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KLC OpCo provides a wide range of quality programs that are continuously updated to reflect current thinking and to meet the needs of individual children. Programs have been developed in conjunction with nationally recognized experts in ECE and various curricula reflect the latest research in brain development. Programs stimulate the social, emotional, intellectual and physical needs of children and each program is age appropriate.

KLC OpCo's ECE facilities are generally open throughout the year, usually five days a week, from 6:30 a.m. to 6:30 p.m. New enrollments are most often highest in September and January, with the largest decrease in enrollment during holiday periods and summer months. Many centers offer summer day camp programs for children up to the age of 12. Additionally, many centers offer "back-up" care, which is offered in the event that the parent's primary child care arrangement is unavailable (e.g., when an in-home provider goes on vacation). The company will provide short-term child care until the parent's child care resumes.

Community Centers

The 1,812 community centers are located in diverse demographic locations. Newly built centers tend to be located in the targeted demographic market of newer upper-middle class to upper income suburban areas with high concentrations of dual income families. In a community center, the current weekly tuition rates for full-day service range from $90 to $400 per child, depending upon the center location and the age of the child. KLC OpCo also offers tutorial programs in areas such as literacy, reading, foreign languages and mathematics in many of its centers for a supplemental fee and is exploring offering additional supplemental fee programs. Tuition is generally paid in advance on a weekly basis and, to a lesser extent, on a monthly basis. The company typically sets tuition for half-day programs at a 20% to 40% premium compared with an equal number of hours for a full-day program. Approximately 20% of tuition is paid under state and federal subsidy programs.

Employer-Sponsored Centers

As of FYE December 31, 2005, KLC OpCo operated 122 corporate or employer-sponsored centers. These centers are typically free-standing, and are located at or near the premises or campus of the employer-sponsor. These sites are different from community centers in that they usually have more square footage per child and larger staff areas. Generally, the corporate sponsor provides the constructed building. KLC OpCo currently has relationships with a diverse group of employers, including hospitals, health care facilities, government agencies, and private sector companies. Its corporate relationships include, but are not limited to, the following: AOL Time Warner, TRW, Lockheed Martin, the World Bank Group, Fox, Maytag, Northrop, TJ Maxx, the National Security Agency, the Mayo Clinic and Stanford University.

Employer-sponsored centers are operated either on a fixed-fee basis (31 centers) or on a profit-and-loss basis (91 centers). Under the former, KLC OpCo receives a fixed fee per month, typically irrespective of occupancy. In these contracts, the Company collects tuition on behalf of the employer sponsor. Under a profit-and-loss contract, KLC OpCo collects tuition for its own account, generally with no guaranteed fees from the employer. In some cases, its operations are subsidized by the employer, typically in the form of tuition subsidies, free or reduced rent, the provision of certain services such as maintenance, landscaping and janitorial services or enrollment guarantees. This enables the company to utilize the subsidies for improved staff quality and teacher / child ratios.

Contract terms typically average between one and five years. Normally the management centers are reserved for children of the corporations' employees. Some contracts provide for accepting non-employee children, for which the company can often charge a higher tuition.

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