Corporate Finance Institute®

Case Study – Caskey Trucking

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Company Overview

Bill Caskey is a truck driver living in a small rural community. He has been working in the
trucking industry for 12 years primarily hauling logs for the forestry industry. He is looking
to expand his business in order to take advantage of the booming local oil and gas sector
and to diversify his operations.

Along with looking to trade in his existing truck (an 8-year-old Western Star) for a new
Western Star truck, he also wants to buy a second truck and trailer that will be used
exclusively for oil and gas clients. He has interviewed and found at least two drivers that he
could hire in order to service this market.

Bill is seeking help to finance the purchase of two new trucks, along with related
equipment for expansion into oil and gas. The purchase price of $425,000 breaks down as
follows:

Breakdown $

Trucks $323,000
Tires $30,000
Rigging costs $27,500
Heavy haul trailer $50,000
Total $430,500
Trade In ($27,000)
Total excluding tax $403,500
Taxes $21,500
Total including tax $425,000

Bill has provided his financial statements for the past few years. He has also provided a
forecasted income statement that includes revenues and expenses related to having two
trucks. The forecast was prepared by his bookkeeper.

Bill is willing to pledge the trucks and associated equipment as security (collateral) for the
loan. He is not willing to provide any personal guarantees. His parents are also unwilling
to provide any guarantees.

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Management

Bill Caskey has been trucking for most of his adult life. People in the community that know
Bill say that he is a hard worker. After meeting with Bill in person at his office, you have
found out the following additional information.

• When asked, Bill could not tell you what his revenues were last year or what his
forecast revenues will be.
• Bill has a bookkeeper to look after day to day financial activities such as invoicing
clients and recording and paying expenses.
• There are no budgets or forecasts prepared for the business.
• Bill changed accounting firms this year because he felt his old accountant wasn’t
that good.
• Bill casually mentioned in his meeting with you that he doesn’t fully understand
what his bookkeeper does so he doesn’t ask.
• Bill’s parents are also in the trucking business. Their company, L&L Enterprises Ltd.
has strong relationships with local forestry and oil and gas clients. L&L Enterprises
Ltd. has a very good reputation in the area.
• Most of Bill’s work comes from his parents. L&L Enterprises subcontract work to
Caskey Trucking.
• Bill broke his leg last year and has been unable to work since. He is not due to
return to work until the end of this year. In the interim, he has hired a driver for his
truck.
• Bill continues to draw a salary from the business, as he is the sole provider for his
family. Fortunately, he has disability insurance.

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Business Strategy

Bill’s company currently owns one 8-year old Western Star truck. Caskey Trucking Ltd.
subcontracts for L&L Enterprises Ltd. - a company owned by his parents, Linda and Lyle
Caskey.

Caskey Trucking has no other customers or income. Bill relies entirely on his parents to
provide work. Although L&L Enterprises Ltd. occasionally lays off its subcontractors, it has
never laid off Bill.

Bill is optimistic that if he can put a second truck on with an experienced driver, he can
expand his operation into oil and gas and start to develop relationships within that industry
to become more diversified and less reliant on one industry.

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Industry and Environment

The major industries for truckers in this region are logging and oil & gas.

The logging/ lumber mills in the area generally do not guarantee amounts of work (or
continued work) with local trucking firms. However, they tend to give priority to larger
owner-operated firms. As a result, small truck operators like Bill often sub-contract for
larger hauling companies.

Hauling activity in the logging industry stops whenever there is:

• too much rain in the summer
• a high fire danger from dry conditions

Besides logging, there is work for truckers in the oil & gas sector. Truckers in this industry
are required to carry extra environment liability insurance, which is very expensive.
However, the industry has been thriving and there is the promise of longer-term
employment in the current environment.

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Credit and Financial Information

Bill has a credit card with a $50,000 limit. Recent month end balances on his card are:
• February (current year) - $43,946
• January (current year) - $45,963
• December (prior year) - $36,262
• November (prior year) - $36,700

Bills’ credit score is 609. Financial statements for Caskey Trucking are provided as a
separate Excel document.

Credit Score Bands

549 and below Bad
550 to 619 Poor
620 to 679 Fair
680 to 739 Good
740 and higher Excellent

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