Arbor Day Foundation Annual Report

2010 Annual Report

We inspire people to plant, nurture, and celebrate trees.

Mission of the Arbor Day Foundation

Fiscal Year 2009-2010 Annual Report

Table of Contents Message from the Chief Executive, John Rosenow Board of Trustees Message from the Chair, Bill Kruidenier

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Arbor Day Foundation Programs Trees for America Tree City USA Tree Line USA Tree Campus USA Nature Explore Celebrate Arbor Day Rain Forest Rescue Conservation Trees Arbor Day Farm

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Financial Report & Audit

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Arbor Day Foundation • 2010 Annual Report

100 Arbor Avenue • Nebraska City, NE 68410

Dear Members and Friends, The Arbor Day Foundation is fortunate to work with many partners – in fostering community forestry, saving rain forests, connecting children with nature, and replanting our national forests. We’re also fortunate that Arbor Day Foundation members – more than one million of us – share a commitment to planting trees. The Foundation’s role is to connect the good work of many so that our impact is magnified. Here are a few examples: Educators, conservationists, and landscape architects work together to create nature-rich learning spaces at child care centers, schools, nature centers, children’s museums, forests, wildlife refuges, parks, and other public spaces to provide children with daily connections with nature. Nature Explore has grown to involve thousands of caring people in many different roles. Together, the good work of these people is changing the lives of countless children.

Through 57 projects in Latin America, hundreds of families are combining 21st-century farming and forestry practices and centuries-old ideals of conservation through Rain Forest Rescue. The shade-grown coffee they grow, the new trees they plant on mountainsides, the sustainable forestry they practice, and the endangered wildlife they preserve are inspiring countless supporters from afar.

Forest Service planting crews tirelessly trek up mountainsides replanting new trees where wildfires had taken their toll. Their work is supported by caring members and corporate partners who may never see those forests.

The Tree City USA community improvement program continues to connect people where they live. Members, citizen volunteers, city foresters and utility professionals, elected officials, and other leaders are improving community forestry and the quality of life in Tree City USAs where 140 million Americans call home.

Diverse conservation organizations come together at Arbor Day Farm to find new solutions to old problems, to help lead the way to a sustainable future.

Tens of thousands of loyal members nationwide plant and harvest Arbor Day Farm hazelnuts. Then they annually report their progress so that their collective observations help our university research partners identify healthy hybrid hazelnuts that might one day feed hungry nations.

Helen Keller said, simply, “Together we can do so much.” The good work of so many good people advance our shared mission every day.

Thank you for your part.

Best Regards,

John Rosenow Chief Executive

Arbor Day Foundation • 2010 Annual Report

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Board of Trustees

Bill Kruidenier Chair Champaign, IL

Doug Bereuter Vice-Chair and Chair-Elect San Francisco, CA

Preston Cole Milwaukee, WI

Mrs. Lee A. Crayton, Jr. (Carolyn) Macon, GA

Ray Empson New Haven, CT

Leticia Roche Fortuny Merida, Yucutan, Mexico

100 Arbor Avenue • Nebraska City, NE 68410

Dear Members and Friends, As with many organizations, we celebrate successes at the Arbor Day Foundation. But we do so only briefly. Goals accomplished are merely milestones along a continued path of sustainable impact.

2010 was no exception. For example: A record number of cities and towns – 3,464 – were recognized last year as a Tree City USA. The sustainable impact is that more people than ever before – now more than 140 million Americans – enjoy a greener, healthier community thanks to people working hard to improve urban forestry where they live.

Planting 20 million trees in 20 years was a fitting milestone reached in June, 2010, through the Foundation’s enduring partnership with the U.S. Forest Service.

Replanting trees lost to insects, disease, and fires in our national forests is helping to ensure that our forests provide immeasurable benefits for future generations.

If we could find a milestone for measuring the human spirit, it might be that the Arbor Day Foundation surpassed more than one million members in 2010, each sharing our mission, caring for our earth, and engaging in good work of deep and lasting value.

We reflect on milestones such as these only briefly. They are markers along our path. We use them to fuel our momentum. They are inspiration for us to keep changing our world for the better.

Thank you for being part of this important work.

Ed Jaenke Madison, VA

Sincerely,

Bill Kruidenier, Chair Board of Trustees

Scott Josiah Lincoln, NE

Ken Munson St. Petersburg, Russia

Dr. James O’Hanlon Lincoln, NE

Dan Patterson Dallas, TX

Stan Cook, with the U.S. Forest Service, is shown on the Gallatin National Forest among young Arbor Day Foundation trees, some of the thousands he has helped plant over the past 20 years.

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Arbor Day Foundation • 2010 Annual Report

Members and friends plant millions of trees to restore damaged forests and enrich America’s communities and countrysides.

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ivotal to the Arbor Day Foundation’s work are more than one million members sharing our mission of planting trees. Loyal members plant trees in their yards and communities to clean the air, control stormwater, and provide energy-saving shade to homes and businesses. They plant trees on their acreages and farms to protect soil, clean rivers and streams, and provide wildlife habitat. And, they help ensure that millions of trees are planted where they are urgently needed most: in our nation’s forests.

Our forests are a treasured legacy threatened by insects, disease, and devastating wildfires. But Foundation members, corporate partners, and supporters continue to respond. This year alone, the Foundation planted more than 3.4 million trees in our national forests through our partnership with the U.S. Forest Service, and another 2.7 million trees through the National Association of State Foresters. The scope of this work is far-reaching. During the past year, Arbor Day Foundation trees were planted in 32 different public forests located in 13 states, ranging from California to Florida to Vermont.

For example, more than 400,000 new trees in the San Bernardino National Forest will help keep water

supplies clean and pure for millions of Californians.

The trees planted in the San Bernardino conserve rain water and snowmelt, and keep mud and silt from eroding into fresh-water lakes and reservoirs in the mountains where the Santa Ana watershed begins. The watershed supplies drinking water to millions of people in southern California, including Los Angeles.

Nearly 300,000 trees were planted to bring life back to the Pike and San Isabel National Forests in Colorado.

The ponderosa pine and Douglasfir trees are helping to restore a fire-ravaged area of the South Platte River watershed and protect the primary source of water for the residents of the Denver metro area.

In the Great Lakes region, Arbor Day Foundation corporate partners helped plant more than 370,000 trees in the Hiawatha National Forest and 600,000 trees in Michigan’s Mackinaw State Forest. This support is providing critical habitat for the endangered Kirtland’s warbler — habitat that has helped bring the species back from the brink of extinction.

And in Florida’s Okaloachoochee Slough State Forest, 115,000 native pine trees were planted to restore a chain of unique natural wetlands that contribute to the health and vitality of the Everglades National Park.

The forested wetlands provide a continuous roaming habitat for many threatened species such as the Florida panther, sandhill crane, and giant gopher tortoise.

These are a few examples of positive and enduring impact. But our work together is far from finished.

We continue to work with foresters to replant native trees, to restore watersheds and ecosystems, and to preserve natural resources for our children and those who will follow.

Quick Facts n This year, members received 8,025,907 trees for planting in their yards, acreages, and communities. n 6,018,909 trees were planted in our nation’s forests. n 240,169 Gift Trees were distributed to members and customers. n Trees were provided to 41,485 visitors at Arbor Day Farm’s Tree Adventure to plant at their homes and in their communities.

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Quick Facts n The Arbor Day Foundation’s Tree City USA program, a collaboration with the U.S. Forest Service and the National Association of State Foresters, was launched in 1976 with 42 communities in 15 states. Today, there are 3,464 Tree City USA communities with a combined population of 140 million people across the United States. n In 2010, 530 communities nationwide advanced beyond the basic standards to receive Tree City USA Growth Awards, demonstrating additional improvements in local tree care.

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Arbor Day Foundation • 2010 Annual Report

More than 3,400 communities reap the benefits of strong and sustainable urban forestry programs.

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ith the support of our members, the Tree City USA program has paved the way to strong and sustainable forestry in more than 3,400 communities. From the Hawaiian islands to the tip of Maine, more than 140 million Americans are living in towns and cities that pay particular attention to tree planting, management, and care. As a result, these communities enjoy energy savings for homeowners and businesses, lower levels of pollution, and a new sense of community pride.

One example is Portland, Oregon, first recognized as a Tree City USA community 34 years ago. Today, forward-thinking community leaders, local nonprofit organizations, and volunteer citizens work together to show how the Tree City USA framework ultimately leads to profound and sustained community improvement.

Portland’s Metro Council acquired more than 10,000 acres of natural spaces in the last eight years to set aside for the benefit of local residents and the environment.

The council purchased the Chehalem Ridge Natural Area, one of the metro area’s largest remaining tract of undeveloped forest. This area is home to thousands of native trees and is the starting point for a collection of streams that flow into the Tualatin River, a source of drinking water for more than 200,000 people. Today, magnificent trees – cedars, firs, spruces, and hemlocks – are being protected and nurtured so the residents of Portland can enjoy the benefits for years to come.

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The Arbor Day Foundation recognized 155 utility companies last year with the Tree Line USA designation. Understanding that trees and utility lines can work together, these utilities show a commitment to practicing proper tree pruning, planting, and urban-forest management — and helping customers know how to plant the right trees in the right places to save energy.

The Portland metro area is also home to the Intertwine, a network of trails, parks, and natural spaces. Intertwine was created by public officials and agencies, nonprofit groups, community associations and businesses to restore and protect forested lands.

By protecting these natural spaces, the Portland community serves as a model of planned environmental stewardship and intelligent growth.

Portland’s new Gray-to-Green initiative adds other aggressive goals. By 2014, Portland plans to add 33,000 yard trees and 50,000 street trees, restore native vegetation, construct 43 acres of green roofs, purchase 419 more acres of natural areas for protection, and manage up to 84 percent of the city’s stormwater runoff.

Tree City USA communities like Portland understand the importance of investing in trees and in their green infrastructure. When a community invests in trees, it adds vital infrastructure that increases in value and service over time.

The vision and effort in Portland is an example of how Tree City USA recognition is only the beginning of urban forestry. Tree City USA is the framework for sustained urban forestry across the country. Thanks to our partners and members, the program’s impact reaches far and wide. More city foresters and arborists are hired. More city budgets include worthwhile investments in trees. And millions of people are showing their pride in community improvement.

Quick Facts n Collectively, Tree Campus USA campuses invested $11.9 million in campus forest management last year. n Through the past year, the Arbor Day Foundation and Toyota have held 20 campus tree-planting events. College students, community volunteers, and professional staff planted more than 1,500 large shade trees on their campuses. n Tree Campus USA recognition is awarded to colleges and universities who meet five core standards for sustainable campus forestry: a tree advisory committee, a campus tree-care plan, dedicated annual expenditures on their campus tree program, an Arbor Day observance, and student service-learning projects.

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Arbor Day Foundation • 2010 Annual Report

Seventy-four colleges and universities engage their students and neighbors to establish and maintain healthy community forests.

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hat better place to manage a community forest than on a college campus? Where students gain the knowledge and tools they need for their livelihoods. Where they develop their minds and their bodies to become critical thinkers, lifelong learners, contributors to society, and, yes, stewards of our natural resources. Where, in the midst of all this activity, they pause under trees to connect...or maybe to study, reflect, or double-check the direction of their lives.

It’s only fitting that the Arbor Day Foundation recognizes colleges and universities that practice sound campus forestry. With the support of Toyota, the Foundation launched the Tree Campus USA program in 2008 to honor colleges and universities for their work to enhance their community forests. This year, 74 colleges and universities with a combined enrollment of 1.1 million students were honored with Tree Campus USA recognition.

Tree Campus USA already is having a positive impact across the country. Students at the University of Maryland, for example, kicked off last year’s weeklong homecoming celebration by planting trees on campus. More than 100 students joined community and campus leaders along with the Arbor Day Foundation and Toyota to raise awareness about the benefits of trees during a tree-planting event on the College Park campus. More than 200 camellia trees were planted near Tyding Hall to restore a historic garden. These trees will provide shade to the building, and future students will enjoy the benefits of cleaner air and beauty for years to come.

This is just one example where students are making a difference by planting trees. Thanks to the Tree Campus USA program, more and more students are getting a hands-on understanding about the many ways trees benefit their environment, improve their community, and enhance the quality of life for all Americans.

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Arbor Day Foundation • 2010 Annual Report

Thanks to Nature Explore, children make deep connections with the natural world as an integral part of learning and living.

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hildren today spend less time outdoors and are more disconnected from nature than ever before. They often grow up far removed from nature’s simple joys and lessons. At the same time, childhood obesity and diabetes, attention deficit disorder, behavioral challenges, and biophobia, (a fear of nature), are on the rise. If these trends continue, long-term consequences could include a new generation of adults with health and social challenges and a lack of interest in environmental stewardship.

In response, the Arbor Day Foundation and Dimensions Educational Research Foundation collaborated to create the Nature Explore program to support efforts by educators, administrators, and families to connect children with nature. So that children can benefit from this connection daily, Nature Explore Classrooms give children the opportunity to learn in nature-rich spaces each day — at child care centers and elementary schools, nature centers and arboretums, parks and community centers, and at home.

Children in Nature Explore Classrooms learn and play outdoors surrounded by the wonders of nature. They climb and crawl through log structures, create their own works of art with acorns and pinecones. They dig little gardens, plant their seeds, and share delight with each other as their flowers and vegetables grow. These well-designed outdoor spaces demonstrate that children benefit from daily connections with the natural world — improved motor skills and concentration, stronger social skills, fewer behavioral problems, and greater selfconfidence.

Quick Facts n In 2010, design consultations were completed for 90 Nature Explore Classrooms nationwide. n In 116 workshops, thousands of educators were inspired to help children make deeper connections with the natural world. n In meeting or exceeding research-based principles for creating an effective outdoor learning space, 42 locations have been recognized as certified Nature Explore Classrooms.

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This year, the network of certified Nature Explore Classrooms has grown throughout the country in new, exciting ways.

For example: • At Hurlburt Air Force Base in Florida, the children of the Hurlburt Youth Center helped build the pathways throughout their new outdoor classroom using natural stone and vegetation.

Local shrubs, trees and wood added a local and regional effect. The children’s help in building a natural space — a space they use every day — is an example of how confidence, a spirit of cooperation, and a sense of accomplishment can build character that lasts a lifetime.

• At the headquarters of Lakeshore Learning Materials, in a Carson, California, warehouse district, an inspiring and beautiful Nature Explore Classroom is now part of Lakeshore’s on-site child-care facility for employees’ children.

Here, parent and employee volunteers were the fundraisers, work force, and enthusiastic advocates. It’s an example of how volunteer involvement results in passionate, sustainable support for connecting children with nature.

• Mary Kay Inc. and The Mary Kay Foundation strengthened their commitment to helping victims of domestic violence by creating certified Nature Explore Classrooms at domestic violence shelters.

This year the first was completed in Downers Grove, Illinois. The outdoor classroom for playing and learning is a place where nurturing and healing begins — and a bright example of how planned spaces that are rich with nature can change the lives of children.

• Adult nature enthusiasts have long visited Bailey Arboretum in Locust Valley, New York, to observe and admire the flora. But children — and their families — are now drawn to the arboretum’s new certified Nature Explore Classroom, aptly called, “The Children’s Habitat.” The well-designed space includes a music and movement area with a stage and a giant wooden marimba, a nature art area where children create masterpieces with natural materials, and even a picnic grove to reinforce a come-and-stay message. Once the children have their imaginations inspired by touching the wonders of nature, they are indeed inclined to stay.

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Arbor Day Foundation • 2010 Annual Report

Nature Explore provides a comprehensive, fieldtested program to help educators, administrators, and businesses move from plastic and asphalt play spaces to nature-rich play environments. The program includes on-site design consultations with specially trained landscape architect-educator teams, workshops for educators and designers, a sourcebook for field-tested components to enhance outdoor learning, and Nature Explore Families Club for family activities.

Whether experiencing a Nature Explore Classroom in an inner city or in a forested arboretum, children benefit from daily interaction with the natural world. Research shows these benefits have lasting impact, especially when they come at an early age and are supported by caring adults.

As the network of Nature Explore Classrooms grows, the impact grows. More children are developing meaningful connections with nature, instilling in them a lifelong sense of wonder, so they might grow to become the next generation of tree planters and environmental stewards.

Top: Nature Explore Design Consultations result in Concept Plans developed for each specific location.

Above: At a design workshop, landscape architects and architects learn how to create nature-filled outdoor classrooms that are changing children’s lives.

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Quick Facts

List of state Arbor Days

Alabama Last full week in February Alaska Third Monday in May Arizona Third Friday in March Arkansas Third Monday in March California March 7-14 Colorado Third Friday in April Connecticut Last Friday in April Delaware Last Friday in April District of Columbia Last Friday in April Florida Third Friday in January Georgia Third Friday in February Hawaii First Friday in November Idaho Last Friday in April

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Arbor Day Foundation • 2010 Annual Report

Illinois Last Friday in April Indiana Last Friday in April Iowa Last Friday in April Kansas Last Friday in April Kentucky First Friday in April Louisiana Third Friday in January Maine Third full week in May Maryland First Wednesday in April Massachusetts Last Friday in April Michigan Last Friday in April Minnesota Last Friday in April Mississippi Second Friday in February Missouri First Friday in April

National Arbor Day Last Friday in April Montana Last Friday in April Nebraska Last Friday in April Nevada Last Friday in April New Hampshire Last Friday in April New Jersey Last Friday in April New Mexico Second Friday in March New York Last Friday in April North Carolina First Friday following March 15 North Dakota First Friday in May Ohio Last Friday in April Oklahoma Last full week in March Oregon First full week in April Pennsylvania Last Friday in April

Rhode Island Last Friday in April South Carolina First Friday in December South Dakota Last Friday in April Tennessee First Friday in March Texas Last Friday in April Utah Last Friday in April Vermont First Friday in May Virginia Last Friday in April Washington Second Wednesday in April West Virginia Second Friday in April Wisconsin Last Friday in April Wyoming Last Monday in April

After more than a century, Arbor Day continues to embody the vision of J. Sterling Morton.

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t the heart of our namesake is Arbor Day itself.

A day for digging holes and planting trees, for writing stories and poetry about those new trees we have just planted, or for searching for those oldest and rarest trees to receive our tender love and care. It’s also a day for celebrating the accomplishments of the past year and expressing hope for the future.

One example of the Foundation’s outreach is recognizing the inspiring work of others through Arbor

Day Awards. In 2010 we again recognized some of the unassuming heroes who work hard to advance the mission we all share.

Dr. David Nowak, a research leader with the U.S. Forest Service, was presented with the J. Sterling Morton Award, the highest honor given by the Arbor Day Foundation. For the past 25 years, Nowak’s research on the value and benefits of urban forests has had a significant impact on the environment. By the early 1990’s, he had sampled and assessed the urban forests of Chicago and Oakland, California, to quantify the value and importance of trees. His work has led to i-Tree, a collaborative program between public and private partners that provides tools used by thousands of communities to better understand the environmental benefits provided by their trees.

Casey Trees of Washington, D.C., and Green City Partnerships Program of the Seattle area, both received Arbor Day Awards for their outstanding efforts to engage volunteers in tree-planting initiatives.

Since 2001, Casey Trees, a nonprofit organization dedicated to restoring the tree canopy in Washington, D.C., has trained 700 Citizen Foresters to become volunteer leaders and educators. They, in turn, teach other volunteers in the community the basics of tree planting and care. Last year, more than 1,600 adults and 600 children participated in 54 tree-planting events. On the other side of the country, conservation organizations from Seattle, Tacoma, Kirkland, Redmond, and Kent, Washington, make up the Cascade Land Conservancy’s Green City Partnerships Program.

Last year, the Partnership provided opportunities for more than 10,000 volunteers who donated a combined 87,000 hours of manpower working on urban forestry restoration projects.

Sheila Flint from Sherwood Park, Alberta, received a Celebration Award, which honors Arbor Day celebrations that best represent the spirit of the tree-planters’ holiday. Last year, more than 1,000 firstgrade students enjoyed a day-long celebration filled with planting trees, inspired learning, “nature-cise” activities, and other fun events as they discovered the benefits of trees.

These efforts give life to Arbor Day founder J. Sterling Morton’s own words from years ago: “The cultivation of flowers and trees is the cultivatin of the good, the beautiful, and the ennobling in man, and for me, I wish to see this culture become universal.”

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Quick Facts n Rain forests cover about 2 percent of the planet’s surface and yet are home to half of the earth’s plant and animal species. n Rain Forest Rescue preservation work has included 57 projects in 7 countries. n Seventy percent of the plants identified by the National Cancer Institute as useful in the treatment of cancer are found in the rain forest.

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Arbor Day Foundation • 2010 Annual Report

Through Rain Forest Rescue, communities and families are being helped to help themselves while preserving vast tracts of pristine tropical forests.

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he beauty of 13,000-foot peaks rising behind tropical lakes belies the tragedies of recent years in Guatemala. For example, when severe storms struck in 2005, more than 1,000 villages were devastated by mudslides and floods. It was the aftermath of long-time agricultural and logging practices that stripped the steep slopes of their natural vegetation. Today, in cooperation with The Nature Conservancy and on-site partners such as Vivamos Mejor, Rain Forest Rescue is helping to develop a local nursery industry and replant the land with soilstabilizing trees. By involving village officials and local residents, the planting projects are receiving widespread support and leading to a better understanding of the vital link between the health of the forest and the health of communities.

In the past year, Rain Forest Rescue has been focused on projects in Guatemala and Belize. In all cases, the guiding principle is to involve families, provide education, and support initiatives that lead to economic and social stability as well as sound conservation practices. The results of this work bodes well for the future and relieves pressure on protected natural areas.

The setting for activities over the past year has been the Maya Forest. It is the largest intact tropical forest outside of the Amazon Basin, and hosts a Noah’s Ark of migratory birds and rare or endangered wildlife species as well as archeological sites, small villages of indigenous people, and the source of water for densely populated cities. One of the major accomplishments was the creation of a bi-national Conservation Action Plan encompassing nearly 600,000 acres of the Maya Forest in Guatemala and Belize. By involving a broad range of stakeholders, the plan will establish the Maya Mountains Protected Area as an exemplary model of integrated management that maintains ecological integrity and preserves the cultural heritage for future generations.

• Seven firefighting brigades were established, trained, and equipped.

• As part of community education, some 1,500 environmental education kits were delivered to local schools along with text books, spelling books, and environmental encyclopedias.

• Farmers are being provided with technical and marketing assistance to produce organic, shadegrown coffee instead of clearing the land for monoculture practices.

• Two new municipal associations were created with technical assistance to help them sustainably manage their communities’ natural resources. These associations represent 14 communities and have an impact on more than 450,000 people.

Thanks to Rain Forest Rescue donors and the cooperation of Arbor Day Foundation’s partners, the residents of Central America’s rain forests are receiving help to protect their ancestral forests while assuring a better future for themselves and their children.

A sampling of other projects includes: • Placement of monitoring stations in two national parks to analyze migratory bird populations and guide management decisions.

• Application of remote sensing technology to pinpoint fires and land-clearing activities in the vast Maya Biosphere Reserve.

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Quick Facts n According to the U.S. Forest Service, 50 million shade trees planted in strategic, energy-saving locations could eliminate the need for seven 100-megawatt power plants. n A total of 108,000 Foundation members were engaged this year in the Hazelnut Project. n Trees improve water quality by reducing stormwater runoff and erosion, and removing harmful chemicals from the soil – preventing them from running into streams and rivers.

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Arbor Day Foundation • 2010 Annual Report

Through education and communication, Americans learn how trees save energy, reduce soil erosion, and clean our waterways and air.

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onservation trees are working trees. They tame the wind, shelter wildlife, keep our water clean, and quietly guard irreplaceable topsoil.

The late Stewart Udall, former Secretary of Interior, conservationist, and essayist, once said, “Each generation has its own rendezvous with the land. We can misuse the land…or we can create a world in which physical affluence and affluence of the spirit go hand in hand.”

Consider the spirit of the Civilian Conservation Corps during the Depression and Dustbowl days of the 1930s. Millions of unemployed people went to work planting miles and miles of shelterbelts across the Midwest. These hard-working people planted billions of conservation trees. These trees and their offshoots have since been hard at work protecting the topsoil of our abundant earth, the foundation of our agricultural productivity, and the key to sustainability.

Such is the spirit of the Arbor Day Foundation’s Conservation Trees program, as farmers and ranchers are informed and inspired to plant trees as part of their rendezvous with the land. From deep-rooted hardwood trees planted as riparian buffers along rivers and streams, to the spruce, pine, and fir trees planted along the edge of rolling cropland, this generation of farmers and ranchers planting trees to benefit the next generation and beyond.

This past year a new effort in conservation gathered momentum with a vision toward the future of our earth.

Research by the Arbor Day Foundation and its Hybrid Hazelnut Consortium partners – Rutgers University, Oregon State University, and the University of Nebraska-Lincoln – is well under way to develop blightresistant hybrid hazelnuts that will thrive across much of the country under a wide variety of soil and climatic conditions. Helping to produce this improved hazel are thousands of Foundation members who are planting hybrid hazelnuts one by one in their fields and yards – and reporting their observations each year.

The benefits of hazels as a perennial woody crop are profound. Deep roots anchor nutrient-rich topsoil.

The leafy bushes are ideal for absorbing carbon dioxide through much of the year while the wood and root systems naturally sequester the carbon. The plants are drought and flood resistant to withstand climate changes. And protein-rich nuts provide a healthy source of nutrition for our expanding population. One day, they could help feed hungry nations.

Enthusiastically participating in the Hybrid Hazelnut Project is an example of how Foundation members and partners share an affluence of the spirit in conserving our natural resources.

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Conservation and education groups from around the world meet at Lied Lodge & Conference Center at Arbor Day Farm.

Quick Facts n Nearly 250,000 people from six continents visited Arbor Day Farm this year, where they witnessed conservation in practice at every turn. n Visitors who touch, see, taste and learn the value of nature transfer those practices into their personal lives – such as the 41,485 who carried trees home from the greenhouse to plant, nurture, and celebrate.

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Arbor Day Foundation • 2010 Annual Report

Visitors from around the world experience conservation principles and the wonders of nature at Arbor Day Farm.

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uilding programs that are high-impact – lifechanging, large scale, partner-engaging, and sustainable – begins at home at Arbor Day Farm.

This 260-acre National Historic Landmark is part of the original estate of Arbor Day founder J. Sterling Morton, and where our mission truly comes to life. It’s no stretch to say the work being done at Lied Lodge & Conference Center and Arbor Day Farm has a tremendous impact worldwide.

With its rich conservation history, education and conservation groups are drawn to Arbor Day Farm to meet, to learn, to soothe their souls, and to renew their commitment to personal and professional action on behalf of the earth and its resources. They return home inspired and ready to apply what they’ve learned to improve the environment.

The ultimate worldwide impact of the people who meet here is clean air and clean water, the conservation of resources and wildlife, sustainable forestry and community improvement, and a renewed commitment to inspire future generations of environmental stewards.

Family and friends, too, connect at Arbor Day Farm – for reunions, weddings, vacations, and weekend getaways. Lied Lodge offers high-speed Internet and Wi-Fi, as well as an indoor Olympic swimming pool, spa, and nature-inspired fine dining. The Tree Adventure attraction, walking trails, and guided tours of vineyards, greenhouses, and historic working orchards, help guests have fun, learn, and leave rejuvenated.

For example, in the past year: • Leadership team members from the U.S. Forest Service gathered at Arbor Day Farm to develop plans to embark on a new “All-Lands” approach to cooperative forest management.

• The Central Division of the Nature Conservancy used the facility for its annual enrichment meeting.

Strategic conservation priorities were discussed such as how to control the invasive Asian carp in the Great Lakes. These meetings have been so successful that this year teams from other divisions – even from Central America – joined their colleagues at Lied Lodge.

• Training sessions conducted by the USDA Natural Resources Conservation Service were held at Lied Lodge and Arbor Day Farm for the 13th consecutive year.

• Educators and landscape architects from around the world visit research-based demonstration Nature Explore Classrooms and attend workshops presented

by Dimensions Educational Research Foundation.

The Nature Explore program, a collaborative project of the Arbor Day Foundation and Dimensions Foundation, is touching the lives of children through nature education, giving them a positive connection and appreciation of the natural world.

• The Society of Municipal Arborists again held its annual Municipal Forestry Institute to train and inspire urban forestry professionals to enhance their work in communities throughout the country.

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FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2010 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2009 INDEPENDENT AUDITORS’ REPORT To the Board of Trustees Arbor Day Foundation Lincoln, Nebraska We have audited the accompanying statement of financial position of Arbor Day Foundation (a nonprofit organization) as of June 30, 2010, and the related statements of activity, functional expenses, and cash flows for the year then ended.

These financial statements are the responsibility of the Foundation’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the Arbor Day Foundation’s 2009 financial statements and, in our report dated September 25, 2009, we expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Arbor Day Foundation as of June 30, 2010, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued a report dated September 10, 2010, on our consideration of Arbor Day Foundation’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.

The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Micek & Crouch, P.C. Lincoln, Nebraska September 10, 2010

Unrestricted $

13,516,849 10,344,920 3,624,080 1,204,062 7,673,306 881,017 890,407 38,134,641 12,510 38,147,151

Property and Equipment 23,654,183 24,340,851 Other Assets:

Endowment fund 141,587 125,709

Construction in progress 2,379,204 1,565,919

Other assets 53,409 56,647

Total other assets 2,574,200 1,748,275

Total assets

Long-Term Debt, Net of Current Portion:

Notes Payable

Capital lease obligations

Total long-term debt

34,723,215

$

34,158,784

1,059,664 9,884 1,069,548

1,278,107 20,575 1,298,682

Other Liabilities:

Annuities payable 694,148 740,079

Total liabilities 9,789,752 9,470,848

Net Assets:

Unrestricted:

Designated for endowment purposes 1,383,339 1,109,275

Undesignated 23,255,466 23,350,695

Temporarily restricted 249,916 189,967

Permanently restricted 44,742 37,999

Total net assets 24,933,463 24,687,936 Total liabilities and net assets

Temporarily Restricted $

$

LIABILITIES AND NET ASSETS

Current Liabilities:

Accounts payable and accrued expenses $ 5,049,278 $ 4,806,727

Current portion of notes payable 286,898 270,040

Current portion of capital lease obligations 6,210 36,187

Deferred revenue 2,683,670 2,319,133

Total current liabilities 8,026,056 7,432,087

STATEMENT OF ACTIVITY For the Year Ended June 30, 2010 With Comparative Totals for the Year Ended June 30, 2009 Revenues:

Membership dues

Contributions

Trees for America

Program grant income

Arbor Day Farm income

Arbor Day Coffee income

Other income (loss) Total revenues

Net assets released from restrictions

Total revenues and net assets released Expenses:

Program services: Tree City USA Arbor Day/Youth Education Conservation Trees Rain Forest Rescue Trees for America Arbor Day Farm Conference programs

Supporting activities: General and administrative Membership development Fundraising

Total expenses

Change in net assets Net Assets at Beginning of Year Net Assets at End of Year

STATEMENT OF FINANCIAL POSITION June 30, 2010 With Comparative Totals as of June 30, 2009

ASSETS

2010 2009 Current Assets:

Cash and cash equivalents $ 4,378,369 $ 3,975,563

Investments 1,011,545 1,033,630

Accounts receivable 1,460,629 1,532,124

Grants receivable 301,411 181,892

Prepaid expense 404,947 242,031

Inventory 937,931 1,104,418

Total current assets 8,494,832 8,069,658

- 72,535 - - - - (76 ) 72,459 (12,510 ) 59,949

$

2010 Permanently Restricted $

- 2,100 - - - - 4,643 6,743 - 6,743

34,723,215

$

2009 Total

Total $

13,516,849 10,419,555 3,624,080 1,204,062 7,673,306 881,017 894,974 38,213,843 - 38,213,843

34,158,784

$

13,177,445 14,072,113 4,088,353 1,066,736 7,873,322 1,051,558 870,520 42,200,047 42,200,047

1,567,842 2,720,769 536,178 2,617,317 14,420,395 11,015,674 475,593

- - - - - - -

- - - - - - -

1,567,842 2,720,769 536,178 2,617,317 14,420,395 11,015,674 475,593

1,315,625 2,862,346 439,161 2,667,814 17,228,469 11,196,864 808,364

862,445 2,460,996 1,291,107 37,968,316 178,835 24,459,970 $ 24,638,805

- - - - 59,949 189,967 249,916

- - - - 6,743 37,999 44,742

862,445 2,460,996 1,291,107 37,968,316 245,527 24,687,936 24,933,463

798,100 2,338,694 1,608,981 41,264,418 935,629 23,752,307 24,687,936

$

$

$

$

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

24

Arbor Day Foundation • 2010 Annual Report

STATEMENT OF CASH FLOWS

For the Year Ended June 30, 2010 With Comparative Totals For the Year Ended June 30, 2009

2010 2009 Cash Flows From Operating Activities:

Change in net assets $ 245,527 $ 935,629 Adjustments to reconcile to net cash provided by operating activities:

Contributions and grants restricted for

long-term purposes (72,535 ) (281,453 ) Depreciation 1,342,270 1,271,788 Amortization 3,162 7,327 Net unrealized (gain) loss on investments (5,138 ) 268,916 (Gain) loss on sale of property and equipment (6,383 ) 2,109 (Increase) decrease in restricted cash for endowment fund (15,878 ) 21,670 (Increase) decrease in receivables (48,024 ) 662,362 (Increase) decrease in prepaid expense (162,916 ) 161,133 (Increase) decrease in inventory 166,487 (99,615 ) Decrease in charitable trusts receivable 76 15,706

(Decrease) increase in accounts payable and accrued expenses for operating activities 242,551 (460,146 ) (Decrease) increase in deferred revenue 364,537 (57,263 ) Increase in annuities payable 86,292 78,855 Net cash flow from operating activities

2,140,028

Cash Flows From Investing Activities: Purchase of investments (105,000 ) (110,000 ) Proceeds from sale of property and equipment 6,383 540 Capital expenditures for property and equipment (1,468,887 ) (2,160.881 ) Net cash flow from investing activities

(1,567,504 )

(2,270,341 )

Cash Flow From Financing Activities: Proceeds from debt financing 111,922 198,692 Payments toward debt retirement (354,175 ) (633,111 ) Proceeds from contributions and grants restricted for capital expenditures 72,535 281,453 Net cash flow from financing activities (169,718 ) (152,966 ) Net increase in cash 402,806 103,711 Cash and Cash Equivalents at Beginning of Year 3,975,563 3,871,852 Cash and Cash Equivalents at End of Year $ 4,378,369 $ 3,975,563 Supplemental Disclosures: Cash Paid During the Year for: Interest $ 104,293 $ 110,083

2,527,018

STATEMENT OF FUNCTIONAL EXPENSES

For the Year Ended June 30, 2010 With Comparative Totals For the Year Ended June 30, 2009 Program Services

Items of Expense:

Salaries, payroll taxes and employee benefits Contract labor Advertising and promotion Printing, publications, mailing

and photography Travel and meetings Professional services

Arbor Day/ Youth Education

Tree City USA $

Rain Forest Rescue

Conservation Trees

Trees for America

Support Activities Total Program Services

Conference Programs

Arbor Day Farm

574,686 $ 391 11,900

Fund Raising

282,934 $ 51,180

Total Year Ended June 30, 2010

Total Year Ended June 30, 2009

876,272 $ 600 35,423

142,476 $ 1,075

215,159 27,929 128,273

540,945 70,863 456,915

199,620 3,823 22,549

1,084,398 3,818 17,858

3,237,896 68,511 277,331

165,141 81,299 80,897

13,587 18,221 20,618

5,456,746 274,464 1,004,441

35,175 18,157 50,865

1,281,783 968 39,587

228,134 14,209 58,433

7,001,838 307,798 1,153,326

7,426,394 425,884 1,578,302

409 227,288 4,116 357 6,835

409 4,805 4,577 391 6,837

136 235 185 977

136 942 70 976

5,542 18,454 10,889 561 68,100

273 16,361 23,715 273,146 258,434

12,246 657 977

19,151 266,908 45,131 274,710 343,136

273 1,179 881 31,637 4,884

345 470 4,884

409 1,144 3,513 3,267 4,884

20,178 269,231 49,995 309,614 357,788

36,276 264,001 114,667 287,326 412,266

75,081

27,900

2,975

16,271

5,138,128

-

-

5,260,355

-

4,330

56,733

5,321,418

6,874,113

Rain forest preservation Inventory purchases Computer services Bank charges Insurance Telephone and utilities

14,215 4,164 16,215

55,636 31,973 7,698 13,955

2,240 595 1,794

125,598 500,834 8,411 272 595 1,899

166,385 257,842 39,854 125,812

1,653,336 39,232 137,221 128,969 524,412

6,776 136 595 2,311

125,598 2,209,806 269,232 395,471 182,470 686,398

6,719 272 2,974 8,971

5,054 2,974 8,971

3,141 2,974 14,001

125,598 2,209,806 284,146 395,743 191,392 718,341

137,301 2,143,176 231,801 419,738 254,905 860,903

Postage Office supplies Operating supplies Dues and subscriptions Interest expense Bad debts

159,018 1,224 7,703 175 -

394,855 1,411 1,423 728 -

133,104 368 -

609,528 276 2,302 339 -

1,613,848 9,578 33,621 2,575 82,429 -

72,248 16,833 538,899 11,702 11,450 191

9,731 683 66,608 50 -

2,992,332 30,373 650,556 15,569 93,879 191

6,256 1,380 26,458 9,127 4,376 -

677,691 736 11,364 -

147,940 1,302 920 3,245 -

3,824,219 33,791 689,298 27,941 98,255 191

4,057,650 55,593 769,702 24,324 115,152 921

29,769 10,939 1,688 5,788

129,440 22,828 4,712 30,173

14,885 5,750 844 2,547

12,550 50,196 844 1,945

100,470 134,113 66,771 50,580

924,359 4,930 112,535 29,390

22,327 80 8,439 2,176

1,233,800 228,836 195,833 122,599

55,817 2,195 2,532 5,340

29,769 56,262 844 850

26,048 9,641 844 1,523

1,345,434 296,934 200,053 130,312

1,279,116 119,548 182,671 184,350

$ 37,968,316

Depreciation and amortization Delivery expense Rental expense Miscellaneous

289,375 $ 10,299,269 $ 235,535 440,979

Membership Development

607,615 $ 400 23,482

Occupancy Recognition material Professional development Taxes Repairs and maintenance Tree purchases and shipping expenses

159,241 $ 2,615,705 $ 5,608,585 $ 160,186 74,349 135,214 227,767 18,018

General and Administrative

707,730 $ 11,864,619 $ 12,110,111 235,926 261,868 1,072 505,131 636,359

Total for year ended June 30, 2010

$

1,567,842

$ 2,720,769

$

536,178

$ 2,617,317 $ 14,420,395 $ 11,015,674 $

475,593 $ 33,353,768 $

862,445

$ 2,460,996

$ 1,291,107

Total for year ended June 30, 2009

$

1,315,625

$ 2,862,346

$

439,161

$ 2,667,814 $ 17,228,469 $ 11,196,864 $

808,364 $ 36,518,643 $

798,100

$ 2,338,694

$ 1,608,981

$ 41,264,418

Arbor Day Foundation • 2010 Annual Report

25

NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2010 AND 2009 Note 1 – Summary of Significant Accounting Policies: The Arbor Day Foundation was incorporated under the Nebraska Nonprofit Corporation Act on September 3, 1971. The purpose of the Foundation is to engage in educational and charitable activities including officially promoting the annual observance of Arbor Day; inspiring people to plant, nurture, and celebrate trees; stimulating a world-wide program of tree and horticultural planting and care; advancing nature education and environmental education; and maintaining Arbor Day Farm, the estate of Arbor Day’s founder J. Sterling Morton.

Basis of Accounting – The financial statements of the Arbor Day Foundation have been prepared on the accrual basis. The significant accounting policies followed are described below to enhance the usefulness of the financial statements to the reader.

Basis of Presentation – Financial statement presentation follows the recommendations of the Financial Accounting Standards Board in its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-for-Profit Organizations. Under SFAS No. 117, the Foundation is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.

Promises to Give – Unconditional promises to give are recognized as revenues or gains in the period received and as assets, decrease of liabilities, or expenses depending on the form of the benefits received. Conditional promises to give are recognized when the conditions on which they depend are substantially met.

Restricted and Unrestricted Revenue and Support – Donor restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished) temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of Activity as net assets released from restrictions.

Cash Equivalents – Cash equivalents consist of investments with original maturities of 60 days or less. Certificates of deposit and other securities with original maturities over 60 days are classified as investments.

Risk Concentration – As of June 30, 2010 and 2009, the Foundation’s cash and investment balances at particular institutions exceeded federally insured limits by $4,190,002 and $4,138,884, respectively. As of June 30, 2010 and 2009, these balances were collateralized with federal agency bonds.

Investments – Investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets. Investment income and gains restricted by a donor are reported as increases in unrestricted net assets if the restrictions are met (either by passage of time or by use) in the reporting period in which the income and gains are recognized.

Inventory – Inventory is stated at the lower of cost or market determined by the first-in, first-out method.

Property, Equipment and Depreciation – Property and equipment acquisitions are capitalized when obligations are incurred for such fixed assets. Donated property, significant in amount, is capitalized at its fair value when received. Depreciation of buildings and equipment is provided over the estimated useful lives of the respective assets on a straight-line basis. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the Statement of Activity for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized.

Accrued Vacation Liability – Accumulated unpaid vacation pay is accrued in the Foundation’s financial statements. At June 30, 2010 and 2009, unpaid vacation pay amounted to $400,156 and $391,483, respectively.

Advertising – Advertising costs are charged to expense as incurred. For the years ended June 30, 2010 and 2009, the Foundation’s advertising costs totaled $505,131 and $636,359, respectively.

Donated Assets – Donated marketable securities and other noncash donations are recorded as contributions at their estimated fair values at the date of donation.

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. Accordingly, actual results could differ from those estimates.

Functional Allocation of Expenses – The costs of providing various programs and other activities have been summarized on a functional basis in the Statement of Activity and in the Statement of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

Note 2 – Investments: Investments are charitable gift annuities consisting of mutual funds. The investment received, and corresponding annuity payment liability, are recognized at fair value in the period in which the investments are received. The fair value of these investments as of June 30, 2010 and 2009, was as follows:

Property and equipment as of June 30, 2010 and 2009, consisted of the following:

Estimated Life

2010 $ 1,419,126 27,349,933 125,082 1,464,538 103,074 1,383,386

2009 $ 1,419,126 27,167,367 2,943 1,460,364 96,842 1,311,524

15-50 years 20 years 5-31 years 20 years 5 years

2,844,103 2,537,112 1,831,797 844,724

2,834,702 2,314,925 1,797,745 844,724

5-10 years 5-8 years 5 years 10 years

Total cost

Less--Accumulated depreciation

Total property and

equipment

39,902,875

Land Buildings Leasehold improvements Farm improvements Orchards Computer hardware Lied Lodge and Conference Center equipment Furniture and equipment Computer software Traveling exhibit

39,250,262

16,248,692

14,909,411

$ 23,654,183

$ 24,340,851

Depreciation expense for the years ended June 30, 2010 and 2009, was $1,342,270 and $1,271,788, respectively.

Note 4 – Other Assets: Other assets as of June 30, 2010 and 2009, consisted of the following: 2010

Contributions receivable from charitable trusts (Note 5) Intangible assets (Note 6) Equity in cooperative

$ $

51,128 2,281 53,409

2009 $ $

51,204 3,162 2,281 56,647

Note 5 – Split-Interest Agreements: The Foundation has entered into irrevocable agreements with donors whereby in exchange for the gift from the donor the Foundation is obligated to provide an annuity to the donor or other designated beneficiaries for a specific number of years.

For these agreements, where the Foundation is not the trustee, the Foundation has recorded an asset as contributions receivable from charitable trusts which represents its beneficial interest in the agreements.

Assets as of June 30, 2010 and 2009, of split-interest agreements and income recognized are summarized as follows: 2010 $

2009

Assets included in property and equipment where the Foundation is trustee

Contributions receivable from charitable trusts

51,128

Income (loss) recognized from change in value of split-interest agreements

(76 )

120,000

$

120,000 51,204 (15,706 )

Note 6 – Intangible Assets: Intangible assets are being amortized on a straight-line basis over 10 years.

Original Cost $ 40,000

Web Domain Name Rain Forest Rescue Trademark

Income Tax Status – The Foundation is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the Foundation’s tax-exempt purpose is subject to taxation as unrelated business income. In addition, the Foundation qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization that is not a private foundation under Section 509(a)(2).

Note 7 – Deferred Revenue:

Arbor Day Foundation • 2010 Annual Report

2009 $ 1,033,630

Note 3 – Property and Equipment:

Comparative Financial Information – The 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 accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Foundation’s financial statements for the year ended June 30, 2009, from which the summarized information was derived.

26

2010 $ 1,011,545

Charitable Gift Annuities

$

Amortization Expense $ 666

33,274 73,274 $

Accumulated Amortization $ 40,000

2,496 3,162 $

$

33,274 73,274 $

Net Value

-

Deferred revenue consists of unearned program support and royalties. The Foundation will record program revenue in the future to match the future costs of providing these program services.

Note 8 – Revolving Credit Note Payable and Letter of Credit:

Minimum future lease payments under capital leases as of June 30, 2010, were as follows:

The Foundation has secured a revolving credit note agreement with Union Bank and Trust, Lincoln, Nebraska, which provides it may borrow up to $1,300,000 at the bank’s variable interest rate. The revolving credit note is supported by an agreement which provides for certain restrictive covenants which includes limitations on disposal of certain property and assets and maintenance of certain ratios. The note is secured by certain real property, all accounts, notes, pledges and bequests, receivables, rights to payment, inventory, machinery and equipment, furniture and fixtures and any general intangible assets. Amounts borrowed on the revolving credit note as of June 30, 2010 and 2009, were $-0- and $-0-, respectively. The revolving credit note expires January 31, 2011, and is renewable at the bank’s discretion. In addition, the Foundation has established an irrevocable letter of credit of $1,200,000, for securing payment drawn in favor of a USDA Forest Service agreement. The letter of credit expires December 31, 2010, and is renewable annually. The fee for the letter of credit is waived.

There was no outstanding balance under the letter of credit as of June 30, 2010.

June 30, 2011 June 30, 2012 June 30, 2013

Net minimum lease payments Amount representing interest

Present value of net minimum lease payments

6,210 6,210 4,853 17,273 (1,179 )

$

16,094

Note 11 – Designated and Restricted Net Assets: The Board of Trustees has designated unrestricted net assets as follows:

Note 9 – Long-Term Debt: Long-term debt as of June 30, 2010 and 2009, consisted of the following:

2010

Contribution designated for endowment

2009

2010 Note payable to Union Bank and Trust, Lincoln, Nebraska, with 5.95 percent interest. Secured by real estate in Lincoln, Nebraska. Payable in monthly installments of $20,267 with the balance of principal due on April 4, 2013.

$

Other endowment purposes

936,417

$

1,137,732

183,463

120,215

Note payable to Farmers Bank, Nebraska City,

Nebraska, with 7.25 percent interest. Secured by real estate in Nebraska City, Nebraska. Payable in monthly installments of $2,406, maturing 164,658 November 6, 2017.

35,213

38,790

Note payable to John Deere Credit, with a 6.75 percent interest. Secured by equipment in Nebraska City, Nebraska. Payable in monthly installments of $548, maturing August 28, 2011.

1,087

7,385

Note payable to John Deere Credit, with a 6.90 percent interest rate. Secured by equipment in Nebraska City, Nebraska. Payable in annual installments of $18,561, maturing July 1, 2012.

33,658

-

$

998,733

1,383,339

110,542 $

1,109,275

Temporarily restricted net assets as of June 30, 2010 and 2009, are available for the following purposes: 2010 Rooftop Garden Contribution receivable - charitable trusts Hazelnut Project Orchard Restoration

180,777

Non-interest bearing note payable to the City of Lincoln for $60,000 with a discounted value of $44,000 at a stipulated interest rate of 6.5 percent.

Secured by real estate in Lincoln, Nebraska.

Payable in monthly installments of $500, maturing November 30, 2017.

1,261,073

2009

122,266 $

$

Note payable to Microsoft Corporation with an imputed interest rate of 6.0 percent. Payable in monthly installments of $6,045, maturing on March 20, 2012.

2009

$

143,620 51,128 37,593 17,575

$

71,085 51,204 42,678 25,000

$

249,916

$

189,967

Permanently restricted net assets as of June 30, 2010 and 2009, are available for the following purposes: 2010 2009 Endowment purposes

$

44,742

$

37,999

Note 12 – Program Grants: During the years ended June 30, 2010 and 2009, grant income consisted of the following:

Note payable to Downtown Civic Ventures, with a 2.15 percent interest rate. Secured by real estate in Lincoln, Nebraska. Payable in annual interest only installments of $753, maturing June 1, 2014.

28,000

Note payable to Arbor Bank, Nebraska City, Nebraska, with 5.75 percent interest. Secured by equipment in Nebraska City, Nebraska. Payable in monthly installments of $542, maturing on April 16, 2015.

-

27,314 $

1,346,562

$

1,059,664

$

286,898 302,193 586,626 60,247 33,475 77,123

$

1,548,147

$

1,278,077

286,898

Less--Current portion

270,070

Long-term debt is scheduled to be retired as follows:

Year ending June 30, 2011

Year ending June 30, 2012

Year ending June 30, 2013

Year ending June 30, 2014

Year ending June 30, 2015

Thereafter

Total

$

$

Grant Source

Grant Purpose

2010

Government: U.S. Department of Tree City USA Agriculture Training Academy

Hazelnut Consortium

Leadership Training

Clean Air Conference

Government Grant Income Private: Toyota Foundation Home Depot Foundation Kimmel Foundation Other

$

255,608 134,994 79,900 -

2009 $

260,110 59,037 44,291

470,502

363,438

Educational Programs

559,000

300,000

Educational Programs Kimmel Orchard

156,090 4,500 13,970

348,910 35,304 19,084

Private Grant Income

Total Grant Income

733,560 $

1,204,062

703,298 $

1,066,736

1,346,562

Note 10 – Capital Leases: The Foundation is the lessee of office and restaurant equipment under capital leases expiring in 2013. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the assets. The assets are amortized over their estimated productive lives. Amortization of assets under capital leases is included in depreciation expense for the fiscal year 2009.

Following is a summary of property held under capital leases: Office Equipment Restaurant Equipment

Less: Accumulated depreciation

$

105,272 26,767 132,039 (62,196 )

$

69,843

Arbor Day Foundation • 2010 Annual Report

27

Note 13 – Other Income:

Note 18 – Related Party Transactions:

Other income listed on the Statement of Activity is detailed as follows:

The Foundation and Dimensions Educational Research Foundation (Dimensions) collaborate on the creation of educational activities and programs that support the Nature Explore program. In connection therewith, for the years ended June 30, 2010 and 2009, the Foundation has paid Dimensions for research and consulting services, $526,000 and $545,000, respectively. These are considered related party transactions as the spouse of the Foundation’s chief executive officer is the executive director of Dimensions.

List rental income Education material sales Tree City USA material sales Conference and training Rental income Gain (loss) on investments Interest income Gain (loss) on sales of property and equipment Royalties Tree planting events Other income under $25,000

Total other income

$

$

2010

544,088

135,917

59,533

57,150

56,429

11,153

6,929

6,383

17,392

894,974

2009 $

$

395,200 173,632 62,285 304,711 (332,029 ) 42,899 (2,109 ) 200,000 22,550 3,381

The Foundation has a net operating loss carryforward that may be offset against future taxable income. If not used, the carryforward will expire between now and June 30, 2030. The loss carryforward at June 30, 2010, totals $15,636,708. No net operating loss is anticipated to be used prior to expiration; therefore, no valuation allowance has been established.

Note 15 – Leases: The Foundation has an agreement to lease Steinhart Lodge from the City of Nebraska City for a term of 99 years commencing June 1, 1985, for the total sum of $1. The Foundation has the option to extend the agreement for an additional term of 99 years for the total sum of $1. Since the lease term extends beyond economical life of the asset, the Steinhart Lodge lease has been shown as a capital addition at a value of $297,750. Steinhart Lodge is part of Arbor Day Farm.

The Foundation leases real property under two cancelable operating lease agreements. Net lease expense for the real property was $26,400 for each of the years ended June 30, 2010 and 2009, respectively. Under the first agreement, lease payments are $42,000 plus inflation adjustments annually through December 31, 2098. The Foundation subleased the first operating lease to another party under the same terms as the Foundation’s. Under the second agreement, lease payments are $26,400 annually through December 31, 2047.

The Foundation leases computer and office equipment under operating leases which expire in June 2014.

Total equipment rental expense amounted to $200,053 and $182,671 for the years ended June 30, 2010 and 2009, respectively.

Future net minimum lease payments for the following five years are as follows: Year ending June 30, 2011 $ 92,775 Year ending June 30, 2012 42,562 Year ending June 30, 2013 33,835 Year ending June 30, 2014 28,359 Year ending June 30, 2015 26,400

Note 17 – Allocation of Joint Costs: The Foundation conducted activities which incurred joint costs for distribution of direct mail fundraising appeals and educational information, and corporate marketing activities. These costs were allocated as follows:

2010

2009

Arbor Day Foundation • 2010 Annual Report

June 30, 2010 Charitable Gift Annuities Contribution Receivable

Charitable Trusts

Fair Value

Quoted Prices in Active Markets for Identical Assets (Level 1)

$ 1,011,545

$ 1,011,545

51,128

-

$ 1,062,673

$ 1,011,545

$

51,128

June 30, 2009 Charitable Gift Annuities Contribution Receivable

Charitable Trusts

$ 1,033,630

$ 1,033,630

$

-

51,204

-

$ 1,084,834

$ 1,033,630

Total

Total

Significant Unobservable Inputs (Level 3) $

51,128

51,204 $

51,204

Fair values for charitable gift annuities are determined by reference to quoted market prices and other relevant information generated by market transactions. The fair value of the charitable trusts is estimated as the present value of expected future cash inflows.

Assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3): Contribution Receivable–Charitable Trusts June 30, 2008

Change in value of trusts

$

June 30, 2009

Change in value of trusts

66,910 (15,706 ) 51,204 (76 )

$

51,128

The change in value of the split-interest agreement is attributable to the revaluation of the contribution receivable (charitable trusts) based on applicable mortality tables and current market conditions and is included in the change in temporarily restricted net assets for the year ended June 30, 2010.

The Foundation has established a defined contribution retirement plan qualified under Section 401(k) of the Internal Revenue Code. The plan covers full-time employees age twenty-one and over with one year of service. During the years ended June 30, 2010 and 2009, the Foundation contributed up to three and six percent of gross salaries, respectively.

Gross salaries exclude compensation in excess of $100,000 for purposes of determining the Foundation’s contribution. Employees may make contributions to the plan up to the maximum amount allowed by the Internal Revenue Code. Plan expenses were $346,282 and $398,445 for the years ended June 30, 2010 and 2009, respectively.

28

Fair Value Measurements at Reporting Date Using

June 30, 2010

Note 16 – Retirement Plan:

Fair values of assets measured on a recurring basis at June 30, 2010 and 2009, are as follows:

870,520

Note 14 – Income Taxes:

Total joint costs allocated to program services

Total joint costs allocated to fundraising

Note 19 – Fair Value Measurements:

$ 2,388,091 630,563 $ 3,018,654

$ 2,174,024 715,371 $ 2,889,395

Board of Trustees

Executive Management Team

Photo Credits

Bill Kruidenier Chair

John Rosenow Chief Executive

Doug Bereuter Vice-Chair and Chair-Elect

Matt Harris President

Carrie Benes Luciano Candisani Ed Goodwin Karina Helm Geoff Johnson Susan Cole Kelly William Lauer Jerry and Marcy Monkman Luis Peon-Casanova Pilar Sada / The Nature Conservancy Amy Stouffer Mitch Wiebell Kerry Wilken iStockphoto

Preston Cole Mrs. Lee A. Crayton, Jr. (Carolyn) Ray Empson Leticia Roche Fortuny Ed Jaenke Scott Josiah Ken Munson Dr. James O’Hanlon Dan Patterson

Britt Ehlers Vice President Human Resources Doug Farrar Vice President Arbor Day Farm Dan Lambe Vice President Programs Woodrow Nelson Vice President Marketing Communications Vicki Woolman Vice President Systems & Operations

Arbor Day Foundation • 2010 Annual Report

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“The cultivation of trees is the cultivation of the good, the beautiful, and the ennobling in man.”

J. Sterling Morton

50074401

100 Arbor Avenue • Nebraska City, NE 68410 • 888-448-7337