sealaska 2011 annual report
DESCRIPTION
The Sealaska 2011 Annual ReportTRANSCRIPT
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honoring our past and our future
Haa ShagóonForty years ago in June Sealaska was legally incorporated.
As we celebrate our 40th anniversary, we live our core value of Haa Shagóon—honoring our past while looking ahead to the future. For years, our parents and grandparents fought for the passage of a land claims bill that would restore to us a portion of the land that had been unjustly taken. The passion and beliefs of people like Emil Notti, Marlene Johnson, Amy Hallingstad, Peter Simpson and countless others led to the historic passage of the Alaska Native Claims Settlement Act (ANCSA) in 1971, securing in perpetuity our abiding connection to the land.
Last year in this report we celebrated the 40th anniversary of ANCSA and the iconic leaders who fought so hard to secure its passage. This year, we recognize the leaders born since 1972 who share their vision of the company through its next 40 years.
Our first 40 years have seen the company grow into a strong institution with subsidiary businesses operating internationally. We’ve educated, trained and hired tribal member shareholders to be leaders throughout our diverse operations, and through the work of the Sealaska Heritage Institute (SHI) we have seen a resurgence of Native culture, art, dance, language and pride in living our Native values. As Native people, we’ve come together in solidarity and in purpose, putting our values into action every day.
Our very first mission statement captured that sense of solidarity and shared values and the strength of our collective identity. Today, our mission is to create opportunities for our people and to strengthen culture and communities within our homeland by embedding Alaska Native values in daily operations and achieving business excellence.
that’s values in action.
letter
dear tribal member shareholders,Forty years ago in June, Sealaska was
incorporated under the terms of ANCSA. The
purpose of the act was to forever protect Alaska
Native land, rights and ways of life. ANCSA was
forged with the strength of our collective identity
as Alaska Natives and based upon core Native
values that guide our actions. As we celebrate
our 40th anniversary, the board of directors has
reaffirmed that our values will continue to guide
us and the vision for our future, including those
shared by several young Alaska Natives in this
annual report. Together, we will chart the path
for our continued collective success.
You will be hearing more about our core Native
values as we renew our focus and revitalize
Sealaska through our “Values In Action” effort.
Values in Action will permeate everything we do,
grounding all of our efforts in our core values:
Haa Aaní, our land, and the basis of our collective
identity and culture; Haa Shagóon, our past,
present and future; Haa Latseen, our collective
strength and leadership; and Wooch.Yax, balance,
reciprocity and respect. Values in Action will
make plain to Sealaska tribal member share-
holders and the public what Sealaska does and
why we do it. We are not an ordinary for-profit
enterprise. We leverage our core cultural values
as a basis to achieve business excellence that will
create sustainable economies on our land and
opportunities for tribal member shareholders.
Our values are evident in Sealaska’s activities
and growing business ventures.
The formation of the Sealaska subsidiary Haa
Aaní, LLC by the Sealaska Board of Directors
speaks directly to the core value Haa Aaní.
Haa Aaní, LLC was established to promote
the cultural, social and economic viability
of Southeast Alaska communities through
collaboration, innovation and direct-resource
investment in community stability. Haa Aaní,
LLC has built momentum through its initiatives,
such as oyster mariculture and renewable energy,
and we are now seeing interest from state and
municipal governments to collaborate in creating
sustainable economic opportunities. In the
region, Sealaska has led by example, developing
and installing the first renewable energy biomass
heating system for a commercial building in
Alaska, and championing the construction of the
new Walter Soboleff Center in Juneau.
In alignment with the value of Wooch.Yax,
Sealaska continues to create opportunities with
business partners through relationships based on
balance, reciprocity and respect. We continue to
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leverage our Native identity through federal 8(a)
contracting and supplier diversity competitive
advantages, both expanding existing opportu-
nities and developing new ones. But Sealaska
cannot just rely on organic growth: our aim is
to acquire at least one sizeable new enterprise
within the next two years that economically
impacts the Southeast Alaska region, has a track
record of profitability, a pathway to the global
economy and leads to greater tribal member
shareholder capacity.
Increasing tribal member shareholder capacity
is a key goal for Sealaska and reflects the
value of Haa Latseen as we work to develop our
shareholders for employment and leadership.
Especially in rural communities and villages,
where economic conditions are challenging
and jobs are difficult to come by, Sealaska
subsidiaries place a priority on shareholder
employment. Opportunities based in Haa Shagóon
combine the wisdom of experienced Sealaska
directors and staff with leadership programs
for shareholders, such as Sealaska’s scholarship
program, internship program and service as a
board youth advisor.
Along with creating new economic opportunities,
Sealaska has been working hard to maintain
the sustainability of our timber operations—a
key economic driver in the region. Key to this
effort is the continued fight for Sealaska’s land
legislation, a Congressional bill we call Haa
Aaní. We appreciate the hard work of the Alaska
delegation in promoting our bill and credit them
with our success thus far.
It is a huge challenge to live up to the strength
and insight of our past leadership and the
vision of our future leaders. It will take all of us,
standing together, to achieve our ultimate goal
of thriving, healthy Native communities and
culture. We hope you will join us in realizing our
aspirations for the next 40 years and beyond.
Albert M. Kookesh Board Chair
Chris E. McNeil Jr. President and Chief Executive Officer
1980 s 1990 s 2000 s 2011
VISIONARY STATEMENTS from annual reports of the 1970s
1970 s
1970s
“The hearts and minds of our people are as great a resource as dollars, minerals, crops or goods, we pledge to remain what we started out to be; a corporation with a conscience.”
“As a business we must be willing to stand on an equal footing with any business in the world. And we have to be willing to be measured against the demands of the competitive business world.”
“What we have achieved with our investment of time and determination is not a harvest, but the right to plant an immensely valuable crop.”
“With this first annual report, your Sealaska Corporation prepares to take the final organizational steps that will lead our company and stockholders, no matter where they live, to a permanent place in the future of Alaska.”
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Barbara Blake, WAAHLAAL GIDAAK Age: 30 Tribe, Clan: Haida/Tlingit and Athabascan, Yahkw
,Láanaas
Occupation: Technical assistant specialist for the Intertribal Agriculture Council
Barbara applies the lessons of leadership and service she learned as a Sealaska board youth advisor as she helps Alaska Natives navigate the U.S. Department of Agriculture and its myriad programs. Much in the way her career is about supporting Alaska Natives, she believes a successful future for Sealaska means continuing to support tribal member shareholders.
David R. Boxley, Gyibaawm laxha Age: 30 Tribe, Clan: Tsimshian, Wolf Occupation: Self-employed artist
A self-employed artist, David displays his masks, sings original songs and dances with his father’s troupe at Celebration, a biennial event hosted by Sealaska Heritage Institute. David realizes the urgency and importance of preserving Native culture, and would like to see an increase in funding for education, language studies and art. “The next generation should be focused on language and living their lives as modern Tlingit, Haida and Tsimshian people,” he says.
“We have to understand what came before,
before we can change it.” – David Boxley
natural resources see growth in emergent marketsAlaska Coastal Aggregates (ACA) is a supplier of aggregate material for state, federal and municipal projects in coastal Alaska.
2011 was a strong year for ACA, with a 99 percent rise in net revenues over 2010, a substantial increase in tribal member employees, most notably in Klawock, Kake and Hoonah, and a new retail sales office in Yakutat.
Looking to 2012, ACA will maximize tribal member and community employment through additional customer-based operations. Additional initiatives will include a focus on expanding the cement and sand markets in Southeast Alaska and developing a supply line to local mines.
A primary timber producer in Southeast
Alaska, Sealaska Timber Corporation (STC)
continues to pursue forward-thinking
initiatives that ensure the health of the forest
and allow us to continue to harvest timber.
While other timber companies felt the sting of
late quarter dips in operations, STC success-
fully read the markets and avoided significant
drop-offs in sales. STC also continued its work
to engage communities regarding its timber
operations by committing to a “no surprise”
policy that keeps communities abreast of
timber programs in their vicinity.
For STC, one of the highlights of the year
was finding an ancient, partially carved
Haida canoe on forested land Sealaska owns
near the Organized Village of Kasaan (OVK)
on Prince of Wales Island. Recognizing the
canoe’s historical importance, STC took
immediate steps to safeguard the site and
engaged OVK with ongoing protection and
management of the site.
2012 will be another forward-looking year,
with an emphasis on leveraging STC’s skill
set in the region and further defining its role
within a changing industry. The company
will also continue to work with its young
growth stands, focusing on future yields and
opportunities, and setting up the company for
ongoing success.Sealaska Timber Corporation and the
Juneau Economic Development Council
co-chaired a cluster working group on
Southeast timber operations.
natural resources
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99%Alaska Coastal Aggregates exceeded 2010 net revenues by
ACA manages the cedar form program,
which supplies paddle forms
to young artist groups in
Southeast Alaska.
1970 s 1990 s 2000 s 2011
VISIONARY STATEMENTS from annual reports of the 1980s
1980 s
1980s
“We have incorporated the strengths of our culture into our business philosophy.”
“It is not enough to say we support our culture. We must do something.”
“As Western culture and institutions influence the values of our young people, and as assimilation threatens the continuity of our heritage, our relationship with the land is more important than ever. It renews our identity and makes us unique. It sustains us.”
“We will not lose sight of the uniqueness of Sealaska and our special relationship to shareholders and their culture and heritage.”
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Sarah Dybdahl, AAnshaawatk’iAge: 30 Tribe, Clan: Tlingit, Taakw.aaneidíOccupation: Project manager at Sealaska Heritage Institute
Through SHI scholarships and internships, Sarah has worked her way to project manager for SHI, and will be organizing Celebration for the second consecutive time. As the youngest board member of her village corporation, she is modeling a Sealaska tradition of engaging the next generation of tribal member shareholders to take leadership positions.
Ishmael Hope, KAA KWAASKAge: 30 Tribe, Clan: Tlingit, Kiks.ádiOccupation: Intern, Sealaska Heritage Institute
Ishmael is a storyteller, learning the art from his Elders with support from SHI. As Sealaska continues to grow, Ishmael sees it as a tool to keep indigenous languages and multiculturalism alive. He also believes that modern ways of doing business can be positively influenced by incorporating traditional values. “We are much more than symbols,” he says. “It helps us to see the world as our ancestors did.”
“I would like to see Sealaska continue to be an advocate for our people.” – Sarah Dybdahl
20 Number of Sealaska tribal members newly employed at a fish processing plant in Kake, Alaska.
haa Aaní, LLC
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building economic growth in southeastSince its founding in 2009, Haa Aaní, LLC has
been working in partnership with governments,
municipalities, Native organizations and tribes
to promote and create thriving and viable
communities in Southeast Alaska.
As rising energy prices and unemployment
stalk Southeast communities, Haa Aaní,
LLC feels a continued sense of urgency and
desire to bring working solutions to Southeast
Alaska’s rural communities.
In 2011, oyster mariculture took center
stage. Seeking to support a tribal member
shareholder who revitalized a defunct oyster
farm in Angoon, Haa Aaní, LLC brokered a
partnership with Pearl of Alaska, the largest
oyster seed producer in the state, to buoy and
stabilize the small farm. Haa Aaní, LLC also
partnered with Yak-Tat Kwaan to form three
new oyster farms in the Yakutat region,
which will provide jobs for tribal members and
produce more oysters in 2012 than the entire
state combined.
Haa Aaní, LLC also continues to promote
renewable energy across Southeast Alaska.
Projects like the oil-to-wood pellet conversion
implemented by Haa Aaní, LLC at Sealaska
Plaza saved $45,000 in heating costs in 2011. As
a result of the company’s leadership, the U.S.
Forest Service and the U.S. Coast Guard have
followed suit and converted their buildings to
renewable energy.
In 2012, Haa Aaní, LLC will establish the
not-for-profit Haa Aaní Community Development
Financial Institution (CDFI). The CDFI is
intended to spur economic development and
meet the needs of those who might not qualify
for traditional financing.
$45,000The amount saved on heating Sealaska Plaza in 2011, thanks to the conversion to wood pellet heating, a Haa Aaní, LLC project.
1970 s 1980 s 2000 s 2011
VISIONARY STATEMENTS from annual reports of the 1990s
1990 s
1990s
“Growing, harvesting, replanting, and maintaining strict environmental safeguards are equally important jobs for us.”
“Sealaska is responsible for balancing conservation and environmental considerations with shareholders’ economic needs.”
“Sealaska has taken a leadership role in backing subsistence laws that meet shareholders’ needs and that reflect traditional historical practices.”
“Sealaska is many things to many people. But most of all, it is a unique blend. It helps preserve the land and culture of our people, and its business success makes possible economic, educational and cultural benefits for all shareholders.”
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Robert KinneenAge: 37 Tribe, Clan: Tlingit, Eagle Occupation: Chef, co-owner of Fresh 49
Chef and traditional foods advocate Robert Kinneen is inspired by Sealaska’s cultural programming and works to perpetuate Alaska Native resilience. In the future, he hopes to see Sealaska invest in more initiatives like Haa Aaní, LLC, a subsidiary that brings economic opportunities to rural Southeast by incorporating traditional values, like respect for the natural environment. “If you take care of the land it will take care of you. It’s a reciprocal relationship.”
Melissa Kookesh, X’EETOOW Age: 35 Tribe/Clan: Athabascan/Tlingit, L’eeneidí Occupation: Assistant to the president and event coordinator for Central Council Tlingit & Haida Indian Tribes of Alaska (CCTHITA)
As a staff member at CCTHITA and a Sealaska tribal member shareholder, Melissa sees the cooperation between the two entities as one of the most positive aspects of her work. “We’re most powerful when we come together,” she says. She believes a successful future for Sealaska means unity across all Native organizations.
“Everything we do is for our people, and we have to be united to move forward...”
– Melissa Kookesh
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100%Year-over-year growth in federal business for Managed Business Solutions
services find expanded opportunitiesColorado-based Managed Business Solutions (MBS) met with success in 2011,in spite of a challenging business climate and delays in negotiated contracts. MBS grew its federal business by 100 percent through federal 8(a) contracting, further diversified its commercial business and launched its Kake, Alaska office with five tribal member shareholder employees. The company also gained traction with its enterprise software solutions, a shareholder-management software program designed for Alaska Native corporations. In 2012, MBS anticipates that increased stability will translate into revenue and profit growth, as well as job opportunities for tribal member shareholders.
Our Subsidiary of the Year for the second year running, Sealaska Environmental Services (SES) achieved a 19 percent increase in profits from last year. Dedicated to environmental management and remediation, SES won three large contracts in 2011, including two with the U.S. Army Corps of Engineers and a competitive contract with the U.S. Navy in Norfolk, Virginia. 2011 was also a year of focused outreach to expand SES’ client base, particularly in New Mexico. With 95 percent of its revenue coming from federal contracts, SES must contend with the general tightening of federal budgets. At the same time, SES continues to build internal capacity and in 2012 will become Sealaska’s first subsidiary to graduate from U.S. SBA 8(a) program.
$25 million Amount of
each of two contracts with the U.S.
Army Corps of Engineers won by
Sealaska Environmental Services
services achieve global presenceFor Security Alliance, LLC (SA), 2011 was a year of geographic expansion. SA opened operations in Los Angeles based on a three-year, U.S. Department of State contract and a new niche in close protection (bodyguard) services. SA also established operations in Seattle to provide security services. In South Florida, SA won three new contracts. In 2012, SA intends to hold on to two major contracts that are expiring this year and which are up for competitive bidding, increase its market share in South Florida and build on its Seattle operation with the goal of creating employment opportunities for tribal member shareholders.
On January 14, 2011, Whiteman Air Force Base in Missouri officially activated its MQ-1 Predator drone squadron beddown facility, a
mere six and half months after kicking off the project with Sealaska Constructors, LLC (SC). The blistering pace was met through careful collaboration between the design team and SC, who was the primary contractor. As a result of this project, SC was awarded new work for the MQ-9 Predator drone. In June, SC was inducted into the Associated General Contractors’ Safety Team based on the high standards of its jobsite safety policies and procedures. SC continues to pursue federal contracts for general construction, civil and infrastructure projects, and environmental remediation and abatement services. SC faces competition from non-federal contractors stepping into federal work and driving down prices. Going forward, SC will stay sharp by focusing on teamwork, safety and streamlined project delivery.
Less than 120 days The time it took Sealaska Constructors
and its design partner to design and construct a Predator drone facility at
Whiteman Air Force Base, 50 percent faster than the typical timeline for such projects.
services
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4Number of continents on which Sealaska Global Logistics works
Sealaska Global Logistics (SGL) is a full-service freight forwarder offering a range of international logistics solutions.
In 2011, SGL enhanced its transportation operations by entering markets in Asia and partnering with connectors on the ground who understand the local nuances. This past year, SGL secured a contract with a Fortune 500 company, proving it has the ability to compete with higher capacity companies and is capable of executing effectively on large projects.
2011 was also a year of building relationships—in India, Europe, Mexico and South Africa, among others—to establish SGL’s position in these emerging markets.
0Number of accidents on Sealaska Constructors, LLC job sites in 2011
1970 s 1980 s 1990 s 2011
VISIONARY STATEMENTS from annual reports of the 2000s
2000 s
2000 s
“The future belongs to those who have the vision to imagine the road ahead, the ability to form a workable plan, and the willingness to work hard to see it through.”
“This is a time of celebration. As we welcome the next generation of Native leaders into the corporation, we are changing the face of our future.”
“There is a vast wealth of knowledge and expertise within our shareholder base. Sealaska is committed to encouraging our shareholders to excel by providing higher education scholarships and career advancement opportunities through shareholder hire.”
“The Southeast economy has benefited significantly through our forestry programs; many communities depend economically on our employment and contracting opportunities.”
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Maka Monture, JINAATLAA Age: 18 Tribe, Clan: Tlingit, K’inéix KwáanOccupation: Student, University of Alaska Fairbanks
As a student of interdisciplinary Native American studies and a Gates Millenium Scholarship recipient, Maka strives to be an example for the next generation. “I live for my culture, and my culture lives through me.” Maka says her career will mirror Sealaska’s commitment to land stewardship and environ-mental protection, which she hopes Sealaska will continue to model in the future.
Madeline Soboleff Levy, SHAA HEI DI TIAA Age: 28 Tribe, Clan: Tlingit/Haida, L’eeneidi Occupation: Law student at UCLA School of Law, self-employed contractor for American Indian law publications
Madeline has worked hard to represent Sealaska, which has supported her through scholarships and internship opportunities, and has set her sights on practicing American Indian law. Madeline would like to see Sealaska receive its full land entitlement under ANCSA in order to further implement its sustainable forestry program and secure economic stability for the region. She hopes to support these endeavors by one day practicing law on behalf of Sealaska. Madeline has been appointed by the Sealaska board as the 2012–13 board youth advisor.
“I live for my culture, and my culture lives through me.” – Maka Monture
nypro kánaak continues to grow despite recessionNypro Kánaak is a full-service plastics manufacturing company that provides high-quality products and services, and is a joint venture between Sealaska and Nypro, Inc.
Building off its success in 2010, revenue grew by more than 30 percent, thanks in part to the acquisition of two anchor clients—Clorox, based in Oakland, Calif., and SC Johnson out of Wisconsin. Kraft also continues to be one of Nypro Kánaak’s top clients.
Nypro Kánaak has taken on the challenge of keeping up with expanding business by fine-tuning its complex manufacturing systems and adhering to lean processes. Goals for 2012 include diversifying its customer portfolio, continuing to pursue large consumer companies as clients and hiring more tribal member shareholders.
largest 4 clients Clorox KraftSC JohnsonProcter & Gamble
manufacturing
land legislation bills continue to move through congressIn 1971, ANCSA was signed into law, guaranteeing the return of a portion of the ancestral lands of Southeast Alaska’s Native peoples that was unjustly taken. With the return of this land, Sealaska continues to strengthen the economic, cultural and social vitality of its Tlingit, Haida and Tsimshian tribal member shareholders. In 2011, Sealaska’s work to realize the full return of those lands gained momentum.
In an historic bipartisan vote, the bill passed through the House Natural Resources Committee in July and the Senate version now awaits markup in the Senate Committee on Energy and Natural Resources.
This past year we also participated in dialogue with the Obama administration and congressional committee staff, resulting in significant movement toward an agreement on the specific lands that should be conveyed through the legislation.
Sealaska continues to work with all Southeast Alaska stakeholders to ensure that we reach a complete and balanced solution to support our communities, our people and the Tongass itself.
haa aaní—our land
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Ricky tagaban, L’eiw YéilAge: 22 Tribe, Clan: Tlingit, L’uknax.ádiOccupation: Student
Ricky is a student at the University of Alaska Southeast, where he studied the Alaska Native Claims Settlement Act (ANCSA) of 1971. Through his studies, he realized the importance of the land to Alaska Natives. This dedication to the land shapes his vision of Sealaska moving forward. “I think we live in the most beautiful place on earth,” he says. Ricky hopes Sealaska maintains that connection to the land and manages it well into the future.
Ben Young, K’UYÁANGAge: 25 Tribe, Clan: Haida, Taakuu ‘LaanaasOccupation: Haida language specialist and student, Butler University
Ben is currently studying secondary education in hopes of becoming a teacher, and has worked with Sealaska Heritage Institute to create Haida language curriculum geared toward K–12 schools. Ben believes Sealaska’s success lies in its ability to further meet the needs of its rural tribal member shareholders through investments in employment and education.
“Our corporation is so important because it’s one of the ways we relate to the land and each other.” – Ricky Tagaban
three decades of strengthening the future by honoring the pastIn 2011, Sealaska Heritage Institute helped the T’akdeintaan Clan of Hoonah repatriate eight cultural items illegally sold to the Pennsylvania Museum of Archaeology—a project 16 years in the making. The clan will continue to pursue repatriation of the remaining cultural artifacts.
In addition, SHI joined the University of Alaska Southeast to create an internship program that fosters archivists and museum curators. The program’s first intern was accepted to an archivist graduate program in California on a full scholarship.
SHI also engaged the community through our annual lecture series—this year focused on ANCSA—and our newly launched Box of Knowledge Occasional Paper Series, a platform for essays covering all aspects of Alaska Native life.
Looking ahead to 2012, SHI will continue its capital campaign for the Walter Soboleff Center, a premier facility for Southeast Alaska Native arts and cultures. The teachings of Dr. Walter Soboleff, who “walked into the forest” at the age of 102, will serve as the foundation for our new center in Juneau.
sealaskaheritageinstitute
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More than 100 The number of recordings of Tlingit speakers that will be migrated to a digital format, thanks to a grant from the Institute of Museum and Library Services $477,000 Amount that
SHI received in 2011 from Sealaska
and Sealaska Timber Corporation
in support of the institute’s
scholarship program
board of directors
albert M. kookeshAngoon, AlaskaChair
rosita F. worlJuneau, AlaskaVice Chair
byron I . mallottYakutat, Alaska
clarence jackson sr.Kake, Alaska
patrick M. andersonAnchorage, Alaska
bill thomasHaines, Alaska
edward K . thomasJuneau, Alaska
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Joseph G . nelsonJuneau, Alaska
j . tate londonBothell, Washington
barbara Cadiente-nelsonJuneau, Alaska
ralph wolfeYakutat, Alaska
Board Youth Advisor
jacqueline johnson pataFairfax, Virginia
sidney c . edenshawHydaburg, Alaska
jodi m. mitchellJuneau, Alaska
management
chris e . mcneil jr .President and Chief Executive Officer
sam landol Chief Operating Officer
Richard P. Harris Executive Vice President
anthony mallott Treasurer and Chief Investment Officer
jaeleen araujo Vice President and General Counsel
nicole hall ingstad Vice President and Corporate Secretary
doug morris Vice President and Chief Financial Officer
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darlene watchman Director of Shareholder Relations
Jason fuj ioka Director of Sales and Marketing
Vicki Soboleff Corporate Controller
todd antioquia Director of Corporate Communications
Nathan mccowan Director of Corporate
Development and Strategy
Mark Shirley Internal Auditor
Gail cheney Director of Human Resources
Ron wolfe Natural Resources Manager
Rob johnson Information Technology Manager
bob wysocki Director of Operations and Finance
Five-year summary of selected consolidated financial data
2007 2008 2009 2010 2011
Total revenues $ 193,977 $ 119,840 $ 196,017 $ 223,823 $ 259,487
Net income (loss) attributable to Sealaska 30,037 (40,851) 20,285 15,154 6,791
Total assets 360,944 333,892 339,336 361,151 368,664
Sealaska shareholders’ equity 273,652 224,960 240,469 247,933 249,778
Long-term bank debt 21,923 37,074 34,905 31,216 28,288
Short-term bank debt 2,914 2,253 1,949 1,172 1,275
Current ratio 2.75 2.68 3.02 2.39 2.30
Bank debt/equity ratio 0.09 0.17 0.15 0.13 0.12
Shareholders’ equity attributable to Sealaska per share
165.08 123.98 112.72 113.52 112.40
Net income (loss) attributable to Sealaska per share
20.38 (22.66) 11.82 8.08 3.73
Dividends per share $ 7.61 $ 4.32 $ 2.15 $ 3.56 $ 2.24
Cumulative distributions to shareholders and Village Corporations since inception 383,597 409,926 445,795 463,460 487,411
Cumulative Section 7(i) payments $ 315,455 $ 315,499 $ 316,942 $ 317,188 $ 317,188
❖ Dollars are in thousands except per share amounts and ratios. Years ended December 31.
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Corporate OverviewSealaska Corporation was formed in 1972 as one of the
13 Regional Native Corporations created as a result of the
Alaska Native Claims Settlement Act (ANCSA). Sealaska
received an initial sum of money and the title to at
least 362,000 acres of surface and subsurface land and
approximately 300,000 acres of additional subsurface land in
Southeast Alaska. Sealaska currently has more than 21,000
tribal member shareholders descended from the three
Alaska Native groups of Southeast Alaska: the Tlingit, Haida,
and Tsimshian.
Sealaska Corporation operates as a managed holding
company with subsidiaries that maintain offices throughout
the United States and in several other countries, including
Mexico, Canada and in Europe. These subsidiaries operate in
the following business segments:
1. Natural Resources
2. Manufacturing
3. Services
4. Gaming
In addition to these active sources of income, Sealaska also
generates income from the following passive sources:
› Investment income from internally managed
portfolio funds
› ANCSA Section 7(i) revenue sharing from other
Regional Corporations
Financial OverviewSealaska’s consolidated continuing operations produced
revenues of $259.49 million in 2011, up from $223.82 million
in 2010. Net income is $6.79 million, down from net income
of $15.15 million in 2010. Sealaska’s total assets at December
31, 2011 of $368.66 million grew 2.08 percent from $361.15
million at December 31, 2010.
Shareholders’ EquitySealaska shareholders’ equity was $262.1 million at the end
of 2011, which increased from $261.12 million at the end of
2010. Sealaska earned $6.79 million of net income in 2011
and paid shareholder dividends of $4.95 million.
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MD&Amanagement’s discussion and analysis of financial condition and result of operations
REVENUE BY BUSINESS SECTOR
-2% Investments
18%Natural Resources
28%Manufacturing
56%Services
Liquidity and Capital ResourcesAs of December 31, 2011, the Corporation had cash on hand
and current investment securities of $60.27 million. An
additional $91.14 million was held in other investments,
including the Marjorie V. Young Shareholder Permanent
Fund, venture capital funds and private equity funds.
Liquidity 2011 2010
Available funds
Cash, cash equivalents and current investments
$ 60.3 $ 57.7
(Less) restricted balances — —
Total available funds 60.3 57.7
Available line of credit and revolving loan
Total line of credit and revolving loan
68.5 61.5
Less: Outstanding balances (30.4) (26.3)
Less: Outstanding letters of credit — —
Total available line of credit and revolving loan
38.1 35.2
Total liquidity $ 98.4 $ 92.9
❖ Dollars are in millions. Years ended December 31.
Working Capital 2011 2010
Current assets $ 139.2 $ 124.7
Current liabilities 60.4 52.1
Working capital $ 78.8 $ 72.6
Current ratio 2.30 2.39
❖ Dollars are in millions. Years ended December 31.
I. Results of Operations
A. Natural ResourcesIn 2011, Sealaska’s natural resources business segment
was comprised of four wholly owned subsidiaries as well
as the Natural Resources Department within corporate
headquarters. Those subsidiaries were: Sealaska Timber
Corporation (STC), Sealaska Global Logistics, LLC, Alaska
Coastal Aggregates, LLC, and Haa Aaní, LLC.
The natural resources business segment produced revenues
of $45.01 million in FY2011, up from $41.22 million in 2010,
and produced income of $2.2 million in 2011, down from
income of $4.5 million in 2010.
Timber prices were favorable and contributed to a strong
performance for STC in 2011. Sealaska Global Logistics
doubled revenue but fell short of achieving profitability.
The corporate Natural Resources Department in 2011
achieved its forest stewardship plan, and secured $1.2
million in grants. The Natural Resources Department made
considerable investment toward securing Sealaska’s final
land entitlements authorized under ANCSA.
B. ManufacturingFor 2011, Sealaska’s manufacturing business segment
continuing operations included three Nypro Kánaak
facilities: Nypro Kánaak Alabama, Nypro Kánaak Iowa, and
Nypro Kánaak Guadalajara.
The manufacturing business segment produced revenues of
$72.22 million in 2011, up from $54.33 million in 2010, and
income of $1.32 million in 2011, up from income of $728,000
in 2010. Sealaska Corporation completed the shutdown
of Olympic Fabrication, LLC in 2011. As a result of the
shutdown, Olympic Fabrication 2011 liquidation income of
$75,000 is reported on the Discontinued Operations line of
the Consolidated Statements of Operations.
In 2011, Sealaska’s manufacturing businesses grew despite
a weak economy, as orders from large customers, including
Kraft, Clorox and SC Johnson, increased. The uptick in
demand and implementation of “lean” initiatives improved
earnings and operational efficiencies, which resulted in
the manufacturing business segment’s continued positive
income.
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C. ServicesFor 2011, Sealaska’s services business segment included
wholly owned subsidiaries Sealaska Environmental Services,
LLC, Kingston Environmental, LLC, Kingston Environmental
Services, Inc., Sealaska Constructors, LLC, Synergy Systems,
Inc., and majority-owned subsidiaries Managed Business
Solutions, LLC, MBS Systems, LLC, and Security Alliance of
Florida, LLC.
The services business segment produced revenues of
$145.49 million in 2011, up from $112.32 million in 2010,
and produced income of $3.50 million in 2011, up from
$3.06 million in 2010.
The recovery from the global economic recession did not
produce increased demand from non-governmental clients
in the services business segment for 2011, but activity from
governmental sources did show strong growth over the same
period. We believe that profits from the services business
segment will improve in 2012 due to implementation of
“lean” initiatives to achieve operational efficiencies and
control costs. The demand for services from key clients
should continue to improve in the immediate future.
D. GamingFor 2011, Sealaska’s gaming business segment included its
wholly owned subsidiary End-to-End Enterprises, LLC (E2E)
which is collaborating with the Cloverdale Rancheria of
Pomo Indians of California (the Tribe) to develop a gaming
casino and resort facility in Cloverdale, California.
The gaming business segment produced revenues of
$147,000 in 2011, down from $207,000 in 2010, and a loss of
$843,000 in 2011 after a loss of $4.68 million in 2010.
Before a casino development can begin, land suitable for
gaming that is not already held in trust for the Tribe must
receive an Indian Land Opinion (ILO) and complete a Bureau
of Indian Affairs administered Environmental Impact
Statement (EIS). The ILO was issued several years ago. The
EIS is now in the Draft EIS stage, which precedes issuance of
a Final EIS.
The EIS enables the land to be taken into trust for the benefit
of the Tribe and establishes the conditions for gaming to
occur on the land. The Draft EIS concludes that the land at
issue is suitable for gaming purposes. The same or similar
conclusion is considered highly likely for the Final EIS. While
awaiting the completion of the EIS process, the Tribe and E2E
are seeking financing partners/investors.
E. InvestmentsFor 2011, Sealaska’s investments business segment
primarily included the Marjorie V. Young (MVY) Shareholder
Permanent Fund and the Investment and Growth (I&G) Fund.
The investment business segment incurred investment
losses of $3.89 million in 2011, down from investment gains
of $14.44 million in 2010, and a loss, including expenses, of
$4.50 million in 2011 down from income, after expenses of
$13.92 million in 2010.
The combined balance of the MVY Permanent Fund and the
I&G fund was $134.42 million at the start of the year, and ended
2011 with a combined balance of $131.19 million invested in
stocks, bonds, real estate and private equity investments.
Both funds have maintained strong long-term performance,
which shows the strength of the funds’ diversification
strategy directed by the board-approved investment policy.
1. Marjorie V. Young Shareholder Permanent Fund
Renamed as a tribute to longtime Native leader and
retired Sealaska director Marjorie V. Young, Sealaska’s MVY
Shareholder Permanent Fund was created in 1987 to provide
tribal member shareholders with meaningful and consistent
dividends over time.
Sealaska management and the board of directors, along
with their investment advisors and investment managers,
constantly evaluate the risk exposure of the total portfolio
and make changes whenever possible to lessen risk—if doing
so does not inordinately affect long-term expected returns.
Sealaska utilizes the services of several external
investment managers.
2. Investment and Growth Fund
The I&G Fund is managed with a short-term investment horizon
and is used for both operational needs and new investments.
The management focus of the fund is to grow principal with
a prudent level of risk, maintain sufficient liquidity to fund
Sealaska’s current business operations, and provide a source
of capital for corporate development.
F. Corporate and Other IncomeFor 2011, Sealaska’s corporate and other income included
the revenue generating departments at corporate
headquarters besides the Natural Resources Department,
such as Real Estate and Diversity Solutions.
The corporate and other income business segment produced
revenues of $521,000 in 2011, down from $1.31 million in
2010, and a loss of $2.18 million in 2011 after a loss of $1.83
million in 2010. The primary business activities included in
this segment are Real Estate Leasing, Business Development
activities, and pursuit of Diversity opportunities.
II. Shareholder Benefits and Services
A. Sealaska Heritage InstituteEstablished in 1980, Sealaska Heritage Institute (SHI) is
Sealaska’s regional nonprofit organization whose mission is
to perpetuate and enhance the Tlingit, Haida and Tsimshian
cultures of Southeast Alaska. Founded for the Native
peoples of Southeast Alaska, SHI develops Native language
and culture programs, manages the Sealaska scholarship
program, coordinates repatriation of cultural and human
objects, and offers other Native programs. SHI is leading
an effort to build the Walter Soboleff Center in downtown
Juneau. The goal of the center is to promote Native art,
culture, research, and to be an archive center for Native
cultural artifacts. It will serve as an education center for
Native people, the general public and visitors to Alaska.
In 2011, Sealaska contributed $1.31 million in cash and
in-kind services to support the operations of SHI. Using
Sealaska donations as leverage, SHI raised an additional
$2.22 million in grants, revenue and sales. In addition,
Sealaska Timber Corporation contributed $292,000 toward
scholarships, and Sealaska contributed $185,000 for a total
of $477,000.
B. Elders’ Settlement Trust The Elders’ Settlement Trust (EST) is a grantor trust created
to provide a special economic benefit to original tribal
member shareholders at the age of 65. The assets and
liabilities of the EST are reported on Sealaska’s consolidated
financial statements (see notes 4 and 12). The EST, which
is governed by a board of trustees, assumes a long-term
annualized rate of return of seven percent in order for the
trust to meet the estimated benefit payments.
C. DistributionsSince its inception in 1972, Sealaska has distributed $487.41
million in dividends and ANCSA Section 7(j) payments to
tribal member shareholders and Village Corporations. The
outstanding shares of dividend paying stock are affected by
the open enrollment of Descendants when they reach 18
years of age, enrollment of Leftouts, and of the additional
shares issued to Elders reaching the age of 65. Adding more
dividend paying stock for the reasons described above
means that dividends will be paid to a larger number of
individuals and may result in smaller dividends to original
tribal member shareholders. However, the recipients of
Descendant and Leftout shares do not receive ANCSA
Section 7(j) payments. This protects a portion of the
distributions for original tribal member shareholders who
do receive those Section 7(j) payments. Also, when holders of
life estate Class D (Descendant), Class E (Elders) and
Class L (Leftouts) shares pass away, their life estate shares
are canceled.
D. Shareholder RelationsAt year’s end, Sealaska had 21,027 tribal member
shareholders. The Shareholder Relations Department
manages tribal member shareholders’ records, stock
transfers due to gifting or estate settlement, shareholder
distributions, and processing EST payments. In 2011,
Sealaska chose to move to a mail distribution method
outside of corporate headquarters for distributions to tribal
member shareholders. This reduces risk by increasing
privacy, and saves expense. The Shareholder Relations
Department is also responsible for the processing of
applications and the issuance of Class D and Class L
stock, following a 2007 vote by Sealaska tribal member
shareholders approving open enrollment for eligible
applicants. The department also issues new Class E Elders
stock to original shareholders at the age of 65, following
a 2009 vote by shareholders to provide this benefit. The
number of common stock shares outstanding at December
31, 2011 was 2,222,176.
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III. Special Note Regarding Forward-Looking StatementsCertain sections of the annual report contain forward-
looking statements that are based on management’s
expectations, estimates, projections and assumptions.
Words such as “expects,” “anticipates,” “plans,” “believes,”
“scheduled,” “estimates” and variations of these words and
similar expressions are intended to identify forward-looking
statements which include, but are not limited to, projections
of revenues, income, segment performance, cash flows,
contract awards, deliveries and backlog. These statements
are not guarantees of future performance and involve
certain risks and uncertainties, which are difficult to predict.
Therefore, actual future results and trends may differ
materially from what is forecast in forward-looking
statements. All forward-looking statements speak only as
of the date of this report, or in the case of any document
incorporated by reference, the date of that document. All
subsequent written and oral forward-looking statements
attributable to the company or any person acting on the
company’s behalf are qualified by the cautionary statements
in this section. The company does not undertake any
obligation to update or publicly release any revisions to
forward-looking statements to reflect events, circumstances
or changes in expectations after the date of this report.
IV. Significant Accounting PoliciesThe Corporation’s consolidated financial statements and
accompanying notes have been prepared in accordance
with Generally Accepted Accounting Principles (GAAP).
The preparation of these financial statements requires the
Corporation’s management to make estimates, judgments
and assumptions that affect reported amounts of assets,
liabilities, revenues and expenses. The Corporation bases its
estimates on historical experience and assumptions believed
to be reasonable under current facts and circumstances.
Actual amounts and results could differ from these
estimates made by management.
To ensure full disclosure and accurate representation of the
financial condition of the Corporation, Sealaska continually
evaluates the accounting policies and estimates used to
prepare the consolidated financial statements, and working
with independent auditors and the board of directors,
adjusts financial statements to accurately represent
the financial condition of the Corporation. See notes to
consolidated financial statements.
V. additional informationSealaska continues to publish more concise discussion and
analysis of its operations by our management team in the
annual report. This streamlined format, introduced in 2010,
enhances readability and is significantly shorter. Therefore,
paper and production costs are reduced. This format
aligns with important lean and green strategies for the
Corporation. Additional operational information is available
at www.sealaska.com. If you have a detailed financial
question related to data previously reported in the longer
format, please contact the Sealaska Corporate Controller at
907.586.1512.
INDEPENDENTAUDITORS’ REPORTTHE BOARD OF DIRECTORS SEALASKA CORPORATION:
We have audited the accompanying consolidated balance sheets of Sealaska Corporation and subsidiaries
(the Corporation) as of December 31, 2011 and 2010, and the related consolidated statements of operations,
shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2011.
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. 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 consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Sealaska Corporation and subsidiaries as of December 31, 2011 and 2010, and
the results of their operations and their cash flows for each of the years in the three-year period ended
December 31, 2011, in conformity with U.S. generally accepted accounting principles.
Seattle, Washington
April 16, 2012
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CONSOLIDATED BALANCE SHEETSAssets (As of December 31, 2011 and 2010) 2011 2010
Current assets
Cash and cash equivalents $ 20,218 $ 21,989
Investments (note 4) 40,050 35,680
Receivables, net (note 5) 66,126 55,022
Inventories (note 6) 8,181 5,746
Prepaid expenses and other current assets 2,374 5,190
Deferred tax asset (note 11) 2,277 1,091
Total current assets 139,226 124,718
Investments (note 4)
Marjorie V. Young Shareholder Permanent Fund 80,064 86,189
Investment and growth long-term 11,074 12,547
Endowment funds 5,068 5,245
Elders’ Settlement Trust 7,635 9,689
Other 3,122 2,986
Total investments 106,963 116,656
Property and equipment, at cost (notes 7 and 10) 291,631 280,605
Less accumulated depreciation (219,364) (211,030)
Total property and equipment, net 72,267 69,575
Notes receivable 295 50
Other assets 2,463 529
Intangible assets (note 9) 2,361 3,179
Goodwill (note 9) 16,496 16,496
Deferred tax asset (note 11) 28,593 29,948
Total assets $ 368,664 $ 361,151
❖ Dollars are in thousands.
See accompanying notes to consolidated financial statements.
Liabilities and Shareholders’ Equity (As of December 31, 2011 and 2010) 2011 2010
Current liabilities
Line of credit (note 10) $ 4,138 $ —
Current portion of long-term debt (note 10) 1,275 1,172
Accounts payable 26,337 22,909
Amounts payable under ANCSA Sections 7(i) and 7(j) (note 3) 14,427 9,562
Other accrued expenses 14,239 18,452
Total current liabilities 60,416 52,095
Noncurrent liabilities
Amounts payable under ANCSA Sections 7(i) and 7(j) (note 3) 5,302 3,819
Long-term debt, less current portion (note 10) 28,288 31,216
Other noncurrent liabilities (note 12) 12,558 12,902
Total liabilities 106,564 100,032
Shareholders’ equity
Common stock, no par or stated value Issued and outstanding 2,222,176 and 2,183,976 shares, in 2011 and 2010 respectively
Contributed capital 93,162 93,162
Retained earnings 156,616 154,771
Total Sealaska's shareholders’ equity 249,778 247,933
Non-controlling interest 12,322 13,186
Total shareholders’ equity 262,100 261,119
Commitments and contingencies (notes 4, 8, 11, 13 and 15)
Total liabilities and shareholders’ equity $ 368,664 $ 361,151
❖ Dollars are in thousands.
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONSYears Ended December 31, 2011, 2010 and 2009 2011 2010 2009
Revenues
Natural resources (note 8) $ 45,012 $ 41,218 $ 44,473
Manufacturing 72,215 54,334 45,240
Investments (note 4) (3,893) 14,439 20,651
Services 145,485 112,319 84,502
Gaming 147 207 470
Corporate and other income 521 1,306 681
Total revenues 259,487 223,823 196,017
Cost and expenses
Natural resources (note 8) 42,768 36,723 44,978
Manufacturing 70,899 53,606 43,070
Investments 610 516 523
Services 141,987 109,256 86,613
Gaming (note 15) 990 4,882 3,226
Corporate and other expenses 2,698 3,131 2,222
Selling, general and administrative 14,953 14,494 14,688
Total cost and expenses 274,905 222,608 195,320
Income (loss) from operations (15,418) 1,215 697
Other, net (752) 1,820 (1,240)
Income (loss) from continuing operations before natural resources revenue sharing and income taxes
(16,170) 3,035 (543)
Net natural resource revenue sharing under ANCSA Sections 7(i) and 7(j) (note 3) 24,067 16,537 19,836
Income from continuing operations before income taxes and discontinued operations 7,897 19,572 19,293
Income tax benefit (note 11) 181 312 4,779
Income from continuing operations before discontinued operations 8,078 19,884 24,072
Discontinued operations, net of tax (note 2) 134 (2,436) (300)
Net income 8,212 17,448 23,772
Less: Net income attributable to the non-controlling interest 1,421 2,294 3,487
Net income attributable to Sealaska $ 6,791 $ 15,154 $ 20,285
Per share of common stock
Income from continuing operations before discontinued operations $ 3.67 $ 9.21 $ 11.96
Discontinued operations (note 2) $ 0.06 $ (1.13) $ (0.14)
Net income $ 3.73 $ 8.08 $ 11.82
❖ Dollars are in thousands except per share values.
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EqUITY
Years Ended December 31, 2011, 2010 and 2009Contributed
capitalRetained earnings
Noncontrolling interest
Total shareholders'
equity
Balance at January 1, 2009 $ 93,162 $ 131,798 $ 8,316 $ 233,276
Net income —
20,285 3,487 23,772
Dividends to shareholders —
(4,776) — (4,776)
Distributions to non-controlling interest — — (1,693) (1,693)
Purchase of non-controlling interest — — (157) (157)
Balance at December 31, 2009 $ 93,162 $ 147,307 $ 9,953 $ 250,422
Net income — 15,154 2,294 17,448
Dividends to shareholders — (7,690) — (7,690)
Distributions to non-controlling interest — — (1,471) (1,471)
Purchase of non-controlling interest — — 2,410 2,410
Balance at December 31, 2010 $ 93,162 $ 154,771 $ 13,186 $ 261,119
Net income — 6,791 1,421 8,212
Dividends to shareholders — (4,946) — (4,946)
Distributions to non-controlling interest — — (2,285) (2,285)
Balance at December 31, 2011 $ 93,162 $ 156,616 $ 12,322 $ 262,100
❖ Dollars are in thousands.
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOwSYears Ended December 31, 2011, 2010 and 2009 2011 2010 2009
Cash flows from operating activities
Net income $ 8,212 $ 17,448 $ 23,772
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation, amortization and depletion 9,537 7,759 8,683
Deferred income tax expense (benefit) 169 63 (5,101)
Gain (loss) on disposal of fixed assets 325 — (35)
Gain on debt forgiveness — (2,950) —
Loss on impairment of assets — 4,302 3,509
Unrealized (gain) loss on investments 8,941 (7,241) (17,730)
Net proceeds from (purchase of) investments (3,619) 23,572 (12,742)
Decrease (increase) in assets, net of effects of acquisition
Receivables (11,104) (25,465) 25,981
Inventories (2,435) 925 3,315
Prepaid expenses and other current assets 2,816 (1,297) 2,146
Increase (decrease) in liabilities, net of effects of acquisition — 6,990 (249)
Accounts payable 3,428 761 1,576
Other accrued expenses (4,213) 6,655 (11,939)
Amounts payable under ANCSA Sections 7(i) and 7(j) 6,348 833 2,616
Other, net (1,277) — —
Net cash provided by operating activities $ 17,128 $ 32,355 $ 23,802
❖ Dollars are in thousands.
See accompanying notes to consolidated financial statements.
Years ended December 31, 2011, 2010 and 2009 2011 2010 2009
Cash flows from investing activities
Capital expenditures $ (12,711) $ (14,994) $ (10,362)
Acquisitions, net of cash acquired (1,000) (4,315) —
Proceeds from sale of land and equipment — — 185
Repayment of notes receivable (245) 760 226
Net cash used in investing activities (13,956) (18,549) (9,951)
Cash flows from financing activities
Dividends to shareholders (4,946) (7,690) (4,776)
Borrowings (repayments) on short-term debt 4,138 (1,244) 195
Borrowings on long-term debt — 5,518 —
Repayments on long-term debt (1,850) (7,395) (2,473)
Distribution to non-controlling interests (2,285) (1,471) (1,693)
Net cash used in financing activities (4,943) (12,282) (8,747)
Net increase (decrease) in cash and cash equivalents (1,771) 1,524 5,104
Cash and cash equivalents at beginning of year 21,989 20,465 15,361
Cash and cash equivalents at end of year $ 20,218 21,989 20,465
Supplemental cash flow disclosures
Cash paid during the year for interest $ 1,060 1,532 1,477
Cash paid during the year for income taxes (173) $ 123 $ 322
Non-cash investing and financing activity
Disposal of land $ 1,300 — —
Debt forgiveness (975) — —
❖ Dollars are in thousands.
See accompanying notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(1) Operations and Summary
of Significant Accounting Policies
Operations
Sealaska Corporation (Sealaska or Company) is a Regional
Alaska Native Corporation formed under the Alaska Native
Claims Settlement Act (ANCSA). Sealaska’s five primary
continuing business activities relate to the development,
production and sale of natural resources; the manufacture
and sale of plastics, parts and products; services related to
environmental remediation, information technology and
construction; gaming and the management of its investment
portfolio. ANCSA is further described in note 3.
Sealaska consolidated subsidiaries are: Alaska Coastal
Aggregates, LLC, Sealaska Global Logistics, LLC, Sealaska
Timber Corporation, Sealaska Wood Products Solutions, LLC,
Synergy Systems, Inc., Sealaska Constructors, LLC, Kingston
Environmental, LLC, Kingston Environmental Services, Inc.,
Nypro Kánaak Guadalajara SA de CV, Nypro Kánaak Iowa,
LLC, Nypro Kánaak Alabama, LLC, Olympic Fabrication, LLC,
Sealaska Environmental Services, LLC, Managed Business
Solutions Systems, LLC, Managed Business Solutions, LLC,
Security Alliance of Florida, LLC, End-to-End Enterprises, LLC,
Amonos, LLC, Haa Aaní, LLC, and Rocky Pass Seafoods, LLC.
Basis of Presentation and Significant Accounting Policies
The consolidated financial statements include the accounts
of Sealaska and its wholly and majority owned subsidiaries.
All significant intercompany balances and transactions have
been eliminated in consolidation.
(a) Revenue Recognition and ReceivablesRevenue is recognized when earned, and the risks of
ownership have been transferred to the buyer, which is
generally upon shipment to the customer. Receivables
are recorded when invoiced and do not bear interest.
Allowance for doubtful accounts is recorded based upon
Sealaska’s collection experience with credit losses in existing
outstanding receivables.
Revenues on long-term service contracts are recognized
ratably over the term of the contract as services are
performed or based on the specific terms of the contracts.
Unbilled revenue represents uncompleted tasks that will
be billed at the time of completion in subsequent years.
Revenue from claims are recognized when the amounts are
received or the related contract modification is approved by
the customer.
(b) Cash and Cash EquivalentsSealaska maintains zero balance checking accounts, and
resulting book overdrafts of $1.9 million and $1.1 million are
included in cash and cash equivalents at December 31, 2011
and 2010, respectively. Sealaska maintains its cash in bank
accounts with various financial institutions. At times, the
balances may exceed federally insured limits. For purposes
of the consolidated statements of cash flows, Sealaska
considers all highly liquid debt instruments with original
maturities of three months or less from the date of purchase
to be cash equivalents.
(C) INVESTMENTSSealaska’s investments in marketable debt and equity
securities (note 4) are classified as trading securities and
are recorded at fair value. Fair value is based upon quoted
market prices. The increase or decrease in fair value
from period to period relating to marketable securities
included in Sealaska’s investment portfolio is included
in the determination of income. Interest and dividend
income is recognized as earned. Gains or losses on the
sale of marketable securities are determined on a specific
identification basis. Certain investments are valued at the
Net Asset Value (NAV) per share/unit reported at the close
of each business day. NAV is used by the Company as a
practical expedient to estimating fair value as these funds
do not have readily determinable fair values. Sealaska
accounts for certain non-controlling interests, less than
50 percent ownership and control, in privately held
corporations, LLCs and partnerships (the investee) using
the equity method of accounting. Under the equity method,
Sealaska’s original investment in the investee is recorded at cost
and subsequently adjusted for changes in the net assets
of the investee. The carrying amount of the investment is
periodically increased (decreased) by the proportionate share
in the earnings (losses) of the investee.
During 2011, Sealaska Corporation acquired Series B
Preferred Stock of Green Earth Greens, Inc. representing a
7.75 percent ownership interest on a fully diluted basis, for
a purchase price of $1.0 million. Green Earth Greens, Inc. is
engaged in the development of proprietary technology and a
multitiered “Vegetable Factory” providing optimum growing
conditions of vegetables, zero environmental pollutants,
and year-round local production of premium produce. The
purchase price grants Sealaska Corporation an exclusive
right to develop the Alaska market.
(d) InventoriesInventories are stated at the lower of cost (determined on
a first in, first out basis) or estimated net realizable value.
Inventories consist primarily of sorted/scaled timber,
manufacturing materials and finished goods.
(e) Property and EquipmentProperty and equipment are stated at cost.
Depreciation and amortization of property, equipment and
leasehold improvements are provided primarily on the
straight line method over the shorter of the expected useful
lives of the assets or the lease term as follows:
Buildings, leaseholds and improvements 15–45 years
Equipment and furnishings 5–20 years
Computer and office equipment 3–5 years
(f) Timber OperationsCosts of logging yards and camps are amortized as timber
is harvested, based on estimated volumes of timber to be
removed from each tax reporting block. Costs of logging
roads are amortized using a composite rate for each
tax reporting block based on actual road costs incurred,
anticipated future road costs to be incurred and estimated
volumes to be removed from the respective tax block.
Costs of silviculture and reforestation activities are
capitalized as an element of property, plant and equipment
and amortized as the associated timber is harvested.
Depletion of purchased timber is provided based on amounts
harvested in relation to volumes purchased. Timber and
mineral resources received under the provisions of ANCSA
are carried at zero value and no depletion expense is
recorded when such resources are harvested or extracted.
For tax purposes, depletion is reported based upon the
higher of the estimated fair value of a specific timber block
or mineral deposit as of the date of conveyance or first
commercial development.
(g) Roads and Yards AssetsRoads and yards constructed for the harvest of timber
are amortized based on units of production, which are
calculated by taking the total estimated future asset capital
costs plus the current known net actual capital costs,
all divided by the total future harvest (estimated total or
remaining timber volume to be harvested).
Roads and yards are classified as long-lived assets and are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts may not
be recoverable. Recoverability of the road assets is measured
by a comparison of the carrying amounts of the asset to
estimated undiscounted cash flows expected to be generated
by the asset. If the carrying amount of an asset exceeds
its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of
an asset exceeds its estimated fair value.
(h) Long-Lived AssetsLong-lived assets, such as property and equipment, are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of assets
may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated
by the asset. If the carrying amount of an asset exceeds
its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of
the asset exceeds the fair value of the asset.
(i) Goodwill and Other Intangible AssetsGoodwill represents the future economic benefits arising
from other assets acquired in a purchase combination
that are not individually identified and separately
recognized. Goodwill is reviewed for impairment at least
annually in accordance with the provisions of the ASC
Topic 350, Intangibles – Goodwill and Other. The goodwill
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impairment test is a two-step test. Under the first step,
the fair value of the reporting unit is compared with its
carrying value (including goodwill). If the fair value of the
reporting unit is less than its carrying value, an indication
of goodwill impairment exists for the reporting unit and
the enterprise must perform step two of the impairment
test (measurement). Under step two, an impairment loss
is recognized for any excess of the carrying amount of the
reporting unit’s goodwill over the implied fair value of that
goodwill. The implied fair value of goodwill is determined by
allocating the fair value of the reporting unit in a manner
similar to a purchase price allocation, in accordance with
ASC 805, Business Combinations. The residual fair value
after this allocation is the implied fair value of the reporting
unit goodwill. Fair value of the reporting unit is determined
using a discounted cash flow analysis. If the fair value of the
reporting unit exceeds its carrying value, step two does not
need to be performed.
Other intangible assets consist of customer relationships.
Customer relationships are amortized over their estimated
useful lives, typically between seven to eight years using the
straight line method.
(j) Alaska Native Claims Settlement AssetsSealaska has received substantial natural resource assets
under the provisions of ANCSA as described in note 8.
These assets are carried in the accompanying consolidated
financial statements at zero value. For tax reporting
purposes, these assets have a tax basis determined as
the higher of their estimated fair value at the date of
conveyance or first commercial development. As a result, a
substantial difference between the book and tax basis exists,
which is considered a temporary difference for purposes of
reporting income tax expense under U.S. generally accepted
accounting principles.
(k) ANCSA Section 7(i) AccountingFixed Assets: In Section 7(i) accounting, ANCSA fixed assets
are expensed in the year they are purchased. For book
accounting, all fixed assets are depreciated using the straight
line method based on their useful life.
Roads and Yards: In Section 7(i) accounting, ANCSA roads
are segregated into three categories: mainline, secondary
and spur. Mainline and secondary roads are amortized based
on units of production and the useful life of 10 and three
years, respectively. Spur roads are expensed in the year they
are placed into service. The book treatment is addressed in
the fixed assets note above. Yards are treated consistently for
Section 7(i) and book accounting.
Inventories: Section 7(i) accounting allows for the deduction
of the cost of inventories from revenues in determining
Section 7(i) sharable income. For book purposes, inventories
are reported at lower of cost or estimated net realizable
value under current assets on the balance sheet.
Accounts Receivable: Section 7(i) accounting allows for
the deduction of outstanding accounts receivables from
revenues in determining Section 7(i) sharable income. For
book purposes, accounts receivable are reported under
current assets on the balance sheets and the associated
revenues are recognized as described in note 1A.
(l) Income TaxesIncome taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period
that includes the enactment date. Uncertain tax positions
are recorded when they are determined to be more likely
than not of being sustained on Sealaska’s tax return. See
note 11 for further discussion of income taxes.
Funds and properties received from the U.S. government
under ANCSA are not subject to income taxes.
(m) Income (Loss) Per ShareIncome (loss) per share information in the consolidated
financial statements is based on weighted average shares
outstanding. Sealaska has no agreements or securities
outstanding that represent dilutive potential common shares.
The number of common stock shares outstanding at
December 31, 2011 and 2010 is 2,222,176 and 2,183,976,
respectively. The stock, dividends paid and other stock rights
are restricted; the stock may not be sold, pledged, assigned
or otherwise alienated except in certain circumstances by
gift, court order or death; the stock carries voting rights only
if the holder thereof is an eligible Native. On June 23, 2007,
Sealaska’s tribal member shareholders authorized
the issuance of two additional classes of common stock
without consideration. Class D stock is issuable to Alaska
Natives born after December 18, 1971, who are 18 years
of age or older and are lineal descendants of an original
Sealaska shareholder and meet certain other requirements.
Class L stock is issuable to Alaska Natives born before
December 18, 1971, who were eligible to enroll in Sealaska
Corporation in 1971 (pursuant to ANCSA) but were not
so enrolled and who meet certain other requirements.
On June 27, 2009, Sealaska’s shareholders authorized the
issuance of an additional class of common stock without
consideration. Class E stock is issuable to Alaska Natives
born before December 18, 1971, who are original tribal
member shareholders of Sealaska who have reached the age
of 65 years or older, and meet certain other requirements.
8,900 shares of Class E stock, 28,900 shares of Class D stock,
and 400 shares of Class L stock were issued in 2011. 10,000
shares of Class E stock, 40,400 shares of Class D stock, and
200 shares of Class L stock were issued in 2010. 191,600
shares of Class E stock, 52,800 shares of Class D stock, and
200 shares of Class L stock were issued in 2009.
(n) Fair ValueAccounting Standards Codification 820 (ASC 820), Fair Value
Measurements and Disclosures, establishes a framework
for fair value measurements in the financial statements
by providing a definition of fair value and guidance on
the methods used to estimate fair value, and expands
disclosures about fair value measurements.
Fair Value Measurements
ASC 820 defines fair value as the price that would be
received to sell an asset or the amount paid to transfer
a liability in an orderly transaction between market
participants (an exit price) at the measurement date. Fair
value is a market based measurement considered from the
perspective of a market participant. Sealaska uses market
data or assumptions that market participants would use in
pricing the asset or liability, including assumptions about
risk and the risks inherent in the inputs to the valuation.
These inputs can be readily observable, market corroborated
or unobservable. Sealaska applies both market and income
approaches for recurring fair value measurements, using
the best available information while utilizing valuation
techniques that maximize the use of observable inputs and
minimize the use of unobservable inputs.
Fair Value Hierarchy
ASC 820 establishes a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority
to measurements involving significant unobservable inputs
(Level 3 measurements). The three levels of the fair value
hierarchy are as follows:
› Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that Sealaska
has the ability to access at the measurement date.
› Level 2 inputs are inputs other than quoted prices
included within Level 1 that are observable for the asset
or liability, either directly or indirectly.
› Level 3 inputs are unobservable inputs for the asset
or liability.
The level in the fair value hierarchy within which a fair
measurement in its entirety falls is based on the lowest level
input that is significant to the fair value measurement in
its entirety.
Fair Value Measurements on a Nonrecurring Basis
Sealaska follows the fair value measurement requirements
related to nonfinancial assets and nonfinancial liabilities
that are not required or permitted to be measured at fair
value on a recurring basis. Those include assets measured at
fair value in goodwill impairment testing and nonfinancial
long-lived assets measured at fair value for impairment
assessment. During 2011, 2010 and 2009, using level three
inputs and an income valuation technique, Sealaska
performed an impairment assessment of certain long-
lived assets and goodwill. In 2011, Sealaska determined
the fair value of these assets to be less than their carrying
amount and accordingly recorded impairment of $691,000
to capitalized roads included in property and equipment on
the balance sheets. In 2010, Sealaska recorded impairment
of $2,950,000 to land in the gaming segment, $195,000 to
property and equipment for the Discontinued Operation
Olympic Fabrication, which was formerly included in the
manufacturing segment, and $1,153,000 to goodwill in the
manufacturing segment. In 2009, Sealaska determined
the fair value of these assets to be less than their carrying
amount and accordingly recorded impairment of $585,000 to
capitalized roads included in property and equipment on the
balance sheets and impairment of $2,924,000 to goodwill in
the services segment.
Financial Instruments
The carrying amounts of cash and cash equivalents,
accounts receivable, notes receivable and accounts payable
approximate fair value because of the short term nature
of these instruments. The carrying amounts of investment
securities are stated at market value. The carrying value of
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debt approximates fair value as the debt bears interest that
adjusts based upon market interest rates.
(o) Foreign Currency TranslationThe financial statements of Sealaska’s foreign operations
have been translated into U.S. dollars in accordance with ASC
830-10, Foreign Currency Matters. As the U.S. dollar is the
functional currency of our subsidiary operations, there are no
foreign currency translation adjustments and all gains and
losses from remeasuring foreign currency transactions into
the functional currency are included in income.
(p) ReclassificationsCertain reclassifications have been made to the 2009 and 2010
balances to conform to the 2010 and 2011 presentation. The
most significant reclassifications to 2009 relate to reporting
of discontinued operations for Olympic Fabrication.
(q) Use of EstimatesThe preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include
provisions relating to uncollectible receivables, useful lives
of capitalized timber costs, property and equipment, the
related depreciation and valuation of certain underlying
assets of limited partnership investments and amortization,
realization of deferred income taxes and impairment of
long-lived assets and goodwill.
The recorded amounts are currently believed by
management to be sufficient. However, such estimates could
significantly change in future periods to reflect new laws,
regulations or information. It is not possible to determine
whether changes in amounts recorded, due to such changed
circumstances, will occur or to reasonably estimate the
amount or range of any potential additional loss.
(2) Acquisitions and Divestitures of Subsidiaries
(A) OLYMPIC FABRICATION, LLCIn December 2010 the Sealaska Board of Directors voted to
discontinue Olympic Fabrication, LLC.
Assets and liabilities of Olympic Fabrication at December 31,
2011 and 2010 were:
2011 2010
Cash $ — 18
Accounts receivable (net) — 582
Inventory — 437
Prepaids and deposits — 17
Property, plant and equipment (net) — 223
Total assets $ — 1,277
Accounts payable $ — 463
Other payables — 1,062
Long-term debt (including current portion)
— 3,889
Contributed capital — 707
Accumulated deficit — (4,844)
Total liabilities and shareholders’ deficit
$ — 1,277
❖ Dollars are in thousands.
Operating results from Olympic Fabrication, which was
formerly included in the manufacturing segment, are
summarized as follows:
2011 2010 2009
Sales $ 1,709 $ 4,388 $ 4,988
Pretax income (loss) 75 (1,988) (236)
Income taxes — — —
Net income (loss) from discontinued operations
$ 75 $ (1,988) $ (236)
❖ Dollars are in thousands. Years ended December 31.
(b) Security Alliance of Florida, LLCDuring 2010 Sealaska Corporation created Sealaska Security
Holdings, LLC. In October 2010 Sealaska Security Holdings
purchased 70 percent of Security Alliance of Florida, LLC
(Security Alliance), for $5.7 million. Sealaska Security
Holdings, LLC acquired tangible assets of $3.3 million,
intangible assets of $2.1 million and total liabilities of $6.6
million. The purchase price allocation resulted in $3.6
million of goodwill which primarily represents the implied
value of Security Alliance’s organized workforce, which
cannot be separately recognized under generally accepted
accounting principles. The fair value of non-controlling
interest was $2.4 million at the date of acquisition by
Sealaska Security Holdings. Determination of the fair
value of the assets and liabilities used to allocate purchase
price was based on the discounted cash flow method
using estimated future earnings. Security Alliance is
headquartered in Miami, Florida, and provides an array of
guard and private investigation services in Florida, Georgia
and Texas, as well as outside the United States. The purchase
agreement includes a conditional noncontrolling interest
redemption feature of an eight to nine percent additional
purchase of Security Alliance if revenue targets are met at
December 31, 2012. The goodwill is attributed to the services
segment, and is deductible for tax purposes.
(c) Kingston Environmental, LLCIn August 2009, Sealaska Corporation agreed to purchase the
remaining 49 percent of Kingston Supply, LLC and Kingston
Environmental Services, Inc. for $1. Sealaska also indemnified
the sellers for existing lines of credit. In addition, the sellers
have a right to 10 percent of net income per year from
environmental services business if the resulting net income
is less than $10 million or 15 percent of net income if net
income is greater than $10 million. This right expires in three
years and is projected to result in an additional acquisition
cost of $158,000. This transaction results in Sealaska owning
100 percent of the two Kingston companies.
(d) Synergy Systems, Inc.In December 2008, the Sealaska Board of Directors voted
to discontinue Synergy Systems, Inc.’s manufacturing
operations. The legal entity was repurposed and now
provides design-build construction and construction
management services.
Assets and liabilities of the discontinued Synergy Systems
manufacturing segment at December 31, 2011 and 2010,
respectively were:
2011 2010
Accounts receivable (net) — —
Total assets $ — $ —
Accounts payable $ — $ 57
Other payables — 528
Contributed capital 5,196 4,611
Accumulated deficit (5,196) (5,196)
Total liabilities and shareholders’ deficit
$ — $ —
❖ Dollars are in thousands.
Operating results from Synergy Systems, which was formerly
included in the manufacturing segment, are summarized
as follows:
2011 2010 2009
Sales $ — $ — $ 730
Pretax income (loss) 59 (448) (60)
Income taxes — — 4
Net income (loss) from discontinued operations
$ 59 $ (448) $ (64)
❖ Dollars are in thousands. Years ended December 31.
(3) Alaska Native Claims Settlement Act
Sealaska was incorporated in 1972 as a Regional Alaska
Native Corporation pursuant to the provisions of ANCSA.
Sections 7(i) and 7(j) are significant to the consolidated
financial statements and are further described herein. Under
the provisions of ANCSA, Sealaska has received, or expects to
receive, conveyance of approximately 362,000 acres of land
in the Tongass National Forest in Southeast Alaska, of which
it will own the surface and subsurface estate. At December
31, 2011, Sealaska has received conveyance of approximately
290,800 acres. Sealaska has received its proportionate share
of the monetary entitlement under the act in the amount of
$93,162,000, which is recorded as contributed capital.
ANCSA also provides for selection of land in Alaska by the
Village and Urban Corporations formed thereunder, the
subsurface estate of which accrues to the related Regional
Corporations. It is anticipated that the Village and Urban
Corporations in Sealaska’s region will receive conveyance to
286,400 acres of land formerly part of the Tongass National
Forest of which Sealaska will own the subsurface estate.
Of the approximate 286,400 acres, conveyance has been
received of approximately 278,100 acres. As described in note
8, the land and related surface and subsurface resources
received under ANCSA are carried at zero value in the
accompanying consolidated financial statements.
Section 7(i) of ANCSA requires that each Alaska Native
Regional Corporation that received revenue or value from
certain resources conveyed pursuant to ANCSA distribute 70
percent of the related net revenues to 12 of the 13 Regional
Corporations, including the distributing Corporation. Sealaska
and the other Regional Corporations have entered into a
Section 7(i) Settlement Agreement, which establishes specific
definitions and methods for calculating shareable revenues.
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Revenues received by Sealaska from the timber resources
and subsurface estate obtained through ANCSA are subject
to the revenue sharing provisions of Section 7(i), except
that subsurface resources commonly known as sand, rock
and gravel, are excluded from Section 7(i) revenue sharing.
Distributions to Sealaska from other Regional Corporations
under the provisions of Section 7(i), after reductions
for distributions required by Section 7(j) of ANCSA, are
recorded as income in the fiscal year the amounts become
determinable and collection is reasonably assured. Section
7(j) of ANCSA requires that not less than 50 percent of monies
received by Sealaska from other Regional Corporations under
Section 7(i) must be distributed to Village Corporations,
tribal member shareholders of Urban Corporations, and
At-Large shareholders. Required distributions to other
Regional Corporations are due 90 days following the end
of the fiscal year and unpaid distributions incur interest at
the prime rate plus five percent. Required distributions to
Village Corporations, shareholders of Urban Corporations,
and At-Large shareholders are based on the ratio of the total
number of Sealaska shares owned by shareholders of Village
Corporations, by shareholders of Urban Corporations and by
At-Large shareholders.
Sealaska accrues and expenses an amount determined by
applying the provisions of Section 7(i) to applicable active
revenue and expense transactions as they are recognized in
the consolidated financial statements. Sealaska recorded a
noncurrent liability representing the estimated distribution
payable for near-term timing differences between the
recognition of revenue and expenses for financial reporting
and Section 7(i) reporting purposes.
(4) InvestmentsInvestments consist of the following:
2011 2010
Investment and Growth
Common stock $ 17,253 $ 19,864
Money market 6,561 1,469
Bonds and notes 15,944 14,139
Accrued interest, dividends and other 292 208
Total investment and growth 40,050 35,680
Marjorie V. Young Shareholder Permanent Fund
Common stock 37,144 40,652
Alternative investments 35,219 38,954
Government bonds and notes 6,761 6,058
Money market, accrued interest, dividends and other 940 525
Total Marjorie V. Young Shareholder Permanent Fund 80,064 86,189
Investment and growth long-term portion
Alternative investments 11,074 12,547
Endowment Fund 5,068 5,245
Elders’ Settlement Trust 7,635 9,689
Other investments 3,122 2,986
Total investments $ 147,013 $ 152,336
❖ Dollars are in thousands. Years ended December 31.
Following a tribal member shareholder advisory vote in 1987, the Sealaska Board of Directors designated certain funds held in
investment securities and related investment earnings be held for long-term uses (Marjorie V. Young Shareholder Permanent
Fund) and, accordingly, such funds are not available for current operations, unless necessary.
Additionally, endowment funds have been established for which the earnings accrue to the benefit of the Sealaska Heritage
Institute scholarship program and the Alaska Native Brotherhood.
During 1991 Sealaska’s tribal member shareholders voted to establish an Elders’ Settlement Trust (the Trust). Accordingly, and
pursuant to ANCSA, the Sealaska Board of Directors established the Trust for the benefit of shareholders. Certain Sealaska
directors are trustees of the Trust. A noncurrent liability was established for future one-time distributions that will be made
from the Trust to shareholders who attain the age of 65 years. The amount distributed during 2011, 2010 and 2009 was $447,000,
$347,000 and $309,000, respectively. As noted above with the Marjorie V. Young Shareholder Permanent Fund, the Endowment
Funds, Elders’ Settlement Trust and other investments are not available to fund current operations, unless necessary.
Investment earnings consist of the following components:
2011 2010 2009
Unrealized gains (losses) $ (8,941) $ 7,241 $ 17,730
Realized net gains, dividends and interest 5,048 7,198 2,921
Total investment earnings (loss) $ (3,893) $ 14,439 $ 20,651
❖ Dollars are in thousands. Years ended December 31.
Sealaska invests in limited partnerships that make private investments in real estate, commercial assets and operating entities.
Sealaska has remaining commitments of $2.9 million that are due when called by the general partners of the investment funds.
If Sealaska cannot or decides not to make the additional investment when called, then the general partner, at its discretion, has
the right to sell Sealaska’s investment.
The following table presents assets that are measured at fair value on a recurring basis at December 31 using:
2011 2010
Level 1: Quoted prices in active markets identical assets $ 80,076 $ 79,203
Level 2: Significant other observable inputs 13,747 18,898
Level 3: Significant unobservable inputs — —
Total $ 93,823 $ 98,101
❖ Dollars are in thousands. Years ended December 31.
Sealaska has no financial instruments that are recorded at fair value on a nonrecurring basis at December 31, 2011 and 2010.
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The following table presents quantitative disclosure about the fair value measurements for each class of assets:
Description Totals
Quoted prices in active
markets for identical assets
(Level 1)
Significant other
observable inputs (Level 2)
Equity securities
Equity securities—domestic $ 38,681 $ 38,681 $ —
Equity securities—international (developed) 12,247 12,247 —
Equity securities—emerging markets 5,232 5,232 —
Equity securities—Vanguard LifeStrategy Mod Growth Fd 14,505 14,505 —
Total equity securities 70,665 70,665 —
Debt securities
Government securities 4,570 2,116 2,454
Corporate securities 10,591 — 10,591
Mortgage-backed securities 702 — 702
PIMCO Total Return Fd 7,295 7,295 —
Total debt securities 23,158 9,411 13,747
Total $ 93,823 $ 80,076 $ 13,747
❖ Dollars are in thousands. Years ended December 31.
(5) ReceivablesReceivables consist of the following:
2011 2010
Trade accounts receivable, less allowance for doubtful accounts of $956 and $843 at December 31, 2011 and 2010, respectively
$ 38,110 $ 33,817
ANCSA Section 7(i) revenue sharing 23,371 18,661
Other 4,645 2,544
Total receivables $ 66,126 $ 55,022
❖ Dollars are in thousands. Years ended December 31.
(6) InventoriesInventories consist of the following:
2011 2010
Timber—finished goods $ 3,671 $ 2,174
Plastics
Raw materials 3,336 2,168
Work in process 43 400
Finished goods 1,056 1,004
Other 75 —
Total inventories $ 8,181 $ 5,746
Fair Value at Reporting Date Using
❖ Dollars are in thousands. Years ended December 31.
(7) Property and EquipmentProperty and equipment consist of the following:
2011 2010
Buildings, leaseholds and improvements $ 19,547 $ 18,650
Equipment and furnishings 36,673 33,290
Logging roads, yards and camps 185,847 179,873
Reforestation and silviculture costs 19,456 17,947
Total property and equipment 261,523 249,760
Less accumulated depreciation (219,364) (211,030)
Construction in progress 1,240 2,383
Land 28,868 28,462
Net property and equipment $ 72,267 $ 69,575
❖ Dollars are in thousands. Years ended December 31.
Land held for development as commercial, recreational or residential property totaling $16.4 million and $16.9 million at
December 31, 2011 and 2010, respectively, is included in the caption “Land” above. Sealaska Corporation and the Cloverdale
Rancheria of Pomo Indians of California entered into a settlement agreement regarding the land purchased and held for
casino development.
(8) Timber, Timberland and Mineral ResourcesAs of December 31, 2011 Sealaska has received approximately 290,800 acres of land under the provisions of ANCSA, as
described in note 3. Under U.S. generally accepted accounting principles, assets received in nonmonetary transactions are
recorded at their estimated fair value at the transaction date unless the fair value is not determinable within reasonable limits
due to major uncertainties, in which case the assets received are recorded, and remain, at a value of zero. It was not practical
for Sealaska to determine the estimated fair value of the resources received on the date of receipt within reasonable limits
for financial reporting purposes. Accordingly, Sealaska carries land and natural resource assets received under ANCSA at zero
value. However, these assets have significant economic value to Sealaska.
Sealaska incurs costs related to the selection of ANCSA land and related resources and related to the potential exchanges of
such property. These costs are capitalized as part of the basis in either the land or the related resources (such as timber). Costs
attributable to resources will be amortized as the related resource is harvested or developed.
Any cost of timber, timberland and mineral resources carried in the accompanying consolidated balance sheets and related
depletion expense is attributable to timber that Sealaska, from time to time, purchases from others. In accordance with ASC
360, Property, Plant and Equipment, an annual impairment analysis is performed. In 2011, the estimated undiscounted future
cash flows generated by the roads in these timber areas were less than the carrying value resulting in an impairment charge
of $691,000.
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Sealaska has asset retirement obligations (AROs) arising from regulatory requirements to perform certain asset retirement
activities at the time that certain road systems are maintained or rehabilitated. The liability was initially measured at fair
value and subsequently is adjusted for accretion expense and changes in the amount or timing of the estimated cash flows.
The corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and
depreciated over the asset’s remaining useful life. The following table presents the activity included in other current liabilities
for the AROs for the year ended December 31, 2011 and 2010:
2011 2010
Balance at beginning of the year $ 896 $ 1,136
Additional obligations incurred 691 —
Obligations settled in current period (370) (330)
Changes in estimates, including timing — 12
Accretion expense 51 78
Balance at end of year 1,268 896
❖ Dollars are in thousands. Years ended December 31.
(9) Goodwill and Intangible AssetsThe following table provides the gross carrying value for each major class of intangible asset by segment as of December 31,
2011 and 2010:
Goodwill: Services Manufacturing Total
Balance, January 1, 2010 $ 11,057 $ 2,758 $ 13,815
Additional purchase—Kingston 193 — 193
Additional purchase—Security Alliance 3,641 — 3,641
Impairment expense — (1,153) (1,153)
Balance, December 31, 2010 14,891 1,605 16,496
Impairment expense — — —
Balance, December 31, 2011 $ 14,891 $ 1,605 $ 16,496
❖ Dollars are in thousands.
Aggregate other intangible assets consist of the following:
Amortizing intangible assets—customer relationships within services segment Total
Balance, December 31, 2009 $ 1,714
Additional purchase—Security Alliance 2,040
Amortization (575)
Balance, December 31, 2010 3,179
Amortization (818)
Balance, December 31, 2011 $ 2,361
❖ Dollars are in thousands. Customer relationships are amortized over 7-8 years from the date of acquisition.
Amortization expense for intangible assets was $818,000 and $575,000 for the years ended December 31, 2011 and 2010,
respectively. Estimated amortization expense for the next five years:
2012 $ 597
2013 438
2014 438
2015 353
2016 291
❖ Dollars are in thousands. Years ended December 31.
In accordance with the provisions of ASC 350, Intangibles – Goodwill and Other, goodwill is reviewed for impairment at least
annually. In 2011, the implied fair value of each reporting unit exceeded its carrying value. In 2010, a goodwill impairment
charge was recorded in the manufacturing segment of $1.2 million. In 2009, a goodwill impairment charge was recorded in the
services segment of $2.9 million.
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(10) Long-Term DebtLong-term debt consists of the following:
2011 2010
Note payable to a bank under an unsecured revolving term loan with variable interest rate pricing that was 1.50 percent at December 31, 2011, with the note expiring October 2014
$ 11,302 $ 11,302
Note payable to a bank under an unsecured revolving term loan with a fixed interest rate, and variable credit spread that was 2.35 percent at December 31, 2011, with the note expiring October 2014
15,000 15,000
Mortgage payable, collateralized by land and building, with interest at the prime rate minus 0.5 percent (2.75 percent at December 31, 2010), due August 2011
— 552
Note payable by Amonos, LLC to Pacific Gulf, LLC; collateralized by land; interest at three percent; principal due July 2012
1,000 1,000
Note payable by Amonos, LLC to an individual; collateralized by land; interest at seven percent—interest only through August 2010; principal due September 2012
— 975
Note payable by Kánaak Alabama to Nypro, Inc., an affiliated partner with Sealaska Corporation with interest at five percent
882 1,179
Other debt 1,379 2,380
Total long-term debt 29,563 32,388
Less current portion (1,275) (1,172)
Total long-term debt less current portion 28,288 31,216
❖ Dollars are in thousands. Years ended December 31.
Scheduled principal maturities of long-term debt are as follows:
2012 1,275
2013 —
2014 26,302
2015 —
2016 —
Thereafter 1,986
Total $ 29,563
❖ Dollars are in thousands. Years ended December 31.
Sealaska’s $60 million unsecured revolving term loan has various affirmative and negative covenants that are typical within
loan agreements. Sealaska was in compliance with all covenants at December 31, 2011. Interest expense totaled $1.1 million in
2011, $1.5 million in 2010 and $1.5 million in 2009.
Sealaska has the following lines of credit available at December 31, 2011:
Amount Amount Outstanding Interest Rate Collateral
$1,000,000 — 3.25% No collateral
$750,000 $538,000 1-month LIBOR + 3.75% Business assets of the borrower
$3,000,000 — Variable No collateral
$4,000,000 $3,600,000 3.25% Business assets of the borrower
The lines of credit are as follows: NKA $1.0 million at Wells Fargo, Security Alliance $750,000 at BankUnited, MBS $3.0 million at
Colorado State Bank and Trust and NKI $4.0 million at Wells Fargo.
(11) Income TaxesIncome tax expense related to continuing operations was the following:
2011 2010 2009
Current income tax expense (benefit)
Federal $ (40) $ (319) $ 57
State (26) (56) 199
Foreign (284) — 66
Total $ (350) (375) $ 322
Deferred income tax expense (benefit)
Federal (313) (138) 762
State (175) 225 134
Foreign 657 (24) (5,997)
Total 169 63 (5,101)
Income tax expense (benefit) $ (181) $ (312) $ (4,779)
❖ Dollars are in thousands. Years ended December 31.
The income tax expense from discontinued operations was $0, $0 and $4,000 for the years ending December 31, 2011, 2010 and
2009, respectively.
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The provision for income taxes from continuing operations differ from the “expected” amount (computed by applying the U.S.
federal corporate tax rate of 35% to earnings before taxes) as follows:
2011 2010 2009
Computed “expected” tax expense $ 2,685 $ 6,959 $ 6,670
State income tax, net of federal tax 490 1,082 1,412
Change in valuation allowance 1,343 (741) (38,948)
Expiration of net operating losses (4,799) (6,606) 25,898
Addition of ANCSA assets (137) (131) (140)
Discontinued operations — — (4)
Other 237 (875) 333
$ (181) $ (312) $ (4,779)
❖ Dollars are in thousands. Years ended December 31.
Net deferred tax assets and liabilities include the following:
2011 2010
Deferred tax assets
Net operating loss carryforwards $ 139,418 $ 135,185
ANCSA resource basis difference 196,013 206,040
Fixed assets 12,372 12,276
Other 11,478 11,113
Total gross deferred tax assets 359,281 364,614
Deferred tax liabilities—investment unrealized losses (gains) 2,106 (4,401)
Valuation allowance (330,517) (329,174)
Net deferred tax asset 30,870 31,039
Less current portion (2,277) (1,091)
Total long-term deferred tax asset $ 28,593 $ 29,948
❖ Dollars are in thousands. Years ended December 31.
Sealaska has recorded a net deferred tax asset of $30.9 million, which primarily reflects (a) estimated future benefit of $322
million federal, $266 million state and $17 million foreign net operating loss (NOL) carryforwards which expire in varying
amounts from 2011 to 2030 and (b) basis differences for significant natural resources received pursuant to ANCSA which have
no carrying value in the accompanying consolidated financial statements but which have substantial basis for domestic tax
reporting purposes. A valuation allowance has been established, reducing the maximum possible benefit of these carryforwards
to management’s estimate of the benefit likely to be realized. Realization is dependent on generating sufficient taxable
income prior to expiration of the loss carryforwards and basis differences. Although realization is not assured, management
believes it is more likely than not that all of the recorded net deferred tax assets will be realized. Net deferred tax assets
considered realizable are adjusted annually dependent on management’s estimate of future earnings. An increase or decrease
in management’s estimate of the total taxable income that will be generated during the carryforward period will have a
corresponding increase or decrease in net deferred tax assets considered realizable.
During the periods presented above and prior periods,
tax depletion arising from Sealaska’s ANCSA resources
has offset all other federal and state taxable income and
Sealaska has not paid federal or state income taxes except
those taxes related to the activities of certain controlled
subsidiaries operating outside Alaska. Sealaska will need
to earn approximately $40 million in taxable income
within the United States of America to utilize its estimated
realizable deferred tax asset related to state and federal tax
jurisdictions prior to the expiration of its federal and state
net operating losses in 2030. Sealaska will also need to earn
approximately $17 million in taxable income in Mexico prior
to the expiration of its net operating losses in 2018
and 2019.
(12) Other Noncurrent LiabilitiesOther noncurrent liabilities consist of the following:
2011 2010
Elders’ distribution payable $ 7,542 $ 7,785
Shareholders' distribution payable 913 750
Endowments payable 2,068 2,246
Voluntary retirement deferrals 1,935 1,821
Charitable contribution payable 100 300
Total $ 12,558 $ 12,902
❖ Dollars are in thousands. Years ended December 31.
(13) Retirement PlansSealaska has a 401(k) plan for virtually all employees
meeting certain eligibility requirements. Participants may
contribute up to 25 percent of their eligible compensation
to the plan, subject to the limits of Section 401(k) of the
Internal Revenue Code. Sealaska matches 100 percent of the
participant’s contribution up to four percent of their eligible
compensation. All participants are immediately vested in
the preceding contributions. Sealaska may contribute six
percent of the participant’s eligible compensation to the
plan and these contributions are vested over a five year
period. Contributions to the plan are based upon employees’
total yearly contributions and base pay. Total approved
contributions to the plans were $1,194,000, $1,394,000,
$1,109,000, in 2011, 2010 and 2009, respectively.
(14) DEscription of the Business and Segment Information
Sealaska, together with the subsidiaries through which the
Company’s businesses are conducted, is a diversified Alaska
Native Corporation with operations in the following business
segments: Natural Resources, Manufacturing, Services,
Investments and Gaming.
Description of the Business
(a) Natural ResourcesThe natural resources division is responsible for the land
management and land stewardship functions of all Sealaska
lands. Sealaska Timber Corporation is responsible for the
harvesting of timber and marketing of logs into the highest
value export and domestic markets. Management activities
include collection of escrow receipts, cadastral survey
of ANCSA lands, maintenance of land records and other
activities vital to land ownership. Alaska Coastal Aggregates,
LLC markets and manages approximately 568,000 acres
of the Company’s subsurface estate. Haa Aaní, LLC is an
enterprise dedicated to creating sustainable communities
throughout our region and to enhancing the social, economic
and cultural lives of all Sealaska tribal member shareholders.
(b) ManufacturingThe manufacturing division is comprised of a contract
manufacturer of injection molded components. The contract
manufacturer specializes in high quality plastics, injection
molded products and value-added manufacturing services
in partnership with customers in the consumer/industrial,
electronics/telecommunications, healthcare and automotive
industries. Secondary value-added services include product
design, engineering, tooling, automated molding and
some secondary value-added services including shielding,
painting, decorating, graphics and assembly.
Substantially all of the manufacturing division’s revenue is
derived from activities and customers in the United States of
America with the exception of the operation of a facility
in Mexico.
(c) ServicesThe services division provides environmental construction
and remediation, environmental assessments, consulting
and engineering services, custom build construction,
construction management services, and security services to
federal government agencies, private and commercial clients
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through wholly owned subsidiaries: Sealaska Environmental Services, LLC, Kingston Environmental Services, Inc., Synergy
Systems, Inc. and Security Alliance, LLC. The services division provides services in the disciplines of information technology (IT)
strategy and consulting, business intelligence, application services, infrastructure management, managed services and data
processing through the subsidiary Managed Business Solutions, LLC. The services division expanded in 2010 with the controlling
acquisition of Security Alliance, LLC. Through Security Alliance, LLC, the services division provides an array of guard and private
investigation services.
(d) InvestmentsSealaska’s securities portfolio consists of two separate investment accounts that are managed to achieve different objectives:
the Marjorie V. Young Shareholder Permanent Fund is managed long-term with the objective of shareholder dividends, and
the Investment and Growth Fund is managed shorter term and is used for operational needs and new investments. Sealaska
investments follow a disciplined investment philosophy by building off existing strengths, exercising patience and selectivity
in making investment, adding investments that will achieve consistency in growth and earnings, and being prepared to exit
investments or potential investments if upside opportunities arise or if problems change expected returns, and by seeking strong
and strategic partnerships, distributing risk and benefit and establishing a new platform for companies for future growth.
(e) GamingThe gaming segment consists of an investment in a gaming venture with the Cloverdale Rancheria of Pomo Indians in
Cloverdale, California. Through its wholly owned subsidiary End-to-End Enterprises, Sealaska is working to develop a new
casino and resort facility. The End-to-End subsidiary has purchased land for the casino development.
2011 2010 2009
Net income (loss) from continuing operations before income taxes
Natural resources $ 2,244 $ 4,495 $ (505)
Manufacturing 1,316 728 2,170
Investments (4,503) 13,923 20,128
Services 3,498 3,063 (2,111)
Gaming (843) (4,675) (2,756)
Corporate and other (2,177) (1,825) (1,541)
Total segment net earnings (loss) (465) 15,709 15,385
Net revenue (expense) not allocable to a segment
Natural resource revenue sharing under Sections 7(i) and 7(j) 24,067 16,537 19,836
Selling, general and administrative expense (14,953) (14,494) (14,688)
Other, net (752) 1,820 (1,240)
Income before taxes 7,897 19,572 19,293
Income tax benefit 181 312 4,779
Income from continuing operations 8,078 19,884 24,072
Discontinued operations, net of tax 134 (2,436) (300)
Net income 8,212 17,448 23,772
Less: Net income attributable to non-controlling interest 1,421 2,294 3,487
Net income attributable to Sealaska $ 6,791 $ 15,154 $ 20,285
❖ Dollars are in thousands. Years ended December 31.
2011 2010 2009
Total assets by operating segment
Natural resources $ 10,778 $ 7,755 $ 6,415
Manufacturing 34,081 27,532 26,616
Investments 146,992 152,336 168,667
Services 23,268 21,262 11,200
Gaming (4,017) (2,231) 6,567
Corporate and other 157,562 154,497 119,871
Total assets $ 368,664 $ 361,151 $ 339,336
Capital expenditures by segment
Natural resources 6,674 7,190 6,034
Manufacturing 1,670 4,022 2,065
Services 367 1,098 881
Gaming 379 405 226
Corporate and other 3,621 2,279 1,156
Total capital expenditures $ 12,711 $ 14,994 $ 10,362
Depreciation, impairment and amortization by segment
Natural resources 5,259 4,382 5,551
Manufacturing 2,796 2,984 1,632
Services 263 1,433 3,709
Gaming — 2,950 —
Corporate and other 1,219 312 1,300
Total depreciation, impairment and amortization $ 9,537 $ 12,061 $ 12,192
❖ Dollars are in thousands. Years ended December 31.
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(15) Commitments and Contingencies
Management is not aware of or party to any legal action that
would have a material adverse effect on the consolidated
financial condition, results of operations or cash flows of
Sealaska. Sealaska, in its normal course of activities, is
exposed to regulatory and environmental matters. In the
opinion of management, the disposition of these matters is
not expected to have a material adverse effect on Sealaska’s
financial condition, results of operations or liquidity.
Sealaska is currently leasing facilities, and manufacturing and
office equipment, from a variety of vendors. Minimum annual
rental commitments on operating leases at December 31 are
as follows:
2012 3,464
2013 2,915
2014 1,980
2015 1,677
2016 1,431
Thereafter 5,108
Total $ 16,575
❖ Dollars are in thousands.
These leases primarily relate to Kánaak. The facility lease
payments are subject to an annual increase based on changes
in the cost of living, as reflected by the Consumer Price Index.
Kánaak has options to renew, at substantially similar terms,
the facility leases for an additional two to 12 years.
In October 2010, Sealaska Corporation purchased 70 percent
of Security Alliance of Florida, LLC. The purchase includes a
conditional non-controlling interest redemption feature of an
eight to nine percent additional purchase of Security Alliance
if revenue targets are met at December 31, 2012.
During December 2011, Sealaska committed to extend a
loan of $500,000 for working capital needs that can be
converted to additional Series B Preferred Stock at the mutual
agreement of the majority owners of Green Earth Greens and
Sealaska Corporation.
(16) Subsequent EventsSealaska has evaluated subsequent events from the
balance sheet date through April 16, 2012, the date at
which the financial statements were available to be issued,
and determined there are no subsequent events which
require disclosure.
SEALASKA CORPORATION
Corporate Headquarters
One Sealaska Plaza, Suite 400
Juneau, AK 99801
TEL: 907.586.1512
FAX: 907.586.2304
Shareholder toll-free line:
800.848.5921
www.sealaska.com
Seattle Office
13810 S.E. Eastgate Way, Suite 420
Bellevue, WA 98005
TEL: 425.283.0600
FAX: 425.283.0650
Sealaska Heritage Institute
One Sealaska Plaza, Suite 301
Juneau, AK 99801
TEL: 907.463.4844
FAX: 907.586.9293
www.sealaskaheritage.org
www.alaskanativeartists.com
SEALASKA SUBSIDIARIES
Sealaska Constructors
General Manager: Daniel Esparza
13810 S.E. Eastgate Way, Suite 420
Bellevue, WA 98005
www.seakcon.com
Sealaska Environmental Services
President and CEO: Derik Frederiksen
One Sealaska Plaza, Suite 400
Juneau, AK 99801
www.sealaskaenvironmental.com
Sealaska Global Logistics
Vice President: Angela Higgs
13810 S.E. Eastgate Way, Suite 420
Bellevue, WA 98005
www.sealaskagloballogistics.com
Sealaska Timber Corporation
President and CEO: Wade Zammit
2030 Sea Level Drive, Suite 202
Ketchikan, AK 99901
www.sealaskatimber.com
Managed Business Solutions
President and CEO: Jon Duncan
12325 Oracle Blvd., Suite 200
Colorado Springs, CO 80921
www.mbshome.com
Security Alliance
President and CEO: David Ramirez
8323 NW 12th St., Suite 218
Doral, FL 33126-1840
www.securityalliancegroup.com
Nypro Kánaak
Managing Director: Julio Oropeza
www.nyprokanaak.com
Nypro Kánaak Alabama & Iowa
General Manager: Kevin Bokros
208 Nypro Lane
Dothan, AL 36305
400 North Harvey Road
Mt. Pleasant, IA 52641
www.nyprokanaak.com
Nypro Kánaak Guadalajara
General Manager: Alejandro Hernandez
Ignacio Jacobo #23
Parque Industrial Belenes
Zapopan Jalisco, MX 45101
Synergy Systems
General Manager: Bob Wysocki
13810 S.E. Eastgate Way, Suite 420
Bellevue, WA 98005
www.sealaska.com/page/synergy_systems
Alaska Coastal Aggregates
General Manager: Bill Bennett
One Sealaska Plaza, Suite 400
Juneau, AK 99801
www.sealaska.com/page/aggregates
Haa Aaní, LLC
President and CEO: Russell Dick
One Sealaska Plaza, Suite 400
Juneau, AK 99801
www.sealaska.com/page/haa-aani-llc
OUTSIDE COUNSEL
Simpson, Tillinghast & Sorensen, P.C.One Sealaska Plaza, Suite 300Juneau, AK 99801
INDEPENDENT AUDITORS
KPMGPhillips Tower South701 West 8th Avenue, Suite 600Anchorage, AK 99501
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