annual report 2006NANA shareholders: a diversified workforceNANA-tkutni lxauruat: Atlakaabiieik Savaaqaqtuat
W
1 Letter To Our Shareholders
2 2006 At A Glance
3 2006 Shareholders of the Year
5 Five-Year Financial Highlights
6 Management Discussion and Analysis
15 A Basic Guide To Financial Terms
18 Independent Auditors’ Report
19 Financial Statements
25 Notes To Financial Statements
48 Board Of Directors
49 In Memoriam
Table of Contents NANA ANNuAl report 06
Photo credits Chris Arend Seth Kantner Maija Johnson
Cover photos / Abe Armstrong / Pilot / Hageland Aviation / Kotzebue (top)
Mary Viveiros / Staff Nurse / Maniilaq Health Center / Kotzebue (bottom left)
Todd Ramoth / Millwright / Red Dog Mine (bottom right)
High SchoolSpring Interns
NANA’S future work force in the making.
WDella Luther / Cheryl BoothManiilaq Health Aides / Noorvik
Our mission Improve the quality
of life for our people
by: protecting and
enhancing our lands,
promoting healthy
communities,
maximizing economic
growth with decisions,
actions, and behaviors
inspired by our Iñupiat
Ilitqusiat values
consistent with
NANA’s core principles.
Our visionNANA will be a respected, profitable,
multi-billion dollar corporation.
Who we are NANA acts on behalf of our shareholders, the
Iñupiat people of Northwest Alaska. In 1972,
when NANA was formed, we had about 4,400
shareholders. With the addition of children born
since incorporation, we now have more than
11,000 shareholders.
The heart of our company is NANA Regional
Corporation, Inc., which focuses on promoting
the economic and social well-being of
shareholders. We created NANA Development
Corporation to oversee our business activities,
to create shareholder job opportunities and to
generate the income needed to fulfill NANA’s
vision, mission and core principles.
NANA’s core principlesHonesty and integrity will govern our activities.
Commitments made will be fulfilled.
Everyone will be treated with dignity and respect.
Vern Cleveland OTZ Telephone / Noorvik
Sinstrumental in helping us to do so.
In 2006, NANA continued our commitment to
shareholder development with enhanced emphasis
on progress, and by expanding the Shareholder
Development Program. A new level of shareholder
outreach has been established through expanding
the internship program to include high school
students and our partnerships will allow NANA to
continue to participate in the career fairs in 2007. We
are very excited about the increased opportunities
we are able to provide to our shareholders.
NANA’s success is based on the hard work,
dedication and resourcefulness of our employees.
We are very proud and grateful for your gifts and
talents. Just as the skilled hunter provides for family
and community, NANA will help provide for the
well-being of our shareholders.
Quyaqpaurabiptibiñ for the opportunity to serve you.
May God’s blessings shine upon you throughout
the year.
Donald G. Sheldon / NalikakChairman
Marie N. Greene / KasafnaalukPresident / CEO
Donald G. Sheldon / NalikakChairman
Marie N. Greene / KasafnaalukPresident / CEO
NANA
Letter to our ShareholderS
At NANA, we are blessed with a diverse, multi-
talented shareholder base. As we have for the past
several years, we continue to pursue our financial
goals while celebrating our Iñupiaq culture and
values. We are fortunate to have our traditional
values to guide us as we make business and
management decisions.
Our theme for the Annual Meeting this year is
“NANA Shareholders: A Diversified Workforce.” We
are proud of the shareholders who work for many
different organizations, small and large throughout
the world. We encourage shareholders to take
advantage of education and training opportunities.
NANA’s dedication will continue as we work
together to build the shareholder workforce needed
for the growing economy.
In the past year, progress was made on a number
of board initiatives. Our Iñupiaq values have
guided us through many challenges. In order to
help share and promote these values, NANA’s
�Iñuuniajiqput�Department has worked with
Rosetta-Stone on the production of a Coastal
Iñupiaq Language CD. The Iñupiatun Eskimo
Dictionary has also been reviewed and both are
anticipated to be released this year. Learning and
speaking our Iñupiaq language is a vital part of
embracing our traditional values as we navigate
today’s world, and both of these tools will be
It’s an honor to report that the NANA family of
companies has had a profitable year. Taikuu to our
dedicated employees for their hard work during the
past year.
Financially, 2006 was another record setting year for
NANA and our subsidiaries. Both the revenues and
net income grew by more than 50%. The revenues
reached over $800 million and the net income grew
to more than $16 million. More importantly, NANA
and our partners employed over 800 shareholders
and paid over $31 million in wages to them. While
we are grateful for the increased royalties that
higher zinc and lead prices have given us, we are
equally grateful for the record level of income from
our operating businesses as a group. We will strive
for even greater achievements in 2007.
� ��
06• A major focus in 2006 has been to evaluate the
proposed Elder Settlement Trust. The purpose of
the trust would be to provide additional support to
elders 65 and older. It was NANA’s intent to bring
this important initiative to the shareholders for a
vote in March of 2007. However, it is delayed until
an IRS 501(c)3 ruling has been made.
• The Shareholder Relations Committee and staff
attended several shareholder forums throughout
the year in Anchorage and Fairbanks.
• The Shareholder Relations Department
completed a shareholder survey and reviewed
findings with the Shareholder Relations
Committee and NRC Board of Directors. The
survey results were published in a special edition
of the Hunter in October.
• �Iñuuniajiqput Department staff worked with
other organizations to sponsor the Maori/Iñupiaq
Exchange in June with more than 80 participants
from the region. Follow up meetings with local
elders’ councils are being held in each village.
• NANA continues to work with other regional
organizations on common goals. The Northwest
Arctic Leadership Team has held village and local
leadership meetings throughout the year. The
Quad Board meeting was held in August.
• The NANA Regional Corporation (NRC) Board of
Directors declared a $7.00 per share dividend at
their September 27, 2006 Board meeting in Kobuk
— the highest dividend paid to our shareholders.
$9.4 million in dividends were paid to more than
11,000 shareholders on November 15, 2006.
• NRC issued a permit to Barrick Gold for minor
exploration in the Ambler Mining District.
• A study is currently being done to identify a
gravel source for the community of Ambler. The
NRC Lands & Natural Resources Department
continues to work with the community to identify
that source.
• The Northwest Arctic Borough and NANA jointly
funded this year’s Resource Protection Program
(Trespass Program) in order to minimize hunting
conflict throughout the region.
• NANA worked closely with Teck Cominco in
developing the Mine Reclamation and Closure
Plan. This plan must be prepared every five years
to ensure the environment is protected after
the mine is closed. The Mine Reclamation and
Closure Plan considers any potential long term
monitoring of air quality, waste rock, mine pit, and
water quality.
At A Glance 2006
• NANA’s net income set a new all time record for
a fiscal year in 2006 growing to more than $16.0
million.
• NANA’s revenue grew to $805.8 million, which was
a 52.9% increase over last year. Total assets grew
to $456.4 million, marking a 19.6% increase over
2005.
• Shareholders’ equity grew to $155.5 million or
$116.31 per share, up from $124.8 million or $95.17
per share in 2005.
• NANA’s investment portfolio of marketable
securities grew by 7.5% from $63.9 million in 2005
to $68.8 million in 2006.
• Zinc prices continued to rise – beginning the year
at $.62 per pound, hitting a high of $1.70 in May
2006 and averaging $1.19 per pound in fiscal
year 2006.
• NANA’s 2006 total contributions to social and
cultural programs increased 25.2% to more than
$2.3 million.
• In 2006, we increased the number of shareholders
working for our company. NANA shareholders
were paid $31,392,000 in salaries and wages by
NANA and our partners.
��
Sr.R
Ayyatafaq has been a
strong advocate of our
subsistence way of life. He
has offered his traditional
knowledge to many outside
agencies, such as, the
Alaska Dept. of Fish and
Game, and the US Fish and
Wildlife Service, where he
has worked at the Selawik
shelter cabin for many
years. Currently, he offers his
support and knowledge as a
staff member at the Maniilaq�Mapsibvik Camp, a traditional
camp, where alcohol
rehabilitation treatment is
offered to young adults and
their families.
Ayyatafaq is a strong
positive example for other
shareholders giving the
knowledge he has to anyone
who asks or needs it. He
lives a quiet life in Selawik
with his wife, Emma.
A number of nominations were received this year.
The Regional Elders Council Selection Committee
had a difficult time narrowing those nominations
down to one, so NANA has decided to honor two
great men.
Ralph Ayyatafaq Ramoth, Sr. / Selawik
We are accustomed to honoring political,
corporate and social leaders. It is right that we
recognize their contributions to our people and
community.
But in smaller and quieter ways, there are
those among us who demonstrate the NANA
spirit in their daily lives. Such a man is Ralph
Ayyatafaq Ramoth, Sr.
Born in 1932, amidst the incoming western
culture, he continued to teach his children
the Iñupiaq way of life. Speaking in Iñupiaq,
living in Iñupiaq. Jane Cleveland of Ambler
stated, “Ralph Ramoth is one example of a true
Iñupiaq Elder who lives and follows the Iñupiat
Illitqusait.”
In spite of cultural changes and vast weather
conditions, Ayyatafaq has persevered and
has been a successful hunter, fisher and
trapper. Often times sharing his knowledge
with the younger generation.
Shareholders Of The Year Ralph Ayyatafaq Ramoth, SR.
� ��
Sr.Roswell Qalayuaq “Ross” Schaeffer Sr.
Kotzebue
Roswell Qalayuaq “Ross” Schaeffer Sr. was
born and raised in Kotzebue, Alaska, to John Sr.
and Annie Schaeffer of Ivik.
Throughout Qalayuaq’s career as mayor, he
has shown us true Iñupiaq leadership. He has
been a past president of NANA, Mayor for the
Northwest Arctic Borough, headed the Alaska
Beluga and Whaling Commission, ensured our
tribal land has been respected, participated
in the ICC, and championed the start of the
Northwest Arctic Leadership Team.
Qalayuaq promoted healthy communities, with
every aspect of his work. He was a role model
for our younger generation to look up to. He
spent much time teaching young men to hunt.
Qalayuaq is an avid hunter, as are many Iñupiaq
men, and he always remembered to bring
along anyone who was interested in learning
his ways. He taught hunting to many people, in
his quiet and positive manner.
Lastly, Qalayuaq is known throughout the
region as a talented carver. “As a hunter, he is
able to capture the true meaning of the culture
using his observations in his work. His use of
Shareholders Of The Year Roswell Qalayuaq schaeffeR, sR.
this traditional knowledge
assists him in his carving
every day of his life. His
Iñupiaq culture is apparent
in his work, which is unique
in materials and execution.”
With Qalayuaq’s
assistance, the entities
within the borough have
developed a regional
arts and crafts center,
Sulaifich, where he has
been spending a lot of
time working with young
people.
Qalayuaq lives in Kotzebue
with his wife, Millie.
��
5yr
NANA Regional Corporation, Inc. and SubsidiariesAs of and for the years ended September 30, 2006, September 25, 2005, September 26, 2004, September 28, 2003, and September 29, 2002.
FY06 FY05 FY04 FY03 FY02
Revenues $ 806,000,000 526,900,000 331,100,000 266,900,000 201,900,000
Net Income (Loss) 16,042,000 10,845,000 3,321,000 2,114,000 (321,000)
Assets 456,439,000 381,802,000 213,694,000 174,112,000 146,582,000
Long-Term Debt and Line of Credit 101,819,000 107,365,000 64,994,000 68,670,000 64,236,000
Shareholders’ Equity 155,454,000 124,819,000 63,472,000 54,189,000 43,745,000
Shares Outstanding 1,336,600 1,311,600 1,288,400 1,271,600 1,237,900
Earnings (Loss) Per Share 12.00 8.27 2.58 1.66 (0.26)
Dividends Paid Per Share 7.00 3.81 2.00 1.50 —
(Dividends are paid in November or December following the end of the fiscal year.)
Five-Year Financial highlights
$1,000
600
800
400
200
0
REVENUE BY YEARmillions
805.8 526.9 331.1 266.9 201.90406 05 03 02
REVENUE
$500
300
400
200
100
0
TOTAL ASSETS &SHAREHOLDERS’ EQUITY
millions
456.4TOTAL ASSETS
SHAREHOLDERS’ EQUITY
381.8 213.7 174.1 146.6155.5 124.8 63.5 54.2 43.7
0406 05 03 02
$20
10
15
5
0
-5
NET INCOME BY YEARmillions
16.0 10.8 3.3 2.1 (0.3)0406 05 03 02
NET INCOME
$8
6
4
2
0
DIVIDENDS PAID PER SHAREdollars
7.00 3.81 2.00 1.50 00406 05 03 02
DIVIDENDS
� ��
mDwight OutwaterNANA Oilfield Services, Inc.Deadhorse
Financial
Overview
During fiscal
year 2006
(FY06), NANA’s
consolidated total
assets grew by
19.5% to $456.4
million from $381.8
million at the end
of fiscal year 2005
(FY05).
Shareholders’ EquityShareholders’ equity represents all of NANA’s
recorded assets, minus the amounts the
Company owes others. Shareholders’ equity
was $155.5 million at the end of FY06, up
25.0% from $124.8 million at the end of FY05.
Shareholders’ equity was $63.5 million at the
end of FY04. The largest portion of the FY06
operates as a managed holding company with
operating subsidiaries throughout
the United States. These subsidiaries operate
in the following business segments:
• Contracted government services;
• Hospitality and tourism;
• Professional and management services; and
• Oilfield and mining support.
In addition, NANA generates passive income
from the following sources:
• Investment income from marketable
securities;
• Natural resource
royalty income
net of sharing with
other regional
corporations; and
• Natural resource 7(i)
income received
from other regional
corporations.
Corporate OverviewNANA Regional Corporation, Inc. (NANA
or the Company) was formed in 1972 as
one of the 13 Regional Native Corporations
created as a result of the Alaska Native Claims
Settlement Act (ANCSA). NANA’s portion of
the ANCSA settlement included 2 million acres
of land and approximately $44 million. NANA
is now owned by more than 11,000 Iñupiat
shareholders, descended from families living in
Northwestern Alaska.
NANA Development Corporation (NDC), a
wholly owned subsidiary of NANA, is
responsible for overseeing the business
interests of the Company. NDC
Management Discussion and Analysis Our Businesses
$500
300
400
200
100
0
TOTAL ASSETSmillions
213.7TOTAL ASSETS
CURRENT ASSETS
381.8 456.4153.7 252.7 298.7
0504 06
continued on page 7
Maude BlairStaff AttorneyNANA Development Corporation
��
EMD&A
to invest in our
businesses.
That capital can
come from only
two sources,
income earned
but not paid out
as dividends
or additional
borrowings from lending institutions. NANA’s
lending institutions continue to increase our
credit facilities as long as NANA continues
to grow profitably; however, in addition to
borrowings, NANA must retain a significant
portion of earned income to achieve
our strategic growth objectives. NANA’s
management believes the Company is
capable of funding future cash requirements
Shareholders’ Equity continued
and FY05 increase ($19.8 and $40.2 million,
respectively) is due to recording assets
representing future tax savings related primarily
to depletion deductions from the mining activity
at Red Dog Mine. Other increases resulted
from changes in
the market value
of marketable
securities and
continued
collective
income growth
in the Company’s
operating
businesses.
The Company
recorded record
earnings of $16.0
million during 2006. Of that, $9.4 million was
distributed to shareholders as dividends in
November 2006.
Liquidity & Capital ResourcesIn order to continue growing at the current
pace, NANA needs additional working capital
with the cash generated from business
operations, and with careful use of established
lines of credit. NANA’s current assets including
its investment portfolio comprise 65.4% of
NANA’s total assets. Current assets are defined
as cash and property of the Company that is
expected to be converted to cash within one
year. Continued growth in NANA’s subsidiaries
resulted in a 29.8% increase in consolidated
$200
150
100
50
0
TOTAL SHAREHOLDERS’ EQUITYmillions
63.5 124.8 155.50504 06
Patricia PaulAttorney At Law / LaConner / WA
Robert Nelson / Safety Training Officer / TeckCominco • Lexi Staheli / Job Shadow Student / Red Dog Mine
� ��
oand is focused
on securing a
sufficient revenue
base to become
profitable and
stable.
This segment
reported EBIT of
$27.5 million in
FY06, a 38.1%
increase over EBIT of $19.9 million in FY05.
FY05 EBIT were 177.7% higher than the $7.2
million in FY04. This segment continues to be
a significant part of NANA’s strategic business
plan. Management expects both revenue and
EBIT from contracted government services to
grow by approximately 25% in FY07.
Hospitality & TourismThis segment consists of five hotels located in
the state of Alaska. In Anchorage, NANA owns
a 60% interest in the Courtyard, the SpringHill
Results of Operations
Contracted Government ServicesNANA owns a controlling interest in four
management companies whose subsidiaries
are government service providers: Akima
Management Services, Inc. (Akima) located
in Anchorage and Charlotte, North Carolina;
Qivliq LLC (Qivliq) located in Anchorage, with
significant operations in Fairfax, Virginia; Ki
Professional Services Group, LLC (KPSG)
located in Colorado Springs, Colorado; and
Akmaaq, LLC located in Anchorage, Alaska.
Earnings before interest and taxes (EBIT) from
this segment have increased in each of the
past three years. To
create an ongoing
pipeline of growing
profitable companies,
NANA has established
entities that are
working through their
“start-up” period.
Akima, Qivliq, and
KPSG are profitable
and stable. Akmaaq is
still in a start-up period
accounts receivable from $137.8 million in 2005
to $178.9 million in 2006. Total current assets
increased 18.2% from $252.7 million in 2005 to
$298.7 million by the end of 2006. This increase
was greater than the increase in current
liabilities and lines of credit which increased
17.6% from $209.5 million to $246.5 million.
At September 30, 2006 and September
25, 2005, NANA had lines of credit available
totaling $100 million, a 100% increase of $50
million available at September 26, 2004.
The outstanding balance on lines of credit
decreased 5.2% from $78.5 million in 2005 to
$74.4 million in 2006.
The Company maintains a central treasury
with its primary lender. The central treasury
aggregates existing idle cash to pay down the
balance on the lines of credit.
Operating cash flows continue to be positive
with $26.6 million, $4.0 million and $7.0 million
in cash provided from operations during FY06,
FY05 and FY04 respectively.
Dean PungalikClinic Construction Clean-up Kobuk
$30
15
20
25
10
5
0
CONTRACTEDGOVERNMENT SERVICES
EBITmillions
7.2 19.9 27.50504 06
continued on page 9
��
HMD&A
income was 10.7% lower than FY04 income
at $3.7 million. The Anchorage properties
continue to perform consistent with
expectations based on established operating
budgets. Revenues and EBIT for 2007 are
expected to be consistent with 2006.
Professional & Management ServicesThis business segment includes NANA
Management Services, LLC (NMS); NANA
Colt Engineering, LLC (NANA/Colt); DOWL
Engineers, LLC (DOWL); ASCG, Incorporated
Hospitality & Tourism continued
Suites and the Residence Inn. In addition, NANA
owns a minority interest in the SpringHill Suites
in Fairbanks. NANA owns 100% of the Nullagvik
hotel located in Kotzebue, Alaska. All of NANA’s
hotels are managed by NANA Management
Services, LLC whose earnings are included
with the Professional & Management Services
business segment.
During the past three years the number of
available rooms in the Anchorage market
has increased
significantly due to
an increase in the
number of new
hotels. This has
put downward
pressure on
room rates and
occupancy.
Accordingly, EBIT
from this segment
decreased
4.2% in FY06 to
$3.2 million from $3.3 million in FY05. FY05
(ASCG) and Worksafe,
Inc. (Worksafe).
EBIT from this
segment has
increased steadily
from FY04.
$4
2
3
1
0
HOSPITALITY & TOURISM EBITmillions
3.7 3.3 3.20504 06
Rachel McClanahan / Administrative AssistantNANA Services, LLC / Federal Way / WA
Officer Nasruk Nay / Alaska State Troopers / Delta Junction
$12
6
8
10
2
4
0
PROFESSIONAL & MANAGEMENT SERVICES
EBIT*millions
7.0 9.4 11.80504 06
Includes earnings from both
consolidated and unconsolidated
entities
� �0�0
odue to significantly
increased market
prices for both
precious and
non-precious
metals. As a result,
management
expects both
revenue and
EBIT for this
business segment
to continue to
increase in 2007.
Investment Portfolio
Management
Marketable Securities Portfolio ManagementNANA’s investment earnings are realized from
dividends, interest, and the gains that occur
when portfolio managers sell securities.
services; NANA Major Drilling, LLC, which has
contracts for exploratory drilling for mining
operations in Alaska; and Arctic Caribou Inn,
Ltd. which provides oilfield camp support.
NANA’s share of EBIT from these business
interests increased
150.7% in FY06
to $3.6 million
from $1.4 million in
FY05 which was
a 161.1% increase
from EBIT of
$549,000 in FY04.
Mining activity has
increased in the
state of Alaska
Professional and Management Services
income increased in FY06 primarily from our
services provided to the oil and gas industry.
Income from our drug testing operations has
increased steadily from 2004 to 2006.
In total, this business segment’s EBIT increased
25.5% to $11.8 million in FY06 from $9.4 million
in FY05 which was a 35.3% increase from
earnings of $7.0 million in FY04.
Oilfield & Mining SupportNANA’s primary active consolidated subsidiary
in the oilfield and mining support business
segment is NANA Oilfield Services, Inc. (NOSI),
located in Deadhorse, Alaska. NOSI is a
provider of petroleum products and related
services to oilfield service companies and
mining companies in Alaska.
NANA has ownership interest in several other
entities providing contract support to the
oilfield and mining industries. These companies
include: NANA Lynden Logistics, LLC, which
provides trucking and other transportation
Officer Nasruk Nay / Alaska State Troopers / Delta Junction
$4
2
3
1
0
OILFIELD & MINING SUPPORT EBIT*
millions
0.5 1.4 3.60504 06
Includes earnings from both consolidated and unconsolidated entities
Renee Douglas Iñupiat Language / Culture Specialist NANA / Kotzebue
continued on page 11Pauline Morris
Owner, Morris Trading Post / Noorvik
�0�0
MMD&A
Natural
Resource
Management
Natural ResourcesNANA’s natural
resource earnings
come from three
sources: Red Dog
Mine royalties;
7(i) earnings from other Regional Native
Corporations (RNCs); and gravel sales and
land leases. Earnings of this segment were
$17.0 million in FY06, up 81.9% over earnings
of $9.4 million in FY05 which was a 30.8%
Marketable Securities Portfolio Management continued
The timing of sales cannot be predicted
and the profit NANA records is determined
by market conditions at the time of the
transactions. For
the year ended
September 30,
2006, NANA
had realized
investment
earnings of $5.7
million. This was
a 98.1% increase
over earnings
of $2.9 million
in FY05, which
in turn was a
58.0% increase over earnings of $1.8 million
in FY04. Management expects 2007 to be
a volatile year for marketable securities, but
overall expects investment earning consistent
with 2006.
increase over earnings of $7.2 million in FY04.
Zinc market prices ranged between 38 and
51 cents per pound in 2004; between 46 and
65 cents per pound in 2005; and between
65 cents and $1.70 per pound in 2006. In
Sandy Kowalski Principal June Nelson Elementary School / Kotzebue
Wilbur Atoruk / Truck Driver / NANA Lynden / Red Dog Mine
$6
2
4
0
MARKET SECURITIES PORTFOLIO EBIT
millions
1.8 2.9 5.70504 06
�� ����
rthe next three to five years, management
expects market prices of zinc to remain at
or above 2006 average levels as worldwide
zinc demand continues to exceed available
supplies. Subsequent to NANA’s fiscal year
end, zinc prices have fluctuated between $1.65
and $2.00 per pound.
The operating agreement for Red Dog Mine
provides advance net smelter royalties
to NANA until Teck Cominco (TCAK) has
recovered its capital investment plus interest
and advance royalties. Should zinc prices
remain at or above 2006 levels during FY07
TCAK will recover all of its capital investment
plus interest and may recover all advance
royalties paid. After recoveries by TCAK,
NANA will receive a percentage of the net
proceeds from the mine instead of net
smelter royalties. The amount of net proceeds
that the mine generates is dependent on a
number of factors including, but not limited
to: market prices of zinc, lead and silver;
operating costs at the mine site; negotiated
terms with refiners and a number of other
factors. While management believes that net
$20
5
15
10
0
NATURAL RESOURCE EBITmillions
7.2 9.4 17.00504 06
Mary YoungersOwner, Printer’s InkAnchorage
Dan Snyder Jr.Alaska Technical Center / Kotzebue
proceeds payments will be significantly higher
than previous advance net smelter royalties
paid in the past, the nature of many of the
factors mentioned is extremely volatile and
accordingly; management cannot provide
reliable estimates for net natural resources
revenues for 2007.
Section 7(i) of the Alaska Native Claims
Settlement Act requires that a portion of
NANA’s natural resource earnings must be
shared with other RNCs. NANA distributed
resource earnings to other RNCs totaling $18.2
million, $9.9 million and $5.9 million in 2006,
2005 and 2004; respectively.
In return, NANA
receives a share
of natural resource
earnings earned by
other RNCs. These
earnings have proven
to be unpredictable
in the past since they
are dependent on
business decisions
continued on page 13
����
Social & Cultural Expenditures FY06 FY05 FY04
In-Region $ 320,028 208,216 160,063
Donations to Native Nonprofit Organizations 115,063 84,717 87,487
Camp Sivivuniigvik 36,586 64,507 60,171
Regional Elders’ Meetings 50,254 21,748 6,727
Resource Specialists 455,488 422,811 301,189
Aqqaluk Trust Scholarships 300,000 300,000 300,000
Aqqaluk Trust Education Department Administration 100,000 100,000 100,000
Aqqaluk Trust 7(i) Scholarship Endowment 269,964 269,964 250,000
Aqqaluk Trust Other Programs and Administration 250,000 250,000 —
Medical, Disaster, and Burial Assistance 105,673 83,548 105,742
Social and Cultural Committee 189,386 42,555 266,520
Rosetta Stone Language CD Project 100,199 — —
Language Commission 20,935 — —
Total $ 2,313,576 1,848,066 1,637,899
MD&A
Social & Cultural Programs
The Company’s earnings
are used, in part, for
social and cultural
programs of importance
to shareholders.
Expenditures are made at
the direction of the board,
Natural Resources continued
made by other RNCs and on the
market process of the related natural
resources. NANA received resource
earnings from other regions, net of
redistributions totaling $3.5 million,
$2.3 million and $1.2 million in FY06,
FY05 and FY04, respectively.
and reflect the guidance of committees focusing
on education and cultural programs. Expenditures
were also made to support other organizations
involved in Alaska Native issues of concern to
NANA shareholders and the NANA Region.
Siikauraq Whiting Mayor / Northwest Arctic Borough Kotzebue
�� ����
nindustry, volatility
in the worldwide
spot-prices of
natural resource
commodities,
stock market
performance,
and the inability
to pass inflation-
based cost
increases through
to customers.
Future revenues
and earnings are
influenced by a number of factors, including
those outlined above, which are inherently
difficult to forecast. However, NANA believes
that it has the competitive and financial
resources for continued business success in
the markets in which it chooses to operate.
It is important to note that NANA’s actual
results could differ significantly from those
described in, or implied from, such forward-
looking statements, because of, among other
factors, continued uncertainty in the Alaskan oil
Special Note REGARDING
FORwARD-LOOKING
STATEMENTS
The statements contained
in this Management
Discussion & Analysis
of Financial Condition &
Results of Operations that
are not purely historical, or
that may be considered
an opinion or projection
concerning NANA or
its business, whether
expressed or implied,
are forward-looking
statements.
These statements may
include statements
regarding Management’s
expectations, intentions,
plans, or strategies
regarding the future. All
forward-looking statements
included in this document are based upon
information available to NANA on the date
hereof, and NANA assumes no obligation to
update any such forward-looking statements.
Kara SandvikVice President / Wells Fargo Bank Anchorage
Mamie Karmun / Executive Administrative Assistant, NANA Contracting Services / AnchorageDeb Billingsley / Executive Administrative Assistant, NANA Development Corporation / Anchorage
����
F 06expenses and taxes are paid. These are also
called income or profits.
EBIT: Earnings before interest and taxes.
Equity: This is the value of property, less the
amount that is owed on it. For example, if you have
a truck that is worth $12,000, but you still owe
$5,000 in payments, your equity is $7,000.
Expenses: Most people think of expenses as
part of the cost of living, like the monthly mortgage
payment on a home, or a telephone bill. For the
Corporation, expenses are costs required to
generate revenue. For example, if NANA buys
paper so that it can bill customers, the cost of the
paper is an expense.
Fiscal Year: Also called a financial year, a fiscal
year (FY) is usually 52 weeks long, but doesn’t
necessarily start on January 1. NANA changed
its fiscal year in 2006 from the last Sunday in
September to September 30.
Investment: An investment is money spent
on an asset that is expected to increase in value
or generate income sometime in the future. For
example, if you buy a house, you are making an
investment, hoping that when you sell the house
(the asset), you’ll get more than you paid for it.
LLC: A Limited Liability Company (LLC) is a
business organization that combines elements of
both partnerships and corporations that limits the
legal risk for its owners.
8 (a): Section 8(a) of the US Small Business Act
gives special consideration to small businesses
when they bid on Federal contracts. When
companies get big enough, they lose the special
status and compete on an equal footing. As a
Native Corporation, NANA is allowed to form
8(a) companies.
Asset: Something of value that you own, such
as a truck or a house. For the Corporation, this
can include big things, like a building. NANA’s
assets include its stock portfolio.
Consolidated Balance Sheets: This data
show what the Corporation, and its subsidiary
companies, own (assets), and owe (liabilities),
and NANA’s net worth (equity) at the end of the
accounting year.
Consolidated Statements of Cash
Flows: These figures indicate all the different
sources of Corporation cash, and also explain
how the money was used.
Consolidated Statements of Income:
These figures show the combined income,
expenses, and profit (or loss) of the Corporation,
and all our subsidiary and affiliated companies,
during a fiscal year.
Earnings: If you earn a paycheck, and use it to
pay your taxes and bills, the money you have left
over is called your earnings. In accounting, this
term means what is left of the revenues, after
A Basic Guide to Financial terms
Liability: If you owe money, it is called a liability.
For NANA, a liability can be a debt, or other
obligation, put in terms of money.
Liquidity: This describes the Corporation’s ability
to convert assets into cash without losing value.
The conversion to cash allows NANA to pay debts
as they become due, and take advantage of
investment opportunities as they arise.
Marketable Securities: This is a general term
for stocks, bonds or other investments that can be
sold on the open market.
Minority Interest: Less than 50 percent equity
interest in a company is called a Minority Interest.
Net Income (Loss): This is the formal
accounting term for total revenues minus total
expenses.
Revenue: This is the total amount of money
the Corporation took in, including income from
all activities and investments.
Shareholders’ Equity: This figure
includes all of NANA’s assets, minus what the
Corporation owes. It is called Shareholders’
Equity because NANA is fully owned by the
shareholders.
Subsidiary: This is a corporation that is
owned by another corporation. For example,
NANA Development Corporation is owned by
NANA Regional Corporation, Inc.
��
NANA Financial Statements
2006
06
��
������
The Board of DirectorsNANA Regional Corporation, Inc.:
We have audited the accompanying consolidated balance sheets of NANA Regional Corporation, Inc. and subsidiaries as of September 30,2006 and September 25, 2005, and the related consolidated statements of income, changes in shareholders equity and comprehensiveincome, and cash flows for each of the years in the three year period ended September 30, 2006. These consolidated financial statements arethe responsibility of the management of NANA Regional Corporation, Inc. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company 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 disclosuresin the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating theoverall 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 NANARegional Corporation, Inc. and subsidiaries as of September 30, 2006 and September 25, 2005 and the results of their operations and theircash flows for each of the years in the three year period ended September 30, 2006, in conformity with U.S. generally accepted accountingprinciples.
Anchorage, Alaska
January 31, 2007
INDEPENDENT AUDITORS REPORT������
CONSOLIDATED BALANCE SHEETS
September 30, 2006 and September 25, 2005
FY06 FY05
Assets
Current Assets
Cash and cash equivalents $ 591,478 9,558,094
Marketable securities (notes 6 and 8) 68,758,982 63,937,262
Trade and other accounts receivable, net (note 3) 178,861,107 137,763,318
Unbilled work in progress 23,013,297 18,612,016
Cost and estimated earnings in excess of billings (note 4) 8,010,126 8,917,436
Inventories 2,701,452 2,054,900
Prepaid expenses and deposits 12,802,720 9,386,145
Deferred income taxes 1,467,760 944,385
Other 2,462,070 1,548,810
Total current assets 298,668,992 252,722,366
Net property and equipment, at cost (notes 5, 9, and 10) 61,177,937 52,740,375
Other assets
Investments in affiliates (note 7) 9,708,065 7,232,817
Intangible assets (note 2) 27,274,116 29,230,853
Deferred income taxes (note 11) 58,532,240 39,255,615
Other 1,078,086 619,874
Total other assets 96,592,507 76,339,159
Total assets $ 456,439,436 381,801,900
�� �0�0�� �0
September 30, 2006 and September 25, 2005
FY06 FY05
Liabilities
Current Liabilities
Accounts payable $ 85,661,355 87,823,177
Accrued expenses (notes 2 and 13) 44,414,828 23,826,243
Dividends payable (note 2) 9,355,829 --
Billings in excess of costs and estimated earnings (note 4) 7,323,338 3,252,875
Line of credit (note 8) 38,387,936 38,291,201
Resource revenues distributable to others (note 1) 23,346,807 12,329,895
Current installments of long-term debt (note 9) 1,674,080 3,504,574
Current installments of long-term capital leases (note 10) 286,719 257,993
Total current liabilities 210,450,892 169,285,958
Line of credit (note 8) 36,028,304 40,224,000
Long-term debt, less current installments (note 9) 25,728,498 25,345,286
Long-term obligations under capital leases (note 10) 273,236 270,263
Other long-term liabilities 939,648 852,938
Minority interest 27,564,618 21,004,601
Total liabilities 300,985,196 256,983,046
Shareholders Equity
Common stock (note 2) 13,366 13,116
Additional paid-in capital 85,048,787 69,893,099
Retained earnings 65,081,780 49,040,269
Accumulated other comprehensive income 5,310,307 5,872,370
Total shareholders equity 155,454,240 124,818,854
Commitments and contingencies (notes 8, 9, 10, 12, 13 and 15) -- --
Total liabilities and shareholders equity $ 456,439,436 381,801,900
See accompanying notes to consolidated financial statements
�0�0�0
CONSOLIDATED STATEMENTS OF INCOME
Years ended September 30, 2006, September 25, 2005, and September 26, 2004
FY06 FY05 FY04
Revenues
Contracted government services $ 492,141,284 335,745,084 199,709,533
Professional and management services 262,016,549 158,832,969 105,955,123
Oilfield and mining support 18,796,935 9,785,076 7,666,040
Hospitality and tourism 8,772,218 8,633,134 9,065,481
Other investments 1,285,858 1,657,262 --
Investment income (note 7) 5,731,226 2,892,565 1,830,904
Natural resource (net of redistribution expenses) 17,015,290 9,353,664 7,152,968
Total revenues 805,759,360 526,899,754 331,380,049
Expenses
Contracted government services 464,684,508 315,863,357 192,549,856
Professional and management services 250,194,439 149,410,439 98,988,935
Oilfield and mining support 15,202,532 8,351,136 7,116,778
Hospitality and tourism 5,586,903 5,309,032 5,344,606
Other investments 3,820,608 2,523,817 523,332
Corporate general and administrative (note 13) 17,740,728 12,771,971 12,707,134
Total expenses 757,229,718 494,229,752 317,230,641
Operating income 48,529,642 32,670,002 14,149,408
Other expenses
Interest expense 7,790,529 4,563,390 3,092,498
Social and cultural programs 2,313,576 1,848,066 1,637,899
Other income (955,444) -- --
Minority interest 12,166,599 7,607,011 3,687,110
Income from continuing operations before income taxes 27,214,382 18,651,535 5,731,901
Income tax expense (note 11) 11,171,808 7,788,646 2,344,536
Income from continuing operations 16,042,574 10,862,889 3,387,365
Loss from discontinued operations, net of taxes (note 16) (1,063) (17,603) (66,779)
Net income $ 16,041,511 10,845,286 3,320,586
Net income per share of common stock $ 12.00 8.27 2.58See accompanying notes to consolidated financial statements
�� ������ ��
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY & COMPREHENSIVE INCOME
Years ended September 30, 2006, September 25, 2005, and September 26, 2004
AccumulatedCommon Additional Retained Comprehensive Total Stock-
Stock Paid-in Capital Earnings Income holders Equity
Balance at September 28, 2003 $ 12,716 21,397,002 34,874,397 (2,094,663) 54,189,452
Comprehensive income
Net income -- -- 3,320,586 -- 3,320,586
Change in unrealized loss on investments -- -- -- 5,537,013 5,537,013
Change in minimum pension liability -- -- -- 344,974 344,974
Total comprehensive income -- -- 3,320,586 5,881,987 9,202,573
Issuance of Class D stock 168 (168) -- -- --
Dividends - $1.50 per share -- (1,907,395) -- -- (1,907,395)
Tax benefit from ANCSA -- 1,986,996 -- -- 1,986,996
Balance at September 26, 2004 $ 12,884 21,476,435 38,194,983 3,787,324 63,471,626
Comprehensive income
Net income -- -- 10,845,286 -- 10,845,286
Change in unrealized gain on investments -- -- -- 2,085,046 2,085,046
Total comprehensive income -- -- 10,845,286 2,085,046 12,930,332
Issuance of Class D stock 232 (232) -- -- --
Dividends - $2.00 per share -- (2,576,593) -- -- (2,576,593)
Tax benefit from ANCSA -- 50,993,489 -- -- 50,993,489
Balance at September 25, 2005 $ 13,116 69,893,099 49,040,269 5,872,370 124,818,854
Comprehensive income
Net income -- -- 16,041,511 -- 16,041,511
Change in unrealized gain on investments -- -- -- (562,063) (562,063)
Total comprehensive income -- -- 16,041,511 (562,063) 15,479,448
Issuance of Class D stock 250 (250) -- -- --
Dividends - $3.81 per share -- (4,996,804) -- -- (4,996,804)
Dividends - $7.00 per share -- (9,355,829) -- -- (9,355,829)
Tax benefit from ANCSA -- 29,508,571 -- -- 29,508,571
Balance at September 30, 2006 $ 13,366 85,048,787 65,081,780 5,310,307 155,454,240
������
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended September 30, 2006, September 25, 2005, and September 26, 2004
FY06 FY05 FY04
Operating ActivitiesNet income $ 16,041,511 10,845,286 3,320,586
Loss from discontinued operations 1,063 17,603 66,779
Income from continuing operations 16,042,574 10,862,889 3,387,365
Additions (deductions):
Depreciation and amortization 8,723,719 4,868,095 3,685,677
Deferred tax expense 10,086,411 6,845,843 1,986,996
Bad debt expense 1,125,004 694,575 (87,915)
Gain on disposition of assets (44,144) (19,005) (8,599)
Gain on sale of marketable securities (1,956,080) (1,202,287) (641,811)
Distributions in excess of (undistributed) equity in earnings of affiliates (2,475,248) (422,618) 1,887,162
Minority interest 12,166,599 7,607,011 3,687,110
Decrease (increase) in assets:
Accounts receivable and unbilled work in-progress, net (46,624,074) (53,631,123) (35,081,255)
Costs and estimated earnings in excess of billings 907,310 (4,819,337) (1,347,826)
Inventories (646,552) (594,159) (251,969)
Other current assets (913,260) (148,030) (1,043,851)
Prepaid expenses and deposits (3,416,575) (1,875,707) (2,296,251)
Increase (decrease) in liabilities:
Accounts payable, accrued expenses and resource revenues
distributable to others 29,530,385 36,139,862 33,102,595
Billings in excess of costs and estimated earnings 4,070,463 (345,123) --
Net cash provided by operating activities 26,576,532 3,960,886 6,977,428
�� ������ ��
Years ended September 30, 2006, September 25, 2005, and September 26, 2004
FY06 FY05 FY04
Investing ActivitiesPurchases of marketable securities (30,271,360) (39,951,344) (96,243,675)
Proceeds from sales of marketable securities 26,465,817 43,011,954 94,765,493
Increase in other investments (458,212) (619,874) --
Capital contributions to affiliates -- -- (900,000)
Proceeds from the sale of assets 214,583 96,686 85,308
Purchases of property and equipment (15,076,914) (9,436,472) (2,720,114)
Net purchase of businesses -- (27,500,000) (358,102)
Net cash used by investing activities (19,126,086) (34,399,050) (5,371,090)
Financing ActivitiesProceeds from long-term debt 2,353,340 23,304,081 45,712
Principal payments on long-term debt (3,800,622) (25,323,570) (5,452,097)
Principal payments on capital leases (266,370) (258,878) (325,917)
Net increase (decrease) in line of credit (4,098,961) 44,390,816 1,730,375
Distributions to minority interests of consolidated subsidiaries (5,606,582) (1,795,219) (2,316,582)
Cash dividends paid (4,996,804) (2,576,593) (1,907,395)
Net cash provided by (used by) financing activities (16,415,999) 37,740,637 (8,225,904)
Net cash used by discontinued operations (1,063) (17,603) (66,779)
Net increase (decrease) in cash (8,966,616) 7,284,870 (6,686,345)
Cash and cash equivalents at beginning of year 9,558,094 2,273,224 8,959,569
Cash and cash equivalents at end of year $ 591,478 9,558,094 2,273,224
Supplementary DisclosuresInterest paid $ 7,790,529 4,859,250 2,948,294
Income taxes paid 1,026,871 470,400 300,243
Equipment purchases financed by capital leases and notes payable 298,069 126,496 193,331
See accompanying notes to consolidated financial statements
������
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Summary of Significant Accounting Policies
(a) Organization
NANA Regional Corporation, Inc. (Company or NANA) was formed as an Alaska for-profit corporation under state law and underthe Alaska Native Claims Settlement Act (ANCSA or Act) of 1971 through which the Company became entitled to cash and land,including the surface and subsurface estate, of 2,258,836 acres and title to subsurface estate rights only on 161,260 acres. AtSeptember 30, 2006, the Company has received interim conveyance or patent to 1,376,637 acres of surface estate and 1,505,835acres of subsurface estate. No value has been ascribed to any land received under the Act.
The Company maintains an investment portfolio and negotiates and oversees resource contracts to extract minerals from its land.Changes in the prices of these minerals, primarily lead and zinc, could have a positive or negative effect on the Company. Inaddition, the Company operates in various business segments. Its contracted government services segment operates around theworld. Its hospitality and tourism, professional and management services and oilfield and mining support segments operate primarilywithin the State of Alaska. Changes in the Alaska economy, particularly the oil and gas industry and tourism, and the spending b ythe U.S. Government, specifically, the U.S. Department of Defense, could have a positive or negative effect on the Company.
The Act required the Company to issue 100 shares of its stock to each Native enrolled in the northwest region of Alaska. NANAcurrently has the following classes of common stock outstanding:
• Class A common stock to those Natives who enrolled in the NANA Region as residents of one of its villages;
• Class B common stock to those Natives who enrolled in the NANA Region, but elected not to be registered as residents ofany of its villages;
• Class C common stock to those Natives who were eligible to, but did not, enroll in the NANA Region in 1971, and also did notenroll under ANCSA;
• Class D common stock to Natives born after 1971 who meet certain eligibility requirements. Recipients receive either 50 or100 shares based on the original parental enrollment in the NANA Region. Class D shares carry certain restrictions.
The Company s stock cannot be sold unless a majority of the outstanding shares is voted to authorize such a sale.
�� ������ ��
Sections 7(i) and 7(j) of the Act require the Company to make the following mandatory distributions:
• 70% of all net revenues received by the Company for subsurface and timber resources transferred under the Act to theCompany must be distributed to all regional corporations, including itself (the funds are allocated based on the final number ofNatives enrolled in each region); and similarly, the Company receives its pro rata share of 70% of resource revenuesreceived by the other 11 Native regional corporations which are recorded as revenues when the amount thereof isdetermined);
• Of the 70% of the resource revenues of the Native regional corporations to which NANA is entitled, 50% of a portion of suchrevenues, which portion is based on the ratio of the nonvillage shareholders and enrolled village shareholders to total NANAshareholders, must be distributed to NANA s enrolled nonvillage shareholders and the Kikiktagruk Inupiat Corporation. NANAretains the shares of such revenues that the merged villages would have been entitled to receive.
(2) Summary of Significant Accounting Policies
(a) Consolidation
The consolidated financial statements include the accounts of the Company and its wholly–owned subsidiary, NANA DevelopmentCorporation. All significant intercompany transactions have been eliminated in consolidation.
(b) Cash Equivalents
For purposes of the consolidated statements of cash flows, highly liquid short-term investments with original maturities of less than60 days are considered to be cash equivalents.
(c) Inventories
Inventories, consisting primarily of fuel and food products, are stated at the lower of cost (first in, first out) or market.
(d) Accounts Receivables
Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is theCompany s best estimate of the amount of probable credit losses in the Company s existing accounts receivable. Accountbalances are charged off against the allowance after all means of collection have exhausted and the potential for recovery isconsidered remote. The Company does not have any off balance sheet credit exposure related to its customers.
������
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(e) Property and Equipment, Depreciation and Amortization
Property and equipment are stated at cost. Equipment under capital leases are stated at the present value of minimum leasepayments.
Depreciation is provided using the straight-line method over the useful lives of the assets which range from three to 40 years.Equipment held under capital leases and leasehold improvements are amortized straight-line over the shorter of the lease term orestimated useful life of the assets. Depletion of investments in oil and gas producing and other mineral properties is calculated usingthe units of revenue method.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount ofan asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carryingamount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount ofan asset exceeds its estimated future cash flow, an impairment charge is recognized by the amount the carrying amount of theasset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet andreported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilitiesof a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of thebalance sheet.
(f) Investments in Affiliates
The equity method of accounting is used to account for unconsolidated investments in affiliates. Under the equity method, theCompany s share of the earnings or losses of each investment is included in the consolidated statements of income, and theundistributed earnings or losses are reported as an increase or decrease to investments in affiliates.
(g) Marketable Securities
The Company has classified all of its marketable securities as securities available for sale. Securities are classified as available forsale when management intends to hold the securities for an indefinite period of time for appreciation and income or when thesecurities may be utilized for tactical asset/liability purposes and may be sold from time to time to effectively manage interest rateexposure and resultant prepayment risk and liquidity needs.
Securities available for sale are stated at fair value with unrealized holding gains and losses excluded from earnings and reportedas a separate component of other comprehensive income. Realized gains and losses on sales of securities are computed using thespecific identification method of determining the cost of securities sold.
A decline in the market value of any available for sale securities or held to maturity securities below cost that is deemed to be otherthan temporary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basisfor the security is established. To determine whether an impairment is other than temporary, the Company considers whether it hasthe ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of theinvestment is recoverable outweighs evidence to the contrary.
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(h) Revenue Recognition
Revenues on contracts are recognized ratably over the term of the contract, as services are performed, percentage of completion orbased on the specific terms of the contracts. Revenue related to reimbursable cost line items is recognized when the applicableexpense is incurred. Revenue from sales where the Company has, by agreement, transferred all significant risk to manufacturers orothers are recorded net of cost. Revenue from such sales totaled $127,551,217, $93,569,818, and $41,382,719 for fiscal years2006, 2005 and 2004. Award fees are recognized at the time of receipt.
Revenues for room, beverage, food, and fuel sales are recognized at the time service is provided.
(i) Income Taxes
The Company and its subsidiaries file consolidated federal and state income tax returns. The Company accounts for income taxesusing the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective taxbasis. The Company s surface and subsurface estate received in accordance with ANCSA have not been recognized in theaccompanying financial statements because the fair value was not determinable within reasonable limits at the time of conveyance.In addition, the tax basis of the Company s surface and subsurface estate also has not been determined, except for certainsubsurface estate for mining activities.
Due to the unique tax attributes of ANCSA corporation s natural resources and the revenue sharing requirements of Section 7(i), thetax basis of such resources most likely would be significantly in excess of their book basis. The Company does not reflect adeferred tax asset for surface or subsurface estate until a reasonable basis also has been determined and such amounts arerecorded to paid-in capital. The net deferred tax benefit or expense associated with ANCSA subsurface estate is also recorded asadditional paid–in capital.
(j) Comprehensive Income
Comprehensive income consists of net income or loss, net unrealized gains and losses on securities and minimum pension liabilityadjustments and is presented in the consolidated statements of shareholders equity and comprehensive income.
(k) Fiscal Year
In 2006 the Company changed its fiscal year from the last Sunday in September to September 30. The current financial reportingperiod extends from September 26, 2005 through September 30, 2006.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(l) Common Stock and Earnings Per Share
Common stock is comprised of:September 30, September 25,
2006 2005Class A common stock of $0.01 par value. Authorized 2,000,000 shares;
issued and outstanding; 704,700 shares $ 7,047 7,047Class B common stock of $0.01 par value. Authorized 500,000 shares;
issued and outstanding 29,400 shares 294 294Class C common stock of $0.01 par value. Authorized 50,000 shares;
issued and outstanding 1,400 shares 14 14Class D common stock of $0.01 par value. Authorized 5,000,000 shares;
issued and outstanding 601,100 shares at September 30, 2006 and576,100 shares at September 25, 2005 6,011 5,761
$ 13,366 13,116
Earnings per share are computed using the end of year number of shares of Class A, B, C, and D common stock outstanding of1,336,600, 1,311,600, and 1,288,400 in 2006, 2005, and 2004, respectively. On September 27, 2006 the board of directorsapproved a dividend of $7.00 per share, with a record date of October 31, 2006. Because the Board of Directors changed NANA syear end to September 30, 2006 during fiscal year 2006 the $9,355,829 dividend payable has been recorded in 2006 along withthe dividend that was approved on September 29, 2005 as a return of capital.
(m) Intangible Assets
Intangible assets consist of goodwill and other intangible assets. Goodwill represents the excess of costs over the fair value ofassets of businesses acquired. Goodwill acquired in a purchase business combination and determined to have an indefinite usefullife is not amortized, but instead tested for impairment at least annually in accordance with the provisions of FASB StatementNo.142, Goodwill and Other Intangible Assets. Intangible assets with estimated useful lives are amortized over their respectiveestimated useful lives to their estimated residual values. Intangible assets are also reviewed for impairment in accordance withFASB Statement No. 144, Accounting for Impairment on Disposal of Long-Lived Assets.
Goodwill and amortizable intangible assets were $17,857,615 and $9,416,501 at September 30, 2006. Intangible assets increasedby approximately $20,753,000 in 2005 due to acquisitions.
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(n) Management Estimates
In preparing the consolidated financial statements, management is required to make a number of estimates and assumptionsrelating to the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of theconsolidated financial statements and reported amounts of revenue and expenses during the period. Significant items subjectto such estimates and assumptions include the carrying amount of property and equipment, investments in aff iliates, goodwilland intangible assets, valuation allowances for receivables, reserves for retained risk insurance programs, and obligationsrelated to its employee retirement plan. Actual results could differ from those estimates.
(o) Fair Value of Financial Instruments
Fair value of financial instruments, as defined under Statement of Financial Accounting Standards No. 107, Disclosures AboutFair Value of Financial Instruments is estimated by management. Fair values for accounts receivable, contract arrangementsand operating liabilities approximated recorded balances at September 30, 2006 and September 25, 2005. Marketablesecurities and lines of credit are recorded at fair value. The fair value of long-term debt is estimated to be $23,209,478 and$26,849,588 at September 30, 2006 and September 25, 2005, respectively. Fair value estimates are dependent uponsubjective assumptions and involve significant uncertainties resulting in variability in estimates with changes in assumptions.
(p) Reclassifications
Certain reclassifications have been made to the 2005 and 2004 balances to conform with the 2006 presentation.
( 3 ) Accounts Receivable
A summary of accounts receivable follows:
September 30, September 25,2006 2005
Trade accounts receivable:Commercial customers 51,920,326 39,086,841 U.S. Government 125,054,907 99,212,111
Other receivables 5,004,183 1,336,147
181,979,416 139,635,099
Less allowance for doubtful accounts 3,118,309 1,871,781
Net receivables 178,861,107 137,763,318
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts
Costs and estimated earnings in excess of billings on uncompleted contracts consist of the following:
September 30, September 25,2006 2005
Gross costs incurred on uncompleted contracts $ 596,351,799 392,008,252Estimated gross profit earned to date 70,615,003 42,976,257
666,966,802 434,984,509
Less billings to date 666,280,014 429,319,948
$ 686,788 5,664,561
Included in the accompanying consolidated balance sheets under the following captions:
September 30, September 25,2006 2005
Cost and estimated earnings in excess of billings $ 8,010,126 8,917,436billings in excess of costs and estimated earnings (7,323,338.00) (3,252,875.00)
$ 686,788.00 5,664,561
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(5) Property and Equipment
A summary of property and equipment, at cost, follows:
Depreciable September 30, September 25,lives 2006 2005
Land — $ 5,395,547 5,395,547Buildings 40 years 42,210,458 43,963,449Work in progress — 4,341,489 3,058,415Other 3 to 15 years 46,597,806 36,398,471
98,545,300 88,815,882
Less accumulated depreciation 37,367,363 36,075,507
Net property and equipment $ 61,177,937 52,740,375
(6) Marketable Securities
Summaries of marketable securities follow:
September 30, 2006Unrealized Unrealized
Cost gains losses Fair value
Cash and cash equivalents $ 27,035,392 — — 27,035,392Corporate notes and bonds 2,969,914 10,817 (95,911) 2,884,820Common stock 29,873,562 9,478,267 (513,059) 38,838,770
$ 59,878,868 9,489,084 (608,970) 68,758,982
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Gross realized gains and losses on sales of marketable securities totaled $1,978,060 and $21,980, respectively, during the year endedSeptember 30, 2006.
September 25, 2005Unrealized Unrealized
Cost gains losses Fair value
Cash and cash equivalents $ 25,185,711 — — 25,185,711Corporate notes and bonds 2,868,251 21,698 (85,770) 2,804,179Common stock 26,063,283 10,491,071 (606,982) 35,947,372
$ 54,117,245 10,512,769 (692,752) 63,937,262
Gross realized gains and losses on sales of marketable securities totaled $2,541,778 and $1,339,491, respectively, during the yearended September 25, 2005.
September 26, 2004Unrealized Unrealized
Cost gains losses Fair value
Cash and cash equivalents $ 5,293,997 — — 5,293,997U.S. Government bonds 3,402,628 18,124 (13,596) 3,407,156Corporate notes and bonds 5,990,328 229,112 (22,325) 6,197,115Common stock 41,288,616 4,805,386 (1,229,377) 44,864,625
$ 55,975,569 5,052,622 (1,265,298) 59,762,893
Gross realized gains and losses on sales of marketable securities totaled $2,532,777 and $1,890,966, respectively, during the yearended September 26, 2004.
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Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category andlength of time that the individual securities have been in a continuous unrealized loss position at September 30, 2006 and September 25,2005 were as follows:
Less than 12 months 12 months or more Total
Unrealized Unrealized Unrealized
losses Fair value losses Fair value losses Fair value
2006
Corporate notes and bonds $ (10,110) 447,121 (85,801) 1,882,630 (95,911) 2,329,751Common stock (376,796) 2,432,337 (136,263) 1,995,814 (513,059) 4,428,151
$ (386,906) 2,879,458 (222,064) 3,878,444 (608,970) 6,757,902
2005
Corporate notes and bonds $ (35,551) 913,541 (50,219) 1,324,575 (85,770) 2,238,116
Common stock (218,330) 2,554,086 (388,652) 1,427,276 (606,982) 3,981,362
$ (253,881) 3,467,627 (438,871) 2,751,851 (692,752) 6,219,478
Because the Company has the intent and ability to hold these investments until there is a market price recovery, these investments arenot considered other than temporarily impaired.
A summary of revenue from marketable securities follows:
2006 2005 2004
Interest $ 1,276,124 1,020,994 762,736Dividends 542,010 862,574 629,791Other 2,221,875 — —Net gain (loss) on sale of securities 1,956,080 1,202,287 641,811Portfolio management expenses (264,863) (193,290) (203,434)
$ 5,731,226 2,892,565 1,830,904
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of contractual maturities of marketable debt securities, including U.S. Government bonds and corporate notes and bonds atSeptember 30, 2006, at cost, follows:
Fiscal year 2007 to 2011 $ 590,140Fiscal year 2012 to 2016 2,300,087Subsequent to fiscal year 2016 79,687
$ 2,969,914
(7) Investments in Affiliates
The Company has invested in affiliates (including joint ventures, partnerships, and limited liability companies) which are primarilyinvolved in oil field services, hospitality services, professional management services, security services, mineral exploration drilling,government contracting, construction, transportation, and engineering services. The Company s ownership in these affiliates ranges from0.39% to 50%. Summarized combined balance sheets and statements of operations of the affiliates follow:
Combined Balance Sheets
September 30, September 25Assets 2006 2005
Current assets $ 22,009,762 16,109,827Equipment, net of accumulated depreciation of $12,457,840 in
2006 and $10,675,197 in 2005 16,973,321 17,800,129Other 408,198 442,855
$ 39,391,281 34,352,811
Liabilities and EquityCurrent liabilities $ 7,700,014 5,720,735Long-term liabilities 10,205,660 12,288,586Owners equity 21,485,607 16,343,490
$ 39,391,281 34,352,811
Combined Statements of Operations
2006 2005 2004
Revenues $ 67,008,339 47,313,468 54,397,784Costs and expenses 59,030,332 42,997,978 52,611,664
Net income $ 7,978,007 4,315,490 1,786,120
,
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,
A summary of net income (loss) allocable to the Company for investments in affiliates by line of business follows:
2006 2005 2004
Hospitality and tourism $ 24,575 (35,599) (45,093) Professional and management services 1,591,436 645,657 649,621 Oilfield and mining support 2,276,812 801,234 (51,329) Other investments 154,623 652,282 (429,493)
$ 4,047,446 2,063,574 123,706
( 8 ) Lines of Credit
A summary of lines of credit follows:September 30, September 25,
2006 2005Authorized $45,000,000 line of credit with a bank
collateralized by marketable securities, interest at anindexed rate (6.45% at September 30, 2006),due July 1, 2008 $ 36,028,304 40,224,000
Authorized $55,000,000 line of credit with a bankcollateralized by accounts receivable, interest atthe prime rate (8.25% at September 30, 2006),due December 28, 2006 38,387,936 38,291,201 Totals $ 74,416,240 78,515,201
In June 2005 the line of credit was modified with the due date of the primary line extended through 2008. Accordingly, $36,028,304and $40,224,000 are classified as long-term and $38,387,936 and $38,291,201 are classified as current at September 30, 2006 andSeptember 25, 2005, respectively. The business loan agreement for each line of credit contains restrictive covenants includingmaintaining certain ratios. The Company obtained a waiver from the bank for a current ratio lower than allowed in the covenants onSeptember 30, 2006. Subsequent to year end the $55 million line of credit was replaced with a $65 million syndicated line of creditwith multiple banks and a $10 million swing line with a bank, both on similar terms.
On September 23, 2003 the Company entered into an interest rate swap agreement, effective October 1, 2003 to change$10,000,000 of its variable interest rate line of credit to an effective fixed interest rate of 3.75%. The swap terms are similar to thedebt and the swap agreement is in effect through October 1, 2008. The fair value of the swap at September 30, 2006 is nominal.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) Long-Term Debt
September 30, September 25,A summary of long term debt follows: 2006 2005
Note payable, due December 1, 2019, interest fixed rate, (5.76 at September 30, 2006)collateralized by real property $ 10,719,576 11,191,432
Note payable, due December 1, 2019, interest fixed rate, (5.76 at September 30, 2006)collateralized by real property 6,468,709 6,753,450
Note payable, due December 1, 2019, interest fixed rate, (5.76 at September 30, 2006)collateralized by real property 3,881,226 4,052,070
Note payable, due June 1, 2018, interest fixed rate, (5.15% at September 30, 2006)collateralized by real property 1,623,919 1,722,440
Note payable, due May 1, 2018, interest indexed to United States treasury rates(5.72% at September 24, 2006), collateralized by real property 1,457,775 1,540,440
Notes payable to former members of TKC Communications, LLC, due between May 15and September 15, 2006, interest at prime plus 1% — 1,274,347
Note payable, due September 30, 2013, interest at variable rates, not less than 6.0%or more than 10% (9.50% at September 30, 2006) 566,800 647,772
Note payable, due September 30, 2009, interest at prime minus 1.0%, (8.25% at September 30, 2006) 220,665 578,062
Note payable, due October 5, 2013, interest at 7.25%, collateralized by real property 1,584,254 —
Note payable, due April 5, 2013, interest at 7.25%, collateralized by real property 455,848 —
Other debt 423,806 1,089,847
Total long-term debt 27,402,578 28,849,860
Less current installments 1,674,080 3,504,574
Long-term debt, less current installments $ 25,728,498 25,345,286
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Scheduled repayment of outstanding debt is as follows:
Amount
Fiscal year ending:2007 $ 1,674,0802008 1,851,8982009 1,927,5472010 1,928,5022011 1,991,272Thereafter 18,029,279
$ 27,402,578
(10) Lease Commitments
Amortization of capital lease properties, provided by use of the straight-line method over the lease terms, has been included indepreciation and amortization expense. The carrying costs related to equipment and vehicles purchased under capital lease were$919,142 at September 30, 2006 and $881,304 at September 25, 2005.
Future minimum rental commitments for capital leases consist of the following:
Amount
Fiscal year ending:2007 $ 319,4412008 173,4322009 121,4072010 2,475
Total minimum lease payments 616,755
Less amounts representing interest (56,800)
Present value of net minimum lease payments 559,955
Less current portion (286,719)
$ 273,236
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company leases office space and equipment under various operating lease agreements. Future minimum operating leasecommitments consist of the following:
Amount
Fiscal year ending:2007 $ 8,559,7492008 7,656,0632009 6,840,7082010 5,491,7292011 4,843,279Thereafter 6,016,931
$ 39,408,459
The rent expense under all operating leases amounted to $9,539,788, $5,154,855, and $2,917,725 in 2006, 2005, and 2004,respectively.
(11) Income Taxes
Income tax expense is as follows:
2006 2005 2004
State $ 2,612,146 1,818,517 777,209Federal 8,558,947 5,958,544 1,522,436
$ 11,171,093 7,777,061 2,299,645
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Current taxes are for state taxes. Tax expense (benefit) is allocated among continuing and discontinued operations as follows:
2006 2005 2004
Current - continuing operations $ 1,084,682 931,128 312,649
Deferred:Continuing operations 10,087,126 6,857,518 2,031,887Discontinued operations (715) (11,585) (44,891)
Tax expense $ 11,171,093 7,777,061 2,299,645
Actual income tax expense differs from “expected” tax expense (benefit) as follows:
2006 2005 2004
Computed “expected” income tax expense $ 9,252,890 6,341,522 1,948,846State tax, net of federal effect 1,724,016 1,199,433 354,672Nondeductible expenses 324,898 512,877 183,985Dividends received exclusion (128,998) (205,293) (149,890)Change in valuation allowance (10,507,653) (7,654,787) (3,187,637)ANCSA tax effect recorded as
additional paid-in capital 10,086,411 6,845,843 1,986,996Other 419,529 737,466 1,162,673
$ 11,171,093 7,777,061 2,299,645
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of and changes in the deferred tax assets and liabilities are as follows:
September 25, Benefit September 30,2005 (expense) 2006
Deferred tax asset:Allowance and accruals $ 5,982,390 (210,171) 5,772,219Basis in fixed assets 4,263,525 (169,452) 4,094,073Basis in Red Dog Mine 151,749,018 (9,655,687) 142,093,331Net operating loss carryforward 97,731,997 (3,572,114) 94,159,883Basis in joint ventures and investments 1,202,255 (981,400) 220,855Other 1,599,958 4,081,171 5,681,129
Total deferred tax asset 262,529,143 (10,507,653) 252,021,490
Deferred tax liability–unrealizedgain on marketable securities (3,947,646) 377,840 (3,569,806)
Valuation allowance (218,381,497) 29,929,813 (188,451,684)
Net deferred tax asset $ 40,200,000 19,800,000 60,000,000
Deferred tax asset established forANCSA property recorded inadditional paid in capital (19,422,160)
ANCSA tax effect recorded inadditional paid in capital (10,086,411)
Deferred income taxes recorded to equity (377,840)
$ (10,086,411)
During 2006, the Company recorded a deferred tax asset of $60 million, the amount that is more likely than not to be realized in theforeseeable future. For the remaining deferred tax asset, a valuation allowance is recorded. Because the related resources were part ofthe Company s original capital, changes in resource related tax attributes are recorded through contributed capital.
The Company s net operating loss carryforwards of approximately $238 million for federal income taxes and $219 million for state incometaxes expire in the years 2007 through 2025.
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(12) Resource Development Agreement
In 1982, the Company signed a development and operating agreement granting Cominco Alaska, Incorporated (CAI):
• An economic interest in mineral-bearing lands received by the Company pursuant to the Act;
• Authority to evaluate the economic development potential of such lands; and
• Authority to develop such lands if determined to be feasible.
Teck Cominco, Limited (Teck), CAI s predecessor, is required to pay a guaranteed minimum advance royalty of $1,000,000 per year forthe remaining term of the agreement, adjusted for inflation, or a 4.5% advance net smelter royalty, whichever is higher. A net proceedsroyalty will be payable when Teck has fully recovered certain capital costs, accrued interest, and advance royalties. The Companyreceived net smelter royalties of $29,691,000, $16,953,000, and $10,883,000 for the years ended September 30, 2006, September 25,2005, and September 24, 2004, respectively. As of September 30, 2006, no amounts have been received under the net proceedsroyalty. When received, royalties described above are subject to sharing with the other regional Native corporations pursuant to Section7(i) of the Alaska Native Claims Settlement Act.
(13) Pension Plan
Effective January 1, 1989, the Company adopted a noncontributory defined benefit pension plan which covers all of its employees, andcertain wholly–owned subsidiaries, except those who are members of a collective bargaining unit for which retirement benefits havebeen the subject of good faith bargaining or in an unrelated line of business. Benefits are based on the length of service andcompensation. The Company s funding policy is to contribute annually an amount at least equal to the minimum requirements of theEmployee Retirement Income Security Act of 1974. Contributions are intended to provide not only for future benefits attributable toservice to date, but also for those expected to be earned in the future.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the plan s benefit obligations, fair value of plan assets, and funded status at September 30, 2006 andSeptember 25, 2005:
2006 2005
Benefit obligation at beginning of year $ 9,594,083 8,548,172Service cost 555,136 478,934Interest cost 524,679 473,264Actuarial loss (gain) (288,959) 225,010Benefits paid (161,825) (131,297)
Benefit obligation at end of year 10,223,114 9,594,083
Fair value of plan assets at beginning of year 7,539,363 6,187,638Actual return on plan assets 675,878 931,022Employer contribution 552,000 552,000Benefits paid (161,825) (131,297)
Fair value of plan assets at end of year 8,605,416 7,539,363
Funded status (1,617,698) (2,054,720)
Unrecognized net actuarial loss (gain) 543,178 928,863
Net amount recognized $ (1,074,520) (1,125,857)
Amounts recognized in the statement of financial positionAccrued benefit cost $ (1,074,520) (1,125,857)
The accumulated benefit obligation for the pension plan was $8,615,455 and $8,014,326 at September 30, 2006 and September 25,2005, respectively.
Weighted average assumptions used to determine benefit obligations at September 30, 2006 and September 25, 2005 were as follows:
2006 2005
Discount rate 5.75% 5.50%Rate of compensation increase 4.00 4.00
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Weighted average assumptions used to determine net cost for the years ended September 30, 2006 and September 25, 2005 were asfollows:
2006 2005
Discount rate 5.50% 5.50%
Expected long-term rate of
return on plan assets 7.50 7.50
Rate of compensation increase 4.00 4.00
The Company s overall expected long-term rate of return on assets is 7.50%. The expected long-term rate of return is based on theportfolio as a whole and not on the sum of the returns on individual asset categories. The return is based exclusively on historical returns,without adjustments.The following table sets forth the components of net periodic benefit costs:
2006 2005
Service cost $ 555,136 478,934Interest cost 524,679 473,264Expected return on plan assets (579,152) (478,707)Amortization of net (gain) loss — 30,015
Net periodic benefit cost $ 500,663 503,506
(a) Plan Assets
The weighted average asset allocation of the Company s pension benefits and postretirement benefits at September 30, 2006 andSeptember 25, 2005 were as follows:
Pension benefitsplan assets
2006 2005
Asset category:International equities 20% 18%Stocks 57 56 Bonds 23 26
Total 100% 100%
The Company s investment policies and strategies for the pension plan include target allocations of 15% international equities, 55%stocks, and 30% bonds. The Company s investment goals are to meet or exceed the Consumer Price Index rate by 5% annually.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(b) Cash Flows
The Company expects to contribute $552,000 to its pension plan in 2007.
The expected benefits are based on the same assumptions used to measure the Company s benefit obligation at September 30,2006 and include estimated future employee service and are as follows:
Amount
Fiscal year ending:2007 $ 202,7632008 211,0742009 259,1852010 267,8842011 340,256Thereafter 2,806,897
$ 4,088,059
(14) Comprehensive Income
Changes in other comprehensive income follow:2006 2005 2004
Unrealized holding gains arising during the year $ 1,394,017 3,287,333 6,178,824Realized gains included in net income (1,956,080) (1,202,287) (641,811)Change in minimum pension liability — — 344,974
$ (562,063) 2,085,046 5,881,987
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(15) Contingencies
The Company is self insured for health care up to $150,000 per participant and $7.3 million in aggregate. The Company has purchasedstop loss insurance for amounts in excess of these limits. The Company also retains the risk for specific workers compensation losses invarying amounts ranging from $250,000 to $500,000. The Company s insurance carrier assumes losses incurred above the retainedamounts. The Company has established a liability for workers compensation and health care claims incurred but not reported.
The Company is aware of possible contamination at a former mining site on land conveyed to the Company under the Alaska NativeClaims Settlement Act. The contamination occurred prior to the conveyance. The Company has not yet determined its legal liability forclean-up. Nor has the Company completed an assessment of the site and therefore has no estimate of the costs to clean up the site.
In addition, the Company may be involved in other legal actions, contract disputes, regulatory issues, and employment matters incidentalto its operations. In the opinion of management, with the exception of the matter disclosed in the preceding paragraph, the ultimate liabilityof such actions will not materially affect the Company s financial position, results of operation or liquidity.
For fiscal years 2006, 2005 and 2004; the Company s revenues from contracted government services were 61%, 64% and 60%,respectively, of total revenues. Substantially all of the contracted government services revenue is with United States Governmentagencies. Such revenue is subject to ongoing and periodic performance audits that may ultimately result in reductions to recognizedrevenues. In managements opinion, future adjustments to revenue, if any; will not materially affect the Companies financial position,results of operations or liquidity.
(16) Discontinued Operations
On January 3, 2003, the Company sold the assets of Arctic Utilities, Inc. (AUI). The Company recognized a gain on the sale of theseassets of $114,129. Gross revenues recorded by AUI totaled $1,276,164 for the year ended September 28, 2003. There were norevenues recorded during the years ended September 30, 2006; September 25, 2005 and September 26, 2004. The results of AUI soperations have been reported separately as discontinued operations in the Company s consolidated statements of income.
(17) Acquisition
On June 20, 2005, NANA Development Corporation purchased all outstanding stock of ASCG, Incorporated and related entities(ASCG). The results of ASCG s operations have been included in the consolidated financial statements since that date.
ASCG offers a full complement of in-house professional architectural and engineering services including architectural design of municipal,commercial, industrial, educational, health care and residential buildings; civil, environmental, structural, mechanical and electricalengineering services; surveying and mapping; and construction management. ASCG conducts operations in Alaska, Washington, NewMexico, Oregon, Idaho, Texas, Arizona and Colorado either directly or through its wholly owned subsidiaries: W&H Pacific, ASCG,Incorporated of New Mexico, and ASCG Incorporated of Colorado.
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BNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In conjunction with the purchase agreement, NANA Development Corporation also acquired all profits and losses from ASTS, Inc. whichwas formed as a minority-owned company under the Small Business Association s 8(a) program, that allows it to receive preferentialbidding rights for government contracts. Under the terms of the purchase agreement, NANA Development Corporation became the ownerof ASTS, Inc. on December 23, 2005, subsequent to the Company s year end.
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition.
Current assets $ 26,214,513Property and equipment 3,545,091Goodwill 15,325,348Intangible 5,427,955
Total assets acquired 50,512,907
Current liabilities 22,190,769Other liabilities 822,138
Total liabilities assumed 23,012,907
Net assets acquired $ 27,500,000
The amortizable intangible assets are related to contracts and customer relationships and are being amortized over 27 months.
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B
Board of Directors
Donald G. SheldonChairman / Noorvik
Roland Booth Sr.First Vice Chairman / Noatak
Robert J. KirkSecond Vice Chairman / Noatak
Linda LeeSecretary / Shungnak
Mary SageTreasurer / Kivalina
Levi ClevelandElder Advisor
Tommy Ballot Sr.Selawik
Charlie CurtisKiana
Eugene DouglasShungnak
Lester Hadley Sr.Buckland
Raymond HawleyKivalina
Henry Horner Sr.Kobuk
Rosa HornerKobuk
Gladys JonesAmbler
Dood LincolnKotzebue
Emerson MotoDeering
Ronald Moto Sr.Deering
Gordon Newlin Sr.Noorvik
Luke SampsonAt-large
Nellie A. SheldonAmbler
Raymond Stoney
Kiana
Allen Ticket Sr.Selawik
Harvey VestalAt-large
Grace WashingtonBuckland
������
AnnieSheldon
KathleenTickett
LuluNazuruk
NedGreist
TinaHenderson
HelenWilliams
FrankHenry
HerbertAdams
RobertGooden
CliffordMitchell
IsaacSnyder
EthelAdams
WalterShield
VeraGarrison
MayJacobus
RosieMouse
PeterLutherSr.
StephenKoenig
EricCarter
LorenaThomas
BetsyMonroe
EdwardBarr
LillianGoodwin
RoseCuster
ArthurWesley
JoeCarter
FeltonCommack
MonaWilliams
MaryPete
MarieGreist
MorganJohnsonJr.
IreneEvan
ThomasPungalikJr.
KevinField
AlbertKoenigJr.
EugeneHensley
EnochAdamsSr.
DavidNelson
DaroldClark
RichardJones
CharlieJaycox
StevenSnyder
BenjaminHensleyJr.
MelvinJ.Booth
JohnSheldon
BertaBaldwin
KennethWallington
JaneWashington
DaisyTickett
FrankGarfieldJr.
SarahWeisner
DelbertHarrison
WilliamJones
MabelNassuk
WoodrowWilsonJr.
GlennHunnicutt
ShaunPenn
RubyOzenna
DuffyHenry
SusanCotter
KivaBeckaLenaJones
MabelHenry
MontanaSimmonds
EmmaHyde
EdnaReynolds
IN MEMORIAM�� �0�0�� �0
annual report 2006
On behalf of the NANA Board of Directors, we extend our condolences to the families who lost loved ones during 2006.
�0�0�0
NANA REGIONAL CORPORATION
P.O. Box 49
Kotzebue, AK 99752
P 907 442 3301
F 907 442 2866
www.nana.com
Our symbol is an Iñupiat hunter moving aggressively toward a successful future in a vast, beautiful and sometimes harsh world. NANA is all of us together as one hunter, successful if we are of one mind and purpose, hungry if we are split by doubts and mistrust of each other. The same qualities of courage, confidence, humility, respect, integrity and sharing that have allowed our people to survive as great hunters in a harsh climate are necessary for NANA to be successful.