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Derivatives and Hedging-Disclosures and Fair Value Measurements | 12 Months Ended
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Sep. 30, 2014
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, 2014, the Partnership had bought 13.9 million gallons of swap contracts with a notional value of $39.9 million and a fair value of $(2.9) million, 3.1 million gallons of call options with a notional value of $10.8 million and a fair value of $0.01 million, 8.5 million gallons of put options with a notional value of $19.3 million and a fair value of $0.1 million and 83.8 million net gallons of synthetic calls with a notional value of $252.3 million and a fair value of $(28.8) million, all in future months to match anticipated sales. To hedge the inter-month differentials for its price-protected customers, its physical inventory on hand and inventory in transit, the Partnership, as of September 30, 2014, had sold 18.7 million gallons of future contracts with a notional value of $52.0 million and a fair value of $2.3 million. In addition to the previously described hedging instruments, to lock-in the differential between high sulfur home heating oil and ultra low sulfur diesel, the Partnership as of September 30, 2014, had bought corresponding long and short 12.4 million net gallons of swap contracts with an average notional value of $36.2 million and a net fair value of $(0.2) million. To hedge a majority of its internal fuel usage for fiscal 2014, the Partnership as of September 30, 2014, had bought 4.3 million gallons of future swap contracts with a notional value of $12.0 million and a fair value of $(0.9) 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, 2013, the Partnership held 2.4 million gallons of physical inventory and had bought 6.0 million gallons of swap contracts with a notional value of $18.0 million and a fair value of $(0.2) million, 2.9 million gallons of call options with a notional value of $10.6 million and a fair value of $0.02 million, 5.0 million gallons of put options with a notional value of $11.8 million and a fair value of $0.04 million and 81.2 million net gallons of synthetic calls with a notional value of $252.8 million and a fair value of $(15.9) million, all in future months to match anticipated sales. To hedge the inter-month differentials for its price-protected customers, its physical inventory on hand and inventory in transit, the Partnership, as of September 30, 2013, had bought 17.4 million gallons of future contracts with a notional value of $51.9 million and a fair value of $(0.6) million, had sold 26.4 million gallons of future contracts with a notional value of $78.9 million and a fair value of $1.2 million and had sold 8.5 million gallons of future swap contracts with a notional value of $24.9 million and a fair value of $(0.3) million. In addition to the previously described hedging instruments, to lock-in the differential between high sulfur home heating oil and ultra low sulfur diesel, the Partnership as of September 30, 2013, had bought corresponding long and short 28.2 million net gallons of swap contracts with a notional value of $83.8 million and a fair value of $0.7 million and bought 6.0 million gallons of spread contracts (simultaneous long and short positions) with a notional value of $(0.5) million and a fair value of $0.1 million. To hedge a majority of its internal fuel usage for fiscal 2013, the Partnership as of September 30, 2013, had bought 3.2 million gallons of future swap contracts with a notional value of $9.0 million and a fair value of $0.05 million. The Partnership’s derivative instruments are with the following counterparties: Bank of America, N.A., Bank of Montreal, Cargill, Inc., JPMorgan Chase Bank, N.A., Key Bank, N.A., Regions Financial Corporation, Societe Generale, and Wells Fargo Bank, N.A. The Partnership assesses counterparty credit risk and maintains master netting arrangements with counterparties to help manage the risks, and record derivative positions on a net basis. The Partnership considers counterparty credit risk to be low. At September 30, 2014, the aggregate cash posted as collateral in the normal course of business at counterparties was $2.5 million. Positions with counterparties who are also parties to our revolving credit facility are collateralized under that facility. As of September 30, 2014, $14.9 million of hedge positions were secured under the credit facility. FASB ASC 815-10-05 Derivatives and Hedging, 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. To the extent derivative instruments designated as cash flow hedges are effective and the standard’s documentation requirements have been met, changes in fair value are recognized in other comprehensive income until the underlying hedged item is recognized in earnings. 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 services, or delivery and branch expenses. FASB ASC 820-10 Fair Value Measurements and Disclosures, 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 and were either a Level 1 or Level 2 instrument. The Partnership had no Level 3 derivative instruments. The fair market value of our Level 1 and Level 2 derivative assets and liabilities are calculated by our counter-parties and are independently validated by the Partnership. The Partnership’s calculations are, for Level 1 derivative assets and liabilities, based on the published New York Mercantile Exchange (“NYMEX”) market prices for the commodity contracts open at the end of the period. For Level 2 derivative assets and liabilities the calculations performed by the Partnership are based on a combination of the NYMEX published market prices and other inputs, including such factors as present value, volatility and duration. 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 Instruments Under FASB ASC 815-10 |  | Balance Sheet Location |  | Total |  |  | Quoted Prices in Active Markets for Identical Assets Level 1 |  |  | Significant Other Observable Inputs Level 2 |
Asset Derivatives at September 30, 2014 |
Commodity contracts |  | Fair asset and fair liability value of derivative instruments |  | $ | 26,263 |  |  | $ | 2,328 |  |  | $ | 23,935 |
Commodity contract assets at September 30, 2014 |  | $ | 26,263 |  |  | $ | 2,328 |  |  | $ | 23,935 |
Liability Derivatives at September 30, 2014 |
Commodity contracts |  | Fair liability and fair asset value of derivative instruments |  | $ | (36,279 | ) |  | $ | — |  |  | $ | (36,279 | )
Commodity contract liabilities at September 30, 2014 |  | $ | (36,279 | ) |  | $ | — |  |  | $ | (36,279 | )
Asset Derivatives at September 30, 2013 |
Commodity contracts |  | Fair asset and fair liability value of derivative instruments |  | $ | 14,467 |  |  | $ | 1,175 |  |  | $ | 13,292 |
Commodity contract assets at September 30, 2013 |  | $ | 14,467 |  |  | $ | 1,175 |  |  | $ | 13,292 |
Liability Derivatives at September 30, 2013 |
Commodity contracts |  | Fair liability and fair asset value of derivative instruments |  | $ | (17,820 | ) |  | $ | (519 | ) |  | $ | (17,301 | )
Commodity contract liabilities at September 30, 2013 |  | $ | (17,820 | ) |  | $ | (519 | ) |  | $ | (17,301 | )
The Partnership’s derivative assets (liabilities) offset by counterparty and subject to an enforceable master netting arrangement are listed on the following table.
(In thousands) |  |  |  |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Statement of Financial Position |
Offsetting of Financial Assets (Liabilities) and Derivative Assets (Liabilities) |  | Gross Assets Recognized |  |  | Gross Liabilities Offset in the Statement of Financial Position |  |  | Net Assets (Liabilities) Presented in the Statement of Financial Position |  |  | Financial Instruments |  |  | Cash Collateral Received |  |  | Net Amount |
Fair asset value of derivative instruments |  | $ | 2,342 |  |  | $ | — |  |  | $ | 2,342 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,342 |
Fair liability value of derivative instruments |  |  | 23,921 |  |  |  | (36,279 | ) |  |  | (12,358 | ) |  |  | — |  |  |  | — |  |  |  | (12,358 | )
Total at September 30, 2014 |  | $ | 26,263 |  |  | $ | (36,279 | ) |  | $ | (10,016 | ) |  | $ | — |  |  | $ | — |  |  | $ | (10,016 | )
Fair asset value of derivative instruments |  | $ | 7,254 |  |  | $ | (6,608 | ) |  | $ | 646 |  |  | $ | — |  |  | $ | — |  |  | $ | 646 |
Fair liability value of derivative instruments |  |  | 7,213 |  |  |  | (11,212 | ) |  |  | (3,999 | ) |  |  | — |  |  |  | — |  |  |  | (3,999 | )
Total at September 30, 2013 |  | $ | 14,467 |  |  | $ | (17,820 | ) |  | $ | (3,353 | ) |  | $ | — |  |  | $ | — |  |  | $ | (3,353 | )
(In thousands) |  |  |  |  |  |  |  |  |  |  |
The Effect of Derivative Instruments on the Statement of Operations |
|  |  |  | Amount of (Gain) or Loss Recognized Years Ended September 30, |
Derivatives Not Designated as Hedging Instruments Under FASB ASC 815-10 |  | Location of (Gain) or Loss Recognized in Income on Derivative |  | 2014 |  |  | 2013 |  |  | 2012 |
Commodity contracts |  | Cost of product (a) |  | $ | 11,781 |  |  | $ | 17,769 |  |  | $ | 18,636 |
Commodity contracts |  | Cost of installations and service (a) |  | $ | (202 | ) |  | $ | (440 | ) |  | $ | (284 | )
Commodity contracts |  | Delivery and branch expenses (a) |  | $ | (104 | ) |  | $ | (286 | ) |  | $ | (82 | )
Commodity contracts |  | (Increase) / decrease in the fair value of derivative instruments |  | $ | 6,566 |  |  | $ | 6,775 |  |  | $ | (8,549 | )
(a) | Represents realized closed positions and includes the cost of options as they expire.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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