A 'perfect storm' of financial woes means no NANA dividend
October 4th, 2013 | NANA Regional Corporation shareholders got a surprise last week in the mail. It was a letter from corporation Chairman Donald Sheldon telling them there will be no dividend this fall.
NANA Regional Corporation shareholders got a surprise last week in the mail. It was a letter from corporation Chairman Donald Sheldon telling them there will be no dividend this fall.
The corporation has approximately 13,300 Inupiat shareholders, and dividends can reach upward of a few thousand dollars per person, depending on the price per share.
For many in NANA's region and beyond, the absence of the yearly dividend is a huge blow to yearly incomes.
"In the villages where people are paying in the ballpark of $9-$10 per gallon of gas and just below that in stove oil to heat their homes, it has a huge affect," said shareholder Paulette Schuerch. "The dividends have historically been paid in early December, among other things this also gave us the opportunity to buy Christmas presents for family and friends."
Most shareholders have 100 to 200 shares each. Some have more if they've inherited them, and some have less depending on where they live. Children are also shareholders and can therefore collect the dividend. So, depending on the household, some families will have to do without $10,000 or more this year.
"For some families with four or five people that would have received the dividend, it's a huge percentage of income that they would have relied on it for groceries, heating fuel, holidays and paying off loans," said Kotzebue's Ian Erlich, former CEO of Maniilaq. "If it's not there, it has a large impact."
Shareholders received the letter late last week, though the word had already gotten around via email and Facebook.
"I was disappointed, but not all that surprised," Erlich said.
This week NANA senior staff traveled to all the villages in the Northwest Arctic and will head to Anchorage, Seattle and Fairbanks this weekend and next week to hold the corporation's annual informal shareholder meetings. Higher-ups in the corporation had a chance to hear concerns and comments from shareholders on a variety of topics, though the dividend was at the top of the list.
"The reaction has been mixed," said NANA Chief Financial Officer Richard Headrick, who has been traveling to the villages for the shareholder meetings.
Headrick said that once an explanation was given, most were understanding and appreciative that they were there.
There are many factors that lead to the decision to nix the dividend, Headrick said.
But the bottom line is, businesses go up and businesses go down. And this year, NANA was down.
Headrick sited the across-the-board federal budget cuts, known as sequestration, as one of the reasons, along with falling commodity prices and a poor economy in the U.S., Europe and Asia.
He noted that NANA did provide a dividend in the spring, though it was the understanding of most that the spring money was the second half of the 2012 dividend.
The corporation owns NANA Development Corporation, which in turn operates businesses in all 50 states and around the world.
NANA relies heavily, about $900 million worth of its revenue, on the federal government, Headrick said. As well as profits from oil and gas activities and royalties from the Red Dog Mine, all of which were lower than expected this year, he said.
But NANA is working to "implement changes that will have a positive affect in the future."
Changes like consolidating holding companies and businesses in the oil and gas sector to cut back on infrastructure costs. NANA's revenue, which was $1.8 billion in 2012, comes from three main sources - natural resources, like the royalty stream from Red Dog; the corporation's investment portfolio; and active business operations like GIS, NANA Oilfield Services and NANA Construction, Headrick said.
And though the corporation has been gaining momentum — profits were up 67 percent from 2009-2013 compared to the five years prior — this year was "a perfect storm from a financial performance standpoint."
But "one year does not make a trend," he said. "We've had bumps in the road before."
Headrick noted that while the decision to cut out dividends was not easy, it is the responsibility of the board to ensure a bright future for shareholders.
"The dividend is just one part of what we provide," he said. "We also provide social and cultural benefits."
Headrick is optimistic that fiscal year 2014, which started on Oct. 1, will be more lucrative for NANA.
And "when performance allows it, the board will consider paying dividends."
A new policy was brought forward in September to "reduce the likelihood of no dividend" from happening again, though the amount is never completely predictable, he said.
But for now, shareholders are left with much less in their bank accounts as winter sets in.
"We have to teach ourselves not to rely on other people to help take care of us financially," said Selawik's Tanya Ballot. "It's great when we get a dividend but it's a learning experience when we don't.
"It's understandable, businesses do good and businesses have hardships."
Shareholders like Schuerch, Erlich and Ballot question some of NANA's business decisions, especially the purchase of Grand Isle Shipyards in 2011, which was rife with controversy earlier this year and was the center of a federal investigation.
"I understand the frustration," Erlich said. "And there has to be accountability but I think the biggest gains are going to be from looking at the business decisions."
Headrick, however, assured that "NANA is a very stable and sound corporation.
"This was just a dip in the road in a normal business cycle and we expect things to improve in FY14."
Shareholders can find phone numbers and email addresses to access for more information on the corporation's Facebook fan page. A recap of information will also be available in the next edition of Hunter, sent to shareholders 18 and over, in mid-October.