2010 Annual Report
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2010 ANNUAL REPORT Connecting America through Coins VISION: TO BE RECOGNIZED AS THE FINEST MINT ORGANIZATION IN THE WORLD THROUGH EXCELLENCE IN OUR PEOPLE, PRODUCTS, CUSTOMER SERVICE AND WORKPLACE. MISSION: TO MANUFACTURE AND DISTRIBUTE CIRCULATING COINS, PRECIOUS METALS AND COLLECTIBLE COINS, AND NATIONAL MEDALS TO MEET THE NEEDS OF THE UNITED STATES. TABLE OF CONTENTS The United States Mint at a Glance 2 Director’s Letter 5 Organizational Profile 10 Our Goals Effectively Met All Circulating Demand 13 Effectively Managed Bullion and Numismatic Programs 17 A Safe, Engaged, Productive and Valued Workforce 20 Leadership and Organizational Excellence 22 Management’s Discussion and Analysis Message from the Chief Financial Officer 24 Operating Results by Segment Circulating Coinage 26 Bullion Products 31 Numismatic Products 35 Transfer to the Treasury General Fund 39 Performance Goals, Objectives and Results 41 Analysis of Systems, Controls and Legal Compliance 44 Limitations of the Financial Statements 46 Independent Auditors’ Report 47 Financial Statements 48 Notes to the Financial Statements 52 Required Supplementary Information 68 Independent Auditors’ Report on Internal Controls 69 Independent Auditors’ Report on Compliance and Other Matters 70 Appendix I: FY 2010 Coin and Medal Products 71 1 THE UNITED STATES MINT AT A GLANCE UNITED STATES MINT Revenue (dollars in millions) Revenue by Line of Business 3,886.7 (percent of total) The United States Mint is the world’s largest Numismatic coin manufacturer. Our men and women serve Bullion 2,912.4 10.6% 2,800.5 73.5% the Nation by manufacturing and distributing 2,635.4 2,323.4 circulating coins, precious metals and collectible coins and national medals to meet the needs of the United States. Our vision is to be Circulating recognized as the finest mint organization in the 15.9% world through excellence in our people, products, customer service and workplace. 2006 2007 2008 2009 2010 Revenue by Denomination Revenue (dollars in millions) (dollars in millions) CIRCULATING COINAGE $1 coin One-Cent The United States Mint is the Nation’s sole 1,727.8 413.5 34.9 manufacturer of legal tender coinage. The 1,294.5 Five-Cent 1,271.9 efficient and effective minting and issuing of 17.9 circulation coinage for the Nation to conduct 777.6 Dime 618.2 88.7 trade and commerce is the United States Mint’s highest priority. Quarter-Dollar 63.2 2006 2007 2008 2009 2010 Revenue by Program Revenue (dollars in millions) BULLION COINS 2,855.4 (dollars in millions) American American The United States Mint is the world’s largest 1,694.8 Eagle Gold Eagle producer of gold and silver bullion coins. The 1,710.8 Silver 948.8 659.9 bullion program provides consumers a simple and tangible means to acquire precious metal coins. 536.6 American Investors purchase bullion coins for their intrinsic Buffalo 356.1 Gold metal value and the United States Government’s 484.7 guarantee of each coin’s metal weight, content and purity. 2006 2007 2008 2009 2010 Revenue by Program Revenue (dollars in millions) (dollars in millions) NUMISMATIC PRODUCTS Commemorative 551.5 557.2 20.1 The United States Mint prepares and distributes Numismatic Recurring 514.9 Sale of Circulating Coins 191.9 numismatic products for collectors and those who 440.0 17.7 desire high-quality versions of the Nation’s 413.1 American Eagle coinage. Making numismatic products accessible, 32.7 available, and affordable to Americans who Ultra High Relief choose to purchase them is the priority of 35.1 numismatic operations. American Buffalo 2006 2007 2008 2009 2010 115.6 Seigniorage and Net Income by Line of Business Seigniorage an d Net Income (dollars in millions, before protection cost) SEIGNIORAGE AND NET INCOME (dollars in millions, before protection cost) Seigniorage, the net return from circulating 1,085.6 Numismatic 49.8 operations, is the difference between the face 806.4 value and cost of producing coinage. The United 767.9 Circulating States Mint transfers seigniorage to the Treasury 300.8 501.6 General Fund to help finance national debt. Net 405.8 Bullion income from bullion and numismatic operations 55.2 can also fund Federal Government programs. 2006 2007 2008 2009 2010 2 Gross Cost (dollars in millions) 2010 PERFORMANCE 3,480.9 The economic environment during fiscal year (FY) 2010 significantly affected the United 2,410.8 States Mint’s financial results. Economic uncertainty tends to intensify demand for 1,994.1 1,555.5 bullion products while reducing demand for circulating coinage and numismatic products. 1,549.8 Record bullion sales drove revenue growth as both circulating and numismatic revenue declined. Total revenue neared $3.9 billion, up 33.5 percent. Because the bullion program is managed to a nominal net margin, revenue growth did not generate higher net returns. Gross cost increased 44.4 percent to nearly $3.5 billion and seigniorage and net income fell 19.1 percent to $405.8 million. Lower net returns resulted in reduced funds of $388 2006 2007 2008 2009 2010 million available for transfer to the Treasury General Fund. Shipments (millions of coins) Circulating coin shipments increased 3.7 percent to 5,399 million coins in FY 2010. five-cent 359 While the total volume grew, the composition of shipments shifted toward lower dime denomination coins, reducing their total value. Circulating revenue fell 20.5 percent one-cent 887 3,487 to $618.2 million. The penny, nickel and dime made up 87.7 percent of total shipments, compared to 72.7 percent in FY 2009. Lower demand for higher denominations and quarter-dollar 252 higher metal prices reduced seigniorage 29.7 percent to $300.8 million. $1 coin 414 Sales (thousands of ounces) Bullion coin demand reached historic highs in FY 2010. The United States Mint sold 35.8 American American Eagle Buffalo million ounces of gold and silver bullion coins in FY 2010, up 8.2 million ounces Silver Gold 33,983 409 (29.7 percent). The bureau sold record volume at higher prices, reflecting increased American market value for gold and silver. Total bullion revenue reached a record high of $2,855.4 Eagle Gold million in FY 2010, up $1,160.6 million (68.5 percent). Bullion net income increased 1,430 68.8 percent to $55.2 million. Sales (thousands of units sold) FY 2010 was a challenging year for numismatic operations. The United States Mint was Recurring unable to offer key gold and silver products because blanks were dedicated to the bullion 4,986 Ultra High Relief 24 American Eagle 18 program to meet unprecedented demand. This negatively affected numismatic sales and American Buffalo 81 customer acquisition and retention. Despite weakened demand, the numismatic sales Commemorative 667 shifted toward high price and high margin products. While numismatic sales revenue fell Numismatic Sales 6.1 percent to $413.1 million, numismatic net income and seigniorage increased 21.2 of Circulating Coins 690 percent to $49.8 million. Transfer to the Treasury General Fund (dollars in millions) 2011 OUTLOOK 825.0 In FY 2011, we will remain focused on meeting demand for our products while making 750.0 750.0 progress toward our vision. Economic uncertainty will continue to shape demand for product-lines. The United States Mint expects circulating volumes in FY 2011 to improve 475.0 388.0 slightly upon those of FY 2010. Bullion coin demand is expected to remain strong until economic conditions stabilize and investors are drawn toward alternative investments. For numismatic products, we will focus on improving our customers’ experience and increasing product availability. 2006 2007 2008 2009 2010 3 United States Mint at Philadelphia medallic artist Phebe Hemphill touches up the plaster model of the Presidential $1 Coin design for John Tyler. Elected and appointed officials, artists and members of the public provide input for coin designs and participate on coin design committees. After a design is approved, a sculptor-engraver creates a model using traditional methods or newer digital methods. With traditional tools, the drawing is sculpted in clay and refined using plaster. The resulting three-dimensional bas-relief sculpt is then digitally scanned. Using digital methods, the relief is directly modeled using software tools. Either method produces a digital database that meets design and manufacturing guidelines. 4 Edmund C. Moy United States Mint Director TO THE AMERICAN PEOPLE, MEMBERS OF THE UNITED STATES CONGRESS, THE UNITED STATES DEPARTMENT OF THE TREASURY, OUR CUSTOMERS AND OUR EMPLOYEES: This year we delivered on our new promise: “Connecting America through Coins.” Our commemorative coins honored the Boy Scouts of America and American Veterans Disabled for Life. We finished the Lincoln Bicentennial One-Cent Coin Series with a coin recognizing the culmination of Abraham Lincoln’s brilliant career, his presidency in Washington, D.C. We also began producing the new Union Shield penny. The United States Mint launched the 12-year America the Beautiful Quarters® Program in Fiscal Year (FY) 2010 with four beautiful quarters honoring Hot Springs, Yellowstone, Yosemite and Grand Canyon National Parks. We continued the Native American $1 Coin series with “Government—the Great Tree of Peace,” brought out four new Presidential $1 Coins and honored three First Spouses in the First Spouse Gold Coin Program. We also are proud to have designed and struck two Congressional Gold Medals, one awarded to Women Air Service Pilots, better known as the WASPs, and one to former U.S. Senator Edward Brooke III. While a coin’s primary purpose is to facilitate commerce, coins also reinforce America’s core values. From the great promise of our “e pluribus unum” credo beneath the banner of Liberty, each coin is a piece of our ongoing American experience, connecting us in an unbroken line to our country’s—and the United States Mint’s—origins in the Constitution.