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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
Commission file number 1-14645
THOUSAND TRAILS, INC.
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(Exact name of registrant as specified in its charter)
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DELAWARE 75-2138671
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
2711 LBJ FREEWAY,
SUITE 200, DALLAS, TX 75234
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (972) 243-2228
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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COMMON STOCK, PAR VALUE $.01 PER SHARE AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
At September 24, 1999, the latest practicable date, the aggregate market value
of voting common stock of the Registrant held by nonaffiliates was $13.7
million.
At September 24, 1999, there were 7,972,228 shares of Common Stock, $.01 par
value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III (Items 10-13) is incorporated by reference
from the Registrant's definitive Proxy Statement for the Registrant's 1999
Annual Meeting of Stockholders, which will be filed with the Securities and
Exchange Commission (the "SEC") pursuant to Regulation 14A.
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INDEX TO
ANNUAL REPORT ON FORM 10-K
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PART I
Item 1. Business.............................................................................4
Item 2. Properties..........................................................................13
Item 3. Legal Proceedings...................................................................16
Item 4. Submission of Matters to a Vote of Security-Holders.................................16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters..............................................................17
Item 6. Selected Financial Data.............................................................20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................................22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..........................39
Item 8. Financial Statements and Supplementary Data.........................................40
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..............................................75
PART III
Item 10. Directors and Executive Officers of the Registrant..................................76
Item 11. Executive Compensation..............................................................76
Item 12. Security Ownership of Certain Beneficial Owners
and Management...................................................................76
Item 13. Certain Relationships and Related Transactions......................................76
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K......................................................................77
Signature Page .......................................................................................85
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PART I
ITEM 1. BUSINESS
OVERVIEW
GENERAL. Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(the "Company") own and operate a system of 53 membership-based campgrounds
located in 17 states and British Columbia, Canada, serving 106,000 members as of
June 30, 1999. Through its subsidiaries, the Company also provides a reciprocal
use program for members of approximately 300 recreational facilities and manages
169 public campgrounds for the US Forest Service. The Company's principal
executive office is located at 2711 LBJ Freeway, Suite 200, Dallas, Texas 75234,
its telephone number is (972) 243-2228, and its home page on the Internet is
www.thousandtrails.com.
The Company entered the membership campground business in 1991 with the
acquisition of 100% of the capital stock of National American Corporation, a
Nevada corporation (collectively with its subsidiaries, "NACO") and 69% of the
capital stock of Thousand Trails, Inc., a Washington corporation (collectively
with its subsidiaries, "Trails"). The Company subsequently increased its
ownership in Trails to 100% and merged Trails into the Company. Prior to
acquiring NACO and Trails, the Company purchased contracts receivable generated
by them from the sale of campground memberships on the installment basis. The
Company was incorporated in 1984, NACO was incorporated in 1967, and Trails was
incorporated in 1969. In 1996, the Company, then known as USTrails Inc.,
reincorporated in the state of Delaware and changed its name to Thousand Trails,
Inc.
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 or the possible 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 also believes that it
may be possible to acquire members through the purchase of other membership
campground operations, many of whom are experiencing financial difficulties.
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 continues to decline, the Company may close and
dispose of additional campgrounds and it will seek to decrease other expenses.
At the same time, the Company intends to expand its sales and marketing efforts
with a view to stopping the membership decline. The Company also intends to
explore the possible acquisition of members through the purchase of other
membership campground organizations. The Company believes that the ultimate size
of its
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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.
CAMPGROUND OPERATIONS
CAMPGROUNDS. The Company and its subsidiaries own and operate a network of 53
membership-based campgrounds located in 17 states and British Columbia, Canada.
The Company owns and operates a network of 32 of these campgrounds under the
Thousand Trails logo, and NACO owns and operates a network of 21 of these
campgrounds under the NACO logo. The 53 campgrounds contain a total of
approximately 9,700 acres and 17,700 campsites.
Members using the campgrounds may bring their own recreational vehicles ("RVs"),
tents or other sleeping equipment, rent travel trailers or cabins located at the
campgrounds or visit for the day. As of June 30, 1999, there were approximately
70,000 campground members in the Thousand Trails system and 36,000 campground
members in the NACO system. However, approximately 40% of the NACO campground
members and approximately 58% of the Thousand Trails campground members possess
the right to use the campgrounds in both networks. The largest percentage of
campground members reside in California (approximately 37%). Large numbers of
campground members also reside in Florida, Oregon, Texas, and Washington.
Memberships provide the member's family access to the Company's network of
campgrounds, but do not convey a deeded interest in the campgrounds with the
exception of six campgrounds in which members received deeded undivided
interests in the campground. A member also does not possess the right to use a
specific campsite, trailer, or cabin, or the right to control further
development or operation of a campground.
In the six campgrounds in which members have received deeded undivided
interests, the Company retains the entire fee interest in the common amenities,
such as the lodge, recreational facilities, and other buildings, and an
undivided interest in the campsites to the extent the interest has not been sold
to the members.
Depending upon member usage, the campgrounds are open year-round or on a
seasonal basis. The campgrounds feature campsites with electrical, water, and in
some cases, sewer connections for RVs, restroom and shower facilities, rental
trailers or cabins, and other recreational amenities. At each campground, a
manager and staff provide security, maintenance, and recreational programs that
vary by location.
The Company derives other campground revenue from renting trailers, cabins, and
sports equipment to members, selling food and other items to members from
convenience stores located at the campgrounds, and providing the members access
to laundry facilities and game machines. The Company also charges members a fee
for storing recreational vehicles and providing food service.
EXISTING MEMBERSHIP. At June 30, 1999, the Company had 106,000 campground
members. The majority of these members have been members for over 10 years. The
Company's membership base has declined significantly over the past five fiscal
years and, net of new sales, the membership base is presently declining at the
rate of approximately 5% per year. The Company attributes this continuing
decline principally to its aging membership base, of whom approximately 50% are
senior citizens. In addition, the Company estimates that the
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memberships sold in recent fiscal years will have an expected life that is
significantly shorter than the expected life of the memberships previously sold
by the Company. To stop the continuing decline in its membership base, the
Company must significantly increase its campground membership sales over current
levels or acquire members through the purchase of other membership campground
operations.
MEMBERSHIP SALES. The Company's membership sales declined significantly in the
early 1990's due to increasing marketing costs and other factors. Over the past
five years, the Company has been rebuilding its sales and marketing organization
with a view to stopping the decline in its membership base. Although the
Company's membership sales have increased, the level of sales has not met the
Company's expectations. In an effort to improve its membership sales, the
Company has been working to increase the number of prospects that attend its
sales presentations. In this regard, in fiscal 1997, the Company entered into a
joint marketing arrangement with Fleetwood Industries, Inc. ("Fleetwood"), the
largest manufacturer of recreational vehicles ("RVs"). Under this marketing
arrangement, purchasers of Fleetwood RVs receive a temporary membership and are
invited to visit one of the Company's campgrounds. Purchasers of new Fleetwood
RVs accounted for approximately 10% of sales in fiscal 1999 and 1998. In the
fourth quarter of fiscal 1998, the Company entered into a similar marketing
arrangement with a major RV financing company and it plans to seek other similar
alliances. The Company has also recently entered into reciprocal sales
agreements with two other companies in an effort to increase sales.
The Company's current membership products offer the consumer a choice of
membership options ranging from the use of approximately five campgrounds in a
defined geographic region to the entire system of campgrounds with sales prices
ranging from $1,995 to $4,995. The Company currently requires a down payment of
at least $495 (at least 25% of the sales price prior to January 1999) and will
finance the balance for periods of up to 36 months. In addition to the sales
price, the memberships require payment of annual dues, which averaged $352 on
new sales in fiscal 1999. During fiscal 1999, 1998, and 1997, the Company sold
approximately 4,200, 2,900, and 3,400 new memberships, respectively. The average
sales price was $1,254 in fiscal 1999, $1,164 in fiscal 1998, and $707 in fiscal
1997.
The Company has the capacity to sell approximately 71,000 additional new
campground memberships in the future, assuming the sale of ten memberships for
each existing campsite. Further downsizing of the Company's business would
reduce this capacity.
Most memberships are transferable with payment of a transfer fee to the Company.
The membership contracts, however, prohibit the sale of a membership for a
profit.
MARKETING. The Company believes that camping is a popular and growing activity
in the United States. The Company believes this is reflected in sales of RVs and
camping equipment as well as campground use. Moreover, the Company believes the
aging of the baby boomers will have a positive effect on sales of RVs and
camping equipment, and lead to more family camping.
While most campers use national or state parks, the Company believes 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 believes that many
campers are "amenity" campers, whose needs match the benefits provided by the
Company's campgrounds, such as pools, lodges,
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sport courts, and recreational activities. The Company believes that the needs
of amenity campers are not being met by underfunded national and state
campgrounds. In addition, the Company believes that it can differentiate its
campgrounds and services from other campgrounds by emphasizing the quality of
its facilities and the benefits and services available at its campgrounds.
DUES. The Company's campground members, including members who own a deeded
undivided interest in a campground, pay annual dues ranging generally from $100
to $600. The annual dues collected from campground members constitute general
revenue of the Company. The Company uses the dues to fund its operating
expenses, including corporate expenses and the maintenance and operation of the
campgrounds. However, the membership agreements do not require the Company to
use the dues for any specific purpose.
The average annual dues paid by the Company's campground members was $357 for
fiscal 1999, $351 for fiscal 1998, and $344 for fiscal 1997. The increases
resulted primarily from the annual increase in dues implemented by the Company
in accordance with the terms of the membership agreements. In addition, the
Company's new members generally pay annual dues at a higher level than the older
members retiring from the system.
The membership agreements generally permit the Company to increase annually the
amount of each member's dues by either (i) the percentage increase in the
consumer price index ("CPI") or (ii) the greater of 10% or the percentage
increase in the CPI. The Company, however, may 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 35% of the members have requested that their dues be frozen
because of their age or disability. The Company estimates that approximately 50%
of the campground members are senior citizens eligible to request that their
dues be frozen. The Company is unable to estimate when or if a significant
number of these members will request that their dues be frozen in the future.
MAINTENANCE AND IMPROVEMENTS. The Company makes annual capital and maintenance
expenditures to maintain and improve the campgrounds. During fiscal 1999, the
Company spent $4.8 million on major maintenance, repairs, and capital
improvements at the campgrounds and anticipates that it will spend an additional
$5.2 million on such items in fiscal 2000. The Company may be required to spend
greater amounts on such items in future years as the facilities age.
RESORT PARKS INTERNATIONAL. NACO members and holders of dual-system memberships,
which permit the member to use the campgrounds in both the NACO and Thousand
Trails systems, may join a reciprocal program operated by Resort Parks
International, Inc. ("RPI"), a wholly owned subsidiary of the Company. The RPI
program offers members reciprocal use of approximately 300 participating
recreational facilities. Members of these participating facilities pay a fee to
RPI that entitles them to use any of the participating facilities, subject to
the limitation that they cannot use an RPI facility located within 125 miles of
their home facility. As of June 30, 1999, there were approximately 77,000 RPI
members, of which approximately 59,000 were members of campgrounds that are not
affiliated with the Company.
CAMPGROUND MANAGEMENT. UST Wilderness Management Corporation ("Wilderness
Management"), a wholly owned subsidiary of the Company, manages 169 public
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campgrounds for the US Forest Service containing a total of 3,850 campsites.
Pursuant to its management contracts with the US Forest Service, Wilderness
Management incurs the expenses of operating the campgrounds and receives the
related revenues, net of a fee paid to the US Forest Service. These management
contracts typically have five-year terms.
SEGMENT FINANCIAL INFORMATION
Segment financial information for the campground, reciprocal use, and campground
management operations is set forth in Note 14 to the consolidated financial
statements included in Item 8.
ASSET SALES
During fiscal 1999, 1998, and 1997, the Company sold certain of its real estate
assets and received proceeds of $2.2 million, $8.6 million, and $4.7 million,
respectively. During this three-year period, the Company sold various properties
at resorts not related to its campground operations. In addition, the Company
sold several campgrounds, excess acreage, and unused buildings and trailers.
Over the next several years, the Company intends to dispose of the remaining
land that it holds for sale, any campgrounds that are closed if the Company
downsizes, and other undeveloped, excess acreage associated with the
campgrounds. The sale of campgrounds requires addressing the rights of members
associated with such campgrounds. The impact of these rights is uncertain and
could adversely affect the availability or timing of sale opportunities or the
ability of the Company to realize recoveries from asset sales. In addition,
although the Company has successfully sold assets during the past 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 effected.
When there are outstanding borrowings under the Credit Agreement (as amended,
the "Credit Agreement"), between the Company and Foothill Capital Corporation
("Foothill"), all proceeds from asset sales must be paid to Foothill and applied
to reduce such borrowings.
CONTRACTS RECEIVABLE
Prior to April 1992, the Company sold substantially all of its campground
memberships on the installment basis, creating a portfolio of contracts
receivable. This portfolio has declined significantly as the Company has
collected the outstanding contracts receivable. Since April 1992, the Company
has sold only a limited number of campground memberships on an installment
basis. However, during fiscal 1999, the Company financed the sale of
approximately 24% of the new campground memberships, and the portfolio of
contracts receivable may grow if sales volume increases and new members elect to
finance their purchase. Otherwise, the portfolio of contracts receivable will
continue to decline.
Interest accrues on the unpaid balance of the contracts receivable at fixed
rates, which vary depending upon the size of the down payment and the length of
the contract. The contracts receivable bear interest at rates ranging generally
from 9.5% to 16%, with a weighted average stated interest rate of 13% as of June
30, 1999. Monthly installment payments range generally from $34 to $207 over the
term of the contracts receivable, which can be up to ten years. The terms of
most newer contracts receivable, however, have averaged two years or less.
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At June 30, 1999, 97% of the campground members had paid for their membership in
full, and the remaining outstanding contracts receivable had an average
remaining term of 15 months.
As of June 30, 1999, the Company owned contracts receivable with an aggregate
principal balance of $3.4 million (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Contracts Receivable " in Item
7).
When there are outstanding borrowings under the Credit Agreement between the
Company and Foothill, all collections on the contracts receivable, including
principal, interest, and fees, must be paid to Foothill and applied to reduce
such borrowings.
SEASONALITY
The Company experiences its most significant demand for working capital between
May and October of each year, which period coincides with the highest level of
operating expenses. During the summer, operating expenses increase significantly
because the peak usage of the campgrounds requires seasonal workers and
increased maintenance and operating expenses. In addition, the majority of the
Company's sales and marketing efforts occur during the spring and summer. On the
other hand, most dues collection activity for campground members occurs during
the months of November through April, which is a period of relatively lower
expenses.
GOVERNMENT REGULATION
To operate its campgrounds, the Company must comply with major discretionary
permits or approvals issued by local governments under local zoning ordinances,
master plans for shoreline use, and state environmental policy statutes. The
Company has complied in all material respects with the discretionary permits and
approvals regulating its existing operations.
In addition, to construct improvements at its campgrounds, the Company has
usually been required to obtain permits that are typically non-discretionary and
routinely issued such as building and sanitary sewage permits. The Company has
generally resolved problems concerning the issuance of such permits through
design, operating, or engineering solutions negotiated with local government
officials.
The Company's campgrounds are also subject to a variety of federal and state
environmental statutes and regulations. Environmental issues may exist at some
of the campgrounds concerning underground storage tanks, sewage treatment plants
and septic systems, and waste disposal. Management believes that these issues
will not have a material adverse impact on the Company's operations or financial
position, as the Company has conducted environmental testing to identify and
correct a number of these problems, and has removed substantially all
underground storage tanks. The Company does not possess insurance or
indemnification agreements with respect to any environmental liability that it
may incur.
Most of the states in which the Company does business have laws regulating
campground membership sales. These laws generally require comprehensive
disclosure to prospective purchasers, and give purchasers the right to rescind
their purchase for three-to-five days after the date of sale. Some states have
laws requiring the Company to register with a state agency and obtain a permit
to market.
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In some states, including California, Oregon, and Washington, laws place
limitations on the ability of the owner of a campground to close the campground
unless the members at the campground receive access to a comparable campground.
In these states, members from campgrounds that have been closed by the Company
were reassigned to other campgrounds located in the same general area as the
closed campgrounds. The impact of the rights of members under these laws is
uncertain and could adversely affect the implementation of, and the benefits or
recoveries that may be available from, additional downsizing of the Company's
business.
The government authorities regulating the Company's activities have broad
discretionary power to enforce and interpret the statutes and regulations that
they administer, including the power to enjoin or suspend sales activities,
require or restrict construction of additional facilities, and revoke licenses
and permits relating to business activities. The Company monitors its sales
presentations and debt collection activities to control practices that might
violate consumer protection laws and regulations or give rise to consumer
complaints. The Company believes that it has conducted its sales programs and
debt collection activities in substantial compliance with all applicable federal
and state laws and regulations.
Certain consumer rights and defenses that vary from jurisdiction to jurisdiction
may affect the Company's portfolio of contracts receivable. Examples of such
laws include state and federal consumer credit and truth-in-lending laws
requiring the disclosure of finance charges, and usury and retail installment
sales laws regulating permissible finance charges. The Company believes that it
has complied in all material respects with these laws.
In certain states, as a result of government regulations and provisions in
certain of the membership agreements, the Company is prohibited from selling
more than 10 memberships per campsite. At the present time, these restrictions
do not preclude the Company from selling memberships in any state. However,
these restrictions may limit the Company's ability to downsize by closing
campgrounds and reassigning members to other campgrounds. In addition,
membership agreements or understandings, or governmental interpretations
thereof, may limit the Company's ability to expand or modify the type of
business activities conducted at the campgrounds.
In a decision to which the Company was not a party, the Mississippi Supreme
Court ruled that the Mississippi Timeshare Rules apply to the sale of campground
memberships in Mississippi. The Company has discussed the ramifications of this
decision with the Mississippi state agency responsible for the administration of
these rules. The Company does not believe that the agency will require the
Company to rescind any sales of campground memberships because of the decision;
however, the agency has the power to do so. The Company has sold $15.9 million
of campground memberships in Mississippi.
COMPETITION
Based on an internally conducted analysis, the Company estimates there are
approximately 15,000 privately owned campgrounds in the United States today, of
which approximately 500 are membership campgrounds. The balance of the
campgrounds are generally open to the public and usually charge fees based on
the length of stay. The 500 membership campgrounds have approximately 400,000
members, of which 106,000 are the Company's members. This information was
derived from a review of publicly available directories of campgrounds,
including those of the Company's competitors. During this analysis, the
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Company identified duplicative directory entries and compiled an estimate of the
total number of campgrounds and members.
Several companies compete directly with the Company's campground operations. For
example, Resorts USA, Inc., which does business as Outdoor World, sells
memberships to its system of 14 campgrounds, Travel America, Inc. (formerly All
Seasons Resorts, Inc. and Thousand Adventures, Inc.) sells memberships to its
system of 37 campgrounds, and Leisure Time Resorts, Inc. sells memberships to
its system of ten campgrounds. Other companies or individuals operate the
balance of the membership campgrounds. The Company's direct competitors
generally offer their members reciprocal use of other campgrounds through
affiliations. Over the past several years, many of the Company's direct
competitors have experienced financial difficulties, and several competitors
have filed for bankruptcy.
The vast majority of the campgrounds in the United States are operated for the
public by Federal, state, and local governments. Although these public
campgrounds are used by most campers, in recent years, many of these public
campgrounds have experienced overcrowding and increased user fees. The Company's
campgrounds also compete indirectly with timeshare resorts and other types of
recreational land developments that do not involve camping.
The Company's campground operations compete on the basis of location and the
quality of facilities and services offered at the campgrounds. The Company
believes 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 (see
"Marketing").
Wilderness Management competes directly with approximately four other companies
in bidding for contracts to manage public campgrounds for the US Forest Service.
Wilderness Management currently has contracts to manage 169 of the approximately
3,000 campgrounds operated for the US Forest Service by private companies.
Coast to Coast Resorts, RPI's primary competitor and the largest reciprocal use
system, has approximately 400 affiliated campgrounds and more than 225,000
members. Both RPI and Coast to Coast Resorts operate vacation clubs offering
travel and lodging discounts and services to their members.
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EMPLOYEES
As of June 30, 1999, the Company had 732 full-time employees and 107 part-time
employees. Due to the seasonal nature of the Company's business, the Company has
a greater number of employees during the summer months. As of June 30, 1999, the
Company had 1,087 seasonal employees. The Company does not have any collective
bargaining agreements with its employees and considers its relations with
employees to be satisfactory.
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ITEM 2. PROPERTIES
OFFICES. The Company leases office space at 2711 LBJ Freeway, Suite 200, Dallas,
Texas 75234. NACO leases office space at 2325 Highway 90, Gautier, Mississippi
39553. RPI leases office space at 3711 Long Beach Blvd., Suite 110, Long Beach,
California 90807.
CAMPGROUNDS. The Company currently operates 53 campgrounds in 17 states and
British Columbia, Canada. The locations of these campgrounds are shown on the
map on page 14. The amenities presently available at each campground are listed
on the chart on page 15. The Company owns 52 of these campgrounds and leases the
LaConner campground and portions of the Lake Tawakoni and Snowflower
campgrounds. The Company has sold undivided interests to members at six of the
campgrounds. Of the 53 campgrounds, 30 operate all year, 10 operate year-round
but provide only limited services during the off-season, and 12 operate
seasonally only. One campground is temporarily closed due to flood damage.
ENCUMBRANCES. The Company has granted liens on substantially all of its assets
to secure its obligations under the Credit Agreement between the Company and
Foothill. As of the date of this report the Company had outstanding borrowings
of $11.6 million under the Credit Agreement (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Item 7). All of
the Company's subsidiaries (other than an immaterial utility subsidiary) have
fully and unconditionally guaranteed, on a joint and several basis, 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.
Some states, including California, Oregon, and Washington, have nondisturbance
statutes that place limitations on the ability of the owner of a campground to
sell or close, or a lienholder to foreclose a lien on, a campground. In certain
states, these statutes permit sale, closure, or foreclosure if the holders of
related memberships receive access to a comparable campground. The mortgages on
the Company's campgrounds that were granted to secure the Company's obligations
under the Credit Agreement contain similar nondisturbance provisions. As a
consequence, although the Company may be able to sell or close some of its
campgrounds as it has done in the past, a sale or closure of significant numbers
of campgrounds would likely be limited by state law or the membership contracts
themselves, and a foreclosure of liens on significant numbers of campgrounds
would also likely be limited. The impact of the rights of members under these
laws and nondisturbance provisions is uncertain and could adversely affect the
availability or timing of sale opportunities or the ability of the Company or
lienholder to realize recoveries from asset sales.
OTHER. The Company owns less than 100 residential lots and other miscellaneous
real estate at three resorts not related to its campground operations, and
various other parcels of undeveloped real estate, that it intends to sell over
time.
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THOUSAND TRAILS, INC.
CAMPGROUNDS
[A MAP OF THE UNITED STATES OF AMERICA WITH PLOT POINTS DEPICTING THOUSAND
TRAILS AND NACO CAMPGROUND LOCATIONS APPEARS HERE]
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o THOUSAND TRAILS CAMPGROUNDS o NACO CAMPGROUNDS
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BRITISH COLUMBIA TEXAS WASHINGTON INDIANA
Cultus Lake Medina Lake Birch Bay Indian Lakes*
Lake Conroe Little Diamond
WASHINGTON Colorado River Rainier VIRGINIA
LaConner Lake Whitney Long Beach Virginia Landing*
Mount Vernon Lake Texoma
Chehalis Lake Tawakoni OREGON NEW JERSEY
Leavenworth South Jetty Chestnut Lakes
MICHIGAN
OREGON Saint Clair CALIFORNIA
Bend Lake Minden
Pacific City INDIANA Russian River
Horseshoe Lakes Snowflower
CALIFORNIA Turtle Beach
Lake of the Springs OHIO Yosemite
Morgan Hill Wilmington Windsor
San Benito Kenissee Lake Rancho Oso
Soledad Canyon Wilderness Lakes
Idyllwild PENNSYLVANIA
Pio Pico Hershey TEXAS
Oakzanita Springs Bay Landing*
Palm Springs VIRGINIA
Lynchburg MISSISSIPPI
NEVADA Chesapeake Bay Indian Point
Las Vegas
NORTH CAROLINA SOUTH CAROLINA
ARIZONA Forest Lake Carolina Landing* * Some members of
Verde Valley these six campgrounds
TENNESSEE own a deeded,
FLORIDA Natchez Trace* undivided interest in
Orlando Cherokee Landing* campsites at their
campground.
</TABLE>
Page 14
<PAGE> 15
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CAMPGROUND FAMILY
FACILITIES AND TENT ADULT CENTER/
AMENITIES ACREAGE RV SITES SITES LODGE PAVILION POOL
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thousand Trails
- ---------------------------------------------------------------------------------------------------------------------------------
Bend 93 300 10 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Chehalis 306 278 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Chesapeake Bay 280 373 19 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Colorado River 217 128 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Cultus Lake 14 185 12 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Forest Lake 205 294 12 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Hershey 196 310 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Horseshoe Lakes 202 118 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Idyllwild 181 287 38 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Kenisee Lake 159 83 10 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LaConner 106 313 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Lake Conroe 130 285 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Lake Of The Springs 176 541 12 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Lake Tawakoni 300 318 1 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Lake Texoma 198 319 2 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Lake Whitney 253 244 3 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Las Vegas 11 217 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Leavenworth 279 275 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Lynchburg 150 223 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Medina Lake 260 387 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Morgan Hill 62 317 28 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Mount Vernon 185 248 3 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Oakzanita Springs 118 121 30 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Orlando 269 734 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Pacific City 105 305 1 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Palm Springs 28 392 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Pio Pico 182 453 12 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
San Benito 200 517 51 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Soledad Canyon 230 809 9 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Saint Clair 110 110 8 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Verde Valley 300 333 6 2 1
- ---------------------------------------------------------------------------------------------------------------------------------
Wilmington 109 125 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
NACO
- ---------------------------------------------------------------------------------------------------------------------------------
Bay Landing 305 257 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Birch Bay 30 215 8 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Carolina Landing 119 193 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Cherokee Landing 55 341 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Chestnut Lake 31 179 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Indian Lakes 545 1202 50 2 1 3
- ---------------------------------------------------------------------------------------------------------------------------------
Indian Point 11 157 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Lake Minden 97 162 161 1
- ---------------------------------------------------------------------------------------------------------------------------------
Little Diamond 200 541 100 1 4 1
- ---------------------------------------------------------------------------------------------------------------------------------
Long Beach 17 120 20 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Natchez Trace 623 561 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Rainier 107 609 300 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Rancho Oso 310 118 50 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Russian River 42 125 30 1
- ---------------------------------------------------------------------------------------------------------------------------------
Snowflower 720 248 10 1
- ---------------------------------------------------------------------------------------------------------------------------------
South Jetty 60 162 10 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Turtle Beach 39 72 120
- ---------------------------------------------------------------------------------------------------------------------------------
Virginia Landing 339 210 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Wilderness Lakes 74 523 5 1 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
Windsor 17 95 25 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
Yosemite Lakes 387 379 131 1
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CAMPGROUND TRAILERS
FACILITIES AND TENNIS ATHLETIC VEHICLE RESTROOMS/ (SEASONAL HORSESHOE
AMENITIES COURT COURT STORAGE SHOWERS AVAILABILITY) PITS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thousand Trails
- ----------------------------------------------------------------------------------------------------------------------------------
Bend 2 1 1 6 17 4
- ----------------------------------------------------------------------------------------------------------------------------------
Chehalis 2 2 1 8 9 7
- ----------------------------------------------------------------------------------------------------------------------------------
Chesapeake Bay 1 1 1 4 45 6
- ----------------------------------------------------------------------------------------------------------------------------------
Colorado River 1 1 1 2 10 4
- ----------------------------------------------------------------------------------------------------------------------------------
Cultus Lake 2 2 1 4 5 2
- ----------------------------------------------------------------------------------------------------------------------------------
Forest Lake 2 1 1 3 16 4
- ----------------------------------------------------------------------------------------------------------------------------------
Hershey 1 1 1 3 38 4
- ----------------------------------------------------------------------------------------------------------------------------------
Horseshoe Lakes 2 1 1 2 11 4
- ----------------------------------------------------------------------------------------------------------------------------------
Idyllwild 3 1 6 28 4
- ----------------------------------------------------------------------------------------------------------------------------------
Kenisee Lake 1 1 2 2
- ----------------------------------------------------------------------------------------------------------------------------------
LaConner 1 1 6 15 6
- ----------------------------------------------------------------------------------------------------------------------------------
Lake Conroe 2 2 1 4 32 8
- ----------------------------------------------------------------------------------------------------------------------------------
Lake Of The Springs 1 2 1 12 36 8
- ----------------------------------------------------------------------------------------------------------------------------------
Lake Tawakoni 1 1 5 24 8
- ----------------------------------------------------------------------------------------------------------------------------------
Lake Texoma 1 1 6 12 6
- ----------------------------------------------------------------------------------------------------------------------------------
Lake Whitney 1 1 1 5 21 8
- ----------------------------------------------------------------------------------------------------------------------------------
Las Vegas 2 1 3 2
- ----------------------------------------------------------------------------------------------------------------------------------
Leavenworth 4 2 1 8 5 5
- ----------------------------------------------------------------------------------------------------------------------------------
Lynchburg 2 6 1 5 5 7
- ----------------------------------------------------------------------------------------------------------------------------------
Medina Lake 1 1 4 34 4
- ----------------------------------------------------------------------------------------------------------------------------------
Morgan Hill 1 1 1 7 23 4
- ----------------------------------------------------------------------------------------------------------------------------------
Mount Vernon 1 1 6 5 4
- ----------------------------------------------------------------------------------------------------------------------------------
Oakzanita Springs 1 1 2 16 4
- ----------------------------------------------------------------------------------------------------------------------------------
Orlando 2 1 7 30 6
- ----------------------------------------------------------------------------------------------------------------------------------
Pacific City 2 1 5 18 12
- ----------------------------------------------------------------------------------------------------------------------------------
Palm Springs 1 1 4 19 4
- ----------------------------------------------------------------------------------------------------------------------------------
Pio Pico 5 3 8 17 12
- ----------------------------------------------------------------------------------------------------------------------------------
San Benito 1 1 7 28 4
- ----------------------------------------------------------------------------------------------------------------------------------
Soledad Canyon 2 3 1 14 52 13
- ----------------------------------------------------------------------------------------------------------------------------------
Saint Clair 1 3 14 2
- ----------------------------------------------------------------------------------------------------------------------------------
Verde Valley 1 2 3 15 8
- ----------------------------------------------------------------------------------------------------------------------------------
Wilmington 1 2 1 2 13 2
- ----------------------------------------------------------------------------------------------------------------------------------
NACO
- ----------------------------------------------------------------------------------------------------------------------------------
Bay Landing 1 1 2 6
- ----------------------------------------------------------------------------------------------------------------------------------
Birch Bay 1 3 13 2
- ----------------------------------------------------------------------------------------------------------------------------------
Carolina Landing 2 1 1 4 4
- ----------------------------------------------------------------------------------------------------------------------------------
Cherokee Landing 1 1 1 3 3
- ----------------------------------------------------------------------------------------------------------------------------------
Chestnut Lake 1 1 16 2
- ----------------------------------------------------------------------------------------------------------------------------------
Indian Lakes 2 2 1 5 8
- ----------------------------------------------------------------------------------------------------------------------------------
Indian Point 1 2 3 1
- ----------------------------------------------------------------------------------------------------------------------------------
Lake Minden 1 1 3 15 2
- ----------------------------------------------------------------------------------------------------------------------------------
Little Diamond 1 1 5 4 3
- ----------------------------------------------------------------------------------------------------------------------------------
Long Beach 1 2 6 2
- ----------------------------------------------------------------------------------------------------------------------------------
Natchez Trace 1 1 5 1
- ----------------------------------------------------------------------------------------------------------------------------------
Rainier 1 1 10 14 8
- ----------------------------------------------------------------------------------------------------------------------------------
Rancho Oso 1 1 3 20 4
- ----------------------------------------------------------------------------------------------------------------------------------
Russian River 4 10 2
- ----------------------------------------------------------------------------------------------------------------------------------
Snowflower 1 11 6 3
- ----------------------------------------------------------------------------------------------------------------------------------
South Jetty 1 5 14 3
- ----------------------------------------------------------------------------------------------------------------------------------
Turtle Beach 1 2 2
- ----------------------------------------------------------------------------------------------------------------------------------
Virginia Landing 1 3 2
- ----------------------------------------------------------------------------------------------------------------------------------
Wilderness Lakes 1 1 1 8 32 6
- ----------------------------------------------------------------------------------------------------------------------------------
Windsor 1 1 7 3
- ----------------------------------------------------------------------------------------------------------------------------------
Yosemite Lakes 1 1 8 22 4
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CAMPGROUND CHILDREN'S
FACILITIES AND PLAY TRADING MINIATURE SHUFFLE
AMENITIES AREA POST GOLF BOARD SPA
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thousand Trails
- -------------------------------------------------------------------------------------------------------------------
Bend 2 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Chehalis 1 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Chesapeake Bay 3 1 1 2 1
- -------------------------------------------------------------------------------------------------------------------
Colorado River 2 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Cultus Lake 2 1 2
- -------------------------------------------------------------------------------------------------------------------
Forest Lake 2 1 1 2 2
- -------------------------------------------------------------------------------------------------------------------
Hershey 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Horseshoe Lakes 10 1 2
- -------------------------------------------------------------------------------------------------------------------
Idyllwild 3 1 1 2
- -------------------------------------------------------------------------------------------------------------------
Kenisee Lake 2 1 1 1
- -------------------------------------------------------------------------------------------------------------------
LaConner 3 1 1 3 1
- -------------------------------------------------------------------------------------------------------------------
Lake Conroe 2 1 1 2 1
- -------------------------------------------------------------------------------------------------------------------
Lake Of The Springs 3 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Lake Tawakoni 2 1 1 8 2
- -------------------------------------------------------------------------------------------------------------------
Lake Texoma 2 1 1 2 2
- -------------------------------------------------------------------------------------------------------------------
Lake Whitney 2 1 1 2 1
- -------------------------------------------------------------------------------------------------------------------
Las Vegas 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Leavenworth 2 1 1 4
- -------------------------------------------------------------------------------------------------------------------
Lynchburg 2 1 1 2 1
- -------------------------------------------------------------------------------------------------------------------
Medina Lake 3 1 1 4 1
- -------------------------------------------------------------------------------------------------------------------
Morgan Hill 3 1 1 4
- -------------------------------------------------------------------------------------------------------------------
Mount Vernon 2 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Oakzanita Springs 3 1 1 2 1
- -------------------------------------------------------------------------------------------------------------------
Orlando 2 1 1 16 1
- -------------------------------------------------------------------------------------------------------------------
Pacific City 2 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Palm Springs 1 2 1
- -------------------------------------------------------------------------------------------------------------------
Pio Pico 3 1 1 8 2
- -------------------------------------------------------------------------------------------------------------------
San Benito 4 1 1 6 2
- -------------------------------------------------------------------------------------------------------------------
Soledad Canyon 7 1 1 8 1
- -------------------------------------------------------------------------------------------------------------------
Saint Clair 2 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Verde Valley 3 1 2 1
- -------------------------------------------------------------------------------------------------------------------
Wilmington 2 1 2 1
- -------------------------------------------------------------------------------------------------------------------
NACO
- -------------------------------------------------------------------------------------------------------------------
Bay Landing 1 1 1 4
- -------------------------------------------------------------------------------------------------------------------
Birch Bay 1 1
- -------------------------------------------------------------------------------------------------------------------
Carolina Landing 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Cherokee Landing 1 1 1 2
- -------------------------------------------------------------------------------------------------------------------
Chestnut Lake 1 1 1 2
- -------------------------------------------------------------------------------------------------------------------
Indian Lakes 3 1 1 2
- -------------------------------------------------------------------------------------------------------------------
Indian Point 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Lake Minden 1 1
- -------------------------------------------------------------------------------------------------------------------
Little Diamond 3 1 2
- -------------------------------------------------------------------------------------------------------------------
Long Beach 2 1 1
- -------------------------------------------------------------------------------------------------------------------
Natchez Trace 4 1 1
- -------------------------------------------------------------------------------------------------------------------
Rainier 2 1 1
- -------------------------------------------------------------------------------------------------------------------
Rancho Oso 1 1 1
- -------------------------------------------------------------------------------------------------------------------
Russian River
- -------------------------------------------------------------------------------------------------------------------
Snowflower 1 2
- -------------------------------------------------------------------------------------------------------------------
South Jetty 1 1 2
- -------------------------------------------------------------------------------------------------------------------
Turtle Beach 1 1
- -------------------------------------------------------------------------------------------------------------------
Virginia Landing 2 1 1 2
- -------------------------------------------------------------------------------------------------------------------
Wilderness Lakes 2 1 1 3 3
- -------------------------------------------------------------------------------------------------------------------
Windsor 1 1
- -------------------------------------------------------------------------------------------------------------------
Yosemite Lakes 1 1 1 1
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CAMPGROUND BOAT
FACILITIES AND LAUNCH/ LAUNDRY CABINS/
AMENITIES VOLLEYBALL MARINA FACILITY LODGING
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thousand Trails
- ------------------------------------------------------------------------------------------------------------
Bend 1 1 7
- ------------------------------------------------------------------------------------------------------------
Chehalis 1 1 4
- ------------------------------------------------------------------------------------------------------------
Chesapeake Bay 1 1 1 18
- ------------------------------------------------------------------------------------------------------------
Colorado River 2 1 1
- ------------------------------------------------------------------------------------------------------------
Cultus Lake 1 1
- ------------------------------------------------------------------------------------------------------------
Forest Lake 1 1 18
- ------------------------------------------------------------------------------------------------------------
Hershey 1 1
- ------------------------------------------------------------------------------------------------------------
Horseshoe Lakes 1 1
- ------------------------------------------------------------------------------------------------------------
Idyllwild 1 3 4
- ------------------------------------------------------------------------------------------------------------
Kenisee Lake 1 1
- ------------------------------------------------------------------------------------------------------------
LaConner 1 1 1 17
- ------------------------------------------------------------------------------------------------------------
Lake Conroe 2 1 2
- ------------------------------------------------------------------------------------------------------------
Lake Of The Springs 1 1 1 3
- ------------------------------------------------------------------------------------------------------------
Lake Tawakoni 2 1 1
- ------------------------------------------------------------------------------------------------------------
Lake Texoma 1 1 1 18
- ------------------------------------------------------------------------------------------------------------
Lake Whitney 2 1
- ------------------------------------------------------------------------------------------------------------
Las Vegas 3
- ------------------------------------------------------------------------------------------------------------
Leavenworth 1 2 8
- ------------------------------------------------------------------------------------------------------------
Lynchburg 2 1
- ------------------------------------------------------------------------------------------------------------
Medina Lake 2 1 1
- ------------------------------------------------------------------------------------------------------------
Morgan Hill 1 1
- ------------------------------------------------------------------------------------------------------------
Mount Vernon 1 1
- ------------------------------------------------------------------------------------------------------------
Oakzanita Springs 1 1
- ------------------------------------------------------------------------------------------------------------
Orlando 1 1 4
- ------------------------------------------------------------------------------------------------------------
Pacific City 1 1 4
- ------------------------------------------------------------------------------------------------------------
Palm Springs 3
- ------------------------------------------------------------------------------------------------------------
Pio Pico 2 2
- ------------------------------------------------------------------------------------------------------------
San Benito 2 1
- ------------------------------------------------------------------------------------------------------------
Soledad Canyon 4 1
- ------------------------------------------------------------------------------------------------------------
Saint Clair 1 1 2
- ------------------------------------------------------------------------------------------------------------
Verde Valley 1 1
- ------------------------------------------------------------------------------------------------------------
Wilmington 1 1
- ------------------------------------------------------------------------------------------------------------
NACO
- ------------------------------------------------------------------------------------------------------------
Bay Landing 1 1 1 19
- ------------------------------------------------------------------------------------------------------------
Birch Bay 1 1
- ------------------------------------------------------------------------------------------------------------
Carolina Landing 1 1 18
- ------------------------------------------------------------------------------------------------------------
Cherokee Landing 1 1 30
- ------------------------------------------------------------------------------------------------------------
Chestnut Lake 1 1
- ------------------------------------------------------------------------------------------------------------
Indian Lakes 3 1 3 54
- ------------------------------------------------------------------------------------------------------------
Indian Point 1 1 1 16
- ------------------------------------------------------------------------------------------------------------
Lake Minden 1 1
- ------------------------------------------------------------------------------------------------------------
Little Diamond 2 1 1 1
- ------------------------------------------------------------------------------------------------------------
Long Beach 1
- ------------------------------------------------------------------------------------------------------------
Natchez Trace 1 1 1 58
- ------------------------------------------------------------------------------------------------------------
Rainier 1 1
- ------------------------------------------------------------------------------------------------------------
Rancho Oso 2 2
- ------------------------------------------------------------------------------------------------------------
Russian River 1 1
- ------------------------------------------------------------------------------------------------------------
Snowflower 1 1 4
- ------------------------------------------------------------------------------------------------------------
South Jetty 1 1
- ------------------------------------------------------------------------------------------------------------
Turtle Beach 1 1 1
- ------------------------------------------------------------------------------------------------------------
Virginia Landing 1 1 1 19
- ------------------------------------------------------------------------------------------------------------
Wilderness Lakes 1 4
- ------------------------------------------------------------------------------------------------------------
Windsor 1
- ------------------------------------------------------------------------------------------------------------
Yosemite Lakes 1 2 32
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Page 15
<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS
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
effect upon the Company's operations or financial position.
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
financial position, operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
Page 16
<PAGE> 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET AND TRADING. The Company's common stock (the "Common Stock") has been
publicly traded on the American Stock Exchange under the symbol TRV since
December 4, 1998. Prior thereto, the Common Stock was publicly traded in the
over-the-counter market under the symbol TRLS from November 20, 1996 through
December 4, 1998, and under the symbol USTQ from 1992 through November 20, 1996.
Historically, the Common Stock has not traded every day and the trading volume
has often been small, such that the Common Stock may not be deemed to be traded
in an established public trading market. The following table sets forth for the
fiscal periods indicated, the high and low bid quotations as quoted through the
NASD OTC Bulletin Board System through December 3, 1998, and the high and low
sales prices as reported on the American Stock Exchange thereafter. Such
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.
[A CHART WITH PLOT POINTS DEPICTING THE HIGH AND LOW BID QUOTATIONS FOR EACH OF
THE FOUR FISCAL QUARTERS OF 1998 AND 1999 APPEARS HERE]
<TABLE>
<CAPTION>
1999 1998
------------------------ -------------------
High Low High Low
------- ------- ----- ------
<S> <C> <C> <C> <C>
First Quarter 5 1/8 3 5/8 3 1/8 2 1/8
Second Quarter 5 13/16 3 5/8 5 3/8 3 1/8
Third Quarter 5 1/4 4 13/16 4 1/2 3 1/4
Fourth Quarter 4 7/8 4 1/4 4 1/4 3 1/2
</TABLE>
As of September 24, 1999, the Company's Common Stock was held by 87 holders of
record. Moreover, security position listings available to the Company listed
approximately 450 beneficial holders of Common Stock.
ABSENCE OF DIVIDENDS. Since inception, the Company has not paid any dividends.
The Credit Agreement prohibits the payment of any cash dividends on the Common
Stock without the consent of Foothill, until the Credit Agreement is terminated.
TRANSFER RESTRICTIONS. The Company's Common Stock is subject to transfer
restrictions designed to avoid an "ownership change" within the meaning of
Section 382 of the Internal Revenue Code of 1986, as amended ("the Code"). These
transfer restrictions are designed to help assure that the Company's substantial
net operating loss carryforwards ("NOLs"), which are estimated to total $27.4
million at June 30, 1999, will continue to be available to offset future taxable
income. Section 382 of the Code limits the use of NOLs and other tax benefits by
a company that has undergone an ownership change.
Such restrictions are set forth in Article IX of the Company's Restated
Certificate of Incorporation. Article IX generally restricts, until June 30,
2011 (or earlier in certain
Page 17
<PAGE> 18
events), direct or indirect transfer of Common Stock that would without the
approval of the Board of Directors of the Company (i) increase to more than
4.75% the percentage ownership of Common Stock of any person who at any time
during the preceding three-year period did not own more than 4.75% of the Common
Stock, (ii) increase the percentage of Common Stock owned by any person that
during the preceding three-year period owned more than 4.75% of the Common
Stock, or by any group of persons treated as a "5 Percent Shareholder" (as
defined in the Code but substituting "4.75%" for "5 Percent"), or (iii) cause an
"ownership change" of the Company. Article IX provides that any direct or
indirect transfer of Common Stock in violation of Article IX is void ab initio
as to the purported transferee, and the purported transferee will not be
recognized as the owner of shares acquired in violation of Article IX for any
purpose, including for purposes of voting and receiving dividends or other
distributions in respect of Common Stock. Any shares purportedly acquired in
violation of Article IX will be transferred to a trustee who will be required to
sell them.
Generally, the transfer restrictions contain several exceptions. For example,
the restrictions will not prevent a transfer if, in the determination of the
Board of Directors of the Company, the transfer does not result in any greater
aggregate increase in Common Stock ownership by 5% shareholders. Also, the
restrictions will not prevent a transfer if the purported transferee obtains the
approval of the Board of Directors of the Company, which approval shall be
granted or withheld in the sole and absolute discretion of the Board of
Directors, after considering all facts and circumstances including, but not
limited to, future events deemed by the Board of Directors to be relevant.
Finally, the transfer restrictions only apply with respect to the amount of
Common Stock purportedly transferred in excess of the threshold established in
the transfer restrictions.
These transfer restrictions (i) may have the effect of impeding the attempt of a
person or entity to acquire a significant or controlling interest in the
Company, (ii) may render it more difficult to effect a merger or similar
transaction even if such transaction is favored by a majority of the
stockholders, and (iii) may serve to make a change in management more difficult.
The purpose of the transfer restrictions is to preserve tax benefits, however,
not to insulate the Company or management from change. The Company believes the
tax benefits of the transfer restrictions outweigh any anti-takeover effect they
may have.
The application of these transfer restrictions to any particular stockholder
will depend on the stockholder's ownership of Common Stock, determined after
applying numerous attribution rules prescribed by the Code and related
regulations, and will also depend on the history of trading of the Common Stock.
As a result, stockholders are urged to consult their tax advisors with respect
to any planned purchase or sale of Common Stock.
RECENT SALES OF UNREGISTERED SECURITIES. In December 1991, the Company issued
warrants to acquire 194,521 shares of Common Stock at $4.24 per share. In June
1992, the Company issued warrants to acquire 290,314 shares of Common Stock at
$4.24 per share. The warrants were issued in transactions exempt from
registration under the Securities Act of 1933, as amended. In such transactions,
the warrants were issued to creditors of the company who were sophisticated, and
the warrants were subject to appropriate restrictions on their transfer. In June
1999, the holders of certain of these warrants exercised them and acquired a
total of 244,308 shares of Common Stock in transactions exempt under Section
4(2) of such Act. The Company received proceeds of $1,230,931 from the exercise
of these
Page 18
<PAGE> 19
warrants, which it used to reduce borrowings under its Credit Agreement with
Foothill. 237,219 of these warrants expired on June 30, 1999 without being
exercised.
Page 19
<PAGE> 20
ITEM 6. SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
<TABLE>
<CAPTION>
For the year ended June 30,
----------------------------------------------------------
1999 1998 1997 1996(1) 1995(1)
-------- -------- -------- -------- --------
(Restated) (Restated)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue $ 67,925 $ 75,509 $ 77,181 $ 91,022 $ 91,392
Membership dues 36,455 37,330 39,945 39,924 41,175
Other campground/resort revenues 17,954 16,475 17,906 22,288 23,506
Membership and lot sales 4,085 3,894 3,477 3,013 4,074
Interest income 2,068 2,635 3,726 6,756 9,935
Interest expense and amortization 2,957 4,599 9,084 17,693 20,960
Income (loss) from operations before taxes,
minority interest and extraordinary item 7,915 15,716 7,169 (240) (11,573)
Extraordinary gain on debt repurchases -- -- -- 1,390 --
Net income (loss) 5,571 24,879 6,799 1,109 (11,828)
Dividends paid (2) -- -- -- -- --
Dividends paid per share (2) -- -- -- -- --
Income (loss) per share data-basic (3):
Income (loss) before extraordinary item .73 3.36 .94 (.08) (3.19)
Extraordinary item -- -- -- .38 --
Net income (loss) .73 3.36 .94 .30 (3.19)
Weighted average shares 7,630 7,407 7,223 3,703 3,703
Income (loss) per share data-diluted (3):
Income (loss) before extraordinary item .66 2.96 .88 (.08) (3.19)
Extraordinary item -- -- -- .38 --
Net income (loss) .66 2.96 .88 .30 (3.19)
Weighted average shares 8,475 8,398 7,704 3,721 3,703
BALANCE SHEET DATA (AT END OF YEAR):
Cash and cash equivalents 2,197 13,631 1,343 37,403 50,596
Receivables, net 2,184 4,181 7,517 13,219 18,698
Campground properties 36,941 37,991 42,764 46,309 51,960
Resort properties 75 1,092 1,530 2,902 5,736
Total assets 56,804 74,262 63,302 111,631 137,517
PIK Notes, including deferred gain -- 32,973 29,393 -- --
Borrowings under Credit Agreement 10,887 -- 14,097 -- --
Secured Notes, net of discount -- -- -- 94,350 115,490
Other notes payable -- -- 604 1,102 4,753
Long term debt 8,787 32,973 38,230 66,922 98,308
Stockholders' equity (deficit) 9,648 2,754 (22,168) (31,952) (33,054)
STATISTICAL DATA (AT END OF YEAR):
Number of operating campgrounds 53 53 55 58 60
Number of campsites 17,700 17,700 18,400 19,300 19,400
Number of members 106,000 111,000 120,000 128,000 136,000
Average annual dues per member $357 $351 $344 $335 $329
Average cost per camper night $ 17.62 $ 18.23 $ 18.13 $ 18.03 $ 19.69
</TABLE>
(1) The historical Selected Financial Data has been restated for the fiscal
years indicated because for fiscal 1997 the Company changed its accounting
method to recognize 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 (see Note 2 to the consolidated financial
statements included in Item 8).
Page 20
<PAGE> 21
(Footnotes continued)
(2) During the periods presented, the Company has been prohibited from paying
any cash dividends by the indentures governing its Secured Notes and PIK
Notes, and by the Credit Agreement with Foothill.
(3) As part of a restructuring of the Company, on July 17, 1996, the Company
issued 3,680,550 additional shares of Common Stock, which represent 45%
of the shares of Common Stock currently outstanding.
Page 21
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 June 30,
1999. 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, 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 or the possible 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 also believes that it
may be possible to acquire members through the purchase of other membership
campground operations, many of whom are experiencing financial difficulties.
The Company's membership base has been declining. In response to this decline,
the Company has downsized its business by closing and disposing of campgrounds
and decreasing campground operating costs and general and administrative
expenses. The Company intends to continue to keep the size of its campground
system in an appropriate relation to the size of its membership base. In this
regard, if the membership base continues to decline, the Company may close and
dispose of additional campgrounds and it will seek to decrease other expenses.
At the same time, the Company intends to expand its sales and marketing efforts
with a view to stopping the membership decline. The Company also intends to
explore the possible acquisition of members through the purchase of other
membership campground organizations, many of whom are experiencing financial
difficulties. 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.
DEBT RESTRUCTURINGS. In July 1996, the Company consummated a restructuring of
its 12% Secured Notes Due 1998 (the "Secured Notes") whereby all of the
$101,458,000 principal amount of Secured Notes outstanding were retired. This
restructuring provided the Company with a new capital structure and decreased
the Company's outstanding debt to a level the
Page 22
<PAGE> 23
Company believes it can support under its downsized operations. As part of this
restructuring, the Company issued $40.2 million principal amount of 12% Senior
Subordinated Pay-In-Kind Notes Due 2003 ("PIK Notes") and 3,680,550 shares of
Common Stock, and it entered into the Credit Agreement with Foothill (see
"Borrowings").
On December 15, 1998, the Company redeemed all $34.8 million principal amount of
PIK Notes outstanding and paid $1.7 million of accrued interest thereon. The
Company funded this redemption with $12.5 million of its existing cash and $24.0
million of new borrowings under the Credit Agreement with Foothill.
CASH. On June 30, 1999, the Company had approximately $2.2 million of cash and
cash equivalents, a decrease of $11.4 million during fiscal 1999. During the
year, the Company's operating activities produced $11.8 million of cash, its
investing activities used $0.7 million of cash, and its financing activities
used $22.6 million of cash. The Company's financing activities reduced
outstanding debt by $22.0 million, including the $12.5 million of cash used to
partially fund the redemption of the PIK Notes, and were partially offset by
proceeds of $1.3 million from the issuance of Common Stock. The Company's
investing activities consisted of $2.2 million in proceeds from the sale of
assets, less $1.7 million spent on capital improvements at the campgrounds and
$1.2 million of HUD-related expenditures.
With respect to the Company's operating activities, for fiscal 1999, the
principal sources of cash were $61.6 million from operations, $6.1 million in
principal and interest collections on contracts receivable and invested cash,
and $4.4 million from sales of campground memberships and lots. Principal uses
of operating cash for fiscal 1999 were $40.3 million in operating expenses,
$10.2 million in administrative expenses (including general and administrative
expenses and corporate member services costs), and $6.2 million in sales and
marketing expenditures.
During fiscal 1997 and the first-half of fiscal 1998, the Company repaid all of
its original borrowings under the Credit Agreement with Foothill. On October 21,
1998, the Company entered into an amendment to the Credit Agreement that gave
the Company the flexibility to borrow up to $5.0 million for working capital
purposes and additional amounts to use to redeem the PIK Notes and for the
possible acquisition of members through the purchase of other membership
campground operations. Under the amended Credit Agreement, the first $15.0
million of borrowings bear interest at prime plus .25% per annum, borrowings
over $15.0 million and up to $25.0 million bear interest at prime plus .50% per
annum, and borrowings over $25.0 million bear interest at prime plus 1.5% per
annum, subject to a minimum interest rate of 9% per annum (reduced to 7% per
annum in June 1999).
On December 15, 1998, the Company borrowed $24.0 million under the amended
Credit Agreement to partially fund the redemption of the PIK Notes as discussed
above. As a result of subsequent repayments, on June 30, 1999, the Company had
$10.9 million of outstanding borrowings under the amended Credit Agreement, and
it had the ability to borrow an additional $4.0 million for working capital
purposes. The Company's ability to borrow up to an additional $10.0 million to
fund its possible acquisition of members through the purchase of other
membership campground operations will expire on December 31, 1999. All
borrowings under the amended Credit Agreement will mature on January 17, 2003.
Under the terms of the amended Credit Agreement, the Company must use all
collections of principal and interest on the contracts receivable and all
proceeds from asset sales to reduce
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borrowings under the Credit Agreement. In addition, the Company must make
specified principal reductions on these borrowings over time based on a monthly
calculation of eligible contracts receivable and an amortization schedule set
forth in the Credit Agreement. The maximum amount of the available borrowing
capacity declines as these principal reductions are made.
As of the date of this report, the Company had $11.6 million of outstanding
borrowings under the amended Credit Agreement, and it had the ability to borrow
an additional $3.3 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 amended Credit
Agreement will be adequate for the Company's operating and other cash
requirements. While any borrowings are outstanding under the amended 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.
CONTRACTS RECEIVABLE. As of June 30, 1999, the Company on a consolidated basis
owned $3.4 million of contracts receivable related to the sale of campground
memberships and lots (see "Contracts Receivable" in Item 1). Because of low
interest rates available in the marketplace during fiscal 1999, 1998, and 1997,
some members chose to prepay their accounts, and the Company received principal
payments of $723,000, $1.1 million, and $1.6 million, respectively, in excess of
scheduled payments. The Company may continue to experience such prepayments in
the future, although at a decreasing rate as the contracts receivable portfolio
continues to decline.
Allowance for Doubtful Accounts
The Company's allowance for doubtful accounts was 30% of gross contracts
receivable at June 30, 1999, compared with 31% of gross contracts receivable at
June 30, 1998 and 1997. The cancellation rate as a percentage of average
contracts receivable was 8% for fiscal 1999, compared with 8% for fiscal 1998
and 7% for fiscal 1997. In fiscal 1999, 1998, and 1997, the Company reduced the
allowance for doubtful accounts on the contracts receivable by $886,000, $1.0
million, and $1.2 million, respectively. These adjustments were made because the
Company experienced lower contract losses than anticipated in these years.
The allowance for doubtful accounts is an estimate of the contracts receivable
that will cancel in the future and is determined based on historical
cancellation rates and other factors deemed relevant to the analysis. Prior to
fiscal 1996, the Company's historic cancellation rates ranged as high as 16.7%.
By fiscal 1996, the Company's cancellation rates appeared to stabilize at
approximately 8%. The Company reduced the allowance for doubtful accounts to 30%
of the portfolio for such fiscal year after applying the then-current
cancellation rate to the maturities of the then-outstanding portfolio and taking
into account the higher historical cancellation rates and the uncertainties
associated with its strategy of reducing the size of the campground system.
In 1997, 1998, and 1999, the cancellation rates were essentially unchanged.
However, the contracts receivable portfolio also declined faster than projected
primarily because collections each year exceeded estimates. As a result, using
the same methodology and considering the same factors deemed relevant to the
analysis as in 1996, the Company reduced the allowance to approximately 31% of
the portfolio in 1997 and 1998 and 30% in 1999.
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The Company does not presently anticipate any further adjustments to the
allowance for doubtful accounts on the contracts receivable. However, the
allowance and the rate at which the Company provides for future losses on its
contracts receivable could be increased or decreased in the future based on the
Company's actual collection experience.
Other Allowances
In connection with the purchase of NACO and Trails, the Company recorded an
allowance for interest discount to increase to 14.75% the weighted average yield
on the contracts receivable then owned by NACO and Trails. The allowance for
interest discount is being amortized using the effective interest method over
the respective terms of the contracts. Additionally, in connection with the
purchase of NACO and Trails and the Company's bankruptcy reorganization in 1991,
the Company recorded an allowance for future collection costs, which is being
amortized as a reduction of general and administrative expenses based on cash
collected on the related portfolio. The Company also purchased contracts
receivable from certain third parties and recorded a valuation allowance to
record the contracts receivable at the purchase price. This valuation allowance
is being amortized as an increase to interest income over the respective terms
of the contracts.
Change in Receivables
The net balance of contracts receivable decreased by $2.0 million during fiscal
1999, due primarily to $4.2 million in cash collections on contracts receivable,
offset by new financed sales, an $886,000 reduction in the allowance for
doubtful accounts, and scheduled amortization of the allowances for interest
discount, collection costs, and valuation discount.
CAMPGROUND AND RESORT PROPERTIES. The Company's campground properties consist of
land, buildings, and other equipment used in administration and operations as
well as land held for sale. Campground properties decreased by $1.0 million in
fiscal 1999 due primarily to $2.6 million of depreciation on property and
equipment, partially offset by $1.7 million of capital expenditures.
The Company makes annual capital and maintenance expenditures to maintain and
improve the campgrounds. During fiscal 1999, the Company spent $4.8 million on
major maintenance, repairs, and improvements at the campgrounds. The Company
anticipates that it will spend an additional $5.2 million on such items in
fiscal 2000, which will be funded by existing cash and cash provided by
operations. The Company may be required to spend greater amounts on such items
in future years as the facilities age.
During the periods presented, the Company's resort properties consisted of lot
inventory, buildings and equipment used in operations, and land held for sale at
resorts not related to the campground operations. Resort properties decreased by
$1.0 million in fiscal 1999, due primarily to the sale of excess acreage at one
resort and the sale of lots in the normal course of business. Over the past
several years, the Company has been selling the assets it owns at these resorts.
During fiscal 1999, the Company spent approximately $1.2 million fulfilling
obligations created by reports that it filed with the Department of Housing and
Urban Development ("HUD") at one resort not related to the campground
operations. The Company was required to expense $230,000 of these costs because
they exceeded previous estimates by this amount. At June 30, 1999, the Company
had a $1.9 million liability for HUD obligations at another
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resort not related to the campground operations, which remain substantially
incomplete. A person who purchased a lot when a HUD report was in effect may
allege that the failure to make timely improvements constitutes a breach of his
or her agreement with the Company and could seek damages from the Company or
rescission of the lot purchase. Approximately 60 persons purchased lots from the
Company when HUD reports in effect described improvements that the Company has
not yet constructed. An insignificant number of persons have asserted claims
against the Company for the failure to make these improvements.
OTHER ASSETS. Other current assets increased by $158,000 during fiscal 1999. The
increase was due to increases of $347,000 in income taxes receivable and
$236,000 in inventory, partially offset by a $250,000 decrease in deposits and a
$155,000 decrease in prepaid insurance. Income taxes receivable increased
because estimated tax payments were made in fiscal 1999 before the Company
redeemed the PIK Notes. Prior to the redemption, the Company deferred deducting
interest expense on the PIK Notes because interest was paid by issuing
additional PIK Notes. Upon the redemption of the PIK Notes, the Company deducted
the interest expense that had been deferred and the estimated tax payments
became refundable.
Other assets decreased by $323,000 in fiscal 1999 due primarily to the refund of
workers compensation deposits from earlier policy years.
BORROWINGS. On June 30, 1999, the Company had $10.9 million of borrowings
outstanding under the Credit Agreement with Foothill. Of these borrowings, $2.1
million are considered current for accounting purposes because the amended
Credit Agreement requires the Company to use all collections of principal and
interest on the contracts receivable and all proceeds from asset sales to reduce
borrowings under the Credit Agreement.
Credit Agreement with Foothill
In connection with the restructuring of the Secured Notes, the Company entered
into the Credit Agreement with Foothill, under which Foothill made term loans to
the Company totaling $13.0 million, and agreed to make revolving loans to the
Company in the maximum amount of $25.0 million. The Credit Agreement originally
had a three-year term expiring in July 1999. During fiscal 1997 and the
first-half of fiscal 1998, the Company repaid all of its original borrowings
under the Credit Agreement.
In October 1998, the Company entered into an amendment to the Credit Agreement
that gave the Company the flexibility to borrow up to $5.0 million for working
capital purposes and additional amounts to use to redeem the PIK Notes and for
the possible acquisition of members through the purchase of other membership
campground operations. Under the amended Credit Agreement, the first $15.0
million of borrowings bear interest at prime plus .25% per annum, borrowings
over $15.0 million and up to $25.0 million bear interest at prime plus .50% per
annum, and borrowings over $25.0 million bear interest at prime plus 1.5% per
annum, subject to a minimum interest rate of 9% per annum (reduced to 7% per
annum in June 1999).
In December 1998, the Company borrowed $24.0 million under the amended Credit
Agreement to partially fund the redemption of the PIK Notes as discussed above.
As a result of subsequent repayments, on June 30, 1999, the company had $10.9
million of outstanding borrowings under the amended Credit Agreement, and it had
the ability to borrow an
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additional $4.0 million for working capital purposes. The Company's ability to
borrow up to an additional $10.0 million to fund its possible acquisition of
members through the purchase of other membership campground operations will
expire on December 31, 1999. All borrowings under the amended Credit Agreement
will mature on January 17, 2003.
The Company's ability to borrow under the amended Credit Agreement for working
capital and other purposes is subject to continued compliance by the Company
with the financial covenants and other requirements of the amended Credit
Agreement, including certain covenants respecting minimum earnings before
interest, taxes, depreciation and amortization, and minimum tangible net worth.
The amended 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 amended Credit Agreement. In addition, the Company's
subsidiaries other than an immaterial utility subsidiary have guaranteed the
Company's obligations under the amended Credit Agreement and, subject to certain
limitations, have granted liens on substantially all of their assets to secure
their guarantees.
The amended Credit Agreement limits the type of investments in which the Company
may invest its available cash, resulting in a relatively low yield.
PIK Notes
In the restructuring of the Secured Notes, the Company issued $40.2 million
principal amount of PIK Notes. In January 1997, the Company issued an additional
$2.4 million principal amount of PIK Notes as interest. In June 1997, the
Company repurchased $13.4 million principal amount of PIK Notes at a cost of
$12.6 million, including accrued interest. The Company made these repurchases at
an average price of $897 per $1,000 of principal amount in a Dutch auction
available to all holders of PIK Notes. A gain of $1.2 million was recognized on
this transaction. In July 1997, January 1998, and July 1998, the Company issued
an additional $1.7 million, $1.9 million, and $2.0 million, respectively, of
principal amount of PIK Notes in lieu of cash interest. In December 1998, the
Company redeemed all $34.8 million principal amount of PIK Notes outstanding and
paid $1.7 million of accrued interest. The Company funded this redemption with
$12.5 million of its existing cash and $24.0 million of new borrowings under its
Credit Agreement with Foothill.
DEFERRED REVENUES AND EXPENSES. Deferred revenues of $24.7 million and $23.4
million at June 30, 1999 and 1998, respectively, include $14.4 million and $14.8
million, respectively, of membership dues collections which relate to future
periods, $8.5 million and $6.9 million, respectively, of campground membership
sales revenues to be recognized in future periods, and other deferred revenues
related primarily to RPI's operations. Deferred membership selling expenses of
$2.1 million and $1.6 million at June 30, 1999 and 1998, respectively, represent
incremental direct selling costs to be recognized in future periods.
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 program 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. In fiscal 1998, the
Company reduced this
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liability by $858,000 because the estimated losses were less than the recorded
liability. This adjustment amount is included in nonrecurring income. At June
30, 1999 and 1998, the Company's recorded liability for estimated losses related
to uninsured general liability claims totaled $1.1 million and $1.2 million,
respectively.
PROPERTY INSURANCE. In fiscal 1998, the Company received proceeds of $1.1
million from insurance settlements for flood and fire damage at certain
campgrounds, and recognized a gain of $588,000, which was recorded as
nonrecurring income.
EMPLOYEE HEALTH INSURANCE. The Company provides medical and dental benefits for
its employees under employee benefit plans (collectively, the "Plans") that are
funded primarily through employer and employee contributions. The Company has
purchased stop loss insurance that protects the Plans against claims in excess
of set policy amounts. The Company has provided a liability for estimated
uninsured claims of $907,000 and $828,000 at June 30, 1999 and 1998,
respectively. This liability is based on actuarial estimates of amounts needed
to fund expected uninsured claims, as well as premium payments and
administrative costs of the Plans.
WORKERS' COMPENSATION INSURANCE. Commencing July 1, 1998, the Company obtained
insurance covering workers' compensation claims with no self-insured deductible.
Prior to this date, the Company's insurance program required the Company to pay
up to $250,000 per occurrence and to deposit funds with the insurance company to
pay claims in excess of the estimated claims that were covered by the amounts
originally paid by the Company. These deposits were generally expensed in the
years the deposits were made because the Company anticipated that the deposits
would be used to cover claims. However, during fiscal 1997, the Company
determined that it was entitled to refunds of $865,000 in future periods for
deposits made in previous years. At June 30, 1997, the Company recorded the
refundable amount as an asset, resulting in nonrecurring income of $865,000. In
fiscal 1998, the Company received refunds totaling $1.3 million for other
deposits expensed in previous years, which were recorded as nonrecurring income.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. The Financial Accounting Standards
Board (the "FASB") has issued several accounting pronouncements that were
effective for the Company in either fiscal 1998 or fiscal 1999. The Company
adopted SFAS No. 128, "Earnings Per Share," in the second quarter of fiscal
1998, which modified the Company's net income per share calculation and required
restatement of prior period calculations. The Company adopted SFAS No. 130,
"Reporting Comprehensive Income," in the first quarter of fiscal 1999, and SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information,"
and SFAS No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits," at the end of fiscal 1999. The adoption of these
statements did not have a material impact on the Company's consolidated
financial statements.
The FASB has issued SFAS No. 133, "Accounting for Derivative and Similar
Financial Instruments for Hedging Activities," which is not expected to have a
material impact on the Company's financial position, when adopted, because the
Company does not currently use derivative instruments. The FASB has also issued
SFAS No. 134, "Accounting for Mortgage-Backed Securities," which, when adopted,
is not expected to have a material impact on the Company's disclosures,
financial conditions, or operations.
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MARKET RISK. In 1997, the SEC issued new rules (Item 305 of Regulation S-K),
which require disclosure of material risks, as defined in Item 305, related to
market risk sensitive financial instruments. As defined, the Company currently
has market risk sensitive instruments related to interest rates.
The Company does not have significant exposure to changing interest rates on
invested cash, which declined from $12.0 million at June 30, 1998 to zero at
June 30, 1999. The Company invests available cash in certificates of deposit and
investment grade commercial paper that have maturities of three months or less.
As a result, the interest rate market risk implicit in these investments at any
given time is low, as the investments mature within three months.
The Company had $3.4 million of contracts receivable at June 30, 1999, which
have a weighted average stated interest rate of 13% and an average remaining
term of 15 months. The Company does not have significant exposure to changing
interest rates related to the contracts receivable because the interest rates on
the contracts receivable are fixed.
As of June 30, 1999, the Company had $10.9 million of outstanding borrowings
under the Credit Agreement with Foothill, which accrue interest at rates that
fluctuate with changes in the prime rate (see "Borrowings - Credit Agreement
with Foothill"). Under the Credit Agreement, the Company could borrow an
additional $4.0 million for working capital purposes and up to an additional
$10.0 million to use for the possible acquisition of members through the
purchase of other membership campground operations. The Company has exposure to
changing interest rates related to the Credit Agreement because increases in
interest rates would increase the Company's interest expense on these
borrowings.
The Company has not undertaken any actions to cover interest rate market risk
and is not a party to any interest rate market risk management activities.
The Company also receives revenues from its Canadian subsidiary and exchanges
them into US Dollars at exchange rates that fluctuate with market conditions;
however, such revenues are not material to the Company's operations.
INTEREST RATE SENSITIVITY. 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 at June 30, 1999, 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.
RESULTS OF OPERATIONS
The following discussion and analysis are based on the historical results of
operations of the Company for the years ended June 30, 1999, 1998, and 1997. The
financial information set forth below should be read in conjunction with the
Company's consolidated financial statements included in Item 8.
NET INCOME. For the year ended June 30, 1999, the Company reported net income of
$5.6 million or $0.66 per diluted share on revenues of $67.9 million. This
compares with net income of $24.9 million or $2.96 per diluted share on revenues
of $75.5 million for the year
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ended June 30, 1998, and net income of $6.8 million or $0.88 per diluted share
on revenues of $77.2 million for the year ended June 30, 1997.
Excluding the impact of gains on assets sales, nonrecurring income, and the
income tax provision, the Company's revenues declined only slightly in fiscal
1999, compared with fiscal 1998, while its expenses remained approximately the
same. The fiscal 1999 results include an income tax provision of $2.3 million
and gains on asset sales of $1.1 million, compared with the fiscal 1998 results,
which include an income tax benefit of $9.2 million, gains on asset sales of
$5.3 million, and nonrecurring income of $2.8 million. The income tax benefit in
fiscal 1998 resulted from a $10.0 million reduction in the valuation allowance
for the Company's net deferred tax assets.
The results for fiscal 1997 include $1.5 million of nonrecurring income, $1.1
million of restructuring costs related to the restructuring of the Secured
Notes, and $132,000 of nonrecurring expenses.
The table on the following page shows separately the results of the campground
operations, Wilderness Management's operations, and RPI's operations, without
any allocation of corporate expenses, as well as corporate expenses and other
revenues and expenses in the aggregate, for the years ended June 30, 1999, 1998,
and 1997.
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
CAMPGROUND OPERATIONS
Membership dues $36,455 $37,330 $39,945
Campground revenues 15,585 14,634 14,208
Cost of campground revenues (7,401) (6,317) (6,665)
Operating expenses (29,998) (30,686) (32,375)
------- ------- -------
Contribution from campground operations 14,641 14,961 15,113
------- ------- -------
SALES
Sales revenues 3,959 3,227 2,892
Selling expenses (3,712) (2,646) (2,654)
Marketing expenses (2,046) (1,700) (1,383)
------- ------- -------
Loss on sales (1,799) (1,119) (1,145)
------- ------- -------
WILDERNESS MANAGEMENT
Revenues 2,271 1,321 1,094
Expenses (2,135) (1,509) (1,022)
------- ------- -------
Contribution from Wilderness Management 136 (188) 72
------- ------- -------
RESORT PARKS INTERNATIONAL
Revenues 3,576 4,035 4,086
Expenses (1,963) (2,132) (1,978)
------- ------- -------
Contribution from RPI 1,613 1,903 2,108
------- ------- -------
Other income 2,682 3,083 3,673
Corporate member services (1,253) (1,472) (1,532)
General and administrative expenses (8,964) (8,640) (10,100)
Other (243) 95 (29)
------- ------- -------
INCOME BEFORE INTEREST INCOME AND EXPENSE, GAIN ON
ASSET SALES, REDUCTION IN THE ALLOWANCE FOR
DOUBTFUL ACCOUNTS, NONRECURRING INCOME AND
EXPENSES, RESTRUCTURING COSTS, AND TAXES 6,813 8,623 8,160
------- ------- -------
Interest income 2,068 2,635 3,726
Interest expense (2,957) (4,599) (9,084)
Gain on asset sales 1,105 5,287 2,892
Reduction in allowance for doubtful accounts 886 1,000 1,232
Nonrecurring income 2,770 1,476
Nonrecurring expenses (132)
Restructuring costs (1,101)
------- ------- -------
INCOME BEFORE TAXES $ 7,915 $15,716 $ 7,169
======= ======= =======
</TABLE>
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OPERATING INCOME. During the year ended June 30, 1999, the Company achieved a
positive contribution from operations of $6.8 million, compared with $8.6
million and $8.2 million in the years ended June 30, 1998 and 1997,
respectively. Operating income declined in fiscal 1999, compared with fiscal
1998 and 1997, because of small declines in the contributions from campground
operations and RPI, an increase in sales and marketing expenses as a percentage
of sales, HUD-related expenditures made at one resort, and a slight decline in
other income. For this purpose, the contribution from operations is defined as
income before interest income and expense, gain on asset sales, reduction in the
allowance for doubtful accounts, nonrecurring income and expenses, restructuring
costs, and taxes. See the table on page 31 for the elements of the contribution
from operations and the Company's income before taxes for the historical periods
presented.
CAMPGROUND OPERATIONS. The Company's operations are highly seasonal. The Company
receives the majority of the dues revenue from its members during the winter,
which are recognized as income ratably during the year. However, the Company
incurs a higher level of operating expenses during the summer. In addition, a
majority of the Company's sales and marketing efforts occur during the summer.
Campground membership dues revenue was $36.5 million for the year ended June 30,
1999, compared with $37.3 and $39.9 million for the years ended June 30, 1998
and 1997, respectively. Dues revenue declined in fiscal 1999 and 1998, compared
with the prior year, because of the net loss of campground members each year.
These declines were partially offset by the effect of the annual dues increase.
Campground revenues were $15.6 million for the year ended June 30, 1999,
compared with $14.6 million and $14.2 million for the years ended June 30, 1998
and 1997, respectively. The related expenses were $7.4 million, $6.3 million,
and $6.7 million for fiscal 1999, 1998, and 1997, respectively. The increase in
campground revenues in fiscal 1999 was due primarily to greater emphasis on
ancillary revenue programs at the campgrounds, partially offset by lower
revenues from harvesting timber at selected campgrounds. The increase in related
expenses in fiscal 1999 was primarily due to higher labor costs. The increase in
campground revenues in fiscal 1998 was due primarily to modest increases in
rental and other service fees at certain campgrounds and revenues from
harvesting timber.
Campground operating expenses were $30.0 million for the year ended June 30,
1999, compared with $30.7 million for the year ended June 30, 1998 and $32.4
million for the year ended June 30, 1997. The decrease in expenses in fiscal
1999 was due primarily to lower maintenance costs at the campgrounds, partially
offset by higher field labor costs. The decrease in expenses in fiscal 1998 was
due primarily to the closure and disposition of campgrounds and to operational
changes made at the campgrounds in fiscal 1998 and 1997.
The Company intends to continue to keep the size of its campground system in an
appropriate relation to the size of its membership base. In this regard, if the
membership base continues to decline, the Company may close and dispose of
additional campgrounds and it will seek to decrease other expenses. 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.
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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 years ended June 30, 1999, 1998,
and 1997, the Company recognized campground membership sales revenues of $4.0
million, $3.2 million, and $2.9 million, respectively. These amounts include
revenues of $3.1 million, $2.5 million, and $1.7 million, respectively, that
were deferred in prior periods. Moreover, for fiscal 1999, 1998, and 1997, the
Company deferred revenues of $4.6 million, $3.1 million, and $2.1 million,
respectively, which will be recognized in future periods.
The increase in sales revenues resulted primarily from the Company's increased
sales and marketing efforts during the past three fiscal years. The Company has
expanded its sales and marketing efforts with a view to stopping the decline in
its membership base. Although the Company's membership sales revenues have
increased, the level of sales has not met the Company's expectations. In an
effort to improve its membership sales, the Company has focused its sales
efforts primarily on guests referred by existing members and customers referred
by RV dealers and RV manufacturers, who management believes are more likely to
purchase memberships.
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 years ended June 30,
1999, 1998, and 1997, the Company recognized selling expenses of $3.7 million,
$2.6 million, and $2.7 million, respectively. These amounts include expenses of
$730,000, $560,000, and $358,000, respectively, that were deferred in prior
periods. Moreover, for fiscal 1999, 1998, and 1997, the Company deferred
expenses of $1.2 million, $794,000, and $505,000, respectively, which will be
recognized in future periods.
Although the Company's sales results are improving, selling and marketing
expenses exceeded sales revenues by $1.8 million, $1.1 million, and $1.1
million, for the years ended June 30, 1999, 1998, and 1997, respectively. These
expenses exceeded sales revenue because of the increased marketing activity, and
the relatively low volume of sales, which did not cover fixed costs. In
addition, the Company deferred more sales revenues than selling expenses in each
of the periods presented.
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 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 revenues. This disparity will increase as the Company grows
campground membership sales.
The Company's selling and marketing efforts during the past three fiscal years
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 significantly
increase its campground membership sales over current levels or acquire members
through the purchase of other membership campground operations, the membership
base will continue to decline, which will further decrease the Company's
revenues. Further 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. Wilderness Management, a wholly owned subsidiary of the
Company, manages 169 public campgrounds for the US Forest Service. For the year
ended June 30, 1999, these operations produced revenues of $2.3 million with
related expenses (excluding certain shared administrative costs) of $2.1
million. This compares with revenues for fiscal 1998 of $1.3 million and related
expenses (excluding certain shared administrative costs) of $1.5 million, and
revenues for fiscal 1997 of $1.1 million and related expenses (excluding certain
shared administrative costs) of $1.0 million. The increase in revenues and
expenses between years was due primarily to new contracts entered into in these
periods. The loss in fiscal 1998 was due to start-up costs incurred in
connection with new management contracts entered into in the Spring of 1998,
which significantly increased the number of campgrounds managed.
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 year ended June 30, 1999,
RPI's operations produced a net contribution of $1.6 million, compared with $1.9
million for the year ended June 30, 1998, and $2.1 million for the year ended
June 30, 1997. The decline in results from year to year was due primarily to a
decrease in revenues between periods. RPI's revenues have declined over the
three year period as a result of declining sales in the membership camping
industry. During this period, however, RPI has been able to maintain its
positive contribution by reducing its expenses. To maintain its contribution in
the future, RPI is working to introduce new products to increase its revenues;
however, there is no assurance that it will be successful.
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 on written-off contracts and delinquent dues,
subscription fees received from members who subscribe to the Company's member
magazine, and fees charged to members for making more than five
operator-assisted reservations in a given year.
Other income was $2.7 million for the year ended June 30, 1999, compared with
$3.1 million for the year ended June 30, 1998, and $3.7 million for the year
ended June 30, 1997. The decrease between years is directly related to lower
fees and other income received from the declining contracts receivables
portfolio and shrinking membership base.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were
$9.0 million for the year ended June 30, 1999, compared with $8.6 million for
the year ended June 30, 1998, and $10.1 million for the year ended June 30,
1997. General and administrative costs increased in fiscal 1999 as a result of
costs incurred to explore new business opportunities. The lower costs in fiscal
1998 were due primarily to personnel reductions in various administrative
departments, lower legal fees, and reduced depreciation, as certain of the
Company's corporate assets have been fully depreciated.
General and administrative expenses include costs related to collecting the
contracts receivable and membership dues of $2.1 million, $2.2 million, and $2.4
million for the years ended June 30, 1999, 1998, and 1997, respectively. These
collection costs were reduced by $136,000, $229,000, and $314,000, respectively,
as a result of the amortization of the allowance for collection costs related to
the contracts receivable (see "Liquidity and Capital Resources -- Contracts
Receivable"). The Company anticipates that these costs will
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<PAGE> 35
continue to decrease as the contracts receivable portfolio declines further;
however, costs could increase if the volume of financed new sales increases.
CORPORATE MEMBER SERVICES. Corporate member services include the reservation and
member support services performed at the corporate office, as well as the costs
incurred to produce the Company's member magazine. These costs were $1.3 million
for the year ended June 30, 1999, compared with $1.5 million for the years ended
June 30, 1998 and 1997. The decrease in costs in fiscal 1999 was due primarily
to reductions in personnel.
INTEREST INCOME AND EXPENSE. Interest income declined to $2.1 million for the
year ended June 30, 1999, from $2.6 million for the year ended June 30, 1998 and
$3.7 million for the year ended June 30, 1997. The decrease in fiscal 1999 and
1998 was due primarily to a decrease in interest earned on the Company's
diminishing portfolio of contracts receivable, partially offset by an increase
in interest earned on higher cash balances. Also included in interest income is
amortization of the allowance for interest discount and valuation allowance
related to the contracts receivable, of which $181,000 was amortized during
fiscal 1999, $293,000 was amortized during fiscal 1998, and $379,000 was
amortized during fiscal 1997 (see "Liquidity and Capital Resources -- Contracts
Receivable"). The interest discount and valuation allowances are expected to be
fully amortized by June 30, 2000.
Interest expense decreased by $1.6 million for the year ended June 30, 1999,
compared with the prior year, due primarily to the redemption of the PIK Notes
on December 15, 1998 and subsequent reductions in the borrowings under the
Credit Agreement with Foothill which were used to partially fund the redemption.
The Company reduced its outstanding debt, including accrued interest on the PIK
Notes, by $23.9 million during fiscal 1999. At June 30, 1999, the Company's
borrowings under the Credit Agreement were $10.9 million. Interest expense will
continue to decline in the future if the Company is able to continue to reduce
borrowings under the Credit Agreement. However, the Company's ability to reduce
such borrowings will be limited if new members elect to finance their
memberships, and borrowings would likely increase if the Company successfully
acquires new members through the purchase of other membership campground
operations.
Interest expense decreased by $4.5 million in fiscal 1998, from the prior year,
due primarily to the repayment of $14.7 million of outstanding debt during the
year.
Interest expense for the year ended June 30, 1999, includes amortization of the
deferred gain related to the PIK Notes, which reduced interest expense by
$150,000, including $138,000 in deferred gain which had not been amortized when
the PIK Notes were redeemed. Interest expense for the year ended June 30, 1998
includes $30,000 in amortization of the deferred gain. Interest expense for the
year ended June 30, 1997 includes (i) amortization of debt issue costs incurred
in connection with obtaining the Credit Agreement in July 1996, which increased
interest expense by $1.8 million, and (ii) amortization of the deferred gain
related to the PIK Notes, which reduced interest expense by $39,000. The
remaining unamortized balance of the debt issue costs and a portion of the
deferred gain were eliminated in connection with an amendment of the Credit
Agreement and repurchase of PIK Notes at the end of fiscal 1997.
GAINS ON ASSET SALES. During the years ended June 30, 1999, 1998, and 1997, the
Company sold certain of its real estate assets and recognized related gains of
$1.1 million, $5.3 million, and $2.9 million, respectively. The differences
between years were due to the timing of asset
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<PAGE> 36
sales. During this three-year period, the Company sold various properties at
resorts not related to the campground operations. In addition, the Company sold
several campgrounds, excess acreage, and unused buildings and trailers. Over the
next several years, the Company intends to dispose of the remaining land that it
holds for sale, any campgrounds that are closed if the Company downsizes, and
other undeveloped, excess acreage associated with the campgrounds. The sale of
campgrounds requires addressing the rights of members associated with such
campgrounds. The impact of these rights is uncertain and could adversely affect
the availability or timing of sale opportunities or the ability of the Company
to realize recoveries from asset sales. In addition, although the Company has
successfully sold assets during the past three 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 effected.
REDUCTION IN THE ALLOWANCE FOR DOUBTFUL ACCOUNTS. In fiscal 1999, 1998, and
1997, the Company reduced the allowance for doubtful accounts on the contracts
receivable by $886,000, $1.0 million, and $1.2 million, respectively. These
adjustments were made because the Company experienced lower contract losses than
anticipated in these years (see "Liquidity and Capital Resources -- Contracts
Receivable").
NONRECURRING INCOME. Nonrecurring income was $2.8 million and $1.5 million for
the years ended June 30, 1998, and 1997, respectively. Nonrecurring income for
fiscal 1998 consisted of $858,000 from a reduction in certain insurance
reserves, $1.3 million from the refund of insurance deposits made in prior
years, and a $588,000 gain on insurance settlements for flood and fire damage at
certain campgrounds. Nonrecurring income for fiscal 1997 consisted of $1.5
million from a reduction in certain insurance reserves.
Prior to 1996, the Company's workers' compensation insurance premium was subject
to an experience audit and retroactive adjustment. Historically, this audit
required payment of an additional retroactive premium. Therefore, a liability
would be recorded based on the historical amounts the Company was required to
pay. At year end 1996, however, the Company changed its workers' compensation
insurance program such that its premiums would not be adjusted retroactively.
The then-existing recorded contingent liability of $799,000 was accordingly
reversed. Prior to fiscal 1997, due to the Company's financial condition, its
insurance carrier required deposits in an amount to cover, in part, the
additional retroactive premium historically experienced. The Company had
expensed these deposits principally because the historical experience audit
results required it to pay an additional premium in excess of the deposits. In
addition, the Company's insurance carrier experienced financial difficulties,
which called into question the Company's ability to recover prior years'
deposits even if owed. During fiscal 1997, the Company's insurance carrier
determined that it had excess amounts on deposit for premiums as much as five
years earlier and returned $865,000 to the Company. The Company recorded this as
non-recurring income in fiscal 1997. In fiscal 1998, the Company received
refunds of $1.3 million for workers' compensation insurance deposits, which were
also recorded as non-recurring income.
The Company reduced its insurance reserves for its self-insured employee health
insurance program by $611,000 in fiscal 1997. These reserves had been based on
an actuarial analysis for employee pools of similar size. As the claims history
developed, the Company experienced a lower claims history than expected. In
fiscal 1997, the Company's reserve exceeded its claims history by $1 million.
The Company determined the actuarial-based reserve to be excessive. Accordingly,
the Company reduced its reserve by $611,000 to
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<PAGE> 37
eliminate the excess of the amounts accrued for the two previous fiscal years
over the amount of actual claims.
In fiscal 1998, the Company received an insurance settlement for flood and fire
damage at certain campgrounds, which amount was $588,000 in excess of the
Company's basis in the damaged assets and the cost of repair. This was recorded
as nonrecurring income.
In fiscal 1998, the Company retained an actuarial firm to analyze its general
liability insurance reserves. On the basis of such analysis, the Company
determined that its recorded liabilities for anticipated losses under its
uninsured deductible were excessive by $858,000 and reduced the reserves.
NONRECURRING EXPENSES AND RESTRUCTURING COSTS. In fiscal 1997, the Company had
$132,000 of nonrecurring expenses. On May 16, 1997, the Company and Foothill
entered into an amendment to the Credit Agreement that significantly modified
its original terms. The Company incurred debt issue costs of $3.1 million to
obtain the original Credit Agreement, which were capitalized and were being
amortized as additional interest expense over the life of the Credit Agreement.
However, because of the substantial modifications made to the original Credit
Agreement, this amendment of the Credit Agreement was accounted for as an
extinguishment of debt and the remaining $1.3 million unamortized balance of the
original debt issue costs was charged to expense. This $1.3 million expense was
reduced by a $1.2 million gain resulting from repurchasing PIK Notes at a
discount.
In fiscal 1997, the Company also incurred $1.1 million of costs in connection
with the restructuring of the Secured Notes (see "Liquidity and Capital
Resources - Debt Restructurings").
INCOME TAXES. The Company's current provision for income taxes was $40,000,
$837,000, and $370,000 for the years ended June 30, 1999, 1998, and 1997,
respectively. The provision for fiscal 1999 relates primarily to state income
taxes payable in the various states where the Company conducts its operations.
The provisions for fiscal 1998 and 1997 include amounts for federal alternative
minimum taxes, as well as amounts for state income taxes. With the exception of
the alternative minimum tax amounts, the Company does not have federal income
taxes payable on a consolidated basis due to its net operating tax loss
carryforwards, which are estimated to total $27.4 million at June 30, 1999, and
expire in years 2009 through 2014. Prior to net operating loss deductions, the
Company had a taxable loss of $1.9 million in fiscal 1999 and taxable income of
$22.8 million and $4.6 million in fiscal 1998 and 1997, respectively.
The tax provision for the year ended June 30, 1999 also includes a net deferred
tax provision of $2.3 million, which consists of $2.7 million in deferred income
tax expense and a $401,000 deferred income tax benefit resulting from a
reduction in the valuation allowance for the Company's net deferred tax assets.
The tax provision for the year ended June 30, 1998 also includes a $10.0 million
deferred income tax benefit resulting from a reduction in the valuation
allowance for the Company's net deferred tax assets (see Note 7 to the
consolidated financial statements included in Item 8). The adjustment will have
no effect on current or future income tax payments, but will result in higher
future tax provisions in the periods the related deferred tax assets are
realized. The Company reduced the valuation allowance in fiscal 1998 because it
expects to generate sufficient taxable income over the next five years to
realize the net deferred tax asset. No increases in current levels of income
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<PAGE> 38
are required to do so. Although the Company has experienced a declining
membership base, it does not expect the net effect of such decline to prevent
the realization of the net deferred tax asset over such period.
INFLATION. During the past three 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 the campground members
because the Company cannot 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 35% of
the members have requested that their dues be frozen because of their age or
disability (see "Campground Operations - Dues").
IMPACT OF YEAR 2000. Based on recent assessments, the Company has determined
that it must modify certain software so that its computer systems will function
properly with respect to dates in the year 2000 and thereafter. The Company
presently believes that by modifying existing software, the Company's computer
systems will not experience material operational problems as a result of the
year 2000 issue. However, if such modifications are not made, or are not timely
completed, the year 2000 issue could have a material adverse impact on the
operations of the Company. The most significant disruption would impact member
billings and collections and campground reservations. In addition, although the
Company does not have any significant suppliers whose timely compliance would
impact the Company, the Company utilizes a number of financial institutions that
are highly dependent upon the proper function of their computer systems. The
Company's depository and treasury functions could be disrupted if these
financial institutions do not become year 2000 compliant within the required
timeframe.
The Company will primarily utilize internal resources to modify existing
software to address the year 2000 issue. The Company anticipates completing the
year 2000 project by November 15, 1999. These modifications, if timely
completed, will avoid any material impact on its operating systems. The Company
spent approximately $215,000 during the year ended June 30, 1999 on year 2000
modifications, and estimates that it will spend an additional $50,000 to make
the necessary modifications to its software. These expenditures will not
significantly impact the Company's financial position, operations, or cash
flows.
The Company does not presently have a formal contingency plan because it
believes the necessary modifications will be completed in the required
timeframe. However, should it become evident that the year 2000 modifications
will not be completed on a timely basis, the Company will explore alternatives
to employ until such time as the year 2000 modifications are completed.
The costs of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best estimates
which were derived utilizing numerous assumptions of future events. However,
there can be no assurance that these estimates and timetable will be achieved,
and actual results could differ materially from those anticipated.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A derivative financial instrument includes futures, forwards, interest rate
swaps, option contracts, and other financial instruments with similar
characteristics. The Company currently does not have any derivative financial
instruments. However, the Company does have other financial instruments
containing market risk. Management believes that the market risk associated with
the Company's financial instruments as of June 30, 1999 is not significant.
The information required by Item 305 of S-K is contained in Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under the headings "Market Risk" and "Interest Rate Sensitivity."
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Consolidated Financial Statements Index
Page
----
<S> <C>
Report of Independent Public Accountants..............................................................41
Consolidated Balance Sheets -- June 30, 1999 and 1998.................................................42
Consolidated Statements of Operations for the years ended
June 30, 1999, 1998 and 1997.......................................................................43
Consolidated Statements of Shareholders' Equity (Deficit)
for the years ended June 30, 1999, 1998 and 1997...................................................44
Consolidated Statements of Cash Flows for the years ended
June 30, 1999, 1998 and 1997.....................................................................45
Notes to Consolidated Financial Statements............................................................47
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts.............................................74
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
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<PAGE> 41
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Thousand Trails, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Thousand Trails,
Inc. (a Delaware corporation) and subsidiaries (the "Company") as of June 30,
1999 and 1998, and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for each of the three years in the
period ended June 30, 1999. These consolidated financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Thousand Trails,
Inc. and subsidiaries as of June 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1999, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The supplemental Schedule II
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic consolidated
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
s/ Arthur Andersen LLP
Dallas, Texas
September 3, 1999
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30,
-----------------------------
ASSETS 1999 1998
------- -------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,197 $13,631
Current portion of receivables, net of allowances and
discount of $.7 million in 1999 and $1.1 million in 1998 1,402 2,440
Current portion of deferred membership selling expenses 693 538
Current portion of net deferred tax assets 2,061 2,954
Other current assets 2,048 1,890
------- -------
Total Current Assets 8,401 21,453
Restricted cash 1,240 1,171
Receivables, net of allowances and discount of $.5 million
in 1999 and $1.6 million in 1998 782 1,741
Campground land 13,200 13,338
Buildings and equipment, net of accumulated depreciation of
$17.5 million in 1999 and $15.0 million in 1998 20,829 21,879
Land held for sale 2,987 3,866
Deferred membership selling expenses 1,372 1,087
Net deferred tax assets 5,635 7,046
Other assets 2,358 2,681
------- -------
Total Assets $56,804 $74,262
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,666 $ 2,037
Accrued interest 110 1,805
Other accrued liabilities 6,148 6,410
Current portion of long term debt 2,100
Accrued construction costs 1,888 2,845
Current portion of deferred revenue 19,098 18,851
------- -------
Total Current Liabilities 31,010 31,948
Long term debt 8,787 32,973
Deferred revenue 5,627 4,588
Other liabilities 1,732 1,999
------- -------
Total Liabilities 47,156 71,508
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,500,000 shares
authorized, none issued and outstanding
Common Stock, $.01 par value, 15,000,000 shares authorized,
8,096,128 and 7,437,083 shares issued and outstanding in
1999 and 1998, respectively, after deducting 3,200 shares
held in Treasury in 1999 81 74
Additional paid-in capital 21,869 20,551
Accumulated deficit subsequent to December 31, 1991, date
of emergence from bankruptcy (12,163) (17,734)
Accumulated other comprehensive loss (139) (137)
------- -------
Total Shareholders' Equity 9,648 2,754
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $56,804 $74,262
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE> 43
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Membership dues $ 36,455 $ 37,330 $ 39,945
Other campground/resort revenue 17,954 16,475 17,906
Membership and lot sales 4,085 3,894 3,477
RPI membership fees 3,576 4,035 4,086
Interest income 2,068 2,635 3,726
Gain on asset sales 1,105 5,287 2,892
Nonrecurring income 2,770 1,476
Other income 2,682 3,083 3,673
-------- -------- --------
Total Revenues 67,925 75,509 77,181
-------- -------- --------
EXPENSES
Campground/resort operating expenses 39,926 39,152 42,860
Selling expenses 3,787 3,098 3,074
Marketing expenses 2,046 1,700 1,383
RPI membership expenses 1,963 2,132 1,978
Corporate member services 1,253 1,472 1,532
Interest expense and amortization 2,957 4,599 9,084
General and administrative expenses 8,964 8,640 10,100
Reduction in allowance for doubtful accounts (886) (1,000) (1,232)
Restructuring costs and nonrecurring expenses 1,233
-------- -------- --------
Total Expenses 60,010 59,793 70,012
-------- -------- --------
INCOME BEFORE INCOME TAXES 7,915 15,716 7,169
Income tax provision - current (40) (837) (370)
Income tax benefit (expense) - deferred (2,304) 10,000
-------- -------- --------
NET INCOME $ 5,571 $ 24,879 $ 6,799
======== ======== ========
NET INCOME PER SHARE - BASIC $ .73 $ 3.36 $ .94
======== ======== ========
NET INCOME PER SHARE - DILUTED $ .66 $ 2.96 $ .88
======== ======== ========
SHARES USED TO CALCULATE NET INCOME PER SHARE:
BASIC 7,630 7,407 7,223
======== ======== ========
DILUTED 8,475 8,398 7,704
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Accumulated
--------------------------- Additional Other
Number of Paid-In Accumulated Comprehensive
Shares Amount Capital Deficit Loss Total
--------- ------- ---------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1996
(restated) 3,702,726 37 17,549 (49,412) (126) (31,952)
Issuance of common shares
in restructuring of
Secured Notes 3,680,550 37 2,953 2,990
Other Comprehensive Loss (5) (5)
Net income 6,799 6,799
---------
Comprehensive Income 6,794
--------- ---------- ---------- ---------- ---------- ---------
Balance, June 30, 1997 7,383,276 74 20,502 (42,613) (131) (22,168)
Issuance of common shares
from exercises of options
and warrants 53,807 49 49
Other Comprehensive Loss (6) (6)
Net income 24,879 24,879
---------
Comprehensive Income 24,873
--------- ---------- ---------- ---------- ---------- ---------
Balance, June 30, 1998 7,437,083 74 20,551 (17,734) (137) 2,754
Issuance of common shares
from exercises of options
and warrants 662,245 7 1,332 1,339
Purchase of treasury stock (3,200) (14) (14)
Other Comprehensive Loss (2) (2)
Net income 5,571 5,571
---------
Comprehensive Income 5,569
--------- ---------- ---------- ---------- ---------- ---------
Balance, June 30, 1999 8,096,128 $ 81 $ 21,869 $ (12,163) $ (139) $ 9,648
========= ========== ========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Collections of principal on receivables $ 4,167 $ 5,760 $ 7,978
Interest received 1,909 2,371 3,407
Interest paid (2,988) (822) (8,107)
General and administrative, corporate member
services and restructuring costs (10,233) (10,123) (14,061)
Cash collected from operations, including
deferred revenue 61,590 62,353 65,894
Cash from sales of memberships and lots at the
point of sale 4,424 3,703 3,705
Expenditures for property operations (38,269) (37,908) (40,872)
Expenditures for sales and marketing (6,151) (4,742) (4,472)
Expenditures for insurance premiums (2,038) (772) (1,706)
Payment of income taxes (507) (700) (370)
Reduction of letter of credit 1,500
Other, net (69) 236 (345)
-------- -------- --------
Net cash provided by operating activities 11,835 19,356 12,551
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and HUD-related expenditures (2,935) (2,085) (1,046)
Proceeds from asset sales 2,246 8,550 4,663
Proceeds from insurance settlements 1,119
-------- -------- --------
Net cash provided by (used in) investing activities (689) 7,584 3,617
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under Credit Agreement (13,113) (14,097) (30,543)
Repayments of notes and mortgages (604) (384)
Borrowings under Credit Agreement 24,000 44,640
Retirement of Secured Notes (50,169)
Retirement of PIK Notes (34,792)
Payment of debt issue costs (3,132)
Repurchase of long term debt (12,640)
Purchase of Treasury Stock (14)
Issuance of Common Stock 1,339 49
-------- -------- --------
Net cash used in financing activities (22,580) (14,652) (52,228)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (11,434) 12,288 (36,060)
CASH AND CASH EQUIVALENTS:
Beginning of year 13,631 1,343 37,403
-------- -------- --------
End of year $ 2,197 $ 13,631 $ 1,343
======== ======== ========
</TABLE>
(continued)
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<PAGE> 46
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net income $ 5,571 $ 24,879 $ 6,799
-------- -------- --------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES-
Depreciation 2,604 2,538 3,195
Amortization of interest yield, collection costs and
valuation allowance (316) (523) (693)
Amortization of PIK Note deferred gain (150) (30) (39)
Amortization of debt issue costs, debt discount and
consent fees 1,809
Gain on asset sales (1,105) (5,287) (2,892)
Net deferral of sales revenues 1,522 640 465
Net deferral of selling expenses (441) (234) (147)
Reduction of bad debt allowances, net (886) (1,000) (1,232)
Reduction of insurance reserves (858) (611)
Increase in insurance deposits (865)
Gain on insurance settlements (588)
Reduction of deferred tax valuation allowance (10,000)
Deferred tax provision 2,304
Net loss on debt restructurings 132
CEO bonus payment (1,270)
Decrease (increase) in restricted cash (69) 236 1,505
Decrease in receivables 2,929 4,773 7,592
Decrease in other assets 139 2,843 767
Increase (decrease) in other liabilities (462) 1,300 (2,077)
Other, net 195 667 113
-------- -------- --------
Total adjustments 6,264 (5,523) 5,752
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 11,835 $ 19,356 $ 12,551
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 46
<PAGE> 47
THOUSAND TRAILS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- NATURE OF OPERATIONS
Thousand Trails, Inc., a Delaware corporation, and its subsidiaries (the
"Company") own and operate a system of 53 membership-based campgrounds located
in 17 states and British Columbia, Canada. In addition, the Company provides a
reciprocal use program for members of approximately 300 recreational facilities
and manages 169 public campgrounds for the US Forest Service. Operating revenues
consist primarily of membership dues received from campground members, fee
revenue from members of the reciprocal use program, management fees from the
campground management operations, and guest fees and revenues received from the
campground and other operations.
The accompanying consolidated financial statements include the accounts of
Thousand Trails, Inc. and the following wholly owned subsidiaries: Coast
Financial Services, Inc. ("Coast"), National American Corporation and its
subsidiaries ("NACO"), Resort Parks International, Inc. ("RPI"), Thousand Trails
(Canada), Inc., and UST Wilderness Management Corporation ("Wilderness
Management"). In 1991, the Company acquired 100% of the capital stock of NACO
and 69% of the capital stock of Thousand Trails, Inc., a Washington corporation
("Trails"). The Company subsequently increased its ownership in Trails to 100%
and merged Trails into the Company. The acquisitions of NACO and Trails were
accounted for as a purchase with the purchase price being allocated to the
assets acquired and liabilities assumed based on their estimated fair value on
the date of acquisition. RPI was a wholly owned subsidiary of NACO until 1992
when it became a direct subsidiary of the Company. Wilderness Management
commenced operations in 1994 and Coast commenced operations in 1997.
The Company emerged from proceedings under Chapter 11 of the Bankruptcy Code on
December 31, 1991, pursuant to a confirmed plan of reorganization. Due to the
Company's emergence from bankruptcy, the Company adopted fresh start reporting,
under which a new reporting entity was created and assets and liabilities were
restated to reflect their reorganization value which approximated fair value at
the date of reorganization.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company sells campground memberships pursuant to membership contracts that
give purchasers the right to use one or more of the Company's campgrounds, but
do not convey a deeded interest in the campgrounds. Until 1990, the Company also
sold campground memberships that gave purchasers an undivided fractional
interest in one of six campgrounds. A membership requires the payment of an
upfront membership fee and permits the member's family to use one or more of the
Company's campgrounds for an initial period, subject to renewal each year upon
payment of annual dues.
The Company also sell residential lots at three resorts not related to the
campground operations.
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<PAGE> 48
The Company has offered financing on certain campground memberships for a period
of up to 36 months with a down payment of at least 25% of the sales price.
Beginning in January 1999, the minimum down payment was changed to $495,
regardless of the sales price. The Company has also offered financing on the
sale of lots for periods up to five years with a down payment of at least 10% of
the sales price. However, during the periods presented, the majority of the
Company's campground membership and lot sales were not financed for more than
two years.
Sales revenue from the sale of lots and campground memberships that convey a
deeded interest in real estate is recognized upon execution of a sales contract
and receipt of a down payment of at least 10% of the sales price. Historically,
sales revenue from the sale of campground memberships that do not convey a
deeded interest in real estate was recognized in the same manner. However, the
Staff of the Securities and Exchange Commission (the "SEC") required the Company
to change its accounting method, beginning with fiscal 1997, to recognize sales
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. In addition, costs directly related to the sale of such
campground memberships are deferred and recognized as selling expenses on a
straight-line basis over the expected life of the memberships sold.
The annual dues paid by the campground members are used to fund the Company's
operating expenses, including corporate expenses and the maintenance and
operation of the campgrounds. The membership contracts generally permit the
Company to increase annually the amount of each member's dues by either (i) the
percentage increase in the consumer price index ("CPI") or (ii) the greater of
10% or the percentage increase in the CPI. The Company, however, may 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 35% of the members have requested
that their dues be frozen because of their age or disability. The Company
estimates that approximately 50% of the campground members are senior citizens
eligible to request that their dues be frozen. The Company is unable to estimate
when or if a significant number of these members will request that their dues be
frozen in the future. Annual dues are recognized as revenue ratably over 12
months as services are provided, and are recorded net of an allowance to provide
for uncollectible amounts. Dues paid in advance are deferred as unearned
revenue.
Cash and Cash Equivalents
The Company considers demand accounts and short-term investments with maturities
of three months or less when purchased to be cash equivalents.
Restricted Cash
Restricted cash generally consists of deposits to collateralize performance
bonds and letters of credit in the ordinary course of business.
Receivables
Prior to June 30, 1991, the Company purchased contracts receivable from NACO and
Trails and recorded them at the selling company's carrying value. In connection
with the Company's acquisition of NACO and Trails and its emergence from
bankruptcy in 1991, the Company recorded the contracts receivable at their fair
value. As a result, the contracts then owned by NACO and Trails were recorded
net of an allowance for interest discount to
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<PAGE> 49
increase the weighted average yield on the contracts to 14.75%, the current
market yield at the time of the acquisition. The allowance for interest discount
is being amortized using the effective interest method over the respective terms
of the contracts. In addition, the Company recorded an allowance for future
costs associated with the collection of the contracts receivable portfolio. This
allowance is being amortized as a reduction of general and administrative
expense based on cash collected on the related portfolio. The Company has also
recorded a valuation allowance in connection with purchases of contracts
receivable from third parties, to record the contracts receivable at the
purchase price. The valuation allowance is being amortized over the respective
terms of the contracts as an increase to interest income.
Interest income is recognized on purchased contracts receivable based upon the
effective yield at which they were purchased and on other contacts receivable at
their stated rates based on the outstanding principal balances.
Allowance for Doubtful Accounts
The Company provides an allowance for future cancellations of contracts
receivable. The allowance is based on management's estimate of future contract
cancellations considering the Company's historical cancellation rates as well as
other factors deemed relevant to the analysis. The allowance is reviewed on a
periodic basis with changes in management's estimates recognized in the period
known. The Company presently believes that the allowance for doubtful accounts
is adequate. However, if cancellations occur at a different rate than is
presently anticipated, it may be necessary for the Company to revise its
estimates and increase or decrease the allowance, which would affect the
Company's operating results and financial condition.
Campground Land and Lot Inventory
Campground land and lot inventory are recorded at the lower of cost or estimated
net realizable value. While the Company sold campground memberships that
conveyed an undivided interest in the campground property, the related
campground property was charged to cost of sales based on the total number of
memberships available for sale at the campground.
Buildings, Equipment and Depreciation
Buildings and equipment are recorded at cost. The costs of betterments and
improvements which extend the useful life of the asset are capitalized whereas
the costs of maintenance and repairs which do not extend the useful life of the
asset are expensed in the period incurred. Depreciation is recorded using the
straight-line method over the estimated useful lives of the assets which range
from three to thirty years.
Consent Fees
In fiscal 1994, to obtain an amendment of the Indenture for the 12% Secured
Notes Due 1998, the Company paid aggregate cash consent fees which were
capitalized and amortized over the term of the notes. The remaining unamortized
balance of the consent fees was eliminated when these notes were retired in a
restructuring that was completed on July 17, 1996 (see Note 6).
Income Taxes
The Company recognizes certain revenues and expenses in periods which differ for
tax and financial reporting purposes.
Page 49
<PAGE> 50
Principles of Consolidation
All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the years ended
June 30, 1999, 1998 and 1997.
Use of Estimates
The accompanying consolidated financial statements were prepared in conformity
with generally accepted accounting principles ("GAAP"). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130 requires the
Company to classify items of other comprehensive income by their nature in its
financial statements and to display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of its consolidated balance sheet. Comprehensive
income includes all changes in equity during a period except those resulting
from investments by owners and distributions to owners, and includes certain
items that were historically reported directly through equity as well as net
income reported on the income statement.
Currently, the Company's only item of other comprehensive income is its foreign
currency translation adjustment. The Company translates the balance sheet of its
Canadian subsidiary into US dollars at exchange rates in effect as of the
balance sheet date. Profit and loss accounts are translated monthly at exchange
rates in effect at that time.
The following table provides statements of comprehensive income for the years
ended June 30, 1999 and 1998, as if the statement had been implemented for the
year ended June 30, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
For the year ended June 30,
---------------------------
1999 1998
------ -------
<S> <C> <C>
Net Income $5,571 $24,879
Foreign Currency
Translation Adjustment (2) (6)
------ -------
Comprehensive Income $5,569 $24,873
====== =======
</TABLE>
Net Income Per Share
SFAS No. 128 replaced the calculation of primary and fully diluted net income
per share with basic and diluted net income per share. Unlike primary net income
per share, basic net income per share excludes any dilutive effects of common
stock equivalents. Diluted earnings per share is similar to the previously
reported fully diluted earnings per share and is computed by dividing net income
by the weighted average number of common and common
Page 50
<PAGE> 51
equivalent shares outstanding, as determined by the treasury stock method. Net
income per share amounts for all periods have been restated and presented to
conform to the SFAS No. 128 requirements.
The table below sets forth the information necessary to compute basic and
diluted net income per share for the years ended June 30, 1999, 1998 and 1997,
including a summary of the components of the numerators and denominators of
basic and diluted net income per share computations for the periods presented
(dollars and shares in thousands, except per share amounts):
<TABLE>
<CAPTION>
Net Income Per Share for the years ended June 30,
-----------------------------------------------
1999 1998 1997
-------- ------- ---------
<S> <C> <C> <C>
Net Income $ 5,571 $24,879 $ 6,799
======= ======= =======
Weighted Average Number of Shares - Basic 7,630 7,407 7,223
Dilutive Options 824 975 480
Dilutive Warrants 21 16 1
------- ------- -------
Weighted Average Number of Shares - Diluted 8,475 8,398 7,704
======= ======= =======
Net Income Per Share - Basic $ .73 $ 3.36 $ .94
======= ======= =======
Net Income Per Share - Diluted $ .66 $ 2.96 $ .88
======= ======= =======
</TABLE>
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<PAGE> 52
NOTE 3 -- RECEIVABLES
CONTRACTS RECEIVABLE
The components of contracts receivable as of June 30, 1999 and 1998, are
summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
------------------------
1999 1998
------- -------
<S> <C> <C>
Contracts receivable --
Memberships/undivided interests $ 3,337 $ 6,425
Lots 80 401
------- -------
3,417 6,826
Allowance for doubtful accounts (1,027) (2,136)
Allowance for interest discount (98) (234)
Allowance for collection costs (98) (234)
Valuation allowance (33) (78)
------- -------
2,161 4,144
Interest receivable 23 37
------- -------
$ 2,184 $ 4,181
======= =======
</TABLE>
Contracts Receivable
Contracts receivable bear interest at rates which range generally from 9.5% to
16%, with a weighted average stated rate of 13% at June 30, 1999 and 1998. The
obligor's weighted average equity in the contracts receivable at June 30, 1999
and 1998, was 80% and 75%, respectively. As of June 30, 1999, 97% of the
campground members and 99% of the purchasers of lots had paid for their
membership or lot in full.
The Company has no obligation to refund moneys received or to provide further
services to purchasers in the event a contract is canceled for the purchaser's
nonperformance of contractual obligations. Contracts receivable related to
undivided interests and lot sales are secured by deeds of trust on the related
real estate. The Company does not require campground members to provide
collateral or other security for related contracts receivable.
Allowance for Doubtful Accounts
In fiscal year 1999, 1998 and 1997, the Company reduced the allowance for
doubtful accounts on the contracts receivable by $886,000, $1.0 million and $1.2
million, respectively. These adjustments were made because the Company
experienced lower contract losses than anticipated in these years.
The allowance for doubtful accounts is an estimate of the contracts receivable
that will cancel in the future and is determined based on historical
cancellation rates and other factors deemed relevant to the analysis. The
Company does not presently anticipate any further adjustments to the allowance
for doubtful accounts on the contracts receivable. However, the allowance and
the rate at which the Company provides for future losses on its contracts
receivable could be increased or decreased in the future based on the Company's
actual collection experience.
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<PAGE> 53
Allowance for Interest Discount
The allowance for interest discount had a remaining balance of $98,000 and
$234,000 at June 30, 1999 and 1998, respectively. Amortization of the allowance
for interest discount totaled $136,000, $221,000 and $267,000 for the years
ended June 30, 1999, 1998 and 1997, respectively, which increased interest
income.
Allowance for Collection Costs
The allowance for collection costs had a remaining balance of $98,000 and
$234,000 at June 30, 1999 and 1998, respectively. Amortization of the allowance
for collection costs totaled $136,000, $230,000 and $314,000 for the years ended
June 30, 1999, 1998 and 1997, respectively, which decreased general and
administrative expense.
Valuation Allowance
The valuation allowance had a balance of $33,000 and $78,000 at June 30, 1999
and 1998, respectively. Amortization of the valuation allowance totaled $45,000,
$72,000 and $112,000 for the years ended June 30, 1999, 1998 and 1997,
respectively, which increased interest income.
At June 30, 1999, scheduled future receipts on contracts receivable are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Memberships
and Undivided
Interests Lots Total
------------- ------ ------
<S> <C> <C> <C>
2000 $2,069 $ 43 $2,112
2001 945 24 969
2002 287 10 297
2003 21 1 22
2004 6 1 7
Thereafter 9 1 10
------ ------ ------
Total $3,337 $ 80 $3,417
====== ====== ======
</TABLE>
The Company operates 53 campgrounds located in 17 states and British Columbia,
Canada. The largest volume of campground membership sales occurred at
campgrounds located in California, and that is where the largest percentage of
campground members reside (approximately 37%). As of June 30, 1999, the
Company's contracts receivable from members who purchased memberships in the
state of California totaled approximately $1.4 million.
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<PAGE> 54
NOTE 4 -- CAMPGROUND AND RESORT PROPERTIES
Campground properties consisted of the following as of June 30, 1999 and 1998
(dollars in thousands):
<TABLE>
<CAPTION>
June 30,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Land held for sale $ 2,917 $ 2,790
Campground land at campgrounds where
right-to-use memberships are sold 11,129 11,257
Campground land at campgrounds where
undivided interests were sold 2,071 2,071
Property and equipment 38,171 36,507
Construction in progress 149 319
Accumulated depreciation (17,496) (14,953)
-------- --------
$ 36,941 $ 37,991
======== ========
</TABLE>
The Company sells campground memberships that give members the right to use one
or more of the Company's campgrounds but do not convey a deeded interest in the
campgrounds. Until 1990, the Company also sold campground memberships that gave
members a deeded undivided interest in one of six campgrounds. At the six
campgrounds where undivided interests were sold, the Company is not required to
seek the consent of the campground members to sell or encumber the Company's
interest in the campgrounds.
The campground properties are encumbered by certain borrowings as described in
Note 6.
Resort properties consisted of the following as of June 30, 1999 and 1998
(dollars in thousands):
<TABLE>
<CAPTION>
June 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Land held for sale $ 70 $ 1,076
Lot inventory 10
Property and equipment 7 7
Accumulated depreciation (2) (1)
------- -------
$ 75 $ 1,092
======= =======
</TABLE>
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<PAGE> 55
NOTE 5 -- DEFERRED REVENUE AND DEFERRED SELLING EXPENSES
Deferred revenue was comprised of the following as of June 30, 1999 and 1998
(dollars in thousands):
<TABLE>
<CAPTION>
June 30,
------------------------
1999 1998
------- -------
<S> <C> <C>
Deferred revenue --
Campground membership sales $ 8,464 $ 6,943
Campground membership dues 14,574 14,771
Other 1,687 1,725
------- -------
$24,725 $23,439
======= =======
</TABLE>
Components of the change in deferred membership selling expenses and deferred
membership sales revenue are as follows (dollars in thousands):
<TABLE>
<CAPTION>
For the years ended June 30,
---------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Deferred membership selling expenses, beginning of
year $ 1,625 $ 1,391 $ 1,244
Deferred 1,170 794 505
Recognized (730) (560) (358)
------- ------- -------
Net change 440 234 147
------- ------- -------
Deferred membership selling expenses,
end of year $ 2,065 $ 1,625 $ 1,391
======= ======= =======
Deferred membership sales revenue,
beginning of year $ 6,943 $ 6,303 $ 5,838
Deferred 4,609 3,100 2,131
Recognized (3,088) (2,460) (1,666)
------- ------- -------
Net change 1,521 640 465
------- ------- -------
Deferred membership sales revenue,
end of year $ 8,464 $ 6,943 $ 6,303
======= ======= =======
</TABLE>
NOTE 6 -- LONG TERM DEBT
SECURED NOTES
In July 1996, the Company consummated a restructuring of its 12% Secured Notes
Due 1998 (the "Secured Notes") whereby all of the $101,458,000 principal amount
of Secured Notes outstanding were retired. This restructuring provided the
Company with a new capital structure and decreased the Company's outstanding
debt to a level the Company believes it can support under its downsized
operations. As part of this restructuring, the Company issued $40.2 million
principal amount of 12% Senior Subordinated Pay-In-Kind Notes Due 2003 ("PIK
Notes") and 3,680,550 shares of Common Stock, and it entered into the Credit
Agreement with Foothill.
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<PAGE> 56
The original principal amount of Secured Notes was recorded net of a discount,
to reduce the carrying value of the Secured Notes to their estimated fair value
as of December 31, 1991, the fresh start reporting date. The discount resulted
in an effective interest yield of 18% for the Secured Notes. The remaining
unamortized balance of this discount was eliminated when the Secured Notes were
retired.
The restructuring of the Secured Notes was accounted for as a Troubled Debt
Restructuring, whereby the restructured debt was recorded at the carrying value
of the old debt and no gain or loss was recorded on the transaction. A deferred
gain of $303,000 recorded in connection with the restructuring was amortized as
a reduction of interest expense using the effective interest method over the
term of the PIK Notes. Upon redemption of the PIK Notes in December 1998, the
remaining deferred gain of $138,000 was recorded as a reduction of interest
expense (see PIK Notes and PIK Note Repurchases below).
The Company incurred $1.1 million of costs in fiscal 1997 in connection with the
consummation of the restructuring of the Secured Notes.
CREDIT AGREEMENT WITH FOOTHILL
In connection with the restructuring of the Secured Notes, the Company entered
into the Credit Agreement with Foothill Capital Corporation ("Foothill"), under
which Foothill made term loans to the Company totaling $13.0 million and agreed
to make revolving loans to the Company in the maximum amount of $25.0 million.
The Credit Agreement originally had a three-year term expiring in July 1999.
During fiscal 1997 and the first-half of fiscal 1998, the Company repaid all of
its initial borrowings under the Credit Agreement, which totaled $32.0 million.
In May 1997, the Company and Foothill entered into an amendment to the Credit
Agreement which significantly modified its original terms. The Company had
incurred debt issue costs of $3.1 million related to obtaining the original
Credit Agreement, which were capitalized and were being amortized as additional
interest expense over the life of the loans. However, because of the substantial
modifications made to the original Credit Agreement, this amendment of the
Credit Agreement was accounted for as an extinguishment of debt and the
remaining $1.3 million unamortized balance of the original debt issue costs was
charged to expense.
In October 1998, the Company entered into an amendment to the Credit Agreement
that gave the Company the flexibility to borrow up to $5.0 million for working
capital purposes and additional amounts to use to redeem the PIK Notes and for
the possible acquisition of members through the purchase of other membership
campground operations. Under the amended Credit Agreement, the first $15.0
million of borrowings bear interest at prime plus .25% per annum, borrowings
over $15.0 million and up to $25.0 million bear interest at prime plus .50% per
annum, and borrowings over $25.0 million bear interest at prime plus 1.5% per
annum, subject to a minimum interest rate of 9% per annum (reduced to 7% per
annum on June 1, 1999).
In December 1998, the Company borrowed $24.0 million under the amended Credit
Agreement to partially fund the redemption of the PIK Notes as discussed below.
As a result of subsequent repayments, on June 30, 1999, the Company had $10.9
million of outstanding borrowings under the amended Credit Agreement, and it had
the ability to borrow an
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<PAGE> 57
additional $4.0 million for working capital purposes. The Company's ability to
borrow up to an additional $10.0 million to fund its possible acquisition of
members through the purchase of other membership campground operations will
expire on December 31, 1999. All borrowings under the amended Credit Agreement
will mature on January 17, 2003.
The Company's ability to borrow under the amended Credit Agreement for working
capital and other purposes is subject to continued compliance by the Company
with the financial covenants and other requirements of the amended Credit
Agreement, including certain covenants respecting minimum earnings before
interest, taxes, depreciation and amortization, and minimum tangible net worth.
The amended 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 amended Credit Agreement. In addition, the Company's
subsidiaries other than an immaterial utility subsidiary have guaranteed the
Company's obligations under the amended Credit Agreement and, subject to certain
limitations, have granted liens on substantially all of their assets to secure
their guarantees.
PIK NOTES AND PIK NOTE REPURCHASES
In the restructuring of the Secured Notes, the Company issued $40.2 million
principal amount of PIK Notes which bore interest at (i) 17 1/2% per annum
through January 15, 1998, and (ii) 12% per annum thereafter. Interest on the PIK
Notes was due semiannually on January 15th and July 15th and was payable in the
form of additional PIK Notes until after July 15, 2000, unless all borrowings
under the Credit Agreement were paid in full on or before such date.
In June 1997, the Company repurchased $13.4 million principal amount of PIK
Notes at a cost of $12.6 million, including accrued interest. The Company made
these repurchases at an average price of $897 per $1,000 of principal amount in
a Dutch auction available to all holders of PIK Notes. The Company borrowed the
$12.6 million it used for these repurchases under the Credit Agreement. Because
the Credit Agreement was amended in May 1997 primarily to provide the funding
for these PIK Note repurchases, the $1.2 million gain resulting from the PIK
Note repurchases was netted with the $1.3 million loss arising from the
amendment of the Credit Agreement discussed above. The net $132,000 loss is
presented as a nonrecurring expense in the accompanying consolidated statement
of operations.
In December 1998, the Company redeemed all $34.8 million principal amount of PIK
Notes outstanding and paid $1.7 million of accrued interest. The Company funded
this redemption with $12.5 million of its existing cash and $24.0 million of new
borrowings under the Credit Agreement with Foothill.
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<PAGE> 58
BALANCE SHEET PRESENTATION
Balance sheet presentation of the current and long term components of the
Company's outstanding debt as of June 30, 1999 and 1998, is reflected below
(dollars in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
------- -------
<S> <C> <C>
CURRENT PORTION OF LONG TERM DEBT:
Borrowings under Credit Agreement $ 2,100 --
======= =======
LONG TERM DEBT:
Borrowings under Credit Agreement $ 8,787 --
PIK Notes, including deferred gain of $.2 million -- $32,973
------- -------
$ 8,787 $32,973
======= =======
Total debt $10,887 $32,973
======= =======
</TABLE>
NOTE 7 -- INCOME TAXES
The Company and its subsidiaries have entered into tax sharing agreements,
pursuant to which they file federal income tax returns on a consolidated basis
and allocate tax benefits and liabilities as provided in the agreements. The
agreements provide generally that a subsidiary will reimburse or be reimbursed
by the Company in an amount equal to 100% of any tax amounts that would have
been due or refundable, calculated as if the subsidiary were a stand-alone
taxpayer.
The differences, expressed as a percentage of pretax income, between statutory
and effective federal income tax rates are as follows:
<TABLE>
<CAPTION>
For the years ended June 30,
-------------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0%
Provision for state income taxes -- 2.7 3.5
Alternative minimum taxes -- 2.6 1.7
Deferred tax provision (benefit) 29.6 (63.6) --
Unrecorded net operating loss (34.0) (34.0) (34.0)
----- ----- -----
Effective tax rate 29.6% (58.3%) 5.2%
===== ===== =====
</TABLE>
At June 30, 1999, the Company had estimated net operating tax loss carryforwards
("NOL's") of $27.4 million, expiring in years 2009 through 2014, as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Year ending Amount
June 30, expiring
----------- --------
<S> <C>
2009 $ 3,736
2010 16,147
2011 5,656
2014 1,878
-------
$27,417
=======
</TABLE>
Page 58
<PAGE> 59
The components of deferred income taxes as of June 30, 1999 and 1998 were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
----------------------
1999 1998
-------- --------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards (NOL's) $ 9,322 $ 9,136
Membership sales 2,175 1,818
Alternative minimum tax credit carryover 552 526
Deferred gain on Secured Note restructuring -- 658
PIK Note interest -- 2,862
Unpaid expenses 1,938 2,257
Restructuring costs 1,384 1,508
Deferred revenue 486 487
Bad debt provision 172 --
Other 306 350
-------- --------
16,335 19,602
-------- --------
DEFERRED TAX LIABILITIES:
Property basis differences (2,720) (2,814)
Purchase discount amortization (112) (195)
Bad debt provision (201)
-------- --------
(2,832) (3,210)
-------- --------
Net Deferred Tax Assets Before Valuation Allowance 13,503 16,392
Valuation Allowance (5,807) (6,392)
-------- --------
Net Deferred Tax Assets After Valuation Allowance $ 7,696 $ 10,000
======== ========
</TABLE>
SFAS No. 109, which provides guidance on reporting for income taxes, requires
the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. Prior to fiscal 1998, the Company provided a
valuation allowance for the amount by which deferred tax assets exceeded
deferred tax liabilities. However, the Company periodically assesses the
realizability of its deferred tax assets and considers whether it is more likely
than not that the tax benefits will be realized. The ultimate realization of the
deferred tax assets is dependent upon the Company having future taxable income
during the periods in which the NOL's may be utilized and other deferred tax
assets become deductible. At the end of fiscal 1998, management's assessment,
which considered scheduled reversals of deferred tax assets and liabilities,
projected future taxable income, and the carryforward periods of the Company's
NOL's, was that it is more likely than not that the Company will realize the
benefits of a significant portion of the net deferred tax assets. As a result,
at June 30, 1998, the Company reduced the valuation allowance by $10.0 million,
resulting in net deferred tax assets after valuation allowance of $10.0 million.
The ultimate realization of these income tax benefits will require aggregate
taxable income of approximately $29.4 million during the carryforward period. In
fiscal 1999, the Company recognized $2.7 million in deferred tax expense and
reduced the valuation allowance by $401,000, resulting in net deferred tax
assets of $7.7 million as of June 30, 1999. The valuation allowance was reduced
as a result of the current tax deductions provided by the PIK Note redemption.
Prior to the redemption, the Company deferred deducting the interest expense on
the PIK Notes for tax purposes because interest was paid by issuing additional
PIK Notes. The valuation allowance associated with the PIK Note interest
deductions was reduced after the redemption because the Company determined that
it is more likely than not that it will realize the tax benefits of those
deductions.
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<PAGE> 60
Management believes that it is more likely than not that the Company will
generate taxable income sufficient to realize the net deferred tax assets after
valuation allowance based upon the current estimates of future taxable income.
No increases in current levels of income are required to do so. Although the
Company has experienced a declining membership base, it does not expect the net
effect of such decline to prevent the realization of the net deferred tax assets
over such period. However, if the Company is unable to generate sufficient
taxable income in the future through operating results, increases in the
valuation allowance will be required through a charge to expense. On the other
hand, if the Company achieves sufficient profitability to utilize a greater
portion of the deferred tax assets, the valuation allowance will be further
reduced through a credit to income.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Lease Commitments
The Company leases equipment and facilities under non-cancelable operating
leases with terms in excess of one year. At June 30, 1999, the Company's future
obligations under non-cancelable operating leases were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Year ending
June 30, Amount
----------- ------
<S> <C>
2000 $823
2001 624
2002 276
2003 117
2004 110
</TABLE>
Accrued Construction Costs
The Company had recorded liabilities of $1.9 million and $2.8 million as of June
30, 1999 and 1998, respectively, for amounts necessary to complete improvements
provided in registration statements filed with the US Department of Housing and
Urban Development at resorts not related to the campground operations. The costs
of such improvements are based upon engineering estimates and are classified as
a current liability in the accompanying consolidated balance sheets.
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. In fiscal 1998, the Company reduced this liability by
$858,000 because the estimated losses were less than the recorded liability.
This amount is included in nonrecurring income in the accompanying consolidated
statement of operations. At June 30, 1999 and 1998, the Company's recorded
liability for estimated losses related to uninsured general liability
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claims totaled $1.1 million and $1.2 million, respectively, which is included in
other liabilities in the accompanying consolidated balance sheets.
Property Insurance
In fiscal 1998, the Company received proceeds of $1.1 million from insurance
settlements for flood and fire damage at certain campgrounds. The Company
recognized a gain of $588,000 from these settlements, which is included in
nonrecurring income in the accompanying consolidated statement of operations.
Employee Health Insurance
The Company has employee benefit plans that are funded primarily through
employer and employee contributions (see Note 13).
Workers' Compensation Insurance
Commencing July 1, 1998, the Company obtained insurance covering workers'
compensation claims with no self-insured deductible. Prior to this date, the
Company's insurance program required the Company to pay up to $250,000 per
occurrence and to deposit funds with the insurance company to pay claims in
excess of the estimated claims that were covered by the amounts originally paid
by the Company. These deposits were generally expensed in the years the deposits
were made because the Company anticipated that the deposits would be used to
cover claims. However, during fiscal 1997, the Company determined that it was
entitled to refunds of $865,000 in future periods for deposits made in previous
years. At June 30, 1997, the Company recorded the refundable amount as an asset,
resulting in nonrecurring income of $865,000. In fiscal 1998, the Company
received refunds totaling $1.3 million for other deposits expensed in previous
years, which were recorded as nonrecurring income.
Declining Membership Base
The Company derives a significant portion of its ongoing operating revenue from
its campground members (92% in fiscal 1999). The Company's membership base has
declined significantly over the past five fiscal years, and, net of new sales,
the membership base is presently declining at the rate of approximately 5% per
year. The Company attributes this continuing decline principally to its aging
membership base, of whom approximately 50% are senior citizens. In addition, the
Company estimates that the memberships sold in recent fiscal years will have an
expected life that is significantly 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 significantly increase its
campground membership sales over current levels or acquire members through the
purchase of other membership campground operations.
Environmental Issues
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
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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 effect upon the Company's operations or
financial position.
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 9 -- SHAREHOLDERS' EQUITY
The Company issued 3,702,726 shares of Common Stock in connection with its
emergence from bankruptcy in December 1991. The Company issued an additional
3,680,550 shares of Common Stock in the restructuring of the Secured Notes in
July 1996 (see Note 6). During fiscal 1998 and fiscal 1999, the Company issued
53,807 and 662,245 additional shares of Common Stock, respectively, upon the
exercise of stock options and warrants. During fiscal 1999, the Company
purchased 3,200 shares of Common Stock. Transfer of the Common Stock is subject
to transfer restrictions that are described below.
Transfer of Common Stock is subject to restrictions designed to avoid an
"ownership change" within the meaning of section 382 of the Internal Revenue
Code of 1986, as amended (the "Code"). Such restrictions are set forth in
Article IX of the Company's Restated Certificate of Incorporation. Article IX
generally restricts, until June 30, 2011 (or earlier in certain events), direct
or indirect transfer of Common Stock that would without the approval of the
board of directors of the Company (i) increase to more than 4.75% the percentage
ownership of Common Stock of any person who at any time during the preceding
three-year period did not own more than 4.75% of the Common Stock, (ii) increase
the percentage of Common Stock owned by any person that during the preceding
three-year period owned more than 4.75% of the Common Stock, or by any group of
persons treated as a "5 Percent Shareholder" (as defined in the Code but
substituting "4.75%" for "5 Percent"), or (iii) cause an "ownership change" of
the Company. Article IX provides that any direct or indirect transfer of Common
Stock in violation of Article IX is void ab initio as to the purported
transferee, and the purported transferee will not be recognized as the owner of
shares acquired in violation of Article IX for any purpose, including for
purposes of voting and receiving dividends or other distributions in respect of
Common Stock. Any shares purportedly acquired in violation of Article IX will be
transferred to a trustee who will be required to sell them.
The Company's Restated Certificate of Incorporation provides for the issuance of
15,000,000 shares of Common Stock, par value of $.01 per share. In addition, the
Company's Restated Certificate of Incorporation provides for the issuance of
1,500,000 shares of preferred stock, par value $.01 per share, none of which
have been issued to date.
The Company has granted stock options to the Company's CEO and other key
employees and non-employee directors (see Note 12).
Since inception, the Company has not paid any dividends. The Credit Agreement
prohibits the payment of any cash dividends on the Common Stock without the
consent of Foothill until the Credit Agreement is terminated.
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NOTE 10 -- SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of non-cash investing and financing activities required
by SFAS No. 95, "Statement of Cash Flows," are presented below for the years
ended June 30, 1999, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------ --------
<S> <C> <C> <C>
Non-cash transactions related to restructuring (see Note 6)
Retirement of Secured Notes ($44,181)
Issuance of PIK Notes 40,521
Issuance of Common Stock 2,990
Write-off of unamortized portion of consent fees 670
Non-cash transactions related to asset sale(1)
Note receivable from buyer $ 800
Deferred gain (471)
Book value of assets sold (223)
Net receivables written off (156)
Non-cash payments of PIK Note interest
PIK Notes issued in lieu of cash interest payment $ 1,969 $3,610 $ 2,372
</TABLE>
(1) On November 21, 1996, the Company sold the timeshare management
operations and timeshare inventory at eight resorts not related to the
campground operations. The sales price was $850,000, of which $50,000 was
paid in cash at closing and the balance was represented by an $800,000
promissory note that was paid in full in June 1998. A deferred gain of
$471,000 was recorded in connection with the sale, which was recognized
on the installment method of accounting as payments on the note were
received.
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NOTE 11 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
an entity to disclose the estimated fair value of its financial instrument
assets and liabilities. Significant estimates and present value calculations
were used by the Company for purposes of this disclosure. The estimated fair
values of the Company's financial instruments as of June 30, 1999 and 1998, as
well as their carrying amounts as reported in the accompanying consolidated
balance sheets, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
---------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and Cash Equivalents $ 2,197 $ 2,197 $ 13,631 $ 13,631
Restricted Cash 1,240 1,240 1,171 1,171
Contracts Receivable 3,440 6,863
Less: allowances and discount (1,256) (2,682)
-------- --------
2,184 2,250 4,181 4,300
FINANCIAL LIABILITIES:
Borrowings under Credit
Agreement 10,887 10,887 -- --
PIK Notes -- -- 32,973 30,690
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of the Company's financial instruments as of June 30, 1999 and 1998,
for which it is practical to estimate that value.
Cash and Cash Equivalents and Restricted Cash
The carrying amount approximates fair value because of the short maturity of
these instruments.
Borrowings under Credit Agreement
The carrying amount approximates fair value because the borrowings under the
Credit Agreement bear a market rate of interest.
Contracts Receivable
The fair value of contracts receivable was estimated by discounting the future
cash flows using the current rates at which the Company estimates a similar loan
portfolio would be purchased by a willing third party, after considering risk
factors regarding collectibility and future collection costs.
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<PAGE> 65
PIK Notes
The fair value of the PIK Notes as of June 30, 1998, was estimated based on
quotes from securities industry professionals.
Changes in assumptions or estimation methodologies may have a material effect on
these estimated fair values. Additionally, lack of uniform valuation
methodologies introduces a greater degree of subjectivity to these estimated
values.
The Company did not have any financial instruments as of the balance sheet dates
presented that were held for trading purposes.
NOTE 12 -- STOCK OPTIONS AND WARRANTS
STOCK OPTIONS
CEO Options
At their annual meeting in November 1996, the stockholders of the Company
approved the grant to the Company's CEO of options to purchase 664,495 shares of
Common Stock at $0.69 per share. These options are 100% vested and are
exercisable for a period of ten years while the CEO is in the employ of the
Company, subject to certain exceptions. The exercise of the options, however, is
subject to restrictions designed to prevent an "ownership change" for federal
tax purposes (see Note 9). As of the date of this report, 244,927 of these
options have been exercised.
1991 Employee Plan
Effective December 31, 1991, the Company adopted the 1991 Employee Stock
Incentive Plan (the "1991 Employee Plan") to enable the Company and its
subsidiaries to attract, retain and motivate their officers, employees and
directors. Awards under the 1991 Employee Plan may take various forms, including
(i) shares of Common Stock, (ii) options to acquire shares of Common Stock
("Options"), (iii) securities convertible into shares of Common Stock, (iv)
stock appreciation rights, (v) phantom stock or (vi) performance units. Options
granted under the 1991 Employee Plan may be (i) incentive stock options
("ISOs"), which have certain tax benefits and restrictions, or (ii)
non-qualified stock options ("Non-qualified Options"), which do not have any tax
benefits and have few restrictions.
The Compensation Committee or, in certain circumstances, the Board of Directors
may grant awards under the 1991 Employee Plan until December 30, 2001. The
recipient of an award duly granted on or prior to such date may thereafter
exercise or settle it in accordance with its terms, although the Company may not
issue any shares of Common Stock pursuant to any award after December 30, 2011.
The Board of Directors may amend or terminate the 1991 Employee Plan at any time
and in any manner, provided that (i) an amendment or termination may not affect
an award previously granted without the recipient's consent, and (ii) an
amendment will not be effective until the stockholders approve it if any
national securities exchange or securities association that lists any of the
Company's securities requires stockholder approval or if Rule 16b-3 requires
stockholder approval.
The Company reserved 291,780 shares of Common Stock for issuance under the 1991
Employee Plan. In September 1995, the Company granted key employees ISOs
covering
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140,000 shares with an exercise price of $.625 per share, and in January 1996,
the Company granted non-employee directors Non-qualified Options to purchase
20,000 shares with an exercise price of $.81 per share. In September 1996, the
Company granted key employees ISOs covering 60,000 shares and one non-employee
director Non-qualified Options covering 5,000 shares, each with an exercise
price of $.80 per share. In November 1996, the Company granted non-employee
directors Non-qualified Options covering 20,000 shares with an exercise price of
$1.08 per share. In November 1997, the Company granted non-employee directors
Non-Qualified Options covering 20,000 shares with an exercise price of $3.71 per
share. In May 1999, the Company granted key employees ISOs covering 17,866
shares and non-employee directors Non-qualified Options covering 21,415 shares,
each with an exercise price of $4.25 per share. To date, options for 186,781
shares are outstanding under the 1991 Employee Plan and options for 104,999
shares have been exercised. 171,781 of the outstanding options are fully vested
and the remaining 15,000 options will vest at a rate of 33 1/3% per year,
commencing May 2000. The options have a term of 10 years from the date of grant.
1993 Employee Plan
On December 2, 1993, the Company adopted the 1993 Stock Option and Restricted
Stock Purchase Plan (the "1993 Employee Plan") in order to enable the Company
and its subsidiaries to attract, retain, and motivate their officers and
employees. Awards under the 1993 Employee Plan are restricted to (i) awards of
the right to purchase shares of Common Stock ("Stock Awards"), or (ii) awards of
Options, which may be either ISOs or Non-Qualified Options. The purchase price
for any Stock Awards and the exercise price for any Non-Qualified Options may be
less than the fair market value of the Common Stock on the date of grant. The
exercise price of any ISOs may not be less than the fair market value of the
Common Stock on the date of grant.
The Compensation Committee or, in certain circumstances, the Board of Directors
may grant awards under the 1993 Employee Plan until October 20, 2003. The
termination of the 1993 Employee Plan, however, will not alter or impair any
rights or obligations under any award previously granted under the plan.
The Board of Directors may amend or terminate the 1993 Employee Plan at any time
and in any manner, provided that (i) an amendment or termination may not affect
an award previously granted without the recipient's consent, (ii) an amendment
will not be effective until the stockholders approve it if any national
securities exchange or securities association that lists any of the Company's
securities requires stockholder approval or if Rule 16b-3 requires stockholder
approval and (iii) the stockholders must approve any amendment decreasing the
minimum exercise price specified in the plan for any ISO granted thereunder.
The Company reserved 285,919 shares of Common Stock for issuance under the
1993 Employee Plan. The 1993 Employee Plan, however, limits the number of shares
of Common Stock with respect to which awards can be made in any calendar year to
any one participant to 200,000 shares. In May 1996, the Company granted key
employees ISOs covering 95,000 shares with an exercise price of $.59 per share.
In September 1996, the Company granted key employees ISOs covering 175,000
shares with an exercise price of $.80 per share. In May 1999, the Company
granted key employees ISOs covering 18,364 shares at an exercise price of $4.25
per share. To date, options for 180,417 shares are outstanding under the 1993
Employee Plan and options for 106,000 shares have been exercised. 165,417 of the
options are fully vested, the remaining 15,000 options will vest at
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a rate of 33 1/3% beginning May 2000. The options have a term of 10 years from
the date of grant.
Director Plan
On December 2, 1993, the Company adopted the 1993 Director Stock Option Plan
(the "Director Plan"), which provides for the grant of Non-Qualified Options to
non-employee directors of the Company. The Company reserved 50,000 shares of
Common Stock for issuance under the Director Plan. In January 1995, the
non-employee directors of the Company were granted Non-Qualified Options
covering 20,000 shares with an exercise price of $.79 per share. In November
1996, the non-employee directors of the Company were granted Non-qualified
Options covering 25,000 shares with an exercise price of $1.08 per share. In
November 1997, the non-employee directors of the Company were granted
Non-Qualified Options covering 5,000 shares with an exercise price of $3.71 per
share. To date, options for 40,000 shares are outstanding under the Director
Plan, all of which are vested, and options for 10,000 shares have been
exercised. The options have a term of 10 years from the date of grant.
The Director Plan was a "formula plan," pursuant to which each non-employee
director automatically received a grant of Non-Qualified Options to purchase
5,000 shares of Common Stock on the day immediately after each annual meeting of
the stockholders at which directors are elected, beginning with the annual
meeting held in December 1993. If on any such day, the number of shares of
Common Stock remaining available for issuance under the Director Plan was
insufficient for the grant of the total number of Non-qualified Options to which
all participants would otherwise be entitled, each participant received
Non-qualified Options to purchase a proportionate number of the available number
of remaining shares. The exercise price of each Non-Qualified Option is equal to
the fair market value on the date of grant of such Option as determined under
the Director Plan. Generally, the Director Plan specifies that such fair market
value is the average trading price of the Common Stock during the period
beginning 45 days before the date of grant and ending 15 days before the date of
grant.
SFAS 123 Disclosures
SFAS 123, "Accounting for Stock-Based Compensation," was effective for the
Company beginning in fiscal 1997. SFAS 123 defines a fair value method of
accounting for employee stock options which provides for compensation cost to be
charged to results of operations at the grant date. The Company has adopted the
disclosure-only provisions of SFAS 123 and follows the accounting treatment
prescribed by Accounting Pronouncement Bulletin Opinion No. 25 ("APB 25") in
accounting for stock options issued to its employees and directors. Accordingly,
no compensation cost was recognized in connection with the grant of options
during the periods presented. Had compensation cost for the stock options issued
been based on the fair value of the options at the grant dates, consistent with
SFAS 123, the Company's net income and net income per share (diluted) for the
years ended June 30, 1999, 1998 and 1997, would have been $5.5 million or $.65
per share, $24.8 million or $2.95 per share, and $6.4 million or $.83 per share,
respectively.
Pro forma results under SFAS 123 in the years presented are not likely to be
representative of future pro forma results because, for example, additional
awards may be made in future years.
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Set forth below is a summary of awards of stock options made by the Company
during the years ended June 30, 1999, 1998 and 1997, and awards outstanding as
of the end of those years:
<TABLE>
<CAPTION>
Years ended June 30,
--------------------------------------------------------------------------
1999 1998 1997
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 1,191,495 $ .78 1,224,495 $ .71 295,000 $ .78
Options granted 55,698 $4.25 25,000 $3.71 949,495 $ .74
Options canceled (5,000) $ .63 (7,501) $ .63 (20,000) $2.75
Options exercised (410,427) $ .71 (50,499) $ .70
--------- --------- ---------
Options outstanding, end
of year 831,766 $1.05 1,191,495 $ .78 1,224,495 $ .71
========= ========= =========
Options exercisable, end
of year 801,766 $ .83 1,152,332 $ .79 1,131,171 $ .72
========= ========= =========
Shares available for
grant, end of year -- n/a 50,200 n/a 67,699 n/a
========= ========= =========
</TABLE>
The weighted-average fair value of stock options granted by the Company during
the years ended June 30, 1999, 1998 and 1997, was $1.74, $.78, and $.38,
respectively. The value of each option grant was estimated as of the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions: (1) a risk-free interest rate of 5.82% for fiscal
1999, 5.41% for fiscal 1998, and 6.19% for fiscal 1997, (2) an expected life of
three years for fiscal 1999, 1998 and 1997, (3) expected volatility of 52.58%
for fiscal 1999, 54.56% for fiscal 1998, and 72.5% for fiscal 1997, and (4) no
dividend yield, as the Company has not paid any dividends since inception. The
Credit Agreement substantially limits the payment of cash dividends.
The following table summarizes information about the Company's stock options
outstanding as of June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------- --------------------------------
Weighted-Average
Number Remaining Weighted-Average Number Weighted-Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Prices at 6/30/99 Life Price at 6/30/99 Price
-------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
OPTION PLANS:
$.59 - $3.71 356,500 5.88 years $ .75 356,500 $ .75
$4.25 55,698 9.88 years $ 4.25 25,698 $ 4.25
CEO OPTIONS:
$.69 419,568 8.08 years $ .69 419,568(1) $ .69
------- -------
831,766 7.22 years $ .95 801,766 $ .83
======= =======
</TABLE>
(1) As previously discussed, the options granted to the Company's CEO, although
100% vested, are subject to restrictions designed to prevent an "ownership
change" for federal tax purposes.
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WARRANTS
In December 1991, the Company issued warrants to acquire 194,521 shares of
Common Stock at $4.24 per share, all of which were exercised during fiscal 1999.
In June 1992, the Company issued warrants to acquire 290,314 shares of Common
Stock at $4.24 per share, of which 3,308 were exercised during fiscal 1998 and
49,787 were exercised during fiscal 1999. The remaining 237,219 warrants expired
on June 30, 1999 without being exercised. In March 1994, the Company issued
warrants to acquire 10,170 shares of Common Stock at $1.625 per share, of which
7,510 were exercised during fiscal 1999. The remaining 2,660 warrants expired on
March 31, 1999 without being exercised.
NOTE 13 -- EMPLOYEE BENEFIT PLANS
Flexible Benefits Plan Trust Fund
Effective July 1, 1992, the Company established a trust (the "Trust") to fund
the Company's employee benefit plans (collectively, the "Plans"). The Plans
include the Company's medical plan, dental plan, disability plan, life insurance
plan, and accidental death and dismemberment plan and any other employee welfare
benefit plan permissible under Section 3(1) of the Employee Retirement Income
Security Act of 1974. The Company has adopted a flexible benefits plan
established pursuant to Section 125 of the Code to furnish eligible employees
with a choice of receiving cash or certain statutory taxable or non-taxable
benefits under the Plans.
The medical and dental benefits provided to the Company's employees under the
Plans are funded primarily through employer and employee contributions to the
Trust. In addition, the Company has purchased stop loss insurance which protects
the Plans against claims in excess of set policy amounts. The Company has
provided a liability for estimated future claims of $907,000 and $828,000 at
June 30, 1999 and 1998, respectively, which is included in other liabilities in
the accompanying consolidated balance sheets. This liability is based on
actuarial estimates of amounts needed to fund expected claims, as well as
premium payments and administrative costs of the Plans.
The Company from time-to-time makes contributions to the Trust, which are
irrevocable. Trust assets may not revert to or inure to the benefit of the
Company. Neither the Company, administrator, nor trustee is responsible for the
adequacy of the Trust.
While the trustee has virtual plenary authority to manage and invest trust
assets, the trustee is required to use trust assets and income exclusively to
provide benefits under the Plans and to defray reasonable expenses of
administering the Plans.
Employees Savings Trust
Effective July 1, 1994, the Company adopted the Thousand Trails, Inc. Employees
Savings Trust (the "401(k) Plan") for the purpose of establishing a contributory
employee savings plan exempt under Section 401(k) of the Code. An eligible
employee participating in this plan may contribute up to 15% of his or her
annual salary, subject to certain limitations. In addition, the Company may make
discretionary matching contributions as determined annually by the Company. The
Company made matching contributions totaling $106,000 for the year ended June
30, 1999, and has committed to make matching contributions for the calendar year
ended December 31, 1999, in an amount equal to 45% of the voluntary
contributions made by each participant, up to 4% of the participant's annual
compensation
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(or a maximum of 1.8% of the participant's annual compensation). Employer
contributions are subject to a seven-year vesting schedule.
Non-Qualified Deferred Compensation Plan
Effective April 23, 1998, the Company established the Thousand Trails, Inc.
Non-Qualified Deferred Compensation Plan (the "Non-Qualified Plan") for the
purpose of establishing a deferred compensation plan for certain "highly
compensated" employees of the Company. An eligible employee participating in
this plan may contribute up to 10% of his or her annual salary subject to
certain limitations. In addition, the Company may make discretionary matching
contributions determined solely at the discretion of the Company. The Company
made matching contributions of approximately $7,000 for the year ended June 30,
1999, and has committed to make matching contributions for the calendar year
ended December 31, 1999, in an amount equal to 45% of the combined voluntary
contributions to the Non-Qualified Plan and 401(k) Plan made by each
participant, up to 4% of the participant's annual compensation (or a maximum of
1.8% of the participants annual compensation). Employer contributions are fully
vested at the time the contributions are made.
Employee Stock Purchase Plan.
Effective August 1, 1999, the Company adopted the Thousand Trails, Inc. Employee
Stock Purchase Plan (the "Stock Purchase Plan") to give employees and
non-employee directors of the Company an opportunity to purchase Common Stock
through payroll deductions. Under the terms of the Stock Purchase Plan,
participants may defer between 1% and 10% of their annual compensation, which is
used to purchase shares of Common Stock on a semi-annual basis. The purchase
price paid by participants is 85% of the closing price of the Common Stock as
reported by the American Stock Exchange on the date of purchase. The Company
pays the other 15% of the purchase price, plus commissions, and the other costs
of administering the Stock Purchase Plan.
NOTE 14 -- INDUSTRY SEGMENT INFORMATION
Effective in fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes standards
for reporting information on operating segments and related matters.
The Company has three reportable segments: campgrounds, RPI, and Wilderness
Management. The campground segment generates a majority of the Company's
operating revenues. These three segments offer different products and services.
The campgrounds segment operates a network of 53 membership-based campgrounds in
17 states and British Columbia, Canada. Operations within the campground segment
include (i) the sale of memberships entitling the member to use campground
facilities, (ii) the sale of undivided interests related to fee simple sales of
interests in campground facilities, and (iii) net revenues earned from
operations at the campgrounds. Separate information regarding Canadian
campground operations is not presented as revenues and identifiable assets
related to the Canadian operations are less than 10% of the related consolidated
amounts for the periods presented.
RPI sells memberships that allow members to use any of the recreational
facilities participating in RPI's reciprocal use system, subject to certain
limitations. Operating revenue consists of the annual membership fees paid by
members.
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Wilderness Management manages 169 public campgrounds for the US Forest Service.
Operating revenue consists of the campsite usage fees paid by people staying at
the public campgrounds.
The Company evaluates performance based upon the income before taxes for each
business segment. Identifiable assets are those assets used exclusively in the
operations of each business segment.
<TABLE>
<CAPTION>
Year ended June 30, 1999
------------------------
Wilderness Corporate
Campgrounds RPI Management and Other Consolidated
----------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 52,040 $ 3,576 $ 2,271 $ 98 $ 57,985
Sales 3,959 126 4,085
Income (loss) before
income taxes 12,842 1,613 136 (6,676) 7,915
Identifiable assets 45,446 361 322 10,675 56,804
Depreciation expense 2,265 19 17 303 2,604
Capital expenditures 1,475 4 1,456 2,935
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30, 1998
------------------------
Wilderness Corporate
Campgrounds RPI Management and Other Consolidated
----------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $51,964 $ 4,035 $ 1,321 $ 520 $57,840
Sales 3,227 667 3,894
Income (loss) before
income taxes 13,842 1,903 (188) 159 15,716
Identifiable assets 48,229 263 352 25,418 74,262
Depreciation expense 2,158 26 11 343 2,538
Capital expenditures 1,666 11 38 370 2,085
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30, 1997
------------------------
Wilderness Corporate
Campgrounds RPI Management and Other Consolidated
----------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $54,153 $ 4,086 $ 1,094 $ 2,604 $61,937
Sales 2,892 585 3,477
Income (loss) before
income taxes 13,968 2,108 72 (8,979) 7,169
Identifiable assets 58,349 277 327 4,349 63,302
Depreciation expense 2,654 26 8 507 3,195
Capital expenditures 784 19 32 211 1,046
</TABLE>
NOTE 15 -- INDEMNIFICATION ARRANGEMENTS
Under its By-laws, the Company must indemnify its present and former directors
and officers for the damages and expenses that they incur in connection with
threatened or pending actions, suits or proceedings arising because of their
status as directors and officers, provided that they acted in good faith and in
a manner that they reasonably believed to be in or not opposed to the best
interests of the Company (or with respect to any criminal action or
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<PAGE> 72
proceeding, provided that they had no reasonable cause to believe that their
conduct was unlawful). In connection with this indemnification obligation, the
Company has entered into indemnification agreements with its directors and
officers.
The Company must advance funds to these individuals to enable them to defend any
such threatened or pending action, suit or proceeding. The Company cannot
release such funds, however, until it receives an undertaking by or on behalf of
the requesting individual to repay the amount if a court of competent
jurisdiction ultimately determines that such individual is not entitled to
indemnification. In connection with this obligation, the Company established
trusts to reimburse present and former directors and officers for any
indemnifiable damages and expenses that they might incur and to advance defense
funds to them. In 1991, the Company contributed $800,000 to the trusts. In
fiscal 1998, the trusts were partially terminated, and a portion of the trust
assets were distributed to the Company. The remaining assets totaled $832,000 at
June 30, 1999, and are included in other assets in the accompanying consolidated
balance sheets. The trusts were terminated in July 1999, and the trust assets
were distributed to the Company.
NACO also contributed $200,000 to a trust that was established to reimburse NACO
directors and officers for any indemnifiable damages and expenses that they
might incur and to advance defense funds to them. This trust was terminated in
fiscal 1998 and the trust assets were distributed to the Company.
NOTE 16 -- SELECTED QUARTERLY FINANCIAL DATA
The following table summarizes the unaudited consolidated quarterly results of
operations for fiscal 1999 and 1998 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fiscal 1999
Total revenues $20,461 $15,736 $14,916 $16,812
Total expenses (before taxes) 18,253 13,399 13,277 15,081
Net income 1,462 2,053 930 1,126
Net income per share-basic .20 .27 .12 .14
Net income per share-diluted .17 .24 .11 .13
Shares used to calculate net income per share:
Basic 7,458 7,512 7,680 7,871
Diluted 8,433 8,425 8,518 8,526
Fiscal 1998
Total revenues $23,262 $16,078 $15,636 $20,533
Total expenses (before taxes) 17,102 13,520 13,387 15,784
Net income 5,986 2,500 2,107 14,286
Net income per share-basic .82 .34 .28 1.92
Net income per share-diluted .72 .29 .25 1.70
Shares used to calculate net income per share:
Basic 7,386 7,393 7,415 7,435
Diluted 8,330 8,468 8,396 8,399
</TABLE>
The Company's operations are highly seasonal. The Company receives the majority
of the dues revenue from its members during the winter, which are recognized as
income ratably during the year. However, the Company incurs a higher level of
operating expenses during
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the summer. In addition, a majority of the Company's sales and marketing efforts
occur during the summer.
During the first quarter of 1998, the Company recorded gains of $3.4 million on
the sale of various campgrounds. During the fourth quarter of 1998, the Company
included in income a $10.0 million deferred income tax benefit resulting from a
reduction in the valuation allowance for the Company's net deferred tax assets.
The Company adopted SFAS No. 128, "Earnings Per Share," in the second quarter
of fiscal 1998, which modified the Company's earnings per share calculation and
required restatement of prior period calculations. SFAS No. 128 replaced the
calculation of primary and fully diluted net income per share set forth in
Accounting Principles Board Opinion No. 15 ("APB No. 15") with basic and diluted
net income per share. Unlike primary net income per share, basic net income per
share excludes any dilutive effects of common stock equivalents. Diluted net
income per share is similar to the previously reported fully diluted net income
per share and is computed by dividing net income by the weighted average number
of common and common equivalent shares outstanding, as determined by the
treasury stock method.
The following table provides the information necessary to reconcile primary and
fully diluted net income per share reported by the Company in its Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997, prior to adoption
of SFAS No. 128, with basic and diluted net income per share utilizing SFAS No.
128 (dollars and shares in thousands, except per share amounts):
<TABLE>
<CAPTION>
For the quarter ended September 30, 1997
-------------------------------------------------------
APB No. 15 SFAS No. 128
-------------------------- ------------------------
Net income Net income Net income Net income
per share - per share - per share - per share -
primary fully diluted basic diluted
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Net income $5,986 $5,986 $5,986 $5,986
====== ====== ====== ======
Weighted average number of shares
outstanding 7,386 7,386 7,386 7,386
Dilutive options 902 1,021 939
Dilutive warrants 5 6 5
------ ------ ------ ------
Weighted average number of shares-diluted 8,293 8,413 n/a 8,330
====== ====== ====== ======
Net income per share .72 .71 .82 .72
====== ====== ====== ======
</TABLE>
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SCHEDULE II
THOUSAND TRAILS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at
Valuation and qualifying accounts beginning of Balance at
deducted from assets Year ended year Additions Deductions end of year
- --------------------------------- ---------- ------------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful 6/30/99 $ 2,136 $ 186 $ 1,295 (a) $ 1,027
accounts 6/30/98 3,855 86 1,805 (a) 2,136
6/30/97 6,290 35 2,470 (a) 3,855
Allowance for uncollectible 6/30/99 $ 3,429 $ 1,607 $ 2,437 $ 2,599
dues receivable 6/30/98 3,568 2,626 2,765 3,429
6/30/97 4,666 3,215 4,313 3,568
Allowance for interest discount, 6/30/99 $ 546 $ 0 $ 317 $ 229
collection costs and valuation 6/30/98 1,069 0 523 546
discount 6/30/97 1,762 0 693 1,069
Deferred tax valuation 6/30/99 $ 6,392 $ 0 $ 585 (b) $ 5,807
allowance 6/30/98 21,961 0 15,569 (b) 6,392
6/30/97 25,220 0 3,259 21,961
</TABLE>
(a) Includes a reduction in the allowance for doubtful accounts of $886,
$1,000, and $1,232 in fiscal 1999, 1998 and 1997, respectively.
(b) Includes a reduction in the deferred tax valuation allowance of $10,000 in
fiscal 1998 and $401 in fiscal 1999.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be included under the captions
"Proposal I - Election of Directors," "Board of Directors," "Executive
Officers," and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Registrant's definitive Proxy Statement for the Registrant's 1999 Annual Meeting
of Stockholders, which will be filed with the SEC pursuant to Regulation 14A,
and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included under the caption
"Executive Compensation" in the Registrant's definitive Proxy Statement for the
Registrant's 1999 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be included under the caption
"Security Ownership" in the Registrant's definitive Proxy Statement for the
Registrant's 1999 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be included under the caption
"Certain Transactions" in the Registrant's definitive Proxy Statement for the
Registrant's 1999 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS
The following documents are filed as part of this Report:
Report of Independent Public Accountants for the years ended June 30,
1999, 1998 and 1997.
Consolidated Balance Sheets as of June 30, 1999 and 1998.
Consolidated Statements of Operations for the years ended June 30,
1999, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the years ended
June 30, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended June 30,
1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
Schedule II - Valuation and Qualifying Accounts
(b) REPORTS ON FORM 8-K
The Company did not file any Current Reports on Form 8-K during the quarter
ended June 30, 1999.
(c) EXHIBITS
The following documents are filed or incorporated by reference as exhibits to
this report:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of October 1, 1996,
between the Company and USTrails Inc. (predecessor in interest
to the Company) (incorporated by reference to the proxy
statement/prospectus filed with the the SEC on October 3, 1996
as part of the Registration Statement on Form S-4,
Registration Statement No. 333-13339, File No. 1-14645 (the
"S-4 Registration Statement").
</TABLE>
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<PAGE> 78
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to the proxy statement/prospectus
filed with the SEC on October 3, 1996 as part of the S-4
Registration Statement).
3.2 Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Form 8-B filed by the Company
with the SEC on November 27, 1996, File No. 1-14645).
4.1 Registration Rights Agreement, dated as of June 12, 1992,
regarding the Company's Additional Series Secured Notes and
the shares of Common Stock issuable upon the exercise of
certain warrants (incorporated by reference to Exhibit 4.4 of
the Company's Current Report on Form 8-K filed with the SEC on
June 25, 1992, File No. 1-14645).
10.1 Loan and Security Agreement, dated as of July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.2 First Amendment to Loan and Security Agreement, dated as of
May 16, 1997, between the Company and Foothill Capital
Corporation (incorporated by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K filed with the SEC on
July 8, 1997, File No. 1-14645).
10.3 Second Amendment to Loan and Security Agreement dated as of
December 23, 1997, between the Company and Foothill
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1997, File No. 1-14645).
10.4 Third Amendment to Loan and Security Agreement dated as of
January 5, 1998, between the Company and Foothill Capital
Corporation (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, File No. 1-14645).
10.5 Fourth Amendment to Loan and Security Agreement, dated as of
June 10, 1998, between the Company and Foothill (incorporated
by reference to Exhibit 10.17 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1998, File No.
1-14645).
10.6 Fifth Amendment to Loan and Security Agreement, dated as of
September 15, 1998, between the Company and Foothill
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1998, File No. 1-14645).
</TABLE>
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<PAGE> 79
<TABLE>
<S> <C>
10.7 Sixth Amendment to Loan and Security Agreement, dated as of
October 21, 1998, between the Company and Foothill
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1998, File No. 1-14645).
10.8 Seventh Amendment to Loan and Security Agreement, dated as of
June 1, 1999, between the Company and Foothill.
10.9 Secured Promissory Note (Account Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.10 Secured Promissory Note (Term Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.11 Form of Pledge and Security Agreement, dated as of July 10,
1996, between the Company and Foothill Capital Corporation,
and schedule of documents substantially identical to the form
of Pledge and Security Agreement (incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1996, File No. 1-14645).
10.12 Consent and First Amendment to Pledge and Security Agreement,
dated as of October 31, 1997, between certain subsidiaries of
the Company and Foothill Capital Corporation (incorporated by
reference to exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998, File No.
1-14645).
10.13 Form of Mortgage, dated as of July 10, 1996, to grant liens to
Foothill Capital Corporation to secure the Company's
obligations under the Credit Agreement with Foothill, and
schedule of documents substantially identical to the form of
Mortgage (incorporated by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996, File No. 1-14645).
10.14 The Company's 1991 Employee Stock Incentive Plan (incorporated
by reference to Exhibit 10.40 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1992, File No.
1-14645).
10.15 Amendment No. 1 to the Company's 1991 Employee Stock Incentive
Plan (incorporated by reference to Exhibit 10.8 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, File No. 1-14645).
</TABLE>
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<PAGE> 80
<TABLE>
<S> <C>
10.16 The Company's 1993 Stock Option and Restricted Stock Purchase
Plan (incorporated by reference to Exhibit 10.22 to the
Company's Registration Statement No. 33-73284 on Form S-2,
originally filed with the SEC on December 22, 1993, File No.
1-14645).
10.17 Amendment No. 1 to the Company's 1993 Stock Option and
Restricted Stock Purchase Plan (incorporated by reference to
Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996, File No. 1-14645).
10.18 The Company's 1993 Director Stock Option Plan (incorporated by
reference to Exhibit 10.23 to the Company's Registration
Statement No. 33-73284 on Form S-2, originally filed with the
SEC on December 22, 1993, File No. 1-14645).
10.19 Amendment No. 1 to the Company's 1993 Director Stock Option
Plan (incorporated by reference to Exhibit 10.10 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, File No. 1-14645).
10.20 Stock Option Agreement, dated as of August 1, 1996, between
the Company and William J. Shaw (incorporated by reference to
Exhibit 10.26 to the Form 8-B filed by the Company with the
SEC on November 27, 1996, File No. 1-14645).
10.21 Assumption of Obligations, dated as of November 20, 1996, by
the Company assuming the obligations of USTrails under the
USTrails Inc. 1991 Employee Stock Incentive Plan, as amended;
the USTrails Inc. 1993 Stock Option and Restricted Stock
Purchase Plan, as amended; the USTrails Inc. 1993 Director
Stock Option Plan, as amended; Warrant Certificates originally
issued on December 31, 1991, June 12, 1992, and March 2, 1994
to May 16, 1995; and the Stock Option Agreement, dated as of
August 1, 1996, between USTrails and William J. Shaw
(incorporated by reference to Exhibit 10.27 to the Form 8-B
filed by the Company with the SEC on November 27, 1996, File
No. 1-14645).
10.22 Employment Agreement, dated as of May 11, 1995, between the
Company and William J. Shaw, and related Standby Letter of
Credit, dated September 22, 1995, issued by The Bank of
California, N.A., for the benefit of Mr. Shaw, and Letter,
dated September 20, 1995, from The Wyatt Company, regarding
Mr. Shaw's Employment Agreement (incorporated by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 1-14645).
</TABLE>
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<TABLE>
<S> <C>
10.23 Letter dated June 29, 1996, from William J. Shaw to the
Company, regarding Mr. Shaw's election to receive the
Enterprise Bonus payable under his Employment Agreement, and
Letter, dated July 8, 1996, from Deloitte & Touche LLP,
regarding the computation of the amount of the Enterprise
Bonus payable to Mr. Shaw under his Employment Agreement
(incorporated by reference to Exhibit 10.30 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.24 Amendment dated as of December 10, 1998 to the Employment
Agreement between the Company and William J. Shaw
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1998, File No. 1-14645).
10.25 Amended and Restated Employment Agreement, dated as of
September 10, 1992, among the Company, NACO, RPI, and William
F. Dawson (incorporated by reference to Exhibit 10.49 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1993, File No. 1-14645), and Letter, dated December 1,
1995, from RPI to William F. Dawson, regarding certain
compensation arrangements (incorporated by reference to
Exhibit 10.4 to the Company's Quarterly on From 10-Q for the
quarter ended December 31, 1995, File No. 1-14645).
10.26 Amended and Restated Employment Agreement, dated as of
December 2, 1992, among the Company, NACO, and Walter B.
Jaccard (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1992, File No. 1-14645), and amendment dated
November 15, 1994 (incorporated by reference to Exhibit 10.30
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1995, File No. 1-14645), and amendment dated December
7, 1995 (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995, File No. 1-14645).
10.27 Employment Agreement, dated as of August 31, 1995, between the
Company and R. Gerald Gelinas (incorporated by reference to
Exhibit 10.32 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 1-14645).
10.28 Agreement, dated as of October 27, 1997, between the Company
and Bryan D. Reed.
10.29 Indemnification Agreement, dated as of February 18, 1992,
between the Company and Andrew Boas (incorporated by reference
to Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1992, File No. 1-14645), and
schedule of substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.33 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1995,
File No. 1-14645).
</TABLE>
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<PAGE> 82
<TABLE>
<S> <C>
10.30 Indemnification Agreement, dated as of September 1, 1995,
between Trails and William J. Shaw, and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.31 Indemnification Agreement, dated as of September 1, 1995,
between NACO and William J. Shaw, and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.37 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.32 Indemnification Agreement, dated as of May 8, 1991, between
the Company and Donald W. Hair, and schedule of substantially
identical Indemnification Agreements (incorporated by
reference to Exhibit 10.38 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, File No. 1-14645).
10.33 Indemnification Agreement, dated as of November 20, 1996,
between the Company and William J. Shaw and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.39 to the Company's
Registration Statement No. 333-19357 on Form S-1, originally
filed with the SEC on January 7, 1997, File No. 1-14645).
10.34 Grantor Trust Agreement, dated as of September 30, 1991,
between Union Bank of California, N.A. (formerly known as The
Bank of California, N.A., and referred to herein as "Union
Bank"), and Trails (incorporated by reference from Trails'
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 1-14645).
10.35 Supplement to Grantor Trust Agreement, dated as of November
20, 1996, by the Company in favor of Union Bank (incorporated
by reference to Exhibit 10.44 to the Company's Registration
Statement No. 333-19357 on Form S-1, originally filed with the
SEC on January 7, 1997, File No. 1-14645).
10.36 Supplement No. 3 to Grantor Trust Agreement, dated as of May
18, 1999, between the Company and a majority of the persons
presently named as beneficiaries under the Grantor Trust
Agreement, dated as of September 30, 1991, as supplemented,
between the Company and Union Bank of California, N.A., as
Trustee.
10.37 Grantor Trust Agreement, dated May 8, 1991, between the
Company and Texas Commerce Bank, N.A. ("Texas Bank")
(incorporated by reference to Exhibit 10.41 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 1-14645).
</TABLE>
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<PAGE> 83
<TABLE>
<S> <C>
10.38 Supplement and Succession Agreement to Grantor Trust
Agreement, dated as of October 13, 1992, among Union Bank,
Texas Bank, the Company, and certain beneficiaries under the
Grantor Trust Agreement (incorporated by reference to Exhibit
10.51 to the Company's Registration Statement No. 33-571261 on
Form S-2, originally filed with the SEC on January 15, 1993,
File No. 1-14645).
10.39 Supplement to Grantor Trust Agreement, dated as of November
20, 1996, by the Company in favor of Union Bank (incorporated
by reference to Exhibit 10.43 to the Form 8-B filed by the
Company with the SEC on November 27, 1996, File No. 1-14645).
10.40 Supplement No. 2 to Grantor Trust Agreement, dated as of
January 22, 1998, between the Company and a majority of the
persons presently named as beneficiaries under the Grantor
Trust Agreement, dated as of May 8, 1991, as supplemented,
between the Company and Union Bank of California, N.A., as
Trustee (incorporated by reference to exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, File No. 1-14645).
10.41 Supplement No. 3 to Grantor Trust Agreement, dated as of May
18, 1999, between the Company and a majority of the persons
presently named as beneficiaries under the Grantor Trust
Agreement, dated as of May 8, 1991, as supplemented, between
the Company and Union Bank of California, N.A., as Trustee.
10.42 Trust Agreement, dated as of July 22, 1992, establishing the
Company's Flexible Benefits Plan Trust Fund (incorporated by
reference to Exhibit 10.45 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992, File No. 1-14645).
10.43 Thousand Trails, Inc. Employee Savings Trust, dated as of July
1, 1994, between the Company and its subsidiaries and The Bank
of California, N.A., as trustee (incorporated by reference to
Exhibit 10.42 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1994, File No. 1-14645).
10.44 Agreement for the Thousand Trails, Inc. Non-Qualified Deferred
Compensation Plan, effective April 23, 1998 (incorporated by
reference to Exhibit 10.56 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1998, File No. 1-14645).
10.45 Agreement for the Thousand Trails, Inc. Employee Stock
Purchase Plan, effective as of August 1, 1999 (incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8, filed with the SEC on July 22, 1999).
</TABLE>
Page 83
<PAGE> 84
<TABLE>
<S> <C>
10.46 Tax Allocation Agreement, dated as of September 10, 1992,
between the Company and RPI (incorporated by reference to
Exhibit 99.6 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993, File No. 1-14645).
10.47 Tax Allocation Agreement, dated as of July 1, 1991, between
the Company and NACO (incorporated by reference to Exhibit
10.44 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1994, File No. 1-14645).
10.48 Tax Allocation Agreement, dated as of October 29, 1993,
between the Company and Wilderness Management (incorporated by
reference to Exhibit 10.46 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994, File No. 1-14645).
10.49 Stockholder Agreement dated April 5, 1999, between the Company
and Carl Marks Management Company, L.P., et. al. (incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1999, File No.
1-14645).
10.50 Sample form of current Membership Contract.
11.1 Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21.1 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1998, File No. 1-14645).
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule as of and for the year ended June 30,
1999.
</TABLE>
Page 84
<PAGE> 85
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THOUSAND TRAILS, INC.
(Registrant)
Date: September 24, 1999 By: /s/ William J. Shaw
-------------------
William J. Shaw
Chairman of the Board, President,
Chief Executive Officer, and acting
Chief Financial Officer
Date: September 24, 1999 By: /s/ Bryan D. Reed
-----------------
Bryan D. Reed
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew M. Boas Director September 24, 1999
- -----------------------------
Andrew M. Boas
/s/ William P. Kovacs Director September 24, 1999
- -----------------------------
William P. Kovacs
/s/ Donald R. Leopold Director September 24, 1999
- -----------------------------
Donald R. Leopold
/s/ H. Sean Mathis Director September 24, 1999
- -----------------------------
H. Sean Mathis
/s/ Douglas K. Nelson Director September 24, 1999
- -----------------------------
Douglas K. Nelson
/s/ William J. Shaw Chairman of September 24, 1999
- ----------------------------- the Board
William J. Shaw
</TABLE>
Page 85
<PAGE> 86
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of October 1, 1996,
between the Company and USTrails Inc. (predecessor in interest
to the Company) (incorporated by reference to the proxy
statement/prospectus filed with the the SEC on October 3, 1996
as part of the Registration Statement on Form S-4,
Registration Statement No. 333-13339, File No. 1-14645 (the
"S-4 Registration Statement").
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to the proxy statement/prospectus
filed with the SEC on October 3, 1996 as part of the S-4
Registration Statement).
3.2 Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Form 8-B filed by the Company
with the SEC on November 27, 1996, File No. 1-14645).
4.1 Registration Rights Agreement, dated as of June 12, 1992,
regarding the Company's Additional Series Secured Notes and
the shares of Common Stock issuable upon the exercise of
certain warrants (incorporated by reference to Exhibit 4.4 of
the Company's Current Report on Form 8-K filed with the SEC on
June 25, 1992, File No. 1-14645).
10.1 Loan and Security Agreement, dated as of July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.2 First Amendment to Loan and Security Agreement, dated as of
May 16, 1997, between the Company and Foothill Capital
Corporation (incorporated by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K filed with the SEC on
July 8, 1997, File No. 1-14645).
10.3 Second Amendment to Loan and Security Agreement dated as of
December 23, 1997, between the Company and Foothill
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1997, File No. 1-14645).
</TABLE>
<PAGE> 87
<TABLE>
<S> <C>
10.4 Third Amendment to Loan and Security Agreement dated as of
January 5, 1998, between the Company and Foothill Capital
Corporation (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, File No. 1-14645).
10.5 Fourth Amendment to Loan and Security Agreement, dated as of
June 10, 1998, between the Company and Foothill (incorporated
by reference to Exhibit 10.17 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1998, File No.
1-14645).
10.6 Fifth Amendment to Loan and Security Agreement, dated as of
September 15, 1998, between the Company and Foothill
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1998, File No. 1-14645).
10.7 Sixth Amendment to Loan and Security Agreement, dated as of
October 21, 1998, between the Company and Foothill
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1998, File No. 1-14645).
10.8 Seventh Amendment to Loan and Security Agreement, dated as of
June 1, 1999, between the Company and Foothill.
10.9 Secured Promissory Note (Account Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.10 Secured Promissory Note (Term Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.11 Form of Pledge and Security Agreement, dated as of July 10,
1996, between the Company and Foothill Capital Corporation,
and schedule of documents substantially identical to the form
of Pledge and Security Agreement (incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1996, File No. 1-14645).
</TABLE>
<PAGE> 88
<TABLE>
<S> <C>
10.12 Consent and First Amendment to Pledge and Security Agreement,
dated as of October 31, 1997, between certain subsidiaries of
the Company and Foothill Capital Corporation (incorporated by
reference to exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998, File No.
1-14645).
10.13 Form of Mortgage, dated as of July 10, 1996, to grant liens to
Foothill Capital Corporation to secure the Company's
obligations under the Credit Agreement with Foothill, and
schedule of documents substantially identical to the form of
Mortgage (incorporated by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996, File No. 1-14645).
10.14 The Company's 1991 Employee Stock Incentive Plan (incorporated
by reference to Exhibit 10.40 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1992, File No.
1-14645).
10.15 Amendment No. 1 to the Company's 1991 Employee Stock Incentive
Plan (incorporated by reference to Exhibit 10.8 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, File No. 1-14645).
10.16 The Company's 1993 Stock Option and Restricted Stock Purchase
Plan (incorporated by reference to Exhibit 10.22 to the
Company's Registration Statement No. 33-73284 on Form S-2,
originally filed with the SEC on December 22, 1993, File No.
1-14645).
10.17 Amendment No. 1 to the Company's 1993 Stock Option and
Restricted Stock Purchase Plan (incorporated by reference to
Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996, File No. 1-14645).
10.18 The Company's 1993 Director Stock Option Plan (incorporated by
reference to Exhibit 10.23 to the Company's Registration
Statement No. 33-73284 on Form S-2, originally filed with the
SEC on December 22, 1993, File No. 1-14645).
10.19 Amendment No. 1 to the Company's 1993 Director Stock Option
Plan (incorporated by reference to Exhibit 10.10 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, File No. 1-14645).
10.20 Stock Option Agreement, dated as of August 1, 1996, between
the Company and William J. Shaw (incorporated by reference to
Exhibit 10.26 to the Form 8-B filed by the Company with the
SEC on November 27, 1996, File No. 1-14645).
</TABLE>
<PAGE> 89
<TABLE>
<S> <C>
10.21 Assumption of Obligations, dated as of November 20, 1996, by
the Company assuming the obligations of USTrails under the
USTrails Inc. 1991 Employee Stock Incentive Plan, as amended;
the USTrails Inc. 1993 Stock Option and Restricted Stock
Purchase Plan, as amended; the USTrails Inc. 1993 Director
Stock Option Plan, as amended; Warrant Certificates originally
issued on December 31, 1991, June 12, 1992, and March 2, 1994
to May 16, 1995; and the Stock Option Agreement, dated as of
August 1, 1996, between USTrails and William J. Shaw
(incorporated by reference to Exhibit 10.27 to the Form 8-B
filed by the Company with the SEC on November 27, 1996, File
No. 1-14645).
10.22 Employment Agreement, dated as of May 11, 1995, between the
Company and William J. Shaw, and related Standby Letter of
Credit, dated September 22, 1995, issued by The Bank of
California, N.A., for the benefit of Mr. Shaw, and Letter,
dated September 20, 1995, from The Wyatt Company, regarding
Mr. Shaw's Employment Agreement (incorporated by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 1-14645).
10.23 Letter dated June 29, 1996, from William J. Shaw to the
Company, regarding Mr. Shaw's election to receive the
Enterprise Bonus payable under his Employment Agreement, and
Letter, dated July 8, 1996, from Deloitte & Touche LLP,
regarding the computation of the amount of the Enterprise
Bonus payable to Mr. Shaw under his Employment Agreement
(incorporated by reference to Exhibit 10.30 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.24 Amendment dated as of December 10, 1998 to the Employment
Agreement between the Company and William J. Shaw
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1998, File No. 1-14645).
10.25 Amended and Restated Employment Agreement, dated as of
September 10, 1992, among the Company, NACO, RPI, and William
F. Dawson (incorporated by reference to Exhibit 10.49 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1993, File No. 1-14645), and Letter, dated December 1,
1995, from RPI to William F. Dawson, regarding certain
compensation arrangements (incorporated by reference to
Exhibit 10.4 to the Company's Quarterly on From 10-Q for the
quarter ended December 31, 1995, File No. 1-14645).
</TABLE>
<PAGE> 90
<TABLE>
<S> <C>
10.26 Amended and Restated Employment Agreement, dated as of
December 2, 1992, among the Company, NACO, and Walter B.
Jaccard (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1992, File No. 1-14645), and amendment dated
November 15, 1994 (incorporated by reference to Exhibit 10.30
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1995, File No. 1-14645), and amendment dated December
7, 1995 (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995, File No. 1-14645).
10.27 Employment Agreement, dated as of August 31, 1995, between the
Company and R. Gerald Gelinas (incorporated by reference to
Exhibit 10.32 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 1-14645).
10.28 Agreement, dated as of October 27, 1997, between the Company
and Bryan D. Reed.
10.29 Indemnification Agreement, dated as of February 18, 1992,
between the Company and Andrew Boas (incorporated by reference
to Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1992, File No. 1-14645), and
schedule of substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.33 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1995,
File No. 1-14645).
10.30 Indemnification Agreement, dated as of September 1, 1995,
between Trails and William J. Shaw, and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.31 Indemnification Agreement, dated as of September 1, 1995,
between NACO and William J. Shaw, and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.37 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 1-14645).
10.32 Indemnification Agreement, dated as of May 8, 1991, between
the Company and Donald W. Hair, and schedule of substantially
identical Indemnification Agreements (incorporated by
reference to Exhibit 10.38 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, File No. 1-14645).
</TABLE>
<PAGE> 91
<TABLE>
<S> <C>
10.33 Indemnification Agreement, dated as of November 20, 1996,
between the Company and William J. Shaw and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.39 to the Company's
Registration Statement No. 333-19357 on Form S-1, originally
filed with the SEC on January 7, 1997, File No. 1-14645).
10.34 Grantor Trust Agreement, dated as of September 30, 1991,
between Union Bank of California, N.A. (formerly known as The
Bank of California, N.A., and referred to herein as "Union
Bank"), and Trails (incorporated by reference from Trails'
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 1-14645).
10.35 Supplement to Grantor Trust Agreement, dated as of November
20, 1996, by the Company in favor of Union Bank (incorporated
by reference to Exhibit 10.44 to the Company's Registration
Statement No. 333-19357 on Form S-1, originally filed with the
SEC on January 7, 1997, File No. 1-14645).
10.36 Supplement No. 3 to Grantor Trust Agreement, dated as of May
18, 1999, between the Company and a majority of the persons
presently named as beneficiaries under the Grantor Trust
Agreement, dated as of September 30, 1991, as supplemented,
between the Company and Union Bank of California, N.A., as
Trustee.
10.37 Grantor Trust Agreement, dated May 8, 1991, between the
Company and Texas Commerce Bank, N.A. ("Texas Bank")
(incorporated by reference to Exhibit 10.41 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 1-14645).
10.38 Supplement and Succession Agreement to Grantor Trust
Agreement, dated as of October 13, 1992, among Union Bank,
Texas Bank, the Company, and certain beneficiaries under the
Grantor Trust Agreement (incorporated by reference to Exhibit
10.51 to the Company's Registration Statement No. 33-571261 on
Form S-2, originally filed with the SEC on January 15, 1993,
File No. 1-14645).
10.39 Supplement to Grantor Trust Agreement, dated as of November
20, 1996, by the Company in favor of Union Bank (incorporated
by reference to Exhibit 10.43 to the Form 8-B filed by the
Company with the SEC on November 27, 1996, File No. 1-14645).
</TABLE>
<PAGE> 92
<TABLE>
<S> <C>
10.40 Supplement No. 2 to Grantor Trust Agreement, dated as of
January 22, 1998, between the Company and a majority of the
persons presently named as beneficiaries under the Grantor
Trust Agreement, dated as of May 8, 1991, as supplemented,
between the Company and Union Bank of California, N.A., as
Trustee (incorporated by reference to exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, File No. 1-14645).
10.41 Supplement No. 3 to Grantor Trust Agreement, dated as of May
18, 1999, between the Company and a majority of the persons
presently named as beneficiaries under the Grantor Trust
Agreement, dated as of May 8, 1991, as supplemented, between
the Company and Union Bank of California, N.A., as Trustee.
10.42 Trust Agreement, dated as of July 22, 1992, establishing the
Company's Flexible Benefits Plan Trust Fund (incorporated by
reference to Exhibit 10.45 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992, File No. 1-14645).
10.43 Thousand Trails, Inc. Employee Savings Trust, dated as of July
1, 1994, between the Company and its subsidiaries and The Bank
of California, N.A., as trustee (incorporated by reference to
Exhibit 10.42 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1994, File No. 1-14645).
10.44 Agreement for the Thousand Trails, Inc. Non-Qualified Deferred
Compensation Plan, effective April 23, 1998 (incorporated by
reference to Exhibit 10.56 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1998, File No. 1-14645).
10.45 Agreement for the Thousand Trails, Inc. Employee Stock
Purchase Plan, effective as of August 1, 1999 (incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8, filed with the SEC on July 22, 1999).
10.46 Tax Allocation Agreement, dated as of September 10, 1992,
between the Company and RPI (incorporated by reference to
Exhibit 99.6 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993, File No. 1-14645).
10.47 Tax Allocation Agreement, dated as of July 1, 1991, between
the Company and NACO (incorporated by reference to Exhibit
10.44 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1994, File No. 1-14645).
</TABLE>
<PAGE> 93
<TABLE>
<S> <C>
10.48 Tax Allocation Agreement, dated as of October 29, 1993,
between the Company and Wilderness Management (incorporated by
reference to Exhibit 10.46 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994, File No. 1-14645).
10.49 Stockholder Agreement dated April 5, 1999, between the Company
and Carl Marks Management Company, L.P., et. al. (incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1999, File No.
1-14645).
10.50 Sample form of current Membership Contract.
11.1 Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21.1 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1998, File No. 1-14645).
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule as of and for the year ended June 30,
1999.
</TABLE>
<PAGE> 1
EXHIBIT 10.8
SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Seventh Amendment to Loan and Security Agreement
("Amendment") is entered into as of June 1, 1999 by and among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), on the one hand, and
NATIONAL AMERICAN CORPORATION, a Nevada corporation ("NACO"), THOUSAND TRAILS,
INC., a Delaware corporation ("Trails"), and the other party borrowers signatory
hereto (each, together with NACO and Trails, individually a "Borrower" and
collectively, jointly and severally, "Borrowers"), on the other hand, in light
of the following:
RECITALS
FACT ONE: Borrowers, or their predecessors in interest, and
Foothill have previously entered into that certain Loan and Security Agreement,
dated as of July 10, 1996 (as amended and modified, the "Loan Agreement").
FACT TWO: Borrowers have requested that Foothill modify the
provisions thereof to, among other things, reduce the minimum interest
chargeable under the Agreement.
FACT THREE: Borrowers and Foothill desire to amend the Loan
Agreement as provided for herein.
AGREEMENT
NOW, THEREFORE, Borrowers and Foothill hereby amend and
supplement the Loan Agreement as follows:
1. DEFINITIONS. All initially capitalized terms used in
this Amendment shall have the meanings given to them in the Loan Agreement
unless specifically defined herein.
2. AMENDMENT.
2.1 Section 1.1 of the Loan Agreement is hereby
amended by deleting the definition of Revolving Maximum Amount and substituting
the following in its place and stead:
"Revolving Maximum Amount" means Twenty-Eight Million Four Hundred
Thirty-Five Thousand Dollars ($28,435,000), which such amount is
permanently reduced to lower amounts by the greater of (y) the sum of
(1) an amount equal to the aggregate net cash proceeds of all sales of
Collateral pursuant to Section 5.4 (other than the last paragraph
thereof), or as otherwise approved by Foothill, which occur after June
10, 1998; plus (2) 100% of Account collections, once the Term Note has
been fully secured by cash; or (z) the amount set forth below opposite
the applicable date of reduction:
1
<PAGE> 2
<TABLE>
<S> <C> <C>
6/30/1999 - $3,544,000
12/31/1999 - $7,108,000
6/30/2000 - $10,662,000
12/31/2000 - $14,216,000
6/30/2001 - $17,770,000
12/31/2001 - $21,324,000
6/30/2002 - $24,878,000
1/17/2003 - $28,435,000:
</TABLE>
Provided, however, there shall be no reductions in the Revolving
Maximum Amount as called for in provisions (y)(1) and (2) called for
above for any sales or collections which occur between June 10, 1998
and the earlier to occur of the following: (i) the completion of the
purchase by Borrower of the PIK Notes, or (ii) the purchase of the
stock of AIC, or (iii) March 31, 1999.
2.2 Section 3.5(c) of the Loan Agreement is
hereby amended by deleting said provision in its entirety, and substituting the
following in its place and stead;
"(a) Minimum Interest. In no event shall the rate of interest
chargeable hereunder be less than seven percent (7%) per annum. To the
extent that interest accrued hereunder at the rate set forth herein
(including the minimum interest rate) would yield less than the
foregoing minimum amount, the interest rate chargeable hereunder for
the period in question automatically shall be deemed increased to that
rate that would result in the minimum amount of interest being accrued
and payable hereunder."
2.3 Section 4.5 of the Loan Agreement is hereby
amended by deleting said provision in its entirety, and substituting the
following in its place and stead;
"2.4 Early Termination or Paydown by Borrower. Borrower has the
option, at any time upon thirty (30) days prior written notice to
Foothill, to terminate this Agreement by paying to Foothill, in cash,
the Obligations, together with a premium (the "Early Paydown Premium")
payable in the following events, as follows:
(A) if the termination results from a refinancing or
recapitalization of any Borrower, or any portion of the funds
used to pay-off the Obligations directly or indirectly result
from borrowed money, the Early Paydown Premium shall be equal
to the greater of: (a) the total interest owing for the
immediately preceding six (6) month period; or (b) (i) Five
Hundred Thousand Dollars ($500,000) if terminated during
calendar year 1999, (ii) Four Hundred Thousand Dollars
($400,000) if terminated during calendar year 2000, (iii)
Three Hundred Thousand Dollars ($300,000) if terminated during
calendar year 2001, or (iv) Two Hundred Thousand Dollars
($200,000) if terminated during calendar years 2002 or 2003.
2
<PAGE> 3
(B) if the termination results from a complete paydown
using funds generated from Borrower's business operations, or
in connection with a Change of Control, the Early Paydown
Premium shall be equal to the greater of: (a) the total
interest owing for the immediately preceding six (6) month
period; or (b) (i) Two Hundred and Fifty Thousand Dollars
($250,000) if terminated during calendar year 1999, (ii) Two
Hundred Thousand Dollars ($200,000) if terminated during
calendar year 2000, (iii) One Hundred and Fifty Thousand
Dollars ($150,000) if terminated during calendar year 2001, or
(iv) One Hundred Thousand Dollars ($100,000) if terminated
during calendar years 2002 or 2003."
2.4 Section 4.8(b) of the Loan Agreement is
hereby amended by deleting said provision in its entirety, and substituting the
following in its place and stead:
"(b) The purchase of the stock of AIC shall occur on or before
December 31, 1999."
2.5 Section 8.13 of the Loan Agreement is hereby
amended by deleting said provision in its entirety, and substituting the
following in its place and stead;
"8.13 Investments. Directly or indirectly make or acquire any
beneficial interest in (including stock, partnership interest, or other
securities of), or make any loan, advance, or capital contribution in
excess of One Hundred Thousand Dollars ($100,000) in any fiscal year,
to, any Person not a Borrower, except (i) payments as contemplated by
the By-Law Amendment referred to in Section 8.11, and (ii) investments
in Cash Equivalents. Notwithstanding the prior sentence, Thousand
Trails, Inc. shall be permitted to purchase up to $100,000 worth of
Thousand Trails, Inc. stock per month at a price which is not greater
than the market price for such stock on such dates. Provided that
Borrower has availability under the Revolving Maximum Amount and
provided that all other conditions under the Loan Agreement have been
satisfied, Borrower shall be permitted to use the proceeds of Revolving
Advances to purchase such stock. Borrower shall be able to cumulate the
$100,000 monthly cap on repurchases of its own stock, so that any
unused allowed sums can be carried over into successive months, with a
maximum carryover allowed amount of $500,000. Commencing July 31, 1999,
the maximum carryover allowed amount shall be increased to $600,000,
and such maximum amount shall increase by an additional $100,000 each
successive month-end until the maximum carryover allowed amount equals
$1,000,000."
3. LIMITED WAIVER WITH RESPECT TO SECTION 8.7. Foothill
hereby waives the negative covenant contained in Section 8.7 solely to the
extent to allow Trails to establish a wholly owned corporation, OWC Acquisition
Corporation, a Delaware corporation, to facilitate Borrower's possible
acquisition of the assets of Outdoor World Corporation, a Pennsylvania
corporation, which is contemplated in accordance with the terms of that certain
letter of intent issued by Foothill to Borrower contemporaneously herewith.
4. REPRESENTATIONS AND WARRANTIES. Borrower hereby
affirms to Foothill that all of Borrower's representations and warranties set
forth in the Loan Agreement are true, complete and accurate in all material
respects as of the date hereof (except to the extent that such representations
and warranties relate solely to an earlier date).
3
<PAGE> 4
5. NO DEFAULTS. Borrower hereby affirms to Foothill that
no Event of Default has occurred and is continuing as of the date hereof.
6. CONDITION PRECEDENT. The effectiveness of this
Amendment is expressly conditioned upon receipt by Foothill of an executed copy
of this Amendment and the fulfillment, to the satisfaction of Foothill and
Foothill's counsel, of each of the following conditions precedent:
6.1 Each Borrower shall be a corporation in good
standing in the jurisdiction of its incorporation and qualified to do business
in any other jurisdiction where such qualification is required by law.
6.2 Borrower shall have paid to Foothill all of
Foothill's out-of-pocket expenses relating to this Amendment, including, but not
limited to, search fees, title search and insurance fees, filing and recording
fees, examination and appraisal fees, internal transaction charges, and
attorneys fees and expenses.
7. LIMITED EFFECT. In the event of a conflict between
the terms and provisions of this Amendment and the terms and provisions of the
Loan Agreement, the terms and provisions of this Amendment shall govern. In all
other respects, the Loan Agreement, as amended and supplemented hereby, shall
remain in full force and effect.
8. WAIVER. The waiver of certain provisions of the Loan
Agreement as provided in this Amendment which, inter alia, allows Trails to
create a wholly owned subsidiary shall constitute a one time waiver only, and
Foothill shall have the right to require strict compliance with all of the
provisions of the Loan Agreement in the future.
9. BROKERS' FEES. Any brokerage commission or finder's
fees payable in connection with the financing arrangement contemplated hereby
will be payable by Borrowers and not by Foothill. Borrowers and Foothill each
represent and warrant to the other that they have not incurred any obligation
for a brokerage commission or a finder's fee. Borrowers hereby indemnify
Foothill and hold Foothill harmless from and against any claim of any broker or
finder arising out of the financing arrangement described above or any
commitment relating thereto.
10. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original. All such counterparts, taken together, shall constitute but one and
the same Amendment. This Amendment shall become effective upon the execution of
a counterpart of this Amendment by each of the parties hereto.
11. COMPLETE AGREEMENT; NO ORAL MODIFICATIONS. This
Amendment embodies the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior proposals, negotiations,
or agreements whether written or oral, relating to the subject matter hereof.
This Amendment may not be modified, amended, supplemented, or otherwise changed,
except by a document in writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first set forth above.
4
<PAGE> 5
"FOOTHILL"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Katy J. Brooks
---------------------------------
Title: Vice President
-----------------------------
"BORROWERS"
NATIONAL AMERICAN CORPORATION,
a Nevada corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
THOUSAND TRAILS, INC.,
a Delaware corporation, f/k/a
USTrails, Inc., a Nevada
corporation, and New Thousand
Trails, Inc., a Delaware corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
THOUSAND TRAILS (CANADA) INC.,
a British Columbian corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
TT OFFSHORE, LTD.,
a Virginia corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
BEECH MOUNTAIN LAKES CORPORATION,
a Pennsylvania corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
5
<PAGE> 6
CAROLINA LANDING CORPORATION,
a South Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
CARRIAGE MANOR CORPORATION,
a North Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
CHEROKEE LANDING CORPORATION,
a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
CHIEF CREEK CORPORATION,
a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
COAST FINANCIAL SERVICES, INC.,
a Delaware corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
DIXIE RESORT CORPORATION,
a Mississippi corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
6
<PAGE> 7
FOXWOOD CORPORATION,
a South Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
GL LAND DEVELOPMENT CORPORATION,
an Oklahoma corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
LAKE ROYALE CORPORATION,
a North Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
LAKE TANSI VILLAGE, INC.,
a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
LML RESORT CORPORATION,
an Alabama corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
NATCHEZ TRACE WILDERNESS PRESERVE
CORPORATION, a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
7
<PAGE> 8
QUAIL HOLLOW PLANTATION CORPORATION,
a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
QUAIL HOLLOW VILLAGE, INC.,
a Pennsylvania corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
RECREATION LAND CORPORATION,
a Pennsylvania corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
RECREATION PROPERTIES, INC.,
a Mississippi corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
RESORT LAND CORPORATION,
an Arkansas corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
RESORT PARKS INTERNATIONAL, INC.,
f/k/a Shorewood Corporation,
a Georgia corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
8
<PAGE> 9
TANSI RESORT, INC.,
a Tennessee corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
THE KINSTON CORPORATION,
a South Carolina corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
THE VILLAS OF HICKORY HILLS, INC.,
a Mississippi corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
WESTERN FUN CORPORATION,
a Texas corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
WESTWIND MANOR CORPORATION,
a Texas corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
WOLF RUN MANOR CORPORATION,
a Pennsylvania corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
UST WILDERNESS MANAGEMENT
CORPORATION, a Nevada corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
-----------------------------
9
<PAGE> 1
EXHIBIT 10.28
October 27, 1997
Bryan Reed
2903 Champlin Ct.
Richardson, TX 75082
Dear Bryan:
If your employment is terminated by the Company for any reason other than cause
(as defined below) within one year following a Change of Control (as defined
below), the Company shall pay you severance compensation equal to six months of
your base salary. This severance compensation shall be in addition to any
severance compensation to which you may be entitled under the Company's
Employee Severance Pay Plan. The severance compensation payable under the terms
of this letter will be paid to you in a lump sum within 30 days following the
termination of your employment or bi-weekly in accordance with the Company's
standard payroll practice, at your election.
For purposes hereof, "cause" shall mean termination of your employment because
of: (i) your conviction for or plea of nolo contendere to any felony or crime
involving moral turpitude, (ii) your commission of an act of dishonesty or
breach of duty in connection with your employment by the Company, (iii)
misconduct on your part in connection with your employment by the Company, (iv)
your failure to execute lawful policies of the Company, (v) chronic alcoholism
or any other form of addiction to drugs on your part, or (vi) your failure,
refusal or inability to adequately perform your duties as an employee, as
determined by the Company in its sole discretion.
For purposes hereof, a "Change of Control" shall mean the first to occur of the
following events: (i) a change of control of the Company of the type required
to be disclosed in a proxy statement pursuant to Item 6(e) (or any successor
provision) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); (ii) a reorganization,
merger, or consolidation of the Company the consummation of which results in
the outstanding securities of the Company being exchanged for or converted into
cash, property, and/or securities not issued by the Company; (iii) the date of
the first public announcement that any person or entity, together with all
Affiliates and Associates (as such capitalized terms are defined in Rule 12-b2
promulgated under the Exchange Act) of such person or entity, shall have become
the Beneficial Owner (as defined in Rule 13d-3 promulgated under the Exchange
Act) of voting securities of the Company representing 50% or more of the voting
power of the Company, provided, however, that the terms "person" and "entity,"
as used in this clause, shall not include any person who is currently a
director or officer of the Company or their respective Affiliates and
Associates, or (iv) approval by both the Board of Directors and the
stockholders of the Company of a sale of substantially all of the property and
assets of
<PAGE> 2
the Company; or (v) approval by both the Board of Directors and the
stockholders of the Company of the dissolution or liquidation of the Company.
Notwithstanding anything in this letter to the contrary, to receive severance
compensation under the terms of this letter, you must sign an election form
which releases the Company and its Affiliates and Associates from all claims or
liabilities of any kind relating to your employment with the Company or the
termination thereof. Furthermore, you are not entitled to severance
compensation under the terms of this letter, (i) if you voluntarily resign or
retire, (ii) if your employment is terminated for cause, (iii) if your
employment is terminated because of your death or disability or (iv) if you
fail or refuse to return to work after a leave of absence.
Sincerely,
/s/ William J. Shaw
William J. Shaw
President and
Chief Executive Officer
cc: Human Resources
<PAGE> 1
EXHIBIT 10.36
SUPPLEMENT NO. 3 TO GRANTOR TRUST AGREEMENT
THIS SUPPLEMENT NO. 3 TO GRANTOR TRUST AGREEMENT (this "Supplement")
is made and entered into as of the 18th day of May, 1999, by THOUSAND TRAILS,
INC., a Delaware corporation (the "Company"), and a majority of the persons
presently named as beneficiaries under the Grantor Trust Agreement, dated as of
September 30, 1991 (the "Trust Agreement"), between the Company and UNION BANK
OF CALIFORNIA, N. A., as Trustee (the "Trustee").
RECITALS
A. The Company, as the successor to Thousand Trails, Inc., a
Washington corporation, entered into the Trust Agreement to provide, among
other things, for the funding of its indemnification obligations to its
directors and officers under indemnification agreements, its constituent
instruments, and applicable law.
B. Pursuant to Section 12 of the Trust Agreement, the Company and a
majority of the persons presently named as beneficiaries under the Trust
Agreement desire to provide for the termination of the trust created by the
Trust Agreement (the "Trust") and for the distribution to the Company of all of
the assets in the Trust as of June 30, 1999.
C. There is no litigation or other proceeding pending or threatened
with respect to any Claim (as defined in the Trust Agreement) and no
beneficiary under the Trust Agreement has given notice that any Claim is likely
to be asserted in the future on the grounds of evidence known to or suspected
by such beneficiary.
AGREEMENTS
NOW, THEREFORE, the Company and a majority of the persons presently
named as beneficiaries under the Trust Agreement, intending to be legally
bound, hereby agrees as follows:
1. Pursuant to Section 12 of the Trust Agreement, the Company and the
twelve (12) persons signing below, who represent a majority of the twenty-three
(23) persons presently named as beneficiaries under the Trust Agreement, hereby
agree and consent to the termination of the Trust as of June 30, 1999, and to
the distribution to the Company of all of the assets in the Trust as of June
30, 1999. For this purpose, the Trustee is authorized and directed to (a)
determine the market value of the assets in the Trust as of June 30, 1999, and
(b) liquidate and distribute to the Company an amount equal to one hundred
percent (100%) of the market value of the assets in the Trust as of June 30,
1999.
<PAGE> 2
IN WITNESS WHEREOF, this Supplement has been executed and delivered as
of the date first above written.
THOUSAND TRAILS, INC.
By: /s/William J. Shaw
-----------------------------
William J. Shaw
President and Chief Executive Officer
- 2 -
<PAGE> 3
AGREEMENT AND CONSENT OF BENEFICIARIES
The undersigned, a beneficiary of the Trust Agreement referred to in
the Supplement No. 3 to Grantor Trust Agreement attached hereto (the
"Supplement"), hereby acknowledges receipt of, and consents and agrees to, the
terms of the Supplement.
<TABLE>
<S> <C>
Dated: May 18, 1999 /s/ Andrew M. Boa
------------------------ ------------------------
Andrew M. Boas
Dated: May 18, 1999 /s/ R. Gerald Gelinas
------------------------ ------------------------
R. Gerald Gelinas
Dated: May 18, 1999 /s/ Kenneth E. Hendrycy
------------------------ ------------------------
Kenneth E. Hendrycy
Dated: May 18, 1999 /s/ Donald R. Hair
------------------------ ------------------------
Donald R. Hair
Dated: May 18, 1999 /s/ Walter B. Jaccard
------------------------ ------------------------
Walter B. Jaccard
Dated: May 18, 1999 /s/ Kenneth E. Hendrycy
------------------------ ------------------------
William P. Kovacs
Dated: May 18, 1999 /s/ Donald R. Leopold
------------------------ ------------------------
Donald R. Leopold
Dated: May 18, 1999 /s/ H. Sean Mathis
------------------------ ------------------------
H. Sean Mathis
Dated: May 18, 1999 /s/ David A. McCrum
------------------------ ------------------------
David A. McCrum
Dated: May 18, 1999 /s/ Douglas K. Nelson
------------------------ ------------------------
Douglas K. Nelson
Dated: May 18, 1999 /s/ William J. Shaw
------------------------ ------------------------
William J. Shaw
Dated: May 18, 1999 /s/ Harry J. White, Jr.
------------------------ ------------------------
Harry J. White, Jr.
</TABLE>
- 3 -
<PAGE> 1
Exhibit No. 10.41
SUPPLEMENT NO. 3 TO GRANTOR TRUST AGREEMENT
THIS SUPPLEMENT NO. 3 TO GRANTOR TRUST AGREEMENT (this "Supplement") is
made and entered into as of the 18th day of May, 1999, by THOUSAND TRAILS, INC.,
a Delaware corporation (the "Company"), and a majority of the persons presently
named as beneficiaries under the Grantor Trust Agreement, dated as of May 8,
1991, as supplemented (the "Trust Agreement"), between the Company and UNION
BANK OF CALIFORNIA, N. A., as Trustee (the "Trustee").
RECITALS
A. The Company, as the successor to USTrails Inc., a Nevada corporation
formerly known as NACO Finance Corporation, entered into the Trust Agreement to
provide, among other things, for the funding of its indemnification obligations
to its directors and officers under indemnification agreements, its constituent
instruments, and applicable law.
B. Pursuant to Section 12 of the Trust Agreement, the Company and a
majority of the persons presently named as beneficiaries under the Trust
Agreement desire to provide for the termination of the trust created by the
Trust Agreement (the "Trust") and for the distribution to the Company of all of
the assets in the Trust as of June 30, 1999.
C. There is no litigation or other proceeding pending or threatened
with respect to any Claim (as defined in the Trust Agreement) and no beneficiary
under the Trust Agreement has given notice that any Claim is likely to be
asserted in the future on the grounds of evidence known to or suspected by such
beneficiary.
AGREEMENTS
NOW, THEREFORE, the Company and a majority of the persons presently
named as beneficiaries under the Trust Agreement, intending to be legally bound,
hereby agrees as follows:
1. Pursuant to Section 12 of the Trust Agreement, the Company and the
ten (10) persons signing below, who represent a majority of the nineteen (19)
persons presently named as beneficiaries under the Trust Agreement, hereby agree
and consent to the termination of the Trust as of June 30, 1999, and to the
distribution to the Company of all of the assets in the Trust as of June 30,
1999. For this purpose, the Trustee is authorized and directed to (a) determine
the market value of the assets in the Trust as of June 30, 1999, and (b)
liquidate and distribute to the Company an amount equal to one hundred percent
(100%) of the market value of the assets in the Trust as of June 30, 1999.
-1-
<PAGE> 2
IN WITNESS WHEREOF, this Supplement has been executed and delivered as
of the date first above written.
THOUSAND TRAILS, INC.
By: /s/ William J. Shaw
---------------------------
William J. Shaw
President and Chief
Executive Officer
-2-
<PAGE> 3
AGREEMENT AND CONSENT OF BENEFICIARIES
The undersigned, a beneficiary of the Trust Agreement referred to in the
Supplement No. 3 to Grantor Trust Agreement attached hereto (the "Supplement"),
hereby acknowledges receipt of, and consents and agrees to, the terms of the
Supplement.
<TABLE>
<S> <C> <C>
Dated: May 18, 1999 /s/ Andrew M. Boas
------------ --------------------------------
Andrew M. Boas
Dated: May 18, 1999 /s/ R. Gerald Gelinas
------------ --------------------------------
R. Gerald Gelinas
Dated: May 18, 1999 /s/ Kenneth E. Hendrycy
------------ --------------------------------
Kenneth E. Hendrycy
Dated: May 18, 1999 /s/ Walter B. Jaccard
------------ --------------------------------
Walter B. Jaccard
Dated: May 18, 1999 /s/ William P. Kovacs
------------ --------------------------------
William P. Kovacs
Dated: May 18, 1999 /s/ Donald R. Leopold
------------ --------------------------------
Donald R. Leopold
Dated: May 18, 1999 /s/ H. Sean Mathis
------------ --------------------------------
H. Sean Mathis
Dated: May 18, 1999 /s/ David A. McCrum
------------ --------------------------------
David A. McCrum
Dated: May 18, 1999 /s/ Douglas K. Nelson
------------ --------------------------------
Douglas K. Nelson
Dated: May 18, 1999 /s/ William J. Shaw
------------ --------------------------------
William J. Shaw
</TABLE>
-3-
<PAGE> 1
EXHIBIT 10.50
Member Name: Member #:
---------------------------------- ------------------
MEMBERSHIP AGREEMENT
(NATIONAL MEMBERSHIP)
RETAIL INSTALLMENT CONTRACT
1. DEFINITION OF TERMS. "You" and "your" refer to the individual purchaser or
purchasers who have signed this Agreement. "We", "us", and "our" refer to
Thousand Trails, Inc. ("Trails") and National American Corporation and its
subsidiaries ("NACO"). "Disclosure Statement" means the booklet containing
information on our membership program that was attached to this Agreement and
delivered to you at the time of your purchase. "Preserves" mean the
recreational campground resorts owned or operated by Trails and the
recreational campground resorts owned or operated by NACO for the benefit of
their respective memberships. "Member Rules" mean the rules and other terms set
forth in our Campground Directory, which govern the use of the preserves by our
members. A copy of our Campground Directory was delivered to you at the time of
your purchase. In the event of any conflict between the terms of this Agreement
and the Member Rules, the terms of this Agreement shall control.
2. WHAT YOU ARE PURCHASING. You are purchasing a NATIONAL CAMPING MEMBERSHIP,
which entitles you to use all Trails and NACO preserves on the terms set forth
herein. The preserves that are currently available for use by members are
described in the Disclosure Statement.
The initial term of your membership is three (3) years following the date of
your purchase. After this initial term, the term of your membership will
automatically renew for additional one-year periods ("renewal terms" herein)
unless you notify us in writing of your desire to terminate your membership at
least 60 days prior to the expiration of the initial term or renewal term, as
the case may be.
3. TERMS OF MEMBERSHIP. During the term of your membership, you are entitled to
use all preserves that are designated by Trails and/or NACO as available for
use by members, subject to the following:
You must use the preserves in accordance with this Agreement and the Member
Rules. We have Member Rules regarding, among other things: (a) advance
reservation or first-come, first-choice space arrangements; (b) length of stay;
(c) frequency of use; (d) charges for benefits or services, including rental
units, pet fees, food services, goods purchased, gasoline, and other services
made available by us from time to time; (e) restrictions on guest visits,
including number of guests allowed and guest fees; (f) length of season for use
of the preserves; (g) hours of operation of facilities; (h) use of preserves by
non-members in connection with programs sponsored by us, including without
limitation, our marketing and sales programs, SuperHost group rentals,
charitable functions, community groups and other public use scheduled so as not
to conflict with member use; and (i) such other matters and restrictions on use
as may be reasonably necessary to ensure maximum availability of any preserve
for use by our membership as a whole. We reserve the right, in our sole
discretion, to add, modify, or delete Member Rules from time to time as we may
deem appropriate. Please consult the current Member Rules if you have questions
regarding use of the preserves.
Your membership entitles you to unlimited day use and unlimited overnight
camping in your own recreational vehicle or tent (subject to length of stay
restrictions) at the preserves. You may stay at one preserve up to 14
consecutive nights at a time. If you stay at any preserve for more than four
consecutive nights, you must wait for seven nights before you stay again at ANY
preserve. You may make reservations to use the preserves 90 days in advance of
your intended date of arrival.
It is your responsibility to use the preserves in a safe and reasonable manner
and to observe the Member Rules. You are also responsible for the conduct of
your children and guests and you are liable for all damages caused by the
negligent or reckless use, or intentional misuse, of the preserves by you or
your children.
The location of, and facilities and amenities at, all of Trails' and NACO's
preserves are described in the Disclosure Statement and are subject to change
by Trails and NACO. Preserves and facilities may be added to or subtracted from
those which existed at the time of
Page 1
<PAGE> 2
execution of this Agreement. Trails and NACO are under no obligation to
increase the number of or improve existing preserves. Trails and NACO reserve
the right to sell memberships with rights and privileges different from your
membership.
Your membership constitutes merely a contractual license to use the facilities
provided by Trails and/or NACO from time to time at the preserves where you
have membership rights. Such preserves and facilities are subject to change as
provided in this Agreement and your membership does not constitute an interest
in, is not secured by, and does not entitle you to any recourse against any
real property of Trails or NACO, nor are you entitled to vote on any aspect
relating to the businesses of Trails or NACO or to share in any of the profits
of the businesses of Trails or NACO. The application and use of all amounts
paid by you under this Agreement, including your purchase price and annual
dues, is within our sole discretion.
You may not possess, hold, or own more than one membership in either Trails or
NACO, and if you acquire more than one membership under any circumstances, we
will terminate all memberships held by you in excess of one.
4. TRANSFERABILITY. Your National Membership is transferable, subject to the
following limitations. A National Membership: (a) may only be resold for a
price which does not exceed the price paid by you for your membership plus a
reasonable transfer fee as set forth below; (b) may be transferred only if the
purchase price for your membership is paid in full and your annual dues are
current at the time of transfer; and (c) may be transferred only if your
transferee agrees to accept the rate of annual dues and use fees charged by us
on new sales of similar memberships and the Member Rules in effect at the time
of transfer. A National Membership cannot be divided and, if you transfer one,
or if one is transferred by operation of law, as in the event of divorce,
inheritance, descent, or attachment, all membership privileges must be
transferred together.
In connection with any transfer of a National Membership, we will charge a
reasonable transfer fee, which is currently $250 if the membership is
transferred to a member of your immediate family and $750 if the membership is
transferred to anyone who is not a member of your immediate family. For
purposes of this Agreement, the members of your immediate family are your
lineal ascendants and descendants (i.e., your parents and grandparents and your
children and grandchildren). A transfer may be effected only with our prior
written consent, which we will not unreasonably withhold. A transfer will not
become effective until: (a) you and your prospective transferee have
represented to us in writing that the transfer is in compliance with the
foregoing terms; and (b) your prospective transferee has entered into a new
membership agreement.
We will not purchase your membership and we can provide no assurance that we
will be able to locate a buyer for your membership in the event it is
transferable and you decide to sell it. In addition to our sale of new
memberships in company sales programs, we currently offer a resale program
pursuant to which we attempt to resell previously-owned memberships on behalf
of the selling member. In order to participate in our resale program, the
selling member must have paid the purchase price of his membership in full and
must be current on his annual dues. We reserve the right to modify or
discontinue our resale program at any time without further notice and without
incurring any legal liability for the modification or discontinuation.
You may not transfer or sell your membership or assign, rent, loan, or
otherwise alienate your membership, temporarily or permanently, in any manner
other than as provided in this section. Any transfer in violation of this
prohibition shall be null and void. In the event of any dispute over ownership
of your membership, we may, without liability to any person and without
releasing you from your financial obligations to us, suspend and refuse
membership privileges to all persons claiming rights to the membership until
they have resolved the dispute in a manner satisfactory to us and communicated
the resolution to us in writing.
5. DEFAULT AND REMEDIES. Time is of the essence of this Agreement and any of
the following events will be "an event of default":
(a) Your failure to make any payment under this Agreement when due,
including but not limited to the payment of the application
fee, purchase price, finance charge, and annual dues, or
(b) The falsity of any representation made by you in this Agreement
or your credit application, or
(c) A material breach by you of any provision of this Agreement or
the Member Rules.
Should any "event of default" occur, we may immediately suspend your membership
rights. In addition, upon the occurrence of any "event of default", we may,
upon 30 days' written notice to you, declare the entire unpaid principal
balance of the purchase price, together with the finance charge and annual dues
accrued to the date of default, immediately due and payable. Moreover, we may
Page 2
<PAGE> 3
continue to collect annual dues from you as they accrue for the balance of the
initial term or renewal term, as the case may be. In the alternative, we may,
upon the occurrence of any "event of default", and upon 30 days' written notice
to you, terminate this Agreement and your membership. If we terminate this
Agreement and your membership because of your default, which we may, but are
not required to do, we shall have all remedies provided by law. If any payment
required by this Agreement is not made in full within ten days of its due date,
you agree to pay us a late charge in the amount set forth in paragraphs 11 and
12. In addition, where permitted by law, reasonable collection charges will be
imposed if any payment required by this Agreement is not made in full within 30
days of its due date and collection efforts are made. If permitted by law, a
reasonable fee will also be imposed for processing any check or other payment
that is returned unpaid. If this Agreement is referred to an attorney for
collection after your default, or if a legal action is commenced to enforce or
declare the meaning of any provision of this Agreement, the prevailing party
will be awarded its reasonable attorney's fees and costs, including fees and
costs incurred in both trial and appellate courts.
6. ASSIGNMENT. We may sell or assign this Agreement, and any such assignment
may vest in our assignee all of our right, title, and interest in this
Agreement, and all payments required to be made by you under this Agreement may
be required to be paid to such assignee. No transfer, extension, or assignment
of any interest under this Agreement will release you from your obligation to
make all payments required under this Agreement.
7. CREDIT APPLICATION AND REPORTING. If this Agreement provides for an
installment purchase, the Agreement may be rescinded by us, in our sole
discretion, unless your application for credit is approved by our corporate
office. If your credit application is not approved, we will notify you in
writing within 30 days. You agree that we may from time to time seek and
receive credit related information about you from others such as stores, other
creditors, and credit reporting agencies. You also agree that we may furnish on
a regular basis credit and experience information regarding your account to
others seeking that information. You represent that all information supplied to
us is true, that you are of legal age, that the address set forth on page 4 of
this Agreement is your permanent residence address, and that you are acquiring
this membership solely for the personal enjoyment of you and your family.
8. MISCELLANEOUS. This Agreement contains the entire agreement between you and
us. No waiver or modification of any of the terms or conditions of this
Agreement shall be effective unless in writing and signed by you and an
authorized representative of our corporate office. The terms of this Agreement
will benefit and bind the respective heirs, executors, administrators, legal
representatives, successors, assigns, and transferees of the parties. Any
provision of this Agreement which proves to be invalid, void, or illegal will
not affect, impair, or invalidate any other provision of this Agreement and
such other provisions will remain in full force and effect.
9. APPLICATION FEE. An application fee of $150.00, plus applicable taxes, is
payable as set forth in section 11. This application fee is designed to cover
the costs we incur in processing your membership application and related
paperwork, setting up your membership in our computer system, and issuing you a
membership card that works with our CIS system.
10. PURCHASE PRICE. The purchase price for your membership is $_______________,
plus applicable taxes, and is payable as set forth in section 11.
Page 3
<PAGE> 4
11. METHOD OF PAYMENT. (CHECK ONLY ONE AND INITIAL.)
_________________ [ ] I desire to pay the total application fee and purchase
(Buyer's Initials) price for my membership of $_____________________________
in full on the day of purchase.
_________________ [ ] I desire to pay the total application fee and purchase
(Buyer's Initials) price for my membership in installments, as follows:
(IF CHECKED, COMPLETE THE BALANCE OF SECTION 11.)
If you are financing, a cash down payment of $______________ is due on the day
of purchase. The remaining balance of $__________________ will accrue interest
on the declining principal balance at the rate of 14.9% per annum, and will be
payable in [ ] 12 (twelve), [ ] 24 (twenty-four), or [ ] 36 (thirty-six) equal
consecutive monthly installments of $___________________ each, including
interest. These payments will commence on the __ day of ________________, 19__,
and will continue on the same day of each month thereafter until the principal
balance and accrued interest thereon are paid in full. All payments are stated
and must be made in U.S. Dollars.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL PERCENTAGE RATE FINANCE CHARGE AMOUNT FINANCED TOTAL OF PAYMENTS TOTAL SALE PRICE
The cost of your credit The dollar amount the The amount of credit The amount you will have The total cost of your
as a yearly rate. credit will cost you. provided to you or on paid after you have paid purchase on credit
your behalf. all payments as including your down
scheduled. payment of
$
------------------
% $ $ $ $
- -------------- ---------------- ------------------ ------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Your payment schedule will be: Number of Payments:
----------------------------------
Amount of Monthly Payment: $
------------------------
Payments are due monthly beginning:
-------------------------
LATE CHARGE: If a payment is late by ten or more days, you will be charged 5% of the delinquent installment or $5.00, whichever is
less.
PREPAYMENT: If you pay off early, you will not have to pay a penalty. See the other provisions of this Agreement for additional
information about nonpayment, default, our right to accelerate the maturity of this obligation, and prepayment.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEMIZATION OF THE AMOUNT FINANCED:
(1) Application Fee $
---------------
(2) Purchase Price of Your Membership $
---------------
(3) Less Down Payment $
---------------
(4) Amount Financed (Sum of items 1 & 2, less item 3) $
---------------
Page 4
<PAGE> 5
12. ANNUAL DUES. During the initial term and each renewal term of your
membership, you agree to pay us annual dues in the amount of $349.00 per year.
Applicable taxes, if any, will be added to your annual dues. BY SIGNING THIS
AGREEMENT, YOU ARE MAKING A LEGAL COMMITMENT TO PAY ANNUAL DUES FOR A MINIMUM
OF THREE YEARS.
Your annual dues will be prorated for the period from the date of this
Agreement through December 31 of the year in which this Agreement is executed.
Thereafter, your annual dues are payable in full on or before January 1 of each
year. As a convenience, you may pay the annual dues in two semi-annual
installments or four quarterly installments. Each of the installment payments
will be subject to a processing fee in an amount set by us. This processing
fee, which is subject to increase, is currently $5 for each installment
payment. If payment of your annual dues is late by ten or more days, you will
be assessed a late charge in the maximum amount permitted for late charges
under the retail installment sales law in effect in the state of your
residence. Your annual dues are stated and must be paid in U.S. Dollars.
DUES INCREASES. The amount of your annual dues may be increased each year, upon
thirty (30) days advance written notice, by the percentage increase in the
Consumer Price Index for the calendar year prior to the year for which the
increase is being made. Consumer Price Index means the consumer price index for
all urban consumers as reported by the United States Department of Labor,
Bureau of Labor Statistics.
Page 5
<PAGE> 6
NOTICE
ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES
OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE
DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
NOTICE TO THE BUYER: (1) DO NOT SIGN THIS AGREEMENT BEFORE YOU READ IT OR IF IT
CONTAINS ANY BLANK SPACES TO BE FILLED IN. (2) YOU ARE ENTITLED TO A COMPLETELY
FILLED IN COPY OF THIS AGREEMENT. (3) YOU CAN PREPAY THE FULL AMOUNT DUE UNDER
THIS AGREEMENT AT ANY TIME. (4) IF YOU DESIRE TO PAY OFF IN ADVANCE THE FULL
AMOUNT DUE, THE AMOUNT WHICH IS OUTSTANDING WILL BE FURNISHED UPON REQUEST. (5)
EACH PERSON SIGNING THIS AGREEMENT AS A MEMBER SHALL BE JOINTLY AND SEVERALLY
LIABLE FOR ALL OF YOUR OBLIGATIONS. (6) YOU ACKNOWLEDGE THAT YOU HAVE READ AND
RECEIVED A COPY OF THIS AGREEMENT, THE DISCLOSURE STATEMENT AND OUR CAMPGROUND
DIRECTORY.
YOUR INITIALS /
------------------------------
IF YOU HAVE BEEN PERSONALLY SOLICITED, AND YOUR AGREEMENT OR OFFER TO PURCHASE
IS MADE AT A PLACE OTHER THAN OUR PLACE OF BUSINESS, YOU MAY CANCEL THIS
AGREEMENT AS SET FORTH BELOW.
YOU, THE BUYER, MAY CANCEL THIS TRANSACTION AT ANY TIME PRIOR TO MIDNIGHT OF
THE THIRD BUSINESS DAY AFTER THE DATE OF THIS TRANSACTION. SEE THE ATTACHED
NOTICE OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT.
CHECK ONE: APPLICABLE [ ] NOT APPLICABLE [ ]
EVEN IF THE FOREGOING RIGHT OF CANCELLATION IS NOT APPLICABLE, YOU MAY CANCEL
THIS AGREEMENT AS SET FORTH BELOW.
NOTICE OF CANCELLATION
YOU MAY CANCEL THIS CONTRACT, WITHOUT ANY PENALTY OR OBLIGATION, WITHIN THREE
BUSINESS DAYS FROM THE DATE THE CONTRACT IS EXECUTED. TO CANCEL THIS CONTRACT,
MAIL OR DELIVER A SIGNED AND DATED COPY OF THIS CANCELLATION NOTICE OR A COPY
OF THIS CONTRACT IF IT CONTAINS THE CANCELLATION INSTRUCTIONS, OR ANY OTHER
WRITTEN NOTICE, OR SEND A TELEGRAM TO THOUSAND TRAILS, INC., AT 2711 LBJ
FREEWAY, SUITE 200, DALLAS, TEXAS 75234; ATTENTION:
CONTRACT PROCESSING, NOT LATER THAN MIDNIGHT OF
.
- --------------------------------
(Date)
I HEREBY CANCEL THIS TRANSACTION .
---------------------------------------
(Date)
--------------------------------
(Purchaser's Signature)
WITH THE NOTICE OF CANCELLATION, OR SEPARATELY IF A TELEGRAM IS SENT, YOU MUST
RETURN THE ORIGINAL MEMBERSHIP CAMPING CONTRACT, MEMBERSHIP CARD AND ALL OTHER
EVIDENCE OF MEMBERSHIP TO THE SELLER. YOU SHOULD PROMPTLY RETURN THESE
DOCUMENTS WITH THE NOTICE OF CANCELLATION, OR SEPARATELY IF A TELEGRAM IS SENT.
FAILURE TO SEND THE DOCUMENTS PROMPTLY COULD DELAY YOUR REFUND. YOU SHOULD
RETAIN FOR YOUR RECORDS ONE COPY OF THE CANCELLATION NOTICE, OR A CARBON OF THE
CONTRACT WHEN IT PROVIDES THE CANCELLATION INFORMATION, OR OTHER WRITING
SHOWING INTENT TO CANCEL. MAILING BY ORDINARY MAIL IS ADEQUATE BUT CERTIFIED
MAIL RETURN RECEIPT REQUESTED IS RECOMMENDED.
Page 6
<PAGE> 7
NAME: ADDRESS:
------------------------------- -----------------------------------
CITY: STATE: ZIP:
-------------------------------- ------------- -------------------
EXECUTED THIS DAY OF 19
------------------------ ---------------------------- ----
<TABLE>
<CAPTION>
Membership Campground Operator:
<S> <C>
- ------------------------------------------------
Purchaser's Signature -----------------------------------------------------
2711 LBJ Freeway, Suite 200
Dallas, Texas 75234
- ------------------------------------------------
Purchaser's Name (please print)
- ------------------------------------------------ -----------------------------------------------------
Purchaser's Signature Authorized Signature
- ------------------------------------------------ -----------------------------------------------------
Purchaser's Name (please print) Preserve
</TABLE>
Page 7
<PAGE> 1
EXHIBIT 11.1
THOUSAND TRAILS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(DOLLARS AND COMMON SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
June 30, 1999 June 30, 1998 June 30, 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
BASIC:
Weighted average number of common shares outstanding 7,630 7,407 7,223
=============== =============== ===============
Net income allocable to common shareholders $ 5,571 $ 24,879 $ 6,799
=============== =============== ===============
Net income per common share -- basic $ 0.73 $ 3.36 $ 0.94
=============== =============== ===============
DILUTED:
Weighted average number of common shares outstanding 7,630 7,407 7,223
Weighted average common stock equivalents -
Dilutive options 824 975 480
Dilutive warrants 21 16 1
--------------- --------------- ---------------
Weighted average number of common shares outstanding 8,475 8,398 7,704
=============== =============== ===============
Net income allocable to common shareholders $ 5,571 $ 24,879 $ 6,799
=============== =============== ===============
Net income per common share -- diluted $ 0.66 $ 2.96 $ 0.88
=============== =============== ===============
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated September 3, 1999, included in the Thousand
Trails, Inc. (the "Company") Form 10-K for the year ended June 30, 1999, into
previously filed registration statements covering the Company's 1991 Employee
Stock Incentive Plan, 1993 Stock Option and Restricted Stock Purchase Plan, 1993
Director Stock Option Plan, 1999 Employee Stock Purchase Plan, and the Stock
Option Agreement dated as of August 1, 1996, between the Company and William J.
Shaw.
/s/ Arthur Andersen LLP
- --------------------------------
Dallas, Texas
September 3, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 2,197
<SECURITIES> 0
<RECEIVABLES> 2,184
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,401
<PP&E> 20,829
<DEPRECIATION> 0
<TOTAL-ASSETS> 56,804
<CURRENT-LIABILITIES> 31,010
<BONDS> 10,887
0
0
<COMMON> 81
<OTHER-SE> 9,567
<TOTAL-LIABILITY-AND-EQUITY> 56,804
<SALES> 4,085
<TOTAL-REVENUES> 67,925
<CGS> 0
<TOTAL-COSTS> 60,010
<OTHER-EXPENSES> 57,053
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,957
<INCOME-PRETAX> 7,915
<INCOME-TAX> (2,344)
<INCOME-CONTINUING> 5,571
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,571
<EPS-BASIC> .73
<EPS-DILUTED> .66
</TABLE>
