##### 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, 2001

OR

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

For the transition period of     to

Commission File Number 1-14645

THOUSAND TRAILS, INC.

---

(Exact Name of Registrant as Specified in Its Charter)

|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 75-2138671                       
|                                                               |  |                                  
|(State or Other Jurisdiction
of Incorporation or Organization) |  | (IRS Employer Identification No.)

|                                                    |  |               
|--------------------------------------------------- |  | --------------
|2711 LBJ Freeway, Suite 200, Dallas, Texas          |  | 75234         
|                                                    |  |               
|(Address of Principal Executive Office)             |  | (Zip Code)    
|                                                   
|Registrants Telephone Number, Including Area Code: |  | (972) 243-2228
|                                                    |  |               

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

Yes  X  No

The number of shares of Common Stock, par value $.01, issued and outstanding as
of
November 9, 2001, was 8,180,390.





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##### Table of Contents



Thousand Trails, Inc.

Index

|                              |         |      |                                                                                                            |  |   
|----------------------------- | ------- | ---- | ---------------------------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION |         | Page
|                             
|                              | Item 1. |      | Financial Statements                                                                                       |  |   
|                             
|                              |         |      | Consolidated Balance Sheets as of September 30, 2001
and June 30, 2001                                     |  | 3 
|                             
|                              |         |      | Consolidated Statements of Operations for the three months ended
September 30, 2001 and September 30, 2000 |  | 4 
|                             
|                              |         |      | Consolidated Statement of Shareholders Equity for the three months
ended September 30, 2001               |  | 5 
|                             
|                              |         |      | Consolidated Statements of Cash Flows for the three months ended
September 30, 2001 and September 30, 2000 |  | 6 
|                             
|                              |         |      | Notes to Consolidated Financial Statements                                                                 |  | 8 
|                             
|                              | Item 2. |      | Managements Discussion and Analysis of
Financial Condition and Results of Operations                      |  | 13
|                             
|                              | Item 3. |      | Quantitative and Qualitative Disclosures About Market Risk                                                 |  | 22
|                             
|PART II. OTHER INFORMATION    |         |     
|                             
|                              | Item 2. |      | Changes in Securities and Use of Proceeds                                                                  |  | 23
|                             
|                              | Item 6. |      | Exhibits and Reports on Form 8-K                                                                           |  | 23

Page 2



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TABLE OF CONTENTS



|                                              |                                                                                               |                                                |  |  |  |  |  | 
|--------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                
|                                              | Item 1. Financial Statements                                                                 
|                                              |                                                                                               | Consolidated Balance Sheets                   
|                                              |                                                                                               | Consolidated Statements of Operations         
|                                              |                                                                                               | Consolidated Statement of Shareholders Equity
|                                              |                                                                                               | Consolidated Statements of Cash Flows         
|                                              |                                                                                               | Notes to Consolidated Financial Statements    
|                                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|Part II. OTHER INFORMATION                   
|                                              | Item 2. Changes in Securities and Use of Proceeds                                            
|                                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|EX-11.1 Statement Re: Computation of Earnings



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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




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

|                                           |                                                                               |                                      |                            |        |   |               |        |        |          |        |  | 
|------------------------------------------ | ----------------------------------------------------------------------------- | ------------------------------------ | -------------------------- | ------ | - | ------------- | ------ | ------ | -------- | ------ |  | 
|                                           |                                                                               |                                      |                            |        |   | September 30, |        |        | June 30, |       
|                                           |                                                                               |                                      |                            |        |   | 2001          |        |        | 2001     |       
|                                           |                                                                               |                                      |                            |        |   |               |        |        |          |       
|                                           |                                                                               |                                      |                            |        |   | (Unaudited)   |        |        |          |        | 
|                                           |                                                                               |                                      |                            | Assets |   |               |        |        |          |        |  | 
|Current Assets                             |                                                                               |                                      |                            |        |   |               |        |       
|                                           | Cash and cash equivalents                                                     |                                      | $                          | 7,374  |   |               | $      | 9,016  |         
|                                           | Current portion of receivables, net of allowances of $1.0 million             |                                      |                            | 2,390  |   |               |        | 2,096  |         
|                                           | Current portion of deferred membership selling expenses                       |                                      |                            | 3,383  |   |               |        | 2,886  |         
|                                           | Current portion of net deferred tax assets                                    |                                      |                            | 6,337  |   |               |        | 6,885  |         
|                                           | Inventories                                                                   |                                      |                            | 999    |   |               |        | 1,221  |         
|                                           | Other current assets                                                          |                                      |                            | 733    |   |               |        | 765    |         
|                                           |                                                                               |                                      |                            |        |   |              
|                                           |                                                                               |                                      | Total Current Assets       |        |   | 21,216        |        |        |          | 22,869 | 
|                                           | Restricted cash                                                               |                                      |                            | 646    |   |               |        | 646    |         
|                                           | Receivables, net of allowances of $1.4 million and $1.3 million, respectively |                                      |                            | 5,879  |   |               |        | 5,492  |         
|                                           | Campground land                                                               |                                      |                            | 20,696 |   |               |        | 20,696 |         
|                                           | Buildings and equipment, net of accumulated depreciation of                   |                                      |                            |        |   |               |        |        |         
|                                           | $22.5 million and $21.8 million, respectively                                 |                                      |                            | 21,520 |   |               |        | 21,256 |         
|                                           | Assets held for sale                                                          |                                      |                            | 5,600  |   |               |        | 5,600  |         
|                                           | Deferred membership selling expenses                                          |                                      |                            | 6,611  |   |               |        | 6,030  |         
|                                           | Net deferred tax assets                                                       |                                      |                            | 1,140  |   |               |        | 995    |         
|                                           | Other assets                                                                  |                                      |                            | 368    |   |               |        | 365    |         
|                                           |                                                                               |                                      |                            |        |   |              
|Total Assets                               |                                                                               | $                                    | 83,676                     |        |   | $             | 83,949 |       
|                                           |                                                                               |                                      |                            |        |   |              
|                                           |                                                                               | Liabilities and Shareholders Equity |                            |        |   |               |        |        |          |       
|Current Liabilities                        |                                                                               |                                      |                            |        |   |               |        |       
|                                           | Accounts payable                                                              |                                      | $                          | 2,179  |   |               | $      | 2,775  |         
|                                           | Other accrued liabilities                                                     |                                      |                            | 7,700  |   |               |        | 8,021  |         
|                                           | Accrued construction cost                                                     |                                      |                            | 1,888  |   |               |        | 1,888  |         
|                                           | Current portion of deferred revenue                                           |                                      |                            | 23,483 |   |               |        | 27,668 |         
|                                           |                                                                               |                                      |                            |        |   |              
|                                           |                                                                               |                                      | Total Current Liabilities  |        |   | 35,250        |        |        |          | 40,352 | 
|                                           | Deferred revenue                                                              |                                      |                            | 22,122 |   |               |        | 20,158 |         
|                                           | Other liabilities                                                             |                                      |                            | 1,695  |   |               |        | 1,004  |         
|                                           |                                                                               |                                      |                            |        |   |              
|                                           |                                                                               |                                      | Total Liabilities          |        |   | 59,607        |        |        |          | 61,514 | 
|                                           |                                                                               |                                      |                            |        |   |              
|Commitments and Contingencies              |                                                                               |                                      |                            |        |   |               |        |       
|Shareholders Equity                       |                                                                               |                                      |                            |        |   |               |        |       
|                                           | Preferred stock, $.01 par value, 1,500,000 shares authorized, none issued or  |                                      |                            |        |   |               |        |        |         
|                                           | outstanding                                                                   |                                      |                            |        |   |               |        |        |         
|                                           | Common stock, $.01 par value, 15,000,000 shares authorized, 8,180,390 and     |                                      |                            |        |   |               |        |        |         
|                                           | 8,167,123 shares issued and outstanding, respectively, after deducting        |                                      |                            |        |   |               |        |        |         
|                                           | 203,438 and 206,705 shares held in Treasury, respectively                     |                                      |                            | 82     |   |               |        | 82     |         
|                                           | Additional paid-in capital                                                    |                                      |                            | 21,154 |   |               |        | 21,132 |         
|                                           | Retained earnings                                                             |                                      |                            | 3,515  |   |               |        | 1,362  |         
|                                           | Accumulated other comprehensive loss                                          |                                      |                            | (142   | ) |               |        | (141   | )       
|                                           |                                                                               |                                      |                            |        |   |              
|                                           |                                                                               |                                      | Total Shareholders Equity |        |   | 24,609        |        |        |          | 22,435 | 
|                                           |                                                                               |                                      |                            |        |   |              
|Total Liabilities and Shareholders Equity |                                                                               | $                                    | 83,676                     |        |   | $             | 83,949 |       
|                                           |                                                                               |                                      |                            |        |   |              

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

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

|                                               |                                 |   |                                          |        |   |      |        |        |  
|---------------------------------------------- | ------------------------------- | - | ---------------------------------------- | ------ | - | ---- | ------ | ------ | -
|                                               |                                 |   | For the three months ended September 30, |       
|                                               |                                 |   |                                          |       
|                                               |                                 |   | 2001                                     |        |   | 2000 |       
|                                               |                                 |   |                                          |        |   |      |       
|Revenues                                       |                                 |   |                                          |        |   |      |        |       
|Membership contracts originated                |                                 | $ | 7,268                                    |        |   | $    | 6,158  |       
|Change in deferred revenue                     |                                 |   | (3,582                                   | )      |   |      | (3,818 | )     
|                                               |                                 |   |                                          |        |   |     
|                                               | Membership sales revenue        |   |                                          | 3,686  |   |      |        | 2,340  |  
|Membership dues                                |                                 |   | 10,071                                   |        |   |      | 10,086 |       
|Other campground revenue                       |                                 |   | 6,800                                    |        |   |      | 6,624  |       
|Trails Management revenue                      |                                 |   | 3,303                                    |        |   |      | 1,930  |       
|RPI membership fees                            |                                 |   | 888                                      |        |   |      | 912    |       
|Interest income                                |                                 |   | 524                                      |        |   |      | 418    |       
|Gain (loss) on asset sales                     |                                 |   | (18                                      | )      |   |      | 150    |       
|Other income                                   |                                 |   | 681                                      |        |   |      | 850    |       
|                                               |                                 |   |                                          |        |   |     
|                                               | Total Revenues                  |   |                                          | 25,935 |   |      |        | 23,310 |  
|                                               |                                 |   |                                          |        |   |     
|Expenses                                       |                                 |   |                                          |        |   |      |        |       
|Campground operating expenses                  |                                 |   | 13,010                                   |        |   |      | 12,800 |       
|Membership origination costs                   |                                 |   | 3,169                                    |        |   |      | 2,854  |       
|Change in deferred origination costs           |                                 |   | (1,078                                   | )      |   |      | (1,223 | )     
|Marketing expenses                             |                                 |   | 1,722                                    |        |   |      | 1,494  |       
|Trails Management expenses                     |                                 |   | 2,702                                    |        |   |      | 1,497  |       
|RPI membership expenses                        |                                 |   | 395                                      |        |   |      | 436    |       
|Corporate member services                      |                                 |   | 302                                      |        |   |      | 361    |       
|Interest expense                               |                                 |   | 5                                        |        |   |      | 336    |       
|General and administrative expenses            |                                 |   | 2,393                                    |        |   |      | 2,293  |       
|                                               |                                 |   |                                          |        |   |     
|                                               | Total Expenses                  |   |                                          | 22,620 |   |      |        | 20,848 |  
|                                               |                                 |   |                                          |        |   |     
|Income Before Income Taxes                     |                                 |   | 3,315                                    |        |   |      | 2,462  |       
|Income Taxes                                  |                                 |   |                                          |        |   |      |        |       
|                                               | Income tax provision  current  |   |                                          | (759   | ) |      |        | (174   | )
|                                               | Income tax provision  deferred |   |                                          | (403   | ) |      |        | (818   | )
|                                               |                                 |   |                                          |        |   |     
|                                               |                                 |   | (1,162                                   | )      |   |      | (992   | )     
|Net Income                                     |                                 | $ | 2,153                                    |        |   | $    | 1,470  |       
|                                               |                                 |   |                                          |        |   |     
|Net Income per Share  Basic                   |                                 | $ | .26                                      |        |   | $    | .18    |       
|                                               |                                 |   |                                          |        |   |     
|Net Income per Share  Diluted                 |                                 | $ | .25                                      |        |   | $    | .17    |       
|                                               |                                 |   |                                          |        |   |     
|Shares Used to Calculate Net Income Per Share: |                                 |   |                                          |        |   |      |        |       
|                                               | Basic                           |   |                                          | 8,171  |   |      |        | 8,010  |  
|                                               |                                 |   |                                          |        |   |     
|                                               | Diluted                         |   |                                          | 8,619  |   |      |        | 8,570  |  
|                                               |                                 |   |                                          |        |   |     

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

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Thousand Trails, Inc. and Subsidiaries
Consolidated Statement of Shareholders Equity
For the Three Months Ended September 30, 2001
(Dollars in thousands)
(Unaudited)

|                                                         |  |               |       |   |        |   |    |         |  |            |          |  |  |               |       |  |       |             |      |   |  |   |        |  
|-------------------------------------------------------- |  | ------------- | ----- | - | ------ | - | -- | ------- |  | ---------- | -------- |  |  | ------------- | ----- |  | ----- | ----------- | ---- | - |  | - | ------ | -
|                                                         |  |               |       |   |        |   |    |         |  |            |          |  |  |               |       |  |       | Accumulated |      |   |  |   |       
|                                                         |  |               |       |   |        |   |    |         |  | Additional |          |  |  |               |       |  | Other |             |      |   |  |  
|                                                         |  | Comprehensive |       |   | Common |   |    | Paid in |  |            | Retained |  |  | Comprehensive |       |  |       |             |     
|                                                         |  | Income        |       |   | Stock  |   |    | Capital |  |            | Earnings |  |  | Loss          |       |  | Total |            
|                                                         |  |               |       |   |        |   |    |         |  |            |          |  |  |               |       |  |       |            
|Balance, June 30, 2001                                   |  |               |      |   |        | $ | 82 |         |  | $          | 21,132   |  |  | $             | 1,362 |  |       | $           | (141 | ) |  | $ | 22,435 |  
|Issuance of common stock                                 |  |               |      |   |        |   |   |         |  |            | 22       |  |  |               |      |  |       |             |     |   |  |   | 22     |  
|Net income for the three months
ended September 30, 2001 |  |               | 2,153 |   |        |   |   |         |  |            |         |  |  |               | 2,153 |  |       |             |     |   |  |   | 2,153  |  
|Other comprehensive loss                                 |  |               | (1    | ) |        |   |   |         |  |            |         |  |  |               |      |  |       |             | (1   | ) |  |   | (1     | )
|                                                         |  |               |       |   |        |   |    |         |  |            |          |  |  |               |       |  |       |            
|Balance, September 30, 2001                              |  | $             | 2,152 |   |        | $ | 82 |         |  | $          | 21,154   |  |  | $             | 3,515 |  |       | $           | (142 | ) |  | $ | 24,609 |  
|                                                         |  |               |       |   |        |   |    |         |  |            |          |  |  |               |       |  |       |            

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

Page 5



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

|                                                               |  |                                          |         |   |      |   |         |  
|-------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                               |  | For the three months ended September 30, |        
|                                                               |  |                                          |        
|                                                               |  | 2001                                     |         |   | 2000 |  
|                                                               |  |                                          |         |   |      |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                          |  |                                          |         |   |      |   |         |  
|Collections of principal on receivables                        |  | $                                        | 1,273   |   |      | $ | 1,082   |  
|Interest received                                              |  |                                          | 524     |   |      |   | 391     |  
|Interest paid                                                  |  |                                          | (5      | ) |      |   | (335    | )
|General and administrative and corporate member services costs |  |                                          | (3,152  | ) |      |   | (2,971  | )
|Cash collected from operations, including deferred revenue     |  |                                          | 16,297  |   |      |   | 15,208  |  
|Cash from sales of memberships                                 |  |                                          | 5,045   |   |      |   | 3,417   |  
|Expenditures for property operations                           |  |                                          | (15,101 | ) |      |   | (13,647 | )
|Expenditures for sales and marketing                           |  |                                          | (4,783  | ) |      |   | (3,902  | )
|Expenditures for insurance premiums                            |  |                                          | (665    | ) |      |   | (1,267  | )
|Payment of income taxes                                        |  |                                          | (59     | ) |      |   | (100    | )
|Other, net                                                     |  |                                          |        |   |      |   | 214     |  
|                                                               |  |                                          |         |   |      |  
|Net cash used in operating activities                          |  |                                          | (626    | ) |      |   | (1,910  | )
|                                                               |  |                                          |         |   |      |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                          |  |                                          |         |   |      |   |         |  
|Capital expenditures                                           |  |                                          | (1,067  | ) |      |   | (430    | )
|Proceeds from asset sales                                      |  |                                          | 45      |   |      |   | 183     |  
|                                                               |  |                                          |         |   |      |  
|Net cash used in investing activities                          |  |                                          | (1,022  | ) |      |   | (247    | )
|                                                               |  |                                          |         |   |      |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                          |  |                                          |         |   |      |   |         |  
|Net borrowings under Credit Agreement                          |  |                                          |        |   |      |   | 1,025   |  
|Purchase of treasury stock                                     |  |                                          |        |   |      |   | (11     | )
|Payment of notes                                               |  |                                          | (16     | ) |      |   | (24     | )
|Issuance of common stock                                       |  |                                          | 22      |   |      |   | 85      |  
|                                                               |  |                                          |         |   |      |  
|Net cash provided by financing activities                      |  |                                          | 6       |   |      |   | 1,075   |  
|                                                               |  |                                          |         |   |      |  
|DECREASE IN CASH AND CASH EQUIVALENTS                          |  |                                          | (1,642  | ) |      |   | (1,082  | )
|CASH AND CASH EQUIVALENTS                                      |  |                                          |         |   |      |   |         |  
|Beginning of period                                            |  |                                          | 9,016   |   |      |   | 2,420   |  
|                                                               |  |                                          |         |   |      |  
|End of period                                                  |  | $                                        | 7,374   |   |      | $ | 1,338   |  
|                                                               |  |                                          |         |   |      |  

continued 

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

|                                                                               |                                                 |   |                                          |        |   |      |        |        |  
|------------------------------------------------------------------------------ | ----------------------------------------------- | - | ---------------------------------------- | ------ | - | ---- | ------ | ------ | -
|                                                                               |                                                 |   | For the three months ended September 30, |       
|                                                                               |                                                 |   |                                          |       
|                                                                               |                                                 |   | 2001                                     |        |   | 2000 |       
|                                                                               |                                                 |   |                                          |        |   |      |       
|Reconciliation of net income to net cash used in
operating activities:         |                                                 |   |                                          |        |   |      |        |       
|                                                                               | Net Income                                      |   | $                                        | 2,153  |   |      | $      | 1,470  |  
|                                                                               |                                                 |   |                                          |        |   |      |       
|Adjustments to reconcile net income to net cash
used in operating activities  |                                                 |   |                                          |        |   |      |        |       
|                                                                               | Depreciation                                    |   |                                          | 740    |   |      |        | 687    |  
|                                                                               | Bad debt provision                              |   |                                          | 269    |   |      |        | 422    |  
|                                                                               | Change in deferred sales revenue                |   |                                          | 3,582  |   |      |        | 3,818  |  
|                                                                               | Change in deferred membership origination costs |   |                                          | (1,078 | ) |      |        | (1,223 | )
|                                                                               | (Gain) loss on asset sales                      |   |                                          | 18     |   |      |        | (150   | )
|                                                                               | Deferred income tax provision                   |   |                                          | 403    |   |      |        | 818    |  
|                                                                               | Decrease in restricted cash                     |   |                                          |       |   |      |        | 214    |  
|                                                                               | Increase in receivables                         |   |                                          | (950   | ) |      |        | (1,502 | )
|                                                                               | Decrease (increase) in other assets             |   |                                          | 251    |   |      |        | (347   | )
|                                                                               | Decrease in accounts payable                    |   |                                          | (596   | ) |      |        | (152   | )
|                                                                               | Decrease in accrued interest                    |   |                                          |       |   |      |        | (4     | )
|                                                                               | Decrease in deferred dues                       |   |                                          | (5,272 | ) |      |        | (5,222 | )
|                                                                               | Decrease in other liabilities                   |   |                                          | (145   | ) |      |        | (739   | )
|                                                                               | Other                                           |   |                                          | (1     | ) |      |        |       |  
|                                                                               |                                                 |   |                                          |        |   |      |       
|Total adjustments                                                              |                                                 |   | (2,779                                   | )      |   |      | (3,380 | )     
|                                                                               |                                                 |   |                                          |        |   |      |       
|Net cash used in operating activities                                          |                                                 | $ | (626                                     | )      |   | $    | (1,910 | )     
|                                                                               |                                                 |   |                                          |        |   |      |       

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

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Thousand Trails, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2001
(Unaudited)

NOTE 1  NATURE OF OPERATIONS

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

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

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

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

All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the three
months ended September 30, 2001 and 2000, and in the consolidated balance sheet
as of June 30, 2001.

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

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NOTE 2  COMPREHENSIVE INCOME

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

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

The following table provides statements of comprehensive income for the three
months ended September 30, 2001 and 2000 (dollars in thousands):

|                                        |  |                            |       |   |      |   |       |  
|--------------------------------------- |  | -------------------------- | ----- | - | ---- | - | ----- | -
|                                        |  | For the three months ended |      
|                                        |  | September 30,              |      
|                                        |  |                            |      
|                                        |  | 2001                       |       |   | 2000 |  
|                                        |  |                            |       |   |      |  
|                                        |  | (Unaudited)                |      
|Net Income                              |  | $                          | 2,153 |   |      | $ | 1,470 |  
|Foreign Currency Translation Adjustment |  |                            | (1    | ) |      |   | (1    | )
|                                        |  |                            |       |   |      |  
|Comprehensive Income                    |  | $                          | 2,152 |   |      | $ | 1,469 |  
|                                        |  |                            |       |   |      |  

NOTE 3  SEGMENT REPORTING

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

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

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

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

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

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

|                                  |  |                                       |        |  |     |   |     |                    |  |   |                      |  |  |              |        |   |  |   |        | 
|--------------------------------- |  | ------------------------------------- | ------ |  | --- | - | --- | ------------------ |  | - | -------------------- |  |  | ------------ | ------ | - |  | - | ------ | 
|                                  |  | Three months ended September 30, 2000 |       
|                                  |  |                                       |       
|                                  |  | Campgrounds                           |        |  | RPI |   |     | Trails 
Management |  |   | Corporate
 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  | 

NOTE 4  NET INCOME PER SHARE

The table below sets forth the information necessary to compute basic and
diluted net income per share for the three months ended September 30, 2001 and
2000, including a summary of the components of the numerators and denominators
of the basic and diluted net income per share computations for the periods
presented (dollars and shares in thousands, except per share amounts):

|                                            |                  |   |                            |     |  |      |       |     | 
|------------------------------------------- | ---------------- | - | -------------------------- | --- |  | ---- | ----- | --- | 
|                                            |                  |   | For the three months ended |    
|                                            |                  |   | September 30,              |    
|                                            |                  |   |                            |    
|                                            |                  |   | 2001                       |     |  | 2000 |      
|                                            |                  |   |                            |     |  |      |      
|                                            |                  |   | (Unaudited)                |    
|Net Income                                  |                  | $ | 2,153                      |     |  | $    | 1,470 |    
|                                            |                  |   |                            |     |  |      |      
|Weighted Average Number of Shares  Basic   |                  |   | 8,171                      |     |  |      | 8,010 |    
|                                            | Dilutive Options |   |                            | 448 |  |      |       | 560 | 
|                                            |                  |   |                            |     |  |      |      
|Weighted Average Number of Shares  Diluted |                  |   | 8,619                      |     |  |      | 8,570 |    
|                                            |                  |   |                            |     |  |      |      
|Net Income Per Share  Basic                |                  | $ | .26                        |     |  | $    | .18   |    
|                                            |                  |   |                            |     |  |      |      
|Net Income Per Share  Diluted              |                  | $ | .25                        |     |  | $    | .17   |    
|                                            |                  |   |                            |     |  |      |      

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

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NOTE 5  LONG TERM DEBT

Line of Credit with Union Bank

On July 1, 2001, the Company established a $15.0 million revolving, secured
line of credit (Line of Credit) with Union Bank of California, N.A. (Union
Bank). Borrowings under the Line of Credit carry an interest rate of prime
minus 0.75%. The Company may borrow, repay and reborrow under the Line of
Credit from time to time, provided, however, that for at least one day during
each twelve-month period, the principal amount outstanding under the Line of
Credit must be not more than $5.0 million. All borrowings under the Line of
Credit will mature on
July 1, 2003. The Company anticipates using the Line of Credit for general
working capital purposes, although it is permitted under the terms of the Line
of Credit to use up to $5.0 million for acquisitions from time to time. The
Company currently has no borrowings outstanding under the Line of Credit.

The Companys ability to borrow under the Line of Credit for working capital
purposes is subject to continued compliance by the Company with the financial
covenants and other requirements of the Line of Credit, including certain
covenants respecting minimum tangible net worth, minimum adjusted EBITDA (as
defined) and minimum total debt to adjusted EBITDA. The Company is
required at all times to maintain a minimum tangible net worth (as
defined) of $18.0 million. The Line of Credit
prohibits the Company from borrowing from other sources.

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

Credit Agreement with
Foothill

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

NOTE 6  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, 2001 and June 30, 2001, the Companys
recorded liability for estimated losses related to uninsured general liability
claims totaled approximately $573,000 and $638,000, respectively, which is
included in other liabilities in the accompanying consolidated balance sheets.

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

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

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

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

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

In this Managements Discussion and Analysis of Financial Condition and Results
of Operations, and elsewhere in this report, the Company makes certain
statements as to its expected financial condition, results of operations, cash
flows, and business strategies, plans and conditions for periods after
September 30, 2001. All of these statements are forward-looking statements
made pursuant to the safe harbor provisions of Section 21(E) of the Securities
Exchange Act of 1934, as amended. These statements are not historical and
involve risks and uncertainties. The Companys actual financial condition,
results of operations, cash flows, and business strategies, plans, and
conditions for future periods may differ materially due to several factors,
including but not limited to the Companys ability to control costs, market
conditions and other factors affecting the Companys sales and marketing plan,
the actual rate of decline in the membership base, the actual use of the
campgrounds by members and guests, the effects on members and guests of the
Companys efforts to downsize its business, the Companys success in collecting
its contracts receivable and selling assets, the Companys success in acquiring
members through the purchase of other membership campground operations, and the
other factors affecting the Companys operations described in this report.

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

Cash.On September 30, 2001, the Company had $7.4 million of cash and cash
equivalents, a decrease of $1.6 million from June 30, 2001. During the three
months ended September 30, 2001, the Companys operating activities used
$626,000 of cash, its investing activities used
$1.0 million of cash, and its financing activities produced $6,000 of cash.
The Companys investing activities consisted of $637,000 in capital
expenditures at the campgrounds and $430,000 to upgrade the Companys computer
system, partially offset by $45,000 in proceeds from the sale of assets. The
Companys financing activities consisted of $22,000 of proceeds from the
exercise of employee stock options, partially offset by $16,000 in payments on
notes payable.

With respect to the Companys operating activities, for the three months ended
September 30, 2001, the principal sources of operating cash were $16.3 million
from operations, $1.8 million in principal and interest collections on
contracts receivable, and $5.0 million from sales of campground memberships.
Principal uses of operating cash for the three months ended September 30, 2001,
were $15.1 million in operating expenses, $3.2 million in administrative
expenses (including general and administrative expenses and corporate members
services costs), $4.8 million in membership origination costs and marketing
expenses, $665,000 in insurance premiums, and $59,000 in income taxes.

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. During
fiscal 2000, the Companys material investing and financing activities related
primarily to capital expenditures at the campgrounds, proceeds from asset
sales, and net borrowing under the Credit Agreement with Foothill.

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.

The Company expects that its capital expenditures will be higher in fiscal
2002, compared with fiscal 2001, because the Company is spending a total of
$2.0 million to upgrade its computer system, including $430,000 spent in the
current quarter. However, since the Company has repaid all of its outstanding
debt, the Company believes its cash reserves will increase during the balance
of fiscal 2002. The amount of cash the Company is able to accumulate will
depend on a number of factors including its ability to control costs, its
success in collecting its contracts receivable and selling assets, and the
other factors affecting the Companys operations described in this report.

During the three months ended September 30, 2001 and through the date of this
report, the Company has had no outstanding borrowings under its Line of Credit
with Union Bank. Based

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upon its current business plan, the Company believes that future cash flows
provided from operations, asset sales, and borrowings available under the Line
of Credit will be adequate for the Companys operating and other cash
requirements.

Material Changes in Financial Condition

Total assets decreased by $273,000 during the three months ended September 30,
2001. Cash decreased by $1.6 million as discussed above. Contracts receivable
increased by $681,000 due primarily to an increase in the percentage of
financed sales. Cash collections of $1.3 million on the existing portfolio
were offset by new financed sales. Buildings and equipment increased by
$264,000 due primarily to capital expenditures at certain campgrounds and
expenditures to upgrade the Companys computer system, partially offset by
depreciation. Other assets decreased by $29,000 due primarily to a decrease in
prepaid selling and marketing expenses. Deferred tax assets decreased by
$403,000 as a result of deferred tax expense recognized in the current period.

Total liabilities decreased by $1.9 million during the three months ended
September 30, 2001, primarily as a result of a $1.7 million decrease in
deferred revenue related to membership sales and dues, and a $475,000 decrease
in deferred revenue from Trails Management. Deferred sales revenue increased by
$3.6 million due to increases in membership contracts originated, and deferred
dues revenue decreased by $5.3 million because dues revenue recognized during
the period exceeded dues collected. Deferred revenue from Trails Management
decreased because of the recognition of fees paid in advance, which were
deferred in prior periods. Accounts payable decreased by $596,000 due to the
timing of payments, and other accrued liabilities decreased by $321,000 due
primarily to payments of accrued wages and benefits, partially offset by an
increase in accrued property taxes and fees accrued by Trails Management that
are payable to the U.S. Forest Service.

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

The Company does not have significant exposure to changing interest rates on
invested cash because the Company invests available cash in certificates of
deposit and investment grade commercial paper that have maturities of three
months or less. The interest rate market risk implicit in these investments at
any given time is low, as the investments mature within three months.

The Company had $10.7 million of contracts receivable at September 30, 2001,
which have a weighted average stated interest rate of 14% and an average
remaining term of 34 months. The Company does not have significant exposure to
changing interest rates related to the contracts receivable because the
interest rates on the contracts receivable are fixed.

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

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

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

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

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, 2001 and
2000. The financial information set forth below should be read in conjunction
with the Companys consolidated financial statements included in Item 1.

Three Months Ended September 30, 2001 and 2000

Net Income.The Company reported net income of $2.2 million or $.25 per
diluted share on revenues of $25.9 million for the three months ended September
30, 2001. This compares with net income of $1.5 million or $.17 per diluted
share on revenues of $23.3 million for the same period last year.

The Companys revenues grew in the current period due primarily to increased
membership sales revenue and increased fees from additional campgrounds managed
by Trails Management. Expenses were also higher in the current period due to
increased sales and marketing efforts, operation of the additional campgrounds
managed by Trails Management, and utility costs, partially offset by a
reduction in interest expense. Because the Company repaid its loan with
Foothill Capital in March 2001, interest expense in the current period was
$331,000 lower than in the prior year.

The table set forth on the following page shows separately the results of the
campground operations, Trails Management, and RPI, without any allocation of
corporate expenses, as well as corporate expenses and other revenues and
expenses in the aggregate, for the three months ended September 30, 2001 and
2000.

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

|                                           |                                      |                          |        |                    |       |   |        |        |       | 
|------------------------------------------ | ------------------------------------ | ------------------------ | ------ | ------------------ | ----- | - | ------ | ------ | ----- | 
|                                           |                                      |                          |        | Three Months Ended |      
|                                           |                                      |                          |        | September 30,      |      
|                                           |                                      |                          |        |                    |      
|                                           |                                      |                          |        | 2001               |       |   | 2000   |       
|                                           |                                      |                          |        |                    |       |   |        |       
|Campground Operations                      |                                      |                          |        |                    |       |   |        |       
|                                           | Membership dues                      |                          | $      | 10,071             |       |   | $      | 10,086 |      
|                                           | Campground revenues                  |                          |        | 6,800              |       |   |        | 6,624  |      
|                                           | Cost of campground revenues          |                          |        | (2,756             | )     |   |        | (2,842 | )    
|                                           | Operating expenses                   |                          |        | (10,254            | )     |   |        | (9,958 | )    
|                                           |                                      |                          |        |                    |       |   |        |       
|Contribution from campground operations    |                                      |                          | 3,861  |                    |       |   | 3,910  |       
|                                           |                                      |                          |        |                    |       |   |        |       
|Sales                                      |                                      |                          |        |                    |       |   |        |       
|                                           | Membership contracts originated      |                          |        | 7,268              |       |   |        | 6,158  |      
|                                           | Change in deferred revenue           |                          |        | (3,582             | )     |   |        | (3,818 | )    
|                                           |                                      |                          |        |                    |       |   |        |       
|                                           |                                      | Membership sales revenue |        |                    | 3,686 |   |        |        | 2,340 | 
|                                           | Membership origination costs         |                          |        | (3,169             | )     |   |        | (2,854 | )    
|                                           | Change in deferred origination costs |                          |        | 1,078              |       |   |        | 1,223  |      
|                                           | Marketing expenses                   |                          |        | (1,722             | )     |   |        | (1,494 | )    
|                                           |                                      |                          |        |                    |       |   |        |       
|Loss on sales                              |                                      |                          | (127   | )                  |       |   | (785   | )     
|                                           |                                      |                          |        |                    |       |   |        |       
|Trails Management                          |                                      |                          |        |                    |       |   |        |       
|                                           | Revenues                             |                          |        | 3,303              |       |   |        | 1,930  |      
|                                           | Expenses                             |                          |        | (2,702             | )     |   |        | (1,497 | )    
|                                           |                                      |                          |        |                    |       |   |        |       
|Contribution from Trails Management        |                                      |                          | 601    |                    |       |   | 433    |       
|                                           |                                      |                          |        |                    |       |   |        |       
|Resort Parks International                 |                                      |                          |        |                    |       |   |        |       
|                                           | Revenues                             |                          |        | 888                |       |   |        | 912    |      
|                                           | Expenses                             |                          |        | (395               | )     |   |        | (436   | )    
|                                           |                                      |                          |        |                    |       |   |        |       
|Contribution from RPI                      |                                      |                          | 493    |                    |       |   | 476    |       
|                                           |                                      |                          |        |                    |       |   |        |       
|                                           | Other income                         |                          |        | 655                |       |   |        | 798    |      
|                                           | Corporate member services            |                          |        | (302               | )     |   |        | (361   | )    
|                                           | General and administrative expense   |                          |        | (2,393             | )     |   |        | (2,293 | )    
|                                           | Other                                |                          |        | 26                 |       |   |        | 52     |      
|                                           |                                      |                          |        |                    |       |   |        |       
|                                           |                                      |                          | (2,014 | )                  |       |   | (1,804 | )     
|                                           |                                      |                          |        |                    |       |   |        |       
|Income before interest income and expense, |                                      |                          |        |                    |       |   |        |       
|gain on asset sales and taxes              |                                      |                          | 2,814  |                    |       |   | 2,230  |       
|                                           |                                      |                          |        |                    |       |   |        |       
|                                           | Interest income                      |                          |        | 524                |       |   |        | 418    |      
|                                           | Interest expense                     |                          |        | (5                 | )     |   |        | (336   | )    
|                                           | Gain (loss) on asset sales           |                          |        | (18                | )     |   |        | 150    |      
|                                           |                                      |                          |        |                    |       |   |        |       
|Income before taxes                        |                                      | $                        | 3,315  |                    |       | $ | 2,462  |       
|                                           |                                      |                          |        |                    |       |   |        |       

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Operating Income.During the three months ended September 30, 2001, the
Companys contribution from operations was $2.8 million, compared with $2.2
million in the same period last year. The increase was due primarily to a
decrease in the negative contribution from the Companys sales operations and
an increase in the contributions from Trails Management and RPI, partially
offset by a decrease in other income and an increase in general and
administrative expenses. For this purpose, the contribution from operations is
defined as income before interest income and expenses, gains on asset sales,
and taxes. See the table on the previous page for the elements of the
contribution from operations and the Companys operating income before taxes
for the periods presented.

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

Campground membership dues revenue was $10.1 million for both the three months
ended
September 30, 2001 and 2000. Dues revenue remained constant because the effect
of the annual dues increase was offset by the net loss of campground members
during the year.

Other campground revenues were $6.8 million for the three months ended
September 30, 2001, compared with $6.6 million for the same period last year.
The related expenses were
$2.8 million for both the three months ended September 30, 2001 and 2000.
Despite a decrease in the number of campgrounds in operation during the current
period due to the closures discussed below, other campground revenues increased
due primarily to an increase in revenue from the Companys extended stay
programs and a greater emphasis on ancillary programs at all campgrounds. The
related expenses remained constant during the periods as higher labor costs
were offset by a decrease in the cost of goods sold.

Campground operating expenses were $10.3 million for the three months ended
September 30, 2001, compared with $10.0 million for the same period last year.
The increase in campground operating expenses in the current period was due
primarily to a $247,000 increase in utility costs at the Companys campgrounds,
principally in California and Texas where such costs increased $204,000, which
accounted for 83% of the total increase. In addition, the Company recorded
higher depreciation and workers compensation expense during the current
period, which was partially offset by a decrease in maintenance expense.

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

For the three months ended September 30, 2001, the Company originated
membership contracts of $7.3 million, compared with $6.2 million in the same
period last year. During the current period, the Company originated more new
membership contracts at higher average sales prices

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than in the prior period. During the three months ended September 30, 2001,
the Company originated 1,490 new contracts at an average price of $2,777,
compared with 1,410 new contracts at an average price of $2,770 during the
prior period. During the current period, the Company also originated 950
upgrade contracts at an average price of $2,995, compared with 750 contracts at
the same average price during the same period last year.

During the current period, the Company offered existing Thousand Trails and
NACO members access to the Leisure Time campgrounds for a fee, which resulted
in 730 contracts at an average price of $246. This program concluded during
the first quarter of fiscal 2002. The Company also offered Leisure Time
members access to the Thousand Trails and NACO campgrounds for a fee, which
resulted in approximately 90 contracts at an average price of $1,754.

The Company recognizes revenue from the sale of campground memberships that do
not convey a deeded interest in real estate on a straight-line basis over the
expected life of the memberships sold. For the three months ended September
30, 2001 and 2000, the Company recognized campground membership sales revenues
of $3.7 million and $2.3 million, respectively. Membership sales revenue
includes revenues of $2.7 million and $1.4 million, respectively, that were
deferred in prior periods. Moreover, during these same periods, the Company
deferred revenues of $6.3 million and $5.3 million, respectively, which will be
recognized in future periods.

Selling expenses directly related to the sale of campground memberships are
deferred and recognized as expenses on a straight-line basis over the expected
life of the memberships sold. All other selling and marketing costs are
recognized as expenses in the period incurred. For the three months ended
September 30, 2001 and 2000, the Company recognized selling expenses of $2.1
million and $1.6 million, respectively. These amounts include expenses of
$831,000 and $420,000, respectively, that were deferred in prior periods.
Moreover, for these same periods, the Company deferred expenses of $1.9 million
and $1.7 million, respectively, which will be recognized in future periods.

Although the Companys sales results are improving, selling and marketing
expenses exceeded sales revenues by $127,000 and $785,000 for the three months
ended September 30, 2001 and 2000, respectively. These expenses exceeded sales
revenues because the Company deferred more sales revenues than selling
expenses.

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

The Companys selling and marketing efforts have not produced the level of
sales needed to stop the continuing decline in the Companys membership base,
although the Company has been successful in slowing the rate of this decline.
If the Company is not able to increase its campground membership sales over
current levels or acquire members through the purchase of other membership
campground operations similar to the acquisition of Leisure Time, the
membership base will continue to decline, which will decrease the Companys
revenues.

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Decreases in revenues that are not offset by sufficient expense reductions
could have a material adverse impact on the Companys business and results of
operations.

Trails Management.Trails Management, a wholly owned subsidiary of the
Company, manages 241 public campgrounds for the U.S. Forest Service and other
entities. For the three months ended September 30, 2001, these operations
produced a net contribution of $601,000 on revenues of $3.3 million, compared
with a net contribution of $433,000 on revenues of
$1.9 million for the same period last year. The increase in revenues and
contribution between periods was due primarily to additional revenue from
contracts entered into during the second quarter of fiscal 2001, which
increased the number of campgrounds managed. Trails Management receives most
of its revenues and incurs most of its expenses during the first fiscal
quarter. During the balance of fiscal 2002, Trails Managements revenues will
decline significantly, while it will continue to incur certain fixed costs,
which will reduce its contribution for the full fiscal year.

Resort Parks International.RPI charges its members a fee for a membership
that entitles them to use any of the campgrounds participating in RPIs
reciprocal use system, subject to certain limitations. For the three months
ended September 30, 2001, RPIs operations produced a net contribution of
$493,000 on revenues of $888,000, compared with a net contribution of
$476,000 on revenues of $912,000 for the same period last year. The decrease
in revenue during the current period resulted from a decline in membership
renewals. The decrease in operating expenses in the current period was due
primarily to decreases in labor costs, postage and communication expenses. RPI
is working to introduce new products to increase its revenues and maintain its
contribution margin; however, there is no assurance that these efforts will be
successful.

Interest Income and Expense.Interest income increased to $524,000 for the
three months ended September 30, 2001, from $418,000 for the same period last
year. The increase in the current period was due primarily to an increase in
the interest earned on the Companys growing portfolio of contracts receivable
and invested cash. The Companys portfolio of contracts receivable increased
with the acquisition of Leisure Time, and has continued to grow as a result of
the increase in membership sales, approximately 39% of which are sold on an
installment basis. As a result, the interest earned on the Companys portfolio
of contracts receivable is expected to increase compared with historical
levels.

Interest expense decreased to $5,000 for the three months ended September 30,
2001, from $336,000 for the same period last year. This decrease in the
current period was due to the Companys repayment, in March 2001, of all
borrowings under the Credit Agreement with Foothill.

Asset Sales.The Company recognized a loss of $18,000 on asset sales for the
three months ended September 30, 2001, compared with a gain of $150,000 for the
same period last year. The decrease in the current period was due to the
timing of asset sales. Over the next several years, the Company intends to
dispose of the remaining assets that it holds for sale, the campgrounds that
were closed following the acquisition of Leisure time, any campgrounds that are
closed in the future 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

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from asset sales. In addition, although the Company has successfully sold
assets during the past several years, no assurance exists that the Company will
be able to locate a buyer for any of the remaining assets or that sales on
acceptable terms can be made.

Other Income.Other income generally consists of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, collections of written-off contracts and delinquent dues,
subscription fees received from members who subscribe to the Companys member
magazine, fees charged members for making more than five operator-assisted
reservations in a given year, and fees received from third parties for billing
and collection services. Other income was $681,000 for the three months ended
September 30, 2001, compared with $850,000 for the same period last year. The
decrease in the current period was due primarily to a decrease in fees received
from third parties for billing and collection services and collections of
written-off contracts and delinquent dues, partially offset by an increase in
subscription fees for the Companys member magazine.

Other Expenses.Administrative expenses, including corporate member service
costs and general and administrative expenses, were $2.7 million for both the
three months ended
September 30, 2001 and 2000. Expenses remained constant between the two
periods despite an increase in expenses related to collecting the Companys
growing portfolio of contracts receivable and third-party legal fees, which
were offset by decreases in labor and other operating costs.

Income Taxes.The Companys current provision for income taxes was $759,000
for the three months ended September 30, 2001, compared with $174,000 for the
same period last year. The current provisions for these periods include
amounts for federal alternative minimum taxes and state income taxes payable in
the various states where the Company conducts its operations. With the
exception of federal alternative minimum taxes, the Company does not have
federal income taxes payable on a consolidated basis due to its net operating
tax loss carryforwards, which totaled $7.9 million at June 30, 2001. The
Company expects to fully utilize its existing tax loss carryforwards during
fiscal 2002.

The Company recorded a deferred tax provision of $403,000 for the three months
ended September 30, 2001, compared to $818,000 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.

Impact of September 11.   The Company experienced a decline in the number of
members and marketing guests visiting its campgrounds during the week following
the terrorist attacks on September 11, 2001. However, the number of members
and marketing guests visiting the Companys campgrounds returned to normal
levels shortly thereafter. The Company does not expect the changes in the
country following September 11 to adversely affect its business because the
Companys campgrounds offer families an opportunity to share time together in a
secure environment that is close to the members home. In addition, members
and marketing guests visit the Companys campgrounds in their own recreational
vehicles or automobiles and there is no need for public transportation, such as
airlines. However, the Company depends on the U. S. mail for the collection of
member dues and other revenues. In addition, the Company uses direct
mail campaigns in its marketing efforts. It is uncertain whether
pending changes in the U.S. mail system will impact the Company's
operations.

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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, 2001 is not significant. The
information required by Item 305 of Regulation S-K is contained in Item 2 
Managements Discussion and Analysis of Financial Condition and Results of
Operations under the heading Market Risk and Interest Rate Sensitivity.

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Part II. OTHER INFORMATION




Item 2. Changes in Securities and
Use of Proceeds

On July 1, 2001, the Company entered into a
credit agreement with Union Bank, which has a two year term. The
agreement requires the Company to comply with certain financial
covenants, including a requirement to maintain a minimum tangible net
worth, as defined. This minimum tangible net worth requirement limits
the Companys ability to pay dividends and other distributions to
stockholders.




Item 6. Exhibits and Reports on Form 8-K

Exhibits

The following documents are filed as exhibits to this report.

|        |  |                                                                                                                                                                                                        |  |  |  | 
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | 
|Exhibit |  |                                                                                                                                                                                                        |  |  |  | 
|Number  |  | Description                                                                                                                                                                                            |  |  |  | 
|        |  |                                                                                                                                                                                                        |  |  |  | 
|10.1    |  | The Companys 2001 Stock Option and Restricted
Stock Purchase Plan (incorporated by reference
to the Companys definitive proxy statement
filed with the SEC on September 26, 2001, File No. 1-14645).
|11.1    |  | Statement re: Computation of Per Share Earnings.                                                                                                                                                      

Reports on Form 8-K

The Company did not file any Current Reports on Form 8-K during the quarter
ended
September 30, 2001.

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SIGNATURE

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

|      |  |                   |  |                                                                              
|----- |  | ----------------- |  | -----------------------------------------------------------------------------
|      |  |                   |  | Thousand Trails, Inc.                                                        
|     
|Date: |  | November 13, 2001 |  | By:  /s/ William J. ShawWilliam J. Shaw
President and Chief Executive Officer
|     
|Date: |  | November 13, 2001 |  | By:  /s/ Bryan D. ReedBryan D. Reed
Chief Financial and Accounting Officer   

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INDEX TO EXHIBITS

|        |  |                                                                                                                                                                                                        |  |  |  | 
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | 
|Exhibit |  |                                                                                                                                                                                                        |  |  |  | 
|Number  |  | Description                                                                                                                                                                                            |  |  |  | 
|        |  |                                                                                                                                                                                                        |  |  |  | 
|10.1    |  | The Companys 2001 Stock Option and Restricted
Stock Purchase Plan (incorporated by reference
to the Companys definitive proxy statement
filed with the SEC on September 26, 2001, File
No. 1-14645).
|11.1    |  | Statement re: Computation of Per Share Earnings.                                                                                                                                                      

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