According to an industry analysis by Marketdata Enterprises, the U.S. child care industry generated an estimated $40 billion in revenues in 2000, and is estimated to generate revenues of approximately $60 billion in 2005. The Children's Foundation estimates that there are currently approximately 117,000 licensed child care centers throughout the United States, compared to approximately 106,000 in 2000. The growth in the child care industry has been driven by a number of factors. Although some of the trends that rose so sharply in the 1980s, such as the population of children under five and return of mothers to the workforce, have stabilized, the factors that drive demand for early education and child care services continue to be strongly positive.

As the number of traditional single earner and stay-at-home parent families has declined, many parents have been forced to struggle with alternative care options for their children. In 2002, approximately 65% of all U.S. families with children under six were dual-income or single parent households, with a declining percentage of children receiving care from a stay-at-home parent. As women and mothers have entered the workforce, the demand for child care has increased proportionally. According to the U.S. Bureau of Labor Statistics, the labor force participation rate of mothers with children under the age of six has increased from approximately 39% in 1975 to approximately 64% in 2002. In 2002, approximately 37% of all children were born to mothers over 30, as compared to 20% in 1980, according to the National Center for Health Statistics.

Within the child care industry, there is a continued trend toward employer-sponsored child care services as large- and medium-size employers continue to recognize the value of child care assistance as an employee benefit. Many corporations and other employers have found that providing early childhood education services enhances employee productivity, loyalty and commitment. For these reasons, employers have increasingly recognized child care benefits as a key element of their employee recruitment and retention strategy, and are increasingly providing this benefit through employer-sponsored child development centers.

The Company has developed a series of educational programs, including five separate proprietary age-specific curricula, tailored for infants and toddlers, two-year olds, preschool, kindergarten and school ages between six and 12. The Company also offers tutorial programs in the areas of literacy, reading, foreign languages and mathematics. The Company’s educational programs recognize the importance of using high quality, research-based curriculum materials designed to create a rich and nurturing learning environment for children. The Company’s programs are revised on a rotating basis to take advantage of the latest research in child development.

The Company operates two types of centers: community centers and employer-sponsored centers. The vast majority of the Company’s centers are community centers which are designed to meet the general needs of families within a given area. The Company’s typical community and employer-sponsored center contains classrooms, play areas and complete kitchen and bathroom facilities. Each center is equipped with a variety of audio and visual aids, educational supplies, games, puzzles, toys and outdoor play equipment. Centers also lease vehicles used for field trips and transporting children enrolled in its before- and after-school program. All centers are equipped with computers for children's educational programs. Most of the Company’s centers are able to accommodate from 95 to 190 children. The employer-sponsored centers are individualized for each sponsor and range in capacity from 75 to 230 children.

The Company determines tuition rates based upon a number of factors, including the age of the child, full- or part-time attendance, enrollment levels, location and competition. Tuition rates are typically adjusted company-wide each year to coincide with the back-to-school periods. However, the Company may adjust individual room rates within a specific center at any time based on competitive position, occupancy levels and demand.

Each of the Company’s centers is linked to its corporate headquarters through a fully automated information, communication and financial reporting system. This system is designed to provide timely information on items such as net revenues, enrollments, expenses, payroll and staff hours and provides center directors with the ability to distribute reports and update centrally maintained information on a daily basis.

Expenses for salaries, wages and benefits increased $3.5 million, from $355.3 million for the forty weeks ended March 7, 2003 to $358.9 million forty weeks ended March 5, 2004.

Depreciation and amortization expense increased $3.2 million from $43.0 million for the forty weeks ended March 7, 2003 to $46.2 million forty weeks ended March 5, 2004.

Rent expense increased $2.2 million from $39.5 million for the forty weeks ended March 7, 2003 to $41.7 million forty weeks ended March 5, 2004.

Operating income was $49.2 million for forty weeks ended March 5, 2004, a decrease of $0.6 million, or 1.2%, from $49.8 million for the forty weeks ended March 7, 2003.