AUGUSTA REGIONAL AIRPORT AT BUSH FIELD

Transcription

1 Augusta, Georgia Financial Statements for the years ended December 31, 2008 and 2007

2 Management s Discussion and Analysis (Unaudited) The following discussion and analysis of the financial performance and activity of the Augusta Regional Airport (the Airport) is to provide an introduction and understanding of the basic financial statements of the Airport for the years ended December 31, 2008 and This discussion has been prepared by management and should be read in conjunction with the audited financial statements and the notes thereto, which follow this section. Using the Financial Statements The Airport financial report includes three basic financial statements: the Statement of Net Assets, Statement of Revenues, Expenses and Changes in Net Assets, and the Statement of Cash Flows. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Airport Activity Highlights In fiscal year 2005, (January December 2005), Augusta Regional Airport at Bush Field (the Airport) began construction of Augusta s first new commercial aviation terminal. Construction began April 2005; total cost of the terminal project, construction services, and program management is approximately $31.8 million. As of December 31, 2008 and 2007, $31.7 million and $29.1 million, respectively, had been spent on the new terminal and construction was on schedule and within budget. The new terminal facility is constructed in the same footprint as the existing structure and includes 8 ticket counter positions, 6 multi-use jet aircraft gates, and 2 baggage claim devices. Date of beneficial occupancy was December 9, 2007, with final demolition ending February 2008 and final project completion in In May 2008, the Airport received a grant allocation of $1.4 million from the Federal Aviation Administration (the FAA ) for the Airport improvement program (AIP) of which $1.1 million will be used to partially cover the cost of the new terminal. It is the goal of the Aviation Commission to utilize the AIP funds in a manner that reduces the cost impact to the airlines. In November 2004, the Augusta-Richmond County (the County ) Commission established rates and charges for the use of Augusta Regional Airport at Bush Field through County Ordinance Number This ordinance superseded County Ordinance Number Upon occupancy of the new terminal, rents and fees have been adjusted and will be adjusted at the beginning of each fiscal year. The rents and fees will cover net operating cost as projected in the Airport s annual budget as approved by the Aviation Commission and adopted by the County. Under the ordinance, rents and fees will be adjusted whenever the Aviation Commission determines that Airport revenues are not sufficient to satisfy the requirements of the ordinance. Rents, fees and charges are calculated proportionate to each airport cost center budget (Airfield, Apron, Loading Bridges, Terminal Area, Terminal Building, Aviation Services, Other buildings and areas). Rates and charges will be established to provide recovery of pro rata direct and indirect operation and maintenance expenses, 1.25 times annual debt service coverage and amounts of deposits to any funds and accounts required by the Bond Resolution. 4

3 Management s Discussion and Analysis (Unaudited) - Continued Rental rates for Airline rentable space in the new terminal building has been increased from $30.00 per square foot per month in 2007 to $37.46 per square foot per month in The rate will be evaluated annually and may be increased, if necessary to recover costs of operating the new terminal building facilities. The rent for joint use space will be prorated among the Airlines according to a joint use formula. With the occupancy of the new terminal building, the landing fee rate has been changed to $0.77 in 2008 from $1.50 in 2007 per one thousand (1,000) pounds of Certificated Maximum Landing Weight. During fiscal year 2008, landed weight increased approximately 16.9% which was due to an increase in the number of seats in the market. With the occupancy of the new terminal, the rate will be evaluated annually and may be increased, if necessary, to recover operating costs. Enplanements, Operations, and Parking Activity for 2008, 2007 and 2006 Percent of Percent of Increase Increase (Decrease) (Decrease) From 2007 From 2006 Enplanements (number of passengers): 180, , , % 13.6% Operations (number of landings): Airlines 10,296 10,530 11,072 (2.2)% (4.9)% General Aviation 15,436 15,644 16,420 (1.3)% (4.7)% Military 2,883 3,455 3,966 (16.6)% (12.9)% Total Landings 28,615 29,629 31,458 (3.4)% (5.8)% Landed Weight (Certified Maximum Gross Landing Weight CMGLW ): 209, , , % (0.3)% Parking Revenue (Gross): Short-Term Parking Lot 94,264-66, % (100.0)% Long-Term Parking Lot 488, , ,756 (14.4)% 0.8% Credit Card Parking Lot 462, , , % 95.1% Total Parking Revenue 1,045, , , % 11.6% For the year ended December 31, 2008, the total number of enplaned passengers was 180,159 which was an increase of 11.1% over Airport management attributes the increase in passengers to lower, more competitive fares, better performance by both airlines that serve the Airport and the extensive marketing efforts of the Airport. The completion of the new terminal also leads to a more pleasant flying experience. For the year ended December 31, 2007, the total number of enplaned passengers was 160,103 which was an increase of 13.6% over Airport management attributes the increase in passengers to lower, more competitive fares, better performance by both airlines that serve the Airport and the extensive marketing efforts of the Airport. 5

4 Management s Discussion and Analysis (Unaudited) - Continued Parking revenue increased 18.1% during 2008 from The increase is consistent with the increase of emplaned passengers. Parking revenue increased 11.6% during 2007 from The increase is consistent with the increase of emplaned passengers. The Airport receives passenger facility charges according to an agreement with the FAA. Passenger facility charges, referred to as PFCs, are authorized by the Aviation Safety and Capacity Expansion Act of On May 5, 1999, the Aviation Commission received approval, pursuant to a first PFC application, to collect a $3.00 PFC from September 1, 1999, to September 1, 2026 on each qualifying enplaning passenger totaling $29,266,258, in order to finance, among other things, the new terminal facility. On May 1, 2000, the FAA approved an amendment to the first PFC application, increasing the collection level to $4.50 on each qualifying enplaning passenger, decreasing the total amount authorized to be collected to $28,835,139 and revising the charge expiration date to July 1, On August 24, 2004, the FAA approved another amendment to the first PFC application increasing the total amount authorized to be collected to $31,482,000 and extending the charge expiration date to July 1, The FAA approved an additional $2,007,000 from a $4.50 PFC charge beginning July 1, 2030 and expiring on August 1, Augusta Regional Airport is somewhat different from other airports as we own and operate our Fixed Based Operation (the FBO ). The FBO sets its own rate structure for landing fees and apron charges that are based on the size and weight of the aircraft. The rate structure has not been changed since fiscal year The FBO also has control over all aviation fuel sales at the Airport. In 2003, Airport management implemented weekly pricing adjustments to coincide with the fluctuating cost of fuel; this effectually stabilized the profit margin. For the year ended 2008, profit margin (sales price/gallon less cost/gallon) generated from the sale of general aviation fuel, which has the highest mark-up, represents approximately 60% of total net fuel sales (sales price less cost fuel sold) and 34% of total gallons sold. For the year ended 2007, profit margin (sales price/gallon less cost/gallon) generated from the sale of general aviation fuel, which has the highest mark-up, represents approximately 57% of total net fuel sales (sales price less cost fuel sold) and 34% of total gallons sold. Fuel sales (gallons) to commercial airlines increased approximately 36% during 2008 from 2007, which generated an increase in profit from airlines (fuel sales less fuel cost of goods sold) of approximately 26%. This increase is consistent with the improvement in airline operations. Fuel sales (gallons) to commercial airlines increased approximately 13% during 2007 from 2006, which generated an increase in profit from airlines (fuel sales less fuel cost of goods sold) of approximately 13%. This increase is consistent with the improvement in airline operations. Total fuel sales (gallons) to all customers (airlines, general aviation, tenants, and military) decreased approximately 7% during 2008 over 2007, and net profit decreased approximately 23% as well. Total fuel sales (gallons) to all customers (airlines, general aviation, tenants, and military) increased approximately 6% during 2007 over 2006, and net profit increased approximately 3% as well. 6

5 Management s Discussion and Analysis (Unaudited) - Continued The Airport has a minimal number of concessionaires that make minimum guarantee payments or a percentage of earnings (7% - 10%) whichever is greater. Previously, catering sales were included in other aeronautical revenue and non-aeronautical expense. After reassessing the catering operations, it was determined that these sales did not actually generate revenue for the Airport. Likewise, the expenses associated with the catering operations did not belong to the Airport and have been eliminated. During fiscal years 2008, 2007, and 2006, there were no changes in the rates charged to rental car concessionaires. Rental car agencies remit to the Airport either 10% of their monthly earnings or minimum guarantee payment of $5,000, whichever is greater. Furthermore, they are charged $10 per ready return space. In July 2006, the Augusta Aviation Commission entered into an agreement with rental car agencies to begin charging a Customer Facility Charge (CFC) of one dollar ($1) on all transaction days for each rental agreement. This rate increased to three dollars and fifty cents ($3.50) in April 2007 and has remained the same through

6 Management s Discussion and Analysis (Unaudited) - Continued For fiscal year 2008: Percent of Increase Increase Revenue Revenue (Decrease) (Decrease) Revenue Classifications Amount Amount from 2007 from 2007 Landing fees $ 244,367 $ 369,499 $ (125,132) (33.9) % Terminal area rental 757, ,746 44, % Security reimbursements 106, ,633 (266,938) (68.2) % Apron charges 495, , , % FBO revenue 134, ,786 13, % Fuel sales 12,093,481 10,649,078 1,444, % Other aeronautical 29,412 22,465 6, % Land/non-terminal fees 656, ,063 (47,989) (6.8) % Terminal food/beverage 11,911 9,268 2, % Terminal other (458) (63.0) % Rental cars 1,081, ,747 91, % Parking 845, , , % Non-aeronautical 54,066 35,676 18, % Total operating revenue $ 16,510,621 $ 14,983,689 $ 1,526, % Passenger facility charge $ 682,660 $ 710,555 $ (27,895) (3.9) % Operating expenses at the Airport increased 21.4% during 2008 over This was primarily due to increased fuel costs in 2008 and depreciation expense related to the new terminal. Percent of Increase Increase (Decrease) (Decrease) Expense Classifications from 2007 from 2007 Personnel salaries/benefits $ 3,723,959 $ 3,641,375 $ 82, % Communications and utilities 530, ,435 95, % Repairs and maintenance 175, ,831 10, % FBO expense 53,190 67,101 (13,911) (20.7) % Fuel expense 9,422,484 7,309,105 2,113, % Contractual services 473, ,256 38, % Insurance 143, ,254 (16,306) (10.2) % Supplies and materials 93,191 98,924 (5,733) (5.8) % Depreciation 2,272,293 1,523, , % Miscellaneous expense 391, ,841 54, % Other expense 717, ,718 59, % Total operating expense $ 17,997,468 $ 14,829,657 $ 3,167, % 8

7 Management s Discussion and Analysis (Unaudited) - Continued For fiscal year 2007: Percent of Increase Increase Revenue Revenue (Decrease) (Decrease) Revenue Classifications Amount Amount from 2006 from 2006 Landing fees $ 369,499 $ 312,247 $ 57, % Terminal area rental 712, ,254 97, % Security reimbursements 333, ,239 (67,606) (16.8) % Apron charges 304, ,363 79, % FBO revenue 121,786 47,938 73, % Fuel sales 10,649,078 9,638,202 1,010, % Other aeronautical 22,465 15,275 7, % Land/non-terminal fees 704, ,804 41, % Terminal food/beverage 9,268 9,938 (670) (6.7) % Terminal other 727 6,557 (5,830) (88.9) % Rental cars 989, ,303 (6,556) (0.7) % Parking 730, ,757 11, % Non-aeronautical 35,676 31,538 4, % Total operating revenue $ 14,983,689 $ 13,680,415 $ 1,303, % Passenger facility charge $ 710,555 $ 546,348 $ 164, % Operating expenses at the Airport increased 5.8% during 2007 over This was primarily due to increased fuel costs. Percent of Increase Increase (Decrease) (Decrease) Expense Classifications from 2006 from 2006 Personnel salaries/benefits $ 3,641,375 $ 3,675,671 $ (34,296) (0.9) % Communications and utilities 434, ,551 (40,116) (8.5) % Repairs and maintenance 164, ,438 (3,607) (2.1) % FBO expense 67,101 59,243 7, % Fuel expense 7,309,105 6,456, , % Contractual services 435, ,903 (12,647) (2.8) % Insurance 160, ,091 (22,837) (12.5) % Supplies and materials 98,924 88,666 10, % Depreciation 1,523,817 1,466,439 57, % Miscellaneous expense 336, ,164 (323) (0.1) % Other expense 657, ,044 (7,326) (1.1) % Total operating expense $ 14,829,657 $ 14,022,814 $ 806, % 9

8 Changes in Net Assets Management s Discussion and Analysis (Unaudited) - Continued Fiscal year 2008 operating income (before depreciation expense) increased approximately $892,603 when compared to the prior fiscal year. This was largely due to an increase in terminal area rentals and landing fees and an overall decrease in several operating expenses. Fiscal year 2007 operating income (before depreciation expense) increased approximately $553,809 when compared to the prior fiscal year. This was largely due to an increase in terminal area rentals and landing fees and an overall decrease in several operating expenses. The following is a summary of the Revenues, Expenses and Changes in Net Assets: Operating revenue $ 16,510,621 $ 14,983,689 $ 13,680,415 Operating expense, excluding depreciation (15,725,175) (13,305,840) (12,556,375) Operating income before depreciation 785,446 1,677,849 1,124,040 Depreciation expense (2,272,293) (1,523,817) (1,466,439) Non-operating revenue 3,495,583 5,568,122 5,569,820 Non-operating expense (497,471) (366,192) (35,632) Change in net assets $ 1,511,265 $ 5,355,962 $ 5,191,789 Financial Position A summarized comparison of the Airport s assets, liabilities and net assets as of December 31, 2008, 2007, and 2006 is as follows: Current assets $ 11,800,989 $ 13,057,410 $ 10,362,405 Restricted assets 15,436,605 17,698,136 21,458,785 Non-current assets 962, ,708 1,033,340 Capital assets, net of accumulated depreciation 54,958,411 51,936,716 44,521,151 Total assets $ 83,158,080 $ 83,689,970 $ 77,375,681 Liabilities Current liabilities $ 2,448,193 $ 4,491,348 $ 3,533,021 Long-term liabilities 19,605,000 19,605,000 19,605,000 Total liabilities $ 22,053,193 $ 24,096,348 $ 23,138,021 Net assets Invested in capital assets, net of related debt $ 44,617,749 $ 44,515,250 $ 41,042,101 Restricted 6,172,267 5,514,602 5,332,835 Unrestricted 10,314,871 9,563,770 7,862,724 Total net assets $ 61,104,887 $ 59,593,622 $ 54,237,660 Current assets have decreased by approximately $1.2 million for fiscal year ended December 31, The decrease is largely due to decreased accounts receivable and federal grants receivable at December 31, 2008 compared to December 31,

9 Management s Discussion and Analysis (Unaudited) - Continued The Airport has invested in Construction in Progress (CIP) in 2008 approximately $33,000, a decrease of $27,198,000 from The decrease was due to terminal construction and infrastructure improvements that have been completed and are now capitalized. The Airport s capital assets are principally constructed using capital contributions from federal grants, bond debt and passenger facility charge revenue. Total liabilities decreased approximately $2.0 million from December 31, 2007 to December 31, This was primarily due to a decrease in current liabilities at December 31, 2008 as compared to December 31, Net assets, which represent the residual interest in the Airport s assets after liabilities are deducted, increased approximately $1,511,000 from December 31, 2007 to December 31, The Airport has invested in Construction in Progress (CIP) in 2007 approximately $27,231,000, an increase of $8,258,000 over The increase was due to terminal construction and infrastructure improvements. The Airport s capital assets are principally constructed using capital contributions from federal grants, bond debt and passenger facility charge revenue. Total liabilities increased approximately $958,000 from December 31, 2006 to December 31, The increase is primarily due to capital expenses for the terminal project. Net assets, which represent the residual interest in the Airport s assets after liabilities are deducted, increased approximately $5,356,000 from December 31, 2006 to December 31, Cash and Investment Management The Airport s unrestricted cash and cash equivalents decreased approximately $90,000 from December 31, 2007 to December 31, 2008 for a total of $10,952,193 at December 31, Cash and cash equivalents are considered highly liquid investments with an original maturity of less than one year or with insignificant early withdrawal penalties. The Airport s unrestricted cash and cash equivalents increased approximately $2,934,000 from December 31, 2006 to December 31, 2007 for a total of $11,042,000 at December 31, Cash and cash equivalents are considered highly liquid investments with an original maturity of less than one year or with insignificant early withdrawal penalties. Cash and investments are controlled by the Airport following Georgia Law, O.C.G.A. Title 45, Chapter 8 and concentrate on very marketable issues with non-volatile investment returns. All deposits are insured or collateralized by U.S. Government or agency obligations, and other permitted investments. Capital Construction As of December 31, 2008, the Airport had expended approximately $33,000 in its on-going CIP. This amount primarily represents the airfield signage project. There were several projects completed in 2008, including the new fuel farm, passenger jet way bridge, with the major project consisting of the new terminal construction. Additional information on the Airport s capital assets can be found in Note 2 of the notes to the financial statements of this report. As of December 31, 2007, the Airport had expended approximately $27,231,000 in its on-going CIP. This amount primarily represents the terminal improvement project. Additional information on the Airport s capital assets can be found in Note 2 of the notes to the financial statements of this report. 11

10 Management s Discussion and Analysis (Unaudited) - Continued Capital Financing and Debt Management During 2008 and 2007, the Aviation Commission did not procure additional long-term debt. In February 2005, the Airport issued $19,605,000 in Airport Revenue Bonds for the purpose of paying the costs of acquiring, constructing and installing a new airline passenger terminal and certain other capital improvements. The bonds are divided into three issues with $6,200,000 paying 5.45% due on January 1, 2031, $4,415,000 paying 5.35% due on January 1, 2028, and $8,990,000 paying 5.15% due on January 1, Additional information on the Airport s long-term debt can be found in Note 11 of the notes to the financial statements of this report. Contacting the Airport s Financial Management The financial report is designed to provide the Airport s management, investors, creditors, and customers with a general view of the Airport s finances and to demonstrate the Airport s accountability for the funds it receives and expends. For additional information about this report, or if you need additional financial information, please contact: Ms. Vishakha Vyas, Interim Director of Finance, Augusta Regional Airport, 1501 Aviation Way, Augusta, GA, 30906, vvyas@augustaga.gov. 12

11 Statements of Net Assets December 31, 2008 and 2007 ASSETS Current assets Cash and cash equivalents $ 10,952,193 $ 11,041,977 Trade receivables, net of allowance of $100,000 in 2008 and , ,391 Grant receivable 47, ,351 Inventories 263, ,691 Total current assets 11,800,989 13,057,410 Noncurrent assets Restricted cash and investments 15,436,605 17,698,136 Capital assets, net 54,958,411 51,936,716 Deferred bond issuance costs 962, ,708 Total noncurrent assets 71,357,091 70,632,560 Total assets 83,158,080 83,689,970 LIABILITIES Current liabilities Accounts and other payables 799,832 1,988,220 Accrued salaries and vacation 359, ,830 Due to Augusta, Georgia 1,288,387 2,182,298 Total current liabilities 2,448,193 4,491,348 Bonds payable 19,605,000 19,605,000 Total liabilities 22,053,193 24,096,348 NET ASSETS Net assets Invested in capital assets, net of related debt 44,617,749 44,515,250 Restricted 6,172,267 5,514,602 Unrestricted 10,314,871 9,563,770 Total net assets $ 61,104,887 $ 59,593,622 See notes to financial statements. 13

12 Statements of Revenues and Expenses Operating revenue Landing fees $ 244,367 $ 369,499 Terminal area rental 757, ,746 Security reimbursements 106, ,633 Apron charges 495, ,337 FBO revenue 134, ,786 Fuel sales 12,093,481 10,649,078 Other aeronautical 29,412 22,465 Land and non-terminal fees 656, ,063 Terminal food and beverage 11,911 9,268 Terminal other Rental cars 1,081, ,747 Parking 845, ,664 Non-aeronautical 54,066 35,676 Total operating revenue 16,510,621 14,983,689 Operating expense Personnel compensation and benefits 3,723,959 3,641,375 Communications and utilities 530, ,435 Repairs and maintenance 175, ,831 FBO expense 53,190 67,101 Fuel expense 9,422,484 7,309,105 Contractual services 473, ,256 Insurance 143, ,254 Supplies and materials 93,191 98,924 Depreciation 2,272,293 1,523,817 Miscellaneous expense 391, ,841 Other expense 717, ,718 Total operating expense 17,997,468 14,829,657 Operating income (loss) (1,486,847) 154,032 Non-operating revenues (expenses) Federal capital grant revenue 1,982,631 3,739,406 Passenger facility charges 682, ,555 Customer facility charges 822, ,816 Interest income 622, ,805 Sale of property 7,300 30,540 Loss on disposal of fixed assets - (313,362) Interest expense (1,037,087) - Master plan and program expenses (35,632) (35,632) Miscellaneous expense events (47,009) (17,198) Net non-operating revenue 2,998,112 5,201,930 Change in net assets $ 1,511,265 $ 5,355,962 See notes to financial statements. 14

13 Statements of Changes in Net Assets Total Net Assets Balance at January 1, 2007 $ 54,237,660 Change in net assets for ,355,962 Balance at December 31, ,593,622 Change in net assets for ,511,265 Balance at December 31, 2008 $ 61,104,887 See notes to financial statements. 15

14 Statements of Cash Flows Cash flows from operating activities Cash received from providing services $ 16,841,684 $ 14,838,205 Cash paid to suppliers and employees (17,638,947) (12,344,577) Net cash provided by (used in) operating activities (797,263) 2,493,628 Cash flows from noncapital financing activities Other revenue (expense) net (35,632) (35,632) Master plan and program expenses (47,009) (17,198) Net cash used in noncapital financing activities (82,641) (52,830) Cash flows from capital and related financing activities Proceeds from federal capital grant 2,724,455 4,156,193 Passenger facility charges 682, ,555 Customer facility charges 822, ,816 Disposal of assets 7,300 30,540 Acquisition and construction of capital assets (5,293,988) (9,252,744) Interest paid (1,037,087) - Net cash used in capital and related financing activities (2,093,668) (3,772,640) Cash flows from investing activities Interest received 622, ,805 Net cash provided by investing activities 622, ,805 Net change in cash and cash equivalents (2,351,315) (827,037) Cash and cash equivalents at beginning of year 28,740,113 29,567,150 Cash and cash equivalents at end of year $ 26,388,798 $ 28,740,113 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities Operating income (loss) $ (1,486,847) $ 154,032 Adjustments to reconcile operating income (loss) to net cash provided by operating activities Depreciation 2,272,293 1,523,817 Amortization 35,633 35,632 Change in assets and liabilities: (Increase)/decrease in trade receivables 331,063 (145,484) (Increase)/decrease in inventories 93,750 (32,696) Increase/(decrease) in payables and accruals (2,043,155) 958,327 Net cash provided by (used in) operating activities $ (797,263) $ 2,493,628 See notes to financial statements. 16

15 Notes to Financial Statements December 31, 2008 and 2007 Note 1 Summary of significant accounting policies Augusta Regional Airport at Bush Field, (the Airport ), accounts for its financial position and results of operations in accordance with accounting principles generally accepted in the United States of America (GAAP) applicable to governmental units. The following is a summary of the significant accounting policies: Reporting entity The Airport provides aviation services to residents of Augusta, Georgia and surrounding areas. The Airport is the only airport within Augusta, Georgia and surrounding areas from which service from the major airlines is available. These financial statements present only an enterprise fund and are not intended to present fairly the financial position and results of operations of Augusta-Richmond County, Georgia, (the Government ), in conformity with accounting principles generally accepted in the United States of America. Basis of Airport s presentation The Airport s financial statements are presented on the full accrual basis in accordance with accounting principles generally accepted in the United States of America. The Airport applies all Governmental Accounting Standards Board (GASB) pronouncements as well as Financial Accounting Standards Board (FASB) statements and interpretations, and the Accounting Principles Board (APB) of the Committee on Accounting Procedures issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. Measurement focus and basis of accounting The financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the Airport gives (or receives) value without directly receiving (or giving) equal value in exchange, include grants, entitlements, and donations. On the full accrual basis, revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The Airport fund is an enterprise fund, which distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the fund s principal ongoing operations. The principal operating revenues of the Airport s fund are charges to customers for sales and services. Operating expenses for the Airport s fund include the costs of sales and services, general and administrative services and depreciation of capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the Airport s policy to use restricted resources first, then unrestricted resources as they are needed. Reclassifications Certain reclassifications of amounts presented in the prior year column have been made to conform to current year classifications. However, due to a change in the chart of accounts, certain individual line items do not conform to the current year presentation. 17

16 Notes to Financial Statements - Continued December 31, 2008 and 2007 Note 1 Summary of significant accounting policies (Continued) Cash and cash equivalents For the purpose of financial statement presentation, the Airport considers all highly liquid investments with an original maturity of less than one year, or with insignificant early withdrawal penalties, to be cash equivalents. Cash equivalents include amounts in certificates of deposit, repurchase agreements, and U.S. Treasury bills, and are stated at cost, which approximates market. All deposits are stated at cost plus accrued interest, which reasonably estimates fair value. The State of Georgia s statutes authorize the Airport to invest in obligations of the United States government and agencies thereof, general obligations of the State of Georgia or any of its political subdivisions, or banks and savings and loan associations to the extent that they are secured by the Federal Deposit Insurance Corporation. Use of estimates Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Trade receivables The Airport operates a fixed base operations facility and provides credit in the normal course of business to customers. The Airport performs ongoing credit evaluations of its customers and monitors credit risk of specific customers, historical trends, and other information. Credit losses, when realized, have not been significant. Investments Investments are reported at fair value. Fair value is determined as follows: short-term investments are reported at cost, which approximates fair value; securities traded on national exchanges are valued at current prices or current prices of similar securities; securities for which an established market does not exist are reported at estimated fair value using selling prices for similar investments for which there is an active market. Inventories All items in inventory are valued at lower of cost (first-in, first-out) or market. Restricted assets and liabilities Cash invested in the Airport s sinking fund and the related revenue bond liability is restricted because its use is limited by applicable debt covenants. Cash invested in the Airport s Passenger Facility Charge account is restricted because its use is limited by applicable Passenger Facility Charge agreements. 18

17 Notes to Financial Statements - Continued December 31, 2008 and 2007 Note 1 Summary of significant accounting policies (Continued) Capital assets Property and equipment are recorded by the Airport at original cost at the time of acquisition. Donated capital assets are recorded at their estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend asset lives are not capitalized. Improvements are capitalized and depreciated over the remaining estimated useful lives of the related capital assets, as applicable. Minimum capitalization costs are $5,000 for all categories of capital assets. Gains and losses are credited or charged to operations. Depreciation is charged to operating income over the estimated useful lives of assets using the straight-line method. The estimated lives used in determining depreciation are as follows: Building and other improvements Vehicles Machinery and equipment Office furniture and fixtures Other capital items Infrastructure years 3 8 years 5 10 years 3 8 years 3 12 years 30 years Due to Augusta, Georgia During the course of operations, numerous transactions occur between the individual funds of Augusta, Georgia and the Airport for goods provided or services rendered. Receivables and payables related to these transactions are classified as Due to Augusta, Georgia in the accompanying statement of net assets. Compensated absences The vacation policy of the Government provides for the accumulation of up to thirty (30) days earned vacation leave with such leave being fully vested when earned. For the Airport s proprietary fund financial statements, an expense and a liability for compensated absences and the salary-related payments are recorded as leave when earned. The portion of that time that is estimated to be used in the next fiscal year has been designated as a current liability. No accrual has been established for accumulated sick leave of employees since it is the Government s policy to record the cost of sick leave only when it is used. Construction costs capitalization of interest Construction costs include, among other things, capitalized net interest costs and engineering fees. There were no capitalized net interest costs in Capitalized net interest costs were approximately $264,000 in

18 Notes to Financial Statements - Continued December 31, 2008 and 2007 Note 2 Capital assets A summary of the changes in capital assets at December 31, 2008 follows: Balance Balance December 31, December 31, 2007 Additions Disposals 2008 Capital assets not being depreciated: Land $ 5,632,542 $ 108,610 $ - $ 5,741,152 Construction in progress 27,230,787 33,009 (27,230,787) * 33,009 Total capital assets not being depreciated 32,863, ,619 (27,230,787) 5,774,161 Other capital assets: Site improvements 2,794, ,318-3,084,273 Building improvements 1,703, ,703,324 Buildings 7,696,589 31,701,638-39,398,227 Vehicles 2,102, ,102,860 Machinery and equipment 2,503, ,329-2,893,600 Furniture and fixtures 321, , ,889 Other capital 166, ,144 Information tech hardware 74, ,411 Information tech software 35, ,832 Infrastructure 25,570,701 - (278,797) 25,291,904 Total capital assets being depreciated 42,969,308 32,661,953 (278,797) 75,352,464 Less accumulated depreciation for: Site improvements (1,062,212) (244,107) - (1,306,319) Building improvements (1,121,054) (31,679) - (1,152,733) Buildings (5,584,490) (971,779) - (6,556,269) Vehicles (1,700,066) (88,122) - (1,788,188) Machinery and equipment (1,360,657) (215,486) - (1,576,143) Furniture and fixtures (289,560) (54,431) - (343,991) Other capital (166,144) - - (166,144) Information tech hardware (68,468) (1,288) - (69,756) Information tech software (27,292) (641) - (27,933) Infrastructure (12,515,978) (664,760) - (13,180,738) Total capital assets being depreciated (23,895,921) (2,272,293) - (26,168,214) Other capital assets being depreciated, net 19,073,387 30,389,660 (278,797) 49,184,250 Augusta Regional Airport capital assets, net $ 51,936,716 $ 30,531,279 $ (27,509,584) $ 54,958,411 * Disposals in construction in progress are shown as additions to capital assets being depreciated. 20

19 Notes to Financial Statements - Continued December 31, 2008 and 2007 Note 2 Capital assets (Continued) A summary of the changes in capital assets at December 31, 2007 follows: Balance Balance December 31, December 31, 2006 Additions Disposals 2007 Capital assets not being depreciated: Land $ 4,684,256 $ 948,286 $ - $ 5,632,542 Construction in progress 18,972,398 8,258,389 - * 27,230,787 Total capital assets not being depreciated 23,656,654 9,206,675-32,863,329 Other capital assets: Site improvements 2,771,735 23,220-2,794,955 Building improvements 1,890,477 15,600 (202,753) 1,703,324 Buildings 9,487,642 - (1,791,053) 7,696,589 Vehicles 2,449,538 - (346,678) 2,102,860 Machinery and equipment 2,552,957 7,249 (56,935) 2,503,271 Furniture and fixtures 327,108 - (5,887) 321,221 Other capital 166, ,144 Information tech hardware 74, ,411 Information tech software 35, ,832 Infrastructure 25,570, ,570,701 Total capital assets being depreciated 45,326,545 46,069 (2,403,306) 42,969,308 Less accumulated depreciation for: Site improvements (865,743) (196,469) - (1,062,212) Building improvements (1,177,483) (61,769) 118,198 (1,121,054) Buildings (6,982,078) (164,965) 1,562,553 (5,584,490) Vehicles (1,935,891) (110,853) 346,678 (1,700,066) Machinery and equipment (1,161,971) (255,621) 56,935 (1,360,657) Furniture and fixtures (279,558) (15,582) 5,580 (289,560) Other capital (166,144) - - (166,144) Information tech hardware (68,468) - - (68,468) Information tech software (26,651) (641) - (27,292) Infrastructure (11,798,061) (717,917) - (12,515,978) Total capital assets being depreciated (24,462,048) (1,523,817) 2,089,944 (23,895,921) Other capital assets being depreciated, net 20,864,497 (1,477,748) (313,362) 19,073,387 Augusta Regional Airport capital assets, net $ 44,521,151 $ 7,728,927 $ (313,362) $ 51,936,716 * Disposals in construction in progress are shown as additions to capital assets being depreciated. Note 3 - Lessor leases The Airport, owns land, parking lots, and buildings which are leased to airlines, rental car companies, hotel and motel management companies and private aircraft owners. The typical lease period is 10 years with some leases open-ended and cancelable upon exercise of 90 days written notice by either party. The lessee is responsible for paying the insurance and maintenance costs related to the leased property. 21

20 Notes to Financial Statements - Continued December 31, 2008 and 2007 Note 4 - Contingent liabilities The Airport participates in Federal assisted grant programs, which are subject to program compliance audits under the Single Audit Act Amendments of An audit of these programs has been performed for the year ended December 31, 2008, in compliance with the Single Audit Act Amendments of 1996 and OMB Circular A-133. The amount, if any, of expenditures which may be disallowed by the granting agency is expected to be immaterial. Note 5 Pension plans Employees of the Airport, an enterprise fund of the Augusta-Richmond County Government s reporting entity, are covered under the following pension plans of the Government. The 1977 Pension Plan, a single-employer pension plan and the General Municipal Employees Benefit System (GMEBS), an agent multiple-employer pension plan, both are defined benefit plans. In addition, all full-time employees with more than one month of service are eligible to participate in the defined contribution plan of the Government, the Augusta-Richmond County Board of Commissioners Retirement Savings Plan (the 1988 plan). The Government also provides postemployment retirement benefits for employees who are participants in one of the retirement plans and reach normal retirement age or are totally disabled while employed. Additional information on these pension plans can be found in the complete financial statements of the Government. These statements may be obtained at the following address: Augusta, Georgia, Finance Department, 501 Greene Street, Augusta, Georgia Note 6 - Risk management The Augusta-Richmond County Commission has elected to provide its own coverage for claims against the Government in the area of public liability and vehicular public liability due to the large increases in liability insurance premiums. The Government has procured fire and extended coverage insurance on the insurable portions of the Airport. In addition, the Government has established a separate fund in order to handle any major losses. The Government is of the opinion that the sums that have been set aside are more than adequate to cover any claims or judgments against Augusta, Georgia and the Airport. The Government is also of the opinion that no bondholder is jeopardized by Augusta, Georgia maintaining its own insurance coverage due to the amounts available for claims or judgments. Note 7 - Internal Service Fund allocation During the year, the Government accumulates expenses for risk management, fleet operations, workers compensation, health benefits, unemployment taxes, disability, and GMA leases in an internal service fund, and allocates the expenses to the various funds at year-end including to Airport operations. Note 8 Legal compliance budgets The Airport operates under the annual budget ordinance of Augusta-Richmond County, Georgia. The ordinance provides for revenues and appropriations. All annual appropriations lapse at the end of the fiscal year. 22

21 Notes to Financial Statements - Continued December 31, 2008 and 2007 Note 9 Deposits and investments Deposits: Custodial Credit Risk for deposits is the risk that, in the event of bank failure, a government s deposits may not be returned to it. At December 31, 2008 and 2007 all of the Airport s deposits were either secured by Federal Depository Insurance Corporation (FDIC) or Savings Association Insurance Fund (SAIF) or by collateral held by the agent in the Airport s name. Various restrictions on deposits and investments are imposed by statutes and restrictions included with the various series of revenue bonds and are summarized as follows: Augusta-Richmond County is authorized to make direct investments in obligations of the State of Georgia or the U.S. Government, obligations fully insured or guaranteed by the U.S. Government, repurchase agreements, and certificates of deposit which are secured by direct obligations of the State of Georgia or the U.S. Government. Deposit and investment transactions are subject to a variety of risks. The Government s adopted investment policies seek to promote the safety of principal, provide adequate liquidity for operation needs, earn market rates of return on investments consistent with liquidity needs and investment quality, and conform with legal requirements. Investments: As of December 31, 2008 and 2007, the investments included in Restricted cash and investments on the Statement of Net Assets were $15,436,605 and $17,698,136, respectively. The balance at December 31, 2008 was categorized as follows: Average Fair Maturity Period Type of Investment Credit Rating Value Less than 1 Year Money market funds AAAm $ 15,436,605 $ 15,436,605 Interest rate risk is the risk that changes in interest rates will adversely affect the value of an investment. The Government s investment policy states that the Government will structure its portfolio to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities prior to their maturity. The policy also emphasizes the purchase of shorter term or more liquid investments. The policy does not place formal limits on investment maturities. Credit Risk is the risk that an issuer or counterparty to an investment will not fulfill its obligations. Various restrictions on deposits and investments are imposed by statutes and restrictions included with the various series of revenue bonds and are summarized as follows: Augusta-Richmond County is authorized to make direct investments in obligations of the State of Georgia or the U.S. Government, obligations fully insured or guaranteed by the U.S. Government, repurchase agreements, and certificates of deposit which are secured by direct obligations of the State of Georgia or the U.S. Government. Concentration of credit risk is the risk of loss attributed to the magnitude of an investment in a single issuer. Disclosures are required for any issuer that represents 5% or more of total investments, exclusive of mutual funds, external investment pools and investments issued or guaranteed by the U.S. government. All of the Government s investments are in U.S. Government securities carry the explicit guarantee of the U.S. government. 23

22 Notes to Financial Statements - Continued December 31, 2008 and 2007 Note 9 Deposits and investments (Continued) Foreign currency risk is the risk that exchange rates may effect the valuation of an investment. The Government has no foreign currency risk. Note 10 Conduit debt obligations Conduit debt obligations are limited obligation revenue bonds, certificates of participation, or similar debt instruments issued for the purpose of providing capital financing for a specific third party that is not a part of the Government s financial reporting entity. The Government has no obligation for the debt beyond the resources provided by a lease or loan with the third party on whose behalf the debt was issued. On December 14, 2000, the Government issued Special Facility Airport Revenue Bonds in the amount of $3,110,000 which qualifies as a conduit debt obligation. The bonds are payable solely from revenues pledged under a lease agreement. As of December 31, 2008 and 2007, the amount outstanding on the Special Facility Airport Revenue Bonds is $3,110,000. A - Debt service requirements to maturity for bonds payable The following requirements to amortize debt outstanding as of December 31, 2008, including interest are as follows: Note 11 Long term debt Revenue Bonds Principal Interest 2009 $ - $ 152, ,110, ,390 $ 3,110,000 $ 304,780 In February 2005, the Airport issued $19,605,000 in Airport Revenue Bonds for the purpose of paying the costs of acquiring, constructing and installing a new airline passenger terminal and certain other capital improvements. The bonds are divided into three lots with $6,200,000 paying 5.45% due on January 1, 2031, $4,415,000 paying 5.35% due on January 1, 2028, and $8,990,000 paying 5.15% due on January 1,

23 Notes to Financial Statements - Continued December 31, 2008 and 2007 Note 11 Long term debt (Continued) Airport Passenger Facility Charge and General Revenue Bonds (Series 2005A)- issued in the original amount of $8,990,000 in 2005 with interest of 5.15% payable semiannually beginning July 1, 2005 and principal payable annually beginning January 1, 2031 ranging from $540,000 to $2,275,000 through maturity on January 1, $ 8,990,000 Airport Passenger Facility Charge and General Revenue Bonds (Series 2005B)- issued in the original amount of $4,415,000 in 2005 with interest of 5.35% payable semiannually beginning July 1, 2005 and principal payable annually beginning January 1, 2025 ranging from $1,355,000 to $1,505,000 through 2027 and principal payable of $130,000 on maturity at January 1, ,415,000 Airport Passenger Facility Charge and General Revenue Bonds (Series 2005C)- issued in the original amount of $6,200,000 in 2005 with interest of 5.45% payable semiannually beginning July 1, 2005 and principal payable annually beginning January 1, 2028 ranging from $1,455,000 to $1,760,000 through 2030 and principal payable of $1,315,000 on maturity at January 1, ,200,000 Year ending Revenue Bonds December 31 Principal Interest 2009 $ - $ 1,037, ,037, ,037, ,037, ,037, ,185, ,185, ,540,000 4,419, ,790,000 2,163, ,275, ,162 $ 19,605,000 $ 22,256,494 $ 19,605,000 There were no long-term debt transactions for the years ended December 31, 2008 and The current portion of long-term debt at December 31, 2008 was $0. 25

24 Notes to Financial Statements - Continued December 31, 2008 and 2007 Note 12 Supplemental disclosure of cash flow information Cash paid for interest for the years ended December 31, 2008 and 2007 was approximately $1,037,088. Note 13 Commitments During 2005, the Airport entered into a contract for construction of a new terminal. The contract, including all approved change orders, totaled approximately $30,000,000. The project was substantially completed in Amounts paid through December 31, 2008 and 2007, in connection with such contract totaled approximately $ and $29,100,000, respectively. 26

25 Miscellaneous Statistical Data (Unaudited) Airport Revenue Bond Operating Disclosure Augusta, Georgia (the Government ) has covenanted in the Bond Resolution and Continuing Disclosure Certificate for the benefit of the beneficial owners of the Series 2005 Revenue Bonds to provide certain financial information and operating data relating to the Augusta Regional Airport at Bush Field, hereafter referred to as the Airport. In addition to the financial statements of the Airport, including a narrative explanation describing the impact of any changes in generally accepted accounting principles, the Disclosure Certificate requires the Government s Annual Report to contain or incorporate by reference the following information for the fiscal year regarding the following categories of financial information and operating data of the Airport. A Historical Enplanements by Airline Airline Enplanements Share Enplanements Share Atlantic Southeast 96, % 103, % US Airways Express 58, % 72, % Delta Airlines 1, % 1, % All others 3, % 2, % Airport total 160, % 180, % 27