Net Income (Loss) December ($3,220,000) ($2,530,000) ($ 690,000) Net Income (Loss) Year to Date ($1,637,000) ($1,557,000) ($ 80,000)

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1 th Ave. NE Kirkland, WA January 14, 2019 Dear Board Member, Today is the start of our spring semester, students are back on campus and activity is picking up once again. It is great to see the campus full of students as we begin Net Income Summary Actual Budget Variance Net Operating Income (Loss) December ($2,529,000) ($2,530,000) $ 1,000 Net Operating Income (Loss) Year to Date ($ 712,000) ($1,604,000) $ 892,000 Net Income (Loss) December ($3,220,000) ($2,530,000) ($ 690,000) Net Income (Loss) Year to Date ($1,637,000) ($1,557,000) ($ 80,000) We separately reflect investment market gains (losses), the swap adjustment gain (loss), and capital contributions. These are the differences between net operating income and net income. December investments experienced a significant loss as the markets tumbled during the month of December, year to date we now have a loss of $1,033,000. The interest rate swap gain or loss went away in FY 18 after we closed the refinance on our debt in August The capital contributions in December reflect some year to date corrections for contributions that were over booked earlier in the year and discovered during the December close. Tuition Summary Year to Date FY 19 Budget Variance Year to Date Tuition Revenue $21,650,000 $22,044,000 ($394,000) Northwest Partnership Program $ 78,000 CSBS $ 75,000 Kirkland Summer Programs ($ 40,000) International Programs ($ 82,000) Center for Leadership Studies ($ 86,000) College of Business ($ 86,000) Online ($ 90,000) Adult Evening ($228,000) All other programs $ 65,000 Tuition Summary December FY 19 Budget Variance Tuition Revenue $9,000 - $9,000 All other programs $9,000 December tuition revenue reflects various adjustments to student s accounts. There is no tuition revenue budgeted in the month of December. Fee revenue is $8,000 worse than budget for the month and $46,000 better than budget year to date. Discounts are $69,000 worse than budget in December and $339,000 worse than budget year to date. Our discounts will be higher than we budgeted for the year, the only question is how much will they be over budget. The fall discount rate for the Kirkland Undergrad program ended at 49.3% versus a budgeted rate of 46.9%. If that trend continues we could be $650,000 worse than budget by the end of the fiscal year. All other sources of revenue for the month of December were $86,000 worse than budget. Year to date all other sources of revenue are $106,000 better than budget, with the largest variances being interest/dividend revenue, which is Phone:

2 2 $125,000 better than budget, followed by other revenue which is $107,000 better than budget, and auxiliary revenue which is $95,000 better than budget. Contribution revenue is $221,000 worse than budget due to timing differences related to when President Banquet advance payments would be received, and general contributions. Combined these two areas are $182,000 worse than budget, all other contribution related revenue is $39,000 worse than budget. Year to Date Operating Contribution Detail Actual Budget Variance Opportunity Fund (General Giving) $195,000 $267,000 ($ 72,000) Other Giving (Mission Trips, Choralons, Banquets, etc.) $230,000 $381,000 ($ 151,000) Grant Contributions (Murdock, Lilly) $ 77,000 $ 75,000 $ 2,000 Total $502,000 $723,000 ($ 221,000) Operating Expense Detail December Monthly Variance Year to Date Variance Primary Variance Factor Total $155,000 $1,473,000 Presidents Department $ 5,000 ($ 10,000) Jim Heugel Departments $ 48,000 $ 755,000 Maintenance & utilities in campus housing, plus the timing of filling open staff/faculty positions, plus international study tour expense; some of this is permanent and some are timing differences. Ken Cornell Departments $ 46,000 $ 345,000 Slower marketing spend, plus timing of filling open staff positions, plus professional services; some of this is permanent and some are timing differences. Phil Rasmussen Departments $ 44,000 $ 8,000 John Jordan Departments $ 9,000 $ 150,000 Depreciation, professional services, and interest expense; some of this is permanent and some are timing differences. Contingency Department $ 3,000 $ 225,000 Revenue contingencies. Balance sheet items to note as of December 31 include the following: Major Balance Sheet Year to Date Variance from Primary Variance Factor for Year to Date Variance Categories Variance Last Year Unrestricted cash $1,659,000 $1,484,000 Slower capital spend than budgeted, higher operational net income than budgeted. Investments ($ 852,000) ($ 466,000) Investment market losses. Fixed assets, net ($ 686,000) ($1,463,000) Slower spend of capital budget. With the Government shutdown, isn t experiencing any impact as the services that we utilize (primarily Government Financial Aid and Loans) are deemed to be essential departments. We are still praying that all services will be back to normal sooner rather than later.

3 3 Please continue to pray for the following items: Pray that the retention rate will be at an all-time high going into spring semester. Pray traditional admission staff will reap benefits with current high school students that have been contacted this fall for enrollment next fall. Also, pray for spring admissions for the Kirkland Undergrad program, we have 45 students budgeted for new admits for spring. At this point it appears we will be very close to a record retention for spring semester. We will know for sure in the next couple weeks once we get past add/drop week. It also looks like we should be very close for new students starting in spring. Pray for the master plan process. We continue to inch closer to the city issuing reports and a public hearing date being set. We had our meeting with city staff to review the SEPA report, and are waiting for them to reissue the SEPA based on some input and changes we proposed. It was supposed to be issued last week, but that hasn t happened yet, unfortunately that is not surprising. Pray for a successful President s Banquet. Please pray that we will reach the goal of $750,000 which is $240,000 more than was raised last year. President Castleberry, Development and Event staff are hard at work to make this increase come through. Should you have any questions regarding this report or the financial statements, please feel free to contact me. Thank you for your service and partnership with, you are appreciated. Sincerely, John Jordan Chief Financial Officer

4 Year to Date Financial Results Through December 2018 (7 months) (In Thousands) Current Month Year to Date Variance Variance Annual Actual Budget Good (Bad) Last Year Actual Budget Good (Bad) Budget Revenue: $ (4) $ $ (4) Kirkland Undergrad Tuition Revenue $ 13,501 $ 14,236 $ 14,206 $ 30 $ 27,820 (5) (5) Grad Tuition Revenue 3,028 3,621 3,718 (97) 7, CAPS Tuition Revenue (less Online) 2,161 2,167 2,317 (150) 4, Online Programs ,039 (90) 1,987 Salem Sacramento International (82) 701 Summer & Other (40) Total Tuition 20,671 21,650 22,044 (394) 42, (8) Fee Revenue ,385 (69) (69) Discounts (6,553) (7,210) (6,871) (339) (13,512) (46) 22 (68) Net Tuition & Fees 14,623 14,928 15,615 (687) 30, (180) Contribution Revenue (221) 1, Auxiliary Revenue 3,168 3,361 3, , Other Revenue Interest/Dividend Revenue (154) Total Operating Revenue 19,300 19,800 20,381 (581) 39,414 Expense: Castleberry Departments (10) 644 1,581 1, Heugel Departments 10,464 10,332 11, , Cornell Departments 2,311 2,462 2, , Rasmussen Departments , Jordan Departments 6,397 6,625 6, , Contingency (15) ,942 3, Total Operating Expense 20,135 20,512 21,985 1,473 38,831 (2,529) (2,530) 1 Net Operating Income (Loss) (835) (712) (1,604) (669) (669) Investment Market gain (loss) 670 (1,033) (1,033) Swap Adjustment gain (loss) 20 (22) (22) Capital Contributions $ (3,220) $ (2,530) $ (690) Net Income (Loss) $ (49) $ (1,637) $ (1,557) $ (80) $ 630

5 Balance Sheet For the period ending December 31, 2018 In thousands Prior Current Budget Variance Year Year to Budget Assets: Unrestricted cash $ 3,435 $ 4,919 $ 3,260 $ 1,659 Donor restricted cash Restricted cash Student receivables, net 79 (12) 169 (181) Other receivables Other current assets Total Current Assets 5,277 6,545 4,853 1,692 Investments 17,129 16,663 17,515 (852) Notes receivable (17) Planned giving assets 4,192 4,022 4,055 (33) Fixed assets, net 45,681 44,218 44,904 (686) Other assets Total Assets $ 73,046 $ 72,169 $ 72,065 $ 104 Liabilities & Net Assets Accounts payable & accrued expenses $ 2,747 $ 3,086 $ 3,019 $ 67 Student deposits Deferred revenue (26) Current portion of notes & bonds payable 2,262 1,829 1,829 Total Current Liabilities 6,190 6,109 5, Planned giving liabilities 2,923 2,920 2,920 Student loan program (9) Notes & bonds payable 29,261 28,560 28,572 (12) Other liabilities Total Liabilities 39,062 38,239 37, Unrestricted net assets 26,224 26,281 26,350 (69) Temporarily restricted net assets 3,094 2,555 2,877 (322) Permanently restricted net assets 4,666 5,094 4, Total Net Assets 33,984 33,930 34,096 (166) Total Liabilities & Net Assets $ 73,046 $ 72,169 $ 72,065 $ 104