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UNITED STATESSECURITIES 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 September 30, 2002

OR

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

For the transition period of  to

Commission File Number 1-14645

THOUSAND TRAILS, INC.

(Exact Name of Registrant as Specified in Its Charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 75-2138671                       
|                                                               |  |                                  
|(State or Other Jurisdiction
of Incorporation or Organization) |  | (IRS Employer Identification No.)
|                                                               |  |                                  
|3801 Parkwood Blvd., Suite 100, Frisco, Texas                  |  | 75034                            
|                                                               |  |                                  
|(Address of Principal Executive Offices)                       |  | (Zip Code)                       
|                                                               |  |                                  
|Registrants Telephone Number, Including Area Code:            |  | (214) 618-7200                   
|                                                               |  |                                  

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) Yes  No X

The number of shares of Common Stock, par value $.01, issued and outstanding as
of November 12, 2002, was 6,963,017.





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TABLE OF CONTENTS



|                                              |                                                                                               |                                                                                              |  |  |  |  |  | 
|--------------------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                
|                                              | Item 1. Financial Statements                                                                 
|                                              |                                                                                               | Consolidated Balance Sheets                                                                 
|                                              |                                                                                               | Consolidated Statements of Operations                                                       
|                                              |                                                                                               | Consolidated Statement of Shareholders Equity For the Three Months Ended September 30, 2002
|                                              |                                                                                               | 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                           
|                                              | Item 4. Controls and Procedures                                                              
|Part II. OTHER INFORMATION                   
|                                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                    
|CERTIFICATIONS                               
|Index to the Exhibits                        
|EX-11.1 Statement Re: Computation of Earnigns



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##### Table of Contents



Thousand Trails, Inc.

Index

|                              |                                                                                                            |  |      |    | 
|----------------------------- | ---------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                              |                                                                                                            |  | Page
|                              |                                                                                                            |  |     
|PART I. FINANCIAL INFORMATION |                                                                                                            |  |      |   
|                              |                                                                                                            |  |      |   
|                              | Item 1. Financial Statements                                                                               |  |      |    | 
|                              |                                                                                                            |  |      |   
|                              | Consolidated Balance Sheets as of September 30, 2002
and June 30, 2002                                     |  |      | 3  | 
|                              |                                                                                                            |  |      |   
|                              | Consolidated Statements of Operations for the three months ended
September 30, 2002 and September 30, 2001 |  |      | 4  | 
|                              |                                                                                                            |  |      |   
|                              | Consolidated Statement of Shareholders Equity for the three months
ended September 30, 2002               |  |      | 5  | 
|                              |                                                                                                            |  |      |   
|                              | Consolidated Statements of Cash Flows for the three months ended
September 30, 2002 and September 30, 2001 |  |      | 6  | 
|                              |                                                                                                            |  |      |   
|                              | Notes to Consolidated Financial Statements                                                                 |  |      | 8  | 
|                              |                                                                                                            |  |      |   
|                              | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations              |  |      | 12 | 
|                              |                                                                                                            |  |      |   
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                                         |  |      | 20 | 
|                              |                                                                                                            |  |      |   
|                              | Item 4. Controls and Procedures                                                                            |  |      | 21 | 
|                              |                                                                                                            |  |      |   
|PART II. OTHER INFORMATION    |                                                                                                            |  |      |   
|                              |                                                                                                            |  |      |   
|                              | Item 6. Exhibits and Reports on Form 8-K                                                                   |  |      | 21 | 
|                              |                                                                                                            |  |      |   
|                              | Signatures                                                                                                 |  |      | 22 | 
|                              |                                                                                                            |  |      |   
|                              | Certifications                                                                                             |  |      | 23 | 

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Thousand Trails, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)

|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |          |        |        |  | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------- | -------------------------- | ------------------------------------ | ------ | ------------- | ------ | -------- | ------ | ------ |  | 
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        | September 30, |        | June 30,
|Assets                                     |                                                                                                                                                                                                                          | 2002              |                            | 2002                                
|                                           |                                                                                                                                                                                                                          |                   |                            |                                     
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        | (Unaudited)   |        |          |        |       
|Current Assets                             |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |         
|                                           | Cash and cash equivalents                                                                                                                                                                                                |                   | $                          | 2,731                                |        |               | $      | 4,180    |       
|                                           | Marketable securities  available for sale                                                                                                                                                                               |                   |                            | 6,599                                |        |               |        | 5,343    |       
|                                           | Current portion of receivables, net of allowances of $.9 million and $1.0
million respectively                                                                                                                           |                   |                            | 3,620                                |        |               |        | 1,230    |       
|                                           | Current portion of deferred membership origination costs                                                                                                                                                                 |                   |                            | 5,412                                |        |               |        | 5,013    |       
|                                           | Current portion of net deferred tax assets                                                                                                                                                                               |                   |                            | 5,915                                |        |               |        | 6,106    |       
|                                           | Inventories                                                                                                                                                                                                              |                   |                            | 1,094                                |        |               |        | 1,158    |       
|                                           | Other current assets                                                                                                                                                                                                     |                   |                            | 795                                  |        |               |        | 2,889    |       
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |          |       
|                                           |                                                                                                                                                                                                                          |                   | Total Current Assets       |                                      |        | 26,166        |        |          |        | 25,919 | 
|                                           | Restricted cash                                                                                                                                                                                                          |                   |                            | 646                                  |        |               |        | 646      |       
|                                           | Receivables, net of allowances of $1.5 million and $1.2 million, respectively                                                                                                                                            |                   |                            | 7,143                                |        |               |        | 8,408    |       
|                                           | Campground land                                                                                                                                                                                                          |                   |                            | 20,696                               |        |               |        | 20,696   |       
|                                           | Buildings and equipment, net of accumulated depreciation of
$25.3 million and $24.5 million, respectively                                                                                                                |                   |                            | 22,581                               |        |               |        | 22,781   |       
|                                           | Assets held for sale                                                                                                                                                                                                     |                   |                            | 5,402                                |        |               |        | 5,402    |       
|                                           | Deferred membership origination costs, less current portion                                                                                                                                                              |                   |                            | 7,559                                |        |               |        | 7,337    |       
|                                           | Net deferred tax assets                                                                                                                                                                                                  |                   |                            | 473                                  |        |               |        | 296      |       
|                                           | Other assets                                                                                                                                                                                                             |                   |                            | 295                                  |        |               |        | 755      |       
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |          |       
|Total Assets                               |                                                                                                                                                                                                                          | $                 | 90,961                     |                                      |        | $             | 92,240 |         
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |          |       
|                                           |                                                                                                                                                                                                                          |                   |                            | Liabilities and Shareholders Equity |        |               |        |          |        |        |  | 
|Current Liabilities                        |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |         
|                                           | Accounts payable                                                                                                                                                                                                         |                   | $                          | 1,820                                |        |               | $      | 2,665    |       
|                                           | Other accrued liabilities                                                                                                                                                                                                |                   |                            | 7,607                                |        |               |        | 8,108    |       
|                                           | Current portion of deferred revenue                                                                                                                                                                                      |                   |                            | 29,647                               |        |               |        | 34,212   |       
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |          |       
|                                           |                                                                                                                                                                                                                          |                   | Total Current Liabilities  |                                      |        | 39,074        |        |          |        | 44,985 | 
|                                           | Deferred revenue, less current portion                                                                                                                                                                                   |                   |                            | 26,034                               |        |               |        | 24,984   |       
|                                           | Other liabilities                                                                                                                                                                                                        |                   |                            | 2,906                                |        |               |        | 1,608    |       
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |          |       
|                                           |                                                                                                                                                                                                                          | Total Liabilities |                            |                                      | 68,014 |               |        |          | 71,577 |       
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |          |       
|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, 8,428,228 and
8,395,528 shares issued and outstanding, respectively |                   |                            | 84                                   |        |               |        | 84       |       
|                                           | Additional paid-in capital                                                                                                                                                                                               |                   |                            | 22,680                               |        |               |        | 22,596   |       
|                                           | Retained earnings                                                                                                                                                                                                        |                   |                            | 11,996                               |        |               |        | 9,688    |       
|                                           | Accumulated other comprehensive loss                                                                                                                                                                                     |                   |                            | (185                                 | )      |               |        | (132     | )     
|                                           | Treasury stock, 1,505,211 and 1,477,912 shares, respectively                                                                                                                                                             |                   |                            | (11,628                              | )      |               |        | (11,573  | )     
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |          |       
|                                           |                                                                                                                                                                                                                          |                   | Total Shareholders Equity |                                      |        | 22,947        |        |          |        | 20,663 | 
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |         
|Total Liabilities and Shareholders Equity |                                                                                                                                                                                                                          | $                 | 90,961                     |                                      |        | $             | 92,240 |         
|                                           |                                                                                                                                                                                                                          |                   |                            |                                      |        |               |        |          |       

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

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

|                                               |                                 |   |                                          |        |      |   |        |        |  
|---------------------------------------------- | ------------------------------- | - | ---------------------------------------- | ------ | ---- | - | ------ | ------ | -
|                                               |                                 |   | For the three months ended September 30,
|                                               |                                 |   |                                         
|                                               |                                 |   | 2002                                     |        | 2001
|                                               |                                 |   |                                          |        |     
|Revenues                                       |                                 |   |                                          |        |      |   |        |       
|Membership contracts originated                |                                 | $ | 7,732                                    |        |      | $ | 7,268  |       
|Change in deferred revenue                     |                                 |   | (2,426                                   | )      |      |   | (3,582 | )     
|                                               |                                 |   |                                          |        |      |   |        |       
|                                               | Membership sales revenue        |   |                                          | 5,306  |      |   |        | 3,686  |  
|Membership dues                                |                                 |   | 10,107                                   |        |      |   | 10,071 |       
|Other campground revenue                       |                                 |   | 6,505                                    |        |      |   | 6,800  |       
|Trails Management revenue                      |                                 |   | 3,172                                    |        |      |   | 3,303  |       
|RPI membership fees                            |                                 |   | 942                                      |        |      |   | 888    |       
|Interest income                                |                                 |   | 610                                      |        |      |   | 524    |       
|Loss on asset sales                            |                                 |   | (4                                       | )      |      |   | (18    | )     
|Other income                                   |                                 |   | 698                                      |        |      |   | 681    |       
|                                               |                                 |   |                                          |        |      |   |        |       
|                                               | Total Revenues                  |   |                                          | 27,336 |      |   |        | 25,935 |  
|                                               |                                 |   |                                          |        |      |   |        |       
|Expenses                                       |                                 |   |                                          |        |      |   |        |       
|Campground operating expenses                  |                                 |   | 13,199                                   |        |      |   | 13,010 |       
|Membership origination costs                   |                                 |   | 3,505                                    |        |      |   | 3,169  |       
|Change in deferred origination costs           |                                 |   | (621                                     | )      |      |   | (1,078 | )     
|Marketing expenses                             |                                 |   | 1,641                                    |        |      |   | 1,722  |       
|Trails Management expenses                     |                                 |   | 2,529                                    |        |      |   | 2,702  |       
|RPI membership expenses                        |                                 |   | 414                                      |        |      |   | 395    |       
|Corporate member services                      |                                 |   | 375                                      |        |      |   | 302    |       
|Interest expense                               |                                 |   | 2                                        |        |      |   | 5      |       
|General and administrative expenses            |                                 |   | 2,536                                    |        |      |   | 2,393  |       
|                                               |                                 |   |                                          |        |      |   |        |       
|                                               | Total Expenses                  |   |                                          | 23,580 |      |   |        | 22,620 |  
|                                               |                                 |   |                                          |        |      |   |        |       
|Income Before Income Taxes                     |                                 |   | 3,756                                    |        |      |   | 3,315  |       
|Income Taxes                                  |                                 |   |                                          |        |      |   |        |       
|                                               | Income tax provision  current  |   |                                          | (1,434 | )    |   |        | (759   | )
|                                               | Income tax provision  deferred |   |                                          | (14    | )    |   |        | (403   | )
|                                               |                                 |   |                                          |        |      |   |        |       
|                                               |                                 |   | (1,448                                   | )      |      |   | (1,162 | )     
|Net Income                                     |                                 | $ | 2,308                                    |        |      | $ | 2,153  |       
|                                               |                                 |   |                                          |        |      |   |        |       
|Net Income per Share  Basic                   |                                 | $ | .33                                      |        |      | $ | .26    |       
|                                               |                                 |   |                                          |        |      |   |        |       
|Net Income per Share  Diluted                 |                                 | $ | .30                                      |        |      | $ | .25    |       
|                                               |                                 |   |                                          |        |      |   |        |       
|Shares Used to Calculate Net Income Per Share: |                                 |   |                                          |        |      |   |        |       
|                                               | Basic                           |   |                                          | 6,920  |      |   |        | 8,171  |  
|                                               |                                 |   |                                          |        |      |   |        |       
|                                               | Diluted                         |   |                                          | 7,683  |      |   |        | 8,619  |  
|                                               |                                 |   |                                          |        |      |   |        |       

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 Three Months Ended September 30, 2002
(Dollars in thousands)
(Unaudited)

|                                                         |  |               |       |        |  |         |    |          |  |               |        |          |  |       |        |       |  |             |      |   |  |   |         |   |  |   |        |  
|-------------------------------------------------------- |  | ------------- | ----- | ------ |  | ------- | -- | -------- |  | ------------- | ------ | -------- |  | ----- | ------ | ----- |  | ----------- | ---- | - |  | - | ------- | - |  | - | ------ | -
|                                                         |  |               |       |        |  |         |    |          |  |               |        |          |  |       |        |       |  | Accumulated |      |   |  |   |         |   |  |  
|                                                         |  |               |       |        |  |         |    |          |  | Additional    |        |          |  |       |        | Other |  |             |      |   |  |   |         |  
|                                                         |  | Comprehensive |       | Common |  | Paid-In |    | Retained |  | Comprehensive |        | Treasury |  |       |        |      
|                                                         |  | Income        |       | Stock  |  | Capital |    | Earnings |  | Loss          |        | Stock    |  | Total
|                                                         |  |               |       |        |  |         |    |          |  |               |        |          |  |      
|Balance, July 1, 2002                                    |  |               |      |        |  | $       | 84 |          |  | $             | 22,596 |          |  | $     | 9,688  |       |  | $           | (132 | ) |  | $ | (11,573 | ) |  | $ | 20,663 |  
|Issuance of common stock                                 |  |               |      |        |  |         |   |          |  |               | 84     |          |  |       |       |       |  |             |     |   |  |   |        |   |  |   | 84     |  
|Purchase of treasury stock                               |  |               |      |        |  |         |   |          |  |               |       |          |  |       |       |       |  |             |     |   |  |   | (55     | ) |  |   | (55    | )
|Net income for the three months
ended September 30, 2002 |  |               | 2,308 |        |  |         |   |          |  |               |       |          |  |       | 2,308  |       |  |             |     |   |  |   |        |   |  |   | 2,308  |  
|Other comprehensive loss                                 |  |               | (53   | )      |  |         |   |          |  |               |       |          |  |       |       |       |  |             | (53  | ) |  |   |        |   |  |   | (53    | )
|                                                         |  |               |       |        |  |         |    |          |  |               |        |          |  |       |        |       |  |             |      |   |  |   |         |   |  |   |        |  
|Balance, September 30, 2002                              |  | $             | 2,255 |        |  | $       | 84 |          |  | $             | 22,680 |          |  | $     | 11,996 |       |  | $           | (185 | ) |  | $ | (11,628 | ) |  | $ | 22,947 |  
|                                                         |  |               |       |        |  |         |    |          |  |               |        |          |  |       |        |       |  |             |      |   |  |   |         |   |  |   |        |  

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 three months ended September 30,
|                                                               |  |                                         
|                                                               |  | 2002                                     |         | 2001
|                                                               |  |                                          |         |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                          |  |                                          |         |      |  |   |         |  
|Collections of principal on receivables                        |  | $                                        | 1,609   |      |  | $ | 1,273   |  
|Interest received                                              |  |                                          | 610     |      |  |   | 524     |  
|Interest paid                                                  |  |                                          | (4      | )    |  |   | (5      | )
|General and administrative and corporate member services costs |  |                                          | (3,391  | )    |  |   | (3,152  | )
|Cash collected from operations, including deferred revenue     |  |                                          | 15,712  |      |  |   | 16,297  |  
|Cash from sales of memberships                                 |  |                                          | 4,587   |      |  |   | 5,045   |  
|Expenditures for campground operations                         |  |                                          | (13,056 | )    |  |   | (15,101 | )
|Expenditures for sales and marketing                           |  |                                          | (4,989  | )    |  |   | (4,783  | )
|Expenditures for insurance premiums                            |  |                                          | (494    | )    |  |   | (665    | )
|Payment of income taxes                                        |  |                                          | (243    | )    |  |   | (59     | )
|                                                               |  |                                          |         |      |  |   |         |  
|Net cash provided by (used in) operating activities            |  |                                          | 341     |      |  |   | (626    | )
|                                                               |  |                                          |         |      |  |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                          |  |                                          |         |      |  |   |         |  
|Capital expenditures                                           |  |                                          | (575    | )    |  |   | (1,067  | )
|Net purchase of marketable securities                          |  |                                          | (1,256  | )    |  |   |        |  
|Proceeds from asset sales                                      |  |                                          | 24      |      |  |   | 45      |  
|                                                               |  |                                          |         |      |  |   |         |  
|Net cash used in investing activities                          |  |                                          | (1,807  | )    |  |   | (1,022  | )
|                                                               |  |                                          |         |      |  |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                          |  |                                          |         |      |  |   |         |  
|Purchase of treasury stock                                     |  |                                          | (55     | )    |  |   |        |  
|Payment of notes                                               |  |                                          | (12     | )    |  |   | (16     | )
|Issuance of common stock                                       |  |                                          | 84      |      |  |   | 22      |  
|                                                               |  |                                          |         |      |  |   |         |  
|Net cash provided by financing activities                      |  |                                          | 17      |      |  |   | 6       |  
|                                                               |  |                                          |         |      |  |   |         |  
|DECREASE IN CASH AND CASH EQUIVALENTS                          |  |                                          | (1,449  | )    |  |   | (1,642  | )
|                                                               |  |                                          |         |      |  |   |         |  
|CASH AND CASH EQUIVALENTS                                      |  |                                          |         |      |  |   |         |  
|Beginning of period                                            |  |                                          | 4,180   |      |  |   | 9,016   |  
|                                                               |  |                                          |         |      |  |   |         |  
|End of period                                                  |  | $                                        | 2,731   |      |  | $ | 7,374   |  
|                                                               |  |                                          |         |      |  |   |         |  

 continued 

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

|                                                                                                          |                                                   |   |                                          |        |      |  |        |        |  
|--------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | - | ---------------------------------------- | ------ | ---- |  | ------ | ------ | -
|                                                                                                          |                                                   |   | For the three months ended September 30,
|                                                                                                          |                                                   |   |                                         
|                                                                                                          |                                                   |   | 2002                                     |        | 2001
|                                                                                                          |                                                   |   |                                          |        |     
|Reconciliation of net income to net cash provided
by (used in) operating activities:                      |                                                   |   |                                          |        |      |  |        |       
|                                                                                                          | Net Income                                        |   | $                                        | 2,308  |      |  | $      | 2,153  |  
|                                                                                                          |                                                   |   |                                          |        |      |  |        |        |  
|Adjustments to reconcile net income to net cash
provided by (used in) operating activities 
Depreciation |                                                   |   | 747                                      |        |      |  | 740    |       
|                                                                                                          | Bad debt provision                                |   |                                          | 359    |      |  |        | 269    |  
|                                                                                                          | Increase in deferred sales revenue                |   |                                          | 2,426  |      |  |        | 3,582  |  
|                                                                                                          | Increase in deferred membership origination costs |   |                                          | (621   | )    |  |        | (1,078 | )
|                                                                                                          | Loss on asset sales                               |   |                                          | 4      |      |  |        | 18     |  
|                                                                                                          | Increase in deferred income tax provision         |   |                                          | 14     |      |  |        | 403    |  
|                                                                                                          | Increase in receivables                           |   |                                          | (1,484 | )    |  |        | (950   | )
|                                                                                                          | Decrease in other assets                          |   |                                          | 2,618  |      |  |        | 251    |  
|                                                                                                          | Decrease in accounts payable                      |   |                                          | (845   | )    |  |        | (596   | )
|                                                                                                          | Decrease in deferred dues                         |   |                                          | (5,263 | )    |  |        | (5,272 | )
|                                                                                                          | Increase (decrease) in other liabilities          |   |                                          | 131    |      |  |        | (145   | )
|                                                                                                          | Other, net                                        |   |                                          | (53    | )    |  |        | (1     | )
|                                                                                                          |                                                   |   |                                          |        |      |  |        |       
|Total adjustments                                                                                         |                                                   |   | (1,967                                   | )      |      |  | (2,779 | )     
|                                                                                                          |                                                   |   |                                          |        |      |  |        |       
|Net cash provided by (used in) operating activities                                                       |                                                   | $ | 341                                      |        |      |  | ($626  | )     
|                                                                                                          |                                                   |   |                                          |        |      |  |        |       

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

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Thousand Trails, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)

NOTE 1  NATURE OF OPERATIONS

Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(collectively, the Company) own and operate 59 membership-based campgrounds
located in 17 states and British Columbia, Canada. In addition, the Company
provides a reciprocal use program for members of approximately 280 recreational
facilities and manages 240 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
Leisure Time Resorts of America, Inc. (Leisure Time).

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

This Quarterly Report on Form 10-Q should be read in conjunction with the
Companys Annual Report on Form 10-K for the year ended June 30, 2002, filed
with the Securities and Exchange Commission (the SEC) on September 30, 2002.

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

Reclassification

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

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NOTE 2  COMPREHENSIVE INCOME

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

Currently, the Companys items of other comprehensive income consist of its
foreign currency translation and unrealized gains on marketable securities held
as available for sale. The Company translates the balance sheet of its
Canadian subsidiary into U.S. dollars at exchange rates in effect at the
balance sheet date. Profit and loss accounts are translated monthly at
exchange rates in effect at that time. Unrealized gains on marketable
securities are calculated as the difference between the carrying amount and the
fair market value of the Companys marketable securities.

The following table provides statements of comprehensive income for the three
months ended September 30, 2002 and 2001 (dollars in thousands):

|                            |                                          |   |                            |     |      |   |       |    |  
|--------------------------- | ---------------------------------------- | - | -------------------------- | --- | ---- | - | ----- | -- | -
|                            |                                          |   | For the three months ended
|                            |                                          |   | September 30,             
|                            |                                          |   |                           
|                            |                                          |   | 2002                       |     | 2001
|                            |                                          |   |                            |     |     
|                            |                                          |   | (Unaudited)               
|Net Income                  |                                          | $ | 2,308                      |     |      | $ | 2,153 |   
|Other Comprehensive Income: |                                          |   |                            |     |      |   |       |   
|                            | Foreign currency translation adjustment  |   |                            |    |      |   |       | (1 | )
|                            | Unrealized loss on marketable securities |   |                            | (53 | )    |   |       |   |  
|                            |                                          |   |                            |     |      |   |       |   
|Comprehensive Income        |                                          | $ | 2,255                      |     |      | $ | 2,152 |   
|                            |                                          |   |                            |     |      |   |       |   

NOTE 3  SEGMENT REPORTING

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

The campground 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 earned from operations at the
campgrounds.

RPI sells memberships that allow members to use any of the approximately 280
recreational facilities participating in RPIs reciprocal use system, subject
to certain limitations. Operating revenue consists of annual membership fees
paid by members.

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Trails Management manages 240 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. Identifiable assets are those assets used exclusively
in the operations of each business segment.

|                                  |  |                                       |        |     |  |                   |     |                     |  |              |       |  |  |   |        |   |  |   |        | 
|--------------------------------- |  | ------------------------------------- | ------ | --- |  | ----------------- | --- | ------------------- |  | ------------ | ----- |  |  | - | ------ | - |  | - | ------ | 
|                                  |  | Three months ended September 30, 2002
|                                  |  |                                      
|                                  |  | Campgrounds                           |        | RPI |  | Trails Management |     | Corporate and Other |  | Consolidated
|                                  |  |                                       |        |     |  |                   |     |                     |  |             
|Operating revenues                |  | $                                     | 16,612 |     |  | $                 | 942 |                     |  | $            | 3,172 |  |  | $ | 22     |   |  | $ | 20,748 | 
|Membership sales
revenue          |  |                                       | 5,306  |     |  |                   |    |                     |  |              |      |  |  |   |       |   |  |   | 5,306  | 
|Income (loss)
before income taxes |  |                                       | 4,194  |     |  |                   | 528 |                     |  |              | 643   |  |  |   | (1,609 | ) |  |   | 3,756  | 

|                                  |  |                                       |        |     |  |                   |     |                     |  |              |       |  |  |   |        |   |  |   |        | 
|--------------------------------- |  | ------------------------------------- | ------ | --- |  | ----------------- | --- | ------------------- |  | ------------ | ----- |  |  | - | ------ | - |  | - | ------ | 
|                                  |  | Three months ended September 30, 2001
|                                  |  |                                      
|                                  |  | Campgrounds                           |        | RPI |  | Trails Management |     | Corporate and Other |  | Consolidated
|                                  |  |                                       |        |     |  |                   |     |                     |  |             
|Operating revenues                |  | $                                     | 16,871 |     |  | $                 | 888 |                     |  | $            | 3,303 |  |  | $ | 26     |   |  | $ | 21,088 | 
|Membership sales
revenue          |  |                                       | 3,686  |     |  |                   |    |                     |  |              |      |  |  |   |       |   |  |   | 3,686  | 
|Income (loss)
before income taxes |  |                                       | 3,734  |     |  |                   | 493 |                     |  |              | 601   |  |  |   | (1,513 | ) |  |   | 3,315  | 

NOTE 4  NET INCOME PER SHARE

The table below sets forth the information necessary to compute basic and
diluted net income per share for the three months ended September 30, 2002 and
2001, including a summary of the components of the numerators and denominators
of the basic and diluted net income per share computations for the periods
presented (dollars and shares in thousands, except per share amounts):

|                                            |                  |   |                            |     |      |   |       |     | 
|------------------------------------------- | ---------------- | - | -------------------------- | --- | ---- | - | ----- | --- | 
|                                            |                  |   | For the three months ended
|                                            |                  |   | September 30,             
|                                            |                  |   |                           
|                                            |                  |   | 2002                       |     | 2001
|                                            |                  |   |                            |     |     
|                                            |                  |   | (Unaudited)               
|Net Income                                  |                  | $ | 2,308                      |     |      | $ | 2,153 |    
|                                            |                  |   |                            |     |      |   |       |    
|Weighted Average Number of Shares  Basic   |                  |   | 6,920                      |     |      |   | 8,171 |    
|                                            |                  |   |                           
|                                            | Dilutive Options |   |                            | 763 |      |   |       | 448 | 
|                                            |                  |   |                            |     |      |   |       |    
|Weighted Average Number of Shares  Diluted |                  |   | 7,683                      |     |      |   | 8,619 |    
|                                            |                  |   |                            |     |      |   |       |    
|Net Income Per Share  Basic                |                  | $ | .33                        |     |      | $ | .26   |    
|                                            |                  |   |                            |     |      |   |       |    
|Net Income Per Share  Diluted              |                  | $ | .30                        |     |      | $ | .25   |    
|                                            |                  |   |                            |     |      |   |       |    

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NOTE 5  LONG TERM DEBT

Line of Credit with Union Bank

On July 1, 2001, the Company established a $15.0 million revolving, secured
line of credit (Line of Credit) with Union Bank of California, N.A. (Union
Bank). Borrowings under the Line of Credit carry an interest rate of prime
minus 0.75%. The Company may borrow, repay and reborrow under the Line of
Credit from time to time, provided, however, that for at least one day during
each twelve-month period, the principal amount outstanding under the Line of
Credit must be not more than $5.0 million. All borrowings under the Line of
Credit will mature on
July 1, 2003. The Company anticipates using the Line of Credit for general
working capital purposes, although it is permitted under the terms of the Line
of Credit to use up to $5.0 million for acquisitions from time to time.

On September 30, 2002, the Company had no outstanding borrowings under the Line
of Credit. The Companys availability under the Line of Credit has been
reduced by $1.1 million as a result of the issuance of a letter of credit to
secure obligations of the Company to its insurance carrier.

The Companys ability to borrow under the Line of Credit for working capital
purposes is subject to continued compliance by the Company with the financial
covenants and other requirements of the Line of Credit, including certain
covenants respecting minimum tangible net worth, minimum adjusted EBITDA (as
defined) and minimum total debt to adjusted EBITDA. The Line of Credit
prohibits the Company from borrowing from other sources.

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

NOTE 6  CONTINGENCIES

General Liability Insurance

Prior to July 1, 1998, the Companys general liability insurance required the
Company to pay the first $250,000 per occurrence, with an annual aggregate
exposure of $2.0 million. In addition, commencing July 1, 2002, the Companys
general liability insurance requires the Company to pay the first $250,000 per
occurrence, with an annual aggregate exposure of $2.0 million. The Company has
provided a liability for estimated claims related to uninsured general
liability risks based on actuarial estimates. As of September 30, 2002 and
June 30, 2002, the Companys recorded liability for estimated losses related to
uninsured general liability claims totaled $691,000 and $567,000, respectively,
which is included in other liabilities in the accompanying consolidated balance
sheets.

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

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.




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, 2002, filed with the SEC on September 30, 2002.

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 September
30, 2002. All of these statements are forward-looking statements made pursuant
to the safe harbor provisions of Section 21 (E) of the Securities Exchange Act
of 1934, as amended. These statements are not historical and involve risks and
uncertainties. The Companys actual financial condition, results of
operations, cash flows and business strategies, plans and conditions for future
periods may differ materially due to several factors, including but not limited
to the Companys ability to control costs, 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 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.

Over the past decade, 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

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dispose of additional campgrounds and it will seek to decrease other expenses.
At the same time, the Company has expanded its sales and marketing efforts with
a view to stopping the membership decline. The Company has also acquired
members through the purchase of Leisure Time, and it intends to explore the
possible acquisition of additional members through the purchase of other
membership campground organizations. However, at this time, the Company has
not identified any realistic acquisition candidates. 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.

Cash.On September 30, 2002, the Company had $2.7 million of cash and cash
equivalents, a decrease of $1.4 million from June 30, 2002. The decrease
resulted primarily from the Companys decision to invest cash in marketable
securities to increase the amount of interest earned on the invested funds.

During the three months ended September 30, 2002, the Companys operating
activities provided $341,000 of cash, its investing activities used $1.8
million of cash, and its financing activities produced $17,000 of cash. The
Companys investing activities consisted of net purchases of $1.3 million of
marketable securities and capital expenditures of $575,000 at the campgrounds,
partially offset by $24,000 in proceeds from the sale of assets. The Companys
financing activities consisted of $84,000 of proceeds from the exercise of
employee stock options and sales of shares through the Companys employee stock
purchase plan, partially offset by $12,000 in payments on notes payable.

With respect to the Companys operating activities, for the three months ended
September 30, 2002, the principal sources of operating cash were $15.7 million
from operations, $2.2 million in principal and interest collections on
contracts receivable and invested cash and $4.6 million from sales of
campground memberships. Principal uses of operating cash for the three months
ended September 30, 2002, were $13.1 million in operating expenses, $5.0
million in membership origination costs and marketing expenses, $3.4 million in
administrative expenses (including general and administrative expenses and
corporate member services costs), $494,000 in insurance premiums and $243,000
in income taxes.

During the three months ended September 30, 2001, the Companys operating
activities used $626,000 of cash, its investing activities used $1.0 million of
cash and its financing activities produced $6,000 of cash. During the prior
year, the Companys material investing and financing activities related
primarily to capital expenditures at the campgrounds, upgrades to the Companys
computer and communication systems, proceeds from asset sales and proceeds from
the exercise of employee stock options and sales of shares through the
Companys employee stock purchase plan.

The Company experiences lower cash flow from operating activities during the
first quarter of its fiscal year because of the seasonal nature of its
operations. The Company receives the majority of the dues revenue from its
members during the winter, while incurring 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.

As of the date of this report, the Company had $563,000 of outstanding
borrowings under its Line of Credit with Union Bank, and it had the ability to
borrow an additional $13.3 million for working capital purposes. The Companys
availability under the Line of Credit has been

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reduced by $1.1 million as a result of the issuance of a letter of credit to
secure obligations of the Company to its insurance carrier. At its current
level of operations, the Company believes its cash reserves will increase
during the current year. The amount of cash the Company is able to accumulate
will depend on a number of factors including its ability to control costs, its
success in collecting its contracts receivable and selling assets and the other
factors affecting the Companys operations described in this report. Based
upon its current business plan, the Company believes that future cash flows
provided from operations, asset sales and borrowings available under the Line
of Credit will be adequate for the Companys operating and other cash
requirements.

Material Changes in Financial Condition

Total assets decreased by $1.3 million during the three months ended September
30, 2002. Marketable securities available for sale increased by $1.3 million,
and contracts receivable increased by $1.1 million due primarily to an increase
in the percentage of financed sales. Cash decreased by $1.4 million as
discussed above. Buildings and equipment decreased by $200,000 due primarily
to depreciation, partially offset by capital expenditures at certain
campgrounds. Deferred membership origination costs decreased by $621,000.
Other assets decreased by
$2.6 million due primarily to the sale of assets.

Total liabilities decreased by $3.6 million during the three months ended
September 30, 2002, due primarily to the $3.4 million decrease in deferred
revenue discussed below. In addition, accounts payable decreased by $846,000
due to the timing of payments and other liabilities increased by $797,000 due
primarily an increase in accrued income and property taxes and fees accrued by
Trails Management that are payable to the U.S. Forest Service, partially offset
by the payment of accrued wages. Deferred revenue related to membership dues
decreased by
$5.3 million because dues revenue recognized during the period exceeded dues
collected. Deferred revenue from Trails Management decreased by $500,000
because of the recognition of fees paid in advance that were deferred in prior
periods. Deferred revenue related to membership sales increased by $2.4
million due to an increase in membership contracts originated.

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

The Company has exposure to changing interest rates on its marketable
securities, which consist of shares in a mutual fund that invests a majority of
its assets in adjustable rate mortgage securities issued or guaranteed by the
U.S. government, with the remaining assets invested in U.S. government
obligations. At September 30, 2002, the Companys investment in marketable
securities totaled $6.6 million. The Company does not have significant
exposure to changing interest rates on invested cash because the Company
invests available cash in certificates of deposit and investment grade
commercial paper that have maturities of three months or less. The interest
rate market risk implicit in these investments at any given time is low, as the
investments mature within three months.

The Company had $13.2 million of contracts receivable at September 30, 2002,
which have a weighted average stated interest rate of 14% and an average
remaining term of 30 months. The Company does not have significant exposure to
changing interest rates related to the contracts receivable because the
interest rate on the contracts receivable are fixed.

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

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

As of the date of this report, the Company had $563,000 of outstanding
borrowings under its Line of Credit with Union Bank, which accrue interest at a
rate that fluctuates with changes in the prime rate. Under the Line of Credit,
the Company could borrow an additional $13.3 million for working capital
purposes. The Company has exposure to changing interest rates related to the
Line of Credit because increases in interest rates would increase the Companys
interest expense on these borrowings.

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

RESULTS OF OPERATIONS

The following discussion and analysis are based on the historical results of
operations of the Company for the three months ended September 30, 2002 and
2001. The financial information set forth below should be read in conjunction
with the Companys consolidated financial statements included in Item 1.

Three Months Ended September 30, 2002 and 2001

Net Income.The Company reported net income of $2.3 million or $.30 per
diluted share on revenues of $27.3 million for the three months ended September
30, 2002. This compares with net income of $2.2 million or $.25 per diluted
share on revenues of $25.9 million for the same period last year.

The Companys revenues grew in the current period due primarily to increased
membership sales revenue. Expenses were also higher in the current period due
to increased sales and marketing efforts, higher costs for insurance and
employee benefits, and higher administrative and utility costs, which were
partially offset by a reduction in operating expenses at campgrounds managed by
Trails Management.

The table set forth on the following page shows separately the results of the
campground operations, Trails Managements operations and RPIs operations,
without any allocation of corporate expenses, as well as corporate expenses and
other revenues and expenses in the aggregate, for the three months ended
September 30, 2002 and 2001.

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

|                                                                         |                                      |                          |        |                    |       |      |        |         |       | 
|------------------------------------------------------------------------ | ------------------------------------ | ------------------------ | ------ | ------------------ | ----- | ---- | ------ | ------- | ----- | 
|                                                                         |                                      |                          |        | Three Months Ended
|                                                                         |                                      |                          |        | September 30,     
|                                                                         |                                      |                          |        |                   
|                                                                         |                                      |                          |        | 2002               |       | 2001
|                                                                         |                                      |                          |        |                    |       |     
|Campground Operations                                                    |                                      |                          |        |                    |       |      |        |        
|                                                                         | Membership dues                      |                          | $      | 10,107             |       |      | $      | 10,071  |      
|                                                                         | Campground revenues                  |                          |        | 6,505              |       |      |        | 6,800   |      
|                                                                         | Cost of campground revenues          |                          |        | (2,615             | )     |      |        | (2,756  | )    
|                                                                         | Operating expenses                   |                          |        | (10,584            | )     |      |        | (10,254 | )    
|                                                                         |                                      |                          |        |                    |       |      |        |        
|Contribution from campground operations                                  |                                      |                          | 3,413  |                    |       |      | 3,861  |        
|                                                                         |                                      |                          |        |                    |       |      |        |        
|Sales                                                                    |                                      |                          |        |                    |       |      |        |        
|                                                                         | Membership contracts originated      |                          |        | 7,732              |       |      |        | 7,268   |      
|                                                                         | Change in deferred revenue           |                          |        | (2,426             | )     |      |        | (3,582  | )    
|                                                                         |                                      |                          |        |                    |       |      |        |        
|                                                                         |                                      | Membership sales revenue |        |                    | 5,306 |      |        |         | 3,686 | 
|                                                                         | Membership origination costs         |                          |        | (3,505             | )     |      |        | (3,169  | )    
|                                                                         | Change in deferred origination costs |                          |        | 621                |       |      |        | 1,078   |      
|                                                                         | Marketing expenses                   |                          |        | (1,641             | )     |      |        | (1,722  | )    
|                                                                         |                                      |                          |        |                    |       |      |        |        
|Contribution (loss) on sales                                             |                                      |                          | 781    |                    |       |      | (127   | )      
|                                                                         |                                      |                          |        |                    |       |      |        |        
|Trails Management                                                        |                                      |                          |        |                    |       |      |        |        
|                                                                         | Revenues                             |                          |        | 3,172              |       |      |        | 3,303   |      
|                                                                         | Expenses                             |                          |        | (2,529             | )     |      |        | (2,702  | )    
|                                                                         |                                      |                          |        |                    |       |      |        |        
|Contribution from Trails Management                                      |                                      |                          | 643    |                    |       |      | 601    |        
|                                                                         |                                      |                          |        |                    |       |      |        |        
|Resort Parks International                                               |                                      |                          |        |                    |       |      |        |        
|                                                                         | Revenues                             |                          |        | 942                |       |      |        | 888     |      
|                                                                         | Expenses                             |                          |        | (414               | )     |      |        | (395    | )    
|                                                                         |                                      |                          |        |                    |       |      |        |        
|Contribution from RPI                                                    |                                      |                          | 528    |                    |       |      | 493    |        
|                                                                         |                                      |                          |        |                    |       |      |        |        
|                                                                         | Other income                         |                          |        | 676                |       |      |        | 655     |      
|                                                                         | Corporate member services            |                          |        | (375               | )     |      |        | (302    | )    
|                                                                         | General and administrative expenses  |                          |        | (2,536             | )     |      |        | (2,393  | )    
|                                                                         | Other                                |                          |        | 22                 |       |      |        | 26      |      
|                                                                         |                                      |                          |        |                    |       |      |        |        
|                                                                         |                                      |                          | (2,213 | )                  |       |      | (2,014 | )      
|                                                                         |                                      |                          |        |                    |       |      |        |        
|Income before interest income and expense,
gain on asset sales and taxes |                                      |                          | 3,152  |                    |       |      | 2,814  |        
|                                                                         |                                      |                          |        |                    |       |      |        |        
|                                                                         | Interest income                      |                          |        | 610                |       |      |        | 524     |      
|                                                                         | Interest expense                     |                          |        | (2                 | )     |      |        | (5      | )    
|                                                                         | Loss on asset sales                  |                          |        | (4                 | )     |      |        | (18     | )    
|                                                                         |                                      |                          |        |                    |       |      |        |        
|Income before taxes                                                      |                                      | $                        | 3,756  |                    |       | $    | 3,315  |        
|                                                                         |                                      |                          |        |                    |       |      |        |         |      

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Operating Income.For the three months ended September 30, 2002, the Companys
contribution from operations was $3.2 million, compared with $2.8 million for
the same period last year. The increase in operating income resulted primarily
from increases in the contributions from the Companys sales operations, Trails
Management and RPI, partially offset by a decrease in the contribution from
campground operations and an increase in general and administrative expenses.
For this purpose, the contribution from operations is defined as income before
interest income and expenses, gains on asset sales and taxes. See the table on
the previous page for the elements of the contribution from operations and the
Companys operating income before taxes for the periods presented.

Campground Operations.The Companys operations are highly seasonal. The
Company receives the majority of the dues revenue from its members during the
winter, which 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.

Campground membership dues revenue was $10.1 million for both the three months
ended September 30, 2002 and 2001. Dues revenue remained constant because the effect
of the annual dues increase offset the net loss of campground members during
the year.

Other campground revenues were $6.5 million for the three months ended
September 30, 2002, compared with $6.8 million for the same period last year.
The related expenses were
$2.6 million for the three months ended September 30, 2002, compared with $2.8
million for the same period last year. Other campground revenues decreased
due primarily to decreases in revenues from the Companys food service programs
and usage fees. The related expenses decreased due primarily to decreases in
labor costs and the cost of goods sold.

Campground operating expenses were $10.6 million for the three months ended
September 30, 2002, compared with $10.3 million for the same period last year.
The increase in campground operating expenses in the current period was due
primarily to increases in labor costs, including a $226,000 increase in
insurance and employee benefits 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, or other opportunities arise consistent with the
needs of the members, the Company may close and dispose of additional
campgrounds and it will seek to decrease other expenses. Although the Company
believes that such changes would 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 three months ended September 30, 2002, the Company originated
membership contracts of $7.7 million, compared with $7.3 million for the same
period last year. In the current period, the Company originated the same
number of new membership contracts at a higher average price and a greater
number of membership upgrades to its existing members, compared with the prior
period. In the three months ended September 30, 2002, the Company originated
approximately 1,300 new membership contracts at an average price of $3,639,
compared with approximately 1,300 new membership contracts at an average price
of $3,124 in the prior period. In the current period, the Company also
originated approximately 1,000 upgrade contracts at an average price

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of $2,995, compared with approximately 950 contracts at the same average price
in the same period last year.

In the three months ended September 30, 2001, the Company offered existing
Thousand Trails and NACO members access to the Leisure Time campgrounds for a
fee, which resulted in 730 contracts at an average price of $246. The Company
also offered Leisure Time members access to the Thousand Trails and NACO
campgrounds for a fee, which resulted in 90 contracts at an average price of
$1,754.

The Company recognizes revenue from the sale of campground memberships that do
not convey a deeded interest in real estate, net of any related allowances, on
a straight-line basis over the expected life of the memberships sold. For the
three months ended September 30, 2002 and 2001, the Company recognized
campground membership sales revenues of $5.3 million and
$3.7 million, respectively. Membership sales revenue includes revenues of $4.4
million and
$2.7 million, respectively, that were deferred in prior periods. Moreover, for
these same periods, the Company deferred revenues of $6.8 million and $6.3
million, respectively, which will be recognized in future periods. The net
change in deferred revenue was $2.4 million this year, compared with $3.6
million last year, reflecting the slower rate of growth of membership contract
originations this year compared with prior years.

Selling expenses directly related to the sale of campground memberships,
substantially all of which are sales commissions, 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 three months ended September 30, 2002 and 2001, the
Company recognized selling expenses of $2.8 million and $2.1 million,
respectively. These amounts include expenses of $1.3 million and $831,000,
respectively, that were deferred in prior periods. Moreover, for these same
periods, the Company deferred expenses of $2.0 million and $1.9 million,
respectively, which will be recognized in future periods.

In the period ended September 30, 2002, the Companys sales revenues exceeded
selling and marketing expenses by $781,000, compared with the same period last
year when selling and marketing expenses exceeded sales revenues by $127,000.
During the current period, the percentage of revenue deferred from new
membership sales decreased, compared with the prior period, because the Company
originated a greater number of membership contracts with a shorter expected
life due to the sale of a greater number of upgrades. In the three months
ended September 30, 2001, selling and marketing expenses exceeded sales
revenues because the Company deferred more sales revenues than selling
expenses.

The Company incurs significant selling and marketing expenses to originate new
membership contracts, and the majority of these expenses 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 result, the Company generally incurs a loss from the sale of new
membership contracts. In contrast, the Company incurs substantially less
selling and marketing expenses to originate upgrade contracts, and these
expenses (substantially all of which are sales commissions) are generally
deferred and recognized on a straight-line basis over the expected life of the
memberships sold, as are the related sales revenue. As a result, the Company
generally has a positive contribution from the sale of upgrade contracts, which
offsets the loss from the sale of new membership contracts. Consequently, the
Company expects that sales

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revenue will exceed selling and marketing expenses for fiscal 2003, and until
the positive impact from the sale of upgrade contracts decreases.

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
current levels or acquire members through the purchase of other membership
campground operations, the membership base will continue to decline, 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.

Trails Management.Trails Management, a wholly owned subsidiary of the
Company, manages 240 public campgrounds for the U.S. Forest Service and other
entities. For the three months ended September 30, 2002, these operations
produced a net contribution of $643,000 on revenues of $3.2 million, compared
with a net contribution of $601,000 on revenues of
$3.3 million for the same period last year. The increase in the contribution
in the current period resulted from a decrease in overall expenses, primarily
maintenance costs, partially offset by a decrease in usage fees. Trails
Management receives most of its revenues and incurs most of its expenses during
the first fiscal quarter. During the balance of fiscal 2003, Trails
Managements revenues will decline significantly, while it will continue to
incur certain fixed costs, which will reduce its contribution for the full
fiscal year.

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 three months
ended September 30, 2002, RPIs operations produced a net contribution of
$528,000 on revenues of $942,000, compared with a net contribution of
$493,000 on revenues of $888,000 for the same period last year. The increase
in revenue in the current period resulted primarily from an increase in
directory sales, while membership fees remained constant. The increase in
operating expenses in the current period was due primarily to increases in the
cost of labor, operating supplies and insurance, partially offset by a decrease
in rental expense.

Interest Income and Expense.Interest income increased to $610,000 for the
three months ended September 30, 2002, from $524,000 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 growing portfolio of contracts receivable
and invested cash. The Companys portfolio of contracts receivable increased
over the past year as a result of the increase in membership sales,
approximately 40% of which are sold on an installment basis. The Company
expects the interest earned on its portfolio of contracts receivable and
invested cash to increase during the balance of fiscal 2003, compared with
historical levels, as the portfolio continues to grow and the Company
accumulates cash.

Interest expense decreased to $2,000 for the three months ended September 30,
2002, from $5,000 for the same period last year.

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Asset Sales.The Company recognized a loss of $4,000 on asset sales for the
three months ended September 30, 2002, compared with a loss of $18,000 for the
same period last year. The decrease in the current period was due to the
timing of asset sales. Over the next several years, the Company intends to
dispose of the remaining assets that it holds for sale.

Other Income.Other income generally consists of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, collections of written-off contracts and delinquent dues,
subscription fees received from members who subscribe to the Companys member
magazine, fees charged members for making more than five operator-assisted
reservations in a given year and fees received from third parties for billing
and collection services. Other income was $698,000 for the three months ended
September 30, 2002, compared with $681,000 for the same period last year. The
increase in the current period was due primarily to an increase in transfer
fees.

Other Expenses.Administrative expenses, including corporate member service
costs and general and administrative expenses, were $2.9 million for the three
months ended
September 30, 2002, compared with $2.7 million for the prior period. Expenses
increased in the current period due primarily to increases in maintenance costs
and depreciation on the Companys new computer and communication systems, and
higher labor and employee benefit costs. In addition, the Company recognized
compensation expense of $224,000 on the purchase of 29,200 shares of its common
stock from a member of the Companys Board of Directors. These increases were
partially offset by decreases in third-party legal fees and the elimination of
a $180,000 reserve relating to contracts receivable that are no longer
outstanding.

Income Taxes.The Companys current provision for income taxes was $1.4
million for the three months ended September 30, 2002, compared with $759,000
for the same period last year. The current provision for the three months
ended September 30, 2002 includes amounts for regular federal corporation
income tax as well as state income taxes in the various states where the
Company conducts its business. For the period ended September 30, 2001, the
Company did not have federal income taxes payable on a consolidated basis, with
the exception of federal alternative minimum taxes, due to its net operating
tax loss carryforwards. The Company fully utilized its tax loss carryforwards
in fiscal 2002. As a result, the Company anticipates that its current
provision for income taxes will be higher during the balance of fiscal 2003
than in prior periods.

The Company recorded a deferred tax provision of $14,000 for the three months
ended September 30, 2002, compared with $403,000 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.




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 September 30, 2002 is not significant. The
information required by Item 305 of Regulation S-K is contained in Item 2 
Managements Discussion and Analysis of Financial Condition and Results of
Operations under the heading Market Risk and Interest Rate Sensitivity.

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Item 4. Controls and Procedures

Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Companys
management, including the Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Companys Chief Executive Officer and Chief Financial
Officer have concluded that the Companys disclosure controls and procedures
are effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) required to be included in
the Companys periodic SEC filings. The Company has not made any significant
changes in its disclosure controls and procedures or in other factors that
could significantly affect its disclosure controls and procedures subsequent to
the date of the evaluation described above.




Part II. OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K

Exhibits

The following documents are filed as exhibits to this report.

|        |  |                                                  |  |  |  |  |  | 
|------- |  | ------------------------------------------------ |  |  |  |  |  | 
|Exhibit |  |                                                  |  |  |  |  |  | 
|Number  |  | Description                                      |  |  |  | 
|        |  |                                                  |  |  |  | 
|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 September 30, 2002.

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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: |  | November 12, 2002 |  | By:                   |  | /s/ William J. ShawWilliam J. Shaw
President and Chief Executive Officer
|     
|Date: |  | November 12, 2002 |  | By:                   |  | /s/ Bryan D. ReedBryan D. Reed
Chief Financial and Accounting Officer   

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CERTIFICATIONS

I, William J. Shaw, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Thousand Trails, Inc.

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date.

5.     The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
the registrants board of directors (or persons performing the equivalent
function):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

|      |  |                   |  |     |  |                                                           
|----- |  | ----------------- |  | --- |  | ----------------------------------------------------------
|Date: |  | November 12, 2002 |  | By: |  | /s/ William J. ShawWilliam J. Shaw
Chief Executive Officer

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I, Bryan D. Reed, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Thousand Trails, Inc.

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date.

5.     The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
the registrants board of directors (or persons performing the equivalent
function):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|      |  |                   |  |     |  |                                                                      
|----- |  | ----------------- |  | --- |  | ---------------------------------------------------------------------
|Date: |  | November 12, 2002 |  | By: |  | /s/ Bryan D. ReedBryan D. Reed
Chief Financial and Accounting Officer

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Index to the Exhibits

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

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