KLC OpCo Financial Forecast and Center Utilization Projections (2006‑2011)

KLC OpCo ($ in millions) 2006P 2007P 2008P 2009P 2010P 2011P ECE Centers $1,488.7 $1,572.8 $1,668.4 $1,797.1 $1,947.4 $2,111.1 School Partnerships 55:5 66.6 79.9 95.9 1184 138.1 KC Distance Learning 13.6 17.1 21:3 26.7 BERS 41.6 Total Revenue $1,557.8 $1,656.5 $1,769.6 $1,919.7 $2,095.8 $2,290.8 Sales Growth From 2006 to 2011 KLC OpCo projects that revenue from the ECE centers will grow at a 7.2% CAGR. The growth forecast is based on the following assumptions: 2 Tuition growth. KLC OpCo projects that tuition rates at existing centers will grow at approximately 4% per year for the next five years. This growth is below recent experience (6.9% in 2005). Moreover, tuition rates in the industry have been growing at average rates of greater than 4%. = Utilization improvement. Management projects that recent improvements witnessed at KLC OpCo will continue. By 2011, KLC OpCo projects Utilization will have increased to 65.2%. Management believes these improvements in Utilization will be the result of expected favorable demographic trends (described elsewhere in this Memorandum), new sales training programs, re-branding efforts in selected markets combined with the opening of appropriately sized centers. » New centers. KLC OpCo expects a net reduction of centers in 2006 and 2007 as it completes its integration of KinderCare and the rationalization of its properties. Beginning in 2008, KLC OpCo projects to be adding net centers. KLC OpCo 2005PF 2006P 2007P 2008P 2009P 2010P 2011P Utilization 61.2% 62.2% 63.0% 63.5% 63.9% 645% 65.2% Average Weekly Tuition $167.35 $173.68 $179.99 $188.37 $197.47 $206.95 $216.52 % Growth - 3.7% 3.6% 4.7% 4.8% 4.8% 4.6% Center Count Beginning of Period 2,021 1,934 1,894 1,878 1,890 1,925 1,963 New Center Additions 10 10 24 52 75 78 80 Closures (97) (50) (40) (40) (40) (40) (40) End of Period 1,934 1,894 1,878 1,890 1,925 1,963 2,003 Additional Products and Services KLC OpCo plans to use its footprint of approximately 2,000 centers across the U.S. as a platform to sell additional educational (e.g., supplemental phonics, math, Spanish and music courses) and non- educational (e.g., health insurance, childcare financing) products and services. The sale of additional products and services is expected to generate approximately 2.2% of total revenue in 2011, which is included in the ECE center projections. 94 HOUSE_OVERSIGHT_024527