2012 COMPREHENSIVE ANNUAL FINANCIAL REPORT Memphis-Shelby County Airport Authority MEMPHIS, TENNESSEE For the Fiscal Years Ended June 30, 2012 and 2011 A COMPONENT UNIT OF THE CITY OF MEMPHIS Memphis-Shelby County Airport Authority MEMPHIS, TENNESSEE A COMPONENT UNIT OF THE CITY OF MEMPHIS Comprehensive Annual Financial Report For the Fiscal Years Ended June 30, 2012 and 2011 PREPARED BY THE FINANCE DIVISION Memphis-Shelby County Airport Authority JUNE 30, 2012 BOARD OF COMMISIONERS Arnold E. Perl, Chairman James J. Keras, Jr., Vice-Chairman Herbert H. Hilliard, Sr. Jack Sammons John W. Stokes, Jr. Jon K. Thompson Ruby R. Wharton OFFICERS AND KEY STAFF MEMBERS POSITION MEMBERS ............................................................. POSITION Larry D. Cox, A.A.E ................................................................................... President and Chief Executive Officer Scott A. Brockman, A.A.E ............................................................. Executive Vice President and Chief Operating Officer/Authority Treasurer John E. Greaud, P.E .........................................................................................................Vice President Operations Brian L. Kuhn, Esquire ........................................................................... General Counsel and Authority Secretary George E. Mabon, P.H.R ..................................................................................... Vice President Human Resources and Authority Assistant Secretary Richard V. White, A.A.E ........................................................................................... Vice President Properties and Business Development Forrest B. Artz, C.P.A .................................................................. Director of Finance and Chief Financial Officer, Authority Assistant Treasurer Mahi C. Chambers, C.P.A ................................................................................................Director of Staff Services James A. Hay II................................................................................................................. Director of Development Bobby D. Kellum ............................................................................................................... Director of Maintenance J. Jarrett Morgan ............................................................................................ Director of Information Technology 2 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal and Exhibits ..........................................................................................................................5 Organizational Chart .............................................................................................................................................14 FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT ............................................................................................................15 MANAGEMENT’S DISCUSSION AND ANALYSIS .......................................................................................17 BASIC FINANCIAL STATEMENTS: Statements of Net Assets ......................................................................................................................................36 Statements of Revenues, Expenses and Changes in Net Assets ...........................................................................38 Statements of Cash Flows .....................................................................................................................................39 Notes to Basic Financial Statements .....................................................................................................................41 SUPPLEMENTAL SCHEDULES: Supplemental Schedule of Statement of Net Assets Information by Airport .......................................................64 Supplemental Schedule of Statement of Revenues, Expenses and Changes in Net Assets Information by Airport.....................................................................................................66 Supplemental Schedule of Statement of Cash Flows Information by Airport .....................................................67 Supplemental Schedule of Operating Revenues by Source by Airport ...............................................................69 Supplemental Schedule of Operating Expenses by Source by Airport ................................................................70 Supplemental Schedule of Debt Service Requirements - Cash Basis ..................................................................72 STATISTICAL SECTION Operating Revenues, Expenses and Changes in Net Assets - Last Ten Years ....................................................76 Net Assets - Last Ten Years..................................................................................................................................79 3 TABLE OF CONTENTS (CONTINUED) Passenger Enplanements Market Share - Last Ten Years ...................................................................................80 Originating and Destination (O&D) Airline Passengers - Last Ten Years ..........................................................82 Cost Per Enplaned Passenger - Last Ten Years ...................................................................................................83 Cargo Market Share Enplaned - Last Ten Years .................................................................................................84 Landed Weights - Last Ten Years .......................................................................................................................86 Aircraft Operations - Last Ten Years ...................................................................................................................88 Debt Service Coverage - Last Ten Years .............................................................................................................89 Ratio of Annual Bond Debt Service to Total Expenses Excluding Depreciation and Amortization - Last Ten Years ...............................................................................90 Airport Revenue Bond Debt Per Enplaned Passenger - Last Ten Years .............................................................90 Use of Bond Proceeds ..........................................................................................................................................91 Ten Largest Employers - Metropolitan Statistical Area ......................................................................................94 Population - Metropolitan Statistical Area ..........................................................................................................94 Airlines Serving Memphis International Airport .................................................................................................95 Employers Located on Airport Property ..............................................................................................................96 Full-time Equivalent Employees by Cost Center - Last Ten Years .....................................................................97 Insurance In Force ................................................................................................................................................98 COMPLIANCE SECTION SINGLE AUDIT INFORMATION: Schedule of Expenditures of Federal and State Awards .....................................................................................100 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards .............................................................................................103 Independent Auditors’ Report on Compliance with Requirements that Could Have a Direct and Material Effect on the Major Program and On Internal Control Over Compliance in Accordance with OMB Circular A-133 .....................................................................................105 Schedule of Findings and Questioned Costs………………………….………………………………………. .107 4 INTRODUCTORY SECTION This Section Contains the Following: Letter of Transmittal and Exhibits Organizational Chart MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY OFFICE: MEMPHIS INTERNATIONAL AIRPORT 2491 WINCHESTER RD., SUITE 113 MEMPHIS, TENNESSEE 38116-3856 OFFICE: 901-922-8000 / FAX 901-922-8099 INTERNET WEB PAGE ADDRESS http://www.mscaa.com October 11, 2012 To the Board of Commissioners of the Memphis-Shelby County Airport Authority The Comprehensive Annual Financial Report (“CAFR”) of the Memphis-Shelby County Airport Authority (the “Authority”) for the fiscal year ended June 30, 2012, is hereby submitted. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the Finance Division of the Authority. To the best of our knowledge and belief, and as indicated by the opinion of our independent auditors, the enclosed data of the Authority is accurate in all material respects and reported in a manner designed to present fairly the financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All disclosures necessary to enable the reader to gain an understanding of the Authority’s financial activities have been included. In developing and evaluating the Authority’s