United States Mint Report to Congress on Operations From January 1 through March 31, 2009 Second Quarter Fiscal Year 2009


Second Quarter Fiscal Year (FY) 2009 Financials: FY 2009 second quarter total revenue increased eight percent from the same quarter last year, as 65 percent growth in bullion revenue offset 39 percent and 15 percent declines circulating and numismatic revenue, respectively.

New Strategy for Pricing Precious Metals Numismatic Products:  The United States Mint implemented a new pricing methodology for its numismatic products containing platinum and gold coins effective January 12, 2009.  This pricing methodology will allow the United States Mint to change the prices of these products as often as weekly to better reflect the costs of platinum and gold on the open markets.

Presidential $1 Coin Act: The ninth coin in the Presidential $1 Coin Program honors President William Henry Harrison and was released to the general public on February 19, 2009.  Shipments of the William Henry Harrison Presidential $1 Coin to the Federal Reserve Bank totaled 96.5 million coins at the close of the second quarter of FY 2009.

2009 District of Columbia and U.S Territories Quarters® Program: United States Mint Director Edmund C. Moy joined Congresswoman Eleanor Holmes Norton to introduce the District of Columbia commemorative quarter-dollar coin in a ceremony on February 26, 2009, at the Smithsonian’s National Museum of American History in Washington, DC. The District of Columbia quarter was released into circulation on January 26, 2009.  The Puerto Rico quarter, the second in the series, was released into circulation on March 30, 2009.

Native American $1 Coin Act:  The first coin in the annual Native American $1 Coin series, featuring Sacagawea and her infant son on the obverse and an Indian woman practicing “Three Sisters” agriculture on the reverse, was released to the public on January 2, 2009.  Through the second quarter of FY 2009, 4.3 million Native American $1 Coins have been disbursed through the United States Mint’s Circulating $1 Coin Direct Ship program.

Contents

  1. Summary
  2. State of the United States Mint
  3. Status of the Public Enterprise Fund
  4. Update on Activities

State of the United States Mint

Vision and Goals of the United States Mint

The vision of the United States Mint is “to embody the American spirit through the creation of our nation’s coins and medals.” The United States Mint is committed to minimizing costs, streamlining operations, and ensuring that every product illustrates our American values and history.  The United States Mint established the following strategic goals to uphold its vision:

  • Establish and reinforce the exclusive brand identity of the United States Mint;
  • Create and execute the most effective coin and medal portfolio strategy;
  • Achieve greater excellence in coin and medal design;
  • Increase operational efficiency while meeting the highest quality standards;
  • Develop optimal workforce and workplace culture.

Responsibilities of the United States Mint

The United States Mint’s primary responsibilities are the following:

  • Enabling commerce by minting and issuing circulating coins in amounts necessary to meet the needs of the United States.
  • Striking national medals, including Congressional Gold Medals.
  • Manufacturing, marketing and selling proof and uncirculated coins, commemorative coins and medals to the general public.  The value of these products, known as numismatic items, generally depends on factors such as mintage, rarity, condition and age.
  • Manufacturing, marketing and selling gold, silver and platinum bullion coins through the American Eagle and American Buffalo Bullion Programs.  The value of bullion coins generally depends on their weight in specific precious metals.  These products are sold by the United States Mint to Authorized Purchasers.  The coins are available to the general public through precious metal and coin dealers, brokerage companies and participating banks.
  • Safeguarding United States Mint assets and non-United States Mint assets in the bureau’s custody, including bullion reserves at the United States Bullion Depository at Fort Knox.

Current Business Environment

The current economic environment significantly affects the United States Mint’s main operating programs in different ways.  Slowing economic activity reduces retailers and the public’s demand for circulating coin for use in cash transactions.  This results in commercial banks and other financial institutions curtailing orders for coins and returning excess coins to the Federal Reserve Banks.  The Federal Reserve Banks, in turn, decrease orders for newly minted coins, resulting in substantially fewer shipments and lower revenue for the United States Mint.  Poor economic conditions also reduce global demand for the metals that constitute the largest portion of overall circulating production costs.  Prices for copper, nickel and zinc remain well below highs experienced in prior fiscal years, reducing the per-unit metal costs for all denominations.  The impact of lower metal prices on overall per-unit costs is somewhat offset by low production volumes which cause fixed and allocated costs to be spread over fewer units.

As economic conditions decline, investors are often driven to precious metal markets as safe havens from declining equity markets.  Demand for the United States Mint’s gold and silver bullion coins remains at unprecedented levels.  The volume of precious metal planchets the agency’s suppliers can timely provide limit the number of bullion coins the United States Mint can produce and sell.  In response, the United States Mint has diverted planchets from the numismatic program and attempted to procure additional supplies.  However, the United States Mint does not expect to completely fulfill demand for bullion coins until economic conditions improve and investors are drawn toward alternative investments.

Status of the Public Enterprise Fund

The United States Mint’s Public Enterprise Fund is financed by the sale of circulating coins to the Federal Reserve and the sale of numismatic and bullion coins and other products to customers worldwide.

Image depicts 3 graphs. The first, a bar chart, shows total second quarter revenue in millions as $819 in 2007, $720 in 2008, and $781 in 2009. The second is a pie chart showing 2009 second quarter revenue by segment, with 22% Circulating, 16% Numismatic, and 62% Bullion. The third, a bar chart, shows total year to date revenue (in millions) as $1,286 in 2007, $1,331 in 2008, and $1569 in 2009.

Second Quarter Ended March 31, 2009

($ in millions) 2009 2008 2007 % Change 2008 to 2009
Circulating $169 $276 $537 -39%
Numismatic $127 $150 $116 -15%
Bullion $485 $294 $166 65%
Total Revenues $781 $720 $819 8%

*Numismatic figures w/out bullion and include surcharges.
Year to Date

($ in millions) 2009 2008 2007 % Change 2008 to 2009
Circulating $453 $603 $784 -25%
Numismatic $244 $332 $279 -27%
Bullion $872 $396 $223 120%
Total Revenues $1,569 $1,331 $1,286 18%

*Numismatic figures w/out bullion and include surcharges.

Circulating

Second quarter revenue from circulating operations totaled $169 million in FY 2009, down 39 percent from the same period in FY 2008. Circulating shipments to the Federal Reserve Banks totaled just fewer than 1.0 billion coins in the second quarter of 2009, down 49 percent from the same period in FY 2008. The slowing economy largely reduced the volume of circulating coins financial institutions require to meet customer demand. Consequently, financial institutions curbed orders for newly minted coins and returned excess coin inventories to the Federal Reserve Banks. Because of this flow back of circulating coin, the Federal Reserve Banks’ inventories of nearly all denominations began approaching capacity. To deplete its accumulated inventory, the Federal Reserve Banks cut orders for newly minted coins and revised their forecasted orders down for the remainder of FY 2009. Revised circulating coin orders forecasted for the third quarter of FY 2009 are 72% lower than coin orders for the same period of FY 2008. The United States Mint expects orders for circulating coin to remain significantly below prior years until the Federal Reserve Banks achieves their desired lower inventory levels.

Numismatic

Numismatic revenue for the second quarter of FY 2009 totaled $127 million, down 15 percent from the same quarter in FY 2008. The decline can be attributed to fewer product releases this quarter compared to the same quarter in FY 2008 and the diversion of limited supplies of gold and silver blanks to the bullion program. While poor economic conditions have reduced demand for some recurring products, sales of the 2009 Abraham Lincoln Commemorative Silver Dollar and 2009 Lincoln Bicentennial One- Cent Coins have exceeded expectations. The United States Mint revised revenue forecasts upward for these products. However, the agency revised the overall numismatic revenue forecast for the remainder of FY 2009 to stay at or below FY 2008 levels because of economic conditions and the continued diversion of precious metal planchets to the bullion program.

Bullion

During the second quarter of FY 2009, the United States Mint continued to experience unprecedented demand for gold and silver bullion coins. Bullion revenues for the second quarter of FY 2009 totaled $485 million, up 65 percent from the same quarter in FY 2008. The United States Mint remains unable to fully satisfy the prevailing demand for these coins because of limited worldwide gold and silver planchets supply. The United States Mint expects to procure additional planchets in the second half of FY 2009 and increase the supply of bullion coins the agency offers authorized purchasers each week. Consequently, revenue from bullion sales is projected to remain significantly above FY 2008 levels for the remainder of FY 2009.

Consolidated

The United States Mint’s revenue from first quarter operations totaled $781 million, up eight percent from the same period in FY 2008. Second quarter revenue continues to exceed last year’s levels as increases in bullion sales offset decreases in both the circulating and numismatic activity.

Update on Activities

New Strategy for Pricing Precious Metals Numismatic Products

The United States Mint implemented a new pricing methodology for its numismatic products containing platinum and gold coins effective January 12, 2009. A new pricing strategy was necessary to mitigate the effect of fluctuating gold and platinum commodity costs on the pricing and selling of these products. The new pricing methodology is based primarily on the London Fix weekly average platinum and gold prices, which reflect the market value of the platinum and gold bullion that these products contain. As required by law, the prices of these products must be sufficient to recover all other costs incurred by the United States Mint, such as the cost of minting, marketing and distributing such products (including labor, materials, dies, use of machinery, and promotional and overhead expenses). This pricing methodology will allow the United States Mint to change the prices of these products as often as weekly so they better reflect the costs of platinum and gold on the open markets.

Presidential $1 Coin Act

William Henry Harrison Presidential $1 Coin

On February 19, 2009, the William Henry Harrison Presidential $1 Coin was released into general circulation. Shipments of the William Henry Harrison Presidential $1 Coins to the Federal Reserve Banks totaled 96.5 million coins at the close of the second quarter of FY 2009. Shipments of the Martin Van Buren Presidential $1 Coin, released in the first quarter of FY 2009, totaled approximately 99.4 million coins. Total shipments of Presidential $1 Coins have steadily declined since the program began in January 2007. Shipments of previously issued Presidential $1 Coins are as follows: George Washington Presidential $1 Coin – 304 million coins; John Adams Presidential $1 Coin – 200 million coins; Thomas Jefferson Presidential $1 Coin – 170 million coins; James Madison Presidential $1 Coin – 142 million coins; James Monroe Presidential $1 Coin – 114 million coins; John Quincy Adams Presidential $1 Coin – 105 million coins; and Andrew Jackson Presidential $1 Coin – 96 million coins.

Demand and use of circulating $1 coins

Net pay, the difference between coins distributed by the Federal Reserve Banks to commercial banks and coins returned from commercial banks, totaled $28 million for all $1 coins in the second quarter of FY 2009, a 55 percent decline from the same quarter in FY 2008. Additionally, second quarter net pay represented a 47 percent decline from the first quarter total of $52 million. Corresponding with the shipment data above, net pay for $1 coins has been trending downward steadily since the release of the first Presidential $1 Coin in January 2007. While declining economic activity has an effect on $1 coin demand, a downward trend is expected as the initial excitement related to the program subsides over time.

Outreach

During the second quarter of FY 2009, the United States Mint tabulated and analyzed results from the four-city pilot program which concluded in November 2007. Through public relations, advertising, supply chain facilitation and an intensive campaign aimed at the interface of retailers and consumers, the United States Mint endeavored to increase $1 coin usage in the four pilot cities of Austin, Texas; Charlotte, North Carolina; Grand Rapids, Michigan; and Portland, Oregon. By using well-tested, new messaging — $1 Coins last for decades, are 100% recyclable and save the Nation money — the pilot sought to go beyond making the public merely aware of $1 coins to helping them become familiar and comfortable with their use in everyday transactions.

Results were encouraging. For the first time since $1 coins have been marketed, the United States Mint was able to make perceptible, positive changes in the way people view and use $1 coins. In the four pilot cities, total coin payout increased by 1.8 million coins, a 24% increase over pre-pilot levels. The United States Mint is continuing to evaluate the pilot and identify the next steps in the outreach process.

Native American $1 Coins

Native American $1 Coins, authorized by Public Law 110-82, were released into circulation on January 2, 2009. United States Mint Director Edmund C. Moy joined National Museum of the American Indian Director Kevin Gover at the museum in Washington, D.C., on January 17, 2009, to ceremonially introduce the first coin to be released in the series. The 2009 reverse design depicts the “Three Sisters of Agriculture” – the method of planting of corn, beans and squash together in the same mound to enhance the productivity of each plant. The obverse design remains the “Sacagawea” portrait first introduced in 2000. The reverse of the coin will change annually to honor Native Americans and the important contributions Indian tribes and individual Native Americans made to the development and history of the United States.

Public Law 110-82 also authorizes the Secretary to mint and issue numismatic versions of the $1 coins. The law stipulates that the number of Native American $1 Coins issued in a year be at least 20 percent of the total number of $1 coins minted and issued annually. Because of this mandate and the Federal Reserve Banks’ current reluctance to order any Native American $1 Coins, the United States Mint is making the coins available through its Circulating $1 Coin Direct Ship Program. As of the second quarter of FY 2009, 4.3 million coins have been disbursed through this program. The law also directs the Secretary of the Treasury to carry out an aggressive, cost-effective, continuing campaign to encourage commercial enterprises to accept and dispense Native American $1 Coins. To meet this requirement, the United States Mint will actively promote Native American $1 Coins through its expanded $1 Coin Robust Circulation Program and other internal programs.

2009 District of Columbia and U.S Territories Quarters® Program

Director Moy joined Congresswoman Eleanor Holmes Norton to introduce the District of Columbia commemorative quarter-dollar coin in a ceremony on February 26, 2009, at the Smithsonian Institution’s National Museum of American History in Washington, D.C. Previously released into circulation on January 26, 2009, the District of Columbia quarter was the first issued under the United States Mint’s 2009 District of Columbia and U.S. Territories Quarters Program. The United States Mint will mint and issue a total of six quarters with reverse designs honoring the District of Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the United States Virgin Islands and the Commonwealth of the Northern Mariana Islands under this program. The Puerto Rico commemorative quarter-dollar was released into circulation on March 30, 2009 with a launch event to be held in San Juan, Puerto Rico, on April 2, 2009.

The United States Mint also introduced new 2009 District of Columbia and U.S. Territories Quarters Program numismatic products in the second quarter of FY 2009. A special six-coin quarter proof set and a six-coin silver quarter proof set were launched in January and March, respectively.  In addition, District of Columbia and Puerto Rico quarter bags and rolls were offered to the public on the same dates the coins were released into circulation.

2009 Lincoln Bicentennial One-Cent Program

United States Mint Deputy Director Andrew Brunhart joined Kentucky Governor Steve Beshear to introduce the first redesigned Lincoln Bicentennial One-Cent Coin in a ceremony on February 12, 2009, in Hodgenville, Kentucky, where Abraham Lincoln was born. The United States Mint will mint and issue three additional one-cent coins in 2009 in recognition of the bicentennial anniversary of President Abraham Lincoln’s birth and the 100th anniversary of the first issuance of the Lincoln Cent. While the obverse will continue to bear the familiar likeness of President Lincoln currently on the one-cent coin, the reverse designs will represent the four major aspects of President Lincoln’s life: his birthplace and early childhood in Kentucky; his formative years in Indiana; his professional career in Illinois; and his presidency in Washington, D.C. The reverse designs were unveiled September 22, 2008, at a ceremony held at the Lincoln Memorial on the National Mall in Washington, D.C.  The four 2009 Abraham Lincoln one-cent coins will maintain the same metal content (2.5 percent copper, balance zinc) and other specifications as the current one-cent coin.
In 2009, the United States Mint will also mint and issue numismatic one-cent coins with the exact metallic content contained in the 1909 coin – 95 percent copper, three percent zinc and two percent tin.  These will feature proof and uncirculated finishes and will be offered for sale in numismatic annual sets and a special set.  On March 13, 2009, circulating versions of the coins were released for sale in specially wrapped two-roll sets. A total of 96,000 units were purchased before selling out. The second redesigned one-cent coin, “Formative Years,” will be released into circulation on May 14, 2009.  A second two-roll set will also be released for sale to the public that day.

2009 Ultra High Relief Double Eagle Gold Coin Program

The United States Mint issued the 2009 Ultra High Relief Double Eagle Gold Coin for sale on January 22, 2009. Using 21st century design technology, the original 1907 design was updated to reflect the year 2009 in Roman numerals (MMIX), four additional stars reflecting the current 50 states and the inscription “In God We Trust.” The 2009 coin also is made of 24-karate gold and includes a small border for a more consistent edge.  As of March 31, 2009, approximately 57,000 coins had been sold.
Director Moy held a ribbon-cutting ceremony at the United States Mint facility at Philadelphia on February 2, 2009, to officially open the 2009 Ultra High Relief Double Eagle Gold Coin exhibit. The exhibit showcases the development of this modern masterpiece from initial test strikes to the finished, one-ounce 24-karat gold coin. A guided tour of the United States Mint facility followed the ceremony.

Other Coin Events

2009 Abraham Lincoln Commemorative Silver Dollar Program

Proof and uncirculated versions of the 2009 Abraham Lincoln Commemorative Silver Dollar went on sale February 12, the 200th anniversary of Lincoln’s birth. The obverse features an image of President Lincoln. The reverse features the immortal words Lincoln spoke at Gettysburg — the last 43 words of his most famous speech – inscribed within a laurel wreath. Surcharges from the sale of this coin are authorized to be paid to the Abraham Lincoln Bicentennial Commission to further its work in planning the celebration of Lincoln’s bicentennial and the continued study of his life.

2009 Louis Braille Bicentennial Silver Dollar Program

Director Moy joined National Federation of the Blind (NFB) Executive Director Mark Mauer at the NFB headquarters in Baltimore on March 26, 2009, to introduce the 2009 Louis Braille Bicentennial Silver Dollar. The coin commemorates the 200th anniversary of the birth of Louis Braille, the inventor of the Braille system used by the blind to read and write.

Coin and Medal Design Information

2010 Presidential $1 Coin Program

The obverse designs honoring Presidents Millard Fillmore, Franklin Pierce, James Buchanan and Abraham Lincoln were presented to the Federal advisory committees in January, and approved by the Secretary of the Treasury on March 11, 2009.

2010 Lincoln Bicentennial One-Cent Coin

The reverse designs, emblematic of President Lincoln’s preservation of the union as a unified Nation, were developed and are scheduled to be presented to the Federal advisory committees in April.

2010 Native American $1 Coin Program
The candidate reverse designs for the 2010 Native American $1 Coin, representing the theme Government – the Great Tree of Peace, were developed and submitted to the National Museum of the American Indian for historical accuracy and appropriateness review. Selected designs were then submitted to the following consulting groups for review: the National Congress of American Indians, the U.S. Senate Committee on Indian Affairs, and the U.S. House of Representatives Congressional Native American Caucus. Comments and recommendations were received from all consulting groups, and the designs are scheduled to be presented to the Federal advisory committees in April.

2010 National Parks Quarters

The decision memo for the new quarter program, including the site selection and design criteria, the site selection process and the design selection process, was approved by the Secretary of the Treasury on January 14, 2009. On January 27, 2009, letters were sent to the governors of the 50 states, the governors of the five territories and the mayor of the District of Columbia requesting site recommendations for their respective jurisdictions by late February. The recommended sites are being reviewed for eligibility and appropriateness.

2010 American Veterans Disabled for Life Commemorative Coin

The designs were developed and submitted to the recipient organization for review. Initial comments are due in early April 2009.

2010 Boy Scouts of America Centennial Commemorative Coin

The designs were developed and are scheduled to be presented to the recipient organization in April 2009.

Senator Brooke Congressional Gold Medal

The designs for the Congressional Gold Medal honoring former Senator Edward W. Brooke III were presented to the Federal advisory committees in February and approved by the Secretary of the Treasury on March 26, 2009.

Daw Aung San Suu Kyi Congressional Gold Medal

The candidate designs for the medal honoring Daw Aung San Suu Kyi were presented to the Federal advisory committees in February 2009. As a result of comments from one of the committees, the reverse design was amended. The amended designs will be submitted to the liaison for review.

Director Edmund C. Moy Medal

The candidate designs for the medal honoring the Director of the United States Mint are in development.

Other Designs

Other programs, including the 2010 First Spouse Gold Coin Program, are in their initial stages of development.

Legislative Update

111th Congress Convenes

Although this is the second quarter of the fiscal year, it was the first quarter for the new Congress that convened on January 3, 2009. A new legislative two-year session requires the introduction of new bills, including those related to coins and medals. By the end of the quarter, there were nine commemorative coin bills and ten Congressional Gold Medal bills introduced in the House and Senate and referred to committee.

The United States Mint’s Legislative Affairs Office continued or initiated consultations of previously enacted public laws to begin the design and manufacturing process. This included:

  • America’s Beautiful National Parks Quarter Dollar Act of 2008
  • United States Army Commemorative Coin Act of 2008
  • Code Talkers Recognition Act of 2008
  • Constantino Brumidi Congressional Gold Medal
  • Stephanie Tubbs Jones Gift of Life Medal Act of 2008
  • Civil Rights Act of 1964 Commemorative Coin Act

2009 Lincoln Bicentennial One-Cent Coin Exchange

The United States Mint held the first of four planned 2009 Lincoln Penny exchanges on Capitol Hill on February 12, 2009. The United States Mint exchanged 1,700 rolls for Members, staff and the general public in the Rayburn House Office Building. There will be four new reverses for the Lincoln one-cent coin in 2009 during the bicentennial of his birth. The first of those designs, featuring his Kentucky birth place, was issued on February 12, 2009.

Alternative Materials for Circulating Coins

Metal constitutes the largest portion of overall production costs, and a dramatic increase in metal prices can have a significant effect on circulating coinage results. In any environment, changing the composition of all circulating coins to less expensive materials could save the United States Treasury millions of dollars a year without compromising the utility of these coins. Accordingly, the United States Mint plans to work with the Department of the Treasury and the Congress to examine alternatives to mitigate the effect rising metal prices can have on circulating coinage.

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