<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period of ________ to ________
Commission File Number 1-14645
THOUSAND TRAILS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 75-2138671
- ----------------------------------------------------------- -----------------------------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
2711 LBJ FREEWAY, SUITE 200, DALLAS, TEXAS 75234
- --------------------------------------------------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code: (972) 243-2228
---------------------------
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -------
The number of shares of Common Stock, par value $.01, issued and outstanding as
of February 14, 2000, was 7,980,592.
<PAGE> 2
THOUSAND TRAILS, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1999
and June 30, 1999...........................................................................3
Consolidated Statements of Operations for the six months ended
December 31, 1999 and December 31, 1998.....................................................4
Consolidated Statements of Operations for the three months ended
December 31, 1999 and December 31, 1998.....................................................5
Consolidated Statement of Shareholders' Equity for the six months
ended December 31, 1999 ....................................................................6
Consolidated Statements of Cash Flows for the six months ended
December 31, 1999 and December 31, 1998.....................................................7
Notes to Consolidated Financial Statements......................................................9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..............................................16
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................................29
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............................................30
Item 6. Exhibits and Reports on Form 8-K...............................................................31
</TABLE>
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<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS December 31, June 30,
1999 1999
------------ ------------
CURRENT ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 2,011 $ 2,197
Current portion of receivables, net of allowances and discount of $1.5
million and $.7 million, respectively 1,239 1,402
Current portion of deferred membership selling expenses 788 693
Current portion of net deferred tax assets 3,524 2,061
Other current assets 2,379 2,048
------------ ------------
Total Current Assets 9,941 8,401
Restricted cash 1,846 1,240
Receivables, net of allowances and discount of $1.3 million and $.5 million,
respectively 3,597 782
Campground land 22,920 13,200
Buildings and equipment, net of accumulated depreciation of $18.8 million
and $17.5 million, respectively 23,081 20,829
Land held for sale 2,965 2,987
Deferred membership selling expenses 1,648 1,372
Net deferred tax assets 162 5,635
Other assets 731 2,358
------------ ------------
Total Assets $ 66,891 $ 56,804
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,290 $ 1,666
Accrued interest 138 110
Other accrued liabilities 6,317 6,148
Current portion of long term debt 3,495 2,100
Accrued construction cost 1,888 1,888
Current portion of deferred revenue 17,852 19,098
------------ ------------
Total Current Liabilities 30,980 31,010
Long term debt 15,930 8,787
Deferred revenue 6,895 5,627
Other liabilities 1,804 1,732
------------ ------------
Total Liabilities 55,609 47,156
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,500,000 shares authorized, none issued or
outstanding
Common stock, $.01 par value, 15,000,000 shares authorized, 7,978,228 and
8,096,128 shares issued and outstanding, respectively, after deducting
132,100 and 3,200 shares held in Treasury, respectively 80 81
Additional paid-in capital 21,314 21,869
Accumulated deficit subsequent to December 31, 1991, date of emergence from
bankruptcy (9,975) (12,163)
Accumulated other comprehensive loss (137) (139)
------------ ------------
Total Shareholders' Equity 11,282 9,648
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 66,891 $ 56,804
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 3
<PAGE> 4
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended December 31,
-------------------------------------
1999 1998
--------------- -------------
<S> <C> <C>
REVENUES
Membership dues $ 18,028 $ 18,542
Other campground revenue 10,787 10,383
Membership and lot sales 2,160 1,909
RPI membership fees 1,617 1,690
Interest income 653 1,123
Gain on asset sales 22 1,106
Other income 1,568 1,444
---------- ----------
Total Revenues 34,835 36,197
---------- ----------
EXPENSES
Campground operating expenses 21,246 20,829
Selling expenses 1,812 1,780
Marketing expenses 1,634 1,044
RPI membership expenses 966 1,012
Corporate member services 674 687
Interest expense and amortization 670 2,037
General and administrative expenses 4,220 4,263
---------- ----------
Total Expenses 31,222 31,652
---------- ----------
INCOME BEFORE INCOME TAXES 3,613 4,545
INCOME TAXES --
Income tax provision -- current (322) (12)
Income tax provision -- deferred (1,103) (1,018)
---------- ----------
(1,425) (1,030)
NET INCOME $ 2,188 $ 3,515
========== ==========
NET INCOME PER SHARE -- BASIC $ .27 $ .47
========== ==========
NET INCOME PER SHARE -- DILUTED $ .25 $ .42
========== ==========
SHARES USED TO CALCULATE NET INCOME PER SHARE:
Basic 7,980 7,485
========== ==========
Diluted 8,617 8,429
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 4
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended December 31,
---------------------------------------
1999 1998
---------------- --------------
<S> <C> <C>
REVENUES
Membership dues $ 8,981 $ 9,202
Other campground revenue 2,921 2,816
Membership and lot sales 1,089 931
RPI membership fees 782 721
Interest income 358 500
Gain on asset sales 18 1,018
Other income 853 548
---------- ----------
Total Revenues 15,002 15,736
---------- ----------
EXPENSES
Campground operating expenses 8,516 8,275
Selling expenses 908 792
Marketing expenses 788 462
RPI membership expenses 449 480
Corporate member services 305 306
Interest expense and amortization 374 959
General and administrative expenses 2,186 2,125
---------- ----------
Total Expenses 13,526 13,399
---------- ----------
INCOME BEFORE INCOME TAXES 1,476 2,337
INCOME TAXES --
Income tax provision -- current (181) 249
Income tax provision -- deferred (401) (533)
---------- ----------
(582) (284)
NET INCOME $ 894 $ 2,053
========== ==========
NET INCOME PER SHARE -- BASIC $ .11 $ .27
========== ==========
NET INCOME PER SHARE -- DILUTED $ .10 $ .24
========== ==========
SHARES USED TO CALCULATE NET INCOME PER SHARE:
Basic 7,978 7,512
========== ==========
Diluted 8,612 8,425
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-In Accumulated Comprehensive
Stock Capital Deficit Loss Total
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1999 $ 81 $ 21,869 $ (12,163) $ (139) $ 9,648
Issuance of common stock -- 8 -- -- 8
Purchase of Treasury Stock (1) (563) -- -- (564)
Other Comprehensive Income -- -- -- 2 2
-------------
Net income for the six months ended
December 31, 1999 -- -- 2,188 -- 2,188
-------------
Comprehensive Income 2,190
------------- ------------- ------------- ------------- -------------
Balance, December 31, 1999 $ 80 $ 21,314 $ (9,975) $ (137) $ 11,282
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 6
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended December 31,
-------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Collections of principal on receivables $ 1,467 $ 2,317
Interest received 589 1,030
Interest paid (670) (1,871)
General and administrative and corporate member services costs (5,831) (5,279)
Cash collected from operations, including deferred revenue 31,764 30,260
Cash from sales of memberships and lots at the point of sale 2,499 1,914
Expenditures for property operations (20,972) (20,415)
Expenditures for sales and marketing (3,819) (3,532)
Expenditures for insurance premiums (1,301) (889)
Payment of income taxes (43) (303)
Other, net (261) (262)
------------ ------------
Net cash provided by operating activities 3,422 2,970
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and HUD-related expenditures (593) (1,898)
Acquisition of Leisure Time (7,928) --
Proceeds from asset sales 57 2,221
------------ ------------
Net cash provided by (used in) investing activities (8,464) 323
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of PIK Notes -- (34,792)
Net borrowings under Credit Agreement 7,779 18,988
Purchase of Treasury Stock (564) --
Payment of notes and mortgages (2,367) --
Issuance of Common Stock 8 54
------------ ------------
Net cash provided by (used in) financing activities 4,856 (15,750)
------------ ------------
(DECREASE) IN CASH AND CASH EQUIVALENTS (186) (12,457)
CASH AND CASH EQUIVALENTS
Beginning of period 2,197 13,631
------------ ------------
End of period 2,011 $ 1,174
============ ============
</TABLE>
-- continued --
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<PAGE> 8
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended December 31,
-------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net Income $ 2,188 $ 3,515
-------------- --------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES --
Depreciation 1,288 1,295
Amortization of interest yield, collection costs and
valuation allowance 114) (191)
Net deferral of sales revenue 1,671 568
Net deferral of selling expenses (370) (188)
Gain on asset sales (22) (1,105)
Deferred income tax provision 1,114 1,018
Increase in restricted cash (261) (262)
Decrease in receivables 117 1,802
Decrease in other assets 1,658 601
Decrease in accounts payable (808) (1,032)
Increase in accrued interest 28 164
Decrease in other liabilities (3,102) (3,142)
Other, net 35 (73)
-------------- --------------
Total adjustments 1,234 (545)
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,422 $ 2,970
============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 8
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Unaudited)
NOTE 1 -- NATURE OF OPERATIONS
Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(collectively, the "Company") own and operate 63 membership-based campgrounds
located in 17 states and British Columbia, Canada. In addition, the Company
provides a reciprocal use program for members of approximately 300 recreational
facilities and manages 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., National American Corporation ("NACO"), Resort Parks
International, Inc. ("RPI"), Thousand Trails (Canada), Inc., Thousand Trails
Management Services, Inc. (formerly known as UST Wilderness Management
Corporation ("Trails Management"), and, commencing December 16, 1999, Leisure
Time Resorts of America, Inc. (See Note 2 - Business Combination).
This Quarterly Report on Form 10-Q should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended June 30, 1999, filed
with the Securities and Exchange Commission (the "SEC") on September 24, 1999.
The Company emerged from proceedings under Chapter 11 of the Bankruptcy Code on
December 31, 1991, pursuant to a confirmed plan of reorganization. Due to the
Company's emergence from bankruptcy, the Company adopted fresh start reporting,
under which a new reporting entity was created and assets and liabilities were
restated to reflect their reorganization value which approximated fair value at
the date of reorganization.
All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the six and
three month periods ended December 31, 1999 and 1998, and in the consolidated
balance sheet as of June 30, 1999.
Reclassification
Certain reclassifications have been made to prior period information to conform
to the current period presentation.
NOTE 2 -- BUSINESS COMBINATION
On December 16, 1999, the Company acquired all of the outstanding capital stock
of Albertsen Investment Corporation, Inc. ("AIC"), a Washington corporation. AIC
was the holding company owning Leisure Time Resorts of America, Inc., a
Washington corporation ("Leisure Time"), which owns and operates 10 membership
campground resorts in Washington and Oregon serving approximately 16,000
members. In February 2000, AIC was merged into Leisure Time, and
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<PAGE> 10
Leisure Time is the sole surviving entity. Leisure Time will continue to operate
a separate system of campgrounds from the Company's other membership-based
campground systems.
The purchase price for the stock of Leisure Time was $7,903,485 in cash, subject
to adjustment after closing based on the balance sheet of Leisure Time as of the
closing date. In connection with the acquisition, the Company also paid in full
all of the outstanding real estate debt on Leisure Time's campgrounds, which
totaled approximately $2.3 million.
The acquisition of AIC was accounted for as a purchase transaction; accordingly,
operating results for AIC and Leisure Time are reported from the date of
acquisition. No goodwill was recorded on the acquisition because the purchase
price did not exceed the estimated values of the identifiable assets received
less liabilities assumed.
Set forth below are unaudited pro forma combined results of operations for the
Company based on the assumption that the acquisition of AIC was completed on
July 1, 1998 (in thousands, except for per share data):
<TABLE>
<CAPTION>
For the six months ended
December 31,
---------------------------------
1999 1998
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 37,751 $ 39,677
Net income (loss) (320) 2,627
Diluted income (loss) per common share (.04) .31
</TABLE>
NOTE 3 -- 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
following table provides statements of comprehensive income for the six and
three months ended December 31, 1999 and 1998 (dollars in thousands):
<TABLE>
<CAPTION>
For the six months ended For the three months ended
December 31, December 31,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Income $ 2,188 $ 3,515 $ 894 $ 2,053
Foreign Currency Translation
Adjustment 2 (5) 2 (2)
------------ ------------ ------------ ------------
Comprehensive Income $ 2,190 $ 3,510 $ 896 $ 2,051
============ ============ ============ ============
</TABLE>
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NOTE 4 -- SEGMENT REPORTING
SFAS No. 131 requires the Company to report information for its operating
segments, which are: campgrounds, RPI, and Trails Management. The campground
segment generates a majority of the Company's operating revenues. Each segment
is differentiated by the products or services it offers.
The campgrounds segment consists of 63 membership-based campgrounds in 17 states
and British Columbia, Canada. Operations within the campground segment include
(i) the sale of memberships entitling the member to use campground facilities,
(ii) the sale of undivided interests related to fee simple sales of interests in
campground facilities, and (iii) net revenues earned from operations at the
campgrounds. Separate information regarding Canadian campground operations is
not presented as revenues and identifiable assets related to the Canadian
operations are less than 10% of the related consolidated amounts for the periods
presented.
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 annual membership fees paid by
members.
Trails Management manages 169 public campgrounds for the US Forest Service.
Operating revenue consists of the campsite usage fees paid by customers staying
at the public campgrounds.
The Company evaluates performance based upon the income before income taxes for
each business segment.
<TABLE>
<CAPTION>
Six months ended December 31, 1999
---------------------------------------------------------------------------------------------
Trails Corporate
Campgrounds RPI Management and Other Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 26,953 $ 1,617 $ 1,823 $ 39 $ 30,432
Sales 2,100 -- -- 60 2,160
Income (loss) before
income taxes 6,058 651 198 (3,294) 3,613
</TABLE>
<TABLE>
<CAPTION>
Six months ended December 31, 1999
---------------------------------------------------------------------------------------------
Trails Corporate
Campgrounds RPI Management and Other Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 27,208 $ 1,690 $ 1,694 $ 23 $ 30,615
Sales 1,851 -- -- 58 1,909
Income (loss) before
income taxes 6,972 678 255 (3,360) 4,545
</TABLE>
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<TABLE>
<CAPTION>
Three months ended December 31, 1999
---------------------------------------------------------------------------------------------
Trails Corporate
Campgrounds RPI Management and Other Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 11,839 $ 782 $ 59 $ 4 $ 12,684
Sales 1,056 -- -- 33 1,089
Income (loss) before
income taxes 2,945 333 (167) (1,635) 1,476
</TABLE>
<TABLE>
<CAPTION>
Three months ended December 31, 1999
---------------------------------------------------------------------------------------------
Trails Corporate
Campgrounds RPI Management and Other Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 11,972 $ 721 $ 41 $ 5 $ 12,739
Sales 911 -- -- 20 931
Income (loss) before
income taxes 3,630 241 (180) (1,354) 2,337
</TABLE>
NOTE 5 -- NET INCOME PER SHARE
SFAS No. 128 requires the Company to report basic and diluted net income per
share. The table below sets forth the information necessary to compute basic and
diluted net income per share for the six and three months ended December 31,
1999 and 1998, including a summary of the components of the numerators and
denominators of the basic and diluted net income per share computations for the
periods presented (dollars and shares in thousands, except per share amounts):
<TABLE>
<CAPTION>
For the six months ended For the three months ended
December 31, December 31,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Income $ 2,188 $ 3,515 $ 894 $ 2,053
============ ============ ============ ============
Weighted Average Number of
Shares - Basic 7,980 7,485 7,978 7,512
Dilutive Options 637 938 634 907
Dilutive Warrants -- 6 -- 6
------------ ------------ ------------ ------------
Weighted Average Number of Shares -
Diluted 8,617 8,429 8,612 8,425
============ ============ ============ ============
Net Income Per Share - Basic $ .27 $ .47 $ .11 $ .27
============ ============ ============ ============
Net Income Per Share - Diluted $ .25 $ .42 $ .10 $ .24
============ ============ ============ ============
</TABLE>
Since inception, the Company has not paid any dividends. The credit agreement
("Credit Agreement") between the Company and Foothill Capital Corporation
("Foothill") prohibits the payment of any cash dividends, without the consent of
Foothill, until the Credit Agreement is terminated.
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NOTE 6 -- LONG TERM DEBT
CREDIT AGREEMENT WITH FOOTHILL
In January 1998, the Company repaid all outstanding borrowings under the Credit
Agreement with Foothill, and it had no outstanding borrowings under the Credit
Agreement until December 1998, when it borrowed $24.0 million to partially fund
the redemption of the Company's 12% Senior Subordinate Pay-In-Kind Notes ("PIK
Notes") as discussed below. Under the Credit Agreement, the first $15.0 million
of borrowings bear interest at prime plus .25% per annum, borrowings over $15.0
million and up to $25.0 million bear interest at prime plus .50% per annum, and
borrowings over $25.0 million bear interest at prime plus 1.5% per annum,
subject to a minimum interest rate of 9% per annum (reduced to 7% per annum in
June 1999).
On December 10, 1999, the Company entered into an amendment to the Credit
Agreement relating to the Company's purchase of the stock of AIC. On December
16, 1999, the Company borrowed $10.2 million under the amended Credit Agreement
to pay the cash purchase price for such stock of approximately $7.9 million and
to pay in full all of the outstanding real estate debt on Leisure Time's
campgrounds, which totaled approximately $2.3 million.
On December 31, 1999, the Company had $18.7 million of outstanding borrowings
under the amended Credit Agreement, and it had the ability to borrow an
additional $5.0 million for working capital purposes. 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 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 AND PIK NOTE REPURCHASES
The Company issued $40.2 million principal amount of PIK Notes in a
restructuring of its debt in July 1996. In January 1997, the Company issued an
additional $2.4 million principal amount of PIK Notes in lieu of cash 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. In July 1997,
January 1998, and July 1998, the Company issued an additional $1.7 million, $1.9
million, and $2.0 million principal amount of PIK Notes, respectively, 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
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with $12.5 million of its existing cash and $24.0 million of new borrowings
under the Credit Agreement with Foothill.
NOTE 7 -- CONTINGENCIES
General Liability Insurance
Commencing July 1, 1998, the Company obtained insurance covering general
liability losses up to an annual limit of $27.0 million, with no self-insured
deductible. Prior to this date, the Company's insurance covered general
liability losses up to an annual limit of $26.8 million, but required the
Company to pay the first $250,000 per occurrence, with an annual aggregate
exposure of $2.0 million. The Company has provided a liability for estimated
known and unknown claims related to uninsured general liability risks based on
actuarial estimates. As of December 31, 1999 and June 30, 1999, the Company's
recorded liability for estimated losses related to uninsured general liability
claims totaled $836,000 and $1.1 million, respectively, which is included in
other liabilities in the accompanying consolidated balance sheets.
Declining Membership Base
The Company derives a significant portion of its ongoing operating revenue from
its campground members (92% in fiscal 1999). The Company's membership base has
declined significantly over the past five fiscal years, and notwithstanding new
sales and excluding the addition of members through the acquisition of Leisure
Time, the membership base is presently declining at the rate of approximately 5%
per year. The Company attributes this continuing attrition principally to its
aging membership base, of whom approximately 50% are senior citizens. Moreover,
the Company estimates that the memberships sold in recent fiscal years will have
an expected life that is 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 organizations, such as its acquisition
of Leisure Time.
Environmental Issues
Certain environmental issues may exist at some of the Company's campgrounds
concerning underground storage tanks, sewage treatment plants and septic
systems, and waste disposal. Management has reviewed these issues and believes
that they will not have a material adverse impact on the Company's operations or
financial position.
Litigation
Foxwood Property Owners Association, Inc. vs. Foxwood Corporation, filed on
February 18, 1999 in the Court of Common Pleas of Oconee County, South Carolina,
under Case No. 99-37-CP-88. In this action, the plaintiff brought suit against a
subsidiary of the Company alleging that the defendant owes the plaintiff in
excess of $2.5 million for past due maintenance fees on subdivided lots owned by
the defendant. The defendant denies the claim and is vigorously defending the
lawsuit. Although discovery in this lawsuit has not been completed, management
does not believe that it will have a material adverse effect upon the Company's
operations or financial position.
Jack and Theresa Lawrence, et. al., vs. Leisure Time Resorts of America, Inc.,
et. al., filed on November 7, 1997, in the Superior Court of the State of
Washington for King County, under Case No. 97-2-28388-4SEA. In this class
action, plaintiffs brought suit against Leisure Time, AIC, and several of their
officers and directors, alleging that the defendants had engaged in
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<PAGE> 15
deceptive trade practices. The parties have entered into a settlement agreement,
which has been approved by the Court. Notice of the settlement has been mailed
to members of the class, and the defendants have paid $1,229,125 to members of
the class who submitted valid claims and the plaintiffs' attorneys. As of the
date of this report, an additional amount of approximately $110,000 remains to
be paid to members of the class who submitted valid claims and the plaintiffs'
attorneys. The former owners of AIC have agreed to pay all claims and expenses
arising from this lawsuit, and a portion of the purchase price for the stock of
AIC was held in escrow to fund these payments.
The Company is involved in certain claims and litigation arising in the normal
course of business. Management believes that the eventual outcome of these
claims and litigation will not have a material adverse impact on the Company's
operations or financial position.
NOTE 8 -- SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of non-cash investing and financing activities required
by Statement of Financial Accounting Standards No. 95 "Statement of Cash Flows"
are presented below for the six months ended December 31, 1999 and 1998 (dollars
in thousands):
<TABLE>
<CAPTION>
Six months ended December 31,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Non-cash payment of PIK Note interest (see Note 6)
PIK Notes issued in lieu of cash interest payment $ -- $ 1,969
</TABLE>
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<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K for the year ended June 30,
1999, filed with the SEC on September 24, 1999.
All capitalized terms used herein have the same meaning as those defined in Item
1 -- Financial Statements.
In this Management's Discussion and Analysis of Financial Condition and Results
of Operations, and elsewhere in this report, the Company makes certain
statements as to its expected financial condition, results of operations, cash
flows, and business strategies, plans and conditions for periods after December
31, 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, the Company's success in acquiring members
through the purchase of other membership campground operations, and the other
factors affecting the Company's operations described in this report.
LIQUIDITY AND CAPITAL RESOURCES
CURRENT BUSINESS STRATEGY. The Company's current business strategy is to improve
its campground operations and stabilize its campground membership base through
increased sales and marketing efforts and the acquisition of members through the
purchase of other campground membership operations. The Company believes there
is a viable market for campground memberships and that it has a significant
opportunity to compete for campers interested in higher quality facilities and a
higher level of service than is typically available at public campgrounds or
competing private campgrounds. The Company has also acquired members through the
purchase of Leisure Time as discussed below, and it believes it may be possible
to acquire additional members through the purchase of other membership
campground operations, many of whom are experiencing financial difficulties.
Over the past several years, the Company's membership base has been declining.
In response to this decline, the Company has downsized its business by closing
and disposing of campgrounds and decreasing campground operating costs and
general and administrative expenses. The Company intends to continue to keep the
size of its campground system in an appropriate relation to the size of its
membership base. In this regard, if the membership base continues to decline,
the Company may close and dispose of additional campgrounds and it will seek to
decrease other expenses. At the same time, the Company intends to expand its
sales and marketing efforts with a view to stopping the membership decline. The
Company has also acquired members through the purchase of Leisure Time, and it
intends to explore the possible acquisition of additional members through the
purchase of other membership campground
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organizations. The Company believes that the ultimate size of its campground
system and the amounts realized from future asset sales will depend principally
upon the degree to which the Company can successfully implement this strategy.
ACQUISITION OF LEISURE TIME. On December 16, 1999, the Company acquired all of
the outstanding capital stock of AIC, which was the holding company owing
Leisure Time. Leisure Time owns and operates 10 membership campground resorts in
Washington and Oregon serving approximately 16,000 members. In February 2000,
AIC was merged into Leisure Time, and Leisure Time is the sole surviving entity.
Leisure Time will continue to operate a separate system of campgrounds from the
Company's other membership-based campground systems.
The purchase price for the stock of AIC was approximately $7.9 million in cash,
subject to adjustment after closing based on the balance sheet of Leisure Time
as of the closing date. The Company does not expect the amount of this
adjustment to be material. In connection with the acquisition, the Company also
paid in full all of the outstanding real estate debt on Leisure Time's
campgrounds, which totaled approximately $2.3 million. The Company borrowed the
funds for the stock purchase and debt repayment under its Credit Agreement with
Foothill.
The principal assets of Leisure Time consist of its 10 membership-based
campground resorts and related improvements and personal property, approximately
16,000 members, and approximately $2.7 million of contracts receivable. The
assets and liabilities of Leisure Time are included in the Company's
consolidated balance sheets as of December 31, 1999, and the operating results
of Leisure Time are included in the operating results of the Company commencing
December 16, 1999. The Company believes the acquisition of Leisure Time will not
have a material impact on the Company's earnings in fiscal 2000 and will be
accretive to earnings beginning in fiscal 2001, as it reduces expenses by
consolidating administrative functions and implementing other cost saving
measures. However, because Leisure Time's members and campgrounds are similar to
the Company's, the increase in members resulting from the acquisition is not
expected to affect the overall rate at which the Company's membership base is
declining.
CASH. On December 31, 1999, the Company had $2.0 million of cash and cash
equivalents, a decrease of $186,000 from June 30, 1999. During the six months
ended December 31, 1999, the Company's operating activities generated $3.4
million of cash, its investing activities used $8.5 million of cash, and its
financing activities produced $4.9 million of cash. The Company's investing
activities consisted of the purchase of the stock of AIC for $7.9 million in
cash and $588,000 in capital expenditures at the campgrounds. The Company's
financing activities consisted primarily of net borrowings of $7.8 million under
the Credit Agreement with Foothill, repayments of $2.3 million of real estate
debt on Leisure Time's campgrounds, and the purchase of 128,900 shares of the
Company's common stock for a total of $564,000.
The Company experiences lower cash flow from operating activities during the
second quarter of its fiscal year because of the seasonal nature of its
operations. The Company receives the majority of the dues revenue from its
members during the winter, while incurring a higher level of operating expenses
during the summer. In addition, a majority of the Company's sales and marketing
efforts occur during the summer.
With respect to the Company's operating activities, for the six months ended
December 31, 1999, the principal sources of operating cash were $31.8 million
from operations, $2.1 million in principal and interest collections on contracts
receivable, $2.5 million from sales of campground memberships and lots, and
$834,000 from the termination of a grantor trust established to
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<PAGE> 18
reimburse directors and officers for any indemnifiable damages and expenses they
might incur. Principal uses of operating cash for the six months ended December
31, 1999, were $21.0 million in operating expenses, $5.8 million in
administrative expenses (including general and administrative expenses and
corporate members services costs), $3.8 million in sales and marketing
expenditures, and $1.3 million in insurance premiums.
In January 1998, the Company repaid all outstanding borrowings under the Credit
Agreement with Foothill, and it had no outstanding borrowings under the Credit
Agreement until December 1998, when it borrowed $24.0 million to partially fund
the redemption of the PIK Notes (see Note 6 to the consolidated financial
statements included in Item 1). Under the Credit Agreement, the first $15.0
million of borrowings bear interest at prime plus .25% per annum, borrowings
over $15.0 million and up to $25.0 million bear interest at prime plus .50% per
annum, and borrowings over $25.0 million bear interest at prime plus 1.5% per
annum, subject to a minimum interest rate of 9% per annum (reduced to 7% per
annum in June 1999).
On December 10, 1999, the Company entered into an amendment to the Credit
Agreement relating to the Company's purchase of the stock of AIC. On December
16, 1999, the Company borrowed $10.2 million under the amended Credit Agreement
to pay the cash purchase price for such stock of approximately $7.9 million and
to pay in full all of the outstanding real estate debt on Leisure Time's
campgrounds, which totaled approximately $2.3 million.
On December 31, 1999, the Company had $18.7 million of outstanding borrowings
under the amended Credit Agreement, and it had the ability to borrow an
additional $5.0 million for working capital purposes. 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 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 revolving loan declines as these principal reductions are
made.
As of the date of this report, the Company had $14.5 million of outstanding
borrowings under the amended Credit Agreement, and it had the ability to borrow
an additional $4.7 million for working capital purposes. Based upon its current
business plan, the Company believes that future cash flows provided from
operations, asset sales, and borrowings available under the 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 pledged and controlled by Foothill.
MATERIAL CHANGES IN FINANCIAL CONDITION
Total assets increased by $10.1 million during the six months ended December 31,
1999. Cash decreased by $186,000 as discussed above. Contracts receivable
increased by $2.6 million due primarily to the acquisition of Leisure Time's
$2.7 million portfolio. Cash collections of $1.5 million on the existing
portfolio were offset by new financed sales and amortization of the allowances
for interest discount, collection costs, and valuation discount. Campground land
increased by $9.7 million due to the acquisition of Leisure Time's campgrounds.
Buildings and
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<PAGE> 19
equipment increased by $2.3 million due primarily to the acquisition of Leisure
Time's campgrounds and capital improvements made at certain campgrounds,
partially offset by depreciation. Other assets decreased by $1.3 million due
primarily to the termination of the grantor trust agreement discussed above, and
the release of prior year workers' compensation deposits that were applied to
current year premiums. Net deferred tax assets declined by $4.0 million in the
current period due primarily to $2.9 million in deferred tax liabilities that
were recorded in conjunction with the acquisition of Leisure Time. Additionally,
the Company recognized $1.1 million in deferred tax expense in the current
period.
Total liabilities increased by $8.5 million during the six months ended December
31, 1999. Deferred revenue was unchanged during the period as a net increase of
$1.7 million in deferred sales revenue was partially offset by a reduction of
$1.4 million in deferred dues revenue due to the recognition of dues revenue in
excess of dues collected during the period. Long term debt increased by $8.5
million due primarily to $7.8 million in net additional borrowings under the
Credit Agreement with Foothill as a result of the acquisition of Leisure Time.
Accounts payable decreased by $376,000 due to the timing of payments and
seasonality of the business.
MARKET RISK AND INTEREST RATE SENSITIVITY. As noted above, as of December 31,
1999, the Company had $18.7 million of outstanding borrowings under the Credit
Agreement with Foothill, and it had the ability to borrow an additional $5.0
million for working capital purposes. (see "Liquidity and Capital Resources -
Cash"). The borrowings under the Credit Agreement accrue interest at rates that
fluctuate with changes in the prime rate and the Company, therefore, has
exposure to changing interest rates because increases in interest rates would
increase the Company's interest expense on these borrowings.
A hypothetical ten percent change in market interest rates over the next year
would not materially impact the Company's earnings or cash flow. At the level of
borrowings in place as of December 31, 1999, a hypothetical ten percent change
in market interest rates over the next year would increase the Company's
interest expense by approximately $187,000. 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 six and three months ended December 31, 1999
and 1998. The financial information set forth below should be read in
conjunction with the Company's consolidated financial statements included in
Item 1.
SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
NET INCOME. The Company reported net income of $2.2 million or $.25 per diluted
share on revenues of $34.8 million for the six months ended December 31, 1999.
This compares with net income of $3.5 million or $.42 per diluted share on
revenues of $36.2 million for the same period last year. Revenues were lower in
the current period primarily because the prior year's results included $1.1
million in gains on asset sales. In addition, interest income was lower this
year by $470,000 due to lower levels of invested cash and reductions in the
contracts receivable portfolio. Due to reductions in debt levels, the Company's
interest costs were also lower during the current period by $1.5 million.
However, the unfavorable impact from the net deferral
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<PAGE> 20
of sales revenue and expenses was $921,000 higher in the current period
reflecting a higher level of sales activity, and income tax expense was $395,000
higher in the current period because the Company recognized a tax benefit in the
prior period upon redemption of the PIK Notes.
The table on the following page shows separately the results of the campground
operations, Trails Management, and Resort Parks International, without any
allocation of corporate expenses, as well as corporate expenses and other
revenues and expenses in the aggregate, for the six months ended December 31,
1999 and 1998.
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<PAGE> 21
THOUSAND TRAILS, INC. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-----------------------------
1999 1998
---------- ----------
<S> <C> <C>
CAMPGROUND OPERATIONS
Membership dues $ 18,028 $ 18,542
Campground revenues 8,925 8,666
Cost of campground revenues (4,141) (3,901)
Operating expenses (15,441) (15,404)
---------- ----------
Contribution from campground operations 7,371 7,903
---------- ----------
SALES
Sales revenues 2,100 1,851
Selling expenses (1,779) (1,738)
Marketing expenses (1,634) (1,044)
---------- ----------
Loss on sales (1,313) (931)
---------- ----------
TRAILS MANAGEMENT
Revenues 1,823 1,694
Expenses (1,625) (1,439)
---------- ----------
Contribution from Trails Management 198 255
---------- ----------
RESORT PARKS INTERNATIONAL
Revenues 1,617 1,690
Expenses (966) (1,012)
---------- ----------
Contribution from RPI 651 678
---------- ----------
Other income 1,496 1,444
Corporate member services (674) (687)
General and administrative expense (4,148) (4,263)
Other 27 (46)
---------- ----------
INCOME BEFORE INTEREST INCOME AND EXPENSE,
GAIN ON ASSET SALES AND TAXES 3,608 4,353
---------- ----------
Interest income 653 1,123
Interest expense (670) (2,037)
Gain on asset sales 22 1,106
---------- ----------
INCOME BEFORE TAXES $ 3,613 $ 4,545
========== ==========
</TABLE>
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OPERATING INCOME. During the six months ended December 31, 1999, the Company's
contribution from operations was $3.6 million, approximately $745,000 less than
the $4.4 million achieved in the same period last year. The decline was due
primarily to declines in the contribution from campground operations and a
higher loss from sales operations. For this purpose, the contribution from
operations is defined as income before interest income and expenses, gains on
asset sales, and taxes. See the table on the previous page for the elements of
the contribution from operations and the Company's operating income before taxes
for the periods presented.
CAMPGROUND OPERATIONS. The Company's operations are highly seasonal. The Company
receives the majority of the dues revenue from its members during the winter,
which are recognized as income ratably during the year. However, the Company
incurs a higher level of operating expenses during the summer. In addition, a
majority of the Company's sales and marketing efforts occur during summer.
Commencing December 16, 1999, the operating results of Leisure Time are included
in the operating results of the Company.
Campground membership dues revenue was $18.0 million for the six months ended
December 31, 1999, compared with $18.5 million for the same period last year.
The decline in dues revenue was due primarily to the net loss of campground
members during the year, partially offset by the effect of the annual dues
increase.
Other campground revenues were $8.9 million for the six months ended December
31, 1999, compared with $8.7 million for the same period last year. The related
expenses were $4.1 million for the six months ended December 31, 1999, compared
with $3.9 million for the same period last year. The increase in campground
revenues and related expenses in the current period was due primarily to a
greater emphasis on ancillary revenue programs at the campgrounds.
Campground operating expenses were $15.4 million for the six months ended
December 31, 1999 and 1998, reflecting the Company's emphasis on controlling
expenses.
In future periods, the operating results of Leisure Time will be included in the
operating results of the Company for the entire period. This will result in an
increase in membership dues and campground operating expenses and other
campground revenues and related expenses, compared with historical levels.
However, the Company believes the acquisition of Leisure Time will not have a
material impact on the Company's earnings in fiscal 2000 and will be accretive
to earnings beginning in fiscal 2001, as it reduces expenses by consolidating
administrative functions and implementing other cost saving measures.
The Company intends to keep the size of its campground system in an appropriate
relation to the size of its membership base. In this regard, if the membership
base continues to decline, the Company may close and dispose of additional
campgrounds and it will seek to decease 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.
The Company recognizes revenue from the sale of campground memberships that do
not convey a deeded interest in real estate on a straight-line basis over the
expected life of the memberships sold. For the six months ended December 31,
1999 and 1998, the Company recognized campground membership sales revenues of
$2.1 million and $1.9 million, respectively. These amounts include revenues of
$1.7 million and $1.4 million, respectively, that were deferred in
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<PAGE> 23
prior periods. Moreover, during these same periods, the Company deferred
revenues of $3.3 million and $2.0 million, respectively, which will be
recognized in future periods. Sales revenues increased in the current period due
to higher average sales prices partially offset by a higher net deferral of
sales revenues in the current period.
Selling expenses directly related to the sale of campground memberships are
deferred and recognized as expenses on a straight-line basis over the expected
life of the memberships sold. All other selling and marketing costs are
recognized as expenses in the period incurred. For the six months ended December
31, 1999 and 1998, the Company recognized selling expenses of $1.8 million and
$1.7 million, respectively. These amounts include expenses of $404,000 and
$340,000, respectively, that were deferred in prior periods. Moreover, for these
same periods, the Company deferred expenses of $774,000 and $529,000,
respectively, which will be recognized in future periods.
Although the Company's sales results are improving, selling and marketing
expenses exceeded sales revenues by $1.3 million and $931,000 for the six months
ended December 31, 1999 and 1998, respectively. In the period, these current
expenses exceeded sales revenues primarily because the Company deferred more
sales revenues than selling expenses. In the prior period, these expenses
exceeded sales revenues because of increased marketing activity and relatively
low volume of sales, which did not cover fixed costs. In addition, the Company
deferred more sales revenues than selling expenses.
The Company's selling and marketing efforts require significant expense, the
majority of which must be expensed in the current period, while the related
sales revenues are generally deferred and recognized on a straight-line basis
over the expected life of the memberships sold. As a consequence, the Company
expects that its selling and marketing expenses will continue to exceed its
campground membership sales revenue. This disparity will increase as the Company
grows campground membership sales.
The Company's selling and marketing efforts have not produced the level of sales
needed to stop the continuing decline in the Company's membership base. If the
Company is not able to significantly increase its campground membership sales
over the 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.
CAMPGROUND MANAGEMENT. Trails Management, a wholly owned subsidiary of the
Company, manages 169 public campgrounds for the US Forest Service. For the six
months ended December 31, 1999, these operations produced a net contribution of
$198,000 on revenues of $1.8 million, compared with a net contribution of
$255,000 on revenues of $1.7 million for the same period last year. The increase
in revenues between periods was due to new contracts entered into in the Spring
of 1999, which increased the number of campgrounds managed. The start-up costs
from these new contracts caused the decline in the net contribution between
periods. The revenues and expenses related to the Company's campground
management operations are included in other campground revenue and campground
operating expenses in the consolidated statement of operations.
RESORT PARKS INTERNATIONAL. RPI charges its members a fee for a membership that
entitles them to use any of the campgrounds participating in RPI's reciprocal
use system, subject to certain limitations. For the six months ended December
31, 1999, RPI's operations produced a net
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contribution of $651,000, on revenues of $1.6 million, compared with a
contribution of $678,000 on revenues of $1.7 million for the same period last
year. Although RPI reduced its operating expenses in the current period,
revenues declined by a greater amount, which resulted in a decrease in
contribution between the two periods. RPI's revenues have declined as a result
of declining sales in the membership camping industry. RPI is working to
introduce new products to increase its revenues and maintain its contribution
margin; however, there is no assurance that these efforts will be successful.
INTEREST INCOME AND EXPENSE. Interest income declined to $653,000 for the six
months ended December 31, 1999, from $1.1 million for the same period last year.
The decrease in the current period was due primarily to decreases in the
interest earned on the Company's diminishing portfolio of contracts receivable
and on invested cash. Most of the Company's invested cash was used to redeem the
PIK Notes in December 1998. Also included in interest income is the amortization
of the allowances for interest and valuation discount related to the contracts
receivable of $65,000 and $109,000, respectively. As the Company's portfolio of
contracts receivable increased with the acquisition of Leisure Time, in the
short term, the interest earned on the Company's portfolio of contracts
receivable will increase, compared with historical levels. However, in the long
term, the interest earned on the Company's portfolio of contracts receivable
will decrease in the future as the portfolio declines.
Interest expense decreased by $1.4 million for the six months ended December 31,
1999, compared with the same period last year, due primarily to the redemption
of the PIK Notes in December 1998. This decrease was partially offset by an
increase in interest expense incurred under the Credit Agreement. Interest
expense will increase in the future because the Company increased borrowings
under the Credit Agreement to fund the acquisition of Leisure Time.
GAIN ON ASSET SALES. The Company had no significant gains on asset sales for the
six months ended December 31, 1999, compared with $1.1 million for the same
period last year. The decrease in the current period was due to the timing of
asset sales. Over the next several years, the Company intends to dispose of the
remaining land it holds for sale, the campgrounds that are closed if the Company
downsizes, and other undeveloped, excess acreage associated with the
campgrounds. The sale of campgrounds requires addressing the rights of members
associated with such campgrounds. The impact of these rights is uncertain and
could adversely affect the availability or timing of sale opportunities or the
ability of the Company to realize recoveries from asset sales. In addition,
although the Company has successfully sold assets during the past several years,
no assurance exists that the Company will be able to locate a buyer for any of
the remaining assets or that sales on acceptable terms can be made.
OTHER INCOME. Other income generally consists of transfer fees received when
existing membership 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, fees charged to other companies for servicing their accounts
receivable, and fees charged to members for making more than five
operator-assisted reservations in a given year. Other income was $1.5 million
for the six months ended December 31, 1999, compared with $1.4 million for the
same period last year. The increase was due to the receipt of a cash settlement
of $183,000 related to a property insurance claim from the late 1980's,
partially offset by lower fees and other income received from the declining
contracts receivable portfolio and shrinking membership base.
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<PAGE> 25
OTHER EXPENSES. Administrative expenses, including corporate member service
costs and general and administrative expenses, were $4.8 million for the six
months ended December 31, 1999, compared with $5.0 million for the same period
last year. The decrease in the current period was due primarily to lower
professional fees.
INCOME TAXES. The Company's current provision for income taxes was $322,000 for
the six months ended December 31, 1999, compared with $12,000 for the same
period last year. The current provisions for these periods include amounts for
federal alternative minimum taxes and state income taxes payable in the various
states where the Company conducts its operations. With the exception of federal
alternative minimum taxes, the Company does not have federal income taxes
payable on a consolidated basis due to its net operating tax loss carryforwards,
which were estimated to total $27.4 million at June 30, 1999.
The Company recorded a deferred tax provision of $1.1 million for the six months
ended December 31, 1999, compared to $1.0 million for the same period last year.
The Company will continue to record a deferred tax provision in future periods
as the related deferred tax assets are realized. The deferred tax provision will
not affect current or future income tax payments.
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
NET INCOME. The Company reported net income of $894,000 or $.10 per diluted
share on revenues of $15.0 million for the three months ended December 31, 1999.
This compares with net income of $2.1 million or $.24 per diluted share on
revenues of $15.7 million for the same period last year. Revenues were lower in
the current period primarily because the prior year's results included $1.0
million in gains on asset sales. In addition, interest income was lower this
year by $142,000 due to lower levels of invested cash and reductions in the
contracts receivable portfolio. Due to reductions in debt levels, the
Company's interest costs were also lower during the current period by $585,000.
However, the unfavorable impact from the net deferral of sales revenue and
expenses was $540,000 higher in the current period reflecting a higher level of
sales activity, and income tax expense was $298,000 higher in the current period
because the Company recognized a tax benefit in the prior period upon redemption
of the PIK Notes.
The table on the following page shows separately the results of the campground
operations, Trails Management, and Resort Parks International, without any
allocation of corporate expenses, as well as corporate expenses and other
revenues and expenses in the aggregate, for the three months ended December 31,
1999 and 1998.
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<PAGE> 26
THOUSAND TRAILS, INC. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------
1999 1998
---------- ----------
<S> <C> <C>
CAMPGROUND OPERATIONS
Membership dues $ 8,981 $ 9,202
Campground revenues 2,858 2,770
Cost of campground revenues (1,511) (1,502)
Operating expenses (6,760) (6,510)
---------- ----------
Contribution from campground operations 3,568 3,960
---------- ----------
SALES
Sales revenues 1,056 911
Selling expenses (891) (779)
Marketing expenses (788) (462)
---------- ----------
Loss on sales (623) (330)
---------- ----------
TRAILS MANAGEMENT
Revenues 59 41
Expenses (226) (221)
---------- ----------
Loss from Trails Management (167) (180)
---------- ----------
RESORT PARKS INTERNATIONAL
Revenues 782 721
Expenses (449) (480)
---------- ----------
Contribution from RPI 333 241
---------- ----------
Other income 795 548
Corporate member services (305) (306)
General and administrative expense (2,129) (2,125)
Other 2 (30)
---------- ----------
INCOME BEFORE INTEREST INCOME AND EXPENSE,
GAIN ON ASSET SALES AND TAXES 1,474 1,778
---------- ----------
Interest income 358 500
Interest expense (374) (959)
Gain on asset sales 18 1,018
---------- ----------
INCOME BEFORE TAXES $ 1,476 $ 2,337
========== ==========
</TABLE>
Page 26
<PAGE> 27
OPERATING INCOME. During the three months ended December 31, 1999, the Company's
contribution from operations was $1.5 million, a decrease of $300,000 from the
$1.8 million achieved in the same period last year. The decrease was due
primarily to a reduced contribution from campground operations and a higher loss
from sales operations, partially offset by an increase in the contribution from
RPI and an increase in other income. For this purpose, the contribution from
operations is defined as operating income before interest income and expense,
gain on asset sales, and taxes. See the table on the previous page for the
elements of the contribution from operations and the Company's operating income
before taxes for the historical periods presented.
CAMPGROUND OPERATIONS. Campground membership dues revenue was $9.0 million for
the three months ended December 31, 1999, compared with $9.2 million for the
same period last year. The slight decline in dues revenue was due primarily to
the net loss of campground members during the year, partially offset by the
effect of the annual dues increase.
Campground revenues were $2.9 million for the three months ended December 31,
1999, compared with $2.8 million for the same period last year. The related
expenses were $1.5 million in both years. The increase in campground revenues in
the current period was due primarily to a greater emphasis on the ancillary
revenue programs at the campgrounds.
Campground operating expenses were $6.8 million for the three months ended
December 31, 1999, compared with $6.5 million for the same period last year. The
increase in expenses in the current period reflects higher costs for employee
benefits and increased depreciation expense.
For the three months ended December 31, 1999 and 1998, the Company recognized
campground membership sales revenues of $1.1 million and $911,000, respectively.
These amounts include revenues of $883,000 and $748,000, respectively, that were
deferred in prior periods. Moreover, during these same periods, the Company
deferred revenues of $1.4 million and $664,000, respectively, which will be
recognized in future periods. Sales revenues increased in the current period due
primarily to higher average sales prices on fewer unit sales, compared with the
prior period.
For the three months ended December 31, 1999 and 1998, the Company recognized
selling expenses of $1.7 million and $1.2 million, respectively. These amounts
included expenses of $214,000 and $176,000, respectively, that were deferred in
prior periods. Moreover, for these same periods, the Company deferred expenses
of $332,000 and $186,000, respectively, which will be recognized in future
periods.
Selling and marketing expenses exceeded sales revenues by $623,000 and $330,000
for the three months ended December 31, 1999 and 1998, respectively. These
expenses exceeded sales revenues because of increased marketing activity and the
low volume of sales, which did not cover fixed costs. In addition, the Company
deferred more sales revenues than selling expenses during the periods presented.
CAMPGROUND MANAGEMENT. For the three months ended December 31, 1999, the
operations of Trails Management produced a loss of $167,000 on revenues of
$59,000, compared with a loss of $180,000 on revenues of $41,000 for the same
period last year. The campground management operations generally incur a loss
during the second fiscal quarter due to fixed expenses and the seasonal closure
of the campgrounds. The revenues and expenses related to these operations are
included in other campground revenue and campground operating expenses in the
consolidated statement of operations.
Page 27
<PAGE> 28
RESORT PARKS INTERNATIONAL. For the three months ended December 31, 1999, RPI's
operations produced a net contribution of $333,000 on revenues of $782,000,
compared with a net contribution of $241,000 on revenues of $721,000 for the
same period last year. The improvement over the prior year was due primarily to
increased revenues from membership renewals.
INTEREST INCOME AND EXPENSE. Interest income was $358,000 for the three months
ended December 31, 1999, compared with $500,000 for the same period last year.
During these periods, interest income included amortization of the allowances
for interest and valuation discount related to the contracts receivable
portfolio of $33,000 and $49,000 respectively. The decrease in interest income
in the current period was due primarily to decreases in the interest earned on
the Company's diminishing portfolio of contracts receivable and on invested
cash.
Interest expense was $374,000 for the three months ended December 31, 1999,
compared with $959,000 for the same period last year. The $585,000 decrease in
interest expense between periods was due primarily to repayments of outstanding
debt during the periods.
GAIN ON ASSET SALES. The Company recognized no significant gains on the sale of
assets for the three months ended December 31, 1999, compared with $1.0 million
for the same period last year. The decrease in the current period was due to the
timing of asset sales.
OTHER INCOME. Other income was $795,000 for the three months ended December 31,
1999, compared with $548,000 for the same period last year. The increase between
periods was due, in part, to a cash settlement of $183,000 related to a property
insurance claim from the late 1980's. Additionally, transfer fees and servicing
fees were also higher in the current period. These increases were partially
offset by a reduction in settlements received on defaulted contracts and
delinquent dues in the current period.
OTHER EXPENSES. Administrative expenses, including corporate member service
costs and general and administrative expenses, were $2.4 million for the three
months ended December 31, 1999 and 1998, reflecting the Company's emphasis on
controlling costs.
INCOME TAXES. The Company had a current income tax expense of $181,000 for the
three months ended December 31, 1999, compared with a current income tax benefit
of $249,000 for the same period last year. The income tax benefit in the prior
period arose primarily from the reversal of income taxes accrued during the
first quarter of fiscal 1999. This reversal resulted from the redemption of PIK
Notes in December 1998 which allowed the Company to deduct the interest
previously paid on the PIK Notes in the form of additional PIK Notes. This
deduction reduced the Company's anticipated income tax liability for 1999. The
Company recorded a deferred tax provision of $401,000 and $533,000 for the three
months ended December 31, 1999, and 1998, respectively.
INFLATION. During the past several fiscal years, the Company's results have not
been affected materially by inflation. However, should the rate of inflation
increase in the future, the Company's expenses are likely to increase at a
greater rate than it can increase the annual dues paid by campground members
because the Company can not increase the dues on existing contracts of senior
citizens and disabled members who notify the Company of their age or disability
and request that their dues be frozen. At the present time, approximately 35% of
the members have requested that their dues be frozen because of their age or
disability.
Page 28
<PAGE> 29
IMPACT OF YEAR 2000. The Company's computer systems have not experienced
operational problems as a result of the year 2000 issue, and the Company does
not expect to experience material problems in the future. In addition, the
Company has not experienced any disruptions in its relationships with financial
institutions and other vendors arising from the year 2000 issue.
The Company spent approximately $50,000 during the six months ended December 31,
1999 completing the modification of software necessary to make its computer
systems year 2000 complaint.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company currently does not have any derivative financial instruments.
However, the Company does have other financial instruments that contain market
risk. Management believes that the market risk associated with the Company's
financial instruments as of December 31, 1999 is not significant. The
information required by Item 305 of Regulation S-K is contained in Item 2 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under the heading "Market Risk and Interest Rate Sensitivity."
Page 29
<PAGE> 30
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On November 18, 1999, the Company held its annual meeting of shareholders. As of
the record date for the meeting, the Company had 7,972,228 shares of common
stock outstanding, of which 7,763,675 shares were represented at the meeting in
person or by proxy. The shareholders took the following actions at the meeting.
1. The shareholders elected the six members of the Board of Directors of the
Company who will serve until the next annual meeting of shareholders and
until their successors are elected and qualified. The six directors and
the votes cast for and withheld for each were as follows:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
---- --------- --------------
<S> <C> <C>
Andrew M. Boas 7,572,013 936
William P. Kovacs 7,572,013 936
Donald R. Leopold 7,572,013 936
H. Sean Mathis 7,572,013 936
Douglas K. Nelson 7,572,013 936
William J. Shaw 7,572,013 936
</TABLE>
2. The shareholders approved the Thousand Trails, Inc. 1999 Stock Option and
Restricted Stock Purchase Plan, pursuant to which up to 140,000 shares of
the Company's common stock may be awarded to employees and non-employee
directors in the form of stock options or other stock awards. The votes
cast for, votes cast against, and the abstentions were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions
--------- ------------- -----------
<S> <C> <C>
7,549,337 5,765 17,847
</TABLE>
3. The shareholders ratified the appointment of Arthur Andersen LLP as the
independent certified public accountants for the Company for the fiscal
year ending June 30, 2000. The votes cast for, votes cast against, and the
abstentions were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions
--------- ------------- -----------
<S> <C> <C>
7,568,119 1,071 3,759
</TABLE>
Page 30
<PAGE> 31
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following documents are filed as exhibits to this report.
Exhibit
Number Description
2.1 Stock Purchase Agreement, dated November 30, 1999, between the
Company as Purchaser and Bernard O. Albertsen, et. al., as
Sellers (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K filed with the SEC on
January 3, 2000, File No. 1-14645).
10.1 Amended and Restated Loan and Security Agreement, dated as of
December 10, 1999, between the Company and its subsidiaries as
Borrowers, and Foothill Capital Corporation (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed with the SEC on January 3, 2000, File No.
1-14645).
10.2 Amendment No. 1 to Amended and Restated Loan and Security
Agreement, dated as of December 10, 1999, between the Company
and its subsidiaries as Borrowers, and Foothill Capital
Corporation.
11.1 Statement re: Computation of Per Share Earnings.
27.1 Financial Data Schedule as of December 31, 1999.
REPORTS ON FORM 8-K
On January 3, 2000, the Company filed with the SEC a Current Report on Form 8-K
reporting under Item 2, Acquisition or Disposition of Assets, the acquisition of
all of the outstanding capital stock of AIC (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources").
Page 31
<PAGE> 32
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
THOUSAND TRAILS, INC.
Date: February 14, 2000 By: /s/ William J. Shaw
---------------------------------------
William J. Shaw
President and Chief Executive Officer
Date: February 14, 2000 By: /s/ Bryan D. Reed
---------------------------------------
Bryan D. Reed
Chief Financial and Accounting Officer
Page 32
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Stock Purchase Agreement, dated November 30, 1999, between the
Company as Purchaser and Bernard O. Albertsen, et. al., as
Sellers (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K filed with the SEC on
January 3, 2000, File No. 1-14645).
10.1 Amended and Restated Loan and Security Agreement, dated as of
December 10, 1999, between the Company and its subsidiaries as
Borrowers, and Foothill Capital Corporation (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed with the SEC on January 3, 2000, File No.
1-14645).
10.2 Amendment No. 1 to Amended and Restated Loan and Security
Agreement, dated as of December 10, 1999, between the Company
and its subsidiaries as Borrowers, and Foothill Capital
Corporation.
11.1 Statement re: Computation of Per Share Earnings.
27.1 Financial Data Schedule as of December 31, 1999.
</TABLE>
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This First Amendment to Amended and Restated Loan and Security
Agreement ("Amendment") is entered into as of December 10, 1999, by and among
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), on the one
hand, and NATIONAL AMERICAN CORPORATION, a Nevada corporation ("NAC"), THOUSAND
TRAILS, INC., a Delaware corporation ("Trails"), and the party borrowers
signatory hereto: (each, individually and collectively, jointly and severally, a
"Borrower"), with their chief executive office located at 2711 LBJ Freeway,
Suite 200, Dallas, Texas, 75234, and is made with reference to the following
facts:
R E C I T A L S
FACT ONE: On or about December 10, 1999, Borrowers and
Foothill entered into that certain Amended and Restated Loan and Security
Agreement dated as of December 10, 1999 (the "Loan Agreement").
FACT TWO: Pursuant to the terms of the Loan Agreement,
Borrower utilized borrowings from Foothill to acquire all of the issued and
outstanding shares of stock of Albertsen Investment Corporation, a Washington
corporation ("AIC"), and will use future borrowers to aid in the conduct of such
business.
FACT THREE: One of the assets of AIC is its ownership of all
of the issued and outstanding shares of stock of Leisure Time Resorts of
America, Inc., a Washington corporation ("Leisure Time").
FACT FOUR: Borrowers and Foothill desire that AIC and Leisure
Time shall each become a borrower under the Loan Agreement and the Loan
Documents (as defined in the Loan Agreement).
FACT FIVE: Borrowers, AIC and Leisure Time desire to amend the
Loan Agreement to add AIC and Leisure Time as Borrowers thereunder.
A G R E E M E N T
NOW, THEREFORE, Borrowers and Foothill hereby amend the Loan
Agreement as follows:
1
<PAGE> 2
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. All references in the Loan Agreement and the Loan Documents
to "Borrower" or "Borrowers" is amended as of the date hereof to additionally
include, on a joint and several basis, Albertsen Investment Corporation and
Leisure Time Resorts of America, Inc.
3. 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.
4. NO DEFAULTS. Borrower hereby affirms to Foothill that no Event of
Default has occurred and is continuing as of the date hereof.
5. CONDITION PRECEDENT. The effectiveness of this Amendment is expressly
conditioned upon receipt by Foothill of an executed copy of this Amendment.
6. 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.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first set forth above.
"FOOTHILL"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Katy J. Brooks
---------------------------------
Title: Vice President
------------------------------
2
<PAGE> 3
"BORROWERS"
ALBERTSEN INVESTMENT CORPORATION,
a Washington corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
------------------------------
LEISURE TIME RESORTS OF AMERICA,
INC., a Washington corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
------------------------------
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
------------------------------
3
<PAGE> 4
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
------------------------------
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
------------------------------
4
<PAGE> 5
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
------------------------------
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
------------------------------
5
<PAGE> 6
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
------------------------------
OWC ACQUISITION CORP.,
a Delaware corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
------------------------------
QUAIL HOLLOW PLANTATION
CORPORATION, a Tennessee
corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
------------------------------
6
<PAGE> 7
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
------------------------------
7
<PAGE> 8
RESORT PARKS INTERNATIONAL, INC.,
f/k/a Shorewood Corporation,
a Georgia corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
------------------------------
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
------------------------------
8
<PAGE> 9
UST WILDERNESS MANAGEMENT
CORPORATION, a Nevada corporation
By: /s/ Walter B. Jaccard
---------------------------------
Title: Vice President
------------------------------
9
<PAGE> 1
Exhibit 11.1
THOUSAND TRAILS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Dollars and common shares in thousands)
<TABLE>
<CAPTION>
Six Months Six Months
Ended December Ended December
31, 1999 31, 1999
-------------- --------------
<S> <C> <C>
BASIC:
Weighted average number of common shares outstanding 7,980 7,485
============== ==============
Net income allocable to common shareholders $ 2,188 $ 3,515
============== ==============
Net income per common share -- basic $ 0.27 $ 0.47
============== ==============
DILUTED:
Weighted average number of common shares outstanding 7,980 7,485
Weighted average common stock equivalents -
Dilutive options 637 938
Dilutive warrants -- 6
-------------- --------------
Weighted average number of common shares outstanding 8,617 8,429
============== ==============
Net income allocable to common shareholders $ 2,188 $ 3,515
============== ==============
Net income per common share -- diluted $ 0.25 $ 0.42
============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,011
<SECURITIES> 0
<RECEIVABLES> 4,836
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,941
<PP&E> 23,081
<DEPRECIATION> 0
<TOTAL-ASSETS> 66,891
<CURRENT-LIABILITIES> 30,980
<BONDS> 19,425
0
0
<COMMON> 80
<OTHER-SE> 11,202
<TOTAL-LIABILITY-AND-EQUITY> 66,891
<SALES> 2,160
<TOTAL-REVENUES> 34,835
<CGS> 0
<TOTAL-COSTS> 31,222
<OTHER-EXPENSES> 30,552
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 670
<INCOME-PRETAX> 3,613
<INCOME-TAX> (1,425)
<INCOME-CONTINUING> 2,188
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,188
<EPS-BASIC> .27
<EPS-DILUTED> .25
</TABLE>
