##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2000

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.

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No

The number of shares of Common Stock, par value $.01, issued and outstanding as
of November 13, 2000, was 8,084,374.





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TABLE OF CONTENTS



|                                                  |                                          |  |  |  |  |  |  | 
|------------------------------------------------- | ---------------------------------------- |  |  |  |  |  |  | 
|                                                  | PART 1. FINANCIAL INFORMATION           
|                                                  | Item 1. Financial Statements            
|Consolidated Balance Sheets                      
|Consolidated Statements of Operations            
|Consolidated Statement of Shareholders Equity   
|Consolidated Statements of Cash Flows            
|Consolidated Statements of Cash Flows (continued)
|Notes to Consolidated Financial Statements       
|Summary of Operating Results                     
|                                                  | Part II. OTHER INFORMATION              
|                                                  | Item 6. Exhibits and Reports on Form 8-K
|EX-11.1 Computation of Per Share Earnings        
|EX-27.1 Financial Data Schedule                  



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Thousand Trails, Inc.

Index

|                              |                                                                                                 |                                                                                                              |  |      |   | 
|----------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ |  | ---- | - | 
|                              |                                                                                                 |                                                                                                              |  | Page
|Part I. Financial Information
|                             
|                             
|                             
|                             
|                              | Item 1. Financial Statements                                                                   
|                             
|                             
|                             
|                             
|                              |                                                                                                 | Consolidated Balance Sheets as of September 30, 2000
and  June 30, 2000                                      |  |      | 3 | 
|                             
|                             
|                             
|                             
|                              |                                                                                                 | Consolidated Statements of Operations for the three months ended
  September 30, 2000 and September 30, 1999 |  |      | 4 | 
|                             
|                             
|                             
|                             
|                              |                                                                                                 | Consolidated Statement of Shareholders Equity for the three months
  ended September 30, 2000               |  |      | 5 | 
|                             
|                             
|                             
|                             
|                              |                                                                                                 | Consolidated Statements of Cash Flows for the three months ended
  September 30, 2000 and September 30, 1999 |  |      | 6 | 
|                             
|                             
|                             
|                             
|                              |                                                                                                 | Notes to Consolidated Financial Statements                                                                   |  |      | 8 | 
|                             
|                             
|                             
|                             
|                              | Item 2. Managements Discussion and Analysis of
Financial Condition   and Results of Operations |                                                                                                              |  | 14   |  
|                             
|                             
|                             
|                             
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                              |                                                                                                              |  | 22   |  
|                             
|                             
|                             
|                             
|PART II. OTHER INFORMATION   
|                             
|                             
|                             
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                                                        |                                                                                                              |  | 23   |  

Page 2



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##### Table of Contents






PART 1. FINANCIAL INFORMATION




Item 1. Financial Statements

Thousand Trails, Inc. and Subsidiaries




|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |          |        |        |  | 
|------------------------------------------ | ------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------------------------------------ | ------ | ------------- | ------ | -------- | ------ | ------ |  | 
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        | September 30, |        | June 30,
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        | 2000          |        | 2000    
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |         
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        | (Unaudited)  
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            | Assets                               |        |              
|                                          
|                                          
|                                          
|                                          
|Current Assets                            
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents |                                                                                                                                                                                                                                                                                                        | $                          | 1,338                                |        |               | $      | 2,420    |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Current portion of receivables, net of allowance of $1.0
million and   $.9 million, respectively                                                                                                                                                                                                       |                            |                                      | 1,796  |               |        |          | 1,668  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Current portion of deferred membership selling expenses                                                                                                                                                                                                                                                |                            |                                      | 1,715  |               |        |          | 1,387  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Current portion of net deferred tax assets                                                                                                                                                                                                                                                             |                            |                                      | 3,829  |               |        |          | 3,780  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Other current assets                                                                                                                                                                                                                                                                                   |                            |                                      | 2,105  |               |        |          | 2,105  |       
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |          |       
|                                           |                           |                                                                                                                                                                                                                                                                                                        | Total Current Assets       |                                      |        | 10,783        |        |          |        | 11,360 | 
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Restricted cash                                                                                                                                                                                                                                                                                        |                            |                                      | 1,106  |               |        |          | 1,320  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Receivables, net of allowances and discount of $1.2
million and $1.0 million,  respectively                                                                                                                                                                                                            |                            |                                      | 5,058  |               |        |          | 4,107  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Campground land                                                                                                                                                                                                                                                                                        |                            |                                      | 22,981 |               |        |          | 22,981 |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Buildings and equipment, net of accumulated depreciation of
$20.8 million  and $20.1 million, respectively                                                                                                                                                                                             |                            |                                      | 22,106 |               |        |          | 22,396 |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Land held for sale                                                                                                                                                                                                                                                                                     |                            |                                      | 2,965  |               |        |          | 2,965  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Deferred membership selling expenses                                                                                                                                                                                                                                                                   |                            |                                      | 4,685  |               |        |          | 3,790  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Net deferred tax assets                                                                                                                                                                                                                                                                                |                            |                                      | 4,711  |               |        |          | 5,362  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Other assets                                                                                                                                                                                                                                                                                           |                            |                                      | 581    |               |        |          | 234    |       
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |         
|Total Assets                               |                           | $                                                                                                                                                                                                                                                                                                      | 74,976                     |                                      |        | $             | 74,515 |         
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |          |       
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            | Liabilities and Shareholders Equity
|                                          
|                                          
|                                          
|                                          
|Current Liabilities                       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Accounts payable                                                                                                                                                                                                                                                                                       |                            | $                                    | 1,752  |               |        | $        | 1,904  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Accrued interest                                                                                                                                                                                                                                                                                       |                            |                                      | 99     |               |        |          | 103    |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Other accrued liabilities                                                                                                                                                                                                                                                                              |                            |                                      | 7,196  |               |        |          | 7,498  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Current portion of long-term debt                                                                                                                                                                                                                                                                      |                            |                                      | 3,072  |               |        |          | 2,905  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Accrued construction cost                                                                                                                                                                                                                                                                              |                            |                                      | 1,888  |               |        |          | 1,888  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Current portion of deferred revenue                                                                                                                                                                                                                                                                    |                            |                                      | 17,376 |               |        |          | 21,977 |       
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |          |       
|                                           |                           |                                                                                                                                                                                                                                                                                                        | Total Current Liabilities  |                                      |        | 31,383        |        |          |        | 36,275 | 
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Long-term debt                                                                                                                                                                                                                                                                                         |                            |                                      | 7,877  |               |        |          | 7,043  |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Deferred revenue                                                                                                                                                                                                                                                                                       |                            |                                      | 14,804 |               |        |          | 12,106 |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Deferred tax credit                                                                                                                                                                                                                                                                                    |                            |                                      | 216    |               |        |          |       |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Other liabilities                                                                                                                                                                                                                                                                                      |                            |                                      | 1,044  |               |        |          | 982    |       
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |          |       
|                                           |                           |                                                                                                                                                                                                                                                                                                        | Total Liabilities          |                                      |        | 55,324        |        |          |        | 56,406 | 
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |         
|Commitments and Contingencies             
|                                          
|                                          
|                                          
|                                          
|Shareholders Equity                      
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Preferred stock, $.01 par value, 1,500,000 shares
authorized, none issued or  outstanding
Common stock, $.01 par value, 15,000,000 shares
authorized,  8,084,374 and 7,980,592 shares issued and
outstanding, respectively, after  deducting 189,454 and
190,736 shares held in Treasury, respectively |                            |                                      | 81     |               |        |          | 80     |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Additional paid-in capital                                                                                                                                                                                                                                                                             |                            |                                      | 21,153 |               |        |          | 21,080 |       
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Accumulated deficit subsequent to December 31, 1991, date
of emergence  from bankruptcy                                                                                                                                                                                                                |                            |                                      | (1,444 | )             |        |          | (2,914 | )     
|                                          
|                                          
|                                          
|                                          
|                                           |                           | Accumulated other comprehensive loss                                                                                                                                                                                                                                                                   |                            |                                      | (138   | )             |        |          | (137   | )     
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |          |       
|                                           |                           |                                                                                                                                                                                                                                                                                                        | Total Shareholders Equity |                                      |        | 19,652        |        |          |        | 18,109 | 
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |         
|Total Liabilities and Shareholders Equity |                           | $                                                                                                                                                                                                                                                                                                      | 74,976                     |                                      |        | $             | 74,515 |         
|                                           |                           |                                                                                                                                                                                                                                                                                                        |                            |                                      |        |               |        |          |       

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

Page 3



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##### Table of Contents



Thousand Trails, Inc. and Subsidiaries




|                                               |                                      |                          |                |        |                                          |        |       |        |       |        | 
|---------------------------------------------- | ------------------------------------ | ------------------------ | -------------- | ------ | ---------------------------------------- | ------ | ----- | ------ | ----- | ------ | 
|                                               |                                      |                          |                |        | For the three months ended September 30,
|                                               |                                      |                          |                |        |                                         
|                                               |                                      |                          |                |        | 2000                                     |        | 1999 
|                                               |                                      |                          |                |        |                                          |        |      
|Revenues                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership contracts originated      |                          | $              | 6,158  |                                          |        | $     | 2,150  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred revenue           |                          |                | (3,818 | )                                        |        |       | (1,106 | )    
|                                               |                                      |                          |                |        |                                          |        |       |       
|                                               |                                      | Membership sales revenue |                |        | 2,340                                    |        |       |        | 1,044 |       
|                                              
|                                              
|                                              
|                                              
|                                               | Membership dues                      |                          |                | 10,086 |                                          |        |       | 9,047  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Other campground revenue             |                          |                | 8,554  |                                          |        |       | 7,831  |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership fees                  |                          |                | 912    |                                          |        |       | 835    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest income                      |                          |                | 418    |                                          |        |       | 295    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Gain on asset sales                  |                          |                | 150    |                                          |        |       | 4      |      
|                                              
|                                              
|                                              
|                                              
|                                               | Other income                         |                          |                | 850    |                                          |        |       | 777    |      
|                                               |                                      |                          |                |        |                                          |        |       |       
|                                               |                                      |                          | Total Revenues |        |                                          | 23,310 |       |        |       | 19,833 | 
|                                               |                                      |                          |                |        |                                          |        |       |       
|Expenses                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Campground operating expenses        |                          |                | 14,297 |                                          |        |       | 12,710 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership origination costs         |                          |                | 2,854  |                                          |        |       | 1,140  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred origination costs |                          |                | (1,223 | )                                        |        |       | (252   | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Marketing expenses                   |                          |                | 1,494  |                                          |        |       | 846    |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership expenses              |                          |                | 436    |                                          |        |       | 517    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Corporate member services            |                          |                | 361    |                                          |        |       | 369    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest expense and amortization    |                          |                | 336    |                                          |        |       | 296    |      
|                                              
|                                              
|                                              
|                                              
|                                               | General and administrative expenses  |                          |                | 2,293  |                                          |        |       | 2,070  |      
|                                               |                                      |                          |                |        |                                          |        |       |       
|                                               |                                      |                          | Total Expenses |        |                                          | 20,848 |       |        |       | 17,696 | 
|                                               |                                      |                          |                |        |                                          |        |       |       
|Income Before Income Taxes                     |                                      |                          | 2,462          |        |                                          |        | 2,137 |       
|                                              
|                                              
|                                              
|                                              
|Income Taxes                                 
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision
 current       |                          |                | (174   | )                                        |        |       | (141   | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision  deferred      |                          |                | (818   | )                                        |        |       | (702   | )    
|                                               |                                      |                          |                |        |                                          |        |       |       
|                                               |                                      |                          | (992           | )      |                                          |        | (843  | )     
|                                              
|                                              
|                                              
|                                              
|Net Income                                     |                                      | $                        | 1,470          |        |                                          | $      | 1,294 |       
|                                               |                                      |                          |                |        |                                          |        |       |       
|Net Income per Share  Basic                   |                                      | $                        | .18            |        |                                          | $      | .16   |       
|                                               |                                      |                          |                |        |                                          |        |       |       
|Net Income per Share  Diluted                 |                                      | $                        | .17            |        |                                          | $      | .15   |       
|                                               |                                      |                          |                |        |                                          |        |       |       
|Shares Used to Calculate Net Income Per Share:
|                                              
|                                              
|                                              
|                                              
|                                               | Basic                                |                          |                | 8,010  |                                          |        |       | 7,983  |      
|                                               |                                      |                          |                |        |                                          |        |       |       
|                                               | Diluted                              |                          |                | 8,570  |                                          |        |       | 8,622  |      
|                                               |                                      |                          |                |        |                                          |        |       |       

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

Page 4



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##### Table of Contents



Thousand Trails, Inc. and Subsidiaries




|                                                           |  |        |    |         |  |             |        |               |  |       |        |       |  |             |      |   |  |   |        |  
|---------------------------------------------------------- |  | ------ | -- | ------- |  | ----------- | ------ | ------------- |  | ----- | ------ | ----- |  | ----------- | ---- | - |  | - | ------ | -
|                                                           |  |        |    |         |  |             |        |               |  |       |        |       |  | Accumulated
|                                                           |  |        |    |         |  | Additional  |        |               |  |       |        | Other
|                                                           |  | Common |    | Paid-In |  | Accumulated |        | Comprehensive
|                                                           |  | Stock  |    | Capital |  | Deficit     |        | Loss          |  | Total
|                                                           |  |        |    |         |  |             |        |               |  |      
|Balance, June 30, 2000                                     |  | $      | 80 |         |  | $           | 21,080 |               |  | $     | (2,914 | )     |  | $           | (137 | ) |  | $ | 18,109 |  
|                                                          
|                                                          
|                                                          
|                                                          
|Issuance of common stock                                   |  |        | 1  |         |  |             | 84     |               |  |       |       |       |  |             |     |   |  |   | 85     |  
|                                                          
|                                                          
|                                                          
|                                                          
|Purchase of treasury stock                                 |  |        |   |         |  |             | (11    | )             |  |       |       |       |  |             |     |   |  |   | (11    | )
|                                                          
|                                                          
|                                                          
|                                                          
|Other Comprehensive Loss                                   |  |        |   |         |  |             |       |               |  |       |       |       |  |             | (1   | ) |  |   | (1     | )
|                                                          
|                                                          
|                                                          
|                                                          
|Net income for the three
months ended   September 30, 2000 |  |        |   |         |  |             |       |               |  |       | 1,470  |       |  |             |     |   |  |   | 1,470  |  
|                                                           |  |        |    |         |  |             |        |               |  |       |        |       |  |             |      |   |  |   |        |  
|Comprehensive Income                                       |  |        |    |         |  |             |        |               |  |       |        |       |  |             |      |   |  |   | 1,469  |  
|                                                           |  |        |    |         |  |             |        |               |  |       |        |       |  |             |      |   |  |   |        |  
|Balance, September 30, 2000                                |  | $      | 81 |         |  | $           | 21,153 |               |  | $     | (1,444 | )     |  | $           | (138 | ) |  | $ | 19,652 |  
|                                                           |  |        |    |         |  |             |        |               |  |       |        |       |  |             |      |   |  |   |        |  

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

Page 5



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##### Table of Contents



Thousand Trails, Inc. and Subsidiaries




|                                          |                                                                  |  |        |         |   |                                          |      |         |   |  |  | 
|----------------------------------------- | ---------------------------------------------------------------- |  | ------ | ------- | - | ---------------------------------------- | ---- | ------- | - |  |  | 
|                                          |                                                                  |  |        |         |   | For the three months ended September 30,
|                                          |                                                                  |  |        |         |   |                                         
|                                          |                                                                  |  |        |         |   | 2000                                     |      | 1999   
|                                          |                                                                  |  |        |         |   |                                          |      |        
|CASH FLOWS FROM OPERATING ACTIVITIES:    
|                                         
|                                         
|                                         
|                                         
|                                          | Collections of principal on receivables                          |  | $      | 1,082   |   |                                          | $    | 779     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Interest received                                                |  |        | 391     |   |                                          |      | 265     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Interest paid                                                    |  |        | (335    | ) |                                          |      | (296    | )
|                                         
|                                         
|                                         
|                                         
|                                          | General and administrative and
corporate member services   costs |  |        | (2,971  | ) |                                          |      | (2,450  | )
|                                         
|                                         
|                                         
|                                         
|                                          | Cash collected from
operations, including deferred  revenue      |  |        | 15,208  |   |                                          |      | 14,200  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Cash from sales of memberships                                   |  |        | 3,417   |   |                                          |      | 1,467   |  
|                                         
|                                         
|                                         
|                                         
|                                          | Expenditures for property operations                             |  |        | (13,647 | ) |                                          |      | (11,599 | )
|                                         
|                                         
|                                         
|                                         
|                                          | Expenditures for sales and marketing                             |  |        | (3,902  | ) |                                          |      | (1,998  | )
|                                         
|                                         
|                                         
|                                         
|                                          | Expenditures for insurance premiums                              |  |        | (1,267  | ) |                                          |      | (901    | )
|                                         
|                                         
|                                         
|                                         
|                                          | Payment of income taxes                                          |  |        | (100    | ) |                                          |      | (15     | )
|                                         
|                                         
|                                         
|                                         
|                                          | Other, net                                                       |  |        | 214     |   |                                          |      | (242    | )
|                                          |                                                                  |  |        |         |   |                                          |      |         |   |  |  | 
|Net cash used in operating activities     |                                                                  |  | (1,910 | )       |   |                                          | (790 | )      
|                                          |                                                                  |  |        |         |   |                                          |      |         |   |  |  | 
|CASH FLOWS FROM INVESTING
ACTIVITIES:    
|                                          | Capital expenditures                                             |  |        | (430    | ) |                                          |      | (218    | )
|                                         
|                                         
|                                         
|                                         
|                                          | Proceeds from asset sales                                        |  |        | 183     |   |                                          |      | 4       |  
|                                          |                                                                  |  |        |         |   |                                          |      |         |   |  | 
|Net cash used in investing activities     |                                                                  |  | (247   | )       |   |                                          | (214 | )      
|                                          |                                                                  |  |        |         |   |                                          |      |         |   | 
|CASH FLOWS FROM FINANCING
ACTIVITIES:    
|                                          | Net borrowings under Credit Agreement                            |  |        | 1,025   |   |                                          |      | 669     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Purchase of treasury stock                                       |  |        | (11     | ) |                                          |      | (564    | )
|                                         
|                                         
|                                         
|                                         
|                                          | Payment of notes                                                 |  |        | (24     | ) |                                          |      |        |  
|                                         
|                                         
|                                         
|                                         
|                                          | Issuance of common stock                                         |  |        | 85      |   |                                          |      | 4       |  
|                                          |                                                                  |  |        |         |   |                                          |      |         |   | 
|Net cash provided by financing activities |                                                                  |  | 1,075  |         |   |                                          | 109  |        
|                                          |                                                                  |  |        |         |   |                                          |      |         |   | 
|DECREASE IN CASH AND CASH EQUIVALENTS     |                                                                  |  | (1,082 | )       |   |                                          | (895 | )      
|                                         
|                                         
|                                         
|                                         
|CASH AND CASH
EQUIVALENTS                
|                                          | Beginning of period                                              |  |        | 2,420   |   |                                          |      | 2,197   |  
|                                          |                                                                  |  |        |         |   |                                          |      |         |   |  |  | 
|                                          | End of period                                                    |  | $      | 1,338   |   |                                          | $    | 1,302   |  
|                                          |                                                                  |  |        |         |   |                                          |      |         |   |  |  | 

 continued 

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##### Table of Contents



Thousand Trails, Inc. and Subsidiaries




|                                                                                |                                                                           |   |                                          |        |      |   |        |        |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | - | ---------------------------------------- | ------ | ---- | - | ------ | ------ | -
|                                                                                |                                                                           |   | For the three months ended September 30,
|                                                                                |                                                                           |   |                                         
|                                                                                |                                                                           |   | 2000                                     |        | 1999
|                                                                                |                                                                           |   |                                          |        |     
|Reconciliation of net
income to net cash  provided by
operating activities:    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Net Income                                                                      |                                                                           | $ | 1,470                                    |        |      | $ | 1,294  |       
|                                                                                |                                                                           |   |                                          |        |      |   |        |       
|Adjustments to reconcile
net income to net  cash used in
operating activities 
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Depreciation                                                              |   |                                          | 687    |      |   |        | 645    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Bad debt provision                                                        |   |                                          | 422    |      |   |        | 17     |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Amortization of interest yield, collection
costs  and
valuation allowance |   |                                          |       |      |   |        | (57    | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Change in deferred sales revenue                                          |   |                                          | 3,818  |      |   |        | 1,106  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Change in deferred membership origination  costs                          |   |                                          | (1,223 | )    |   |        | (252   | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Gain on asset sales                                                       |   |                                          | (150   | )    |   |        | (4     | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Deferred income tax provision                                             |   |                                          | 818    |      |   |        | 702    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Decrease in restricted cash                                               |   |                                          | 214    |      |   |        | 242    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Decrease (increase) in receivables                                        |   |                                          | (1,502 | )    |   |        | 34     |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Decrease (increase) in other assets                                       |   |                                          | (347   | )    |   |        | 1,053  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Increase (decrease) in accounts payable                                   |   |                                          | (152   | )    |   |        | 228    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Decrease in accrued interest                                              |   |                                          | (4     | )    |   |        | (13    | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Decrease in deferred dues                                                 |   |                                          | (5,222 | )    |   |        | (5,108 | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Decrease in other liabilities                                             |   |                                          | (739   | )    |   |        | (677   | )
|                                                                                |                                                                           |   |                                          |        |      |   |        |       
|Total adjustments                                                               |                                                                           |   | (3,380                                   | )      |      |   | (2,084 | )     
|                                                                                |                                                                           |   |                                          |        |      |   |        |       
|Net cash used in operating activities                                           |                                                                           | $ | (1,910                                   | )      |      | $ | (790   | )     
|                                                                                |                                                                           |   |                                          |        |      |   |        |       

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

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Thousand Trails, Inc. and Subsidiaries




NOTE 1  NATURE OF OPERATIONS

Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(collectively, the Company) own and operate 63 membership-based campgrounds
located in 17 states and British Columbia, Canada. In addition, the Company
provides a reciprocal use program for members of approximately 300 recreational
facilities and manages 169 public campgrounds for the U.S. Forest Service.
Operating revenues consist primarily of membership dues received from
campground members, fee revenue from members of the reciprocal use program,
management fees from the campground management operations, and guest fees and
revenues received from the campground and other operations.

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

The accompanying consolidated financial statements of the Company have not been
examined by independent accountants, but in the opinion of management, the
unaudited interim financial statements furnished herein reflect all
adjustments, which are necessary for a fair presentation of the results for the
interim periods. All such adjustments are of a normal recurring nature.

This Quarterly Report on Form 10-Q should be read in conjunction with the
Companys Annual Report on Form 10-K for the year ended June 30, 2000, filed
with the Securities and Exchange Commission (the SEC) on September 28, 2000.

The Company emerged from proceedings under Chapter 11 of the Bankruptcy Code on
December 31, 1991, pursuant to a confirmed plan of reorganization. Due to the
Companys emergence from bankruptcy, the Company adopted fresh start reporting,
under which a new reporting entity was created and assets and liabilities were
restated to reflect their reorganization value which approximated fair value at
the date of reorganization.

All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the three
month periods ended September 30, 2000 and 1999, and in the consolidated
balance sheet as of June 30, 2000.

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

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NOTE 2  BUSINESS COMBINATION

On December 16, 1999, the Company acquired all of the outstanding capital stock
of Leisure Time, which owns and operates 10 membership campgrounds in
Washington and Oregon serving approximately 15,000 members. Leisure Time
operates a separate system of campgrounds from the Companys other
membership-based campground systems.

The purchase price for the stock of Leisure Time was approximately $7.7 million
in cash. In connection with the acquisition, the Company also paid in full all
of the outstanding real estate debt on Leisure Times campgrounds, which
totaled approximately $2.3 million.

The acquisition of Leisure Time was accounted for as a purchase transaction;
accordingly, operating results for Leisure Time are reported from the date of
acquisition. No goodwill was recorded on the acquisition because the purchase
price did not exceed the estimated values of the identifiable assets received
less liabilities assumed. The allocation of the purchase price of Leisure Time
is based on preliminary estimates of fair value, and may be revised at a later
date.

NOTE 3  COMPREHENSIVE INCOME

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

The following table provides statements of comprehensive income for the three
months ended September 30, 2000 and 1999 (dollars in thousands):

|                                        |  |                            |       |      |  |   |       | 
|--------------------------------------- |  | -------------------------- | ----- | ---- |  | - | ----- | 
|                                        |  | For the three months ended
|                                        |  | September 30,             
|                                        |  |                           
|                                        |  | 2000                       |       | 1999
|                                        |  |                            |       |     
|                                        |  | (Unaudited)               
|Net Income                              |  | $                          | 1,470 |      |  | $ | 1,294 | 
|                                       
|                                       
|                                       
|                                       
|Foreign Currency Translation Adjustment |  |                            | (1    | )    |  |   |      | 
|                                        |  |                            |       |      |  |   |       | 
|Comprehensive Income                    |  | $                          | 1,469 |      |  | $ | 1,294 | 
|                                        |  |                            |       |      |  |   |       | 

NOTE 4  SEGMENT REPORTING

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

The campgrounds segment consists of 63 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

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interests related to fee simple sales of interests in campground facilities,
and (iii) net revenues earned from operations at the campgrounds. Separate
information regarding Canadian campground operations is not presented as
revenues and identifiable assets related to the Canadian operations are less
than 10% of the related consolidated amounts for the periods presented.

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

Trails Management manages 169 public campgrounds for the U.S. Forest Service.
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.

|                                  |  |                                       |        |     |  |            |     |           |  |              |       |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | ------------------------------------- | ------ | --- |  | ---------- | --- | --------- |  | ------------ | ----- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Three months ended September 30, 2000
|                                  |  |                                      
|                                  |  |                                       |        |     |  |            |     |           |  | Trails       |       | Corporate
|                                  |  | Campgrounds                           |        | RPI |  | Management |     | and Other |  | Consolidated
|                                  |  |                                       |        |     |  |            |     |           |  |             
|Operating revenues                |  | $                                     | 16,710 |     |  | $          | 912 |           |  | $            | 1,930 |           |  | $ | 52     |   |  | $ | 19,604 | 
|                                 
|                                 
|                                 
|                                 
|Membership sales
revenue          |  |                                       | 2,340  |     |  |            |    |           |  |              |      |           |  |   |       |   |  |   | 2,340  | 
|                                 
|                                 
|                                 
|                                 
|Income (loss)
before income taxes |  |                                       | 3,125  |     |  |            | 476 |           |  |              | 433   |           |  |   | (1,572 | ) |  |   | 2,462  | 

|                                  |  |                                       |        |     |  |            |     |           |  |              |       |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | ------------------------------------- | ------ | --- |  | ---------- | --- | --------- |  | ------------ | ----- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Three months ended September 30, 1999
|                                  |  |                                      
|                                  |  |                                       |        |     |  |            |     |           |  | Trails       |       | Corporate
|                                  |  | Campgrounds                           |        | RPI |  | Management |     | and Other |  | Consolidated
|                                  |  |                                       |        |     |  |            |     |           |  |             
|Operating revenues                |  | $                                     | 15,114 |     |  | $          | 835 |           |  | $            | 1,764 |           |  | $ | 76     |   |  | $ | 17,789 | 
|                                 
|                                 
|                                 
|                                 
|Membership sales
revenue          |  |                                       | 1,044  |     |  |            |    |           |  |              |      |           |  |   |       |   |  |   | 1,044  | 
|                                 
|                                 
|                                 
|                                 
|Income (loss)
before income taxes |  |                                       | 3,113  |     |  |            | 318 |           |  |              | 365   |           |  |   | (1,659 | ) |  |   | 2,137  | 

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##### Table of Contents



NOTE 5  NET INCOME PER SHARE

The table below sets forth the information necessary to compute basic and
diluted net income per share for the three months ended September 30, 2000 and
1999, 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,             
|                                            |                  |   |                           
|                                            |                  |   | 2000                       |     | 1999
|                                            |                  |   |                            |     |     
|                                            |                  |   | (Unaudited)               
|Net Income                                  |                  | $ | 1,470                      |     |      | $ | 1,294 |    
|                                            |                  |   |                            |     |      |   |       |    
|Weighted Average Number of Shares  Basic   |                  |   | 8,010                      |     |      |   | 7,983 |    
|                                           
|                                           
|                                           
|                                           
|                                            | Dilutive Options |   |                            | 560 |      |   |       | 639 | 
|                                            |                  |   |                            |     |      |   |       |    
|Weighted Average Number of Shares  Diluted |                  |   | 8,570                      |     |      |   | 8,622 |    
|                                            |                  |   |                            |     |      |   |       |    
|Net Income Per Share  Basic                |                  | $ | .18                        |     |      | $ | .16   |    
|                                            |                  |   |                            |     |      |   |       |    
|Net Income Per Share  Diluted              |                  | $ | .17                        |     |      | $ | .15   |    
|                                            |                  |   |                            |     |      |   |       |    

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

NOTE 6  LONG TERM DEBT

On September 30, 2000, the Company had $10.6 million of outstanding borrowings
under its Credit Agreement with Foothill, and it had the ability to borrow an
additional $3.7 million for working capital purposes. Under the Credit
Agreement, the first $15.0 million of borrowings bear interest at prime plus
 .25% per annum, borrowings over $15.0 million and up to $25.0 million bear interest at prime plus .50% per annum, and borrowings over
$25.0 million bear interest at prime plus 1.5% per annum, subject to a minimum
interest rate of 7% per annum. All borrowings under the Credit Agreement will
mature on January 17, 2003.

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

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

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to certain limitations, have granted liens on substantially all of their assets
to secure their guarantees.

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

NOTE 7  CONTINGENCIES

General Liability Insurance
Commencing July 1, 1998, the Company obtained insurance covering general
liability losses up to an annual limit of $27.0 million, with no self-insured
deductible. Prior to this date, the Companys insurance covered general
liability losses up to an annual limit of $26.8 million, but required 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
known and unknown claims related to uninsured general liability risks based on
actuarial estimates. As of September 30, 2000 and June 30, 2000, the Companys
recorded liability for estimated losses related to uninsured general liability
claims totaled approximately $638,000 and $650,000, respectively, which is
included in other liabilities in the accompanying consolidated balance sheets.

Declining Membership Base
The Company derives a significant portion of its ongoing operating revenue from
its campground members (93% in fiscal 2000). The Companys membership base has
declined over the past five fiscal years. Although the acquisition of Leisure
Time increased the size of the membership base, the Company expects that,
notwithstanding new sales, the membership base will continue to decline at the
rate of approximately 3% per year. The Company attributes this attrition
principally to its aging membership base, of whom approximately 50% are senior
citizens. Moreover, the Company estimates that the memberships sold in recent
fiscal years will have an expected life that is shorter than the expected life
of the memberships previously sold by the Company. To stop the continuing
decline in the Companys membership base, the Company must increase its
campground membership sales over current levels or acquire members through the
purchase of other membership campground organizations, similar to the
acquisition of Leisure Time.

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

LitigationFoxwood Property Owners Association, Inc. vs. Foxwood Corporation, filed on
February 18, 1999 in the Court of Common Pleas of Oconee County, South
Carolina, under Case
No. 99-37-CP-88. In this action, the plaintiff brought suit against a
subsidiary of the Company alleging that the defendant owes the plaintiff in
excess of $2.5 million for past due maintenance fees on subdivided lots owned
by the defendant. The defendant denies the claim and is vigorously defending
the lawsuit. Although discovery in this lawsuit has not been completed,
management does not believe that it will have a material adverse impact on the
Companys operations or financial position.

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##### Table of Contents



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

NOTE 8  SUPPLEMENTAL CASH FLOW INFORMATION

The Company had no non-cash investing or financing activities as defined by
Statement of Financial Accounting Standards No. 95 during the three month
periods ended September 30, 2000 and 1999.

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##### Table of Contents



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

The following discussion should be read in conjunction with the Managements
Discussion and Analysis of Financial Condition and Results of Operations
included in the Companys Annual Report on Form 10-K for the year ended June
30, 2000, filed with the SEC on September 28, 2000.

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

In this Managements Discussion and Analysis of Financial Condition and Results
of Operations, and elsewhere in this report, the Company makes certain
statements as to its expected financial condition, results of operations, cash
flows, and business strategies, plans and conditions for periods after
September 30, 2000. All of these statements are forward-looking statements
made pursuant to the safe harbor provisions of Section 21 (E) of the Securities
Exchange Act of 1934, as amended. These statements are not historical and
involve risks and uncertainties. The Companys actual financial condition,
results of operations, cash flows, and business strategies, plans, and
conditions for future periods may differ materially due to several factors,
including but not limited to the Companys ability to control costs, campground
market conditions and other factors affecting the Companys sales and marketing
plan, the actual rate of decline in the campground membership base, the actual
use of the campgrounds by members and guests, the effects on members and guests
of the Companys efforts to downsize its business, the Companys success in
collecting its contracts receivable and selling assets, the Companys success
in acquiring members through the purchase of other membership campground
operations, and the other factors affecting the Companys operations described
in this report.

LIQUIDITY AND CAPITAL RESOURCES

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

Over the past several years, the Companys membership base has been declining.
In response to this decline, 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,
the Company may close and dispose of additional campgrounds and it will seek to
decrease other expenses. At the same time, the Company intends to expand its
sales and marketing efforts with a view to stopping the membership decline.
The Company has also acquired members through the purchase of Leisure Time, and
it intends to explore the possible

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##### Table of Contents



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

Acquisition of Leisure Time. On December 16, 1999, the Company acquired all of
the outstanding capital stock of Leisure Time, which owns and operates 10
membership campgrounds in Washington and Oregon serving approximately 15,000
members. Leisure Time operates a separate system of campgrounds from the
Companys other membership-based campground systems.

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

Cash. On September 30, 2000, the Company had $1.3 million of cash and cash
equivalents, a decrease of $1.1 million from June 30, 2000. During the three
months ended September 30, 2000, the Companys operating activities used $1.9
million of cash, its investing activities used $247,000 of cash, and its
financing activities produced $1.1 million of cash. The Companys investing
activities consisted of $430,000 in capital expenditures at the campgrounds,
partially offset by $183,000 in proceeds from the sale of assets. The
Companys financing activities consisted primarily of net borrowings of $1.0
million under the Credit Agreement with Foothill, proceeds of $85,000 from the
issuance of common stock, and a payment of $11,000 for the purchase of 2,500
shares of common stock.

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.

With respect to the Companys operating activities, for the three months ended
September 30, 2000, the principal sources of operating cash were $15.2 million
from operations, $1.5 million in principal and interest collections on
contracts receivable, and $3.4 million from sales of campground memberships.
Principal uses of operating cash for the three months ended September 30, 2000,
were $13.6 million in operating expenses, $3.0 million in administrative
expenses (including general and administrative expenses and corporate members
services costs), $3.9 million in membership origination costs and marketing
expenses, and $1.3 million in insurance premiums.

As of the date of this report, the Company had $11.5 million of outstanding
borrowings under its Credit Agreement with Foothill, and it had the ability to
borrow an additional $2.8 million for working capital purposes. Based upon its
current business plan, the Company believes that future cash flows provided
from operations, asset sales, and borrowings available under the Credit
Agreement will be adequate for the Companys operating and other cash
requirements.

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##### Table of Contents



While any borrowings are outstanding under the Credit Agreement, all cash held
by the Company and its wholly owned subsidiaries will generally be deposited in
accounts that are controlled by and pledged to Foothill.

Material Changes in Financial Condition

Total assets increased by $461,000 during the three months ended September 30,
2000. Cash decreased by $1.1 million as discussed above. Contracts receivable
increased by $1.1 million due primarily to an increase in the percentage of
financed sales. Cash collections of $1.1 million on the existing portfolio
were offset by new financed sales. Buildings and equipment decreased by
$290,000 million due primarily to depreciation, partially offset by capital
expenditures made at certain campgrounds. Other assets increased by $347,000
due primarily to increases in workers compensation deposits. Deferred tax
assets decreased by $818,000 in the current period as a result of deferred tax
expense recognized in the current period.

Total liabilities decreased by $1.1 million during the three months ended
September 30, 2000, primarily as a result of a $1.9 million decrease in
deferred revenue related to membership sales and dues. Deferred sales revenue
increased by $3.8 million due to increases in membership contracts originated,
and deferred dues revenue decreased by $5.7 million because dues revenue
recognized during the period exceeded dues collected. Long term debt increased
by $1.0 million as a result of increased borrowing under the Credit Agreement.
Accounts payable increased by $152,000 due to the timing of payments and other
accrued liabilities decreased by $302,000 due primarily to payments of accrued
wages and benefits, partially offset by an increase in accrued property taxes.

Market Risk and Interest Rate Sensitivity. As noted above, as of September 30,
2000, the Company had $10.6 million of outstanding borrowings under its Credit
Agreement with Foothill (see Liquidity and Capital Resources  Cash). The
borrowings under the Credit Agreement accrue interest at rates that fluctuate
with changes in the prime rate and the Company, therefore, has exposure to
changing interest rates 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. At the level
of borrowings in place as of September 30, 2000, a hypothetical ten percent
change in market interest rates over the next year would increase the Companys
interest expense by approximately $100,000. A hypothetical ten percent change
in market interest rates would not have a material effect on the fair value of
the Companys contracts receivable, its borrowings under the Credit Agreement
with Foothill, or its short-term cash investments.

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RESULTS OF OPERATIONS

The following discussion and analysis are based on the historical results of
operations of the Company for the three months ended September 30, 2000 and
1999. 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, 2000 and 1999

Net Income. The Company reported net income of $1.5 million or $.17 per
diluted share on revenues of $23.3 million for the three months ended September
30, 2000. This compares with net income of $1.3 million or $.15 per diluted
share on revenues of $19.8 million for the same period last year.

The Companys revenues increased in the current period due primarily to higher
dues revenue and ancillary revenue from the acquisition of Leisure Time and
increased membership sales revenue. Due to greater sales activity, membership
sales revenues increased even though the unfavorable impact from the net
deferral of sales revenues and expenses was $1.7 million higher in the current
period. Expenses were also higher in the current period due primarily to the
operation of the Leisure Time campgrounds and increased sales and marketing
efforts.

The table set forth on the following page shows separately the results of the
campground operations, Trails Management, and Resort Parks International,
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, 2000 and 1999.

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##### Table of Contents



Thousand Trails, Inc. and Subsidiaries




|                                                                         |                                      |                          |       |                    |       |      |       |        |       | 
|------------------------------------------------------------------------ | ------------------------------------ | ------------------------ | ----- | ------------------ | ----- | ---- | ----- | ------ | ----- | 
|                                                                         |                                      |                          |       | Three Months Ended
|                                                                         |                                      |                          |       | September 30,     
|                                                                         |                                      |                          |       |                   
|                                                                         |                                      |                          |       | 2000               |       | 1999
|                                                                         |                                      |                          |       |                    |       |     
|Campground Operations                                                   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership dues                      |                          | $     | 10,086             |       |      | $     | 9,047  |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Campground revenues                  |                          |       | 6,624              |       |      |       | 6,067  |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Cost of campground revenues          |                          |       | (2,918             | )     |      |       | (2,630 | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Operating expenses                   |                          |       | (9,882             | )     |      |       | (8,681 | )    
|                                                                         |                                      |                          |       |                    |       |      |       |       
|Contribution from campground operations                                  |                                      |                          | 3,910 |                    |       |      | 3,803 |       
|                                                                         |                                      |                          |       |                    |       |      |       |       
|Sales                                                                   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership contracts originated      |                          |       | 6,158              |       |      |       | 2,150  |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in deferred revenue           |                          |       | (3,818             | )     |      |       | (1,106 | )    
|                                                                         |                                      |                          |       |                    |       |      |       |       
|                                                                         |                                      | Membership sales revenue |       |                    | 2,340 |      |       |        | 1,044 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership origination costs         |                          |       | (2,854             | )     |      |       | (1,140 | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in deferred origination costs |                          |       | 1,223              |       |      |       | 252    |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Marketing expenses                   |                          |       | (1,494             | )     |      |       | (846   | )    
|                                                                         |                                      |                          |       |                    |       |      |       |       
|Loss on sales                                                            |                                      |                          | (785  | )                  |       |      | (690  | )     
|                                                                         |                                      |                          |       |                    |       |      |       |       
|Trails Management                                                       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Revenues                             |                          |       | 1,930              |       |      |       | 1,764  |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Expenses                             |                          |       | (1,497             | )     |      |       | (1,399 | )    
|                                                                         |                                      |                          |       |                    |       |      |       |       
|Contribution from Trails Management                                      |                                      |                          | 433   |                    |       |      | 365   |       
|                                                                         |                                      |                          |       |                    |       |      |       |       
|Resort Parks International                                              
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Revenues                             |                          |       | 912                |       |      |       | 835    |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Expenses                             |                          |       | (436               | )     |      |       | (517   | )    
|                                                                         |                                      |                          |       |                    |       |      |       |       
|Contribution from RPI                                                    |                                      |                          | 476   |                    |       |      | 318   |       
|                                                                         |                                      |                          |       |                    |       |      |       |       
|                                                                         | Other income                         |                          |       | 798                |       |      |       | 701    |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Corporate member services            |                          |       | (361               | )     |      |       | (369   | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | General and administrative expense   |                          |       | (2,293             | )     |      |       | (2,070 | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Other                                |                          |       | 52                 |       |      |       | 76     |      
|                                                                         |                                      |                          |       |                    |       |      |       |       
|Income before interest income and expense,
gain on asset sales and taxes |                                      |                          | 2,230 |                    |       |      | 2,134 |       
|                                                                         |                                      |                          |       |                    |       |      |       |       
|                                                                         | Interest income                      |                          |       | 418                |       |      |       | 295    |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Interest expense                     |                          |       | (336               | )     |      |       | (296   | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Gain on asset sales                  |                          |       | 150                |       |      |       | 4      |      
|                                                                         |                                      |                          |       |                    |       |      |       |       
|Income before taxes                                                      |                                      | $                        | 2,462 |                    |       | $    | 2,137 |       
|                                                                         |                                      |                          |       |                    |       |      |       |       

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Operating Income. During the three months ended September 30, 2000, the
Company achieved a positive contribution from operations of $2.2 million,
compared with $2.1 million in the same period last year. The increase was due
primarily to higher contributions from campground operations, Trails
Management, and RPI, partially offset by an increase in the negative
contribution from the Companys sales operations. 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. Commencing December 16, 1999, the operating results of Leisure
Time are included in the operating results of the Company.

Campground membership dues revenue was $10.1 million for the three months ended
September 30, 2000, compared with $9.0 million for the same period last year.
The increase in dues revenue was due primarily to the addition of $1.2 million
in dues paid by the members of Leisure Time and the effect of the annual dues
increase, partially offset by the loss of campground members during the year.

Other campground revenues were $6.6 million for the three months ended
September 30, 2000, compared with $6.1 million for the same period last year.
The related expenses were
$2.9 million for the three months ended September 30, 2000, compared with $2.6
million for the same period last year. The increase in other campground
revenues during the current period was due primarily to $487,000 in revenue
from Leisure Times campgrounds. The increase in expenses during the current
period resulted from $170,000 in expenses from Leisure Times campgrounds, as
well as higher labor costs and expenses at the Companys other campgrounds.

Campground operating expenses were $9.9 million for the three months ended
September 30, 2000, compared with $8.7 million for the same period last year.
The increase in campground operating expenses in the current period was due
primarily to $1.0 million of expenses from Leisure Times campgrounds. In
addition, the Company experienced an increase in labor costs, maintenance
expenses, and utilities at its other campgrounds.

The Company intends to keep the size of its campground system in an appropriate
relation to the size of its membership base. In this regard, if the membership
base continues to decline, the Company may close and dispose of additional
campgrounds and it will seek to decrease other expenses. Although the Company
believes that the anticipated changes should result in lower future operating
expenses, no assurance can be given that such changes will not reduce revenues
by an amount in excess of the expense reductions.

For the three months ended September 30, 2000, the Company originated
membership contracts of $6.2 million, compared with $2.2 million in the same
period last year. During the current period, the Company originated more new
membership contracts at higher average sales prices than in the prior period,
and also originated contracts totaling $2.2 million from an upgrade program at
Leisure Times campgrounds involving its existing members. During the three
months ended September 30, 2000, the Company originated approximately 1,290 new

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membership contracts at an average sales price of $2,945, and approximately 750
contracts in the Leisure Time upgrade program at an average sales price of
$2,895. This compares with approximately 960 new membership contracts at an
average sales price of $1,930 during the three months ended September 30, 1999.
The upgrade program at Leisure Time is now complete; however, the Company
intends to begin marketing a similar upgrade product to the existing members of
Thousand Trails and NACO.

The Company recognizes revenue from the sale of campground memberships that do
not convey a deeded interest in real estate on a straight-line basis over the
expected life of the memberships sold. For the three months ended September
30, 2000 and 1999, the Company recognized campground membership sales revenues
of $2.3 million and $1.0 million, respectively. Membership sales revenue
includes revenues of $1.4 million and $781,000, respectively, that were
deferred in prior periods. Moreover, during these same periods, the Company
deferred revenues of $5.3 million and $1.9 million, respectively, which will be
recognized in future periods. In the current period, the Company recognized
$559,000 in sales revenue related to Leisure Time.

Selling expenses directly related to the sale of campground memberships are
deferred and recognized as expenses on a straight-line basis over the expected
life of the memberships sold. All other selling and marketing costs are
recognized as expenses in the period incurred. For the three months ended
September 30, 2000 and 1999, the Company recognized selling expenses of
$1.6 million and $888,000, respectively. These amounts include expenses of
$420,000 and $190,000, respectively, that were deferred in prior periods.
Moreover, for these same periods, the Company deferred expenses of $1.7 million
and $442,000, respectively, which will be recognized in future periods. In the
current period, the Company recognized selling and marketing expenses related
to Leisure Time of $385,000.

Although the Companys sales results are improving, selling and marketing
expenses exceeded sales revenues by $785,000 and $690,000 for the three months
ended September 30, 2000 and 1999, respectively. These expenses exceeded sales
revenues because the Company deferred more sales revenues than selling
expenses.

The Companys selling and marketing efforts require significant expense, the
majority of which must be expensed in the current period, while the related
sales revenues are generally deferred and recognized on a straight-line basis
over the expected life of the memberships sold. As a consequence, the Company
expects that its selling and marketing expenses will continue to exceed its
campground membership sales revenue. This disparity will increase as the
Company grows campground membership sales.

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

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Campground Management. Trails Management, a wholly owned subsidiary of the
Company, manages 169 public campgrounds for the U.S. Forest Service. For the
three months ended
September 30, 2000, these operations produced a net contribution of $433,000 on
revenues of
$1.9 million, compared with a net contribution of $365,000 on revenues of $1.8
million for the same period last year. The increase in revenues between
periods was due primarily to higher usage of the campgrounds, which the Company
attributes to mild weather in the Northwest United States, where a majority of
the campgrounds are located. The revenues and expenses related to the Companys
campground management operations are included in other campground revenue and
campground operating expenses in the consolidated statement of operations.

Resort Parks International. RPI charges its members a fee for a membership
that entitles them to use any of the campgrounds participating in RPIs
reciprocal use system, subject to certain limitations. For the three months
ended September 30, 2000, RPIs operations produced a net contribution of
$476,000 on revenues of $912,000, compared with a net contribution of
$318,000 on revenues of $835,000 for the same period last year. The increase
in revenue during the current period resulted from a higher renewal rate. The
decrease in operating expenses in the current period was due primarily to a
decrease in professional expenses, lower marketing costs, and a decrease in the
cost of operating supplies, partially offset by increases in labor costs and
the cost of printed materials. RPI is working to introduce new products to
increase its revenues and maintain its contribution margin; however, there is
no assurance that these efforts will be successful.

Interest Income and Expense. Interest income increased to $418,000 for the
three months ended September 30, 2000, from $295,000 for the same period last
year. The increase in the current period was due primarily to an increase in
the interest earned on the Companys portfolio of contracts receivable. Also
included in interest income in the prior period is amortization of the
allowance for interest discount and valuation allowance related to the
contracts receivable of $32,000. The interest discount and valuation
allowances were fully amortized at June 30, 2000. As the Companys portfolio
of contracts receivable increased with the acquisition of Leisure Time, in the
short term, the interest earned on the Companys portfolio of contracts
receivable will increase compared with historical levels. However, in the long
term, the interest earned on the Companys portfolio of contracts receivable is
expected to decrease as the portfolio declines.

Interest expense increased to $336,000 for the three months ended September 30,
2000, from $296,000 for the same period last year. This increase in the
current period was primarily due to a higher interest rate on the Companys
borrowings under the Credit Agreement, compared with the same period last year.

Gain on Asset Sales. The Company recognized a gain of $150,000 on asset sales
for the three months ended September 30, 2000, compared with $4,000 for the
same period last year. The increase in the current period was due to the
timing of asset sales. Over the next several years, the Company intends to
dispose of the remaining land it holds for sale, the campgrounds that are
closed if the Company downsizes, and other undeveloped, excess acreage
associated with the campgrounds. The sale of campgrounds requires addressing
the rights of members associated with such campgrounds. The impact of these
rights is uncertain and could adversely affect the availability or timing of
sale opportunities or the ability of the Company to realize recoveries from
asset sales. In addition, although the Company has successfully sold assets
during the past

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##### Table of Contents



several years, no assurance exists that the Company will be able to locate a
buyer for any of the remaining assets or that sales on acceptable terms can be
made.

Other Income. Other income generally consists of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, collections of written-off contracts and delinquent dues,
subscription fees received from members who subscribe to the Companys member
magazine, fees charged members for making more than five operator-assisted
reservations in a given year, lot sales and fees received from third parties
for billing and collection services. Other income was $850,000 for the three
months ended September 30, 2000, compared with $777,000 for the same period
last year. The increase in the current period was due primarily to an increase
in collections of written-off contracts and delinquent dues. Fees for billing
and collection services are expected to decline in future periods by
approximately $350,000 per year because a primary customer has terminated its
contract with the Company.

Other Expenses. Administrative expenses, including corporate member service
costs and general and administrative expenses, were $2.7 million for the three
months ended
September 30, 2000, compared with $2.4 million for the same period last year.
The increase in the current period was due primarily to $70,000 of expenses
directly related to Leisure Time as well as higher labor and other operating
costs that were partially offset by decreases in third-party legal fees.

Income Taxes. The Companys current provision for income taxes was $174,000
for the three months ended September 30, 2000, compared with $141,000 for the
same period last year. The current provisions for these periods include
amounts for federal alternative minimum taxes and state income taxes payable in
the various states where the Company conducts its operations. With the
exception of federal alternative minimum taxes, the Company does not have
federal income taxes payable on a consolidated basis due to its net operating
tax loss carryforwards, which totaled $20.9 million at June 30, 2000.

The Company recorded a deferred tax provision of $818,000 for the three months
ended September 30, 2000, compared to $702,000 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, 2000 is not significant. The
information required by Item 305 of Regulation S-K is contained in Item 2  
Managements Discussion and Analysis of Financial Condition and Results of
Operations under the heading Market Risk and Interest Rate Sensitivity.

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Part II. OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K

Exhibits

The following documents are filed as exhibits to this report.

|        |  |                                                  
|------- |  | -------------------------------------------------
|Exhibit
|Number  |  | Description                                      
|11.1    |  | Statement re: Computation of Per Share Earnings. 
|       
|       
|       
|       
|27.1    |  | Financial Data Schedule as of September 30, 2000.

Reports on Form 8-K

The Company did not file any Current Reports on Form 8-K during the quarter
ended
September 30, 2000.

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##### Table of Contents



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 13, 2000 |  | By: /s/ William J. Shaw
      William J. Shaw
      President and Chief Executive Officer
|                       
|Date: November 13, 2000 |  | By: /s/ Bryan D. Reed
      Bryan D. Reed
      Chief Financial and Accounting Officer   

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INDEX TO EXHIBITS

|        |  |                                                  
|------- |  | -------------------------------------------------
|Exhibit
|Number  |  | Description                                      
|11.1    |  | Statement re: Computation of Per Share Earnings. 
|       
|       
|       
|       
|27.1    |  | Financial Data Schedule as of September 30, 2000.