Large Landscaping Company
A very large multi-state landscaping business with thousands of vehicles located throughout the United States. (They have asked to remain anonymous because they want to maintain their competitive advantage.)
The Problem
The company needed to manage its fuel costs to make sure price volatility didn't impact its earnings. Although they were large fuel users, they didn't have the internal expertise needed to understand the impact of various hedging techniques in all markets scenarios and to create proper reporting and monitoring procedures.
The Solution
Pricelock's team of experts analyzed their geographic and seasonal use of fuel. Together they evaluated this along with Pricelock's detailed recommendations for a fuel hedging program-customized to the company's budget and risk goals. The CFO decided that a swap transaction would provide the company with protection against increases in fuel prices with some ability to benefit if prices were to fall. Pricelock then negotiated with multiple parties to get best execution. On an ongoing basis, the company receives reports monitoring the performance of the hedge and ensuring that it continues to comply with FAS 133 hedge accounting requirements.
Northeast Garden Supply Business
Family owned for over 30 years, the company is a garden supply business headquartered in the Northeast. The company employs up to 30 people during its peak season in the spring and operates a fleet of 35 vehicles.
The Problem
Fuel is a huge concern for the VP of Operations since "it's an enormous part of our budget and any in increase in fuel price hurts us both short-term and long-term." Operating in a tight competitive market, the company has no choice but to absorb the costs directly, hurting its bottom line.
The Solution
The company started off with a three month trial plan protecting over 24,000 gallons of diesel at $3.00. The company was so impressed with how the plan kept their fuel costs under control despite rising fuel prices that they executed another plan for over 150,000 gallons of diesel at $3.20 for its peak season in the spring. The company also liked how fuel price protection put it in a stronger position than competitors who were forced to directly absorb higher fuel prices.
McCorkle Nurseries
Family-owned company specializes in growing and distributing more than four million container plants annually with delivery to over 1,800 clients, including landscaping companies, Lowe's, Home Depot and other retailers. With two locations in Georgia, the company employs up to 300 employees in its peak season.
The Problem
Diesel fuel is one of the company's biggest single delivery costs. Since McCorkle Nurseries operates in a tight competitive market, the company cannot easily raise prices and has been forced to absorb higher fuel costs.
The Solution
McCorkle Nurseries began with a three month diesel plan in 2010 to protect the spring months when it typically incurs its greatest fuel costs. Despite not receiving a payout, the company was happy that diesel prices actually fell-this meant its actual fuel costs came in below its protected price. McCorkle Nurseries executed a three month plan in 2011 and has already received payouts in the first two months of the plan. According to Bill, "I would recommend businesses to seriously consider Pricelock's fuel price protection because you never know what's going to happen with fuel prices."
Mid-Atlantic Nursery Business
The company grows and sells container grown plants to independent garden centers and chain store retailers including Costco. Based in the Mid-Atlantic region, the company employees up to 100 people in their peak season and distributes their plants to retailers from North Carolina up to Massachusetts.
The Problem
The VP of Finance says the company is "prey to fuel prices." Any jump in diesel prices increases the company's shipping costs, erodes its margins and makes it harder to keep its pricing low for clients.
The Solution
The company decided to use fuel price protection to protect itself from any drastic jumps in diesel prices during its highest revenue period in the spring. It created a three month plan starting in February that would pay the company when diesel prices rose over $4/gallon. Each month, Pricelock compares the national average diesel price to the company's protection price of $4 and makes a payment based on the difference. The company is happy to "take the fuel price risk out of their business" and thereby protect profits while keeping prices low for clients.
Nicholas & Son
Located in Ohio, they are a small family owned septic tank cleaning business. In addition to running Nicholas & Son, Dale Nicholas is President of the Ohio Waste Haulers Association.
The Problem
In past, Dale has been concerned that increases in diesel prices could impact his ability to do business and pay his employees, many of whom are family members.
The Solution
Dale chose to use Fuel Price Protection knowing that it would cap his diesel expense and also allow him to benefit if prices fell at the pump. He created a plan that would pay when diesel prices were over $2.50. He continues to buy diesel as he always has, paying the price at the pump. Each month Pricelock compares the national average diesel price to Dale's protection price of $2.50 and makes a payment based on the difference between the two prices. Based on his experience, Dale has received a payment every month and has chosen to extend his coverage.