JAWA Lunch With Leaders -- Eric Cremers

Great, well thanks Leah, and good afternoon everybody. As Leah said, I'm Eric Cremers, I'm the CEO of PotlatchDeltic. I've been with the company 14 years, seven years as the Chief Financial Officer, seven years as the Chief Operating Officer, and I was just named CEO in December, so I've been in this job for about one month. PotlatchDeltic is a forest products company. We have about 1.8 million acres of timberland, seven mills that produce lumber and plywood, and we also have a real estate business that sells rural acres at a high premium, and a master plan community where we develop and sell residential and commercial lots in Little Rock, Arkansas. We harvest about 6 million tons per year of logs and produce about 1 billion board feet of lumber. To put it in perspective, a billion board feet is enough lumber to produce about 70,000 houses. We are the 10th largest lumber producer in the United States, with headquarters here in Spokane but operations in Idaho, Minnesota, Michigan, Alabama, Arkansas, and Mississippi. We have a market capitalization of a little over $3 billion, net debt of around $700 million, so our enterprise value is around $4 billion. As Leah said, I have a long history with Junior Achievement. I was a JA company when I was in high school for two years, and I'm going to tell you more about that. I was my company's Vice President of Manufacturing of the Year for Central Kentucky and went on to compete in a national JA competition at Purdue University in Indiana. I also got a $5,000 scholarship from Junior Achievement when I was in graduate school, which I'll talk more about. And finally, I taught JA when I was in high school in Houston after graduate school, so I have four experiences with Junior Achievement. I'm very grateful to be here today. By way of introduction, when I was a kid in high school, my JA company made these really cool lamps from refurbished electric meters. When you turned the lamp on, the little meter would spin and measure the electricity the bulb was consuming. We sold them for about $25 — this was some 40 years ago — and we were very successful, selling about 200 of those lamps per year. We won Company of the Year for the Central Kentucky region, and my job was in charge of manufacturing the lamps. So I'm very happy to be here to tell you my story about JA. How did I get to where I am as CEO? It's a bit of a long story, but it's important to understand that getting to be the CEO of a large public company is a long, arduous journey. It doesn't just happen overnight. The best things in life don't come easy; they take a lot of hard work. I was recently promoted to this role, and I've been working about 40 years. I'm 57 years old, lots of my friends are retired, but I love what I do so I'm continuing on. I grew up in Lexington, Kentucky, kind of the other side of the country from here. I was just an ordinary kid in high school with pretty good grades. My focus was on math and sciences, not so much history, English, or French — I didn't care for the liberal arts side. My parents pushed me hard; they wanted me to get an education. I generally got A's in my science classes and B's in history, English, and French. My parents convinced me I really needed to go to college to have a good career. I just accepted it as what I had to do. I chose the University of Kentucky — right in my backyard. My parents didn't have a lot of money, and tuition at UK was cheap, about $400 per semester. I chose mechanical engineering for my degree, not necessarily out of passion but as a means to get a good job. I remember talking to my dad, who was himself a mechanical engineer, and he said, 'Eric, you don't really seem to have passion for much of anything in terms of career choice, so why don't you just pick a field where you're going to get a good job at the end of the day? Engineers are always in high demand and tend to get good jobs.' I was in many student organizations at UK and chose to take a leadership position in one: the American Society of Mechanical Engineers student chapter, which I'll talk more about later. One thing I want to mention: all through high school and college, I held jobs to earn spending money. I started cutting grass when I was 14 or 15, then delivered newspapers, worked in a hospital cafeteria scrubbing pots and pans, and worked in a barbecue restaurant. All the while I was going to school full-time. I graduated UK in three and a half years with my mechanical engineering degree and went to work for Exxon in Houston. The Baytown Refinery was the largest oil refinery in the United States. I had a summer internship between my junior and senior years, so I knew what I was getting into. It was a huge refinery with over 200 engineers. They hired 20 new engineers every year, so people came from all over the country. It was easy to leave Lexington for Houston. After about two years as a mechanical engineer, Exxon approached me and said, 'Hey Eric, you should go into operations management,' running part of the refinery. I did that for about two years. I thought to myself, if I really want to get into management, I should think about getting an MBA. I thought it would pay dividends down the road if I truly decided to get into business management. Every year at the refinery, roughly three to four engineers would leave to go to business school, usually to very good ones like Harvard and Stanford. I watched this happen for a few years and thought, if these guys can do it, why can't I? So I applied, and lo and behold, I was accepted into Harvard Business School in 1988. HBS is a two-year program; at the time it cost about $75,000, and now it's up to about $220,000. I had to quit my job, go about $50,000 in debt, but I thought it was worthwhile. My wife and I had just gotten married; she wasn't thrilled about me going back to business school, but she agreed to the journey. I also had an educational leave of absence from Exxon, so if Harvard didn't work out, I could always go back. When I first got to HBS, I was scared stiff. The workload was immense: I had to read 100 to 150 pages every single night, three to four business cases, typically 30 to 40 pages long. I would get maybe four or five hours of sleep per night, working my tail off 60 hours a week. Business cases are business situations where the student is the protagonist. You had to figure out what you would do given the situation, assuming you're the CEO. An example might be the Boeing CEO right now with all the 737 MAX issues — what should that CEO be doing? The important thing is that half your grade in each class was based on public speaking — making comments about the case in a class of 90 people. The other half was a written essay at the end of the semester. Being in class in front of 90 people was very intimidating to me. I really didn't have much experience with public speaking other than the ASME organization I led at UK. I was an engineer, and engineers are generally not good communicators. At HBS, most of the people around me went to fancy schools like Princeton, Yale, Harvard, Stanford, and I was an ordinary kid from the University of Kentucky. UK usually has a really good basketball team, but not this year, I'm sorry to say. At HBS, I got average grades my first year. The way you get an A is being in the top 10 percent, B is the middle 80 percent, and C is the bottom 10 percent. If you get too many C's, you're kicked out. In my first year I got mostly B's — I didn't flunk out, I was really happy. But in my second year, I got A's in six out of ten classes. Why did I do so much better? I got more comfortable with the fact that I could do the work and that others weren't necessarily any better than me. My confidence went up, and as it went up, I spoke more freely in class. As I shared my ideas and opinions, I got better grades. It was a virtuous cycle. Let me shift gears. After I got my MBA, I specialized in corporate strategy and mergers and acquisitions (M&A). At the time, the late 1980s, it looked like Japan was going to take over the world, buying up skyscrapers in New York and Pebble Beach Golf Links in California. I was fascinated with why they wanted to acquire these assets and how much they were paying. So after HBS, I worked in M&A and corporate strategy for five large companies: Pillsbury, industrial companies like Leggett & Platt and Cooper Industries, Albertsons grocery retail, and now forest products with PotlatchDeltic. Let me tell you a quick story about my experience at Pillsbury in 1997. I was in Minneapolis doing really cool M&A projects all over the world: Argentina, Brazil, Hong Kong, Israel, Colombia. The company gave me a blank check and said, 'Eric, go do deals for us.' I had a project in Brazil where a company was being sold and we had one week to figure out how much to pay and get approval. We heard about the company very late. I went to Brazil on a Monday; our bid was due the following Monday. I was in Brazil for an entire week, came back Friday night flying to Minneapolis, worked all night on the flight, and then worked all weekend. My proposal was for a $100 million acquisition. I sent it to London, where Pillsbury's parent company was, on Sunday at 1 AM. London approved the offer late Monday morning, and by Monday afternoon we had our bid in for $100 million. We won the auction. About two months later, I was promoted to Vice President at Pillsbury at age 36. I was the youngest in the company's history and the youngest of over 100 VPs. Was there a correlation between that promotion and getting that deal done? I certainly think so. To work for those five companies, I had to move often. I lived in Houston, New York, Minneapolis, Boise, and now Spokane, always moving with my wife and two kids. I've been married to my wife for over 32 years, and our kids are off to college. I joined Potlatch 14 years ago as CFO. I'd never been a CFO before, but I'd worked closely with them over my career and had the confidence I could do the job. My primary task was to figure out what to do with our pulp and paper business. The company had been a typical forest products conglomerate trying to do too many things and wasn't particularly good at any of them. We decided to spin off the pulp and paper business into a new company called Clearwater Paper, headquartered in Spokane. It took about two years to get that done. After being CFO for seven years, the company asked me if I wanted to move into the COO role, overseeing the business units where the money is made. I'd never been COO before, but I had the confidence I could do it. I knew taking that role was a step toward becoming CEO. After seven years as COO, I was promoted to CEO about a month ago. What motivates me? I have enormous pride in the work I do. I always try to do my best and make sure it's right. Second, I always want to win — I want my company to win, to be the best in the industry. And finally, I want to make a difference in the world. When I decide to retire, I want to look back and say I really did make a difference. Here are a few things I learned along the way that have had a great impact on my career, and I think these concepts will serve you well no matter what path you take. First, never underestimate yourself. Always set high goals for yourself. Think about my experience at HBS: I was scared stiff, felt I had no right to be there, and I excelled. You'd be amazed at what you can accomplish if you put your mind to it. Second, work hard. It will show and eventually you'll be rewarded. Think about my experience at Pillsbury with that deal in Brazil — I'm certain there was a correlation between getting promoted and that deal. My grades at HBS too—I worked my tail off to get those grades. Third, don't be afraid to move. It will open up lots of opportunities. A lot of my friends in Kentucky said they didn't want to leave Central Kentucky because their family and friends were there. You'll limit your career significantly if you only stay in one geographic area. Next, communication skills are really important, especially in big companies. Speaking in class at HBS was very intimidating, but the more I did it, the better I got. I've carried that with me my entire life, and now I use it in boardroom meetings. Learn to speak fluently and thoughtfully in front of large groups; it will really come in handy. College is great, but it's not for everybody. There are lots of other great options like vocational schools and community colleges. I've been on the community college foundation board here in Spokane for many years. You don't have to go to college to aspire to do great things. I've given you lots of advice, but more than anything, remember that first item: never underestimate yourself. You can go a lot further in this world than you think. Just set high goals for yourself and be constantly working toward them. So Leah, that's all I have to say, and I guess we'll open it up for questions.

I would honestly say working in a hospital — a huge 600-bed hospital in Lexington. I worked in the cafeteria in the basement, scrubbing pots and pans. And I'm talking big pots and pans — enormous, not like your typical home kitchen. The cooks would go out of their way to make it tough on the cleaning crew. Scrubbing those pots and pans for eight hours non-stop in front of three different sinks — a wash sink and two rinses — gave me a lot of care and a great appreciation for what work ethic is all about.

I would say the easiest way to pursue it is to get a forestry degree. We have probably over 50 or 60 foresters in our company. Their role is to look after our forests, provide the right silvicultural treatments in terms of choosing the right seedlings, providing fertilizer and herbicides, basically getting the trees to grow as fast as they can, and deciding when they should be harvested. If you get a forestry degree, after two or three years you can get an internship with a company like PotlatchDeltic, and then you get your degree and it leads to a full-time job. That's probably the best way to go about doing it.

I would say it's a toss-up between Boise and Spokane. Boise is a very outdoor-recreational kind of place with hiking, beautiful mountains, and fly fishing, all very accessible. Spokane is very similar with those same attributes. So I'd say it's a toss-up between those two cities.

I had enormous fear of public speaking when I was getting my engineering degree. Engineering was really focused on problem solving; there were no communication classes. You'd write a couple paragraphs in English class, but no big deal — you didn't have to do the speaking side. I pushed myself when I was at UK to be president of ASME because I knew I would have to get up once a week and tell my peers what was going on related to our major. It wasn't a big deal — just standing up for five or ten minutes saying, 'These companies are coming to town to recruit,' or 'There's this social event tomorrow.' It was an introduction to public speaking. Practice makes perfect. Before I do any public speaking, I think very carefully about what I want to convey. It's funny you asked that question, Leah, because before this presentation, I typed up all these notes about what I wanted to say. I bet I read these notes six times before talking to you today. It might seem like I was relatively fluent, but the reality is I practiced and practiced. That's how you get perfect — you practice. I have my notes right here too.

What do I do to hold myself accountable? I focus on just a very few number of goals. I don't have lots of things I'm after. I really want to do the best I possibly can for my company. I get a review just like anybody else at the end of the year, and I have to get feedback, both good and bad, on how I did. When I was bad, I try to think what I can do to change and overcome those weaknesses. It comes down to wanting to get as good a report card as I possibly can, just like I did back when I was in high school or college — I really wanted to get good grades.

Oh sure, you want me to show it again? Okay. So here is a product I made in Junior Achievement back in high school about 40 years ago in Kentucky. My company made this really cool lamp. I've got the shade not tied on because I wanted to be able to take it off. This lamp is made from reclaimed electricity meters. When an apartment building or house got torn down, our sponsor Kentucky Utilities would reclaim these meters. They'd typically have paint, cement, and glue all over them. We had to refurbish them, do all the wiring, and provide the base. When you turn the lamp on, the little electric meter down there actually spins around, measuring the electricity the bulb is consuming. We produced and sold about 200 of these a year for $25 apiece. Our company won Company of the Year for the Central Kentucky region with this product. It was a really fun part of my life, and I've saved this lamp and toted it around with me all over the country for the past 40 years. It's an important part of my life.

Great, thank you Leah. Bye!