Cleveland Clinic Health System Obligated Group - FMSbonds.com

portfolio. Offsetting the decrease in collateralized receivables were increases in prepaid expenses of $12.2 millionprimarily due to the timing of annual maintenance contracts and insurance payments, increases in Hospital CareAssurance Program receivables of $8.3 million and increases in inventories of $4.7 million.Investments. Total investments decreased $242.0 million (9.5%) from December 31, 2007 to June 30,2008. Unrestricted investments decreased $193.1 million (9.8%) primarily from negative market returns on theSystem’s long-term investment pool and reclassifications to short-term cash to fund, in particular, the purchase ofbonds in lieu of redemption (See the discussion under “Cash and Investments” above). Donor restricted assetsdecreased $42.8 million (12.7%) primarily from the release of restrictions for capital purchases of the Miller FamilyPavilion and Glickman Tower construction projects. Assets held by captive insurance companies decreased $6.1million (3.5%). The decrease in assets held by captive insurance companies is primarily related to the timing ofreimbursement for claims previously settled and paid by other System entities in excess of insurance premiumsreceived.Property, Plant and Equipment, Net. Net property, plant and equipment increased $109.2 million (4.4%)from December 31, 2007 to June 30, 2008. In 2008, the System acquired $228.2 million in new assets. Theseadditions were offset by a $119.0 million increase in accumulated depreciation for the same period. Included incapital acquisitions were $95.2 million for the Miller Family Pavilion project, $24.6 million for the Glickman Towerproject, $14.3 million for the System’s portion of the Carnegie and 89th Street Garage and Service Center project,$12.0 million for the 93rd Street parking garage expansion at the main campus, $5.2 million for the System’sinvestment in electronic medical records systems, and $3.8 million for the leasehold improvements of office spacein Beachwood that the System began leasing in 2007.Current Liabilities. Accounts payable decreased $19.5 million (6.8%) since December 31, 2007. Thisdecrease is principally attributable to a higher than normal level of large invoices at year-end associated with theSystem’s current construction projects. Compensation and amounts withheld from payroll increased $16.5 million(16.2%) since December 31, 2007 which is primarily the result of the timing of payroll and growth in salaries andFTEs. Other current liabilities decreased $336.2 million (50.4%) since December 31, 2007. Included in othercurrent liabilities is a payable of $14.0 million associated with securities lending activity, which decreased $345.7million from December 31, 2007. (See the discussion under “Other Current Assets” above.) Offsetting this decreaseis a $6.1 million increase in third party payor deposits that are expected to be refunded in 2008 and a $5.5 millionincrease in research deferred revenue related to research activities.Long-Term Debt. Hospital revenue bonds payable decreased $332.9 million (22.7%) since December 31,2007. The decrease was primarily the result of the System’s payment of $329.4 million to purchase bonds in lieu ofredemption. Notes payable and capital leases decreased $6.2 million (11.9%) since December 31, 2007. Thedecrease was the result of regularly scheduled debt payments and the reclassification of payments from noncurrentto current.Non-Current Liabilities. Other liabilities increased $26.5 million (3.2%) since December 31, 2007. Theincrease is the result of a $9.5 million increase in accrued malpractice liabilities, a $4.7 million increase in accruedretirement benefits, and a $12.3 million increase in other noncurrent liabilities. The increase in other noncurrentliabilities was primarily due to a $9.7 million increase in noncurrent paid time off and a $2.8 million increase inderivative liabilities.Net Assets. Total net assets increased $19.5 million (0.6%) from December 31, 2007 to June 30, 2008.Unrestricted net assets increased $68.1 million (2.5%) comprised primarily of $41.5 million of excess of revenuesover expenses, and $50.0 million of donated capital and assets released from restrictions offset by a $21.1 millionreduction related to the adoption of FASB Statement No. 158 and a $2.2 million change in unrealized investment netlosses on nontrading investments. Restricted net assets decreased $48.6 million (7.3%) comprised of $25.3 millionof restricted gifts and $0.5 million increase in beneficial interest in foundations, less $65.0 million of assets releasedfrom restrictions and $9.4 million net investment loss.G. PENSION PLANThe Health System, including both the Obligated Group and other affiliated entities, has non-contributorydefined benefit pension plans covering most employees. As of December 31, 2007, the projected benefit obligationexceeded the fair value of the pension assets by approximately $306.9 million. The Cleveland Clinic’s funding forits pension plans were $3.0 million in 2007, $92.0 million in 2006, and $113.0 million in 2005. In 2008, theA-43