ | ---- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Three months ended March 31, 2001
|                                  |  |                                  
|                                  |  |                                   |        |     |  |            |       |           |  | Trails       |      | Corporate |  |   |        |  
|                                  |  | Campgrounds                       |        | RPI |  | Management |       | and Other |  | Consolidated
|                                  |  |                                   |        |     |  |            |       |           |  |             
|Operating revenues                |  | $                                 | 12,958 |     |  | $          | 1,035 |           |  | $            |     |           |  | $ | 37     |   |  | $ | 14,030 | 
|Membership sales
revenue          |  |                                   | 2,230  |     |  |            |      |           |  |              |     |           |  |   |       |   |  |   | 2,230  | 
|Income (loss)
before income taxes |  |                                   | 3,129  |     |  |            | 548   |           |  |              | (130 | )         |  |   | (1,664 | ) |  |   | 1,883  | 

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NOTE 4  NET INCOME PER SHARE

The table below sets forth the information necessary to compute basic and
diluted net income per share for the nine and three months ended March 31, 2002
and 2001, including a summary of the components of the numerators and
denominators of the basic and diluted net income per share computations for the
periods presented (dollars and shares in thousands, except per share amounts):

|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |     | 
|------------------------------------------- | ---------------- | - | ------------------------- | --- | -------------------------- | - | ----- | --- | ---- | - | ----- | --- |  | - | ----- | --- | 
|                                            |                  |   | For the nine months ended |     | For the three months ended
|                                            |                  |   | March 31,                 |     | March 31,                 
|                                            |                  |   |                           |     |                           
|                                            |                  |   | 2002                      |     | 2001                       |   | 2002  |     | 2001
|                                            |                  |   |                           |     |                            |   |       |     |     
|                                            |                  |   | (Unaudited)               |     | (Unaudited)               
|Net Income                                  |                  | $ | 6,029                     |     |                            | $ | 3,546 |     |      | $ | 2,165 |     |  | $ | 1,167 |    
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Weighted Average Number of Shares  Basic   |                  |   | 8,129                     |     |                            |   | 8,087 |     |      |   | 8,062 |     |  |   | 8,166 |    
|                                            | Dilutive Options |   |                           | 509 |                            |   |       | 499 |      |   |       | 637 |  |   |       | 436 | 
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Weighted Average Number of Shares  Diluted |                  |   | 8,638                     |     |                            |   | 8,586 |     |      |   | 8,699 |     |  |   | 8,602 |    
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Net Income Per Share  Basic                |                  | $ | .74                       |     |                            | $ | .43   |     |      | $ | .27   |     |  | $ | .14   |    
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Net Income Per Share  Diluted              |                  | $ | .70                       |     |                            | $ | .41   |     |      | $ | .25   |     |  | $ | .13   |    
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    

Since inception, the Company has not paid any dividends and, at the present
time, it has no plans to pay dividends.

NOTE 5  MARKETABLE SECURITIES

The Companys marketable securities are shares of a mutual fund that invests a
majority of its assets in adjustable rate mortgage securities issued or
guaranteed by the U.S. government, with the remaining assets invested in U.S.
government obligations. In connection with the closing of the tender offer
announced on April 24, 2002, the Company anticipates that it will liquidate a
significant portion of its marketable securities in order to pay the purchase
price for the stock purchased in the tender offer (see Note 8).

These investments are classified as available-for-sale, as defined by Statement
of Financial Accounting Standards No. 115 Accounting for Certain Investments
in Debt and Equity Securities.The Company did not recognize any unrealized
gains or losses on its investment in marketable securities during the current
period because there was no change in the market value of these securities.

NOTE 6  LONG TERM DEBT

Line of Credit with Union Bank

On July 1, 2001, the Company established a $15.0 million revolving, secured
line of credit (Line of Credit) with Union Bank of California, N.A. (Union
Bank). Borrowings under the Line of Credit carry an interest rate of prime
minus 0.75%. The Company may borrow, repay and reborrow under the Line of
Credit from time to time, provided, however, that for at least one

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day during each twelve-month period, the principal amount outstanding under the
Line of Credit must be not more than $5.0 million. All borrowings under the
Line of Credit will mature on July 1, 2003. The Company obtained the Line of
Credit principally for general working capital purposes, although it is
permitted under the terms of the Line of Credit to use up to $5.0 million
for acquisitions from time to time. The Company currently has no borrowings
outstanding under the Line of Credit.

The Companys ability to borrow under the Line of Credit for working capital
purposes is subject to continued compliance by the Company with the financial
covenants and other requirements of the Line of Credit, including certain
covenants respecting minimum tangible net worth, minimum adjusted EBITDA (as
defined) and minimum total debt to adjusted EBITDA. On April 26, 2002, the
Company entered into an amendment to the Line of Credit that requires the
Company at all times to maintain a minimum tangible net worth (as defined) of
$8.0 million at June 30, 2002, $9.8 million at September 30, 2002, $11.3
million at December 31, 2002, $13.1 million at March 31, 2003, and
$13.9 million at June 30, 2003. The Line of Credit prohibits the Company
from borrowing from other sources.

The Company has granted liens on substantially all of its assets, other than
its real estate, to secure its obligations under the Line of Credit. In
addition, the Companys principal subsidiaries have guaranteed the Companys
obligations under the Line of Credit and have granted liens on substantially
all of their assets, other than their real estate, to secure their guarantees.

Credit Agreement with Foothill

Through the normal course of operations, in March 2001, the Company repaid all
outstanding borrowings under the Credit Agreement (as amended, the Credit
Agreement) between the Company and Foothill Capital Corporation (Foothill),
and it terminated the Credit Agreement on June 30, 2001. During the periods
presented, borrowings under the Credit Agreement accrued interest at prime plus
     .25% per annum, subject to a minimum interest rate of 7% per annum.

NOTE 7  CONTINGENCIES

General Liability Insurance

Prior to July 1, 1998, the Companys liability insurance required the Company
to pay the first $250,000 per occurrence. The Company has provided a liability
for estimated known and unknown claims related to uninsured general liability
risks based on actuarial estimates. As of March 31, 2002 and June 30, 2001,
the Companys recorded liability for estimated losses related to uninsured
general liability claims totaled approximately $567,000 and $638,000,
respectively, which is included in other liabilities in the accompanying
consolidated balance sheets.

Declining Membership Base

The Company derives a significant portion of its ongoing operating revenue from
its campground members (93% in fiscal 2001). The Companys membership base has
declined over the past five fiscal years, although the Company has been
successful in slowing the rate of this attrition. While the acquisition of
Leisure Time increased the size of the membership base, the Company expects
that, notwithstanding new sales, the membership base will continue to decline
at the rate of approximately 2% per year. The Company attributes this
attrition principally to its aging membership base, of whom approximately 50%
are senior citizens. To stop the continuing

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decline in the Companys membership base, the Company must increase its
campground membership sales over current levels or acquire members through the
purchase of other membership campground organizations, similar to the
acquisition of Leisure Time.

Environmental Issues

Certain environmental issues may exist at some of the Companys campgrounds
concerning underground storage tanks, sewage treatment plants and septic
systems, and waste disposal. Management has reviewed these issues and believes
that they will not have a material adverse impact on the Companys operations
or financial position.

Litigation

The Company is involved in certain claims and litigation arising in the normal
course of business. Management believes that the eventual outcome of these
claims and litigation will not have a material adverse impact on the Companys
operations or financial position.

NOTE 8  SUBSEQUENT EVENTS

On April 24, 2002, the Company announced that its Board of Directors approved a
tender offer by the Company for up to 1,500,000 shares, or 18.6%, of its
outstanding common stock, at a purchase price of $8.41 per share, payable in
cash. One of the Companys largest stockholders, Carl Marks Strategic
Investments II, LP, has agreed to tender the 1,140,418 shares that it owns.
Its affiliate, Carl Marks Strategic Investments, LP, however, has advised that
it will not tender any shares in the offer. In addition, the directors and
executive officers of the Company and the Companys second largest stockholder,
IAT Reinsurance Syndicate, Ltd., have advised that they will not tender any of
their shares in the offer. If more than 1,500,000 shares are tendered, the
Company will purchase shares from each tendering stockholder on a pro rata
basis.

The tender offer began on Wednesday, May 1, 2002, and will expire on Thursday,
May 30, 2002, unless extended. If 1,500,000 or more shares are tendered and
not withdrawn, the Company will spend approximately $12.7 million (including
estimated expenses) purchasing the stock.

Shares that the Company acquires in the offer will be held initially as
treasury shares and will be available for the Company to sell without further
stockholder action (except as required by applicable law or rules) for all
purposes, including the acquisition of other businesses, the raising of
additional capital for use in the business and the satisfaction of obligations
under existing or future employee benefit plans. The purchase of shares
pursuant to the offer will reduce the Companys paid-in capital by the amount
of the cost of the purchase.

In connection with the tender offer, on April 26, 2002, the Company entered
into an amendment to its Line of Credit with Union Bank which modified the
minimum tangible net worth covenant in the Line of Credit. As amended, this
covenant requires the Company at all times to maintain a minimum tangible net
worth (as defined) of $8.0 million at June 30, 2002, $9.8 million at September
30, 2002, $11.3 million at December 31, 2002, $13.1 million at March 31, 2003,
and $13.9 million at June 30, 2003.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Managements
Discussion and Analysis of Financial Condition and Results of Operations
included in the Companys Annual Report on Form 10-K for the year ended June
30, 2001, filed with the SEC on September 26, 2001.

All capitalized terms used herein have the same meaning as those defined in
Item 1  Financial Statements.

In this Managements Discussion and Analysis of Financial Condition and Results
of Operations, and elsewhere in this report, the Company makes certain
statements as to its expected financial condition, results of operations, cash
flows, and business strategies, plans and conditions for periods after March
31, 2002. All of these statements are forward-looking statements made pursuant
to the safe harbor provisions of Section 21(E) of the Securities Exchange Act
of 1934, as amended. These statements are not historical and involve risks and
uncertainties. The Companys actual financial condition, results of
operations, cash flows, and business strategies, plans, and conditions for
future periods may differ materially due to several factors, including but not
limited to the Companys ability to control costs, market conditions and other
factors affecting the Companys sales and marketing plan, the actual rate of
decline in the membership base, the actual use of the campgrounds by members
and guests, the Companys success in collecting its contracts receivable and
selling assets, the Companys success in acquiring members through the purchase
of other membership campground operations, and the other factors affecting the
Companys operations described in this report.

LIQUIDITY AND CAPITAL RESOURCES

Current Business Strategy.The Companys current business strategy is to
improve its campground operations and stabilize its campground membership base
through increased sales and marketing efforts and the acquisition of members
through the purchase of other membership campground operations. The Company
believes there is a viable market for campground memberships and that it has a
significant opportunity to compete for campers interested in higher quality
facilities and a higher level of service than is typically available at public
campgrounds or competing private campgrounds. The Company has also acquired
members through the purchase of Leisure Time, and it believes it may be
possible to acquire additional members through the purchase of other membership
campground operations, many of whom are experiencing financial difficulties.

Over the past several years, the Companys membership base has been declining,
although the Company has been successful in slowing the rate of this decline.
In response to this attrition, the Company has downsized its business by
closing and disposing of campgrounds and decreasing campground operating costs
and general and administrative expenses. The Company intends to continue to
keep the size of its campground system in an appropriate relation to the size
of its membership base. In this regard, if the membership base continues to
decline, or other opportunities arise consistent with the needs of the members,
the Company may close and dispose of additional campgrounds and it will seek to
decrease other expenses. At the same time, the Company has expanded its sales
and marketing efforts with a view to stopping the membership decline. The
Company has also acquired members through the purchase of Leisure

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Time, and it intends to explore the possible acquisition of additional members
through the purchase of other membership campground organizations. The Company
believes that the ultimate size of its campground system and the amounts
realized from future asset sales will depend principally upon the degree to
which the Company can successfully implement this strategy.

Tender Offer. On April 24, 2002, the Company announced that its Board of
Directors approved a tender offer by the Company for up to 1,500,000 shares, or
18.6%, of its outstanding common stock, at a purchase price of $8.41 per share,
payable in cash. One of the Companys largest stockholders, Carl Marks
Strategic Investments II, LP, has agreed to tender the 1,140,418 shares that it
owns. Its affiliate, Carl Marks Strategic Investments, LP, however, has
advised that it will not tender any shares in the offer. In addition, the
directors and executive officers of the Company and the Companys second
largest stockholder, IAT Reinsurance Syndicate, Ltd., have advised that they
will not tender any of their shares in the offer. If more than 1,500,000
shares are tendered, the Company will purchase shares from each tendering
stockholder on a pro rata basis.

The tender offer began on Wednesday, May 1, 2002, and will expire on Thursday,
May 30, 2002, unless extended. If 1,500,000 or more shares are tendered and
not withdrawn, the Company will spend approximately $12.7 million (including
estimated expenses) purchasing the stock. The Company intends to fund the
stock repurchases with its existing cash and short-term investments.

The Company believes that purchasing it stock at this time would be a prudent
use of its existing cash resources given current business, economic, and market
conditions. The Company is presently funding its operations with internally
generated cash, and it is generating cash flow in excess of its current
requirements. Moreover, the Companys long-term strategy of seeking to effect
strategic acquisitions does not require the use of the Companys cash in the
short-term because the Company has $5 million of availability under its Line of
Credit for such purposes.

In connection with the tender offer, on April 26, 2002, the Company entered
into an amendment to its Line of Credit with Union Bank which modified the
minimum tangible net worth covenant in the Line of Credit. As amended, this
covenant requires the Company at all times to maintain a minimum tangible net
worth (as defined) of $8.0 million at June 30, 2002, $9.8 million at September
30, 2002, $11.3 million at December 31, 2002, $13.1 million at March 31, 2003,
and $13.9 million at June 30, 2003. The Company does not anticipate any
difficulty in continuing to comply with the covenant after completion of the
tender offer.

Cash.On March 31, 2002, the Company had $5.6 million of cash and cash
equivalents, a decrease of $3.4 million from June 30, 2001. During the nine
months ended March 31, 2002, the Companys operating activities provided $13.4
million of cash, its investing activities used
$16.0 million of cash, and its financing activities used $760,000 of cash. The
Companys investing activities consisted of purchases of $11.7 million in
marketable securities, expenditures of $2.8 million to upgrade the Companys
computer and communication systems, and capital expenditures of $1.9 million at
the campgrounds, partially offset by $404,000 in proceeds from the sale of
assets. The Companys financing activities consisted of $58,000 of proceeds
from the exercise of employee stock options, payments of $764,000 for the
purchase of 125,800 shares of common stock, and $54,000 in payments on notes
payable, which are included in other liabilities in the accompanying financial
statements.

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With respect to the Companys operating activities, for the nine months ended
March 31, 2002, the principal sources of operating cash were $54.6 million from
operations, $5.8 million in principal and interest collections on contracts
receivable, and $13.5 million from sales of campground memberships. Principal
uses of operating cash for the nine months ended
March 31, 2002, were $34.3 million in operating expenses, $13.0 million in
membership origination costs and marketing expenses, $9.1 million in
administrative expenses (including general and administrative expenses and
corporate members services costs), $1.9 million in insurance premiums, and $2.2
million in income taxes.

During the nine months ended March 31, 2001, the Companys operating activities
provided $12.2 million of cash, its investing activities used $1.4 million of
cash, and its financing activities used $9.6 million of cash.

The Company expects that its capital expenditures will be higher in fiscal
2002, compared with fiscal 2001, because the Company is spending a total of
$3.2 million to upgrade its computer and communication systems, including $2.8
million in the current period. In addition, if 1,500,000 or more shares are
tendered and not withdrawn in the tender offer announced on April 24, 2002, the
Company will spend approximately $12.7 million (including estimated expenses)
purchasing the stock.

During the nine months ended March 31, 2002 and through the date of this
report, the Company has had no outstanding borrowings under its Line of Credit
with Union Bank. Based upon its current business plan, the Company believes
that future cash flows provided from operations, asset sales, and borrowings
available under the Line of Credit will be adequate for the Companys operating
and other cash requirements.

Material Changes in Financial Condition

Total assets increased by $12.6 million during the nine months ended March 31,
2002. Cash decreased by $3.4 million and marketable securities increased by
$11.7 million as discussed above. Contracts receivable increased by $1.0
million as new receivables from financed sales exceeded the $4.1 million of
cash collections on the existing portfolio. Approximately 31% of new sales
were financed during the current period. Buildings and equipment increased by
$2.3 million due primarily to expenditures to upgrade the Companys computer
and communication systems, partially offset by depreciation. Deferred
membership selling expenses increased $2.4 million as a result of an increase
in sales. Inventories decreased by $252,000 due to a reduced demand for
inventory items during a slower period in the Companys normal operating cycle.
Other current assets decreased by $85,000 due primarily to decreases in
prepaid insurance and other prepaid expenses. Deferred tax assets decreased by
$1.0 million in the current period as a result of deferred tax expense
recognized in the current period.

Total liabilities increased by $7.3 million during the nine months ended March
31, 2002, primarily as a result of increases in increases in deferred sales
revenue and deferred dues, partially offset by decreases in accounts payable
and other accrued liabilities. Deferred sales revenue increased by $7.3
million due to increases in membership sales contracts originated, and deferred
dues increased by $2.1 million because dues collected during the period
exceeded dues revenue recognized. Accounts payable decreased by $1.3 million
due to the timing of payments, and other accrued liabilities decreased by
$787,000 due primarily to payments of accrued wages and benefits.

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Market Risk and Interest Rate Sensitivity.Item 305 of Regulation S-K requires
disclosure of material risks, as defined in Item 305, related to market risk
sensitive financial instruments. As defined, the Company currently has market
risk sensitive financial instruments related to interest rates.

The Company has exposure to changing interest rates on its marketable
securities, which consist of shares in a mutual fund that invests a majority of
its assets in adjustable rate mortgage securities issued or guaranteed by the
U.S. government, with the remaining assets invested in U.S. government
obligations. The Company does not have significant exposure to changing
interest rates on its invested cash because the Company invests available cash
in certificates of deposit and investment grade commercial paper that have
maturities of three months or less. The interest rate market risk implicit in
these investments at any given time is low, as the investments mature within
three months.

The Company had $11.0 million of contracts receivable at March 31, 2002, which
have a weighted average stated interest rate of 14% and an average remaining
term of 31 months. The Company does not have significant exposure to changing
interest rates related to the contracts receivable because the interest rates
on the contracts receivable are fixed.

The Company has not undertaken any action to cover interest rate market risk
and is not a party to any interest rate market risk management activities.

The Company also receives revenues from its Canadian subsidiary and exchanges
them into U.S. Dollars at exchange rates that fluctuate with market conditions;
however, such revenues are not material to the Companys operations.

A hypothetical ten percent change in market interest rates over the next year
would not materially impact the Companys earnings or cash flow. A
hypothetical ten percent change in market interest rates would not have a
material effect on the fair value of the Companys contracts receivable,
marketable securities, or its short-term cash investments.

The Company currently has no outstanding borrowings under its Line of Credit
with Union Bank. If, however it becomes necessary for the Company to borrow
under its Line of Credit, the Companys sensitivity to changes in interest
rates would increase because borrowings under the Line of Credit bear interest
at prime minus .75%.

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RESULTS OF OPERATIONS

The following discussion and analysis are based on the historical results of
operations of the Company for the nine months ended March 31, 2002 and 2001.
The financial information set forth below should be read in conjunction with
the Companys consolidated financial statements included in Item 1.

Nine Months Ended March 31, 2002 and 2001

Net Income.The Company reported net income of $6.0 million or $.70 per
diluted share on revenues of $65.0 million for the nine months ended March 31,
2002. This compares with net income of $3.5 million or $.41 per diluted share
on revenues of $57.7 million for the same period last year.

The Companys revenues grew in the current period due primarily to increased
membership sales revenue and increased fees from campgrounds managed by Trails
Management, the Companys property management subsidiary. Membership sales
revenue was higher because of higher average new sales prices and an upgrade
program. Expenses were also higher in the current period due to increased
sales and marketing efforts, the operation of additional campgrounds by Trails
Management, and higher general and administrative costs in the third quarter,
partially offset by lower interest expense. Because the Company repaid its
loan with Foothill Capital in March 2001, interest expense in the current
period was $746,000 lower than in the prior period.

The table set forth on the following page shows separately the results of the
campground operations, Trails Management, and RPI, without any allocation of
corporate expenses, as well as corporate expenses and other revenues and
expenses in the aggregate, for the nine months ended March 31, 2002 and 2001.

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Thousand Trails, Inc. and Subsidiaries
Summary of Operating Results
(Dollars in thousands)
(Unaudited)

|                                                                         |                                      |                          |        |                   |        |      |        |         |       | 
|------------------------------------------------------------------------ | ------------------------------------ | ------------------------ | ------ | ----------------- | ------ | ---- | ------ | ------- | ----- | 
|                                                                         |                                      |                          |        | Nine Months Ended
|                                                                         |                                      |                          |        | March 31,        
|                                                                         |                                      |                          |        |                  
|                                                                         |                                      |                          |        | 2002              |        | 2001
|                                                                         |                                      |                          |        |                   |        |     
|Campground Operations                                                    |                                      |                          |        |                   |        |      |        |        
|                                                                         | Membership dues                      |                          | $      | 29,994            |        |      | $      | 29,973  |      
|                                                                         | Campground revenues                  |                          |        | 13,350            |        |      |        | 12,848  |      
|                                                                         | Cost of campground revenues          |                          |        | (5,790            | )      |      |        | (5,930  | )    
|                                                                         | Operating expenses                   |                          |        | (25,936           | )      |      |        | (25,800 | )    
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|Contribution from campground operations                                  |                                      |                          | 11,618 |                   |        |      | 11,091 |        
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|Sales                                                                    |                                      |                          |        |                   |        |      |        |        
|                                                                         | Membership contracts originated      |                          |        | 19,234            |        |      |        | 14,601  |      
|                                                                         | Change in deferred revenue           |                          |        | (7,326            | )      |      |        | (7,977  | )    
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|                                                                         |                                      | Membership sales revenue |        |                   | 11,908 |      |        |         | 6,624 | 
|                                                                         | Membership origination costs         |                          |        | (9,136            | )      |      |        | (6,717  | )    
|                                                                         | Change in deferred origination costs |                          |        | 2,397             |        |      |        | 2,445   |      
|                                                                         | Marketing expenses                   |                          |        | (4,229            | )      |      |        | (3,872  | )    
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|Contribution (loss) from sales                                           |                                      |                          | 940    |                   |        |      | (1,520 | )      
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|Trails Management                                                        |                                      |                          |        |                   |        |      |        |        
|                                                                         | Revenues                             |                          |        | 3,417             |        |      |        | 1,989   |      
|                                                                         | Expenses                             |                          |        | (3,132            | )      |      |        | (1,921  | )    
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|Contribution from Trails Management                                      |                                      |                          | 285    |                   |        |      | 68     |        
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|Resort Parks International                                               |                                      |                          |        |                   |        |      |        |        
|                                                                         | Revenues                             |                          |        | 2,689             |        |      |        | 2,709   |      
|                                                                         | Expenses                             |                          |        | (1,325            | )      |      |        | (1,378  | )    
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|Contribution from RPI                                                    |                                      |                          | 1,364  |                   |        |      | 1,331  |        
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|                                                                         | Other income                         |                          |        | 1,753             |        |      |        | 1,952   |      
|                                                                         | Corporate member services            |                          |        | (1,028            | )      |      |        | (966    | )    
|                                                                         | General and administrative expense   |                          |        | (7,545            | )      |      |        | (6,982  | )    
|                                                                         | Other                                |                          |        | 62                |        |      |        | 138     |      
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|Income before interest income and expense,
gain on asset sales and taxes |                                      |                          | 7,449  |                   |        |      | 5,112  |        
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|                                                                         | Interest income                      |                          |        | 1,662             |        |      |        | 1,362   |      
|                                                                         | Interest expense                     |                          |        | (27               | )      |      |        | (773    | )    
|                                                                         | Gain on asset sales                  |                          |        | 144               |        |      |        | 146     |      
|                                                                         |                                      |                          |        |                   |        |      |        |         |      
|Income before taxes                                                      |                                      | $                        | 9,228  |                   |        | $    | 5,847  |        
|                                                                         |                                      |                          |        |                   |        |      |        |         |      

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Operating Income.For the nine months ended March 31, 2002, the Companys
contribution from operations was $7.4 million, compared with $5.1 million for
the same period last year. The contribution from operations increased in the
current period due primarily to an improvement in the contribution from sales
(from a negative $1.5 million last year to a positive $940,000 in the current
period). In addition, the contribution from campground operations and Trails
Management increased $527,000 and $217,000, respectively, in the current
period. These increases were partially offset by a $199,000 decrease in other
income, and a $625,000 increase in general and administrative costs, including
costs associated with member services. For this purpose, the contribution from
operations is defined as income before interest income and expenses, gains on
asset sales, and taxes. See the table on the previous page for the elements of
the contribution from operations and the Companys operating income before
taxes for the periods presented.

Campground Operations.The Companys operations are highly seasonal. The
Company receives the majority of the dues revenue from its members during the
winter, which is recognized as income ratably during the year. However, the
Company incurs a higher level of operating expenses during the summer. In
addition, a majority of the Companys sales and marketing efforts occur during
the summer.

Campground membership dues revenue was $30.0 million for both nine months ended
March 31, 2002 and 2001. Dues revenue remained constant because the effect of
the annual dues increase was offset by the net loss of campground members
during the year.

Other campground revenues were $13.3 million for the nine months ended March
31, 2002, compared with $12.8 million for the same period last year. The
related expenses were
$5.8 million for the nine months ended March 31, 2002, compared with $5.9
million for the same period last year. Despite a decrease in the number of
campgrounds in operation during the current period due to the closures
discussed below, campground revenues increased due to fees generated by an
extended stay program at some of the Companys campgrounds, utility fees
instituted at some campgrounds in response to increased utility costs, and
increases in recreational vehicle storage revenue and facility rentals. The
slight decline in the related expenses was due primarily to decreases in
maintenance expenses and the cost of operating the Companys rental trailers,
partially offset by an increase in the cost of goods sold.

Campground operating expenses were $25.9 million for the nine months ended
March 31, 2002, compared with $25.8 million for the same period last year. The
increase in the current period was due primarily to increases in labor costs,
operating supplies, utility costs, and depreciation, partially offset by lower
maintenance costs.

In February 2001, the Company completed its consolidation of Leisure Times
operations and closed four campgrounds. The Company intends to keep the size
of its campground system in an appropriate relation to the size of its
membership base. In this regard, if the membership base continues to decline,
or other opportunities arise consistent with the needs of the members, the
Company may close and dispose of additional campgrounds and it will seek to
decrease other expenses. Although the Company believes that the anticipated
changes should result in lower future operating expenses, no assurance can be
given that such changes will not reduce revenues by an amount in excess of the
expense reductions.

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For the nine months ended March 31, 2002, the Company originated membership
contracts of $19.2 million, compared with $14.6 million for the same period
last year. The increase in the current period resulted primarily from the sale
of a greater number of new membership contracts at a higher average sales price
and an increase in the number of contracts originated in an upgrade program
involving the Companys existing members. During the nine months ended March
31, 2002, the Company originated approximately 3,400 new membership contracts
at an average sales price of $2,679, compared with approximately 3,300 new
membership contracts at an average sales price of $2,511 in the same period
last year. In the current period, the Company also originated contracts
totaling $9.5 million in the upgrade program, compared with
$6.2 million in the same period last year. During the nine months ended March
31, 2002 and 2001, the Company originated approximately 3,200 and 2,100
contracts, respectively, in the upgrade program at an average sales price of
$2,995.

In addition, the Company offered existing Thousand Trails and NACO members
access to the Leisure Time campgrounds for a fee, which resulted in
approximately 730 contracts at an average sales price of $244 in the current
period, compared with 1,623 contracts at an average sales price of $230 in the
same period last year. In the current period, the Company also offered Leisure
Time members access to the Thousand Trails and NACO campgrounds for a fee,
which resulted in approximately 760 contracts at an average sales price of
$572.

The Company recognizes revenue from the sale of campground memberships that do
not convey a deeded interest in real estate on a straight-line basis over the
expected life of the memberships sold. For the nine months ended March 31,
2002 and 2001, the Company recognized campground membership sales revenues of
$11.9 million and $6.6 million, respectively. Membership sales revenue
includes revenues of $9.5 million and $4.9 million, respectively, that were
deferred in prior periods. Moreover, during these same periods, the Company
deferred revenues of $16.8 million and $12.9 million, respectively, which will
be recognized in future periods.

Selling expenses directly related to the sale of campground memberships are
deferred and recognized as expenses on a straight-line basis over the expected
life of the memberships sold. All other selling and marketing costs are
recognized as expenses in the period incurred. For the nine months ended March
31, 2002 and 2001, the Company recognized selling expenses of
$6.7 million and $4.3 million, respectively. These amounts include expenses of
$2.9 million and $1.5 million, respectively, that were deferred in prior
periods. Moreover, for these same periods, the Company deferred expenses of
$5.3 million and $3.9 million, respectively, which will be recognized in future
periods.

During the nine months ended March 31, 2002, sales revenues exceeded selling
and marketing expenses by $940,000, compared with the same period last year,
when selling and marketing expenses exceeded sales revenue by $1.5 million.
Although the negative impact of the sales deferral was $1.4 million greater in
the current period, the percentage of revenue deferred from new membership
sales decreased, compared with prior periods, because the Company originated a
greater number of membership contracts with a shorter expected life due to the
sale of a greater number of upgrades. In addition, fewer membership contracts
were originated at Leisure Time campgrounds in the current period, which
resulted in the recognition of more revenue that was deferred in prior periods
than the Company deferred in the current period. During the nine months ended
March 31, 2001, selling and marketing expenses exceeded sales revenues because
the Company deferred more sale revenues than selling expenses.

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The Companys selling and marketing efforts generally require significant
expense, the majority of which must be expensed in the current period, while
the related sales revenues are generally deferred and recognized on a
straight-line basis over the expected life of the memberships sold. As a
consequence, for new membership sales, the Company expects that its selling and
marketing expenses will generally exceed its sales revenue. However, sales of
upgrades are generally profitable and offset the negative impact of new
membership sales.

The Companys selling and marketing efforts have not produced the level of
sales needed to stop the continuing decline in the Companys membership base,
although the Company has been successful in slowing the rate of this decline.
If the Company is not able to increase its campground membership sales over the
current levels or acquire members through the purchase of other membership
campground operations similar to the acquisition of Leisure Time, the
membership base will decline in the future, which could decrease the Companys
revenues. Decreases in revenues that are not offset by sufficient expense
reductions could have a material adverse impact on the Companys business and
results of operations.

Trails Management.Trails Management, a wholly owned subsidiary of the
Company, currently manages 241 public campgrounds for the U.S. Forest Service
and other entities. For the nine months ended March 31, 2002, these operations
produced a net contribution of $285,000 on revenues of $3.4 million, compared
with a net contribution of $68,000 on revenues of
$2.0 million for the same period last year. The increase in revenues and
expenses between periods was due primarily to additional revenue and expenses
from contracts entered into during the second quarter of fiscal 2001, which
increased the number of campgrounds managed. Trails Management receives most
of its revenues and incurs most of its expenses during the first fiscal
quarter.

Resort Parks International.RPI charges its members a fee for a membership
that entitles them to use any of the campgrounds participating in RPIs
reciprocal use system, subject to certain limitations. For the nine months
ended March 31, 2002, RPIs operations produced a net contribution of $1.4
million on revenues of $2.7 million, compared with a net contribution of $1.3
million on revenues of $2.7 million for the same period last year. RPIs
contribution increased during the current period due primarily to a decrease in
communication and marketing expenses. RPI is working to introduce new products
to increase its revenues and maintain its contribution margin; however, there
is no assurance that these efforts will be successful.

Interest Income and Expense.Interest income increased to $1.7 million for the
nine months ended March 31, 2002, from $1.4 million for the same period last
year. The increase in interest income in the current period was due primarily
to an increase in interest earned on the Companys portfolio of contracts
receivable. The Companys portfolio of contracts receivable increased with the
acquisition of Leisure Time, and has continued to grow as a result of the
increase in membership sales, approximately 31% of which are sold on an
installment basis. As a result, the interest earned on the Companys portfolio
of contracts receivable is expected to increase compared with historical
levels. At the same time, the interest earned on the Companys cash and
short-term investments is expected to decline after the Company completes the
stock purchases contemplated in its pending tender offer.

Interest expense was $27,000 for the nine months ended March 31, 2002, compared
with $773,000 for the same period last year. This decrease in the current period
was due to the

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Companys repayment, in March 2001, of all borrowings under the Credit
Agreement with Foothill.

Gain on Asset Sales.The Company recognized a gain of $144,000 on asset sales
for the nine months ended March 31, 2002, compared with $146,000 for the same
period last year. The decrease in the current period was due to the timing of
asset sales. Over the next several years, the Company intends to dispose of
the remaining assets it holds for sale, including the campgrounds that were
closed following the acquisition of Leisure Time, any campgrounds that are
closed in the future, and other undeveloped, excess acreage associated with the
campgrounds. The sale of campgrounds requires addressing the rights of members
associated with such campgrounds. The impact of these rights is uncertain and
could adversely affect the availability or timing of sale opportunities or the
ability of the Company to realize recoveries from asset sales. In addition,
although the Company has successfully sold assets during the past several
years, no assurance exists that the Company will be able to locate a buyer for
any of the remaining assets or that sales on acceptable terms can be made.

Other Income.Other income generally consists of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, collections of written-off contracts and delinquent dues,
subscription fees received from members who subscribe to the Companys member
magazine, fees charged members for making more than five operator-assisted
reservations in a given year, and fees received from third parties for billing
and collection services. Other income was $1.8 million for the nine months
ended March 31, 2002, compared with $2.0 million for the same period last year.
The decrease in the current period was due primarily to decreases in the
collection of written-off contracts and delinquent dues and fees received for
third party billing and collection services, partially offset by an increase in
subscription revenue from the Companys member magazine.

Other Expenses.Administrative expenses, including corporate member service
costs and general and administrative expenses, were $8.6 million for the nine
months ended
March 31, 2002, compared with $7.9 million for the same period last year. The
increase in the current period was due primarily to higher labor costs, bank
service fees, and third party legal fees.

The Companys insurance renews on an annual basis, effective July 1 each year.
The Company has been advised by its insurance broker that the cost of insurance
in fiscal 2003 will be significantly higher than the cost incurred by the
Company in fiscal 2002. To reduce the impact of such cost increases in fiscal
2003, the Company may elect to purchase insurance with high deductibles or
self-insured retentions, which could expose the Company to greater risk of
loss.

Income Taxes.The Companys current provision for income taxes was $2.2
million for the nine months ended March 31, 2002, compared with $649,000 for
the same period last year. The current provisions for these periods include
amounts for federal alternative minimum taxes and state income taxes payable in
the various states where the Company conducts its operations. With the
exception of federal alternative minimum taxes, the Company does not have
federal income taxes payable on a consolidated basis due to its net operating
tax loss carryforwards, which totaled $7.9 million at June 30, 2001. The
Company expects to fully utilize its existing tax loss carryforwards during
fiscal 2002.

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The Company recorded a deferred tax provision of $1.0 million for the nine
months ended
March 31, 2002, compared with $1.7 million for the same period last year. The
Company will continue to record a deferred tax provision in future periods as
the related deferred tax assets are realized. The deferred tax provision will
not affect current or future income tax payments.

Three Months Ended
March 31, 2002 and 2001

Net Income.The Company reported net income of $2.2 million or $.25 per
diluted share on revenues of $19.7 million for the three months ended March 31,
2002. This compares with net income of $1.2 million or $.13 per diluted share
on revenues of $17.3 million for the same period last year.

The Companys revenues grew in the current quarter due primarily to increased
membership sales revenue, which resulted from higher average new sales prices
and an upgrade program. Expenses were also higher in the current quarter due
primarily to increased sales and marketing efforts and higher general and
administrative costs resulting from increases in legal fees, professional fees,
and credit card processing fees.

The table set forth on the following page shows separately the results of the
campground operations, Trails Management, and RPI, without any allocation of
corporate expenses, as well as corporate expenses and other revenues and
expenses in the aggregate, for the three months ended March 31, 2002 and 2001.

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Thousand Trails, Inc. and Subsidiaries
Summary of Operating Results
(Dollars in thousands)
(Unaudited)

|                                                                         |                                      |                          |       |                    |       |      |       |        |       | 
|------------------------------------------------------------------------ | ------------------------------------ | ------------------------ | ----- | ------------------ | ----- | ---- | ----- | ------ | ----- | 
|                                                                         |                                      |                          |       | Three Months Ended
|                                                                         |                                      |                          |       | March 31,         
|                                                                         |                                      |                          |       |                   
|                                                                         |                                      |                          |       | 2002               |       | 2001
|                                                                         |                                      |                          |       |                    |       |     
|Campground Operations                                                    |                                      |                          |       |                    |       |      |       |       
|                                                                         | Membership dues                      |                          | $     | 9,921              |       |      | $     | 9,837  |      
|                                                                         | Campground revenues                  |                          |       | 3,264              |       |      |       | 3,121  |      
|                                                                         | Cost of campground revenues          |                          |       | (1,470             | )     |      |       | (1,513 | )    
|                                                                         | Operating expenses                   |                          |       | (7,797             | )     |      |       | (7,988 | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Contribution from campground operations                                  |                                      |                          | 3,918 |                    |       |      | 3,457 |       
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Sales                                                                    |                                      |                          |       |                    |       |      |       |       
|                                                                         | Membership contracts originated      |                          |       | 6,297              |       |      |       | 5,018  |      
|                                                                         | Change in deferred revenue           |                          |       | (1,952             | )     |      |       | (2,788 | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|                                                                         |                                      | Membership sales revenue |       |                    | 4,345 |      |       |        | 2,230 | 
|                                                                         | Membership origination costs         |                          |       | (3,013             | )     |      |       | (2,088 | )    
|                                                                         | Change in deferred origination costs |                          |       | 692                |       |      |       | 754    |      
|                                                                         | Marketing expenses                   |                          |       | (1,167             | )     |      |       | (1,224 | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Contribution (loss) on sales                                             |                                      |                          | 857   |                    |       |      | (328  | )     
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Trails Management                                                        |                                      |                          |       |                    |       |      |       |       
|                                                                         | Revenues                             |                          |       | 1                  |       |      |       |       |      
|                                                                         | Expenses                             |                          |       | (149               | )     |      |       | (130   | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Loss from Trails Management                                              |                                      |                          | (148  | )                  |       |      | (130  | )     
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Resort Parks International                                               |                                      |                          |       |                    |       |      |       |       
|                                                                         | Revenues                             |                          |       | 1,003              |       |      |       | 1,035  |      
|                                                                         | Expenses                             |                          |       | (426               | )     |      |       | (487   | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Contribution from RPI                                                    |                                      |                          | 577   |                    |       |      | 548   |       
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|                                                                         | Other income                         |                          |       | 560                |       |      |       | 577    |      
|                                                                         | Corporate member services            |                          |       | (294               | )     |      |       | (290   | )    
|                                                                         | General and administrative expense   |                          |       | (2,827             | )     |      |       | (2,395 | )    
|                                                                         | Other                                |                          |       | 18                 |       |      |       | 37     |      
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Income before interest income and expense,
gain on asset sales and taxes |                                      |                          | 2,661 |                    |       |      | 1,476 |       
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|                                                                         | Interest income                      |                          |       | 632                |       |      |       | 518    |      
|                                                                         | Interest expense                     |                          |       | (4                 | )     |      |       | (103   | )    
|                                                                         | Loss on asset sales                  |                          |       | (11                | )     |      |       | (8     | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Income before taxes                                                      |                                      | $                        | 3,278 |                    |       | $    | 1,883 |       
|                                                                         |                                      |                          |       |                    |       |      |       |        |      

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Operating Income.For the three months ended March 31, 2002, the Companys
contribution from operations was $2.7 million, compared with $1.5 million for
the same period last year. The contribution from operations increased in the
current period due primarily to an improvement in the contribution from sales
(from a negative $328,000 last year to a positive $857,000 in the current
period). In addition, the contribution from campground operations increased
$461,000 in the current period. These increases were partially offset by a
$436,000 increase in general and administrative costs, including costs
associated with member services. For this purpose, the contribution from
operations is defined as income before interest income and expenses, gains on
asset sales, and taxes. See the table on the previous page for the elements of
the contribution from operations and the Companys operating income before
taxes for the periods presented.

Campground Operations.Campground membership dues revenue was $9.9 million for
the three months ended March 31, 2002, compared with $9.8 million for the same
period last year. The increase in dues revenue was due primarily to the effect
of the annual dues increase, partially offset by the loss of campground members
during the year.

Other campground revenues were $3.3 million for the three months ended March
31, 2002, compared with $3.1 million for the same period last year. The
related expenses were
$1.5 million for both the three months ended March 31, 2002 and 2001. Despite
a decrease in the number of campgrounds in operation during the current period
due to the closures discussed above, other campground revenues increased due
primarily to fees generated by an extended stay program at some of the
Companys campgrounds and utility fees instituted at some campgrounds to offset
higher utility costs.

Campground operating expenses were $7.8 million for the three months ended
March 31, 2002, compared with $8.0 million for the same period last year. The
decrease in campground operating expenses in the current period was due
primarily to a decrease in maintenance expenses, partially offset by an
increase in labor costs and depreciation.

For the three months ended March 31, 2002, the Company originated membership
contracts of $6.3 million, compared with $5.0 million in the same period last
year. During the three months ended March 31, 2002, the Company originated
approximately 1,200 new membership contracts at an average sales price of
$1,976, and approximately 1,300 contracts in the upgrade program at an average
sales price of $2,995. This compares with approximately 950 new membership
contracts at an average sales price of $2,410, and 800 contracts in the upgrade
program at an average sales price of $2,892 during the three months ended March
31, 2001.

During the current period, the Company offered existing Leisure Time members
access to Thousand Trails and NACO campgrounds for a fee, which resulted in
approximately 470 contracts at an average sale price of $489. This compares
with approximately 1,600 contracts at an average price of $299 in the same
period last year.

For the three months ended March 31, 2002 and 2001, the Company recognized
campground membership sales revenues of $4.3 million and $2.2 million,
respectively. Membership sales revenue includes revenues of $3.5 million and
$1.9 million, respectively, that were deferred in prior periods. Moreover,
during these same periods, the Company deferred revenues of
$5.5 million and $4.7 million, respectively, which will be recognized in future
periods.

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For the three months ended March 31, 2002 and 2001, the Company recognized
selling expenses of $2.3 million and $1.3 million, respectively. These amounts
include expenses of $1.1 million and $574,000, respectively, that were deferred
in prior periods. Moreover, for these same periods, the Company deferred
expenses of $1.8 million and $1.3 million, respectively, which will be
recognized in future periods.

For the three months ended March 31, 2002, sales revenue exceeded selling and
marketing expenses by $857,000, compared with the same period last year, when
selling and marketing expenses exceed sales revenue by $328,000. The
percentage of revenue deferred from new membership sales decreased, compared
with prior periods, because the Company originated a greater number of
membership contracts with a shorter expected life due to the sale of a greater
number of upgrades. During the three months ended March 31, 2001, selling and
marketing expenses exceeded sales revenue because the Company deferred more
sales revenue than selling expenses.

Trails Management.For the three months ended March 31, 2002, the operations
of Trails Management produced a loss of $148,000, compared with a loss of
$130,000 for the same period last year. The campground management operations
generally incur a loss during the third fiscal quarter due to fixed expenses
and the seasonal closure of the campgrounds.

Resort Parks International.For the three months ended March 31, 2002, RPIs
operations produced a net contribution of $577,000 on revenues of $1.0 million,
compared with a net contribution of $548,000 on revenues of $1.0 million for
the same period last year. While revenue remained constant between periods, a
decrease in the cost of membership materials increased the contribution in the
current period.

Interest Income and Expense.Interest income increased to $632,000 for the
three months ended March 31, 2002, from $518,000 for the same period last year.
The increase in the current period was due primarily to an increase in the
interest earned on the Companys portfolio of contracts receivable.

Interest expense decreased to $4,000 for the three months ended March 31, 2002,
from $103,000 for the same period last year. This decrease in the current
period was due to the Companys repayment in March 2001 of all borrowings under
the Credit Agreement with Foothill.

Loss on Asset Sales.For the three months ended March 31, 2002 and 2001, the
Company recognized losses of $11,000 and $8,000, respectively, on sales of
assets.

Other Income.Other income was $560,000 for the three months ended March 31,
2002, compared with $577,000 for the same period last year. The decrease in
the current period was due primarily to decreases in transfer fee revenue and
collections of written-off contracts and delinquent dues, partially offset by
an increase in subscription revenue from the Companys member magazine.

Other Expenses.Administrative expenses, including corporate member service
costs and general and administrative expenses, were $3.1 million for the three
months ended
March 31, 2002, compared with $2.7 million for the same period last year. The
increase in the current period was due primarily to an increase in third party
legal fees, professional fees, and bank service and credit card processing
fees.

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Income Taxes.The Companys current provision for income taxes was $623,000
for the three months ended March 31, 2002, compared with $179,000 for the same
period last year. The Company recorded a deferred tax provision of $490,000
for the three months ended
March 31, 2002, compared with $537,000 for the same period last year.

Inflation.During the past several fiscal years, the Companys results have not
been affected materially by inflation. However, should the rate of inflation
increase in the future, or should utility costs or insurance premiums increase
significantly, the Companys expenses are likely to increase at a greater rate
than it can increase the annual dues paid by campground members because the
Company can not increase the dues on existing contracts of senior citizens and
disabled members who notify the Company of their age or disability and request
that their dues be frozen. At the present time, approximately 37% of the
members have requested that their dues be frozen because of their age or
disability.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company currently does not have any derivative financial instruments.
However, the Company does have other financial instruments that contain market
risk. Management believes that the market risk associated with the Companys
financial instruments as of March 31, 2002 is not significant. The information
required by Item 305 of Regulation S-K is contained in Item 2  Managements
Discussion and Analysis of Financial Condition and Results of Operations under
the heading Market Risk and Interest Rate
Sensitivity.

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Part II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

Exhibits

The following documents are filed as exhibits to this report.

|        |  |                                                                                                                                                                                                                                                                 |  |  |  | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |  |                                                                                                                                                                                                                                                                 |  |  |  | 
|Number  |  | Description                                                                                                                                                                                                                                                     |  |  |  | 
|        |  |                                                                                                                                                                                                                                                                 |  |  |  | 
|10.1    |  | First Amendment dated April 26, 2002, to the
Loan Agreement between the Company and Union
Bank of California, N.A.                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                
|10.2    |  | Letter Agreement dated April 23, 2002, between
the Company and Carl Marks Strategic
Investments II, LP (incorporated by reference
to Exhibit (d)(1) to the Companys Tender Offer
Statement on Schedule TO filed with the SEC on
May 1, 2002, File No. 1-14645)
|        |  |                                                                                                                                                                                                                                                                
|11.1    |  | Statement re: Computation of Per Share Earnings.                                                                                                                                                                                                               

Reports on Form 8-K

The Company did not file any Current Reports on Form 8-K during the quarter
ended March 31, 2002.

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SIGNATURES

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

|      |              |  |     |                       |                     |                                                       |  | 
|----- | ------------ |  | --- | --------------------- | ------------------- | ----------------------------------------------------- |  | 
|      |              |  |     | Thousand Trails, Inc. |                     |                                                      
|      |              |  |     |                       |                     |                                                       |  | 
|Date: | May 10, 2002 |  | By: |                       | /s/ William J. Shaw |                                                       | 
|      |              |  |     |                       |                     |                                                       |  | 
|      |              |  |     |                       |                     | William J. Shaw
President and Chief Executive Officer |  | 
|      |              |  |     |                       |                     |                                                       |  | 
|Date: | May 10, 2002 |  | By: |                       | /s/ Bryan D. Reed   |                                                       | 
|      |              |  |     |                       |                     |                                                       |  | 
|      |              |  |     |                       |                     | Bryan D. Reed
Chief Financial and Accounting Officer  |  | 

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Index to Exhibits

|        |  |                                                                                                                                                                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                
|Number  |  | Description                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                
|10.1    |  | First Amendment dated April 26, 2002, to the Loan Agreement
between the Company and Union Bank of California, N.A.                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                
|10.2    |  | Letter Agreement dated April 23, 2002, between the Company and
Carl Marks Strategic Investments II, LP (incorporated by reference
to Exhibit (d)(1) to the Companys Tender Offer Statement on
Schedule TO filed with the SEC on
May 1, 2002, File No. 1-14645)
|        |  |                                                                                                                                                                                                                                                                
|11.1    |  | Statement re: Computation of Per Share Earnings.