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    Success Story - McCorkle

    McCorkle Nurseries hopes diesel prices remain low so it never gets a payout


    Bill Janci, McCorkle Nurseries CFO outlines the impact of fuel on the company, "Diesel fuel is one of the company's biggest costs. In prior years, we didn't worry about fuel prices but that changed in 2008 with its stratospheric rise." Since McCorkle Nurseries operates in a tight competitive market, the company cannot easily raise prices and has been forced to absorb higher fuel costs.

    As the company struggled with increasing fuel costs, fuel budget control became an even higher priority. "While I was familiar with future contracts from hedging foreign currency and commodities, this was the first time I took a hard look at hedging fuel," said Bill.

    Bill attended a 2010 risk management webinar sponsored by the Tatum Group, the largest CFO executive services group in the U.S., and discovered Pricelock. "I was sold on Pricelock," said Bill, "based on the simplicity and straight-forwardness of its fuel price protection product which pays us when fuel prices go up and enables us to take advantage of lower prices when fuel prices fall. Because we always prepare our diesel budget with a certain diesel price level, I believed that Pricelock could help stabilize the company's fuel costs and reduce the negative impact of rising fuel prices on our budgeted expenses. I didn't bother to explore other options because I felt extremely comfortable with the Pricelock team."

    In 2010, the company executed a three month diesel protection plan to protect the spring months when it typically incurs its greatest fuel costs. Bill set the protection level based on the diesel price used in the company's fuel budget.

    "My expectation of fuel price protection is that it's similar to an insurance policy where you hope to never make a claim," said Bill. "Or in this case, never get a payout because it means that fuel prices were actually below what we budgeted for our busy spring season."

    Despite not receiving a payout, the company was happy that diesel prices actually fell-this meant its actual fuel costs came in below the protected price. Bill opted to execute another three month plan for spring 2011. "We knew we had to protect ourselves again due to the turmoil in the Middle East and growing commodity prices. And as history shows, there are always unexpected events which can make fuel prices skyrocket even further."

    Just two months into their current plan, the company has received two payouts. "With fuel price protection, I believe that the company can be better off than doing nothing," says Bill. "If we don't receive a payout, it means that diesel prices stayed below the price we protected. And if we do receive a payout, I know that we've reduced, to some degree, budget over-runs."

    McCorkle
    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.
    "I would recommend businesses to seriously consider Pricelock's fuel price protection because you never know what's going to happen with fuel prices."
    Bill Janci
    McCorkle Nurseries CFO


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