##### Table of Contents



Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED OCTOBER 13, 2000

OR

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) |  | 38-3261854
(I.R.S. Employer Identification No.)

38345 West Ten Mile Road, Suite 100
Farmington Hills, Michigan 48335
(Address of principal executive offices)

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

Indicate by check mark whether the Registrant: (1) has filed all reports required to be
filed by Section 13 of 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 required for the past 90 days. Yes  No

The number of shares of Registrants Common
Stock, no par value per share, outstanding at
November 3, 2000 was 5,225,772.





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TABLE OF CONTENTS



|                                     |                                                                                               |                                                                                                                                                             |  |  |  |  |  | 
|------------------------------------ | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION       
|                                     | ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS                                                    
|                                     |                                                                                               | A. CONSOLIDATED BALANCE SHEET OCTOBER 13, 2000 AND MARCH 31, 2000                                                                                          
|                                     |                                                                                               | B. CONSOLIDATED STATEMENT OF INCOME TWELVE WEEKS ENDED OCTOBER 31, 2000 AND OCTOBER 15, 1999 TWENTY-EIGHT WEEKS ENDED OCTOBER 13, 2000 AND OCTOBER 15, 1999
|                                     |                                                                                               | C. CONSOLIDATED STATEMENT OF CASH FLOWS TWENTY-EIGHT WEEKS ENDED OCTOBER 13, 2000 AND OCTOBER 15, 1999                                                     
|                                     |                                                                                               | D. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                              
|                                     | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II OTHER INFORMATION           
|                                     | ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K                                                      
|SIGNATURES                          
|Fourth Amendment to Credit Agreement
|Financial Data Schedule             



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CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES

Index

Form 10-Q

For the Quarterly Period Ended October 13, 2000

|                              |                                                                                               |                                                                                                                                                                                |      |        |   | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---- | ------ | - | 
|                              |                                                                                               |                                                                                                                                                                                |      | Page  
|                              |                                                                                               |                                                                                                                                                                                |      | Number
|PART I. FINANCIAL INFORMATION
|                             
|                             
|                             
|                             
|                              | ITEM 1. Consolidated Financial Statements                                                    
|                             
|                             
|                             
|                             
|                              |                                                                                               | A. Consolidated Balance Sheet 
         October 13, 2000 and March 31, 2000                                                                                                    |      |        | 3
|                             
|                             
|                             
|                             
|                              |                                                                                               | B. Consolidated Statement of Income 
         Twelve Weeks Ended October 13, 2000 and October 15, 1999
         Twenty-Eight Weeks Ended October 13, 2000 and October 15, 1999 |      |        | 4
|                             
|                             
|                             
|                             
|                              |                                                                                               | C. Consolidated Statement of Cash Flows 
         Twenty-Eight Weeks Ended October 13, 2000 and October 15, 1999                                                               |      |        | 5
|                             
|                             
|                             
|                             
|                              |                                                                                               | D. Notes to Consolidated Financial Statements                                                                                                                                  |      | 6-8    |  
|                             
|                             
|                             
|                             
|                              | ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                                                                                | 9-12 |       
|                             
|                             
|                             
|                             
|PART II. OTHER INFORMATION   
|                             
|                             
|                             
|                             
|                              | ITEM 6. Exhibits, Reports on Form 8-K                                                         |                                                                                                                                                                                |      | 13     |  
|                             
|                             
|                             
|                             
|SIGNATURES                    |                                                                                               |                                                                                                                                                                                | 13   |       
|                             
|                             
|                             
|                             

2



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##### Table of Contents












PART I
FINANCIAL INFORMATION
FORM 10-Q

CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES

Consolidated Balance Sheet

|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |            |             |            | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------ |  |  |  | ---------- | ---------- | ----------- | ---------- | ---------- | ---------- | ----------- | ---------- | 
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            | October 13, |            | March 31, 
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            | 2000        |            | 2000      
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            | (Unaudited) |            |           
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |           
|Assets                              
|                                    
|                                    
|                                    
|                                    
|Current assets:                     
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                                                                                                           |                                                |              |  |  |  | $          | 3,240,273  |             |            | $          | 2,704,465  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts receivable, net                                                                                                            |                                                |              |  |  |  |            | 4,782,837  |             |            |            | 4,216,880  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Reimbursable construction costs                                                                                                     |                                                |              |  |  |  |            | 3,533,853  |             |            |            | 1,279,348  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Prepaid expenses and other                                                                                                          |                                                |              |  |  |  |            | 2,224,036  |             |            |            | 2,547,200  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred income taxes                                                                                                               |                                                |              |  |  |  |            | 1,502,000  |             |            |            | 1,437,000  |            
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                     |                                                                                                                                     | Total current assets                           |              |  |  |  |            |            | 15,282,999  |            |            |            | 12,184,893  |           
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|Land, buildings and equipment:      
|                                    
|                                    
|                                    
|                                    
|                                     | Land                                                                                                                                |                                                |              |  |  |  |            | 9,663,715  |             |            |            | 9,930,239  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Buildings                                                                                                                           |                                                |              |  |  |  |            | 19,050,608 |             |            |            | 19,232,936 |            
|                                    
|                                    
|                                    
|                                    
|                                     | Vehicles, furniture and equipment                                                                                                   |                                                |              |  |  |  |            | 13,254,614 |             |            |            | 11,954,127 |            
|                                    
|                                    
|                                    
|                                    
|                                     | Leasehold improvements                                                                                                              |                                                |              |  |  |  |            | 8,777,076  |             |            |            | 8,072,998  |            
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                     |                                                                                                                                     |                                                |              |  |  |  | 50,746,013 |            |             |            | 49,190,300 |           
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                                                                                     | Less accumulated depreciation and amortization |              |  |  |  |            |            | (13,625,994 | )          |            |            | (12,410,551 | )         
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                     |                                                                                                                                     |                                                |              |  |  |  | 37,120,019 |            |             |            | 36,779,749 |           
|                                    
|                                    
|                                    
|                                    
|                                     | Land held for disposal                                                                                                              |                                                |              |  |  |  |            | 65,600     |             |            |            | 65,600     |            
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                     |                                                                                                                                     |                                                |              |  |  |  | 37,185,619 |            |             |            | 36,845,349 |           
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|Other noncurrent assets:            
|                                    
|                                    
|                                    
|                                    
|                                     | Intangible assets, net                                                                                                              |                                                |              |  |  |  |            | 23,720,448 |             |            |            | 21,131,029 |            
|                                    
|                                    
|                                    
|                                    
|                                     | Refundable deposits and other                                                                                                       |                                                |              |  |  |  |            | 1,140,210  |             |            |            | 1,012,254  |            
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                     |                                                                                                                                     |                                                | Total assets |  |  |  |            |            | $           | 77,329,276 |            |            | $           | 71,173,525 | 
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|Liabilities and shareholders equity
|                                    
|                                    
|                                    
|                                    
|Current liabilities:                
|                                    
|                                    
|                                    
|                                    
|                                     | Revolving line of credit                                                                                                            |                                                |              |  |  |  | $          | 3,622,943  |             |            | $          | 1,357,800  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Current maturities of long-term debt                                                                                                |                                                |              |  |  |  |            | 2,091,708  |             |            |            | 2,413,063  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                                                                                                                    |                                                |              |  |  |  |            | 4,267,128  |             |            |            | 5,220,182  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued wages and payroll taxes                                                                                                     |                                                |              |  |  |  |            | 3,367,115  |             |            |            | 3,477,878  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued vacation                                                                                                                    |                                                |              |  |  |  |            | 1,185,244  |             |            |            | 1,214,755  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Other current liabilities                                                                                                           |                                                |              |  |  |  |            | 3,617,975  |             |            |            | 3,473,891  |            
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                     |                                                                                                                                     | Total current liabilities                      |              |  |  |  |            |            | 18,152,113  |            |            |            | 17,157,569  |           
|                                    
|                                    
|                                    
|                                    
|Long-term debt                       |                                                                                                                                     |                                                |              |  |  |  | 4,933,772  |            |             |            | 4,214,146  |           
|                                    
|                                    
|                                    
|                                    
|Deferred rent liability              |                                                                                                                                     |                                                |              |  |  |  | 1,077,749  |            |             |            | 1,129,153  |           
|                                    
|                                    
|                                    
|                                    
|Deferred income taxes                |                                                                                                                                     |                                                |              |  |  |  | 3,575,000  |            |             |            | 3,734,000  |           
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                     |                                                                                                                                     | Total liabilities                              |              |  |  |  |            |            | 27,738,634  |            |            |            | 26,234,868  |           
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|Commitments and contingencies        |                                                                                                                                     |                                                |              |  |  |  |           |            |             |            |           |           
|                                    
|                                    
|                                    
|                                    
|Shareholders equity:               
|                                    
|                                    
|                                    
|                                    
|                                     | Common stock, 10,000,000 shares authorized, no par value; 5,225,772
outstanding at October 13, 2000 and 4,931,655 at March 31, 2000 |                                                |              |  |  |  |            | 30,794,126 |             |            |            | 27,996,180 |            
|                                    
|                                    
|                                    
|                                    
|                                     | Preferred stock, 1,000,000 shares authorized, no par value; no shares
issued or outstanding                                         |                                                |              |  |  |  |            |           |             |            |            |           |            
|                                    
|                                    
|                                    
|                                    
|                                     | Retained earnings                                                                                                                   |                                                |              |  |  |  |            | 18,796,516 |             |            |            | 16,942,477 |            
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                     |                                                                                                                                     | Total shareholders equity                     |              |  |  |  |            |            | 49,590,642  |            |            |            | 44,938,657  |           
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                     | Total liabilities and shareholders equity                                                                                          |                                                |              |  |  |  | $          | 77,329,276 |             |            | $          | 71,173,525 |            
|                                     |                                                                                                                                     |                                                |              |  |  |  |            |            |             |            |            |           
|                                    
|                                    
|                                    
|                                    

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

3



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##### Table of Contents



FINANCIAL INFORMATION
FORM 10-Q

CHILDTIME LEARNING CENTERS, INC. AND CONSOLIDATED SUBSIDIARIES




Consolidated Statement of Income

(Unaudited)

|                                       |                            |  |  |  |  |   |                    |           |                          |   |             |           |             |   |            |           |  |   |            |           | 
|-------------------------------------- | -------------------------- |  |  |  |  | - | ------------------ | --------- | ------------------------ | - | ----------- | --------- | ----------- | - | ---------- | --------- |  | - | ---------- | --------- | 
|                                       |                            |  |  |  |  |   | Quarter-to-Date    |           | Year-to-Date            
|                                       |                            |  |  |  |  |   | Twelve Weeks Ended |           | Twenty-Eight Weeks Ended
|                                       |                            |  |  |  |  |   |                    |           |                         
|                                       |                            |  |  |  |  |   | October 13,        |           | October 15,              |   | October 13, |           | October 15,
|                                       |                            |  |  |  |  |   | 2000               |           | 1999                     |   | 2000        |           | 1999       
|                                       |                            |  |  |  |  |   |                    |           |                          |   |             |           |            
|Revenues                               |                            |  |  |  |  | $ | 33,692,743         |           |                          | $ | 28,763,222  |           |             | $ | 79,553,729 |           |  | $ | 67,507,032 |          
|                                      
|                                      
|                                      
|                                      
|Cost of revenues                       |                            |  |  |  |  |   | 30,341,188         |           |                          |   | 25,215,033  |           |             |   | 70,505,898 |           |  |   | 58,737,313 |          
|                                       |                            |  |  |  |  |   |                    |           |                          |   |             |           |             |   |            |           |  |   |            |          
|                                       | Gross profit               |  |  |  |  |   |                    | 3,351,555 |                          |   |             | 3,548,189 |             |   |            | 9,047,831 |  |   |            | 8,769,719 | 
|                                      
|                                      
|                                      
|                                      
|Marketing expenses                     |                            |  |  |  |  |   | 406,134            |           |                          |   | 385,846     |           |             |   | 920,010    |           |  |   | 898,508    |          
|                                      
|                                      
|                                      
|                                      
|General and administrative expenses    |                            |  |  |  |  |   | 1,765,739          |           |                          |   | 1,615,702   |           |             |   | 4,724,095  | (1)       |  |   | 3,734,923  |          
|                                       |                            |  |  |  |  |   |                    |           |                          |   |             |           |             |   |            |           |  |   |            |          
|                                       | Operating income           |  |  |  |  |   |                    | 1,179,682 |                          |   |             | 1,546,641 |             |   |            | 3,403,726 |  |   |            | 4,136,288 | 
|                                      
|                                      
|                                      
|                                      
|Interest expense                       |                            |  |  |  |  |   | 259,728            |           |                          |   | 59,349      |           |             |   | 537,879    |           |  |   | 126,238    |          
|                                      
|                                      
|                                      
|                                      
|Interest income                        |                            |  |  |  |  |   | (15,841            | )         |                          |   | (54,027     | )         |             |   | (26,274    | )         |  |   | (149,894   | )        
|                                      
|                                      
|                                      
|                                      
|Other income, net                      |                            |  |  |  |  |   | (25,108            | )         |                          |   | (11,060     | )         |             |   | (104,918   | )         |  |   | (85,618    | )        
|                                       |                            |  |  |  |  |   |                    |           |                          |   |             |           |             |   |            |           |  |   |            |          
|                                       | Income before income taxes |  |  |  |  |   |                    | 960,903   |                          |   |             | 1,552,379 |             |   |            | 2,997,039 |  |   |            | 4,245,562 | 
|                                      
|                                      
|                                      
|                                      
|Income tax provision                   |                            |  |  |  |  |   | 358,000            |           |                          |   | 578,000     |           |             |   | 1,143,000  |           |  |   | 1,591,000  |          
|                                       |                            |  |  |  |  |   |                    |           |                          |   |             |           |             |   |            |           |  |   |            |          
|                                       | Net income                 |  |  |  |  |   | $                  | 602,903   |                          |   | $           | 974,379   |             |   | $          | 1,854,039 |  |   | $          | 2,654,562 | 
|                                       |                            |  |  |  |  |   |                    |           |                          |   |             |           |             |   |            |           |  |   |            |          
|Weighted average shares outstanding    |                            |  |  |  |  |   | 5,082,215          |           |                          |   | 5,411,680   |           |             |   | 4,996,181  |           |  |   | 5,423,094  |          
|                                       |                            |  |  |  |  |   |                    |           |                          |   |             |           |             |   |            |           |  |   |            |          
|Earnings per share  basic and diluted |                            |  |  |  |  | $ | 0.12               |           |                          | $ | 0.18        |           |             |   | 0.37       |           |  |   | 0.49       |          
|                                       |                            |  |  |  |  |   |                    |           |                          |   |             |           |             |   |            |           |  |   |            |          

|    |                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $298,000 for a one-time compensation charge related to options granted and $68,000 for fees in connection with the
Jacobson Partners consulting agreement. (See Item 7 in the Companys Notes to Consolidated Financial Statements)

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

4



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##### Table of Contents



FINANCIAL INFORMATION
FORM 10-Q

CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES




Consolidated Statement of Cash Flows

(Unaudited)

|                                                     |                                                                                   |                                                          |           |                          |           |             |            |            |           |  
|---------------------------------------------------- | --------------------------------------------------------------------------------- | -------------------------------------------------------- | --------- | ------------------------ | --------- | ----------- | ---------- | ---------- | --------- | -
|                                                     |                                                                                   |                                                          |           | Year-to-Date            
|                                                     |                                                                                   |                                                          |           | Twenty-Eight Weeks Ended
|                                                     |                                                                                   |                                                          |           |                         
|                                                     |                                                                                   |                                                          |           | October 13,              |           | October 15,
|                                                     |                                                                                   |                                                          |           | 2000                     |           | 1999       
|                                                     |                                                                                   |                                                          |           |                          |           |            
|Cash flows from operating activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income                                                                        |                                                          | $         | 1,854,039                |           |             | $          | 2,654,562  |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income to net
cash provided by operating activities:
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Depreciation and amortization                            |           |                          | 2,422,483 |             |            |            | 1,716,157 |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Stock option compensation expense                        |           |                          | 297,950   |            
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Deferred rent liability                                  |           |                          | (51,404   | )           |            |            | (70,773   | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Deferred income taxes                                    |           |                          | (224,000  | )           |            |            | (91,000   | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Loss on land, buildings and equipment                    |           |                          | (24,784   | )           |            |            | (5,059    | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Changes in assets and liabilities providing (consuming) cash:                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Accounts receivable                                      |           |                          | (565,957  | )           |            |            | (999,312  | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Prepaid expenses, refundable deposits and other assets   |           |                          | 323,164   |             |            |            | 173,944   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Accounts payable, accruals and other current liabilities |           |                          | 356,948   |             |            |            | (26,430   | )
|                                                     |                                                                                   |                                                          |           |                          |           |             |            |           
|                                                     | Net cash provided by operating activities                                         |                                                          |           | 4,388,439                |           |             |            | 3,352,089  |          
|                                                     |                                                                                   |                                                          |           |                          |           |             |            |           
|Cash flows from investing activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Expenditures for land, buildings and equipment                                    |                                                          |           | (2,277,230               | )         |             |            | (1,791,712 | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Expenditures for reimbursable construction costs                                  |                                                          |           | (4,901,334               | )         |             |            | (1,649,451 | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisition of intangible assets                                                  |                                                          |           | (1,938,855               | )         |             |            | (1,038,962 | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sales of land, buildings and equipment                              |                                                          |           | 621,197                  |           |             |            | 577,123    |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payments for refundable deposits and other assets                                 |                                                          |           | (127,957                 | )         |             |            | (13,668    | )        
|                                                     |                                                                                   |                                                          |           |                          |           |             |            |           
|                                                     | Net cash used in investing activities                                             |                                                          |           | (8,624,179               | )         |             |            | (3,916,670 | )        
|                                                     |                                                                                   |                                                          |           |                          |           |             |            |           
|Cash flows from financing activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net borrowings on revolving line of credit                                        |                                                          |           | 2,265,143                |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Changes in book overdraft                                                         |                                                          |           | (1,306,191               | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repurchase of common stock                                                        |                                                          |           |                          |           |             |            | (1,471,269 | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payments on long-term debt                                                        |                                                          |           | (1,334,229               | )         |             |            | (667,338   | )        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments of reimbursable construction                                           |                                                          |           | 2,646,829                |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of shares                                                                |                                                          |           | 2,499,996                |          
|                                                     |                                                                                   |                                                          |           |                          |           |             |            |           
|                                                     | Net cash provided (used) by financing activities                                  |                                                          |           | 4,771,548                |           |             |            | (2,138,607 | )        
|                                                    
|                                                    
|                                                    
|                                                    
|Net increase (decrease) in cash and cash equivalents |                                                                                   |                                                          | 535,808   |                          |           |             | (2,703,188 | )         
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of year         |                                                                                   |                                                          | 2,704,465 |                          |           |             | 5,843,329  |           
|                                                     |                                                                                   |                                                          |           |                          |           |             |            |           
|Cash and cash equivalents, end of period             |                                                                                   | $                                                        | 3,240,273 |                          |           | $           | 3,140,141  |           
|                                                     |                                                                                   |                                                          |           |                          |           |             |            |           

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

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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Form 10-Q

(1) GENERAL

The consolidated financial statements of Childtime Learning Centers,
Inc. (the Company) are unaudited and, in the opinion of management, include
all adjustments necessary to fairly state the Companys financial condition,
results of operations and its cash flows, for the interim periods presented. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for the full fiscal year. These statements should be read
in conjunction with the Companys annual report for the fiscal year ended March
31, 2000.

(2) PRINCIPALS OF CONSOLIDATION

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. The Company provides for-profit child care through
307 child care centers located in 23 states and the District of Columbia as of
October 13, 2000.

(3) FISCAL YEAR

The Company utilizes a 52-53 week fiscal year ending on the Friday
closest to March 31. For fiscal years 2000 and 2001, the second quarter
contained twelve weeks, and the fiscal years contain 52 weeks.

(4) ACCOUNTS RECEIVABLE

Accounts receivable is presented net of an allowance for doubtful
accounts. At October 13, 2000 and March 31, 2000, the allowance for doubtful
accounts was $318,333 and $295,000, respectively.

(5) REIMBURSABLE CONSTRUCTION COSTS

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 quarter ended October 13, 2000
and the year ended March 31, 2000, the Company financed construction costs of
$4,901,334 and $2,659,854, respectively. Related repayments received under
reimbursement agreements were $2,646,829 and $1,538,755, respectively.

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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Form 10-Q

(6) FINANCING ARRANGEMENTS

At October 13, 2000, the Companys unsecured revolving line of credit
provides for borrowings up to $10,000,000, with interest payable at a variable
rate, at the Companys option, based on either the prime rate (9.5 percent at
October 13, 2000) or the Eurodollar rate. Under the line of credit, there were
outstanding borrowings of $3,622,943 at October 13, 2000 and $1,357,800 at March
31, 2000. Outstanding letters of credit further reduced the availability under
the line of credit in the amount of $2,722,000 and $2,972,000 at October 13,
2000 and March 31, 2000, respectively.  Due to the impact on rental expense from the Company's recent acquisitions, the primary
lender approved the appropriate waiver to the "Fixed Charge Ratio" covenant of the February 1, 1996
credit agreement.  This change, made after the fiscal 2001 second quarter close, was effective October
13, 2000, concurrent with the end of the fiscal quarter.

In connection with the acquisition of certain centers, the Company also
incurred $1,732,500 in notes payable for the twenty-eight weeks ended October
13, 2000. At October 13, 2000 and March 31, 2000, the total long-term debt was
$4,933,772 and $4,214,146, respectively. The Company also made payments in the
amount of $1,334,229 during the twenty-eight weeks ended October 13, 2000 to
reduce portions of long-term debt.

(7) OPTION GRANTS FOR CONSULTING SERVICES

The Company has retained Jacobson Partners, of which Benjamin R.
Jacobson, a director of the Company, is the managing general partner, to provide
management and financial consulting services. As part of the consideration to be
paid to, and to add further incentive for such services, Jacobson Partners has
been granted stock options to purchase 557,275 shares. As of the twelve weeks
ended October 13, 2000, Jacobson Partners has exercised options totaling 294,117
shares at a cost of $2,499,996. Additionally, Jacobson Partners will receive an
annual fee in the amount of $250,000, paid in quarterly installments, plus
reimbursement of reasonable out-of-pocket expenses. As a result of the stock
option grants, the Company has recorded additional compensation expense of
$297,950 resulting in a related income tax benefit of approximately $114,000 for
the twenty-eight weeks ended October 13, 2000.

(8) INCOME TAXES

The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, 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.

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##### Table of Contents



CHILDTIME LEARNING CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Form 10-Q

(9) EARNINGS PER SHARE

For the twelve week periods ended October 13, 2000 and October 15,
1999, basic earnings per share has been calculated by dividing earnings
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share has been calculated by
dividing earnings available to common shareholders by the weighted average
number of common shares outstanding for the period and the assumed conversion of
all potentially dilutive stock options (4,714 dilutive shares for the twelve
weeks ended October 13, 2000; 27,507 shares for the twelve weeks ended October
15, 1999; 1,037 shares for the twenty-eight week period ended October 13, 2000;
and 28,819 shares for the twenty-eight week period ended October 15, 1999).

(10) SUPPLEMENTAL CASH FLOW INFORMATION

In connection with the acquisition of certain centers, the Company
incurred seller-financed debt of $1,732,500 and $1,748,000 for the twenty-eight
weeks ended October 13, 2000 and October 15, 1999, respectively.

(11) BOOK OVERDRAFTS

Book overdrafts, which are included in accounts payable on the balance
sheet, 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 finance charges, as soon as they are presented. At October 13, 2000 and
March 31, 2000, the aggregate book overdrafts were $2,150,000 and $3,457,000,
respectively.

(12) STAFF ACCOUNTING BULLETIN

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin Number 101, Revenue Recognition in Financial Statements
(SAB 101). The guidelines in SAB 101 must be adopted during the fourth quarter
of the Companys 2001 fiscal year. The Company is evaluating the effect, if any,
that such an adoption may have on its financial position and results of
operations.

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##### Table of Contents






Managements Discussion and Analysis of
Financial Condition and Results of Operations

Form 10-Q

General

The information presented herein refers to the twelve weeks (second
quarter 2001) and the twenty-eight weeks (year-to-date 2001) ended October
13, 2000, compared to the twelve weeks (second quarter 2000) and the
twenty-eight weeks (year-to-date 2000) ended October 15, 1999.

During the second quarter 2001, the Company added 4 centers and closed
1. The additions were 4 build-to-suit leased centers. This compares to the
addition of 6 centers (4 acquisitions and 2 build-to-suit leased centers) and
the closing of 5 centers during the second quarter 2000. During year-to-date
2001, the Company has added 16 centers and closed 2. The additions included 10
acquisitions and 6 build-to-suit leased centers. Accordingly, as of October 13,
2000, the Company operated 307 centers, as compared to 274 at October 15, 1999.
The Company also operates 8 Oxford Learning Centers, all located in the state of
Michigan.

The results of centers opened, acquired or disposed of are included in
the Companys financial statements from the date of opening or acquisition and
through the date of disposition, as applicable. The timing of such new openings,
acquisitions or dispositions could influence comparisons of year over year
results.

Results of Operations

Second quarter 2001 revenues increased to $33,693,000 from $28,763,000
for the second quarter 2000 ($4,930,000, or 17.1%). This increase was
principally attributable to increased revenues from centers opened or acquired
in fiscal 2000 ($3,395,000) and centers opened or acquired in fiscal 2001
($1,373,000). Year-to-date 2001 revenues increased to $79,554,000 from
year-to-date 2000 revenues of $67,507,000. This increase was principally
attributable to increased revenues from centers opened or acquired in fiscal
2000 ($9,271,000) and centers opened in fiscal 2001 ($2,628,000). These
increases were partially offset by centers closed in fiscal 2001 ($1,277,000).

Comparable center revenues (centers operating during all of
year-to-date 2001 and year-to-date 2000) increased 1.6% ($441,000) for the
second quarter 2001. Year-to-date comparable center revenues increased 1.8%
($1,150,000). The second quarter and year-to-date 2001 increases were primarily
the result of tuition increases, partially offset by a decrease in the
utilization percentage for certain geographical areas.

Second quarter 2001 gross profit decreased to $3,352,000 (10.0% of
revenues) from $3,548,000 (12.3% of revenues) for the second quarter 2000, a
5.5% decrease. The decrease in gross profit was principally from comparable
centers ($257,000), centers opened or acquired in fiscal 2001 ($147,000) and
gross operating losses from the newly opened Oxford Learning Centers (149,000).
These decreases were partially offset by gross operating profits from centers

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##### Table of Contents



Managements Discussion and Analysis of
Financial Condition and Results of Operations

Form 10-Q

Results of Operations  Continued

opened or acquired in fiscal 2000 ($270,000). Year-to-date 2001 gross profit
increased to $9,048,000 (11.4% of revenues) from $8,770,000 (13.0% of revenues),
a 3.2% increase. The year-to-date 2001 increase in gross profit was principally
from centers opened or acquired in fiscal 2000 ($859,000), partially offset by
decreases in operating profit from comparable centers ($439,000) and
gross operating losses from Oxford Learning Centers ($388,000).

Marketing expenses increased 5.2% to $406,000 for the second quarter
2001 from $386,000 for the second quarter 2000. Year-to-date 2001 marketing
expenses increased 2.3% to $920,000 from $899,000. These increases were
primarily due to the additional expenses associated with the promotion and
marketing activities for 307 centers as of the end of the second quarter 2001,
compared to 274 centers at the end of the second quarter 2000. As a percentage
of revenues, both the second quarter 2001 and year-to-date marketing expenses
decreased to 1.2% of revenues for the twelve and twenty-eight weeks ended
October 13, 2000 from 1.3% of revenues for the twelve and twenty-eight weeks
ended October 15, 1999. The decrease is attributable to successful cost
containment and, to a lesser extent, operating leverage provided by higher
revenues.

General and administrative expenses increased 9.3% to $1,766,000 for
the second quarter 2001 from $1,616,000 for the second quarter 2000.
Year-to-date 2001 general and administrative expenses increased 26.5% to
$4,724,000 from $3,735,000 for year-to-date 2000. The increase is due primarily
to a charge of $366,000 for the Jacobson Partners options and related
consulting fees, the addition of three new area offices and the additional
expenses associated with the operation of 307 centers as of the end of the
second quarter 2001, as compared to 274 centers at the end of the second quarter
2000. As a percentage of revenues, general and administrative expenses decreased
to 5.2% for the second quarter 2001 from 5.6% for the second quarter 2000.
Year-to-date general and administrative expenses increased to 5.9% for
year-to-date 2001 from 5.5% for year-to-date 2000.

As a result of the foregoing changes, operating income decreased to
$1,180,000 for the second quarter 2001 from $1,547,000 for the second quarter
2000. The operating income change of $367,000 represents a decrease of 23.7%
from the second quarter 2000. Year-to-date 2001 operating income decreased 17.7%
to $3,404,000 from $4,136,000 for year-to-date 2000.

Interest expense increased to $260,000 for the second quarter 2001 from
$59,000 for the second quarter 2000. Year-to-date 2001 interest expense
increased to $538,000 from $126,000 for the prior year. The increase is a result
of interest paid on new acquisition debt, interest paid on funds borrowed to
repurchase shares of the Companys common stock during fiscal 2000 and an
increase in the prime rate, partially offset by the cash benefit received from
the exercise of the Jacobson Partners options.

The provision for income taxes decreased to $358,000 (an effective tax
rate of 37.3%) for the second quarter 2001 from $578,000 (an effective tax rate
of 37.2%) for the second quarter

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##### Table of Contents



Managements Discussion and Analysis of
Financial Condition and Results of Operations

Form 10-Q

Results of Operations  Continued

2000. Year-to-date 2001 provision for income taxes decreased to $1,143,000 (an
effective tax rate of 38.1%) from $1,591,000 (an effective tax rate of 37.5%).

As a result of the foregoing changes, net income decreased to $603,000,
or 1.8% of revenues for the second quarter 2001, from $974,000, or 3.4% of
revenues for the second quarter 2000. Year-to-date 2001 net income decreased to
$1,854,000, or 2.3% of revenues from $2,655,000, or 3.9% of revenues.

Liquidity and Capital Resources

The Companys primary cash requirements currently consist of its
maintenance of existing centers, repayment of debt and related interest, its new
center expansion program including Oxford Learning Centers and other potential
ventures. The Company believes that cash flow from operations, together with
amounts available under a $10.0 million unsecured revolving line of credit
facility, will be sufficient to satisfy the Companys anticipated cash
requirements on both a long-term and short-term basis. The line of credit bears
annual interest at either the prime rate or an adjusted Eurodollar based rate,
at the Companys option. Under the line of credit, there were outstanding
borrowings of $3,623,000 at October 13, 2000 and borrowings of $1,358,000 at
March 31, 2000. Outstanding letters of credit further reduced the availability
under the line of credit in the amount of $2,722,000 at October 13, 2000 and
$2,972,000 at March 31, 2000. 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.

Net cash provided by operations increased to $4,388,000 for
year-to-date 2001, from $3,352,000 for year-to-date 2000. Year-to-date 2001 cash
provided by operations, $2,500,000 from the issuance of new shares, $2,265,000
of net borrowings on the line of credit and $621,000 from the sale of fixed
assets, were principally used for investment in capital expenditures totaling
$4,216,000, to add 16 centers and make capital improvements to existing centers
and for the net funding of $2,255,000 of reimbursable construction costs related
to certain new build centers. Additionally, $1,334,000 was used for repayments
on long-term debt and $1,306,000 was used for the funding of zero balance checks
(see Item 11 in the Companys Notes to Consolidated Financial Statements). The
Company incurred additional seller-financed notes payable of approximately
$1,732,500 during the year-to-date 2001, related 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

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##### Table of Contents



Managements Discussion and Analysis of
Financial Condition and Results of Operations

Form 10-Q

Liquidity and Capital Resources-Continued

upgrades and related hardware of approximately $163,000 during fiscal 1999 and
$228,000 during fiscal 2000. As of March 31, 2000 the Company completed the
majority of the hardware and software purchases. 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 in the next 12 to
15 months.

Due to the impact on rental expense from the Companys recent
acquisitions, the primary lender approved the appropriate waiver to the Fixed
Charge Ratio covenant of the February 1, 1996 credit agreement. This change,
made after the fiscal 2001 second quarter close, was effective October 13, 2000,
concurrent with the end of the fiscal quarter.

SAFE HARBOR STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements included herein that are not historical facts, such as those
related to anticipated cash requirements, funding sources and the estimated
training costs for completing the Companys information technology system
upgrade, 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, the identification and availability of quality acquisition or new
development targets, the continuation of federal and state assistance programs,
demand for child care, taxing authority legislation, as well as general economic
conditions, pricing and competition. Accordingly, actual results could differ
materially from those projected in such forward-looking statements.

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##### Table of Contents






PART II
OTHER INFORMATION

FORM 10-Q

CHILDTIME LEARNING CENTERS, INC. AND CONSOLIDATED SUBSIDIARIES







Item 6 Exhibits and Reports on Form 8-K

(a)Index to Exhibits

|        |  |                                            |  |  |  | 
|------- |  | ------------------------------------------ |  |  |  | 
|Exhibit
|Number  |  | Description                               
|        |  |                                           
|4.1     |  | Fourth Amendment to Credit Agreement      
|       
|       
|       
|       
|27      |  | Financial Data Schedule (For SEC use only)

(b)Reports on Form 8-K: None

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

| |  |                                                                                                                                                  |         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------ | --------
| |  | CHILDTIME LEARNING CENTERS, INC.
(REGISTRANT)                                                                                                   
|
| |  | /s/ Michael M. Yeager
Michael M. YeagerChief Financial Officer and Secretary-Treasurer
(Duly Authorized Officer and Principal Financial Officer) | 11/14/00

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##### Table of Contents



Exhibit Index

|            |  |                                     
|----------- |  | ------------------------------------
|Exhibit No. |  | Description                         
|            |  |                                     
|4.1         |  | Fourth Amendment to Credit Agreement
|           
|           
|           
|           
|27          |  | Financial Data Schedule