A Word from the President, March 2016

Photo by Yuit LLC.
Photo by Yuit LLC.

Many of you have read about CIRI’s recent decision to sell a company that we have proudly hailed as a hallmark of our portfolio for the past 20 years. Several months ago, CIRI was approached by Viad Corporation, an international travel and tour company, with an interest to acquire CIRI Alaska Tourism Corporation (CATC). The Board of Directors faced a difficult decision whether to sell CATC. But after careful analysis and deliberations with management, the Board determined it was in CIRI’s best interests to authorize management to pursue acceptable terms of a sale. I wanted to take the opportunity here to explain the reasoning behind the decision.

CIRI first invested in CATC in 1996 with the purchase of Kenai Fjords Tours, Alaska’s #1 wildlife and glacier cruise in Seward, Alaska. We later added the Seward Windsong Lodge, the Talkeetna Alaskan Lodge, the Kenai Fjords Wilderness Lodge and Alaska Heritage Tours, a company that offers vacation packages showcasing the best of Alaska.

CIRI is proud to have built CATC into one of the strongest tourism operations in the state of Alaska. We invested in state-of-the-art assets and assembled the best team in tourism. CATC allowed us, as the region’s First People, to showcase the best of Alaska, the importance of the land to its people and the richness of its resources. CATC became part of CIRI’s identity. The CATC team was part of the CIRI family. We treated customers with respect and excellent service and they rewarded us by coming back again and again, recommending our properties to their friends and relatives, and earning CATC many prestigious awards.

Because of the great team of CATC employees, their commitment to customer service, and CATC’s excellent assets, the company grew. Last year was CATC’s most profitable year ever with strong bookings and significant income contributing to CIRI’s overall positive 2015 results. That’s not to say it was easy. Because of the seasonal nature of the business, the assets were only active for about one-third of the year. Every year, it was a monumental task to prepare for each season—hire the staff and boat crews, aggressively market our products to the world and maintain our facilities to the high standards our customers had come to expect.

I commend our CATC team for the expertise and enthusiasm they brought to their jobs each and every day on behalf of CIRI shareholders. It is their success that ultimately attracted the buyer. CIRI was not actively trying to sell the company, but when approached, the Board and management carefully considered what action would deliver the best longterm value to our shareholders. That is the reason CIRI eventually agreed to sell.

The CATC sale also helps to fulfill a strategic investment objective at CIRI. CIRI is focused on investing in assets that produce long-term, sustainable returns that will allow CIRI to continue paying healthy, consistent dividends to our shareholders. Proceeds from the CATC transaction will provide the capital necessary to make new investments to grow and strengthen the company.

Often, after CIRI sells an asset, shareholders will inquire about receiving a special dividend, similar to what followed CIRI’s windfall profits from our investments in telecommunications. There are no plans to issue additional special dividends. The Board has determined the best dividend policy for CIRI is to maintain consistent, predictable dividends for the long term. That is why the Board established the policy that dividends will amount to 3.5 percent of shareholders’ equity, calculated as of Dec. 31 of the prior year. To ensure consistent and strong dividends, as management, it is our job – our number one objective – to grow shareholders’ equity.

We believe that many of our recent investments will help accomplish this objective. These investments include a new natural gas power plant in Ohio to serve the largest power market in the world, and new financing strategies for CIRI to support partners like Capital Dynamics in other major energy investments. These types of investments may lack some of the “cool factor” that CATC had, but there aren’t many investments that are as cool as CATC.

We will miss CATC, especially the kind and committed team of individuals that have become our lifelong friends. But we also firmly believe that this decision was made in the best long-term, financial interest of our shareholders.

I look forward to discussing this further with our shareholders at the spring informational meetings and the CIRI Annual Meeting to be held June 4 in Puyallup, Wash.