TABLE OF CONTENTS




|                                                  |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                  | PART 1. FINANCIAL INFORMATION                                                                
|Consolidated Balance Sheets                      
|Consolidated Statements of Operations            
|Consolidated Statements of Operations            
|Consolidated Statement of Shareholders Equity   
|Consolidated Statements of Cash Flows            
|Consolidated Statements of Cash Flows (continued)
|Notes to Consolidated Financial Statements       
|                                                  | 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 4. Submission of Matters to a Vote of Security-Holders                                  
|                                                  | Item 6. Exhibits and Reports on Form 8-K                                                     
|EX-11.1 Computation of Per Share Earnings        



---



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 December 31, 2000

OR

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

For the transition period of ________ to ________

Commission File Number 1-14645

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

|                                                                                   |  |                                              | 
|---------------------------------------------------------------------------------- |  | -------------------------------------------- | 
|Delaware
(State or Other Jurisdiction
of Incorporation or Organization)            |  | 75-2138671
(IRS Employer Identification No.)
|                                                                                  
|2711 LBJ Freeway, Suite 200, Dallas, Texas
(Address of Principal Executive Office) |  | 75234
(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
February 13, 2001, was 8,188,123.



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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 December 31, 2000
and June 30, 2000                                    |  |  | 3  | 
|                             
|                              |         | Consolidated Statements of Operations for the six months ended
December 31, 2000 and December 31, 1999   |  |  | 4  | 
|                             
|                              |         | Consolidated Statements of Operations for the three months ended
December 31, 2000 and December 31, 1999 |  |  | 5  | 
|                             
|                              |         | Consolidated Statement of Shareholders Equity for the six months
ended December 31, 2000                |  |  | 6  | 
|                             
|                              |         | Consolidated Statements of Cash Flows for the six months ended
December 31, 2000 and December 31, 1999   |  |  | 7  | 
|                             
|                              |         | Notes to Consolidated Financial Statements                                                               |  |  | 9  | 
|                             
|                              | Item 2. | Managements Discussion and Analysis of
Financial Condition and Results of Operations                    |  |  | 15 | 
|                             
|                              | Item 3. | Quantitative and Qualitative Disclosures About Market Risk                                               |  |  | 28 | 
|                             
|PART II. OTHER INFORMATION   
|                             
|                              | Item 4. | Submission of Matters to a Vote of Security Holders                                                      |  |  | 29 | 
|                             
|                              | Item 6. | Exhibits and Reports on Form 8-K                                                                         |  |  | 29 | 

Page 2



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##### Table of Contents






PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements




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



|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |        |  | 
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ------ | ------------ | - | -------- | ------ | ------ |  | 
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        | December 31, |   | June 30,
|Assets                                     |                                                                                                                                                                                                                                                                                                     | 2000                       |            | 2000  
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |       
|Current Assets                             |                                                                                                                                                                                                                                                                                                     |                            | (Unaudited | )     
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                                                                                                                                                                                                                                                                           |                            | $          | 1,663  |              |   | $        | 2,420  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of receivables, net of allowance of $1.0
million and $.9 million, respectively                                                                                                                                                                                                      |                            |            | 1,846  |              |   |          | 1,668  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of deferred membership selling expenses                                                                                                                                                                                                                                             |                            |            | 1,953  |              |   |          | 1,387  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of net deferred tax assets                                                                                                                                                                                                                                                          |                            |            | 4,629  |              |   |          | 3,780  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Other current assets                                                                                                                                                                                                                                                                                |                            |            | 1,667  |              |   |          | 2,105  |       
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |       
|                                           |                                                                                                                                                                                                                                                                                                     | Total Current Assets       |            |        | 11,758       |   |          |        | 11,360 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Restricted cash                                                                                                                                                                                                                                                                                     |                            |            | 1,777  |              |   |          | 1,320  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Receivables, net of allowances and discount of $1.2
million and $1.0 million, respectively                                                                                                                                                                                                          |                            |            | 5,035  |              |   |          | 4,107  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Campground land                                                                                                                                                                                                                                                                                     |                            |            | 22,981 |              |   |          | 22,981 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Buildings and equipment, net of accumulated depreciation of
$21.4 million and $20.1 million, respectively                                                                                                                                                                                           |                            |            | 21,964 |              |   |          | 22,396 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Land held for sale                                                                                                                                                                                                                                                                                  |                            |            | 2,965  |              |   |          | 2,965  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred membership selling expenses                                                                                                                                                                                                                                                                |                            |            | 4,916  |              |   |          | 3,790  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Net deferred tax assets                                                                                                                                                                                                                                                                             |                            |            | 3,398  |              |   |          | 5,362  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Other assets                                                                                                                                                                                                                                                                                        |                            |            | 590    |              |   |          | 234    |       
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |       
|Total Assets                               |                                                                                                                                                                                                                                                                                                     | $                          | 75,384     |        |              | $ | 74,515   |       
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |       
|Liabilities and Shareholders Equity      
|                                          
|                                          
|                                          
|                                          
|Current Liabilities                       
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                                                                                                                                                                                                                                                    |                            | $          | 1,289  |              |   | $        | 1,904  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued interest                                                                                                                                                                                                                                                                                    |                            |            | 88     |              |   |          | 103    |       
|                                          
|                                          
|                                          
|                                          
|                                           | Other accrued liabilities                                                                                                                                                                                                                                                                           |                            |            | 6,361  |              |   |          | 7,498  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of long-term debt                                                                                                                                                                                                                                                                   |                            |            | 3,035  |              |   |          | 2,905  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued construction cost                                                                                                                                                                                                                                                                           |                            |            | 1,888  |              |   |          | 1,888  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Current portion of deferred revenue                                                                                                                                                                                                                                                                 |                            |            | 20,826 |              |   |          | 21,977 |       
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |       
|                                           |                                                                                                                                                                                                                                                                                                     | Total Current Liabilities  |            |        | 33,487       |   |          |        | 36,275 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Long-term debt                                                                                                                                                                                                                                                                                      |                            |            | 4,857  |              |   |          | 7,043  |       
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred revenue                                                                                                                                                                                                                                                                                    |                            |            | 15,532 |              |   |          | 12,106 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Other liabilities                                                                                                                                                                                                                                                                                   |                            |            | 948    |              |   |          | 982    |       
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |       
|                                           |                                                                                                                                                                                                                                                                                                     | Total Liabilities          |            |        | 54,824       |   |          |        | 56,406 | 
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |       
|Commitments and Contingencies             
|                                          
|                                          
|                                          
|                                          
|Shareholders Equity                      
|                                          
|                                          
|                                          
|                                          
|                                           | Preferred stock, $.01 par value, 1,500,000 shares
authorized, none issued or outstanding
Common stock, $.01 par value, 15,000,000 shares
authorized, 8,084,374 and 7,980,592 shares issued and
outstanding, respectively, after deducting 189,454 and
190,736 shares held in Treasury, respectively |                            |            | 81     |              |   |          | 80     |       
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid-in capital                                                                                                                                                                                                                                                                          |                            |            | 21,153 |              |   |          | 21,080 |       
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated deficit                                                                                                                                                                                                                                                                                 |                            |            | (535   | )            |   |          | (2,914 | )     
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated other comprehensive loss                                                                                                                                                                                                                                                                |                            |            | (139   | )            |   |          | (137   | )     
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |       
|                                           |                                                                                                                                                                                                                                                                                                     | Total Shareholders Equity |            |        | 20,560       |   |          |        | 18,109 | 
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |       
|Total Liabilities and Shareholders Equity |                                                                                                                                                                                                                                                                                                     | $                          | 75,384     |        |              | $ | 74,515   |       
|                                           |                                                                                                                                                                                                                                                                                                     |                            |            |        |              |   |          |        |       

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

Page 3



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##### Table of Contents






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



|                                               |                                      |                          |                |        |                                       |        |        |        |       |        | 
|---------------------------------------------- | ------------------------------------ | ------------------------ | -------------- | ------ | ------------------------------------- | ------ | ------ | ------ | ----- | ------ | 
|                                               |                                      |                          |                |        | For the six months ended December 31,
|                                               |                                      |                          |                |        |                                      
|                                               |                                      |                          |                |        | 2000                                  |        | 1999  
|                                               |                                      |                          |                |        |                                       |        |       
|Revenues                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership contracts originated      |                          | $              | 9,583  |                                       |        | $      | 3,771  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred revenue           |                          |                | (5,189 | )                                     |        |        | (1,671 | )    
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|                                               |                                      | Membership sales revenue |                |        | 4,394                                 |        |        |        | 2,100 |       
|                                              
|                                              
|                                              
|                                              
|                                               | Membership dues                      |                          |                | 20,136 |                                       |        |        | 18,028 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Other campground revenue             |                          |                | 11,716 |                                       |        |        | 10,748 |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership fees                  |                          |                | 1,674  |                                       |        |        | 1,617  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest income                      |                          |                | 844    |                                       |        |        | 653    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Gain on asset sales                  |                          |                | 154    |                                       |        |        | 22     |      
|                                              
|                                              
|                                              
|                                              
|                                               | Other income                         |                          |                | 1,476  |                                       |        |        | 1,667  |      
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|                                               |                                      |                          | Total Revenues |        |                                       | 40,394 |        |        |       | 34,835 | 
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|Expenses                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Campground operating expenses        |                          |                | 24,020 |                                       |        |        | 21,207 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership origination costs         |                          |                | 4,629  |                                       |        |        | 2,149  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred origination costs |                          |                | (1,691 | )                                     |        |        | (370   | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Marketing expenses                   |                          |                | 2,648  |                                       |        |        | 1,634  |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership expenses              |                          |                | 891    |                                       |        |        | 966    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Corporate member services            |                          |                | 676    |                                       |        |        | 674    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest expense and amortization    |                          |                | 670    |                                       |        |        | 670    |      
|                                              
|                                              
|                                              
|                                              
|                                               | General and administrative expenses  |                          |                | 4,587  |                                       |        |        | 4,292  |      
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|                                               |                                      |                          | Total Expenses |        |                                       | 36,430 |        |        |       | 31,222 | 
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|Income Before Income Taxes                     |                                      |                          | 3,964          |        |                                       |        | 3,613  |       
|                                              
|                                              
|                                              
|                                              
|Income Taxes                                 
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision current        |                          |                | (470   | )                                     |        |        | (322   | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision deferred       |                          |                | (1,115 | )                                     |        |        | (1,103 | )    
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|                                               |                                      |                          | (1,585         | )      |                                       |        | (1,425 | )     
|                                              
|                                              
|                                              
|                                              
|Net Income                                     |                                      | $                        | 2,379          |        |                                       | $      | 2,188  |       
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|Net Income per Share  Basic                   |                                      | $                        | .29            |        |                                       | $      | .27    |       
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|Net Income per Share  Diluted                 |                                      | $                        | .28            |        |                                       | $      | .25    |       
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|Shares Used to Calculate Net Income Per Share:
|                                              
|                                              
|                                              
|                                              
|                                               | Basic                                |                          |                | 8,047  |                                       |        |        | 7,980  |      
|                                               |                                      |                          |                |        |                                       |        |        |        |      
|                                               | Diluted                              |                          |                | 8,578  |                                       |        |        | 8,617  |      
|                                               |                                      |                          |                |        |                                       |        |        |        |      

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

Page 4



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##### Table of Contents






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



|                                               |                                      |                          |                |        |                                         |        |       |       |       |        | 
|---------------------------------------------- | ------------------------------------ | ------------------------ | -------------- | ------ | --------------------------------------- | ------ | ----- | ----- | ----- | ------ | 
|                                               |                                      |                          |                |        | For the three months ended December 31,
|                                               |                                      |                          |                |        |                                        
|                                               |                                      |                          |                |        | 2000                                    |        | 1999 
|                                               |                                      |                          |                |        |                                         |        |      
|Revenues                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership contracts originated      |                          | $              | 3,425  |                                         |        | $     | 1,621 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred revenue           |                          |                | (1,371 | )                                       |        |       | (565  | )    
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|                                               |                                      | Membership sales revenue |                |        | 2,054                                   |        |       |       | 1,056 |       
|                                              
|                                              
|                                              
|                                              
|                                               | Membership dues                      |                          |                | 10,050 |                                         |        |       | 8,981 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Other campground revenue             |                          |                | 3,162  |                                         |        |       | 2,917 |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership fees                  |                          |                | 762    |                                         |        |       | 782   |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest income                      |                          |                | 426    |                                         |        |       | 358   |      
|                                              
|                                              
|                                              
|                                              
|                                               | Gain on asset sales                  |                          |                | 4      |                                         |        |       | 18    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Other income                         |                          |                | 626    |                                         |        |       | 890   |      
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|                                               |                                      |                          | Total Revenues |        |                                         | 17,084 |       |       |       | 15,002 | 
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|Expenses                                      
|                                              
|                                              
|                                              
|                                              
|                                               | Campground operating expenses        |                          |                | 9,723  |                                         |        |       | 8,497 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Membership origination costs         |                          |                | 1,775  |                                         |        |       | 1,009 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Change in deferred origination costs |                          |                | (468   | )                                       |        |       | (118  | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Marketing expenses                   |                          |                | 1,154  |                                         |        |       | 788   |      
|                                              
|                                              
|                                              
|                                              
|                                               | RPI membership expenses              |                          |                | 455    |                                         |        |       | 449   |      
|                                              
|                                              
|                                              
|                                              
|                                               | Corporate member services            |                          |                | 315    |                                         |        |       | 305   |      
|                                              
|                                              
|                                              
|                                              
|                                               | Interest expense and amortization    |                          |                | 334    |                                         |        |       | 374   |      
|                                              
|                                              
|                                              
|                                              
|                                               | General and administrative expenses  |                          |                | 2,294  |                                         |        |       | 2,222 |      
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|                                               |                                      |                          | Total Expenses |        |                                         | 15,582 |       |       |       | 13,526 | 
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|Income Before Income Taxes                     |                                      |                          | 1,502          |        |                                         |        | 1,476 |      
|                                              
|                                              
|                                              
|                                              
|Income Taxes                                 
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision  current       |                          |                | (296   | )                                       |        |       | (181  | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Income tax provision  deferred      |                          |                | (297   | )                                       |        |       | (401  | )    
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|                                               |                                      |                          | (593           | )      |                                         |        | (582  | )    
|                                              
|                                              
|                                              
|                                              
|Net Income                                     |                                      | $                        | 909            |        |                                         | $      | 894   |      
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|Net Income per Share  Basic                   |                                      | $                        | .11            |        |                                         | $      | .11   |      
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|Net Income per Share  Diluted                 |                                      | $                        | .11            |        |                                         | $      | .10   |      
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|Shares Used to Calculate Net Income Per Share:
|                                              
|                                              
|                                              
|                                              
|                                               | Basic                                |                          |                | 8,084  |                                         |        |       | 7,978 |      
|                                               |                                      |                          |                |        |                                         |        |       |       |      
|                                               | Diluted                              |                          |                | 8,585  |                                         |        |       | 8,612 |      
|                                               |                                      |                          |                |        |                                         |        |       |       |      

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

Page 5



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##### Table of Contents






Thousand Trails, Inc. and Subsidiaries
Consolidated Statement of Shareholders Equity
For the Six Months Ended December 31, 2000
(Dollars in thousands)
(Unaudited)



|                                                      |  |        |    |         |  |             |        |               |  |       |         |       |  |             |       |   |  |   |        |  
|----------------------------------------------------- |  | ------ | -- | ------- |  | ----------- | ------ | ------------- |  | ----- | ------- | ----- |  | ----------- | ----- | - |  | - | ------ | -
|                                                      |  |        |    |         |  |             |        |               |  |       |         |       |  | Accumulated
|                                                      |  |        |    |         |  | Additional  |        |               |  |       |         | Other
|                                                      |  | Common |    | Paid-In |  | Accumulated |        | Comprehensive
|                                                      |  | Stock  |    | Capital |  | Deficit     |        | Loss          |  | Total
|                                                      |  |        |    |         |  |             |        |               |  |      
|Balance, June 30, 2000                                |  | $      | 80 |         |  | $           | 21,080 |               |  |       | ($2,914 | )     |  |             | ($137 | ) |  | $ | 18,109 |  
|                                                     
|                                                     
|                                                     
|                                                     
|Issuance of common stock                              |  |        | 1  |         |  |             | 84     |               |  |       |        |       |  |             |      |   |  |   | 85     |  
|                                                     
|                                                     
|                                                     
|                                                     
|Purchase of treasury stock                            |  |        |   |         |  |             | (11    | )             |  |       |        |       |  |             |      |   |  |   | (11    | )
|                                                     
|                                                     
|                                                     
|                                                     
|Other Comprehensive Loss                              |  |        |   |         |  |             |       |               |  |       |        |       |  |             | (2    | ) |  |   | (2     | )
|                                                     
|                                                     
|                                                     
|                                                     
|Net income for the six
months ended December 31,
2000 |  |        |   |         |  |             |       |               |  |       | 2,379   |       |  |             |      |   |  |   | 2,379  |  
|                                                      |  |        |    |         |  |             |        |               |  |       |         |       |  |             |       |   |  |   |        |  
|                                                     
|                                                     
|                                                     
|                                                     
|Comprehensive Income                                  |  |        |   |         |  |             |       |               |  |       |        |       |  |             |      |   |  |   | 2,377  |  
|                                                      |  |        |    |         |  |             |        |               |  |       |         |       |  |             |       |   |  |   |        |  
|Balance, December 31, 2000                            |  | $      | 81 |         |  | $           | 21,153 |               |  |       | ($535   | )     |  |             | ($139 | ) |  | $ | 20,560 |  
|                                                      |  |        |    |         |  |             |        |               |  |       |         |       |  |             |       |   |  |   |        |  

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

Page 6



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##### Table of Contents






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



|                                                    |                                                                |  |                                       |         |      |  |        |         |  
|--------------------------------------------------- | -------------------------------------------------------------- |  | ------------------------------------- | ------- | ---- |  | ------ | ------- | -
|                                                    |                                                                |  | For the six months ended December 31,
|                                                    |                                                                |  |                                      
|                                                    |                                                                |  | 2000                                  |         | 1999
|                                                    |                                                                |  |                                       |         |     
|CASH FLOWS FROM OPERATING ACTIVITIES:              
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Collections of principal on receivables                        |  | $                                     | 2,162   |      |  | $      | 1,467   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Interest received                                              |  |                                       | 804     |      |  |        | 589     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Interest paid                                                  |  |                                       | (670    | )    |  |        | (670    | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | General and administrative and corporate member services costs |  |                                       | (5,874  | )    |  |        | (5,831  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cash collected from operations, including deferred revenue     |  |                                       | 32,842  |      |  |        | 31,764  |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cash from sales of memberships                                 |  |                                       | 5,983   |      |  |        | 2,499   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Expenditures for property operations                           |  |                                       | (23,779 | )    |  |        | (20,972 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Expenditures for sales and marketing                           |  |                                       | (6,934  | )    |  |        | (3,819  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Expenditures for insurance premiums                            |  |                                       | (1,648  | )    |  |        | (1,301  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Payment of income taxes                                        |  |                                       | (429    | )    |  |        | (43     | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other, net                                                     |  |                                       | (457    | )    |  |        | (261    | )
|                                                    |                                                                |  |                                       |         |      |  |        |         |  
|Net cash provided by operating activities           |                                                                |  | 2,000                                 |         |      |  | 3,422  |        
|                                                    |                                                                |  |                                       |         |      |  |        |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:              
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Capital expenditures                                           |  |                                       | (966    | )    |  |        | (593    | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Acquisition of Leisure Time                                    |  |                                       |        |      |  |        | (7,928  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Proceeds from asset sales                                      |  |                                       | 191     |      |  |        | 57      |  
|                                                    |                                                                |  |                                       |         |      |  |        |         |  
|Net cash used in investing activities               |                                                                |  | (775                                  | )       |      |  | (8,464 | )      
|                                                    |                                                                |  |                                       |         |      |  |        |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:              
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net borrowings under Credit Agreement                          |  |                                       | (2,022  | )    |  |        | 7,779   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Purchase of treasury stock                                     |  |                                       | (11     | )    |  |        | (564    | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Payment of notes                                               |  |                                       | (34     | )    |  |        | (2,367  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Issuance of common stock                                       |  |                                       | 85      |      |  |        | 8       |  
|                                                    |                                                                |  |                                       |         |      |  |        |         |  
|Net cash (used in) provided by financing activities |                                                                |  | (1,982                                | )       |      |  | 4,856  |        
|                                                    |                                                                |  |                                       |         |      |  |        |         |  
|DECREASE IN CASH AND CASH EQUIVALENTS               |                                                                |  | (757                                  | )       |      |  | (186   | )      
|                                                   
|                                                   
|                                                   
|                                                   
|CASH AND CASH EQUIVALENTS                          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Beginning of period                                            |  |                                       | 2,420   |      |  |        | 2,197   |  
|                                                    |                                                                |  |                                       |         |      |  |        |         |  
|                                                    | End of period                                                  |  | $                                     | 1,663   |      |  | $      | 2,011   |  
|                                                    |                                                                |  |                                       |         |      |  |        |         |  

 continued 

Page 7



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##### Table of Contents






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



|                                                                                   |                                                                          |   |                                       |        |      |   |       |        |  
|---------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | - | ------------------------------------- | ------ | ---- | - | ----- | ------ | -
|                                                                                   |                                                                          |   | For the six months ended December 31,
|                                                                                   |                                                                          |   |                                      
|                                                                                   |                                                                          |   | 2000                                  |        | 1999
|                                                                                   |                                                                          |   |                                       |        |     
|Reconciliation of net income to net cash provided by
operating activities:        
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Net Income                                                                         |                                                                          | $ | 2,379                                 |        |      | $ | 2,188 |       
|                                                                                   |                                                                          |   |                                       |        |      |   |       |       
|Adjustments to reconcile net income to net cash provided
by operating activities 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Depreciation                                                             |   |                                       | 1,360  |      |   |       | 1,288  |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Bad debt provision                                                       |   |                                       | 473    |      |   |       | 76     |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Amortization of interest yield, collection costs and
valuation allowance |   |                                       |       |      |   |       | (114   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Change in deferred sales revenue                                         |   |                                       | 5,189  |      |   |       | 1,671  |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Change in deferred membership origination costs                          |   |                                       | (1,691 | )    |   |       | (370   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Gain on asset sales                                                      |   |                                       | (154   | )    |   |       | (22    | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Deferred income tax provision                                            |   |                                       | 1,115  |      |   |       | 1,114  |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Increase in restricted cash                                              |   |                                       | (457   | )    |   |       | (261   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Decrease (increase) in receivables                                       |   |                                       | (1,590 | )    |   |       | 117    |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Decrease in other assets                                                 |   |                                       | 93     |      |   |       | 1,658  |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Decrease in accounts payable                                             |   |                                       | (615   | )    |   |       | (808   | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Increase (decrease) in accrued interest                                  |   |                                       | (15    | )    |   |       | 28     |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Decrease in deferred dues                                                |   |                                       | (2,610 | )    |   |       | (1,610 | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Decrease in other liabilities                                            |   |                                       | (1,475 | )    |   |       | (1,532 | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Other, net                                                               |   |                                       | (2     | )    |   |       | (41    | )
|                                                                                   |                                                                          |   |                                       |        |      |   |       |       
|Total adjustments                                                                  |                                                                          |   | (379                                  | )      |      |   | 1,234 |       
|                                                                                   |                                                                          |   |                                       |        |      |   |       |       
|Net cash provided by operating activities                                          |                                                                          | $ | 2,000                                 |        |      | $ | 3,422 |       
|                                                                                   |                                                                          |   |                                       |        |      |   |       |       

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

Page 8



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##### Table of Contents






Thousand Trails, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2000
(Unaudited)

NOTE 1  NATURE OF OPERATIONS

Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(collectively, the Company) own and operate 63 membership-based campgrounds
located in 17 states and British Columbia, Canada. In addition, the Company
provides a reciprocal use program for members of approximately 300 recreational
facilities and manages 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,
commencing December 16, 1999, Leisure Time Resorts of America, Inc. (Leisure
Time). See Note 2 Business Combination.

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

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

All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the six and
three month periods ended December 31, 2000 and 1999, and in the consolidated
balance sheet as of June 30, 2000.

Reclassification

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

NOTE 2  BUSINESS COMBINATION

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

Page 9



---



##### Table of Contents



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

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

NOTE 3  COMPREHENSIVE INCOME

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

The following table provides statements of comprehensive income for the six and
three months ended December 31, 2000 and 1999 (dollars in thousands):

|                                        |  |                          |       |                            |  |      |       |      |  |   |     |   |  |   |     | 
|--------------------------------------- |  | ------------------------ | ----- | -------------------------- |  | ---- | ----- | ---- |  | - | --- | - |  | - | --- | 
|                                        |  | For the six months ended |       | For the three months ended
|                                        |  | December 31              |       | December 31,              
|                                        |  |                          |       |                           
|                                        |  | 2000                     |       | 1999                       |  | 2000 |       | 1999
|                                        |  |                          |       |                            |  |      |       |     
|                                        |  | (Unaudited)              |       | (Unaudited)               
|Net Income                              |  | $                        | 2,379 |                            |  | $    | 2,188 |      |  | $ | 909 |   |  | $ | 894 | 
|                                       
|                                       
|                                       
|                                       
|Foreign Currency
Translation
Adjustment |  |                          | (2    | )                          |  |      | 2     |      |  |   | (1  | ) |  |   | 2   | 
|                                        |  |                          |       |                            |  |      |       |      |  |   |     |   |  |   |     | 
|Comprehensive Income                    |  | $                        | 2,377 |                            |  | $    | 2,190 |      |  | $ | 908 |   |  | $ | 896 | 
|                                        |  |                          |       |                            |  |      |       |      |  |   |     |   |  |   |     | 

NOTE 4  SEGMENT REPORTING

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

The campgrounds segment consists of 63 membership-based campgrounds in 17
states and British Columbia, Canada. Operations within the campground segment
include (i) the sale of memberships entitling the member to use campground
facilities, (ii) the sale of undivided 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.

Page 10



---



##### Table of Contents



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

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

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

|                                  |  |                                    |        |     |  |            |       |           |  |              |       |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | ---------------------------------- | ------ | --- |  | ---------- | ----- | --------- |  | ------------ | ----- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Six months ended December 31, 2000
|                                  |  |                                   
|                                  |  |                                    |        |     |  |            |       |           |  | Trails       |       | Corporate
|                                  |  | Campgrounds                        |        | RPI |  | Management |       | and Other |  | Consolidated
|                                  |  |                                    |        |     |  |            |       |           |  |             
|Operating revenues                |  | $                                  | 29,863 |     |  | $          | 1,674 |           |  | $            | 1,989 |           |  | $ | 101    |   |  | $ | 33,627 | 
|                                 
|                                 
|                                 
|                                 
|Membership sales
revenue          |  |                                    | 4,394  |     |  |            |      |           |  |              |      |           |  |   |       |   |  |   | 4,394  | 
|                                 
|                                 
|                                 
|                                 
|Income (loss)
before income taxes |  |                                    | 6,442  |     |  |            | 783   |           |  |              | 198   |           |  |   | (3,459 | ) |  |   | 3,964  | 

|                                  |  |                                    |        |     |  |            |       |           |  |              |       |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | ---------------------------------- | ------ | --- |  | ---------- | ----- | --------- |  | ------------ | ----- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Six months ended December 31, 1999
|                                  |  |                                   
|                                  |  |                                    |        |     |  |            |       |           |  | Trails       |       | Corporate
|                                  |  | Campgrounds                        |        | RPI |  | Management |       | and Other |  | Consolidated
|                                  |  |                                    |        |     |  |            |       |           |  |             
|Operating revenues                |  | $                                  | 26,953 |     |  | $          | 1,617 |           |  | $            | 1,823 |           |  | $ | 172    |   |  | $ | 30,565 | 
|                                 
|                                 
|                                 
|                                 
|Membership sales
revenue          |  |                                    | 2,100  |     |  |            |      |           |  |              |      |           |  |   |       |   |  |   | 2,100  | 
|                                 
|                                 
|                                 
|                                 
|Income (loss)
before income taxes |  |                                    | 6,058  |     |  |            | 651   |           |  |              | 198   |           |  |   | (3,294 | ) |  |   | 3,613  | 

|                                  |  |                                      |        |     |  |            |     |           |  |              |      |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | ------------------------------------ | ------ | --- |  | ---------- | --- | --------- |  | ------------ | ---- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Three months ended December 31, 2000
|                                  |  |                                     
|                                  |  |                                      |        |     |  |            |     |           |  | Trails       |      | Corporate
|                                  |  | Campgrounds                          |        | RPI |  | Management |     | and Other |  | Consolidated
|                                  |  |                                      |        |     |  |            |     |           |  |             
|Operating revenues                |  | $                                    | 13,153 |     |  | $          | 762 |           |  | $            | 59   |           |  | $ | 49     |   |  | $ | 14,023 | 
|                                 
|                                 
|                                 
|                                 
|Membership sales
revenue          |  |                                      | 2,054  |     |  |            |    |           |  |              |     |           |  |   |       |   |  |   | 2,054  | 
|                                 
|                                 
|                                 
|                                 
|Income (loss)
before income taxes |  |                                      | 3,317  |     |  |            | 307 |           |  |              | (235 | )         |  |   | (1,887 | ) |  |   | 1,502  | 

|                                  |  |                                      |        |     |  |            |     |           |  |              |      |           |  |   |        |   |  |   |        | 
|--------------------------------- |  | ------------------------------------ | ------ | --- |  | ---------- | --- | --------- |  | ------------ | ---- | --------- |  | - | ------ | - |  | - | ------ | 
|                                  |  | Three months ended December 31, 1999
|                                  |  |                                     
|                                  |  |                                      |        |     |  |            |     |           |  | Trails       |      | Corporate
|                                  |  | Campgrounds                          |        | RPI |  | Management |     | and Other |  | Consolidated
|                                  |  |                                      |        |     |  |            |     |           |  |             
|Operating revenues                |  | $                                    | 11,839 |     |  | $          | 782 |           |  | $            | 59   |           |  | $ | 96     |   |  | $ | 12,776 | 
|                                 
|                                 
|                                 
|                                 
|Membership sales
revenue          |  |                                      | 1,056  |     |  |            |    |           |  |              |     |           |  |   |       |   |  |   | 1,056  | 
|                                 
|                                 
|                                 
|                                 
|Income (loss)
before income taxes |  |                                      | 2,945  |     |  |            | 333 |           |  |              | (167 | )         |  |   | (1,635 | ) |  |   | 1,476  | 

Page 11



---



##### Table of Contents



NOTE 5  NET INCOME PER SHARE

The table below sets forth the information necessary to compute basic and
diluted net income per share for the six and three months ended December 31,
2000 and 1999, including a summary of the components of the numerators and
denominators of the basic and diluted net income per share computations for the
periods presented (dollars and shares in thousands, except per share amounts):

|                                            |                  |   |                          |     |                            |   |       |     |      |   |       |     |  |   |       |     | 
|------------------------------------------- | ---------------- | - | ------------------------ | --- | -------------------------- | - | ----- | --- | ---- | - | ----- | --- |  | - | ----- | --- | 
|                                            |                  |   | For the six months ended |     | For the three months ended
|                                            |                  |   | December 31,             |     | December 31,              
|                                            |                  |   |                          |     |                           
|                                            |                  |   | 2000                     |     | 1999                       |   | 2000  |     | 1999
|                                            |                  |   |                          |     |                            |   |       |     |     
|                                            |                  |   | (Unaudited)              |     | (Unaudited)               
|Net Income                                  |                  | $ | 2,379                    |     |                            | $ | 2,188 |     |      | $ | 909   |     |  | $ | 894   |    
|                                            |                  |   |                          |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Weighted Average Number of Shares  Basic   |                  |   | 8,047                    |     |                            |   | 7,980 |     |      |   | 8,084 |     |  |   | 7,978 |    
|                                           
|                                           
|                                           
|                                           
|                                            | Dilutive Options |   |                          | 531 |                            |   |       | 637 |      |   |       | 501 |  |   |       | 634 | 
|                                            |                  |   |                          |     |                            |   |       |     |      |   |       |     |  |   |       |    
|                                           
|                                           
|                                           
|                                           
|Weighted Average Number of Shares  Diluted |                  |   | 8,578                    |     |                            |   | 8,617 |     |      |   | 8,585 |     |  |   | 8,612 |    
|                                            |                  |   |                          |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Net Income Per Share  Basic                |                  | $ | .29                      |     |                            | $ | .27   |     |      | $ | .11   |     |  | $ | .11   |    
|                                            |                  |   |                          |     |                            |   |       |     |      |   |       |     |  |   |       |    
|Net Income Per Share  Diluted              |                  | $ | .28                      |     |                            | $ | .25   |     |      | $ | .11   |     |  | $ | .10   |    
|                                            |                  |   |                          |     |                            |   |       |     |      |   |       |     |  |   |       |    

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

NOTE 6  LONG TERM DEBT

On December 31, 2000, the Company had $7.6 million of outstanding borrowings
under its Credit Agreement with Foothill, and it had the ability to borrow an
additional $4.9 million for working capital purposes. Borrowings under the
Credit Agreement bear interest at prime plus .25% per annum, subject to a
minimum interest rate of 7% per annum. All borrowings under the Credit
Agreement will mature on January 17, 2003.

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

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

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

NOTE 7  CONTINGENCIES

General Liability Insurance
Commencing July 1, 1998, the Company obtained insurance covering general
liability losses up to an annual limit of $27.0 million, with no self-insured
deductible. Prior to this date, the Companys insurance covered general
liability losses up to an annual limit of $26.8 million, but required the
Company to pay the first $250,000 per occurrence, with an annual aggregate
exposure of $2.0 million. The Company has provided a liability for estimated
known and unknown claims related to uninsured general liability risks based on
actuarial estimates. As of December 31, 2000 and June 30, 2000, the Companys
recorded liability for estimated losses related to uninsured general liability
claims totaled approximately $584,000 and $650,000, respectively, which is
included in other liabilities in the accompanying consolidated balance sheets.

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

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

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

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

NOTE 8  SUPPLEMENTAL CASH FLOW INFORMATION

The Company had no non-cash investing or financing activities as defined by
Statement of Financial Accounting Standards No. 95 during the six months ended
December 31, 2000 and 1999.

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

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

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

In this Managements Discussion and Analysis of Financial Condition and Results
of Operations, and elsewhere in this report, the Company makes certain
statements as to its expected financial condition, results of operations, cash
flows, and business strategies, plans and conditions for periods after December
31, 2000. All of these statements are forward-looking statements made pursuant
to the safe harbor provisions of Section 21 (E) of the Securities Exchange Act
of 1934, as amended. These statements are not historical and involve risks and
uncertainties. The Companys actual financial condition, results of
operations, cash flows, and business strategies, plans, and conditions for
future periods may differ materially due to several factors, including but not
limited to the Companys ability to control costs, campground market conditions
and other factors affecting the Companys sales and marketing plan, the actual
rate of decline in the campground membership base, the actual use of the
campgrounds by members and guests, the effects on members and guests of the
Companys efforts to downsize its business, the Companys success in collecting
its contracts receivable and selling assets, the Companys success in acquiring
members through the purchase of other membership campground operations, and the
other factors affecting the Companys operations described in this report.

LIQUIDITY AND CAPITAL RESOURCES

Current Business Strategy.The Companys current business strategy is to
improve its campground operations and stabilize its campground membership base
through increased sales and marketing efforts and the acquisition of members
through the purchase of other 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.
In response to this decline, the Company has downsized its business by closing
and disposing of campgrounds and decreasing campground operating costs and
general and administrative expenses. The Company intends to continue to keep
the size of its campground system in an appropriate relation to the size of its
membership base. In this regard, if the membership base continues to decline,
or other opportunities arise consistent with the needs of the members, the
Company may close and dispose of additional campgrounds and it will seek to
decrease other expenses. At the same time, the Company intends to expand its
sales and marketing efforts with a view to stopping the membership decline.
The Company has also acquired members through the

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

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

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

Cash.On December 31, 2000, the Company had $1.7 million of cash and cash
equivalents, a decrease of $757,000 from June 30, 2000. During the six months
ended December 31, 2000, the Companys operating activities provided $2.0
million of cash, its investing activities used $775,000 of cash, and its
financing activities used $2.0 million of cash. The Companys investing
activities consisted of $966,000 in capital expenditures at the campgrounds,
partially offset by $191,000 in proceeds from the sale of assets. The
Companys financing activities consisted primarily of net repayments of $2.0
million under the Credit Agreement with Foothill, proceeds of $85,000 from the
issuance of common stock, and a payment of $11,000 for the purchase of 2,500
shares of common stock.

The Company experiences lower cash flow from operating activities during the
second quarter of its fiscal year because of the seasonal nature of its
operations. The Company receives the majority of the dues revenue from its
members during the winter, while incurring a higher level of operating expenses
during the summer. In addition, a majority of the Companys sales and
marketing efforts occur during the summer.

With respect to the Companys operating activities, for the six months ended
December 31, 2000, the principal sources of operating cash were $32.8 million
from operations, $2.2 million in principal and interest collections on
contracts receivable, and $6.0 million from sales of campground memberships.
Principal uses of operating cash for the six months ended December 31, 2000,
were $23.8 million in operating expenses, $5.9 million in administrative
expenses (including general and administrative expenses and corporate members
services costs), $6.9 million in membership origination costs and marketing
expenses, and $1.6 million in insurance premiums.

As of the date of this report, the Company had $2.2 million of outstanding
borrowings under its Credit Agreement with Foothill, and it had the ability to
borrow an additional $4.7 million for working capital purposes. Based upon its
current business plan, the Company believes that future cash flows provided
from operations, asset sales, and borrowings available under the

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

Material Changes in Financial Condition

Total assets increased by $869,000 during the six months ended December 31,
2000. Cash decreased by $757,000 as discussed above. Contracts receivable
increased by $1.1 million due primarily to an increase in the percentage of
financed sales. Cash collections of $2.2 million on the existing portfolio
were offset by new financed sales. Buildings and equipment decreased by
$432,000 million due primarily to depreciation, partially offset by capital
expenditures made at certain campgrounds. Other assets increased by $356,000
due primarily to increases in workers compensation deposits. Deferred tax
assets decreased by $1.1 million in the current period as a result of deferred
tax expense recognized in the current period.

Total liabilities decreased by $1.6 million during the six months ended
December 31, 2000, primarily as a result of decreases in long term debt,
deferred dues revenue, accounts payable and other accrued liabilities,
partially offset by an increase in deferred revenue related to membership
sales. Deferred dues decreased by $2.6 million because dues revenue recognized
during the period exceeded dues collected. Long term debt decreased by $2.0
million as a result of repayments under the Credit Agreement. Accounts payable
decreased by $615,000 due to the timing of payments and other accrued
liabilities decreased by $1.2 million due primarily to payments of accrued
wages and benefits. Deferred sales revenue increased by $5.2 million due to
increases in membership sales contracts originated.

Market Risk and Interest Rate Sensitivity.As noted above, as of December 31,
2000, the Company had $7.6 million of outstanding borrowings under its Credit
Agreement with Foothill (see Liquidity and Capital Resources Cash). The
borrowings under the Credit Agreement accrue interest at rates that fluctuate
with changes in the prime rate and the Company, therefore, has exposure to
changing interest rates because increases in interest rates would increase the
Companys interest expense on these borrowings.

A hypothetical ten percent change in market interest rates over the next year
would not materially impact the Companys earnings or cash flow. At the level
of borrowings in place as of December 31, 2000, a hypothetical ten percent
change in market interest rates over the next year would increase the Companys
interest expense by approximately $100,000.A hypothetical ten percent change
in market interest rates would not have a material effect on the fair value of
the Companys contracts receivable, its borrowings under the Credit Agreement
with Foothill, or its short-term cash investments.

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RESULTS OF OPERATIONS

The following discussion and analysis are based on the historical results of
operations of the Company for the six months ended December 31, 2000 and 1999.
The financial information set forth below should be read in conjunction with
the Companys consolidated financial statements included in Item 1.

Six Months Ended December 31, 2000 and 1999

Net Income.The Company reported net income of $2.4 million or $.28 per
diluted share on revenues of $40.4 million for the six months ended December
31, 2000. This compares with net income of $2.2 million or $.25 per diluted
share on revenues of $34.8 million for the same period last year.

The Companys revenues increased in the current period due primarily to higher
dues revenue and ancillary revenue from the acquisition of Leisure Time and
increased membership sales revenue. Due to greater sales activity, membership
sales revenues increased even though the unfavorable impact from the net
deferral of sales revenues and expenses was $2.2 million higher in the current
period. Expenses were also higher in the current period due primarily to the
operation of the Leisure Time campgrounds and increased sales and marketing
efforts.

The table set forth on the following page shows separately the results of the
campground operations, Trails Management, and RPI, without any allocation of
corporate expenses, as well as corporate expenses and other revenues and
expenses in the aggregate, for the six months ended December 31, 2000 and 1999.

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



|                                                                         |                                      |                          |        |                  |       |      |        |         |       | 
|------------------------------------------------------------------------ | ------------------------------------ | ------------------------ | ------ | ---------------- | ----- | ---- | ------ | ------- | ----- | 
|                                                                         |                                      |                          |        | Six Months Ended
|                                                                         |                                      |                          |        | December 31,    
|                                                                         |                                      |                          |        |                 
|                                                                         |                                      |                          |        | 2000             |       | 1999
|                                                                         |                                      |                          |        |                  |       |     
|Campground Operations                                                   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership dues                      |                          | $      | 20,136           |       |      | $      | 18,028  |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Campground revenues                  |                          |        | 9,727            |       |      |        | 8,925   |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Cost of campground revenues          |                          |        | (4,594           | )     |      |        | (4,141  | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Operating expenses                   |                          |        | (17,635          | )     |      |        | (15,441 | )    
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|Contribution from campground operations                                  |                                      |                          | 7,634  |                  |       |      | 7,371  |        
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|Sales                                                                   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership contracts originated      |                          |        | 9,583            |       |      |        | 3,771   |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in deferred revenue           |                          |        | (5,189           | )     |      |        | (1,671  | )    
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|                                                                         |                                      | Membership sales revenue |        |                  | 4,394 |      |        |         | 2,100 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership origination costs         |                          |        | (4,629           | )     |      |        | (2,149  | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in deferred origination costs |                          |        | 1,691            |       |      |        | 370     |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Marketing expenses                   |                          |        | (2,648           | )     |      |        | (1,634  | )    
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|Loss on sales                                                            |                                      |                          | (1,192 | )                |       |      | (1,313 | )      
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|Trails Management                                                       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Revenues                             |                          |        | 1,989            |       |      |        | 1,823   |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Expenses                             |                          |        | (1,791           | )     |      |        | (1,625  | )    
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|Contribution from Trails Management                                      |                                      |                          | 198    |                  |       |      | 198    |        
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|Resort Parks International                                              
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Revenues                             |                          |        | 1,674            |       |      |        | 1,617   |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Expenses                             |                          |        | (891             | )     |      |        | (966    | )    
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|Contribution from RPI                                                    |                                      |                          | 783    |                  |       |      | 651    |        
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|                                                                         | Other income                         |                          |        | 1,375            |       |      |        | 1,496   |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Corporate member services            |                          |        | (676             | )     |      |        | (674    | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | General and administrative expense   |                          |        | (4,587           | )     |      |        | (4,293  | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Other                                |                          |        | 101              |       |      |        | 172     |      
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|Income before interest income and expense,
gain on asset sales and taxes |                                      |                          | 3,636  |                  |       |      | 3,608  |        
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|                                                                         | Interest income                      |                          |        | 844              |       |      |        | 653     |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Interest expense                     |                          |        | (670             | )     |      |        | (670    | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Gain on asset sales                  |                          |        | 154              |       |      |        | 22      |      
|                                                                         |                                      |                          |        |                  |       |      |        |         |      
|Income before taxes                                                      |                                      | $                        | 3,964  |                  |       | $    | 3,613  |        
|                                                                         |                                      |                          |        |                  |       |      |        |         |      

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Operating Income.During the six months ended December 31, 2000 and 1999, the
Company achieved a positive contribution from operations of $3.6 million.
While operating income remained constant between the two periods, the
contribution from campground operations and RPI increased in the current period
and the negative contribution from the Companys sales operations decreased in
the current period. These improvements were offset by a decrease in other
income during the current period. For this purpose, the contribution from
operations is defined as income before interest income and expenses, gains on
asset sales, and taxes. See the table on the previous page for the elements of
the contribution from operations and the Companys operating income before
taxes for the periods presented.

Campground Operations.The Companys operations are highly seasonal. The
Company receives the majority of the dues revenue from its members during the
winter. Dues are recognized as income ratably during the year. However, the
Company incurs a higher level of operating expenses during the summer. In
addition, a majority of the Companys sales and marketing efforts occur during
the summer. Commencing December 16, 1999, the operating results of Leisure
Time are included in the operating results of the Company.

Campground membership dues revenue was $20.1 million for the six months ended
December 31, 2000, compared with $18.0 million for the same period last year.
The increase in dues revenue was due primarily to the addition of $2.4 million
in dues paid by the members of Leisure Time and the effect of the annual dues
increase, partially offset by the loss of campground members during the year.

Other campground revenues were $9.7 million for the six months ended December
31, 2000, compared with $8.9 million for the same period last year. The
related expenses were
$4.6 million for the six months ended December 31, 2000, compared with $4.1
million for the same period last year. The increase in other campground
revenue during the current period was due primarily to $565,000 in revenue from
Leisure Times campgrounds and fees generated by an extended stay program at
some of the Companys other campgrounds. The increase in expenses during the
current period resulted from $211,000 in expenses from Leisure Times
campgrounds, as well as higher labor costs and expenses at the Companys other
campgrounds.

Campground operating expenses were $17.6 million for the six months ended
December 31, 2000, compared with $15.4 million for the same period last year.
The increase in campground operating expenses in the current period was due
primarily to $2.0 million of expenses from Leisure Times campgrounds. In
addition, the Company experienced an increase in labor costs, maintenance
expenses, and utilities at its other campgrounds.

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

For the six months ended December 31, 2000, the Company originated membership
contracts of $9.6 million, compared with $3.8 million in the same period last
year. During the current period, the Company originated more new membership
contracts at higher average sales prices than in the prior period, and also
originated contracts totaling $3.8 million from upgrade programs

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involving its existing members. During the current period the Company
completed the upgrade program offered to Leisure Times existing members, and
began marketing a similar product to the existing members of Thousand Trails
and NACO. During the six months ended December 31, 2000, the Company
originated 2,297 new membership contracts at an average sales price of $2,548
and 1,270 contracts in the upgrade programs at an average sales price of
$2,995. This compares with approximately 1,965 new membership contracts at an
average sales price of $1,916 during the six months ended December 31, 1999.

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 six months ended December 31,
2000 and 1999, the Company recognized campground membership sales revenues of
$4.4 million and $2.1 million, respectively. Membership sales revenue includes
revenues of $3.0 million and $1.6 million, respectively, that were deferred in
prior periods. Moreover, during these same periods, the Company deferred
revenues of $8.2 million and $3.3 million, respectively, which will be
recognized in future periods. In the current period, the Company recognized
$967,000 in sales revenue related to Leisure Time.

Selling expenses directly related to the sale of campground memberships are
deferred and recognized as expenses on a straight-line basis over the expected
life of the memberships sold. All other selling and marketing costs are
recognized as expenses in the period incurred. For the six months ended
December 31, 2000 and 1999, the Company recognized selling expenses of
$2.9 million and $1.8 million, respectively. These amounts include expenses of
$910,000 and $404,000, respectively, that were deferred in prior periods.
Moreover, for these same periods, the Company deferred expenses of $2.6 million
and $774,000, respectively, which will be recognized in future periods. In the
current period, the Company recognized selling and marketing expenses related
to Leisure Time of $429,000.

Although the Companys sales results are improving, selling and marketing
expenses exceeded sales revenues by $1.2 million and $1.3 million for the six
months ended December 31, 2000 and 1999, respectively. These expenses exceeded
sales revenues because the Company deferred more sales revenues than selling
expenses.

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

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

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Campground Management.Trails Management, a wholly owned subsidiary of the
Company, currently manages 241 public campgrounds for the U.S. Forest Service
and other entities. For the six months ended December 31, 2000, these
operations produced a net contribution of $198,000 on revenues of $2.0 million,
compared with a net contribution of $198,000 on revenues of $1.8 million for
the same period last year. The increase in revenues between periods was due
primarily to higher usage of the campgrounds, which the Company attributes to
mild weather in the Northwest United States, where a majority of the
campgrounds are located. Trails Management was recently awarded contracts to
manage 72 campgrounds in addition to the 169 campgrounds that it managed
during the periods presented. The Company expects further revenue growth as a
result of these new contracts. The revenues and expenses related to the
Companys campground management operations are included in other campground
revenue and campground operating expenses in the consolidated statement of
operations.

Resort Parks International.RPI charges its members a fee for a membership
that entitles them to use any of the campgrounds participating in RPIs
reciprocal use system, subject to certain limitations. For the six months
ended December 31, 2000, RPIs operations produced a net contribution of
$783,000 on revenues of $1.7 million, compared with a net contribution of
$651,000 on revenues of $1.6 million for the same period last year. The
increase in revenue during the current period resulted from an increase in the
number of RPI memberships sold to the Companys members as part of the upgrade
programs discussed above. The decrease in operating expenses in the current
period was due primarily to a decrease in professional expenses, lower
marketing costs, and a decrease in the cost of operating supplies, partially
offset by increases in labor costs and the cost of printed materials. RPI is
working to introduce new products to increase its revenues and maintain its
contribution margin; however, there is no assurance that these efforts will be
successful.

Interest Income and Expense.Interest income increased to $844,000 for the six
months ended December 31, 2000, from $653,000 for the same period last year.
Interest income in the prior period includes amortization of the allowance for
interest discount and valuation allowance related to the contracts receivable
of $65,000. These allowances were fully amortized at June 30, 2000. The
increase in interest income in the current period was due primarily to an
increase in the interest earned on the Companys portfolio of contracts
receivable. The Companys portfolio of contracts receivable increased with the
acquisition of Leisure Time, and has continued to grow as a result of the
increase in membership sales, approximately 37% of which are sold on an
installment basis. As a result, the interest earned on the Companys portfolio
of contracts receivable is expected to increase compared with historical
levels.

Interest expense was $670,000 for the six months ended December 31, 2000 and
1999. In the current period the Companys borrowings under the Credit
Agreement were at a lower lever compared with the same period last year, but
the Company was required to pay a higher rate of interest during the current
period.

Gain on Asset Sales.The Company recognized a gain of $154,000 on asset sales
for the six months ended December 31, 2000, compared with $22,000 for the same
period last year. The increase in the current period was due to the timing of
asset sales. Over the next several years, the Company intends to dispose of
the remaining land it holds for sale, the campgrounds that are closed if the
Company downsizes or responds to other opportunities, and other undeveloped,
excess acreage associated with the campgrounds. The sale of campgrounds
requires addressing the rights of members associated with such campgrounds.
The impact of these rights is uncertain

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and could adversely affect the availability or timing of sale opportunities or
the ability of the Company to realize recoveries from asset sales. In
addition, although the Company has successfully sold assets during the past
several years, no assurance exists that the Company will be able to locate a
buyer for any of the remaining assets or that sales on acceptable terms can be
made.

Other Income.Other income generally consists of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, collections of written-off contracts and delinquent dues,
subscription fees received from members who subscribe to the Companys member
magazine, fees charged members for making more than five operator-assisted
reservations in a given year, lot sales and fees received from third parties
for billing and collection services. Other income was $1.4 million for the six
months ended December 31, 2000, compared with $1.5 million for the same period
last year. The decrease in the current period was due primarily to a decrease
in fees received for billing and collections services, partially offset by an
increase in the collection of delinquent dues and contracts receivable. In
addition, the prior period included $183,000 from the settlement of a property
insurance claim. Fees for billing and collection services are expected to
decline in future periods by approximately $350,000 per year because a primary
customer terminated its contract with the Company as of September 30, 2000.

Other Expenses.Administrative expenses, including corporate member service
costs and general and administrative expenses, were $4.6 million for the six
months ended
December 31, 2000, compared with $4.3 million for the same period last year.
The increase in the current period was due primarily to $91,000 of expenses
directly related to Leisure Time in addition to higher labor and bank service
charges that were partially offset by decreases in third-party legal fees.

Income Taxes.The Companys current provision for income taxes was $470,000
for the six months ended December 31, 2000, compared with $322,000 for the same
period last year. The current provisions for these periods include amounts for
federal alternative minimum taxes and state income taxes payable in the various
states where the Company conducts its operations. With the exception of
federal alternative minimum taxes, the Company does not have federal income
taxes payable on a consolidated basis due to its net operating tax loss
carryforwards, which totaled $20.9 million at June 30, 2000.

The Company recorded a deferred tax provision of $1.1 million for the six
months ended December 31, 2000 and 1999. The Company will continue to record a
deferred tax provision in future periods as the related deferred tax assets are
realized. The deferred tax provision will not affect current or future income
tax payments.

Three Months Ended December 31, 2000 and 1999

Net Income.The Company reported net income of $909,000 or $.11 per diluted
share on revenues of $17.1 million for the three months ended December 31,
2000. This compares with net income of $894,000 or $.10 per diluted share on
revenues of $15.0 million for the same period last year.

The Companys revenues increased in the current period due primarily to higher
dues revenue and ancillary revenue from the acquisition of Leisure Time and
increased membership sales

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revenue. Due to greater sales activity, membership sales revenues increased
even though the unfavorable impact from the net deferral of sales revenues and
expenses was $456,000 higher in the current period. Expenses were also higher
in the current period due primarily to the operation of the Leisure Time
campgrounds and increased sales and marketing efforts.

The table set forth on the following page shows separately the results of the
campground operations, Trails Management, and 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 December 31, 2000 and
1999.

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



|                                                                         |                                      |                          |       |                    |       |      |       |        |       | 
|------------------------------------------------------------------------ | ------------------------------------ | ------------------------ | ----- | ------------------ | ----- | ---- | ----- | ------ | ----- | 
|                                                                         |                                      |                          |       | Three Months Ended
|                                                                         |                                      |                          |       | December 31,      
|                                                                         |                                      |                          |       |                   
|                                                                         |                                      |                          |       | 2000               |       | 1999
|                                                                         |                                      |                          |       |                    |       |     
|Campground Operations                                                   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership dues                      |                          | $     | 10,050             |       |      | $     | 8,981  |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Campground revenues                  |                          |       | 3,103              |       |      |       | 2,858  |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Cost of campground revenues          |                          |       | (1,676             | )     |      |       | (1,511 | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Operating expenses                   |                          |       | (7,753             | )     |      |       | (6,760 | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Contribution from campground operations                                  |                                      |                          | 3,724 |                    |       |      | 3,568 |       
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Sales                                                                   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership contracts originated      |                          |       | 3,425              |       |      |       | 1,621  |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in deferred revenue           |                          |       | (1,371             | )     |      |       | (565   | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|                                                                         |                                      | Membership sales revenue |       |                    | 2,054 |      |       |        | 1,056 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Membership origination costs         |                          |       | (1,775             | )     |      |       | (1,009 | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in deferred origination costs |                          |       | 468                |       |      |       | 118    |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Marketing expenses                   |                          |       | (1,154             | )     |      |       | (788   | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Loss on sales                                                            |                                      |                          | (407  | )                  |       |      | (623  | )     
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Trails Management                                                       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Revenues                             |                          |       | 59                 |       |      |       | 59     |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Expenses                             |                          |       | (294               | )     |      |       | (226   | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Contribution from Trails Management                                      |                                      |                          | (235  | )                  |       |      | (167  | )     
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Resort Parks International                                              
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Revenues                             |                          |       | 762                |       |      |       | 782    |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Expenses                             |                          |       | (455               | )     |      |       | (449   | )    
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Contribution from RPI                                                    |                                      |                          | 307   |                    |       |      | 333   |       
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|                                                                         | Other income                         |                          |       | 577                |       |      |       | 795    |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Corporate member services            |                          |       | (315               | )     |      |       | (305   | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | General and administrative expense   |                          |       | (2,294             | )     |      |       | (2,223 | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Other                                |                          |       | 49                 |       |      |       | 96     |      
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Income before interest income and expense,
gain on asset sales and taxes |                                      |                          | 1,406 |                    |       |      | 1,474 |       
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|                                                                         | Interest income                      |                          |       | 426                |       |      |       | 358    |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Interest expense                     |                          |       | (334               | )     |      |       | (374   | )    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Gain on asset sales                  |                          |       | 4                  |       |      |       | 18     |      
|                                                                         |                                      |                          |       |                    |       |      |       |        |      
|Income before taxes                                                      |                                      | $                        | 1,502 |                    |       | $    | 1,476 |       
|                                                                         |                                      |                          |       |                    |       |      |       |        |      

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Operating Income.During the three months ended December 31, 2000, the Company
achieved a positive contribution from operations of $1.4 million, compared with
$1.5 million in the same period last year. While the contribution from
campground operations increased and the negative contribution from the
Companys sales operations decreased during the current period, the prior
period included $183,000 from the settlement of an insurance claim. For this
purpose, the contribution from operations is defined as income before interest
income and expenses, gains on asset sales, and taxes. See the table on the
previous page for the elements of the contribution from operations and the
Companys operating income before taxes for the periods presented.

Campground Operations.Campground membership dues revenue was $10.1 million
for the three months ended December 31, 2000, compared with $9.0 million for
the same period last year. The increase in dues revenue was due primarily to
the addition of $1.2 million in dues paid by the members of Leisure Time and
the effect of the annual dues increase, partially offset by the loss of
campground members during the year.

Other campground revenues were $3.1 million for the three months ended December
31, 2000, compared with $2.9 million for the same period last year. The
related expenses were
$1.7 million for the three months ended December 31, 2000, compared with $1.5
million for the same period last year. The increase in other campground
revenues during the current period was due primarily to $78,000 in revenue from
Leisure Times campgrounds and increases in revenues at the Companys other
campgrounds. The increase in expenses during the current period resulted from
$41,000 in expenses from Leisure Times campgrounds, as well as higher labor
costs and expenses at the Companys other campgrounds.

Campground operating expenses were $7.8 million for the three months ended
December 31, 2000, compared with $6.8 million for the same period last year.
The increase in campground operating expenses in the current period was due
primarily to $776,000 of expenses from Leisure Times campgrounds. In
addition, the Company experienced an increase in labor costs, maintenance
expenses, and utilities at its other campgrounds.

For the three months ended December 31, 2000, the Company originated membership
contracts of $3.4 million, compared with $1.6 million in the same period last
year. During the three months ended December 31, 2000, the Company originated
650 new membership contracts at an average sales price of $2,808, and 395
contracts in the upgrade programs at an average sales price of $2,995. This
compares with 765 new membership contracts at an average sales price of $2,114
during the three months ended December 31, 1999.

For the three months ended December 31, 2000 and 1999, the Company recognized
campground membership sales revenues of $2.1 million and $1.1 million,
respectively. Membership sales revenue includes revenues of $1.6 million and
$883,000, respectively, that were deferred in prior periods. Moreover, during
these same periods, the Company deferred revenues of $3.0 million and $1.4
million, respectively, which will be recognized in future periods. In the
current period, the Company recognized $408,000 in sales revenue related to
Leisure Time.

For the three months ended December 31, 2000 and 1999, the Company recognized
selling and marketing expenses of $2.5 million and $1.7 million, respectively.
These amounts include expenses of $490,000 and $214,000, respectively, that
were deferred in prior periods. Moreover, for these same periods, the Company
deferred expenses of $959,000 and $332,000, respectively,

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which will be recognized in future periods. In the current period, the Company
recognized selling and marketing expenses related to Leisure Time of $116,000.

Although the Companys sales results are improving, selling and marketing
expenses exceeded sales revenues by $407,000 and $623,000 for the three months
ended December 31, 2000 and 1999, respectively. In the current period these
expenses exceeded sales revenues because the Company deferred more sales
revenues than selling expenses. In the prior period selling and marketing
expenses exceeded sales revenue before deferrals.

Campground Management.For the three months ended December 31, 2000, the
operations of Trails Management produced a loss of $235,000 on revenues of
$59,000, compared with a loss of $167,000 on revenues of $59,000 for the same
period last year. The campground management operations generally incur a loss
during the second fiscal quarter due to fixed expenses and the seasonal closure
of the campgrounds. In addition, current period expenses include $38,000 in
legal fees related to a personal injury claim in which Trails Management was
found not liable for damages. The revenues and expenses related to these
operations are included in other campground revenue and campground operating
expenses in the consolidated statement of operations.

Resort Parks International.For the three months ended December 31, 2000,
RPIs operations produced a net contribution of $307,000 on revenues of
$762,000, compared with a net contribution of $333,000 on revenues of $782,000
for the same period last year. The decrease in revenue during the current
period resulted from a lower membership renewal rate, partially offset by an
increase in the number of new memberships sold to the Companys members as a
part of the upgrade program at the Companys campgrounds. Operating costs
increased slightly during the current period as a result of increased marketing
expenses.

Interest Income and Expense.Interest income increased to $426,000 for the
three months ended December 31, 2000, from $358,000 for the same period last
year. The increase in the current period was due primarily to an increase in
the interest earned on the Companys portfolio of contracts receivable. Also
included in interest income in the prior period is amortization of the
allowance for interest discount and valuation allowance related to the
contracts receivable of $33,000.

Interest expense decreased to $334,000 for the three months ended December 31,
2000, from $374,000 for the same period last year. This decrease in the
current period was primarily due to reduced borrowings under the Companys
Credit Agreement, compared with the same period last year.

Gain on Asset Sales.The Company recognized a gain of $4,000 on asset sales
for the three months ended December 31, 2000, compared with $18,000 for the
same period last year. The decrease in the current period was due to the
timing of asset sales.

Other Income.Other income was $577,000 for the three months ended December
31, 2000, compared with $795,000 for the same period last year. The decrease
in the current period was due primarily to a decrease in servicing fee income,
partially offset by an increase in the collection of delinquent dues. In
addition, the prior period included $183,000 from the settlement of a property
insurance claim.

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Other Expenses.Administrative expenses, including corporate member service
costs and general and administrative expenses, were $2.6 million for the three
months ended
December 31, 2000, compared with $2.5 million for the same period last year.
The increase in the current period was due primarily to $21,000 of expenses
directly related to Leisure Time as well as higher labor and other operating
costs that were partially offset by decreases in third-party legal fees.

Income Taxes.The Companys current provision for income taxes was $296,000
for the three months ended December 31, 2000, compared with $181,000 for the
same period last year. The Company recorded a deferred tax provision of
$297,000 for the three months ended December 31, 2000, compared to $401,000 for
the same period last year.

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




Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company currently does not have any derivative financial instruments.
However, the Company does have other financial instruments that contain market
risk. Management believes that the market risk associated with the Companys
financial instruments as of December 31, 2000 is not significant. The
information required by Item 305 of Regulation S-K is contained in Item 2 
Managements Discussion and Analysis of Financial Condition and Results of
Operations under the heading Market Risk and Interest Rate Sensitivity.

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##### Table of Contents






Part II. OTHER INFORMATION




Item 4. Submission of Matters to a Vote of Security-Holders

On November 16, 2000, the Company held its annual meeting of shareholders. As
of the record date for the meeting, the Company had 8,084,374 shares of common
stock outstanding, of which 7,141,354 shares were represented at the meeting in
person or by proxy. The shareholders took the following actions at the
meeting.



|1. |  | The shareholders elected the six members of the Board of Directors of the
Company who will serve until the next annual meeting of shareholders and
until their successors are elected and qualified. The six directors and
the votes cast for and withheld for each were as follows:
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  |  |           |           |                |  |  |     | 
|----------------- |  | --------- | --------- | -------------- |  |  | --- | 
|Name              |  | Votes For |           | Votes Withheld
|                  |  |           |           |               
|Andrew M. Boas    |  |           | 7,140,476 |                |  |  | 878 | 
|                 
|                 
|                 
|                 
|William P. Kovacs |  |           | 7,140,476 |                |  |  | 878 | 
|                 
|                 
|                 
|                 
|Donald R. Leopold |  |           | 7,140,476 |                |  |  | 878 | 
|                 
|                 
|                 
|                 
|H. Sean Mathis    |  |           | 7,140,476 |                |  |  | 878 | 
|                 
|                 
|                 
|                 
|Douglas K. Nelson |  |           | 7,140,476 |                |  |  | 878 | 
|                 
|                 
|                 
|                 
|William J. Shaw   |  |           | 7,140,476 |                |  |  | 878 | 



|2. |  | The shareholders ratified the appointment of Arthur Andersen LLP as
the independent certified public accountants for the Company for the
fiscal year ended June 30, 2001. The votes cast for, votes cast
against, and the abstentions were as follows:
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|          |  |               |     |             |  |  |       | 
|--------- |  | ------------- | --- | ----------- |  |  | ----- | 
|Votes For |  | Votes Against |     | Abstentions
|          |  |               |     |            
|7,136,937 |  |               | 837 |             |  |  | 3,580 | 




Item 6. Exhibits and Reports on Form 8-K

Exhibits

The following documents are filed as exhibits to this report.

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

Reports on Form 8-K

The Company did not file any Current Reports on Form 8-K during the quarter
ended
December 31, 2000.

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##### Table of Contents



SIGNATURE

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



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



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##### Table of Contents



INDEX TO EXHIBITS



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