United States Figure Skating Association

Transcription

1 Consolidated Financial Statements Year Ended June 30, 2010 (With Comparative Totals for 2009)

2 Consolidated Financial Statements Year Ended June 30, 2010 (With Comparative Totals for 2009)

3 Contents Independent Auditors Report 1 Consolidated Statement of Financial Position 2 Consolidated Statement of Activities 3 Consolidated Statement of Cash Flows 4 Summary of Significant Accounting Policies 5 13 Notes to Consolidated Financial Statements Supplemental Material: Independent Auditors Report on Supplemental Material 21 Schedule 1 - Statement of Financial Position Information 22 Schedule 2 - Statement of Activities Information 23

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5 Consolidated Statement of Financial Position (With Comparative Totals for 2009) June 30, Assets Cash and cash equivalents $ 2,228,301 $ 2,881,765 Accounts receivable, net 474, ,302 Inventory, net 104, ,573 Prepaid expenses and other assets 122, ,279 Prepaid film production costs 500,000 - Property and equipment, net 1,401,420 1,391,254 Historical artifacts, at cost 688, ,261 Investments 60,387,822 56,934,595 Promise to give restricted to endowment, net 214, ,338 Investments restricted to endowment 155,718 93,756 Beneficial interest in perpetual trust 105, ,207 Total assets $ 66,383,253 $ 63,627,330 Liabilities and Net Assets Accounts payable and accrued expenses $ 1,046,874 $ 1,048,408 Deferred revenue 959,655 1,175,214 Total liabilities 2,006,529 2,223,622 Commitments and contingencies Net assets Unrestricted: Board-designated for reserves 55,090,326 52,744,248 Board-designated for skaters 6,527,220 6,014,412 Invested in property and equipment and historical artifacts 2,089,681 2,079,515 Unrestricted 63,707,227 60,838,175 Temporarily restricted 177, ,656 Permanently restricted 491, ,877 Total net assets 64,376,724 61,403,708 Total liabilities and net assets $ 66,383,253 $ 63,627,330 See accompanying summary of significant accounting policies and notes to consolidated financial statements. 2

6 Consolidated Statement of Activities (With Comparative Totals for 2009) Year Ended June 30, Unrestricted Temporarily Restricted Permanently Restricted Total Total Revenue, support, and gains Dues, admissions, and activity fees $ 4,289,913 $ - $ - $ 4,289,913 $ 4,032,660 Skating events and sponsorships 2,672, ,672,036 5,651,739 Broadcasting and licensing 2,417, ,417,938 1,883,179 Publications 295, , ,954 Contributions 720,695 40,205 59, , ,607 USOC and PSA grants 1,070, ,070, ,100 Net investment return (loss) 6,027,420 15,548 4,301 6,047,269 (10,966,363) Net assets released from restrictions 15,548 (15,548) Total revenue, support, and gains 17,509,382 40,205 63,759 17,613,346 2,302,876 Expenses Program services: Membership activities and services 1,880, ,880,740 2,004,058 Development and support of athletes 4,290, ,290,132 4,017,798 Skating events 4,888, ,888,854 5,347,138 Governance and judging 483, , ,559 Publications 590, , ,132 Total program services 12,132, ,132,992 12,268,685 Supporting services: Management and general 1,688, ,688,442 1,867,567 Donor development 818, , ,247 Total supporting services 2,507, ,507,338 2,573,814 Total expenses 14,640, ,640,330 14,842,499 Change in net assets 2,869,052 40,205 63,759 2,973,016 (12,539,623) Net assets, beginning of year 60,838, , ,877 61,403,708 73,943,331 Net assets, end of year $ 63,707,227 $ 177,861 $ 491,636 $ 64,376,724 $ 61,403,708 See accompanying summary of significant accounting policies and notes to consolidated financial statements. 3

7 Consolidated Statement of Cash Flows (With Comparative Totals for 2009) Increase (Decrease) in Cash and Cash Equivalents Year Ended June 30, Cash flows from operating activities Change in net assets $ 2,973,016 $ (12,539,623) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 138, ,460 Net investment (return) loss (6,047,269) 10,966,363 Change in accrued interest on investments and investments restricted to endowment 26,536 (26,536) Contributions restricted to endowment (59,458) (205,338) Change in beneficial interest in perpetual trust (4,301) 21,130 Decrease (increase) in operating assets: Accounts receivable, net 490,693 (644,821) Inventory, net 2,447 12,146 Prepaid expenses and other assets (363,413) 146,837 Increase (decrease) in operating liabilities: Accounts payable and accrued expenses (1,534) 117,336 Deferred revenue (215,559) (279,435) Net cash used in operating activities (3,060,593) (2,256,481) Cash flows from investing activities Cash withdrawn from investments 2,555,544 3,828,797 Cash (added to) withdrawn from investments restricted to endowment (50,000) 6,897 Purchases of property and equipment (148,415) (33,106) Net cash provided by investing activities 2,357,129 3,802,588 Cash flows from financing activities Collections of contributions restricted to endowment 50,000 - Net cash provided by financing activities 50,000 - Net (decrease) increase in cash and cash equivalents (653,464) 1,546,107 Cash and cash equivalents, beginning of year 2,881,765 1,335,658 Cash and cash equivalents, end of year $ 2,228,301 $ 2,881,765 See accompanying summary of significant accounting policies and notes to consolidated financial statements. 4

8 Summary of Significant Accounting Policies Organization The United States Figure ( U.S. Figure Skating, Association, we, us, or our ) is the national governing body for the sport of figure skating on ice in the United States, and is so recognized by the International Skating Union ( ISU ) and the United States Olympic Committee ( USOC ). Our headquarters are located in Colorado Springs, Colorado. We promote and regulate participation in the sport of figure skating throughout the United States of America. Our mission is to provide programs to encourage participation, enjoyment, and achievement in the sport of figure skating. Established in 1921, our membership now includes approximately 600 member clubs and more than 190,000 registered skaters. Recognizing that competition at every level is a principal incentive for figure skaters to train, develop, and improve their proficiency, we sanction official test sessions to measure progress in the various branches of the sport. We also sanction, directly or indirectly, all official U.S. Figure Skating competitions. Member clubs throughout the United States conduct the tests and competitions. By ascending the competition ladder, competitors registered with U.S. Figure Skating develop opportunities to gain entry to international figure skating events, among them the Olympic Winter Games and World Championships. The World Figure Skating Museum and Hall of Fame (the Museum ), an activity of U.S. Figure Skating, honors the heritage of our sport. Serving as an international repository for the sport of figure skating, the Museum is dedicated exclusively to the collection, preservation and interpretation of the history and historical artifacts of figure skating throughout the world. The greatest names in figure skating are honored in the Hall of Fame, housed within the Museum. Ice Network, LLC ( Ice Network ) is a wholly-owned subsidiary of the Association created in 2007 to hold exclusive rights to certain interactive media assets licensed to it by the Association. Ice Network and the Association have an agreement with MLB Advance Media, LP ( MLBAM ) under which MLBAM is solely responsible for the development, management, operation, and maintenance of the exclusive, official website and interactive media assets of Ice Network. The agreement expires on June 30, 2011, but may be extended by mutual agreement. 20 First Street Properties ( Properties ) is a separate, tax exempt not-for-profit title-holding company created in 2004 solely for the purpose of owning, holding title to, and maintaining the land, buildings, and improvements of the Association s headquarters located at 20 First Street in Colorado Springs, Colorado. The United States Figure Skating Foundation ( Foundation ) is a separate, tax exempt not-for-profit organization established in 2000 to receive, hold, manage, and invest funds transferred, conveyed, or contributed to it by or for the benefit of the Association. The Foundation is governed by a separate board 5

9 Summary of Significant Accounting Policies of directors, a majority of whom are appointed by the Association s board of directors. The board of directors of the Foundation authorizes supporting distributions to the Association. FASB Accounting Standards Codification As of July 1, 2009, the FASB Accounting Standards Codification (the Codification ) became the sole source of authoritative U.S. generally accepted accounting principles ( GAAP ) recognized by the Financial Accounting Standards Board ( FASB ) to be applied by nongovernmental entities. The Codification superseded and replaced all then-existing non-sec accounting and reporting standards. Reporting Entity and Principles of Consolidation The consolidated financial statements include the assets, liabilities, net assets, and activities of the Association, Ice Network, Properties, and the Foundation. All significant intercompany transactions and balances have been eliminated in consolidation. Collectively, these consolidated entities are hereinafter referred to as, U.S. Figure Skating, we, us, or our. Comparative Financial Information Our financial statements include certain prior-year summarized comparative information in total, but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with GAAP. Accordingly, such information should be read in conjunction with our audited consolidated financial statements for the year ended June 30, 2009, from which the summarized information was derived. Basis of Accounting Our financial statements have been prepared on the accrual basis of accounting. Basis of Presentation We report information regarding our financial position and activities according to three classes of net assets unrestricted, temporarily restricted, and permanently restricted as follows: Unrestricted Net Assets - net assets available for use in general operations. Temporarily Restricted Net Assets - amounts subject to donor restrictions that may or will be met by expenditure or action, and/or the passage of time, and certain income earned on permanently restricted net assets that has not yet been appropriated for expenditure. Contributions restricted by donors for 6

10 Summary of Significant Accounting Policies specific purposes, spent in satisfaction of those restrictions in the year received, are reported as unrestricted contributions in the consolidated statement of activities. Permanently Restricted Net Assets - assets whose use is limited by donor-imposed restrictions that neither expire by the passage of time nor can be fulfilled or otherwise removed solely by actions we may take. The restrictions stipulate that resources be maintained permanently but permit us to expend the income generated by those resources in accordance with the wishes of the donors. Cash and Cash Equivalents For purposes of the statements of financial position and cash flows, we consider all highly liquid financial instruments with original maturities of three months or less, and which are not held for longterm investment purposes, to be cash and cash equivalents. Cash and highly liquid financial instruments held for long-term investment purposes, regardless of original length to maturity, are reported as investments and are excluded from this definition. The net amount of operating cash added to, or withdrawn from, our long-term investments is reported as an investing activity in the statement of cash flows. Investments Investment purchases are initially recorded at cost or, if contributed, at the fair values of the investment assets received at the date of contribution. Subsequent to initial acquisition, investments are reported at fair value in the statement of financial position, and unrealized gains and losses are included in the statement of activities. Net investment return consists of interest and dividend income, and the realized and unrealized gains and losses on the investments, less investment management and custodial fees. With limited exceptions, investments are managed by independent professional investment management firms. Firms are selected, monitored, and reviewed by management and the board of directors with the assistance of an independent investment advisor. Investments include cash, money market funds, U.S. Treasury and Agency securities, individual equity and debt securities, commingled mutual funds and trusts, and pooled-investment funds. Some of our investments are exposed to various risks that may cause their reported fair values to fluctuate from period to period and could result in material changes in our net assets. Investments in equity securities fluctuate in value in response to many factors, such as the activities and financial condition of individual companies, general business and industry market conditions, and the state or perceived direction of the economy. The values of debt securities fluctuate in response to changing interest rates, credit worthiness of issuers, and overall economic policies that impact market conditions. The values of certain investments, such as hedge funds, can fluctuate in response to direct market conditions and other factors that may or may not have a high correlation to overall market direction. 7

11 Summary of Significant Accounting Policies Certain of our investment managers are permitted to use investment strategies and techniques designed to achieve higher investment returns, reduce volatility, or decrease correlations to major market indices and other asset classes. Strategies and techniques, such as the use of leverage, futures and forward contracts, option agreements, and other derivative instruments, could increase the impact of favorable or adverse security price movements on our investments. Accounts Receivable, Net Accounts receivable are comprised of amounts due under contracts with event sponsors, marketing agents, licensees, and broadcasters. Also included are amounts due from clubs for dues, merchandise, shortfalls of member dues, test fees or sanction fees. We use the allowance method to determine the uncollectible amounts and base our estimates on historical experience and subsequent collections. We estimated the allowance for doubtful accounts to be approximately $3,200 as of June 30, Inventory, Net We maintain limited amounts of program-related inventory consisting primarily of achievement pins, medals, emblems, team/logo apparel, and other supplies held for resale to clubs, members and athletes. Inventory is reported using the first-in-first-out method at the lower of cost or estimated fair value. Inventory at June 30, 2010 has been reduced by an allowance for obsolescence of approximately $3,700. Prepaid Expenses and Other Assets Prepaid expenses and other assets consist primarily of expenses paid and tickets purchased in advance of future skating events. Prepaid Film Production Costs We have commissioned the cinematic feature RISE, which will celebrate American figure skating while commemorating the 50 th anniversary of the 1961 World Figure Skating Team that perished in a plane crash on its way to the World Championships in Prague, Czechoslovakia. We capitalize all direct expenses paid associated with pre-production of the film, and will amortize such costs when the film premieres on February 17, Non-direct costs, such as advertising and marketing are expensed as incurred. Property and Equipment We capitalize all purchases or donations of property and equipment in excess of $1,000, and compute depreciation on a straight-line basis over the estimated useful lives of the assets, ranging from three to thirty-nine years. Upon sale or other disposition, the asset and its related accumulated depreciation are 8

12 Summary of Significant Accounting Policies removed from the accounts, and any remaining gain or loss is included in the statement of activities. Costs of repairs and maintenance are charged to expense when incurred. Historical Artifacts, at Cost The Museum s historical artifacts are capitalized at original cost, or if donated, at fair value at the date the artifacts were received, and are not depreciated because the Museum intends to preserve these assets in perpetuity. Impairment of Long-Lived Assets We review asset carrying amounts whenever events or circumstances indicate that such amounts may not be recoverable. When considered impaired, the carrying amount of the asset is reduced to its estimated fair value, and the impairment loss is included in the statement of activities. There were no impairments of long-lived assets during the year or at June 30, Promises to Give Restricted to Endowment, Net Unconditional promises to give expected to be collected within one year are recorded at their estimated net realizable values. Unconditional promises to give expected to be collected in more than one year are recorded at the present values of their estimated future cash flows, computed using risk-adjusted interest rates. Amortization of the discount is included in contribution revenue. Conditional promises to give are recognized when the conditions are substantially met. We anticipate full collection of outstanding promises to give at June 30, Beneficial Interest in Perpetual Trust U.S. Figure Skating is the beneficiary of an irrevocable perpetual trust. The beneficial interest in the trust is reported at its estimated fair value in the statement of financial position. Distributions from the trust, and unrealized gains and losses, are included in the statement of activities. Endowment Composition of Endowment As required by GAAP, net assets associated with endowment funds, including funds designated by the board of directors to function as endowment, if any (collectively, the Endowment ), are classified and reported based on the existence or absence of donor-imposed restrictions. Because the board of directors has not designated any unrestricted net assets to function as endowment, our Endowment includes only 9

13 Summary of Significant Accounting Policies donor-restricted funds totaling $370,514 at June 30, The earnings of these funds have been restricted by the donors for specific purposes (Note 8.) Interpretation of Relevant Law The board of directors has interpreted the Colorado Uniform Prudent Management of Institutional Funds Act ( UPMIFA ) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. At June 30, 2010, there were no contrary donor stipulations. As a result of this interpretation, we classify as permanently restricted net assets as: (a) the original value of gifts donated to the Endowment, (b) the original value of subsequent gifts donated to the Endowment, and (c) accumulations to the Endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted Endowment that is not classified as permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, we consider the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: The duration and preservation of the fund The purposes of the organization and the donor-restricted endowment fund General economic conditions The possible effect of inflation and deflation The expected total return from income and the appreciation of investments Other resources of the organization The investment policies of the organization Return Objectives and Risk Parameters We have adopted investment and spending policies for Endowment assets that attempt to provide a predictable stream of funding to programs supported by the Endowment while seeking to preserve the original fair values of the Endowment s assets. Under this policy, as approved by the board of directors, Endowment assets are invested primarily in equity and debt securities in a manner designed to achieve a low-to-moderate level of investment risk. Endowment investments, over full market cycles, are expected to produce results that equal or exceed the price and yield results of comparable market indices or other appropriate management-style indices. Actual returns in any given year will likely vary from this amount. 10

14 Summary of Significant Accounting Policies Strategies Employed for Achieving Objectives To satisfy our long-term rate-of-return objectives, we utilize a total-return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). We target a diversified asset allocation that places a greater emphasis on equity-based investments to achieve our long-term return objectives within prudent risk constraints. Spending Policy and Relation to Investment Objectives We follow a policy that considers the long-term expected return on the Endowment, and appropriate for distribution each year only so much of the accumulated earnings in excess of the permanently restricted net assets of the Endowment as we anticipate spending on donor-specified purposes. Accordingly, over the long term, we expect the current spending policy to preserve the permanently restricted net assets of the Endowment. This is consistent with our objective to preserve the original fair values of the endowment assets as well as to provide an opportunity for real growth through capital appreciation and new gifts. Revenue Recognition Contributions are recognized when an unconditional promise to give is received. Dues, publications, and other period-related revenues are recognized in the period to which they relate. Admissions, activity fees, broadcasting and licensing revenues, and skating-event and sponsorship revenues are included in deferred revenue and recognized when the related event or use occurs. Donated Services and Materials Many individuals volunteer their time and perform a variety of tasks that assist our clubs, members, and athletes. Although the value of these services is significant, it is not recorded in the financial statements because the recognition criteria established by GAAP are not met. Donated professional services are recorded at the respective fair values of the services received. Donated property and supplies are recorded at fair value at the date of donation. Expenses Expenses are recognized in the period incurred. Expenses paid in advance, but not yet incurred, are deferred to the applicable period. 11

15 Summary of Significant Accounting Policies Functional Allocation of Expenses The costs of conducting our programs and supporting-services activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of support, revenue, expenses, and distributions during the reporting period. Actual results could differ from those estimates, and those differences could be material. Financial Instruments and Credit Risk We manage deposit concentration risk by placing our cash, money market accounts, and certificates of deposit with various local, regional, and national financial institutions. From time to time, portions of those deposits may exceed FDIC or other insurance limits. We have experienced no losses in these accounts. Our investments in securities are made primarily by professional investment management firms, and are monitored by management and the investment committee of the board of directors. Though the market values of investments are subject to fluctuation on a year-to-year basis, management and the investment committee believe that the investment policy is prudent for the long-term welfare of U.S. Figure Skating. Fair Value Measurements We follow the methods of fair value measurement described in the Fair Value Measurements and Disclosures topic of the Codification to determine the fair values of all assets and liabilities required to be measured at fair value. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability, i.e., the exit price, in an orderly transaction between market participants at the measurement date. A hierarchy prioritizes the observable and unobservable inputs used to measure fair value into three broad levels, as described below: Level 1 Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive 12

16 Summary of Significant Accounting Policies markets, or model-derived valuations in which all significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Unobservable inputs are used when little or no market data is available. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Accounting for Uncertain Tax Positions Effective July 1, 2009, we adopted the provisions of the Income Taxes topic of the Codification relating to uncertain tax positions. Those provisions apply to all open tax periods in all tax jurisdictions in which we are required to file an income tax return. Upon adoption, we determined that no cumulative effect adjustment was necessary, and that no uncertain tax positions have been taken (or are expected to be taken) that could have a material effect on our income tax liabilities. We believe we have conducted our operations in accordance with, and have properly maintained, our tax-exempt status. Our tax returns for 2007, 2008, and 2009 are subject to examination by the Internal Revenue Service. Reclassifications Certain amounts in the 2009 financial statements have been reclassified for comparative purposes to conform to the current year financial statement presentation. 13

17 Notes to Consolidated Financial Statements 1. INCOME TAXES U.S. Figure and U.S. Figure Skating Foundation are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, and qualify for the charitable contribution deduction under Sections 170(b)(1)(A)(vi) and (viii), respectively. Pursuant to Sections 509(a)(1) and (3), respectively, the organizations have been determined not to be private foundations. 20 First Street Properties, which has no operating activities, is exempt from federal income taxes under Section 501(c)(2). Ice Network LLC is a disregarded entity for income tax purposes, and is included and reported as a part of the Association s activities. Income from activities not directly related to tax-exempt purposes is subject to taxation as unrelated business income. During the year ended June 30, 2010, no unrelated business income taxes were incurred or paid. 2. FAIR VALUE DISCLOSURES Assets measured at fair value on a recurring basis have been categorized based upon a fair value hierarchy as of: June 30, 2010 Quoted Prices in Description Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance as of June 30, 2009 Investments Cash and money market funds (1) $ 5,110,212 $ - $ - $ 5,110,212 U.S. Treasury securities (2) 4,906, ,906,812 Corporate bonds and bond mutual funds (2) 8,698, ,698,116 Domestic equities and equity mutual funds (2) 21,100, ,100,887 Foreign equities and equity mutual funds (2) 8,387, ,387,758 U.S. Olympic Foundation pooled trust (3) ,024,237 10,024,237 Real estate investment trust (2) 1,512, ,512,971 Fund of hedge funds (4) , ,547 $ 49,716,756 $ - $ 10,826,784 $ 60,543,540 Beneficial interest in charitable trust (5) $ - $ - $ 105,508 $ 105,508 14

18 Notes to Consolidated Financial Statements 2. FAIR VALUE DISCLOSURES (CONTINUED) Investments are reported in the consolidated statement of financial position based on the existence or absence of donor-imposed restrictions as follows at: June 30, 2010 Investments: Unrestricted $ 60,387,822 Restricted to endowment 155,718 $ 60,543,540 (1) (2) (3) (4) (5) The fair values of cash and money market funds are equal to the sum of the account balances. The fair values of direct investments in debt and equity securities, investments in exchange-traded investment funds, open-ended mutual funds, and the real estate investment trust are based upon quoted market prices for identical securities in active markets, and published redemption values at the close of business at June 30, 2010, respectively. Certain of our investments are held in a pooled investment fund sponsored and managed by the United States Olympic Foundation ( USOF ). The USOF invests on behalf of the United States Olympic Committee ( USOC ) and national sports organizations recognized by the USOC. The USOF maintains a broadly diversified portfolio, and provides audited financial statements to the organizations on whose behalf it invests. We review the audit report and prepare an investment roll-forward from the date of the financial statements (December 31) to our year end (June 30), and compare the results reported by the USOF to appropriate benchmarks for the various categories of investments in the pooled investment fund. We hold an investment in a fund of hedge funds managed by an investment management firm. The fund invests in a variety of hedge funds, including funds of hedge funds, to create a portfolio of funds having widely diversified investment strategies. The funds have varying degrees of transparency into their underlying holdings, and the investment management firm reports fair value information accumulated from the various fund managers. Performance results are monitored by the investment management firm and compared to benchmarks selected to help evaluate an individual strategy or the skill of an individual manager compared to similar managers. We review the composition and performance results of the fund of hedge funds. See Note 5. 15

19 Notes to Consolidated Financial Statements 2. FAIR VALUE DISCLOSURES (CONTINUED) Below is a reconciliation of the beginning and ending balance of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended: June 30, 2010 Investments Beneficial Interest in Perpetual Trust Beginning balance $ 10,206,004 $ 101,207 Distributions (516,840) - Net realized and unrealized gain included in the statement of activities 1,137,620 4,301 Ending balance $ 10,826,784 $ 105,508 Gain included in the statement of activities attributable to the change in unrealized gain relating to assets still held at June 30, 2010 $ 943,695 $ 4, NET INVESTMENT RETURN Net investment return was composed of the following for the year ended: Temporarily Permanently June 30, 2010 Unrestricted Restricted Restricted Total Dividend and interest income $ 1,548,031 $ 3,586 $ - $ 1,551,617 Net realized and unrealized gain 4,668,693 11,962 4,301 4,684,956 Investment management and custodial fees (189,304) - - (189,304) $ 6,027,420 $ 15,548 $ 4,301 $ 6,047,269 16

20 Notes to Consolidated Financial Statements 4. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at: June 30, 2010 Land $ 237,963 Building 2,565,997 Equipment 2,617,013 5,420,973 Accumulated depreciation (4,019,553) 5. BENEFICIAL INTEREST IN PERPETUAL TRUST $ 1,401,420 We are the beneficiary of an irrevocable perpetual trust (the Trust ) administered by a bank. We receive periodic distribution of Trust net income; however, we will never receive the assets of the Trust. Distributions of Trust net income must be used to purchase appropriate trophies for first, second, and third-place winners in various figure skating events. At June 30, 2010, we estimated the fair value of the assets held by the Trust to be $105,508. During the year ended June 30, 2010, we received distributions of $1,201 from the trust. 6. LEASE OBLIGATION We lease printing and copying equipment under a non-cancelable operating lease that expires in May Future minimum lease payments are due as follows during the years ending: June 30, 2011 $ 33, , , ,583 Total $ 126,883 Lease expense was $51,708 for the year ended June 30,

21 Notes to Consolidated Financial Statements 7. RESTRICTIONS ON NET ASSETS Board-Designated Net Assets At June 30, 2010 unrestricted net assets designated by the board of directors for reserves and for the support of skaters were $55,090,326 and $6,527,220, respectively. Temporarily Restricted Net Assets Temporarily restricted net assets consist of contributions restricted by donors for particular purposes as follows at: June 30, 2010 Club activities $ 121,719 Museum operations 41,062 Skater assistance 15,080 $ 177,861 Temporarily restricted net assets of $15,548 were released from restriction during the year ended June 30, 2010 because they were expended in accordance with donor restrictions that they be used for club activities. Permanently Restricted Net Assets Permanently restricted net assets of $491,636 consist of endowment fund assets to be held in perpetuity and the beneficial interest in perpetual trust. Interest earned on permanently restricted net assets may be appropriated for expenditure in satisfaction of donor-specified purposes and in accordance with the trust agreement. 8. ENDOWMENT The endowment is composed of donor-restricted contributions and the amount of unrestricted net assets designated for endowment by the board of directors from time to time (none at present). Earnings arising from permanently restricted funds are temporarily restricted until appropriated for expenditure. Earnings arising from board-designated funds are unrestricted. The endowment was allocated among the following net asset classifications at: June 30, 2010 Unrestricted Temporarily Restricted Permanently Restricted Total Donor-restricted for permanent operating endowment $ (15,614) $ - $ 386,128 $ 370,514 18

22 Notes to Consolidated Financial Statements 8. ENDOWMENT (CONTINUED) Changes in endowment net assets were as follows for the year ended: June 30, 2010 Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, beginning of year $ (27,576) $ - $ 326,670 $ 299,094 Investment return: Investment income - 3,586-3,586 Net gain realized and unrealized - 11,962 9,458 21,420 Total investment return - 15,548 9,458 25,006 Contributions ,000 50,000 Distributions - (3,586) - (3,586) Other changes: Recovery of deficiency in original fair value of permanently restricted net assets over current fair value 11,962 (11,962) - - Endowment net assets, end of year $ (15,614) $ - $ 386,128 $ 370,514 Funds with Deficiencies From time to time, the fair value of permanently restricted endowments may fall below their original fair values, the amounts UPMIFA requires us to retain as funds of perpetual duration. The deficiency resulted from unfavorable market fluctuations that occurred during During 2010, improved market conditions increased the fair value of our endowments; however, the increase was not enough to recover the entire amount of the prior deficiency. Accordingly, a deficiency of $15,614 at June 30, 2010 has been reported in unrestricted net assets. 19

23 Notes to Consolidated Financial Statements 9. RETIREMENT PLAN We sponsor a tax-deferred retirement plan (the Plan ) for our employees pursuant to Section 403(b) of the Internal Revenue Code. All employees are immediately eligible to make pre-tax contributions in which they are immediately vested. After completing three months of service, we match employee pre-tax contributions at levels established by the plan. These contributions also are immediately vested. In addition, we may, but are not required to make additional employer discretionary contributions. These contributions are vested over three years at the rate of one-third per year. During the year ended June 30, 2010, we contributed $156,782 in matching and employer discretionary contributions to the Plan. 10. COMMITMENTS AND CONTINGENCIES In the normal course of conducting our events and activities, we enter into a variety of contracts that may include revenue and expense sharing agreements, guarantees, limitations reimbursement arrangements, and other terms and conditions that entitle or obligate us to receive income or incur expenses in future periods. During 2010, we commissioned the cinematic feature RISE, which will celebrate American figure skating while commemorating the 50 th anniversary of the 1961 World Figure Skating Team that perished in a plane crash on its way to the World Championships in Prague, Czechoslovakia. We are committed to pay $500,000 in connection with this agreement during fiscal year SUBSEQUENT EVENTS We have evaluated subsequent events through October 20, 2010, which is the date the financial statements were available to be issued. 20

24 Supplemental Material

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26 Schedule 1 United States Figure Statement of Financial Position Information June 30, 2010 Assets USFS Association USFS Foundation Eliminations Total Cash and cash equivalents $ 2,226,088 $ 2,213 $ - $ 2,228,301 Accounts receivable, net 500,622 - (26,013) 474,609 Inventory, net 104, ,126 Prepaid expenses and other assets 122, ,692 Prepaid film production costs 500, ,000 Property and equipment, net 1,401, ,401,420 Historical artifacts, at cost 688, ,261 Investments 5,924,262 56,523,781 (2,060,221) 60,387,822 Promises to give restricted to endowment, net 214, ,796 Investments restricted to endowment 155, ,718 Beneficial interest in perpetual trust 105, ,508 Total assets $ 11,943,493 $ 56,525,994 $ (2,086,234) $ 66,383,253 Liabilities and Net Assets Accounts payable and accrued expenses $ 1,037,623 $ 35,264 $ (26,013) $ 1,046,874 Deferred revenue 959, ,655 Assets held in trust - 2,060,221 (2,060,221) - Total liabilities 1,997,278 2,095,485 (2,086,234) 2,006,529 Commitments and contingencies Net assets Unrestricted: Board-designated for reserves 6,523,553 48,566,773-55,090,326 Board-designated for skaters 663,484 5,863,736-6,527,220 Invested in property and equipment and historical artifacts 2,089, ,089,681 Unrestricted 9,276,718 54,430,509-63,707,227 Temporarily restricted 177, ,861 Permanently restricted 491, ,636 Total net assets 9,946,215 54,430,509-64,376,724 Total liabilities and net assets $ 11,943,493 $ 56,525,994 $ (2,086,234) $ 66,383,253 See accompanying independent auditors report on supplemental material. 22

27 Schedule 2 United States Figure Statement of Activities Information Year Ended June 30, 2010 Support, revenue and gains USFS Association USFS Foundation Eliminations Total Dues, admissions, and activity fees $ 4,289,913 $ - $ - $ 4,289,913 Skating events and sponsorships 2,672, ,672,036 Broadcasting and licensing 2,417, ,417,938 Publications 295, ,828 Contributions 1,432,164 - (611,806) 820,358 USOC and PSA grants 1,070, ,070,004 Net investment return 237,121 5,810,148-6,047,269 Total support, revenue and gains 12,415,004 5,810,148 (611,806) 17,613,346 Expenses Program services: Membership activities and services 1,880, ,880,740 Development and support of athletes 4,290, ,290,132 Skating events 4,888, ,888,854 Governance and judging 483, ,002 Publications 590, ,264 Total program services 12,132, ,132,992 Supporting services: Management and general 1,638,562 49,880-1,688,442 Donor development 818, ,896 Support provided to USFS Association - 611,806 (611,806) - Total supporting services 2,457, ,686 (611,806) 2,507,338 Total expenses 14,590, ,686 (611,806) 14,640,330 Change in net assets (2,175,446) 5,148,462-2,973,016 Net assets, beginning of year 12,121,661 49,282,047-61,403,708 Net assets, end of year $ 9,946,215 $ 54,430,509 $ - $ 64,376,724 See accompanying independent auditors report on supplemental material. 23