<PAGE>
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                 AMENDMENT NO. 1
                                       TO
                                   FORM 10-K/A

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                        Commission File No. 333-56239-01

                                LPA HOLDING CORP.
             (exact name of registrant as specified in its charter)

                       SEE TABLE OF ADDITIONAL REGISTRANTS

Delaware                                    48-1144353
(State or other jurisdiction of             (IRS employer identification number)
incorporation or organization)

                        8717 WEST 110TH STREET, SUITE 300
                             OVERLAND PARK, KS 66210
              (Address of principal executive office and zip code)

                                 (913) 345-1250
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                (1) Yes   X    No              (2) Yes   X     No
                        -----     -----                -----      -----

There are no shares of voting stock of La Petite Academy, Inc. held by
non-affiliates.

As of November 27, 2001, LPA Holding Corp. had outstanding 564,985 shares of
Class A Common Stock (par value, $.01 per share) and 20,000 shares of Class B
Common Stock (par value, $.01 per share). As of November 27, 2001, each of the
additional registrants had the number of outstanding shares, which is shown on
the following table.



                                       1
<PAGE>




ADDITIONAL REGISTRANT

<TABLE>
<CAPTION>
                                                                                   Number of Shares
                          Jurisdiction of  Commission         IRS Employer            of Common
Name                       Incorporation   File Number      Identification No.    Stock Outstanding
----                       -------------   -----------      ------------------    -----------------
<S>                       <C>              <C>              <C>                   <C>
La Petite Academy, Inc.   Delaware         333-56239          43-1243221          100 shares of Common
                                                                                  Stock (par value, $.01 per share)
</TABLE>















                                       2
<PAGE>





                                EXPLANATORY NOTE

LPA Holding Corp. and La Petite Academy (the "Registrants") are filing this
Amendment No. 1 on Form 10-K/A (the "Amendment No. 1") in response to comments
received from the Securities and Exchange Commission (the "SEC") regarding the
Registrants' Form 10-K for the fiscal year ended June 30, 2001 that was
originally filed on November 30, 2001 (the "Original 10-K Filing"). This
Amendment No. 1 is being filed in response to the SEC's comments received in
connection with a review of the Registrants' Original 10-K Filing, including
management determining, subsequent to the Original 10-K Filing that it had
incorrectly accounted for the transition adjustment related to certain
derivative interest rate instruments in connection with the adoption of
Statement of Financial Accounting Standards No. 133, Accounting For Derivative
Instruments and Hedging Activities ("SFAS No. 133") on July 2, 2000.
Accordingly, this Amendment No. 1 reflects the following:

     (1) (a) the restatement of the Registrants' consolidated financial
statements for the fiscal year ended June 30, 2001 contained in Item 8 related
to the transition adjustment recorded upon the adoption of SFAS No.133 (as
described more fully in Note 14 to the consolidated financial statements), (b)
revisions to the Registrant's consolidated balance sheet presentation of the
Series A 12% redeemable preferred stock contained in Item 8, (c) additional
disclosures relating to advertising costs in Note 1 to the Registrants'
consolidated financial statements for the fiscal year ended June 30, 2001
contained in Item 8, (d) revisions to the disclosures relating to scheduled
maturities of long-term debt and capital lease obligations in Note 3 to the
Registrants' consolidated financial statements for the fiscal year ended June
30, 2001 contained in Item 8, and (e) revisions to the disclosures relating to
stock options in Note 10 to the Registrants' consolidated financial statements
for the fiscal year ended June 30, 2001 contained in Item 8;

     (2) the corresponding disclosures related to the transition adjustment
restatement in Item 6. Selected Financial Data; and

     (3) the corresponding disclosures related to the transition adjustment
restatement and a revised EBITDA presentation in Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations.

For the convenience of the reader, this Amendment No. 1 amends and restates in
its entirety the Original 10-K Filing, as amended by this Amendment No. 1. This
Amendment No. 1 continues to speak as of the date of the Original 10-K Filing,
and the Registrants have not updated the disclosure contained herein to reflect
any events that occurred at a later date. All information contained in this
Amendment No. 1 is subject to updating and supplementing as provided in the
Registrants' periodic reports filed with the SEC subsequent to the date of the
Original 10-K Filing.






                                       3
<PAGE>


LPA HOLDING CORP.

INDEX



<TABLE>
<CAPTION>
PART I.
                                                                                                          PAGE
                                                                                                          ----
<S>         <C>                                                                                           <C>
Item 1.     Business                                                                                         5

Item 2.     Properties                                                                                      12

Item 3.     Legal Proceedings                                                                               13

Item 4.     Submission of Matters to a Vote of Security Holders                                             14


PART II.

Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters                           14

Item 6.     Selected Financial Data                                                                         14

Item 7.     Management's Discussion and Analysis of Financial Condition and
             Results of Operations                                                                          17

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk                                      24

Item 8.     Financial Statements and Supplementary Data                                                     25

Item 9.     Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure                                                            45

PART III.

Item 10.    Directors and Executive Officers of the Registrant                                              46

Item 11.    Executive Compensation                                                                          49

Item 12.    Security Ownership of Certain Beneficial Owners and Management                                  51

Item 13.    Certain Relationships and Related Transactions                                                  53

PART IV.

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K                                 54

SIGNATURES                                                                                                  62
</TABLE>




                                       4
<PAGE>

PART I.

ITEM 1. BUSINESS

ORGANIZATION

   Vestar/LPA Investment Corp. (Parent), a privately-held Delaware corporation,
   was formed in 1993 for the purpose of holding the capital stock of La Petite
   Holdings Corp. (Holdings), a Delaware corporation. Holdings, which has no
   assets or operations, was formed in 1993 for the purpose of holding the
   capital stock of La Petite Acquisition Corp. (Acquisition). On July 23, 1993,
   as a result of a series of transactions, Holdings acquired all the
   outstanding shares of common stock, par value $.01 (the Common Stock), of La
   Petite Academy, Inc., a Delaware corporation (La Petite). The transaction was
   accounted for as a purchase and the excess of purchase price over the net
   assets acquired is being amortized over 30 years. On May 31, 1997, Holdings
   was merged with and into La Petite with La Petite as the surviving
   corporation. On August 28, 1997, LPA Services, Inc. (Services), a wholly
   owned subsidiary of La Petite, was incorporated. Services provides third
   party administrative services on insurance claims to La Petite.

   On March 17, 1998, LPA Investment LLC (LPA), a Delaware limited liability
   company owned by an affiliate of JP Morgan Partners (JPMP) and by an entity
   controlled by Robert E. King, a director of La Petite, and Parent, which was
   renamed LPA Holding Corp., entered into an Agreement and Plan of Merger
   pursuant to which a wholly owned subsidiary of LPA was merged into Parent
   (the Recapitalization). In the Recapitalization, all of the then outstanding
   shares of preferred stock and common stock of Parent (other than the shares
   of common stock retained by Vestar/LPT Limited Partnership and management of
   La Petite) owned by the existing stockholders of Parent (the Existing
   Stockholders) were converted into cash. As part of the Recapitalization, LPA
   purchased $72.5 million (less the value of options retained by management) of
   common stock of the Parent and $30 million of redeemable preferred stock of
   Parent (collectively, the Equity Investment). In addition, in connection with
   the purchase of preferred stock of Parent, LPA received warrants to purchase
   up to 6.0% of Parent's common stock on a fully diluted basis. The
   Recapitalization was completed May 11, 1998.

   On July 21, 1999, La Petite acquired all the outstanding shares of Bright
   Start, Inc. (Bright Start). See Note 11 to the consolidated financial
   statements.

   On December 15, 1999, LPA acquired an additional $15.0 million of Parent's
   redeemable preferred stock and received warrants to purchase an additional 3%
   of Parent's common stock on a fully-diluted basis at that time. The $15.0
   million proceeds received by Parent were contributed to La Petite as common
   equity.

   Pursuant to a notice dated November 13, 2001, Parent offered all of its
   stockholders the right to purchase up to their respective pro rata amount of
   a newly created class of convertible preferred stock and warrants to purchase
   common stock of Parent. The convertible preferred stock is junior to the
   redeemable preferred stock of Parent in terms of dividends, distributions,
   and rights upon liquidation. Up to $4.25 million of convertible preferred
   stock of Parent and warrants to purchase 562,500 shares of common stock of
   Parent were offered. Stockholders of Parent electing to participate in the
   offer were required to commit to purchase a similar percentage of an
   additional aggregate amount of convertible preferred stock equal to $10.75
   million. At any time, or from time to time, prior to May 14, 2002, as
   requested by Parent, the stockholders of Parent participating in the
   pre-emptive rights offer are required to purchase the balance of the
   convertible preferred stock being offered thereby. All of the proceeds from
   the pre-emptive rights offer received by Parent will be contributed to La
   Petite as common equity and will be used by La Petite for general working
   capital and liquidity purposes.




                                       5
<PAGE>


   Pursuant to the pre-emptive offer, on November 15, 2001 LPA acquired $3.4
   million of Parent's convertible preferred stock and received warrants to
   purchase 452,343 shares of common stock. LPA also committed to purchase the
   balance of the $11.6 million of convertible preferred stock being offered and
   not otherwise purchased by the other stockholders of Parent. Prior to
   December 31, 2001 LPA is required to purchase an amount of convertible
   preferred stock equal to the difference between $0.8 million and the value of
   the amount of the convertible preferred stock purchased by other stockholders
   in connection with the pre-emptive offer. After December 31, 2001, the
   balance of the convertible preferred stock of Parent to be purchased by LPA
   will, as applicable, be purchased at any time, or from time to time, prior to
   May 14, 2002 at the request of Parent. If Parent has not requested that LPA
   fund its commitment to purchase the balance of the convertible preferred
   stock prior to May 14, 2002, LPA has the right to cause Parent to issue the
   balance of the convertible preferred stock to LPA.

   As a result of the recapitalization and additional purchases of preferred
   stock and warrants, LPA beneficially owns approximately 90.0% of the common
   stock of Parent on a fully diluted basis, $45 million of redeemable preferred
   stock of Parent and $3.4 million of convertible participating preferred stock
   of Parent. An affiliate of JPMP owns a majority of the economic interests of
   LPA and an entity controlled by Robert E. King owns a majority of the voting
   interests of LPA.

   Parent, consolidated with La Petite, Bright Start and Services, is referred
   to herein as the Company.

   BUSINESS DESCRIPTION

   The following discussion refers to the Company, and includes a discussion of
   La Petite prior to the 1993 acquisition:

   La Petite, founded in 1968, is the largest privately held and one of the
   leading for-profit preschool educational facilities (commonly referred to as
   Academies) in the United States based on the number of centers operated. The
   Company provides center-based educational services and child care to children
   between the ages of six weeks and 12 years. Management believes the Company
   differentiates itself through its superior educational programs, which were
   developed and are regularly enhanced by its Curriculum Department. The
   Company's focus on quality educational services allows it to capitalize on
   the increased awareness of the benefits of premium educational instruction
   for preschool and elementary school age children. At its residential and
   employer-based Academies, the Company utilizes its proprietary Journey(R)
   curriculum with the intent of maximizing a child's cognitive and social
   development. The Company also operates Montessori schools that employ the
   Montessori method of teaching, a classical approach that features the
   programming of tasks with materials presented in a sequence dictated by each
   child's capabilities.

   As of June 30, 2001 the Company operated 734 Academies including 674
   residential Academies, 28 employer-based Academies and 32 Montessori schools
   located in 36 states and the District of Columbia. For the 52 weeks ended
   June 30, 2001, the Company had an average attendance of approximately 80,000
   full and part-time children.

   CURRICULUM

   Residential and Employer-Based Academies. La Petite, with the assistance of
   outside educational experts, designed and developed the Journey(R) curriculum
   to not only maximize children's cognitive development but also to provide a
   positive learning experience for the children. The Company believes the
   Journey(R) curriculum is unsurpassed by the educational materials of any of
   the major child care providers or our other competitors, many of whom
   purchase educational materials from third party vendors.

   Journey is an integrated approach to learning, giving children opportunities
   to learn through all of their senses while stimulating development and
   learning in all areas. Children progress at their own




                                       6
<PAGE>

   pace, building skills and abilities in a logical pattern. The Journey(R)
   curriculum covers children of all ages that La Petite Academy serves. Each
   level of the curriculum includes a parent component, built-in training,
   carefully selected age appropriate materials, equipment and activities, and a
   well planned and developed environment.

   For infants and toddlers, Journey provides activities for a variety of
   developmental areas such as listening and talking, physical development,
   creativity and learning from the world around them. As infants become
   toddlers, more activities focus on nurturing their need for independence and
   practicing small motor skills that help them learn to feed themselves, walk
   and communicate with others. Journey provides songs, fingerplay, art ideas,
   storytelling tips, building activities and many activities to develop the
   bodies of toddlers through climbing, pushing and pulling. These activities
   also build the foundation for social skills such as how to get along with
   others and how to share.

   The Journey preschool program includes a balance of teacher-directed and
   child-directed activities that address both the physical and intellectual
   development of preschool children. Physical activities are designed to
   increase physical and mental dexterity, specifically hand-eye and large and
   small muscle coordination. Preschool children also engage in creative and
   expressive activities such as painting, crafts and music. Intellectual
   activities are designed to promote language development, pre-reading, writing
   and thinking skills, imagination through role playing, pretending and problem
   solving. In addition, Journey enables the children to experience the world
   around them through geography, Spanish, mathematics and sensorial activities.

   The Journey(R) curriculum for SuperStars, children ages 5 through 12,
   consists of providing quiet, private space for them to do homework; social
   interaction with children of their own age; participation in enrichment
   programs such as arts and crafts and fitness activities, and transportation
   to and from their elementary schools.

   Montessori Schools. Montessori is a non-traditional method of education in
   that children work and learn in a highly individualized environment.
   Montessori materials, combined with our certified Montessori instructors,
   create a learning environment in which children become energized to explore,
   investigate and learn. Children work in mixed age group classrooms with
   attractive, state-of-the-art Montessori materials that have been designed to
   stimulate each child's interest in reading, mathematics, geography and
   science. In addition to the Montessori method, Montessori schools provide
   enrolled children foreign language and computer learning.

   ACADEMY NETWORK

   The Company operates three types of child care centers: residential
   Academies, employer-based Academies and Montessori schools. Academies
   generally operate year round, five days a week and typically are open from
   6:30 AM to 6:30 PM. A child may be enrolled in any of a variety of program
   schedules from a full-time, five-day-per-week plan to as little as two or
   three half-days a week. A child attending full-time typically spends
   approximately nine hours a day, five days per week, at an Academy. The
   SuperStars program for children ages five to 12 provides extended child care
   before and after the elementary school day and transportation to and from the
   elementary school.

   Academy employees include Academy Directors, Assistant Directors (who are
   generally teachers), full-time and part-time teachers, temporary and
   substitute teachers, teachers' aides, and non-teaching staff. On average,
   there are 15 to 20 employees per Academy. Each Academy is managed by an
   Academy Director. An Academy Director implements company policies and
   procedures, but has the autonomy to individualize local operations.
   Responsibilities of Academy Directors include curriculum implementation, the
   establishment of daily, weekly and monthly operating schedules, staffing,
   marketing to develop and increase enrollment and control of operating
   expenses. Personnel involved in operations as Academy Director and above are
   compensated in part on the basis of the profitability and level of parent and
   employee satisfaction of each Academy for which they have managerial
   responsibility.




                                       7
<PAGE>


   Academy Directors are supervised by a Managing Director. Managing Directors
   have an average of 12 years of experience with the Company, typically are
   responsible for six to 30 Academies and report to one of three Divisional
   Vice Presidents. Managing Directors visit their Academies regularly and are
   in frequent contact to help make decisions and improvements to program
   quality and profitability. The Divisional Vice Presidents average in excess
   of 19 years of experience with the Company.

   Residential Academies. As of June 30, 2001, the Company operated 674
   residential Academies. Residential Academies are typically located in
   residential, middle income neighborhoods, and are usually one-story,
   air-conditioned buildings located on three-quarters of an acre to one acre of
   land. A typical Academy also has an adjacent playground designed to
   accommodate the full age range of children attending the school. Newly built
   Academies are approximately 9,500 square feet, built on sites of
   approximately one acre, have an operating capacity of approximately 175
   children and incorporate a closed classroom concept. The Company continues to
   improve, modernize and renovate existing residential Academies to improve
   efficiency and operations, to better compete, to respond to the requests of
   parents and to support the Journey(R) curriculum.

   Residential Academies generally have programs to care for children from
   toddlers to 12 years old arranged in five age groups. In addition, over half
   of the Academies offer child care for infants, as young as six weeks old.
   Teacher-student ratios vary depending on state requirements but generally
   decrease with the older child groups.

   Employer-Based Academies. As of June 30, 2001, the Company operated 28
   employer-based Academies, which are similar to residential Academies, but are
   designed to offer businesses, including government employers and hospitals,
   on-site employer-sponsored child care. The Company's focus has been
   principally on developing on-site centers, operating employers' on-site
   centers through management contracts and providing consulting services for
   developing and managing centers. At most employer-based Academies, tuition is
   collected from our students in the same way as at residential Academies. At
   some employer-based Academies, additional payments or support services from
   the sponsoring employer are received. At other employer-based Academies, a
   fee in addition to tuition may be received.

   Montessori Schools. As of June 30, 2001, the Company operated 32 Montessori
   schools. Montessori schools are typically located in upper-middle income
   areas and feature brick facades and closed classrooms. The Montessori schools
   typically have lower staff turnover, and their lead teachers are certified
   Montessori instructors, many of whom are certified through the Company's
   internal training program. In addition, unlike students at residential
   Academies, Montessori students are enrolled for an entire school year, pay
   tuition monthly in advance and pay higher tuition rates.

   SEASONALITY

   Historically, the Company's operating revenue has followed the seasonality of
   a school year, declining during the summer months and the year-end holiday
   period. The number of new children enrolling at the Academies is generally
   highest in September-October and January-February; therefore, the Company
   attempts to concentrate its marketing efforts immediately preceding these
   high enrollment periods. Several Academies in certain geographic markets have
   a backlog of children waiting to attend; however, this backlog is not
   material to the overall attendance throughout the system.



                                       8
<PAGE>




   NEW ACADEMY DEVELOPMENT

   The Company intends to expand within existing markets and enter new markets
   with Academies concentrated in clusters. In existing markets, management
   believes it has developed an effective selection process to identify
   attractive markets for prospective Academy sites. In evaluating the
   suitability of a particular location, the Company concentrates on the
   demographics of its target customer within a two-mile radius of residential
   Academies. The Company targets Metropolitan Statistical Area's with benchmark
   demographics which indicate parent education levels and family incomes
   combined with high child population growth, and considers the labor supply,
   cost of marketing and the likely speed and ease of development of Academies
   in the area.

   Newly constructed Academies are generally able to open approximately 36 weeks
   after the real estate contract is signed. Because a location's early
   performance is critical in establishing its ongoing reputation, the Academy
   staff is supported with a variety of special programs to help achieve quick
   enrollment gains and development of a positive reputation. These programs
   include special compensation for the Academy Director who opens the new site
   and investment in local marketing prior to the opening.

   During the 2001 year, the Company re-opened one Journey based Academy and
   five new employer based Academies.

   TUITION

   Academy tuition depends upon a number of factors including, but not limited
   to, location of an Academy, age of the child, full or part-time attendance
   and competition. The Company also provides various tuition discounts
   primarily consisting of sibling, staff, and Corporate Referral Program. The
   Company adjusts tuition for Academy programs by child age-group and program
   schedule within each Academy on an annual basis each September. Parents also
   pay an annual registration fee, which is reduced for families with more than
   one child attending an Academy. Tuition and fees are payable weekly and in
   advance for most residential and employer-based Academies and monthly and in
   advance for Montessori schools. Management estimates that state governments
   pay the tuition for approximately 16% of the children under its care.

   MARKETING AND ADVERTISING

   In 2000, the Company embarked on a branding and marketing initiative that the
   Company believes will enhance the value of the La Petite Academy name. A
   series of focus groups were conducted to study different graphical elements
   of parent communications and a new logo design. The Company introduced a new
   logo and identity package. The new Apple design retains a previous theme but
   adds a contemporary feel. The new logo brings an attractive design element
   yet retains the brand equity found in the previous Apple style. The new logo
   and other graphic elements were used to develop a complete package of parent
   communications, print advertising, and other collateral material. The design
   elements have been being incorporated into other branding efforts including
   signage and additional advertising mediums.

   The Company continues to focus on retention as the greatest asset to business
   stability and growth. In July 2000, the Company introduced an innovative
   employee cash incentive bonus program. This program rewards Academy employees
   for achieving utilization targets and in-turn, providing high levels of
   customer service. The Company believes that the program is viewed by parents
   as a highly positive means of improving teacher retention and adding value to
   the Company.

   A heavy emphasis has been placed on expanding corporate partner relationships
   and growing the Preferred Employer Program. This Program allows the Company
   to build quality relationships with large corporations by providing preferred
   pricing for their employees who enroll their children at the Company's
   Academies.



                                       9
<PAGE>



   INFORMATION SYSTEMS

   The Company's financial and management reporting systems are connected
   through a Virtual Private Network (VPN) that connects all Academies, field
   management and Support Center employees. Through the use of the Company's
   point of sale software product, called ADMIN, and the implementation of the
   VPN, information such as financial reporting, enrollments, pricing, labor,
   receivables, and attendance are available at all levels of the organization.

   The Company continues to review its management information systems to ensure
   it reports on meaningful, specific and measurable performance indicators as
   well as provide consistent access.

   To improve the management of the Company's labor and human resources, the
   Company implemented the first phase of a new Payroll and Human Resource
   system that focuses on employee self-service and analytic capabilities. The
   Company anticipates significant savings with the automation of payroll
   collection and with the ability to manage our human resources for the first
   time with automated capabilities.

   COMPETITION

   The United States preschool education and child care industry is highly
   fragmented and competitive. The Company's competition consists principally of
   local nursery schools and child care centers, some of which are non-profit
   (including religious-affiliated centers), providers of services that operate
   out of their homes and other for profit companies which may operate a number
   of centers. Local nursery schools and child care centers generally charge
   less for their services. Many religious-affiliated and other non-profit child
   care centers have no or lower rental costs than the Company, may receive
   donations or other funding to cover operating expenses and may utilize
   volunteers for staffing. Consequently, tuition rates at these facilities are
   commonly lower than our rates. Additionally, fees for home-based care are
   normally lower than fees for center-based care because providers of home care
   are not always required to satisfy the same health, safety or operational
   regulations as our Academies. The competition also consists of other large,
   national, for profit child care companies that may have more aggressive
   tuition discounting and other pricing policies than La Petite. The Company
   competes principally by offering trained and qualified personnel,
   professionally planned educational and recreational programs, well-equipped
   facilities and additional services such as transportation. In addition, the
   Company offers a challenging and sophisticated program that emphasizes the
   individual development of the child. Based on focus group research, the
   majority of parent's rank the qualities of staff as the most important
   deciding factor in choosing a child care facility. Following teacher
   qualification were such items as safety, cleanliness, programs, and
   curriculum. Price typically played a minimal role in the decision process,
   assuming price was within a reasonable variance. For some potential
   customers, the non-profit status of certain competitors may be a significant
   factor in choosing a child care provider.

   REGULATION AND GOVERNMENT INVOLVEMENT

   Child care centers are subject to numerous state and local regulations and
   licensing requirements, and the Company has policies and procedures in place
   in order to comply with such regulations and requirements. Although state and
   local regulations vary greatly from jurisdiction to jurisdiction, government
   agencies generally review the ratio of staff to enrolled children, the
   safety, fitness and adequacy of the buildings and equipment, the dietary
   program, the daily curriculum, staff training, record keeping and compliance
   with health and safety standards. In certain jurisdictions, new legislation
   or regulations have been enacted or are being considered which establish
   requirements for employee background checks or other clearance procedures for
   new employees of child care centers. In most jurisdictions, governmental
   agencies conduct scheduled and unscheduled inspections of child care centers,
   and licenses must be renewed periodically. Failure by an Academy to comply
   with applicable regulations can subject it to state sanctions, which might
   include the Academy being


                                       10
<PAGE>


   placed on probation or, in more serious cases, suspension or revocation of
   the Academy's license to operate and could also lead to sanctions against our
   other Academies located in the same jurisdiction. In addition, this type of
   action could lead to negative publicity extending beyond that jurisdiction.

   Management believes the Company is in substantial compliance with all
   material regulations and licensing requirements applicable to our businesses.
   However, there is no assurance that a licensing authority will not determine
   a particular Academy to be in violation of applicable regulations and take
   action against that Academy. In addition, there may be unforeseen changes in
   regulations and licensing requirements, such as changes in the required ratio
   of child center staff personnel to enrolled children that could have material
   adverse effect on our operations.

   Certain tax incentives exist for child care programs. Section 21 of the
   Internal Revenue Code provides a federal income tax credit ranging from 20%
   to 30% of certain child care expenses for "qualifying individuals" (as
   defined in the Code). The fees paid to the Company for child care services by
   eligible taxpayers qualify for the tax credit, subject to the limitations of
   Section 21 of the Code. In addition to the federal tax credits, various state
   programs provide child care assistance to low income families. Management
   estimates approximately 16% of operating revenue is generated from such,
   federal and state programs. Although no federal license is required at this
   time, there are minimum standards that must be met to qualify for
   participation in certain federal subsidy programs.

   Government, at both the federal and state levels, is actively involved in
   expanding the availability of child care services. Federal support is
   delivered at the state level through government-operated educational and
   financial assistance programs. Child care services offered directly by states
   include training for child care providers and resource and referral systems
   for parents seeking child care. In addition, the state of Georgia has an
   extensive government-paid private sector preschool program in which the
   Company participates.

   The Federal Americans with Disabilities Act (the "Disabilities Act")
   prohibits discrimination on the basis of disability in public accommodations
   and employment. The Disabilities Act became effective as to public
   accommodations in January 1992 and as to employment in July 1992. Since
   effectiveness of the Disabilities Act, the Company has not experienced any
   material adverse impact as a result of the legislation.

   In September of 1998, the National Highway Transportation Safety
   Administration (NHTSA) issued interpretative letters that modified its
   interpretation of regulations governing the sale by automobile dealers of
   vehicles intended to be used for the transportation of children to and from
   school. These letters indicate that dealers may no longer sell
   fifteen-passenger vans for this use, and that any vehicle designed to
   transport eleven persons or more must meet federal school bus standards if it
   is likely to be "used significantly" to transport children to and from school
   or school-related events. The Company currently maintains a fleet of
   approximately 1,300 fifteen-passenger vans and 120 school buses for use in
   transportation of children which management believes are safe and effective
   vehicles for that purpose. The Company's current fleet meets all necessary
   federal, state, and local safety requirements. In accordance with the new
   NHTSA requirements, all new fleet additions or replacements will meet school
   bus standards.

   COMPLIANCE WITH ENVIRONMENTAL PROTECTION PROVISIONS

   Compliance with federal, state and local laws and regulations governing
   pollution and protection of the environment is not expected to have any
   material effect upon the financial condition or results of operations of the
   Company.



                                       11
<PAGE>


   TRADEMARKS

   The Company has various registered trademarks covering the name La Petite
   Academy, its logos, and a number of other names, slogans and designs,
   including, but not limited to: La Petite Journey, Parent's Partner,
   SuperStars and Montessori Unlimited(R). A federally registered trademark in
   the United States is effective for ten years subject only to a required
   filing and the continued use of the mark by the registrant. A federally
   registered trademark provides the presumption of ownership of the mark by the
   registrant in connection with its goods or services and constitutes
   constructive notice throughout the United States of such ownership. In
   addition the Company has registered various trademarks in Japan, Taiwan and
   the Peoples Republic of China. Management believes that the Company name and
   logos are important to its operations and intends to continue to renew the
   trademark registrations thereof.

   INSURANCE AND CLAIMS ADMINISTRATION

   The Company maintains insurance covering comprehensive general liability,
   automotive liability, workers' compensation, property and casualty, crime and
   directors and officers insurance. The policies provide for a variety of
   coverage, are subject to various limits, and include substantial deductibles
   or self-insured retention. There is no assurance that claims in excess of, or
   not included within, coverage will not be asserted, the effect of which could
   have an adverse effect on the Company.

   EMPLOYEES

   As of June 30, 2001, the Company employed approximately 12,000 full-time
   Associates. The Company's employees are not represented by any organized
   labor unions or employee organizations and management believes relations with
   employees are good.


   ITEM 2. PROPERTIES

   As of June 30, 2001, the Company operated 734 Academies, 665 of which were
   leased under operating leases, 49 of which were owned and 20 of which were
   operated in employer-owned centers. Most of these Academy leases have 15-year
   terms, some have 20-year terms, many have renewal options, and most require
   the Company to pay utilities, maintenance, insurance and property taxes. In
   addition, some of the leases provide for contingent rentals, if the Academy's
   operating revenue exceeds certain base levels.

   Because of different licensing requirements and design features, Academies
   vary in size and licensed capacity. Academies typically contain 5,400, 6,700,
   7,800 or 9,500 square feet in a one-story, air-conditioned building typically
   located on three-quarters of an acre to one acre of land. Each Academy has an
   adjacent playground designed to accommodate the full age range of children
   attending the Academy. Licensed capacity for the same size building varies
   from state to state because of different licensing requirements.



                                       12
<PAGE>




   The following table summarizes Academy openings and closings for the
   indicated periods.

<TABLE>
<CAPTION>
    FISCAL YEAR                         2001          2000          1999          1998         1997
    -----------                      -----------   -----------  ------------  ------------  -----------
<S>                                  <C>           <C>          <C>           <C>           <C>
    Academies;
    Open at Beginning of Period             752           743           736           745          751
    Opened During Period                      6            59            13             1            3
    Closed During Period                   (24)          (50)           (6)          (10)          (9)
                                     -----------   -----------  ------------  ------------  -----------

    Open at End of Period                   734           752           743           736          745
                                     ===========   ===========  ============  ============  ===========
</TABLE>

   During the 2001 fiscal year, the Company re-opened one Residential Academy,
   and opened five employer based Academies. During that same period, the
   Company closed 24 schools. Eight of the closures resulted from management's
   decision to close certain schools located in areas where the demographic
   conditions no longer supported economically viable operations, and the
   remaining 16 closures were due to management's decision not to renew the
   leases or contracts of certain schools.

   The following table shows the number of locations operated by the Company as
   of June 30, 2001:

<TABLE>
<S>                <C>     <C>            <C>     <C>              <C>     <C>                 <C>
    Alabama        (14)    Indiana        (18)    Nevada           (17)    Texas               (110)
    Arizona        (25)    Iowa           (7)     New Jersey       (2)     Utah                (4)
    Arkansas       (5)     Kansas         (23)    New Mexico       (20)    Virginia            (36)
    California     (53)    Kentucky       (4)     North Carolina   (28)    Washington, DC      (1)
    Colorado       (24)    Louisiana      (1)     Ohio             (17)    Washington          (14)
    Connecticut    (1)     Maryland       (15)    Oklahoma         (22)    Wisconsin           (14)
    Delaware       (1)     Minnesota      (5)     Oregon           (7)     Wyoming             (1)
    Florida        (85)    Mississippi    (3)     Pennsylvania     (5)
    Georgia        (44)    Missouri       (28)    South Carolina   (20)
    Illinois       (23)    Nebraska       (10)    Tennessee        (27)
</TABLE>

   The leases have initial terms expiring as follows:

<TABLE>
<CAPTION>
     YEARS INITIAL LEASE TERMS EXPIRE                   NUMBER OF ACADEMIES
<S>                                                     <C>
     2002                                                         112
     2003                                                         105
     2004                                                         124
     2005                                                          65
     2006                                                          95
     2007 and later                                               164
                                                        --------------
                                                                  665
                                                        --------------
</TABLE>

   The Company currently leases 665 Academies from approximately 425 lessors.
   The Company has generally been successful when it has sought to renew
   expiring Academy leases.


   ITEM 3. LEGAL PROCEEDINGS

   The Company has litigation pending which arose in the ordinary course of
   business. In management's opinion, none of such litigation in which the
   Company is currently involved will result in liabilities that will have a
   material adverse effect on its financial condition or results of operations.



                                       13
<PAGE>

   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   None

   PART II.

   ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   The common stock of the Parent is not publicly traded. As of November 27,
   2001, LPA owned 89.6% of the Parent's common stock, Vestar/LPT Limited
   Partnership owned 3.6%, management owned 1.8% and former management owned
   5.0%.

   No cash dividends were declared or paid on the Parent's common stock during
   the 2001 and 2000 years. The Company's Senior Notes and preferred stock (see
   Note 3 and Note 7, respectively, to the consolidated financial statements)
   contain certain covenants that, among other things, do not permit La Petite
   to pay cash dividends on its common or preferred stock now or in the
   immediate future.

   As of November 27, 2001, there were 13 holders of record of Parent's common
   stock.

ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS OF DOLLARS)

   The following selected financial data of the Company should be read in
   conjunction with "Management's Discussion and Analysis of Financial Condition
   and Results of Operations" and the other financial information included
   elsewhere in this Form 10K/A. The selected financial data contains certain
   financial information that has been restated. See Note 14 to the consolidated
   financial statements for further discussion of this matter.



                                       14
<PAGE>
<TABLE>
<CAPTION>
                                        52 WEEKS       52 WEEKS      44 WEEKS       52 WEEKS      52 WEEKS
                                          ENDED          ENDED        ENDED          ENDED         ENDED
                                         JUNE 30,        JULY 1,      JULY 3,       AUGUST 29,    AUGUST 30,
                                         2001 (a)         2000        1999 (a)         1998          1997
                                       ------------    ----------  -------------  -------------  -----------
                                      AS RESTATED, (j)
<S>                                   <C>              <C>         <C>            <C>            <C>
INCOME STATEMENT DATA
Operating revenue                        $  384,837    $  371,037  $     281,072  $     314,933  $   302,766
Operating expenses:
    Salaries, wages and benefits            216,018       205,665        150,052        166,501      159,236
    Facility lease expense                   44,751        46,573         33,670         38,403       38,094
    Depreciation                             12,423        13,500         10,911         13,892       13,825
    Amortization of goodwill
       and other intangibles                  2,829         2,835          1,972          3,122        3,474
    Recapitalization costs (b)                                                            8,724
    Restructuring charge (c)                                7,500
    Other                                    91,924        89,879         68,277         76,258       74,111
                                         ----------    ----------  -------------  -------------  -----------
Total operating expenses                    367,945       365,952        264,882        306,900      288,740
                                         ----------    ----------  -------------  -------------  -----------
Operating income                             16,892         5,085         16,190          8,033       14,026
Interest expense (d)                         21,322        20,880         16,145         14,126        9,245
Minority interest in net
    income of subsidiary                                                                  2,849        3,693
Interest income                                 (85)         (163)          (153)          (885)        (959)
                                         ----------    ----------  -------------  -------------  -----------
Income (loss) before income taxes
    and extraordinary item                   (4,345)      (15,632)           198         (8,057)       2,047
Provision (benefit) for income taxes           (644)       (5,085)           995           (254)       3,264
                                         ----------    ----------  -------------  -------------  -----------
Loss before extraordinary item               (3,701)      (10,547)          (797)        (7,803)      (1,217)
Extraordinary loss on early
    retirement of debt (e)                                                               (5,525)
Net loss                                     (3,701)      (10,547)          (797)       (13,328)      (1,217)

Other comprehensive income
    Other comprehensive income                  492
    Reclassification into                      (161)
                                         ----------    ----------  -------------  -------------  -----------
    Comprehensive loss                   $   (3,370)   $  (10,547) $        (797) $     (13,328) $    (1,217)
                                         ==========    ==========  =============  =============  ===========
BALANCE SHEET DATA (AT END OF PERIOD)
Total assets                             $  165,730    $  165,647  $     169,468  $     160,791  $   171,160
Subordinated debt                                                                                        903
Total long-term debt                        192,394       182,319        187,999        185,727       85,903
Redeemable preferred stock                   54,941        47,314         29,310         25,625       32,521
Stockholders' equity (deficit)             (134,682)     (123,653)      (110,183)      (105,701)       3,374
OTHER DATA
EBITDA (f)                               $   32,144    $   28,920  $      29,073  $      33,771  $    31,325
Cash flows from operating activities          2,792         5,597         10,320          7,224       14,886
Cash flows from investing activities        (14,705)      (10,341)       (19,204)       (11,005)      (6,848)
Cash flows from financing activities         12,983         4,180          6,588        (13,322)       3,142
Depreciation and amortization (g)            16,364        17,387         13,712         17,859       18,149
Capital expenditures                         14,894        23,412         31,666         13,637        7,300
Ratio of earnings to fixed charges(h)            (h)           (h)           1.0x            (h)         1.1x
Proceeds from sale of assets                    189        23,432         12,462          2,632          452
Academies at end of period                      734           752            743            736          745
FTE utilization during the period (i)            63%           63%            65%            65%          66%
</TABLE>




                                       15
<PAGE>



a)       On April 18, 2001, the Company changed its fiscal year end from the 52
         or 53-week period ending on the first Saturday in July to the 52 or
         53-week period ending on the Saturday closest to June 30. On June 10,
         1999, the Company changed its fiscal year to be the period starting on
         the first Saturday in July and ending on the first Saturday of July of
         the subsequent year, resulting in a 44-week year for fiscal 1999 (see
         Note 1 in the consolidated financial statements).
b)       Recapitalization costs consist principally of transaction bonuses of
         $1.5 million and payments for the cancellation of options of $7.2
         million, both of which were inclusive of payroll taxes.
c)       In the third quarter of 2000, management committed to a plan to close
         certain Academies located in areas where the demographic conditions no
         longer support an economically viable operation and to restructure its
         operating management to better serve the remaining Academies.
         Accordingly, the Company recorded a $7.5 million restructuring charge
         ($4.5 million after tax) to provide for costs associated with the
         Academy closures and restructuring of 49 Academies. The charge
         consisted principally of $5.9 million for the present value of rent,
         real estate taxes, common area maintenance charges, and utilities, net
         of anticipated sublease income, and $1.1 million for the write-down of
         fixed assets to fair market value. At June 30, 2001, the Company had an
         accrual for the closing of these Academies of $3.8 million.
d)       Interest expense includes $1.1 million, $1.1 million, $0.8 million,
         $0.8 million, and $0.9 million of amortization of deferred financing
         costs for fiscal years 2001, 2000, 1999, 1998, and 1997, respectively.
e)       On May 11, 1998, the Company incurred a $5.5 million extraordinary loss
         related to (i) the retirement of all the outstanding $85.0 million
         principal amount of 9 5/8% Senior Notes due on 2001, (ii) the exchange
         of all outstanding shares of La Petite's Class A Preferred Stock for
         $34.7 million in aggregate principal amount of La Petite's 12 1/8%
         Subordinated Exchange Debentures due 2003, and (iii) the retirement of
         all the 12 1/8% Subordinated Exchange Debentures and the 6.5%
         Convertible Debentures. The loss principally reflects the write off of
         premiums and related deferred financing costs, net of applicable income
         tax benefit.
f)       EBITDA is defined herein as income before non-cash restructuring
         charges, extraordinary items, net interest cost, taxes, depreciation
         and amortization and is presented because it is generally accepted as
         providing useful information regarding a company's ability to service
         and/or incur debt. EBITDA should not be considered in isolation or as a
         substitute for net income, cash flows from operating activities and
         other consolidated income or cash flow statement data prepared in
         accordance with accounting principles generally accepted in the United
         States of America or as a measure of the Company's profitability or
         liquidity. EBITDA may not be comparable to similarly titled measures
         used by other companies.
g)       Depreciation and amortization includes amortization of deferred
         financing costs and accretion of discount on the 6.5% Convertible
         Debentures that is presented as interest expense on the statements of
         income.
h)       For purposes of determining the ratio of earnings to fixed charges,
         earnings are defined as income before income taxes and extraordinary
         items, plus fixed charges. Fixed charges consists of interest expense
         on all indebtedness, amortization of deferred financing costs, and
         one-third of rental expense on operating leases representing that
         portion of rental expense that the Company deemed to be attributable to
         interest. For the 52 weeks ended June 30, 2001, July 1, 2000 and August
         29, 1998, earnings were inadequate to cover fixed charges by $4.3
         million, $15.6 million and $8.1 million, respectively.
i)       FTE Utilization is the ratio of full-time equivalent (FTE) students to
         the total operating capacity for all of the Company's Academies. FTE
         attendance is not a measure of the absolute number of students
         attending the Company's Academies; rather, it is an approximation of
         the full-time equivalent number of students based on Company estimates
         and weighted averages. For example, a student attending full-time is
         equivalent to one FTE, while a student attending one-half of each day
         is equivalent to 0.5 FTE.
j)       See Note 14 to the consolidated financial statements included at Item
         8.



                                       16
<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the consolidated
financial statements and the related notes thereto included elsewhere in this
document. The Management's Discussion and Analysis of Financial Condition and
Results of Operations presented below reflects certain restatements to
previously reported results of operations for these periods. See Note 14 to the
consolidated financial statements for further discussion of this matter.

On April 18, 2001, the Company changed its fiscal year end from the 52/53-week
period ending on the first Saturday in July to the 52/53-week period ending on
the Saturday closest to June 30 (See Note 1 of the consolidated financial
statements). The table below presents the results of the 52 weeks ended June 30,
2001 and the results of the 52 weeks ended July 1, 2000 (herein referred to as
the 2001 year and the 2000 year). The 52 weeks ended July 1, 2000 includes the
results of Bright Start from July 21, 1999, the date of acquisition.

The Company's operating results for the 2001 year are consistent and comparable
with the 2000 year, except for operating results associated with new educational
facilities (New Academies). The Company considers an Academy as new if it opened
within the current or previous fiscal year. These schools typically generate
operating losses during the first few months of operation until the Academies
achieve normalized occupancies. Included in operating income and EBIDTA were New
Academy operating income of $0.3 million for the 2001 year and New Academy
operating losses of $1.9 million for the 2000 year.

Full-time equivalent (FTE) attendance, as defined by the Company, is not a
measure of the absolute number of students attending the Company's Academies,
but rather is an approximation of the full-time equivalent number of students
based on Company estimates and weighted averages. For example, a student
attending full-time is equivalent to one FTE, while a student attending only
one-half of each day is equivalent to 0.5 FTE.

2001 COMPARED TO 2000 RESULTS (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                     52 WEEKS ENDED                  52 WEEKS ENDED
                                           ----------------------------------------------------------------
                                             June 30,        Percent of         July 1,       Percent of
                                               2001            Revenue            2000          Revenue
                                           --------------   --------------    -------------  --------------
<S>                                        <C>              <C>               <C>            <C>
Operating revenue                              $ 384,837           100.0%        $ 371,037          100.0%

Operating expenses:
Salaries, wages and benefits                     216,018             56.1          205,665            55.4
Facility lease expense                            44,751             11.6           46,573            12.6
Depreciation and amortization                     15,252              4.0           16,335             4.4
Provision for doubtful accounts                    4,531              1.2            2,931             0.8
Restructuring Costs                                                                  7,500             2.0
Other                                             87,393             22.7           86,948            23.4
                                           --------------   --------------    -------------  --------------
Total operating expenses                         367,945             95.6          365,952            98.6
                                           --------------   --------------    -------------  --------------

Operating income                               $  16,892             4.4%         $  5,085            1.4%
                                           ==============   ==============    =============  ==============
</TABLE>


During the 2001 year, the Company opened six new schools and closed 24 schools.
As a result, the Company operated 734 schools on June 30, 2001. During fiscal
year 2001, eight of the closures resulted


                                       17
<PAGE>


from management's decision to close certain schools located in areas where the
demographic conditions no longer supported an economically viable operation, and
the remaining 16 closures were due to management's decision not to renew the
leases or contracts of certain schools.

Operating revenue. Operating revenue increased $13.8 million or 3.7% during the
2001 year as compared to the 2000 year. The increase in operating revenue
includes $18.4 million of incremental revenue from established schools, $7.8
million of incremental revenue from the new schools, most of which were opened
late in the 1999 year or early in the 2000 year, offset by $12.4 million of
reduced revenue from closed schools. Tuition revenue increased 3.8% during the
2001 year as compared to the 2000 year. The increase in tuition revenue reflects
an increase of the average weekly FTE tuition rates of 9.9% offset by a decrease
in full time equivalent (FTE) attendance of 5.6%.

The increase in average weekly tuition per FTE was principally due to selective
price increases, which were put into place in February of the 2000 fiscal year
and in September of the 2001 fiscal year, based on geographic market conditions
and class capacity utilization. The decrease in FTE attendance was due to a 3.4%
decline at our established schools (schools which were open prior to the 2000
year) and a 74.9% decline in schools closed during the 2000 and 2001 years,
offset by a 41.8% increase at our new schools.

Salaries, wages and benefits. Salaries, wages and benefits increased $10.4
million or 5.0% during the 2001 year as compared to the 2000 year. As a
percentage of revenue, labor costs were 56.1% for the 2001 year as compared to
55.4% during the 2000 year. The increase in salaries, wages and benefits
includes incremental labor costs at established schools of $12.5 million,
incremental labor costs at new schools of $3.2 million, increased field
management and corporate administration labor costs of $1.1 million, increased
benefit costs of $1.8 million, increased bonus costs of $1.1 million, offset by
reduced incremental labor costs at closed schools of $9.3 million. The increase
in labor costs at established schools was mainly due to a 7.8% increase in
average hourly wage rates and a 0.1% increase in labor hours. New schools
experience higher labor costs relative to revenue as compared to the established
schools.

Facility lease expense. Facility lease expense decreased $1.8 million or 3.9%
during the 2001 year as compared the 2000 year. The decrease in facility lease
expense was mainly due to the closures late in the 2000 year, offset by slightly
increased lease expense on lease renewals.

Depreciation and amortization. Depreciation expense decreased $1.0 million or
6.6% during the 2001 year as compared to the 2000 year. This decrease was mainly
due to the closings that occurred in late fiscal year 2000.

Provision for doubtful accounts. The provision for doubtful accounts increased
$1.6 million or 54.6%. The increase in the provision for doubtful accounts is a
result of increasing revenue, higher write-offs and an increase in the bad debt
reserve of $0.1 million.

Restructuring charge. In the third quarter of 2000, management committed to a
plan to close certain schools located in areas where the demographic conditions
no longer support an economically viable operation and to restructure its
operating management to better serve the remaining schools. Accordingly, the
Company recorded a $7.5 million restructuring charge ($4.5 million after tax) to
provide for costs associated with the school closures and restructuring 49
schools. The charge consisted principally of $5.9 million for the present value
of rent, real estate taxes, common area maintenance charges, and utilities, net
of anticipated sublease income and $1.1 million for the write-down of fixed
assets to fair market value.

Other operating costs. Other operating costs increased $0.4 million or 0.5%
during the 2001 year as compared to the 2000 year. Other operating costs include
repair and maintenance, utilities, insurance, marketing, real estate taxes,
food, supplies, transportation, recruitment and training. The increase was due
primarily to higher expenses in repairs and maintenance, utilities, insurance,
real estate taxes, offset by decreases in food, supplies, recruitment, training
and other costs. As a percentage of revenue, other operating costs decreased to
22.7% in the 2001 year as compared to 23.4% in the 2000 year.




                                       18
<PAGE>


Operating income. As a result of the foregoing, operating income was $16.9
million for the 2001 year as compared to $5.1 million during the 2000 year.
Excluding the 2000 year restructuring costs, operating income increased $4.3
million or 34.2% in the year 2001 as compared to the year 2000. The increase in
operating income is principally due to increased revenue and lower non-labor
operating costs.

Interest expense. Net interest expense for the 2001 year increased $0.4 million
from the 2000 year. The increase was principally due to a $1.2 million
amortization of the fair value adjustment to the carrying value of the senior
notes, a $1.1 million increase resulting from additional borrowing and higher
interest rates and $0.3 million in interest on the closed school reserve, offset
by a $2.1 million mark-to-market adjustment for derivative instruments. (See
Note 1 to the consolidated financial statements)

Income tax rate. After adding back the permanent differences to pretax income,
the effective income tax rate for the 2001 year was approximately 41% as
compared to approximately 40% for the 2000 year.

EBITDA

EBITDA is being presented because management believes that certain investors
find EBITDA to be a useful tool for measuring the Company's ability to service
its debt. In addition, EBITDA is being presented because it is an important
measure that is used in the calculation of the covenants under the Company's
indenture and Credit Agreement. However, EBITDA is not necessarily a measure of
the Company's ability to fund its cash needs and should not be construed as
being more important than the GAAP financial information disclosed under
"-Results of Operations." EBITDA is not calculated under GAAP and therefore it
is not necessarily comparable to similarly titled measures reported by other
companies.

EBITDA is defined as income before non-cash restructuring charges, extraordinary
items, net interest cost, taxes, depreciation and amortization. EBITDA was $32.1
million for the year 2001 as compared to $28.9 million for 2000, an increase of
11.1%. EBITDA as a percentage of revenue improved to 8.4% in year 2001 as
compared to 7.8% in year 2000. The increase in EBITDA was principally due to
increased revenue and lower non-labor operating costs.



                                       19
<PAGE>


2000 COMPARED TO 1999 RESULTS

On June 10, 1999, the Company changed its fiscal year to be the period starting
on the first Sunday in July and ending on the first Saturday in July in the
subsequent year (See Note 1 of the consolidated financial statements). For
comparative purposes, the table below presents the results of the 52 weeks ended
July 1, 2000 and the results of the 52 weeks ended July 3, 1999 (herein referred
to as the 2000 year and the 1999 year). The subsequent discussion of results is
based on the 52 week comparison. The selected data for the 52 weeks ended July
3, 1999 is unaudited but reflects all adjustments, consisting of normal
recurring accruals, which in the opinion of management are necessary to fairly
present the Company's results of operations for the unaudited period. The
selected data for the 52 weeks ended July 1, 2000 includes the results of Bright
Start from July 21, 1999, the date of acquisition.


2000 COMPARED TO 1999 RESULTS (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                     52 WEEKS ENDED            52 WEEKS ENDED
                                 ----------------------    -----------------------
                                  July 1,    Percent of     July 3,     Percent of
                                   2000       Revenue        1999        Revenue
                                 --------    ----------    --------     ----------
<S>                              <C>         <C>           <C>          <C>
Operating revenue                $371,037        100.0%    $328,763         100.0%

Operating expenses:
Salaries, wages and benefits      205,665         55.4      175,563          53.4
Facility lease expense             46,573         12.6       39,539          12.0
Depreciation                       13,500          3.6       13,034           4.0
Amortization of goodwill
     and other intangibles          2,835          0.8        2,330           0.7
Restructuring Costs                 7,500          2.0
Other                              89,879         24.2       79,914          24.3
                                 --------     --------     --------     ---------
Total operating expenses          365,952         98.6      310,380          94.5
                                 --------     --------     --------     ---------

Operating income                 $  5,085          1.4%    $ 18,383           5.5%
                                 ========     ========     ========     =========
</TABLE>




During the 2000 year, the Company opened 16 new schools and acquired 43 schools
through the acquisition of Bright Start. During that same period, the Company
closed 50 schools. As a result, the Company operated 752 schools on July 1,
2000. During fiscal year 2000, 39 of the closures resulted from management's
decision to close certain schools located in areas where the demographic
conditions no longer supported an economically viable operation, and the
remaining 11 closures were due to management's decision not to renew the leases
or contracts of certain schools.

Operating revenue. Operating revenue increased $42.3 million or 12.9% during the
2000 year as compared to the 1999 year. The increase in operating revenue
includes $24.0 million from the acquired Bright Start schools, $13.9 million of
incremental revenue from established schools, $10.9 million of incremental
revenue from the new schools, most of which were opened late in the 1999 year or
early in the 2000 year, offset by $6.5 million of reduced revenue from closed
schools. Tuition revenue increased 13.2% during the 2000 year as compared to the
1999 year. The increase in tuition revenue reflects an increase in full time
equivalent (FTE) attendance of 7.1% and an increase of the average weekly FTE
tuition rates of 5.7%.

The increase in FTE attendance is due to the addition of the Bright Start
schools and the new schools offset by a 1.2% decline at our established schools
(schools which were open prior to the 1999 year). The increase in average weekly
tuition per FTE was principally due to selective price increases which were put
into



                                       20
<PAGE>

place in February of fiscal years 1999 and 2000, based on geographic market
conditions and class capacity utilization.

Salaries, wages and benefits. Salaries, wages and benefits increased $30.1
million or 17.1% during the 2000 year as compared to the 1999 year. As a
percentage of revenue, labor costs were 55.4% for the 2000 year as compared to
53.4% during the 1999 year. The increase in salaries, wages and benefits
includes incremental labor costs at established schools of $12.3 million, Bright
Start labor costs of $13.1 million, incremental labor costs at new schools of
$6.1 million, increased field management and corporate administration labor
costs of $0.9 million, increased benefit costs of $1.6 million, offset by
reduced incremental labor costs at closed schools of $3.9 million. The increase
in labor costs at established schools was mainly due to a 7.0% increase in
average hourly wage rates and a 1.3% increase in labor hours. New schools
experience higher labor costs relative to revenue as compared to the established
schools.

Facility lease expense. Facility lease expense increased $7.0 million or 17.8%
during the 2000 year as compared the 1999 year. The increase in facility lease
expense was mainly due to higher relative lease costs associated with the Bright
Start schools and the 28 new schools opened in late fiscal 1999 and early fiscal
year 2000, offset by the closures late in fiscal year 2000.

Depreciation. Depreciation expense increased $0.5 million or 3.6% during the
2000 year as compared to the 1999 year. The increase in depreciation was due to
the addition of the Bright Start schools.

Amortization of goodwill and other intangibles. The amortization of goodwill and
other intangibles increased $0.5 million or 21.7% for the 2000 year as compared
the 1999 year. This increase is due to the amortization of goodwill associated
with the Bright Start acquisition.

Restructuring charge. In the third quarter of 2000, management committed to a
plan to close certain schools located in areas where the demographic conditions
no longer support an economically viable operation and to restructure its
operating management to better serve the remaining schools. Accordingly, the
Company recorded a $7.5 million restructuring charge ($4.5 million after tax) to
provide for costs associated with the school closures and restructuring 49
schools. The charge consists principally of $5.9 million for the present value
of rent, real estate taxes, common area maintenance charges, and utilities, net
of anticipated sublease income and $1.1 million for the write-down of fixed
assets to fair market value. At July 1, 2000, the Company had an accrual for the
closing of these Academies of $6.2 million. During fiscal year 2000, 39 schools
were closed. Subsequent to the end of the fiscal year, an additional four
schools have closed in connection with the restructuring plan. By the end of
fiscal year 2001, management plans to address the closing of the remaining six
schools.

Other operating costs. Other operating costs increased $10.0 million or 12.5%
during the 2000 year as compared to the 1999 year. Other operating costs include
repair and maintenance, utilities, insurance, marketing, real estate taxes,
food, supplies and transportation. The increase was due primarily to higher
expenses in repairs and maintenance, utilities, real estate taxes, food and
supplies. As a percentage of revenue, other operating costs decreased to 24.2%
in the 2000 year from 24.3% in the 1999 year.

Operating. As a result of the foregoing, operating income was $5.1 million for
the 2000 year as compared to $18.4 million during the 1999 year. The decline in
operating income is principally due to higher costs and the restructuring charge
offsetting the increased revenue.

Interest expense. Net interest expense for the 2000 year increased $1.7 million
from the 1999 year. The increase is mainly a result of additional interest paid
on the Senior Notes due to interest rate swap arrangement, higher average
borrowings under the Revolving Credit facility resulting from the acquisition of
Bright Start, and reduced capitalized interest associated with constructing new
schools.

Income tax rate. After adding back the permanent differences to pretax income,
the effective income tax rate for the 2000 year was approximately 40% as
compared to approximately 49% for the 1999 year. The 1999 year effective income
tax rate was impacted by the resolution of issues raised by the IRS regarding
the Company's benefit plan (see Note 8 to the consolidated financial
statements).












                                       21
<PAGE>



EBITDA

EBITDA is being presented because management believes that certain investors
find EBITDA to be a useful tool for measuring the Company's ability to service
its debt. In addition, EBITDA is being presented because it is an important
measure that is used in the calculation of the covenants under the Company's
indenture and Credit Agreement. However, EBITDA is not necessarily a measure of
the Company's ability to fund its cash needs and should not be construed as
being more important than the GAAP financial information disclosed under
"-Results of Operations." EBITDA is not calculated under GAAP and therefore it
is not necessarily comparable to similarly titled measures reported by other
companies.

EBITDA is defined as income before non-cash restructuring charges, extraordinary
items, net interest cost, taxes, depreciation and amortization. EBITDA was $28.9
million for the year 2000 as compared to $33.7 million for the year 1999. EBITDA
as a percentage of revenue decreased to 7.8% in year 2000 as compared to 10.3%
in year 1999. The decline in EBITDA is principally due to higher costs and the
restructuring charge offsetting increased revenue.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of liquidity are from cash flows generated by
operations, borrowings on the revolving credit facility under the Credit
Agreement, and sale and leaseback financing for newly constructed schools and
capital contributions expected to be received from Parent in the amount of $11.6
million of convertible preferred stock to LPA pursuant to LPA's commitment. The
Company's principal uses of liquidity are to meet its debt service requirements,
finance its capital expenditures and provide working capital. The Company
incurred substantial indebtedness in connection with the Recapitalization.

Parent and La Petite have entered into the Credit Agreement, as amended,
consisting of the $40 million Term Loan Facility and the $25 million Revolving
Credit Facility. Parent and La Petite borrowed the entire $40 million available
under the Term Loan Facility in connection with the Recapitalization. The
borrowings under the Credit Agreement, together with the proceeds from the sale
of the Senior Notes and the Equity Investment, were used to consummate the
Recapitalization and to pay the related fees and expenses.

The Credit Agreement will terminate on May 11, 2005. The term loan amortizes in
an amount equal to $1.0 million per year in fiscal years 2001 through 2003, $7.8
million in fiscal year 2004, and $27.5 million in fiscal year 2005. The term
loan is also subject to mandatory prepayment in the event of certain equity or
debt issuances or asset sales by the Company or any of its subsidiaries and in
amounts equal to specified percentages of excess cash flow (as defined). On June
30, 2001, there was $37.3 million outstanding on the term loan and $13.0 million
outstanding on the Revolving Credit Facility. La Petite had outstanding letters
of credit in an aggregate amount equal to $8.7 million, and $3.3 million was
available for working capital purposes under the Revolving Credit Facility. The
Company's Credit Agreement, Senior Notes and preferred stock contain certain
covenants that limit the ability of the Company to incur additional
indebtedness, pay cash dividends or make certain other restricted payments

On November 14, 2001, Parent, La Petite and certain of its senior secured
lenders entered into an amendment to the Credit Agreement. The amendment waived
existing defaults of Parent and La Petite in connection with the failure to
satisfy certain financial covenants for the quarterly periods ended June 30,
2001 and September 30, 2001, and the failure to deliver timely financial
information to the senior secured lenders. Additionally, the amendment revised
certain financial covenant targets for fiscal years 2002, 2003 and 2004. The
amendment also addressed specific waivers necessary to permit the issuance of a
new class of convertible preferred stock of Parent. In consideration for the
waiver and amendments, Parent is required to issue additional equity equal to
$15.0 million prior to May 14, 2002, with $3.4 million to be issued prior to the
effectiveness of the amendment and an additional $0.825 million to be issued
prior to December 31, 2001. Additionally, as part of the amendment, JPMP agreed
to guaranty a portion of the bank debt if LPA fails to satisfy its commitment to
purchase the new equity prior to May 14, 2002 or earlier



                                       22
<PAGE>



if the bank debt has been accelerated. The amount of such guaranty equals the
amount of LPA's unfunded commitment to purchase the new equity, as adjusted from
time to time.

On July 21, 1999, the Company acquired all the outstanding shares of Bright
Start for $9.3 million in cash and assumed approximately $2.0 million in debt.
Bright Start operated 43 preschools in the states of Minnesota, Wisconsin,
Nevada, and New Mexico (see Note 11 to the consolidated financial statements).

On December 15, 1999, LPA acquired an additional $15.0 million of redeemable
preferred stock of the Parent and received warrants to purchase an additional
3.0% of the Parent's outstanding common stock on a fully diluted basis at that
time. The proceeds of that investment were contributed to La Petite as common
equity. In connection with such purchase and contribution, the banks waived
their right under the Credit Agreement to require that such proceeds be used to
repay amounts outstanding under the Credit Agreement. The proceeds of such
equity contribution were used to repay borrowings under the revolving credit
facility that were incurred to finance the Bright Start acquisition.

Pursuant to a notice dated November 13, 2001, Parent offered all of its
stockholders the right to purchase up to their respective pro rata amount of a
newly created class of convertible preferred stock and warrants to purchase
common stock of Parent. The convertible preferred stock is junior to the
redeemable preferred stock of Parent in terms of dividends, distributions, and
rights upon liquidation. Up to $4.25 million of convertible preferred stock of
Parent and warrants to purchase 562,500 shares of common stock of Parent were
offered. Stockholders of Parent electing to participate in the offer were
required to commit to purchase a similar percentage of an additional aggregate
amount of convertible preferred stock equal to $10.75 million. At any time, or
from time to time, prior to May 14, 2002, as requested by Parent, the
stockholders of Parent participating in the pre-emptive rights offer are
required to purchase the balance of the convertible preferred stock being
offered thereby. All of the proceeds from the pre-emptive rights offer received
by Parent will be contributed to La Petite as common equity and will be used by
La Petite for general working capital and liquidity purposes.

Pursuant to the pre-emptive offer, on November 15, 2001 LPA acquired $3.4
million of Parent's convertible preferred stock and received warrants to
purchase 452,343 shares of common stock. The proceeds of that $3.4 million
investment were contributed to La Petite as common equity. In connection with
such purchase, the banks waived their right under the Credit Agreement to
require that the proceeds be used to repay amounts outstanding under the Credit
Agreement.

LPA also committed to purchase the balance of the $11.6 million of convertible
preferred stock being offered and not otherwise purchased by the other
stockholders of Parent. Prior to December 31, 2001 LPA is required to purchase
an amount of convertible preferred stock equal to the difference between $0.8
million and the value of the amount of the convertible preferred stock purchased
by other stockholders in connection with the pre-emptive offer. After December
31, 2001, the balance of the convertible preferred stock of Parent to be
purchased by LPA will, as applicable, be purchased at any time, or from time to
time, prior to May 14, 2002 at the request of Parent. If Parent has not
requested that LPA fund its commitment to purchase the balance of the
convertible preferred stock prior to May 14, 2002, LPA has the right to cause
Parent to issue the balance of the convertible preferred stock to LPA. After
giving effect to the investment on November 15, 2001, LPA beneficially owns
approximately 90.0% of Holdings' outstanding common stock on a fully diluted
basis.

In connection with the Amendment to the Credit Agreement and the $15.0 million
of committed capital, management is continuing to review plans and actions that
will enable the Company to improve future operations. However, there can be no
assurance that the Company will be able to do so.

Cash flows from operating activities were $2.8 million during the 52 weeks ended
June 30, 2001, (2001 year) as compared to cash flows from operating activities
of $5.6 million during the 52 weeks ended July 1, 2000, (2000 year). The $2.8
million decrease in cash flows from operations was mainly due to a $6.8 million
decrease in net loss, a $4.8 million change in deferred income taxes, a $0.9
million amortization of transaction adjustment into operations, offset by the
non-cash restructuring charge of $7.5 million in 2000, a $7.0 million net change
in other assets and liabilities and a $0.8 million net change in working
capital.

                                       23

<PAGE>




Cash flows used for investing activities were $14.7 million during the 2001 year
as compared to cash flows used of $10.3 million during the 2000 year. The $4.4
million increase in cash flows used for investing activities was principally due
to a $4.5 million increase in maintenance capital expenditures, a $23.2 million
decrease in proceeds from new school sale lease-backs, a $12.9 million decrease
in new school development, and a $10.4 million decrease used for the Bright
Start acquisition.

Cash flows from financing activities were $13.0 million during the 2001 year
compared to cash flows from financing activities of $4.2 million during the 2000
year. The $8.8 million increase in cash flows from financing activities was
principally due to a $0.7 million net decrease in restricted cash requirements,
a $13.0 million increase in net borrowings and a $1.2 million increase in bank
overdrafts related to the timing of monthly expense payments. Restricted cash
investments represent cash deposited in escrow accounts as collateral for the
self-insured portion of the Company's workers compensation insurance coverage.

The Company opened 16 new schools during the 2000 year. The cost to open a new
school ranges from $1.0 million to $1.5 million of which approximately 85% is
typically financed through a sale and leaseback transaction. Alternatively, the
school may be constructed on a build to suit basis, which reduces the working
capital requirements during the construction process. In addition, the Company
intends to explore other efficient real estate financing transactions in the
future.

Purchasers of schools in sale and leaseback transactions have included insurance
companies, bank trust departments, pension funds, real estate investment trusts
and individuals. The leases are operating leases and generally have terms of 15
to 20 years with one or two five-year renewal options. Most of these
transactions are structured with an annual rental designed to provide the
owner/lessor with a fixed cash return on their capitalized cost over the term of
the lease. In addition, many of the Company's leases provide for contingent
rentals if the school's operating revenue exceeds certain levels. Although the
Company expects sale and leaseback transactions to continue to finance its
expansion, no assurance can be given that such funding will always be available.

Total capital expenditures for the 52 weeks ended June 30, 2001 and July 1,
2000, exclusive of the Bright Start acquisition, were $14.9 million and $23.4
million, respectively. The Company views all capital expenditures, other than
those incurred in connection with the development of new schools, to be
maintenance capital expenditures. Maintenance capital expenditures for the 52
weeks ended June 30, 2001 and July 1, 2000 were $14.9 million and $10.4 million,
respectively. For fiscal year 2002, the Company expects total maintenance
capital expenditures to be approximately $14.1 million.

In addition to maintenance capital expenditures, the Company expends additional
funds to ensure that its facilities are in good working condition. Such funds
are expensed in the periods in which they are incurred. The amounts of such
expenses for the 52 weeks ended June 30, 2001 and July 1, 2000 were $12.5
million and $11.9 million, respectively.

INFLATION AND GENERAL ECONOMIC CONDITION
During the past three years (a period of low inflation) the Company implemented
selective increases in tuition rates based on geographic market conditions and
class capacity utilization. During the 2001 year, the Company experienced
inflationary pressures on average wage rates, as hourly rates increased
approximately 8%. Management believes this is occurring industry wide and there
is no assurance that such wage rate increases can be recovered through future
increases in tuition. A sustained recession with high unemployment may have a
material adverse effect on the Company's operations.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Current indebtedness consists of Senior Notes in the aggregate principal amount
of $145 million, the term loan under the Credit Agreement in the aggregate
principal amount of $37.3 million at June 30, 2001 and the revolving credit
facility under the Credit Agreement providing for revolving loans to the Company
in an aggregate principal amount (including swingline loans and the aggregate
stated amount of letters of credit) of $25 million. Borrowings under the Senior
Notes bear interest at 10% per annum. Borrowings




                                       24
<PAGE>



under the Credit Agreement bear interest at a rate per annum equal (at the
Company's option) to: (a) an adjusted London inter-bank offered rate ("LIBOR")
not to be less than an amount equal to 2.50% per annum, plus a percentage based
on the Company's financial performance; or (b) a rate equal to the higher of The
Chase Manhattan Bank's published prime rate, a certificate of deposit rate plus
1% or the federal funds effective rate plus 1/2 of 1% plus, in each case, a
percentage based on the Company's financial performance. The borrowing margins
applicable to the Credit Agreement are currently 3.25% for LIBOR loans and 2.25%
for ABR loans. The Senior Notes will mature in May 2008 and the Credit Agreement
will mature in May 2005. The term loan amortizes in an amount equal to $1.0
million in fiscal year 2001 through 2003, $7.8 million in fiscal year 2004 and
$27.5 million in fiscal year 2005. The term loan is also subject to mandatory
prepayment in the event of certain equity or debt issuances or asset sales by
the Company or any of its subsidiaries in amounts equal to specified percentage
of excess cash flow (as defined).

To reduce the impact of interest rate changes on the term loan, the Company
entered into interest rate collar agreements during the second quarter of fiscal
year 1999. The collar agreements cover the LIBOR interest rate portion of the
term loan, effectively setting maximum and minimum interest rates of 9.5% and
7.9%. A collar agreement expired on February 11, 2001. As of June 30, 2001, the
notional value of the interest rate collar agreement was $18.6 million.

To reduce interest expense on the $145 million Senior Notes, the Company entered
into an interest rate swap transaction and an interest rate collar during the
third quarter of fiscal year 1999. The effect of this transaction is that the
fixed rate debt was essentially exchanged for a variable rate arrangement based
on LIBOR plus a fixed percentage. The interest rate collar covers the LIBOR
portion of variable rate swap, effectively setting maximum and minimum interest
rates of 10.9% and 9.2%. On January 11, 2001, the Company entered into an
agreement with the counter party to terminate the interest rate swap on the
Senior Notes. The termination agreement required the Company to pay the counter
party $575,000 on February 28, 2001.

There were no initial costs associated with either the swap or the interest rate
collar agreements as the floor and ceiling cap rates were priced to offset each
other. Any differential paid or received based on the swap/collar agreements is
recognized as an adjustment to interest expense. As of June 30, 2001 the
notional value of such derivatives was $18.6 million. A 1% increase in the
applicable index rate, after giving effect to the interest rate collars, would
result in an interest rate increase of $0.2 million per year.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements:

         Independent Auditors' Report

         Consolidated Balance Sheets as of June 30, 2001 and July 1, 2000

         Consolidated Statements of Operations and Comprehensive Loss for the 52
         weeks ended June 30, 2001, 52 weeks ended July 1, 2000, and 44 weeks
         ended July 3, 1999

         Consolidated Statements of Stockholders' Equity (Deficit) for the 52
         weeks ended June 30, 2001, 52 weeks ended July 1, 2000, and 44 weeks
         ended July 3, 1999

         Consolidated Statements of Cash Flows for the 52 weeks ended June 30,
         2001, 52 weeks ended July 1, 2000, and 44 weeks ended July 3, 1999

         Notes to Consolidated Financial Statements



                                       25

<PAGE>



INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
LPA Holding Corp.
Overland Park, Kansas

We have audited the accompanying consolidated balance sheets of LPA Holding
Corp. and subsidiaries (the "Company") as of June 30, 2001 and July 1, 2000, and
the related consolidated statements of operations and comprehensive loss,
stockholders' deficit, and cash flows for the 52 weeks ended June 30, 2001, the
52 weeks ended July 1, 2000, and the 44 weeks ended July 3, 1999. Our audits
also included the financial statement schedules listed in the Index at Item 14.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of LPA Holding Corp. and subsidiaries
as of June 30, 2001 and July 1, 2000, and the results of their operations and
their cash flows for the 52 weeks ended June 30, 2001, the 52 weeks ended July
1, 2000, and the 44 weeks ended July 3, 1999 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

As discussed in Notes 3 and 13, the Company was not in compliance as of June 30,
2001 with certain financial covenants contained in its Credit Agreement. On
November 14, 2001, the Company entered into Amendment No. 3 to Credit Agreement
and Waiver (the "Amendment") with its senior secured lenders. The Amendment
waives the events of default and establishes future modified covenants. In
addition, the Amendment provides for specific waivers necessary to permit the
issuance of $15.0 million of a new class of convertible preferred stock of the
Company.

As discussed in Note 14, the accompanying 2001 financial statements have been
restated.

Deloitte & Touche LLP

Kansas City, Missouri
September 14, 2001 (November 15, 2001 as to Note 13 and March 25, 2002 as to the
effects of the restatement discussed in Note 14)


                                       26

<PAGE>



LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
                                                                            JUNE 30,          JULY 1,
                                                                              2001              2000
                                                                          AS RESTATED,
                                                                          SEE NOTE 14
                                                                         -------------------------------
<S>                                                                      <C>                <C>
ASSETS
Current assets:
    Cash and cash equivalents                                                 $   5,078        $   4,008
    Restricted cash investments (Note 1)                                             91              837
    Accounts and notes receivable, (net of allowance for
       doubtful accounts of $537 and $406)                                        9,920            7,462
    Prepaid food and supplies                                                     6,346            7,127
    Other prepaid expenses                                                        3,475            5,324
    Refundable income taxes  (Note 5)                                                55              109
    Deferred income taxes  (Note 5)                                                                  950
                                                                         ---------------    -------------
         Total current assets                                                    24,965           25,817

Property and equipment, at cost:
    Land                                                                          5,778            5,886
    Buildings and leasehold improvements                                         85,753           79,568
    Equipment                                                                    11,491           23,780
    Facilities under construction                                                 2,280            2,041
                                                                         ---------------    -------------
                                                                                105,302          111,275
    Less accumulated depreciation                                                46,278           54,842
                                                                         ---------------    -------------
         Net property and equipment                                              59,024           56,433

Other assets (Note 2)                                                            65,108           69,159
Deferred income taxes (Note 5)                                                   16,633           14,238
                                                                         ---------------    -------------
                                                                              $ 165,730        $ 165,647
                                                                         ---------------    -------------
</TABLE>
                                                                     (continued)


                                       27

<PAGE>



LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                        JUNE 30,           JULY 1,
                                                                                          2001              2000
                                                                                       AS RESTATED,
                                                                                       SEE NOTE 14
                                                                                     -------------------------------
<S>                                                                                  <C>                  <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
    Overdrafts due banks                                                                $   5,925          $   4,756
    Accounts payable                                                                        5,707              8,273
    Current reserve for closed academies                                                    3,100              3,268
    Current maturities of long-term debt and capital lease obligations                      1,255              1,897
    Accrued salaries, wages and other payroll costs                                        15,495             14,212
    Accrued insurance liabilities                                                           2,359              2,586
    Accrued property and sales taxes                                                        3,368              3,490
    Accrued interest payable                                                                2,487              2,568
    Other current liabilities                                                               4,692              5,556
    Deferred income taxes (Note 5)                                                          1,629
                                                                                        ---------          ---------
         Total current liabilities                                                         46,017             46,606

Long-term debt and capital lease obligations (Note 3)                                     192,394            182,319
Other long-term liabilities (Note 4)                                                        7,060             13,061

Series A 12% redeemable preferred stock ($.01 par value per share);
    45,000 shares authorized, issued and outstanding at June 30, 2001                      54,941             47,314
    and July 1, 2000 at aggregate liquidation preference of $61.2
    million and $54.5 million, respectively  (Note 7)

Commitments and contingencies (Note 9)

Stockholders' deficit:
    Class A common stock ($.01 par value per share); 950,000 shares                             6                  6
    authorized and 564,985 shares issued and outstanding as of June 30, 2001 and
    July 1, 2000 (Note 7)
    Class B common stock ($.01 par value per share);
    20,000 shares authorized, issued and outstanding as of June 30, 2001 and
    July 1, 2000 (Note 7)
    Common stock warrants (Note 7)                                                          8,596              8,596
    Accumulated other comprehensive income                                                    331
    Accumulated deficit                                                                  (143,615)          (132,255)
                                                                                        ---------          ---------
         Total stockholders' deficit                                                     (134,682)          (123,653)
                                                                                        ---------          ---------
                                                                                        $ 165,730          $ 165,647
                                                                                        ---------          ---------
</TABLE>


                                                                     (concluded)
See notes to consolidated financial statements


                                       28
<PAGE>



LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                         52 WEEKS           52 WEEKS           44 WEEKS
                                                          ENDED               ENDED              ENDED
                                                         JUNE 30,            JULY 1,            JULY 3,
                                                           2001               2000               1999
                                                       AS RESTATED,
                                                       SEE NOTE 14
                                                      ---------------    ----------------   ----------------
<S>                                                   <C>                <C>                <C>
Operating revenue                                       $ 384,837           $ 371,037           $ 281,072


Operating expenses:
    Salaries, wages and benefits                          216,018             205,665             150,052
    Facility lease expense                                 44,751              46,573              33,670
    Depreciation and amortization                          15,252              16,335              12,883
    Restructuring costs (Note 12)                                               7,500
    Provision for doubtful accounts                         4,531               2,931               1,382
    Other                                                  87,393              86,948              66,895
                                                        ---------           ---------           ---------

Total operating expenses                                  367,945             365,952             264,882
                                                        ---------           ---------           ---------

Operating income                                           16,892               5,085              16,190

Interest expense                                           21,323              20,880              16,145
Interest income                                               (85)               (163)               (153)
                                                        ---------           ---------           ---------
        Net interest expense                               21,238              20,717              15,992
                                                        ---------           ---------           ---------
Income (loss) before income taxes                          (4,346)            (15,632)                198
Provision (benefit) for income taxes                         (645)             (5,085)                995
                                                        ---------           ---------           ---------
Net loss                                                   (3,701)            (10,547)               (797)
                                                        ---------           ---------           ---------

Other comprehensive income
    Other comprehensive income, net                           492
    Reclassification into operations                         (161)
                                                        ---------           ---------           ---------
        Total other comprehensive income                      331
                                                        ---------           ---------           ---------
Comprehensive loss                                      $  (3,370)          $ (10,547)          $    (797)
                                                        =========           =========           =========
</TABLE>

See notes to consolidated financial statements.

                                       29

<PAGE>



LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
                                   COMMON STOCK
                                   ------------                                       ACCUMULATED            TOTAL
                                  NUMBER                            ACCUMULATED     OTHER COMPREHENSIVE     STOCKHOLDERS'
                               OF SHARES    AMOUNT     WARRANTS       DEFICIT             INCOME           EQUITY (DEFICIT)
                              ---------------------   ---------     ------------   --------------------    ---------------
<S>                           <C>        <C>          <C>        <C>               <C>                     <C>
Balance, August 30, 1998       580,026   $       6     $   5,645      $(111,352)                              $(105,701)

Preferred stock dividend                                                 (3,685)                                 (3,685)
(Note 7)
Net loss                                                                   (797)                                   (797)
                             ---------   ---------     ---------      ---------       ---------               ---------
Balance, July 3, 1999          580,026           6         5,645       (115,834)                               (110,183)

Exercise of stock options        4,959                                       89                                      89

Issuance of warrants                                       2,951                                                  2,951

Preferred stock dividend                                                 (5,963)                                 (5,963)

Net loss                                                                (10,547)                                (10,547)
                             ---------   ---------     ---------      ---------       ---------               ---------
Balance, July 1, 2000          584,985           6         8,596       (132,255)                               (123,653)

Other comprehensive income,                                                                 492                     492
       net, as restated

Reclassification of other                                                                  (161)                   (161)
       comprehensive income
       into operations, as
       restated

Buyback of stock options                                                    (32)                                    (32)

Preferred stock dividend                                                 (7,627)                                 (7,627)

Net loss, as restated                                                    (3,701)                                 (3,701)
                             ---------   ---------     ---------      ---------       ---------               ---------
Balance, June 30, 2001,        584,985   $       6     $   8,596      $(143,615)      $     331               $(134,682)
as restated (see note 14)
                             =========   =========     =========      =========       =========               =========
</TABLE>

See notes to consolidated financial statements.

                                       30

<PAGE>



LPA HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                52 WEEKS          52 WEEKS         44 WEEKS
                                                                                  ENDED            ENDED            ENDED
                                                                              JUNE 30, 2001     JULY 1, 2000     JULY 3, 1999
                                                                              AS RESTATED,
                                                                               SEE NOTE 14
                                                                             ----------------  ---------------  ---------------
<S>                                                                          <C>               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                     $ (3,701)        $(10,547)        $   (797)
    Adjustments to reconcile net loss to net cash provided by
     operating activities
       Restructuring costs                                                                           7,500
       Amortization of transition adjustment into operations                          937
       Depreciation and amortization                                               16,364           17,387           13,712
       Deferred income taxes                                                          (41)          (4,831)             708
    Changes in operating assets and liabilities:
       Accounts and notes receivable                                               (2,292)           1,199           (1,014)
       Prepaid expenses and supplies                                                2,630            2,187           (5,488)
       Accrued property and sales taxes                                              (122)            (302)            (354)
       Accrued interest payable                                                       (81)             180           (2,383)
       Accounts payable and other accrued liabilities                              (2,289)          (5,511)           9,409
       Other changes in assets and liabilities, net                                (8,613)          (1,665)          (3,473)
                                                                                 --------         --------         --------
              Net cash provided by operating activities                             2,792            5,597           10,320
                                                                                 --------         --------         --------
CASH FLOWS FROM INVESTING ACTIVITIES
    Acquisition of Bright Start, net of cash acquired                             (10,361)
    Capital expenditures                                                          (14,894)         (23,412)         (31,666)
    Proceeds from sale of assets                                                      189           23,432           12,462
                                                                                 --------         --------         --------
              Net cash used for investing activities                              (14,705)         (10,341)         (19,204)
                                                                                 --------         --------         --------
CASH FLOWS FROM FINANCING ACTIVITIES
    Repayment of debt and capital lease obligations                                (1,900)          (8,242)          (1,692)
    Net borrowings under the Revolving Credit Agreement                            13,000                             4,000
    Exercise of stock options                                                                           89
    Deferred financing costs                                                                          (346)            (818)
    Proceeds from issuance (buyback) of redeemable preferred
    stock and warrants, net of expenses                                               (32)          14,992
    Increase (reduction)  in bank overdrafts                                        1,169           (2,694)           4,560
    Decrease in restricted cash investments                                           746              381              538
                                                                                 --------         --------         --------
              Net cash provided by financing activities                            12,983            4,180            6,588
                                                                                 --------         --------         --------
NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS                               1,070             (564)          (2,296)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                    4,008            4,572            6,868
                                                                                 --------         --------         --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       $  5,078         $  4,008         $  4,572
                                                                                 ========         ========         ========
SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid during the period for:
       Interest (net of amounts capitalized)                                     $ 21,403         $ 19,694         $ 17,699
       Income taxes                                                                   160               86              275
    Cash received during the period for:
       Interest                                                                  $     92         $    156         $    152
       Income taxes                                                                    43               88            2,122
    Non-cash investing and financing activities:
       Capital lease obligations of $588, $34 and $29 were incurred during
         the 52 weeks ended June 30, 2001, the 52 weeks ended July 1,
         2000 and 44 weeks ended July 3, 1999 respectively, when the
         Company entered into leases for new computer equipment
</TABLE>

See notes to consolidated financial statements.

                                       31

<PAGE>




 LPA HOLDING CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Vestar/LPA Investment Corp. (Parent), a privately-held Delaware
         corporation, was formed in 1993 for the purpose of holding the capital
         stock of La Petite Holdings Corp. (Holdings), a Delaware corporation.
         Holdings, which has no independent assets or operations, was formed in
         1993 for the purpose of holding the capital stock of La Petite
         Acquisition Corp. (Acquisition). On July 23, 1993, as a result of a
         series of transactions, Holdings acquired all the outstanding shares of
         common stock, par value $.01 (the Common Stock), of La Petite Academy,
         Inc., a Delaware corporation (La Petite). The transaction was accounted
         for as a purchase and the excess of purchase price over the net assets
         acquired is being amortized over 30 years. On May 31, 1997, Holdings
         was merged with and into La Petite with La Petite as the surviving
         corporation. On August 28, 1997 LPA Services, Inc. (Services), a wholly
         owned subsidiary of La Petite, was incorporated. Services provides
         third party administrative services on insurance claims to La Petite.

         On March 17, 1998, LPA Investment, LLC (LPA), a Delaware limited
         liability company owned by an affiliate of J.P. Morgan Partners, LLC
         (JPMP) and by an entity controlled by Robert E. King, a director of La
         Petite, and Parent, which was renamed LPA Holding Corp., entered into
         an Agreement and Plan of Merger pursuant to which a wholly owned
         subsidiary of LPA was merged into Parent (the Recapitalization). In the
         Recapitalization, all of the then outstanding shares of preferred stock
         and common stock of Parent (other than the shares of common stock
         retained by Vestar/LPT Limited Partnership and management of La Petite)
         owned by the existing stockholders of Parent (the Existing
         Stockholders) were converted into cash. As part of the
         Recapitalization, LPA purchased $72.5 million (less the value of
         options retained by management) of common stock of the Parent and $30
         million of redeemable preferred stock of Parent (collectively, the
         Equity Investment). In addition, in connection with the purchase of
         preferred stock of Parent, LPA received warrants to purchase up to 6.0%
         of Parent's common stock on a fully diluted basis. Transaction expenses
         included in operating expenses under the caption "Recapitalization
         Costs" for this period include approximately $1.5 million in
         transaction bonuses and $7.2 million for the cancellation of stock
         options and related taxes. The Recapitalization was completed May 11,
         1998.

         On July 21, 1999, La Petite acquired all the outstanding shares of
         Bright Start, Inc. ("Bright Start"). See Note 11 to the consolidated
         financial statements.

         On December 15, 1999, LPA acquired an additional $15.0 million of
         Parent's redeemable preferred stock and received warrants to purchase
         an additional 3% of Parent's common stock on a fully-diluted basis. The
         $15.0 million proceeds received by Parent was contributed to La Petite
         as common equity. As a result of the recapitalization and additional
         purchase of preferred stock and warrants, LPA beneficially owns 81.3%
         of the common stock of Parent on a fully diluted basis and $45 million
         of redeemable preferred stock of Parent (See Notes 7 and 13). An
         affiliate of JPMP owns a majority of the economic interests of LPA and
         an entity controlled by Robert E. King owns a majority of the voting
         interests of LPA.

         Parent, consolidated with La Petite, Bright Start and Services, is
         referred to herein as the Company.

         The Company offers educational, developmental and child care programs
         that are available on a full-time or part-time basis, for children
         between six weeks and twelve years old. The Company's



                                       32
<PAGE>



         schools are located in 35 states and the District of Columbia,
         primarily in the southern, Atlantic coastal, mid-western and western
         regions of the United States.

         PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
         include the accounts of Parent and its wholly-owned subsidiary, La
         Petite, and La Petite's wholly-owned subsidiaries, Bright Start and
         Services, after elimination of all significant inter-company accounts
         and transactions.

         FISCAL YEAR END -- On April 18, 2001, the Company changed its fiscal
         year end from the 52 or 53-week period ending on the first Saturday in
         July to the 52 or 53-week period ending on the Saturday closest to June
         30. This change was made to align the Company's business fiscal year
         with its tax fiscal year. On June 10, 1999, the Company changed its
         fiscal year to be the 52 or 53-week period ending on the first Saturday
         in July. Prior to this change, the Company utilized a fiscal year
         consisting of the 52 or 53-week period ending on the last Saturday in
         August.

         USE OF ESTIMATES -- The preparation of financial statements in
         conformity with accounting principles generally accepted in the United
         States of America requires management to make estimates and assumptions
         that affect the reported amounts of assets and liabilities and
         disclosure of contingent assets and liabilities at the date of the
         financial statements and the reported amounts of revenues and expenses
         during the reporting period. Actual results could differ from those
         estimates.

         RECOGNITION OF REVENUES AND PRE-OPENING EXPENSES -- The Company
         operates preschool education and child care Academies. Revenue is
         recognized as the services are performed. Expenses associated with
         opening new Academies are charged to expense as incurred.

         DEPRECIATION AND AMORTIZATION -- Buildings, leasehold improvements,
         furniture and equipment are depreciated over the estimated useful lives
         of the assets using the straight-line method. For financial reporting
         purposes, buildings are generally depreciated over 29 to 40 years,
         furniture and equipment over three to 10 years and leasehold
         improvements over five to 15 years.

         Maintenance and repairs are charged to expense as incurred. The cost of
         additions and improvements is capitalized and depreciated over the
         remaining useful lives of the assets. The cost and accumulated
         depreciation of assets sold or retired are removed from the accounts,
         and any gain or loss is recognized in the year of disposal, except
         gains and losses on property and equipment that have been sold and
         leased back, which are recognized over the terms of the related lease
         agreements.

         EXCESS OF PURCHASE PRICE OVER THE NET ASSETS ACQUIRED -- The excess of
         the purchase price over the fair value of assets and liabilities
         acquired related to the acquisitions of La Petite and Bright Start are
         being amortized over periods of 30 years and 20 years, respectively, on
         the straight-line method.

         OTHER ASSETS -- Other assets include real estate property held for
         sale, the loss on real estate sale-leaseback transactions, deposits for
         rent and utilities, and the fair value of identifiable intangible
         assets acquired in connection with the acquisition of La Petite. The
         loss on sale-leaseback transactions is being amortized over the lease
         life, and the intangible assets are being amortized over periods
         ranging from 2 to 10 years on the straight-line method.

         DEFERRED FINANCING COSTS -- The costs of obtaining financing are
         included in other assets and are being amortized over the life of the
         related debt.

         CASH EQUIVALENTS -- The Company's cash equivalents consist of
         commercial paper and money market funds with original maturities of
         three months or less.


                                       33
<PAGE>



         RESTRICTED CASH INVESTMENTS -- The restricted cash investment balance
         represents cash deposited in an escrow account as security for the
         self-insured portion of the Company's workers compensation and
         automobile insurance coverage.

         INCOME TAXES -- The Company establishes deferred tax assets and
         liabilities, as appropriate, for all temporary differences between
         financial reporting and income tax bases of the Company's assets and
         liabilities, and adjusts deferred tax balances to reflect changes in
         tax rates expected to be in effect during the periods the temporary
         differences reverse. Management has evaluated the recoverability of the
         deferred income tax asset balances and believes that the deferred
         balances will be realized.

         DISCLOSURES REGARDING FINANCIAL INSTRUMENTS -- At June 30, 2001 the
         carrying values of the Company's financial instruments, with the
         exception of the Company's Senior Notes and preferred stock,
         approximate fair value. The estimated fair values of Senior Notes and
         preferred stock at June 30, 2001 were $98.6 million and $61.2 million,
         respectively. The estimated fair values of Senior Notes and preferred
         stock at July 1, 2000 were $85.6 million and $54.5 million,
         respectively. The combined estimated fair value of the Company's
         interest rate contracts at July 1, 2000 was a liability of $3,463.
         Estimates of fair value are obtained from independent broker quotes.

         IMPAIRMENT OF LONG-LIVED ASSETS -- The Company reviews long-lived
         assets and certain identifiable intangibles for impairment whenever
         events or changes in circumstances indicate that the carrying amount of
         an asset may not be recoverable.

         ADVERTISING COSTS -- The Company expenses the production costs of
         advertising the first time the advertising takes place, except for
         direct-response advertising, which is capitalized and amortized over
         its expected period of future benefits. At June 30, 2001, no
         advertising was reported as an asset. Advertising expense was $5.4
         million, $5.5 million and $5.9 million for the years ended June 30,
         2001, July 1, 2000 and July 3, 1999, respectively.

         STOCK-BASED COMPENSATION -- The Company accounts for stock compensation
         awards under Accounting Principles Board ("APB") Opinion No. 25 that
         requires compensation cost to be recognized based on the excess, if
         any, between the market price of the stock at the date of grant and the
         amount an employee must pay to acquire the stock. The Company has
         disclosed the pro forma net income (loss) determined on the fair value
         method in accordance with Statement of Financial Accounting Standards
         ("SFAS) No. 123 (See Note 10).


         SEGMENT REPORTING --The Company has determined that it currently
         operates entirely in one segment.

         DERIVATIVE FINANCIAL INSTRUMENTS-- Effective July 2, 2000, the Company
         adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging
         Activities, as amended by SFAS Nos. 137 and 138, which establishes
         accounting and reporting standards for derivative instruments,
         including certain derivative instruments embedded in other contracts
         and for hedging activities. All derivatives, whether designated in
         hedging relationships or not, are required to be recorded on the
         balance sheet at fair value. If the derivative is designated as a fair
         value hedge, the changes in the fair value of the derivative and of the
         hedged item attributable to the effective portion of the hedged risk
         are recognized in earnings. If the derivative is designated as a cash
         flow hedge, the effective portion of changes in the fair value of the
         derivative are recorded in other comprehensive income and are
         recognized in the income statement when the hedged item affects
         earnings. Ineffective portions of changes in the fair value of cash
         flow hedges are recognized in earnings. Changes in fair value of
         derivative instruments that do not meet hedge accounting criteria are
         recorded as a component of current operations. The Company is exposed
         to credit risk on derivative instruments, limited to the net interest
         receivable and the fair market value of the derivative instrument
         should the counter-party fail. Credit risk is managed through an
         evaluation



                                       34
<PAGE>



         of the credit worthiness of counter-parties and continuing review and
         monitoring of counter-parties. The Company is also exposed to market
         risk from derivative instruments when adverse changes in interest rates
         occur. Market risk is monitored and controlled through adherence to
         financial risk policies and periodic review of open positions. The
         adoption of SFAS No. 133 on July 2, 2000 resulted in a transition gain
         recorded in other comprehensive income of $0.8 million ($0.5 million
         net of taxes) resulting from the fair value adjustment of interest rate
         collars that were used to hedge cash flows associated with variable
         rate debt (see Note 3b). Additionally, the fair value adjustment to
         record an interest rate swap and related collar resulted in a $3.5
         million ($2.1 million net of tax) charge to earnings which was offset
         by a corresponding gain of $3.5 million ($2.1 million net of tax)on
         fixed rate senior notes (see Note 3a).

         The aforementioned interest rate agreements do not qualify for hedge
         accounting on an ongoing basis. Accordingly, such contracts were marked
         to market subsequent to the adoption of SFAS No. 133. The adjustment
         recorded upon transition to the carring value of the fixed rate debt is
         being amortized to interest expense through May 15, 2003. The
         transition gain recorded as the only component of accumulated other
         comprehensive income is reclassified into interest expense over the
         remaining life of the related contract.

         During the year ended June 30, 2001, approximately $0.9 million ($0.5
         million net of tax) was reclassified from accumulated other
         comprehensive income into interest expense. As of June 30, 2001, the
         Company has one remaining interest rate collar agreement which expires
         May 15, 2005. The Company estimates that approximately $83,000 ($50,000
         net of taxes) will be reclassified out of accumulated other
         comprehensive income into interest expense during fiscal year 2002.

         Prior to the adoption of SFAS No. 133, the Company utilizes swap and
         collar agreements to manage interest rate risks. The Company has
         established a control environment that includes policies and procedures
         for risk assessment and the approval, reporting, and monitoring of
         derivative financial instrument activities. Company policy prohibits
         holding or issuing derivative financial instruments for trading
         purposes. Any differential paid or received based on the swap/collar
         agreements is recognized as an adjustment to interest expense. Amounts
         receivable or payable under derivative financial instrument contracts,
         when recognized, are reported on the Consolidated Balance Sheet as both
         current and long term receivables or liabilities. Gains and losses on
         terminations of hedge contracts are recognized as other operating
         expense when terminated in conjunction with the termination of the
         hedged instrument, or to the extent that such instrument remains
         outstanding, deferred as other assets or other liabilities and
         amortized to interest expense over the remaining life of the position.


         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - SFAS No. 140, Accounting
         for Transfers and Servicing of Financial Assets and Extinguishments of
         Liabilities, is effective for transfers and servicing of financial
         assets and extinguishments of liabilities occurring after June 30,
         2001. This Statement replaces SFAS No. 125 and carries over most of the
         provisions without reconsideration. However, SFAS No. 140 does revise
         the accounting for securitizations and other transfers of financial
         assets and collateral, and requires certain disclosures. This Statement
         is effective for transfers and servicing of financial assets and
         extinguishments of liabilities occurring after June 30, 2001 and for
         recognition and reclassification of collateral and for disclosures
         relating to securitization transactions and collateral for the fiscal
         year ended June 30, 2001. The Company adopted the Statement as of July
         1, 2001, which had no impact on the Company's financial statements.

         In June 2001, the Financial Accounting Standards Board ("FASB")
         approved SFAS No. 141, Business Combinations, and SFAS No. 142,
         Goodwill and Other Intangible Assets. SFAS No. 141 will require
         business combinations entered into after June 30, 2001 to be accounted
         for using the purchase method of accounting. Specifically identifiable
         intangible assets having finite lives acquired, other than goodwill,
         will be amortized over their estimated useful economic life. SFAS No.
         142 requires that goodwill not be amortized, but instead be tested for
         impairment at least annually. SFAS No. 142 is effective for fiscal
         years beginning after December 15, 2001 to all



                                       35
<PAGE>



         goodwill and other intangible assets recognized in an entity's
         statement of financial position at that date, regardless of when those
         assets were initially recognized. Once adopted, annual goodwill
         amortization of approximately $2.6 million will cease. The Company has
         not yet determined if any impairment will result from adoption of these
         Statements.

         Also, in June 2001, the FASB issued SFAS No. 143, Accounting for Asset
         Retirement Obligations. This Statement addresses financial accounting
         and reporting for obligations associated with retirement of tangible
         long-lived assets and the associated asset retirement costs. It applies
         to legal obligations associated with the retirement of long-lived
         assets that result from the acquisition, construction, development and
         (or) the normal operation of a long-lived assets, except for certain
         obligations of lessees. The Company has not yet determined the impact
         of the implementation of this Statement, which is effective for the
         Company's 2003 fiscal year.

         In August 2001, The FASB issued SFAS No. 144 Accounting for Impairment
         or Disposal of Long-Lived Assets. SFAS No. 144 modified the financial
         accounting and reporting for long-lived assets to be disposed of by
         sale, and it broadens the presentation of discontinued operations to
         include more disposal transactions. The Company has not yet determined
         the impact of the implementation of this Statement, which is effective
         for the Company's 2003 fiscal year.

         RECLASSIFICATIONS -- Certain reclassifications to prior year amounts
         have been made in order to conform to the current year presentation.

2.       OTHER ASSETS
         (in thousands of dollars)

<TABLE>
<CAPTION>
                                                                          JUNE 30,             JULY 1,
                                                                           2001                2000
                                                                      ---------------      --------------
<S>                                                                 <C>                  <C>
           Intangible assets:
           Excess purchase price over net assets acquired           $         74,220     $        74,220
           Curriculum                                                          1,497               1,497
           Accumulated amortization                                         (19,356)            (16,533)
                                                                    -----------------    ----------------
                                                                              56,361              59,184

           Deferred financing costs                                            8,769               8,769
           Accumulated amortization                                          (3,252)             (2,141)
           Other assets                                                        3,230               3,347
                                                                    -----------------    ----------------
                                                                    $         65,108     $        69,159
                                                                    ================     ===============

1.       LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
         (in thousands of dollars)

                                                                        JUNE 30,             JULY 1,
                                                                          2001                 2000
                                                                      --------------      ---------------

           Senior Notes, 10.0% due May 15, 2008, net of             $       142,746     $        145,000
           discount (a)
           Borrowings under credit agreement (b)                             50,250               38,250
           Capital lease obligations                                            653                  966
                                                                    ----------------    -----------------
                                                                            193,649              184,216
           Less current maturities of long-term debt and capital
           lease obligations                                                (1,255)              (1,897)
                                                                    ----------------    -----------------
                                                                    $       192,394     $        182,319
                                                                    ================    ================
</TABLE>


                                       36
<PAGE>




         a)       The Senior Notes mature on May 15, 2008. Interest is payable
                  semi-annually on May 15 and November 15 of each year.
                  Commencing May 15, 2003, the Senior Notes are redeemable at
                  various redemption prices at Parent and La Petite's option.
                  The Senior Notes are joint and several obligations of Parent
                  and its 100% owned subsidiary, La Petite, as co-issuers, and
                  are fully and unconditionally guaranteed on a joint and
                  several basis by all of Parent's other subsidiaries, namely,
                  Bright Start and Services. Bright Start and Services are 100%
                  owned subsidiaries of La Petite. Parent has no independent
                  assets or operations. There does not exist any restrictions on
                  the ability of Parent or La Petite to obtain funds from its
                  subsidiaries by dividend or loan. The Senior Notes contain
                  certain covenants that, among other things, limit Parent and
                  La Petite's ability to incur additional debt, transfer or sell
                  assets, and pay cash dividends.

                  To reduce interest expense on the $145 million Senior Notes,
                  the Company entered into an interest rate swap transaction of
                  the same notional amount and an interest rate collar during
                  the third quarter of fiscal year 1999. The effect of this
                  transaction was that the fixed rate debt was essentially
                  exchanged for a variable rate arrangement based on LIBOR plus
                  a fixed percentage. The interest rate collar covers the LIBOR
                  portion of variable rate swap, effectively setting maximum and
                  minimum interest rates of 10.9% and 9.2%, respectively. On
                  January 11, 2001, the Company entered into an agreement with
                  the counter party to terminate the interest rate swap on the
                  Senior Notes. The termination agreement required the Company
                  to pay the counter party $575,000 on February 28, 2001, which
                  was recorded as interest expense.

         b)       On May 11, 1998 the Company entered into an agreement (the
                  Credit Agreement) providing for a term loan facility in the
                  amount of $40.0 million and a revolving credit agreement for
                  working capital and other general corporate purposes in the
                  amount of $25 million. Borrowings under the Credit Agreement
                  are secured by substantially all of the assets of the Parent,
                  La Petite and its subsidiaries. Loans under the Credit
                  Agreement bear an interest rate per annum equal to (at the
                  Company's option): (i) an adjusted London inter-bank offered
                  rate (LIBOR) not to be less than an amount equal to 2.5% per
                  annum, plus a percentage based on the Company's financial
                  performance or (ii) a rate equal to the higher of Chase's
                  prime rate, a certificate of deposit rate plus 1%, or the
                  Federal Funds rate plus 1/2 of 1% plus in each case a
                  percentage based on the Company's financial performance. The
                  Company is required to pay fees of 0.5% per annum of the
                  unused portion of the Credit Agreement plus letter of credit
                  fees, annual administration fees and agent arrangement fees.
                  The Credit Agreement matures in May 2005. The term loan
                  amortizes in an amount equal to $1.0 million in fiscal year
                  2001 through 2003, $7.8 million in fiscal year 2004, and $27.5
                  million in fiscal year 2005. The term loan is also subject to
                  mandatory prepayment in the event of certain equity or debt
                  issuances or asset sales by the Company or any of its
                  subsidiaries and in amounts equal to specified percentage of
                  excess cash flow (as defined). At June 30, 2001 there was
                  $13.0 million outstanding on the revolver.

                  To reduce the impact of interest rate changes on the term
                  loan, the Company entered into interest rate collar agreements
                  during the second quarter of fiscal year 1999. The collar
                  agreements cover the LIBOR interest rate portion of the term
                  loan, effectively setting maximum and minimum interest rates
                  of 9.5% and 7.9%, respectively. A collar agreement expired on
                  February 11, 2001. As of June 30, 2001, the notional value of
                  the interest rate collar agreement was $18.6 million.

                  At June 30, 2001, the Company was not in compliance with
                  certain of the financial covenants contained in the Credit
                  Agreement. On November 14, 2001, the Company entered into
                  Amendment No. 3 to Credit Agreement and Waiver (the
                  "Amendment"), which effectively waived the events of default
                  and established future modified financial covenants (see Note
                  13). The Company expects to comply with the amended financial



                                       37
<PAGE>



                  covenants contained in the Amendment to the Credit Agreement,
                  throughout fiscal year 2002. However, there can be no
                  assurance that the Company will be able to do so.
                  Additionally, the Amendment established revised rates of
                  interest based on the Company's leverage ratio, as defined.

         Scheduled maturities and mandatory prepayments of long-term debt and
         capital lease obligations during the five years subsequent to June 30,
         2001 are as follows (in thousands of dollars):

<TABLE>
<S>                                                                                       <C>
           2002                                                                                $   1,255
           2003                                                                                    1,220
           2004                                                                                    7,928
           2005                                                                                   40,500
           2006
           2007 and thereafter                                                                   142,746
                                                                                          ---------------
                                                                                               $ 193,649
                                                                                          ===============
</TABLE>

4.       OTHER LONG-TERM LIABILITIES
         (in thousands of dollars)

<TABLE>
<CAPTION>
                                                                              JUNE 30,         JULY 1,
                                                                               2001            2000
                                                                          ---------------  --------------

<S>                                                                       <C>               <C>
           Unfavorable lease, net of accumulated amortization                   $  2,542        $  3,973
           Reserve for closed academies                                            1,858           5,295
           Interest rate swap agreement                                               10
           Long-term insurance liabilities                                         2,650           3,793
                                                                          ---------------  --------------
                                                                                $  7,060       $  13,061
                                                                          ===============  ==============
</TABLE>

         In connection with the acquisition of La Petite and Bright Start, a
         liability for unfavorable operating leases was recorded and is being
         amortized over the average remaining life of the leases.

         The reserve for closed academies includes the long-term liability
         related primarily to leases for Academies that were closed and are no
         longer operated by the Company.



                                       38
<PAGE>



5.       INCOME TAXES
         The provisions (benefit) for income taxes recorded in the Consolidated
         Statements of Operations consisted of the following (in thousands of
         dollars):
<TABLE>
<CAPTION>
                                                              52 WEEKS        52 WEEKS       44 WEEKS
                                                               ENDED           ENDED           ENDED
                                                              JUNE 30,        JULY 1,         JULY 3,
                                                                2001            2000           1999
                                                              --------        --------       --------
<S>                                                           <C>           <C>             <C>
           (Refundable) Payable Currently:
             Federal                                           $    23      $  (8,304)       $ 1,426
             State                                                   4         (1,612)           277
                                                              ----------------------------------------
               Total                                                27         (9,916)         1,703
                                                              ----------------------------------------
           Deferred:
             Federal                                              (562)         4,046           (593)
             State                                                (110)           785           (115)
                                                              ----------------------------------------
               Total                                              (672)         4,831           (708)
                                                              ----------------------------------------
                                                               $  (645)      $ (5,085)       $   995
                                                              ========================================
</TABLE>

         The difference between the provision for income taxes, as reported in
         the Consolidated Statements of Operations, and the provision computed
         at the statutory Federal rate of 34 percent is due primarily to state
         income taxes and nondeductible amortization of the excess of purchase
         price over the net assets acquired of $2.6 million, $2.6 million, and
         $1.8 million in the 52 weeks ended June 30, 2001, and July 1, 2000, and
         the 44 weeks ended July 3, 1999, respectively. In addition, the 1999
         fiscal year provision was impacted by the resolution of issues raised
         by the IRS regarding the Company's benefit plan (see Note 8 to the
         consolidated financial statements).

         Deferred income taxes result from differences between the financial
         reporting and income tax basis of the Company's assets and liabilities.
         The sources of these differences and their cumulative tax effects at
         June 30, 2001 and July 1, 2000 are estimated as follows (in thousands
         of dollars):

<TABLE>
<CAPTION>
                                                                                 JUNE 30,       JULY 1,
                                                                                   2001          2000
                                                                                 --------      --------
<S>                                                                              <C>           <C>
                           Current deferred taxes:
                             Accruals not currently deductible                   $  2,519      $  3,788
                             Supplies                                              (2,633)       (2,985)
                             Prepaids and other                                    (1,515)          147
                                                                                 --------      --------
                               Net current deferred tax assets (liabilities)     $ (1,629)     $    950
                                                                                 ========      ========


                           Noncurrent deferred taxes:
                             Unfavorable leases                                  $  1,032      $  1,613
                             Insurance reserves                                     1,076         1,540
                             Reserve for closed academies                             754         2,150
                             Long-term debt                                          (915)
                             Carryforward of net operating loss                     8,120         3,847
                             Property and equipment                                 4,651         4,448
                             Intangible assets                                        324           349
                             Derivative financial instruments                       1,272
                             Other                                                    319           291
                                                                                 --------      --------
                               Net noncurrent deferred tax assets                $ 16,633      $ 14,238
                                                                                 ========      ========

</TABLE>


                                       39

<PAGE>



         The Company has federal net operating loss carry-forwards of $17.1
         million to offset future taxable income through the tax year 2012 and
         2018. Management believes that the deferred tax assets recorded on the
         balance sheet are recoverable and no reserve is required.

6.       LEASES

         Academy facilities are leased for terms ranging from 15 to 20 years.
         The leases provide renewal options and require the Company to pay
         utilities, maintenance, insurance and property taxes. Some leases
         provide for annual increases in the rental payment and many leases
         require the payment of additional rentals if operating revenue exceeds
         stated amounts. These additional rentals range from 2% to 10% of
         operating revenue in excess of the stated amounts and are recorded as
         rental expense. Vehicles are also rented under various lease
         agreements, most of which are cancelable within 30 days after a
         one-year lease obligation. Substantially all Academy and vehicle leases
         are operating leases. Rental expense for these leases were $47.4
         million, $52.3 million, and $39.1 million, for the 52 weeks ended June
         30, 2001, and July 1, 2000, and the 44 weeks ended July 3, 1999,
         respectively. Contingent rental expense of $2.3 million, $1.9 million
         and $1.4 million were included in rental expense for the 52 weeks ended
         June 30, 2001, July 1, 2000, and the 44 weeks ended July 3, 1999,
         respectively.

         Aggregate minimum future rentals payable under facility leases as of
         June 30, 2001 were as follows (in thousands of dollars):

<TABLE>
<S>                                                                       <C>
           Fiscal year ending:
           2002                                                                $   41,880
           2003                                                                    37,104
           2004                                                                    30,525
           2005                                                                    24,083
           2006                                                                    20,485
           2007 and thereafter                                                     58,988
                                                                          ----------------
                                                                               $  213,065
                                                                          ----------------
</TABLE>


7.       REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

         The authorized stock of Parent as of June 30, 2001 consists of:

         (i)      45,000 shares of Series A Redeemable Preferred Stock, $.01 par
                  value, (the preferred stock) all of which were issued and
                  outstanding as of June 30, 2001 and July 1, 2000. The carrying
                  value of the preferred stock is being accreted to its
                  redemption value of $45.0 million on May 11, 2008. The
                  preferred stock is non-voting and mandatorily redeemable on
                  May 11, 2008. Dividends at the rate of 12.0% per annum are
                  cumulative and if not paid on the June 30 or December 31
                  semi-annual preferred stock dividend dates are added to the
                  liquidation value. The liquidation value per share was
                  $1,360.563 as of June 30, 2001 and $1,211.291 as of July 1,
                  2000. The preferred stock may be exchanged for 12.0%
                  Subordinated Exchange Debentures due 2008, at Parent's option,
                  subject to certain conditions, in whole, but not in part, on
                  any scheduled dividend payment date. The preferred stock
                  contains certain restrictive provisions that limit the ability
                  of Parent to pay cash dividends.

         (ii)     950,000 shares of Class A Common Stock, $.01 par value, (the
                  Class A Common Stock) of which 564,985 shares were issued and
                  outstanding as of June 30, 2001.

         (iii)    20,000 shares of Class B Common Stock, $.01 par value, (the
                  Class B Common Stock) of which 20,000 shares were issued and
                  outstanding as of June 30, 2001 and July 1, 2000. The Class B
                  Common Stock votes together with the Class A Common Stock as a
                  single

                                       40
<PAGE>



                  class, with the holder of each share of common stock entitled
                  to cast one vote. The holders of the Class B Common Stock have
                  the exclusive right, voting separately as a class, to elect
                  one member to the Board of Directors of Parent. Each share of
                  the Class B Common Stock is convertible at the option of the
                  holder, at any time, into one share of Class A Common Stock.

         (iv)     Warrants to purchase 64,231 shares of Class A Common Stock at
                  a purchase price of $.01 per share any time on or before May
                  11, 2008. The Warrants were issued in connection with the sale
                  of Series A Redeemable Preferred Stock; the Company recognized
                  discounts on the preferred stock by allocating $8,596,000 to
                  the Warrants representing the fair value of the Warrants when
                  issued.

8.       BENEFIT PLAN

         Through May 31, 1999, the Company sponsored a defined contribution plan
         (the "Plan") for substantially all employees. Until January 1, 1998
         eligible participants could make contributions to the Plan from 1% to
         20% of their compensation (as defined). The Company also made
         contributions at the discretion of the Board of Directors. Contribution
         and plan administration cost expense attributable to this Plan was
         $15,679, $0.3 million and $0.3 million for the 52 weeks ended June 30,
         2001, July 1, 2000, and the 44 weeks ended July 3, 1999, respectively.

         During fiscal year 1997, the Plan was under audit by the Internal
         Revenue Service ("IRS"), which raised several issues concerning the
         Plan's operation. All issues raised by the IRS were satisfactorily
         resolved during fiscal year 1999, and the impact on financial position
         and results of operations was not material. However, recognizing some
         inherent deficiencies in the Plan's design, the Company petitioned the
         IRS for the right to terminate the plan effective May 31, 1999, and on
         January 13, 2000 the Company received a favorable determination from
         the IRS and terminated the plan effective May 31, 1999.

         The Company sponsors a new defined contribution plan that was
         established on January 1, 2001 (the "2001 Plan") for substantially all
         employees. Eligible participants may make contributions to the 2001
         Plan from 0% to 15% of their compensation (as defined). The Company may
         make contributions at the discretion of the Board of Directors. The
         Company made no contributions for fiscal year 2001.

9.       CONTINGENCIES

         The Company has litigation pending which arose in the ordinary course
         of business. Litigation is subject to many uncertainties and the
         outcome of the individual matters is not presently determinable. It is
         management's opinion that this litigation will not result in
         liabilities that would have a material adverse effect on the Company's
         financial position or results of operations.

10.      STOCK-BASED COMPENSATION

         On August 27, 1995, the Board of Directors of Parent adopted the
         "Non-Qualified Stock Option Agreement" (1995 Plan). Under the terms of
         the 1995 Plan, the Board of Directors in their sole discretion granted
         non-qualified stock options, with respect to the common stock of
         Parent, to key executives of the Company. Options were granted pursuant
         to an agreement at the time of grant, and typically become exercisable
         in equal cumulative installments over a five-year period beginning one
         year after the date of grant. All such options granted expire on the
         tenth anniversary of the grant date. No market existed for the common
         stock of Parent, but options were granted at prices that, in the
         opinion of the Board of Directors, were equal to or greater than the
         fair value of the stock at the time of grant.

         Effective May 11, 1998, the Board of Directors of Parent adopted the
         "1998 Stock Option Plan" (1998 Plan). The 1998 Plan provides for the
         granting of Tranche A and Tranche B options to



                                       41
<PAGE>
         purchase up to 60,074 shares of the Parent's common stock. During the
         2001 year, the Board of Directors of parent amended the 1998 Plan,
         increasing to 230,000 the number of shares of the Parent's common stock
         that may be purchased. Tranche A options were granted at prices, which
         exceeded the fair value of a share of common stock of the Parent at the
         date of grant. These options expire ten years from the date of grant
         and become exercisable ratably over 48 months. Tranche B options were
         granted at $133.83 per share, expire ten years from the date of grant
         and are exercisable only in the event of a change in control or a
         registered public offering of common stock which provides certain
         minimum returns (as defined).

         On August 19, 1999, Parent adopted the 1999 Stock Option Plan for
         Non-Employee Directors (1999 Plan). Under the terms of the 1999 Plan,
         10,000 shares of Parent's common stock are reserved for issuance to
         non-employee directors at prices that approximate the fair value of a
         share of Parent's common stock at the date of issuance. Options vest
         ratably on the last day of each month over four years following the
         date of grant, if the person is a director on that day.

         Stock option transactions during the past three years have been as
follows:

<TABLE>
<CAPTION>
                                                  1998 PLAN                 1998
                                                                            PLAN
                             1995 PLAN             TRANCHE A              TRANCHE B               1999 PLAN
                            --------------------- ---------------------- ------------------- -----------------------
                                      WEIGHTED                WEIGHTED            WEIGHTED            WEIGHTED

                            OPTIONS  AVG. PRICE    OPTIONS   AVG. PRICE  OPTIONS  AVG. PRICE     OPTIONS  AVG. PRICE
                            -------  ----------    -------   ----------  -------  ----------     -------  ----------
<S>                         <C>      <C>           <C>       <C>         <C>      <C>            <C>      <C>
 Options outstanding
    at August 29, 1998       20,717   $  19.19      38,850    $   66.92    13,205  $ 133.83
                            -------   --------     -------    ---------   -------  --------      -------  ---------

      Granted                                        4,500        66.92     1,200    133.83
                            -------   --------     -------    ---------   -------  --------      -------  ---------

 Options outstanding
    at July 3, 1999          20,717      19.19      43,350        66.92    14,405    133.83
                            -------   --------     -------    ---------   -------  --------      -------  ---------

      Granted                                                                                      4,400  $   66.92
      Exercised               4,959      18.00
      Canceled               11,795      19.01      33,450        66.92     9,605    133.83
                            -------   --------     -------    ---------   -------  --------      -------  ---------

 Options outstanding
    at July 1, 2000           3,963      21.22       9,900        66.92     4,800    133.83        4,400      66.92
                            -------   --------     -------    ---------   -------  --------      -------  ---------


      Granted                                      182,285        66.92
      Canceled                  750      18.00       2,575        66.92     4,200    133.83          500      66.92
                            -------   --------     -------    ---------   -------  --------      -------  ---------

 Options outstanding
    at June 30, 2001          3,213   $  21.97     189,610    $   66.92       600  $ 133.83        3,900  $   66.92
                            =======   ========     =======    =========   =======  ========      =======  =========

 Options exercisable
 at June 30, 2001             3,213                 55,308                                         1,787
                            =======                =======                =======                =======

 Options available for
 grant at June 30, 2001                             25,374                14,416                   6,100
                            =======                =======                =======                =======
</TABLE>



                                       42
<PAGE>
<TABLE>
<CAPTION>

                                        OPTIONS OUTSTANDING               OPTIONS EXERCISABLE
                             -----------------------------------------  ----------------------
                                                WEIGHTED
                                                AVERAGE     WEIGHTED                WEIGHTED
                                                REMAINING   AVERAGE                 AVERAGE
          RANGE OF                 NUMBER       CONTRACTUAL EXERCISE    NUMBER      EXERCISE
          EXERCISE PRICE           OUTSTANDING  LIFE        PRICE       EXERCISABLE PRICE
          ------------------------------------------------------------------------------------
         <S>                      <C>           <C>         <C>         <C>         <C>


          1995 Plan:
               $ 18.00                  2,463   4.2 years      $18.00        2,463    $ 18.00
               $ 35.00                    750   5.5 years      $35.00          750    $ 35.00
          ------------------------------------------------------------------------------------
               $ 18.00 to $ 35.00       3,213   4.5 years      $21.97        3,213    $ 21.97

          ====================================================================================

          1998 Tranche A:
               $ 66.92                189,610   8.8 years      $66.92       55,308    $ 66.92
          ====================================================================================

          1998 Tranche B
              $ 133.83                    600   6.9 years     $133.83
          ====================================================================================

          1999 Plan
               $ 66.92                  3,900   8.1 years      $66.92        1,787    $ 66.92
          ====================================================================================
</TABLE>


         The Company accounts for all options in accordance with APB Opinion No.
         25, which requires compensation cost to be recognized only on the
         excess, if any, between the fair value of the stock at the date of
         grant and the amount an employee must pay to acquire the stock. Under
         this method, no compensation cost has been recognized for stock options
         granted.

         The weighted average fair value at date of grant for options granted
         during fiscal years 2001, 2000 and 1999 was $0.00, $5.08 and $4.43 per
         share, respectively, which for the purposes of this disclosure, is
         assumed to amortize over the respective vesting periods of the grants.
         Had compensation cost for these options been recognized as prescribed
         by SFAS No. 123, "Accounting for Stock-Based Compensation," the
         Company's net loss would have been increased by (in thousands) $11 in
         2001, $14 in 2000 and $37 in 1999. The Company is privately owned and
         there is no market for its stock. The estimated compensation element is
         based on the time value of money at the U.S. Treasury rates assuming
         that the value of the stock will be at least equal to the grant price
         when fully exercisable. The estimated compensation expense above is
         assumed to be amortized over the vesting period.

11.      ACQUISITION

         On July 21, 1999, the Company acquired all the outstanding shares of
         Bright Start for $9.3 million in cash and assumed approximately $2.0
         million in debt. At the time of the acquisition, Bright Start operated
         43 preschools in the states of Minnesota, Wisconsin, Nevada, and New
         Mexico with one new school under construction. For the year ended
         August 31, 1998, Bright Start had operating revenue of $22.2 million
         and at August 31, 1998 total assets were $5.1 million. The acquisition
         was accounted for as a purchase and, accordingly, the purchase price
         has been allocated to the fair value of net assets acquired and
         resulted in an allocation to goodwill of $10.1 million which is being
         amortized on a straight-line basis over 20 years. The Company's
         financial statements reflect the results of operations of Bright Start
         during the period subsequent to July 21, 1999. On an unaudited pro
         forma basis, assuming the acquisition had occurred on July 4, 1998, the
         Company's operating revenue and net loss for the 52 weeks ended July 3,
         1999 would have been $352.0 million and $1.2 million, respectively.





                                       43


<PAGE>




12.      RESTRUCTURING CHARGE

         In the third quarter of 2000, management committed to a plan to close
         certain Academies located in areas where the demographic conditions no
         longer supported an economically viable operation and to restructure
         its operating management to better serve the remaining Academies.
         Accordingly, the Company recorded a $7.5 million restructuring charge
         ($4.5 million after tax) to provide for costs associated with the
         Academy closures and restructuring of 49 Academies. The charge
         consisted principally of $5.9 million for the present value of rent,
         real estate taxes, common area maintenance charges, and utilities, net
         of anticipated sublease income, and $1.1 million for the write-down of
         fixed assets to fair market value.

         As of June 30, 2001, the following costs related to the closings and
         restructurings were charged against the 2000 year restructuring
         reserve:

<TABLE>
<CAPTION>

                                                          FACILITIES &         OTHER
                                                         RELATED ASSETS        COSTS          TOTAL
                                                        ------------------  -------------  -------------
<S>                                                     <C>                 <C>            <C>


          Reserves recorded in fiscal year 2000                $    6,989        $   511       $  7,500
          Amount utilized in fiscal year 2000                     (1,234)          (149)        (1,383)
                                                        ------------------------------------------------
          Balance at July 1, 2000                                   5,755            362          6,117

          Amount utilized in fiscal year 2001                     (2,222)          (139)        (2,361)
                                                        ------------------  -------------  -------------
          Balance at June 30, 2001                             $    3,533        $  223        $  3,756
                                                        =================   =============  =============
</TABLE>


13.      SUBSEQUENT EVENTS

         On November 14, 2001, the Company and certain of its senior secured
         lenders entered into Amendment No. 3 to Credit Agreement and Waiver
         (the "Amendment"). The Amendment waived existing defaults in connection
         with the failure to satisfy certain financial covenants for the
         quarterly periods ended June 30, 2001 and September 30, 2001, and the
         failure to deliver timely financial information to the senior secured
         lenders. Additionally, the Amendment revised certain future financial
         covenants. The Company expects to comply with the financial covenants
         contained in the Credit Agreement, as amended, throughout fiscal year
         2002. However, there can be no assurance that the Company will be able
         to do so. The Amendment also provided for specific waivers necessary to
         permit the issuance of a new class of convertible preferred stock of
         the Company. In consideration for the waiver and amendments, the
         Company is required to issue additional equity of $15.0 million prior
         to May 14, 2002, with $3.4 million to be issued prior to the
         effectiveness of the Amendment and an additional $0.825 million to be
         issued prior to December 31, 2001. As part of the Amendment, JPMP
         agreed to guarantee a portion of the bank debt if LPA fails to satisfy
         its commitment to purchase the new equity prior to May 14, 2002 or
         earlier if the bank debt has been accelerated. The amount of such
         guaranty equals the amount of LPA's unfunded commitment to purchase the
         new equity, as adjusted from time to time.

         The Company offered all of its stockholders the right to purchase up to
         their respective pro rata amount of a newly created class of
         convertible preferred stock and warrants to purchase common stock. The
         convertible preferred stock is junior to the redeemable preferred stock
         of Parent in terms of dividends, distributions, and rights upon
         liquidation. Up to $4.25 million of convertible preferred stock of
         Parent and warrants to purchase 562,500 shares of common stock were
         offered. At any time, or from time to time, prior to May 14, 2002, as
         requested by Parent, the stockholders of Parent participating in the
         offer are required to purchase the balance of the convertible preferred
         stock being offered. All of the proceeds received by Parent will be
         contributed to La Petite as common equity and will be used by La Petite
         for general working capital and liquidity purposes.

                                       44
<PAGE>




         Pursuant to the offer, on November 15, 2001 LPA acquired $3.4 million
         of Parent's convertible preferred stock and received warrants to
         purchase 452,343 shares of common stock. The proceeds were contributed
         to La Petite as common equity. In connection with such purchase, the
         banks waived their right under the Credit Agreement to require that the
         proceeds be used to repay amounts outstanding under the Credit
         Agreement. LPA also committed to purchase the balance of the $11.6
         million of convertible preferred stock being offered and not otherwise
         purchased by the other stockholders of the Company. After giving effect
         to the investment on November 15, 2001, LPA beneficially owns
         approximately 90.0% of Parent's outstanding common stock on a fully
         diluted basis.

         In connection with the Amendment to the Credit Agreement and the $15.0
         million of committed capital, management is continuing to review plans
         and actions that will enable the Company to improve future operations.
         However, there can be no assurance that the Company will be able to do
         so.

14.      RESTATEMENT

         Subsequent to the issuance of the Company's fiscal 2001 financial
         statements, the Company's management determined that it had incorrectly
         accounted for the transition adjustment related to certain derivative
         interest rate instruments in connection with the adoption of SFAS No.
         133 on July 2, 2000. As a result, the fiscal 2001 financial statements
         have been restated from the amounts previously reported. A summary of
         the significant effects of the restatement is as follows:


<TABLE>
<CAPTION>
                                                                                        2001
                                                                           As previously          As
                                                                             reported          restated
                                                                         ------------------ ----------------
<S>                                                                      <C>                <C>

         At June 30:
           Noncurrent deferred income taxes                                        $16,276          $16,633
           Long-term debt and capital lease obligations                            194,648          192,394
           Accumulated deficit                                                   (146,226)        (143,615)

         For the 52 weeks ended June 30:
           Interest expense                                                         23,577           21,323
           Loss before income taxes                                                (6,600)          (4,346)
           Provision (benefit) for income taxes                                      (288)            (645)
           Net loss                                                                (6,312)          (3,701)
           Comprehensive loss                                                      (5,981)          (3,370)

</TABLE>


                                * * * * * * * * *

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

Not applicable.

                                       45
<PAGE>



PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the name, age and current position held by the
persons who are the directors and executive officers of the Company:

<TABLE>
<CAPTION>

Name                                                       Age                Position
----                                                       ---                --------
<S>                                                        <C>    <C>

Stephen P. Murray ..........................................38    Chairman of the Board and Director
Judith A. Rogala............................................60    Chief Executive Officer, President and
                                                                  Director
Mitchell J. Blutt, M.D .....................................44    Director
Terry D. Byers .............................................47    Director
Robert E. King .............................................65    Director
Brian J. Richmand ..........................................47    Director
Ronald L. Taylor ...........................................57    Director
Damaris M. Campbell ........................................48    Vice President, Eastern Region
Jeffrey J. Fletcher ........................................49    Chief Financial Officer
Brian J. Huesers ...........................................40    Chief Information Officer
Lisa J. Miskimins ..........................................41    Vice President, Central Region
Rebecca L. Perry ...........................................46    Vice President, Operations
Bill Buckland ..............................................55    Vice President, People
Amy Larson..................................................38    Vice President, Marketing
</TABLE>

The business experience during the last five years and other information
relating to each executive officer and director of the Company is set forth
below.

Stephen P. Murray became the Chairman of the Board in January 2000 and has been
a Director of the Company since May 1998. Mr. Murray has been a General Partner
of JPMP since 1994. From 1988 to 1994 Mr. Murray was a Principal at JPMP. Prior
thereto, he was a Vice President with the Middle-Market Lending Division of
Manufacturers Hanover. Mr. Murray has a BA from Boston College and a MBA from
Columbia Business School. He also serves as director of The Vitamin Shoppe,
Starbelly, Inc., Home Products International, Inc., Futurecall Telemarketing,
American Floral Services, The International Cornerstone Group, Medical Arts
Press and Regent Lighting Corporation.

Judith A. Rogala became a director and the Chief Executive Officer and President
of the Company in January 2000. From 1997 to 1999 Ms. Rogala was President of
ARAMARK Uniform Services. She was an Executive Vice President of Office Depot
from 1994 to 1997. From 1992 to 1994 she was President and Chief Executive
Officer of EQ (the Environmental Quality Company) and from 1990 to 1992 Ms.
Rogala was President and Chief Executive Officer of Flagship Express. From 1980
to 1990 she was a Senior Vice President at Federal Express. Ms. Rogala has a
B.S. from Roosevelt University and a MBA from the University of New Mexico.

Mitchell J. Blutt, M.D. has been a Director of the Company since May 1998. Dr.
Blutt has served as an Executive Partner of JPMP since 1992. From 1988 to 1992
he was a General Partner of JPMP. Dr. Blutt has a BA and a MD from the
University of Pennsylvania and a MBA from The Wharton School of the University
of Pennsylvania. He is an Adjunct Professor of Medicine at the New York
Hospital/Cornell Medical School. Dr. Blutt is a director of the Hanger
Orthopedic Group, Senior Psychology Services Corporation, Fisher Scientific
International, dj Orthopedics, Inc, dj Orthopedics, LLC, Medsite.com, Palm
Entertainment Corporation, and on the Advisory Boards of the DS Polaris Fund,
Dubilier & Co., The Tinicum Fund, the Global Academy for the Human Genome Human
Being and the Cornell Center for Complementary and Integrative Medicine. He is a
member of the Board of Trustees of the University of Pennsylvania and a member
of the Board of Overseers of the University of Pennsylvania's School of Arts and
Sciences. Dr. Blutt also serves on the International Board of Governors of the
Peres Center for Peace.

                                       46

<PAGE>






Terry D. Byers has been a Director of the Company since December 1998. Ms. Byers
has more than 17 years experience in information technology ranging from
hands-on systems design and development to executive management. She has
extensive experience in designing and architecting enterprise-level IT
infra-structures, developing and integrating business information systems,
implementing large ERP applications, and developing and deploying
technology-based solutions to clients. Since 1996, Ms. Byers has been a Senior
Vice President and the Chief Technology Officer for American Floral Services,
Inc. located in Oklahoma City. She holds a Bachelors of Business Administration
degree in Computer Science from the University of Central Oklahoma.

Robert E. King has been a Director of the Company since May 1998. Mr. King is
Chairman of Salt Creek Ventures, LLC, a private equity company he founded in
1994. Salt Creek Ventures, LLC is an organization specializing in equity
investments in technology companies. Mr. King has been involved over the past 33
years as a corporate executive and entrepreneur in technology-based companies.
From 1983 to 1994, he was President and Chief Executive Officer of The Newtrend
Group. Mr. King has participated as a founding investor in five companies. Mr.
King has a B.A. from Northwestern University. He serves on the Board of
Directors of DeVry, Inc., American Floral Services, Inc., COLLEGIS, Inc.,
Premier Systems Integrators, Inc. and eduprise.com, inc.

Brian J. Richmand has been a Director of the Company since May 1998. Mr.
Richmand became a Special Partner of JPMP in January 2000. He was a General
Partner of JPMP from 1993 to 2000. From 1986 to August 1993 Mr. Richmand was a
partner with the law firm of Kirkland & Ellis. He has a B.S. from The Wharton
School of the University of Pennsylvania and a J.D. from Stanford Law School.
Mr. Richmand is a director of Transtar Metals, L.L.C., Riverwood International
Corp., Reiman Publishing, L.L.C., and American Media, Inc.

Ronald L. Taylor has been a Director of the Company since April 1999. Mr. Taylor
has been President and Chief Operating Officer of DeVry, Inc since 1987. He is
Chairman of the Proprietary Schools Advisory Committee for the Illinois Board of
Higher Education; a member of the Institutional Action Committee for the North
Central Association of Colleges and Schools; a Commissioner for the Commission
on Adult Learning and Educational Credentials, American Council on Education; a
mentor for the Next Generation Leadership Institute at Loyola University
Chicago; a member of the Board of Directors of the Illinois State Chamber of
Commerce. He also serves on the Board of Directors of DeVry, Inc. and the Better
Business Bureau of Chicago & Northern Illinois, Inc. Mr. Taylor has a BA from
Harvard University and received his MBA from Stanford University.

Damaris M. Campbell became the Vice President of the Eastern Region for the
Company in June 2000. She is responsible for the supervision of 14 states. From
1997 to 2000, Ms. Campbell was an Area Vice President with supervisory
responsibility for the operations of the Company in five states. She was a
Divisional Director of 54 schools in three states from 1993 to 1997. From 1983
to 1993, she supervised 13 academies in the Charlotte, NC Region. She began her
career with the Company in 1980 as a teacher.

Jeffrey J. Fletcher became Chief Financial Officer of the Company in June 2000.
From 1998 to 2000, Mr. Fletcher was Chief Financial Officer for Hirsh
Industries, Inc. From 1995 to 1998, he provided strategic, finance and
operations consulting services to a variety of businesses including
manufacturers, Internet start-ups, medical services and retailers. Mr. Fletcher
served as Chief Financial Officer of the Environmental Quality Company from 1992
to 1995. Prior to 1992, Mr. Fletcher served in various financial capacities at
Gaylord Container. Mr. Fletcher began his career with Coopers & Lybrand and
Deloitte & Touche. Mr. Fletcher has a B.S. from the University of Iowa and a
M.M. from the Kellogg Graduate School of Management at Northwestern University.

Brian J. Huesers became Chief Information Officer of the Company in June 2000.
From 1999 to 2000 Mr. Huesers was the Chief Information Officer for the Kansas
City, Missouri School District. Mr. Huesers was the Assistant Vice President for
Technical Services at H&R Block, Inc. from 1997 to 1999. From 1984 to 1996 Mr.
Hueser's held various positions at H&R Block Tax Services. Mr. Huesers has a BA
from Washburn University.

                                       47

<PAGE>



Lisa J. Miskimins became the Vice President of the Central Region of the Company
on June 2000. She is responsible for the supervision of 13 states. From 1997 to
2000, Ms. Miskimins was an Area Vice President with supervisory responsibility
for the operations of the Company in eight midwestern states. She was a
Divisional Director of 50 schools in three states from 1994 to 1997. She began
her career with the Company in 1983 as a Preschool Teacher. Ms. Miskimins has a
B.A. in Elementary Education and English.

Rebecca L. Perry became the Vice President of Operations in April 2000. She was
the Executive Vice President of Operations from 1997 to 2000. From 1993 to 1997,
Ms. Perry was a Senior Vice President and Eastern Operating Officer. From 1988
to 1993, she was Assistant Vice President of Operations with supervisory
responsibility for the operations of the Company in 14 southern and midwestern
states. From 1985 to 1988, she served as Divisional Director of Florida and from
1981 to 1985 she served as Regional Director of Tampa.

Bill Buckland joined the company in July as Vice President, People. From 1993 to
2001 Mr. Buckland was Vice President, Human Resources of Allied Van Lines, Inc.
From 1990 to 1992 he was the Director, Human Resources for SuperAmerica Group, a
subsidiary of Ashland Oil. From 1969 to 1990 Mr. Buckland held various positions
in the Human Resources Department with the Montgomery Ward Company. He has a
B.B.A. from the University of Kentucky.

Amy Larson joined the company August 1 as Vice President, Marketing. From 2000
to 2001 Ms. Larson was Vice President, Customer Experience Marketing, from
iExplore. From 1999 to 2000 Ms. Larson was Sr. Marketing Manager for Peapod.
From 1998 to 1999 she was Vice President, Marketing for the Travel Payment
Services Division of Citigroup. From 1991 to 1998 Ms. Larson held various
managerial positions with the Whirlpool Corporation. Ms. Larson has an M.B.A. in
Finance and Marketing from the University of Illinois, and a B.S. in Business
Information Systems from Illinois State University.

BOARD COMMITTEES AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors has an Audit Committee consisting of Robert E. King and
Stephen P. Murray, and a Compensation Committee consisting of Stephen P. Murray
and Brian J. Richmand. The Audit Committee reviews the scope and results of
audits and internal accounting controls and all other tasks performed by our
independent public accountants. The Compensation Committee determines
compensation for the executive officers and will administer the 1998 Option
Plan. None of the Company's executive officers have served as a director or
member of the compensation committee (or other committee forming an equivalent
function) of any other entity, whose executive officers served as a director of
or member of the Compensation Committee of the Company's Board of Directors.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

The members of the Board of Directors are reimbursed for out-of-pocket expenses
related to their service on the Board of Directors or any committee thereof. In
addition, members of the Board of Directors who are neither officers of the
Company nor employed by JPMP or any of its partners are entitled to receive an
attendance fee of $1,000 for each meeting attended.

On August 19, 1999, Parent adopted the LPA Holding Corp. 1999 Stock Option Plan
for Non-Employee Directors (1999 Plan). The purpose of the plan is to provide a
means for attracting, retaining, and incentivizing qualified directors. Under
the terms of the plan, 10,000 shares of Parent's common stock are reserved for
issuance to non-employee directors.

Non-employee directors may exercise their options to purchase shares of Parent's
common stock once those options have vested. One-forty eighth of the options
become vested on the last day of each month following the date of grant, if the
person is a director on that day. Each option entitles the director to purchase
one share of Parent's common stock. The exercise price will equal the fair
market value on the date of grant of the option to the non-employee director.
Vested options and shares of common stock may be repurchased from any
non-employee director who ceases to be a director for any reason. Any options

                                       48

<PAGE>



that have not vested at the time the non-employee director ceases to be a
director are forfeited. For the 52 weeks ended June 30, 2001, options to
purchase 182,285 shares of common stock of Parent have been granted under the
plan.

ITEM 11.  EXECUTIVE COMPENSATION

The following table provides certain summary information concerning compensation
earned for the 52 weeks ended June 30, 2001 (2001), for the 52 weeks ended July
1, 2000 (2000), and for the 44 weeks ended July 3, 1999 (1999), by the Company's
Chief Executive Officer, and the four other most highly compensated executive
officers whose salary and bonus exceeded $100,000 for the fiscal year:

<TABLE>

                                          SUMMARY COMPENSATION TABLE
                                          COMPENSATION FOR THE PERIOD
                                          ---------------------------
                                                         ANNUAL              LONG-TERM           ALL OTHER
                                                      COMPENSATION          COMPENSATION       COMPENSATION
                                                      ------------          ------------       ------------

                                                                             NUMBER OF
                                                                            SECURITIES
                                                                            UNDERLYING
NAME AND PRINCIPAL POSITION               YEAR      SALARY       BONUS    OPTION/SAR AWARDS
---------------------------               ----      ------       -----    -----------------
<S>                                       <C>       <C>          <C>      <C>                  <C>



Judith A. Rogala                          2001    $350,000      $175,000    49,810
   Chief Executive Officer & President    2000    $180,385 (1)    87,500

Jeffrey J. Fletcher                       2001     160,150        64,000    20,000
    Chief Financial Officer               2000       7,385 (2)    25,000

Rebecca L. Perry                          2001     151,438                   2,000
    Vice President Operations             2000     183,729
                                          1999     155,490

Brian J. Huesers                          2001     140,000                  20,000
    Chief Information Officer             2000      10,769 (3)

Lisa J. Miskimins                         2001     115,780                  19,325             $14,879 (4)
    Vice President, Central Region        2000      74,703         2,000
                                          1999      68,310                     750
</TABLE>

(1)   2000 compensation covers 27 weeks from December 21, 1999 through July 1,
      2000.

(2)   2000 compensation covers three weeks from June 8, 2000 through July 1,
      2000.

(3)   2000 compensation covers four weeks from June 1, 2000 through July 1,
      2000.

(4)   Represents payments made to Ms. Miskimins related to her relocation to the
      Chicago, IL area.






                                       49



<PAGE>
The following tables present information relating to grants to the named
executive officers of options to purchase common stock of Company:

            AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
                       FISCAL YEAR END OPTION/SAR VALUES

<TABLE>
<CAPTION>

                                                                    NUMBER OF
                                                                   SECURITIES
                                                                   UNDERLYING              VALUE OF
                                                                   UNEXERCISED           IN-THE-MONEY
                                                                  OPTIONS/SARS           OPTIONS/SARS
                                                                 AT FY END (#)           AT FY END (2)

                               SHARES ACQUIRED      VALUE         EXERCISABLE/           EXERCISABLE/
        NAME                   ON EXERCISE (#)    REALIZED        UNEXERCISABLE          UNEXERCISABLE
<S>                            <C>                <C>           <C>                      <C>

Judith A. Rogala                                                 18,679 / 31,131 (1)          0 / 0

Jeffrey J. Fletcher                                               5,000 / 15,000 (1)          0 / 0

Rebecca L. Perry                                                  3,275 /  2,325 (1)          0 / 0

Brian J. Huesers                                                  5,000 / 15,000 (1)          0 / 0

Lisa J. Miskimins                                                 5,352 / 14,648 (1)          0 / 0

</TABLE>

(1)  The Board of Directors granted to certain key executives Tranche A options
     at $66.92 per share, an amount which approximates the fair value of a share
     of common stock of the Company at the date of the grant. These options
     become exercisable ratably over forty-eight months and expire ten years
     from the date of grant.

(2)  The equity of the Company is not traded and there is no market for pricing
     the value of the options. "In the Money" calculations are based on the
     estimated enterprise value of the Company adjusted for debt, preferred
     stock, common shares issued and retired, warrants and options and
     adjustments for market liquidity and a control premium.

                               OPTIONS/SAR GRANTS
                              IN LAST FISCAL YEAR
<TABLE>
<CAPTION>

                      NUMBER OF                                                            POTENTIAL REALIZABLE
                     SECURITIES       % OF TOTAL                                        VALUE (2) AT ASSUMED ANNUAL
                     UNDERLYING     OPTIONS/SAR'S       EXERCISE OR                       RATES OF STOCK PRICE
                    OPTIONS/SAR'S    GRANTED TO          BASE PRICE     EXPIRATION      APPRECIATION FOR OPTION TERM
   NAME               GRANTED         EMPLOYEES          ($/SHARE)         DATE              5%($)        10% ($)
   ----               -------         ---------          ---------         ----              -----        -------
<S>                <C>             <C>                 <C>           <C>                <C>              <C>

FISCAL YEAR 2001

Judith A. Rogala      49,810 (1)         27%               $66.92     December, 2009       $2,096,285    $5,312,398

Jeffrey J. Fletcher   20,000 (1)         11%               $66.92       June, 2010         $  841,713    $2,133,065

Rebecca Perry          2,000 (1)         1%                $66.92       June, 2010         $   84,171    $  213,306

Brian J. Huesers      20,000 (1)         11%               $66.92       June, 2010         $  841,713    $2,133,065

Lisa J. Miskimins     19,325 (1)         11%               $66.92       June, 2010         $  813,305    $2,061,074

</TABLE>



(1)    Tranche A options
(2)    The potential realizable value of the options granted in fiscal year 2001
       was calculated by multiplying those options by the excess of (a) the
       assumed fair value of a share of common stock at the end of the option's
       ten year term, based on a 5% or 10% annual increase in value from the
       fair value at date of issue over (b) the base price shown. This
       calculation does not take into account any taxes or other expenses which
       might be owed. The assumed fair value at a 5% assumed annual appreciation
       rate over the 10-year term is $109.91 and such value at a 10% assumed
       annual appreciation rate over that term is $173.57. The 5% and 10%
       appreciation rates are set forth in the Securities and Exchange
       Commission rules and no representation is made that the common stock will
       appreciate at these assumed rates or at all.

                                       50
<PAGE>
EMPLOYMENT CONTRACTS

The Company has entered into an employment agreement with Judith A. Rogala. The
Employment Agreement provides for Ms. Rogala to receive a base salary, subject
to annual performance adjustments, of $350,000 plus a bonus of up to 150% of
base salary. Ms. Rogala was also entitled to receive a cash Interim Bonus with
respect to the Company's fiscal year ending in July 2000 equal to $87,500 and a
Signing Incentive of $1.5 million, vesting at 25% per year, payable on the
fourth anniversary date of employment. The term of the Employment Agreement is
three years subject to one year automatic renewals. The Employment Agreement
also provides that the executive is entitled to participate in the health and
welfare benefit plans available to the Company's other senior executives. The
Employment Agreement provides for severance in the case of termination without
'cause' or a resignation with 'good reason' in an amount equal to one year of
base salary plus a prorated bonus as described in the agreement and a cash lump
sum equal to (a) any compensation payments deferred by Ms. Rogala, together with
any applicable interest or other accruals; (b) any unpaid amounts, as of the
date of such termination, in respect of the Bonus for the fiscal year ending
before the fiscal year in which such termination occurs; (c) the Signing
Incentive Bonus (to the extent not already paid) and (d) the Pro Rata Bonus as
described in the agreement. Included in the severance in the case of termination
without 'cause' or resignation with 'good reason' is one year of coverage under
and participation in the Company's employee benefit program. The Employment
Agreement also contains customary non-disclosure, non-competition and
non-solicitation provision.


1998 OPTION PLAN

The Company adopted the 1998 Plan pursuant to which options, which currently
represents 7.6% of Parent's common stock, on a fully diluted basis, are
available to grant. The 1998 Plan provides for the granting of Tranche A and
Tranche B options to purchase up to 60,074 shares of Parent's common stock. The
options will be allocated in amounts to be agreed upon between LPA and Parent.
Seventy-five percent of the options will vest over four years and twenty-five
percent of the options will vest if certain transactions are consummated which
generate certain minimum returns to LPA. The exercise price for the time vesting
options will be 50% of the per share price paid by LPA for its common stock of
Parent and the exercise price for the remaining options will be 100% of the per
share price paid by LPA for its common stock of Parent. The options expire 10
years from the date of grant.

During fiscal year 2001, the Company amended the 1998 Plan, increasing to
230,000 the number of options available for grant. Options to purchase 190,210
shares of Parent's common stock have been granted.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

All of La Petite's common stock is held by LPA Holding Corp. (Parent). As of
November 27 2001, LPA Investment LLC (LPA) owned 89.6% of the outstanding common
stock of Parent (approximately 90.0% on a fully diluted basis, including the
warrants described below) and Vestar, the former principal stockholder of the
Company, and La Petite's current and former management own approximately 3.6%,
1.8% and 5.0%, respectively, of the outstanding common stock of Parent
(approximately 1.0%, 7.0% and 1.0%, respectively, on a fully diluted basis). In
connection with the purchases of preferred stock of Parent, described below, LPA
received warrants to purchase shares of Parent's common stock that currently
represents the right to acquire 43.0% of Parent's common stock on a fully
diluted basis.

In connection with the recapitalization, LPA purchased redeemable preferred
stock of Parent and warrants to purchase shares of Parent's common stock on a
fully diluted basis for aggregate cash consideration of $30.0 million, the
proceeds of which were contributed by Parent to common equity. On December 15,
1999, LPA acquired an additional $15.0 million of Parent's redeemable preferred
stock and received warrants to purchase an additional 3.0% of Parent's common
stock on a fully diluted basis. The $15.0 million proceeds received by Parent
were contributed to common equity.

                                     51


<PAGE>
The preferred stock is not redeemable at the option of the holder prior to the
maturity of the notes and dividends are not payable in cash prior to the seventh
anniversary of the consummation of the transactions. Thereafter, Parent may pay
dividends in cash subject to any restrictions contained in our indebtedness,
including the Credit Agreement and the indenture.

Following the consummation of the recapitalization, Parent and its stockholders,
including all holders of options and warrants, entered into a Stockholders'
Agreement. The Stockholders' Agreement contains restriction on the
transferability of Parent common stock, subject to certain exceptions. The
Stockholder' Agreement also contains provisions regarding the designation of
members of the Board of Directors and other voting arrangements. The
Stockholders' Agreement will terminate at such time as Parent consummates a
qualified public offering.

The Stockholders' Agreement restricts transfers of common stock of Parent by,
among other things (i) granting rights to all stockholders to tag along on
certain sales of stock by LPA and management, (ii) granting rights to LPA to
force the other stockholders to sell their common stock on the same terms as
sales of common stock by LPA, and (iii) granting preemptive rights to all
holders of 2% or more of Parent's common stock in respect of sales by other
stockholders.

The Stockholder's Agreement provides that the Board of Directors of Parent shall
consist of 5 to 8 persons as determined pursuant to the Stockholders Agreement.
The Stockholder's Agreement further provides that LPA is entitled to designate
four of the directors, one of whom is entitled to three votes as a director.
Messrs. Murray, Blutt, Richmand and King have been elected as directors pursuant
to this provision with Mr. King being entitled to three votes as a director.
Certain management stockholders of Parent are entitled to elect one director,
currently Ms. Rogala. The Stockholder's Agreement further provides that the
ensuing directors of Parent shall be designated by mutual consent of LPA and the
management stockholders.

The Stockholders' Agreement also contains covenants in respect of the delivery
of certain financial information to Parent's stockholders and granting access to
Parent's records to holders of more than 2% of our Parent's common stock.

A majority of the economic interests of LPA is owned by CB Capital Investors,
LLC (CBCI), an affiliate of JPMP, and a majority of the voting interests of LPA
is owned by an entity controlled by Robert E. King, one of Parent's Directors.
However, pursuant to the LPA Operating Agreement, LPA has granted to CBCI the
right to elect a majority of the directors of LPA if certain triggering events
occur and LPA agreed not to take certain actions in respect of the common stock
of Parent held by LPA without the consent of CBCI. Accordingly, if certain
triggering events occur, through its control of LPA, CBCI would be able to elect
a majority of the Board of Directors of Parent. As a licensed small business
investment company, or SBIC, CBCI is subject to certain restrictions imposed
upon SBICs by the regulations established and enforced by the United States
Small Business Administration. Among these restrictions are certain limitations
on the extent to which an SBIC may exercise control over companies in which it
invests. As a result of these restrictions, unless certain events described in
the operating agreement occur, CBCI may not own or control a majority of the
outstanding voting stock of LPA or designate a majority of the members of the
Board of Directors. Accordingly, while CBCI owns a majority of the economic
interests of LPA, CBCI owns less than a majority of LPA's voting stock.

In connection with the recapitalization, Parent and its stockholders following
consummation of the recapitalization entered into a Registration Rights
Agreement. The Registration Rights Agreement grants stockholders demand and
incidental registration rights with respect to shares of capital stock held by
them and contains customary terms and provisions with respect to such
registration rights.

Pursuant to a notice dated November 13, 2001, Parent offered all of its
stockholders the right to purchase up to their respective pro rata amount of a
newly created class of convertible preferred stock and warrants to purchase
common stock of Parent. The convertible preferred stock is junior to the
redeemable preferred stock of Parent in terms of dividends, distributions, and
rights upon liquidation. Up to $4.25 million of convertible preferred stock of
Parent and warrants to purchase 562,500 shares of common stock of Parent were
offered. Stockholders of Parent electing to participate in the offer were
required to commit to

                                       52

<PAGE>



purchase a similar percentage of an additional aggregate amount of convertible
preferred stock equal to $10.75 million. At any time, or from time to time,
prior to May 14, 2002, as requested by Parent, the stockholders of Parent
participating in the pre-emptive rights offer are required to purchase the
balance of the convertible preferred stock being offered thereby. All of the
proceeds from the pre-emptive rights offer received by Parent will be
contributed to La Petite as common equity and will be used by La Petite for
general working capital and liquidity purposes.

Pursuant to the pre-emptive offer, on November 15, 2001 LPA acquired $3.4
million of Parent's convertible preferred stock and received warrants to
purchase 452,343 shares of common stock. The proceeds of that $3.4 million
investment were contributed to La Petite as common equity. In connection with
such purchase, the banks waived their right under the Credit Agreement to
require that the proceeds be used to repay amounts outstanding under the Credit
Agreement.

LPA also committed to purchase the balance of the $11.6 million of convertible
preferred stock being offered and not otherwise purchased by the other
stockholders of Parent. Prior to December 31, 2001 LPA is required to purchase
an amount of convertible preferred stock equal to the difference between $0.8
million and the value of the amount of the convertible preferred stock purchased
by other stockholders in connection with the pre-emptive offer. After December
31, 2001, the balance of the convertible preferred stock of Parent to be
purchased by LPA will, as applicable, be purchased at any time, or from time to
time, prior to May 14, 2002 at the request of Parent. If Parent has not
requested that LPA fund its commitment to purchase the balance of the
convertible preferred stock prior to May 14, 2002, LPA has the right to cause
Parent to issue the balance of the convertible preferred stock to LPA. After
giving effect to the investment on November 15, 2001, LPA beneficially owns
approximately 90.0% of Holdings' outstanding common stock on a fully diluted
basis.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

J.P. Morgan Securities Inc., or JPMSI, one of the initial purchasers of the old
Senior Notes, is an affiliate of JPMorgan Chase Bank (formerly known as The
Chase Manhattan Bank), an agent and a lender to La Petite under the Credit
Agreement of the Senior Notes, LPA, an affiliate of JPMP and JPMSI, owns 89.6%
of the outstanding common stock of Parent (approximately 90.0% on a fully
diluted basis). LPA owns $45 million of Parent's redeemable preferred stock,
$3.4 million of Parent's convertible preferred stock, and warrants to purchase
43.0% of the common stock of Parent on a fully diluted basis. Certain partners
of JPMP are members of La Petite's Board of Directors (see Item 10). In
addition, CSI, Chase and their affiliates perform various investment banking and
commercial banking services on a regular basis for our affiliates.

In connection with the recapitalization, CBCI entered into an Indemnification
Agreement with Robert E. King, one of Parents' Directors, pursuant to which CBCI
has agreed to indemnify Mr. King for any losses, damages or liabilities and all
expenses incurred or sustained by Mr. King in his capacity as a manager, officer
or director of LPA or any of its subsidiaries, including Parent and La Petite.

Banc of America Securities LLC, one of the initial purchasers of the old Senior
Notes, is an affiliate of Bank of America, an agent and lender under the Credit
Agreement.

In December 1999 and November 2001, Parent sold additional equity in LPA. See
"Item 1. Business - Organization"

                                       53



<PAGE>



PART IV.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1.   Financial Statements

         See pages 24 to 41 of this Annual Report on Form 10-K for financial
         statements of LPA Holding Corp. as of June 30, 2001 and July 1, 2000
         and for the 52 weeks ended June 30, 2001, for the 52 weeks ended July
         1, 2000, and for the 44 weeks ended July 3, 1999.

(a) 2.   Financial Statement Schedules

         The following additional financial data should be read in conjunction
         with the consolidated financial statements for the 52 weeks ended June
         30, 2001, for the 52 weeks ended July 1, 2000, and for the 44 weeks
         ended July 3, 1999. Other schedules not included with these additional
         financial statement schedules have been omitted because they are not
         applicable or the required information is contained in the consolidated
         financial statements or notes thereto.

                                    SCHEDULES

         Schedule I -- Condensed Financial Information of Registrants

         Schedule II -- Valuation and Qualifying Accounts

(a) 3.   Exhibits

         EXHIBIT
         NUMBER                                 DESCRIPTION

         3.1(i)     Amended and Restated Certificate of Incorporation of LPA
                    Holding Corp.
         3.2(i)     Certificate of Designations, Preferences and Rights of
                    Series A Redeemable Preferred Stock of LPA Holding Corp.
         3.3(i)     Bylaws of LPA Holding Corp.
         3.4(i)     Amended and Restated Certificate of Incorporation of La
                    Petite Academy, Inc.
         3.5(i)     Bylaws of La Petite Academy, Inc.
         3.6(v)     Certificate of Amendment of the Amended and Restated
                    Certificate of Incorporation of
                    LPA Holding Corp. filed on December 13, 1999
         3.7(v)     Certificate of Amendment of the Certificate of Designations,
                    Preferences and Rights of Series A Redeemable
                    Preferred Stock of LPA Holdings Corp. filed on December 13,
                    1999
         3.8(viii)  Certificate of Amendment of the Amended and Restated
                    Certificate of Incorporation of LPA Holding Corp., filed
                    on November 14, 2001.

         3.9(viii)  Certificate of Designations, Preferences and Rights of
                    Series B Convertible  Redeemable Participating
                    Preferred Stock of LPA Holding Corp., filed on November 14,
                    2001.
         4.1(i)     Indenture among LPA Holding Corp., La Petite Academy, Inc.,
                    LPA Services, Inc. and PNC Bank, National
                    Association dated as of May 11, 1998
         4.2(iv)    First Supplemental Indenture dated as of July 23, 1999,
                    among Bright Start, Inc., LPA Holding Corp., La Petite
                    Academy, Inc., and The Chase Manhattan Bank
         10.1(i)    Purchase Agreement among Vestar/LPA Investment Corp., La
                    Petite Academy, Inc., LPA Services, Inc., Chase
                    Securities Inc. and NationsBanc Montgomery Securities LLC
                    dated May 6, 1998

                                       54
<PAGE>




         EXHIBIT
         NUMBER                                 DESCRIPTION

         10.2(i)    Exchange and Registration Rights Agreement among La Petite
                    Academy, Inc., LPA Holding Corp., LPA Services, Inc., Chases
                    Securities Inc., NationsBanc Montgomery Securities LLC dated
                    May 11, 1998
         10.3(i)    Merger Agreement by and between LPA Investment LLC and
                    Vestar/LPA Investment Corp. dated as of March 17, 1998
         10.4(i)    Stockholders Agreement among LPA Holding Corp., Vestar/LPT
                    Limited Partnership, LPA Investment LLC and the
                    management stockholders dated as of May 11, 1998
         10.5(v)    Amendment #1 and Consent of the Stockholders Agreement among
                    LPA Holding Corp., Vestar/LPT Limited Partnership, LPA
                    Investment LLC and the management stockholders dated as
                    April 8, 1999.
         10.6(i)    1998 Stock Option Plan and Stock Option Agreement for LPA
                    Holding Corp. dated as of May 18, 1998
         10.7(i)    Preferred Stock Registration Rights Agreement between LPA
                    Holding Corp. and LPA Investment LLC dated May 11, 1998
         10.8(i)    Registration Rights Agreement among LPA Holding Corp.,
                    Vestar/LPT Limited Partnership, the stockholders listed
                    therein and LPA Investment LLC, dated May 11, 1998
         10.9(i)    Credit Agreement dated as of May 11, 1998 among La Petite
                    Academy, Inc., LPA Holding Corp., Nationsbank, N.A., and The
                    Chase Manhattan Bank
         10.10(i)   Pledge Agreement among La Petite Academy, Inc., LPA Holding
                    Corp., Subsidiary Pledgors and Nationsbank, N.A. dated as of
                    May 11, 1998
         10.11(i)   Security Agreement among La Petite Academy, Inc., LPA
                    Holding Corp., Subsidiary Guarantors and Nationsbank, N.A.
                    dated as of May 11, 1998
         10.12(i)   Parent Company Guarantee Agreement among LPA Holding Corp.
                    and Nationsbank, N.A. dated as of May 11, 1998
         10.13(i)   Subsidiary Guarantee Agreement among Subsidiary Guarantor of
                    La Petite Academy, Inc., LPA Services, Inc. and
                    Nationsbank, N.A. dated as of May 11, 1998
         10.14(i)   Indemnity, Subrogation and Contribution Agreement among La
                    Petite Academy, Inc., LPA Services, Inc., as Guarantor and
                    Nationsbank, N.A. dated as of May 11, 1998
         10.19(v)   1999 Stock Option Plan for Non-Employee Directors
         10.20(iii) Agreement and Plan of Merger By and Between La Petite
                    Academy, Inc., LPA Acquisition Co. Inc., and Bright Start,
                    Inc.
         10.21(v)   Amendment No. 1, Consent and Waiver dated as of December 13,
                    1999, to the Credit Agreement dated as of May 11, 1998 among
                    LPA Holding Corp., La Petite Academy, Inc., Bank of America,
                    N.A. (formerly known as NationsBank, N.A.) as Administrative
                    Agent, Documentation Agent and Collateral Agent for the
                    Lenders and The Chase Manhattan Bank as Syndication Agent
         10.22(v)   Warrant No. 2 dated as of December 15, 1999, issued by LPA
                    Holding Corp. to LPA Investment LLC

         10.23(v)   Amendment No. 1 to the LPA Holding Corp. 1999 Stock Option
                    Plan for Non-Employee Directors
         10.24(vii) Employment Agreement among LPA Holding Corp., La Petite
                    Academy, Inc., and Judith A. Rogala
         12.1*      Statement regarding computation of ratios
         21.1(vi)   Subsidiaries of Registrant


         (i)        Incorporated by reference to the Exhibits to La Petite
                    Academy, Inc.'s Registration Statement on Form S-4,
                    Registration No. 333-56239, filed with the Securities and
                    Exchange Commission on June 5, 1998.

                                       55

<PAGE>
         (ii)       Incorporated by reference to the Exhibits to LPA Holding
                    Corp.'s Form 10-K for the Fiscal Year ended August 29, 1998,
                    filed with the Securities and Exchange Commission on
                    November 24, 1998

         (iii)      Incorporated by reference to the Exhibits to LPA Holding
                    Corp.'s Form 8-K, filed with the Securities and Exchange
                    Commission on December 7, 1999

         (iv)       Incorporated by reference to the Exhibits to LPA Holding
                    Corp.'s Form 10-Q/A for the 16 weeks ended October 23, 1999,
                    filed with the Securities and Exchange Commission on
                    December 16, 1999

         (v)        Incorporated by reference to the Exhibits to LPA Holding
                    Corp.'s Form 8-K, filed with the Securities and Exchange
                    Commission on December 21, 1999

         (vi)       Incorporated by reference to the Exhibits to LPA Holding
                    Corp.'s Form S-4 Post Effective Amendment #1, filed with the
                    Securities and Exchange Commission on December 23, 1999

         (vii)      Incorporated by reference to the Exhibits to LPA Holding
                    Corp.'s Form 8-K, filed with the Securities and Exchange
                    Commission on February 16, 2000

         (viii)     Incorporated by reference to the exhibits to LPA Holding
                    Corp.'s Form 8-K, filed with the Securities and Exchange
                    Commission on November 16, 2001.

         (*)        Filed herein

(b)      Reports on Form 8-K

                    During the last quarter of fiscal 2001, the Company filed a
                    Form 8-K dated April 18, 2001 announcing the change of
                    Company's fiscal year end from the 52/53 period ending on
                    the first Saturday in July to the 52/53 period ending on the
                    Saturday closest to June 30.

(c)      Supplemental information to be furnished with reports filed pursuant to
         Section 15(d) of the Act by Registrants which have not registered
         securities pursuant to Section 12 of the Act

                    Except for a copy of this Annual Report on Form 10-K, no
                    annual report to security holders covering the registrants'
                    last fiscal year or proxy materials will be sent to security
                    holders.



                                       56
<PAGE>


<TABLE>
<CAPTION>


LPA HOLDING CORP.

SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------------------------------------------

                                                                               JUNE 30,          JULY 1,
                                                                                 2001             2000
                                                                             AS RESTATED,
  BALANCE SHEETS                                                              SEE NOTE 14
                                                                            ---------------  ---------------
<S>                                                                         <C>              <C>

  ASSETS:
  Investment in La Petite Academy, Inc.                                         $ (24,577)       $ (21,207)

                                                                            ---------------  ---------------
                                                                                $ (24,577)       $ (21,207)
                                                                            ===============  ===============


  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
  Current liabilities:
     Payable to La Petite Academy, Inc.                                             55,164           55,132
                                                                            ---------------  ---------------
          Total current liabilities                                                 55,164           55,132


  Series A 12% redeemable preferred stock ($.01 par value per share);               54,941           47,314
     45,000 shares authorized, issued and outstanding at June 30, 2001 at
     aggregate liquidation preference of $1,360.563 and $1,211.291 as of
     July 1, 2000 (Note 7)

  Stockholders' deficit:
     Class A common stock ($.01 par value per share); 950,000 shares                     6                6
     authorized and 564,985 issued and outstanding as of June 30, 2001 and
     July 1, 2000
     Class B common stock ($.01 par value per share); 20,000 shares
     authorized, issued and outstanding as of June 30, 2001 and July 1,
     2000
     Common stock warrants                                                          8,596            8,596
     Accumulated other comprehensive income                                            331
     Accumulated deficit                                                         (143,615)        (132,255)
                                                                            ---------------  ---------------
          Total stockholders' deficit                                            (134,682)        (123,653)
                                                                            ---------------  ---------------
                                                                                $ (24,577)       $ (21,207)
                                                                            ===============  ===============
</TABLE>

     See notes to consolidated financial statements included in Part II of the
     Annual Report on Form 10-K/A.


                                       57
<PAGE>
<TABLE>
<CAPTION>


LPA HOLDING CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(IN THOUSANDS OF DOLLARS)
-------------------------------------------------------------------------------------------------------------------


                                                             52 WEEKS         52 WEEKS           44 WEEKS
                                                               ENDED            ENDED              ENDED
                                                              JUNE 30,          JULY 1,           JULY 3,
                                                                2001             2000               1999
                                                           AS RESTATED,
STATEMENTS OF OPERATIONS                                   SEE NOTE 14
                                                          -----------------  --------------  ---------------
<S>                                                       <C>                <C>             <C>


Equity in net loss of La Petite Academy, Inc.                   $  (3,370)      $ (10,547)        $   (797)
                                                          -----------------  --------------  ---------------

Net loss                                                        $  (3,370)      $ (10,547)        $   (797)
                                                          =================  ==============  ===============
</TABLE>



See notes to consolidated financial statements included in Part II of the Annual
Report on Form 10-K/A.




                                       58

<PAGE>
<TABLE>
<CAPTION>


LPA HOLDING CORP.

SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(IN THOUSANDS OF DOLLARS)
-------------------------------------------------------------------------------------------------------------------


                                                                52 WEEKS         52 WEEKS       44 WEEKS
                                                                  ENDED            ENDED         ENDED
                                                                JUNE 30,          JULY 1,       JULY 3,
                                                                  2001             2000           1999
                                                              AS RESTATED,
STATEMENTS OF CASH FLOWS                                      SEE NOTE 14
                                                             ---------------  --------------  -------------
<S>                                                         <C>               <C>             <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                      $ (3,370)      $ (10,547)       $  (797)
    Adjustments to reconcile net loss to net cash from
       operating activities:
       Equity in net loss of La Petite Academy, Inc.                  3,370          10,547            797
                                                             ---------------  --------------  -------------

             Net cash from operating activities                   $       -      $        -       $      -
                                                             ===============  ==============  =============

</TABLE>


See Notes to Consolidated Financial Statements included in Part II of the Annual
Report on Form 10-K/A.

                                       59

<PAGE>

<TABLE>
<CAPTION>


LPA HOLDING CORP.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
-------------------------------------------------------------------------------------------------------------------


ALLOWANCE FOR DOUBTFUL ACCOUNTS


                                              BALANCE AT       CHARGED TO                      BALANCE AT
                                               JULY 1,         COSTS AND                        JUNE 30
DESCRIPTION                                      2000           EXPENSES       WRITE-OFFS         2001
                                            ---------------  ---------------  -------------  ---------------
<S>                                         <C>              <C>              <C>            <C>

Allowance for doubtful accounts                 $   406         $  4,531        $ 4,400          $   537
                                            ---------------  ---------------  -------------  ---------------


                                              BALANCE AT       CHARGED TO                      BALANCE AT
                                               JULY 3,         COSTS AND                        JULY 1,
DESCRIPTION                                      1999           EXPENSES       WRITE-OFFS         2000
                                            ---------------  ---------------  -------------  ---------------

Allowance for doubtful accounts                 $   306         $  2,931        $ 2,831          $   406
                                            ---------------  ---------------  -------------  ---------------


                                              BALANCE AT       CHARGED TO                      BALANCE AT
                                              AUGUST 29,       COSTS AND                        JULY 3,
DESCRIPTION                                      1998           EXPENSES       WRITE-OFFS         1999
                                            ---------------  ---------------  -------------  ---------------

Allowance for doubtful accounts                 $   196         $  1,382        $ 1,272          $   306
                                            ---------------  ---------------  -------------  ---------------

                                                                                             (continued)
</TABLE>
                                       60


<PAGE>



<TABLE>
<CAPTION>

LPA HOLDING CORP.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
-------------------------------------------------------------------------------------------------------------------


RESERVE FOR CLOSED ACADEMIES
                                         BALANCE AT        CHARGED TO                         BALANCE AT
                                           JULY 1,          COSTS AND       CHARGED TO         JUNE 30,
DESCRIPTION                                 2000            EXPENSES          RESERVE            2001
                                        ------------      --------------   --------------    --------------
<S>                                  <C>               <C>              <C>               <C>

Reserve for Closed Academies            $     8,563       $      426       $     4,031       $     4,958
                                        ------------      --------------   --------------    --------------


                                         BALANCE AT        CHARGED TO                         BALANCE AT
                                           JULY 3,          COSTS AND       CHARGED TO          JULY 1,
DESCRIPTION                                 1999            EXPENSES          RESERVE            2000
                                        --------------    --------------   --------------    --------------

Reserve for Closed Academies            $     4,048       $    7,500       $    2,985        $     8,563
                                        --------------    --------------   --------------    --------------



                                         BALANCE AT        CHARGED TO                         BALANCE AT
                                         AUGUST 30,         COSTS AND       CHARGED TO          JULY 3,
DESCRIPTION                                 1998            EXPENSES          RESERVE            1999
                                        --------------    --------------   --------------    --------------

Reserve for Closed Academies            $     5,417       $                $   1,369         $     4,048
                                        --------------    --------------   --------------    --------------

                                                                                             (concluded)
</TABLE>


                                       61
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on April 18, 2002.

<TABLE>
<S>                                                         <C>
                                                            LPA Holding Corp.

                                                            /s/ Michael L. Goldberg
                                                            -----------------------------------------
                                                            By: Michael L. Goldberg
                                                            Chief Financial Officer and duly
                                                            authorized representative of the
                                                            registrant
</TABLE>

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed by the following persons on
behalf of the registrant and in the capabilities indicated on April 18, 2002.

<TABLE>
<S>                                                         <C>
/s/  Judith A. Rogala                                       /s/  Stephen P. Murray
--------------------------------------------                -----------------------------------------
By:  Judith A. Rogala                                       By: Stephen P. Murray
Chief Executive Officer, President and                      Chairman of the Board and Director
Director

/s/  Mitchell J. Blutt, M.D.                                /s/  Terry D. Byers
--------------------------------------------                -----------------------------------------
By:  Mitchell J. Blutt, M.D.                                By:  Terry D. Byers
Director                                                    Director

/s/  Robert E. King
--------------------------------------------
By:  Robert E. King
Director

/s/  Ronald L. Taylor
--------------------------------------------
By:  Ronald L. Taylor
Director

</TABLE>


                                       62
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on April 18, 2002.

<TABLE>
<S>                                                         <C>

                                                            La Petite Academy, Inc.

                                                            /s/  Michael L. Goldberg
                                                            ----------------------------------------------
                                                            By:  Michael L. Goldberg
                                                            Chief Financial Officer and duly
                                                            authorized representative of the
                                                            registrant
</TABLE>

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed by the following persons on
behalf of the registrant and in the capabilities indicated on April 18, 2002.

<TABLE>
<S>                                                         <C>
/s/  Judith A. Rogala                                       /s/  Stephen P. Murray
--------------------------------------------                -----------------------------------------
By:  Judith A. Rogala                                       By: Stephen P. Murray
Chief Executive Officer, President and                      Chairman of the Board and Director
Director

/s/  Mitchell J. Blutt, M.D.                                /s/  Terry D. Byers
--------------------------------------------                -----------------------------------------
By:  Mitchell J. Blutt, M.D.                                By:  Terry D. Byers
Director                                                    Director

/s/  Robert E. King
--------------------------------------------
By:  Robert E. King
Director

/s/  Ronald L. Taylor
--------------------------------------------
By:  Ronald L. Taylor
Director

</TABLE>


                                       63