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HALIFAX INTERNATIONAL AIRPORT AUTHORITY 2005 ANNUAL REPORT 24 Notes To Financial Statements December 31, 2005 1. General The Halifax International Airport Authority (the “Authority”) was incorporated on November 23, 1995 as a corporation without share capital under Part II of the Canada Corporations Act. On February 1, 2000, the Authority signed a 60-year ground lease with Transport Canada and assumed responsibility for the management, operation and development of the Halifax International Airport. Excess revenues over expenses are retained and reinvested in airport operations and development. The Authority is a dynamic and multi-faceted aviation enterprise that provides air access to the world, facilitates personal and business connections and promotes regional economic growth. The Authority is governed by a Board of Directors whose members are nominated by the Halifax Regional Municipality, the Province of Nova Scotia and the Federal Government, as well as the Halifax Chamber of Commerce. The nominated members can also appoint additional members who represent the interests of the community. The Authority is exempt from federal and provincial income tax, federal large corporation tax, and Nova Scotia capital tax. 2. Significant Accounting Policies The Authority’s financial statements have been prepared in accordance with Canadian generally accepted accounting principles. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities at the date of the financial statements and the reported amounts of certain revenues and expenses during the year. Actual results could differ from those estimates. Inventories Inventories consist of materials, parts and supplies and are stated at the lower of cost determined on an average cost basis and estimated replacement cost. Ground lease The ground lease with Transport Canada is accounted for as an operating lease. Capital assets Capital assets are recorded at cost including interest on funds borrowed for capital purposes, net of contributions and government assistance and are amortized over their estimated useful lives on a straight-line basis as follows: Assets Rate Computer hardware and software 20% - 33% Leasehold improvements 2.5% - 10% Machinery, equipment, furniture and fixtures 5% - 20% Vehicles 5% - 17% Construction in progress is recorded at cost and is transferred to leasehold improvements when the projects are complete and the assets are placed into service. Revenue recognition Landing fees, terminal fees, parking revenues and passenger security fees are recognized as the airport facilities are utilized. Concession revenues are recognized on the accrual basis and calculated using agreed percentages of reported concessionaire sales, with specified minimum guarantees where applicable. Rental revenues are recognized over the lives of respective leases, licenses and permits. Airport improvement fees (“AIF”) are recognized when originating departing passengers board their aircraft as reported by the airlines. Deferred revenue consists primarily of concession revenue for minimum guarantees and license fees received in advance of services being rendered. Employee benefit plans The Authority sponsors a pension plan on behalf of its employees which has defined benefit and defined contribution components. In valuing pension obligations for its defined benefit component, the Authority uses the accrued benefit actuarial method prorated on services and best estimate assumptions. Pension plan assets are valued at current market values. The excess of the accumulated net actuarial gain or loss over 10% of the greater of the accrued benefit obligation and the fair value of the plan assets is amortized over the average remaining service life of employees. Defined contribution component amounts are expensed as incurred.
HALIFAX INTERNATIONAL AIRPORT AUTHORITY 2005 ANNUAL REPORT 25 3. Capital Assets 4. Long-term Debt In thousands of dollars Computer hardware and software Leasehold improvements Machinery, equipment, furniture and fixtures Vehicles Construction in progress In thousands of dollars Computer hardware and software Leasehold improvements Machinery, equipment, furniture and fixtures Vehicles Construction in progress Cost $ 2,472 72,100 4,025 7,609 43,537 129,743 Cost $ 1,935 49,080 3,363 6,180 11,228 Accumulated Depreciation $ 1,587 5,542 1,514 3,165 -- 11,808 Accumulated Depreciation $ 1,273 3,528 1,110 2,547 -- 2005 $ Net Book Value $ 885 66,558 2,511 4,444 43,537 117,935 2004 $ Net Book Value $ 662 45,552 2,253 3,633 11,228 In thousands of dollars Halifax Regional Municipality deed transfer tax loan, unsecured, non-interest bearing, repayable in monthly installments of $5,633. Canadian Imperial Bank of Commerce Construction installment loan, bearing interest at prime rate less 65 basis points. Transport Canada deferred rent, non-interest bearing, repayable in monthly installments of $6,700 commencing in 2006. (See note (d) below) Current portion of long-term debt (See note (b) below) 2005 $ -- 26,000 805 26,805 26,081 724 2004 $ 6 -- 3,182 3,188 1,303 1,885 (a) Credit Facilities The Authority has authorized credit facilities with the Canadian Imperial Bank of Commerce for $78 million, which, in the event of default, will be secured by an Agreement containing a fixed mortgage by way of sublease of the Authority’s interest in the lease with Transport Canada, and a security interest in all of the other assets of the Authority. This security is not registered, recorded or filed in any public registry until an event of default has occurred. The credit facilities consist of an operating line of credit to a maximum of $3.0 million bearing interest at prime rate less 70 basis points. A demand installment loan to finance construction costs is available to a maximum of $75.0 million and bears interest at prime rate less 65 basis points. 71,786 8,458 63,328 (b) Current Portion of Long-Term Debt The terms of the construction installment loan only require repayment as agreed by the Bank and the Authority. The loan amount is shown as current, as repayment terms have not been agreed upon and although not expected, the loan could be demanded. This amount will form part of a long-term financing arrangement which the Authority is currently in the process of negotiating.
Page 1: ONWARD and UPWARD HALIFAX INTERNATI
Page 4 and 5: ONWARD and UPWARD ‘Onward and Upw
Page 6 and 7: Message HALIFAX INTERNATIONAL AIRPO
Page 8 and 9: Our staff has risen to the challeng
Page 10 and 11: Leveraging HALIFAX INTERNATIONAL AI
Page 12 and 13: It’s our people that really make
Page 14 and 15: Richard Garson AIR SERVICE SPECIALI
Page 16 and 17: Increasing HALIFAX INTERNATIONAL AI
Page 18 and 19: HIAA values its role in the communi
Page 20 and 21: Sustaining Financial Stability HALI
Page 22 and 23: HALIFAX INTERNATIONAL AIRPORT AUTHO
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