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Other costs recorded at the center level include rent, marketing, maintenance, utilities, transportation, classroom and office supplies, insurance and food. KLC’s management believes its large, combined nationwide center base gives it the ability to leverage the costs of programs and services, such as curriculum development, training programs and other management processes. During fiscal year 2005, KLC experienced a reduction in projected claims costs for its self-insurance programs. However, management anticipates that premium and claims costs will continue to refiect market forces, which are beyond KLC’s control. The Real Estate Transaction did not affect consolidated rent expense, but resulted in an increase of approximately $96.0 million in annual rent expense of KLC OpCo, which is leasing centers from KLC PropCo which now has title to substantially all of KLC's owned real property. Other Operating Expenses KLC's other operating expenses include the costs associated with the field management and corporate oversight and support of its centers and resiructuring related expenses. Labor related costs are the largest component of KLC's general and administrative expenses. Seasonality New enrollments are generally highest during the traditional fall “back to school” period and after the calendar year-end holidays. KLC attempts to focus its marketing efforts to support these periods of high reenrallments. Enrollment generally decreases somewhat during the summer months and the calendar year-end holidays. Resuits Discussion Revenue increased to $1.48 billion in 2005, which represents an increase of $35.6 million over 2004. Gross margin was $340.7 million during the 52 weeks ended December 31, 2005, an increase of $11.1 million, or 3.4%, compared to the same period last year. Adjusted EBITDA during the 52 weeks ended December 31, 2005, was $238.0 million which was $6.6 million, or 2.9%, above the same period in 2004. 77 HOUSE_OVERSIGHT_024510