##### 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, 2001

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      |  | (IRS Employer Identification No.)
|                                 
|                                 
|                                 
|                                 
|of Incorporation or Organization)



|                                                    |  |               
|--------------------------------------------------- |  | --------------
|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, 2001, was 8,167,123.





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TABLE OF CONTENTS



|                                                |                                                                                               |  |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART 1. 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 1. Legal Proceedings                                                                    
|                                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|Statement Re: Computation of Earnings Per Share



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##### Table of Contents



Thousand Trails, Inc.

Index

|                              |                                                                    |                                                                    |                                               |    |   |    | 
|----------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------------------ | --------------------------------------------- | -- | - | -- | 
|Part I. Financial Information |                                                                    |                                                                    | Page                                          |   
|                             
|                             
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|                             
|                              | Item 1. Financial Statements                                       |                                                                    |                                               |    |  
|                             
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|                             
|                              |                                                                    | Consolidated Balance Sheets as of March 31, 2001                  
|                             
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|                             
|                              |                                                                    |                                                                    | and June 30, 2000                             |    |   | 3  | 
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|                              |                                                                    | Consolidated Statements of Operations for the nine months ended   
|                             
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|                             
|                              |                                                                    |                                                                    | March 31, 2001 and March 31, 2000             |    |   | 4  | 
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|                              |                                                                    | Consolidated Statements of Operations for the three months ended  
|                             
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|                             
|                              |                                                                    |                                                                    | March 31, 2001 and March 31, 2000             |    |   | 5  | 
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|                              |                                                                    | Consolidated Statement of Shareholders Equity for the nine months
|                             
|                             
|                             
|                             
|                              |                                                                    |                                                                    | ended March 31, 2001                          |    |   | 6  | 
|                             
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|                              |                                                                    | Consolidated Statements of Cash Flows for the nine months ended   
|                             
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|                              |                                                                    |                                                                    | March 31, 2001 and March 31, 2000             |    |   | 7  | 
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|                              |                                                                    | Notes to Consolidated Financial Statements                         |                                               |    | 9 |   
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|                             
|                              | Item 2. Managements Discussion and Analysis of                   
|                             
|                             
|                             
|                             
|                              |                                                                    |                                                                    | Financial Condition and Results of Operations |    |   | 15 | 
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|                             
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk |                                                                    |                                               | 28 |  
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|                             
|PART II. OTHER INFORMATION    |                                                                    |                                                                    |                                               |   
|                             
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|                              | Item 1. Legal Proceedings                                          |                                                                    |                                               | 29 |  
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|                              | Item 6. Exhibits and Reports on Form 8-K                           |                                                                    |                                               | 29 |  

Page 2



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##### Table of Contents






PART 1. FINANCIAL INFORMATION




Item 1. Financial Statements

Thousand Trails, Inc. and Subsidiaries




|                                           |                                                                 |                                                               |                                               |        |       |           |        |          |       |        |  | 
|------------------------------------------ | --------------------------------------------------------------- | ------------------------------------------------------------- | --------------------------------------------- | ------ | ----- | --------- | ------ | -------- | ----- | ------ |  | 
|                                           |                                                                 |                                                               |                                               |        |       | March 31, |        | June 30,
|Assets                                     |                                                                 | 2001                                                          |                                               | 2000  
|                                           |                                                                 |                                                               |                                               |       
|Current Assets                             |                                                                 |                                                               | (Unaudited                                    | )     
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                                       |                                                               | $                                             | 3,623  |       |           | $      | 2,420    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of receivables, net of allowance of $.9 million |                                                               |                                               | 1,897  |       |           |        | 1,668    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of deferred membership selling expenses         |                                                               |                                               | 2,342  |       |           |        | 1,387    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of net deferred tax assets                      |                                                               |                                               | 5,429  |       |           |        | 3,780    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Other current assets                                            |                                                               |                                               | 1,978  |       |           |        | 2,105    |      
|                                           |                                                                 |                                                               |                                               |        |       |           |        |         
|                                           |                                                                 |                                                               | Total Current Assets                          |        |       | 15,269    |        |          |       | 11,360 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Restricted cash                                                 |                                                               |                                               | 1,235  |       |           |        | 1,320    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Receivables, net of allowances and discount of $1.3 million    
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                 | and $1.0 million, respectively                                |                                               |        | 4,984 |           |        |          | 4,107 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Campground land                                                 |                                                               |                                               | 20,696 |       |           |        | 22,981   |      
|                                          
|                                          
|                                          
|                                          
|                                           | Buildings and equipment, net of accumulated depreciation of    
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                 |                                                               | $22.1 million and $20.1 million, respectively |        |       | 21,897    |        |          |       | 22,396 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Land held for sale                                              |                                                               |                                               | 5,211  |       |           |        | 2,965    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred membership selling expenses                            |                                                               |                                               | 5,282  |       |           |        | 3,790    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Net deferred tax assets                                         |                                                               |                                               | 2,061  |       |           |        | 5,362    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Other assets                                                    |                                                               |                                               | 614    |       |           |        | 234      |      
|                                           |                                                                 |                                                               |                                               |        |       |           |        |         
|                                          
|                                          
|                                          
|                                          
|Total Assets                               |                                                                 | $                                                             | 77,249                                        |        |       | $         | 74,515 |         
|                                           |                                                                 |                                                               |                                               |        |       |           |        |         
|Liabilities and Shareholders Equity      
|                                          
|                                          
|                                          
|                                          
|Current Liabilities                       
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                |                                                               | $                                             | 1,361  |       |           | $      | 1,904    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued interest                                                |                                                               |                                               | 20     |       |           |        | 103      |      
|                                          
|                                          
|                                          
|                                          
|                                           | Other accrued liabilities                                       |                                                               |                                               | 6,775  |       |           |        | 7,498    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of long-term debt                               |                                                               |                                               |       |       |           |        | 2,571    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued construction cost                                       |                                                               |                                               | 1,888  |       |           |        | 1,888    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of deferred revenue                             |                                                               |                                               | 27,661 |       |           |        | 21,977   |      
|                                           |                                                                 |                                                               |                                               |        |       |           |        |         
|                                           |                                                                 |                                                               | Total Current Liabilities                     |        |       | 37,705    |        |          |       | 35,941 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Long-term debt                                                  |                                                               |                                               |       |       |           |        | 7,043    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred revenue                                                |                                                               |                                               | 16,846 |       |           |        | 12,106   |      
|                                          
|                                          
|                                          
|                                          
|                                           | Other liabilities                                               |                                                               |                                               | 991    |       |           |        | 1,316    |      
|                                           |                                                                 |                                                               |                                               |        |       |           |        |         
|                                           |                                                                 |                                                               | Total Liabilities                             |        |       | 55,542    |        |          |       | 56,406 | 
|                                           |                                                                 |                                                               |                                               |        |       |           |        |         
|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,    
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                 | 8,167,123 and 7,980,592 shares issued and outstanding,       
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                 | respectively, after deducting 206,705 and 190,736 shares held
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                 | in Treasury, respectively                                     |                                               |        | 82    |           |        |          | 80    |       
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid-in capital                                      |                                                               |                                               | 21,132 |       |           |        | 21,080   |      
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings (accumulated deficit)                         |                                                               |                                               | 632    |       |           |        | (2,914   | )    
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated other comprehensive loss                            |                                                               |                                               | (139   | )     |           |        | (137     | )    
|                                           |                                                                 |                                                               |                                               |        |       |           |        |         
|                                           |                                                                 |                                                               | Total Shareholders Equity                    |        |       | 21,707    |        |          |       | 18,109 | 
|                                           |                                                                 |                                                               |                                               |        |       |           |        |         
|Total Liabilities and Shareholders Equity |                                                                 | $                                                             | 77,249                                        |        |       | $         | 74,515 |         
|                                           |                                                                 |                                                               |                                               |        |       |           |        |         

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

Page 3



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##### Table of Contents



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,
|                                               |                                      |                          |                |        |                                    
|                                               |                                      |                          |                |        | 2001                                |        | 2000  
|                                               |                                      |                          |                |        |                                     |        |       
|Revenues                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership contracts originated      |                          | $              | 14,601 |                                     |        | $      | 7,733  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred revenue           |                          |                | (7,977 | )                                   |        |        | (4,446 | )    
|                                               |                                      |                          |                |        |                                     |        |        |       
|                                               |                                      | Membership sales revenue |                |        | 6,624                               |        |        |        | 3,287 |       
|                                              
|                                              
|                                              
|                                              
|                                               | Membership dues                      |                          |                | 29,973 |                                     |        |        | 27,719 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Other campground revenue             |                          |                | 14,837 |                                     |        |        | 13,755 |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership fees                  |                          |                | 2,709  |                                     |        |        | 2,681  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest income                      |                          |                | 1,362  |                                     |        |        | 1,034  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Gain on asset sales                  |                          |                | 146    |                                     |        |        | 16     |      
|                                              
|                                              
|                                              
|                                              
|                                               | Other income                         |                          |                | 2,090  |                                     |        |        | 2,347  |      
|                                               |                                      |                          |                |        |                                     |        |        |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                      |                          | Total Revenues |        |                                     | 57,741 |        |        |       | 50,839 | 
|                                               |                                      |                          |                |        |                                     |        |        |       
|Expenses                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Campground operating expenses        |                          |                | 33,651 |                                     |        |        | 30,062 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership origination costs         |                          |                | 6,717  |                                     |        |        | 3,976  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred origination costs |                          |                | (2,445 | )                                   |        |        | (1,313 | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Marketing expenses                   |                          |                | 3,872  |                                     |        |        | 2,605  |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership expenses              |                          |                | 1,378  |                                     |        |        | 1,386  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Corporate member services            |                          |                | 966    |                                     |        |        | 982    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest expense and amortization    |                          |                | 773    |                                     |        |        | 1,099  |      
|                                              
|                                              
|                                              
|                                              
|                                               | General and administrative expenses  |                          |                | 6,982  |                                     |        |        | 6,936  |      
|                                               |                                      |                          |                |        |                                     |        |        |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                      |                          | Total Expenses |        |                                     | 51,894 |        |        |       | 45,733 | 
|                                               |                                      |                          |                |        |                                     |        |        |       
|                                               |                                     
|Income Before Income Taxes                     |                                      |                          | 5,847          |        |                                     |        | 5,106  |       
|                                              
|                                              
|                                              
|                                              
|Income Taxes                                 
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision  current       |                          |                | (649   | )                                   |        |        | (648   | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision  deferred      |                          |                | (1,652 | )                                   |        |        | (1,402 | )    
|                                               |                                      |                          |                |        |                                     |        |        |       
|                                               |                                      |                          | (2,301         | )      |                                     |        | (2,050 | )     
|                                               |                                     
|                                              
|                                              
|                                              
|                                              
|Net Income                                     |                                      | $                        | 3,546          |        |                                     | $      | 3,056  |       
|                                               |                                      |                          |                |        |                                     |        |        |       
|Net Income per Share  Basic                   |                                      | $                        | .43            |        |                                     | $      | .38    |       
|                                               |                                      |                          |                |        |                                     |        |        |       
|Net Income per Share  Diluted                 |                                      | $                        | .41            |        |                                     | $      | .35    |       
|                                               |                                      |                          |                |        |                                     |        |        |       
|Shares Used to Calculate Net Income Per Share:
|                                              
|                                              
|                                              
|                                              
|                                               | Basic                                |                          |                | 8,087  |                                     |        |        | 7,981  |      
|                                               |                                      |                          |                |        |                                     |        |        |        |      
|                                               | Diluted                              |                          |                | 8,586  |                                     |        |        | 8,605  |      
|                                               |                                      |                          |                |        |                                     |        |        |       

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

Page 4



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##### Table of Contents



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,
|                                               |                                      |                          |                |        |                                     
|                                               |                                      |                          |                |        | 2001                                 |        | 2000 
|                                               |                                      |                          |                |        |                                      |        |      
|Revenues                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership contracts originated      |                          | $              | 5,018  |                                      |        | $     | 3,961  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred revenue           |                          |                | (2,788 | )                                    |        |       | (2,774 | )    
|                                               |                                      |                          |                |        |                                      |        |       |       
|                                               |                                      | Membership sales revenue |                |        | 2,230                                |        |       |        | 1,187 |       
|                                              
|                                              
|                                              
|                                              
|                                               | Membership dues                      |                          |                | 9,837  |                                      |        |       | 9,691  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Other campground revenue             |                          |                | 3,121  |                                      |        |       | 3,007  |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership fees                  |                          |                | 1,035  |                                      |        |       | 1,064  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest income                      |                          |                | 518    |                                      |        |       | 381    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Loss on asset sales                  |                          |                | (8     | )                                    |        |       | (6     | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Other income                         |                          |                | 614    |                                      |        |       | 680    |      
|                                               |                                      |                          |                |        |                                      |        |       |       
|                                               |                                      |                          | Total Revenues |        |                                      | 17,347 |       |        |       | 16,004 | 
|                                               |                                      |                          |                |        |                                      |        |       |       
|Expenses                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Campground operating expenses        |                          |                | 9,631  |                                      |        |       | 8,855  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership origination costs         |                          |                | 2,088  |                                      |        |       | 1,827  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred origination costs |                          |                | (754   | )                                    |        |       | (943   | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Marketing expenses                   |                          |                | 1,224  |                                      |        |       | 971    |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership expenses              |                          |                | 487    |                                      |        |       | 420    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Corporate member services            |                          |                | 290    |                                      |        |       | 308    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest expense and amortization    |                          |                | 103    |                                      |        |       | 429    |      
|                                              
|                                              
|                                              
|                                              
|                                               | General and administrative expenses  |                          |                | 2,395  |                                      |        |       | 2,644  |      
|                                               |                                      |                          |                |        |                                      |        |       |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                      |                          | Total Expenses |        |                                      | 15,464 |       |        |       | 14,511 | 
|                                               |                                      |                          |                |        |                                      |        |       |       
|                                               |                                     
|Income Before Income Taxes                     |                                      |                          | 1,883          |        |                                      |        | 1,493 |       
|                                              
|                                              
|                                              
|                                              
|Income Taxes                                 
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision  current       |                          |                | (179   | )                                    |        |       | (326   | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision  deferred      |                          |                | (537   | )                                    |        |       | (299   | )    
|                                               |                                      |                          |                |        |                                      |        |       |       
|                                               |                                      |                          | (716           | )      |                                      |        | (625  | )     
|                                              
|                                              
|                                              
|                                              
|                                               |                                     
|Net Income                                     |                                      | $                        | 1,167          |        |                                      | $      | 868   |       
|                                               |                                      |                          |                |        |                                      |        |       |       
|Net Income per Share  Basic                   |                                      | $                        | .14            |        |                                      | $      | .11   |       
|                                               |                                      |                          |                |        |                                      |        |       |       
|Net Income per Share  Diluted                 |                                      | $                        | .13            |        |                                      | $      | .10   |       
|                                               |                                      |                          |                |        |                                      |        |       |       
|Shares Used to Calculate Net Income Per Share:
|                                              
|                                              
|                                              
|                                              
|                                               | Basic                                |                          |                | 8,166  |                                      |        |       | 7,981  |      
|                                               |                                      |                          |                |        |                                      |        |       |        |      
|                                               | Diluted                              |                          |                | 8,602  |                                      |        |       | 8,580  |      
|                                               |                                      |                          |                |        |                                      |        |       |       

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, 2001


(Dollars in thousands)
(Unaudited)

|                               |                      |   |              |   |         |   |            |   |          |   |               |       |       |   |             |   |  |   |        |       | 
|------------------------------ | -------------------- | - | ------------ | - | ------- | - | ---------- | - | -------- | - | ------------- | ----- | ----- | - | ----------- | - |  | - | ------ | ----- | 
|                               |                      |   |              |   |         |   |            |   |          |   |               |       |       |   | Accumulated
|                               |                      |   |              |   |         |   | Additional |   |          |   |               |       | Other
|                               |                      |   |              |   |         |   | Paid-In    |   | Retained |   | Comprehensive
|                               |                      |   | Common Stock |   | Capital |   | Earnings   |   | Loss     |   | Total        
|                               |                      |   |              |   |         |   |            |   |          |   |              
|Balance, June 30, 2000         |                      | $ | 80           |   |         | $ | 21,080     |   |          | $ | (2,914        | )     |       | $ | (137        | ) |  | $ | 18,109 |      
|                              
|                              
|                              
|                              
|Issuance of common stock       |                      |   | 2            |   |         |   | 168        |   |          |   |              |       |       |   |            |   |  |   | 170    |      
|                              
|                              
|                              
|                              
|Purchase of treasury stock     |                      |   |             |   |         |   | (116       | ) |          |   |              |       |       |   |            |   |  |   | (116   | )    
|                              
|                              
|                              
|                              
|Other Comprehensive Loss       |                      |   |             |   |         |   |           |   |          |   |              |       |       |   | (2          | ) |  |   | (2     | )    
|                              
|                              
|                              
|                              
|Net income for the nine months
|                               | ended March 31, 2001 |   |              |  |         |   |            |  |          |   |               | 3,546 |       |   |             |  |  |   |        | 3,546 | 
|                               |                      |   |              |   |         |   |            |   |          |   |               |       |       |   |             |   |  |   |        |      
|Comprehensive Income           |                      |   |             |   |         |   |           |   |          |   |              |       |       |   |            |   |  |   | 3,544  |      
|                               |                      |   |              |   |         |   |            |   |          |   |               |       |       |   |             |   |  |   |        |      
|Balance, March 31, 2001        |                      | $ | 82           |   |         | $ | 21,132     |   |          | $ | 632           |       |       | $ | (139        | ) |  | $ | 21,707 |      
|                               |                      |   |              |   |         |   |            |   |          |   |               |       |       |   |             |   |  |   |        |      

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,
|                                          |                                                                |  |                                    
|                                          |                                                                |  | 2001                                |         | 2000
|                                          |                                                                |  |                                     |         |     
|CASH FLOWS FROM OPERATING ACTIVITIES:    
|                                         
|                                         
|                                         
|                                         
|                                          | Collections of principal on receivables                        |  | $                                   | 3,285   |      |  | $      | 2,488   |  
|                                         
|                                         
|                                         
|                                         
|                                          | Interest received                                              |  |                                     | 1,362   |      |  |        | 935     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Interest paid                                                  |  |                                     | (773    | )    |  |        | (1,099  | )
|                                         
|                                         
|                                         
|                                         
|                                          | General and administrative and corporate member services costs |  |                                     | (8,797  | )    |  |        | (8,876  | )
|                                         
|                                         
|                                         
|                                         
|                                          | Cash collected from operations, including deferred revenue     |  |                                     | 52,824  |      |  |        | 50,484  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Cash from sales of memberships                                 |  |                                     | 9,705   |      |  |        | 4,913   |  
|                                         
|                                         
|                                         
|                                         
|                                          | Expenditures for property operations                           |  |                                     | (32,545 | )    |  |        | (29,588 | )
|                                         
|                                         
|                                         
|                                         
|                                          | Expenditures for sales and marketing                           |  |                                     | (10,038 | )    |  |        | (6,563  | )
|                                         
|                                         
|                                         
|                                         
|                                          | Expenditures for insurance premiums                            |  |                                     | (2,271  | )    |  |        | (1,783  | )
|                                         
|                                         
|                                         
|                                         
|                                          | Payment of income taxes                                        |  |                                     | (654    | )    |  |        | 55      |  
|                                         
|                                         
|                                         
|                                         
|                                          | Other, net                                                     |  |                                     | 85      |      |  |        | 881     |  
|                                          |                                                                |  |                                     |         |      |  |        |        
|                                         
|                                         
|                                         
|                                         
|Net cash provided by operating activities |                                                                |  | 12,183                              |         |      |  | 11,847 |        
|                                          |                                                                |  |                                     |         |      |  |        |        
|CASH FLOWS FROM INVESTING ACTIVITIES:    
|                                         
|                                         
|                                         
|                                         
|                                          | Capital expenditures                                           |  |                                     | (1,568  | )    |  |        | (982    | )
|                                         
|                                         
|                                         
|                                         
|                                          | Acquisition of Leisure Time                                    |  |                                     |        |      |  |        | (7,727  | )
|                                         
|                                         
|                                         
|                                         
|                                          | Proceeds from asset sales                                      |  |                                     | 216     |      |  |        | 59      |  
|                                          |                                                                |  |                                     |         |      |  |        |        
|                                         
|                                         
|                                         
|                                         
|Net cash used in investing activities     |                                                                |  | (1,352                              | )       |      |  | (8,650 | )      
|                                          |                                                                |  |                                     |         |      |  |        |        
|CASH FLOWS FROM FINANCING ACTIVITIES:    
|                                         
|                                         
|                                         
|                                         
|                                          | Net (repayments) borrowings under Credit Agreement             |  |                                     | (9,614  | )    |  |        | 385     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Purchase of treasury stock                                     |  |                                     | (116    | )    |  |        | (852    | )
|                                         
|                                         
|                                         
|                                         
|                                          | Payment of notes                                               |  |                                     | (68     | )    |  |        | (2,772  | )
|                                         
|                                         
|                                         
|                                         
|                                          | Issuance of common stock                                       |  |                                     | 170     |      |  |        | 62      |  
|                                          |                                                                |  |                                     |         |      |  |        |        
|Net cash used in financing activities     |                                                                |  | (9,628                              | )       |      |  | (3,177 | )      
|                                          |                                                                |  |                                     |         |      |  |        |        
|INCREASE IN CASH AND CASH EQUIVALENTS     |                                                                |  | 1,203                               |         |      |  | 20     |        
|                                         
|                                         
|                                         
|                                         
|CASH AND CASH EQUIVALENTS                
|                                         
|                                         
|                                         
|                                         
|                                          | Beginning of period                                            |  |                                     | 2,420   |      |  |        | 2,197   |  
|                                          |                                                                |  |                                     |         |      |  |        |        
|                                         
|                                         
|                                         
|                                         
|                                          | End of period                                                  |  | $                                   | 3,623   |      |  | $      | 2,217   |  
|                                          |                                                                |  |                                     |         |      |  |        |        

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,
|                                                               |                        |                                                      |                     |  |                                    
|                                                               |                        |                                                      |                     |  | 2001                                |   | 2000  
|                                                               |                        |                                                      |                     |  |                                     |   |       
|Reconciliation of net income to net cash provided by operating
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | activities:           
|                                                              
|                                                              
|                                                              
|                                                              
|Net Income                                                     |                        | $                                                    | 3,546               |  |                                     | $ | 3,056  | 
|                                                               |                        |                                                      |                     |  |                                     |   |        | 
|Adjustments to reconcile net income to net cash provided by   
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | operating activities 
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Depreciation                                         |                     |  | 2,034                               |   |        |  | 1,970  |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Bad debt provision                                   |                     |  | (146                                | ) |        |  | 197    |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Amortization of interest yield, collection costs and
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        |                                                      | valuation allowance |  |                                     |  |        |  |        | (172 | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Increase in deferred sales revenue                   |                     |  | 7,977                               |   |        |  | 4,446  |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Increase in deferred membership origination costs    |                     |  | (2,445                              | ) |        |  | (1,313 | )   
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Gain on asset sales                                  |                     |  | (146                                | ) |        |  | (16    | )   
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Increase in deferred income tax provision            |                     |  | 1,652                               |   |        |  | 1,402  |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Decrease in restricted cash                          |                     |  | 85                                  |   |        |  | 386    |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Increase in receivables                              |                     |  | (973                                | ) |        |  | (53    | )   
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | (Increase) decrease in other assets                  |                     |  | (240                                | ) |        |  | 1,687  |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Decrease in accounts payable                         |                     |  | (543                                | ) |        |  | (662   | )   
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | (Decrease) increase in accrued interest              |                     |  | (83                                 | ) |        |  | 8      |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Increase in deferred dues                            |                     |  | 2,250                               |   |        |  | 2,571  |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Decrease in other liabilities                        |                     |  | (783                                | ) |        |  | (2,085 | )   
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                        | Other, net                                           |                     |  | (2                                  | ) |        |  | 425    |     
|                                                               |                        |                                                      |                     |  |                                     |   |        | 
|                                                              
|                                                              
|                                                              
|                                                              
|Total adjustments                                              |                        |                                                      | 8,637               |  |                                     |   | 8,791  | 
|                                                               |                        |                                                      |                     |  |                                     |   |        | 
|Net cash provided by operating activities                      |                        | $                                                    | 12,183              |  |                                     | $ | 11,847 | 
|                                                               |                        |                                                      |                     |  |                                     |   |        | 

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

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##### Table of Contents



Thousand Trails, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2001
(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, fee revenue from members of
the reciprocal use program, management fees from the campground management
operations, and guest fees and revenues received from the campground and other
operations.

The accompanying consolidated financial statements include the accounts of
Thousand Trails, Inc. and the following wholly owned subsidiaries: Coast
Financial Services, Inc., National American Corporation and its subsidiaries
(NACO), Resort Parks International, Inc. (RPI), Thousand Trails (Canada),
Inc., Thousand Trails Management Services, Inc. (Trails Management), and,
commencing December 16, 1999, Leisure Time Resorts of America, Inc. (Leisure
Time). See Note 2  Business Combination.

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
SX. Accordingly, these financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
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, 2000, filed
with the Securities and Exchange Commission (the SEC) on September 28, 2000.

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, 2001 and 2000, and in the consolidated
balance sheet as of June 30, 2000.

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

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NOTE 2  BUSINESS COMBINATION

On December 16, 1999, the Company acquired all of the outstanding capital stock
of Leisure Time for $7.7 million in cash. In addition, the Company paid in
full all of the outstanding real estate debt on Leisure Times campgrounds,
which totaled approximately $2.3 million.

The acquisition of Leisure Time was accounted for as a purchase transaction;
accordingly, operating results for Leisure Time are reported from the date of
acquisition. No goodwill was recorded on the acquisition because the purchase
price did not exceed the estimated values of the identifiable assets received
less liabilities assumed.

Leisure Time currently owns and operates 7 membership campgrounds in Washington
and Oregon serving approximately 15,000 members. The Company closed three
Leisure Time campgrounds in February 2001. Leisure Time operates a separate
system of campgrounds from the Companys other membership-based campground
systems.

NOTE 3  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 following table provides statements of comprehensive income for the nine
and three months ended March 31, 2001 and 2000 (dollars in thousands):

|                             |            |   |                           |    |                            |   |       |   |      |   |       |   |  |   |     |   | 
|---------------------------- | ---------- | - | ------------------------- | -- | -------------------------- | - | ----- | - | ---- | - | ----- | - |  | - | --- | - | 
|                             |            |   | For the nine months ended |    | For the three months ended
|                             |            |   | March 31,                 |    | March 31,                 
|                             |            |   |                           |    |                           
|                             |            |   | 2001                      |    | 2000                       |   | 2001  |   | 2000
|                             |            |   |                           |    |                            |   |       |   |     
|                             |            |   | (Unaudited)               |    | (Unaudited)               
|Net Income                   |            | $ | 3,546                     |    |                            | $ | 3,056 |   |      | $ | 1,167 |   |  | $ | 868 |  
|                            
|                            
|                            
|                            
|Foreign Currency Translation
|                            
|                            
|                            
|                            
|                             | Adjustment |   |                           | (2 | )                          |   |       | 2 |      |   |       |  |  |   |     |  | 
|                             |            |   |                           |    |                            |   |       |   |      |   |       |   |  |   |     |  
|Comprehensive Income         |            | $ | 3,544                     |    |                            | $ | 3,058 |   |      | $ | 1,167 |   |  | $ | 868 |  
|                             |            |   |                           |    |                            |   |       |   |      |   |       |   |  |   |     |  

NOTE 4  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 related to fee simple sales of
interests in campground facilities, and (iii) net revenues

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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.

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

|                     |              |   |                                  |       |     |   |            |       |           |   |              |    |           |   |     |        |   |   |        |       | 
|-------------------- | ------------ | - | -------------------------------- | ----- | --- | - | ---------- | ----- | --------- | - | ------------ | -- | --------- | - | --- | ------ | - | - | ------ | ----- | 
|                     |              |   | 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 | 

|                     |              |   |                                  |       |     |   |            |       |           |   |              |     |           |   |     |        |   |   |        |       | 
|-------------------- | ------------ | - | -------------------------------- | ----- | --- | - | ---------- | ----- | --------- | - | ------------ | --- | --------- | - | --- | ------ | - | - | ------ | ----- | 
|                     |              |   | Nine months ended March 31, 2000
|                     |              |   |                                 
|                     |              |   |                                  |       |     |   |            |       |           |   | Trails       |     | Corporate
|                     |              |   | Campgrounds                      |       | RPI |   | Management |       | and Other |   | Consolidated
|                     |              |   |                                  |       |     |   |            |       |           |   |             
|Operating revenues   |              | $ | 39,639                           |       |     | $ | 2,681      |       |           | $ | 1,835        |     |           | $ | 263 |        |   | $ | 44,418 |      
|                    
|                    
|                    
|                    
|Membership sales    
|                    
|                    
|                    
|                    
|                     | revenue      |   |                                  | 3,287 |     |   |            |      |           |   |              |    |           |   |     |       |   |   |        | 3,287 | 
|                    
|                    
|                    
|                    
|Income (loss) before
|                    
|                    
|                    
|                    
|                     | income taxes |   |                                  | 9,330 |     |   |            | 1,295 |           |   |              | 101 |           |   |     | (5,620 | ) |   |        | 5,106 | 

|                     |              |   |                                   |       |     |   |            |     |           |   |              |      |           |   |    |        |   |   |        |       | 
|-------------------- | ------------ | - | --------------------------------- | ----- | --- | - | ---------- | --- | --------- | - | ------------ | ---- | --------- | - | -- | ------ | - | - | ------ | ----- | 
|                     |              |   | 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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|                     |              |   |                                   |       |     |   |            |     |           |   |              |     |           |   |    |        |   |   |        |       | 
|-------------------- | ------------ | - | --------------------------------- | ----- | --- | - | ---------- | --- | --------- | - | ------------ | --- | --------- | - | -- | ------ | - | - | ------ | ----- | 
|                     |              |   | Three months ended March 31, 2000
|                     |              |   |                                  
|                     |              |   |                                   |       |     |   |            |     |           |   | Trails       |     | Corporate
|                     |              |   | Campgrounds                       |       | RPI |   | Management |     | and Other |   | Consolidated
|                     |              |   |                                   |       |     |   |            |     |           |   |             
|Operating revenues   |              | $ | 12,686                            |       |     | $ | 1,064      |     |           | $ | 12           |     |           | $ | 91 |        |   | $ | 13,853 |      
|                    
|                    
|                    
|                    
|Membership sales    
|                    
|                    
|                    
|                    
|                     | revenue      |   |                                   | 1,187 |     |   |            |    |           |   |              |    |           |   |    |       |   |   |        | 1,187 | 
|                    
|                    
|                    
|                    
|Income (loss) before
|                    
|                    
|                    
|                    
|                     | income taxes |   |                                   | 3,272 |     |   |            | 644 |           |   |              | (97 | )         |   |    | (2,326 | ) |   |        | 1,493 | 

NOTE 5  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, 2001
and 2000, 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,                 
|                                            |                  |   |                           |     |                           
|                                            |                  |   | 2001                      |     | 2000                       |   | 2001  |     | 2000
|                                            |                  |   |                           |     |                            |   |       |     |     
|                                            |                  |   | (Unaudited)               |     | (Unaudited)               
|Net Income                                  |                  | $ | 3,546                     |     |                            | $ | 3,056 |     |      | $ | 1,167 |     |  | $ | 868   |    
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Weighted Average Number of Shares  Basic   |                  |   | 8,087                     |     |                            |   | 7,981 |     |      |   | 8,166 |     |  |   | 7,981 |    
|                                           
|                                           
|                                           
|                                           
|                                            | Dilutive Options |   |                           | 499 |                            |   |       | 624 |      |   |       | 436 |  |   |       | 599 | 
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Weighted Average Number of Shares  Diluted |                  |   | 8,586                     |     |                            |   | 8,605 |     |      |   | 8,602 |     |  |   | 8,580 |    
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Net Income Per Share  Basic                |                  | $ | .43                       |     |                            | $ | .38   |     |      | $ | .14   |     |  | $ | .11   |    
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Net Income Per Share  Diluted              |                  | $ | .41                       |     |                            | $ | .35   |     |      | $ | .13   |     |  | $ | .10   |    
|                                            |                  |   |                           |     |                            |   |       |     |      |   |       |     |  |   |       |    

Since inception, the Company has not paid any dividends. The credit agreement
(Credit Agreement) between the Company and Foothill Capital Corporation
(Foothill) prohibits the payment of any cash dividends, without the consent
of Foothill, until the Credit Agreement is terminated.

NOTE 6  LONG TERM DEBT

Through repayments in the normal course of operations, in March 2001, the
Company repaid all outstanding borrowings under its Credit Agreement with
Foothill. As of March 31, 2001, the Company had the ability to borrow $5.0
million under the Credit Agreement for working capital purposes. Such
borrowings bear interest at prime plus .25% per annum, subject to a minimum
interest rate of 7% per annum. All borrowings under the Credit Agreement will
mature on January 17, 2003.

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The Companys ability to borrow under the Credit Agreement for working capital
purposes is subject to continued compliance by the Company with the financial
covenants and other requirements of the Credit Agreement, including certain
covenants respecting minimum earnings before interest, taxes, depreciation and
amortization, and minimum tangible net worth. The Credit Agreement prohibits
the Company from borrowing from other sources in significant amounts except for
equipment purchases.

The Company has granted liens on substantially all of its assets to secure its
obligations under the Credit Agreement. In addition, the Companys
subsidiaries other than an immaterial utility subsidiary have guaranteed the
Companys obligations under the Credit Agreement and, subject to certain
limitations, have granted liens on substantially all of their assets to secure
their guarantees.

The Credit Agreement limits the type of investments in which the Company may
invest its available cash, resulting in a relatively low yield.

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, 2001 and June 30, 2000,
the Companys recorded liability for estimated losses related to uninsured
general liability claims totaled approximately $577,000 and $650,000,
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 2000). 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 3% per year. The Company attributes this
attrition principally to its aging membership base, of whom approximately 50%
are senior citizens. Moreover, the Company estimates that the memberships sold
in recent fiscal years will have an expected life that is shorter than the
expected life of the memberships previously sold by the Company. To stop the
continuing 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.

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Litigation

During the current quarter, the Company completed the settlement of Foxwood
Property Owners Association, Inc. vs. Foxwood Corporation, filed on February
18, 1999 in the Court of Common Pleas of Oconee County, South Carolina, under
Case No. 99-37-CP-88. In this action, the plaintiff alleged that a subsidiary
of the Company owed the plaintiff in excess of $2.5 million for past due
maintenance fees on subdivided lots owned by the defendant. Under the terms of
the settlement, the Company (i) paid $200,000 to the plaintiff, (ii) cancelled
a promissory note from the plaintiff to the Company in the amount of $160,000,
and (iii) transferred several small parcels of real estate to the plaintiff.
In addition, under the terms of the settlement, the Companys subsidiary will
not have to pay maintenance fees on subdivided lots in the future. The lawsuit
has been dismissed with prejudice.

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  SUPPLEMENTAL CASH FLOW INFORMATION

The Company had no non-cash investing or financing activities as defined by
Statement of Financial Accounting Standards No. 95 during the nine months ended
March 31, 2001 and 2000.

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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, 2000, filed with the SEC on September 28, 2000.

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, 2001. 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, campground market conditions
and other factors affecting the Companys sales and marketing plan, the actual
rate of decline in the campground membership base, the actual use of the
campgrounds by members and guests, the effects on members and guests of the
Companys efforts to downsize its business, 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 intends to expand its
sales and marketing efforts with a view to stopping the

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membership decline. The Company has also acquired members through the purchase
of Leisure 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.

Acquisition of Leisure Time. On December 16, 1999, the Company acquired all of
the outstanding capital stock of Leisure Time, which currently owns and
operates 7 membership campgrounds in Washington and Oregon serving
approximately 15,000 members. Leisure Time operates a separate system of
campgrounds from the Companys other membership-based campground systems.

In February 2001, the Company completed its consolidation of Leisure Times
operations by closing one NACO campground and three Leisure Time campgrounds in
the Northwest. The Company closed these campgrounds to eliminate excess
inventory in the Northwest resulting from the acquisition. Members at the
closed campgrounds were offered use of substitute campgrounds in the same
general area with equal or better amenities. In April 2001, the Company sold
one of the closed campgrounds to an unrelated third party for $1.4 million.
The Company will record a gain of $250,000 on the sale.

The operating results of Leisure Time are included in the operating results of
the Company commencing December 16, 1999. The acquisition has been accretive
to earnings in the current fiscal year as the Company has reduced expenses by
consolidating administrative functions and implementing other cost saving
measures. However, because Leisure Times members and campgrounds are similar
to the Companys, the increase in members resulting from the acquisition is not
expected to affect the overall rate at which the Companys membership base is
declining.

Cash.On March 31, 2001, the Company had $3.6 million of cash and cash
equivalents, an increase of $1.2 million from June 30, 2000. 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s investing activities consisted of $1.6 million in capital
expenditures at the campgrounds, partially offset by $216,000 in proceeds from
the sale of assets. The Companys financing activities consisted primarily of
net repayments of $9.6 million under the Credit Agreement with Foothill,
proceeds of $170,000 from the issuance of common stock, and a payment of
$116,000 for the purchase of 23,500 shares of common stock.

With respect to the Companys operating activities, for the nine months ended
March 31, 2001, the principal sources of operating cash were $52.8 million from
operations, $4.6 million in principal and interest collections on contracts
receivable, and $9.7 million from sales of campground memberships. Principal
uses of operating cash for the nine months ended
March 31, 2001, were $32.5 million in operating expenses, $10.0 million in
membership origination costs and marketing expenses, $8.8 million in
administrative expenses (including general and administrative expenses and
corporate members services costs), and $2.3 million in insurance premiums.

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Through repayments in the normal course of operations, in March 2001, the
Company repaid all outstanding borrowings under its Credit Agreement with
Foothill. As of the date of this report, the Company had no outstanding
borrowings under the Credit Agreement, and it had the ability to borrow $5.0
million for working capital purposes. Based upon its current business plan,
the Company believes that future cash flows provided from operations, asset
sales, and borrowings available under the Credit Agreement will be adequate for
the Companys operating and other cash requirements. While any borrowings are
outstanding under the Credit Agreement, all cash held by the Company and its
wholly owned subsidiaries will generally be deposited in accounts that are
controlled by and pledged to Foothill. The Company is presently exploring
alternative financing to replace the Credit Agreement with Foothill.

Material Changes in Financial Condition

Total assets increased by $2.7 million during the nine months ended March 31,
2001. Cash increased by $1.2 million as discussed above. Contracts receivable
increased by $1.4 million as new receivables from financed sales exceeded the
$3.3 million of cash collections on the existing portfolio. Campground land
decreased by $2.3 million, offset by a comparable increase in land held for
sale, because the carrying value of the campgrounds closed in February 2001 was
transferred from campground land to land held for sale. Buildings and
equipment decreased by $499,000 due primarily to depreciation, partially offset
by capital expenditures made at certain campgrounds. Deferred membership
origination costs increased $2.4 million as a result of an increase in sales.
Other assets increased by $253,000 due primarily to increases in workers
compensation deposits. Deferred tax assets decreased by $1.7 million in the
current period as a result of deferred tax expense recognized in the current
period.

Total liabilities decreased by $864,000 during the nine months ended March 31,
2001, primarily as a result of decreases in long term debt, accounts payable
and other accrued liabilities, partially offset by increases in deferred dues
and deferred revenue related to membership sales. Long term debt decreased by
$9.6 million as a result of repayments under the Credit Agreement. Accounts
payable decreased by $543,000 due to the timing of payments, and other accrued
liabilities decreased by $723,000 due primarily to payments of accrued wages
and benefits. Deferred dues increased by $2.3 million because dues collected
during the period exceeded dues revenue recognized, and deferred sales revenue
increased by $8.0 million due to increases in membership sales contracts
originated.

Market Risk and Interest Rate Sensitivity.As noted above, as of March 31,
2001, the Company had no outstanding borrowings (see Liquidity and Capital
Resources  Cash) and, therefore, is not currently exposed to interest rate
changes. Future borrowings under the Credit Agreement will accrue interest at
rates that fluctuate with changes in the prime rate.

A hypothetical ten percent change in market interest rates would not have a
material effect on the fair value of the Companys earnings or cash flow, its
contracts receivable, its borrowings under the Credit Agreement with Foothill,
or its short-term cash investments.

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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, 2001 and 2000.
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, 2001 and 2000

Net Income.The Company reported net income of $3.5 million or $.41 per
diluted share on revenues of $57.7 million for the nine months ended March 31,
2001. This compares with net income of $3.1 million or $.35 per diluted share
on revenues of $50.8 million for the same period last year.

The Companys revenues increased in the current period due primarily to higher
dues revenue and ancillary revenue from the acquisition of Leisure Time and
increased membership sales revenue. Due to greater sales activity, membership
sales revenue increased even though the unfavorable impact from the net
deferral of sales revenues and expenses was $2.4 million higher in the current
period. Expenses were also higher in the current period due primarily to the
operation of the Leisure Time campgrounds, increased sales and marketing
efforts, and higher utility costs, particularly in California.

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, 2001 and 2000.

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

|                                           |                                      |                          |        |                   |       |      |        |         |       | 
|------------------------------------------ | ------------------------------------ | ------------------------ | ------ | ----------------- | ----- | ---- | ------ | ------- | ----- | 
|                                           |                                      |                          |        | Nine Months Ended
|                                           |                                      |                          |        | March 31,        
|                                           |                                      |                          |        |                  
|                                           |                                      |                          |        | 2001              |       | 2000
|                                           |                                      |                          |        |                   |       |     
|Campground Operations                     
|                                          
|                                          
|                                          
|                                          
|                                           | Membership dues                      |                          | $      | 29,973            |       |      | $      | 27,719  |      
|                                          
|                                          
|                                          
|                                          
|                                           | Campground revenues                  |                          |        | 12,848            |       |      |        | 11,920  |      
|                                          
|                                          
|                                          
|                                          
|                                           | Cost of campground revenues          |                          |        | (6,197            | )     |      |        | (5,652  | )    
|                                          
|                                          
|                                          
|                                          
|                                           | Operating expenses                   |                          |        | (25,533           | )     |      |        | (22,676 | )    
|                                           |                                      |                          |        |                   |       |      |        |        
|Contribution from campground operations    |                                      |                          | 11,091 |                   |       |      | 11,311 |        
|                                           |                                      |                          |        |                   |       |      |        |        
|Sales                                     
|                                          
|                                          
|                                          
|                                          
|                                           | Membership contracts originated      |                          |        | 14,601            |       |      |        | 7,733   |      
|                                          
|                                          
|                                          
|                                          
|                                           | Change in deferred revenue           |                          |        | (7,977            | )     |      |        | (4,446  | )    
|                                           |                                      |                          |        |                   |       |      |        |        
|                                           |                                      | Membership sales revenue |        |                   | 6,624 |      |        |         | 3,287 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Membership origination costs         |                          |        | (6,717            | )     |      |        | (3,976  | )    
|                                          
|                                          
|                                          
|                                          
|                                           | Change in deferred origination costs |                          |        | 2,445             |       |      |        | 1,313   |      
|                                          
|                                          
|                                          
|                                          
|                                           | Marketing expenses                   |                          |        | (3,872            | )     |      |        | (2,605  | )    
|                                           |                                      |                          |        |                   |       |      |        |        
|Loss on sales                              |                                      |                          | (1,520 | )                 |       |      | (1,981 | )      
|                                           |                                      |                          |        |                   |       |      |        |        
|Trails Management                         
|                                          
|                                          
|                                          
|                                          
|                                           | Revenues                             |                          |        | 1,989             |       |      |        | 1,835   |      
|                                          
|                                          
|                                          
|                                          
|                                           | Expenses                             |                          |        | (1,921            | )     |      |        | (1,734  | )    
|                                           |                                      |                          |        |                   |       |      |        |        
|Contribution from Trails Management        |                                      |                          | 68     |                   |       |      | 101    |        
|                                           |                                      |                          |        |                   |       |      |        |        
|Resort Parks International                
|                                          
|                                          
|                                          
|                                          
|                                           | Revenues                             |                          |        | 2,709             |       |      |        | 2,681   |      
|                                          
|                                          
|                                          
|                                          
|                                           | Expenses                             |                          |        | (1,378            | )     |      |        | (1,386  | )    
|                                           |                                      |                          |        |                   |       |      |        |        
|Contribution from RPI                      |                                      |                          | 1,331  |                   |       |      | 1,295  |        
|                                           |                                      |                          |        |                   |       |      |        |        
|                                          
|                                          
|                                          
|                                          
|                                           | Other income                         |                          |        | 1,952             |       |      |        | 2,084   |      
|                                          
|                                          
|                                          
|                                          
|                                           | Corporate member services            |                          |        | (966              | )     |      |        | (982    | )    
|                                          
|                                          
|                                          
|                                          
|                                           | General and administrative expense   |                          |        | (6,982            | )     |      |        | (6,936  | )    
|                                          
|                                          
|                                          
|                                          
|                                           | Other                                |                          |        | 138               |       |      |        | 263     |      
|                                           |                                      |                          |        |                   |       |      |        |        
|Income before interest income and expense,
|                                          
|                                          
|                                          
|                                          
|                                           | gain on asset sales and taxes        |                          |        | 5,112             |       |      |        | 5,155   |      
|                                           |                                      |                          |        |                   |       |      |        |        
|                                           | Interest income                      |                          |        | 1,362             |       |      |        | 1,034   |      
|                                          
|                                          
|                                          
|                                          
|                                           | Interest expense                     |                          |        | (773              | )     |      |        | (1,099  | )    
|                                          
|                                          
|                                          
|                                          
|                                           | Gain on asset sales                  |                          |        | 146               |       |      |        | 16      |      
|                                           |                                      |                          |        |                   |       |      |        |        
|Income before taxes                        |                                      | $                        | 5,847  |                   |       | $    | 5,106  |        
|                                           |                                      |                          |        |                   |       |      |        |        

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Operating Income.During the nine months ended March 31, 2001, the Company
achieved a positive contribution from operations of $5.1 million, compared with
$5.2 million during the same period last year. Operating income decreased
during the current period as the result of a $220,000 decrease in the
contribution from campground operations and a $287,000 decrease in other
income, which was partially offset by a $461,000 decrease in the negative
contribution from the Companys sales operations during the current period.
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. Dues are 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.

The operating results of Leisure Time are included in the operating results of
the Company for the entire nine months ended March 31, 2001, compared with only
three and one-half months (from December 16, 1999) for the same period last
year.

Campground membership dues revenue was $30.0 million for the nine months ended
March 31, 2001, compared with $27.7 million for the same period last year. The
increase in dues revenue in the current period was due in part to the addition
of $3.6 million in dues paid by the members of Leisure Time, compared with $1.0
million in the same period last year. The increase in the current period was
also due in part to the effect of the annual dues increase, partially offset by
the loss of campground members during the year.

Other campground revenues were $12.8 million for the nine months ended March
31, 2001, compared with $11.9 million for the same period last year. The
related expenses were
$6.2 million for the nine months ended March 31, 2001, compared with $5.7
million for the same period last year. The increase in other campground
revenue in the current period was due in part to $636,000 in revenue from
Leisure Times campgrounds, compared with $66,000 in the same period last year.
The increase in the current period was also due in part to fees generated by
an extended stay program at some of the Companys other campgrounds and an
increase in revenue from other ancillary programs. The increase in expenses in
the current period resulted from $246,000 in expenses at Leisure Times
campgrounds, compared with $27,000 in the same period last year, as well as
higher labor costs and expenses at the Companys other campgrounds.

Campground operating expenses were $25.5 million for the nine months ended
March 31, 2001, compared with $22.7 million for the same period last year. The
increase in campground operating expenses in the current period was due in part
to $2.5 million in operating expenses at Leisure Times campgrounds, compared
with $500,000 in the same period last year. The increase in the current period
was also due in part to a $560,000 increase in utility costs at the Companys
other campgrounds, principally in Southern California where such costs
increased $349,000, which accounts for 62% of the total increase in utility
costs.

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, the Company may close and dispose of additional
campgrounds and it will seek to decrease other

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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.

For the nine months ended March 31, 2001, the Company originated membership
contracts of $14.6 million, compared with $7.7 million in the same period last
year. The increase in contracts originated in the current period was due
primarily to the sale of a greater number of new membership contracts at higher
average sales prices and the sale of a greater number of membership upgrades to
the Companys existing members. In the current period, the Company completed
the upgrade program offered to Leisure Times existing members, and began
marketing a similar product to the existing members of Thousand Trails and
NACO.

During the nine months ended March 31, 2001, the Company originated 3,253 new
membership contracts at an average sales price of $2,511 and 2,079 contracts in
the upgrade programs at an average sales price of $2,914. This compares with
2,820 new membership contracts at an average sales price of $2,004 and 792
contracts in the upgrade programs at an average sales price of $2,627 during
the nine months ended March 31, 2000. In February 2001, the Company also
offered existing Thousand Trails and NACO members access to the Leisure Time
campgrounds for a fee, which resulted in 1,623 contracts at an average price of
$230 in the current period.

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,
2001 and 2000, the Company recognized campground membership sales revenues of
$6.6 million and $3.3 million, respectively. Membership sales revenue includes
revenues of $4.9 million and $2.7 million, respectively, that were deferred in
prior periods. Moreover, during these same periods, the Company deferred
revenues of $12.9 million and $7.1 million, respectively, which will be
recognized in future periods. In the current period, the Company recognized
$1.2 million in sales revenue related to Leisure Time, compared with $63,000 in
the same period last year.

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, 2001 and 2000, the Company recognized selling expenses of
$4.3 million and $2.7 million, respectively. These amounts include expenses of
$1.5 million and $652,000 respectively, that were deferred in prior periods.
Moreover, for these same periods, the Company deferred expenses of $3.9 million
and $2.0 million, respectively, which will be recognized in future periods. In
the current period, the Company recognized selling and marketing expenses
related to Leisure Time of $646,000, compared with $288,000 in the same period
last year.

Although the Companys sales results are improving, selling and marketing
expenses exceeded sales revenues by $1.5 million and $2.0 million for the nine
months ended March 31, 2001 and 2000, respectively. These expenses exceeded
sales revenues because the Company deferred more sales revenues than selling
expenses.

The Companys selling and marketing efforts 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

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consequence, the Company expects that its selling and marketing expenses will
continue to exceed its campground membership sales revenue. This disparity
will increase as the Company grows campground 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 will 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.

Campground 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, 2001, these operations
produced a net contribution of $68,000 on revenues of $2.0 million, compared
with a net contribution of $101,000 on revenues of
$1.8 million for the same period last year. The increase in revenues and
expenses between periods was due primarily to higher usage of the campgrounds,
which the Company attributes to mild weather in the Northwest United States,
where a majority of the campgrounds are located. Trails Management was
recently awarded contracts to manage 72 campgrounds in addition to the
169 campgrounds that it managed during the periods presented. The Company
expects further revenue growth as a result of these new contracts. The
revenues and expenses related to the Companys campground management operations
are included in other campground revenue and campground operating expenses in
the consolidated statement of operations.

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, 2001 and 2000, RPIs operations produced a net contribution of
$1.3 million on revenues of $2.7 million. New membership sales and sales of
directories increased during the current period, but these increases were
offset by a decrease in membership renewals. Increases in labor costs were
offset by decreases in the cost of operating supplies. 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 $1.4 million for the
nine months ended March 31, 2001, from $1.0 million for the same period last
year. Interest income in the prior period includes amortization of the
allowance for interest discount and valuation allowance related to the
contracts receivable of $97,000. These allowances were fully amortized at
June 30, 2000. The increase in interest income in the current period was due
primarily to an increase in the 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 35% 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.

Interest expense was $773,000 for the nine months ended March 31, 2001,
compared with
$1.1 million for the same period last year. As discussed above, the Company
repaid all outstanding borrowings under its Credit Agreement with Foothill
during the current period.

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Gain on Asset Sales.The Company recognized a gain of $146,000 on asset sales
for the nine months ended March 31, 2001, compared with $16,000 for the same
period last year. The increase 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 land it holds for sale, the campgrounds that are closed if the
Company downsizes or responds to other opportunities, 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, lot sales and fees received from third parties
for billing and collection services. Other income was $2.0 million for the
nine months ended March 31, 2001, compared with $2.1 million for the same
period last year. The decrease in the current period was due primarily to a
decrease in fees received for billing and collections services, partially
offset by an increase in transfer fees and the collection of delinquent dues
and contracts receivable. In addition, the prior period included $183,000 from
the settlement of a property insurance claim. Fees for billing and collection
services are expected to decline in future periods by approximately $350,000
per year because a primary customer terminated its contract with the Company as
of September 30, 2000.

Other Expenses.Administrative expenses, including corporate member service
costs and general and administrative expenses, were $7.9 million for the nine
months ended
March 31, 2001 and 2000. The current period included $93,000 of expenses
directly related to Leisure Time, compared with $165,000 in the same period
last year. The Company will attempt to continue reducing general and
administrative costs in the future.

Income Taxes.The Companys current provision for income taxes was $649,000
for the nine months ended March 31, 2001, compared with $648,000 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 $20.9 million at June 30, 2000.

The Company recorded a deferred tax provision of $1.7 million for the nine
months ended March 31, 2001, compared with $1.4 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.

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Three Months Ended March 31, 2001 and 2000

Net Income.The Company reported net income of $1.2 million or $.13 per
diluted share on revenues of $17.3 million for the three months ended March 31,
2001. This compares with net income of $868,000 or $.10 per diluted share on
revenues of $16.0 million for the same period last year.

The Companys revenues increased in the current period due primarily to
increased membership sales revenue, campground dues and ancillary revenues,
partially offset by a decrease in revenues from RPI and Trails Management.
Expenses were also higher in the current period due primarily to increased
sales and marketing efforts and increased operating costs at the campgrounds.

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, 2001 and 2000.

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

|                                           |                                      |                          |       |                    |       |      |       |        |       | 
|------------------------------------------ | ------------------------------------ | ------------------------ | ----- | ------------------ | ----- | ---- | ----- | ------ | ----- | 
|                                           |                                      |                          |       | Three Months Ended
|                                           |                                      |                          |       | March 31,         
|                                           |                                      |                          |       |                   
|                                           |                                      |                          |       | 2001               |       | 2000
|                                           |                                      |                          |       |                    |       |     
|Campground Operations                     
|                                          
|                                          
|                                          
|                                          
|                                           | Membership dues                      |                          | $     | 9,837              |       |      | $     | 9,691  |      
|                                          
|                                          
|                                          
|                                          
|                                           | Campground revenues                  |                          |       | 3,121              |       |      |       | 2,995  |      
|                                          
|                                          
|                                          
|                                          
|                                           | Cost of campground revenues          |                          |       | (1,603             | )     |      |       | (1,503 | )    
|                                          
|                                          
|                                          
|                                          
|                                           | Operating expenses                   |                          |       | (7,898             | )     |      |       | (7,243 | )    
|                                           |                                      |                          |       |                    |       |      |       |       
|Loss  from campground operations           |                                      |                          | 3,457 |                    |       |      | 3,940 |       
|                                           |                                      |                          |       |                    |       |      |       |       
|Sales                                     
|                                          
|                                          
|                                          
|                                          
|                                           | Membership contracts originated      |                          |       | 5,018              |       |      |       | 3,962  |      
|                                          
|                                          
|                                          
|                                          
|                                           | Change in deferred revenue           |                          |       | (2,788             | )     |      |       | (2,775 | )    
|                                           |                                      |                          |       |                    |       |      |       |       
|                                           |                                      | Membership sales revenue |       |                    | 2,230 |      |       |        | 1,187 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Membership origination costs         |                          |       | (2,088             | )     |      |       | (1,827 | )    
|                                          
|                                          
|                                          
|                                          
|                                           | Change in deferred origination costs |                          |       | 754                |       |      |       | 943    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Marketing expenses                   |                          |       | (1,224             | )     |      |       | (971   | )    
|                                           |                                      |                          |       |                    |       |      |       |       
|Loss on sales                              |                                      |                          | (328  | )                  |       |      | (668  | )     
|                                           |                                      |                          |       |                    |       |      |       |       
|Trails Management                         
|                                          
|                                          
|                                          
|                                          
|                                           | Revenues                             |                          |       |                   |       |      |       | 12     |      
|                                          
|                                          
|                                          
|                                          
|                                           | Expenses                             |                          |       | (130               | )     |      |       | (109   | )    
|                                           |                                      |                          |       |                    |       |      |       |       
|Loss from Trails Management                |                                      |                          | (130  | )                  |       |      | (97   | )     
|                                           |                                      |                          |       |                    |       |      |       |       
|Resort Parks International                
|                                          
|                                          
|                                          
|                                          
|                                           | Revenues                             |                          |       | 1,035              |       |      |       | 1,064  |      
|                                          
|                                          
|                                          
|                                          
|                                           | Expenses                             |                          |       | (487               | )     |      |       | (420   | )    
|                                           |                                      |                          |       |                    |       |      |       |       
|Contribution from RPI                      |                                      |                          | 548   |                    |       |      | 644   |       
|                                           |                                      |                          |       |                    |       |      |       |       
|                                           | Other income                         |                          |       | 577                |       |      |       | 588    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Corporate member services            |                          |       | (290               | )     |      |       | (308   | )    
|                                          
|                                          
|                                          
|                                          
|                                           | General and administrative expense   |                          |       | (2,395             | )     |      |       | (2,643 | )    
|                                          
|                                          
|                                          
|                                          
|                                           | Other                                |                          |       | 37                 |       |      |       | 91     |      
|                                           |                                      |                          |       |                    |       |      |       |       
|Income before interest income and expense,
|                                          
|                                          
|                                          
|                                          
|                                           | gain on asset sales and taxes        |                          |       | 1,476              |       |      |       | 1,547  |      
|                                           |                                      |                          |       |                    |       |      |       |       
|                                           | Interest income                      |                          |       | 518                |       |      |       | 381    |      
|                                          
|                                          
|                                          
|                                          
|                                           | Interest expense                     |                          |       | (103               | )     |      |       | (429   | )    
|                                          
|                                          
|                                          
|                                          
|                                           | Loss on asset sales                  |                          |       | (8                 | )     |      |       | (6     | )    
|                                           |                                      |                          |       |                    |       |      |       |       
|Income before taxes                        |                                      | $                        | 1,883 |                    |       | $    | 1,493 |       
|                                           |                                      |                          |       |                    |       |      |       |       

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Operating Income.During the three months ended March 31, 2001 and 2000, the
Company achieved a positive contribution from operations of $1.5 million.
Although the contribution between the two periods remained constant, the
negative contribution from membership sales decreased during the current
period. This decrease was offset by lower contributions from campground
operations, Trails Management and RPI. 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 operating results of Leisure Time are included in
the operating results of the Company for the entire three months ended March
31, 2001 and 2000.

Campground membership dues revenue was $9.8 million for the three months ended
March 31, 2001, compared with $9.7 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 $3.1 million for the three months ended March
31, 2001, compared with $3.0 million for the same period last year. The
related expenses were
$1.6 million for the three months ended March 31, 2001, compared with $1.5
million for the same period last year. The increase in other campground
revenues during the current period was due primarily to fees generated by an
extended stay program at some of the Companys campgrounds and an increase in
revenue from other ancillary programs. The increase in expenses during the
current period resulted primarily from higher utility and labor costs.

Campground operating expenses were $7.9 million for the three months ended
March 31, 2001, compared with $7.2 million for the same period last year. The
increase in campground operating expenses in the current period was due
primarily to an increase in labor and utility costs. In the current period,
utility costs at the campgrounds increased by $371,000, which includes a
$211,000 increase at the campgrounds in Southern California, which accounts for
57% of the total increase.

For the three months ended March 31, 2001, the Company originated membership
contracts of $5.0 million, compared with $4.0 million in the same period last
year. During the three months ended March 31, 2001, the Company originated 956
new membership contracts at an average sales price of $2,410, and 809 contracts
in the upgrade programs at an average sales price of $2,892. This compares
with 855 new membership contracts at an average sales price of $2,207, and 792
contracts in the upgrade programs at an average sales price of $2,627 during
the three months ended March 31, 2000. During the current period, the Company
also originated 1,623 contracts at an average price of $229 in the new upgrade
program allowing Thousand Trails and NACO members to use Leisure Time
campgrounds.

For the three months ended March 31, 2001 and 2000, the Company recognized
campground membership sales revenues of $2.2 million and $1.2 million,
respectively. Membership sales revenue includes revenues of $1.9 million and
$1.0 million, respectively, that were deferred in prior periods. Moreover,
during these same periods, the Company deferred revenues of
$4.7 million and $3.8 million, respectively, which will be recognized in future
periods.

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For the three months ended March 31, 2001 and 2000, the Company recognized
selling and marketing expenses of $2.6 million and $1.9 million, respectively.
These amounts include expenses of $574,000 and $248,000, respectively, that
were deferred in prior periods. Moreover, for these same periods, the Company
deferred expenses of $1.3 million and $1.2 million, respectively, which will be
recognized in future periods.

Selling and marketing expenses exceeded sales revenues by $328,000 and $668,000
for the three months ended March 31, 2001 and 2000, respectively. These
expenses exceeded sales revenue primarily because the Company deferred more
sales revenue than selling expenses.

Campground Management.For the three months ended March 31, 2001, the
operations of Trails Management produced a loss of $130,000, compared with a
loss of $97,000 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. The revenues and
expenses related to these operations are included in other campground revenue
and campground operating expenses in the consolidated statement of operations.

Resort Parks International.For the three months ended March 31, 2001, RPIs
operations produced a net contribution of $548,000 on revenues of $1.0 million,
compared with a net contribution of $644,000 on revenues of $1.1 million for
the same period last year. The decrease in revenue during the current period
resulted from a lower membership renewal rate, partially offset by an increase
in the number of new memberships sold. Operating costs increased slightly
during the current period as a result of increases in marketing expenses and
the cost of membership materials, partially offset by decreases in the cost of
labor and communications.

Interest Income and Expense.Interest income increased to $518,000 for the
three months ended March 31, 2001, from $381,000 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. Also
included in interest income in the prior period is amortization of the
allowance for interest discount and valuation allowance related to the
contracts receivable of $33,000.

Interest expense decreased to $103,000 for the three months ended March 31,
2001, from $429,000 for the same period last year. This decrease in the
current period was due primarily to reduced borrowings under the Companys
Credit Agreement, compared with the same period last year.

Gain on Asset Sales.The Company did not recognize a material gain on the
sales of assets for the three months ended March 31, 2001 and 2000.

Other Income.Other income was $577,000 for the three months ended March 31,
2001, compared with $588,000 for the same period last year. The decrease in
the current period was due primarily to a decrease in servicing fee income,
partially offset by an increase in the collection of delinquent dues.

Other Expenses.Administrative expenses, including corporate member service
costs and general and administrative expenses, were $2.7 million for the three
months ended
March 31, 2001, compared with $3.0 million for the same period last year. The
decrease in the

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current period was due primarily to a decrease in third-party legal fees,
professional fees, and rental expense, partially offset by an increase in bank
service fees.

Income Taxes.The Companys current provision for income taxes was $179,000
for the three months ended March 31, 2001, compared with $326,000 for the same
period last year. The Company recorded a deferred tax provision of $537,000
for the three months ended March 31, 2001, compared with $299,000 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, in the current period, the
Companys results were affected adversely by rising utility costs at the
Companys campgrounds, principally in Southern California. Should the rate of
inflation increase in the future, or should utility costs continue to rise, 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. The
Company intends to utilize conservation measures and increased user fees to
help offset rising utility costs.

The Company has not experienced a decline in campground usage as a result of
rising gasoline prices, although such a decline could occur. Members generally
reside within a two hour drive of a campground and view their membership as a
prepaid get-a-way.




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, 2001 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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##### Table of Contents






Part II. OTHER INFORMATION




Item 1.   Legal Proceedings

During the current quarter, the Company completed the settlement of Foxwood
Property Owners Association, Inc. vs. Foxwood Corporation, filed on February
18, 1999 in the Court of Common Pleas of Oconee County, South Carolina, under
Case No. 99-37-CP-88. In this action, the plaintiff alleged that a subsidiary
of the Company owed the plaintiff in excess of $2.5 million for past due
maintenance fees on subdivided lots owned by the defendant. Under the terms of
the settlement, the Company (i) paid $200,000 to the plaintiff, (ii) cancelled
a promissory note from the plaintiff to the Company in the amount of $160,000,
and (iii) transferred several small parcels of real estate to the plaintiff.
In addition, under the terms of the settlement, the Companys subsidiary will
not have to pay maintenance fees on subdivided lots in the future. The lawsuit
has been dismissed with prejudice.




Item 6.   Exhibits and Reports on Form 8-K

Exhibits

The following documents are filed as exhibits to this report.

|        |  |                                                  |  |  |  | 
|------- |  | ------------------------------------------------ |  |  |  | 
|Exhibit
|Number  |  | Description                                     
|        |  |                                                  | 
|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, 2001.

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SIGNATURE

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, 2001 |  | By: |  | /s/ William J. Shaw                   
|                   |  |     |  |                                       
|                   |  |     |  | William J. Shaw                       
|                  
|                  
|                  
|                  
|                   |  |     |  | President and Chief Executive Officer 
|                  
|Date: May 10, 2001 |  | By: |  | /s/ Bryan D. Reed                     
|                   |  |     |  |                                       
|                   |  |     |  | Bryan D. Reed                         
|                  
|                  
|                  
|                  
|                   |  |     |  | Chief Financial and Accounting Officer

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INDEX TO EXHIBITS

|        |  |                                                  |  |  |  | 
|------- |  | ------------------------------------------------ |  |  |  | 
|Exhibit
|Number  |  | Description                                     
|        |  |                                                  | 
|11.1    |  | Statement re: Computation of Per Share Earnings.

Page 31