Sarasota Manatee Airport Authority. Financial Statements with Management s Discussion and Analysis

Transcription

1 Financial Statements with Management s Discussion and Analysis For the years ended September 30, 2005 and 2004 with Supplemental Schedules and Report of Independent Public Accountants

2 Financial Statements and Other Financial Information Years ended September 30, 2005 and 2004 Contents Management s Discussion and Analysis (Unaudited)... 1 Report of Independent Certified Public Accountants Financial Statements Statements of Net Assets Statements of Revenues, Expenses and Changes in Net Assets Statements of Cash Flows Notes to Financial Statements...20 Supplemental Schedules Schedule of Operating Expenses...35 Schedule of Receipts and Disbursements Bond Proceeds Account Schedule of Receipts and Disbursements Cash Unrestricted Operating and Investment Accounts... 37

3 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 The following Management Discussion and Analysis (MD & A) of the Sarasota Manatee Airport Authority s (the Authority) activities and financial performance provides an introduction to the basic financial statements of the Authority for the year ended September 30, 2005 with comparative information for the year ended September 30, The information contained in this MD & A should be considered in conjunction with the information contained in the financial statements and the notes thereto, which are essential to a full understanding of the financial statement data. Authority Background and History The Authority is an independent special district pursuant to the constitution and laws of Florida, particularly Chapter , Laws of Florida, as amended, revising and consolidating Chapter 31263, Special Laws of Florida, 1955, which, by the Act authorized the Authority to own and operate the Sarasota Bradenton International Airport (the Airport). The Authority has jurisdiction, control, supervision and management of the Airport. The Authority's Board consists of six members who are appointed on a non-partisan basis to four-year staggered terms. The Act requires that three members of the Authority be residents of, and be appointed within, each of Sarasota and Manatee Counties. The Act further requires that the Chairperson elected by the members thereof, alternate county representation annually. The Airport is situated on approximately 1,100 acres located in Sarasota and Manatee Counties and the City of Sarasota. It is classified as a small hub airport by the Federal Aviation Administration (FAA). The airport has two crossing asphalt-surfaced runways, 4/22 (NE/SW) and 14/32 (SE/NW). Both runways were built in the early 1940 s. Runway 4/22, at 5,004 feet long is used almost exclusively by general aviation aircraft. Runway 14/32 was extended in 1969 to 7,003 feet and again in 2001 to its present length of 9,500 feet. As the main carrier runway, it is used by commercial jets as well as general aviation aircraft. The current terminal building opened to travelers on October 29, It is located southwest of the intersection of runways 4/22 and 14/32 and has approximately 240,000 square feet of interior space. The terminal project, including the new building, parking area, ramp space and landscaping took nearly ten years to apply for and be approved by the local governments, regional planning councils and the State of Florida. Construction began in 1987 and was completed in The construction costs were approximately $58 million for which $72.8 million in bonds were issued with $12 million being subsequently redeemed, leaving approximately $61 million outstanding. The Authority is self supporting, using aircraft landing fees, fees from terminal and other rentals, and revenues from concessions to fund operating expenses. Operating expenses of the Authority are not taxpayer funded. Construction programs are funded by federal and state grants, Passenger Facility Charges (PFCs), and Authority revenues. 1

4 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 Sarasota Bradenton International Airport activities during 2005 are as follows: % Increase FY 2005 FY 2004 (Decrease) Enplanements 652, , % Aircraft Operations 159, , % Landed Weight 813,432, ,558, % The Airport, like most airports, was closed from September 11 through 13, 2001 and reopened on September 14, The Authority received federal and state funds of approximately $1.3 million in fiscal year 2005 and $1.1 million in fiscal year 2004 to replace lost revenues and additional expenses incurred as a result of the events of September 11, 2001 (September 11). The lost revenue compensation is included in non-operating revenues and the reimbursement of additional expenses is included in federal and state grants in the Statements of Revenues, Expenses and Changes in Net Assets. The majority of the operating revenues at the Airport are directly related to the number of passenger and aircraft operations. With the addition of new service from AirTran and additional service from Delta, there was a significant increase in passenger activity and a resulting increase in operating revenues at the Authority. With the desire of the Authority to increase air service to the Airport, the Authority passed several resolutions waiving fees such as landing fees and terminal rent fees in an effort to improve air service. The Authority issued approximately $.8 million in fee waivers to those airlines who qualified under the fee waiver program during fiscal year 2005 and $.2 million during fiscal year The following is a summary of the financial results for the year ended September 30, 2005: Operating revenues increased by 3.5% from $14.1 million in fiscal 2004 to $14.6 million in fiscal 2005 due to the following: parking lot fees and car rental concessions increased as a direct result of increased passengers. Operating expenses (excluding depreciation and amortization) increased from $11.8 million in fiscal 2004 to $13.3 million in fiscal 2005 primarily as a result of an increase in marketing and maintenance costs. Depreciation and amortization increased from $6.1 million in fiscal 2004 to $6.9 million in fiscal Operating loss before non-operating revenues and expenses increased from a loss of $3.8 million in fiscal 2004 to a loss of $5.6 million in fiscal Non-operating revenues and expenses increased from a net expense of $1.2 million in fiscal 2004 to $.1 million in fiscal 2005 due primarily to the $1.4 million Revenue Guarantee paid to AirTran and $.5 million from Manatee and Sarasota Counties for assistance with advertising for new airline service with AirTran. Capital contributions received in the form of grants from Federal and State governments decreased from $12.6 million in fiscal 2004 to $9.5 million in fiscal 2005 as a result of the timing of when project expenditures were incurred, and thus became eligible for Federal and State funding. 2

5 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 Summary of Operations and Changes in Net Assets FY 2005 FY 2004 Operating revenues $ 14,583,053 $ 14,089,702 Operating expenses (20,211,432) (17,866,236) Loss before non-operating revenues and expenses (5,628,379) (3,776,534) Non-operating revenues and expenses, net (130,983) (1,227,534) Loss before capital contributions (5,759,362) (5,004,068) Capital contributions 9,516,167 12,578,694 Increase in Net Assets $ 3,756,805 $ 7,574,626 Summary of Net Assets Net assets may serve over time as a useful indicator of the Authority s financial position. The Authority s net assets exceeded liabilities by approximately $108.5 million at September 30, 2005, a $3.7 million increase from September 30, FY 2005 FY 2004 Assets: Current and other assets $ 33,190,343 $ 34,852,114 Capital assets, net 117,155, ,970,801 Total assets 150,345, ,822,915 Liabilities: Revenue bonds payable, less current portion 34,286,610 37,441,712 Other liabilities 7,470,398 6,549,487 Total liabilities 41,757,008 43,991,199 Net assets: Invested in capital assets, net of related debt 79,655,635 73,527,471 Restricted 14,613,735 16,557,354 Unrestricted 14,319,151 14,746,891 Total net assets: $ 108,588,521 $ 104,831,716 The largest portion of the Authority s net assets each year represents its investment in capital assets (e.g., land, buildings, improvements and equipment), less the related indebtedness outstanding used to acquire and construct those capital assets. The Authority uses these capital assets to provide services to its passengers and visitors to the Airport; consequently, these assets are not available for future spending. Although the Authority s investment in its capital assets is reported net of related debt, the resources required to repay this debt must be provided annually from operations, since it is unlikely the capital assets themselves will be liquidated to pay liabilities. 3

6 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 An additional portion of the Authority s net assets represents bond reserve funds that are subject to external restrictions on how they can be used under bond resolutions, and Passenger Facility Charges that are restricted by Federal regulations and a bond resolution until they can be used to pay future indebtedness. The remaining unrestricted net assets may be used to meet any of the Authority s ongoing obligations. Airport Use Agreements The Authority has entered into Airport Use Agreements with the principal commercial air carriers that serve the airport. The signatory airlines are American Eagle, Air Sunshine, American Trans Air, Continental, Delta Air Lines, and US Airways. American Eagle terminated service in April 2001 and Air Sunshine terminated service June 2004, but as signatories, they were required to pay rent until September 2004, the end of their five-year signatory agreement. ATA entered Chapter 11 bankruptcy protection in October 2004, rejected its signatory agreement with the Authority, and terminated service in April AirTran Airways signed a signatory agreement in December 2004 and initiated new non-stop service to Atlanta and Baltimore. AirTran added service to Chicago Midway in February 2005 and Indianapolis in November 2005, effectively replacing ATA s service to those destinations. The signatory airlines are granted the non-exclusive use of the airport for the purpose of operating an air transportation system for the carriage of persons, property, cargo and mail, according to the rules and regulations of the Authority. The term of the use agreement is five years, subject to each airline s right to terminate its agreement for cause upon sixty days prior written notice to the Authority. The agreements for American Trans Air, Continental, Delta and US Airways were originally set to expire in September The fiscal year 2001 rate reconciliation, wherein airline rates and charges are reconciled to actual year-end costs, resulted in approximately $800,000 in additional charges being owed to the Authority by the airlines. Considering the financial stresses on the airline industry after the September 11 tragedy and this sizeable amount owed, the Authority successfully negotiated a two-year extension of the agreements with those remaining active airlines in exchange for a waiver of the amount owed. Consequently, the $800,000 is included in other long-term assets and is being amortized over the remaining term of the agreements. The agreements are now set to expire at the end of September Rates and Charges Each of the signatory airlines leases space in the terminal for its exclusive use with the right to make certain leasehold improvements. Each of the signatory airlines pays monthly: (1) rentals for terminal building space, (2) landing fees, and (3) preferential apron space rental. Rentals and landing fees may be adjusted by the Authority, usually on an annual basis, to maintain a balanced budget. Rates and charges for recent years are as follows: Landing fee (per 1,000 lbs MGLW) Signatory Non-signatory Average terminal rate (per square foot) Signatory Non-signatory Apron fee rental (per linear foot) Air cargo facility (per square foot)

7 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 Landing Fees All costs of the airfield runway area, as well as the cost of unleased terminal space, are combined in a monthly landing fee based upon the signatory airline s aircraft arrivals at the airport during the month. The landing fee is computed by multiplying the maximum gross certified landing weight of the aircraft arrival by a landing fee rate expressed in terms of thousand pound units of landed weight. Revenues A summary of revenues for the year ended September 30, 2005 and the amount and percentage of change in relation to prior year amounts is as follows: Increase Percent 2005 Percent (Decrease) Increase Amount of Total from 2004 (Decrease) Operating Revenues: Building rentals $ 5,341, % $ (66,577) -1.2% Car rental concessions 3,210, % 339, % Parking lot fees 2,001, % 389, % Landing fees 737, % (466,166) -38.7% Other airfield revenue 1,464, % 120, % Other concessions 648, % (5,438) -0.8% Non-aviation system revenue 1,154, % 197, % Other revenue 24, % (15,640) -39.0% Total Operating Revenues 14,583, % 493, % Non-Operating Revenues: Federal/state compensation, net 3,414, % 2,538, % Interest and other investment income 557, % (81,416) -12.7% Other miscellaneous 5, % (182,080) -97.2% Total Non-Operating Revenues 3,976, % 2,274, % Total Revenues $ 18,559, % $ 2,768, % The following chart shows the major sources and the percentage of revenues for the year ended September 30, 2005: Building rentals Car rental concessions 0.0% 0.1% 6.2% 18.4% 3.0% 28.8% Parking lot fees Landing fees Other airfield revenue Other concessions 3.5% Non-aviation system revenue 7.9% 4.0% 10.8% 17.3% Other revenue Other miscellaneous Federal/state compensation, net Interest and other investment income 5

8 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 Expenses A summary of expenses for the year ended September 30, 2005 and the amount and percentage of change in relation to prior year amounts is as follows: Increase Percent 2005 Percent (Decrease) Increase Amount of Total from 2004 (Decrease) Operating Expenses: Depreciation and amortization $ 6,912, % $ 846, % Salaries and employee benefits 7,646, % 182, % Administration and general 3,398, % 1,007, % Maintenance 1,455, % 305, % Utilities 797, % 2, % Total Operating Expenses 20,211, % 2,345, % Non-Operating Expenses: Interest expense 2,582, % (228,194) -8.1% Revenue guarantee 1,425, % 1,425, % Amortization of bond issuance costs 99, % (18,638) -15.7% Total Non-Operating Expenses 4,107, % 1,178, % Total Expenses $ 24,319, % $ 3,523, % The following chart shows the major cost centers and the percentage of expenses for the year ended September 30, 2005: 10.6% 3.3% 6.0% 14.0% 0.4% 5.9% 31.4% 28.4% Depreciation and amortization Salaries and employee benefits Administration and general Maintenance Utilities Interest expense Revenue guarantee Amortization of bond issuance costs 6

9 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 Summary of Cash Flow Activities The following shows a summary of the major sources and uses of cash and cash equivalents for the past two years. Cash equivalents are considered cash-on-hand, bank deposits and highly liquid investments with an original maturity of three months or less. FY 2005 FY 2004 Cash flows from Operating Activities $ 1,435,747 $ 1,050,545 Cash flows from Investing Activities (7,170,012) (4,811,624) Cash flows from Non-capital Financing Activities 1,991,475 1,079,404 Cash flows from Capital and Related Financing Activities 897,301 (3,753,857) Net increase (decrease) in Cash and Cash Equivalents (2,845,489) (6,435,532) Cash and Cash Equivalents: Beginning of year 10,180,779 16,616,311 End of Year $ 7,335,290 $ 10,180,779 The Authority s available cash and cash equivalents decreased from approximately $10.1 million at the end of fiscal year 2004 to approximately $7.3 million at the end of fiscal year 2005 mainly due to project expenses. Airport Statistics The following operating and passenger data are provided to comply with the Authority s covenant to holders of the Series 1996 and Series 2003 bonds to provide continuing disclosure of such information. Fiscal Year Historical Passenger Enplanements Fiscal Year Total Yearly Percent (Decrease) Increase Airport as Percent of U.S. Total , % , % , % , % , % n.a. 7

10 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 Calendar Year Historical Passenger Enplanements Calendar Year Total Yearly Percent (Decrease) Increase Airport as Percent of U.S. Total , % , % , % , % , % n.a. 1 Calendar year 2005 total and percentage data is for the ten-month period of January through October Airline Aircraft Departures Fiscal Year Total Departures Average Daily Departures Enplaned Passengers per Departure , , , , , As of January 2005, the Airport was served by six national airlines (American TransAir, AirTran, Continental, Delta, Northwest and US Airways) and two commuter airlines (Cape Air, and Comair; collectively, the Participating Airlines ). AirTran started operations in December 2004 and American TransAir filed for bankruptcy and ceased operations in April In fiscal year 2005, the top four airlines accounted for 71.3% of total enplanements. Delta Air Lines ranks first in number of enplaned passengers (41.2%), with AirTran ranking second (17.4%), US Airways third (6.9%) and American TransAir Airlines ranking fourth (5.8%). The tables below set forth information on passenger enplanements and landed weight by airlines. The Airport remains actively engaged in on-going marketing activities to enhance service by incumbent carriers as well as recruit service from airlines not currently serving the Airport Service Area. 8

11 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 Airline Passenger Enplanements (Fiscal Years ended September 30, ) ATA 71,647 68,805 73,053 73,333 35,929 AirTran ,732 Continental 54,704 44,594 44,863 46,888 34,031 Delta 267, , , , ,286 Northwest 1 29,036 28,026 24,445 28,711 26,972 US Airways 124,036 94,031 83,770 77,473 42,876 Other Airlines 2 84,971 68,057 81, , ,665 Totals 631, , , , ,491 Airline Market Shares Enplaned Passengers (Fiscal Years ended September 30, ) ATA 11.3% 12.3% 13.6% 13.2% 5.8% AirTran 17.4% Continental 8.7% 8.0% 8.4% 8.4% 5.5% Delta 42.3% 45.5% 42.6% 40.0% 41.2% Northwest 1 4.6% 5.0% 4.6% 5.2% 4.4% US Airways 19.6% 16.9% 15.6% 13.9% 6.9% Other Airlines % 12.2% 15.3% 19.3% 18.7% Totals 100.0% 100.0% 100.0% 100.0% 100.0% 1 Changed to charter operations in May Includes American, Air Sunshine, Atlantic Southeast, Comair and Gulfstream 9

12 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 Airline Landed Weights (Fiscal Years ended September 30, ) (in thousand pounds) ATA 87,186 79,907 85,395 84,967 49,477 AirTran 132,080 Continental 70,444 57,392 51,920 53,226 38,472 Delta 320, , , , ,827 Northwest 1 33,962 34,760 29,308 37,372 30,853 US Airways 126,785 97, ,287 90,454 47,200 Other Airlines 2 117,503 98, , , ,524 Totals 755, , , , ,433 Airline Market Shares Landed Weights (Fiscal Years ended September 30, ) Share of total landed weight ATA 11.5% 11.1% 12.7% 12.1% 6.1% AirTran 16.2% Continental 9.3% 8.0% 7.7% 7.6% 4.7% Delta 42.3% 49.0% 44.1% 41.3% 39.7% Northwest 1 4.5% 4.8% 4.3% 5.3% 3.8% US Airways 16.8% 13.5% 15.0% 12.9% 5.8% Other Airlines % 13.6% 16.2% 20.8% 23.7% Totals 100.0% 100.0% 100.0% 100.0% 100.0% 1 Changed to charter operations in May Includes American, Air Sunshine, Atlantic Southeast, Comair and Gulfstream 10

13 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 Aircraft Operations The volume of aircraft operations at the Airport, as reported by the FAA air traffic control tower, is presented below. Aircraft operations consist of aircraft landings and departures and are reported by the FAA in four categories: air carrier, air taxi and commuter airline, general aviation, and military. As shown, total aircraft operations have fluctuated from 168,308 in fiscal year 2001 to 159,261 in fiscal year Aircraft Operations (Fiscal Years ended September 30, ) Fiscal Year Air Carrier Air Taxi and Commuter General Aviation Military Total ,823 10, ,057 1, , ,821 11, ,935 1, , ,511 10, ,156 2, , ,876 11, ,209 1, , ,702 12, ,734 2, ,261 Financial Statements The Authority s financial statements are prepared on an accrual basis in accordance with generally accepted accounting principles promulgated by the Government Accounting Standards Board ( GASB ). The Authority is structured as a single enterprise fund with revenues recognized when earned, not when received. Expenses are recognized when incurred, not when they are paid. Capital assets are capitalized and, except for land, depreciated over their useful lives. Amounts are restricted for debt service and, where applicable, for construction activities. The financial statements are comprised of the Statements of Net Assets; the Statements of Revenues, Expenses and Changes in Net Assets; and the Statements of Cash Flows. Net assets are displayed in three components: invested in capital assets, net of related debt; restricted; and unrestricted. The component of net assets comprising invested in capital assets, net of related debt, includes restricted capital assets, is net of accumulated depreciation and reduced by the outstanding balances of any outstanding debt that is attributable to the acquisition, construction or improvements of those assets. The Statements of Cash Flows present information showing how the Authority s cash and cash equivalents changed during the fiscal year. The Statements of Cash Flows classify cash receipts and cash payments as resulting from operating activities, capital related financing activities, and investing activities. Capital Acquisitions and Construction Activities During fiscal year 2005, the Authority expended approximately $8.3 million on capital activities. This included approximately $2.3 million for sound insulation and easement acquisitions, with the remaining balance for major construction projects, principally the construction for the extension and refurbishment of taxiway Delta, expanding the terminal security area and the design and construction of taxiways Hotel, and Juliet. 11

14 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 During fiscal year 2005, a number of on-going projects were closed from construction-in-progress to their respective capital accounts. These projects totaled approximately $27.6 million and were as follows: Noise compatibility and sound insulation $10,812,161 Taxiway Charlie design and construction $9,575,097 AIRCOM and Emergency Operations Center $4,090,047 Runway 14/32 construction completion $2,331,981 Security access upgrade $251,490 Taxiway Delta design $222,162 Taxiway India design $194,621 Taxiway Hotel design $107,386 Development of Regional Impact $33,531 Electrical improvements at fire station $19,446 Acquisitions are funded using a variety of financing techniques, including federal grants with matching state grants, PFCs and airport funds. Additional information on the Authority s capital assets and commitments can be found in Note 8 Commitment and Contingencies, of the Notes to the Financial Statements. Long-term Debt Administration The Authority had outstanding long-term debt of $34.3 million and $37.4 million as of September 30, 2005 and Both amounts are net of any current maturities, unamortized premiums or unamortized discounts and unamortized loss on refunding. The following table reflects the debt activities that occurred during fiscal year 2005: Total Total Outstanding Bonds Principal Outstanding 10/1/2004 Issued Paid Retired 9/30/2005 Revenue refunding bonds: Series 2003 $ 6,015,000 0 $ 540,000 0 $ 5,475,000 Series ,195, ,930, ,265,000 $ 43,210,000 0 $ 3,470,000 0 $ 39,740,000 Less current maturities $ (3,615,000) Long term portion 36,125,000 Capital lease less current maturity 12,403 Less unamortized loss on refunding (1,838,390) Total $ 34,299,013 Passenger Facilities Charges (PFC) On June 29, 1992, the Authority received approval from the FAA of its first application to impose a $3.00 Passenger Facility Charge (PFC) at the Airport effective September 1, The authorization to impose the PFC is contingent on continued compliance with the terms of the Federal Aviation Regulations. A second application to "use" the proceeds of the first application was filed with the FAA and approval was 12

15 Management's Discussion and Analysis (Unaudited) September 30, 2005 and 2004 granted in its Record of Decision dated January 31, Applications three and four were combined impose and use PFC applications and were approved by the FAA in Records of Decision dated December 15, 1995 and October 3, 2000, respectively. On February 22, 2002 an amendment to the fourth application was administratively approved by the FAA that increased the charge level from $3.00 to $4.50 per enplaned passenger and increased the approved collection amount. Since inception of the PFC program, the Authority has collected approximately $ 30.1 million and expended approximately $27.3 million of these locally generated funds. Request for Information This financial report is designed to provide a general overview of the Authority s finances for all those interested. Questions concerning any of the information provided in this report, or request for additional information should be addressed in writing to the Vice President, Chief Financial Officer, Sarasota Manatee Airport Authority, 6000 Airport Circle, Sarasota, FL or by to martin.lange@srqairport.com. 13

16 Statements of Net Assets September 30, 2005 and 2004 Assets Current Assets Unrestricted Assets Cash and cash equivalents $ 176,999 $ 1,497,874 Investments 13,616,840 13,877,889 Accounts receivable (net of allowance for doubtful accounts of $105,362 and $0, respectively) 838, ,128 Grants receivable 3,291,681 1,721,389 Inventory of materials and supplies 164, ,590 Prepaid expenses and other current assets 1,061, ,742 Total unrestricted assets 19,150,218 18,690,612 Restricted Assets Cash and cash equivalents 7,158,291 8,682,905 Investments 5,480,477 5,553,460 Accounts receivable 268, ,895 Accrued interest receivable 46,234 46,234 Total restricted assets 12,953,137 14,588,494 Total current assets 32,103,355 33,279,106 Non-Current Assets Capital assets, net 117,155, ,970,801 Intangible and other assets 669,266 1,100,094 Deferred bond issuance costs (net of accumulated amortization of approximately $1,212,000 and $1,075,000, respectively) 417, ,914 Total non-current assets 118,242, ,543,809 Total Assets $ 150,345,529 $ 148,822,915 The accompanying notes are an integral part of these financial statements. 16

17 Statements of Net Assets (continued) September 30, 2005 and 2004 Liabilities and Net Assets Current Liabilities Payable from unrestricted assets Accounts payable $ 2,169,593 $ 1,650,155 Accrued expenses and other liabilities 1,066, ,796 Total unrestricted liabilities 3,235,640 2,612,951 Current liabilities payable from restricted assets Accrued revenue bond interest payable 331, ,158 Security deposits 275, ,318 Current portion of revenue bonds payable 3,615,000 3,470,000 Total restricted liabilities 4,222,355 3,934,476 Total current liabilities 7,457,995 6,547,427 Non-Current Liabilities Payable from unrestricted assets Obligations under capital lease 12,403 2,060 Payable from restricted assets Revenue bonds payable, less current portion 34,286,610 37,441,712 Total non-current liabilities 34,299,013 37,443,772 Total liabilities 41,757,008 43,991,199 Net Assets Invested in capital assets, net of related debt 79,655,635 73,527,471 Restricted 14,613,735 16,557,354 Unrestricted 14,319,151 14,746,891 Total net assets 108,588, ,831,716 Total Liabilities and Net Assets $ 150,345,529 $ 148,822,915 The accompanying notes are an integral part of these financial statements. 17

18 Statements of Revenues, Expenses and Changes in Net Assets For the Years ended September 30, 2005 and Operating Revenues Building rentals $ 5,341,446 $ 5,408,023 Car rental concessions 3,210,402 2,870,665 Parking lot fees 2,001,654 1,612,241 Landing fees 737,191 1,203,357 Other airfield revenue 1,464,526 1,344,287 Other concessions 648, ,286 Non-aviation system revenue 1,154, ,731 Other revenue 24,472 40,112 Total operating revenues 14,583,053 14,089,702 Operating Expenses Depreciation and amortization 6,912,675 6,065,920 Salaries and employee benefits 7,646,848 7,464,596 Administration and general 3,398,682 2,391,158 Maintenance 1,455,297 1,149,412 Utilities 797, ,150 Total operating expenses 20,211,432 17,866,236 Operating Loss (5,628,379) (3,776,534) Non-Operating Revenues (Expenses) Interest expense (2,582,628) (2,810,822) Interest and other investment income 557, ,559 Revenue Guarantee (1,425,012) - Federal/state compensation, net 3,414, ,115 Amortization of bond issuance costs (99,992) (118,630) Other miscellaneous 5, ,244 Total non-operating expenses (130,983) (1,227,534) Loss before Capital Contributions (5,759,362) (5,004,068) Capital Contributions Passenger facility charges 2,609,943 2,231,032 Federal and state grants 6,906,224 10,347,662 Total capital contributions 9,516,167 12,578,694 Net Assets Increase in net assets 3,756,805 7,574,626 Total net assets, beginning of year 104,831,716 97,257,090 Total net assets, end of year $ 108,588,521 $ 104,831,716 The accompanying notes are an integral part of these financial statements. 18

19 Statements of Cash Flows For the Years ended September 30, 2005 and Cash Flows from Operating Activities: Cash received from customers $ 14,448,078 $ 14,500,098 Cash paid to employees (7,629,457) (7,439,901) Cash paid to suppliers for goods and services (5,382,874) (6,009,652) Net cash provided by operating activities 1,435,747 1,050,545 Cash Flows from Capital and Related Financing Activities: Principal paid on revenue bonds maturity (3,470,000) (3,090,000) Interest paid (2,148,947) (2,243,710) Net cash contributed to refunding - (395,619) Purchases of capital assets (8,303,809) (11,708,666) Proceeds from sale of PP&E 3,019 40,385 Acquisition of intangibles (1,413,349) (142,707) Contributions and grants 7,983,635 13,783,752 Payment of capital lease obligations 10,343 (2,265) Increase in security deposits 169,096 4,973 Net cash (used in) provided by capital and related financing activities (7,170,012) (3,753,857) Cash Flows from Non-capital Financing Activities: Federal/State compensation from 9/11 disaster 3,414, ,115 Revenue Guarantee (1,425,012) - Car Rental Concession Settlements 2, ,289 Net cash (used in) provided by non-capital financing activities 1,991,475 1,079,404 Cash Flows from Investing Activities: Proceeds from sales and maturities of investments 3,000, ,000 Purchases of investments (3,000,000) (6,170,000) Interest on restricted investments 349, ,016 Interest on unrestricted investments 547, ,360 Net cash provided by (used in) investing activities 897,301 (4,811,624) Net increase (decrease) in Cash and Cash Equivalents (2,845,489) (6,435,532) Cash and Cash Equivalents, Beginning of Year 10,180,779 16,616,311 Cash and Cash Equivalents, End of Year $ 7,335,290 $ 10,180,779 Cash and Cash Equivalents: Unrestricted $ 176,999 $ 1,497,874 Restricted 7,158,291 8,682,905 $ 7,335,290 $ 10,180,779 Reconciliation of Operating Loss to Net Cash Provided by Operating Activities: Operating loss $ (5,628,379) $ (3,776,534) Adjustments to reconcile operating loss to net cash provided by operations: Depreciation 6,191,692 5,531,829 Amortization 720, ,091 Other non-operating expenses/income - - (Increase) decrease in accounts receivable (217,473) 410,396 (Increase) decrease in inventory, prepaid expenses and other assets (253,765) 73,353 Increase (decrease) in accounts payable and accrued expenses 622,689 (1,722,590) Net cash provided by operating activities $ 1,435,747 $ 1,050,545 19

20 Notes to the Finance Statements For the Years ended 30, 2005 and Significant Accounting Policies Nature of Entity The Sarasota Manatee Airport Authority (the Authority) is an independent special district pursuant to the constitution and laws of Florida, particularly Chapter , Laws of Florida, as amended, revising and consolidating Chapter 31263, Special Laws of Florida, 1955, which, by the Act authorized the Authority to own and operate the Sarasota Bradenton International Airport (the Airport). The Authority has jurisdiction, control, supervision and management of the Airport. The Authority's Board consists of six members who are appointed on a non-partisan basis to four-year staggered terms. The Act requires that three members of the Authority be residents of, and be appointed within, each of Sarasota and Manatee Counties. It is mandated that the Chairperson elected by the members thereof, alternate county representation on an annual basis. The Airport is situated on approximately 1,100 acres located in Sarasota and Manatee Counties and the City of Sarasota. It is classified as a small hub airport by the Federal Aviation Administration (FAA). Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Basis of Presentation The Authority's financial statements are presented in the form of a single enterprise fund which encompasses all financial activity relative to owning, operating, and improving the Airport facilities. Governmental proprietary operations (enterprise funds) are accounted for using a flow of economic resources measurement focus on an accrual basis of accounting. Revenues are recognized in the period in which they are earned and expenses are recognized in the period incurred. Revenues from airlines, concessions, rental cars and parking are reported as operating revenues. Transactions which are capital, financing or investing related are reported as non-operating revenues. All expenses related to operating the Airport are reported as operating expenses. Interest expense, financing costs, and certain operating grant expenditures are reported as non-operating expenses. The accounting and reporting policies of the Authority conform with the accounting rules prescribed by the Governmental Accounting Standards Board (GASB). The Authority has elected under GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting to apply all applicable GASB pronouncements, as well as all applicable Financial Accounting Standards Board (FASB) Statements and Interpretations issued on or before November 30, 1989, except for those that conflict with or contradict GASB pronouncements. For the year ended September 30, 2002, the Authority adopted GASB Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments (GASB 34) as amended by GASB Statements No. 37 and No. 38, and applied these standards on a retroactive basis to all periods presented. GASB Statement No. 34 establishes standards for external financial reporting for state and local governments and requires that resources be classified for accounting and reporting purposes into the following four net asset categories: 20

21 Notes to the Finance Statements For the Years ended 30, 2005 and 2004 Invested in capital assets, net of related debt: Capital assets, net of accumulated depreciation and outstanding debt balances (net of deferred losses and unamortized issuance costs) attributable to the acquisition, construction or improvement of those assets. Restricted: Nonexpendable Net assets subject to externally imposed stipulations requiring that the Airport Authority maintain them permanently. The Authority has no nonexpendable net assets. Expendable Net assets whose use by the Authority is subject to externally imposed stipulations that can be fulfilled by actions of the Authority pursuant to those stipulations or that expire by the passage of time. Such assets included the Authority s bond construction funds on hand. Unrestricted: Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of management or the Board of Directors or may otherwise be limited by contractual agreements with outside parties. Reporting Entity The accompanying financial statements present the financial position, results of operations and cash flows of the Authority in accordance with GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. As a result of applying the reporting entity criteria in GASB Statement Nos. 14 and 39, no other component units exist in which the Authority has any financial accountability, which would require inclusion in the Authority's financial statements. Cash and Cash Equivalents The Authority considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Investments The Authority's investments are managed by the Vice President, Chief Financial Officer in conjunction with the Sarasota County Clerk's Office. Investments in commercial paper are recorded at cost, which approximates fair value. Investments in U.S. Treasury and government agency securities are recorded at fair value, as determined by quoted market prices. The Local Government Investment Pool operated by the Florida State Board of Administration is treated as a "2a-7 like" pool in accordance with GASB Statement No. 31; therefore, it is presented at its actual pooled share price, which approximates fair value. All investment income, including changes in the fair value of investments, is reported as interest and other investment income in the Statements of Revenues, Expenses and Changes in Net Assets. Concentrations of Credit Risk The Authority maintains its cash and cash equivalents with a large financial institution. All accounts are guaranteed by the Federal Deposit Insurance Corporation up to $100,000 per bank. The Authority has cash deposited that exceeds the federally insured amount, however, management does not anticipate nonperformance by the financial institution. 21

22 Notes to the Finance Statements For the Years ended 30, 2005 and 2004 Additionally, the Authority has unrestricted and restricted investments in federal government agencies that have a high credit standing. The Authority does not believe there is a significant risk of nonperformance from these agencies. Inventories of Materials and Supplies Inventories of materials and supplies are valued at the lower of cost, using the moving-average method, or market. Restricted Assets Certain assets are restricted in accordance with the provisions of the bond covenants and in accordance with FAA restrictions, or as required by law. Assets restricted under the bond covenant are designed primarily for payment of debt service. When both restricted and unrestricted resources are available for use, it is the Authority s policy to use restricted resources first, then unrestricted resources as they are needed. Capital Assets Capital assets are recorded at cost, or the fair value at receipt for contributions. They are depreciated under the straight-line method over the following estimated useful lives: Building and structures Avigation easements Runways, taxiways and ramps Land improvements Fencing Lights and signs Equipment, furniture and fixtures Computers years 40 years years years 7 10 years 7 10 years 5 10 years 3 5 years Project costs are capitalized and included in construction in progress as the costs are incurred and maintenance and repair costs are expensed as incurred. The accumulated project costs are transferred to capital assets upon completion. The gain or loss recognized on assets retired or otherwise disposed of is reflected in operations and the associated cost and related accumulated depreciation are removed from the accounts. The Airport Authority purchases certain residential parcels of land that are considered to be within the area designated as noise impacted surrounding the Airport, as well as administer a program of sound insulation of eligible homes in the 65 DNL area in exchange for avigation easements recorded on the property. The cost of acquisition, structure demolition and other costs associated with the purchase are eligible under the Federal Aviation Administration (FAA) Noise Compatibility Plan (NCP) for reimbursement. The FAA funds approximately 90% of these costs with the remainder reimbursed by Passenger Facility Charges (PFC) funds and Authority funds. The FAA retains a continuing interest in the purchased properties equal to its original funding percentages and restricts the use of such properties to purposes which are compatible with noise levels associated with the operation of airports. The total costs associated with these noise abatement procedures are approximately $12.9 million and $12.6 million at September 30, 2005 and 2004, respectively, and is recorded under the caption land in the accompanying statements of net assets. 22

23 Notes to the Finance Statements For the Years ended 30, 2005 and 2004 Under the NCP, the Authority purchased forty-seven (47) non-contiguous residential properties in Tri-Par Mobile Home Park (Tri-Par). Mobile homes comprise an incompatible land use when located in the 65+DNL Noise Contour. Accordingly, the Authority sold and removed forty-five (45) mobile home residences. In March of 2004, the Authority sold the forty-seven (47) lots to the Tri-Par Estates Homeowners Association with deeds containing restrictive covenants. The cost of the Tri-Par properties was approximately $2.6 million, and was reclassified to the avigation easement category of capital assets during Construction in progress consists mainly of the airport communications and security project, and taxiway and runway construction and construction to expand the terminal security area. Deferred Bond Issuance Costs Deferred bond issue costs are amortized over the life of the bonds using the effective interest method. Capital Contributions Contributions and grants are funds donated by various governmental agencies and Airport tenants for specific improvement to the Airport facilities (Improvements). In the normal course of business, the Authority applies for and receives money from the FAA under Airport Improvement Program grant agreements. Costs incurred under these agreements are subject to review and approval by the FAA. Contributions and grants for improvements are reported in the Statements of Revenues, Expenses and Changes in Net Assets after non-operating revenues and expenses as capital contributions. Passenger Facility Charges On June 29, 1992, the Authority received approval from the FAA to impose a $3.00 Passenger Facility Charge (PFC) at the Airport effective September 1, The authorization to impose the PFC is contingent on continued compliance with the terms of the Federal Aviation Regulations. A use application was filed with the FAA and a decision of approval was granted on December 15, In addition, another impose and use PFC application was filed and approved by the FAA in its Record of Decision dated October 3, On February 22, 2002 an amendment to that application was administratively approved by the FAA that increased the charge level from $3.00 to $4.50 per enplaned passenger and increased the approved collection amount. Revenue Recognition Airfield Landing Fee Charges Landing fees are principally generated from scheduled airlines and nonscheduled commercial aviation and are based on the landed weight of the aircraft. The estimated landing fee structure is determined annually pursuant to an agreement between the Authority and the signatory airlines based on the operating budget of the Authority and is adjusted at year end for the actual landed weight of all aircraft. Landing fees are recognized as revenue when the related facilities are utilized (see Note 6). 23

24 Notes to the Finance Statements For the Years ended 30, 2005 and 2004 Terminal Rents, Out parcel Rentals, Concessions and Ground Transportation Rental and Concession fees are generated from airlines, parking lots, food and beverage, retail, rental cars, advertising and other commercial tenants. Leases are for terms from one to fifty years and generally require rentals based on the volume of business, with specific minimum annual rental payments required. Rental revenue is recognized over the life of the respective leases and concession revenue is recognized based on reported concessionaire revenue. Other All other types of revenues are recognized when earned. Federal/State Compensation As a result of the terrorist acts of September 11, 2001 (September 11) the federal and state governments have provided compensation to the Authority to replace lost revenue and offset capital and operating expenditures for increased security costs (see Note 7). In addition, the Authority received a $1.5 million grant for new airline service (see Note 10). 2. Cash, Cash Equivalents and Investments Deposits All of the Authority s public deposits are held in qualified public depositories pursuant to Florida Statutes, Chapter 280. Qualified public depositories are required to pledge collateral to the State Treasurer with a market value equal to 50% of the average daily balance of all public deposits in excess of any federal deposit insurance. In addition, to the extent that total public deposits exceed the total amount of the regulatory capital accounts of a bank or the regulatory net worth of a savings association, the required collateral shall have a market value equal to 125% of the deposits. In event of default by a qualified public depository, all claims for public deposits would be satisfied by the State Treasurer from the proceeds of federal deposit insurance, pledged collateral of the public depository in default and, if necessary, a pro-rata assessment to the other qualified public depositories in the collateral pool. Therefore, the cash and time deposits are fully insured or collateralized. The carrying value of the Authority s deposits at September 30, 2005 and 2004 of approximately $7.3 million and $10.1 million respectively. Of the bank balance, $1.5 million was covered by federal depository insurance, $5.8 million was covered by collateral pursuant to Florida Statutes, Chapter 80. In addition to cash deposits, the Authority maintains cash on hand for the purpose of making change on transactions. The amount of cash on hand as of September 30, 2005 and 2004 was $

25 Notes to the Finance Statements For the Years ended 30, 2005 and 2004 Investments As of September 30, 2005 and 2004, the Authority has the following investments and maturities: Investment Type FY 2004 FY 2005 Less than More than Fair Value Fair Value 1 Year 1-3 Years 3 Years Unrestricted Federal Home Loan Bank $2,953,140 $2,914,680 $ - $2,914,680 $ - Fannie Mae 2,957,820 2,890,320-2,890,320 - Fannie Mae 1,969,380 1,938,120-1,938,120 - Federal National Mortgage Assoc. - 2,941, ,941,890 Federal Home Loan Mortgage Corp. 1,995,700 1,957,140-1,957,140 - Federal Home Loan Bank 999, , ,690 - Federal Home Loan Mortgage Corp. 3,002, Total Unrestricted 13,877,890 13,616,840-10,674,950 2,941,890 Restricted Federal Home Loan Mortgage Corp. 636, , ,195 Federal Home Loan Mortgage Corp. 4,916,954 4,853,156 4,853, SBA - 6,126 6, Total Restricted 5,553,459 5,480,477 4,859, ,195 Total Investments $19,431,349 $19,097,317 $4,859,282 $10,674,950 $3,563,085 Following is a summary of restricted cash and investments at September 30, 2005 and 2004: September 30, Passenger Facility Charges $ 2,858,921 $ 2,981,632 Sound Mitigation Program 2,976,137 4,499,818 Debt Service (P&I) 1,047,819 1,024,319 Debt Service (Reserve) 5,480,477 5,619,909 Tenant Escrow 275, ,318 Medical Spending Account - 4,369 $ 12,638,768 $ 14,236,365 Investments of the Authority conform to the provisions of Section 5(21) of Chapter , Laws of Florida (the Sarasota-Manatee Airport Authority Act ), and Florida Statutes, Section Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the Authority s investment policy limits its risk by maintaining an investment portfolio with limited volatility. Accordingly, no security shall have an estimated average return of principal exceeding five years. Credit Risk. The Authority is authorized under Florida Statutes, Section (16);Section 5(21) of Chapter , Laws of Florida to invest in certain investments. All of the Authority s investments carried a credit rating of AAA by Standard & Poor s and Aaa by Moody s as of September 30,