KLC Consolidated 2004‑2005 Financial Summary

KLC Consolidated 2004PF 2005PF Revenue $1,442.2 $1,477.7 Revenue Growth 2.5% Payroll and other $725.0 $734.9 Rent 113:2 121.1 Other Operating Expenses 274.4 281.0 Gross Profit $329.6 $340.7 Adjusted EBITDA $231.4 $238.0 Adjusted EBITDA Margin 16.0% 16.1% Adjusted EBITDAR $344.5 $359.1 Adjusted EBITDAR Margin 23.9% 24.3% Other Financial and Operating Data Depreciation and Amortization $97.1 $89.3 Interest Expense 89.9 89.9 Capital Expenditures 70.6 83.1 # of Centers (at year end) 2,021 1,934 Average Weekly Tuition $156.61 $167.35 (combined actual) Utilization 61.6% 61.2% Revenue. During the 52 weeks ended December 31, 2005, revenue increased $35.6 million, or 2.5%, over the same period in 2004. The increase was primarily due to tuition rate increases, which took effect in January 2005 and September 2005, offset by the impact of center closures and a slight decline in Utilization. However, during the third quarter of 2005 Utilization levels increased versus the same period in 2004, from 59.3% to 60.3%. This positive Utilization trend was repeated in the fourth quarter of 2005 as levels rose to 59.2% versus 58.9% in the comparable period of 2004. Management believes these improvements reflect stronger economic conditions, strong back-to-school enrollments, marketing efforts and other management initiatives and programs. ECE revenue increased $24.9 million, or 1.8%, in the 52 weeks ended December 31, 2005 compared to the same period of 2004. On a same center basis (centers opened for more than one year), revenue increased 4.4% from 2004 to 2005. KLC Consolidated Revenue 2004PF 2005PF ECE Centers $1,394.4 $1,419.3 School Partnerships 39.8 48.5 KCDL 8.0 10.0 Total $1,442.2 $1,477.7 Cost _of revenue and gross margin. Gross margin for the 52 weeks ended December 31, 2005 was $340.7 million, or 23.1% as a percentage of sales, compared to $329.6 million, or 22.9% in the prior year. Costs of revenue include the following: 78 HOUSE_OVERSIGHT_024511