Childtime Learning Centers, Inc.
Childtime Learning Centers, Inc.
Sales: $112.96 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: CTIM
NAIC: 62441 Child Day Care Services (pt)
Childtime Learning Centers, Inc. offers child-care and preschool services through its network of more than 290 centers in 22 states and the District of Columbia. The company serves more than 30,000 families and provides care for children aged 6 weeks to 12 years through its Childtime Centers and employer-sponsored, at-work facilities. Childtime experienced considerable growth in the 1990s and has plans to continue expanding at the rate of about 30 new centers a year to boost revenues.
Building Business in the Early Years: 1967-90
What eventually evolved into Childtime Learning Centers was founded in Illinois in 1967. The child-care firm was acquired by Michigan-based baby food manufacturer Gerber Products Company in 1973, and the name was changed to Gerber Children’s Centers, Inc. The company grew swiftly and expanded into New York, Illinois, California, Florida, Oklahoma, Ohio, Michigan, Maryland, Virginia, Georgia, Texas, and Arizona by the late 1980s.
Gerber was a pioneer in the development of employer-sponsored child-care services, opening its first corporate child-care center in 1981 at the Hurley Medical Center in Flint, Michigan. The center provided daycare and child-care services to employees of the hospital as well as members of the community. Gerber followed up the success of the Hurley center with centers at the Fresno Hospital in Fresno, California, in 1983, on the campus of Prince Georges Community College in 1984, at Mercy Hospital in Oklahoma City, Oklahoma, in 1986, and at Henry Ford Hospital in Detroit, Michigan, in 1987. In early 1990 Gerber opened a center at Edward W. Sparrow Hospital in Lansing, Michigan, and one at William Beaumont Hospital, located in Royal Oak, Michigan. The Beaumont facility turned a profit after only six months in operation.
Gerber Children’s Centers built a reputation for focusing on education, but its rapid expansion and what some in the industry viewed as poor management led to financial struggles in the late 1980s. The business suffered losses of about $3 million, and enrollment sagged—the centers, which numbered 115 in 1990, operated at about 60 percent of capacity at best, and 19 of the total were only half full. Attention from parent company Gerber Products was lacking as well; Gerber Products had diversified to the detriment of its primary business of baby food, and in the late 1980s the company began to shed its unprofitable, noncore operations, which included a trucking firm and businesses that manufactured toys, infant car seats, sleepwear, and children’s furniture, in order to return its attention to baby food. The Gerber Children’s Centers business was considered extraneous as well, and in 1990 Gerber Products announced the sale of its child-care subsidiary to KD Acquisition Corporation, a private investment firm based in New York. The sale was completed in July, and new ownership began the task of turning around the ailing business.
New Ownership and Restructuring in the Early 1990s
The U.S. child-care industry was highly fragmented, filled with many independent and local providers. In the early 1990s the largest child-care companies controlled only about four percent of the entire $15 billion market, leaving ample room for growth. The child-care industry was forecast to grow considerably as the number of working mothers increased, and the new owners of Gerber Children’s Centers hoped to tap into this growth. As Deborah Ludwig, executive vice-president and general manager of Gerber Children’s Centers, explained in a company press release, “Nearly 75 percent of all pre-school children will have employed mothers by 1995.... And more women with infants are choosing to stay employed than ever before in the history of this country. This, along with an overall rise in births—4.5 percent from July 1989 to July 1990—all point to growth opportunities for reputable providers of child care.”
The new owners of Gerber Children’s Centers wasted no time getting to work on reviving the company. Expansion, primarily in the growing field of employer-sponsored facilities, was a goal, and in December 1990 the company acquired Supertots, a provider of at-work child-care services, from Ogden Services Corporation. The purchase of the ten Supertots locations cemented the position of Gerber Children’s Centers as one of the five largest child-care providers in the nation. Among the centers acquired by Gerber Children’s Centers were those at Prudential Insurance Company of America in Iselin, New Jersey, and at Schering-Plough Corporation in Union, New Jersey.
Another major change for the company came in 1991. Under terms of the sale, KD Acquisition agreed to give up the Gerber name. To select a new company name, Gerber Children’s Centers staged a contest that resulted in more than 3,000 entries. Two people came up with the winning name, Childtime Children’s Centers, and for their efforts they were each given a $25,000 college scholarship bond.
The company moved its headquarters from Fremont, Michigan, to Brighton to be nearer to a major airport and assembled a new management team. Harold Lewis was recruited from Thomas Cook Travel Inc. to serve as president and CEO. Lewis, who had no previous work experience in the child-care industry, implemented a new management strategy that focused more heavily on the business aspect of running a child-care center. Lewis told Crain’s Detroit Business, “We make it clear to our center directors that there’s no inconsistency at all in being profitable and in caring for and teaching young children.... Without profitability, we can’t invest back into the business in terms of new equipment for the children.” Incentive programs that rewarded center directors for increasing enrollment and running more efficient operations were launched, and the company began offering management courses for directors that included classes on planning budgets, recruiting and firing staff members, marketing, and finance. Childtime also implemented a marketing program that targeted dual-income families with young children. The program used direct mail to entice prospective customers and marketed its services to businesses located close to Childtime facilities to attract working parents.
The emphasis on business and management did not mean Childtime ignored the care of children. The company installed computer systems in the majority of Childtime centers and hired an educational consultant to develop a curriculum for each age group served by the facilities. Childtime educational programs emphasized the process of learning and discovery, and children were placed into groups depending on their social, intellectual, emotional, and physical maturity. To retain business, Childtime made it a policy to keep parents informed regarding the activities and progress of their children, and thus the centers distributed the curriculum and periodic report cards to parents.
Childtime moved its headquarters again in 1992, to Farmington Hills, Michigan, and by the end of that year business was on the upswing—of the 19 centers that had been running at half capacity at the beginning of the decade, 16 had recovered and become profitable. By 1993 Childtime posted revenues of $44 million and a profit of $1 million. In 1993 the company opened two new at-work facilities, one at St. Francis Hospital in Evans-ton, Illinois, and one at the Northern Illinois Medical Center in McHenry. The following year Childtime began operating a facility for Blue Cross and Blue Shield of Mississippi and opened the Child Development Center at the Tulsa State Office Building in Oklahoma. To realize its goal of adding about 20 new centers a year, Childtime continued to expand through strategic acquisitions as well, and in 1994 the company bought Little Learners, a child-care provider in Syracuse, New York. The acquisition boosted Childtime’s numbers to 135 centers covering 14 states and Washington, D.C.
By the mid-1990s Childtime’s recovery seemed complete. For the fiscal year ended March 31, 1995, Childtime enjoyed record growth. The company reported revenues of $55 million, an increase of $7 million from the previous year, and net income of about $2.7 million. Harold Lewis commented on the company’s accomplishments in a prepared statement and said, “Our growth over the past three years, in a very competitive market, is primarily the result of target marketing and focused management.” Lewis also noted that the company’s achievements were all the more remarkable when considering the slim profit margins in the child-care industry.
The Children entrusted to our care will receive the best in learning environments in an atmosphere of acceptance, understanding, respect, and love.
The Parents of our children shall receive support in meeting the developmental and educational needs for their children and, as customers of our service, be treated with courtesy and respect.
The Shareholders will view shares of Childtime as an opportunity for meaningful return.
The Community will be served by a responsible corporate citizen supporting those activities which improve the quality of life for all children.
The Women and Men who, as members of our company, are directly responsible for its success, will enjoy a professionally fulfilling, participative, work life.
We commit ourselves to the quest of meeting our objectives in a manner that will allow us to truthfully say: “We Make a Difference.”
Steady Growth and Increasing Revenues in the Late 1990s
Childtime welcomed new challenges as it entered the second half of the decade. The company reincorporated as Childtime Learning Centers, Inc. in November 1995 and completed its initial public offering in February 1996. Childtime shares were offered on the NASDAQ exchange at $10 a share. In addition, although the child-care industry was growing rapidly, Childtime planned to expand steadily but conservatively, aiming to open about 25 to 30 new facilities a year until the end of the decade. Lewis told the Detroit News, “The problem with expanding any faster is coming up with the capital and human resources. We don’t want any handicaps. Our goal is to maintain steady growth with high-quality facilities.” Each newly built center cost about $1 million to build. The spacious centers ranged from 6,400 to 8,000 square feet. To ensure the success of the centers it opened, Childtime sought locations in residential areas with a high density of dual-income families and in regions with numerous office buildings. The company also looked for opportunities managing employer-sponsored, at-work facilities.
Differing state regulations, high employee turnover, and low profit margins all posed problems to those in the child-care industry, but the potential for growth in the U.S. market outweighed the cons. Thomas Johnson of Kindercare Learning Centers, Inc., one of the largest child-care providers in the United States, explained in Crain’s Detroit Business in 1996, “There are 51 million children under the age of 12.... Even if you total 50 of the largest for-profit child-care centers in the country, they’d be able to take care of only 1 percent of the nation’s children.” By the late 1990s the industry had grown to a $30 billion market, and consolidation had begun, indicating acknowledgment by investors of the growth potential of the business. In 1997 Kindercare was purchased by Kohlberg Kravis Roberts & Co., and La Petite Academy was acquired by Chase Manhattan. In 1998 Children’s Discovery Center was bought by Knowledge Universe, an investment company led by infamous junk bond dealer Michael Milken, Milken’s brother Lowell, and Oracle Systems Corporation Chairman Lawrence Ellison.
Childtime’s growth strategy proved successful, and the company’s revenues grew steadily. Childtime’s revenues for fiscal 1997 reflected a 20 percent increase over 1996 revenues and reached $78.63 million. The company opened 37 centers that year, including the takeover of Bureautots, an at-work facility serving employees of the U.S. Census Bureau in Suitland, Maryland. Childtime also won contracts to operate centers on the campus of the New Jersey Institute of Technology and the Veterans Affairs Medical Center in Pennsylvania. In 1997 the company made its entry into the state of Washington when it acquired nine centers from Abundant Life Childcare Centers in Seattle. Childtime also secured a contract to assume operation of an at-work center sponsored by the General Services Administration in downtown Seattle.
By the end of fiscal 1999, which ended April 2, the number of Childtime facilities had grown to 270 spanning 19 states and Washington, D.C. Childtime’s revenues reached $112.96 million, up from $97.83 million in 1998. Net income also increased, from $4.35 million in 1998 to $5.1 million. Enrollment in the centers had grown from 26,000 to 30,000 children, and the company added 30 new facilities. Childtime gained seven centers in Nevada through an acquisition, and two contracts involved the management of child-care facilities located at mass transit stops. The centers, in Baltimore, Maryland, and Des Moines, Iowa, were designed to promote mass transit commuting by working parents.
In August 1999 Childtime announced that its first quarter results would fall below estimates. The company blamed high electricity bills, caused by an unseasonably warm summer, and expenses from unsuccessful acquisition negotiations for the fall in earnings. Childtime also stated plans to close seven of its centers, which resulted in a severe one-day drop in the company’s share price of 13.2 percent. The company indicated that it could possibly close six to ten additional underperforming centers during the year, but that plans to open 35 to 40 new facilities were in place.
Childtime may have hit a few snags as it neared the turn of the century, but the company was not discouraged. The company was included on “The 200 Best Small Companies in America,” an annual list compiled by Forbes, in 1999. Childtime continued to grow and expand, adding 11 new centers in North Carolina, Georgia, and Texas at the end of 1999 and winning a management contract for the Lovelace Child Development Center, which provided services for the employees and members of Lovelace Health Systems, a health maintenance organization. In September Childtime partnered with ParentWatch, an Internet company that provided parents with live video access via the World Wide Web to their children at participating child-care facilities. To enhance its educational programs, Childtime formed a joint venture with Oxford Learning Centres of Canada. Known as Oxford Learning Centers of America, the venture was designed to offer after-school tutoring and enrichment programs to children from kindergarten through the eighth grade.
In the course of one decade, Childtime not only had defied its demise but it also had grown from 115 centers to more than 280 facilities in 22 states and the District of Columbia. For the first nine months of fiscal 2000, Childtime reported revenues of $96.37 million, up from $84.88 million for the comparable period of 1999. Net income fell from $3.5 million to $3.2 million, but Childtime remained confident in its future. The company planned to continue growing and expanding to meet the demands of working families in the 21st century.
- Company begins operations in Illinois.
- Original company is acquired by Gerber Products Company and renamed Gerber Children’s Centers, Inc.
- KD Acquisition Corporation buys Gerber Children’s Centers.
- Gerber Children’s Centers is renamed Childtime Children’s Centers.
- Childtime Learning Centers, Inc. is incorporated.
- Company goes public and begins trading on the NASDAQ.
Childtime Childcare, Inc.; Childtime Childcare—Michigan, Inc.; Childtime Childcare—PMC, Inc.
KinderCare Learning Centers, Inc.; La Petite Academy, Inc.; ARAMARK Corporation.
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