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Derivatives And Hedging - Disclosures And Fair Value Measurements | 12 Months Ended
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Sep. 30, 2011
Derivatives And Hedging - Disclosures And Fair Value Measurements [Abstract] |
Derivatives And Hedging - Disclosures And Fair Value Measurements | 5) Derivatives and Hedging—Disclosures and Fair Value Measurements The Partnership uses derivative instruments such as futures, options, and swap agreements, in order to mitigate exposure to market risk associated with the purchase of home heating oil for price-protected customers, physical inventory on hand, inventory in transit and priced purchase commitments. To hedge a substantial majority of the purchase price associated with heating oil gallons anticipated to be sold to its price-protected customers as of September 30, 2011 the Partnership had bought 3.1 million gallons of physical inventory and held 2.3 million gallons of swap contracts to buy heating oil with a notional value of $6.0 million and a fair value of $0.3 million, 5.5 million gallons of call options with a notional value of $16.3 million and a fair value of $1.2 million, 1.7 million gallons of put options with a notional value of $3.6 million and a fair value of $0.09 million and 80.0 million net gallons of synthetic calls with a notional value of $248.7 million and a fair value of $(5.0) million. To hedge the inter-month differentials for our price-protected customers, its physical inventory on hand, and inventory in transit, the Partnership as of September 30, 2011 had 2.7 million gallons of future contracts to buy heating oil with a notional value of $7.9 million and a fair value of $(0.6) million, 4.2 million gallons of future contracts to sell heating oil with a notional value of $12.0 million and a fair value of $0.7 million and 20.7 million gallons of swap contracts to sell heating oil with a notional value of $62.2 million and a fair value of $4.6 million. To hedge a portion of its internal fuel usage, the Partnership as of September 30, 2011, had 1.6 million gallons of swap contracts to buy gasoline with a notional value of $4.5 million and a fair value of $(0.4) million and 1.5 million gallons of swap contracts to buy diesel with a notional value of $4.5 million and a fair value of $(0.4) million. To hedge a substantial majority of the purchase price associated with heating oil gallons anticipated to be sold to its price-protected customers as of September 30, 2010, the Partnership bought 4.3 million gallons of physical inventory and had 0.6 million gallons of swap contracts to buy heating oil with a notional value of $1.4 million and a fair value of $(0.04) million; 34.2 million gallons of call options with a notional value of $85.0 million and a fair value of $4.9 million; 1.4 million gallons of put options with a notional value of $2.3 million and a fair value of $0.02 million and 58.4 million net gallons of synthetic calls with a notional value of $135.8 million and a fair value of $3.6 million. To hedge the inter-month differentials for our price-protected customers, its physical inventory on hand, and inventory in transit, the Partnership as of September 30, 2010 had 0.3 million gallons of future contracts to buy heating oil with a notional value of $0.6 million and a fair value of $0.03 million; 0.9 million gallons of future contracts to sell heating oil with a notional value of $2.0 million and a fair value of $(0.1) million; and 22.6 million gallons of swap contracts to sell heating oil with a notional value of $48.7 million and a fair value of $(3.3) million. To hedge a portion of its internal fuel usage, the Partnership as of September 30, 2010, had 1.4 million gallons of swap contracts to buy gasoline with a notional value of $2.8 million and a fair value of $0.2 million and 1.4 million gallons of swap contracts to buy diesel with a notional value of $3.1 million and a fair value of $0.2 million. The Partnership's derivative instruments are with the following counterparties: Key Bank National Association, JPMorgan Chase Bank, N.A., Bank of America, N.A., Cargill, Inc., Societe Generale and Newedge USA, LLC. The Partnership assesses counterparty credit risk and maintains master netting arrangements with its counterparties to help manage the risks, and records its derivative positions on a net basis. The Partnership periodically assesses counterparty credit risks and adjusts its positions accordingly; the Partnership has taken into account that several of our counterparties have possible exposure to sovereign debt risks. At September 30, 2011, the aggregate cash posted as collateral in the normal course of business at counterparties was $0.3 million. Positions with counterparties who are also parties to our revolving credit facility are collateralized under that facility. As of September 30, 2011, $7.8 million of hedging losses were secured under the revolving credit facility. FASB ASC 815-10-05, Derivatives and Hedging topic, established accounting and reporting standards requiring that derivative instruments be recorded at fair value and included in the consolidated balance sheet as assets or liabilities, along with qualitative disclosures regarding the derivative activity. The Partnership has elected not to designate its derivative instruments as hedging instruments under this standard and the change in fair value of the derivative instruments is recognized in our statement of operations in the line item (increase) decrease in the fair value of derivative instruments. Depending on the risk being hedged, realized gains and losses are recorded in cost of product, cost of installations and service, or delivery and branch expenses. FASB ASC 820-10, Fair Value Measurements and Disclosures topic, established a three-tier fair value hierarchy, which classified the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Partnership's Level 1 derivative assets and liabilities represent the fair value of commodity contracts used in its hedging activities that are identical and traded in active markets. The Partnership's Level 2 derivative assets and liabilities represent the fair value of commodity contracts used in its hedging activities that are valued using either directly or indirectly observable inputs, whose nature, risk and class are similar. No significant transfers of assets or liabilities have been made into and out of the Level 1 or Level 2 tiers. All derivative instruments were non-trading positions. The market prices used to value the Partnership's derivatives have been determined using the New York Mercantile Exchange ("NYMEX") and independent third party prices that are reviewed for reasonableness. The Partnership had no assets or liabilities that are measured at fair value on a nonrecurring basis subsequent to their initial recognition. The Partnership's financial assets and liabilities measured at fair value on a recurring basis are listed on the following table.
(In thousands) |  |  |  |  |  |  | Fair Value Measurements at Reporting Date Using: |
Derivatives Not Designated as Hedging |  |  |  |  |  |  | Quoted Prices in Active Markets for Identical Assets |  |  | Significant Other Observable Inputs |  |  | Significant Unobservable Inputs |
Instruments Under FASB ASC 815-10 |  | Balance Sheet Location |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Asset Derivatives at September 30, 2011 |
Commodity contracts |  | Fair asset and fair liability value of derivative instruments |  | $ | 41,531 |  |  | $ | 550 |  |  | $ | 40,981 |  |  | $ | — |
Commodity contracts |  | Long-term derivative assets included in the deferred charges and other assets, net balance |  |  | 257 |  |  |  | 171 |  |  |  | 86 |  |  |  | — |
Commodity contract assets at September 30, 2011 |  | $ | 41,788 |  |  | $ | 721 |  |  | $ | 41,067 |  |  | $ | — |
Liability Derivatives at September 30, 2011 |
Commodity contracts |  | Fair liability and fair asset value of derivative instruments |  | $ | (41,179 | ) |  | $ | (602 | ) |  | $ | (40,577 | ) |  | $ | — |
Commodity contracts |  | Long-term derivative liabilities netted with the deferred charges and other assets, net balance |  |  | (96 | ) |  |  | (25 | ) |  |  | (71 | ) |  |  | — |
Commodity contract liabilities at September 30, 2011 |  | $ | (41,275 | ) |  | $ | (627 | ) |  | $ | (40,648 | ) |  | $ | — |
Asset Derivatives at September 30, 2010 |
Commodity contracts |  | Fair asset and fair liability value of derivative instruments |  | $ | 11,991 |  |  | $ | 29 |  |  | $ | 11,962 |  |  | $ | — |
Commodity contracts |  | Long-term derivative assets included in the deferred charges and other assets, net balance |  |  | 43 |  |  |  | — |  |  |  | 43 |  |  |  | — |
Commodity contract assets at September 30, 2010 |  | $ | 12,034 |  |  | $ | 29 |  |  | $ | 12,005 |  |  | $ | — |
Liability Derivatives at September 30, 2010 |
Commodity contracts |  | Fair liability and fair asset value of derivative instruments |  | $ | (6,419 | ) |  | $ | (101 | ) |  | $ | (6,318 | ) |  | $ | — |
Commodity contract liabilities at September 30, 2010 |  | $ | (6,419 | ) |  | $ | (101 | ) |  | $ | (6,318 | ) |  | $ | — |
(In thousands) |
The Effect of Derivative Instruments on the Statement of Operations |
|  |  |  | Amount of (Gain) or Loss Recognized |
Derivatives Not Designated as Hedging Instruments Under FASB ASC 815-10 |  | Location of (Gain) or Loss Recognized in Income on Derivative |  | Twelve Months Ended September 30, 2011 |  |  | Twelve Months Ended September 30, 2010 |  |  | Twelve Months Ended September 30, 2009 |
Commodity contracts |  | Cost of product (a) |  | $ | (9,089 | ) |  | $ | 24,412 |  |  | $ | 73,574 |
Commodity contracts |  | Cost of installations and service (a) |  | $ | (1,030 | ) |  | $ | (958 | ) |  | $ | 3,012 |
Commodity contracts |  | Delivery and branch expenses (a) |  | $ | (740 | ) |  | $ | (512 | ) |  | $ | 3,260 |
Commodity contracts |  | (Increase) / decrease in the fair value of derivative instruments |  | $ | 2,567 |  |  | $ | (5,622 | ) |  | $ | (13,690 | )
(a) | Represents realized closed positions and includes the cost of options as they expire.

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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