Episode 17: Louisville Certified Financial Planner Jeb Jarrell interviews Nick Carter. Nick is a navy veteran, he led an IPO for Natural Resource Partners and now serves on several boards. He’ll share perspectives gained through some very interesting experiences is both business and life.
Meet Nick Carter
Nick is from Lincoln County, Kentucky. He was active in several high school organizations. Nick recounts that he and his brother never attended the first 6-weeks of the fall semester, because they were helping their father on the farm. Nick’s mother would make sure they had their assignments, which would get done after they returned from the farm each day. His father recognized the value of FFA (Future Farmers of America) and urged his sons to get involved in the organization. Nick was encouraged to leave the field to attend FFA meetings.
Nick recalls his father’s intense work ethic. Even before the family owned a farm, they worked on other farms to earn money. Those long days taught Nick more than he probably realized, in the moment, about what it would take to be successful in life. Hard work earned more than a living. It earned respect.
Tobacco farming is a very difficult job. Nick’s family farmed several acres of it. If you’ve ever spent a summer working in the tobacco fields or hanging it in the barn, you know what real work is.
After high school, Nick went to the University of Kentucky. He wanted to major in agricultural economics. He excelled at UK. Interestingly he considered becoming a college professor, with the ultimate goal of becoming the US Secretary of Agriculture. He was accepted to graduate school at Purdue and Cornell. However, he was elected to the student senate at UK and his career goals changed.
The Pivot to Law School, Almost
Nick explains how many of his fellow students in the senate were go to attend law school. He spoke to the dean and decided to apply, as well. He got accepted into the program. However, during the late 1960s, the Vietnam draft was active. Nick spoke to a family member, who happened to be a Navy recruiter. After graduation, Nick joined the US Navy. He eventually was stationed in Honolulu, after getting married. Nick’s group tracked Russian naval vessels in the Pacific Ocean.
During his time in the Navy, Nick applied to the MBA program at the University of Hawaii. He was accepted and began pursuing his MBA, while serving. He earned his Masters and eventually returned to UK to finally attend law school. After law school, he ran for State Representative, but lost by 25 votes. That experience would eventually lead to another interesting career move.
Upon graduating, Nick accepted a position with a Lexington law firm. About a year later, he and a few colleagues established their own law firm. They worked together for the next 5 years.
The Private Sector
Over the years, Nick and Joe Kraft became good friends. Joe wound up in Tulsa, Oklahoma. Several months later, Joe called Nick to offer him a position as corporate counsel for his coal company, Alliance Coal. The coal industry was experiencing a significant amount of new regulations and legislation. As a result, Joe and Nick agreed that Nick would be even more beneficial in a different role focused on trying to shape some of discussions before they became regulations and/or laws. He assumed a role running the Land Department and Risk Management area for the company, while actively lobbying in Washington on behalf of 6 states. Nick’s previous political experience was coming full-circle.
Nick shares some very personal comments about alcoholism and how he got sober in 1988, with the help of a lot of good people through AA.
In 1990, Nick took on a new role, Western Pocahontas Properties. The company owned 600,000 acres of CSXs land holding, across 5 states. These were coal holding properties. Nick took over as the president of this entity. In 1992, they completed the largest real estate transaction in the country (at that time); excluding the Louisiana Purchase and the Alaska Purchase. The deal involved a multi-state purchase from a Burlington Northern Railroad subsidiary. Nick assumed the role of president for this new company, in addition to his role at Western Pocahontas Properties.
In 1990, Arch Minerals, the 2nd largest mining company in the US, met with Nick to discuss an opportunity to combine their mutual coal companies. There appeared to be a significant upside to the concept, so they pursued it. Each entity had to evaluate the other’s value. A valuation for both entities was reached. They met to discuss it. An agreement was reached surprisingly quickly. Investment bankers were brought in to help finalize the deal. That’s when things got chaotic.
The new venture was preparing to go public. During this time, the Enron scandal was unfolding, as was the Arthur Andersen involvement. Arthur Andersen was handling the books for Nick. In fact, Nick’s office address located directly across the street from Enron. Nick’s company was using the same law firm as Enron. Both Enron and Nick’s company had hired Arthur Anderson to perform the required audits. Now, Arthur Anderson was imploding along with Enron. And lest we forget, the financial crisis was in full bloom, wreaking havoc on the stock market.
Nick’s group hired Ernst & Young to go back and audit the past 3 years. Nonetheless, they were able to get the certification completed in time for the IPO. Natural Resource Partners went public on 10/11/02, with a market cap of $450,000,000.
During this same period, Nick began negotiating the acquisition for the land holdings of Coastal Coal company. He was able reach a gentlemen’s agreement, pending the successful IPO. The day after the IPO quiet period, the acquisition was announced. The company went on to grow, through more than 80 additional acquisitions, to an astonishing scale and value.
Lessons Learned on the Farm
Jeb and Nick discuss how the work ethic and integrity Nick learned while working with his dad played an integral part in his professional reputation and performance. Nick’s word is more valuable than a signature on a piece of paper. His father made sure of that!
Why Did They Pursue the IPO?
Nick explains it was the ability to have working capital, via public money, to continue to grow. The merger of their properties with the properties from Arch Minerals actually occurred on the same day they went public. This also involved a $200,000,000 line of credit, which later increased to $400,000,000. The line of credit was used to fund acquisitions. Subsequent to the acquisitions, they would raise funds to replenish the line of credit via either the bond or stock market.
The funding mechanisms evolved, over time, as they normally would, involving public offerings of debt.
Interestingly, Nick discusses how they focused on metallurgical coal beginning in roughly 2008, during the Obama administration. This is different from “steam coal.” Metallurgical coal is an input for steel production, which acted as a hedge against the pressures being felt by the energy production sectors involving steam coal.
Looking Back on His Career
There are always lessons to be learned. Nick begins by crediting his staff. The company’s reputation allowed them to hire really, solid talent as the staff expanded. He comments that if you develop a strong reputation, you’ll always attract both customers and talent.
Nick explains that if you’re running a company, it’s imperative that you realize that your reputation impacts everyone who’s associated with your company. It’s incumbent upon leaders to understand this and to be faithful to it.
“I Flunked Retirement”
Nick retired in 2014, but he didn’t stop there. He explains how other opportunities came about and have been extremely interesting. A colleague approached him with an offer to be a non-executive Chairman of the Board. They were evaluating either selling the business or taking it public. His colleague knew Nick had the perfect background for this challenge.
Nick evaluated the company and its current situation. He was able to help them network in the right financial circles. The company eventually sold to US Silica. Nick and his colleague still work on projects. They’ve been good friends for many years.
His friend Joe Kraft from Alliance contacted him. This eventually led to a seat on the Alliance board. He’s enjoyed that role for the past 7 years. Alliance has a stellar reputation in the industry.
Nick also serves on the board of Community Trust Bank. Another one of his friends invested in a Canadian iron ore mine and offered him a seat on its board. Nick served a term as its chairman.
On the personal side, Nick has been able to rekindled his love for FFA. He served on the board of the Kentucky FFA Foundation. The foundation actively supports many of the young members’ involvement and activities. Nick believes many of the opportunities are life changing for the FFA members. Recently, the organization asked Nick to assume the role of Chairman of the Board in 2023 for a 2-year term.
Nick has also been able to be actively involve with his college fraternity, Farmhouse. He served as President of the Alumni Association for 3 years.
Final Questions for Nick
What Book Would He Give as a Gift?
· Nick comments that the one book that seriously changed his life is Atlas Shrugged, by Ayn Rand. He also recommends any book written by Ray Dalio. Growing up, Nick says the Bible, obviously was extremely influential to his life.
What Message Would He Put on a Billboard?
· Without pause, Nick answers, “Protect Your Reputation.”
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