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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period of ________ to ________
Commission File Number 1-14645
THOUSAND TRAILS, INC.
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(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 (IRS Employer Identification No.)
Incorporation or Organization)
2711 LBJ FREEWAY,
SUITE 200, DALLAS, TEXAS 75234
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(Address of Principal Executive Office) (Zip Code)
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Registrant's Telephone Number, Including Area Code: (972) 243-2228
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Securities registered pursuant to Section 12(b) of the Act:
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Name of exchange on
Title of each class which registered
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COMMON STOCK, PAR VALUE AMERICAN STOCK EXCHANGE
$.01 PER SHARE
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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. [X]
At September 26, 2000, the latest practicable date, the aggregate market value
of voting common stock of the Registrant held by nonaffiliates was $13.7
million.
At September 26, 2000, there were 8,084,374 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 2000
Annual Meeting of Shareholders, 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
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Item 1. Business....................................................................4
Item 2. Properties.................................................................13
Item 3. Legal Proceedings..........................................................17
Item 4. Submission of Matters to a Vote of Security-Holders........................17
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters......18
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.................37
Item 8. Financial Statements and Supplementary Data................................38
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.....................................72
PART III
Item 10. Directors and Executive Officers of the Registrant.........................73
Item 11. Executive Compensation.....................................................73
Item 12. Security Ownership of Certain Beneficial Owners and Management.............73
Item 13. Certain Relationships and Related Transactions.............................73
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............74
Signatures Page......................................................................81
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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 63 membership-based campgrounds
located in 17 states and British Columbia, Canada, serving 119,000 members as of
June 30, 2000. 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 United States 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 ("Trails"). The
Company subsequently increased its ownership in Trails to 100% and merged Trails
into the Company. In December 1999, the Company acquired 100% of the capital
stock of Leisure Time Resorts of America, Inc., a Washington corporation
("Leisure Time"). The Company and Leisure Time were 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 and the acquisition of members through the
purchase of other membership campground operations. The Company believes there
is a viable market for campground memberships and that it has a significant
opportunity to compete for campers interested in higher quality facilities and a
higher level of service than is typically available at public campgrounds or
competing private campgrounds. The Company has also acquired members through the
purchase of Leisure Time and 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 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 organizations. The Company believes that
the ultimate size of its campground system and the
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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 63
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, NACO owns and operates a network of 21 of these
campgrounds under the NACO logo, and Leisure Time owns and operates a network of
10 of these campgrounds under the Leisure Time logo. The 63 campgrounds contain
a total of approximately 10,100 acres and 19,000 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, 2000, there were approximately
69,000 campground members in the Thousand Trails system, 34,000 campground
members in the NACO system, and 16,000 campground members in the Leisure Time
system. However, approximately 42% of the NACO campground members and
approximately 60% of the Thousand Trails campground members possess the right to
use the campgrounds in both networks. Approximately 11% of the Leisure Time
members are also members of either the Thousand Trails or NACO systems. The
largest percentage of campground members reside in California (approximately
32%). Large numbers of campground members also reside in Washington, Oregon, and
Texas.
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 recreation 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 campsites to members
for extended vacations and from renting trailers, cabins, and sports equipment
to members. The Company also sells food and other items to members from
convenience stores located at the campgrounds, provides members access to
laundry facilities and game machines, and charges members a fee for storing RVs
and providing food service.
EXISTING MEMBERSHIP. At June 30, 2000, the Company had 119,000 campground
members. The majority of these members have been members for over 10 years. The
Company's membership
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base has declined over the past five fiscal years. Although the acquisition of
Leisure Time increased the size of the membership base, the Company expects
that, notwithstanding new sales, the membership base will continue to decline at
the rate of approximately 3% per year. The Company attributes this attrition
principally to its aging membership base, of whom approximately 50% are senior
citizens. Moreover, the Company estimates that the memberships sold in recent
fiscal years will have an expected life that is shorter than the expected life
of the memberships previously sold by the Company. To stop the continuing
decline in its membership base, the Company must increase its campground
membership sales over current levels or acquire members through the purchase of
other membership campground organizations, such as the acquisition of Leisure
Time.
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. 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, the
Company entered into a joint marketing arrangement with Fleetwood Industries,
Inc. ("Fleetwood"), the largest manufacturer of 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 each of the last three fiscal
years. The Company entered into a similar marketing arrangement with a major RV
financing company and a large RV dealer in Florida, and it plans to seek other
similar alliances. The Company has also entered into reciprocal sales agreements
with several other companies in an effort to increase sales.
The Company's current membership products offer the consumer a choice of
membership options that depend principally on the number of campgrounds the
purchaser is able to use. Membership sales prices range from $2,995 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 $349 on new sales in fiscal 2000. During
fiscal 2000, 1999 and 1998, the Company sold approximately 3,700, 4,200 and
2,900 new memberships, respectively. The average sales price was $2,298 in
fiscal 2000, $1,254 in fiscal 1999 and $1,164 in fiscal 1998.
During fiscal 2000, the Company introduced a new upgrade program that was
marketed to the existing members of Leisure Time. In addition to the new
membership sales discussed above, the Company sold 1,700 of these membership
upgrades at an average sales price of $2,895. During fiscal 2001, the Company
intends to market a similar membership upgrade to the existing members of
Thousand Trails and NACO.
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.
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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, 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 $355 for
fiscal 2000, $357 for fiscal 1999 and $351 for fiscal 1998. The decrease in
average annual dues paid in fiscal 2000 resulted primarily from the acquisition
of Leisure Time's members who paid average annual dues of $323, compared with an
average of $360 for the Company's other members. The average annual dues paid by
the Thousand Trails and NACO members continued to increase, from $355 in fiscal
1999 to $360 in fiscal 2000, due primarily to 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 37% 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 2000, the
Company spent $4.9 million on major maintenance, repairs, and capital
improvements at the campgrounds and anticipates that it will spend an additional
$5.7 million on such items in fiscal 2001. The Company may be required to spend
greater amounts on such items in future years as the facilities age.
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RESORT PARKS INTERNATIONAL. Leisure Time members, NACO members and holders of
dual-system memberships, which permit the member to use the campgrounds in both
the Thousand Trails and NACO 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, 2000, there were approximately
71,000 RPI members, of which approximately 54,000 were members of campgrounds
not affiliated with the Company.
CAMPGROUND MANAGEMENT. Thousand Trails Management Services, Inc. ("Trails
Management"), a wholly owned subsidiary of the Company, manages 169 public
campgrounds for the U.S. Forest Service containing a total of 3,850 campsites.
Pursuant to its management contracts with the U.S. Forest Service, Trails
Management incurs the expenses of operating the campgrounds and receives the
related revenues, net of a fee paid to the U.S. 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 17 to the consolidated financial
statements included in Item 8.
ASSET SALES
During fiscal 2000, 1999 and 1998, the Company sold certain of its real estate
assets and received proceeds of $74,000, $2.2 million and $8.6 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.
While 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 fiscal 1993, the Company sold substantially all of its campground
memberships on the installment basis, creating a portfolio of contracts
receivable. From fiscal 1993 through fiscal 1999, this portfolio declined
significantly as the Company collected the outstanding contracts receivable. In
fiscal 2000, the Company's gross contracts receivable increased by $4.3 million
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due primarily to the acquisition of Leisure Time's portfolio of contracts
receivable. In addition, during fiscal 2000 and 1999, the Company financed the
sale of approximately 35% and 24%, respectively, of new campground memberships.
The portfolio of contracts receivable may grow in the future if sales volume
increases and new members elect to finance their purchase; otherwise, the
portfolio of contracts receivable will decline as collections are made.
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 5.5% to 19.5%, with the weighted average stated interest rate of 13% as of
June 30, 2000. Monthly installment payments range generally from $20 to $267
over the term of the contracts receivable, which can be up to ten years. The
terms of the newer contracts receivable, however, have averaged two years or
less.
At June 30, 2000, 97% of the campground members had paid for their membership in
full, and the remaining outstanding contracts receivable had an average
remaining term of 35 months.
As of June 30, 2000, the Company owned contracts receivable with an aggregate
principal balance of $7.7 million (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Contracts Receivable" in
Item 7).
While 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 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 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
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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.
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 these
rules with the Mississippi state agency
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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 119,000 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 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. sells
memberships to its system of 37 campgrounds and Western Horizons RV Resorts,
Inc. sells memberships to its system of 18 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 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 the 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 higher level of service than is typically
available at public campgrounds or competing private campgrounds. (see
"Marketing").
Trails Management competes directly with approximately five other companies in
bidding for contracts to manage public campgrounds for the U.S. Forest Service.
Trails Management currently has contracts to manage 169 of the approximately
3,000 campgrounds operated for the U.S. Forest Service by private companies.
Coast to Coast Resorts, RPI's primary competitor and the largest reciprocal use
system, has approximately 350 affiliated campgrounds and more than 175,000
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, 2000, the Company had 900 full-time employees, 125 part-time
employees and 1,300 seasonal employees. Due to the seasonal nature of the
Company's business, the Company has a greater number of employees during the
summer months. 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 63 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 62 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 63 campgrounds, 41 operate all year, 9 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 $10.4 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 a 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 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 various parcels of undeveloped real estate (not related
to its campground operations) that it intends to sell over time.
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THOUSAND TRAILS, INC.
CAMPGROUND RESORTS
[A MAP WITH PLOT POINTS DEPICTING THE LOCATION FOR EACH OF THE THOUSAND TRAILS,
INC. CAMPGROUNDS APPEARS HERE]
<TABLE>
<S> <C> <C> <C>
BRITISH COLUMBIA CALIFORNIA TEXAS NORTH CAROLINA
------------------- --------------------- ------------------- -------------------
- Cultus Lake - Lake of the Springs - Medina Lake - Forest Lake
- Morgan Hill - Lake Conroe
WASHINGTON - San Benito - Colorado River NEW JERSEY
------------------- - Soledad Canyon - Lake Whitney -------------------
- LaConner - Idyllwild - Lake Texoma o Chestnut Lakes
- Mount Vernon - Pio Pico - Lake Tawakoni
- Chehalis - Oakzanita Springs o Bay Landing* MISSISSIPPI
- Leavenworth - Palm Springs -------------------
o Birch Bay o Lake Minden MICHIGAN o Indian Point
o Little Diamond o Russian River -------------------
o Rainier o Snowflower - Saint Clair SOUTH CAROLINA
o Long Beach o Turtle Beach -------------------
* Grandy Creek o Yosemite Lakes INDIANA o Carolina Landing*
* Thunderbird o Windsor -------------------
* Cascade o Rancho Oso - Horseshoe Lakes TENNESSEE
* Oceana o Wilderness Lakes o Indian Lakes* -------------------
* Crescent Bar o Natchez Trace*
* Paradise NEVADA OHIO o Cherokee Landing*
* Warden Lake --------------------- -------------------
- Las Vegas - Wilmington
OREGON - Kenissee Lake
------------------- ARIZONA
- Bend --------------------- PENNSYLVANIA
- Pacific City - Verde Valley -------------------
o South Jetty - Hershey
* Seaside FLORIDA
* Neskowin Creek --------------------- VIRGINIA
* Whaler's Rest - Orlando -------------------
- Lynchburg
- Chesapeake Bay
o Virginia Landing*
</TABLE>
*Some members of these six campgrounds own a deeded, undivided interest in
campsites at their campground.
Page 14
<PAGE> 15
<TABLE>
<CAPTION>
CAMPGROUND
FACILITIES AND Family
AMENITIES Acreage RV Sites Tent Sites Adult Lodge Center/Pavilion
-------------- ------- -------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Thousand Trails
Bend 93 300 10 1 1
Chehalis 306 278 1 1
Chesapeake Bay 280 373 19 1 1
Colorado River 217 128 1 1
Cultus Lake 14 185 12 1 1
Forest Lake 205 294 12 1 1
Hershey 196 310 1 1
Horseshoe Lakes 202 118 1
Idyllwild 181 287 38 1 1
Kenisee Lake 159 83 10 1
LaConner 106 313 1 1
Lake Conroe 130 285 1 1
Lake Of The Springs 176 541 12 1 1
Lake Tawakoni 300 318 1 1 1
Lake Texoma 198 319 2 1 1
Lake Whitney 253 244 3 1 1
Las Vegas 11 217 2 1
Leavenworth 279 275 1 1
Lynchburg 150 223 1 1
Medina Lake 260 387 1 1
Morgan Hill 62 317 28 1 1
Mount Vernon 185 248 3 1 1
Oakzanita Springs 118 121 30 1 1
Orlando 269 734 1 1
Pacific City 105 305 1 1 1
Palm Springs 28 392 1 1
Pio Pico 182 453 12 1 1
San Benito 200 517 51 1 1
Soledad Canyon 230 809 9 1 1
Saint Clair 110 110 8 1 1
Verde Valley 300 333 6 2
Wilmington 109 125 1 1
<CAPTION>
CAMPGROUND
FACILITIES AND
AMENITIES Pool Tennis Court Athletic Court Vehicle Storage Restrooms/Showers
-------------- ---- ------------ -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Thousand Trails
Bend 2 2 1 1 6
Chehalis 2 2 2 1 8
Chesapeake Bay 2 1 1 1 4
Colorado River 1 1 1 1 2
Cultus Lake 1 2 2 1 4
Forest Lake 2 2 1 1 3
Hershey 1 1 1 1 3
Horseshoe Lakes 1 2 1 1 2
Idyllwild 1 3 1 6
Kenisee Lake 1 1 1 2
LaConner 1 1 6
Lake Conroe 1 2 2 1 4
Lake Of The Springs 1 1 2 1 12
Lake Tawakoni 2 1 1 5
Lake Texoma 2 1 1 6
Lake Whitney 2 1 1 1 5
Las Vegas 1 2 1 3
Leavenworth 2 4 2 1 8
Lynchburg 1 2 6 1 5
Medina Lake 1 1 1 4
Morgan Hill 1 1 1 1 7
Mount Vernon 1 1 1 6
Oakzanita Springs 1 1 1 2
Orlando 2 2 1 7
Pacific City 1 2 1 5
Palm Springs 1 1 1 4
Pio Pico 2 5 3 8
San Benito 2 1 1 7
Soledad Canyon 2 2 3 1 14
Saint Clair 1 1 3
Verde Valley 1 1 2 3
Wilmington 1 1 2 1 2
<CAPTION>
CAMPGROUND Trailers
FACILITIES AND (Seasonal Children's
AMENITIES Availability) Play Area Trading Post Miniature Golf Spa
-------------- ------------- ----------- ------------ -------------- ---
<S> <C> <C> <C> <C> <C>
Thousand Trails
Bend 17 2 1 1
Chehalis 9 1 1 1 1
Chesapeake Bay 25 3 1 1 1
Colorado River 10 2 1 1 1
Cultus Lake 4 2 1
Forest Lake 3 2 1 1 2
Hershey 35 1 1 1
Horseshoe Lakes 10 10 1
Idyllwild 28 3 1 1
Kenisee Lake 6 2 1 1
LaConner 13 3 1 1 1
Lake Conroe 32 2 1 1 1
Lake Of The Springs 36 3 1 1
Lake Tawakoni 21 2 1 1 2
Lake Texoma 6 2 1 1 2
Lake Whitney 16 2 1 1 1
Las Vegas 11 1 1 1
Leavenworth 4 2 1 1
Lynchburg 5 2 1 1 1
Medina Lake 34 3 1 1 1
Morgan Hill 23 3 1 1
Mount Vernon 6 2 1 1 1
Oakzanita Springs 11 3 1 1 1
Orlando 30 2 1 1 1
Pacific City 18 2 1 1
Palm Springs 19 1 1
Pio Pico 22 3 1 1 2
San Benito 24 4 1 1 2
Soledad Canyon 53 7 1 1 1
Saint Clair 14 2 1 1
Verde Valley 16 3 1 1
Wilmington 13 2 1 1
<CAPTION>
CAMPGROUND
FACILITIES AND Boat
AMENITIES Launch/Marina Laundry Facility Cabins/Lodging
-------------- ------------- ---------------- --------------
<S> <C> <C> <C>
Thousand Trails
Bend 1 7
Chehalis 1 4
Chesapeake Bay 1 1 18
Colorado River 1 1
Cultus Lake 1
Forest Lake 1 18
Hershey 1
Horseshoe Lakes 1
Idyllwild 3 4
Kenisee Lake 1
LaConner 1 1 17
Lake Conroe 1 2
Lake Of The Springs 1 1 3
Lake Tawakoni 1 1
Lake Texoma 1 1 18
Lake Whitney 1
Las Vegas 3
Leavenworth 2 8
Lynchburg 1
Medina Lake 1 1
Morgan Hill 1
Mount Vernon 1
Oakzanita Springs 1
Orlando 1 4
Pacific City 1 4
Palm Springs 3
Pio Pico 2
San Benito 1
Soledad Canyon 1
Saint Clair 1 2
Verde Valley 1
Wilmington 1
</TABLE>
Page 15
<PAGE> 16
<TABLE>
<CAPTION>
CAMPGROUND
FACILITIES AND Family
AMENITIES Acreage RV Sites Tent Sites Adult Lodge Center/Pavilion
-------------- ------- -------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
NACO
Bay Landing 305 257 1
Birch Bay 30 215 8 1 1
Carolina Landing 119 193 1
Cherokee Landing 55 341 1
Chestnut Lake 31 179 1 1
Indian Lakes 545 1202 50 2 1
Indian Point 11 157 1
Lake Minden 97 162 161 1
Little Diamond 200 541 100 1 4
Long Beach 17 120 20 1
Natchez Trace 623 561 1
Rainier 107 609 300 1
Rancho Oso 310 118 50 1 1
Russian River 42 125 30 1
Snowflower 720 248 10
South Jetty 60 162 10 1 1
Turtle Beach 39 72 120
Virginia Landing 339 210 1
Wilderness Lakes 74 523 5 1 1
Windsor 17 95 25 1
Yosemite Lakes 387 379 131 1
LEISURE TIME
Cascade 20 164 24 1
Crescent Bar 24 110 15 1
Grandy Creek 65 130 76 1
Neskowin Creek 35 100 25 1
Oceana 28 114 2
Paradise 60 308 149 2
Seaside 90 252 2
Thunderbird 35 98 27 1
Warden Lake 20 35 30 1
Whaler's Rest 23 152 4 2
<CAPTION>
CAMPGROUND
FACILITIES AND
AMENITIES Pool Tennis Court Athletic Court Vehicle Storage Restrooms/Showers
-------------- ---- ------------ -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
NACO
Bay Landing 1 1 1 2
Birch Bay 1 1 3
Carolina Landing 2 2 1 1 4
Cherokee Landing 1 1 1 1 3
Chestnut Lake 1 1 1
Indian Lakes 2 2 2 1 5
Indian Point 2 1 2
Lake Minden 1 1 3
Little Diamond 1 1 1 5
Long Beach 1 1 2
Natchez Trace 2 1 1 5
Rainier 1 1 1 10
Rancho Oso 1 1 1 3
Russian River 4
Snowflower 1 1 11
South Jetty 1 1 5
Turtle Beach 1 2
Virginia Landing 1 1 3
Wilderness Lakes 2 1 1 1 8
Windsor 1 1 1
Yosemite Lakes 1 1 8
LEISURE TIME
Cascade 3 1 2 2
Crescent Bar 1 1 1 1
Grandy Creek 2 2 1
Neskowin Creek 1 1 1 2
Oceana 3
Paradise 3 1 1 2
Seaside 1 1 11 4
Thunderbird 3 2
Warden Lake 1
Whaler's Rest 1 1 1 3
<CAPTION>
CAMPGROUND Trailers
FACILITIES AND (Seasonal Children's
AMENITIES Availability) Play Area Trading Post Miniature Golf Spa
-------------- ------------- ---------- ------------ -------------- ---
<S> <C> <C> <C> <C> <C>
NACO
Bay Landing 1 1 1
Birch Bay 11 1 1
Carolina Landing 1 1 1
Cherokee Landing 1 1 1
Chestnut Lake 15 1 1 1
Indian Lakes 3 1 1
Indian Point 3 1 1 1
Lake Minden 13 1 1
Little Diamond 4 3 1 2
Long Beach 6 2 1 1
Natchez Trace 4 1 1
Rainier 9 2 1 1
Rancho Oso 23 1 1 1
Russian River 10
Snowflower 14 1
South Jetty 15 1 1 2
Turtle Beach 1 1
Virginia Landing 2 1 1
Wilderness Lakes 34 2 1 1 3
Windsor 7 1
Yosemite Lakes 16 1 1 1
LEISURE TIME
Cascade 14 1 1 1 1
Crescent Bar 9 1 1
Grandy Creek 5 1 1 1
Neskowin Creek 9 1
Oceana 14 1 1
Paradise 32 1 1 1 1
Seaside 32 1
Thunderbird 4 1 1 1 1
Warden Lake 1 1
Whaler's Rest 16 1 1 1
<CAPTION>
CAMPGROUND
FACILITIES AND Boat
AMENITIES Launch/Marina Laundry Facility Cabins/Lodging
-------------- ------------- ---------------- --------------
<S> <C> <C> <C>
NACO
Bay Landing 1 1 19
Birch Bay 1
Carolina Landing 1 18
Cherokee Landing 1 30
Chestnut Lake 1
Indian Lakes 1 3 54
Indian Point 1 1 16
Lake Minden 1
Little Diamond 1 1 1
Long Beach 1
Natchez Trace 1 1 58
Rainier 1
Rancho Oso 2
Russian River 1
Snowflower 1 4
South Jetty 1
Turtle Beach 1 1
Virginia Landing 1 1 19
Wilderness Lakes 4
Windsor 1
Yosemite Lakes 2 32
LEISURE TIME
Cascade
Crescent Bar 1 1
Grandy Creek
Neskowin Creek 1
Oceana
Paradise
Seaside 1
Thunderbird 1
Warden Lake
Waler's Rest 1
</TABLE>
Page 16
<PAGE> 17
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 17
<PAGE> 18
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 2000 AND 1999 APPEARS HERE]
<TABLE>
<CAPTION>
2000 1999
-------------- ------------------
High Low High Low
----- ----- ------- -------
<S> <C> <C> <C> <C>
First Quarter 4 7/8 4 1/4 5 1/8 3 5/8
Second Quarter 5 4 3/8 5 13/16 3 5/8
Third Quarter 5 1/8 4 5/8 5 1/4 4 13/16
Fourth Quarter 4 7/8 4 3/8 4 7/8 4 1/4
</TABLE>
As of September 26, 2000, the Company's Common Stock was held by 67 holders of
record. Moreover, security position listings available to the Company listed
approximately 503 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 $20.9
million at June 30, 2000, 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 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
Page 18
<PAGE> 19
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.
The 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.
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,
-----------------------------------------------------------
2000(1) 1999 1998 1997 1996(2)
--------- --------- --------- --------- ----------
(Restated)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenue $ 70,771 $ 67,925 $ 75,509 $ 77,181 $ 91,022
Membership dues 37,495 36,455 37,330 39,945 39,924
Other campground revenue 19,239 17,856 16,475 17,906 22,288
Membership contracts originated 13,912 5,480 3,867 3,362 2,630
Membership sales revenue 5,564 3,959 3,227 2,894 1,655
Interest income 1,509 2,068 2,635 3,726 6,756
Interest expense and amortization 1,427 2,957 4,599 9,084 17,693
Income (loss) from operations before
taxes, minority interest and
extraordinary item 5,458 7,915 15,716 7,169 (240)
Extraordinary gain on debt repurchases -- -- -- -- 1,390
Net income 9,249 5,571 24,879 6,799 1,109
Dividends paid (3) -- -- -- -- --
Dividends per common share (3) -- -- -- -- --
Income per share data - basic (4):
Income before extraordinary item 1.16 .73 3.36 .94 (.08)
Extraordinary item -- -- -- -- .38
Net income 1.16 .73 3.36 .94 .30
Weighted average number of shares 7,981 7,630 7,407 7,223 3,703
Income per share data - diluted (4):
Income before extraordinary item 1.08 .66 2.96 .88 (.08)
Extraordinary item -- -- -- -- .38
Net income 1.08 .66 2.96 .88 .30
Weighted average shares 8,594 8,475 8,398 7,704 3,721
BALANCE SHEET DATA (AT END OF YEAR):
Cash and cash equivalents 2,420 2,197 13,631 1,343 37,403
Receivables, net 5,775 2,184 4,181 7,517 13,219
Campground properties 48,272 36,941 37,991 42,764 46,309
Properties at unrelated resorts 70 75 1,092 1,530 2,902
Total assets 74,515 56,804 74,262 63,302 111,631
PIK Notes, including deferred gain(4) -- -- 32,973 29,393 --
Borrowings under Credit Agreement(4) 9,614 10,887 -- 14,097 --
Secured Notes, net of discount(4) -- -- -- -- 94,350
Other notes payable 334 -- -- 604 1,102
Long-term debt(5) 7,043 8,787 32,973 38,230 66,922
Shareholders' equity (deficit) 18,109 9,648 2,754 (22,168) (31,952)
STATISTICAL DATA (AT END OF YEAR):
Number of operating campgrounds 63 53 53 55 58
Number of campsites 19,000 17,700 17,700 18,400 19,300
Number of members 119,000 106,000 111,000 120,000 128,000
Average annual dues per member $ 355 $ 357 $ 351 $ 344 $ 335
Average cost per camper night $ 18.72 $ 17.62 $ 18.23 $ 18.13 $ 18.03
</TABLE>
(1) The historical Selected Financial Data for fiscal 2000 includes the
operating results of Leisure Time from December 16, 1999, the date of
acquisition.
(Footnotes continued)
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<PAGE> 21
(2) The historical Selected Financial Data for fiscal 1996 has been restated
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.
(3) During the periods presented, the Company has been prohibited from paying
any cash dividends by the indentures governing its public debt and by the
Credit Agreement with Foothill.
(4) In July 1996, the Company consummated a restructuring of its 12% Secured
Notes Due 1998 ("Secured Notes") whereby all of the outstanding notes were
retired. As part of this restructuring, the Company issued its 12% Senior
Subordinated Pay-In-Kind Notes Due 2003 ("PIK Notes") and 3,680,550
additional shares of Common Stock, and it entered into the Credit Agreement
with Foothill.
(5) Long-term debt includes only the long-term portions of the PIK Notes,
Credit Agreement with Foothill and Secured Notes.
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,
2000. All of these statements are forward-looking statements made pursuant to
the safe harbor provisions of Section 21 (E) of the Securities Exchange Act of
1934, as amended. These statements are not historical and involve risks and
uncertainties. The Company's actual financial condition, results of operations,
cash flows, and business strategies, plans, and conditions for future periods
may differ materially due to several factors, including but not limited to the
Company's ability to control costs, campground market conditions and other
factors affecting the Company's sales and marketing plan, the actual rate of
decline in the campground membership base, the actual use of the campgrounds by
members and guests, the effects on members and guests of the Company's efforts
to downsize its business, the Company's success in collecting its contracts
receivable and selling assets, the Company's success in acquiring members
through the purchase of other membership campground operations and the other
factors affecting the Company's operations described in this report.
LIQUIDITY AND CAPITAL RESOURCES
CURRENT BUSINESS STRATEGY. The Company's current business strategy is to improve
its campground operations and stabilize its campground membership base through
increased sales and marketing efforts and the acquisition of members through the
purchase of other membership campground operations. The Company believes there
is a viable market for campground memberships and that it has a significant
opportunity to compete for campers interested in higher quality facilities and a
higher level of service than is typically available at public campgrounds or
competing private campgrounds. The Company has also acquired members through the
purchase of Leisure Time, and it believes it may be possible to acquire
additional members through the purchase of other membership campground
operations, many of whom are experiencing financial difficulties.
Over the past several years, the Company's membership base has been declining.
In response to this decline, the Company has downsized its business by closing
and disposing of campgrounds and decreasing campground operating costs and
general and administrative expenses. The Company intends to continue to keep the
size of its campground system in an appropriate relation to the size of its
membership base. In this regard, if the membership base continues to decline,
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 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 Albertsen Investment Corporation ("AIC"), which
was the holding company owning Leisure Time. Leisure Time owns and operates 10
membership campgrounds
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<PAGE> 23
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 $7.7 million in cash after
adjustments 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 $2.3
million. The Company borrowed the funds for the stock purchase and debt
repayment under its Credit Agreement with Foothill.
At the date of acquisition, the principal assets of Leisure Time consisted of
its 10 membership-based campgrounds 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 June 30, 2000, 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 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 June 30, 2000, the Company had approximately $2.4 million of cash and
cash equivalents, an increase of $200,000 during fiscal 2000. During the year,
the Company's operating activities produced $14.1 million of cash, its investing
activities used $9.0 million of cash and its financing activities used $4.9
million of cash. The Company's investing activities consisted of the purchase of
the stock of AIC for $7.7 million in cash and $1.3 million in capital
expenditures at the campgrounds. The Company's financing activities consisted
primarily of a $1.3 million reduction in outstanding debt under the Credit
Agreement with Foothill, repayments of $2.8 million of real estate debt on
Leisure Time's campgrounds and other Leisure Time debt and the purchase of
189,900 shares of the Company's common stock for a total of $852,000.
With respect to the Company's operating activities, for fiscal 2000, the
principal sources of operating cash were $64.7 million from operations, $4.9
million in principal and interest collections on contracts receivable and
invested cash, $10.7 million from sales of campground memberships and $834,000
from the termination of a grantor trust established to reimburse directors and
officers for any indemnifiable damages and expenses they might incur. Principal
uses of operating cash for fiscal 2000 were $41.4 million in operating expenses,
$11.6 million in administrative expenses (including general and administrative
expenses and corporate member services costs), $10.7 million in membership
origination costs and marketing expenses and $2.1 million in insurance premiums.
As of the date of this report, the Company had $10.4 million of outstanding
borrowings under its Credit Agreement with Foothill, and it had the ability to
borrow an additional $3.9 million for working capital purposes. Based upon its
current business plan, the Company believes that future cash flows provided from
operations, asset sales and borrowings available under the Credit Agreement will
be adequate for the Company's operating and other cash requirements. While any
borrowings are outstanding under the Credit Agreement, all cash held by the
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<PAGE> 24
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, 2000, the Company on a consolidated basis
owned $7.7 million of contracts receivable related to the sale of campground
memberships (see "Contracts Receivable" in Item 1). Because of low interest
rates available in the marketplace during fiscal 2000, 1999 and 1998, some
members chose to prepay their accounts, and the Company received principal
payments of $673,000, $723,000 and $1.1 million, respectively, in excess of
scheduled payments. The Company may continue to experience such prepayments in
the future, although at a decreasing rate if the contracts receivable portfolio
declines.
Allowance for Doubtful Accounts
The Company's allowance for doubtful accounts was 25% of gross contracts
receivable at June 30, 2000, compared with 30% and 31% of gross contracts
receivable at June 30, 1999 and 1998, respectively. The cancellation rate as a
percentage of average contracts receivable was 5% for fiscal 2000, compared with
8% for fiscal 1999 and 1998. In fiscal 2000, the Company experienced lower
contract losses than anticipated on contracts receivable generated from
membership sales at Thousand Trails and NACO campgrounds and, as a result, the
Company reduced the allowance for doubtful accounts relating to these contracts
by $435,000. However, because of uncertainty surrounding the collection of
Leisure Time's contracts receivable, the Company increased Leisure Time's
allowance for doubtful accounts by $184,000 at June 30, 2000. In fiscal 1999 and
1998, the Company reduced the allowance for doubtful accounts by $886,000 and
$1.0 million, respectively, 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. In fiscal
1998 and 1999, the Company's historic cancellation rates remained stable at
approximately 8% (consistent with the prior two fiscal years). The cancellation
rate improved to 5% in fiscal 2000. The Company reduced the allowance for
doubtful accounts in each of these years after applying the cancellation rate at
year-end to the maturities of the then-outstanding portfolio and taking into
account the uncertainties associated with its business. During these years, 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,
the Company reduced the allowance to approximately 31% of the portfolio in
fiscal 1998, 30% in fiscal 1999, and 25% in fiscal 2000.
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 was amortized using the effective interest method over the
respective terms of the contracts, and was fully amortized in fiscal 2000.
Additionally, in connection with the purchase of NACO and Trails, the Company
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recorded an allowance for future collection costs, which was amortized as a
reduction of general and administrative expenses based on cash collected on the
related portfolio, and was fully amortized in fiscal 2000. 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 was amortized as an increase to interest income over
the respective term of the contracts, and was fully amortized in fiscal 2000.
Change in Receivables
The net balance of contracts receivable increased by approximately $3.6 million
during fiscal 2000, primarily as a result of the acquisition of Leisure Time.
Leisure Time's contracts receivable represent approximately $2.7 million of the
Company's portfolio as of June 30, 2000. The remaining increase in contracts
receivable resulted from an increase in financed sales, a $251,000 reduction in
the allowance for doubtful accounts and scheduled amortization of the allowances
for interest discount, collection costs and valuation discount, partially offset
by $4.9 million in cash collections.
CAMPGROUND 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 increased by $11.3 million in fiscal
2000 due primarily to the acquisition of Leisure Time's campgrounds and $1.3
million of capital expenditures, partially offset by $2.6 million of
depreciation on property and equipment.
The Company makes annual capital and maintenance expenditures to maintain and
improve the campgrounds. During fiscal 2000, the Company spent $4.9 million on
major maintenance, repairs and improvements at the campgrounds. The Company
anticipates that it will spend an additional $5.7 million on such items in
fiscal 2001, which will be funded by existing cash and cash provided by
operations. The Company may be required to spend greater amounts in future years
as the facilities age.
During the periods presented, the Company also owned lot inventory, buildings
and equipment and land held for sale at certain resorts not related to the
campground operations. Over the past several years, the Company has sold
substantially all of the assets it owns at these resorts.
At June 30, 2000, the Company had a $1.9 million liability for 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,
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 $57,000 during fiscal 2000. The
increase was due primarily to the addition of $200,000 in dues receivable from
Leisure Time members, $100,000 in other accounts receivable and $37,000 in
inventory, partially offset by a $261,000 decrease in income tax receivable.
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Other assets decreased by $2.1 million in fiscal 2000 due primarily to the
termination of a grantor trust agreement established to reimburse directors and
officers for any indemnifiable damages they might incur, and the release of
prior year workers' compensation deposits that were applied to current year
premiums.
BORROWINGS. At June 30, 2000, $2.9 million of the borrowings outstanding under
the Credit Agreement are considered current for accounting purposes because the
Company is required to use all collections of principal and interest on the
contracts receivable and all proceeds from asset sales to reduce such
borrowings.
Credit Agreement with Foothill
On June 30, 2000, the Company had $9.6 million of borrowings outstanding under
the Credit Agreement with Foothill, and it had the ability to borrow an
additional $4.7 million for working capital purposes. Under the Credit
Agreement, the first $15.0 million of borrowings bear interest at prime plus
.25% per annum and 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). All borrowings under the
Credit Agreement will mature on January 17, 2003.
Under the terms of the 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.
The Company's ability to borrow under the Credit Agreement for working capital
purposes is subject to continued compliance by the Company with the financial
covenants and other requirements of the Credit Agreement, including certain
covenants respecting minimum earnings before interest, taxes, depreciation and
amortization, and minimum tangible net worth. The Credit Agreement prohibits the
Company from borrowing from other sources in significant amounts except for
equipment purchases.
The Company has granted liens on substantially all of its assets to secure its
obligations under the Credit Agreement. In addition, the Company's subsidiaries
other than an immaterial utility subsidiary have guaranteed the Company's
obligations under the Credit Agreement and, subject to certain limitations, have
granted liens on substantially all of their assets to secure their guarantees.
The Credit Agreement limits the type of investments in which the Company may
invest its available cash, resulting in a relatively low yield.
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PIK Note Redemption
In December 1998, the Company redeemed all $34.8 million principal amount of its
12% Senior Subordinated Pay-in-Kind Notes Due 2003 ("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.
DEFERRED REVENUES AND EXPENSES. Deferred revenues of $34.1 million and $24.7
million at June 30, 2000 and 1999, respectively, include $15.5 million and $14.4
million, respectively, of membership dues collections which relate to future
periods, $16.8 million and $8.5 million, respectively, of campground membership
sales revenues to be recognized in future periods and other deferred revenues
related primarily to RPI's operations and Trails Management. Deferred membership
selling expenses of $5.2 million and $2.1 million at June 30, 2000 and 1999,
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 liability by $858,000 because the estimated losses were
less than the recorded liability. This adjustment is included in nonrecurring
income. At June 30, 2000 and 1999, the Company's recorded liability for
estimated losses related to uninsured general liability claims totaled $650,000
and $1.1 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 $817,000 and $907,000 at June 30, 2000 and 1999,
respectively. This liability is based on actuarial estimates of amounts needed
to fund expected uninsured claims, as well as premium payments and
administrative cost 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. In fiscal 1998, the Company received refunds
totaling $1.3 million for deposits expensed in previous years, which were
recorded as nonrecurring income. In fiscal 2000, the Company increased its
workers compensation reserves by $538,000 because the Company estimates that it
will be required to
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pay additional amounts in future periods to cover claims not covered by the
premiums originally paid by the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. The Financial Accounting Standards
Board has issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivatives and Similar Financial Instruments for Hedging
Activities," which will become effective for the Company in fiscal 2001. SFAS
No. 133 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.
MARKET RISK. Item 305 of Regulation S-K requires disclosure of material risks,
as defined in Item 305, related to market risk sensitive financial instruments.
As defined, the Company currently has market risk sensitive instruments related
to interest rates.
The Company does not have significant exposure to changing interest rates on
invested cash because the Company invests available cash in certificates of
deposit and investment grade commercial paper that have maturities of three
months or less. The interest rate market risk implicit in these investments at
any given time is low, as the investments mature within three months. In
addition, the Company had no invested cash at June 30, 2000 and 1999.
The Company had $7.7 million of contracts receivable at June 30, 2000, which
have a weighted average stated interest rate of 13% and an average remaining
term of 35 months. The Company does not have significant exposure to changing
interest rates related to the contracts receivable because the interest rate on
the contracts receivable are fixed.
As of June 30, 2000, the Company had $9.6 million of outstanding borrowings
under the Credit Agreement with Foothill, and it had the ability to borrow an
additional $4.7 million for working capital purposes (see "Borrowings - Credit
Agreement with Foothill"). 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.
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 U.S. 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, 2000, a hypothetical
ten percent change in market interest rates over the next year would increase
the Company's interest expense by approximately $100,000. A hypothetical ten
percent change in market interest rates would not have a material effect on the
fair value of the Company's contracts receivable, its borrowings under the
Credit Agreement with Foothill or its short-term cash investments.
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RESULTS OF OPERATIONS
The following discussion and analysis are based on the historical results of
operations of the Company for the years ended June 30, 2000, 1999 and 1998. The
financial information set forth below should be read in conjunction with the
Company's consolidated financial statements included in Item 8.
NET INCOME. The Company reported net income of $9.2 million or $1.08 per diluted
share on revenues of $70.8 million for the year ended June 30, 2000. This
compares with net income of $5.6 million or $.66 per diluted share on revenues
of $67.9 million for the year ended June 30, 1999, and net income of $24.9
million or $2.96 per diluted share on revenues of $75.5 million for the year
ended June 30, 1998.
The Company's revenues increased by $2.8 million in fiscal 2000, compared with
fiscal 1999, due primarily to increased dues revenue from the acquisition of
Leisure Time's members and increased membership sales revenue. Revenues
increased in fiscal 2000 even though gains from asset sales were lower this year
by $1.1 million, and interest income was lower this year by $559,000 due
primarily 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 by $1.5 million in fiscal 2000. However, the unfavorable
impact from the net deferral of sales revenues and expenses was $6.8 million
higher this year reflecting an increase in the level of sales activity, and
campground operating expenses were $3.3 million higher this year due to the
acquisition of Leisure Time's campgrounds. Net income for fiscal 2000 also
includes an income tax benefit of $5.8 million, partially offset by a $1.4
million tax provision, resulting from the elimination of the valuation allowance
for the Company's net deferred tax assets.
The results for fiscal 1998 includes 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 table on the following page shows separately the results of the campground
operations, Trails 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, 2000, 1999
and 1998.
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended June 30,
---------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
CAMPGROUND OPERATIONS
Membership dues $ 37,495 $ 36,455 $ 37,330
Campground revenues 16,731 15,585 14,634
Cost of campground revenues (8,095) (7,401) (6,317)
Operating expenses (32,158) (29,998) (30,686)
-------- -------- --------
Contribution from campground operations 13,973 14,641 14,961
-------- -------- --------
SALES
Membership contracts originated 13,912 5,480 3,867
Change in deferred revenue (8,348) (1,521) (640)
-------- -------- --------
Membership sales revenue 5,564 3,959 3,227
Membership origination costs (7,614) (4,152) (2,880)
Change in deferred origination costs 3,112 440 234
Marketing expenses (4,026) (2,046) (1,700)
-------- -------- --------
Loss on sales (2,964) (1,799) (1,119)
-------- -------- --------
TRAILS MANAGEMENT
Revenues 2,508 2,271 1,321
Expenses (2,545) (2,135) (1,509)
-------- -------- --------
(Loss) Contribution from Trails Management (37) 136 (188)
-------- -------- --------
RESORT PARKS INTERNATIONAL
Revenues 3,706 3,576 4,035
Expenses (1,844) (1,963) (2,132)
-------- -------- --------
Contribution from RPI 1,862 1,613 1,903
-------- -------- --------
Other income 2,880 2,739 3,084
Corporate member services (1,333) (1,253) (1,472)
General and administrative expense (9,634) (9,431) (9,731)
Other 374 227 1,185
-------- -------- --------
(7,713) (7,718) (6,934)
INCOME BEFORE INTEREST INCOME AND EXPENSE,
GAIN ON ASSET SALES AND TAXES 5,121 6,873 8,623
-------- -------- --------
Interest income 1,509 2,008 2,635
Interest expense (1,427) (2,957) (4,599)
Gain on asset sales 4 1,105 5,287
Reduction in allowance for doubtful accounts 251 886 1,000
Nonrecurring income -- -- 2,770
-------- -------- --------
INCOME BEFORE TAXES $ 5,458 $ 7,915 $ 15,716
======== ======== ========
</TABLE>
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OPERATING INCOME. During the year ended June 30, 2000, the Company achieved a
positive contribution from operations of $5.1 million, compared with $6.9
million and $8.6 million in the years ended June 30, 1999 and 1998,
respectively. Operating income declined in fiscal 2000 primarily because of
declines in the contributions from campground operations and Trails Management
and a higher loss from sales operations. 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 and taxes. See the table on the previous page 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.
Commencing December 16, 1999, the operating results of Leisure Time are included
in the operating results of the Company.
Campground membership dues revenue was $37.5 million for the year ended June 30,
2000, compared with $36.5 and $37.3 million for the years ended June 30, 1999
and 1998, respectively. The $1.0 million (3%) increase in dues revenue in fiscal
2000 was due primarily to the addition of $1.9 million in dues paid by the
members of Leisure Time and the effect of the annual dues increase, partially
offset by the loss of campground members during the year.
Other campground revenues were $16.7 million for the year ended June 30, 2000,
compared with $15.6 million and $14.6 million for the years ended June 30, 1999
and 1998, respectively. The $1.1 million (7%) increase in other campground
revenues in fiscal 2000 resulted primarily from $300,000 of campground revenue
from Leisure Time's campgrounds, an increase in revenue from the extended stay
program at certain campgrounds and a greater emphasis on ancillary revenue at
all campgrounds. The related expenses were $8.1 million, $7.4 million and $6.3
million for fiscal 2000, 1999 and 1998, respectively. The increase in related
expenses in the current year was due primarily to $140,000 in expenses related
to Leisure Time's campgrounds and a $427,000 increase in labor costs, of which
$380,000 related to the extended stay program.
Campground operating expenses were $32.2 million for the year ended June 30,
2000, compared with $30.0 million for the year ended June 30, 1999, and $30.7
million for the year ended June 30, 1998. The $2.2 million (7%) increase in
campground operating expenses in fiscal 2000 resulted primarily from additional
operating expenses of $1.7 million relating to Leisure Time's campgrounds and a
$330,000 increase in maintenance 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. Although the
Company believes that the anticipated changes should result in lower future
operation expenses, no assurance can be given that such changes will not reduce
revenues by an amount in excess of the expense reductions.
For the year ended June 30, 2000, the Company originated membership contracts of
$13.9 million, compared with $5.5 million and $3.9 million in the years ended
June 30, 1999 and 1998, respectively. In fiscal 2000, the Company originated
fewer new membership contracts at higher
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average sales prices, compared with the prior years, and also originated
contracts totaling $5.0 million from an upgrade program at Leisure Time's
campgrounds involving its existing members. During fiscal 2000, the Company
originated approximately 3,700 new membership contacts at an average sales price
of $2,298, and approximately 1,700 contracts in the Leisure Time upgrade program
at an average sales price of $2,895. This compares with approximately 4,200 new
membership contracts at an average sales price of $1,254 in fiscal 1999, and
approximately 2,900 new membership contracts at an average sales price of $1,164
in fiscal 1998.
The Company recognizes revenue from the sale of campground memberships that do
not convey a deeded interest in real estate, net of any related allowances, on a
straight-line basis over the expected life of the memberships sold. For the
years ended June 30, 2000, 1999 and 1998, the Company recognized campground
membership sales revenue of $5.6 million, $4.0 million and $3.2 million,
respectively. Membership sales revenue includes revenues of $3.9 million, $3.1
million and $2.5 million, respectively, that were deferred in prior periods.
Moreover, for fiscal 2000, 1999 and 1998, the Company deferred revenues of $12.3
million, $4.6 million and $3.1 million, respectively, which will be recognized
in future periods. In the current year, the Company recognized $619,000 in sales
revenue related to Leisure Time.
Selling expenses directly related to the sale of campground memberships,
substantially all of which are sales commissions, 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, 2000, 1999 and 1998, the Company
recognized selling expenses of $4.5 million, $3.7 million and $2.6 million,
respectively. These amounts include expenses of $998,000, $730,000 and $560,000,
respectively, that were deferred in prior periods. Moreover, for fiscal 2000,
1999 and 1998, the Company deferred expenses of $4.1 million, $1.2 million and
$794,000, respectively, which will be recognized in future periods. In fiscal
2000, the Company recognized selling and marketing expenses of $865,000 related
to Leisure Time.
Although the Company's sales results are improving, selling and marketing
expenses exceeded sale revenues by $3.0 million, $1.8 million and $1.1 million,
for the years ended June 30, 2000, 1999 and 1998, respectively. These expenses
exceeded sales revenue primarily because the Company deferred more sales revenue
than selling expenses. In addition, in fiscal 1999 and 1998, these expenses
exceeded sales revenue, in part, because the relatively low volume of sales did
not cover fixed costs.
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 sale 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 increase its
campground membership sales over current levels or acquire members through the
purchase of other membership campground operations similar to the acquisition of
Leisure Time, the membership base will continue to decline, which
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will decrease the Company's revenues. Decreases in revenues that are not offset
by sufficient expense reductions could have a material adverse impact on the
Company's business and results of operations.
CAMPGROUND MANAGEMENT. Trails Management, a wholly owned subsidiary of the
Company, manages 169 public campgrounds for the U.S. Forest Service. For the
year ended June 30, 2000, these operations produced a net loss of $37,000 on
revenues of $2.5 million. This compares with a net contribution of $136,000 on
revenues of $2.3 million for the year ended June 30, 1999 and a net loss of
$188,000 on revenues of $1.3 million for the year ended June 30, 1998. The
increase in revenues from year to year was due primarily to new contracts
entered into in these years, which increased the number of campgrounds managed.
However, expenses also increased from year to year, principally labor and
utilities, which caused the loss in fiscal 2000.
RESORT PARKS INTERNATIONAL. RPI, a wholly owned subsidiary of the Company,
charges its members a fee for a membership that entitles them to use any of the
recreational facilities participating in RPI's reciprocal use system, subject to
certain limitations. For the year ended June 30, 2000, RPI's operations produced
a net contribution of $1.9 million on revenues of $3.7 million. This compares
with a net contribution of $1.6 million on revenues of $3.6 million for the year
ended June 30, 1999, and a net contribution of $1.9 million on revenues of $4.0
million for the year ended June 30, 1998. While RPI's revenues increased
slightly in fiscal 2000, compared with fiscal 1999, the increase in the net
contribution this year resulted primarily from lower operating expenses, which
were attributable to lower communication costs and a decrease in the cost of
operating supplies, partially offset by an increase in labor costs. The decline
in the net contribution between fiscal 1999 and 1998 was due primarily to a
decrease in revenues, while operating expenses remained fairly constant. RPI's
revenues declined as a result of declining sales in the membership camping
industry generally. 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.
OTHER INCOME. Other income generally consists of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, collections of written-off contracts and delinquent dues,
subscription fees received from members who subscribe to the Company's member
magazine, fees charged to members for making more than five operator-assisted
reservations in a given year, lot sales and fees received from third parties for
billing and collection services. Fees for billing and collection services are
expected to decline in future periods by approximately $360,000 per year because
a primary customer has terminated its contract with the Company.
Other income was $2.9 million for the year ended June 30, 2000, compared with
$2.7 million for the year ended June 30, 1999, and $3.1 million for the year
ended June 30, 1998. The increase in other income during fiscal 2000 was due
primarily to an increase in transfer fees and servicing fees, partially offset
by a decrease in the collection of written-off contracts and delinquent dues.
Leisure Time contributed $86,000 in other income during the current year. Other
income decreased in fiscal 1999 as a direct result of lower fees and other
income received from the declining contracts receivable portfolio and shrinking
membership base.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were
$9.6 million for the year ended June 30, 2000, compared with $9.4 million for
the year ended June 30, 1999, and $9.7 million for the year ended June 30, 1998.
General and administrative expenses
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increased in fiscal 2000 due primarily to increases in labor costs, rental
expense, credit card processing fees and approximately $77,000 in expenses
related to the acquisition of Leisure Time that could not be capitalized as part
of the cost of acquisition. These increases were partially offset by decreases
in third-party legal fees, professional expenses and depreciation, as certain of
the Company's corporate assets have been fully depreciated. General and
administrative expenses directly related to Leisure Time were $268,000 in fiscal
2000. General and administrative costs increased between fiscal 1999 and 1998 as
a result of costs incurred to explore new business opportunities.
General and administrative expenses include costs related to collecting the
contracts receivable and membership dues of $2.2 million, $2.1 million and $2.2
million for the years ended June 30, 2000, 1999 and 1998, respectively. These
collection costs were reduced by $98,000, $136,000 and $229,000, 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"). Collection costs related to Leisure Time's contracts receivable
were $139,000 in fiscal 2000. The Company anticipates that its overall
collection costs will continue to decrease as the contracts receivable portfolio
declines further; however, such costs could increase if the volume of financed
new sale 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 years ended June 30, 2000, and 1999, compared with $1.5 million for the
year ended June 30, 1998. The decrease in costs in fiscal 1999 was due primarily
to reductions in personnel.
INTEREST INCOME AND EXPENSE. Interest income declined to $1.5 million for the
year ended June 30, 2000, from $2.1 million for the year ended June 30, 1999 and
$2.6 million for the year ended June 30, 1998. The decreases in fiscal 2000 and
1999 were due primarily to decreases in interest earned on the Company's
diminishing portfolio of contracts receivable and invested cash. Also included
in interest income is amortization of the allowance for interest discount and
valuation allowance related to the contracts receivable, of which $229,000 was
amortized during fiscal 2000, $181,000 was amortized during fiscal 1999 and
$293,000 was amortized during fiscal 1998 (see "Liquidity and Capital Resources
- Contracts Receivable"). The interest discount and valuation allowances were
fully amortized at June 30, 2000. As the Company's portfolio of contracts
receivable increased with the acquisition of Leisure Time, in the short term,
the interest earned on the Company's portfolio of contracts receivable will
increase compared with historical levels. However, in the long term, the
interest earned on the Company's portfolio of contracts receivable is expected
to decrease as the portfolio declines.
Interest expense decreased to $1.4 million for the year ended June 30, 2000,
from $3.0 million for the year ended June 30, 1999 and $4.6 million for the year
ended June 30, 1998. The decreases were due primarily to the redemption of the
PIK Notes in December 1998. For the years ended June 30, 1999 and 1998, the
Company recorded $1.9 million and $3.8 million, respectively, in interest
expense related to the PIK Notes. These decreases were partially offset by
increases in interest expense incurred under the Credit Agreement as a result of
borrowings used to finance the acquisition of Leisure Time in fiscal 2000 and
borrowings used to partially fund the redemption of the PIK Notes in fiscal
1999.
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<PAGE> 35
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.
The Company reduced its outstanding debt by $1.3 million during fiscal 2000, and
by $23.8 million (including accrued interest on the PIK Notes) during fiscal
1999. At June 30, 2000, the Company's borrowings under the Credit Agreement were
$9.6 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 acquires new members through the purchase of other membership
campground operations, similar to the acquisition of Leisure Time.
GAINS ON ASSET SALES. During the years ended June 30, 2000, 1999 and 1998, the
Company sold certain of its real estate assets and recognized related gains of
$4,000, $1.1 million and $5.3 million, respectively. The decreases between years
were due to the timing of asset 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 2000, 1999 and 1998,
the Company reduced the allowance for doubtful accounts on the contracts
receivable by $251,000, $886,000 and $1.0 million, respectively. The 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 for the year ended
June 30, 1998, which 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.
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.
Prior to fiscal 1997, the Company's insurance carrier required the Company to
make deposits to cover, in part, the additional premium that the insurance
carrier estimated would be due in the future after it conducted an experience
audit of the Company's workers' compensation program. The Company expended these
deposits principally because, in the past, the results of these
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<PAGE> 36
experience audits had 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. In fiscal 1998, the Company received refunds of
$1.3 million from its insurance carrier after the carrier determined that it had
excess amounts on deposit. These refunds were recorded as nonrecurring income.
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.
INCOME TAXES. The Company accounts for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes". This standard requires, among other things,
recognition of future tax benefits, measured by enacted tax rates, attributable
to deductible temporary differences between financial statements and income tax
bases of assets and liabilities and to tax net operating loss carryforwards
("NOLs"), to the extent that realization of such benefits is more likely than
not.
The Company's current provision for income taxes was $621,000, $40,000 and
$837,000 for the years ended June 30, 2000, 1999 and 1998, respectively. The
provision for fiscal 2000 includes amounts for federal alternative minimum taxes
as well as state income taxes in the various states where the Company conducts
its business. The provision for fiscal 1999 relates primarily to state income
taxes, and the provision for fiscal 1998 includes 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 NOLs, which are
estimated to total $20.9 million at June 30, 2000, and expire in years 2010 to
2014. Prior to net operating loss deductions, the Company had taxable income of
$7.0 million in fiscal 2000, a loss of $2.1 million for tax purposes in fiscal
1999 and taxable income of $22.8 million in fiscal 1998.
The tax provision for the year ended June 30, 2000 also includes a $5.8 million
deferred income tax benefit resulting from the reversal of the valuation
allowance for the Company's net deferred tax assets (see Note 10 to the
consolidated financial statements included in Item 8) and a net deferred tax
provision of $1.4 million. 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. The
adjustments to the valuation allowance 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 and 1999, and eliminated the valuation
allowance in fiscal 2000, because it expects to generate sufficient taxable
income during the carryforward period to realize the net deferred tax assets. 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 a decline to prevent the realization of the net deferred tax
assets over such period.
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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 37% of
the members have requested that their dues be frozen because of their age or
disability (see "Campground Operations - Dues").
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, 2000 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
Consolidated Financial Statements Index
<TABLE>
<S> <C>
Report of Independent Public Accountants......................................39
Consolidated Balance Sheets - June 30, 2000 and 1999..........................40
Consolidated Statements of Operations for the years ended
June 30, 2000, 1999 and 1998.............................................41
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 2000, 1999 and 1998.......................................42
Consolidated Statements of Cash Flows for the years ended
June 30, 2000, 1999 and 1998.............................................43
Notes to Consolidated Financial Statements....................................45
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts.......................71
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes hereto.
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<PAGE> 39
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,
2000 and 1999, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended June 30, 2000. 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 auditing standards generally accepted
in the United States. 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, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2000, in conformity with accounting principles generally accepted in
the United States.
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 consolidated 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 6, 2000
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THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30,
--------------------
ASSETS 2000 1999
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,420 $ 2,197
Current portion of receivables, net of allowances and discount of $.9
million and $.7 million, respectively 1,668 1,402
Current portion of deferred membership selling expenses 1,387 693
Current portion of net deferred tax assets 3,780 2,061
Other current assets 2,105 2,048
-------- --------
Total Current Assets 11,360 8,401
Restricted cash 1,320 1,240
Receivables, net of allowances and discount of $1.0 million and $.5 million,
respectively 4,107 782
Campground land 22,981 13,200
Buildings and equipment, net of accumulated depreciation of $20.1 million
and $17.5 million, respectively 22,396 20,829
Land held for sale 2,965 2,987
Deferred membership selling expenses 3,790 1,372
Net deferred tax assets 5,362 5,635
Other assets 234 2,358
-------- --------
TOTAL ASSETS $ 74,515 $ 56,804
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,904 $ 1,666
Accrued interest 103 110
Other accrued liabilities 7,498 6,148
Current portion of long-term debt 2,905 2,100
Accrued construction cost 1,888 1,888
Current portion of deferred revenue 21,977 19,098
-------- --------
Total Current Liabilities 36,275 31,010
Long-term debt 7,043 8,787
Deferred revenue 12,106 5,627
Other liabilities 982 1,732
-------- --------
Total Liabilities 56,406 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, 7,980,592 and
8,096,128 shares issued and outstanding, respectively, after deducting
190,736 and 3,200 shares held in Treasury, respectively 80 81
Additional paid-in capital 21,080 21,869
Accumulated deficit subsequent to December 31, 1991, date of emergence from
bankruptcy (2,914) (12,163)
Accumulated other comprehensive loss (137) (139)
-------- --------
Total Shareholders' Equity 18,109 9,648
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 74,515 $ 56,804
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 41
\
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,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Membership contracts originated $ 13,912 $ 5,480 $ 3,867
Change in deferred revenue (8,348) (1,521) (640)
-------- -------- --------
Membership sales revenue 5,564 3,959 3,227
Membership dues 37,495 36,455 37,330
Other campground revenue 19,239 17,856 15,955
RPI membership fees 3,706 3,576 4,035
Interest income 1,509 2,068 2,635
Gain on asset sales 4 1,105 5,287
Nonrecurring income -- -- 2,770
Other income 3,254 2,906 4,270
-------- -------- --------
Total Revenues 70,771 67,925 75,509
-------- -------- --------
EXPENSES
Campground operating expenses 42,798 39,534 38,512
Membership origination costs 7,614 4,152 2,880
Change in deferred origination costs (3,112) (440) (234)
Marketing expenses 4,026 2,046 1,700
RPI membership expenses 1,844 1,963 2,132
Corporate member services 1,333 1,253 1,472
Interest expense and amortization 1,427 2,957 4,599
General and administrative expenses 9,634 9,431 9,732
Reduction in allowance for doubtful accounts (251) (886) (1,000)
-------- -------- --------
Total Expenses 65,313 60,010 59,793
-------- -------- --------
INCOME BEFORE INCOME TAXES 5,458 7,915 15,716
INCOME TAXES --
Income tax provision - current (621) (40) (837)
Income tax benefit (provision) - deferred 4,412 (2,304) 10,000
-------- -------- --------
NET INCOME $ 9,249 $ 5,571 $ 24,879
======== ======== ========
NET INCOME PER SHARE -- BASIC $ 1.16 $ .73 $ 3.36
======== ======== ========
NET INCOME PER SHARE -- DILUTED $ 1.08 $ .66 $ 2.96
======== ======== ========
SHARES USED TO CALCULATE NET INCOME PER SHARE:
Basic 7,981 7,630 7,407
======== ======== ========
Diluted 8,594 8,475 8,398
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 42
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(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, 1997 7,383,276 $ 74 $ 20,502 $ (42,613) $ (131) $ (22,168)
Issuance of common shares 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 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
Issuance of common shares 74,364 1 61 -- -- 62
Purchase of treasury stock (189,900) (2) (850) -- -- (852)
Other Comprehensive Income -- -- -- -- 2 2
Net income -- -- -- 9,249 -- 9,249
----------
Comprehensive Income -- -- -- -- -- 9,251
---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2000 7,980,592 $ 80 $ 21,080 $ (2,914) $ (137) $ 18,109
========== ========== ========== ========== ========== ==========
</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,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Collections of principal on receivables $ 3,562 $ 4,167 $ 5,760
Interest received 1,387 1,909 2,371
Interest paid (1,427) (2,988) (822)
General and administrative and corporate member services costs (11,640) (10,233) (10,123)
Cash collected from operations, including deferred revenue 65,502 61,590 62,353
Cash from sales of memberships 10,747 4,424 3,703
Expenditures for property operations (41,387) (38,269) (37,908)
Expenditures for sales and marketing (10,661) (6,151) (4,742)
Expenditures for insurance premiums (2,083) (2,038) (772)
Payment of income taxes (212) (507) (700)
Other, net 265 (69) 236
-------- -------- --------
Net cash provided by operating activities 14,053 11,835 19,356
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and HUD-related expenditures (1,322) (2,935) (2,085)
Acquisition of Leisure Time (7,727) -- --
Proceeds from asset sales 74 2,246 8,550
Proceeds from insurance settlements -- -- 1,119
-------- -------- --------
Net cash (used in) provided by investing activities (8,975) (689) 7,584
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under Credit Agreement (1,273) 10,887 (14,097)
Redemption of PIK Notes -- (34,792) --
Repayment of notes and mortgages (2,792) -- (604)
Purchase of treasury stock (852) (14) --
Issuance of common stock 62 1,339 49
-------- -------- --------
Net cash used in financing activities (4,855) (22,580) (14,652)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 223 (11,434) 12,288
CASH AND CASH EQUIVALENTS
Beginning of period 2,197 13,631 1,343
-------- -------- --------
End of period $ 2,420 $ 2,197 $ 13,631
======== ======== ========
</TABLE>
-- continued --
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<PAGE> 44
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended June 30,
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net Income $ 9,249 $ 5,571 $ 24,879
-------- -------- --------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES --
Depreciation 2,662 2,604 2,538
Bad debt provision 904 187 86
Amortization of interest yield, collection costs and
valuation allowance (229) (316) (523)
Amortization of PIK Note deferred gain -- (150) (30)
Change in deferred sales revenue 8,348 1,522 640
Change in deferred membership origination costs (3,112) (441) (234)
Gain on asset sales (3) (1,105) (5,287)
Reduction of bad debt allowances, net (251) (886) (1,000)
Reduction of insurance reserves -- -- (858)
Gain on insurance settlements -- -- (588)
Reduction of deferred tax valuation allowance (5,807) -- (10,000)
Deferred income tax provision 1,394 2,304 --
Decrease (increase) in restricted cash 265 (69) 236
Decrease (increase) in receivables (1,283) 2,929 4,773
Decrease in other assets 2,182 139 2,843
Increase (decrease) in other liabilities (267) (462) 1,300
Other, net 1 8 581
-------- -------- --------
Total adjustments 4,804 6,264 (5,523)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 14,053 $ 11,835 $ 19,356
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 44
<PAGE> 45
THOUSAND TRAILS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 -- NATURE OF OPERATIONS
Thousand Trails, Inc., a Delaware corporation, and its subsidiaries
(collectively, the "Company") own and operate 63 membership-based campgrounds
located in 17 states and British Columbia, Canada. In addition, the Company
provides a reciprocal use program for members of approximately 300 recreational
facilities and manages 169 public campgrounds for the U.S. Forest Service.
Operating revenues consist primarily of membership dues received from campground
members, fee revenue from members of the reciprocal use program, management fees
from the campground management operations and guest fees and revenues received
from the campground and other operations.
The accompanying consolidated financial statements include the accounts of
Thousand Trails, Inc. and the following wholly owned subsidiaries: Coast
Financial Services, Inc., National American Corporation and its subsidiaries
("NACO"), Resort Parks International, Inc. ("RPI"), Thousand Trails (Canada),
Inc., Thousand Trails Management Services, Inc. ("Trails Management") and,
commencing December 16, 1999, Leisure Time Resorts of America, Inc. ("Leisure
Time"). See Note 3 - Business Combination.
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. Previously, the Company sold residential lots at certain
resorts not related to the campground operations.
The Company has offered financing on 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
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
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<PAGE> 46
campground memberships were not financed for more than two years, and all sales
of lots were on cash terms.
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. Sales revenue
from the sale of campground memberships that do not convey a deeded interest in
real estate, net of any related allowances, is recognized 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 37% 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
Before the Company acquired certain subsidiaries in 1991, the Company purchased
contracts receivable from them and recorded the contracts receivables at the
selling company's carrying value. In connection with the Company's acquisition
of these subsidiaries, the Company recorded the contracts receivable then owned
by the subsidiaries at their fair value, which was net of an allowance for
interest discount to increase the weighted average yield on the contracts to
14.75%, the current market yield at the time of acquisition. The allowance for
interest discount was amortized using the effective interest method over the
respective terms of the contracts, and was fully amortized at June 30, 2000. In
addition, the Company recorded an allowance for future collection costs
associated with the collection of the contracts receivable portfolio. This
allowance was amortized as a reduction of general and administrative expense
based on cash collected on the related portfolio, and was fully amortized at
June 30, 2000. The Company 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 was
amortized over the respective terms of the contracts as an increase to
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<PAGE> 47
interest income, and was fully amortized at June 30, 2000. In connection with
the acquisition of Leisure Time, the Company recorded the contracts receivable
owned by Leisure Time at their face value, less an allowance for doubtful
accounts.
Interest income is recognized on purchased contracts receivable based upon the
effective yield at which they were purchased and on other contracts 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 Undeveloped Land
Campground land and undeveloped land held for sale is 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 membership 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
assets 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.
Income Taxes
The Company recognized certain revenues and expenses in periods which differ for
tax and financial reporting purposes.
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, 2000, 1999 and 1998.
Use of Estimates
The accompanying consolidated financial statements were prepared in conformity
with accounting principles generally accepted in the United States ("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.
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<PAGE> 48
Reclassifications
Certain reclassifications have been made to prior period information to conform
to the current period presentation.
NOTE 3 -- BUSINESS COMBINATION
On December 16, 1999, the Company acquired all of the outstanding capital stock
of Albertsen Investment Corporation, Inc. ("AIC"). AIC was the holding company
owning Leisure Time, which owns and operates 10 membership campgrounds 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 Leisure Time was $7.7 million in cash after
post-closing adjustments 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 $2.3 million.
The acquisition of Leisure Time 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. The allocation of the purchase price of
Leisure Time is based on preliminary estimates of fair value, and may be revised
at a later date.
Set forth below are unaudited pro forma combined results of operations for the
Company based on the assumption that the acquisition of Leisure Time was
completed on July 1, 1998 (in thousands, except per share data):
<TABLE>
<CAPTION>
For the year ended June 30,
---------------------------
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 73,687 $ 75,099
Net income 6,741 4,159
Diluted income per common share $ .79 $ .49
</TABLE>
NOTE 4 -- 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, 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
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<PAGE> 49
U.S. dollars at exchange rates in effect at the balance sheet date. Profit and
loss accounts are translated monthly at exchange rates in effect at that time.
There is no tax effect on items of other comprehensive income.
The following table provides statements of comprehensive income for the years
ended June 30, 2000 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
For the year ended June 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net Income $ 9,249 $ 5,571
Other Comprehensive Income:
Foreign Currency Translation
Adjustment 2 (2)
------------ ------------
Comprehensive Income $ 9,251 $ 5,569
============ ============
</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 years ended June 30, 2000, 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 year ended June 30,
------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net Income $ 9,249 $ 5,571 $ 24,879
========== ========== ==========
Weighted Average Number of Shares -
Basic 7,981 7,630 7,407
Dilutive Options 613 824 975
Dilutive Warrants -- 21 16
---------- ---------- ----------
Weighted Average Number of Shares -
Diluted 8,594 8,475 8,398
========== ========== ==========
Net Income Per Share - Basic $ 1.16 $ .73 $ 3.36
========== ========== ==========
Net Income Per Share - Diluted $ 1.08 $ .66 $ 2.96
========== ========== ==========
</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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<PAGE> 50
NOTE 6 -- RECEIVABLES
CONTRACTS RECEIVABLE
The components of contracts receivable as of June 30, 2000 and 1999, are
summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Contracts receivable
Memberships/undivided interest $ 7,656 $ 3,337
Lots 25 80
------------ ------------
7,681 3,417
Allowance for doubtful accounts (1,928) (1,027)
Allowance for interest discount -- (98)
Allowance for collection costs -- (98)
Valuation allowance -- (33)
------------ ------------
5,753 2,161
Interest receivable 22 23
------------ ------------
$ 5,775 $ 2,184
============ ============
</TABLE>
Contracts Receivable
Contracts receivable bear interest at rates ranging generally from 5.5% to
19.5%, with a weighted average stated rate of 13% at June 30, 2000 and 1999. The
obligor's weighted average equity in the contracts receivable at June 30, 2000
and 1999, was 57% and 80%, respectively. As of June 30, 2000, 97% of the
campground members and 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 years 2000, 1999 and 1998, the Company reduced the allowance for
doubtful accounts on the contracts receivable by $251,000, $886,000 and $1.0
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> 51
Allowance for Interest Discount
Amortization of the allowance for interest discount totaled $98,000, $136,000
and $221,000 for the years ended June 30, 2000, 1999 and 1998, respectively,
which increased interest income. This allowance was fully amortized at June 30,
2000.
Allowance for Collection Costs
Amortization of the allowance for collection costs totaled $98,000, $136,000 and
$230,000 for the years ended June 30, 2000, 1999 and 1998, respectively, which
decreased general and administrative expense. This allowance was fully amortized
at June 30, 2000.
Valuation Allowance
Amortization of the valuation allowance totaled $33,000, $45,000 and $72,000 for
the years ended June 30, 2000, 1999 and 1998, respectively, which increased
interest income. This allowance was fully amortized at June 30, 2000.
At June 30, 2000, scheduled future receipts on contracts receivable are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Memberships and
Undivided Interests Lots Total
-------------------- -------------------- --------------------
<S> <C> <C> <C>
2001 $ 2,553 $ 16 $ 2,569
2002 2,020 6 2,026
2003 1,427 1 1,428
2004 761 1 762
2005 454 1 455
Thereafter 463 -- 463
-------------------- -------------------- --------------------
Total $ 7,678 $ 25 $ 7,703
==================== ==================== ====================
</TABLE>
The Company operates 63 campgrounds located in 17 states and British Columbia,
Canada. The largest percentage of campground members (approximately 32%) reside
in California and, as of June 30, 2000, contracts receivable from members who
purchased memberships in California totaled approximately $1.6 million. A large
percentage of members also reside in Washington and Oregon and, as of June 30,
2000, contracts receivable from members who purchased memberships in Washington
and Oregon totaled $2.9 million and $1.2 million, respectively.
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<PAGE> 52
NOTE 7 -- CAMPGROUND PROPERTIES
Campground properties consisted of the following as of June 30, 2000 and 1999
(dollars in thousands):
<TABLE>
<CAPTION>
June 30,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Land held for sale $ 2,895 $ 2,917
Campground land at campgrounds where right-to-use
memberships are sold 20,888 11,129
Campground land at campgrounds where undivided interest
were sold 2,093 2,071
Property and equipment 42,361 38,171
Construction in progress 146 149
Accumulated depreciation (20,111) (17,496)
------------ ------------
$ 48,272 $ 36,941
============ ============
</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 9.
As of June 30, 2000 and 1999, the Company owned the following property at
resorts not related to the campground operations (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Land held for sale $ 70 $ 70
Property and equipment -- 7
Accumulated depreciation -- (2)
------------ ------------
$ 70 $ 75
============ ============
</TABLE>
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<PAGE> 53
NOTE 8 -- DEFERRED REVENUE AND DEFERRED SELLING EXPENSES
Deferred revenue was comprised of the following as of June 30, 2000 and 1999
(dollars in thousands):
<TABLE>
<CAPTION>
June 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Deferred revenue -
Campground membership sales $ 16,812 $ 8,464
Campground membership dues 15,466 14,574
Other 1,805 1,687
------------ ------------
$ 34,083 $ 24,725
============ ============
</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,
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Deferred membership selling expenses,
beginning of year $ 2,065 $ 1,625 $ 1,391
Deferred 4,110 1,170 794
Recognized (998) (730) (560)
------------ ------------ ------------
Increase in deferral 3,112 440 234
------------ ------------ ------------
Deferred membership selling expenses, end
of year $ 5,177 $ 2,065 $ 1,625
============ ============ ============
Deferred membership sales revenue,
beginning of year $ 8,464 $ 6,943 $ 6,303
Membership contracts originated 13,912 5,480 3,867
Less provision for doubtful accounts (709) -- --
------------ ------------ ------------
Membership contracts originated, net 13,203 5,480 3,867
Membership revenue recognized (4,855) (3,959) (3,227)
------------ ------------ ------------
Increase in deferral 8,348 1,521 640
Deferred membership sales revenue,
end of year $ 16,812 $ 8,464 $ 6,943
============ ============ ============
</TABLE>
NOTE 9 -- LONG-TERM DEBT
CREDIT AGREEMENT WITH FOOTHILL
On June 30, 2000, the Company had $9.6 million of outstanding borrowings under
the Credit Agreement with Foothill, and it had the ability to borrow an
additional $4.7 million for working capital purposes. Under the Credit
Agreement, the first $15.0 million of borrowings bear interest at prime plus
.25% per annum and 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). All borrowings under the
Credit Agreement will mature on January 17, 2003.
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<PAGE> 54
The Company's ability to borrow under the Credit Agreement for working capital
purposes is subject to continued compliance by the Company with the financial
covenants and other requirements of the Credit Agreement, including certain
covenants respecting minimum earnings before interest, taxes, depreciation and
amortization, and minimum tangible net worth. The Credit Agreement prohibits the
Company from borrowing from other sources in significant amounts except for
equipment purchases.
The Company has granted liens on substantially all of its assets to secure its
obligations under the Credit Agreement. In addition, the Company's subsidiaries
other than an immaterial utility subsidiary have guaranteed the Company's
obligations under the Credit Agreement and, subject to certain limitations, have
granted liens on substantially all of their assets to secure their guarantees.
The 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
In July 1996, the Company issued $40.2 million principal amount of 12% Senior
Subordinated Pay-in-Kind Notes Due 2003 ("PIK Notes") in a transaction that 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. The Company recorded a deferred gain of $303,000 in
connection with the transaction and amortized it 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.
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 with $12.5 million of its existing cash and $24.0 million of new
borrowings under the Credit Agreement with Foothill.
Page 54
<PAGE> 55
BALANCE SHEET PRESENTATION
Balance sheet presentation of the current and long-term components of the
Company's outstanding debt as of June 30, 2000 and 1999, is reflected below
(dollars in thousands):
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Current portion of long-term debt:
Borrowings under Credit Agreement $ 2,571 $ 2,100
Notes and mortgages 334 --
------------ ------------
2,905 2,100
============ ============
Long-term debt:
Borrowings under Credit Agreement 7,043 8,787
============ ============
Total debt $ 9,948 $ 10,887
============ ============
</TABLE>
NOTE 10 -- 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,
----------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0%
Provision for state income taxes 8.4 -- 2.7
Alternative minimum taxes 3.0 -- 2.6
Deferred tax provision (benefit) (80.8) 29.6 (63.6)
Unrecorded net operating loss (34.0) (34.0) (34.0)
---------- ---------- ----------
(69.4%) 29.6% (58.3%)
========== ========== ==========
</TABLE>
At June 30, 2000, the Company had estimated net operating tax loss carryforwards
("NOLs") of $20.9 million, expiring in years 2010 through 2014, as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Year ending Amount
June 30, expiring
------------ ----------
<S> <C>
2010 $ 13,098
2011 5,655
2014 2,143
----------
$ 20,896
==========
</TABLE>
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<PAGE> 56
The NOLs available for future utilization were generated by a combination of
operating losses and interest expense. Since 1995, the Company has instituted a
number of cost-cutting moves, including closing and disposing of campgrounds and
decreasing campground operating costs and general and administrative expenses.
In addition, the Company has reduced its debt load and related interest expense.
The Company has generated book income before taxes of at least $5.4 million in
each of the last three years. In assessing the likelihood of utilization of
existing NOLs, management considered the Company's historical results and the
current operating environment.
A reconciliation of the Company's income before taxes for financial statement
purposes to taxable income (loss) for the three years ended June 30, 2000 is as
follows (dollars in thousands):
<TABLE>
<CAPTION>
For the year ended June 30,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Income before taxes for financial
statement purposes $ 5,458 $ 7,915 $ 15,716
Temporary differences related to:
Sales of membership contracts 1,800 1,079 406
Interest expense related to PIK Notes -- (10,313) 3,351
Contracts receivable 1,127 966 5,398
Gain on sale of assets 39 (131) (1,299)
Other (1,093) (1,659) (810)
---------- ---------- ----------
Total temporary differences 1,873 (10,058) 7,046
---------- ---------- ----------
Permanent difference related to:
Non-qualified stock options (447) -- --
Other 74 74 63
---------- ---------- ----------
Total permanent differences (373) 74 63
---------- ---------- ----------
Taxable income (loss) $ 6,958 $ (2,069) $ 22,825
========== ========== ==========
</TABLE>
Temporary differences for each of the years presented are primarily related to
revenue recognition on membership contracts, interest expense deductions, gains
on collections of the contracts receivable portfolio and gains on asset sales.
For financial statement purposes, the Company recognizes revenue from the sale
of membership contracts, and expenses directly related to the sale, over the
expected life of the membership. For tax purposes, in fiscal years 1999 and
1998, the revenue and directly related expenses were recognized in the year of
sale. In fiscal 2000, for tax purposes, the Company elected to recognize revenue
from the sale of membership contracts using the installment method, whereby
revenue is recognized as cash is collected. The temporary difference related to
the sale of membership contracts increased taxable income by $1.8 million, $1.1
million and $406,000 in the years ended June 30, 2000, 1999 and 1998,
respectively.
Deductions for interest expense related to the PIK Notes were deferred for tax
purposes until the PIK Notes were redeemed in December 1998. The temporary
difference related to interest expense on the PIK Notes decreased taxable income
by $10.3 million in the year ended June 30, 1999, and increased taxable income
by $3.4 million in the year ended June 30, 1998.
Page 56
<PAGE> 57
The tax basis in the contract receivable portfolio is different than the basis
for financial statement purposes, primarily as a result of elections made for
tax purposes and a difference in the timing of deductions for bad debt expense.
The temporary difference related to basis differences in the contract receivable
portfolio increased taxable income by $1.1 million, $966,000 and $5.4 million in
the years ended June 30, 2000, 1999 and 1998, respectively.
The tax basis in the Company's property, plant and equipment is different than
the basis for financial statement purposes due to the timing of depreciation
expense deductions, elections made for tax purposes and write-downs of assets
used in the operation of resorts not related to the campground operations. As a
result, when assets are sold, the gain or loss for tax purposes is different
than the gain or loss for book purposes. The temporary difference related to
basis differences in assets sold increased taxable income by $39,000 in the year
ended June 30, 2000, and decreased taxable income by $131,000 and $1.3 million
in the years ended June 30, 1999 and 1998, respectively.
Other temporary differences, which primarily relate to the timing of payments
for accrued expenses, reduced taxable income by $1.1 million, $1.7 million and
$810,000 in the years ended June 30, 2000, 1999 and 1998, respectively.
Permanent differences consist primarily of taxable expenses created by the
exercise of non-qualified stock options and a reduction in taxable expenses
related to non-deductible meals and entertainment expenses. The permanent
difference related to non-qualified stock options decreased taxable income by
$447,000 in the year ended June 30, 2000. The permanent difference related to
non-deductible meals and entertainment expenses increased taxable income by
$74,000 in the years ended June 30, 2000 and 1999 and by $63,000 in the year
ended June 30, 1998.
The components of deferred income taxes as of June 30, 2000 and 1999, were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Deferred Tax Assets - Federal
Net operating loss carryforwards (NOLs) $ 7,104 $ 9,322
Membership sales 3,956 2,175
Alternative minimum tax credit carryover 1,563 552
Unpaid expenses 1,729 1,938
Restructuring costs 1,397 1,384
Deferred revenue 423 486
Bad debt provision 1,102 172
Other 333 306
------------ ------------
17,607 16,335
------------ ------------
Deferred Tax Liabilities - Federal
Property basis differences (6,480) (2,720)
Purchase discount amortization (46) (112)
Installment sales (1,733) --
------------ ------------
(8,259) (2,832)
------------ ------------
Deferred Tax Liability - State (206) --
------------ ------------
Net deferred tax assets before valuation allowance 9,142 13,503
Valuation allowance -- (5,807)
------------ ------------
Net deferred tax assets after valuation allowance $ 9,142 $ 7,696
============ ============
</TABLE>
Page 57
<PAGE> 58
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 NOLs 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 NOLs, was that it is more
likely than not that the Company would 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. In fiscal 1999
the Company reduced the valuation allowance by $401,000, as a result of the
current tax deduction provided by the redemption of the PIK Notes. 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 deduction was reduced
after the redemption because the Company determined that it is more likely than
not that it would realize the tax benefits of those deductions. At June 30,
2000, the Company reversed the remaining $5.8 million of the valuation allowance
because management believes that it is more likely than not that the Company
will generate sufficient taxable income to realize the net deferred tax assets
based upon the current estimates of future taxable income. The ultimate
realization of these income tax benefits will require aggregate taxable income
of approximately $20.9 million during the carryforward period. The Company will
not have to increase current levels of income to generate this aggregate taxable
income over such period. 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.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Lease Commitments
The Company leases equipment and facilities under noncancelable operating leases
with terms in excess of one year. At June 30, 2000, the Company's future
obligations under noncancelable operating leases were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Year ending
June 30, Amount
----------- ------
<S> <C>
2001 $884
2002 580
2003 267
2004 111
2005 110
</TABLE>
Page 58
<PAGE> 59
Accrued Construction Costs
The Company had recorded liabilities of $1.9 million at both June 30, 2000 and
1999, for amounts necessary to complete improvements provided in registration
statements filed with the U.S. 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. As of June 30, 2000 and 1999, the Company's recorded
liability for estimated losses related to uninsured general liability claims
totaled $650,000 and $1.1 million, respectively, which is included in other
liabilities in the accompanying consolidated balance sheets.
Employee Health Insurance
The Company has employee benefit plans that are funded primarily through
employer and employee contributions (see Note 16).
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, in fiscal 1998, the Company received refunds totaling
$1.3 million for 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 (93% in fiscal 2000). The Company's membership base has
declined over the past five fiscal years. Although the acquisition of Leisure
Time increased the size of the membership base, the Company expects that,
notwithstanding new sales, the membership base will continue to decline at the
rate of approximately 3% per year. The Company attributes this attrition
principally to its aging membership base, of whom approximately 50% are senior
citizens. Moreover, the Company estimates that the memberships sold in recent
fiscal years will have an expected life that is shorter than the expected life
of the memberships previously sold by the Company. To stop the continuing
decline in the Company's membership base, the Company must increase its
campground membership sales over current levels or acquire members through the
purchase of other membership campground organizations, similar to the
acquisition of Leisure Time.
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<PAGE> 60
Environmental Issues
Certain environmental issues may exist at some of the Company's campgrounds
concerning underground storage tanks, sewage treatment plants and septic
systems, and waste disposal. Management has reviewed these issues and believes
that they will not have a material adverse impact on the Company's operations or
financial position.
Litigation
Foxwood Property Owners Association, Inc. vs. Foxwood Corporation, filed on
February 18, 1999 in the Court of Common Pleas of Oconee County, South Carolina,
under Case No. 99-37-CP-88. In this action, the plaintiff brought suit against a
subsidiary of the Company alleging that the defendant owes the plaintiff in
excess of $2.5 million for past due maintenance fees on subdivided lots owned by
the defendant. The defendant denies the claim and is vigorously defending the
lawsuit. Although discovery in this lawsuit has not been completed, management
does not believe that it will have a material adverse impact on the Company's
operations or financial position.
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 12 -- SHAREHOLDERS' EQUITY
The Company had shares of Common Stock outstanding as follows:
<TABLE>
<S> <C>
June 30, 1997 7,383,276
Issuances 53,807
Repurchases 0
---------
June 30, 1998 7,437,083
Issuances 662,245
Repurchases (3,200)
---------
June 30, 1999 8,096,128
Issuances 74,364
Repurchases (189,900)
---------
June 30, 2000 7,980,592
=========
</TABLE>
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 that 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
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<PAGE> 61
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 15).
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.
NOTE 13 -- 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, 2000, 1999 and 1998 (dollars in thousands):
<TABLE>
<CAPTION>
For the year ended June 30,
------------------------------------
Non-cash payment of PIK Note interest (see Note 9) 2000 1999 1998
-------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
PIK Notes issued in lieu of cash interest payment $ -- $ 1,969 $ 3,610
</TABLE>
NOTE 14 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 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, 2000
and 1999, as well as their carrying amounts as reported in the accompanying
consolidated balance sheets, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
------------------------ -----------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 2,420 $ 2,420 $ 2,197 $ 2,197
Restricted cash 1,320 1,320 1,240 1,240
Contracts receivable 7,703 3,440
Less: allowances and discount (1,928) (1,256)
---------- ----------
5,775 5,800 2,184 2,250
Financial Liabilities:
Borrowings under Credit Agreement 9,614 9,614 10,887 10,887
Notes and mortgages 334 334 -- --
</TABLE>
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<PAGE> 62
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, 2000 and 1999,
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.
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 15 -- STOCK OPTIONS AND WARRANTS
STOCK OPTIONS
CEO Options
At their annual meeting in November 1996, the shareholders 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 12). As of the date of this report, 344,927 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.
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<PAGE> 63
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 shareholders approve it if any
national securities exchange or securities association that lists any of the
Company's securities requires shareholder approval or if Rule 16b-3 requires
shareholder approval.
The Company reserved 291,780 shares of Common Stock for issuance under the 1991
Employee Plan. To date, options for 163,783 shares are outstanding under the
1991 Employee Plan and options for 127,499 shares have been exercised. 153,783
of the outstanding options are fully vested and the remaining 10,000 options
will vest at a rate of 50% per year over the next two years. 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 it 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 shareholders approve it if any national
securities exchange or securities association that lists any of the Company's
securities requires shareholder approval or if Rule 16b-3 requires shareholder
approval and (iii) the shareholders 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. To date, options for 130,917 shares are
outstanding under the 1993 Employee Plan and options for 153,000 shares have
been exercised. 125,084 of the outstanding options are fully vested and the
remaining 8,333 options will vest at a rate of 50% per year over the next two
years. The options have a term of 10 years from the date of grant.
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<PAGE> 64
1999 Employee Plan
On November 18, 1999, the Company adopted the 1999 Stock Option and Restricted
Stock Purchase Plan (the "1999 Employee Plan") in order to enable the Company
and it subsidiaries to attract, retain, and motivate their officers, employees
and directors. Awards under the 1999 Employee Plan are restricted to (i) 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 1999 Employee Plan until September 27, 2009. The
termination of the 1999 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 1999 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 shareholders approve it if any national
securities exchange or securities association that lists any of the Company's
securities requires shareholder approval and (iii) the shareholders must approve
any amendment decreasing the minimum exercise price specified in the plan for
any ISO granted thereunder.
The Company reserved 140,000 shares of Common Stock for issuance under the 1999
Employee Plan. As of the date of this report, no awards had been made under the
1999 Employee Plan.
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. 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 shareholders 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.
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<PAGE> 65
SFAS No. 123 Disclosures
SFAS No. 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 No. 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
No. 123, the Company's net income and net income per share (diluted) for the
years ended June 30, 2000, 1999 and 1998, would have been $9.2 million or $1.08
per share, $5.5 million or $.65 per share, and $24.8 million or $2.95 per share,
respectively.
Pro forma results under SFAS No. 123 for 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.
Set forth below is a summary of awards of stock options made by the Company
during the years ended June 30, 2000, 1999 and 1998, and awards outstanding as
of the end of those years:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------ ------------------------ ------------------------
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 831,268 $ 1.05 1,191,495 $ .78 1,224,495 $ .71
Options granted -- -- 55,200 $ 4.15 25,000 $ 3.71
Options cancelled (2,500) $ 4.25 (5,000) $ .63 (7,501) $ .63
Options exercised (72,000) $ .72 (410,427) $ .71 (50,499) $ .70
---------- ---------- ---------- ---------- ---------- ----------
Options outstanding,
end of year 756,768 $ 1.07 831,268 $ 1.05 1,191,495 $ .78
========== ========== ==========
Options exercisable,
end of year 738,435 $ .99 801,268 $ .83 1,152,332 $ .79
========== ========== ==========
Shares available for
grant, end of year 142,500 n/a -- n/a 50,200 n/a
========== ========== ==========
</TABLE>
The weighted-average fair value of stock options granted by the Company during
the years ended June 30, 1999 and 1998 was $1.74 and $.78, respectively. No
options were granted during the year ended June 30, 2000. 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 and 5.41% for fiscal 1998, (2)
an expected life of three years for 1999 and 1998, (3) expected volatility of
52.58% for fiscal 1999 and 54.56% for fiscal 1998, 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.
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<PAGE> 66
The following table summarizes information about the Company's stock options
outstanding as of June 30, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Outstanding Remaining Exercise Exercisable Exercise
Range of Prices at 6/30/00 Contractual Life Price at 6/30/00 Price
------------------- ------------- ------------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Option Plans:
$ .59 - $1.08 259,500 5.87 years $ .77 259,500 $ .77
$3.71 - $4.25 77,700 8.39 years $4.08 59,367 $4.02
CEO Options:
$.69 419,568 6.08 years $ .69 419,568(1) $ .69
------------- -------------
756,768 6.25 years $1.07 738,435 $ .99
============= =============
</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 income tax purposes.
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 16 -- 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 plan.
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 $817,000 and $907,000 at
June 30, 2000 and 1999, 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.
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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.
Employee 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 approximately $152,000 for the year
ended June 30, 2000, and has committed to make matching contributions for the
calendar year ended December 31, 2000, in an amount equal to 45% of the
voluntary contributions made by each participant, up to 4% of the participant's
annual compensation (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 $10,000 for the year ended June 30,
2000, and has committed to make matching contributions for the calendar year
ended December 31, 2000, 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. During the year ended June 30, 2000,
employees purchased 2,364 shares of Common Stock. Pursuant to APB No. 25, no
expense was recorded by the Company in connection with this plan.
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NOTE 17 -- SEGMENT REPORTING
The Company has three reportable segments: campgrounds, RPI, and Trails
Management. The campground segment generates a majority of the Company's
operating revenues. Each segment is differentiated by the products or services
it offers.
The campground segment consists of 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 approximately 300
recreational facilities participating in RPI's reciprocal use system, subject to
certain limitations. Operating revenue consists of annual membership fees paid
by members.
Trails Management manages 169 public campgrounds for the U.S. Forest Service.
Operating revenue consists of the campsite usage fees paid by customers staying
at the public campgrounds.
The Company evaluates performance based upon the income before income taxes for
each business segment. Identifiable assets are those assets used exclusively in
the operations of each business segment.
<TABLE>
<CAPTION>
Year ended June 30, 2000
--------------------------------------------------------------------------
Trails Corporate
Campgrounds RPI Management and Other Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 54,226 $ 3,706 $ 2,508 $ 374 $ 60,814
Membership sales revenue 5,564 -- -- -- 5,564
Income (loss) before
income taxes 11,009 1,862 (37) (7,376) 5,458
Identifiable assets 61,780 242 312 12,181 74,515
Depreciation expense 2,456 10 17 179 2,662
Capital expenditures 1,289 -- 11 24 1,324
</TABLE>
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<TABLE>
<CAPTION>
Year Ended June 30, 1999
-------------------------------------------------------------------------
Trails Corporate
Campgrounds RPI Management and Other Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 52,040 $ 3,576 $ 2,271 $ 227 $ 58,114
Membership sales revenue 3,959 -- -- -- 3,959
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
-------------------------------------------------------------------------
Trails Corporate
Campgrounds RPI Management and Other Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 51,964 $ 4,035 $ 1,321 $ 1,186 $ 58,506
Membership sales revenue 3,227 -- -- -- 3,227
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>
NOTE 18 -- 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
interest of the Company (or with respect to any criminal action or 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 trusts were terminated in July 1999
and the remaining trust assets were distributed to the Company.
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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 19 -- SELECTED QUARTERLY FINANCIAL DATA
The following table summarizes the unaudited consolidated quarterly results of
operations for fiscal 2000 and 1999 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fiscal 2000
Total revenues $19,833 $15,002 $16,004 $19,932
Total expenses (before taxes) 17,696 13,526 14,511 19,580
Net income 1,294 894 868 6,193
Net income per share - basic .16 .11 .11 .78
Net income per share - diluted .15 .10 .10 .73
Shares used to calculate net income per share:
Basic 7,983 7,978 7,981 7,981
Diluted 8,622 8,612 8,580 8,594
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
</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 the summer. In addition, a majority of the Company's
sales and marketing efforts occur during the summer.
Net income decreased by $1.2 million in the second quarter of fiscal 2000,
compared with the same quarter from the prior year. The second quarter of fiscal
1999 included $1.0 million in gains on the sale of assets, compared with only
$18,000 in the second quarter of fiscal 2000.
Net income increased by $5.1 million in the fourth quarter of fiscal 2000,
compared with the same quarter from the prior year, primarily as the result of a
$5.8 million deferred tax benefit from the elimination of the valuation
allowance for the Company's deferred tax asset.
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SCHEDULE II
THOUSAND TRAILS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Balance
Valuation and qualifying accounts Year beginning at end of
deducted from assets ended of year Additions Deductions year
--------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts 6/30/00 $ 1,027 $ 2,664 $ 1,763(a) $ 1,928
6/30/99 2,136 186 1,295(a) 1,027
6/30/98 3,855 86 1,805(a) 2,136
Allowance for uncollectible 6/30/00 2,599 3,138 3,393 2,344
dues receivable 6/30/99 3,429 1,607 2,437 2,599
6/30/98 3,568 2,626 2,765 3,429
Allowance for interest discount, 6/30/00 229 0 229 0
Collection costs and valuation 6/30/99 546 0 317 229
discount 6/30/98 1,069 0 523 546
Deferred tax valuation allowance 6/30/00 5,807 0 5,807(b) 0
6/30/99 6,392 0 585(b) 5,807
6/30/98 21,961 0 15,569(b) 6,392
</TABLE>
(a) Includes reductions in the allowance for doubtful accounts of $251, $886,
and $1,000 in fiscal 2000, 1999 and 1998, respectively.
(b) Includes reductions in the deferred tax valuation allowance of $5,807,
$401, and $10,000 in fiscal 2000, 1999 and 1998, respectively.
Page 71
<PAGE> 72
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Page 72
<PAGE> 73
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 2000 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 2000 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 2000 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONS 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 2000 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.
Page 73
<PAGE> 74
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 Accounts for the years ended June 30, 2000,
1999, and 1998.
Consolidated Balance Sheets as of June 30, 2000 and 1999.
Consolidated Statements of Operations for the years ended June 30, 2000,
1999, and 1998.
Consolidated Statements of Shareholders' Equity for the years ended June
30, 2000, 1999, and 1998 .
Consolidated Statements of Cash Flows for the years ended June 30, 2000,
1999, and 1998.
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, 2000.
(c) EXHIBITS
The following documents are filed or incorporated by reference as exhibits to
this report:
Exhibit
Number Description
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 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").
2.2 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).
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<PAGE> 75
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 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 (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 30, 1999, File No. 1-14645).
10.3 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).
10.4 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).
10.5 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).
10.6 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).
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<PAGE> 76
10.7 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).
10.8 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 of Form S-2,
originally filed with SEC on December 22, 1993, File No.
1-14645).
10.9 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).
10.10 The Company's 1993 Director Stock Option Plan (incorporated by
reference to Exhibit 10.23 to the Company's Registration
Statement No. 33-73284 of Form S-2, originally filed with the
SEC on December 22, 1993, File No. 1-14645).
10.11 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).
10.12 The Company's 1999 Stock Option and Restricted Stock Purchase
Plan.
10.13 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).
10.14 Assumptions of Obligations, dated as of November 20, 1996, by
the Company assuming the obligations of 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).
10.15 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).
Page 76
<PAGE> 77
10.16 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).
10.17 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.)
10.18 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 Report on Form 10-Q
for the quarter ended December 31, 1995, File No. 1-14645).
10.19 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 for the quarter ended December 31,
1995, File No. 1-14645).
10.20 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).
10.21 Employment Agreement, dated as of October 15, 1999, between
the Company and Bryan D. Reed (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999, File No. 1-14645).
10.22 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).
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<PAGE> 78
10.23 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).
10.24 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).
10.25 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).
10.26 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).
10.27 Indemnification Agreement, dated as of October 15, 1999,
between the Company and Bryan D. Reed (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File No.
1-14645).
10.28 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).
10.29 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).
10.30 Supplement No. 3 to the 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 (incorporated by reference to
Exhibit 10.36 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1999, File No. 1-14645).
10.31 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 of the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 1-14645).
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<PAGE> 79
10.32 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).
10.33 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).
10.34 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).
10.35 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., (incorporated
by reference to Exhibit 10.36 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1999, File No.
1-14645).
10.36 Trust Agreement, dated as of July 22, 1992, establishing the
Company's Flexible Benefits Plant 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).
10.37 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).
10.38 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).
10.39 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).
10.40 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).
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<PAGE> 80
10.41 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).
10.42 Tax Allocation Agreement, dated as of July 1, 1991, 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).
10.43 Stockholder Agreement, dated as of 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).
10.44 Sample form of current Membership Contract.
11.1 Statement re: Computation of Per Share Earnings.
22.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule as of and for the year ended June 30,
2000.
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<PAGE> 81
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 26, 2000 By: /s/ William J. Shaw
--------------------------------------
William J. Shaw
Chairman of the Board, President,
and Chief Executive Officer
Date: September 26, 2000 By: /s/ Bryan D. Reed
--------------------------------------
Bryan D. Reed
Chief Financial and 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 26, 2000
-------------------------------------
Andrew M. Boas
/s/ William P. Kovacs Director September 26, 2000
-------------------------------------
William P. Kovacs
/s/ Donald R. Leopold Director September 26, 2000
-------------------------------------
Donald R. Leopold
/s/ H. Sean Mathis Director September 26, 2000
-------------------------------------
H. Sean Mathis
/s/ Douglas K. Nelson Director September 26, 2000
-------------------------------------
Douglas K. Nelson
/s/ William J. Shaw Chairman of the Board September 26, 2000
-------------------------------------
William J. Shaw
</TABLE>
81
<PAGE> 82
INDEX TO EXHIBITS
<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 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").
2.2 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).
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 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 (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 30, 1999, File No. 1-14645).
10.3 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> 83
<TABLE>
<S> <C>
10.4 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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 of Form S-2,
originally filed with SEC on December 22, 1993, File No.
1-14645).
10.9 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).
10.10 The Company's 1993 Director Stock Option Plan (incorporated by
reference to Exhibit 10.23 to the Company's Registration
Statement No. 33-73284 of Form S-2, originally filed with the
SEC on December 22, 1993, File No. 1-14645).
10.11 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).
10.12 The Company's 1999 Stock Option and Restricted Stock Purchase
Plan.
10.13 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> 84
<TABLE>
<S> <C>
10.14 Assumptions of Obligations, dated as of November 20, 1996, by
the Company assuming the obligations of 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).
10.15 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).
10.16 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).
10.17 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.)
10.18 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 Report on Form 10-Q
for the quarter ended December 31, 1995, File No. 1-14645).
10.19 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 for the quarter ended December 31,
1995, File No. 1-14645).
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10.20 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).
10.21 Employment Agreement, dated as of October 15, 1999, between
the Company and Bryan D. Reed (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999, File No. 1-14645).
10.22 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).
10.23 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).
10.24 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).
10.25 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).
10.26 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).
10.27 Indemnification Agreement, dated as of October 15, 1999,
between the Company and Bryan D. Reed (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File No.
1-14645).
10.28 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).
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10.29 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).
10.30 Supplement No. 3 to the 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 (incorporated by reference to
Exhibit 10.36 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1999, File No. 1-14645).
10.31 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 of the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 1-14645).
10.32 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).
10.33 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).
10.34 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).
10.35 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., (incorporated
by reference to Exhibit 10.36 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1999, File No.
1-14645).
10.36 Trust Agreement, dated as of July 22, 1992, establishing the
Company's Flexible Benefits Plant 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).
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10.37 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).
10.38 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).
10.39 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).
10.40 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).
10.41 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).
10.42 Tax Allocation Agreement, dated as of July 1, 1991, 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).
10.43 Stockholder Agreement, dated as of 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).
10.44 Sample form of current Membership Contract.
11.1 Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule as of and for the year ended June 30,
2000.
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