NANA continues blistering growth with eye on future
March 29th, 2011 | Alex DeMarban
A combination of surging metal prices and federal contracts boosted NANA to another year of record income in 2010, allowing it to provide millions in shareholder dividends while boosting endowments for elders and students, according to the company's annual report.
The report says:
Earnings for NANA and dozens of subsidiaries reached a record $41 million.
Total revenue rose to $1.6 billion in revenues, another record and nearly double 2006 levels.
Shareholder equity rose to $261.4 million, an increase of 7.5 percent from 2009.
The Native regional company's 12,500-plus shareholders can partly thank the world's largest zinc mine for the company's success.
The Red Dog deposit, which also produces lead on NANA lands, has pumped $596 million in proceeds into the company for more than 20 years.
Over that period, it's also improved budgets at other Native regional corporations by $341 million thanks to a federal sharing requirement.
Household income in the Kotzebue region jumped since the mine's opening, from about $18,000 in 1980 to $58,000 in 2008, the report notes, citing a McDowell study. Northwest Alaska residents with bachelor's degrees rose nearly 200 percent during that period.
Things could improve further: The flow of cash from the mine operation rose spectacularly in 2008, when a unique contracting term crafted by NANA leaders kicked in after Teck recovered all its capital investment plus interest.
Under its agreement with the operator, NANA began receiving 25 percent of the mine's net proceeds that year. The royalty payout has risen 5 percent each year and tops out at 50 percent.
"The royalties increased significantly in 2008 and beyond, and that has provided us with fairly significant amounts of investment capital," said Kevin Thomas, chief financial officer. "It's also increased the distributions to the other regions by probably a factor of four or five-fold at least."
The larger mine earnings last year helped NANA distribute $82 million to other Alaska Native corporations.
Higher zinc and lead prices drove a portion of the 2010 gains. Earnings in the company's natural-resource segment rose 213 percent between 2009 and 2010, blasting from $24.7 million to $77.3 million.
More federal spending also improved the bottom line, with management companies Akima Management Services, Qivliq LLC and Akmaaq playing a lead role in the company's government-services segment. Earnings there rose to $46.1 million, up almost $20 million from two years ago.
Some areas lag
Not everything was rosy. Ebbing activity in real estate, tourism and oil and gas industries weighed down some subsidiaries.
In tourism - NANA owns six hotels in Alaska - earnings fell from $3.9 million to $3.6 million.
Earnings in the professional and management services sector dropped from $7.6 million to a loss of 1.9 million.
The 'professional and services' businesses, which include Dowl HKM and NANA Management Services, showed signs of renewed growth toward the end of 2010, the report notes.
In that segment, NANA sold the majority of its stake in Worksafe, which provides drug and employee drug-and-alcohol testing for Alaska companies.
Despite the stunning overall growth the company's board of directors is looking ahead to the day when the mine stops producing, said Thomas.
That's estimated to happen in 2031, with last year's opening of the new Aqqaluk Deposit extending the mine's life by an estimated 20 years.
The board of directors has directed staff to replace or beat the mine's royalty income with new sources of money when that time comes, said Thomas.
NANA now operates more than 60 subsidiaries and affiliates to help it prepare for that day. Last year it broke ground in the film industry in Alaska - a promising field emboldened by state tax credits - buying 11 percent of Evergreen Films, an independent film company in Anchorage.
The board has also requested that extra cash be plowed into endowments.
The annual report, dubbed 'Building for the Future,' notes the company made a large contribution to the three-year old NANA Elders' Settlement Trust, enabling a special dividend of $2,000 for those 65 or older early this year.
The company distributed $20.5 million to more than 12,500 shareholders in 2010, a $3.3 million increase from the previous year. It also employed more than 1,300 shareholders paying them $48 million or about $37,000 each.
NANA also contributes heavily to the Aqqaluk Trust, created to preserve Inupiaq culture and language while promoting education.
The company spent $5.3 million on social and cultural programs in 2010. That's down slightly from last year and down significantly from $8.2 million two years ago.
The big difference is that $5 million was given to the Aqqaluk Trust's scholarship endowment in 2008, compared to $2 million the last two years, Thomas said.
"That's based on the board's consideration of everything that NANA has going on, cash flows available each year when they're going through the budget process," he said.
Alex DeMarban can be reached at firstname.lastname@example.org