continuing disclosure statements · 2020-04-22 · dfw airport, texas 75261-9428. dallas/fort worth...

CONTINUING DISCLOSURE STATEMENTS

For the Fiscal Year Ended September 30, 2010

The Finance DepartmentP.O. Box 619428DFW Airport, Texas 75261-9428



The Finance DepartmentP.O. Box 619428DFW Airport, Texas 75261-9428



DALLAS/FORT WORTH INTERNATIONAL AIRPORT CONTINUING DISCLOSURE STATEMENTS

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2010

Table of Contents

Required Table Section Page Table One - Enplaned Passengers by month i Table Two - Enplaned Passengers by carrier ii Table Three - Landed Weights by carrier iii Table Four - Revenues and Expenses by source iv Table Five - Landing Fee Summary v Table Six - Joint Airport Fund vi Annual Financial Report – Dallas/Fort Worth International Airport Independent Auditor’s Report 1 Management’s Discussion and Analysis (Unaudited) 3 Basic Financial Statements Statements of Net Assets 19 Statements of Revenues, Expenses and Changes in Net Assets 20 Statements of Cash Flows 21 Statements of Fiduciary Net Assets for DFW Pension Plans 22 Statements of Changes in Fiduciary Net Assets for DFW Pension Plans 23 Notes to the Basic Financial Statements 24 Required Supplementary Information Schedule of Funding Progress - Pension 49 Schedule of Funding Progress – Other Post employment Benefits 50 Supplementary Information Combining Statements of Fiduciary Net Assets for DFW Pension Plan 51 Combining Statements of Changes in Fiduciary Net Assets for DFW Pension Plan 52 Required Supplementary Information – Rental Car Facility Bonds Table Seven - Rental Car Facility Transaction Days 53 Table Eight - Rental Car Facility Charge Revenue 54 Table Nine - Rental Car Facility Flow of Funds 55 Required Supplementary Information – Hotel Revenue Bonds Table Ten - Public Facility improvement Corporation Flow of Funds 56 Annual Financial Report – Public Facility Improvement Corporation Independent Auditor’s Report 57 Management’s Discussion and Analysis 58 Basic Financial Statements Statement of Net Assets Statement 60 Statement of Revenues, Expenses and Changes in Net Assets 61 Statement of Cash Flows 62 Notes to the Basic Financial Statements 63 Supplementary Information Combining Statement of Net Assets 73 Combining Statement of Revenues, Expenses and Changes in Net Assets 74 Annual Business Plan 76

Required Tables

2010 2009 2008 2007 2006

October 2,374 2,389 2,511 2,487 2,466

November 2,229 2,139 2,449 2,371 2,439

December 2,313 2,330 2,401 2,468 2,482

January 2,131 2,078 2,270 2,246 2,333

February 1,922 1,979 2,192 2,137 2,159

March 2,401 2,368 2,394 2,587 2,589

April 2,344 2,305 2,236 2,457 2,511

May 2,428 2,370 2,521 2,629 2,706

June 2,605 2,578 2,659 2,687 2,797

July 2,677 2,729 2,750 2,829 2,834

August 2,484 2,488 2,534 2,669 2,561

September 2,280 2,194 2,138 2,285 2,277Total 28,188 27,947 29,055 29,852 30,154

Increase (Decrease) over Prior Period 0.86% (3.81%) (2.67%) (1.00%) 2.14%

Source: Dallas/Fort Worth International Airport Finance Department

TABLE ONE

DALLAS/FORT WORTH INTERNATIONAL AIRPORT

Total Enplaned Domestic and International Passengers

(in thousands)

i

2010 2009 2008 2007 2006

Air Canada 35,119 37,354 46,073 44,823 44,238 Air Midwest - - 6,298 11,759 11,081 AirTran 313,644 307,661 333,538 349,354 438,007 Alaska Airlines 126,228 139,111 136,075 124,110 93,914 America West - - - 400,862 387,623 American (including TWA) 20,732,125 20,533,907 21,283,587 21,690,588 21,864,908 American Eagle 3,120,394 3,359,470 3,496,999 3,597,519 3,676,310 ATA - - 63,416 178,538 168,552 Atlantic Southeast 626 1,701 3,236 16,397 13,620 British Airways 66,364 67,278 59,325 59,119 60,947 Champion - - 22,875 73,766 52,217 Chautauqua 25,956 60,279 36,242 16,795 7,090 Comair 89,056 74,425 61,181 49,611 41,642 Continental 226,231 279,666 329,772 333,640 458,932 Delta 553,793 504,244 530,982 532,135 629,631 Executive Airlines 420,292 123,417 - - - Express Jet 108,068 51,835 81,713 107,320 64,794 Frontier 194,586 201,354 219,739 208,221 200,048 Korean Air 39,762 41,707 37,963 35,290 31,168 Lufthansa 76,020 72,786 78,686 81,177 78,161 Mesaba Airlines 152,916 136,240 103,798 12,117 - Midwest 18,264 64,723 92,326 85,635 84,979 MN aka Sun Country 65,062 60,553 82,763 83,595 78,865 Northwest 37,683 181,482 231,612 362,705 406,075 Other 367,662 367,483 385,226 364,527 78,941 Republic Airlines 132,176 103,087 119,151 98,682 55,058 SkyWest 184,624 147,419 120,510 85,667 20,160 United 310,073 337,073 435,736 528,243 706,039 US Airways 791,416 692,297 656,320 320,142 400,886 Total 28,188,140 27,946,552 29,055,142 29,852,337 30,153,886

TABLE TWODALLAS/FORT WORTH INTERNATIONAL AIRPORT

Enplaned Passengers

ii

2010 2009 2008 2007 2006Aeromexico - - 41,627 26,652 50,700 Air Canada (including Canadian Airlines) 5,206 67,532 72,525 72,977 72,265 Jazz Air (Air Canada) 62,018 - - 75 150 Air France - 13,131 29,960 33,177 16,914 Air Midwest/Mesa - - 15,803 26,206 21,292 Airborne Express - 125,721 73,340 82,177 74,798 AirTran 355 354,672 364,656 422,128 564,192 Alaska Air 130,634 153,662 153,507 142,448 - America West - - - 473,009 456,653 American (including TWA) 23,887,438 23,861,647 24,504,485 25,373,414 25,795,043 American Eagle 3,832,948 3,873,080 4,246,317 4,236,531 4,293,371 ATA - - 136,241 244,612 193,284 Atlantic Southeast 940 1,880 3,920 19,646 14,312 British Airways 165,800 167,900 155,957 156,817 156,518 Compass Airlines 82,514 34,379 29,810 - - Chautauqua 24,288 57,541 41,183 18,048 8,295 China Airlines 161,040 141,240 194,040 234,960 367,381 Comair 106,344 91,976 75,219 59,534 47,001 Continental 313,833 404,835 435,973 446,802 444,705 Delta 656,253 578,086 598,135 641,287 739,697 Executive Airlines 656,682 155,002 - - - EVA Airways 214,841 185,752 183,206 209,657 223,033 Express Jet 105,222 49,842 79,589 95,997 Express One - - - 9,831 117,419 Federal Express 494,769 491,898 642,606 684,435 648,745 Freedom Airlines (dba America West) - - - - 6,109 Frontier 243,826 257,440 287,262 304,473 279,818 KLM 89,878 96,566 74,286 - - Korean Air 311,723 313,968 319,296 315,448 301,322 Lufthansa 287,982 277,250 278,061 212,214 201,531 Mesaba 180,673 158,508 88,167 - - Mexicana 82,796 103,070 104,793 84,845 - Midwest 23,935 94,250 151,752 133,656 136,260 MN Airlines (dba Sun Country) 93,440 87,703 107,310 115,924 112,566 Northwest 44,093 236,048 291,488 449,002 462,420 Republic Airlines Inc. 149,362 114,565 134,254 127,310 71,300 Shuttle America Airlines 115,913 134,497 95,450 174,995 144,407 Singapore Airlines 179,152 181,150 198,465 170,493 136,527 SkyWest 205,701 92,190 148,437 100,246 22,708 United 419,311 449,044 556,749 730,287 766,928 UPS 851,263 964,769 1,163,306 1,208,308 1,147,157 US Airways 907,220 774,513 745,335 841,918 822,030 Others/General Aviation 1,247,036 1,040,024 773,371 441,780 518,400

TOTAL 36,334,428 36,185,328 37,595,881 39,121,319 39,435,251

TABLE THREEDALLAS/FORT WORTH INTERNATIONAL AIRPORT

Landed Weights(1,000 lbs.)

iii

2010 2009 2008 2007 2006Operating revenues

Landing fees (PAX & Cargo) 162,998$ 164,428$ 164,452$ 155,136$ 193,344$ Terminal rents and use fees 18,719 26,248 25,455 28,690 32,851 Federal Inspection Services (FIS) 10,557 9,938 10,632 10,539 10,289 Airline HVAC 10,618 12,403 13,444 13,786 13,993 Aircraft Parking 446 383 355 412 180 Airline Bad Debt (335) 915 (1,588) 3,406 227

Total Airline Revenue 203,003$ 214,315$ 212,748$ 211,969$ 250,884$ Parking 97,329 92,728 103,875 106,572 90,703 Concessions, net 50,133 47,757 50,841 46,752 40,782 RAC rental 25,717 30,451 32,236 31,302 27,174 Ground and facility leases 27,385 20,661 22,267 18,585 21,119 Fuel Facility 5,260 5,350 5,710 5,718 5,959 General Aviation 1,570 1,366 1,810 1,836 1,975 Non-Airline Utilities 3,887 4,392 4,773 3,956 5,169 Employee transportation 7,747 8,383 8,358 7,647 7,573 Taxi and limo fees 7,167 5,825 6,695 6,838 5,579 Natural gas 1,697 2,806 4,197 - - Other revenue 10,843 10,895 11,743 9,742 12,457

Total Non-Airline revenue 238,734$ 230,615$ 252,506$ 238,948$ 218,490$

Total Operating Reveneus 441,737 444,930 465,255 450,918 469,373 Non-Operating Revenues

Passenger Facility charges 112,971 123,755 123,536 119,066 118,218 Interest Income 1,211 8,577 15,634 18,047 9,805 Other miscellaneous revenues 29,619 39,602 29,171 28,484 7,701

Total Revenues 585,538$ 616,864$ 633,595$ 616,515$ 605,098$

Operating and Maintenance ExpensesAirfield 27,724$ 24,923$ 26,196$ 27,208$ 23,427$ Terminal Area 61,372 62,437 63,700 62,879 61,140 Parking 38,990 38,284 40,356 39,293 32,338 Concessions 4,582 4,661 4,815 4,792 4,555 Ground Rentals/Outside Concessions 3,027 3,986 4,856 3,435 5,006 Utilities 17,381 19,725 21,265 21,219 21,668 Transportation systems 28,692 27,581 27,198 24,727 25,647 Taxi's, limos & shuttles 6,885 6,327 6,604 6,489 5,694 Airport Services Overhead 129,766 124,132 127,008 124,890 128,191 Department of Public Safety 9,614 9,188 8,637 7,436 6,368 Other operating expenses - 2 33 7 20

Total Operating and Maintenance Expenses 328,032$ 321,247$ 330,669$ 322,375$ 314,054$ Non-operating expenses

Debt Service and coverage 261,012 295,617 299,494 294,488 273,855 Operating reserve (3,506) - 3,432 (348) 17,189

Total Expenses and Debt Service 585,538$ 616,864$ 633,595$ 616,515$ 605,098$

Source: Dallas/Fort Worth International Airport Finance Department records as of September 30, 2010, thedate of the most current information available to the Board.

TABLE FOURDALLAS/ FORT WORTH INTERNATIONAL AIRPORTRevenues and Operating and Maintenance Expenses

Last five Fiscal Years (unaudited)(in thousands)

iv

Forecasted Settlement DifferencePeriod Rate Rate

10/1/09 to 9/30/10 4.70 (1) 4.49 (0.21)

10/1/08 to 9/30/09 4.37 (2) 4.54 0.1710/1/07 to 9/30/08 4.37 4.37 0.00

10/1/06 to 9/30/07 4.29 (3) 3.95 (0.34)

10/1/05 to 9/30/06 4.94 (4) 4.88 (0.06)

10/1/04 to 9/30/05 3.35 (5) 3.91 0.56

10/1/03 to 9/30/04 2.97 (6) (7) 2.53 (0.44)

10/01/02 to 9/30/03 2.41 (8) (9) 2.03 (0.38)

10/01/01 to 9/30/02 1.96 (10) 1.92 (0.04)10/01/00 to 9/30/01 1.82 1.82 0.00

10/01/99 to 9/30/00 1.53 (11) 1.48 (0.05)

10/01/98 to 9/30/99 1.67 (12) (13) 1.28 (0.39)

(1) Effective May 1, 2010, the Landing Fee was decreased from $4.70 to $4.37.(2) Effective April 1, 2009, the Landing Fee was increased to $4.83 from $4.37.(3) Effective April 1, 2007, the Landing Fee was decreased to $3.99 from $4.29.(4) Effective July 1, 2006, the Landing Fee was decreased to $4.44 from $4.94.(5) Effective April 1, 2005, the Landing Fee was increased to $5.07 from $3.35.(6) Effective April 1, 2004, the Landing Fee was decreased to $2.69 from $2.97.(7) Effective July 1, 2004, the Landing Fee was decreased to $2.13 from $2.69.(8) Effective April 1, 2003, the Landing Fee was decreased to $2.07 from $2.41.(9) Effective June 1, 2003, the Landing Fee was increased to $2.23 from $2.07.(10) Effective January 1, 2002, the Landing Fee was increased to $2.03 from $1.96.(11) Effective August 1, 2000, the Landing Fee was decreased to $1.38 from $1.53.(12) Effective April 1, 1999, the Landing Fee was decreased to $1.57 from $1.67.(13) Effective June 1, 1999, the Landing Fee was decreased to $1.37 from $1.57.

TABLE FIVEDALLAS/FORT WORTH INTERNATIONAL AIRPORT

Landing Fee Summary

v

Capital Improvements Fund (2) …………………………………… 423,882,827$

Construction Funds (3) …………………………………… 5,415,792 Debt Service Fund …………………………………… 113,099,976

Debt Service Reserve Fund (4) …………………………………… 167,147,484 Operating Revenue and Expense Fund …………………………………… 87,700,643

(1) Fund balances include current assets less current liabilities.(2)

(3)

(4)

TABLE SIX

Joint Airport Fund

The balances, as of September 30, 2010 in the various funds created by the Controlling Ordinances and certain other funds and accounts in the Joint Airport Fund were:

Statement of Certain Fund Balances (1)

Pursuant to the Controlling Ordinances, annual valuation of the investments in the Debt Service Reserve Fund will occur. The Debt Service Reserve Fund balance listed in Table Six includes the combined amount of the Surety Bonds ($ 91,280,405).

Board funds only.

Substantially committed to ongoing projects.

September 30, 2010

DALLAS/FORT WORTH INTERNATIONAL AIRPORT

vivi

Independent Auditor's Report,

Management's Discussion and Analysis

and

Basic Financial Statements

Dallas/Fort Worth International Airport

3

MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) The following discussion and analysis of the financial performance and activity of the Dallas/Fort Worth International Airport (“DFW” or “the Airport”) provides an introduction and understanding of DFW’s Basic Financial Statements for the fiscal year ended September 30, 2010. The Airport is a business-type activity and as such DFW’s Basic Financial Statements and Required Supplementary Information consist of Management’s Discussion and Analysis (MD&A); Statement of Net Assets; Statement of Revenues, Expenses, and Changes in Net Assets; Statement of Cash Flows; and Notes to the Basic Financial Statements. Also included are the Statement of Fiduciary Net Assets; Statement of Changes in Fiduciary Net Assets; and a Schedule of Funding Progress for the Airports Fiduciary Funds which have a December 31st year end. The MD&A has been prepared by management and should be read in conjunction with the Basic Financial Statements and the attached notes.

DFW’s Controlling Documents DFW was created by a Contract and Agreement between the Cities of Dallas and Fort Worth (the Cities), dated April 15, 1968, for the purpose of developing and operating an airport as a joint venture between the Cities. In addition to this Contract and Agreement, DFW is governed by several other key documents including the 30th Supplemental Bond Ordinance which modified the original 1968 Concurrent Bond Ordinance (collectively called the “Bond Ordinances”); and the original Use Agreement between DFW and the signatory airlines signed in 1974. DFW’s original Use Agreement expired on September 30, 2010. A new 10 year Use Agreement became effective October 1, 2010. Collectively, these documents are called the “Controlling Documents.”

The Controlling Documents define how DFW manages its financial affairs and its business relationship with the airlines. DFW, under the original Use Agreement, is a residual airport which means that the signatory airlines pay the residual net cost of operating the Airport. DFW does not collect local tax revenue to fund its operations. DFW operates as an Enterprise Fund.

Each year, management prepares an Annual Budget (approved by the DFW Board and the Cities) of projected expenditures for the Operating Revenue and Expense Fund (commonly referred to as the “102 Fund”). This budget includes DFW’s projected operating expenses excluding depreciation, plus annual debt service (interest and principal), plus an amount sufficient to pay an additional 25% of the aggregate annual debt service (defined as “Coverage”), plus any incremental amount sufficient to maintain an operating reserve up to 90 days.

DFW also budgets non-airline revenues (e.g., parking, concessions, and ground leases) and non-operating revenues (e.g., interest income, Passenger Facility Charges, then accumulates these revenues and expenses into “cost centers” to calculate the required airline and tenant revenues (primarily landing fees and terminal rents) that must be collected during the year so that total forecasted revenues equal total forecasted expenditures. Landing fee revenue is the ultimate “balancer” to ensure that forecasted operating revenues equal forecasted expenditures. The landing fee rate is calculated by dividing total required landing fee revenues by total projected Signatory Airline landed weights per thousand pounds. Management then uses this information to prepare an annual Schedule of Rates, Fees, and Charges (approved by the Board) which is the basis for charging the airlines, tenants, and other airport users for DFW services during the fiscal year.

At the end of the year, a reconciliation or settlement of the 102 Fund is computed using actual revenues and actual expenses. Depending on whether an individual signatory airline has overpaid or underpaid during the year, it receives a refund or is billed an additional payment. The attached financial statements reflect the results of operations after the settlement has been calculated.

The Controlling Documents require DFW to collect an additional 25% of aggregate annual debt service for debt coverage. During the fiscal year, these funds are held in reserve to pay debt service if required. After the fiscal year, these funds are transferred to the Capital Improvement Fund (CIF).

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DFW’s Controlling Documents govern the allocation and use of the CIF. The CIF may be used to pay any costs of the Airport, extraordinary operating and maintenance (O&M) expenses, debt service if necessary, or for any other lawful purpose. Historically, DFW has used these funds for capital projects although a portion of the CIF funds are transferred back to the 102 Fund each year. In certain circumstances in the past, DFW has transferred incremental lump sum amounts from the CIF to the 102 Fund to provide additional financial relief to the airlines.

Under the original Use Agreement, CIF is allocated among three accounts: Airline Trust Accounts (400 Fund); the Airport’s Discretionary Account (302 Fund); and the Common Capital Improvement Account (301 Fund). Although DFW uses the word “fund” to designate the source and prospective use of proceeds, DFW is an enterprise fund and does not utilize traditional “fund accounting” commonly used by government organizations. The following table summarizes the primary funds used by DFW and whether the related cash is restricted or not restricted:

The basic financial statements include all of DFW’s funds. DFW manages its day-to-day airport operations primarily through the 102 Fund in accordance with the Controlling Documents. The Airport’s financial statements include all of the transactions of the Public Facility Improvement Corporation (PFIC), which operates the Grand Hyatt Hotel, and the Facility Improvement Corporation (FIC) which funded the construction of the Rental Car Facility (RAC) through the issuance of debt. Although the FIC and PFIC are legally separate entities, the financial transactions of both have been combined into the Airport’s Enterprise Fund due to their nature and significance to the Airport. The FIC and PFIC are considered blended component units because the component units governing bodies are substantively the same as DFW, the primary government.

Fund Restricted ( R)Number Fund Description Primary Use Not Restricted (NR)

101 Capital Assets/LT Debt Capital Assets/Debt R

102 Operating Revenue and Expense Operations NR

252 Passenger Facility Charges (PFC) Capital/Debt Service R

301 CIF -Common Capital Improvement Account Capital NR

302 CIF - Airport Discretionary Account Capital NR

304-314 Various Funds Capital NR

315 Non-CDP Bond Sales Capital R

316 ATSAC Reimbursement Account Capital NR

400s CIF - Airline Trust Account Capital NR

500/600 Debt Service and Sinking Funds Debt Service R

907 FIC - Rental Car Facility Rental Car Facility R

910 PFIC - Grand Hyatt Hotel Hotel R

5

Operational and Financial Highlights

DFW utilizes a performance measurement process that is closely aligned with the Airport’s Strategic Plan shown in the graphic below.

VISION STATEMENT: DFW International Airport –Connecting the World

MISSION STATEMENT:DFW International Airport will provide our Customersoutstanding facilities and services, expanding globalaccess and economic benefits to those we serve.

PRIMARY BUSINESS GOAL:Grow the core business of domestic andinternational passenger and cargo airline service.

KEY DRIVERS/RESULTS:

COSTCOMPETITIVE

CUSTOMERSATISFACTION

OPERATIONALEXCELLENCE

EMPLOYEEENGAGEMENT

Strategic Objectives

VISION STATEMENT: DFW International Airport –Connecting the World

MISSION STATEMENT:DFW International Airport will provide our Customersoutstanding facilities and services, expanding globalaccess and economic benefits to those we serve.

PRIMARY BUSINESS GOAL:Grow the core business of domestic andinternational passenger and cargo airline service.

KEY DRIVERS/RESULTS:

COSTCOMPETITIVE

CUSTOMERSATISFACTION

OPERATIONALEXCELLENCE

EMPLOYEEENGAGEMENT

Strategic Objectives

DFW management believes that if it focuses on achieving the four Key Drivers/Results it will be well positioned to achieve its primary business goal of growing the core business. New Use Agreement Subsequent to the end of the fiscal year, DFW and the Airlines finalized the negotiation of a new ten-year Use Agreement that differs significantly from the Agreement that expired on September 30, 2010. The new Agreement converts DFW from a “residual” business model into a “hybrid” business model. Under the hybrid model, the airlines pay the net cost of the airfield and terminals primarily through landing fees and terminal rentals (Airfield and Terminal Cost Centers) and DFW retains the net revenues from the concessions, parking, rental car, and commercial development business units (i.e. non-airline revenues) less the cost of the Skylink people-mover system in the DFW Cost Center. If the net revenues of the DFW Cost Center exceed $60 million in a fiscal year, DFW shares 75% of the excess with the airlines in the following year to reduce landing fees. The remaining net revenues ($60 million plus 25% of the excess) are transferred into the DFW Capital Account which is a fully discretionary account under the control of DFW Management. The $60 million cap is adjusted for inflation each year. The new Agreement also establishes a Joint Capital Account which requires airline approval to use. However, the airlines preapproved certain capital projects and the debt financing of these projects as part of the new Agreement, including the $1.9 billion TRIP and an additional $220 million of projects (net of grants). Proceeds from the sale of land and natural gas are deposited into the Joint Capital Account. The new Use Agreement became effective October 1, 2010 and will expire September 30, 2020. Grow the Core Business DFW had 28.2 million enplanements in FY 2010, a 0.9% improvement over the prior year primarily driven by strong international growth, (6.3% better than FY 2009). Despite the global economic

6

recession, American Airlines added new international service to San Salvador, El Salvador increasing total international destinations served to 38 as of September 30, 2010. American Airlines also announced four new international routes that will begin in FY 2011 including; Rio De Janeiro, Brazil; Barbados; Queretaro, Mexico; and Veracruz, Mexico. . Additionally, Qantas Airlines announced that they would begin non-stop passenger service from DFW to Sydney, Australia in FY 2011. Domestic traffic was flat versus FY 2009 reflecting the overall depressed economy. However, American Airlines continued to expand service from DFW by added eight new domestic locations including; Augusta, Georgia; Cheyenne, Wyoming; Ashville, North Carolina; Columbus, Georgia; Fayetteville, North Carolina; Sioux City, South Dakota; Myrtle Beach, South Carolina; and Rapid City, North Dakota. This brought total domestic destinations served to 142 by fiscal yearend. Additionally, Virgin America and Spirit Airlines announced that they would begin operating passenger service from DFW in FY 2011. Keep DFW Cost Competitive and Financially Strong

DFW is in a financially strong position with total cash and investments of $1.0 billion and total unrestricted cash and investments of $566.0 million as of September 30, 2010. Unrestricted cash and investments are sufficient to cover more than 600 days of operating expenses. DFW is currently rated A+ (Stable Outlook) by Fitch, A1 (Stable Outlook) by Moody’s, and A+ (Stable Outlook) by Standard and Poor’s.

Total 102 Operating Fund expenditures were $616.9 million, a $31.4 million (5.1%) decrease from FY 2009 primarily due to the restructuring of DFW’s debt portfolio. The debt savings reduced airline cost and allowed DFW to contribute an incremental $10.4 million into its defined benefit pension plans (i.e., more than the required contribution). DFW’s total pension and OPEB asset was $54.4 million as of September 30, 2010. DFW also started a new defined contribution plan to replace its defined benefit plans for new general employees hired on or after January 1, 2010 (excludes Department of Public Safety employees).

The airline industry uses airline Cost per Enplanement (CPE) as its key productivity measure. CPE is calculated by dividing airline cost (total passenger airline payments for landing fees and terminal rents) by the number of enplanements. DFW’s CPE in FY 2010 was $6.74, a decrease of $0.43 (6.0%) from $7.17 in FY 2009, primarily due to lower airline cost and higher enplanements. Total airline cost was $203 million, a decrease of $10.8 million (5.1%) from $213.8 million in FY 2009 primarily due to lower debt service and higher non airline revenues. Non-airline revenues were $8.51 per enplanement, in FY 2010, a $0.23 increase from FY 2009.

DFW’s long range goal is to remain in or near the first quartile for this measure versus its competitive set of 13 large hub US airports. In FY 2009, DFW had the 3rd lowest direct CPE versus its competitive set. Based on an internal study, DFW had the lowest CPE versus its competitive set on a fully loaded basis which considers other costs such as delay costs and airline incurred costs and was American Airlines’ lowest-cost hub airport. Competitive information for FY 2010 is not yet available.

The chart shows that DFW has had a declining cost structure since FY 2008 because it has been able to lower its debt structure. Expenses have also remained relatively flat over this time period because management has found innovative ways to contain costs despite $80 million of fixed increases.

$322 $334 $321 $325

$294 $299 $296 $261

$0

$100

$200

$300

$400

$500

$600

$700

07A 08A 09A 10A

Total Operating Fund Expenditures (MS)

Operating Expenses Debt Service

7

DFW set a new record for non-airline revenues per enplanement in FY2010. Non-Airline revenues include parking, concessions, rental car (RAC), commercial development, employee parking, taxis, limos, shuttles and non-airline utilities.

Ensure Customer Satisfaction

DFW measures and focuses on customer satisfaction because management believes that passengers make a choice when they fly, especially when connecting through an airport. For example, the Airport utilized survey feedback from FY 2007 and FY 2008 to initiate a $45 million terminal renovation program that included renovation of all domestic terminal bathrooms, improved lighting, new flight and gate display monitors, and other interior refurbishments. As a result of this and other actions, DFW achieved its highest score ever on the independent Airport Council International customer satisfaction survey in FY 2010. Based on these surveys, DFW ranked 1st in its competitive set of 13 large hub airports and ranked 3rd (behind Hong Kong and Beijing) in the world for participating airports with more than 40 million people.

Deliver Operational Excellence

Operational excellence means continuous improvement year over year, continuous improvement versus the industry benchmarks, and peer recognition (i.e., DFW is recognized as an industry leader). DFW tracks the completion of its major goals and initiatives each year for reporting purposes. Some major accomplishments during FY 2010 follow:

DFW has had zero uncorrectable deficiencies in its annual FAA Part 139 inspection for the tenth year in a row.

DFW achieved over 30% M/WBE participation in its construction, professional services, and goods and services categories in FY 2010 and for 6 of the last 7 years.

The Environmental Protection Agency (EPA) recognized DFW as being one of the largest local government green power purchasers of clean renewable energy in the country.

DFW completed Phase II of Sustainable (Green) Standards including design and construction standards, Green program elements for the TRIP, and sustainable purchasing standards. This initiative incorporates environmental responsibility, energy and water efficiency resource conservation, and environmental quality into DFW’s purchasing, design and construction practices.

Foster Employee Engagement

DFW measures employee engagement through surveys, then uses the information to implement change. Management believes that an engaged workforce will produce better results over time. Over the past five years DFW has significantly increased employee engagement from 67% to 73%. Engagement can also be measured by survey participation. In FY 2010 and FY 2009, 86% of all employees completed the survey, up from 84% in FY 2008. Some of the initiatives in

$6.53

$7.19

$7.93

$8.43 $8.12

$8.51

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

2005 2006 2007 2008 2009 2010

Non-Airline Rev Per Enplanement

56%

58%

60%

62%

64%

66%

68%

70%

72%

74%

FY06 FY07 FY08 FY09 FY10

DFW Employee Engagement

8

FY 2010 included: implementation of employee engagement corporate action plans to address teamwork and collaboration with 95% of the departments in compliance; and implementation of three communication programs to promote the DFW Beliefs of “You’re Important!, Step Up!, Own It!, Reach Out!, and Innovation Wins!”.

Capital Programs and Airport Development Plan Update DFW’s Airport Improvement Plan (“AIP”) provides guidelines and direction for the Airport’s future capital development. The TRIP represents the largest component of the AIP and is estimated to cost approximately $1.9 billion (adjusted for inflation) between FY 2010 and FY 2018. The TRIP consists of renovation and renewal of the Airport’s four older terminals (Terminals A, B, C, and E) that were constructed between 35 and 40 years ago. These terminals have been expanded and renovated over their life, but primarily consist of their original structural and building systems. Approximately two-thirds of the TRIP budget will be used for the replacement of aging systems such as electrical, plumbing, heating and cooling, security, fire safety, conveyances, telecommunications, lighting, and information technology systems. The majority of the remaining budget will be used to upgrade ticket halls, TSA security areas, certain baggage systems, and concessions villages. The TRIP also includes modest improvements to the terminal exteriors, entrances and parking structures. The planning, programming and schematic design of the TRIP was developed jointly by the Airport and the airlines from FY 2008 through FY 2010. Additionally, a detailed ten year Capital Improvement Program (CIP) includes other non-terminal capital projects which is estimated to cost between $800 million to $900 million over the next ten years and includes both renewal and enhancement to airfield, support facilities, infrastructure, rolling stock, commercial development, and equipment replacement. DFW successfully negotiated pre-approval of both capital plans and associated financing with the airlines as part of the recently approved 10-year Use Agreement which became effective on October 1, 2010. As of September 30, 2010, DFW has 219 approved capital projects in process for a total estimated cost of $625.1 million upon completion. Of this total, $312.1 million had been expended by year end and an additional $208.6 million is under contract and committed, leaving approximately $104.4 million remaining to be committed and spent. Some of the larger projects include $22.4 million for replacement of DFW Airport’s Parking Control System, $18.6 million for development of an airport water reclamation system, $66.5M in various airfield pavement and airfield lighting rehabilitation projects, as well as approximately $121.1 million in projects associated with TRIP design and preliminary construction for Terminal A and certain enabling projects, which is the first terminal to undergo major renovation as part of the TRIP program described above. DFW Business and Operations Overview The following table highlights changes in the Airport’s key operating statistics for the past three years.

Key Operat ing Informat ion FY 2010 FY 2009 FY 2008

Enplanements (000s) 28,188 27,947 29,055

Total Passengers (000s) 56,391 55,922 58,106

Aircraft Operations (000s) 646 633 659

Cargo (tons in 000s) 711 626 748

Cargo Landed Weight (in millions) 3,034 3,064 3,440

Landed Weight (in millions) 36,334 36,185 37,596

Cost per Enplaned Passenger 6.74$ 7.17$ 6.85$

Average Landing Fee 4.49$ 4.54$ 4.37$

For the Year Ended

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FY 2010 Compared to FY 2009 DFW had 56.4 million passengers (includes origination, destination and connecting) in FY 2010, a 0.8% increase from 55.9 million passengers in FY 2009 due to an improving economy and continued growth for American Airlines and American Eagle Airlines (including Executive Airlines). American Airlines (including American Eagle and Executive Airlines) increased its’ market share of passengers to 86.1% in FY 2010 compared to 85.4% in FY 2009. DFW’s second largest passenger airline was, US Airways with 2.8% of passengers in FY 2010 compared to 2.4% in FY 2009. Aircraft operations increased 2.0% to 646,000 in FY 2010 from 633,000 in FY 2009 and total landed weights increased 0.4% to 36.3 billion pounds in FY 2010 from 36.2 billion pounds in FY 2009, primarily due to economic conditions and additional service. Cargo tons increased 13.7% to 711,000 in FY 2010 from 626,000 in FY 2009 due to additional service. American Airlines share of DFW’s total operations increased from 81.1% in FY 2009 to 82.4% in FY 2010; and landed weights increased from 77.2% in FY 2009 to 78.1% in FY 2010. US Airways’ share of DFW’s total operations increased from 1.9% in FY 2009 to 2.2% in FY 2010; and landed weights increased from 2.1% in FY 2009 to 2.5% in FY 2010.

Cost per Enplanement (CPE) measures the net cost to the passenger airlines primarily for landing fees and terminal rentals divided by the total number of enplaned passengers. Management’s goal is to have a competitive CPE. Average landing fees represents the total landing fees paid by the signatory airlines after settlement divided by total landed weights per 1000 pounds. Cost per enplaned passenger decreased from $7.17 in FY 2009 to $6.74 in FY 2010 primarily due to lower expenses and debt service and higher enplanements. The average landing fee decreased from $4.54 in FY 2009 to $4.50 in FY 2010 due to higher landed weights and higher non-airline revenues. FY 2009 Compared to FY 2008 DFW had 55.9 million passengers in FY 2009, a 3.8% decrease from 58.1 million passengers in FY 2008 due to reduction in frequency of scheduled flights due to fuel costs and the economic downturn. American Airlines (including American Eagle) increased it’s market share of passengers to 85.4% in FY 2009 compared to 85.3% in FY 2008. DFW’s second largest passenger airline was, US Airways with 2.5% of passengers in FY 2009 compared to 2.3% in FY 2008. Aircraft operations decreased 3.9% to 633,000 in FY 2009 from 659,000 in FY 2008 and total landed weights decreased 3.8% to 36.2 billion pounds in FY 2009 from 37.6 billion pounds in FY 2008, primarily due to the reduction of scheduled flights due to economic conditions and the continued downsizing of aircraft by passenger airlines. Cargo tons decreased 16.3% to 626,000 in FY 2009 from 748,000 in FY 2008 due to the global economic downturn. American Airlines share of DFW’s total operations decreased from 82.2% in FY 2008 to 81.1% in FY 2009; and landed weights increased from 76.3% in FY 2008 to 77.2% in FY 2009. US Airways’ share of DFW’s total operations increased from 1.8% in FY 2008 to 1.9% in FY 2009; and landed weights decreased from 2.2% in FY 2008 to 2.1% in FY 2009.

Cost per enplaned passenger increased from $6.85 in FY 2008 to $7.17 in FY 2009 and the average landing fee increased from $4.37 in FY 2008 to $4.54 in FY 2009 due to the lower number of enplanements and landed weights and lower parking and concessions revenues. Revenues, Expenses, and Change in Net Assets: The following table is a summary of Revenues, Expenses, Net Non-Operating Revenues, and Increase (Decrease) in Net Assets for the years ending September 30, 2010, 2009, and 2008. Detailed descriptions and variances of the components of revenues, expenses and non-operating revenues are described in the following sections.

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Operating Revenues: The following table highlights the major components of operating revenues for the fiscal years ended September 30, 2010, 2009, and 2008. Significant variances are explained below.

FY 2010 Compared to FY 2009 Total Airline Revenue consists of fees paid by signatory and non-signatory airlines for the use of the airfield and terminals at DFW based on DFW’s cost to provide related facilities. Total airline revenue decreased as a result of lower debt service costs. Landing fees for passenger and cargo carriers are assessed per 1,000 pounds of maximum approved landed weight for each specific aircraft as certified by the FAA. Signatory airlines are the airlines that sign a Use Agreement with DFW. Passenger airline landing fees decreased $1.3 million (0.9%), from $151.3 million in FY 2009 to $150.0 million in FY 2010

Increase(Decrease) in Net Assets FY2010 FY 2009 FY 2008Operating revenues $500,953 $503,519 $631,217Operating expenses (552,252) (561,717) (562,312) Operating income (loss) (51,299) (58,199) 68,905Non-operating expenses, net (63,053) (85,068) (49,117)Income(loss) before capital contributions (114,352) (143,267) 19,788Capital contributions 29,907 42,098 33,568 Increase(decrease) in net assets (84,444)$ (101,168)$ 53,357$

For the Year Ended (000s)

For the Year Ended (000s)Operat ing Revenues: FY 2010 FY 2009 FY 2008

Passenger airline landing fees 149,951$ 151,262$ 149,953$

Terminal rent and use fees 18,719 26,248 25,455

Federal Inspection Services (FIS) 10,557 9,938 10,632

Airline HVAC and other 11,064 12,786 13,798

Cargo landing fees 13,047 13,166 14,499

Airline bad debt (335) 915 (1,588)

Total air line revenue 203,003 214,315 212,748

Parking 97,329 92,728 103,875

Concessions 51,170 48,758 52,350

RAC lease and rentals 25,714 25,697 28,057

Ground and facilities leases 28,001 26,111 27,201

RAC customer transportation charge 9,242 8,430 7,224

Employee transportation 7,747 8,383 8,358

Taxi and limo fees 7,167 5,825 6,695

Natural gas 25,521 26,255 131,886

Grand Hyatt Hotel 25,692 25,290 28,234

Other revenue 20,367 21,728 24,589

Total non-air line revenue 297,950 289,203 418,469

Total Operat ing Revenues 500,953$ 503,519$ 631,217$

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due to the lower cost allocated to the airfield. Cargo landing fees decreased $0.1 million (0.9%), from $13.2 million in FY 2009 to $13.0 million in FY 2010. The average landing fee in FY 2010 was $4.49 per 1,000 pounds as compared to $4.54 per 1,000 pounds in FY 2009. Signatory airlines paid approximately 98.8% of total landing fees in FY 2010. Terminal rents and use fees (“Terminal Revenues”) include terminal rent from gates leased primarily by signatory airlines and gate use fees from DFW-owned gates. The Controlling Documents require the signatory airlines to pay terminal rent equal to the cost of terminal operations, plus allocated debt service, and overhead, minus concessions revenue. Terminal revenues decreased $7.5 million (28.7%) from $26.2 million in FY 2009 to $18.7 million due to lower debt service and a decrease in maintenance contract costs for the terminals Federal Inspection Service (FIS) fees ($4.80 per departing international passenger in Terminal D) increased $0.6 million (6.2%), from $9.9 million in FY 2009 to $10.6 million in FY 2010 due to increased deplaning international passengers clearing US Customs. Airline HVAC and other includes the heating, ventilation and air conditioning for the terminals and aircraft parking fees. Airline HVAC and other decreased $1.7 million (13.5%), from $12.7 million in FY 2009 to $11.1 million in FY 2010 due to lower energy costs and usage. Airline bad debt charge of $335 represents Mexicana Airlines filing for bankruptcy in FY 2010. In FY 2009 DFW had recoveries from airlines that had previously filed bankruptcy. Parking fees are charged based on the length of time and parking product. DFW’s primary parking products include terminal ($17 per day), express ($10-12 per day) and remote ($8 per day). Parking revenues increased $4.6 million (5.0%), from $92.7 million in FY 2009 to $97.3 million in FY 2010 due to an increase in originating passengers and parking rates Terminal parking revenues account for 66.5% and 65.7% of total parking revenues in FY 2010 and FY 2009. Concession revenues (e.g., food and beverage, retail, passenger services, and advertising) increased $2.4 million (4.9%), from $48.8 million in FY 2009 to $51.2 million in FY 2010, primarily due to an increase in enplaned passengers and higher average spend per enplanement in FY 2010. Rent-A-Car (RAC) lease and rentals revenue consists of ground leases plus a percentage rent based on gross revenues. Percentage rent accounted for 84.9% of the total RAC rental revenues in FY 2009 and 84.2% in FY 2010. Ground and facility lease revenues consist primarily of ground leases of Airport property, various facility leases, Hyatt Regency Hotel, and other. Ground and facility lease revenue increased $1.9 million (7.2%) from $26.1 million in FY 2009 to $28.0 million in FY 2010 primarily due to an increase in the average rental rate per acre. RAC customer transportation revenue is charged directly to the rental car companies as a pass through cost to renters and is derived from a $2.20 per rental day transaction fee to fund operation and maintenance of the bus fleet used to transport passengers from the airport terminals to the RAC. RAC transportation revenue increased $0.8 million (9.6%), from $8.4 million in FY 2009 to $9.2 million in FY 2010 due to an increase in transaction days. Employee transportation revenues consist primarily of the $40 monthly fee paid by airlines and other tenants for transportation services for their employees from remote parking lots to the terminals. Employee transportation revenues decreased $0.6 million (7.6%) from $8.4 million in FY 2009 to $7.7 million in FY 2010 due to lower numbers of employees using the service. Taxi and limo fees represent the access, decal, and application fees charged to taxicab, limousine, shared ride, and courtesy van companies and providers. Taxi and limo fees were $1.3 million (23.0%) higher in FY 2010 as compared to FY 2009 due to customer preference shifting from drop-offs to taxis.

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Natural gas revenues include royalties and property and surface use fees resulting from natural gas drilling. Natural gas decreased $0.7 million (2.8%) from $26.3 million in FY 2009 to $25.5 million in FY 2010 due to a decline in natural gas prices. Royalty revenue accounted for 89.3 % of the total natural gas revenue in FY 2009 and 93.4% in FY 2010. The Grand Hyatt Hotel operations include room rental, food and beverage and other revenues. Revenues increased $0.4 million (1.6%), from $25.3 million in FY 2009 to $25.7 million in FY 2010 primarily due to higher food and beverage revenues. Other operating revenues consist primarily of general aviation fees, aircraft fueling system fees (fuel farm), non-airline utilities, pass-through revenues from airline and tenants, building code/standard fees, and other miscellaneous revenues offset by non-airline bad debt. General Aviation fees consist of fueling and aircraft service fees. The fuel farm fees are paid by the airlines to retire the debt incurred to construct the fueling system and overhead of the fuel farm. Non-Airline utilities represents fees charged to non-airline users of HVAC, trash removal and water usage. Utility charges to users are based on the cost to provide the services. Pass-through revenues primarily represent reimbursements for contract services provided by DFW for the direct benefit of the airlines and tenants. Other revenue decreased $1.3 million (5.9%) from $21.7 million in FY 2009 to $20.4 million in FY 2010 due to an increase in non-airline bad debt. FY 2009 Compared to FY 2008 Passenger landing fees increased $1.3 million (0.9%), from $150 million in FY 2008 to $151.3 million in FY 2009 due to the net impact of a higher average landing fee rates and lower landed weights (see above). Cargo landing fees decreased $1.3 million (9.2%), from $14.5 million in FY 2008 to $13.2 million in FY 2009. The average landing fee in FY 2009 was $4.54 per 1,000 pounds as compared to $4.37 per 1,000 pounds in FY 2008. Signatory airlines paid approximately 98.8% of total landing fees in FY 2009. The Controlling Documents require the signatory airlines to pay terminal rent equal to the cost of terminal operations, plus allocated debt service, and overhead, minus concessions revenue. Terminal revenues increased $0.8 million (3.1%) from $25.5 million in FY 2008 to $26.2 million in FY 2009 due to lower concessions revenues. Federal Inspection Service (FIS) fees decreased $0.7 million (6.5%), from $10.6 million in FY 2008 to $9.9 million in FY 2009 due to decreased deplaning international passengers clearing US Customs. Airline HVAC and other decreased $1.0 million (7.3%), from $13.8 million in FY 2008 to $12.8 million in FY 2009 due to lower energy costs. In FY 2009, Airline bad debt of $915 represents recoveries of pre-petition bankruptcy filings from airlines. In FY 2008, the $1.5 million charge represents pre-petition bankruptcy filings. Parking revenues decreased $11.1 million (10.7%), from $103.9 million in FY 2008 to $92.7 million in FY 2009 due to a decrease in originating passengers and passengers switching to lower price parking options. Terminal parking revenues account for 65.7% and 68.2% of total parking revenues in FY 2009 and FY 2008. Concession revenues decreased $3.6 million (6.9%), from $52.4 million in FY 2008 to $48.8 million in FY 2009, primarily due to fewer passengers in FY 2009. Rent-A-Car (RAC) lease and rentals revenue decreased $2.4 million (8.4%), from $28.1 million in FY 2008 to $25.7 million in FY 2009 due to lower percentage rent generated by lower gross revenues from rental car companies from fewer passengers. The percentage rent revenue accounted for 86.5% of the total RAC rental revenues in FY 2008 and 84.9% in FY 2009.

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Ground and facility lease revenue decreased $1.1 million (4.0%) from $27.2 million in FY 2008 to $26.1 million in FY 2009 due to a decrease in the Hyatt Regency percentage rent. RAC customer transportation charge revenue increased $1.2 million (16.7%), from $7.2 million in FY 2008 to $8.4 million in FY 2009 due to a rate increase. Taxi and limo fees were $0.9 million (13.0%) lower in FY 2009 as compared to FY 2008 due to customer preference shifting to drop-offs from taxis. Natural gas decreased $105.6 million (80.1%) from $131.9 million in FY 2008 to $26.3 million in FY 2009 primarily due to the recognition of $92.6 million of upfront bonus payments in FY 2008 and a decline of $11.6 million in royalty income due to the decline in natural gas prices in FY 2009. The Grand Hyatt Hotel revenues decreased $2.9 million (10.4%), from $28.2 million in FY 2008 to $25.3 million in FY 2009 due lower average room rentals and lower food and beverage revenues. Other revenue decreased $2.9 million (11.6%) from $24.6 million in FY 2008 to $21.7 million in FY 2009 due to an increase in non-airline bad debt. Operating Expenses: The following table highlights the major components of operating expenses for the fiscal years ended September 30, 2010, 2009, and 2008. Significant variance explanations follow. FY 2010 Compared to FY 2009 Salaries, wages and benefits increased $4.3 million (2.8%) from $153.5 million in FY 2009 to $157.8 million in FY 2010 primarily due to more employees and the payment of a lump sum merit award. DFW employed 1,825 and 1,765 full time employees as of September 30, 2010 and 2009, respectively. Contract services include grounds and facility maintenance, busing services, financial and legal services, software and hardware maintenance, advertising, planning and other professional services. Contract services decreased $17.0 million (12.2%), from $139.0 million in FY 2009 to $122.0 million in FY 2010, due to a lower ITS, terminal maintenance and bus maintenance costs and the adoption of GASB Statement 49 – Pollution Remediation Obligation in FY 2009.

For the Year Ended (000s)Operat ing Expenses: FY 2010 FY 2009 FY 2008

Salaries, wages, and benefits 157,810$ 153,531$ 152,896$

Contract services 121,950 138,958 130,208

Utilities 30,328 34,659 37,664

Equipment and supplies 20,842 16,329 23,432

Grand Hyatt Hotel 18,716 17,366 17,780

Insurance 4,590 4,321 4,327

General, administrative and other charges 5,058 4,448 6,132

Depreciation and amortization 192,958 192,107 189,873 Total Operat ing Expenses 552,252$ 561,719$ 562,312$

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Utilities represent the cost of electricity, natural gas, potable water, trash removal, and telecommunications services. Utilities decreased $4.3 million (12.5%), from $34.7 million in FY 2009 to $30.3 million in FY 2010, primarily due to lower usage and lower electricity rates. Electricity represented 72.0% of this expense category in FY 2010 and 70.2% in FY 2009. Equipment and supplies primarily consists of non-capitalized equipment, materials, fuel for vehicles, and supplies used to maintain and operate the Airport. Equipment and supplies increased $3.6 million (22.0%), from $16.3 million in FY 2009 to $19.9 million in FY 2010, primarily due to an increase in facility maintenance supplies. Grand Hyatt Hotel operations include room, food and beverage and other expenses. Operating costs increased $1.4 million (7.8%) from $17.4 million in FY 2009 to $18.7 million in FY 2010, due to increased room and food and beverage costs. General, administrative and other charges increased $0.6 million (13.7%), from $4.4 million in FY 2009 to $5.1 million in FY 2010, primarily due to higher travel, meetings and staff training cost. FY 2009 Compared to FY 2008 Salaries, wages and benefits increased $0.6 million (0.4%) from $152.9 million in FY 2008 to $153.5 million in FY 2009 primarily due to salary increases and pension contribution. DFW employed 1,765 and 1,793 full time employees as of September 30, 2009 and 2008, respectively. Contract services increased $8.8 million (6.7%), from $130.3 million in FY 2008 to $139.0 million in FY 2009, primarily due to the adoption of GASB Statement 49 – Pollution Remediation Obligations. Utilities decreased $3.0 million (8.0%), from $37.7 million in FY 2008 to $34.7 million in FY 2009, primarily due to lower usage and lower prices for electricity. Electricity represented 70.2% of this expense category in FY 2009 and 73.6% in FY 2008. Equipment and supplies decreased $7.1 million (30.3%), from $23.4 million in FY 2008 to $16.3 million in FY 2009, primarily due to a decrease in prices of CNG, gasoline and diesel fuels and expenses related to the fueling system in FY 2008. Grand Hyatt Hotel operating costs decreased $0.4 million (2.7%) from $17.8 million in FY 2008 to $17.4 million in FY 2009, due to decreased food and beverage and repair and maintenance costs. General, administrative and other charges decreased $1.7 million (27.5%), from $6.1 million in FY 2008 to $4.4 million in FY 2009, primarily due to cost containment measures resulting in decreased travel, meetings and staff training. Non-Operating Revenues and Expenses: The following table highlights non-operating revenues and expenses for the fiscal years ended September 30, 2010, 2009, and 2008.

Non-operat ing revenues (expenses ) FY 2010 FY 2009 FY 2008

Passenger facility charges $105,890 $104,903 $107,443

Rental car customer facility charge 16,712 16,510 19,765

Interest income 7,999 26,859 45,659

Interest expense on revenue bonds (190,161) (217,696) (218,295)

Other, net (3,494) (15,644) (3,689)Total non-operat ing revenues, net ($63,053) (85,068)$ (49,117)$

For the Year Ended (000s )

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FY 2010 Compared to FY 2009 Congress established Passenger Facility Charges (PFCs) in 1990 as part of the Aviation Safety and Capacity Expansion Act of 1990. DFW currently collects a $4.50 Passenger Facility Charge (PFC) from revenue enplaned passengers to pay for the cost to design and construct eligible Airport capital projects or to repay debt service issued to build such projects. PFCs are collected by the air carriers when passengers purchase their tickets and are remitted to DFW the month following collection, less an $0.11 administrative fee. DFW estimates that 84.2% of all enplaned passengers were required to pay PFCs in FY 2010. PFC funds are deposited in the 252 PFC Fund when collected from the airlines, and then a portion is used to pay eligible debt service costs and for eligible pay-as-you-go capital projects. PFC revenues (e.g., collections) increased $1.0 million (0.9%), from $104.9 million in FY 2009 to $105.9 million in FY 2010 as a result of an increase in passengers. Rental car customers pay a $4 facility charge for each transaction day. The revenues derived for this charge are held in trust and used to pay debt service on the outstanding Facility Improvement Corporation (FIC) bonds issued to build the Rental Car Facility. Any excess revenues may be used to pay capital projects associated with the rental car facility. Interest earnings from FY 2009 to FY 2010 decreased by $18.9 million, from $26.9 million in FY 2009 to $8.0 million in FY 2010 due to lower cash balances and the decrease in the average rate of return. Other net non-operating expenses are comprised primarily of amortization expense of direct financing lease receivables, plus write-offs of capital assets and investments, less revenue associated from special facility bonds. Other, net decreased $12.0 million from ($15.6) million in FY 2009 to ($3.5) million in FY 2010, due to write-offs of capital assets in FY 2009, primarily associated with a parking control system that was initiated, but not completed. FY 2009 Compared to FY 2008 DFW estimates that 85.5% of all enplaned passengers were required to pay PFCs in FY 2009. PFC revenues (e.g., collections) decreased $2.5 million (2.4%), from $107.4 million in FY 2008 to $104.9 million in FY 2009 as a result of a decrease in passengers. Interest earnings from FY 2008 to FY 2009 decreased by $18.8 million, from $45.7 million in FY 2008 to $26.9 million in FY 2009, due to the decrease in the average rate of return. Other net non-operating expenses is comprised primarily of amortization expense of direct financing lease receivables, plus write-offs of capital assets, less revenue associated from the special facility bonds. Other, net increased $11.9 million from ($3.7) million in FY 2008 to ($15.6) million in FY 2009, due to write-offs of capital assets in FY 2009, primarily the costs incurred to develop a parking system that was not implemented. Capital Contributions: The following table highlights capital contributions for the fiscal years ended September 30, 2010, 2009, and 2008.

Capital contr ibut ions FY 2010 FY 2009 FY 2008

Federal and state grant reimbursements $29,907 $42,098 $33,568Total capital contr ibut ions 29,907$ 42,098$ 33,568$

For the Year Ended (000s)

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FY 2010 Compared to FY 2009 DFW receives Airport Improvement Program (AIP) and other grants through the Federal Aviation Administration (FAA) and other federal and state agencies. In FY 2010, the Airport received total revenues from federal and state grants reimbursements of $29.9 million. Revenue of $21.8 million was received from the FAA’s Airport Improvement Program. DFW receives federal reimbursements from the Department of Homeland Security (DHS) to pay for security equipment needs at DFW. The Airport received $6.1 million of revenues directly from the Department of Homeland Security. FY 2009 Compared to FY 2008 In FY 2009, the Airport received total revenues from federal and grants reimbursements of $42.1 million. Revenue of $22.8 million was received from the FAA’s Airport Improvement Program. DFW receives federal reimbursements from the Department of Homeland Security (DHS) to pay for security equipment needs at DFW. The Airport received $20.2 million of revenues directly from the Department of Homeland Security. Assets, Liabilities, and Net Assets: The following table provides condensed summary of DFW’s net assets as of September 30, 2010, 2009, and 2008. A discussion of significant items follows. Total current and other assets decreased $91.3 million from $1.32 billion in FY 2009 to $1.23 billion in FY 2010 primarily due to the use of cash for capital expenditures and a reduction in accounts receivable for certain rents that, under the new Use Agreement beginning in FY 2011, are no longer applicable. Capital assets decreased $37.0 million in FY 2010 and $73.0 million in FY 2009 as a result of depreciation. Total current and other assets decreased $131.3 million from $1.45 billion in FY 2008 to $1.32 billion in FY 2009 primarily due to cash used for capital expenditures and a reduction in the PFC cash reserves. Total liabilities decreased $44.8 million from $4.01 billion in FY 2009 to $3.96 billion in FY 2010 primarily due to the reduction of principal due on the Joint Revenue Bonds and the reduction of deferred revenue related to supplement rent due from the airlines. Total liabilities decreased $103.2 million from $4.11 billion in FY 2008 to $4.01 billion in FY 2009 primarily due to the reduction of principal due on the Joint Revenue Bonds.

Summary of Net Assets 2010 2009 2008Assets: Current and other assets 1,231,014$ 1,322,296$ 1,453,570$ Capital assets 4,085,837 4,123,793 4,196,859 Total assets 5,316,851 5,446,089 5,650,429

Liabilities: Current and other liabilities, excluding debt 188,376 192,551 208,083 Noncurrent liabilities 10,912 28,657 18,983 Long-term debt outstanding: due within one year 44,110 20,440 58,280 due in more than one year 3,720,614 3,767,160 3,826,633 Total liabilities 3,964,013 4,008,807 4,111,979 Total net assets 1,352,838$ 1,437,282$ 1,538,450$

Total revenues 661,462$ 693,889$ 837,806$ Total expenses (745,906) (795,057) (784,448) Total change in net assets (84,444)$ (101,168)$ 53,358$

As of September 30 (000s)

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The following table summarizes net assets as of September 30, 2010, 2009, and 2008. Invested in capital assets, net of related debt increased $212.6 million in FY 2010 from $403.7 million in FY 2009 due to the change in reporting of debt issued for non-capital related activities. FY 2009, Invested in capital assets increased $18.5 million from $385.2 million in FY 2008 due to a decrease in long term debt generated from debt restructuring completed in September 2009. Restricted net assets, FIC/PFIC and other, decreased $102.8 million from $107.6 million in FY 2009 to $4.9 million in FY 2010 due to a decrease in investments and change in reporting of debt and deferred financing charges for FIC/PFIC. Approximately 94%, 82% and 80% of the balance in FY 2010, FY 2009 and FY 2008, respectively, is the restricted net assets of the FIC-Rental Car Facility and PFIC-Grand Hyatt which are not eligible to be used for other airport purposes. Restricted net assets, debt service, (prior to FY 2010) primarily represented moneys legally restricted for Debt Service Reserve Funds and Debt Service Interest and Sinking Funds as required by the Controlling Documents, less accrued interest expense. At September 30, 2010, DFW began including long-term debt associated with the debt service reserved funds as a reduction of restricted net assets for debt service. This change reduced the amount of restricted for debt service to an immaterial amount. The balance of $92,000 is combined with the Restricted net assets, FIC/PFIC and Other on the Statement of Net Assets. Restricted net assets, PFC’s represent the cash and investments held from the collection of PFCs that will be used in the future to pay eligible debt service primarily. PFCs paid approximately 75% of the total debt service in FY 2008, FY 2009 and FY 2010. The PFC balance decreased in FY 2010 and FY 2009 as funds have been used to pay eligible debt service. Restricted net assets, Public safety - represents cash obtained during seizures and arrests. These funds may only be used for public safety and security purposes as defined by Federal law. Unrestricted Net Assets at September 30, 2010 were $627.6 million, a decrease of $4.9 million (0.8%) over FY 2009 primarily due to the use of cash for acquisition and construction of capital assets during the year. Unrestricted net assets include the cash and investment amounts in the Common Capital Improvement Account (301 Fund with $146.7 million at September 30, 2010), plus the Airport Discretionary Account (302 Fund with $53.4 million at September 30, 2010), plus the 102 Operating Fund ($161.8 million at September 30, 2010) plus other funds that are not restricted ($204.1 million at September 30, 2010). Each of these accounts may be used by DFW for any lawful purpose. Liquidity and Financing DFW is a residual airport under its original Use Agreement. The Controlling Documents require DFW to establish rates, fees, and charges so that revenues for the year are sufficient to pay for operating expenses (excluding depreciation); plus annual debt service (principal and interest) plus the incremental 25% coverage on annual aggregate debt service. It also allows for rates to provide for a 90 day

Net assets 2010 2009 2008Invested in capital assets, net of debt 616,286$ 403,652$ 385,162$ Restricted net assets:

FIC/PFIC and other 4,860 107,648 108,932 Debt service - 180,783 220,550 Passenger facility charges 101,689 110,487 135,396 Public safety 2,398 2,162 2,237

Total restricted 108,948 401,080 467,115 Unrestricted net assets 627,603 632,550 686,173

Total net assets 1,352,838$ 1,437,282$ 1,538,451$

As of September 30 (000s)

18

operating reserve; plus any extraordinary expenditures. Management monitors 102 Fund revenues and expenses to determine if it needs to modify its rate structure during the year to ensure that it has sufficient cash to pay its operating and debt service costs. The following table summarizes annual debt service (principal and interest) plus the incremental 25% coverage on annual aggregate debt service and the amount of debt service paid by the airlines in FY 2008, FY 2009, and FY 2010.

From a capital expenditure standpoint, DFW must identify and have available funds (CIF, grants, debt, and PFCs) before it can enter into contracts for capital programs. Typically, the amount available from the CIF and grants is sufficient to fund normal asset replacements at DFW; while bonds and discretionary grants are used to finance major capital expansion programs. The signatory airlines must approve debt issuances for expansion projects in advance where they are responsible for the repayment of debt through rates, fees, and charges. Total joint revenue bond debt outstanding was $3.58 billion and $3.59 billion at September 30, 2010 and 2009, respectively, net of unamortized discount/premium and deferred loss on refunding. In September 2009, DFW issued fixed rate bonds (Series 2009) to refund approximately $339.9 million of fixed rate revenue bonds (Series 2004A-1,2 and Series 2006A). The refunding resulted in a net loss (based on total debt service) of $2.2 million, however, DFW recognized a net present value economic gain of $20.1 million over the life of the bonds. In April 2008, DFW’s variable rate joint revenue bonds were converted to a fixed rate mode. DFW plans its annual debt service payments over time so that total principal and interest payments are relatively constant over the repayment period. Generally, DFW capitalizes interest on major capital programs like the TRIP between the time of borrowing and date of beneficial occupancy. Coverage paid by the airlines as part of the rates, fees and charges, represents 25% of net debt service and is used to fund the CIF in the following fiscal year. DFW uses PFCs to pay a portion of eligible debt service on outstanding debt. The remaining debt service is repaid by the airlines primarily through landing fees and terminal rents and fees. Additional information on long-term capital asset activity and debt activity are disclosed in notes 4 and 6 to the financial statements. Request for Information This financial report is designed to provide a general overview of the Airport’s finances for all those with an interest. Questions concerning any of the information presented in this report or requests for additional information should be addressed to the Office of the Executive Vice President and Chief Financial Officer, 3200 East Airfield Drive, P.O. Box 619428, DFW Airport, Texas 75261-9428.

FY 2010 FY 2009 FY 2008

Net debt service compar ison Actual Actual ActualTotal principal and interest 208.9$ 237.5$ 241.4$ Less: interest and offsets (0.1) (1.0) (2.9)Sub-total 208.8 236.5 238.4 Add debt service coverage (25%) 52.2 59.1 59.6 Net debt service 261.0 295.6 298.1 Less: PFCs and other (116.1) (127.1) (125.1)Debt service paid by airlines 144.9$ 168.5$ 173.0$

For the Year Ended (Millions )


Statement of Net Assets As of September 30, 2010 (Amounts in Thousands)

See accompanying notes to the basic financial statements. 19

2010Assets

Current AssetsCash and cash equivalents (notes 1d, 2) 233,263$ Restricted cash and cash equivalents (notes 1n, 2, 8) 148,018 Investments (notes 1d,2) 212,140 Restricted Investments (notes 1n, 2, 8) 54,001 Accounts receivable, net of allowance for doubtful accounts of $8.3 (note 1e) 42,050 Materials and supplies inventories (note 1f) 1,789 Other current assets 2,822 Restricted accounts receivable and accrued interest (notes 1n, 8) 22,831 Total current assets 716,913

Long-Term AssetsRestricted cash and cash equivalents (notes 1n, 2, 8) 155,777$ Investments (notes 1d, 2) 120,610 Restricted Investments (notes 1n, 2, 8) 95,618 Capital assets, net (notes 1g, 4)

Non-depreciable 460,055 Depreciable, net 3,625,783

Total capital assets, net 4,085,837Deferred financing charges 85,035 Net pension and other post employment benefit assets (note 9c,10c) 57,060 Total long-term assets 4,599,938 Total Assets 5,316,851$

LiabilitiesCurrent Liabilities

Accounts payable and other current liabilities (note 5) 98,823$ Payable from restricted assets (notes 1n, 8) 89,553Long-term liabilities due within one year (note 1n, 6) 44,110 Total current liabilities 232,486$

Long-Term Liabilities Deferred revenue and other long-term liabilities (notes 1n) 10,912$ Joint revenue bonds payable (note 6) 3,538,512Facility improvement corporation bonds payable (note 6) 111,433Public facility improvement corporation bonds payable (note 6) 70,670Total long-term liabilities 3,731,527 Total Liabilities 3,964,013$

Net Assets (notes 7, 8)Invested in capital assets, net of related debt 616,286$

Restricted for:FIC/PFIC and other 4,860 Passenger facility charges 101,689 Public safety 2,398

Total restricted 108,948

Unrestricted 627,603 Total Net Assets 1,352,838$


Statement of Revenues, Expenses and Changes in Net Assets For The Year Ended September 30, 2010

(Amounts in Thousands)


2010

Operating Revenues Passenger airline landing fees 149,951$ Terminal rent and use fees 18,719 Cargo landing fees 13,047 Airline HVAC and other 11,064 Federal Inspection Services (FIS) 10,557 Airline bad debt (335)

Total airline revenues 203,003 Parking 97,329 Concessions 51,170 Ground and facilities leases 28,001 RAC lease and rentals 25,714 Grand Hyatt Hotel 25,692 Natural gas royalties and other fees 25,521 RAC customer transportation charge 9,242 Employee transportation 7,747 Taxi and limo fees 7,167 Other revenue 20,367

Total non-airline revenues 297,950 Total operating revenues 500,953

Operating ExpensesSalaries, wages, and benefits 157,810$ Contract services 121,950 Utilities 30,328 Equipment and supplies 20,842 Grand Hyatt Hotel 18,716 Insurance 4,590 General, administrative and other charges 5,058 Depreciation and amortization 192,958

Total operating expenses 552,252$

Operating income (loss) (51,299)

Non-Operating Revenues (Expenses)Passenger facility charges 105,890 Rental car customer facility charge 16,712 Interest income 7,999 Interest expense on revenue bonds (190,161)Other, net (3,494)

Total non-operating expenses, net (63,053)$

Gain (loss) before capital contributions (114,352)

Capital ContributionsFederal and state grant reimbursements 29,907$

Total capital contributions 29,907$

Net Assets

Increase (decrease) in net assets (84,444)$

Total net assets, beginning of year 1,437,282

Total net assets, end of year 1,352,838$


Statement of Cash Flows For The Year Ended September 30, 2010



2010Cash flows from operating activities:

Cash received from operations 497,509$ Cash paid to outside vendors (200,047)Cash paid to employees (158,270) Net cash provided by operating activities 139,192

Cash flows from capital and related financing activities:Acquisition and construction of capital assets (158,234)$ Proceeds from retirement of assets 215Deferred financing charges 0Principal paid on revenue bonds (20,440)Interest paid on revenue bonds (197,197)Federal grants receipts 29,907Passenger facility charges 104,370Rental car financing fees 16,712

Net cash used in capital and related financing activities (224,667)

Cash flows from noncapital and related financing activities:Other nonoperating revenues 38,847$ Other nonoperating expenses (42,340)

Net cash used in noncapital and related financing activites (3,493)

Cash flows from investing activities:Interest received on investments 8,537$ Purchase of investments (694,356)Sale and maturity of investments 1,037,956 Net cash provided by investing activities 352,137

Net increase in cash and cash equivalents 263,169

Cash and cash equivalents, beginning of year 273,886

Cash and cash equivalents, end of year 537,056$

Unrestricted cash and cash equivalents $233,262Restricted cash and cash equivalents 303,794

Cash and cash equivalents, end of year 537,056$

Reconciliation of operating income (loss) to net cashprovided by operating activities:Operating income (loss) (51,299)$ Adjustments to reconcile operating income (loss) to net cash provided by operating activities:

Depreciation and amortization 192,958Changes in assets and liabilities:

Accounts receivable (519)Materials and supplies inventories (201)Other current assets 1,004Net pension assets (9,999)Accounts payable, other liabilities, and deferred revenue 7,248 Net cash provided by operating activities 139,192$

Supplemental disclosure of non-cash activitiesAssets acquired under capital lease 52Amortization of bond premium/discount (3,342)Amortization of bond issuance cost 5,802Unrealized gain (loss) on investments 266


Statement of Fiduciary Net Assets As Of December 31, 2009 (Amounts in Thousands)


2009

AssetsCash 112$

Investments at fair value U.S. government securities 42,876 Common stocks 178,763 Bonds 60,887 Foreign stocks 743 Money market funds and notes 38,387 Real estate investment funds 1,741 Limited Partnership 715

Total investments 324,111

Total cash and investments, at fair value 324,223

Due from broker 355 Accrued interest and dividends 1,220

Total assets 325,798$

LiabilitiesDue to broker for securities purchased 288$ Claims/premiums payable 331 Accrued transaction fees 19 Accrued management fees 249

Total liabilities 887

Net assetsHeld in trust for benefits 324,911$


Statement of Changes in Fiduciary Net Assets For the year ended December 31, 2009



2009

Additions:Investment income 8,717$ Net appreciation in fair value of fund investments 43,497 Contributions from employees 1,518 Contributions from employer 31,451 Total additions 85,183

Deductions:Pension benefit payments 14,230 Claims/premiums expenses 1,486 Administrative fees 1,560 Investment fees 54 Total deductions 17,330

Change in net assets 67,853 Plan net assets, beginning of year 257,058

Plan net assets, end of year 324,911$

Dallas /Fort Worth International Airport Notes To The Basic Financial Statements

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Footnote Reference

Note Page

1. Summary of Significant Accounting and Reporting Policies 25

2. Deposits and Investments 30

3. Related-Party Transactions 34

4. Capital Assets 34

5. Accounts Payable and Other Current Liabilities 34

6. Long-Term Debt 35

7. Net Assets 37

8. Restricted Assets and Liabilities 38

9. Retirement Plans 39

10. Other Post-Employment Benefits (OPEB) 41

11. PFIC Background and Segment Financial Information 45

12. Commitments and Contingencies 46

13. Self-Insurance/Risk Management 47

14. Concentration of Credit Risk 47

15. Pollution Remediation 47

16. Subsequent Event 48


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(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

(a) Reporting Entity

The Dallas/Fort Worth International Airport (DFW or the Airport) was created by the Contract and Agreement between the City of Dallas, Texas, and the City of Fort Worth, Texas, effective April 15, 1968 (Contract and Agreement), for the purpose of developing and operating an airport as a joint venture of the Cities of Dallas and Fort Worth (the Cities). In accordance with the Contract and Agreement. The initial capital was contributed by the Cities. The Cities approve the Airport’s annual budget and all bond sales, but have no responsibility for the Airport’s debt service requirements. The DFW Airport Board of Directors (the Board) is composed of 12 members, 11 of whom are voting members (seven of which are appointed by Dallas and four by Fort Worth) in accordance with each city’s ownership interest in the Airport. The 12th position represents the Airport’s neighboring cities of Irving, Grapevine, Euless or Coppell and is non-voting. The Board is a semi-autonomous body charged with governing the Airport and may enter into contracts without approval of the City Councils. The Board appoints the Chief Executive Officer, who is charged with the day-to-day operations of the Airport. The Chief Executive Officer, in turn, hires a professional management team to assist him in that responsibility. The Airport’s financial statements include all of the transactions of the Dallas/Fort Worth Airport Public Facility Improvement Corporation (PFIC), which operates a Grand Hyatt Hotel, and the Dallas/Fort Worth International Airport Facility Improvement Corporation (FIC) relating to the construction of the Rental Car Facility at the Airport (see footnote 7(c)). Although the FIC and PFIC are legally separate entities, the financial transactions of PFIC and the RAC have been included into the Airport’s Enterprise Fund due to their nature and significance to the Airport and to comply with Governmental Accounting Standards Board (GASB) Statement 14, The Financial Reporting Entity as amended by GASB 39 Determining whether Certain Organizations are Component Units. The FIC and PFIC are considered blended component units because the component units governing bodies are substantively the same as DFW, the primary government. See footnote 6(e) for a discussion of the remaining FIC transactions. In addition, the component units provide direct benefits exclusively or almost exclusively to DFW, the primary government. The Airport has two fiduciary pension plans covering substantially all DFW employees with the plan year ended December 31, 2009: the Employees of Dallas/Fort Worth International Airport Retirement Plan and the Department of Public Safety (DPS) Retirement Plan (Retirement Plans, collectively). Additionally, DFW has a single-employer defined Other Post Employment Benefit Plan (OPEB) providing retiree health care for qualified retired employees ages 65 or younger with the plan year ended December 31, 2009.

(b) Basis of Accounting

The accounts of the Airport are organized into an Enterprise Fund which represents the business type activities and two Pension Trust Funds and one OPEB Trust Fund which represent the fiduciary activities. The Airport uses a separate set of self-balancing accounts for each fund including assets, liabilities, net assets, revenues, and expenses. The Airport includes its fiduciary pension plans in its financial statements. The Basic Financial Statements and Required Supplementary Information (RSI) of the Airport consist of Management’s Discussion and Analysis; Statement of Net Assets; Statement of Revenues, Expenses, and


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Changes in Net Assets; Statement of Cash Flows; Statement of Fiduciary Net Assets; Statement of Changes in Fiduciary Net Assets; and Notes to the Basic Financial Statements and Schedules of Funding Progress. The funds are categorized into two generic fund types and three broad categories as follows: Enterprise Fund – The financial statements of the Enterprise Fund use the economic resource measurement focus and are presented on the accrual basis of accounting. Revenues are recorded when earned. DFW’s operating revenues are derived from fees paid by airlines, tenants, concessionaires, patrons who park at DFW, natural gas, hotel transactions, and others. The fees are based on usage rates established by DFW or in accordance with the Amended and Restated Use Agreement with the signatory airlines. Expenses are recognized when incurred. The Airport constructs facilities to provide services to others, which are financed in part by the issuance of its revenue bonds. Users, primarily airlines and tenants, generally contract to pay amounts equal to the Airport’s operating and maintenance expenses (excluding depreciation), debt service and coverage requirements, and any other obligations payable from the revenues of the Airport. Fiduciary Funds – The financial statements of the Fiduciary Funds includes the pension trust funds and OPEB trust fund and uses the economic resource measurement focus and are presented on the accrual basis of accounting. The Fiduciary Funds are maintained to account for assets held by the Airport in a trustee capacity for active and retired employees. Contributions are recognized in the period in which the contributions are due. Benefits, refunds, claims and premiums are recognized when due and payable in accordance with the terms of each plan. The Fiduciary Funds fiscal year ended is December 31 of each year. The amounts presented in these financial statements are as of December 31, 2009.

(c) Basis of Presentation

The Airport applies GASB pronouncements, as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. The Airport distinguishes between operating revenues and non-operating revenues based on the nature of revenues and expenses. In general, revenues and related expenses resulting from providing services such as landing, parking, hotel transactions, terminal rental, ground rental and natural gas leasing are considered operating. These revenues result from exchange transactions in which each party receives and gives up essentially equal values. Non-operating revenues, such as interest income, and passenger facilities charges, result from non-exchange transactions or ancillary activities. Non-operating expenses primarily consist of the interest expense on joint revenue bonds. Grants are recorded as capital contributions.

(d) Cash, Cash Equivalents, and Investments

Cash and cash equivalents For purposes of the statements of cash flows, the Airport considers cash on hand, money market funds, and investments with an original maturity of three months or less, when originally purchased, to be cash equivalents, whether unrestricted or restricted. All bank balances are moved to collateralized overnight sweep accounts.


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Investments The Airport states all investments held at September 30, 2010 with maturities of more than one year from the date of purchase at fair value. The amounts necessary to adjust fair value were $0.3 million increase in FY 2010. Investments with a maturity of one year or less, from original purchase date are reported at amortized cost. The Airport may invest in obligations of the United States or its agencies, obligations of the State of Texas or its agencies, municipal obligations having a rating not less than AA, bankers’ acceptances, certain repurchase and reverse repurchase agreements, commercial paper, certificates of deposit, certain SEC regulated money market mutual funds, certain local government investment pools, and guaranteed investment contracts. Under the current investment policy, the fiduciary funds invest in money market funds, domestic equities, international equities and fixed income instruments. The FIC and PFIC investments are governed by trust indentures between the Airport and the trustees which define “qualified investments” as obligations of the U.S. Treasury and U.S. agencies, municipal securities, commercial paper, repurchase agreements, nationally recognized institutional mutual funds, and certain other securities. All of the FIC and PFIC investments at September 30, 2010 were “qualified investments”.

(e) Accounts Receivable

Receivables are reported at their gross value when earned. The Airport’s collection terms are 20 days. The allowance for uncollectible accounts is based on a weighted aging calculation. As a customer’s balance is deemed uncollectible, the receivable is cleared and the amount is written off. If the balance is subsequently collected, such payments are applied to the allowance account. Accounts receivables are shown net of the allowance for doubtful accounts in the amount of $8.3 million for fiscal year 2010.

(f) Materials and Supplies Inventories

Inventories are valued at the lower of average cost or market and consist primarily of expendable parts and supplies held for consumption within the next year.

(g) Capital Assets

All capital assets are stated at historical cost or, if donated, at the fair value on the date donated. The capitalization threshold for real property is $50,000 and $15,000 for personal property. Depreciation is provided on the straight-line method over the following estimated useful lives:

Repairs and maintenance are charged to operations as incurred unless they have the effect of improving or extending the life of the asset, in which case they are capitalized as part of the cost of the asset. Construction-in-progress is composed of costs attributable to construction of taxiways, roads, terminal improvements, systems installation and conversion, and various other projects.

Buildings 10 - 50 yearsImprovements other than buildings 10 - 50 yearsMachinery and equipment 3 - 30 yearsVehicles 2 - 20 years


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(h) Capitalized Interest

The Airport capitalizes interest costs on bonds outstanding, until the asset is placed in service, net of interest earned on the unexpended bond proceeds. There was no incremental capitalized interest in fiscal year 2010.

(i) Grants and Federal Reimbursements

Grants and federal reimbursements are recorded in the accounting period in which eligibility requirements have been met on projects.

(j) Passenger Facilities Charges (PFC)

The PFC Program is authorized by federal legislation and allows an airport to impose a fee of up to $4.50 on revenue enplaning passengers for FAA approved projects. DFW collects at the imposed limit. The PFC fee is collected by air carriers and remitted to the Airport on a monthly basis. As of September 30, 2010, the FAA has approved nine PFC applications for the Airport for a total collection authority of $5.5 billion through December 2034 with remaining collection authority of $4.0 billion. DFW is currently collecting PFC’s under PFC 5; applications 1 to 4 are closed.

(k) Deferred Compensation Plan

The Airport offers a deferred compensation plan, created in accordance with Internal Revenue Code Section 457, to all Airport employees to allow them to defer a portion of their salaries up to IRS limits until future years. The deferred compensation is not available to employees until termination, retirement, death, or an unforeseeable emergency. Amounts are held in trust for the benefit of the Airport’s employees and are not subject to claims of the Airport’s general creditors. The Airport is not the trustee of the Deferred Compensation Plan. The Deferred Compensation Plan balances totaling $42.4 million for 2010 are not reported in the assets or liabilities of the Airport in accordance with GASB Statement 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. Beginning January 2010, DFW requires employees, excluding Public Safety Officers, hired after January 1, 2010 to participate in a deferred compensation plan, created in accordance with Internal Revenue Code Section 401(a) plan, in which employees are required to defer 1% to 3% of their salaries, based on tenure. All new employees are also eligible to participate in the 457 Plan. DFW will match up to 7% of employee contribution to both the 401(a) and 457 plans. The deferred compensation is not available to employees until termination, retirement, death, or an unforeseeable emergency. Amounts are held in trust for the benefit of the Airport’s employee and are not subject to claims of the Airport’s general creditors. The Airport is not the trustee of the Plan. The Deferred Compensation Plan balances totaling $0.1 million for 2010 are not reported in the assets or liabilities of the Airport in accordance with GASB Statement 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans.

(l) Retirement Plans

It is the policy of the Airport to fund the pension costs of its two retirement funds annually. Pension costs are comprised of normal cost and amortization of unfunded actuarial accrued liability and of unfunded prior service cost. The Airport currently carries a Net Pension Asset of $54.4 million as of September 30, 2010 which is the cumulative difference between the annual pension costs and contribution made to the two retirement pensions plans. DFW is


September 30, 2010

29

funding its pension plans in excess of the actuarial requirements because it currently has an unfunded pension obligation of approximately $128.3 million as of December 31, 2009. The Pension plan accounting is in accordance with GASB Statement 27, Accounting for Pensions by State and Local Governmental Employers and as amended by GASB Statement 50, Pension Disclosures. Benefits and refunds are recognized when due and payable. Investments are stated at fair value. If available, quoted market prices are used to value investments. Securities that have no quoted market price are valued at estimated fair value using Bloomberg Financial Services. Purchases and sales of investments are recorded on a trade-date basis.

(m) OPEB Plan

It is the policy of the Airport to fund the OPEB cost annually. OPEB costs are comprised of normal cost and amortization of unfunded actuarial accrued liability. The Airport currently carries a Net Pension Asset of $2.6 million as of September 30, 2010 which is the cumulative difference between the annual OPEB costs and contribution made to the OPEB plan. DFW made a contribution of $2.7 million in FY 2010. OPEB has an unfunded obligation of approximately $29.7 million as of December 31, 2009. The OPEB plan is accounted for in accordance with GASB Statement 43 Financial Reporting for Post-employment Benefit Plans Other than Pension Plans and GASB Statement 45 Accounting and Financial Reporting by Employers for Post-Employment Benefits Other than Pensions. Claims and premiums are recognized when due and payable. Investments are stated at fair value.

(n) Restricted Assets and Liabilities

Restricted assets consist of cash, investments, and other resources that are legally restricted by third parties to certain uses. Capital program funds are restricted to pay the costs of certain capital projects as defined in various bond agreements. PFC program funds are restricted to pay the cost of FAA approved capital projects and any debt incurred to finance those projects. Debt service funds are restricted to make payments for principal, interest, sinking fund, and coverage as required by the specific bond covenants. Public safety funds obtained from seizures are restricted to specified security or public safety uses. Liabilities payable from restricted assets are the accounts payable, accrued interest, and current portion of long-term debt associated with the purchase and construction of the capital projects funded by the restricted assets.

(o) Compensated Absences

DFW employees earn 12 days of sick leave per year with a maximum accrual of 130 days. Unused sick leave for terminated employees is not paid and, therefore, not accrued. DFW employees are granted Time Off with Pay (TOP) at rates of 15 to 30 days per year depending on length of employment and position. Employees may accumulate up to a maximum of 2 times their annual accrual rate. Upon termination, employees are paid for any unused TOP. The accumulated TOP is recorded as a liability when earned and is reflected in the accrued TOP. Estimated TOP usage due within one year is expected to remain at the same level. The calculation of the liability is based on the pay or salary rates in effect as of the end of the fiscal year (in thousands).

Balance as of September 30, 2009 7,008$ TOP used during the year (8,000) TOP earned during the year 8,485 Balance as of September 30, 2010 7,493$


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(p) Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

(2) DEPOSITS AND INVESTMENTS

(a) Deposits

As of September 30, 2010, DFW’s cash balance (including amounts under restricted assets – see Note 8) represents $537.1 million of cash and cash equivalents. The bank balance for the cash and cash equivalents accounts were approximately $540.1 million on September 30, 2010. The balance of cash and cash equivalents are kept in money market accounts or swept nightly. The money market funds are collateralized by the assets of the funds. The sweep accounts are collateralized by pledged securities. Money Market Funds are regulated by the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940. These funds are pooled monies from investors to purchase short-term investments, such as Treasury bills, certificates of deposit, and short-term bonds (known as commercial paper) issued by large corporations, that meet certain standards set forth by the SEC for credit quality, liquidity, and diversification. DFW investments in money market funds are reflected in the financial statements as cash equivalents for 2010 as follows (in thousands): The risk rating for money market funds is AAAm by Standard and Poor’s, Aaa by Moody’s and AAAmmf by Fitch’s.

(b) Investments – DFW

As of September 30, 2010 the maturity values are as follows (in thousands):

Description Fair Value < 1 years 1 - 5 years > 5 years

U.S. government securities

Federal Home Loan Mortgage Corp 119,991$ 119,991$ -$ -$

Federal Home Loan Bank 36,158 7,042 29,116 -

Federal Farm Credit Bank 69,324 55,063 14,261 -

Federal National Mortgage Assoc 148,224 - 148,224 -

First International Bank CD 1,000 1,000 - -

JP Morgan Chase CD 100,000 100,000 - -

One World bank CD 1,000 1,000 - -

Flexible Repurchase Agreement 6,843 - - 6,843

Total investments 482,540$ 284,095$ 191,602$ 6,843$

2010

Maturities (in years)

Description 2010Money market funds 537,057$ Total cash and cash equivalents 537,057$


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(c) Interest Rate Risk – DFW

Investment portfolios are designed with the objectives of preserving capital while attaining the best possible rate of return commensurate with DFW’s investment risk constraints and the cash flow characteristics of each portfolio. Return on investments, although important, is subordinate to the safety and liquidity objectives. In accordance with DFW’s investment policy, two strategies are employed when market conditions vary. In markets where time risk is rewarded, investments are for longer terms. In markets where time risk is not rewarded, investments are for shorter terms and allow for flexibility and to reinvest funds when markets improve. DFW has identified various purposes for the use of investments and has established maximum maturities for each of these purposes. The repurchase agreement is a type of investment held by a Trustee for PFIC as defined in the bond documents and is not subject to the DFW investment policy. The following table summarizes by purpose the maximum investment maturities.

The following table summarizes the DFW total investments as a percentage of maturities.

(d) Credit Risk – DFW

DFW’s investment policy restricts investments to obligations the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, fully collateralized certificates of deposit, including accrued interest, fully collateralized repurchase agreements, banker’s acceptances, commercial paper, mutual funds, and public fund investment pools. All securities of U.S. Government Sponsored Enterprises (GSE) are rated Aaa by Moody’s Investors Service and AAA by Standard & Poor’s. The CD’s and repurchase agreements are fully collateralized.

(e) Concentration of Credit Risk – DFW

DFW is prohibited from investing more than 5% of the total Board’s funds, in any individual investment, unless the investment is fully collateralized. As of September 30, 2010 there were no individual investments greater than 5%. DFW’s investments are in Federal Home Loan Mortgage (24.9%), Federal Home Loan Bank (7.5%), Federal Farm Credit Bank (14.4%), and Federal National Mortgage Association (30.7%), as of September 30, 2010. These percentages listed above are based on total investments by type. The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation are under US government conservatorship, allowing them to maintain their AAA credit ratings.

Purpose MaturityOperating 365 daysOperating Reserve 60 monthsCapital Improvements 60 monthsPassenger Facility Charges 36 monthsInterest and Sinking Next payment dateDebt Service Reserve 60 months

2010Maturity % of InvestmentLess than One Year 59%One to five years 40%Greater than five years 1%


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(f) Investments – DFW’s Fiduciary Pension Plans

DFW has contracted with JP Morgan Chase for custody and safekeeping of all investments of the Retirement Plans. The Retirement Plans’ assets are carried at fair value, as of December 31, 2009 include investments of (in thousands):

(g) Interest Rate Risk – DFW’s Fiduciary Pension Plans

The investment strategy of the plans is to emphasize total return in the form of aggregate return from capital appreciation, dividend and interest income. The primary objective over a five year period for the plan assets are to maintain the purchasing power of the current assets and all future contributions by producing positive real rates of return on the plan assets, meet or exceed the actuarially assumed rate of return, and provide an acceptable level of volatility in both the long and short-term periods. As of December 31, 2009, the maturity values are as follows (in thousands):

(h) Credit Risk – DFW’s Fiduciary Pension Plans

Based on the plans long-term liquidity requirement, DFW has determined that currently a majority of securities purchased for the plans have readily ascertainable market values and shall be easily marketable. The credit risk adopted for the plans include domestic and international equity and fixed income asset classes such as domestic and international bonds, real estate, and private equity. All of the U.S. government, mortgage backed, asset backed, CMO/REMIC, and commercial mortgage backed securities are rated Aaa by Moody’s Investors Service and/or AAA by Standard & Poor’s. All corporate bonds are rated at investment grade or better. An investment grade rating is considered to be Baa or above by Moody’s Investors Service and/or BBB and above by Standard & Poor’s.

2009Description Total

U.S. government securities 42,876$ Common stocks 178,763 Bonds 60,887 Foreign stocks 743 Money market funds 29,725 Real estate investment funds 1,741 Limited Partnership 715

315,450$

0-5 6-10 11-15 16+ Total

U.S. Government Securities 12,388$ 4,338$ 489$ 3,421$ 20,636$ Mortgage Backed Securities 123 1,315 1,196 19,606 22,240 Total Governmental 12,511$ 5,653$ 1,685$ 23,027$ 42,876$

Corporate Bonds 26,734$ 15,637$ 1,103$ 4,187$ 47,661$ Assets Backed 2,563 344 - - 2,907 CMO/REMIC 566 - 500 484 1,550 Commercial Mortgage Backed - - - 8,769 8,769 Total Non-Governmental 29,863$ 15,981$ 1,603$ 13,440$ 60,887$

2009 Maturity (in years)


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(i) Concentration of Credit Risk – DFW’S Fiduciary Pension Plans

The Retirement Committee reviews its allocation policy annually and actual allocations on a quarterly basis to ensure that no concentration of credit risk could occur. There were no individual investments representing 5% or more of the total funds.

(j) Investments – DFW’s Fiduciary OPEB Plans

DFW has contracted with JP Morgan Chase Bank (“Trustee’) for custody and safekeeping of investments, accounting for transactions based on the instructions of investment managers, and payment of benefits to participants, subject to the policies and guidelines established by DFW. The Trust Fund is invested in accordance with Texas Public Investment Code. See note 2(a) for the money market ratings. The OPEB Plan asset, are carried at fair value, as of December 31, 2009 and include the following investments (in thousands):

(k) Interest Rate Risk – DFW’s Fiduciary OPEB Plans

The long term investment strategy of the plan is to emphasize total return in the form of aggregate return from capital appreciation, dividend and interest income. The primary objective over a five year period for the plan assets are to maintain the purchasing power of the current assets and all future contributions by producing positive real rates of return on the plan assets, meet or exceed the actuarially assumed rate of return, and provide an acceptable level of volatility in both the long and short-term periods.

(l) Credit Risk – DFW’s Fiduciary OPEB Plans

Based on the plan’s long-term liquidity requirement, DFW has determined that currently all securities purchased for the plan have readily ascertainable market values and shall be easily marketable.

(m) Concentration of Credit Risk – DFW’S Fiduciary OPEB Plans

The contributed amounts were invested into a money market fund through the Trustee in 2009.

2009Description Total

Money market funds 8,661$ Total Investments 8,661$


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(3) RELATED-PARTY TRANSACTIONS

DFW makes certain payments routinely to the Cities. Payments to Fort Worth, primarily for legal services, bond fees, water purchases, and facilities rentals for the years ended September 30, 2010 were approximately $1.17 million. Payments to Dallas, primarily for legal services, water purchases, and bond fees, for the years ended September 30, 2010 were approximately $1.35 million.

(4) CAPITAL ASSETS

Changes in capital assets for the year ended September 30, 2010 were as follows (in thousands):

At September 30, 2010, DFW had certain capital assets that are currently not in use and considered idle. The Baggage System in Terminal B is categorized as an idle asset, but remains operational and will be used in the future. The baggage system has a carrying value of approximately $6.2 million.

(5) ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

A detail of accounts payable and other current liabilities for the year ended September 30, 2010 are as follows (in thousands):

FY 2010

Accrued Expenses 48,384$

Payroll and employee benefits 17,530

Accounts Payable 8,148

Time Off with Pay 7,493

Signatory Airline Refunds 6,234

Other Deposits 5,607

Deferred revenue 4,038

Insurance 1,390

Total 98,824$

Balance Transfer and BalanceSeptember 30, Completed September 30

Description 2009 Additions Projects Retirements 2010

Capital assets not being depreciated: Land 295,112$ -$ 983$ -$ 296,095$ Construction in progress 99,579 157,185 (92,805) 163,959

394,691 157,185 (91,822) - 460,054

Depreciable capital assets: Buildings 2,217,499 - 25,699 (6,626) 2,236,572 Improvements other than buildings 2,323,791 - 25,406 (218) 2,348,979 Machinery and equipment 875,551 - 17,567 (22,976) 870,142 Vehicles 148,563 68 23,150 (14,849) 156,932

5,565,404 68 91,822 (44,669) 5,612,625

Less accumulated depreciation for: Buildings (625,027) (57,887) - 6,590 (676,324) Improvements other than buildings (812,056) (73,482) - 218 (885,320) Machinery and equipment (331,235) (48,837) - 21,031 (359,041) Vehicles (67,986) (12,406) - 14,234 (66,158) Accumulated depreciation (1,836,303) (192,612) - 42,073 (1,986,842) Depreciable capital assets, net 3,729,101 (192,544) 91,822 (2,596) 3,625,783 Total, net 4,123,792$ (35,359)$ -$ (2,596)$ 4,085,837$

2010


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(6) LONG-TERM DEBT

A summary of bond indebtedness changes during the year ended September 30, 2010 follows (in thousands):

(a) Joint Revenue Bonds

To provide funds for the construction of DFW in November 1968, the Cities adopted the 1968 Regional Airport Concurrent Bond Ordinance (Bond Ordinance). This ordinance authorized the issuance of the Series 1968 Dallas/Fort Worth Regional Airport Joint Revenue Bonds and reserved for the Cities the right to issue additional bonds on parity with the Series 1968 Bonds. Additional parity bonds may be issued for the purpose of improving, constructing, replacing, or otherwise extending DFW. The 1968 Ordinance was amended by the 30th Supplement, which was adopted by the Cities in February 2000. Bonds are issued under provisions of Applicable Law, including Chapter 22 of the Transportation Code, Chapter 1371 of the Texas Government Code, as amended, and the provision of the

Series : Maturi ty: Interest Rate Beginning

Ba lance Addi t ions Reductions Ending Ba lance

Amounts Due wi thin One Year

Jo int Revenue Bonds 2000A: Due 11/16-11/35: 5.75%-6.125% $ 335,000 $ - $ - $ 335,000 $ - 2001A: Due 11/02-11/35: 5.5%-5.875% 620,655 - 5,695 614,960 6,000 2002A: Due 11/03-11/35: 5.0%-5.5% 342,520 - 6,780 335,740 7,150 2002B: Due 11/16-11/28: 5.75%-6.25% 75,000 - - 75,000 - 2002C: Due 11/16-11/28: 5.75%-6.25% 50,000 - - 50,000 - 2003A: Due 11/13-11/35: 5.0%-6.0% 1,457,700 - - 1,457,700 - 2003C-1: Due 11/11-11/18: 5.144%-5.75% 56,375 - - 56,375 - 2003C-2: Due 11/11-11/18: 6.125% 56,400 - - 56,400 - 2004B: Due 11/06-11/35: 3.0%-5.75% 206,165 - 295 205,870 305 2007: Due 11/08-11/23: 4.5%-5.0% 101,455 - 1,025 100,430 1,075 2009A: Due 11/10-11/24: 3.0%-5.0% 281,005 - - 281,005 22,565

Tota l 3,582,275 - 13,795 3,568,480 37,095

Plus (Less) unamortized discount/premium, net 22,849 - 3,491 19,358 - Less: Deferred Loss on Refunding (13,139) - 908 (12,231) -

Tota l Jo int Revenue Bonds 3,591,985$ -$ 16,379$ 3,575,607$ 37,095$

Faci l i ty Improvement Corporation Revenue Bonds Rental Car Facility Charge - 1998: Due 11/09-11/24: 6.5%-7.07% $ 107,400 $ - $ 5,325 $ 102,075 $ 5,665 Rental Car Facility Charge - 1999: Due 11/09-11/24: 7.4%-8.0% 16,880 - 570 16,310 610 Tota l 124,280 - 5,895 118,385 6,275 Plus (Less) unamortized discount/premium, net (760) - (83) (677) -

Tota l Faci l i ty Improvement Corporat ion

Revenue Bonds $ 123,520 $ - $ 5,812 $ 117,708 $ 6,275

Publ i c Faci l i ty Improvement Corporat ion 2001: Due 1/09-7/31: 4.3%-5.5% $ 73,105 $ - $ 750 $ 72,355 $ 740 Plus (Less) unamortized discount/premium, net (1,011) - (67) (945) - Tota l Pub l i c Faci l i ty Improvement $ 72,094 $ - $ 683 $ 71,410 $ 740

Total $ 3,779,660 $ - $ 20,440 $ 3,759,220 $ 44,110

Plus (Less) unamortized discount/premium, net 21,078 - 3,342 17,736 - Plus (Less): Deferred Loss on Refunding (13,139) - 908 (12,231) -

Total Bonds Payable 3,787,599$ -$ 24,689$ 3,764,725$ 44,110$


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Controlling Ordinances. Management believes DFW is in compliance with all bond covenants. Revenues derived from the ownership and operations of the Airport are pledged to meet debt service requirements of the bonds issued pursuant to the Bond Ordinance. The Bond Ordinance provides that the Airport shall set rentals, rates, fees and charges to produce, in each fiscal year, gross revenues sufficient to pay (a) DFW’s operating and maintenance expenses, excluding depreciation, (b) 1.25 times the amount required to be set aside for principal and interest on the joint revenue bonds (the excess over that required for debt service is transferred at year-end to the capital improvement fund to be used primarily for capital projects), and (c) an amount equal to any other obligations payable from the revenues of the Airport. In addition, PFC revenue is pledged to pay debt service to the extent that debt service is eligible and funds are available. PFC’s pledged are noted in the table below. Total principal and interest remaining to be paid on the bonds is $6.5 billion with annual requirements ranging from $229.2 million to $298.5 million. Revenue bond principal is due annually on November 1, while interest is due semiannually on November 1 and May 1.

(b) Facility Improvement Corporation Revenue Bonds

In 1998, DFW issued bonds through the FIC for construction of a consolidated rental car facility. These bonds are secured by a facility agreement between FIC and the rental car companies which provide that rental car companies will collect a transaction fee on each car rental day. This fee is currently $4 per day. This fee is set by the FIC Board of Directors and is pledged to pay annual debt service. Since these bonds were issued on behalf of DFW, and DFW manages the RAC facilities, the operating and non-operating revenues and expenses, assets and liabilities, associated with the RAC and FIC bonds are presented in the financial statements. FIC principal is due annually on November 1, while interest is due semiannually on November 1 and May 1.

(c) Public Facility Improvement Corporation

To provide funds for the construction of the Grand Hyatt Hotel, the Cities and DFW established the PFIC. Bonds issued by the PFIC are payable first from net revenues and accumulated cash balances of the Grand Hyatt hotel facility and second from the Airport’s

Bond Ser ies PFC Pledged PFC Applied PFC Applicat ion No. Comments

2000A $3.00 $4.50 5,8 Capital Development Program

2001A 3.00 4.50 5,8 Capital Development Program

2002A 3.00 4.50 5,6,8Capital Development Program,

De-Icing

2002B 3.00 4.50 5,8 Capital Development Program

2002C 3.00 4.50 5,8 Capital Development Program

2003A 3.00 4.50 5,8 Capital Development Program

2003C-1 - 4.50 7,9 ATSAC

2003C-2 - 4.50 7,9 ATSAC

2004A-1 - - N/A Not Eligible for PFC's

2004A-2 - - N/A Not Eligible for PFC's

2004B 3.00 4.50 5,8 Capital Development Program

2006A - - N/A Not Eligible for PFC's

2007 - - N/A Not Eligible for PFC's

2009A - - N/A Not Eligible for PFC's


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discretionary Airport Capital Improvements 302 Fund, if necessary. In accordance with the Airport Hotel Revenue Bonds, Series 2001, PFIC pledges net revenues of the hotel to cover 100% of the debt requirements. PFIC principal is due annually on January 15, while interest on is due semiannually on January 15 and July 15.

(d) Debt Service Requirement

Annual debt service requirements to maturity for bonds are as follows (in thousands):

At September 30, 2010 the Airport held approximately $201.2 million in reserve funds, interest and sinking funds for use in payment of the above debt service requirements. Certain amounts of the joint revenue, special facility FIC, and PFIC revenue bonds may be redeemed at a premium at various dates at the option of the Cities.

(e) Conduit Financing

In 1990, the Cities established the FIC for the purpose of providing conduit financing for the airlines and other users of the Airport. Each series of FIC bonds is payable solely from payments made pursuant to the facilities agreement between FIC and the borrower, with the exception of the RAC (see note 6(b)). The project related revenues that are pledged to support payment of FIC bonds are not part of revenue of the Airport and do not secure the bonds, with the exception of the RAC. Therefore, the assets, liabilities, revenues and expenses associated with these bonds are not reported in the Airport financial statements. FIC Revenue Bonds outstanding exclusive of the RAC were $1.02 billion for fiscal years 2010.

(7) NET ASSETS

Net assets reported as invested in capital assets, net of related debt, are comprised of the following amounts at September 30 (in thousands):

Principal Interest Principal Interest Principal Interest Principal Interest37,095$ 188,964$ 740$ 3,787$ 6,275$ 8,196$ 44,110$ 200,947$ 40,930 187,247 925 3,745 4,965 7,819 46,820 198,811 54,430 184,954 910 3,699 5,300 7,473 60,640 196,126 81,205 181,476 1,100 3,646 5,650 7,095 87,955 192,217 85,700 177,059 1,310 3,580 6,050 6,682 93,060 187,321

571,400 796,889 11,755 16,406 37,345 26,066 620,500 839,360 700,225 626,309 21,115 11,925 52,800 10,038 774,140 648,272 786,910 424,058 27,995 5,479 - - 814,905 429,537 982,015 194,699 6,505 169 - - 988,520 194,868 228,570 5,969 - - - - 228,570 5,969

3,568,480$ 2,967,623$ 72,355$ 52,437$ 118,385$ 73,370$ 3,759,220$ 3,093,429$

2026-20302031-20352036 -2040

Year Ending September 30

Joint Revenue Bonds PFIC FIC Total

2021-2025

20112012201320142015

2016-2020

2010Invested in capital assets ,

net of related debt:Net capital assets 4,085,837$ Less: long-term debt payable, portion used for

capital activities, and capital related payables (3,469,551) Total invested in capital 616,286$


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(8) RESTRICTED ASSETS AND LIABILITIES

The following table details assets and liabilities payable from restricted assets and the calculation of restricted net assets reported in the financial statements (in thousands):

DescriptionPublic Safety

FIC/PFIC and Other Debt Service

Passenger Facility

Charges Total

Assets :Current Cash and cash equivalents $ 1,407 $ 7,988 $ 77,111 $ 61,512 $ 148,018 Investments 1,000 3,998 35,989 13,014 54,001 Accounts receivable and accrued interest 94 5,142 331 17,263 22,831 Total currrent assets 2,501 17,128 113,431 91,789 224,850

Noncurrent Cash and cash equivalents $ - $ 67,500 $ 88,276 $ - $ 155,776 Investments - 6,843 78,875 9,900 95,618 Deferred Finaning Charges - 2,892 82,054 - 84,946 Total noncurrent assets - 9,735 249,205 9,900 180,564

Total current and noncurrent assets 2,501 26,863 362,636 101,689 405,414

Payable from restr icted assets :Current Accounts payable 103 5,817 393 - 6,313 Accrued interest on revenue bonds - 4,297 78,943 - 83,240 Long-term liabilities due within one year - 7,015 34,004 - 41,019 Total current payable from restricted assets 103 17,129 113,339 - 130,571

Noncurrent Deferred revenue - 52 - - 52 Total noncurrent payable from restricted assets - 52 - - 52

Total current and noncurrent payables 103 17,181 113,339 - 130,624

Restr i cted assets less l i ab i l i t i es 2,398 9,682 249,296 101,689 274,790

Reclass to investment in cap i ta l assets Less: long term debt associated with reserves and financing charges - (9,691) (249,205) - (258,895)Add: AP capital projects and Retainage - 4,777 - - 4,777

Net assets , res tr i cted 2,398$ 4,768$ 92$ 101,689$ 20,672$

2010


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(9) RETIREMENT PLANS

(a) Plan Descriptions

DFW has two fiduciary defined-benefit pension plans covering substantially all DFW employees: the employees of Dallas/Fort Worth International Airport Retirement Plans and the Department of Public Safety (DPS) Retirement Plans (Retirement Plans, collectively) that were established by Board resolution. Both plans are single-employer public employee retirement system plans in which the assets are held in an investment trust. Employees vest after five years of service and are eligible for early retirement at ages 55-61 and full retirement benefits at age 62 and after. Pension benefits increase by a cost of living adjustment each January 1. The fiscal year-end for the Retirement Plans is December 31. Copies of the Retirement Plans’ annual report may be obtained by writing to the Finance Department, DFW Airport, Post Office Drawer 619428, DFW Airport, Texas 75261-9428. Employee Plan - All regular employees, other than DPS officers are covered by the Employee Plan. Benefits vest after five years of service. DFW employees who retire are entitled to an annual retirement benefit, payable monthly for life in an amount equal to a percentage of final average monthly compensation times credited service plus an annual cost of living adjustment (as defined by the Employee Plan). Employees can also elect a limited lump-sum distribution. The Employee Plan also provides early retirement, death, and disability benefits. As of January 1, 2010 the Employee Plan is closed to new employees. DPS Plan - The DPS Plan was established effective October 1, 1999 when the assets and liabilities accrued by public safety officers eligible for the DPS Plan prior to October 1, 1999 were transferred from the Employee Plan to the DPS Plan in compliance with the requirements of IRS Code Section 414(1). The public safety officers who retired or terminated employment prior to October 1, 1999, were not eligible for the DPS Plan and will continue to receive their benefits, if any, from the Employee Plan. The DPS Plan permits early retirement at ages 55 to 61, or upon satisfaction of the “Rule of 80.” The “Rule of 80” is the attainment of age 50 and the completion of the number of years of benefit service that when added to the participant’s age equals the sum of 80. DPS officers receive pension benefits in the form of a qualified joint and survivor annuity; however, an employee may request optional forms of pension benefit payments upon written request to the Plan Administrator. Other forms of payment of accumulated plan benefits include lump-sum distribution upon retirement or termination or equal monthly payments for life.

(b) Funding Policies

DFW determines each Retirement Plans’ funding policy. In general, DFW contributes an amount approximately equal to the actuarially determined pension cost for the year. In some years, however, DFW funds additional contributions to help retire the unfunded liability sooner. The significant actuarial assumptions used to compute the actuarially determined contribution requirement are the same as those used to compute the actuarial accrued liability. Both pension plans provide that employees with five or more years of service are entitled to annual pension benefits, beginning at normal retirement age of 62, equal to a certain percentage of their final average monthly compensation for each year of credited service, less


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a certain percentage of anticipated primary insurance benefits. The final average monthly compensation is determined by utilizing the highest 60 consecutive months of earnings out of the 120 months immediately preceding the date of service termination. Employer contributions are generally made annually and recognized as additions in the period in which employee services are performed. Employee contributions are required for the DPS Plan, but not permitted for the Employee Plan. The actuarially determined contribution requirements for the DFW’s fiscal years are computed through an actuarial valuation performed as of January 1 each year. The annual actuarial valuation is performed to determine the adequacy of current contribution rates, to describe the current financial condition of the Plans and to analyze changes in the Plans' condition. Significant actuarial assumptions are as follows:

DFW’s annual pension costs, contributions, percent contributed, and net pension asset is as follows (in thousands):

Employee Plan DPS Plan

Valuation date January 1, 2009 January 1, 2009Actuarial cost method Entry age normal Entry age normalAmortization method Level percent, closed Level percent, closedRemaining amortization period 30 years 30 yearsAssets valuation method 5-year moving average 5-year moving averageActuarial assumptions:

a. Investment rate of return* 8.00% 8.00%b. Projected salary increases* Variable rate 4.0% to 7.25% Variable rate 4.0% to 10.0% * includes inflation at 3.00% 3.00%c. Cost of living adjustments 3.00% 3.00%

Employee PlanAnnual NetPension Airport Percentage Pension

DFW Year ended Cost Contribution Contributed AssetSeptember 30, 2010 16,638$ 24,688$ 148% 40,031$ September 30, 2009 15,050 20,902 139% 39,182 September 30, 2008 14,935 19,797 133% 26,130

Annual NetPension Airport Percentage Pension

DFW Year ended Cost Contribution Contributed AssetSeptember 30, 2010 4,761$ 6,735$ 141% 14,400$ September 30, 2009 4,284 5,945 139% 12,424 September 30, 2008 4,172 5,482 131% 10,765

DPS Plan


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As of January 1, 2010, the most recent actuarial valuation date, the funding status of the plans is as follows (in thousands): The schedule of funding progress, presented as Required Supplemental Information (RSI) following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits.

(c) Net Pension Asset

DFW net pension assets for its Employee and DPS plans for DFW’s fiscal year 2010 are as follows (in thousands):

(10) OTHER POST-EMPLOYMENT BENEFITS (OPEB)

(a) Plan Descriptions

General The OPEB Plan is a single-employer defined benefit other than pension plan covering qualified retirees of DFW. The OPEB Plan is established and derives its authority from a DFW resolution effective September 2007. The OPEB Plan is administered by the DFW Board with the Executive Vice President of Administration and Diversity and the Vice President of Human Resources serving as the “Plan Administrators”. The management of the assets and any amendments of the Plan is the responsibility of the DFW Board’s Retirement Committee, the Executive Vice President - CFO and the Vice President of Treasury Management.

Employee DPS

Actuarial accrued liabilities 348,720$ 130,853$ Actuarial value of assets 261,084 90,216 (Unfunded) actuarial accrued liability (87,636)$ (40,637)$

Funded ratio 74.9% 68.9%Annual covered payroll 77,625$ 22,179$ (Unfunded) actuarial accrued liability as a percentage of covered payroll (112.9%) (183.2%)

2010

Employees plan DPS plan Total

Annual required contribution 16,356$ 4,652$ 21,008$ Interest on net pension asset (2,559) (994) (3,553)Adjustment to annual required contribution 2,840 1,104 3,944Annual pension cost 16,638 4,761 21,400Employer contributions 24,688 6,735 31,423Increase in net pension (asset) (8,050) (1,974) (10,023)Net pension (asset), beginning of year (31,982) (12,426) (44,407)Net pension (asset), end of year (40,031)$ (14,400)$ (54,431)$

September 30, 2010


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Beginning in FY 2008, DFW implemented GASB Statement No. 45 “Accounting and Financial Reporting by Employers for Post-Employment Benefits Other than Pensions”. In connections with such implementation, DFW has commissioned an actuarial study from an outside consultant to quantify the amount of the Airport’s OPEB obligations. This study indicates an unfunded actuarial accrued liability of approximately $29.7 million as of January 1, 2010. DFW has deposited its’ OPEB obligations and has made a contribution of $2.7 million in FY 2010. The fiscal year-end for the OPEB Plan is December 31. Copies of the OPEB annual report may be obtained by writing to the Finance Department, DFW Airport, Post Office Drawer 619428, DFW Airport, Texas 75261-9428. OPEB Plan Eligibility The OPEB Plan provides retiree health care for qualified retired employees ages 65 or younger and their eligible dependents when required criteria are met. To be eligible as a retiree, an employee must be enrolled in one of the DFW’s medical plans, be eligible for retirement under one of the DFW’s pension plans; and begin drawing pension benefits immediately upon retirement. Failure to immediately draw pension benefits will result in loss of eligibility for medical coverage.

To be eligible as a retiree’s dependents, dependent(s) must be either a legal spouse; unmarried children and under age 25 who are dependent on the retiree for at least 50% of their support and claimed on the retiree’s income tax return; unmarried grandchildren under age 25 who are dependent on the retiree for at least 50% of their support, reside in the retiree’s household, and claimed on the retiree’s income tax return; or unmarried children at any age if mentally or physically incapable of self-support. Normal retirement benefits for general employees and DPS employees begin when they complete 5 years of service and age 62. Health Care Benefit

The health care coverage offered to active employees is available to retirees under age 65 and their eligible dependents. The benefit includes medical, prescription drug, and vision coverage. Medical plans offered include Aetna Select and Aetna Choice POS II.

Retiree Medical Subsidy As of January 1, 2003, DFW provides a subsidy to eligible employees who retire to purchase medical coverage prior to Medicare eligibility. The subsidy is for pre-65 OPEB medical benefits only, and offers a credit of $20 per month of completed year of service up to a maximum benefit of $400 per month. These credits have no cash value and can only be used toward purchasing medical coverage from the DFW. Retirees pay the total amount charged to DFW, less the retiree’s subsidy, if applicable. To be eligible for the subsidy, retirees must have retired after January 1, 2003, have 10 or more years of service, have been enrolled continuously in a DFW medical plan, and immediately draw retirement benefits. Medicare Supplement Plan DFW offers a PPO Medicare Supplement Plan for retirees and/or their spouses age 65 or older. The retiree and/or spouse must transfer to the Medicare Supplement Plan by the first of the month following their 65th birthday if they choose to remain on the DFW Plan.


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To be eligible for the Medicare Supplement Plan, a retiree or spouse must be 65 of age and currently enrolled in DFW medical plan, has applied for the Medicare Supplement Plan 2 month prior to turning age 65, and transitions to Medicare Supplement Plan the 1st of the month following their 65th birthday.

(b) Funding Policies

DFW determines the OPEB funding policy. In general, DFW contributes an amount approximately equal to the actuarially determined OPEB ARC for the year. In some years, however, DFW funds additional contributions to help retire the unfunded liability sooner. The significant actuarial assumptions used to compute the actuarially determined contribution requirement are the same as those used to compute the actuarial accrued liability. Employer contributions are generally made quarterly and recognized as additions in the period in which employee services are performed. Employee contributions are not permitted. The actuarially determined contribution requirements for the DFW’s fiscal years are computed through an actuarial valuation performed as of January 1 each year. The annual actuarial valuation is performed to determine the adequacy of current contribution rates, to describe the current financial condition of OPEB and to analyze changes in condition. The (unfunded) actuarial accrued liability rate is (29.8%) of annual covered payroll as of December 31, 2009. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The required schedule of funding progress presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on the plan and include the types of benefits in force at the valuations date and the pattern of sharing benefit costs between DFW and the plan members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Significant methods and assumptions are as follows:

Significant actuarial assumptionsValuation Date January 1, 2009Actuarially assumed investment return 8.0% per annum compunded annuallyMortality rates for males and females Retirement Plans 2000 Healthy Mortality TableRetirement, disablement and seperation rates Graduated rates based on age (detailed in actuary's report)Actuarial cost method Individual Entry-Age Acturial Cost MethodGeneral inflation 3.0% per annumPayroll growth rate 4.0% per annumHealth cost increase Graduated rates based on age (detailed in actuary's report)Method used for determining actuarial value of assets Market value of assetsAmortization method Level percent, closedRemaining amortization 27 years


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DFW’s annual OPEB costs, contributions, percent contributed, and net OPEB asset is as follows (in thousands):

The funding status of the OPEB plan as of January 1, 2010, representing the most recent valuation date, is as follows (in thousands):

(c) Net OPEB Assets

DFW’s net OPEB assets for DFW’s fiscal year 2010 are as follows (in thousands):

2010

Annual required contribution 2,742$ Interest on net OPEB asset (212)Adjustment to annual required contribution 236Annual OPEB cost 2,766Employer contributions 2,742Increase in net OPEB (asset) 24Net OPEB (asset), beginning of year (2,652)Net OPEB (asset), end of year (2,628)$

2010

Actuarial accrued liabilities 38,058$ Actuarial value of assets 8,337 (Unfunded) actuarial accrued liability (29,721)$

Funded ratio 21.9%Annual covered payroll 99,804$ (Unfunded) actuarial accrued liability as a percentage of covered payroll (29.8%)

OPEB PlanAnnual NetOPEB Airport Percentage OPEB

DFW's Year ended Cost Contribution Contributed AssetSeptember 30, 2010 2,766$ 2,742$ 99% 2,628$ September 30, 2009 2,700 2,676 99% 2,652 September 30, 2008 2,763 2,739 99% 2,676


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(11) PFIC BACKGROUND AND FINANCIAL INFORMATION

The PFIC is a duly incorporated public instrumentality in the State of Texas, created on December 14, 2000 by the Airport’s owner cities. The PFIC was created pursuant to Chapter 22 of the Texas Transportation Code for the purpose of financing, equipping and operating one or more public facilities within the boundaries of the Airport. To date, only one such facility has been approved and completed, the DFW Grand Hyatt (Hotel) which opened July 1, 2005. The hotel was constructed, equipped, and furnished with proceeds from the 2001 Airport Hotel Revenue Bonds, issued in the amount of $75 million. In addition to construction funds, these bonds plus a contribution of $8.1 million from the Airport Discretionary account provided for payments of interest until March 1, 2006, reserve funds, working capital, and the cost of issuance. In addition, the Airport has, over the course of construction, provided additional construction funds of $7.2 million from its discretionary capital account. The Hotel was constructed by the Airport based on a Development Agreement entered into between the Airport and the PFIC. Upon completion of the Hotel, the Airport leased the Hotel to the PFIC pursuant to the Hotel Lease Agreement. The PFIC accounts for the transaction as a capital lease. The Hotel has 298 rooms and is situated in DFW’s International Terminal D. The Hotel is managed by the Hyatt International Corporation. The following summarizes the PFIC financial information (in thousands) for the fiscal year ended 2010.

2010Operating revenues 25,692$ Operating expenses (21,122)Operating Income 4,570 Non-operating expense (3,670)Change in net assets 900

Net assets at the beginning of the year 26,489 Net assets at the end of the year 27,389$

Capital assets 57,236 Other assets 44,885 Total assets 102,121

Long term liabilities (70,722)Other liabilities (4,010) Total liabilities (74,732) Net assets 27,389$

2010

Cash flows from operating activities 7,469$

Cash flows from financing activities (6,084)

Cash flows from noncapital financing activities (109)

Cash flows from investing activities 440

Net increase in cash and cash equivalents 1,716 Cash and cash equivalents at beginning of the year 32,920

Cash and cash equivalents at end of the year 34,636$


September 30, 2010

46

The PFIC is required to make monthly contributions to a Debt Service Fund and maintain a Supplemental Debt Service Fund with a value equivalent to 1 year’s worth of Debt Service. If the Debt Service Fund is insufficient to pay either principal or interest when due, funds are taken from the Supplemental Debt Service Fund and the Board is required to reimburse the Supplemental Debt Service Fund from the D/FW International Airport Board Discretionary Fund within 1 year from the draw. The fiscal year end for the PFIC is September 30 and is separately audited. Copies of the audited financial report may be obtained by writing to the Finance Department, DFW Airport, Post Office Drawer 619428, DFW Airport, Texas 75261-9428.

(12) COMMITMENTS AND CONTINGENCIES

(a) Contingencies PAZ Energy v. Chesapeake Exploration, DFW Airport Board, Cities of Dallas and Fort Worth, LADA Investments, Callejo Energy, First Preston, Forty-Four Energy, ICC Energy, Margolf, SLNJG Investments, and S.B. Dike- The Airport is in a dispute with Chesapeake as to the price at which the gas is sold. Section 4(b) of the lease specifies that the price on which the royalty is based shall never be less than the price actually received by Chesapeake, and also shall never be less than the highest price paid "for the field where produced and run". The disagreement is over the definition of the word "field". We have proposed the possibility of establishing a combination of indices. Chesapeake has rejected it, alleging that “the field” does not encompass the entirety of the Barnett Shale. Also in dispute is the extent to which Chesapeake earned the right to maintain leasehold acreage before it ceased drilling—so called “Retained Tracts”. Chesapeake seeks to draw the lines in a way that retains virtually all the airport. We were working to resolve the disputes when PAZ Energy, one of the minority investors, filed a declaratory judgment action to determine this very question, as well as to determine how many acres were earned by Chesapeake prior to their cessation of drilling activity. The Cities of Dallas and Fort Worth, as the actual lessors, had to be named as defendants, as did the other minority investors. The Cities and the Board are jointly represented by the Shayne Moses, who has been involved with the Chesapeake contract since its inception. He drafted the lease. The Airport Board will pay all costs of defense, as well as any judgments for attorneys fees that might be rendered against the Board or the Cities. The matter was mediated on September 24, 2009 without settlement, so the parties proceeded with discovery. DFW and the Cities filed a Motion for Partial Summary Judgment on the issue of retained tracts, but it was denied. Discovery is proceeding..

(b) Federal Grants

The Airport has received federal grants for specific purposes including Department of Homeland Security (DHS) and Airport Improvement Program (AIP) that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursement to the grantor agency for expenditures disallowed under terms of the grant. In the opinion of management of the Airport, disallowed costs, if any, would not be material.

(c) Personal Injury liability

A number of suits have been filed against the Airport related to accidents on Airport property. The Board is fully insured to the extent of the statutory limit under the tort claim act.

(d) Construction

As of September 30, 2010 the Airport had entered into construction contracts totaling $418.5 million of which $241.5 million is still outstanding.


September 30, 2010

47

(13) SELF-INSURANCE/RISK MANAGEMENT

DFW maintains self-insured liability for employee medical and workers compensation claims. DFW utilizes a third-party company to provide stop loss coverage on individual health claims and a third-party administrator to manage workers compensation claims in accordance with Texas state statutes and limits. DFW accrues the estimated cost of self-insurance liabilities based on annual actuarial reviews. Changes in liabilities in 2010 for all Airport self-insured programs are detailed below (in thousands).

DFW is exposed to various risks of loss related to theft, damage to and destruction of assets and natural disasters for which DFW carries commercial insurance. Specific details regarding deductibles and coverage can be found in the statistical section. Any settlement payments covered by commercial insurance did not exceed coverage in FY 2010.

(14) CONCENTRATION OF CREDIT RISK

DFW’s customers are principally concentrated within the airline industry. DFW periodically evaluates the financial condition of its customers and typically does not require collateral. DFW received approximately $168.8 million (33.7%) of its revenues during fiscal year 2010 from American Airlines (including American Eagle). American Airlines (including American Eagle and Executive Airlines) had 86.1% of passengers in FY 2010 and 78.1% of landed weights in FY 2010.

(15) POLLUTION REMEDIATION

In FY 2009, DFW Airport implemented GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. The Airport has determined that the implementation of GASB 49 had no material effect on prior year financial statements.

The Airport has one area of subsurface land (Central Terminal Area) that is under an agreed-upon order by the Texas Commission for Environmental Quality for the remediation of a jet fuel leak in the underground pipeline in which two terminal areas are affected, Terminal B & C. As of September 30, 2010, the Airport accrued a liability, measured at the current value amount, using the expected cash flows technique, of $1.65 million for the operating and maintenance (O&M) costs related to this underground pipeline. Terminal C area has approximately 4 to 5 years of O&M costs to achieve site remedial goals while Terminal B area has approximately 15 to 20 years to achieve site remedial goals. Once Terminal C is complete, a site re-evaluation will be necessary to determine the O&M cost associated with the remaining years of remediation in Terminal B.

The Airport’s Northwest Cargo Area VCP (Voluntary Clean-up Program), an area of approximately 150 acres, has completed the voluntary investigation activities that include site assessment, site investigation and corrective measures feasibility study and design of a remedial action plan (RAP) for a chlorinated solvent plume and includes small areas of additional jet fuel contamination. It has been determined that the contaminated area covers 22 acres of land located in the Northwest Cargo Area generated from previous tenants. As of September 30, 2010, the Airport accrued a liability, measured at the current value amount, using the expected cash flows technique, of an estimated $10 million for the capital outlay covering the next 4 to 5 years for the mobile

Description 2010 2009

Beginning balance 4,336$ 4,267$ Plus: Current year claims and changes in estimate 20,002 19,105 Less: Payments (20,470) (19,037)Ending balance 3,868 4,336$


September 30, 2010

48

extraction system, mobile remediation system, and underground infrastructure including plumbing, monitor wells, recovery wells, soil mixing and slurry walls. The annual O&M cost is unknown at this time.

The pollution remediation obligation is an estimate and subject to change resulting from price increases and equipment requirements. During FY 2010, there have been no changes to the pollution remediation liability requirements.

(16) SUBSEQUENT EVENT

(a) New Use Agreement

The Controlling Documents define how the Airport manages its financial affairs. Effective October 1, 2010, the Airport operates pursuant to a hybrid agreement which means that the Signatory Airlines agree to pay the terminal rents in an amount that will generate revenues, after the receipt of certain other sources of revenues, intended to equal cost of the terminal cost centers. The Signatory Airlines further agree to pay landing fees to be established pursuant to an allocation formula intended to comply with the rate covenant. The revenues and expenses will be allocated among three cost centers: Airfield Cost Center, Terminal Cost Center and DFW Cost Center. Management then uses this information to prepare the annual schedule of Rates, Fees, and Charges which is the basis for charging the airlines, tenants and other airport users for the Airport services during the year.

(b) Fiscal Year 2011 Debt Issuance

In October 2010, the airport issued $304.4 million of fixed rate joint revenue bonds (Series 2010A). The bonds were issued for the purpose of (1) financing improvements to the airport including the Terminal Renewal and Improvement Program (TRIP) and the Airport Improvement Program of the airport, (2) providing capitalized interest, and (3) paying the cost associated with the issuance of the bonds.

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

Dallas/Fort Worth International Airport Schedule of Funding Progress - Pension

September 30, 2010 (Amounts in Thousands)

(Unaudited)

49

The following presents the funding progress from January 1, 2006 to January 1, 2010:

Unfunded

Actuar ial Actuar ial actuar ial

value accrued accrued asset Annual UAAL

Valuat ion of assets liability ( liability) Funded covered as % of

date (AVA) (AAL) (UAAL) rat io payroll payroll

(2) – (3) (2)/(3) (4)/(6)

(1) (2) (3) (4) (5) (6) (7)

Employee PlanJanuary 1, 2010 261,084$ 348,720$ (87,636)$ 74.9% 77,625$ (112.9%)

January 1, 2009 245,813 329,225 (83,412) 74.7% 77,665 (107.4%)

January 1, 2008 232,884 300,825 (67,941) 77.4% 73,475 (92.5%)

January 1, 2007 201,632 277,147 (75,515) 72.8% 70,832 (106.6%)

January 1, 2006 181,324 252,817 (71,493) 71.7% 67,968 (105.2%)

DPS PlanJanuary 1, 2010 90,216 130,853 (40,637) 68.9% 22,179 (183.2%)

January 1, 2009 85,048 125,564 (40,516) 67.7% 21,388 (189.4%)

January 1, 2008 80,483 116,431 (35,948) 69.1% 20,130 (178.6%)

January 1, 2007 69,915 106,985 (37,070) 65.4% 19,284 (192.2%)

January 1, 2006 61,045 100,054 (39,009) 61.0% 18,722 (208.4%)

Dallas/Fort Worth International Airport Schedule of Funding Progress - OPEB

September 30, 2010 (Amounts in Thousands)

(Unaudited)

50

The following presents the funding progress from January 1, 2007 to January 1, 2010:

UnfundedActuar ial Actuar ial actuar ial

value accrued accrued asset Annual UAALValuat ion of assets liability ( liability) Funded covered as % of

date (AVA) (AAL) (UAAL) rat io payroll payroll(2) – (3) (2)/(3) (4)/(6)

(1) (2) (3) (4) (5) (6) (7)

January 1, 2010 8,337$ 38,058$ (29,721)$ 21.9% 99,804$ (29.8%)

January 1, 2009 6,343 32,572 (26,229) 19.5% 99,053 (26.5%)

January 1, 2008 5,403 32,151 (26,748) 16.8% 93,605 (28.6%)

January 1, 2007 - 29,243 (29,243) 0.0% 90,116 (32.5%)

SUPPLEMENTARY INFORMATION

(Unaudited)

Dallas/Fort Forth International Airport Combining Statements of Fiduciary Net Assets

As of December 31, 2009 (Amounts in Thousands)

51

Employee DPS OPEB

Plan Plan Plan 2009

AssetsCash 83$ 29$ -$ 112$

Investments at fair valueU.S government securities 31,875 11,001 - 42,876 Common stocks 132,895 45,868 - 178,763 Bonds 45,264 15,623 - 60,887 Foreign stocks 552 191 - 743 Money market funds 22,099 7,627 8,661 38,387 Real estate investment funds 1,294 447 - 1,741 Limited Partnership 532 183 - 715

Total Investments 234,511 80,939 8,661 324,111

Total cash and investments, at fair value 234,594 80,968 8,661 324,223

Employer contribution - - - - Due from broker 264 91 - 355 Accrued interest and dividends 899 310 11 1,220

Total assets 235,757 81,369 8,672 325,798

LiabilitiesDue to broker for securities purchased 214 74 - 288 Due to employee plan - - - - Claims/premiums payable - - 331 331 Accrued transaction fees 11 4 4 19 Accrued management fees 185 64 - 249

Total retirement plan liabilities 410 142 335 887

Net AssetsHeld in trust for pension benefits 235,347$ 81,227$ 8,337$ 324,911$

Fiduciary Activities

Dallas/Fort Worth International Airport Combining Statements Of Changes in Fiduciary Net Assets

For The Years Ended December 31, 2009 (Amounts in Thousands)

52

Employee DPS OPEB

Plan Plan Plan 2009

Additions:Investment income 5,914$ 2,056$ 747$ 8,717$ Net appreciation in fair value of investment on funds 32,254 11,243 - 43,497 Contributions from employee - 1,518 - 1,518 Contributions from employer 22,355 6,354 2,742 31,451

Total additions 60,523 21,171 3,489 85,183

Deductions:Pension benefit payments 10,371 3,859 - 14,230 Claims/premiums expenses payments - - 1,486 1,486 Administrative fees 1,151 400 9 1,560 Investment fees 40 14 - 54

Total deductions 11,562 4,273 1,495 17,330

Change in net assets 48,961 16,898 1,994 67,853 Plan net assets, beginning of year 186,386 64,329 6,343 257,058

Plan net assets, end of year 235,347$ 81,227$ 8,337$ 324,911$

Fiduciary Activities

Required Supplemental Information

Rental Car Facility Bonds

Series 1998

Series 1999

Rental Car Facility

Facility Improvement Corporation - Series 1998 & 1999

Transaction Days

Month FY2010 FY2009 FY2008 FY2007 FY2006

October 382,940 376,893 395,000 316,372 387,665 November 340,162 456,573 275,794 325,880 454,878 December 298,126 334,852 578,908 508,839 428,128 January 305,793 338,701 371,345 238,263 281,126 February 321,081 301,465 360,467 230,467 356,244 March 351,245 303,795 404,725 476,078 389,712 April 391,459 338,733 310,732 593,002 550,623 May 388,021 355,228 524,613 617,954 423,861 June 358,747 349,700 481,880 382,187 353,324 July 361,173 352,338 395,000 509,409 545,306 August 357,488 343,246 401,390 498,688 379,517 September 371,205 275,988 441,313 405,164 407,149

Total 4,227,440 4,127,512 4,941,167 5,102,303 4,957,533

Table Seven

53

Rental Car Facility


Facility Charge Revenue

Month FY2010 FY2009 FY2008 FY2007 FY2006

October 1,388,719 1,507,572 1,580,000 1,265,488 1,550,660 November 1,446,169 1,826,290 1,103,176 1,303,520 1,819,512 December 1,360,648 1,339,408 2,315,632 2,035,356 1,712,512 January 1,249,239 1,354,804 1,485,380 953,052 1,124,504 February 1,257,136 1,205,860 1,441,868 921,868 1,424,976 March 1,212,708 1,215,180 1,618,900 1,904,312 1,558,848 April 1,463,236 1,354,932 1,242,928 2,372,008 2,202,492 May 1,579,196 1,420,912 2,098,452 2,471,814 1,695,444 June 1,140,117 1,398,800 1,927,520 1,528,748 1,413,296 July 1,846,956 1,409,352 1,580,000 2,037,636 2,181,224 August 1,444,692 1,372,984 1,605,560 1,994,752 1,518,069 September 1,323,416 1,103,952 1,765,252 1,620,656 1,628,596

Total 16,712,232 16,510,046 19,764,668 20,409,210 19,830,133

Table Eight

54

Fund FY2010Revenue Fund - Administrative Costs Fund 100,000 Debt Service Fund '98 8,326,385 Debt Service Fund '99 305,000 Debt Service Coverage Fund 3,672,411 Surplus Reserve Account 1,468,965 Surplus Supplemental Debt Service 7,344,823 Surplus Residual Fund 20,954,501

Total 42,172,085

Rental Car Facility


Fund balances as at September 30, 2010

Table Nine

55

Required Supplementary Information

Hotel Revenue Bonds

Series 2001

Fund FY2010Revenue Fund 1,860,436 Operating Fund 972,729 Owners Operating Fund 619,173 Debt Service Fund 1,127,545 Supplemental Debt Service Fund 4,475,638 Debt Service Reserve Fund 6,843,260 Subordinate Mgmt. Fee 794 Operating Reserve Fund 4,247,091 FF&E Fund 1,371,078 Capital Fund 2,421,380 Insurance Fund 200,375 Redemption & Improvement Fund 16,715,235

Total 40,854,734

Table TenGrand Hyatt Hotel

Public Facility Improvement Corporation - Series 2001

Fund balances as at September 30, 2010

56

Independent Auditor's Report,

Management's Discussion and Analysis

and

Basic Financial Statements

Public Facility Improvement Corporation

58

Management’s Discussion and Analysis

The following discussion and analysis of the financial performance and activity of the Dallas/Fort Worth International Airport Public Facility Improvement Corporation (the “PFIC”) provides an introduction and understanding of the PFIC and an overview of the Financial Statements for the fiscal year ended September 30, 2010 and September 30, 2009. The PFIC is a business-type activity and as such the PFIC’s Financial Statements consist of Management’s Discussion and Analysis (MD&A); Statement of Net Assets; Statement of Revenues, Expenses, and Changes in Net Assets; Statement of Cash Flows; and Notes to the Financial Statements. The MD&A has been prepared by management and should be read in conjunction with the Financial Statements and the accompanying notes.

PFIC’s Business Structure

The PFIC is a duly incorporated public instrument in the State of Texas, created on December 14, 2000 by Dallas/Fort Worth International Airport’s (“DFW” or the “Airport”) owner cities. The PFIC was created pursuant to Chapter 22 of the Texas Transportation Code for the purpose of financing, equipping and operating one or more public facilities within the boundaries of DFW. The fiscal year end for the PFIC is September 30th.

To date only one such facility has been approved and completed, the DFW Grand Hyatt (the “Hotel”) which opened July 1, 2005. The Hotel was constructed, equipped, and furnished with proceeds from the Series 2001 Airport Hotel Revenue Bonds (the ”Bonds”), issued in the amount of $75 million. These bonds plus a contribution of $8.1 million from the Airport Discretionary account at closing provided payments of interest until March 1, 2006, reserve funds, working capital, and the cost of issuance. In addition, DFW has provided additional construction funds of $7.2 million from its discretionary account.

The Hotel was constructed by DFW based on a Development Agreement entered into between DFW and the PFIC. Upon completion of the Hotel, DFW leased the Hotel to the PFIC pursuant to the Hotel Lease Agreement. The PFIC presents the asset and associated debt of the hotel in its financials as a capital asset and long term debt.

The Hotel has 298 rooms and is situated in DFW’s International Terminal D. The Hotel is managed by the Hyatt Hotel Corporation.

Condensed Financial Information

The following summarizes the PFIC financial information (in thousands) as of and for the fiscal years ended 2010 and 2009. Operating revenues increased $0.4 million from $25.3 million in FY 2009 to $25.7 million in FY2010 primarily due to an increase in food and beverage revenue. In FY 2009, operating revenue decreased $2.9 million from $28.2 million in FY 2008 to $25.3 million in FY 2009 primarily due to lower room revenues driven by a down turn in the economy. Operating expenses increase $1.4 million from $19.8 million in FY 2009 to $21.1 million in FY 2010 due to an increase in room expenses. In FY 2009, operating expenses remained flat as compared to FY 2008, from $19.1 million in FY 2008 to $19.8 million in FY 2009. The change in net assets for 2010 represents an

59

increase in operating revenues of $0.4 million (1.6%) and an increase in operating and non-operating expenses of $1.3 million (5.5%).

Assets/Liabilities

Capital assets are primarily the hotel and associated assets. Other assets consist of primarily cash and investments related to the PFIC. Long term liabilities consist of the outstanding bond to pay for the construction of the Grand Hyatt and interest that was borrowed.

Debt Service

The PFIC is required to make monthly contributions to a debt service fund and maintain a supplemental debt service fund with a value equivalent to a year’s worth of debt service. If the debt service fund is insufficient to pay either principal or interest when due, funds are taken from the supplemental debt service fund and DFW is required to reimburse the supplemental debt service fund from the DFW discretionary account within 1 year from the draw. See Note 6 – Debt.

Request for Information

This financial report is designed to provide a general overview of the PFIC. Questions concerning any of the information presented in this report or requests for additional information should be addressed to the Office of the Executive Vice President and Chief Financial Officer, P.O. Box 619428, DFW Airport, Texas 75261-9428.

2010 2009 2008Operating revenues 25,692$ 25,290$ 28,234$ Operating expenses (21,122) (19,760) (19,125) Non-operating expenses (3,670) (3,733) (3,921) Change in net assets 900 1,797 5,188

Net assets at the beginning of the year 26,489 24,692 19,504 Net assets at the end of the year 27,389$ 26,489$ 24,692$

Capital assets 57,236$ 58,089$ 59,601$ Other assets 44,740 42,944 40,353 Total assets 101,976 101,033 99,954

Long term liabilities (70,722) (71,349) (72,050) Other liabilities (3,865) (3,195) (3,212) Total liabilities (74,587) (74,544) (75,262)

Net Assets 27,389$ 26,489$ 24,692$

Dallas/Fort Worth International Airport Public Facility Improvement Corporation

Statement of Net Assets As of September 30, 2010 (Amounts in Thousands)

60

The accompanying notes are an integral part of these financial statements.

2010

Current assetsUnrestricted cash and cash equivalents 16,715$ Restricted cash and cash equivalents 2,157 Current restricted assets 1,707

Total current assets 20,579

Long-term assetsRestricted cash and cash equivalents 15,763 Restricted Investments 6,843

Capital assetsBuildings and components 57,997 Furniture, fixtures and equipment 9,975 Less accumulated depreciation (12,224) Construction-in-progress 1,488

Total capital assets 57,236

Other assets, net of accumulated amortization of $1,026 1,555

Total assets 101,976

Current liabilitiesCurrent liabilities payable from restricted assets 3,125$ Current portion of long term debt 740

Total current liabilities 3,865

Long-term liabilitiesCapital lease obligations 52 Debt 70,670

Total long-term liabilities 70,722

Total liabilities 74,587

Net assetsInvested in capital assets, net of related debt (5,079) Restricted for: Operations 7,754 Capital 3,792 Debt service 4,207 Total restricted: 15,753

Unrestricted 16,715 Net assets 27,389$

Assets

Liabilities and Net Assets


Statement of Revenues, Expenses and Changes in Net Assets For the Year Ended September 30, 2010


61


2010Operating revenues

Rooms 13,918$ Food and beverage 11,235 Telecommunications and other 539

Total operating revenues 25,692

Operating expensesRooms 4,196 Food and beverage 6,553 Telecommunications and other 266 Administrative and general expenses 3,151 Sales and marketing 1,644 Utilities 684 Repairs and maintenance 886 Other 133 Depreciation and amortization 2,405

Sub-total operating expenses before management fees 19,918 Management fees 1,204

Total operating expenses 21,122

Operating income 4,570

Non-operating revenues and (expenses)Interest income 440 Interest expense (4,001) Other, net (109)

Total non-operating revenues and (expenses) (3,670)

Change in net assets 900

Net assets at beginning of year 26,489

Net assets at end of year 27,389$


Statement of Cash Flows For The Year Ended September 30, 2010


62


2010

Cash flows from operating activitiesCash received from customers 25,521$ Cash paid to outside vendors and employees (18,052)

Net cash provided by operating activities 7,469

Cash flows from capital and related financing activitiesAcquisition and construction of capital assets (1,500)Principal paid (750)Cash paid for interest (3,834)

Net cash used in capital and related financing activities (6,084)

Cash flows from noncapital financing activitiesOther nonoperating revenues 81 Other nonoperating expenses (190)

Net cash used in noncapital financing activities (109)

Cash flows from investing activitiesInterest received on time deposits and investments 440

Net cash provided by investing activites 440

Net increase in cash and cash equivalents 1,715

Cash and cash equivalents at beginning of year 32,920

Cash and cash equivalents at end of year 34,636$

Unrestricted cash and cash equivalents 16,715 Restricted cash and cash equivalents 17,921

Cash and cash equivalents at end of year 34,636$

Supplemental disclosure of cash flow informationReconciliation of operating income to net cash provided by Operating activities: Operating income 4,570$ Adjustment to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 2,405 Changes in assets and liabilities: Accounts receivable and other assets (194) Accounts payable and other liabilities 688

Net cash provided by operating activities 7,469$

Supplemental disclosure of non-cash activitiesAssets acquired under capital lease 52 Amortization of Bond Premium/Discount 67 Amortization of Bond Issuance Expense 107


Notes to the Financial Statements September 30, 2010


63

(1) ORGANIZATION AND DESCRIPTION OF BUSINESS

The Dallas/Fort Worth International Airport Public Facility Improvement Corporation (the “PFIC”) is a duly incorporated public instrument in the State of Texas, created on December 14, 2000 by Dallas/Fort Worth International Airport’s (“DFW” or the “Airport”) owner cities. PFIC was created pursuant to Chapter 22 of the Texas Transportation Code for the purpose of financing, equipping and operating one or more public facilities within the boundaries of DFW. PFIC is a blended component unit of Dallas Fort Worth International Airport.

To date only one such facility has been approved and completed, the DFW Grand Hyatt (the “Hotel”) which opened July 1, 2005. The Hotel was constructed, equipped, and furnished with proceeds from the Series 2001 Airport Hotel Revenue Bonds (the ”Bonds”), issued in the amount of $75 million. These bonds plus a contribution of $8.1 million from the Airport Discretionary account at closing provided payments of interest until March 1, 2006, reserve funds, working capital, and the cost of issuance. In addition, DFW has provided additional construction funds of $7.2 million from its discretionary account.

The Hotel was constructed by DFW based on a Development Agreement entered into between DFW and the PFIC. Upon completion of the Hotel, DFW leased the Hotel to PFIC pursuant to the Hotel Lease Agreement. The PFIC presents the asset and associated debt of the hotel in its financials as a capital asset and long term debt.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The financial statements of PFIC use the economic resources measurement focus and are presented on the accrual basis of accounting. Revenues are recorded when earned. The PFIC’s operating revenues are derived from lodging, food and beverage, telecommunications, rentals, and other services. Expenses are recognized when incurred.

Basis of Presentation

PFIC applies Government Accounting Standards Board (“GASB”) pronouncements, as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements.

PFIC distinguishes between operating revenues and non-operating revenues based on the nature of revenues and expenses. Revenues and expenses relating to lodging, food and beverage, telecommunications, rentals and other services are considered operating. These revenues result from exchange transactions. Non-operating revenues, such as interest income, result from non-exchange transactions or ancillary activities. Non-operating expenses consist of interest expense on revenue bonds and funding from other sources.




64

Accounts Receivable

Receivables are stated net of allowance for doubtful accounts. The allowance for uncollectible accounts is based on a 12 month rolling average with 3% to 5% of the average balance in the allowance account. A customer’s balance is deemed uncollectible after all efforts to collect the balance has been exhausted or a notice is received concerning bankruptcy.

Interest Income

Interest Income is recorded as earned based on prevailing interest rates on deposits and investments.

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 certain reported amounts and disclosures. Actual results could differ from those estimates.

Net Assets

Net assets reported as invested in capital assets, net of related debt, are comprised of the following amounts at September 30 (in thousands):

Restricted Assets and Liabilities

Restricted assets consist of cash and cash equivalents, investments, accounts receivable, inventory, and other resources that are restricted legally to certain uses. Capital program funds (including construction in progress) are restricted to pay the costs of certain capital projects as defined in the bond agreement. Debt service funds are restricted to make payments for principal, interest, sinking fund, and coverage requirements as required by the specific bond covenants.

Restricted liabilities are primarily accounts payable, accrued interest and the current portion of long-term debt associated with the purchase and construction of the capital projects funded by the restricted assets. Under the terms of the 2001 Trust Indenture, which remains in effect until all bonds relating to PFIC are retired, all funds are restricted to the operating and financing of the Hotel. Within the PFIC funds, certain funds are unrestricted. The Redemption and Improvement

2010

Invested in capital assets, net of related debt: Net capital assets 57,236$ Less: Capital related long-term debt payable (62,315)

(5,079)$




65

Fund is considered unrestricted as those funds are not required to be used for any specific purpose and could, at the discretion of the PFIC Board, be used for any lawful purpose relating to the Hotel. PFIC bond documents require DFW to maintain certain cash reserves including: debt, debt service, capital replacement, insurance, and operating reserves (restricted assets); and then to place all excess funds into a Redemption and Improvement fund (unrestricted assets).

Cash and Cash Equivalents

For purposes of the accompanying statements of cash flows, PFIC considers cash on hand, money market mutual funds and investments with original maturities of three months or less to be cash equivalents. As of September 30, 2010, the PFIC had $852,537 in demand deposits of which $602,537 was uninsured and uncollateralized.

Investments

PFIC investments are governed by trust indentures between DFW and the trustees which define “qualified investments” as obligations of the U.S. Treasury and U.S. Agencies, municipal securities, mortgage-backed and other asset-backed securities, commercial paper, repurchase agreements,

Total Operating Capital Debt

AssetsCurrent assets

Cash and cash equivalents 2,157$ 709$ -$ 1,448$ Accounts receivable, net of allowance for doubtful accounts of $23 1,479 1,479 - - Inventories and operating equipment 141 141 - - Other assets 87 1 - 86

Total current restricted assets 3,865 2,331 - 1,534 Non-current assets

Cash and cash equivalents 15,763 7,762 3,792 4,208 Investments 6,843 - - 6,843 Deferred Financing Charges 1,555 45 - 1,511

Total current and non-current restricted assets 28,026$ 10,138$ 3,792$ 14,096$

LiabilitiesCurrent liabilities payable from restricted assets

Accounts payable 1,020$ 1,020$ -$ -$ Accrued expenses and other 670 670 - - Payroll accrual 641 641 - - Accrued interest on revenue bonds 794 - - 794 Current portion of long term debt 740 - - 740

Total current restricted liabilities 3,865 2,331 - 1,534 Non-current liabilities

Capital lease obligations 52 52 - - Non-capital long term debt 8,355 - - 8,355

Total current and noncurrent restricted liabilities 12,273 2,384 - 9,889 Net assets, restricted for hotel operations, capital and debt service 15,753$ 7,754$ 3,792$ 4,207$

Description2010




66

nationally recognized institutional mutual funds and certain other securities. All of PFIC investments at September 30, 2010 were “qualified investments”. $34.6 million of PFIC funds were placed in money market mutual funds except the debt service reserve fund of $6.8 million which is invested in a repurchase agreement. The agreement is issued by JP Morgan Chase maturing in May 2031 with fixed semi-annual interest payments and is not rated by the nationally recognized statistical rating organizations. The agreement is collateralized at 102% and carried at face value. The Money Market Funds are regulated by the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940. These funds are pooled monies from investors to purchase short-term investments such as Treasury bills, certificates of deposit, and short-term bonds (known as commercial paper) issued by large corporations that meet certain standards set forth by the SEC for credit quality, liquidity, and diversification. The risk rating for the money market fund invested in by PFIC are AAAm by Standard & Poor’s, Aaa by Moody’s, and AAAmmf by Fitch.

Inventories

Inventories consist of food and beverage and are carried at lower of cost or market on a first-in, first-out basis.

Capital Assets

Capital Assets consist of property and equipment, which are stated at lower of cost or realizable value. Depreciation is recorded using the straight-line method using the following estimated useful lives. PFIC’s capitalization threshold for real property is $50 and $15 for personal property.

Estimated Asset Classification useful life Building and Components 20-45 years Machinery and equipment 3-10 years Furniture and Fixtures 3-10 years

Repairs and maintenance are charged to operations as incurred unless they have the effect of improving or extending the life of the asset, in which case they are capitalized as part of the cost of the asset. Interest was capitalized during construction of the hotel before the date of beneficial occupancy (asset completion). There has been no capitalized interest recorded since 2005.

Other Assets

Other assets consist of prepaid expenses and deferred loan costs relating to the bonds. The deferred costs are amortized over the loan period using the effective interest method.

Revenue Recognition

Revenues are recognized at the time services are rendered. Revenues include fees for lodging, food and beverage, telecommunications, rentals and other services.




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Advertising

The costs of advertising, promotion and marketing programs are charged to operations in the period incurred. The Hotel recognized advertising expense of approximately $171 for fiscal year 2010, which is included in sales and marketing expenses in the accompanying financial statements.

(3) CAPITAL ASSETS

Depreciation expense for the year ended September 30, 2010 was $2,405. Total Capital Assets is $57.2 million.

(4) CAPITAL LEASE OBLIGATIONS The Hotel leases two automobiles under capital leases. The following is a summary of the leased

assets at September 30:

Balance September

30, 2009 AdditionsTransfers and

reclassifications Retirements

Balance September

30, 2010

Capital assets not being depreciated:Construction in progress -$ 1,483$ 5$ -$ 1,488$

Capital assets subject to depreciation:Buildings and components 57,992 - 5 - 57,997 Furniture, fixtures and equipment 9,887 - (10) - 9,877 Transportation equipment 110 67 - (80) 97

Total depreciable capital assets 67,989 67 (5) (80) 67,971$

Less: Accumulated depreciation:Buildings and components 5,504 1,342 - - 6,846 Furniture, fixtures and equipment 4,289 1,044 - - 5,333 Transportation equipment 106 19 - (80) 45

Total accumulated depreciation 9,899 2,405 - (80) 12,224 Net capital assets 58,090$ (855)$ -$ -$ 57,236$

2010

Transportation equipment 97$ Less: accumulated depreciation (45) Total lease obligations 52$




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Aggregate future payments on capital lease obligations at September 30 are summarized below:

(5) OTHER ASSETS

Other assets primarily consist of prepaid expenses and deferred charges relating to the cost of issuance of the Bonds in the amount of $1,555, net of accumulated amortization of $1,026 in fiscal year 2010.

(6) DEBT

In April 2001, PFIC issued $75 million of Airport Hotel Revenue Bonds, Series 2001 (the “Revenue Bonds”) to provide funding for the construction of the Hotel. The Revenue Bonds are in denominations of $5, and bear interest, payable semiannually on each January 15th and July 15th, beginning July 15, 2001. Principal payments began in fiscal year 2007 with increasing interest rates from 4.1% in fiscal year 2007 to 5.2% at maturity in fiscal year 2031. Accrued interest associated with the Revenue Bonds was $794 at September 30, 2010. Interest expense (including amortized bond costs) was $4,001 for fiscal year 2010. A summary of bond indebtedness changes during the year ended September 30, 2010 follows (in thousands):

Year Principal Interest2011 20$ 1$ 2012 20 - 2013 7 - 2014 5 -

52$ 1$ Total future principal and interest payments

Series: Maturity: Interest RateBeginning Balance Additions Reductions

Ending Balance

Amounts due within one year

Public Facility Improvement Corporat ion 2001: Due 1/09-7/31: 4.3%-5.5% 73,105$ -$ 750$ 72,355$ 740$ Plus (Less) unamortized discount/premium, net (1,011) - (66) (945) - Total Public Facility Improvement Corporation 72,094$ -$ 684$ 71,410 740$




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Annual debt service requirements to maturity are as follows (in thousands):

Under the terms of the trust indenture, the PFIC is required to make monthly contributions from the revenues of the Hotel to a debt service fund. Additionally, a supplemental debt service fund is maintained with a value equivalent to the subsequent year’s worth of debt service. If the debt service fund is insufficient to pay either principal or interest when due, funds are taken from the supplemental debt service fund and DFW is required to reimburse the supplemental debt service fund from the DFW discretionary account within one year from the draw. In accordance with the Airport Hotel Revenue Bonds, Series 2001, PFIC pledges net revenues of the hotel to cover 100% of the debt requirements. Total principal and interest remaining to be paid on the bond is $124.8 million with annual requirements ranging from $4.5 million to $6.7 million. As of September 30, 2010, the debt service fund has balances sufficient to pay current principal and interest.

(7) EMPLOYEE BENEFIT PLANS

PFIC does not have any employees or employee benefits. All employees working at the Hotel are employed by Hyatt Hotel Corporation and are included in operations on these financial statements. Hyatt Hotel Corporation provides health care, disability, retirement and other social benefits to its employees.

(8) COMMITMENTS AND CONTINGENCIES

Operating Leases

The Hotel utilizes certain equipment under operating lease agreements expiring through 2013. Rent expense was approximately $113 during fiscal year 2010.

Principal InterestFiscal Year Amount Amount

2011 740$ 3,787$ 2012 925 3,745 2013 910 3,699 2014 1,100 3,646 2015 1,310 3,580

2016-2020 11,755 16,406 2021-2025 21,115 11,925 2026-2030 27,995 5,479

2031-thereafter 6,505 169 Total future principal and interest payments 72,355$ 52,437$ Less unamortized discount (945)

71,410$




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Future minimum lease payments relating to operating leases as of September 30, 2010 are as follows:

Litigation

In the ordinary course of business, PFIC may become involved in various legal proceedings and claims. After consultation with legal counsel, the management of PFIC believes that the outcome of these matters will not materially affect the financial position or cash flows of PFIC.

Construction

On September 2, 2010 the Airport Board approved a $13 million dollar project for the first renovation of the Grand Hyatt Hotel. This renovation is expected to begin in the summer of FY 2011. No contractual commitments had been made at fiscal year end.

(9) MANAGEMENT FEES

The PFIC and Hyatt Hotel Corporation entered into a Hotel Management Agreement whereby Hyatt Hotel Corporation receives a fixed fee for the management of the Hotel on behalf of the PFIC. General accounting and centralized reservations are provided by Hyatt Hotel Corporation to the Hotel. In addition, an affiliate of Hyatt Hotel Corporation provides liquor to the Hotel. Management fees were $1,071 for fiscal year 2010. The management fee is split between the priority fee of 70% paid from hotel operations and the subordinate fee of 30% paid from funds held by the trustee. The subordinate fee is subject to the availability of funds. Any unpaid subordinate fee is accrued, along with interest, until funds are available. In addition, the PFIC entered into an Asset Management Agreement with Woodbine Corporation, whereby Woodbine Corporation receives a fixed fee to provide asset management services for the Hotel. The asset management fees amounted to approximately $133 for fiscal year 2010. The current agreement expires July 2015.

Future management fees for Hyatt Hotel Corporation and Woodbine Corporation as of September 30, 2010, are as follows:

Year Payment2011 85$ 2012 81 2013 51

Total minimum lease payments 217$

Fiscal Year Hyatt Woodbine2011 1,059$ 132$ 2012 1,137 142 2013 1,221 153 2014 1,287 161 2015 987 123




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(10) RELATED PARTY TRANSACTIONS

PFIC/DFW Grand Hyatt

DFW provided general airport services related to the Department of Public Safety, Fire Department, HVAC, water, and trash, common area maintenance for the elevators and escalators and employee parking totaling $133 for the fiscal year 2010.

DFW Grand Hyatt/Other Parties

In addition to management fees earned by Hyatt, the Hotel incurred charges for services, programs, and allocated costs from Hyatt and certain of its subsidiaries and affiliates for the fiscal years ended September 30, 2010 as follows:

Additionally, the Hotel reimburses Hyatt for salary, related benefits and employment costs of Hyatt employees who work for the hotel. Hyatt also provides an aggregate of twelve complimentary rooms per year (on a space available basis) to employees who have completed one year of employment with Hyatt or any Hyatt hotel. The maximum number of complimentary room nights per employee in any one hotel is three nights per year. Each Hyatt hotel must generally reserve 1% of its room inventory for employee complimentary rooms. Furthermore, Hyatt and its affiliates directly or indirectly own or have interests in certain Hyatt hotels. Such Hyatt hotels are allocated costs on the same basis as any other Hyatt hotel.

At September 30, 2010, amounts included in liabilities related to the above transactions were $152.

The following supplemental disclosures describe additional transactions, of which Hyatt is aware, with other entities, although not considered affiliates, in which Hyatt or its affiliates hold a minority, non-controlling interest:

Avendra LLC (“Avendra”), a purchasing company in which an affiliate of Hyatt holds a minority, non-controlling interest, provides purchasing services to Hyatt Hotels for certain food, non-alcoholic beverage, operating equipment and supplies. In addition, Avendra reported that it earned an

2010Chain Allocation 309$ Coordinated marketing services 78 Gold Passport program 211 Employees' benefit plans 1,226 Insurance 343 Data processing services 136 Other 348




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estimated $57 in 2010, in commissions directly from manufacturers, distributors and other vendors related to purchases for the Hotel. Pursuant to Hyatt’s purchasing services agreement with Avendra, the aggregate amount of purchasing fees paid by the Hotel and commissions received directly by Avendra in excess of certain percentages of annual purchasing volume, if any, will be credited to Hyatt. Hyatt has advised Avendra to remit all excess amounts, if any, directly to the Hotel, and accordingly, the Hotel received $33 in 2010, respectively, from Avendra related purchases.

(11) INSURANCE

Insurance currently in place for the PFIC is as follows:

(12) REPLACEMENT FUNDS Furniture, Fixture and Equipment Fund

The trust indenture requires that a fund for replacement of and additions to furnishings and equipment be established (FF&E Fund). An account is maintained for this requirement and held by the bond trustee. The fund receives, if available after the proceeding required distributions have been made, 4% beginning July 2008 and 5% beginning July 2010. The balance at September 30, 2010 was $1,371. The deposit made was $1,107 for FY 2010 and distribution was $1,243 for FY 2010.

Capital Fund

The trust indenture requires that a fund for replacement of and additions to any capital items be established. An account is maintained for this requirement and held by the bond trustee. The fund receives, if available after the proceeding required distributions have been made, 2% of cash collected. The balance at September 30, 2010 was $2,421.

Coverage type Aggregate Limits

Property $2 billion replacement valueBusiness interruption $500 millionCommercial general liabili $35 million aggregatePublic liability (With excess) $375 million aggregateAuto liability $1 millionFidelity bond $5 millionD&O $5 million

SUPPLEMENTARY INFORMATION

(Unaudited)


Combining Statement of Net Assets September 30, 2010 (Amounts in Thousands)

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AssetsGrand Hyatt PFIC Combined

Current assetsUnrestricted cash and cash equivalents -$ 16,715$ 16,715$

Current restricted assetsCash, cash equivalents, and investments 496 1,661 2,157Accounts receivable, less allowance for doubtful accounts of $22 1,479 - 1,479Food and beverage inventories 69 - 69Other 131 28 159 Total current assets 2,175 18,404 20,579

Long-term assetsRestricted cash, and cash equivalents 170 15,593 15,763Restricted investements - 6,843 6,843

Capital assetsBuildings and components - 57,997 57,997Furniture and fixtures - 9,975 9,975Less accumulated depreciation - (12,224) (12,224)Construction-in-progress - 1,488 1,488 Total capital assets - 57,236 57,236

Other assets, net of accumulated amortization of $1,026 - 1,555 1,555 Total assets 2,345$ 99,631$ 101,976$

LiabilitiesCurrent restricted liabilities

Accounts payable 700$ -$ 700$ Other payables 320 - 320Accrued expenses (29) 950 921Advance deposits 322 - 322Accrued taxes 221 - 221Accrued salaries & wages 641 - 641Current portion of long term debt payable - 740 740 Total current restricted liabilities 2,175 1,690 3,865

Long-term liabilitiesNon current restricted liabilities - 52 52Debt - 70,670 70,670 Total long-term liabilities - 70,722 70,722

Total liabilities 2,175 72,412 74,587

Net assets 170$ 27,219$ 27,389$


Combining Statement of Revenues, Expenses and Changes in Net Assets September 30, 2010 (Amounts in Thousands)

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Grand Hyatt PFIC CombinedOperating revenues

Rooms 13,918$ -$ 13,918$ Food and beverage 11,235 - 11,235Telecommunications and other 219 - 219 Other 320 - 320 Total operating revenues 25,692 - 25,692

Operating ExpensesRooms 4,196 - 4,196Food and beverage 6,553 - 6,553Telecommunications and other 266 - 266Administrative and general expenses 2,393 758 3,151Sales and marketing 1,644 - 1,644Utilities 684 - 684Repairs and maintenance 886 - 886Other 317 (184) 133Depreciation and amortization - 2,405 2,405 Sub-total operating expenses before management fees 16,939 2,979 19,918Management fees 750 454 1,204 Total operating expenses 17,689 3,433 21,122

Operating income 8,003 (3,433) 4,570

Non-operating revenues (expenses)Interest income - 440 440Interest expense - (4,001) (4,001)Other - (109) (109) Total non-operating revenues (expenses) - (3,670) (3,670)

Changes in net assets 8,003 (7,103) 900

Transfer to PFIC (7,915) 7,915 -

Net assets at beginning of year 82 26,407 26,489

Net assets at end of year 170$ 27,219$ 27,389$

Annual Business Plan

Grand Hyatt Hotel

Hyatt HotelsDFW Grand

Summary Operating Statement - FiscalLocal

Mar 18, 2011 10:33 AM/Planning Hotels/HHC/Fiscal/12 Month\12 Month Summary Op Stmt FiscalPage 1 of 1

FY10 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11

YearTotal YearTotal YearTotal P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12

Act-Fcst Budget Act-Fcst Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget

Rooms Available 108,770 108,770 108,770 9,238 8,940 9,238 9,238 8,344 9,238 8,940 9,238 8,940 9,238 9,238 8,940

Rooms Sold 81,362 73,247 74,359 7,081 6,024 6,116 7,462 7,418 7,189 6,629 5,911 4,427 3,662 4,951 6,377

Occupancy % excluding Comps 74.8 67.3 68.4 76.7 67.4 66.2 80.8 88.9 77.8 74.1 64.0 49.5 39.6 53.6 71.3

Average Rate excluding Comps 171.06 183.18 191.13 174.36 165.95 163.52 177.51 212.09 188.19 175.04 193.05 188.09 190.79 183.23 186.90

RevPAR 127.96 123.35 130.67 133.65 111.82 108.26 143.38 188.56 146.45 129.80 123.52 93.14 75.63 98.20 133.32

Revenue

Rooms 13,918,021 13,417,040 14,212,513 1,234,625 999,671 1,000,076 1,324,544 1,573,313 1,352,905 1,160,368 1,141,123 832,692 698,689 907,174 1,191,859

Food & Beverage 11,235,139 10,445,806 10,709,581 1,044,760 865,023 739,350 1,207,816 1,188,573 1,101,685 924,888 883,053 519,321 369,132 645,989 956,215

Total Other Operating Departments 218,526 175,884 230,393 17,349 14,912 14,304 18,125 18,319 17,308 15,947 14,032 10,513 7,991 11,699 15,383

Rentals & Other Income 320,026 287,639 287,569 23,091 19,249 19,540 24,256 74,113 23,371 21,557 19,231 14,423 11,945 16,121 20,741

Total Revenue 25,691,712 24,326,369 25,440,056 2,319,825 1,898,856 1,773,271 2,574,740 2,854,318 2,495,270 2,122,760 2,057,439 1,376,950 1,087,757 1,580,984 2,184,199

Departmental Expenses

Rooms 4,195,748 3,752,681 3,644,115 334,862 301,033 312,572 365,505 359,886 350,436 328,429 306,345 260,253 231,597 278,226 323,537

Food & Beverage 6,553,001 6,771,217 6,613,177 623,889 556,687 542,126 688,127 669,769 630,249 542,855 574,271 462,023 399,372 487,356 594,492

Total Other Operating Departments 265,983 289,796 301,717 25,144 23,028 24,965 25,269 23,194 26,272 24,128 23,195 24,202 22,613 22,237 25,549

Total Departmental Expenses 11,014,732 10,813,695 10,559,009 983,895 880,748 879,662 1,078,900 1,052,850 1,006,958 895,412 903,811 746,478 653,582 787,819 943,578

Departmental Income (Loss) 14,676,979 13,512,674 14,881,047 1,335,930 1,018,107 893,608 1,495,840 1,801,469 1,488,312 1,227,348 1,153,628 630,472 434,174 793,165 1,240,621

Undistributed Operating Expenses

Administrative & General 2,394,554 2,574,531 2,427,919 210,485 202,344 223,634 229,928 229,077 232,888 218,466 217,370 197,889 189,495 200,992 221,964

Marketing & Sales 1,644,034 1,929,473 1,747,361 142,988 138,905 143,213 172,704 171,101 173,398 168,402 172,628 160,386 159,051 159,655 167,042

Property Operating & Maint. 886,300 938,276 927,731 79,650 76,146 80,466 84,473 79,712 82,176 78,765 78,589 72,427 71,707 75,263 78,901

Utilities 683,689 779,851 704,553 64,371 58,133 58,676 71,100 70,858 69,404 65,849 61,290 66,059 58,781 71,081 64,249

Other Undistributed Expenses - - 0 - - - - - - - - - - - -

Total Undistributed Expenses 5,608,578 6,222,131 5,807,565 497,494 475,529 505,989 558,204 550,748 557,866 531,481 529,877 496,761 479,034 506,990 532,157

Gross Operating Profit 9,068,402 7,290,543 9,073,482 838,435 542,579 387,619 937,636 1,250,720 930,446 695,867 623,751 133,712 (44,860) 286,174 708,464

Management Fees 1,070,880 1,058,840 1,058,840 86,670 86,670 86,670 86,670 86,670 86,670 86,670 86,670 86,670 92,937 92,937 92,937

Income Before Fixed Charges 7,997,522 6,231,703 8,014,642 751,765 455,909 300,949 850,966 1,164,050 843,776 609,197 537,081 47,042 (137,797) 193,238 615,527

Fixed Charges

Rent 181,373 202,887 197,743 16,704 16,704 16,704 16,975 16,975 16,975 16,975 16,975 16,975 16,975 16,975 16,975

Property & Other Taxes 2,563 - 1,448 - - - - - - - - - - - -

Insurance 133,083 160,635 158,680 14,545 14,545 14,545 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000

Other Expenses - - - - - - - - - - - - - - -

Other Income - - - - - - - - - - - - - - -

Total Fixed Charges 317,019 363,522 357,871 31,249 31,249 31,249 29,975 29,975 29,975 29,975 29,975 29,975 29,975 29,975 29,975

Net Operating Income 7,680,503 5,868,181 7,656,772 720,516 424,660 269,700 820,991 1,134,075 813,801 579,222 507,106 17,067 (167,772) 163,263 585,552

Less: Replacement Reserves 1,083,311 1,216,318 1,272,003 115,991 94,943 88,664 128,737 142,716 124,764 106,138 102,872 68,848 54,388 79,049 109,210

Adjusted Net Operating Income 6,597,192 4,651,863 6,384,769 604,525 329,717 181,037 692,254 991,359 689,037 473,084 404,234 (51,781) (222,160) 84,214 476,342