##### Table of Contents






SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K



|    |                                                                                      
|--- | -------------------------------------------------------------------------------------
|[X] | Annual Report pursuant to Section 13 or 15(d) of the
	Securities Exchange Act of 1934

for the fiscal year ended March 31, 2000




|      |                                                                                                                                                                 
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|[   ] | Transition report pursuant to Section 13 or 15(d) of the
	Securities Exchange Act of 1934 for the transition period from
	                to

	                .

Commission File Number 0-27656




CHILDTIME LEARNING CENTERS, INC.

(Exact name of registrant as specified in its
charter)


|                                                                           |  |                                                  
|-------------------------------------------------------------------------- |  | -------------------------------------------------
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Michigan
	 (State or other jurisdiction of
	incorporation or organization) |  | 38-3261854
	(I.R.S. Employer
	Identification No.)

38345 West 10 Mile Road, Suite 100, Farmington Hills,
Michigan  48335

| |                                          |           
| | ---------------------------------------- | ----------
| | (Address of principal executive offices) | (Zip Code)

Registrants telephone number, including area code: (248) 476-3200

Securities registered pursuant to Section 12(b) of the Act:
None



|                                                            |                           
|----------------------------------------------------------- | --------------------------
|Securities registered pursuant to Section 12(g) of the Act: | Common Stock, No Par Value

(Title of Class)


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.  Yes [X] 
No [   ]

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]

The aggregate market value of
voting Common Stock held by non-affiliates of the registrant as
of June 1, 2000, computed by reference to the last sale
price for such stock on that date as reported on the NASDAQ
National Market System, was approximately $13,191,000.

At June 1, 2000, the number of
 shares outstanding of the registrants Common Stock,
without par value, was 4,931,655.

Portions of the registrants
Proxy Statement for its 2000 Annual Meeting of Shareholders have
been incorporated by reference in Part III of this Annual
Report on Form 10-K.



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TABLE OF CONTENTS



|                                                                                            |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I                                                                                     
|PART II                                                                                    
|PART III                                                                                   
|PART IV                                                                                    
|SIGNATURES                                                                                 
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE                
|Report of Independent Accountants                                                          
|CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET               
|CONSOLIDATED STATEMENT OF INCOME                                                           
|CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCK PURCHASE WARRANT AND SHAREHOLDERS EQUITY
|CONSOLIDATED STATEMENT OF CASH FLOWS                                                       
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                 
|SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS                                              
|INDEX TO EXHIBITS                                                                          



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PART I




Safe Harbor Statement Under Private Securities
Litigation Reform Act of 1995

Statements included herein which are not historical facts are
forward-looking statements pursuant to the safe harbor provisions
 of the Private/ Securities Litigation Reform Act of 1995.
Forward-looking statements involve a number of risks and
uncertainties, including, but not limited to, identification and
availability of quality acquisition or new development targets,
the ability to successfully implement new business opportunities
such as the Companys recent announcement to create the
Oxford Learning Centers of America joint venture, continuation of
 federal and state assistance programs, demand for child care,
general economic conditions as well as pricing, competition and
insurability. Childtime Learning Centers, Inc. cautions that
actual results could differ materially from those projected
forward-looking statements.

Item 1.  Business

General

Childtime Learning Centers, Inc. conducts business through its
wholly owned subsidiary Childtime Childcare, Inc. and its wholly
owned subsidiaries, Childtime Childcare  Michigan,
Inc., and Childtime Childcare  PMC, Inc. (together
referred to as the Company). All significant
intercompany transactions have been eliminated.

The Company provides for-profit child care through 293 child care
 centers as of March 31, 2000, located in 23 states and
 the District of Columbia. Center-based child care and preschool
educational services are provided five days a week throughout the
 year to children between the ages of six weeks and twelve years.
 At March 31, 2000, the Company had over 30,000 children
enrolled (full and part-time) nationwide. Substantially all of
the Companys child care centers are operated under the
Childtime Childrens Centers name. The
Companys centers are primarily located on free-standing
sites in suburban residential areas with substantial preschool
populations. Included among the Companys 293 child care
centers at March 31, 2000, were 47 at-work sites
 providing child care for working parents at various business
enterprises, office complexes, shopping centers and hospitals.

The Companys strategy is to offer an independently
developed, nationally recognized educational curriculum within a
stimulating environment in order to provide high quality child
care and to maximize development and preparation of children for
school. The Company places a great deal of emphasis on the
recruitment, selection and ongoing training of its child care
center directors. Within a framework of centralized financial and
 quality controls, the Company grants significant authority over
center operations to its center directors and rewards its center
directors on an incentive basis tied to individual center
performance.

The Company has recently announced a plan to create Oxford
Learning Centers of America (OLCA), a partnership
with Oxford Learning Centres of Canada (OLCC),
offering individualized tutoring and enrichment programs for
children ages 5 to 14, tailored to each students needs.
OLCA has proven assessment, tutorial and enrichment programs,
developed over the past seventeen years by OLCC. At
March 31, 2000 the Company has opened seven Oxford Learning
Centers, all located in the state of Michigan.

The Company has entered into a partnership with ParentWatch, an
internet viewing provider that, for a nominal fee, allows parents
 to view live video images of their children using a computer at
home or at their work place.

The Company utilizes a 52 to 53 week fiscal year (generally
comprised of 13 four-week periods), ending on the Friday closest
to March 31. The fiscal years ended March 31, 2000 and
April 2, 1999 contained 52 weeks, while the fiscal year
 ended April 3, 1998 contained 53 weeks. The fourth
quarter of fiscal 1998 contained 13 weeks, as compared to
12 weeks in the fourth quarter of both fiscal 1999 and 2000.

2



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Business Strategy

The Companys business strategy is to (i) develop and
acquire new centers, including the new Oxford concept, in areas
which meet its specific demographic requirements and close those
centers which do not meet minimum criteria; (ii) provide a
greater focus on enhancing profitability of existing centers
through various programs; (iii) continue to invest in its
centers to maintain and improve quality; (iv) emphasize its
sales and marketing programs aimed at increasing new enrollments
and promoting customer loyalty; (v) offer programs to better
 utilize its centers on a year-round basis; and
(vi) continue to improve the quality of its staff through
recruitment, training and incentive programs.

Set forth below are certain key elements of the Companys
business strategy:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Standardized Operations.  The Company has a
	consistent overall approach in providing child care services in
	its centers. With the exception of certain employer-sponsored
	sites and approximately 20 centers located within Texas and
	California, the centers operate under the Childtime
	Childrens Centers name in suburban communities or
	at-work locations which have similar demographic characteristics.
	 Each center utilizes an independently developed, nationally
	recognized educational curriculum. All center facilities are well
	 maintained, similarly equipped and utilize the closed classroom
	concept. The Company utilizes prototype building designs for use
	in its build-to-suit centers.                                                                                                                                                                                                                                                                           
|
| | Center Entrepreneurship.  Within a framework of
	centralized financial and quality controls, each center director
	is empowered to customize the centers programs, dietary
	menus and other features to adapt to local market requirements.
	Each director is also involved in the budgeting and financial
	planning process with regard to his or her center. The Company
	believes that its directors are given more autonomy than are
	directors of other child care centers enabling them to better
	market their center while meeting the child care objectives of
	local customers. The Company trains its center directors to
	fulfill these additional responsibilities through a series of
	internally and externally prepared training programs designed to
	enhance interpersonal and business skills, basic financial
	concepts and marketing. Center directors are compensated, in
	part, through an incentive program based on the performance of
	the center under their supervision.
|
| | Balanced Growth Strategy.The Companys
	strategy for growth consists of a combination of the expansion of
	 its Oxford Learning Centers operation, increased development of
	new build-to-suit centers and a reduced reliance on acquisitions
	of existing centers. Other large multi-unit operators often rely
	solely on acquisitions or, alternatively, new center
	construction. In addition to acquiring or building centers in
	residential areas, the Company also actively pursues contracts
	with employers and office complex managers to operate centers in
	at-work locations. The Company believes that its ability to grow
	both through the acquisition of existing child care centers and
	development of build-to-suit centers affords it greater
	flexibility to sustain its controlled growth strategy in various
	geographic markets. See Growth Strategy below.                                                                                                               

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Growth Strategy

The Company has a strategy to expand its business through an
increased level of new build-to-suit centers and reduced level of
 acquisitions. The following table sets forth the number of child
 care centers acquired or otherwise opened, as well as closed,
during the periods indicated.

|                    |                          |                           |     |          |    |          |     |    |    |  |     |    |    | 
|------------------- | ------------------------ | ------------------------- | --- | -------- | -- | -------- | --- | -- | -- |  | --- | -- | -- | 
|                    |                          |                          
|                    |                          | Fiscal Year Ended        
|                    |                          |                          
|                    |                          | March 31,                 |     | April 2, |    | April 3,
|                    |                          | 2000                      |     | 1999     |    | 1998    
|                    |                          |                           |     |          |    |         
|Number of centers:  |                          |                           |     |          |    |          |     |    |    |  |     |   
|                   
|                   
|                   
|                   
|Beginning of period |                          |                           | 270 |          |    |          | 242 |    |    |  | 211 |   
|                   
|                   
|                   
|                   
|                    | Additions during period: |                           |     |          |    |          |     |    |    |  |     |    |   
|                   
|                   
|                   
|                   
|                    |                          | Acquisitions and other    |     |          | 34 |          |     |    | 23 |  |     |    | 26 | 
|                   
|                   
|                   
|                   
|                    |                          | New builds and new leases |     |          | 4  |          |     |    | 7  |  |     |    | 9  | 
|                    |                          |                           |     |          |    |          |     |    |    |  |     |   
|                    | Total additions          |                           |     | 38       |    |          |     | 30 |    |  |     | 35 |   
|                   
|                   
|                   
|                   
|                    | Closings during period   |                           |     | (15      | )  |          |     | (2 | )  |  |     | (4 | ) 
|                    |                          |                           |     |          |    |          |     |    |    |  |     |   
|End of period       |                          |                           | 293 |          |    |          | 270 |    |    |  | 242 |   
|                    |                          |                           |     |          |    |          |     |    |    |  |     |   

In making its expansion decisions, the Company strives to add
units in its existing markets in order to increase market
concentration and to leverage administrative and advertising
expenses. Entry into new markets is also considered, but only if
these markets can eventually support a minimum of ten centers.
Due to a reduced level of acquisitions expected for fiscal 2001,
the Company does not anticipate adding centers at the same pace
as previously experienced. The Companys decision whether to
 add a new center by acquisition or by opening a new location is
based on which alternative best meets its needs and objectives.
Furthermore, the Company continuously reviews its existing center
 portfolio in an effort to ensure the centers meet its minimum
standards. Centers become candidates for closure when they fail
to meet certain demographic or financial criteria. As a result,
the Company decided to close 15 centers during fiscal 2000.

In choosing locations for new centers, the Company considers a
number of factors, emphasizing suburban neighborhoods with
growing populations of young families. Management looks for sites
 in proximity to newly developed or developing residential areas
on heavily traveled local streets. The Company performs a
detailed analysis of the demographics of the area surrounding the
 proposed site and focuses on several site selection criteria: an
 above-average concentration in the percentage of children under
age six; a minimum population density of 25,000 people within a
three-mile radius surrounding a proposed site; and an average
household income in excess of $50,000. The Company also analyzes
the percentage of the population consisting of college-educated,
dual income families, as well as the average home value in the
target area. The Company believes that parents in more affluent
areas are more willing to pay a premium for higher quality child
care services.

In addition to acquiring or building centers in residential
areas, the Company also actively pursues contracts with employers
 and office complex managers to operate centers in at-work
locations. Historically, public agencies and hospitals have been
the principal employers providing or otherwise arranging for
child care services for their employees. A number of private
sector employers have begun to offer this benefit, as they
recognize that reduction of employee absenteeism due to a lack of
 reliable and available child care can significantly offset the
cost to employers in offering such benefits. The Company expects
to capitalize on this trend by actively pursuing contracts with
employers, as well as selectively acquiring existing at-work
centers.

The Companys acquisition and new build activity is limited
to child care centers in market areas showing strong growth
potential and to sites which the Company believes it can conform
to its standard facility and educational format. The Company
believes, when appropriate, that it can continue to acquire
centers on terms that compare favorably with the costs and risks
of establishing new facilities. In an effort to standardize its
new facilities, the Company has developed two building prototypes
 which accommodate 130 to 180 children. Although the Company
engages in an active new site selection process, there are no
assurances that it will be able to continue to acquire and
develop new sites in an economic manner.

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Educational Programs

The Companys educational programs stress the process of
learning and discovery. Staff are trained to support children in
their active explorations and to help them to become
self-confident, independent and inquisitive learners. The Company
 believes in fostering all aspects of a childs development:
 social, emotional, physical and intellectual. The two primary
means of meeting this goal are the use in each center of a
nationally recognized educational curriculum developed by
independent educators and the centers ongoing dialogue with
 parents in providing a learning environment for their children
which meets or exceeds their expectations as customers.

In each center, the Company utilizes The Creative
Curriculum® For Early Childhood, a nationally
recognized educational curriculum published by Teaching
Strategies, Inc. and written by Diane Trister Dodge (a member of
the Governing Board of the National Association for the Education
 of Young Children from 1990 to 1994) and Laura J. Colker. The
Company believes that using a curriculum prepared by independent
educators, knowledgeable in the education of young children,
enables them to take advantage of professional expertise that is
otherwise not available to themselves or other child care center
operators. In addition, an externally developed curriculum
typically emphasizes educational objectives over cost and other
financial objectives. The Company trains its center directors and
 other caregivers to utilize The Creative Curriculum®
 .

Children enrolled at a center are placed into groups, according
to their emotional, physical, intellectual and social maturity,
rather than merely the childs age. Each group has specific
learning goals which enable the staff to develop planning
activities and daily programs and to assess each childs
growth and development. Although all centers utilize the same
educational curriculum, the staff at each center is responsible
for developing daily lesson plans and activities appropriate for
each of its developmental groups and for its locale. At
designated times during the year, an informal developmental
assessment is prepared for each child and reviewed with the
childs parents.

The Companys classrooms are organized in seven levels
following the sequential process of growth and development, from
infancy through school-age:

Infants (six weeks  twelve months)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A homelike environment and positive caregiver interactions foster
	 the infants sense of trust and self-esteem. Daily routines
	 (feeding, diapering and rocking) and sensory experiences are
	used to promote listening and language skills to help infants
	learn about the world around them. Play activities and
	interactions focus on the development of large muscles for
	sitting, crawling, standing and walking. Activities that develop
	small muscles for grasping, reaching, holding and picking up
	objects are also utilized on a routine basis.

Young Toddler (1  2 years)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Classroom space and materials are organized to support the young
	toddlers need to physically explore and discover and to be
	independent. Caregivers provide comforting words and lap time to
	help toddlers deal with separation from parents. Toddlers are
	encouraged to participate in daily routines to develop self-help
	skills and self-esteem. Play activities provide repeated
	opportunities with sensory experiences to help develop large and
	small muscles and thinking skills, and to promote communication
	skills. Stories, pictures and books are introduced to help
	toddlers experience reading as a pleasurable activity. Caregivers
	 reinforce positive behaviors, set limits and are consistently
	available as a homebase to support the toddlers
	 conflicting need for independence and comfort.

Toddler (2  3 years)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Classroom space and material are organized to support the older
	toddlers increased need for independence in making simple
	decisions, engaging in pretend play and playing cooperatively
	with other children. Toddlers are supported in their self-help
	skills (dressing, feeding and toileting) and encouraged to help
	with daily routines to become familiar with the sequence of
	routines and foster their self-esteem.

5



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| |                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Play activities provide opportunities to practice skills,
	increase communication about sensory experiences and promote
	listening and speaking skills. Indoor and outdoor activities
	focus on helping toddlers strengthen small muscles, develop
	eye-hand coordination and develop large muscles.

Preschool 1 (3  4 years)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Classroom space and materials are organized in distinct interest
	centers to support young preschoolers initiative to
	practice and test their new skills and express their ideas and
	feelings. These centers are set up to encourage preschoolers to
	select play activities, engage in hands-on exploration and
	pretend play, and develop the ability to play cooperatively.
	Small muscles and eye-hand coordination continue to be
	strengthened through art activities, sand and water play and work
	 with manipulative toys and blocks. The daily schedule includes
	many activities for large muscle development. Stories and books
	are used daily to increase familiarity with the meaning of
	letters and words (emergent literacy) and to foster reading as a
	pleasurable activity.

Preschool 2 (4  5 years)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Classroom organization and the daily schedule provide increased
	opportunities for independent and small group play in interest
	centers. Such group play supports older preschoolers
	developing ability to organize their own play, assign roles and
	tasks, and work towards a common goal. Activities provide
	hands-on experiences. Caregiver interaction focuses on helping
	preschoolers organize the information they gather, develop an
	understanding of number concepts, reasoning and problem solving
	skills (matching, classifying and sequencing), while expanding
	listening and language skills. Independent and group activities
	with books and stories promote reading readiness. Caregivers
	create a print rich environment (signs, labels and charts) and
	provide opportunities for children to draw, paint and engage in
	writing activities. Children are increasingly involved in helping
	 to set limits for positive and caring behaviors.

Five Year Old or Kindergartner (5 
6 years)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Classroom organization, materials and activities support the five
	 year-olds increased ability to understand written symbols
	(letters, numbers and some words) and interest in writing.
	Educational interest centers continue to provide opportunities
	for hands-on exploration to sharpen observation skills, explore
	cause and effect, share and play cooperatively with others, plan
	and carry out a task and engage in independent or group play for
	an extended period of time. Materials are provided to encourage
	representation, symbolic play and to practice drawing and
	writing. Activities are planned to help children learn to follow
	directions, recall and sequence events, understand measurement,
	recognize how materials can change, think creatively to solve
	problems, improve their coordination skills, and use their bodies
	 in challenging outdoor play tasks. Centers which offer a
	kindergarten program for transitioning children into first grade,
	 follow the school districts specific goals and assessment
	requirements.

School-ages (6  12 years)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Classroom space, equipment and materials are organized to support
	 school-agers sense of industry and competence and to
	accommodate the wide range of interests and abilities of six to
	twelve year-olds. The program provides opportunities for
	school-agers to pursue their interest, perfect coordination of
	large and small muscles and perceptual motor coordination, and to
	 learn to work with others. The environment is designed to engage
	 children in activities (arts and crafts, cooking, dramatize
	play, music, dance, games and sports) they can pursue
	independently, with a friend, or as a group project. Caregiver
	integration focuses on helping children set reasonable goals and
	manageable tasks, guiding them to think about the consequences of
	 their words and actions so as to foster a sense of community.

Through parent surveys, the Company continually assesses the
quality of its education curriculum. These surveys provide the
Company with feedback on parent satisfaction with their
childs developmental growth and with the Companys
curriculum, center director and overall quality of the center.
Center directors also

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The Company continues to focus its efforts to accredit many of
its centers by the National Association for the Education of
Young Children (NAEYC) or the National Child Care
Association (NCCA). The NAEYC and NCCA are national
organizations which have established comprehensive criteria for
providing quality child care. NAEYC and NCCA have developed and
implemented a child care center accreditation process through
which child care providers can receive formal, national
recognition of their child care program. The Company believes
that the review process leading toward accreditation assists the
Company in its efforts to continually improve its programs and
facilities. The Company shares NAEYC and NCCAs commitment
to provide quality child care and, accordingly continues an
aggressive accreditation program.

Products and Services

General.The Companys child care operations
consist of an Eastern Region, a Central Region and a Western
Region, each headed by a Regional Vice President. These three
regions are further divided into 21 areas, each of which is
managed by an area manager. Area managers usually oversee from
nine to eighteen centers, and are responsible for their operation
 and performance. Each individual center has a dedicated center
director and a staff ranging from 15 to 30 persons. The
 centers operate year round, five days per week, generally
opening at 6:30 a.m. and remaining open until 6:30 p.m.
 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 9 hours a day, five days per week,
 at a center.

The Companys current weekly tuition for full-day service
typically ranges from $74 to $255, depending on the location of
the center and the age of the child. Tuition is generally paid,
in advance, on a weekly basis. In addition, parents currently pay
 an annual registration fee ranging from $25 to $80. The Company
generally reviews its tuition rates at least once each year to
determine whether rates at a particular center should be changed
in light of that centers competitive environment and
financial results.

Center Operations.Each center is managed by a
director who is supervised by an area manager. The Company places
 a great deal of emphasis on the recruitment, selection and
ongoing training of center directors. Center directors are hired
by their respective area manager from a pool of candidates who
have undergone an initial psychological profile screen, reference
 check and criminal background check. All center directors are
required by state regulations to have some minimum level of
training, which is typically in the form of credit hours from a
state approved training agency or an accredited educational
institution. The Company prefers that potential directors have a
bachelors degree in early childhood education, child
development or a health related field plus a minimum of two years
 experience in licensed child care. Many directors are recruited
from within the Company and have served as caregivers or
assistant directors in one of the Companys centers. A
center director has overall responsibility for the operations of
a center including: ensuring that the center is operated in
accordance with Company and state licensing standards and
operating procedures; providing an educational, caring and safe
environment for children and their parents; marketing the Company
 to parents and otherwise promoting the positive image of the
Company in the community. The center directors receive a salary
and bonus tied to the performance of their center. Each center
director is also responsible for hiring his or her staff,
including caregivers.

The center director assesses and collects tuition and fees. All
funds received by each center are deposited in an account
established by the Company in a local bank. All payroll and most
other center expenses are paid directly by the Companys
corporate office. Basic supplies are purchased by the centers
pursuant to national vendor contracts negotiated by the corporate
 office to take advantage of volume buying discounts and to
retain financial controls. Direct expenditures by the centers are
 limited to miscellaneous operating expenses.

Area Supervision.An area manager hires the director
 of each of his or her centers and is supervised by one of the
three Regional Vice Presidents. Area managers also work very
closely with other corporate staff members, such as the Director
of Real Estate, Vice President-Marketing or Vice President-Human
Resources, on such issues as center acquisition and marketing,
personnel actions and financial planning.

7



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Training.The Company believes that the skills and
expertise of the director and staff at each center are among the
most significant factors for parents selecting center-based child
 care programs. In order to enhance the quality of the staff at
each center, the Company provides both externally and internally
developed training programs for its personnel. It has developed
training materials and manuals for its staff on such subjects as
interpersonal and business skills, basic financial concepts and
marketing, and regularly conducts seminars for its area managers
and directors. All management personnel (including area managers,
 center directors and assistant directors) participate in
periodic training programs or meetings and must comply with
applicable state and local licensing regulations. Center staff
are required to participate in orientation and training sessions.
 In addition, the Company has developed and implements, on a
continuous basis, extensive training programs to prepare and
enhance the skills of its caregivers to meet the Companys
internal standards and applicable state licensing requirements.

Safety.The Company is committed to the health and
safety of the children in its care. To prevent unauthorized
persons from entering the center, a majority of the buildings use
 a double door entrance with a security code and have a centrally
 monitored security system to protect the center after hours.
Each day, children must be signed in and out by parents, legal
guardians or an authorized designee of the parent or guardian.
All centers have at least one staff member trained in first aid
and CPR.

Center staff members are trained to detect child neglect and
abuse, and are required by law and company policy to immediately
report all suspected instances. In the rare event that an
employee is accused of child neglect or abuse, it is the
Companys policy to place the employee on paid
administrative leave pending the results of an independent state
agency investigation, in which the Company cooperates fully. No
assurances can be made that allegations of child neglect or abuse
 will not be made in the future. However, allegations of child
neglect or abuse against an employee are rare, and in most cases,
 covered by the Companys general liability insurance. Since
 these incidents fall within the insurance policy limits, it is
the Companys position that such occurrences will not
materially affect the financial position, results of operations,
or cash flow position of the Company. The Company maintains
general liability insurance and appropriate umbrella policies in
adequate amounts, as described under Insurance.

Financial Planning; Budgeting and Cost Control.The
Company has implemented a program of financial planning and cost
control which seeks to maximize operational profit without
sacrificing quality child care. This goal is accomplished by
actively engaging the area manager and center director in the
formulation and implementation of the budget for each center.
Under this budgeting process, budgets are initially developed at
the center level, with center directors taking an active role in
developing and submitting the budget for their respective centers
 through their area manager and on to the Companys
corporate management for approval. Directors are then responsible
 for implementing the approved budget and become primarily
responsible for the financial performance of the center. In order
 to encourage profitable performance, the Company has implemented
 a financial incentive program for meeting or exceeding
pre-approved budget goals.

Facilities.Most of the Companys centers are
freestanding structures owned or leased by the Company. The
Company utilizes prototype buildings designed specifically for
each state emphasizing efficiency, lower maintenance costs and
enhanced appearance. Depending on the state, these prototype
designs contain between 7,900 or 9,800 square feet in a one
story, air-conditioned building. The interiors primarily consist
of closed classrooms bordering an open area in the middle of the
center. Such a design accommodates the desire to allow children
the freedom to explore their environment as well as the
staffs need to be able to monitor activities in the
classroom. The Companys centers contain classrooms,
recreational areas, a kitchen and bathroom facilities and are
typically laid out to accommodate the grouping of children by age
 or development. Room materials are chosen for their educational
value, quality and versatility. The infant/young toddler room

8



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##### Table of Contents





Licensed capacity generally ranges from 130 to 180 children for
the same size building. The capacity variance differs from state
to state because of various licensing requirements. The aggregate
 licensed capacity of the Companys centers (including those
 under management contracts) at March 31, 2000 was 37,771
children (or an average of 129 children per center).

At-Work Sites.In addition to operating residential
child care centers, the Company also managed, at March 31,
2000, 47 child care centers in at-work locations, making it one
of the largest providers of at-work child care services. Many of
these centers, including those for Schering Plough (a division of
 the Schering Corporation), Blue Cross Blue Shield of Mississippi
 and Henry Ford Health Systems, are located on or near the
premises of a specific employer and involve varying degrees of
involvement from the employer, such as ownership of the premises,
 minimum enrollment guarantees, the assumption of financial
responsibility for the ongoing operations of the center, other
management arrangements, or any combination of the above. Other
at-work centers are located in office complexes or shopping
centers. Historically, public agencies and hospitals have been
the principal employers providing or otherwise arranging for
child care services for their employees. A number of private
sector employers have begun to offer this benefit, as they
recognize that reduction of employee absenteeism due to a lack of
 reliable and available child care can significantly offset the
cost to employers of offering such benefits. The Company expects
to capitalize on this trend by actively pursuing contracts with
employers, as well as acquiring centers that serve particular
employers.

Marketing

The Company believes that the quality of a centers
director, staff, center location, and consistent advertising and
marketing are the key components to a successful center. The
Company relies heavily on recommendations from current customers
as a source of new enrollments. To encourage recommendations, the
 Company offers a referral bonus to parents and employees of the
Company who successfully recommend the Company to others. In
addition, the Company advertises through a variety of database
direct marketing programs which target parents within a specified
 radius of each center. The advertising budget is largely spent
in the summer months in anticipation of the back-to-school
enrollment in new centers. The Company also advertises through
direct mail distribution of promotional material in residential
areas surrounding a center and through listings in the Yellow
Pages and maintains an internet web site. The Company will
continue to promote its safe, secure facilities along with its
respected curriculum and qualified staff through direct marketing
 campaigns timed around peak enrollment periods or to support
specified programs.

Seasonality

Generally, the Companys accounting periods are organized
into 13 four-week periods, with 4 four-week periods
comprising the first fiscal quarter and 3 four-week periods
comprising each of the second, third and fourth fiscal quarters.
Consequently, the Companys quarterly revenues and gross
profit results for the first quarter are favorably impacted by
the additional four weeks included in such period. Periodically,
due to the Companys closing the fiscal year on the Friday
closest to March 31, the Company will have a five-week
period in the thirteenth period of its fiscal year. Such was the
case for the thirteenth period of the fiscal year ended
April 3, 1998. Consequently, the 1998 fiscal year was
comprised of 4 four-week periods in the first fiscal
quarter, 3 four-week periods in each of the second and third
 fiscal quarters, and 2 four-week periods and a five-week
period in the fourth fiscal quarter.

9



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In July and August of each year (the last month of the
Companys first fiscal quarter and the first month of the
Companys second fiscal quarter), the Company has
historically experienced an enrollment decline. To offset this
decline, the Company has successfully implemented and marketed a
summer camp program with a new theme and focus each year. As a
result of such programming and the timing of the quarters,
average weekly revenues by quarter during fiscal 2000 and 1999
were very consistent and not adversely impacted by the normal
summer enrollment decline. In addition, new enrollments are
generally highest in September and January; accordingly, August
and December are traditionally the best months to open new
centers. However, with the exception of spring, the Company has
demonstrated an ability to successfully open centers throughout
the year because of enhanced pre-opening marketing efforts. Total
 enrollments (and, accordingly, the Companys results) are
typically the strongest in the fourth quarter (which include the
months of January, February and March).

The following table shows certain unaudited financial information
 for the Company for the interim periods indicated. Quarterly
results may vary from year to year depending on the timing and
amount of revenues and costs associated with new center
development and acquisitions, as well as certain other costs,
including the impairment charge of $282,000, which was incurred
during the 12 weeks ended January 7, 2000.

|                             |  |                                       |        |                 |  |                  |        |                |  |   |        |  |  |   |        | 
|---------------------------- |  | ------------------------------------- | ------ | --------------- |  | ---------------- | ------ | -------------- |  | - | ------ |  |  | - | ------ | 
|                             |  |                                      
|                             |  | Quarterly Data                       
|                             |  |                                      
|                             |  | Fiscal 2000                          
|                             |  |                                      
|                             |  | 12 Weeks Ended                        |        | 12 Weeks Ended  |  | 12 Weeks Ended   |        | 16 Weeks Ended
|                             |  | March 31, 2000                        |        | January 7, 2000 |  | October 15, 1999 |        | July 23, 1999 
|                             |  |                                       |        |                 |  |                  |        |               
|                             |  |                                      
|                             |  | (In thousands, except per share data)
|                            
|                            
|                            
|                            
|Revenues                     |  | $                                     | 32,364 |                 |  | $                | 28,865 |                |  | $ | 28,763 |  |  | $ | 38,744 | 
|                            
|                            
|                            
|                            
|Gross profit                 |  | $                                     | 4,474  |                 |  | $                | 3,038  |                |  | $ | 3,548  |  |  | $ | 5,222  | 
|                            
|                            
|                            
|                            
|Net income                   |  | $                                     | 1,168  |                 |  | $                | 507    |                |  | $ | 974    |  |  | $ | 1,680  | 
|                            
|                            
|                            
|                            
|Earnings per share  Diluted |  | $                                     | 0.23   |                 |  | $                | 0.10   |                |  | $ | 0.18   |  |  | $ | 0.31   | 

|                             |  |                |        |                 |  |                  |        |                |  |   |        |  |  |   |        | 
|---------------------------- |  | -------------- | ------ | --------------- |  | ---------------- | ------ | -------------- |  | - | ------ |  |  | - | ------ | 
|                             |  |               
|                             |  | Fiscal 1999   
|                             |  |               
|                             |  | 12 Weeks Ended |        | 12 Weeks Ended  |  | 12 Weeks Ended   |        | 16 Weeks Ended
|                             |  | April 2, 1999  |        | January 8, 1999 |  | October 16, 1998 |        | July 24, 1998 
|                             |  |                |        |                 |  |                  |        |               
|Revenues                     |  | $              | 28,088 |                 |  | $                | 25,524 |                |  | $ | 25,323 |  |  | $ | 34,028 | 
|                            
|                            
|                            
|                            
|Gross profit                 |  | $              | 4,401  |                 |  | $                | 3,493  |                |  | $ | 3,383  |  |  | $ | 5,145  | 
|                            
|                            
|                            
|                            
|Net income                   |  | $              | 1,600  |                 |  | $                | 939    |                |  | $ | 914    |  |  | $ | 1,643  | 
|                            
|                            
|                            
|                            
|Earnings per share  Diluted |  | $              | 0.29   |                 |  | $                | 0.17   |                |  | $ | 0.17   |  |  | $ | 0.30   | 

Since the operations of the Company are influenced by general
economic conditions, the Company believes that increased labor
costs in the past 12-18 months have had a negative effect on
 its results.

Competition

The child care and preschool education industry is highly
fragmented and competitive and has historically been dominated by
 small, local nursery schools and child care centers. The
Companys competition consists principally of local nursery
schools and child care centers (some of which are non-profit,
including church-affiliated centers), providers of services that
operate out of homes and other proprietary multi-unit child care
center providers some of which are larger and may have
substantially greater financial resources than the Company. The
largest providers of for-profit child care and preschool
education are KinderCare Learning Centers, Inc. and La Petite
Academy, Inc. The Company believes it is able to compete
favorably with these providers by offering a higher quality level
 of child care services. This is especially true in competing
against local nursery schools, child care centers and in-home
providers where the Company is often at a price disadvantage,
because these providers generally charge less for their services
than the Company charges. Many church-affiliated and other
non-profit child care centers have lower rental costs, if any,
than the Company and may receive donations or other funding to
cover operating expenses. Consequently, operators of such centers
 often charge tuition rates that are less than the Companys
 rates. In addition, fees for home-based

10



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Personnel

As of March 31, 2000, the Company employed more than 5,000
persons (including part-time and substitute caregivers), of whom
45 are employed at corporate headquarters, 21 are area managers
and the remainder are employed at the Companys child care
centers or as local field support personnel. Center employees
include center directors and assistant directors, regular
full-time and part-time caregivers, substitute caregivers and
aides, and other staff, including cooks and van drivers. All
center directors and corporate supervisory personnel are
salaried; all other employees are paid on an hourly basis. The
Company does not have an agreement with any labor union and
believes that its relations with its employees are good.

The Company is also subject to the Fair Labor Standards Act,
which governs minimum wages, overtime compensation and working
conditions. A portion of the Companys personnel (estimated
to be less than 1% as a percentage of total payroll expense) are
paid at the federal minimum wage.

Regulation

Child care centers are subject to numerous state and local
regulations and detailed licensing requirements. Although these
regulations vary from jurisdiction to jurisdiction, government
agencies generally review, among other things, the adequacy of
buildings and equipment, licensed capacity, the ratio of staff to
 children, staff training, record keeping, the dietary program,
the daily curriculum and health and safety standards. In most
jurisdictions, these agencies conduct scheduled and unscheduled
inspections of centers, and licenses must be renewed
periodically. In a few 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.
Repeated failures by a center to comply with applicable
regulations can subject it to state sanctions, which might
include fines, corrective orders, being placed on probation or,
in more serious cases, suspension or revocation of the
centers license to operate. Management believes the Company
 is in substantial compliance with all material regulations
applicable to its business.

For the fiscal year ended March 31, 2000, approximately 18%
of the Companys revenues were generated from federal child
care assistance programs, primarily the Child Care and
Development Block Grant and At-Risk Programs. These programs are
typically designed to assist low-income families with child care
expenses and are administered through various state agencies.
Although no federal license is required at this time, there are
minimum standards which must be met to qualify for participation
in certain federal programs. In addition, the Company
participates in the Georgia Prekindergarten Program which
provides services for eligible four-year-old children and their
families. This resulted in approximately $1,560,000 of revenue
during the fiscal year ended March 31, 2000. There is no
assurance that funding for such federal and state programs will
continue at current levels and a significant reduction in such
funding may have an adverse impact on the Company.

There are certain tax incentives for parents utilizing 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 therein). 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. The amount of the
qualifying child care expenses is limited to $2,400 for one child
 and $4,800 for two or more children and, therefore, the maximum
credit ranges from $480 to $720 for one child and from $960 to
$1,440 for two or more children. Tax incentives provided under
the Internal Revenue Code are subject to change.

11



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##### Table of Contents



The Company must also comply with the Americans with Disabilities
 Act (ADA) which prohibits discrimination on the
basis of disability in public accommodations and employment.
Costs incurred to date by the Company to comply with the ADA have
 not been significant. A determination that the Company is not in
 compliance with the ADA, however, could result in the imposition
 of fines or an award of damages to private litigants, and could
require significant expenditures. The Company believes that the
majority of its centers are substantially in compliance with all
material ADA requirements.

Insurance

The Companys insurance program currently includes the
following types of policies: workers compensation,
commercial general and automobile liability, property, excess
umbrella liability, and a medical payment program for
 accidents which provides secondary coverage for each child
enrolled in a Company center. The policies provide for a variety
of coverages and are subject to various limits and deductibles.
The workers compensation policy requires contributions to a
 self-insured deduction fund. For fiscal 1999 and 2000, the
Companys policies for workers compensation had a
deductible of $250,000 per occurrence. The commercial general
liability policy includes coverage for child physical and sexual
abuse claims, with an annual limit of $1,000,000 per location
(including all general liability claims except product liability
claims), $1,000,000 per occurrence and $2,000,000 in the
aggregate. The Company also has excess umbrella
coverage, relating to general liabilities including child
physical and sexual abuse claims, in the amount of $20,000,000
per year. Management believes that the Companys current
insurance coverages are adequate to meet its needs.

Item 2.  Properties

The following table shows the locations of the Companys
centers, including those operated under management contracts, as
of March 31, 2000 (the numbers in the parentheses reflect
the number of centers in that state):

|                  |  |                    
|----------------- |  | -------------------
|Arizona (26)      |  | New Mexico (1)     
|California (29)   |  | New York (29)      
|Florida (15)      |  | North Carolina (10)
|Georgia (17)      |  | Ohio (23)          
|Illinois (6)      |  | Oklahoma (10)      
|Iowa (3)          |  | Pennsylvania (1)   
|Maryland/ DC (14) |  | South Carolina (1) 
|Michigan (18)     |  | Texas (44)         
|Mississippi (1)   |  | Virginia (14)      
|Missouri (4)      |  | Washington (10)    
|Nevada (7)        |  | Wisconsin (1)      
|New Jersey (9)    |  |                    

As of March 31, 2000, the Company operated 293 centers, 232
of which were operated under lease or operating agreements, 53 of
 which were owned and 8 of which were operated under management
contracts. The leases have terms ranging from 1 to 25 years,
 often with renewal options, with most leases having an initial
term of 5 to 20 years. The leases typically require the
Company to pay utilities, maintenance, insurance and property
taxes and some provide for contingent rentals if the
centers revenues exceed a specified base level. The Company
 also has 7 leases for its Oxford Learning Centers, with terms
ranging from 3 to 5 years.

12



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##### Table of Contents



As of March 31, 2000, the Company had leases or operating
agreements with initial terms (including renewal options)
expiring as follows:

|               |  |            |     | 
|-------------- |  | ---------- | --- | 
|               |  | Number of 
|               |  | Leases or 
|               |  | Operating 
|               |  | Agreements
|Fiscal Year    |  | Expiring  
|               |  |           
|2001-2002      |  |            | 40  | 
|              
|              
|              
|              
|2003-2004      |  |            | 26  | 
|              
|              
|              
|              
|2005-2008      |  |            | 69  | 
|              
|              
|              
|              
|2009 and later |  |            | 112 | 

The Company also owns one undeveloped site acquired prior to
1990. This property does not currently fit within the
Companys long-term growth strategy. Accordingly, this site
is carried on the Companys books at fair value less cost to
 sell in the amount of $65,600 and is held for sale.

The Company currently leases approximately 10,120 square feet for
 its corporate offices in Farmington Hills, Michigan.

Item 3.  Legal Proceedings

The Company is involved from time to time in routine litigation
arising out of the ordinary course of its business, most of which
 is covered by general liability insurance. In managements
opinion, none of the litigation in which the Company is currently
 involved will have a material effect on its financial condition,
 results of operations, or cash flows.

Item 4.  Submission of matters to a Vote of Security
 Holders

None.

Item 4A.  Executive Officers of the Registrant

The information regarding executive officers of the Company
contained in Item 10 of this Report as it appears in
Part III of this Report is incorporated herein by reference.

13



---



##### Table of Contents








PART II


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

The Companys Common Stock is regularly quoted on the NASDAQ
 National Market System under the symbol CTIM. The following
table sets forth, for the fiscal years ended March 31, 2000,
 and April 2, 1999, the high and low closing sale prices for
 the Companys Common Stock.

|             |             |              |   |       |  |  |   |       | 
|------------ | ----------- | ------------ | - | ----- |  |  | - | ----- | 
|             |             |             
|             |             | Common Stock
|             |             | Sales Prices
|             |             |             
|             |             | High         |   | Low  
|             |             |              |   |      
|Fiscal 2000: |             |              |   |       |  |  |   |      
|            
|            
|            
|            
|             | 1st Quarter |              | $ | 15.50 |  |  | $ | 11.25 | 
|            
|            
|            
|            
|             | 2nd Quarter |              | $ | 15.00 |  |  | $ | 10.63 | 
|            
|            
|            
|            
|             | 3rd Quarter |              | $ | 13.50 |  |  | $ | 12.00 | 
|            
|            
|            
|            
|             | 4th Quarter |              | $ | 12.50 |  |  | $ | 7.13  | 
|            
|            
|            
|            
|Fiscal 1999: |             |              |   |       |  |  |   |      
|            
|            
|            
|            
|             | 1st Quarter |              | $ | 25.00 |  |  | $ | 16.00 | 
|            
|            
|            
|            
|             | 2nd Quarter |              | $ | 21.25 |  |  | $ | 13.25 | 
|            
|            
|            
|            
|             | 3rd Quarter |              | $ | 15.63 |  |  | $ | 12.88 | 
|            
|            
|            
|            
|             | 4th Quarter |              | $ | 16.75 |  |  | $ | 12.25 | 

The Company has not paid dividends on shares of Common Stock and
has no intention of declaring or paying any such dividends in the
 foreseeable future. The Company is not currently subject to any
contractual restrictions on its ability to pay dividends.
Nonetheless, the Company intends to retain its earnings, if any,
to finance the growth and development of its business, including
future acquisitions.

As of June 1, 2000, there were approximately 727 holders of
the Companys Common Stock (including individual
participants in security position listings).

14



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##### Table of Contents



Item 6.  Selected Financial Data

The following table sets forth, for the periods indicated,
selected data from the Companys financial statements. This
table and subsequent discussions should be read in conjunction
with the Consolidated Financial Statements and related Notes
appearing elsewhere in this Report.

Childtime Learning Centers, Inc. and Consolidated Subsidiaries

|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |       |        | 
|-------------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------------- | ------- | ---------- | ------ | ---------- | ------- | ---------- | ------ | ---------- | ------ | ----- | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | 
|                                                               |                                                   | March 31,                                         |         | April 2,   |        | April 3,   |         | March 28,  |        | March 29, 
|                                                               |                                                   | 2000                                              |         | 1999       |        | 1998       |         | 1997       |        | 1996      
|                                                               |                                                   | (52 weeks)                                        |         | (52 weeks) |        | (53 weeks) |         | (52 weeks) |        | (52 weeks)
|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |           
|                                                               |                                                   |                                                  
|                                                               |                                                   | (Dollars in thousands, except for per share data)
|                                                              
|                                                              
|                                                              
|                                                              
|Selected Income Statement Data:                                |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|                                                              
|                                                              
|                                                              
|                                                              
|Revenues                                                       |                                                   | $                                                 | 128,736 |            |        | $          | 112,963 |            |        | $          | 97,828 |       |        | $ | 78,634 |       |        | $ | 65,623 |      
|                                                              
|                                                              
|                                                              
|                                                              
|Cost of revenues                                               |                                                   |                                                   | 112,454 |            |        |            | 96,541  |            |        |            | 83,432 |       |        |   | 66,437 |       |        |   | 53,951 |      
|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|                                                               |                                                   | Gross profit                                      |         |            | 16,282 |            |         |            | 16,422 |            |        |       | 14,396 |   |        |       | 12,197 |   |        |       | 11,672 | 
|                                                              
|                                                              
|                                                              
|                                                              
|Marketing expenses                                             |                                                   |                                                   | 1,601   |            |        |            | 1,455   |            |        |            | 1,265  |       |        |   | 1,161  |       |        |   | 1,038  |      
|                                                              
|                                                              
|                                                              
|                                                              
|General and administrative expenses                            |                                                   |                                                   | 7,598   |            |        |            | 6,853   |            |        |            | 6,193  |       |        |   | 5,393  |       |        |   | 5,139  |      
|                                                              
|                                                              
|                                                              
|                                                              
|Revaluation of land held for disposal                          |                                                   |                                                   |        |            |        |            |        |            |        |            |       |       |        |   |       |       |        |   | 612    |      
|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|                                                               | Operating income                                  |                                                   |         | 7,083      |        |            |         | 8,114      |        |            |        | 6,938 |        |   |        | 5,643 |        |   |        | 4,884 |       
|                                                              
|                                                              
|                                                              
|                                                              
|Interest expense                                               |                                                   |                                                   | 428     |            |        |            | 312     |            |        |            | 287    |       |        |   | 160    |       |        |   | 1,800  |      
|                                                              
|                                                              
|                                                              
|                                                              
|Interest (income)                                              |                                                   |                                                   | (157    | )          |        |            | (240    | )          |        |            | (226   | )     |        |   | (189   | )     |        |   | (39    | )    
|                                                              
|                                                              
|                                                              
|                                                              
|Other (income), net                                            |                                                   |                                                   | (117    | )          |        |            | (119    | )          |        |            | (34    | )     |        |   | (399   | )     |        |   | (331   | )    
|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|                                                               | Income before income taxes and extraordinary item |                                                   |         | 6,929      |        |            |         | 8,161      |        |            |        | 6,911 |        |   |        | 6,071 |        |   |        | 3,453 |       
|                                                              
|                                                              
|                                                              
|                                                              
|Income tax provision                                           |                                                   |                                                   | 2,600   |            |        |            | 3,065   |            |        |            | 2,565  |       |        |   | 1,751  |       |        |   | 1,326  |      
|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|Income before extraordinary item                               |                                                   |                                                   | 4,329   |            |        |            | 5,096   |            |        |            | 4,346  |       |        |   | 4,320  |       |        |   | 2,127  |      
|                                                              
|                                                              
|                                                              
|                                                              
|Extraordinary item, gain on extinguishment of debt, net of tax |                                                   |                                                   |        |            |        |            |        |            |        |            |       |       |        |   |       |       |        |   | 148    |      
|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|                                                               | Net income                                        |                                                   | $       | 4,329      |        |            | $       | 5,096      |        |            | $      | 4,346 |        |   | $      | 4,320 |        |   | $      | 2,275 |       
|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|Earnings per share  Basic                                     |                                                   | $                                                 | 0.82    |            |        | $          | 0.94    |            |        | $          | 0.80   |       |        | $ | 0.80   |       |        | $ | 0.60   |      
|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|Earnings per share  Diluted                                   |                                                   | $                                                 | 0.82    |            |        | $          | 0.93    |            |        | $          | 0.80   |       |        | $ | 0.80   |       |        | $ | 0.60   |      
|                                                               |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|                                                              
|Selected Balance Sheet Data:                                   |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|                                                              
|                                                              
|                                                              
|                                                              
|Total assets                                                   |                                                   | $                                                 | 71,174  |            |        | $          | 62,611  |            |        | $          | 58,118 |       |        | $ | 50,286 |       |        | $ | 44,688 |      
|                                                              
|                                                              
|                                                              
|                                                              
|Total debt                                                     |                                                   | $                                                 | 7,985   |            |        | $          | 2,638   |            |        | $          | 3,062  |       |        | $ | 2,272  |       |        | $ | 1,236  |      
|                                                              
|                                                              
|                                                              
|                                                              
|Total shareholders equity                                     |                                                   | $                                                 | 44,939  |            |        | $          | 46,407  |            |        | $          | 41,287 |       |        | $ | 35,489 |       |        | $ | 31,109 |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|Selected Operating Data:                                       |                                                   |                                                   |         |            |        |            |         |            |        |            |        |       |        |   |        |       |        |   |        |      
|                                                              
|                                                              
|                                                              
|                                                              
|Number of centers (at end of period)                           |                                                   |                                                   | 293     |            |        |            | 270     |            |        |            | 242    |       |        |   | 211    |       |        |   | 174    |      
|                                                              
|                                                              
|                                                              
|                                                              
|Center capacity (at end of period) (1)                         |                                                   |                                                   | 36,770  |            |        |            | 32,832  |            |        |            | 28,911 |       |        |   | 24,280 |       |        |   | 19,922 |      
|                                                              
|                                                              
|                                                              
|                                                              
|Average utilization (1)                                        |                                                   |                                                   | 61.4    | %          |        |            | 62.0    | %          |        |            | 62.5   | %     |        |   | 63.4   | %     |        |   | 66.5   | %    




|    |                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Average utilization is calculated by dividing total child days
	for a period by the total capacity of the Companys centers
	(excluding the capacity of those centers managed by the Company
	pursuant to management contracts) at the end of such period.
	Child days are calculated based upon the Companys standard
	hours by program (e.g., full-time, before and after, etc.).

15



---



##### Table of Contents



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

General

During the past five fiscal years, the Company has increased the
number of centers from 148, at the beginning of fiscal year 1996,
 to 293 at fiscal year end 2000. The Company has achieved this
growth through a combination of acquisitions, prototype
build-to-suit centers, and new leases. Fiscal year 2000 growth
consisted of 38 centers. The additions included 32 acquisitions,
1 management contract, 1 at-work center, 1 new
lease, and 3 build-to-suit leased centers. During the fiscal
 year, the Company also closed 15 centers that no longer met
 the demographic and growth criteria as contained in its overall
growth strategy. These centers were incurring operating losses,
therefore the closing of these centers should help future
results.

Results of Operations

The following table sets forth, for the periods indicated,
certain items from Selected Consolidated Financial
Data expressed as a percentage of revenues and the
percentage change in the dollar amounts of such items compared to
 the prior period:

|                                    |                            |                       |       |                     |   |            |       |            |   |            |       |      |   |  |       |       |   |  |       |      |  
|----------------------------------- | -------------------------- | --------------------- | ----- | ------------------- | - | ---------- | ----- | ---------- | - | ---------- | ----- | ---- | - |  | ----- | ----- | - |  | ----- | ---- | -
|                                    |                            |                       |       |                    
|                                    |                            | Percentage of Revenue |       | Percentage Increase
|                                    |                            | Fiscal Year Ended     |       | (Decrease)         
|                                    |                            |                       |       |                    
|                                    |                            | March 31,             |       | April 2,            |   | April 3,   |       | FY00 over  |   | FY99 over 
|                                    |                            | 2000                  |       | 1999                |   | 1998       |       | FY99       |   | FY98      
|                                    |                            | (52 weeks)            |       | (52 weeks)          |   | (53 weeks) |       | (52 weeks) |   | (52 weeks)
|                                    |                            |                       |       |                     |   |            |       |            |   |           
|Revenues                            |                            |                       | 100.0 | %                   |   |            | 100.0 | %          |   |            | 100.0 | %    |   |  | 14.0  | %     |   |  | 15.5  | %   
|                                   
|                                   
|                                   
|                                   
|Cost of revenues                    |                            |                       | 87.4  | %                   |   |            | 85.5  | %          |   |            | 85.3  | %    |   |  | 16.5  | %     |   |  | 15.7  | %   
|                                    |                            |                       |       |                     |   |            |       |            |   |            |       |      |   |  |       |       |   |  |       |     
|                                    | Gross profit               |                       |       | 12.6                | % |            |       | 14.5       | % |            |       | 14.7 | % |  |       | -0.8  | % |  |       | 14.1 | %
|                                   
|                                   
|                                   
|                                   
|Marketing expenses                  |                            |                       | 1.2   | %                   |   |            | 1.3   | %          |   |            | 1.3   | %    |   |  | 10.1  | %     |   |  | 14.9  | %   
|                                   
|                                   
|                                   
|                                   
|General and administrative expenses |                            |                       | 5.9   | %                   |   |            | 6.1   | %          |   |            | 6.3   | %    |   |  | 10.9  | %     |   |  | 10.7  | %   
|                                    |                            |                       |       |                     |   |            |       |            |   |            |       |      |   |  |       |       |   |  |       |     
|                                    | Operating income           |                       |       | 5.5                 | % |            |       | 7.2        | % |            |       | 7.1  | % |  |       | -12.7 | % |  |       | 17.0 | %
|                                   
|                                   
|                                   
|                                   
|Interest expense                    |                            |                       | 0.3   | %                   |   |            | 0.3   | %          |   |            | 0.3   | %    |   |  | 37.2  | %     |   |  | 9.0   | %   
|                                   
|                                   
|                                   
|                                   
|Interest (income)                   |                            |                       | -0.1  | %                   |   |            | -0.2  | %          |   |            | -0.2  | %    |   |  | -34.6 | %     |   |  | 6.3   | %   
|                                   
|                                   
|                                   
|                                   
|Other (income), net                 |                            |                       | -0.1  | %                   |   |            | -0.1  | %          |   |            | -0.0  | %    |   |  | -1.4  | %     |   |  | 258.3 | %   
|                                   
|                                   
|                                   
|                                   
|                                    | Income before income taxes |                       |       | 5.4                 | % |            |       | 7.3        | % |            |       | 7.1  | % |  |       | -15.1 | % |  |       | 18.1 | %
|                                    |                            |                       |       |                     |   |            |       |            |   |            |       |      |   |  |       |       |   |  |       |     
|Income tax provision                |                            |                       | 2.0   | %                   |   |            | 2.7   | %          |   |            | 2.6   | %    |   |  | -15.2 | %     |   |  | 19.5  | %   
|                                    |                            |                       |       |                     |   |            |       |            |   |            |       |      |   |  |       |       |   |  |       |     
|                                    | Net income                 |                       |       | 3.4                 | % |            |       | 4.5        | % |            |       | 4.4  | % |  |       | -15.1 | % |  |       | 17.3 | %
|                                    |                            |                       |       |                     |   |            |       |            |   |            |       |      |   |  |       |       |   |  |       |     

Fiscal 2000 Compared to Fiscal 1999.Revenues
 increased to $128.7 million in fiscal 2000 (52 weeks),
 from $113.0 million in fiscal 1999 (52 weeks), a 14.0%
 increase. Centers added during fiscal 2000 and a full year
impact of centers opened in fiscal 1999 attributed to a 14.2%
increase. An additional an increase of 1.8%, or $2.1 million
 came from comparable center revenue growth (revenues from
centers operating during all of fiscal 2000 and fiscal 1999).
However, these increases were offset by 2.3% from centers closed
in fiscal 2000. The growth in comparable center revenues resulted
 from increases in tuition rates, slightly offset by decreased
utilization.

Gross profit decreased to $16.3 million in fiscal 2000 from
$16.4 million in fiscal 1999, a decrease of 0.8%. As a
percentage of revenues, gross profit decreased to 12.6% in fiscal
 2000 from 14.5% in fiscal 1999. The decrease in margin was due
to several factors including, certain regional markets falling
below enrollment expectations, cost of labor increases,
impairment charges and the addition of new centers which
experienced initial start up losses early in their operations.

Marketing expenses increased to $1.6 million in fiscal 2000
from $1.5 million in fiscal 1999, a 10.1% increase. The
increase was primarily due to the additional marketing expenses
relating to the opening or acquisition of 38 new centers in
fiscal 2000 as well as a full year of expense for the 30 new
centers opened or acquired in fiscal 1999. As a percentage of
revenues, however, marketing expenses decreased to 1.2% in fiscal
 2000 from 1.3% in 1999, due primarily to operating leverage
provided by higher revenues.

16



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##### Table of Contents



General and administrative expenses increased to
$7.6 million in fiscal 2000, from $6.9 million in 1999,
 a 10.9% increase. As a percentage of revenues, however, general
and administrative expenses decreased to 5.9% in fiscal 2000 from
 6.1% in fiscal 1999, due primarily to operating leverage
provided by higher revenues.

Interest expense increased to $0.4 million in fiscal 2000
from $0.3 million in fiscal 1999, primarily due to interest paid
on funds borrowed to repurchase shares of the Companys
common stock. As a percentage of revenues, interest expense
remained constant at 0.3% in fiscal 2000 and 1999.

The provision for income tax decreased to $2.6 million (an
effective rate of 37.5%) in fiscal 2000 from $3.1 million
(an effective rate of 37.6%) in fiscal 1999.

As a result of the foregoing changes, the Companys net
income was $4.3 million, or 3.4% of revenues, in fiscal 2000 as
compared to $5.1 million, or 4.5% of revenues, in fiscal
1999.

Fiscal 1999 Compared to Fiscal 1998.Revenues
 increased to $113.0 million in fiscal 1999 (52 weeks),
 from $97.8 million in fiscal 1998 (53 weeks), a 15.5%
increase. Of that increase, 14.7% came from centers added during
fiscal 1999 and from the full year impact of centers opened in
fiscal 1998. The remaining increase came from comparable center
revenue growth (revenues from centers operating during all of
fiscal 1999 and fiscal 1998), partially offset by centers closed
in fiscal 1999. Comparable center revenue growth was 1.2%, or
$1.2 million over last years comparable center
revenues. This growth in comparable center revenues resulted
primarily from increases in tuition rates. The Companys
fiscal 1998 revenues, however, benefited from an additional week
of revenue (2,068,000) as a result of the Companys policy
to utilize a 52-53 week fiscal year ending on the Friday closest
to March 31.

Gross profit increased to $16.4 million in fiscal 1999 from
$14.4 million in fiscal 1998, an increase of 14.1%. As a
percentage of revenues, gross profit decreased to 14.5% in fiscal
 1999 from 14.7% in fiscal 1998. This decrease in margin was
primarily due to the Company continuing to add new centers, which
 early in their operations will experience initial start up
costs, operating losses and/or low margins. In addition, in
fiscal 1998 the Company benefited from an additional week of
gross profit as a result of the Companys policy to utilize
a 52-53 week fiscal year ending on the Friday closest to
March 31.

Marketing expenses increased to $1.5 million in fiscal 1999
from $1.3 million in fiscal 1998, a 14.9% increase. The increase
was primarily due to the additional marketing expenses relating
to the opening or acquisition of 30 new centers in fiscal 1999 as
 well as a full year of expense for the 35 new centers opened or
acquired in fiscal 1998. As a percentage of revenues, however,
marketing expenses remained constant at 1.3% for both fiscal 1999
 and 1998, due primarily to operating leverage provided by higher
 revenues.

General and administrative expenses increased to
$6.9 million in fiscal 1999, from $6.2 million in 1998,
 a 10.7% increase. As a percentage of revenues, however, general
and administrative expenses decreased to 6.1% in fiscal 1999 from
 6.3% in fiscal 1998, due primarily to operating leverage
provided by higher revenues.

Interest expense remained constant at $0.3 million in fiscal
 1999 and 1998. As a percentage of revenues, interest expense
remained constant at 0.3% in fiscal 1999 and 1998.

Other income increased to $0.1 million in fiscal 1999 from
$0.03 million in fiscal 1998. This increase is due to the
Companys early retirement of certain acquisition debt that
resulted in a gain of approximately $82,000.

The provision for income tax increased to $3.1 million (an
effective rate of 37.6%) in fiscal 1999 from $2.6 million
(an effective rate of 37.1%) in fiscal 1998.

As a result of the foregoing changes, the Companys net
income was $5.1 million, or 4.5% of revenues, in fiscal 1999 as
compared to $4.3 million, or 4.4% of revenues, in fiscal
1998.

Liquidity and Capital Resources

The Companys primary cash requirements during fiscal 2000
were repurchase of the Companys common stock, new center
expansion (through development of build-to-suit centers, new
leases and acquisitions), maintenance of existing centers, and
the repayment of debt and related interest. The Companys

17



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##### Table of Contents





Due to the balance sheet impact of the Companys stock
repurchase plan, which was completed during the fiscal year
ending March 31, 2000, the primary lender approved the
appropriate change to the Total Liabilities to Tangible Net
 Worth covenant of the February 1, 1996 credit
agreement. This change, made after the fiscal year 2000 close,
was effective March 31, 2000, concurrent with the end of the
 fiscal year.

During fiscal year 2000, the Company reached a maximum borrowing
of $4,359,000 under the credit agreement, compared to no
borrowings for fiscal year 1999. However, after subsequent
repayments, the balance as of March 31, 2000 was $1,358,000.

During fiscal 2000, $7.5 million of net cash provided by
operations, $5.8 million of existing cash balances,
$3.5 million in unfunded checks (see Item 12 to the
Companys Notes to Consolidated Financial Statements),
$1.4 million of net borrowings on the line of credit and
$0.7 million of proceeds on the sale of assets (primarily
from the sale of land held for disposal), were principally used
for investment in capital expenditures totaling $6.9 million
 (to add 38 centers, make capital improvements to existing
centers, and upgrade information technology systems), the
repurchase of 500,000 shares of common stock ($5.8 million),
 payments on long-term debt ($2.3 million), and the net
funding of reimbursable construction costs related to certain new
 build centers ($1.1 million). The Company incurred
additional seller-financed notes payable of approximately
$6,284,000 during fiscal 2000 relating to the acquisition of
centers.

Expenditures related to information technology systems were part
of managements five-year information system plan to
accommodate the growth of the Company for the next five to ten
years. In connection with this plan, the Company purchased and
capitalized financial software upgrades and related hardware of
approximately $144,000 during fiscal 1998, $163,000 during fiscal
 1999, and $228,000 during fiscal 2000. As of March 31,
2000, the Company has completed the majority of the hardware and
software purchases and future costs related to the information
system plan will primarily consist of training costs, which are
estimated to be approximately $100,000 and will be completed
during the next 12 to 18 months.

Net accounts receivable increased to $4.2 million at
March 31, 2000, from $3.1 million at April 2,
1999. This increase was principally due to increased
participation in federal child care assistance programs and
general growth in revenues. Reimbursable construction costs
increased to $1.3 million at March 31, 2000, from
$0.2 million at April 2, 1999.

The Company from time to time enters into contractual
arrangements with general contractors for the construction of
build-to-suit centers. The Companys Director of Real Estate
 Development and staff oversee the design and construction of the
 new build centers and pay the periodic contractual construction
draws to the general contractor as well as other developmental
costs incurred. The Company then periodically throughout the
construction phase requests reimbursement for the construction
draws and development costs from the property owner/landlord with
 which the Company has a contractual leaseback arrangement. The
Company has various legal remedies available pursuant to
construction agreements to minimize the risk of non-reimbursement
 as well as holding a security interest in the building during
the construction phase.

Accrued wages and payroll taxes increased to $3.5 million at
 March 31, 2000, from $2.8 million at April 2,
1999. This was primarily due to an increase in the payroll costs
of operating 293 centers at the end of fiscal 2000 compared to
270 at the end of fiscal 1999.

During fiscal 2000, the Company opened or acquired 38 centers,
consisting of 4 build-to-suit centers or new leases, with the
balance coming from acquisitions. Typically, the cash required to
 open a build-to-suit center, including capital expenditures for
lease improvements and initial start-up costs, is approximately
$110,000, with each center experiencing additional cash
requirements of approximately $50,000 during its first

18



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##### Table of Contents





During fiscal year 2001, as a result of the Companys
increased focus on improving existing centers and expanding its
OLCA tutorial program, the Company does not plan to open or
acquire as many centers as has been the historical practice.
However, the Company still estimates opening or acquiring at
least 20 child care centers. While the financial impact of
acquired centers will vary with the economic impact and size of
each transaction, the Companys build-to-suit cash
requirements per center should not change substantially from
prior years. Additionally, the Company plans to continue to
expand its OLCA tutorial programs and estimates opening 10 to 15
new OLCA locations during fiscal year 2001. The Companys
estimated total cash requirements for center expansion, expansion
 of the OLCA programs, and ongoing maintenance of existing
centers should approximate $7.2 million in fiscal 2001. An
acquisition of a larger multi-unit operator could increase these
cash requirements.

New Accounting Pronouncements and Reclassifications

The Financial Accounting Standards Board (FASB) has
recently issued two new accounting pronouncements. SFAS
No. 133, issued in June 1998 regarding the
Accounting for Derivative Instruments and Hedging
Activities, requires that all derivative instruments be
recorded on the balance sheet at fair value. In June 1999,
FASB issued SFAS No. 137, Accounting for Derivative
Instruments and Hedging Activities  Deferral of the
Effective Date of FASB Statement No. 133, which defers
 the effective adoption date of the SFAS No. 133 to
January 1, 2001. The Company does not believe that it will
be affected by either pronouncement.

Year 2000 Date Conversion

The Year 2000 Issue is the result of computer programs that were
written using two digits rather than four to define the
applicable year. If the Companys computer programs with
date-sensitive functions were not Year 2000 compliant, they may
have recognized a date using 00 as the Year 1900,
rather than the Year 2000. This issue could have resulted in a
system failure or miscalculations causing disruptions of
operations, including, among other things, the temporary
inability to process transactions.

During 1999, the Company identified and contacted its
subsidy/funding providers, major vendors and financial service
organizations to determine the extent to which the Companys
 operations and interface systems would have been vulnerable if
those third parties failed to remedy their Year 2000
Issues. The Company has not experienced any disruptions
contingent upon the Year 2000 issue, nor does it foresee any, but
 will continue to monitor these items for any irregularities that
 may occur.

Effect of Inflation

The Company does not believe that general inflation has had an
overall material effect on the results of its operations over the
 past three fiscal years.

Item 8.  Financial Statements and Supplementary Data

The financial statements and supplementary data required by this
Item are included in the Consolidated Financial Statements set
forth on pages F-1 through F-14, attached hereto and found
following the signature page of this Report.

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

None.

19



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##### Table of Contents








PART III


Item 10.  Directors and Executive Officers of the
Registrant

Set forth below is certain information with respect to the
executive officers of the Company.

|                    |  |     |    |          |  |                                                                
|------------------- |  | --- | -- | -------- |  | ---------------------------------------------------------------
|Name                |  | Age |    | Position
|                    |  |     |    |         
|Harold A. Lewis     |  |     | 54 |          |  | President and Chief Executive Officer                          
|                   
|                   
|                   
|                   
|Michael M. Yeager   |  |     | 41 |          |  | Vice President, Chief Financial Officer Secretary and Treasurer
|                   
|                   
|                   
|                   
|Cherie M. King      |  |     | 43 |          |  | Vice President  Central Region                                
|                   
|                   
|                   
|                   
|Deborah D. Ludwig   |  |     | 46 |          |  | Vice President  Eastern Region                                
|                   
|                   
|                   
|                   
|Kathryn C. Peel     |  |     | 50 |          |  | Vice President  Human Resources                               
|                   
|                   
|                   
|                   
|William H. Van Huis |  |     | 43 |          |  | Vice President  Marketing                                     
|                   
|                   
|                   
|                   
|Taylor V. Ward      |  |     | 46 |          |  | Vice President  Western Region                                

Six of the executive officers of the Company have held the
positions with the Company set forth above since the
Companys incorporation in November 1995. Kathryn C.
Peel was appointed as an executive officer in August 1997.
Cherie M. King was appointed as an executive officer in
January 1999. In addition, each has served in the following
positions:

Harold A. Lewishas been the President and Chief Executive
 Officer and a director of Childtime Childcare, Inc. since
August 1991. From 1990 to 1991, he was Chief Operating
Officer International Operations of U.S. Travel Systems, Inc., a
national, multi-unit travel company headquartered in Rockville,
Maryland. From 1989 to 1990, Mr. Lewis was Chief Operating
Officer of U.S. Travel Systems, Inc. Mr. Lewis
previous experience includes 14 years with The Dun &
Bradstreet Corporation in New York, including as President of one
 of its subsidiaries, Thomas Cook Travel USA, a national
multi-unit travel company. Mr. Lewis serves on the
Deans Executive Council at the Frank G. Zarb School of
Business at Hofstra University and serves as a director of Caproc
 L.L.C., a firm specializing in the acquisition, development, and
 management of real estate. Mr. Lewis holds a BBA from
Hofstra University and an MBA from New York University.

Michael M. Yeagerhas served as Chief Financial Officer,
Secretary and Treasurer of Childtime Childcare, Inc. since
April 1991. From 1987 until he joined the Company,
Mr. Yeager held various executive level positions, including
 Chief Financial Officer and Director of International Operations
 and Regional Controller, for Dominos Pizza Distribution
Corporation, located in Ann Arbor, Michigan, a multi-unit food
manufacturer and distributor. Mr. Yeager, a certified public
accountant, has a BA from Albion College.

Cherie M. Kinghas been the Vice PresidentCentral
Region of Childtime Childcare, Inc. since January 1999.
Ms. King served as an Area Manager for Childtime from
August 1993 to her present promotion where she covered areas
 from Oklahoma to Texas and was instrumental in growing the two
states from 12 centers to 54 centers. During her 22year
career in child care, she has also worked as a Director of
several centers achieving NAEYC Accreditation, as a District
Manager for Kids At Work where she developed and opened corporate
 child care centers, and as a District Manager for KinderCare
Learning Centers in Arizona. Ms. Kings educational
background is in business and sociology.

Deborah D. Ludwighas been the Vice President-Eastern
Region of Childtime Childcare, Inc. since June 1992 and
served as Executive Vice President and General Manager of
Childtime Childcare, Inc. from July 1990 to June 1992.
Ms. Ludwig also served as a director of Childtime Childcare, Inc.
 from July 1990 until November 1995. She has a 25-year
career in child care with the Company and its predecessor, GCC.
Ms. Ludwig holds a BA from the University of Michigan.

20



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##### Table of Contents



Kathryn C. Peelhas been the Vice President of Human
Resources of Childtime Childcare, Inc. since April 1997. She
 joined Childtime in May 1993 as Director of Human
Resources. From 1989 to 1993, Ms. Peel was Director of
Corporate Human Resource Services for Mercy Health Services in
Michigan. From 1984 to 1989 she was Assistant Administrator at
Egleston Hospital for Children in Atlanta, Georgia. She has
20 years experience in human resources and communications.
She holds a BS in Journalism from The George Washington
University and an MS in Human Resources from Troy State
University.

William H. Van Huishas been the Vice President of
Marketing of Childtime Childcare, Inc. since November 1990.
In addition to supervising the marketing and advertising of the
Companys centers, Mr. Van Huis is also responsible for
 developing employer-sponsored child care locations. From 1986 to
 1990, Mr. Van Huis was National Marketing Manager for
Ziebart International Corporation/ TKD North America, an
automotive aftermarket firm located in Troy, Michigan. He holds a
 BA from Michigan State University.

Taylor V. Wardhas been the Vice President-Western Region
of Childtime Childcare, Inc. since June 1992. From 1982
until joining the Company, Ms. Ward served as a District
Manager for KinderCare Learning Centers in the Texas, California
and Nevada areas. Ms. Ward holds degrees in Accounting from
Wichita State University and in Early Childhood Development from
Southwest Texas State University, and she has substantially
completed her course work for a Masters of Science in
Communications from Southwest Texas State University.

Additional information required by this Item will be contained in
 the 2000 Proxy Statement of the Company under the caption,
Election of Directors, and is incorporated herein by
reference.

Item 11.  Executive Compensation

Information required by this Item will be contained in the 2000
Proxy Statement of the Company under the captions,
Executive Compensation, Compensation Committee
Interlocks and Insider Participation, Committees of
the Board of Directors and Director
Compensation, and is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial
Owners and Management

Information required by this Item will be contained in the 2000
Proxy Statement of the Company under the captions, Election
 of Directors and Principal Shareholders, and
is incorporated herein by reference.

Item 13.  Certain Relationships and Related
Transactions

Information required by this Item will be contained in the 2000
Proxy Statement under the caption, Compensation Committee
Interlocks and Insider Participation, and is incorporated
herein by reference.

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PART IV


Item 14.  Exhibits, Financial Statements, Schedule,
and Reports on Form 8-K

(a)  1.  Financial Statements



| |                                                                         
| | ------------------------------------------------------------------------
| | The financial statements filed with this Report are listed on
	page F-1.
|
| | 2.  Financial Statements Schedule                                       

The financial statement schedule filed with this Report is listed
 on page F-1. Other financial statement schedules, for which
 provision is made in the applicable accounting regulations of
the Securities and Exchange Commission, are not required under
the related instructions or are inapplicable and, therefore, have
 been omitted.



| |             
| | ------------
| | 3.  Exhibits

The exhibits filed with this Report are listed on the
Exhibit Index on pages E-1 through E-2.

(b)  Reports on Form 8-K

No current Reports on Form 8-K were filed by the Company
during the last quarter of the fiscal year ended March 31,
2000.

22



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##### Table of Contents








SIGNATURES


Pursuant to the requirements of Section 13 of the Securities
 Exchange Act of 1934, the registrant has caused this Report to
be signed on its behalf by the undersigned, thereunto duly
authorized, on June 13, 2000.



| |                                 
| | --------------------------------
| | CHILDTIME LEARNING CENTERS, INC.

Dated: June 13, 2000

| |     |                    
| | --- | -------------------
| | By: | /s/ HAROLD A. LEWIS

| |                                      
| | -------------------------------------
| |                                      
| | Harold A. Lewis,                     
| | President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated on June 13, 2000.

|                                             |  |                                                                                         
|-------------------------------------------- |  | ----------------------------------------------------------------------------------------
|Signature                                    |  | Title                                                                                   
|                                             |  |                                                                                         
|/s/ HAROLD A. LEWISHarold A. Lewis           |  | President, Chief Executive Officer and Director
	(Principal Executive Officer)          
|/s/ MICHAEL M. YEAGERMichael M. Yeager       |  | Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)
|/s/ MILTON H. DRESNERMilton H. Dresner       |  | Director                                                                                
|/s/ JASON K. FELDJason K. Feld               |  | Director                                                                                
|/s/ JAMES W. GEISZJames W. Geisz             |  | Director                                                                                
|/s/ BENJAMIN R. JACOBSONBenjamin R. Jacobson |  | Director                                                                                
|/s/ GEORGE A. KELLNERGeorge A. Kellner       |  | Director                                                                                
|/s/ LEONARD C. TYLKALeonard C. Tylka         |  | Director                                                                                

23



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES






INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


AND FINANCIAL STATEMENT SCHEDULE


The following consolidated financial statements of Childtime
Learning Centers, Inc. are referred to in Item 8:

|                                                                                                                |                                                                                              |       |     |            | 
|--------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ----- | --- | ---------- | 
|                                                                                                                |                                                                                              | Pages
|                                                                                                                |                                                                                              |      
|Report of Independent Accountants                                                                               |                                                                                              |       | F-2 |           
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|Financial Statements:                                                                                           |                                                                                              |       |     |           
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                                | Consolidated Balance Sheet                                                                   |       |     | F-3        | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                                | Consolidated Statement of Income                                                             |       |     | F-4        | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                                | Consolidated Statement of Changes in Common Stock Purchase
	Warrant and Shareholders Equity |       |     | F-5        | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                                | Consolidated Statement of Cash Flows                                                         |       |     | F-6        | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                                | Notes to Consolidated Financial Statements                                                   |       |     | F-7 - F-15 | 
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|The following consolidated financial statement schedule of Childtime Learning Centers, Inc. is included herein:
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                                | Schedule II  Valuation and qualifying accounts                                              |       |     | S-1        | 

All other schedules for which provision is made in the applicable
 accounting regulations of the Securities and Exchange Commission
 are not required under the related instructions or are
inapplicable, and therefore have been omitted.

F-1



---



##### Table of Contents








Report of Independent Accountants


To the Board of Directors and Shareholders of



In our opinion, the consolidated financial statements listed in
the index appearing under Item 14(a)(1) on page 22 present
fairly, in all material respects, the financial position of
Childtime Learning Centers, Inc. and Subsidiaries (the
Company) at March 31, 2000 and April 2,
1999, and the results of their operations and their cash flows
for each of the three fiscal years in the period ended
March 31, 2000 in conformity with accounting principles
generally accepted in the United States. In addition, in our
opinion, the financial statement schedule listed in the index
appearing under Item 14(a)(2) on page 22, these
financial statements and financial statement schedule are the
responsibility of the Companys management; our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which
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, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan



F-2



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##### Table of Contents








CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEET

|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |            |             |            | 
|------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------------ | ---------- | ----------- | ---------- | ---------- | ---------- | ----------- | ---------- | 
|                                                                                                             |                                                                                                   | March 31,                                      |                                            | April 2,  
|                                                                                                             |                                                                                                   | 2000                                           |                                            | 1999      
|                                                                                                             |                                                                                                   |                                                |                                            |           
|ASSETS                                                                                                       |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Current assets:                                                                                              |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Cash and cash equivalents                                                                         |                                                | $                                          | 2,704,465  |             |            | $          | 5,843,329  |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Accounts receivable, less allowance for doubtful accounts of
	$295,000 and $255,000, respectively |                                                |                                            | 4,216,880  |             |            |            | 3,126,072  |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Reimbursable construction costs                                                                   |                                                |                                            | 1,279,348  |             |            |            | 158,249    |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Prepaid expenses and other                                                                        |                                                |                                            | 2,547,200  |             |            |            | 2,198,272  |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Deferred income taxes                                                                             |                                                |                                            | 1,437,000  |             |            |            | 1,100,000  |            
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                             |                                                                                                   |                                                | Total current assets                       |            |             | 12,184,893 |            |            |             | 12,425,922 | 
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|Land, buildings and equipment:                                                                               |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Land                                                                                              |                                                |                                            | 9,930,239  |             |            |            | 9,935,000  |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Buildings                                                                                         |                                                |                                            | 19,232,936 |             |            |            | 19,010,848 |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Vehicles, furniture and equipment                                                                 |                                                |                                            | 11,954,127 |             |            |            | 10,379,719 |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Leasehold improvements                                                                            |                                                |                                            | 8,072,998  |             |            |            | 6,766,398  |            
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                             |                                                                                                   |                                                | 49,190,300                                 |            |             |            | 46,091,965 |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                                                                                                   | Less accumulated depreciation and amortization |                                            |            | (12,410,551 | )          |            |            | (10,718,523 | )         
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                             |                                                                                                   |                                                | 36,779,749                                 |            |             |            | 35,373,442 |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Land held for disposal                                                                            |                                                |                                            | 65,600     |             |            |            | 512,450    |            
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                             |                                                                                                   |                                                | 36,845,349                                 |            |             |            | 35,885,892 |           
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|Other noncurrent assets:                                                                                     |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Intangible assets, net                                                                            |                                                |                                            | 21,131,029 |             |            |            | 13,350,826 |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Refundable deposits and other                                                                     |                                                |                                            | 1,012,254  |             |            |            | 948,067    |            
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                             |                                                                                                   |                                                | Total assets                               |            | $           | 71,173,525 |            |            | $           | 62,610,707 | 
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|LIABILITIES                                                                                                  |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Current liabilities:                                                                                         |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Revolving line of credit                                                                          |                                                | $                                          | 1,357,800  |             |            | $          |           |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Current maturities of long-term debt                                                              |                                                |                                            | 2,413,063  |             |            |            | 746,502    |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Accounts payable                                                                                  |                                                |                                            | 5,220,182  |             |            |            | 1,607,573  |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Accrued wages and payroll taxes                                                                   |                                                |                                            | 3,477,878  |             |            |            | 2,753,769  |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Accrued vacation                                                                                  |                                                |                                            | 1,214,755  |             |            |            | 971,804    |            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             | Other current liabilities                                                                         |                                                |                                            | 3,473,891  |             |            |            | 3,647,344  |            
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                             |                                                                                                   |                                                | Total current liabilities                  |            |             | 17,157,569 |            |            |             | 9,726,992  | 
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Long-term debt                                                                                               |                                                                                                   |                                                | 4,214,146                                  |            |             |            | 1,891,857  |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Deferred rent liability                                                                                      |                                                                                                   |                                                | 1,129,153                                  |            |             |            | 1,178,617  |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Deferred income taxes                                                                                        |                                                                                                   |                                                | 3,734,000                                  |            |             |            | 3,406,000  |           
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                             |                                                                                                   |                                                | Total liabilities                          |            |             | 26,234,868 |            |            |             | 16,203,466 | 
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|SHAREHOLDERS EQUITY                                                                                         |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Common stock, 10,000,000 shares authorized, no par value;
	4,931,655 and 5,431,655 outstanding, respectively |                                                                                                   |                                                | 27,996,180                                 |            |             |            | 30,836,180 |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Preferred stock, 1,000,000 shares authorized, no par value; no
	shares issued or outstanding                 |                                                                                                   |                                                |                                           |            |             |            |           |           
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Retained earnings                                                                                            |                                                                                                   |                                                | 16,942,477                                 |            |             |            | 15,571,061 |           
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                             |                                                                                                   |                                                | Total shareholders equity                 |            |             | 44,938,657 |            |            |             | 46,407,241 | 
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           
|                                                                                                             |                                                                                                   |                                                | Total liabilities and shareholders equity |            | $           | 71,173,525 |            |            | $           | 62,610,707 | 
|                                                                                                             |                                                                                                   |                                                |                                            |            |             |            |            |           

The accompanying notes are an integral part of the consolidated
financial statements.

F-3



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES






CONSOLIDATED STATEMENT OF INCOME


|                                    |                            |                    |             |            |  |          |             |            |  |   |            |            | 
|----------------------------------- | -------------------------- | ------------------ | ----------- | ---------- |  | -------- | ----------- | ---------- |  | - | ---------- | ---------- | 
|                                    |                            |                   
|                                    |                            | Fiscal Years Ended
|                                    |                            |                   
|                                    |                            | March 31,          |             | April 2,   |  | April 3,
|                                    |                            | 2000               |             | 1999       |  | 1998    
|                                    |                            |                    |             |            |  |         
|Revenues                            |                            | $                  | 128,736,444 |            |  | $        | 112,962,784 |            |  | $ | 97,827,659 |           
|                                   
|                                   
|                                   
|                                   
|Cost of revenues                    |                            |                    | 112,454,360 |            |  |          | 96,541,248  |            |  |   | 83,431,931 |           
|                                    |                            |                    |             |            |  |          |             |            |  |   |            |           
|                                    | Gross profit               |                    |             | 16,282,084 |  |          |             | 16,421,536 |  |   |            | 14,395,728 | 
|                                   
|                                   
|                                   
|                                   
|Marketing expenses                  |                            |                    | 1,601,082   |            |  |          | 1,454,358   |            |  |   | 1,265,356  |           
|                                   
|                                   
|                                   
|                                   
|General and administrative expenses |                            |                    | 7,598,437   |            |  |          | 6,853,303   |            |  |   | 6,192,608  |           
|                                    |                            |                    |             |            |  |          |             |            |  |   |            |           
|                                    | Operating income           |                    |             | 7,082,565  |  |          |             | 8,113,875  |  |   |            | 6,937,764  | 
|                                   
|                                   
|                                   
|                                   
|Interest expense                    |                            |                    | 428,476     |            |  |          | 312,191     |            |  |   | 286,514    |           
|                                   
|                                   
|                                   
|                                   
|Interest income                     |                            |                    | (157,389    | )          |  |          | (240,644    | )          |  |   | (226,375   | )         
|                                   
|                                   
|                                   
|                                   
|Other income, net                   |                            |                    | (117,339    | )          |  |          | (119,032    | )          |  |   | (33,217    | )         
|                                    |                            |                    |             |            |  |          |             |            |  |   |            |           
|                                    | Income before income taxes |                    |             | 6,928,817  |  |          |             | 8,161,360  |  |   |            | 6,910,842  | 
|                                   
|                                   
|                                   
|                                   
|Income tax provision                |                            |                    | 2,600,000   |            |  |          | 3,065,000   |            |  |   | 2,565,000  |           
|                                    |                            |                    |             |            |  |          |             |            |  |   |            |           
|                                    | Net income                 |                    | $           | 4,328,817  |  |          | $           | 5,096,360  |  |   | $          | 4,345,842  | 
|                                    |                            |                    |             |            |  |          |             |            |  |   |            |           
|Earnings per share:                 |                            |                    |             |            |  |          |             |            |  |   |            |           
|                                   
|                                   
|                                   
|                                   
|                                    | Basic                      |                    | $           | 0.82       |  |          | $           | 0.94       |  |   | $          | 0.80       | 
|                                    |                            |                    |             |            |  |          |             |            |  |   |            |           
|                                    | Diluted                    |                    | $           | 0.82       |  |          | $           | 0.93       |  |   | $          | 0.80       | 
|                                    |                            |                    |             |            |  |          |             |            |  |   |            |           

The accompanying notes are an integral part of the consolidated
financial statements.

F-4



---



##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES






CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCK PURCHASE
WARRANT


AND SHAREHOLDERS EQUITY


|                                       |  |          |            |              |  |                   |           |            |  |          |            |       |  |   |        |   |  |   |            |   |  |   |            |  
|-------------------------------------- |  | -------- | ---------- | ------------ |  | ----------------- | --------- | ---------- |  | -------- | ---------- | ----- |  | - | ------ | - |  | - | ---------- | - |  | - | ---------- | -
|                                       |  |          |            |             
|                                       |  |          |            | Sha          |  | reholders Equity
|                                       |  | Common   |            |              |  |                  
|                                       |  | Stock    |            | Common Stock |  |                  
|                                       |  | Purchase |            |              |  | Subscriptions     |           | Retained   |  |         
|                                       |  | Warrant  |            | Shares       |  | Amount            |           | Receivable |  | Earnings |            | Total
|                                       |  |          |            |              |  |                   |           |            |  |          |            |      
|                                      
|                                      
|                                      
|                                      
|Balances, March 28, 1997               |  |          | 1,440,000  |              |  |                   | 5,227,811 |            |  | $        | 29,363,816 |       |  | $ | (3,441 | ) |  | $ | 6,128,859  |   |  | $ | 35,489,234 |  
|                                      
|                                      
|                                      
|                                      
|Collection of subscriptions receivable |  |          |           |              |  |                   |          |            |  |          |           |       |  |   | 3,441  |   |  |   |           |   |  |   | 3,441      |  
|                                      
|                                      
|                                      
|                                      
|Exercise of purchase warrant           |  |          | (1,440,000 | )            |  |                   | 201,511   |            |  |          | 1,448,061  |       |  |   |       |   |  |   |           |   |  |   | 1,448,061  |  
|                                      
|                                      
|                                      
|                                      
|Net income                             |  |          |           |              |  |                   |          |            |  |          |           |       |  |   |       |   |  |   | 4,345,842  |   |  |   | 4,345,842  |  
|                                       |  |          |            |              |  |                   |           |            |  |          |            |       |  |   |        |   |  |   |            |   |  |   |            |  
|Balances, April 3, 1998                |  |          | 0          |              |  |                   | 5,429,322 |            |  |          | 30,811,877 |       |  |   | 0      |   |  |   | 10,474,701 |   |  |   | 41,286,578 |  
|                                      
|                                      
|                                      
|                                      
|Shares issued under stock plans        |  |          |            |              |  |                   | 2,333     |            |  |          | 24,303     |       |  |   |       |   |  |   |           |   |  |   | 24,303     |  
|                                      
|                                      
|                                      
|                                      
|Net income                             |  |          |           |              |  |                   |          |            |  |          |           |       |  |   |       |   |  |   | 5,096,360  |   |  |   | 5,096,360  |  
|                                       |  |          |            |              |  |                   |           |            |  |          |            |       |  |   |        |   |  |   |            |   |  |   |            |  
|Balances, April 2, 1999                |  |          | 0          |              |  |                   | 5,431,655 |            |  |          | 30,836,180 |       |  |   | 0      |   |  |   | 15,571,061 |   |  |   | 46,407,241 |  
|                                      
|                                      
|                                      
|                                      
|Repurchase of common stock             |  |          |            |              |  |                   | 500,000   |            |  |          | (2,840,000 | )     |  |   |       |   |  |   | (2,957,401 | ) |  |   | (5,797,401 | )
|                                      
|                                      
|                                      
|                                      
|Net income                             |  |          |           |              |  |                   |          |            |  |          |           |       |  |   |       |   |  |   | 4,328,817  |   |  |   | 4,328,817  |  
|                                       |  |          |            |              |  |                   |           |            |  |          |            |       |  |   |        |   |  |   |            |   |  |   |            |  
|Balances, March 31, 2000               |  | $        | 0          |              |  |                   | 4,931,655 |            |  | $        | 27,996,180 |       |  | $ | 0      |   |  | $ | 16,942,477 |   |  | $ | 44,938,657 |  
|                                       |  |          |            |              |  |                   |           |            |  |          |            |       |  |   |        |   |  |   |            |   |  |   |            |  

The accompanying notes are an integral part of the consolidated
financial statements.

F-5



---



##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES






CONSOLIDATED STATEMENT OF CASH FLOWS


|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |            |            |           |  
|-------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------- | ---------- | ---------- | ---------- | --------- | ---------- | ---------- | -------- | --------- | ---------- | ---------- | --------- | -
|                                             |                                                                                    |                                                                                                                         
|                                             |                                                                                    | Fiscal Years Ended                                                                                                      
|                                             |                                                                                    |                                                                                                                         
|                                             |                                                                                    | March 31,                                                                                                                |                                                           | April 2,   |            | April 3,  
|                                             |                                                                                    | 2000                                                                                                                     |                                                           | 1999       |            | 1998      
|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |           
|Cash flows from operating activities:        |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|                                            
|                                            
|                                            
|                                            
|                                             | Net income                                                                         |                                                                                                                          | $                                                         | 4,328,817  |            |            | $         | 5,096,360  |            |          | $         | 4,345,842  |           
|                                            
|                                            
|                                            
|                                            
|                                             | Adjustments to reconcile net income to net cash provided by
	operating activities: |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |            |           
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                    | Depreciation and amortization                                                                                            |                                                           |            | 3,423,233  |            |           |            | 2,861,480  |          |           |            | 2,393,689  |          
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                    | Deferred rent liability                                                                                                  |                                                           |            | (49,464    | )          |           |            | (96,383    | )        |           |            | 400,000    |          
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                    | Deferred income taxes                                                                                                    |                                                           |            | (9,000     | )          |           |            | (68,000    | )        |           |            | (220,000   | )        
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                    | (Gain) losses and provisions for losses on land, buildings,
	equipment, and intangible assets and land held for disposal |                                                           |            | 294,583    |            |           |            | (11,912    | )        |           |            | (8,454     | )        
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                    | Changes in assets and liabilities providing (consuming) cash:                                                            |                                                           |            |            |            |           |            |            |          |           |            |            |          
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                    |                                                                                                                          | Accounts receivable                                       |            |            | (1,090,808 | )         |            |            | (640,261 | )         |            |            | (544,752  | )
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                    |                                                                                                                          | Prepaid expenses and other assets                         |            |            | (348,928   | )         |            |            | (344,460 | )         |            |            | (441,539  | )
|                                            
|                                            
|                                            
|                                            
|                                             |                                                                                    |                                                                                                                          | Accounts payable, accruals, and other current Liabilities |            |            | 949,709    |           |            |            | (195,031 | )         |            |            | 2,463,370 |  
|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|                                             |                                                                                    | Net cash provided by operating activities                                                                                |                                                           |            | 7,498,142  |            |           |            | 6,601,793  |          |           |            | 8,388,156  |          
|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|Cash flows from investing activities:        |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|                                            
|                                            
|                                            
|                                            
|                                             | Expenditures for land, buildings and equipment                                     |                                                                                                                          |                                                           | (3,663,984 | )          |            |           | (3,244,799 | )          |          |           | (2,464,472 | )         
|                                            
|                                            
|                                            
|                                            
|                                             | Expenditures for reimbursable construction costs                                   |                                                                                                                          |                                                           | (2,659,854 | )          |            |           | (4,663,361 | )          |          |           | (4,174,674 | )         
|                                            
|                                            
|                                            
|                                            
|                                             | Acquisition of intangible assets                                                   |                                                                                                                          |                                                           | (3,234,672 | )          |            |           | (2,712,159 | )          |          |           | (2,312,408 | )         
|                                            
|                                            
|                                            
|                                            
|                                             | Proceeds from sales of land, buildings, equipment and intangible
	assets           |                                                                                                                          |                                                           | 724,683    |            |            |           | 1,103,263  |            |          |           | 118,717    |           
|                                            
|                                            
|                                            
|                                            
|                                             | Payments for refundable deposits and other assets                                  |                                                                                                                          |                                                           | (64,187    | )          |            |           | (236,921   | )          |          |           | (120,674   | )         
|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|                                             |                                                                                    | Net cash used in investing activities                                                                                    |                                                           |            | (8,898,014 | )          |           |            | (9,753,977 | )        |           |            | (8,953,511 | )        
|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|Cash flows from financing activities:        |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|                                            
|                                            
|                                            
|                                            
|                                             | Net borrowings on revolving line of credit                                         |                                                                                                                          |                                                           | 1,357,800  |            |            |           |           |            |          |           |           |           
|                                            
|                                            
|                                            
|                                            
|                                             | Changes in book overdraft                                                          |                                                                                                                          |                                                           | 3,456,507  |            |            |           |           |            |          |           |           |           
|                                            
|                                            
|                                            
|                                            
|                                             | Payments on long-term debt                                                         |                                                                                                                          |                                                           | (2,294,653 | )          |            |           | (2,005,712 | )          |          |           | (897,231   | )         
|                                            
|                                            
|                                            
|                                            
|                                             | Repayments of reimbursable construction costs                                      |                                                                                                                          |                                                           | 1,538,755  |            |            |           | 5,435,800  |            |          |           | 3,259,032  |           
|                                            
|                                            
|                                            
|                                            
|                                             | Repurchase of common stock                                                         |                                                                                                                          |                                                           | (5,797,401 | )          |            |           |           |            |          |           |           |           
|                                            
|                                            
|                                            
|                                            
|                                             | Issuance of shares, net of subscriptions receivable                                |                                                                                                                          |                                                           |           |            |            |           | 24,303     |            |          |           | 11,502     |           
|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|                                             |                                                                                    | Net cash provided by financing activities                                                                                |                                                           |            | (1,738,992 | )          |           |            | 3,454,391  |          |           |            | 2,373,303  |          
|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|Net increase in cash and cash equivalents    |                                                                                    |                                                                                                                          | (3,138,864                                                | )          |            |            | 302,207   |            |            |          | 1,807,948 |           
|                                            
|                                            
|                                            
|                                            
|Cash and cash equivalents, beginning of year |                                                                                    |                                                                                                                          | 5,843,329                                                 |            |            |            | 5,541,122 |            |            |          | 3,733,174 |           
|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           
|Cash and cash equivalents, end of year       |                                                                                    | $                                                                                                                        | 2,704,465                                                 |            |            | $          | 5,843,329 |            |            | $        | 5,541,122 |           
|                                             |                                                                                    |                                                                                                                          |                                                           |            |            |            |           |            |            |          |           |           

The accompanying notes are an integral part of the consolidated
financial statements.

F-6



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  Principles of Consolidation and Corporate
Organization:

The consolidated financial statements include the accounts of
Childtime Learning Centers, Inc. and its wholly owned
subsidiaries (together referred to as the Company).
All significant intercompany transactions have been eliminated.
The Company began operations in 1967. Childtime Learning Centers,
 Inc. was incorporated on November 2, 1995 and completed its
 initial public offering on February 2, 1996. As of
March 31, 2000, the Company provides for-profit child care
through 293 child care centers located in 23 states and the
District of Columbia, and also operates seven Oxford Learning
Centers, a subsidiary, all located in Michigan.

2.  Summary of Significant Accounting Policies:

a.  Fiscal Year:The Company utilizes a
52-53 week fiscal year (comprised of 13 four-week periods),
ending on the Friday closest to March 31. The fiscal year
ended April 3, 1998 contained 53 weeks, while fiscal
years ended March 31, 2000, and April 2, 1999 contained
 52 weeks.

b.  Land, Buildings and Equipment:Land,
buildings and equipment are recorded at cost. Depreciation is
provided on a straight-line basis over the estimated useful lives
 of the assets (generally 40 years for buildings and between
 3 and 15 years for vehicles, furniture and equipment).
Leasehold improvements are recorded at cost and amortized on a
straight-line basis over the lesser of the estimated useful life
of the leasehold improvement or the life of the lease. Land held
for disposal is carried at its estimated fair value less cost to
sell. Gains and losses on sales and retirements are included in
the determination of the results of operations. Maintenance and
repair costs and preopening costs for new centers are charged to
operating expense in the period incurred.

c.  Deferred Financing Costs:Costs related to
incurring debt are deferred and amortized over the life of the
underlying indebtedness. Accumulated amortization at
March 31, 2000 and April 2, 1999 was $20,660 and
$20,606, respectively. As of March 31, 2000, the costs
related to incurring debt have been fully amortized.

d.  Intangible Assets:Intangible assets
represent principally the unamortized excess of the cost of
acquiring Childtime (by the predecessor of Childtime Learning
Centers, Inc.) and other acquisitions of existing child care
facilities over the fair values of the companies net
tangible assets at the dates of acquisition. The intangible
assets are being amortized using a straight-line method over
various periods, but primarily over 15 years, with such
amortization expense included in cost of revenues. Accumulated
amortization at March 31, 2000 and April 2, 1999 was
$4,469,483 and $3,265,781, respectively.

e.  Impairment of Long-Lived Assets:The
Company periodically assesses the recoverability of the
unamortized cost of acquired assets in excess of fair value based
 on a review of projected undiscounted cash flows of the related
centers. These cash flows are prepared and reviewed by management
 in connection with the Companys annual long-range planning
 process. Once the Company has utilized its resources in order to
 make the center profitable, without current success, and the
unamortized cost of acquired assets are deemed to provide no
future benefit, the Company records an impairment loss for the
entire carrying amount of the non-transferable assets. At
March 31, 2000, the Company recorded an impairment loss of
$231,007 for a loss on intangible assets and $50,884 for a loss
on tangible property. The loss is recorded under the Costs of
revenues caption in the Consolidated Statement of Income.

f.  Income Taxes:The Company provides for
income taxes for the expected future tax consequences of events
that have been included in the financial statements or tax
returns. Deferred tax liabilities and assets are determined based
 on the difference between financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.

g.  Cash and Cash Equivalents:The Company
considers all temporary investments with original maturities of
three months or less at time of purchase to be cash equivalents.

F-7



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)



2.  Summary of Significant Accounting
Policies  (Continued)


h.  Financial Instruments:In managements
 opinion, the carrying values of cash and cash equivalents,
accounts receivable and payable, and accrued liabilities
approximate fair value due to the short-term maturities of these
instruments. The carrying values of long-term debt approximate
fair value based on the current borrowing rates for similar
instruments.

i.  Risk Concentration:Accounts receivable is
the principal financial instrument which subjects the Company to
concentration of credit risk. Concentration of credit risk is
somewhat limited due to the Companys large number,
diversity and dispersion of customers. The Company maintains an
allowance for doubtful accounts based upon the expected
collectibility of accounts receivable.

Revenues from federal child care assistance programs represent a
significant portion of total revenues. For fiscal 2000, 1999 and
1998, federal assistance revenues were approximately $23,300,000
(18 percent), $18,200,000 (16 percent) and $13,200,000
(14 percent), respectively.

In connection with certain build-to-suit centers to be leased,
the Company enters into arrangements, whereby the Company
accumulates costs during the construction process and is then
reimbursed by the developer. The Company has various legal
remedies available pursuant to the construction agreements to
minimize the risk of nonreimbursement. For the years ended
March 31, 2000, April 2, 1999 and April 3, 1998,
the Company financed construction costs of $2,659,854, $4,663,361
 and $4,174,674, respectively. Related repayments received under
reimbursement agreements were $1,538,755, $5,435,800 and
$3,259,032 for the years then ended.

j.  Common Stock Repurchase:During fiscal
2000, the Companys board of directors authorized the
repurchase of up to 500,000 shares of the Companys common
stock. As of March 31, 2000 the Company has purchased all
500,000 shares at a total cost of $5,797,401. The Companys
repurchase of shares is recorded as a charge against common stock
 in an amount equal to the average paid in capital per share,
multiplied by the number of shares repurchased. The excess of the
 aggregate repurchase price over the amount charged against
common stock is charged against retained earnings. During fiscal
2000, $2,957,401 was charged against retained earnings.

k.  Common Stock Purchase Warrant:The common
stock purchase warrant was initially recorded at its estimated
fair value at the date of issuance, July 9, 1990. The
Companys policy was to record changes in the estimated fair
 value of the common stock purchase warrant only to the extent it
 exceeded the carrying value for the periods in which the former
lender had the right to put the common stock purchase
 warrant to the Company. During fiscal 1998, the former lender
exercised its right to require the Company to convert the warrant
 to 201,511 common shares represented by this warrant. In
addition, the former lender has the right to require the Company
to register these shares under the Securities Exchange Act of
1934.

l.  Common Stock and Earnings Per Share:All
earnings per share amounts have been presented, and where
necessary, restated to conform with the requirements of SFAS 128,
 Earnings Per Share. The common stock purchase
warrant (201,511 shares) is treated as a common stock equivalent
prior to exercise in 1998 and, accordingly, has been included in
common shares outstanding for all periods presented. A
reconciliation of the denominators used in the basic and diluted
EPS calculation follows:

|             |                                                       |                                                  |  |           |           |          |  |           |           |  |  |           |           | 
|------------ | ----------------------------------------------------- | ------------------------------------------------ |  | --------- | --------- | -------- |  | --------- | --------- |  |  | --------- | --------- | 
|             |                                                       | March 31,                                        |  | April 2,  |           | April 3,
|             |                                                       | 2000                                             |  | 1999      |           | 1998    
|             |                                                       |                                                  |  |           |           |         
|Denominator: |                                                       |                                                  |  |           |           |          |  |           |           |  |  |          
|            
|            
|            
|            
|             | Weighted average shares outstanding EPS, basic        |                                                  |  | 5,251,438 |           |          |  | 5,429,785 |           |  |  | 5,429,322 |          
|            
|            
|            
|            
|             | Incremental shares from assumed conversion of options |                                                  |  | 19,793    |           |          |  | 48,292    |           |  |  | 21,063    |          
|             |                                                       |                                                  |  |           |           |          |  |           |           |  |  |          
|             |                                                       | Weighted average shares outstanding EPS, diluted |  |           | 5,271,231 |          |  |           | 5,478,077 |  |  |           | 5,450,385 | 
|             |                                                       |                                                  |  |           |           |          |  |           |           |  |  |          

F-8



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)



2.  Summary of Significant Accounting
Policies  (Continued)


m.  Revenue Recognition: Substantially all of the
Companys revenues are derived from providing child care
services through residential and at-work centers. All revenues
are recognized as the service is provided. For services provided
to employers under short-term (1-5 years) management
contract arrangements where the employer assumes financial
responsibility for the ongoing operations, only the management
fee is recorded as revenue. Management contracts generally call
for reimbursement of all operational costs of the center plus a
management fee, negotiated based on center size, as well as
various operational and financial considerations.

n.  Pre-Opening Costs: Pre-opening costs are expensed
 as incurred.

o.  Advertising Expenses: Yellow pages advertising is
 paid in advance and recorded as a prepaid expense which is
amortized over the one year publication period. Direct mailing
costs are incurred at various times during the fiscal year and
are expensed over the period in which revenues are generated and
recognized (generally measured in months and less than one year).
 All other marketing costs are treated as period expenses and,
accordingly, are directly expensed in the period incurred. As of
March 31, 2000, the Company recorded prepaid yellow pages
and prepaid direct mailing costs of $383,246 and $74,913,
respectively.

p.  Use of Estimates: The preparation of financial
statements in conformity with generally accepted accounting
principles 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.

q.  Reclassifications: Certain amounts for the fiscal
 years ended April 2, 1999 and April 3, 1998 have been
reclassified to conform to the presentation adopted in fiscal
2000.

3.  Acquisitions:

The Company completed 32 center acquisitions during fiscal
2000 from various independent child care providers for an
aggregate of approximately $3,614,000 in cash and $6,284,000 in
seller-financed debt. Approximately $9,085,000 of intangible
assets were recorded as a result of the fiscal 2000 acquisitions.
 The Company completed 22 center acquisitions during fiscal
1999 from various independent child care providers for an
aggregate of approximately $3,018,000 in cash and $1,583,000 in
seller-financed debt. Approximately $4,039,000 of intangible
assets were recorded as a result of the fiscal 1999 acquisitions.
 The results of operations of the acquired centers have been
included in the consolidated results of the Company (accounted
for under the purchase method) from their respective acquisition
dates.

The following unaudited pro forma information assumes that all
fiscal 2000 and 1999 acquisitions occurred at the beginning of
each of the fiscal years. Pro forma information is based upon
certain assumptions and estimates, including interest expense on
debt assumed (ranging from 7.75 percent to
9.0 percent); depreciation and amortization charges based on
 the new accounting basis for assets acquired; and the related
income tax effect and do not necessarily represent results which
would have occurred if the acquisitions had taken place as
assumed above, nor are they necessarily indicative of future
results.

|                            |  |                           |             |                          |  |            |             |             |  |   |             |  |  |   |             | 
|--------------------------- |  | ------------------------- | ----------- | ------------------------ |  | ---------- | ----------- | ----------- |  | - | ----------- |  |  | - | ----------- | 
|                            |  |                           |             |                         
|                            |  | Year Ended March 31, 2000 |             | Year Ended April 2, 1999
|                            |  |                           |             |                         
|                            |  | Historical                |             | Pro Forma                |  | Historical |             | Pro Forma  
|                            |  |                           |             |                          |  |            |             |            
|                            |  |                           |             | (Unaudited)              |  |            |             | (Unaudited)
|                           
|                           
|                           
|                           
|Revenue                     |  | $                         | 128,736,444 |                          |  | $          | 139,156,898 |             |  | $ | 112,962,784 |  |  | $ | 118,394,394 | 
|                           
|                           
|                           
|                           
|Net income                  |  |                           | 4,328,817   |                          |  |            | 4,389,463   |             |  |   | 5,096,360   |  |  |   | 5,038,078   | 
|                           
|                           
|                           
|                           
|Earnings per share, diluted |  | $                         | 0.82        |                          |  | $          | 0.83        |             |  | $ | 0.93        |  |  | $ | 0.92        | 

F-9



---



##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)

4.  Other Current Assets and Liabilities:

Other current assets and liabilities are composed of the
following:

|                                           |                                                                                                                                                                           |           |           |           |  |   |           |           | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | --------- | --------- |  | - | --------- | --------- | 
|                                           |                                                                                                                                                                           | March 31, |           | April 2, 
|                                           |                                                                                                                                                                           | 2000      |           | 1999     
|                                           |                                                                                                                                                                           |           |           |          
|Prepaid expenses and other current assets: |                                                                                                                                                                           |           |           |           |  |   |           |          
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid rent                                                                                                                                                              |           | $         | 1,412,128 |  |   | $         | 1,181,303 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Other                                                                                                                                                                     |           |           | 1,135,072 |  |   |           | 1,016,969 | 
|                                           |                                                                                                                                                                           |           |           |           |  |   |           |          
|                                           |                                                                                                                                                                           | $         | 2,547,200 |           |  | $ | 2,198,272 |          
|                                           |                                                                                                                                                                           |           |           |           |  |   |           |          
|Other current liabilities:                 |                                                                                                                                                                           |           |           |           |  |   |           |          
|                                          
|                                          
|                                          
|                                          
|                                           | Unearned revenue                                                                                                                                                          |           | $         | 801,446   |  |   | $         | 746,921   | 
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued workers compensation expense (net of $1,033,316 and
	 $512,299 of advance deposits held by insurance company at
	March 31, 2000 and April 2, 1999, respectively) |           |           | 330,347   |  |   |           | 804,384   | 
|                                          
|                                          
|                                          
|                                          
|                                           | Other                                                                                                                                                                     |           |           | 2,342,098 |  |   |           | 2,096,039 | 
|                                           |                                                                                                                                                                           |           |           |           |  |   |           |          
|                                           |                                                                                                                                                                           | $         | 3,473,891 |           |  | $ | 3,647,344 |          
|                                           |                                                                                                                                                                           |           |           |           |  |   |           |          

5.  Financing Arrangements:

Financing arrangements consist of the following:

|                                                                                                                                                                                                                                                                                                                                                                      |                                           |           |           |           |  |   |           |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | --------- | --------- | --------- |  | - | --------- | ------- | 
|                                                                                                                                                                                                                                                                                                                                                                      |                                           | March 31, |           | April 2, 
|                                                                                                                                                                                                                                                                                                                                                                      |                                           | 2000      |           | 1999     
|                                                                                                                                                                                                                                                                                                                                                                      |                                           |           |           |          
|Note payable to a corporation resulting from an acquisition,
	interest at prime (9.0 percent at March 31, 2000),
	quarterly principal payments of $100,000 plus interest, remaining
	 balance payable January 2005.                                                                                                                                                   |                                           | $         | 1,900,000 |           |  | $ | 0         |        
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                     
|Note payable to a corporation resulting from an acquisition,
	interest at prime (9.0 percent at March 31, 2000),
	quarterly principal payments of $54,688, plus interest, remaining
	 principal balance payable April 2001.                                                                                                                                           |                                           |           | 875,000   |           |  |   | 0         |        
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                     
|Notes payable to various entities and individuals resulting from
	acquisitions, interest at various fixed rates ranging from 7.75
	to 8.5 percent and variable rates ranging from prime (9.0
	percent at March 31, 2000 and 7.75 percent at
	April 2, 1999) to prime plus 1 percent, various payment
	 terms with original maturities ranging from one to seven years |                                           |           | 3,852,209 |           |  |   | 2,638,359 |        
|                                                                                                                                                                                                                                                                                                                                                                      |                                           |           |           |           |  |   |           |        
|                                                                                                                                                                                                                                                                                                                                                                      |                                           |           | 6,627,209 |           |  |   | 2,638,359 |        
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                      | Less current maturities of long-term debt |           |           | 2,413,063 |  |   |           | 746,502 | 
|                                                                                                                                                                                                                                                                                                                                                                      |                                           |           |           |           |  |   |           |        
|                                                                                                                                                                                                                                                                                                                                                                      |                                           | $         | 4,214,146 |           |  | $ | 1,891,857 |        
|                                                                                                                                                                                                                                                                                                                                                                      |                                           |           |           |           |  |   |           |        

At March 31, 2000, aggregate principal payments due on the
long-term debt over the next four years and thereafter are as
follows:

|                    |  |   |           | 
|------------------- |  | - | --------- | 
|                   
|                   
|                   
|                   
|2001                |  | $ | 2,413,063 | 
|                   
|                   
|                   
|                   
|2002                |  |   | 1,441,177 | 
|                   
|                   
|                   
|                   
|2003                |  |   | 1,255,278 | 
|                   
|                   
|                   
|                   
|2004                |  |   | 791,091   | 
|                   
|                   
|                   
|                   
|2005 and thereafter |  |   | 726,600   | 
|                    |  |   |           | 
|                    |  | $ | 6,627,209 | 
|                    |  |   |           | 

F-10



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)



5.  Financing Arrangements  (Continued)


At March 31, 2000, the Companys revolving line of
credit is unsecured and provides for borrowings up to $7,500,000,
 with interest payable monthly at a variable rate, at the
Companys option, based on either the prime rate
(9 percent at March 31, 2000) or the Eurodollar rate.
Under the line of credit, there were outstanding borrowings of
$1,357,800 at March 31, 2000 and no borrowings at
April 2, 1999. For the year ended March 31, 2000, the
average borrowings on the line of credit were in the amount of
$1,490,826, with an average interest rate of 8.71 percent.
Outstanding letters of credit further reduced the availability
under the line of credit in the amount of $2,972,498 at
March 31, 2000 and $1,149,668 at April 2, 1999. Under
this agreement, the Company is required to maintain certain
financial ratios and other financial conditions, the most
restrictive of which requires the Company to maintain certain
debt-to-equity ratios, a minimum fixed charge coverage and a
minimum amount of tangible net worth. In addition, there are
restrictions on the incurrence of additional indebtedness,
disposition of assets and transactions with affiliates.

In connection with obtaining original acquisition financing in
1990, the Company issued a common stock purchase warrant to the
former lender which entitled the former lender to purchase
201,511 shares of common stock. A fair value of $806,044 was
originally ascribed to the common stock purchase warrant. Until
January 5, 1996, the former lender had the right to
put the common stock purchase warrant to the Company
at a price equal to the fair value or book value of the common
stock purchase warrant as defined in the Agreement. The Company
also had the right to call the common stock purchase warrant
under similar terms. During fiscal 1998, the former lender
exercised its right to require the Company to convert the warrant
 to 201,511 common shares. In addition, the former lender has the
 right to require the Company to register these shares under the
Securities Exchange Act of 1934.

6.  Income Taxes:

The income tax provision on income before income taxes and
extraordinary item reflected in the consolidated statement of
income consists of the following:

|          |                 |           |           |           |   |          |           |           |   |   |           |           |  
|--------- | --------------- | --------- | --------- | --------- | - | -------- | --------- | --------- | - | - | --------- | --------- | -
|          |                 | March 31, |           | April 2,  |   | April 3,
|          |                 | 2000      |           | 1999      |   | 1998    
|          |                 |           |           |           |   |         
|Current:  |                 |           |           |           |   |          |           |           |   |   |           |          
|         
|         
|         
|         
|          | Federal         |           | $         | 2,440,000 |   |          | $         | 2,726,000 |   |   | $         | 2,366,000 |  
|         
|         
|         
|         
|          | State and local |           |           | 169,000   |   |          |           | 407,000   |   |   |           | 419,000   |  
|          |                 |           |           |           |   |          |           |           |   |   |           |          
|          |                 |           | 2,609,000 |           |   |          | 3,133,000 |           |   |   | 2,785,000 |          
|          |                 |           |           |           |   |          |           |           |   |   |           |          
|Deferred: |                 |           |           |           |   |          |           |           |   |   |           |          
|         
|         
|         
|         
|          | Federal         |           |           | (8,000    | ) |          |           | (60,000   | ) |   |           | (213,000  | )
|         
|         
|         
|         
|          | State and local |           |           | (1,000    | ) |          |           | (8,000    | ) |   |           | (7,000    | )
|          |                 |           |           |           |   |          |           |           |   |   |           |          
|          |                 |           | (9,000    | )         |   |          | (68,000   | )         |   |   | (220,000  | )        
|          |                 |           |           |           |   |          |           |           |   |   |           |          
|          |                 | $         | 2,600,000 |           |   | $        | 3,065,000 |           |   | $ | 2,565,000 |          
|          |                 |           |           |           |   |          |           |           |   |   |           |          

F-11



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)

6.  Income Taxes  (Continued)

Differences between the income tax provision on income before
income taxes reflected in the statement of income and that
computed by applying the statutory federal income tax rate are
attributable to the following:

|                                                   |  |           |           |          |  |          |           |  |  |   |           |  
|-------------------------------------------------- |  | --------- | --------- | -------- |  | -------- | --------- |  |  | - | --------- | -
|                                                   |  | March 31, |           | April 2, |  | April 3,
|                                                   |  | 2000      |           | 1999     |  | 1998    
|                                                   |  |           |           |          |  |         
|Income tax provision at the statutory federal rate |  | $         | 2,356,000 |          |  | $        | 2,775,000 |  |  | $ | 2,350,000 |  
|                                                  
|                                                  
|                                                  
|                                                  
|State and local taxes, net of federal tax benefit  |  |           | 111,000   |          |  |          | 263,000   |  |  |   | 272,000   |  
|                                                  
|                                                  
|                                                  
|                                                  
|Other                                              |  |           | 133,000   |          |  |          | 27,000    |  |  |   | (57,000   | )
|                                                   |  |           |           |          |  |          |           |  |  |   |           |  
|                                                   |  | $         | 2,600,000 |          |  | $        | 3,065,000 |  |  | $ | 2,565,000 |  
|                                                   |  |           |           |          |  |          |           |  |  |   |           |  

Temporary differences and carryforwards which give rise to
deferred tax assets and (liabilities) are as follows:

|                        |                                                |                            |            |            |            |          |            |            |            |   |            |            |            |  
|----------------------- | ---------------------------------------------- | -------------------------- | ---------- | ---------- | ---------- | -------- | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | -
|                        |                                                |                           
|                        |                                                | Fiscal Years              
|                        |                                                |                           
|                        |                                                | March 31,                  |            | April 2,   |            | April 3,
|                        |                                                | 2000                       |            | 1999       |            | 1998    
|                        |                                                |                            |            |            |            |         
|Deferred tax asset:     |                                                |                            |            |            |            |          |            |            |            |   |            |           
|                       
|                       
|                       
|                       
|                        | Provision for bad debt balance                 |                            | $          | 114,000    |            |          | $          | 98,000     |            |   | $          | 87,000     |           
|                       
|                       
|                       
|                       
|                        | Vested and non-vested vacation balance         |                            |            | 469,000    |            |          |            | 375,000    |            |   |            | 353,000    |           
|                       
|                       
|                       
|                       
|                        | Workers compensation accrual                   |                            |            | 526,000    |            |          |            | 508,000    |            |   |            | 373,000    |           
|                       
|                       
|                       
|                       
|                        | Capital loss carryforwards                     |                            |            | 361,000    |            |          |            | 162,000    |            |   |            | 221,000    |           
|                       
|                       
|                       
|                       
|                        | All other                                      |                            |            | (33,000    | )          |          |            | (43,000    | )          |   |            | (89,000    | )         
|                        |                                                |                            |            |            |            |          |            |            |            |   |            |           
|                        | Provision for estimated expenses               |                            | $          | 1,437,000  |            |          | $          | 1,100,000  |            |   | $          | 945,000    |           
|                       
|                       
|                       
|                       
|Deferred tax liability: |                                                |                            |            |            |            |          |            |            |            |   |            |           
|                       
|                       
|                       
|                       
|                        | Basis and depreciation differences of property |                            | $          | (4,218,000 | )          |          | $          | (3,909,000 | )          |   | $          | (3,859,000 | )         
|                       
|                       
|                       
|                       
|                        | Straight-line rent                             |                            |            | 484,000    |            |          |            | 503,000    |            |   |            | 540,000    |           
|                        |                                                |                            |            |            |            |          |            |            |            |   |            |           
|                        |                                                |                            | (3,734,000 | )          |            |          | (3,406,000 | )          |            |   | (3,319,000 | )         
|                       
|                       
|                       
|                       
|                        |                                                | Net deferred tax liability |            | $          | (2,297,000 | )        |            | $          | (2,306,000 | ) |            | $          | (2,374,000 | )
|                        |                                                |                            |            |            |            |          |            |            |            |   |            |           

The Company has capital loss carryforwards which will expire as
follows: March 30, 2001, $351,000; March 29, 2002,
$74,000; March 28, 2003, $58,000; and April 1, 2005,
$451,000.

7.  Leases:

The Company leases certain land and buildings, primarily
childrens centers and vehicles, under noncancelable
operating leases with original terms ranging from 1 to
25 years. Certain leases contain purchase and renewal
options, impose restrictions upon making certain payments and
incurring additional debt, and may provide for rental increases
at specified intervals and contingent rents based upon a
specified percentage of the gross revenues derived from operating
 a business at the lease facility. Rental expense for the years
ended March 31, 2000, April 2, 1999 and April 3,
1998 was $17,496,726, $14,529,077 and $12,081,613, respectively.
These amounts included contingent rental expense of $338,705,
$365,466 and $390,573 for the years ended March 31, 2000,
April 3, 1999 and April 3, 1998, respectively.

F-12



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)

7.  Leases  (Continued)

Future minimum rental commitments at March 31, 2000 for all
noncancelable operating leases are as follows:

|           |  |   |            | 
|---------- |  | - | ---------- | 
|          
|          
|          
|          
|2001       |  | $ | 18,267,065 | 
|          
|          
|          
|          
|2002       |  |   | 17,580,799 | 
|          
|          
|          
|          
|2003       |  |   | 16,832,966 | 
|          
|          
|          
|          
|2004       |  |   | 15,952,826 | 
|          
|          
|          
|          
|2005       |  |   | 14,909,254 | 
|          
|          
|          
|          
|Thereafter |  |   | 86,438,024 | 

8.  Employee Benefit Plan:

The Company has a 401(k) Savings and Retirement Plan (the
Plan) covering substantially all of its full-time
employees. The Company matches 25 percent of employee
contributions up to 4 percent of compensation. Employees may
 contribute up to 15 percent of compensation to the Plan.
Amounts expensed for the years ended March 31, 2000,
April 2, 1999, and April 3, 1998 were $92,506, $100,481
 and $91,055, respectively.

9.  Stock Options:

In November 1995, the Company adopted the 1995 Stock Incentive
Plan for Key Employees (the Stock Option Plan). The
Stock Option Plan became effective, February 2, 1996,
concurrent with the effectiveness of the registration statement
relating to the Companys initial public offering of Common
Stock. The aggregate number of shares which may be issued
pursuant to the Stock Option Plan, is 300,000 shares. Options may
 be granted, or restricted stock awarded at the discretion of the
 Companys compensation committee from time to time at a
range of 75 percent to 110 percent of the market value
of the stock on the date on which such option is granted as
defined in the Stock Option Plan. Each option granted under the
plan shall expire in five to ten years from the date of grant, as
 defined in the Stock Option Plan. Restrictions on sale or
transfer of stock awarded under the Stock Option Plan, if any,
range from six months to five years. Vesting requirements are
determined by the committee at the time of the grant, provided,
however, no stock option may be exercisable prior to the
expiration of six months from the date of grant, unless the
Participant dies or becomes disabled prior thereto. All options
granted during fiscal 2000 (56,350) and 1999 (50,000) were
granted at the then market price and vest evenly over a
three-year period.

In addition, the Company adopted the Director Stock Option Plan,
effective February 2, 1996, providing for annual grants of
stock options to nonemployee directors to purchase common stock
at fair value as of the date of such grant. The aggregate number
of shares which may be issued pursuant to the Director Stock
Option Plan, is 75,000 shares. Each option grant under the plan
shall expire in five years from the date of grant. Options vest
in full on the first anniversary of the date of grant. 15,000
options were granted under the plan during both fiscal 2000 and
1999.

The Company has adopted the disclosure provisions of SFAS
No. 123 Accounting for Stock-Based Compensation,
 and continues to measure compensation cost using the intrinsic
value method in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to
Employees. Had stock option compensation cost for these
plans been determined based on the fair value at the grant dates
for awards

F-13



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)



9.  Stock Options  (Continued)


under those plans consistent with the methodology of SFAS
No. 123, the Companys net income and earnings per
share would have been reduced to the pro forma amounts indicated
below:

|                                                               |         |  |             |             |  |            |           |            |  |   |           |      |  |   |           |      | 
|-------------------------------------------------------------- | ------- |  | ----------- | ----------- |  | ---------- | --------- | ---------- |  | - | --------- | ---- |  | - | --------- | ---- | 
|                                                               |         |  |             | Year Ended  |  | Year Ended |           | Year Ended
|                                                               |         |  |             | March 31,   |  | April 2,   |           | April 3,  
|                                                               |         |  |             | 2000        |  | 1999       |           | 1998      
|                                                               |         |  |             |             |  |            |           |           
|Net income:                                                    |         |  |             |             |  |            |           |            |  |   |           |      |  |   |           |     
|                                                               |         |  | As reported |             |  | $          | 4,328,817 |            |  | $ | 5,096,360 |      |  | $ | 4,345,842 |     
|                                                               |         |  | Pro forma   |             |  | $          | 4,106,330 |            |  | $ | 4,897,494 |      |  | $ | 4,150,803 |     
|                                                              
|                                                              
|                                                              
|                                                              
|Earnings per share:                                            |         |  |             |             |  |            |           |            |  |   |           |      |  |   |           |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Basic   |  |             | As reported |  |            | $         | 0.82       |  |   | $         | 0.94 |  |   | $         | 0.80 | 
|                                                               |         |  | Pro forma   |             |  | $          | 0.78      |            |  | $ | 0.90      |      |  | $ | 0.76      |     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Diluted |  |             | As reported |  |            | $         | 0.82       |  |   | $         | 0.93 |  |   | $         | 0.80 | 
|                                                               |         |  | Pro forma   |             |  | $          | 0.78      |            |  | $ | 0.89      |      |  | $ | 0.76      |     
|                                                              
|                                                              
|                                                              
|                                                              
|Weighted average fair value of options Granted during the year |         |  |             |             |  | $          | 4.22      |            |  | $ | 6.00      |      |  | $ | 4.23      |     
|                                                               |         |  |             |             |  |            |           |            |  |   |           |      |  |   |           |     

The fair value of the options used to compute pro forma net
income and earnings per share disclosures is the estimated
present value at grant date using the Black-Scholes
option-pricing model with the following weighted average
assumptions for 2000, 1999 and 1998, respectively: no dividend
yield; expected volatility of 39.0, 37.2 and 50.3 percent;
risk free interest rate of 5.3, 5.6 and 6.5 percent; and
expected holding periods of 3.7 years, for fiscal years 2000
 and 1999, and 3.8 years for fiscal year 1998.

Presented below is a summary of the status of the stock options
held by employees of the Company as of March 31, 2000,
April 2, 1999 and April 3, 1998:

|                                           |  |                |         |               |  |               |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |       | 
|------------------------------------------ |  | -------------- | ------- | ------------- |  | ------------- | ----- | -------- |  | ------ | ------- | -------- |  | - | ----- |  |  |  | ------- | - |  | - | ----- | 
|                                           |  |                |         |               |  |              
|                                           |  | Year Ended     |         | Year Ended    |  | Year Ended   
|                                           |  | March 31, 2000 |         | April 2, 1999 |  | April 3, 1998
|                                           |  |                |         |               |  |              
|                                           |  |                |         | Weighted      |  |               |       | Weighted |  |        |         | Weighted
|                                           |  |                |         | Average       |  |               |       | Average  |  |        |         | Average 
|                                           |  |                |         | Exercise      |  |               |       | Exercise |  |        |         | Exercise
|Options                                    |  | Shares         |         | Price         |  | Shares        |       | Price    |  | Shares |         | Price   
|                                           |  |                |         |               |  |               |       |          |  |        |         |         
|Options outstanding at beginning of Period |  |                | 251,267 |               |  | $             | 11.81 |          |  |        | 198,083 |          |  | $ | 10.04 |  |  |  | 79,250  |   |  | $ | 11.00 | 
|                                          
|                                          
|                                          
|                                          
|Granted                                    |  |                | 71,350  |               |  |               | 11.77 |          |  |        | 65,000  |          |  |   | 17.20 |  |  |  | 124,000 |   |  |   | 9.41  | 
|                                          
|                                          
|                                          
|                                          
|Exercised                                  |  |                |        |               |  |               |      |          |  |        | (2,333  | )        |  |   | 10.42 |  |  |  |        |   |  |   |      | 
|                                          
|                                          
|                                          
|                                          
|Forfeited/expired                          |  |                | (8,266  | )             |  |               | 12.09 |          |  |        | (9,483  | )        |  |   | 12.02 |  |  |  | (5,167  | ) |  |   | 9.60  | 
|                                           |  |                |         |               |  |               |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |       | 
|Options outstanding at end of Period       |  |                | 314,351 |               |  | $             | 11.80 |          |  |        | 251,267 |          |  | $ | 11.81 |  |  |  | 198,083 |   |  | $ | 10.04 | 
|                                           |  |                |         |               |  |               |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |       | 
|Options exercisable                        |  |                | 183,667 |               |  | $             | 11.44 |          |  |        | 122,167 |          |  | $ | 10.51 |  |  |  | 57,169  |   |  | $ | 11.00 | 
|                                           |  |                |         |               |  |               |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |       | 

Of the 314,351 options outstanding at March 31, 2000,
254,351 were exercisable at per share prices ranging from $9.19
to $11.81, with a weighted average exercise price of $10.51 and a
 weighted average remaining contractual life of 2.3 years;
60,000 were exercisable at per share prices ranging from $16.88
to $18.28, with a weighted average exercise price of $17.22 and a
 weighted average remaining contractual life of 3.1 years.

F-14



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)

10.  Contingencies:

Various legal actions and other claims are pending or could be
asserted against the Company. Litigation is subject to many
uncertainties; the outcome of individual litigated matters is not
 predictable with assurance, and it is reasonably possible that
some of these matters may be decided unfavorably to the Company.
It is the opinion of management that the ultimate liability, if
any, with respect to these matters will not materially affect the
 financial position, results of operations or cash flows of the
Company.

11.  Supplemental Cash Flow Information:

|                                   |              |           |   |           |  |          |   |           |  |  |   |           | 
|---------------------------------- | ------------ | --------- | - | --------- |  | -------- | - | --------- |  |  | - | --------- | 
|                                   |              | March 31, |   | April 2,  |  | April 3,
|                                   |              | 2000      |   | 1999      |  | 1998    
|                                   |              |           |   |           |  |         
|Cash payments during the year for: |              |           |   |           |  |          |   |           |  |  |   |          
|                                  
|                                  
|                                  
|                                  
|                                   | Interest     |           | $ | 370,765   |  |          | $ | 315,892   |  |  | $ | 289,429   | 
|                                  
|                                  
|                                  
|                                  
|                                   | Income taxes |           | $ | 2,867,047 |  |          | $ | 3,118,506 |  |  | $ | 2,772,527 | 

In connection with the acquisition of certain assets, the Company
 incurred debt of $6,283,500, $1,582,500 and $1,686,750 in 2000,
1999 and 1998, respectively.

12.  Book Overdrafts:

Book overdrafts represent unfunded checks drawn on zero balance
accounts that have not been presented for funding to the
Companys banks. The overdrafts are funded, without bank
finance charges, as soon as they are presented. The aggregate
book overdrafts for the year ended March 31, 2000 was
$3,457,000 and is included in Accounts Payable on the
Consolidated Balance Sheet.

F-15



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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES






SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS


|                                                                            |  |                      |     |          |  |            |     |            |  |        |   |  |  |   |      |   |  |   |     | 
|--------------------------------------------------------------------------- |  | -------------------- | --- | -------- |  | ---------- | --- | ---------- |  | ------ | - |  |  | - | ---- | - |  | - | --- | 
|                                                                            |  |                     
|                                                                            |  | Additions Charged to
|                                                                            |  |                     
|                                                                            |  | Balance at           |     |          |  | Balance at
|                                                                            |  | Beginning            |     | Cost and |  | Other      |     |            |  | End of
|Description                                                                 |  | of Period            |     | Expenses |  | Accounts   |     | Deductions |  | Period
|                                                                            |  |                      |     |          |  |            |     |            |  |       
|                                                                            |  |                     
|                                                                            |  | (In thousands)      
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Fiscal year ended April 3, 1998, reserve for doubtful
	accounts and claims  |  | $                    | 185 |          |  | $          | 330 |            |  | $      | 0 |  |  | $ | (290 | ) |  | $ | 225 | 
|                                                                            |  |                      |     |          |  |            |     |            |  |        |   |  |  |   |      |   |  |   |     | 
|Fiscal year ended April 2, 1999, reserve for doubtful
	accounts and claims  |  | $                    | 225 |          |  | $          | 278 |            |  | $      | 0 |  |  | $ | (248 | ) |  | $ | 255 | 
|                                                                            |  |                      |     |          |  |            |     |            |  |        |   |  |  |   |      |   |  |   |     | 
|Fiscal year ended March 31, 2000, reserve for doubtful
	accounts and claims |  | $                    | 255 |          |  | $          | 385 |            |  | $      | 0 |  |  | $ | (345 | ) |  | $ | 295 | 
|                                                                            |  |                      |     |          |  |            |     |            |  |        |   |  |  |   |      |   |  |   |     | 

S-1



---



##### Table of Contents








INDEX TO EXHIBITS


|        |      |  |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ---- |  |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |  
|Number  |      |  |  |  
|        |      |  |  |  
|        | 3.1  |  |  |  |  | Restated Articles of Incorporation of the Registrant, filed as
	Exhibit 3.2 to the Registrants Form S-1
	Registration Statement (Registration No. 33-99596), are
	incorporated herein by reference.                                                                                                                                                                                                  
|        | 3.2  |  |  |  |  | Restated Bylaws of the Registrant, filed as Exhibit 3.4 to
	the Registrants Form S-1 Registration Statement
	(Registration No. 33-99596), are incorporated herein by
	reference.                                                                                                                                                                                                                     
|        | 4.1  |  |  |  |  | Common Stock Purchase Warrant between Security Pacific Business
	Credit Inc. (SPBC) and KD Acquisition
	Corporation (Acquisition), filed as Exhibit 4.1
	to the Registrants Form S-1 Registration Statement
	(Registration No. 33-99596), is incorporated herein by
	reference.                                                                                                                  
|        | 4.2  |  |  |  |  | Credit Agreement between Childtime Childcare, Inc.
	(Childtime) and NBD Bank dated as of
	February 1, 1996, filed as Exhibit 4 to the
	Registrants Form 10-Q for the quarter ended
	January 5, 1996, is incorporated herein by reference.                                                                                                                                                          
|        | 4.3  |  |  |  |  | Shareholders Agreement between the Company, Childcare Associates,
	 KD Partners II, GCC Partners, Ltd., Lenard B. Tessler
	and James W. Geisz dated as of July 9, 1990, together with
	amendments thereto dated January 4, 1993 and as of
	July 7, 1995, filed as Exhibit 4.3 to the
	Registrants Form S-1 Registration Statement
	(Registration No. 33-99596), is incorporated herein by
	reference.
|        | 4.4  |  |  |  |  | First Amendment to Common Stock Purchase Warrant between SPBC and
	 Acquisition dated as of December 28, 1995, filed as
	Exhibit 4.4 to the Registrants Form S-1
	Registration Statement (Registration No. 33-99596), is
	incorporated herein by reference.                                                                                                                                          
|        | 4.5  |  |  |  |  | First Amendment to Credit Agreement between Childtime and
	NBD Bank dated as of February 1, 1996, filed as
	Exhibit  4.5 to the Registrants Form 10-K for the
	 year ended April  2, 1999, is incorporated herein by
	reference.                                                                                                                                                                     
|        | 4.6  |  |  |  |  | Second Amendment to Credit Agreement between Childtime and
	NBD Bank dated as of April 1, 1999, filed as
	Exhibit 4.1 to the Registrants Form 10-Q for the
	quarter ended January 7, 2000, is incorporated herein by
	reference.                                                                                                                                                                     
|        | 4.7  |  |  |  |  | Third Amendment to Credit Agreement between Childtime and Bank
	One, Michigan (f/k/a/ NBD Bank), dated as of December  6,
	1999, filed as Exhibit 4.2 to the Registrants
	Form  10-Q for the quarter ended January 7, 2000, is
	incorporated herein by reference.                                                                                                                                    
|        | 4.8  |  |  |  |  | Letter Agreement to amend the Total Liabilities to Tangible Net
	Worth negative covenant pursuant to the February 1, 1996
	Credit Agreement.                                                                                                                                                                                                                                                          
|        | 9    |  |  |  |  | Voting Agreement between Harold A. Lewis and George A. Kellner
	dated January 8, 1996, filed as Exhibit 9 to the
	Registrants Form S-1 Registration Statement
	(Registration No. 33-99596), is incorporated herein by
	reference.                                                                                                                                                                    
|        | 10.1 |  |  |  |  | Director Stock Option Plan, filed as Exhibit 10.1 to the
	Registrants Form S-1 Registration Statement
	(Registration No. 33-99596), is incorporated herein by
	reference.                                                                                                                                                                                                                            
|        | 10.2 |  |  |  |  | 1995 Stock Incentive Plan for Key Employees, filed as
	Exhibit 10.2 to the Registrants Form S-1
	Registration Statement (Registration No. 33-99596), is
	incorporated herein by reference.                                                                                                                                                                                                           
|        | 10.3 |  |  |  |  | Employment Agreement between Childtime and Harold A. Lewis dated
	January 8, 1996, filed as Exhibit 10.8 to the
	Registrants Form S-1 Registration Statement
	(Registration No. 33-99596), is incorporated herein by
	reference.                                                                                                                                                                     
|        | 10.4 |  |  |  |  | Consulting Agreement dated May 15, 1997 between the
	Registrant and Leonard C. Tylka.                                                                                                                                                                                                                                                                                                                 
|        | 21   |  |  |  |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                 
|        | 23   |  |  |  |  | Consent of PricewaterhouseCoopers, LLP, dated June 13, 2000.                                                                                                                                                                                                                                                                                                                                          
|        | 27   |  |  |  |  | Financial Data Schedule.                                                                                                                                                                                                                                                                                                                                                                              

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