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News Release

December 14, 2004

Contact:

Kate Chesley, University Communications: (650) 725-3697, kchesley@stanford.edu

Stanford University reports FY 2004 financial results

Stanford University achieved essentially breakeven results with a surplus from operations of $7 million for the fiscal year ended Aug. 31, 2004 (FY04), following a $46 million surplus in the previous fiscal year. The Stanford Hospital and Clinics reported an excess of revenues over expenses of $101 million. Lucile Salter Packard Children's Hospital reported an excess of revenues over expenses of $47 million. The university and hospitals together generated an operating surplus of $155 million in FY04, compared with $142 million in FY03.

FY04 results were reported to the university's Board of Trustees on Dec. 13. The results are summarized on the Stanford bondholder web pages (http://bondholder-information.stanford.edu) and will be widely distributed through Stanford's annual report of financial results, expected to be published in February.

Stanford's consolidated net assets increased $1.7 billion to end the year at $14 billion, the largest net asset balance recorded to date. Continued positive investment performance and substantial new gifts combined with strong operating results at the hospitals contributed to the increase in net assets. Consolidated net assets include the value of endowment, expendable funds, plant facilities and other assets, less debt and other liabilities for the university and hospitals.

In FY04, the university's total investment returns were $1.7 billion, compared with $1.3 billion in FY03. The endowment ended the year at $9.9 billion, up from $8.6 billion in FY03. The university recorded its second-highest year for donations with $524 million of gifts reported on a cash basis.

A change in policy governing the distribution of investment income from expendable funds to operations resulted in a lower operating surplus for the university than during the previous fiscal year. The new policy resulted in a payout to operations of $42 million in FY04 compared to $82 million in FY03 and a corresponding increase in investment returns being transferred to endowment of $122 million in FY04 from $37 million in FY03.

Randy Livingston, vice president for business affairs and chief financial officer, said that despite two consecutive years of positive financial results, the university and the hospitals continue to focus on challenges in FY05 and subsequent years. Among those challenges are anticipated low growth in federal sponsored research funding, declines in indirect cost rate over the next two years, continued increases in health care costs for employees and retirees, persistent volatility in the financial markets, the need to renovate and invest in new facilities to remain competitive and a tight labor market and competitive reimbursement market for the hospitals.

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Information in this press release contains statements that, to the extent they are not recitations of historical fact, may constitute "forward-looking statements." In this respect, the words "estimate," "project," "anticipate," "expect," "intend," "believe" and similar expressions are intended to identify forward-looking statements. A number of important factors affecting the university's business and financial results could cause actual results to differ materially from those stated in the forward-looking statements.

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