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owns 68 (included in the 649 centers) Montessori schools which cater to K-12 students. LPA's residential Academies are typically located in residential, middle-income neighborhoods. As of February 28, 2006, the company reported LTM sales and EBITDA of $411 million and $33 million, respectively. The company has been owned by JP Morgan Capital since 1998.

■ Nobel Learning Communities (Public)

Nobel is a for-profit provider of private pay education and services for education entities for the preschool through 12th grade market. The company's programs are offered through a network of general education preschools, elementary and middle schools, programs for learning challenged students and special purpose high schools. Nobel operates 150 schools in 13 states across the U.S. As of December 31, 2005, the company reported LTM sales and EBITDA of $166 million and $15 million, respectively. Affiliates of the Principals are currently significant shareholders of the company.

8.3.4 Government's Role in Early Childhood Education

Approximately 83% of the estimated $54 billion spent on ECE is generated by private and independent non-profit services. The government provides the remaining 17% of services through Head Start and public schools. The government pays for public school and Head Start programs, but also subsidizes payments of low-income families to providers of their choice through the Child Care Development Block Grant and Temporary Assistance for Needy Families, which are blended with state dollars. About 25% of for-profit early childhood care revenue comes from these subsidy programs.
The government is, at both the federal and state level, actively involved in expanding the availability of early childhood care services. Federal support is delivered at the state level through government-operated educational and financial assistance programs. Early childhood care services offered directly by states include training, licensing and regulation for early childhood care providers and resource and referral systems for parents seeking ECE.

The increasing importance of education is further demonstrated by the "No Child Left Behind Act of 2001," signed into law in January 2002. This Act is the most sweeping reform of the Elementary and Secondary Education Act, or ESEA, since ESEA was enacted in 1965. To support this commitment, President Bush requested a $54.4 billion budget for the Department of Education for fiscal 2007, a 28.9% increase from the 2001 budget of $42.2 billion.

Certain tax incentives exist for early childhood care programs. Section 21 of the Internal Revenue Code provides federal income tax credits ranging from 20% to 35% of certain early childhood care expenses for qualified individuals.

8.4. The U.S. K-12 Education Market

A fundamental change has occurred in the K-12 sector in recent years, as the desire to improve school quality has overtaken demographics as a key growth driver. Companies providing supplemental educational services (e.g., KLC) and several school alternatives, such as charter and contract schools (e.g., k12), are expected to be instrumental in improving K-12 student performance.

The K-12 education market in the U.S. is comprised of over 15,000 school districts including more than 90,000 K-12 public schools, approximately 3.5 million teachers, and about 54 million students according to the National Center for Education Statistics. Total K-12 expenditures, federal, state and local, are approximately $500 billion.

Despite the growth in spending on public education over the last decade, student achievement has shown little progress. According to the 2005 National Assessment of Educational Progress, 32% of eighth-graders performed below the Basic level in mathematics, and only 29% performed at or above the Proficient level. One-third of American fourth graders are functionally illiterate. KUE believes the following factors will present significant market opportunities in the coming years for for-profit K-12

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