CLARK COUNTY DEPARTMENT OF AVIATION CLARK COUNTY, NEVADA INTERIM FINANCIAL STATEMENTS. March 31, 2002

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2 INTERIM FINANCIAL STATEMENTS March 31, 2002

3 TABLE OF CONTENTS Balance Sheet Statement of Revenues and Expenses Statement of Changes in Equity Schedule I - Restricted Assets Schedule II - Long-Term Debt Schedule III - Airport Revenue Bonds Debt Service Coverage Schedule IV - Restricted Operating Revenue Schedule V - Airport Environs Overlay District Land Transfer - CMA Land Management Discussion and Analysis i

4 BALANCE SHEET June 30, 2001 and March 31, 2002 June 30 March 31 Ass ets (unaudited) Current Assets: Cash and cash equivalents $ 86,621,176 $ 105,401,046 Accounts receivable, net allowance for doubtful accounts of $1,931,801 and $931,801, respectively 12,738,540 14,812,662 Inventories 887, ,729 Prepaid expenses 326,734 1,814,591 Total current assets 100,573, ,877,028 Restricted and Designated Assets: Cash and Investments 573,027, ,425,796 Interest receivable 8,475,123 6,615,233 Total restricted and designated assets 581,502, ,041,029 Property and Equipment: Land and improvements 1,129,954,141 1,147,185,080 Buildings 832,324, ,356,759 Furniture and fixtures 4,977,734 5,255,753 Machinery and equipment 126,342, ,098,020 Construction in progress 84,908, ,798,468 2,178,508,037 2,260,694,080 Less Accumulated Depreciation (532,699,681) (580,317,128) Total property and equipment, net 1,645,808,356 1,680,376,952 Deferred charges, net 13,298,712 15,507,029 Total Assets $ 2,341,182,746 $ 2,516,802,038 1

5 June 30 March 31 Liabilities and Equity (unaudited) Current Liabilities (payable from current assets): Accounts payable $ 7,496,863 $ 9,403,788 Accrued payroll 7,106,961 8,766,707 Deferred income 5,191,058 5,435,436 Total current liabilities (payable from current assets) 19,794,882 23,605,931 Current Liabilities (payable from restricted assets): Securities lending 62,629,025 - Current portion of long-term debt 45,365,000 46,010,000 Accrued interest 31,758,194 17,395,195 Contracts payable 3,119,374 2,608,572 Total current liabilities (payable from restricted assets) 142,871,593 66,013,767 Long-term debt, net of current portion 1,437,289,455 1,641,085,491 Total Liabilities 1,599,955,930 1,730,705,189 Equity: Contributed capital, Federal Aviation Administration 232,424, ,446,537 Retained Earnings Reserved per revenue bond ordinances 104,272, ,071,414 Unreserved 404,530, ,578, ,802, ,650,312 Total Equity 741,226, ,096,849 Total Liabilities and Equity $ 2,341,182,746 $ 2,516,802,038 2

6 STATEMENT OF REVENUES AND EXPENSES Nine Months Ended March 31, 2002 and 2001 (Unaudited) March 31 March Revenues: Landing and other aircraft fees $ 23,946,937 $ 25,339,876 Building and land rental 56,836,856 56,004,964 Concession income 76,686,513 75,235,141 Other 3,105,140 3,207,819 Total Revenues 160,575, ,787,800 Expenses: Salaries and related 42,173,773 39,724,146 Operating and maintenance 37,997,293 31,563,833 Administrative 4,264,445 2,448,535 Total Expenses 84,435,511 73,736,514 Operating income before depreciation 76,139,935 86,051,286 Depreciation: Clark County Capital Outlay 44,947,322 45,688,171 Federal Aviation Administration Grants 2,977,699 2,741,877 Total Depreciation 47,925,021 48,430,048 Operating Income 28,214,914 37,621,238 Non-operating Income (expenses): Interest income 30,752,701 28,995,562 Interest expense (66,454,281) (65,929,669) Restricted revenue 41,780,400 43,101,623 Other non operating revenue 1,527,579 2,740,715 Federal Aviation Administration Contributions 9,048,720 9,734,397 Net Income $ 44,870,033 $ 56,263,866 3

7 STATEMENT OF REVENUES AND EXPENSES Six Months Ended March 31, 2002 and 2001 (Unaudited) Revenues: March 31 March Landing and other aircraft fees $ 15,893,016 $ 17,036,924 Building and land rental 37,878,199 37,598,956 Concession income 50,850,403 49,790,088 Other 1,927,216 2,109,911 Total Revenues 106,548, ,535,879 Expenses: Salaries and related 28,174,916 26,716,522 Operating and maintenance 25,746,251 21,887,350 Administrative 3,219,073 1,665,041 Total Expenses 57,140,240 50,268,913 Operating income before depreciation 49,408,594 56,266,966 Depreciation: Clark County Capital Outlay 30,239,045 30,502,825 Federal Aviation Administration Grants 2,072,909 1,816,456 Total Depreciation 32,311,954 32,319,281 Operating Income 17,096,640 23,947,685 Non-operating Income (expenses): Interest income 20,776,208 20,605,240 Interest expense (45,394,947) (43,710,345) Restricted revenue 26,317,410 28,541,814 Other non operating revenue 1,115,924 1,494,856 Federal Aviation Administration Contributions 9,048,720 9,734,397 Net Income $ 28,959,955 $ 40,613,647 4

8 STATEMENT OF CHANGES IN EQUITY Nine Months Ended March 31, 2002 Contributed Capital Federal Aviation Administration Retained Earnings Balance, June 30, 2001 $ 232,424,236 $ 508,802,580 Amortization of Federal Aviation Administration Contributions (2,977,699) 2,977,699 Net Income (Loss) - 44,870,033 Balance, March 31, 2002 $ 229,446,537 $ 556,650,312 5

9 SCHEDULE I - RESTRICTED ASSETS June 30, 2001 and March 31, 2002 Certain amounts of cash, cash equivalents and investments are restricted by revenue bond ordinances or designated by management for capical expenses. A summary of these restricted and designated assets is as follows: June 30 March (unaudited) Restricted: Current debt service: Cash and investments $ 91,515,198 $ 106,553,939 Interest receivable 1,946, ,034 93,461, ,385,973 Airport construction: Cash and investments - construction 13,858, ,922,949 Passenger facility charge 63,261,642 51,374,368 77,120, ,297,317 Other restricted assets: Debt service reserve: Cash and investments - passenger facility charge bonds 55,870,620 52,024,554 Cash and investments - other bonds 72,908,006 91,085,201 Interest receivable 562,394 2,954, ,341, ,063,986 Working capital and contingency cash and investmests 19,672,518 20,719,268 Capital improvement and replacement cash and investments 5,000,000 5,000, ,013, ,783,254 Total restricted by revenue bond ordinance 324,594, ,466,544 Securities Lending Collateral 62,629,025 - Designated by management: Airport capital expansion: Cash and investments 188,311, ,745,517 Interest receivable 5,966,522 2,828, ,278, ,574,485 $ 581,502,150 $ 698,041,029 6

10 SCHEDULE II - LONG-TERM DEBT June 30, 2001 and March 31, 2002 Following is a list of long-term debt: June 30 March (unaudited) 1993A Refunding Revenue Bonds $ 293,800,000 $ 277,300, A-1 & A-2 Adjustable Rate Airport System Subordinate Lien Revenue Bonds 74,470,000 73,490, A Non AMT Airport System Subordinate Lien Revenue Bonds 119,995, ,440, B AMT Airport System Subordinate Lien Revenue Bonds 62,900,000 55,000, A Non AMT Airport System Subordinate Lien Revenue Bonds 105,220, B-1 & B-2 Adjustable Rate Airport System Subordinate Lien Revenue Bonds 102,960, ,960, A AMT Airport System Subordinate Lien Revenue Bonds - 59,920, B Non AMT Airport System Subordinate Lien Revenue Bonds - 184,805, C Non AMT Airport System Subordinate Lien Revenue Bonds - 115,560, A & B Passenger Facility Charge Revenue Bonds 81,670,000 75,375, A Passenger Facility Charge Revenue Bonds 375,185, ,315, Passenger Facility Charge Refunding Revenue Bonds 214,245, ,180, /93 General Obligation (Limited Tax) Airport Bonds 43,995,000 43,995, General Obligation (Limited Tax) Airport Bonds 49,950,000 47,220,000 Total principal outstanding 1,524,390,000 1,737,560,000 Less: Current 45,365,000 46,010, A-1 & A-2 Unamortized discount 301, , A Unamortized premium and refunding loss deferred 3,362,703 3,186, A Unamortized discount and swap option proceeds (1,313,552) B Unamortized discount - 1,049, C Unamortized refunding loss - 8,220, A & B Unamortized discount - PFC Bonds 2,132,134 1,962, A Unamortized discount - PFC Bonds 15,424,322 14,942, Unamortized discount and refunding loss deferred - PFC Bonds 19,126,161 18,326, /93 Unamortized discount and refunding loss deferred - General - Obligation Bonds 2,683,686 2,466, Unamortized discount - General Obligation Bonds 18,996 17,809 Long-term debt, net of current portion and unamortized discount $ 1,437,289,455 $ 1,641,085,491. 7

11 Schedule II - Long-term debt continued As of March 31, 2002, the approximate maturities of long-term debt are as follows: Due FYE June 30 Principal Interest Total 2002 $ 45,365,000 $ 90,680,000 $ 136,045, $ 46,010,000 $ 91,063,000 $ 137,073, $ 49,125,000 $ 88,228,000 $ 137,353, $ 52,125,000 $ 85,154,000 $ 137,279, $ 55,365,000 $ 81,896,000 $ 137,261,000 Later Years $ 1,489,570,000 $ 970,583,000 $ 2,460,153,000 Annual principal and interest payments on Airport Revenue bonds is approximately $65,000,000 through 2012, ranges from $16,000,000 to $25,000,000 through 2022 and levels off at approximately $53,000,000 from 2026 through The General Obligation (Limited Tax) bonds are payable at approximately $11,200,000 per year through 2011, then $5,400,000 through Annual principal and interest payments on the three Passenger Facility Charge (PFC) Revenue Bonds issues which will be paid by PFC revenue is approximately $52,000,000 per year through 2022 and $28,000,000 through Current PFC revenue is projected to be sufficient to cover annual debt service payments on the PFC Bonds. Principal and interest for the revenue bonds and the PFC bonds is transferred monthly to the trustee who holds the monies for distribution to the bondholders as required under the terms of the bond ordinance. For the General Obligation (Limited Tax) Bonds, funds are set aside monthly in a debt service payment account. 8

12 SCHEDULE III - AIRPORT REVENUE BONDS DEBT SERVICE COVERAGE Nine months ended March 31, 2002 and 2001 March 31 March 31 Reference General Airport Revenue: Operating Revenue $ 160,575,446 $ 159,787,800 Unrestricted Interest Income 20,034,391 20,420,562 Other Income 1,527,579 - Operating Expenses (84,435,511) (73,736,514) Net Revenue 1 97,701, ,471,848 Other Available funds-coverage prorated 8,566,000 9,011,000 Net general and other available funds 2 $ 106,267,905 $ 115,482,848 Restricted Revenue-Passenger Facility Charges (PFC): PFC Collections $ 33,183,933 $ 34,033,469 PFC Related Interest Income 5,544,277 7,193,851 Total Restricted Revenue 3 $ 38,728,210 $ 41,227,320 Debt Service Requirement: General Airport Revenue Bonds - Senior: Series 1993A Airport Revenue Bonds 4 $ 27,113,532 $ 27,116,415 Subordinate Revenue Bonds: Series 1995A Subordinate Revenue Bonds - Adjustable $ 1,753,445 $ 2,891,281 Series 1998A Subordinate Revenue Bonds - Non AMT Fixed 7,181,835 5,173,901 Series 1998B Subordinate Revenue Bonds - AMT Adjustable 2,908,489 7,835,027 Series 1999A Subordinate Revenue Bonds - Adjustable - (Refunded) 495,182 3,394,734 Series 1999B-1 Subordinate Revenue Bonds - Adjustable 860,096 1,888,132 Series 1999B-2 Subordinate Revenue Bonds - Adjustable 484,734 1,137,357 Series 2001A Subordinate Revenue Bonds - Adjustable ** - - Series 2001B Subordinate Revenue Bonds ** - - Series 2001C Subordinate Revenue Bonds 4,198,680 - Total Subordinate Revenue Bonds 5 17,882,461 22,320,432 Total General Airport and Subordinate Revenue Bonds 6 $ 44,995,993 $ 49,436,847 Subordinate Passenger Facility Charge (PFC) Revenue Bonds: Series 1992 PFC Bonds $ 8,440,370 $ 8,439,860 Series 1995 PFC Bonds 21,563,073 21,562,604 Series 1998 PFC Bonds 8,738,558 8,129,306 Total Subordinate PFC Revenue Bonds 7 $ 38,742,001 $ 38,131,770 Debt Service Coverage Achieved: General Airport Revenue excluding other available funds (For Information Only) 1/ General Airport Revenue Bonds including other available funds (Required 1.25) 2/ General Airport and Subordinate Revenue Bonds (Required 1.10) 2/6* Subordinate Revenue Bonds after payment of Senior Bonds (For Information Only) (1-4)/5* Passenger Facility Charge Revenue Bonds: Based on PFC Revenues (For Information Only) 3/ *Includes PFC Debt Service not covered by PFC Revenues, if any ** Paid by Capitalized Interest 9

13 CLARK COUNTY DEPARTM ENT OF AVIATION CLARK COUNTY, NEV ADA SCHEDULE III - AIRPORT REVENUE BONDS DEBT SERVICE COVERAGE Six months ended March 31, 2002 and 2001 March 31 March 31 Reference General Airport Revenue: Operating Revenue $ 106,548,834 $ 106,535,879 Unrestricted Interest Income 12,780,663 14,405,426 Other Income 1,115,924 1,494,856 Operating Expenses (57,140,240) (50,268,913) Net Revenue 1 63,305,181 72,167,248 Other Available funds-coverage prorated 5,754,000 5,982,999 Net general and other available funds 2 $ 69,059,181 $ 78,150,247 Restricted Revenue-Passenger Facility Charges (PFC): PFC Collections $ 20,748,033 $ 22,492,747 PFC Related Interest Income 3,570,630 5,201,356 Total Restricted Revenue 3 $ 24,318,663 $ 27,694,103 Debt Service Requirement: General Airport Revenue Bonds - Senior: Series 1993A Airport Revenue Bonds 4 $ 18,075,688 $ 18,077,610 Subordinate Revenue Bonds: Series 1995A Subordinate Revenue Bonds - Adjustable $ 1,076,673 $ 1,878,001 Series 1998A Subordinate Revenue Bonds - Non AMT Fixed 4,787,890 3,449,267 Series 1998B Subordinate Revenue Bonds - AMT Adjustable 1,865,905 5,172,509 Series 1999A Subordinate Revenue Bonds - Adjustable - (Refunded) (20,713) 2,196,954 Series 1999B-1 Subordinate Revenue Bonds - Adjustable 493,417 1,212,611 Series 1999B-2 Subordinate Revenue Bonds - Adjustable 269, ,618 Series 2001A Subordinate Revenue Bonds - Adjustable ** - - Series 2001B Subordinate Revenue Bonds ** - - Series 2001C Subordinate Revenue Bonds 3,877,940 - Total Subordinate Revenue Bonds 5 12,350,777 14,635,960 Total General Airport and Subordinate Revenue Bonds 6 $ 30,426,465 $ 32,713,570 Subordinate Passenger Facility Charge (PFC) Revenue Bonds: Series 1992 PFC Bonds $ 5,626,913 $ 5,626,574 Series 1995 PFC Bonds 14,375,382 14,375,069 Series 1998 PFC Bonds 5,825,705 5,419,537 Total Subordinate PFC Revenue Bonds 7 $ 25,828,000 $ 25,421,180 Debt Service Coverage Achieved: General Airport Revenue excluding other available funds (For Information Only) 1/ General Airport Revenue Bonds including other available funds (Required 1.25) 2/ General Airport and Subordinate Revenue Bonds (Required 1.10) 2/6* Subordinate Revenue Bonds after payment of Senior Bonds (For Information Only) (1-4)/5* Passenger Facility Charge Revenue Bonds: Based on PFC Revenues (For Information Only) 3/ *Includes PFC Debt Service not covered by PFC Revenues, if any ** Paid by Capitalized Interest 10

14 SCHEDULE IV - RESTRICTED OPERATING REVENUE Six Months Ended March 31 % Nine Months Ended March 31 % Change Change Passenger Facility Charge $20,748,033 $ 22,492, % $33,183,933 $34,033, % Jet A Fuel Tax 5,569,377 6,049, % 8,596,467 9,068, % Total Restricted Operating Revenue $26,317,410 $28,541, % $41,780,400 $43,101, % Passenger Facility Charges (PFCs) are restricted to be used only on FAA approved PFC projects, which include debt service on PFC revenue bonds. Jet Fuel Tax revenues are generally available for any authorized airport project but cannot be used for operating and maintenance expenses. 11

15 SCHEDULE V - AIRPORT ENVIRONS OVERLAY DISTRICT LAND TRANSFER - COOPERATIVE MANAGEMENT AREA (CMA) LAND The Southern Nevada Public Land Management Act of 1998, Public Law , was enacted by Congress in October A provision of this law is that the Bureau of Land Management (BLM), an agency of the United States Department of the Interior, transfer approximately 5,000 acres of land to the Department, without consideration, subject to the following :1) Valid existing rights. 2) The land must be managed in accordance with the law and Section of Title 40, United States Code (relating to airport noise compatibility planning), and regulations promulgated pursuant to that section. 3) If any lands are sold, leased, or otherwise conveyed or leased by the Department, such sale, lease, or other conveyance shall contain a limitation that requires uses compatible with the law and such Airport Noise Compatibility Planning provisions. 4) If any lands are sold, leased, or otherwise conveyed or leased by the Department, such sale, lease, or other conveyance shall be for fair market value. The Department shall contribute 85% of the gross proceeds from the sale, lease, or other conveyance of such lands directly to the BLM for use in purchasing, improving, or developing other lands for environmental purposes. The Department shall contribute 5% of the gross proceeds from the sale, lease, or other conveyance of such lands directly to the State of Nevada for use in the general education program of the State. The remainder shall be available for use by the Department for the benefit of airport development and the Noise Compatibility Program. The land transferred to the Department under the provisions of the Southern Nevada Public Land Management Act of 1998 is more commonly known as the Cooperative Management Area (CMA). Due to the uncertainty of any future benefit to the Department, a value has not been assigned nor income reported relating to the CMA land not yet sold or leased under the Southern Nevada Public Land Management Act of Fiscal Year To Date Total Since Inception Dept Share Other's Share Total Dept Share Other's Share Total Land Rents Received $ 36,953 $ 332,578 $ 369,531 $ 127,462 $ 1,147,163 $ 1,274,625 Sales of Land $ 1,338,133 $ 12,043,200 $ 13,381,333 $ 3,467,330 $ 31,205,975 $ 34,673,305 12

16 REPORTING ENTITY AND ITS SERVICES The Clark County Department of Aviation (Department) comprises a single enterprise fund of Clark County, Nevada (County) and operates as a separate department of the County. The Board of Commissioners of Clark County is responsible for governing the affairs of the Department. The accounting principles used are those applicable to a similar private business enterprise, where the cost of providing services to the public on a continuing basis is recovered primarily through user charges. Tax revenues of the County do not subsidize the Department. Rates charged the airline users are established periodically by County Ordinance and are intended to recover the actual costs (including maintenance, operating and administrative expenses) of operating the related airfield or terminal facilities plus annual debt service. The rates are based on estimates of future operating costs, use or occupancy. The vision of the Department is to be a global leader. The County Airport system is comprised of: McCarran International Airport - the 8th busiest airport in the United States. Reliever airports located in: North Las Vegas, Nevada Henderson, Nevada Jean, Nevada Overton, Nevada Searchlight, Nevada TERRORIST ATTACKS On September 11, 2001, the United States was subjected to extensive terrorist attacks likely to have far-reaching effects on economic activity in the country for an indeterminate period. The near- and long-term impact on the southern Nevada economy and the Department s business cannot be predicted at this time but may be substantial. Enplaned passengers in the six months following the attacks are approximately 12.5% less than the same period for the prior year. Total operating revenues (which have not decreased) have not been impacted to the same extent because certain revenue streams such as building rents are not dependent on passenger numbers and certain concession revenues have benefited from the additional time passengers spend in the airport. Security requirements and the passenger handling process are still evolving. The resulting impact on per passenger revenues over a long-term cannot be predicted at this time. Operating revenues for October 2001 through March 2002 are approximately 1.8% less than the same period for the prior year. The Department will incur additional costs for security requirements and related costs. The costs are presently projected to be approximately $3,000,000. Insurance costs will increase approximately $2,500,000. Due to the strong operating results, airline rates and charges for fiscal year 2003 will not increase. 13

17 Most capital projects related to capacity have been placed on hold indefinitely. Each will be evaluated on its own merits from time to time. Key projects have been designed and when the time to proceed is determined, they can immediately go out for bid, thus providing a fast track for development. As of March 31, 2002, the Department has $105,000,000 of unrestricted cash and $214,000,000 of cash designated for capital expansion. Other than management s designation, there are no other restrictions on the Designated money other than it be used for Airport System purposes. This cash position will provide maximum flexibility as management navigates through these trying uncertain times. Because of the events of September 11, 2001, the following comments relate to a comparison of the nine months ended March 31, 2002 and March 31, 2001 unless noted otherwise. This provides information related to financial operations reflecting the impacts on operating revenues and expenses because of the terrorist attacks and current economic conditions. Nine Months Nine Months Percent Inc reas e (-) Decrease Revenues: Landing and other aircraft fees $ 23,947,000 $ 25,340, % Building and land rental 56,837,000 56,005, % Concession income 76,686,000 75,235, % Other 3,105,000 3,208, % Total Revenues $ 160,575,000 $ 159,788, % Six Months Six Months Percent Inc reas e (-) Decrease Revenues: Landing and other aircraft fees $ 15,893,000 $ 17,037, % Building and land rental 37,878,000 37,599, % Concession income 50,850,000 49,790, % Other 1,927,000 2,110, % Total Revenues $ 106,548,000 $ 106,536, % 14

18 STATISTICAL ANALYSIS Fiscal Year Fiscal Year Percent Increase (-) Decrease Rates & Charges: Landing Fee $ 1.22 $ % Terminal Rents $ $ % Gate Use Fee $ 62,700 $ 64, % Enplaned Passengers - Quarter Ended: July 1,627,574 1,587, % August 1,682,876 1,614, % September 1,048,318 1,471, % Quarter 4,358,768 4,673, % October 1,398,121 1,670, % November 1,260,947 1,559, % December 1,257,366 1,461, % Quarter 3,916,434 4,690, % January 1,264,965 1,399, % February 1,299,871 1,413, % March 1,584,941 1,712, % Quarter 4,149,777 4,525, % Total Nine Months 12,424,979 13,889, % Landed Weight (1000 Pounds): Quarter Ended: July 2,075,756 2,026, % August 2,123,615 2,084, % September 1,789,102 2,070, % Quarter 5,988,473 6,181, % October 1,965,702 2,181, % November 1,862,060 2,089, % December 1,892,136 2,043, % Quarter 5,719,898 6,314, % January 1,919,262 2,054, % February 1,805,567 1,889, % March 2,076,032 2,147, % Quarter 5,800,861 6,091, % Total Nine Months 17,509,232 18,587, % Landing revenue decreased 5.5% during the nine months ended March 31, Landed weight decreased 5.8% for the same period. Terminal building rent increased 1.5%. This is attributed to the fact that rental revenues are not impacted by the decline in passengers and the decline in weights. 15

19 Concession Income: Six Months Ended March 31 % Nine Months Ended March 31 % Change Change Slot Machine Concession $16,585,000 $ 14,853, % $23,619,000 $21,992, % Transportation Concession 12,046,000 12,372, % 19,025,000 18,793, % Sales Concession 14,052,000 14,507, % 21,059,000 22,127, % Parking 8,167,000 8,058, % 12,983,000 12,323, % Total Concession Income $50,850,000 $49,790, % $76,686,000 $75,235, % Concession income has been impacted not only by the decrease in passengers (12.5% for the six months ended March 31, 2002), but by the way passengers are processed from ticketing through security screening to the gate area. Often there are lines at ticketing and/or security screening. Passengers have been spending more time in the airport. This additional time has yielded a siginificant increase in slot machine revenue. Transportation concession income declined 2.6% during the six month period. Income from rent car operations was down 5.8% ($463,000). This is partially offset by a 35.4% increase in limousine income ($498,000). The limousine increase is attributable to new contracts with the limousine companies which have significantly higher minimum monthly guarantees over the prior year. Sales concessions have decreased only 3.1% as compared to the 12.5% decrease in passengers. The additional time in the airport and the business decision by the air carriers to significantly reduce on board food service has helped to mitigate the effects of the 12.5% decrease in passengers. Parking income is up 1.3% from the prior year. Short term parking rates have been increased 25% over the prior year and employee parking has increased $200,000 (32%) due to a 30% increase in employee parking rates implemented August 1, These increasess have offset the effects caused by the decrease in passengers. Operating and Maintenance Expenses: Six Months Ended March 31 % Nine Months Ended March 31 % Change Change Salaries and related expenses $28,175,000 $ 26,716, % $42,174,000 $39,724, % Operating and maintenance 25,746,000 21,888, % 37,997,000 31,564, % Administrative expenses 3,219,000 1,665, % 4,264,000 2,449, % Total Expenses $57,140,000 $50,269, % $84,435,000 $73,737, % 16

20 Salaries, wages and related expenses have increased due to contractual merit increases, cost of living increase and staff overtime related to security crowd control issues. The increase in operating and maintenance expenses ($3,858,000) are reasonable in the circumstances and material increases are identified as follows: * Professional services have increased $3,100,000 which is attributed to - -- $2,498,000 (a 90% increase) in fire and police protection related to increased security staffing and contractual increases. -- $607,000 increase in professional services related to land use, noise, environmental and legal issues and various studies related to the potential purchase of land at the proposed Ivanpah airport sight. * Utilities increased $614,000 related to costs of electricity and natural gas. * The remaining $139,000 increase in operating and maintenance costs is related to supplies, materials and maintenance and repair costs. Administrative costs increased $1,554,000--a 93% increase - -- Insurance costs for the six months ended March 31, 2002 increased from $933,000 to $1,996,000--a 140% increase. -- Allowance for doubtful accounts increased $600,000. This was provided in anticipation of financial concerns regarding the probability of airlines financial difficulties. -- All other administrative costs decreased $209,000. This decrease is a result of cost containment procedures implemented as a result of the September terrorists attacks and reduction in passengers. RESTRICTED OPERATING REVENUES Passenger Facility Charge: The Federal Aviation Administration (FAA) authorized the County to impose a Passenger Facility Charge (PFC) of $3.00 per qualifying enplaned passenger commencing June 1, The net receipts from PFCs are required to be used on FAA approved PFC projects which include PFC related debt service. Accordingly, PFC revenue is restricted revenue. The County has been authorized to collect PFCs in the aggregate amount of $1,775,087,000 or for 30 years (to 2023) whichever occurs first. Through March 31, 2002, the aggregate PFC revenue received was $369,766,000. PFC revenues have been pledged for debt service. PFC revenues will pay annual principal and interest payments on the PFC Revenue bond issues. Subsequent to 2000, the annual debt service payment is approximately $52,000,000 per year through 2022 and then is $28,700,000 through PFC revenue including related interest income, is currently sufficient to cover annual debt service payments. 1992, 1995 and 1998 Passenger Facility Charge Revenue Bonds total $657,870,000. Proceeds of these bonds have been used to implement certain of the FAA approved PFC projects. PFC revenue received in excess of debt service requirements will be applied to PFC projects on a pay as you go basis. PFC revenues for the six months ended March 31, 2002 decreased 7.8% to $20,748,

21 Jet A Fuel Tax Revenue: In 1991, the Nevada State legislature established state statutes enabling local governmental entities to impose a Jet A Fuel Tax of up to 5 cents per gallon. The Clark County Board of County Commissioners adopted an ordinance providing for a 2 cents per gallon tax in addition to an existing 1 cent per gallon tax (total 3 cents per gallon), which began July 1, Total collected during fiscal year ended June 30, 2001 was $11,989,000. Receipts for the nine months ended March 31, 2002, are $8,596,000 as compared to $9,068,000 for the prior year s period. Annual debt service for the related bonds, a portion of which have been refinanced, is approximately $5,710,000 annually. Jet A Tax revenue has been sufficient to meet the debt service obligation and provide funds for pay as you go projects that may arise. Jet A Fuel Tax revenue for the six months ended March 31, 2002, decreased 7.9% to $5,569,000. CAPITAL IMPROVEMENT AND LAND ACQUISITION PROGRAM The significant capital projects currently in various stages of development and planning include the following: * Extensive ramp renovation. * Expansion of the D Gates including adding the third leg of the building. * A stand alone Terminal 3 including expanded international passenger processing facilities. * Continued land acquisition-especially those related to Terminal 3. * Airport access roads. * A future airport in the Ivanpah Valley (35 miles south of Las Vegas). * Consolidated Rent Car Facility. These projects have evolved into what we refer to as Vision Due to the impact resulting from the September 11, 2001 terrorist attacks, many of these projects are on hold. (See Terrorist Attacks) Ramp renovation, land acquisition and various environmental projects are continuing to move forward. The ultimate build out at McCarran International Airport is projected to accommodate 55 to 60 million passengers per year (total arriving and departing passengers). The runway and taxiway facilities are generally in place. Accordingly, the demand for passenger gates is driving the projects in the near future. To achieve the projected passenger levels at McCarran, we are challenged with achieving a more efficient use of the air space and expanding the capacity of the reliever airports. Through their expansion, they will achieve their destiny as relievers to McCarran. In the last quarter of calendar year 2000, the US Congress provided the process by which the Department could eventually acquire 6,500 acres of land in the Ivanpah Valley. This legislation provides for the Department to purchase the land at fair market value (currently estimated at less than $20 million) to build a new airport. Prior to acquisition, various environmental and land use issues must be addressed. These are currently either in process or in the planning stages. Ultimately, in response to demand, the planners will design facilities to effectively supplement the capacity at McCarran International Airport. 18