3 Major Expense Variances Operating Expenses were $13.1M lower than the budget mainly due to vacant positions, delay hiring, savings of outside contracted services and travel, and timing of spending.
4 Portwide Financial Summary Excluding Aeronautical revenues, other operating revenues for Q2 were $4.2M above budget. Excluding Aeronautical revenues, other operating revenues are forecasted to be $125K below budget. Total operating expenses are forecasted to be $3.7M below budget. NOI before Depreciation is forecasted to be $1.3M below budget.
Q2 2014 Performance Report Aviation July 29, 2014
Aviation Business Overview Received FAA approval for Part 150 Noise study. Delta launched new flights to Seoul and Hong Kong. China Eastern Airlines and Nippon Air Cargo initiated seasonal wide-body freighter service. Opened gate B-4, adding much needed gate capacity. Received Commission approval for Panattoni lease at Des Moines Creek Business Park. Sub Pop and Metsker Maps opened new retail stores in the terminal, adding to the mix of local specialty retail. Live Music Program expanded to provide approximately 100 hours of live music per week, up from 40 hours per week early in Q1. 7
Financial Summary 9 (1)Includes Airline Realignment costs incurred by other Divisions (2)Reduced by Airline Realignment costs shown separately (3)For Accounting purposes, the 2013 reduction in the airline revenue requirement of $17.9 million was treated as a lease incentive and is being amortized over the five year SLOA III agreement.
Key Measures 10 Airport increased 2014 forecast of enplaned passengers to 6.4% above 2013. This reflects new scheduled flights, primarily by Alaska and Delta. Much of new seat capacity will be added in second half of year. Reduction in CPE reflects lower airline costs due to higher revenue sharing (driven by increased non-airline revenues), and increased enplaned passengers. Improved debt service coverage compared to budget reflects both increased cash flow and lower debt service than budgeted due to refinancing that closed in December 2013. Debt per enplaned passenger will increase with next revenue bond issue, currently anticipated for early 2015.
Aeronautical Business 11 (1) Debt service is forecasted & budgeted on an annual basis only.
Non-Airline Business 12 (1) Debt service and primary concession sales are forecasted and budgeted on an annual basis only.
Q2 2014 Performance Report Seaport July 29, 2014
Seaport Business Overview Full Year Net Operating Income forecasted to be ($5.4 million) unfavorable to budget. Business Volume TEU Volume was 719K, down 9.4% from 2013. Grain volume was at 1,948K metric tons which was 94% favorable to 2014 budget and about 7 times higher than 2013. Cruise passengers totaled 316K which was.5% favorable to budget, but down 8% from 2013. Commission approved design funding for the modernization of Terminal 5. The terminal will close at the end of July. The majority of Terminal 5 volume moved to Terminal 18 in June. The Westwood services will move to Port of Tacoma for covered storage. Environmental Launched ScRAPS 2 truck scrapping and replacement project. Terminal 117 clean-up largely completed. 15
Seaport Financial Summary 16 Forecasted Revenue Variance: T5 net impact of lease termination ($6.0 million). T18 Crane Rent: ($1.9 million) due to sale of MHI cranes to tenant. Budget assumed receipt of min payment. T5 Crane Rent prior to lease termination ($.8 million) due to lower volume. Grain Revenue $.9 million favorable as volume is currently forecasted to come in 36% above budget. Forecasted Expense Variance: Terminal 5 Maintenance Dredge project costs below budget and T91 Maintenance Dredge project delayed until 2015.
Seaport Business Groups Significant Variances: Container variance reflects lower cost related to T5 Maintenance Dredge project. Grain variance reflects favorable volume variance and increase in volume from 2013. Cruise variance reflects delay of T91 Maintenance Dredge project until 2015. 17 Net Operating Income Before Depreciation
Seaport Capital Budget 18 Significant Variances: T46 Development - $4.2M moved out due to reprioritization of projects. T18 Dock Rehabilitation – $.6M timing moved out due to reprioritization of projects. Cruise - $.5M for second gangways per berth at Terminal 91 moved out to 2016 for continued evaluation of need.
Q2 2014 Performance Report Real Estate July 29, 2014
Real Estate Business Overview Full Year Net Operating Income forecasted to be ($325K) below budget. Occupancy Rates/Activity Commercial property at 90% occupancy, below target of 92% but at 2014 Q2 Seattle market average of 90%. Marinas: Fishermen’s Terminal and Maritime Industrial Center at 85% average occupancy, above target of 79%. Recreational marinas at 96%, above target of 95%. Conference and Events Center activity is on budget making a significant comeback from Q1 results. Real Estate Development & Planning Commission approved an option/ground lease agreement with a Panattoni Development Company for the Des Moines Creek Business Park project. Eastside Rail Corridor A lawsuit was filed against the Port by a group of Eastside property owners disputing the Port’s authority to grant an easement to Puget Sound Energy. 20
Real Estate Financial Summary 21 Eastside Rail Corridor expense variance reflects a reserve for litigation expenses.
Real Estate Business Groups 22 Net Operating Income Before Depreciation Favorable variances largely driven by favorable expense results. Eastside Rail Corridor expense variance reflects a reserve for litigation expenses.
Real Estate Capital Budget 23 Significant Variances: Shilshole Bay Marina Central Seawall Replacement delayed to 2015 due to material lead time. Pier 69 North Apron Corrosion Control project closeout costs lower than expected. No change orders and contingency not needed. Reduced scope for Fishermen’s Terminal C15 Building Subsidence and East Sewer Line projects. Several other projects delayed to 2015.
Q2 2014 Performance Report Capital Development July 29, 2014
25 CDD Business Overview New cell phone lot completed and opened for use. C60/61 baggage system upgrade completed and operational ahead of accelerated schedule. Supported rollout of on-line requisitioning. Completed draft revised General Conditions for major works contracts. Construction complete for the following contracts: o Laptop Power in Concourses o Emergency Environ Response for Terminal 117 Cleanup o Pier 66 and 69 Corrosion Control o Terminal 5 Maintenance Dredging 2013
26 Capital Development Key Metrics Project Hard/Soft Costs
Capital Development Key Metrics continued 27 Total Time Receipt of Scope to Execution (Avg # Days) 2013 2014 Goods & Services55 days *52 days Major Public Works78 days 65 days Small Works56 days 44 days Service Agreements169 days 108 days *Pulled out 1 outlier procurement Procurement Timeliness
Operating Results by Account 28 Fav (UnFav)Incr (Decr) 2013 YTD2014 Year-to-Date Budget VarianceChange from 2013 $ in 000's Actual Budget $ %$ % Salaries & Benefits 7,1177,3288,149 82110.1% 211 3.0% Wages & Benefits 513734622 (113)-18.1% 222 43.2% Payroll to Capital Projects 6,3167,7718,393 6227.4% 1,455 23.0% Equipment Expense 172226309 8327.0% 54 31.4% Supplies & Stock 242235257 228.7% (7) -3.0% Outside Services 1,3022,5784,190 1,61238.5% 1,276 98.0% Utilities 222739 1231.5% 5 23.4% Travel & Other Employee Exps9482257 17568.0% (12) -12.3% Promotional Expenses 111 (1)-150.6% 1 75.2% Other Expenses 1,1091,194173 751434.8% 85 7.7% Charges to Capital Projects (10,183)(13,166)(14,446) (1,281)8.9% (2,982) 29.3% TOTAL 6,7047,0117,943 93211.7% 307 4.6%
Q2 2014 Performance Report Corporate July 29, 2014
31 Key Business Overview Engaged the community in Centennial Kick off at Fishermen’s Terminal. Achieved milestone in Harbor Maintenance Tax reform effort with the passage of WRRDA. Secured $3.8 million in grants for the regional Clean Truck Program. Executed a search for a new Chief Executive Officer by an executive search firm. Implemented the new enterprise risk and claims management cloud platform system successfully. Received a clean and unqualified independent CPA audit from Moss Adams. Received the 2014 Distinguished Budget Presentation Award from GFOA. Completed the Citizen’s Academy successfully.
32 Key Metrics Airport Jobs helped 682 people gain employment. Provided 50 Apprenticeship Opportunity Project Placements. Conducted 17 small business and workforce development outreach events. Registered 85 new small businesses to the Procurement Roster Management System (PRMS). Responded to 174 public disclosure requests. Provided development/structured learning classes to 233 employees. Achieved 89% health assessment completion rate in Q2.