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Derivatives and Hedging-Disclosures and Fair Value Measurements | 9 Months Ended
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Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives and Hedging-Disclosures and Fair Value Measurements | 6) Derivatives and Hedging—Disclosures and Fair Value Measurements The Company 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, priced purchase commitments and internal fuel usage. 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. The Company has elected not to designate its commodity derivative instruments as hedging derivatives, but rather as economic hedges whose change in fair value is recognized in its statement of operations in the caption “(Increase) decrease in the fair value of derivative instruments.” Depending on the risk being economically hedged, realized gains and losses are recorded in cost of product, cost of installations and services, or delivery and branch expenses. As of June 30, 2024, the Company held the following derivative instruments in order to hedge a substantial majority of the purchase price associated with heating oil gallons anticipated to be sold to its price-protected customers that settle in future months to match anticipated sales: 7.2 million gallons of swap contracts, 3.8 million gallons of call options, 3.5 million gallons of put options, and 37.0 million net gallons of synthetic call options. The Company held the following derivative instruments to hedge its physical inventory on hand, inventory in transit and basis risk: 0.1 million gallons of swap contracts, 0.2 million gallons of long future contracts and 6.9 million gallons of short future contracts that settle in future months. The Company held 7.9 million gallons of swap contracts that settle in future months to hedge its internal fuel usage and other activities for fiscal 2024 and 2025. As of June 30, 2023, the Company held the following derivative instruments in order to hedge a substantial majority of the purchase price associated with heating oil gallons anticipated to be sold to its price-protected customers that settle in future months to match anticipated sales: 5.0 million gallons of swap contracts, 6.1 million gallons of call options, 2.2 million gallons of put options, and 41.6 million net gallons of synthetic call options. The Company held the following derivative instruments to hedge its physical inventory on hand, inventory in transit and basis risk: 0.9 million gallons of swap contracts and 10.9 million gallons of short future contracts that settle in future months. The Company held 5.4 million gallons of swap contracts that settle in future months to hedge its internal fuel usage and other activities for fiscal 2023 and 2024. As of June 30, 2024, the Company has interest rate swap agreements in order to mitigate exposure to market risk associated with variable rate interest on $52.9 million, or 40.0%, of its long term debt. The Company has designated its interest rate swap agreements as cash flow hedging derivatives. To the extent these derivative instruments are effective and the accounting standard’s documentation requirements have been met, changes in fair value are recognized in other comprehensive income (loss) until the underlying hedged item is recognized in earnings. As of June 30, 2024 the fair value of the swap contracts was $0.6 million. As of September 30, 2023, the notional value of the swap contracts was $55.5 million and the fair value of the swap contracts was $1.6 million. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of the swap contracts. The Company’s derivative instruments are with the following counterparties: Bank of America, N.A., Bank of Montreal, Cargill, Inc., Citibank, N.A., JPMorgan Chase Bank, N.A., Key Bank, N.A. and Wells Fargo Bank, N.A. The Company assesses counterparty credit risk and considers it to be low. We maintain master netting arrangements that allow for the non-conditional offsetting of amounts receivable and payable with counterparties to help manage our risks and record derivative positions on a net basis. The Company generally does not receive cash collateral from its counterparties and does not restrict the use of cash collateral it maintains at counterparties. At June 30, 2024, the aggregate cash posted as collateral in the normal course of business at counterparties was $1.5 million and recorded in “Prepaid expense and other current assets.” Positions with counterparties who are also parties to our credit agreement are collateralized under that facility. As of June 30, 2024, $2.9 million hedge positions or payable amounts were secured under the credit facility. The Company’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 Company’s Level 2 derivative assets and liabilities represent the fair value of commodity and interest rate 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 Company 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 Company. The Company’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 Company are based on a combination of the NYMEX published market prices and other inputs, including such factors as present value, volatility and duration. The Company had no assets or liabilities that are measured at fair value on a nonrecurring basis subsequent to their initial recognition. The Company’s commodity 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 |  |  |  |  |  |  | Quoted Prices in Active Markets for Identical Assets |  |  | Significant Other Observable Inputs |
Under FASB ASC 815-10 |  | Balance Sheet Location |  | Total |  |  | Level 1 |  |  | Level 2 |
Asset Derivatives at June 30, 2024 |
Commodity contracts |  | Fair liability value of derivative instruments |  | $ | 7,308 |  |  | $ | — |  |  | $ | 7,308 |
Commodity contracts |  | Long-term derivative assets included in the deferred charges and other assets, net and other long-term liabilities, net balances |  |  | 469 |  |  |  | — |  |  |  | 469 |
Commodity contract assets at June 30, 2024 |  | $ | 7,777 |  |  | $ | — |  |  | $ | 7,777 |
Liability Derivatives at June 30, 2024 |
Commodity contracts |  | Fair liability value of derivative instruments |  | $ | (10,052 | ) |  | $ | — |  |  | $ | (10,052 | )
Commodity contracts |  | Long-term derivative liabilities included in the deferred charges and other assets, net and other long-term liabilities, net balances |  |  | (499 | ) |  |  | — |  |  |  | (499 | )
Commodity contract liabilities at June 30, 2024 |  | $ | (10,551 | ) |  | $ | — |  |  | $ | (10,551 | )
Asset Derivatives at September 30, 2023 |
Commodity contracts |  | Fair asset and liability value of derivative instruments |  | $ | 17,891 |  |  | $ | — |  |  | $ | 17,891 |
Commodity contracts |  | Long-term derivative assets included in the deferred charges and other assets, net and other long-term liabilities, net balances |  |  | 779 |  |  |  | — |  |  |  | 779 |
Commodity contract assets September 30, 2023 |  | $ | 18,670 |  |  | $ | — |  |  | $ | 18,670 |
Liability Derivatives at September 30, 2023 |
Commodity contracts |  | Fair asset and liability value of derivative instruments |  | $ | (7,349 | ) |  | $ | — |  |  | $ | (7,349 | )
Commodity contracts |  | Long-term derivative liabilities included in the deferred charges and other assets, net and other long-term liabilities, net balances |  |  | (679 | ) |  |  | — |  |  |  | (679 | )
Commodity contract liabilities September 30, 2023 |  | $ | (8,028 | ) |  | $ | — |  |  | $ | (8,028 | )
The Company’s commodity 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 |
Long-term derivative assets included in deferred charges and other assets, net |  |  | 102 |  |  |  | (92 | ) |  |  | 10 |  |  |  | — |  |  |  | — |  |  |  | 10 |
Fair liability value of derivative instruments |  |  | 7,308 |  |  |  | (10,052 | ) |  |  | (2,744 | ) |  |  | — |  |  |  | — |  |  |  | (2,744 | )
Long-term derivative liabilities included in other long-term liabilities, net |  |  | 367 |  |  |  | (407 | ) |  |  | (40 | ) |  |  | — |  |  |  | — |  |  |  | (40 | )
Total at June 30, 2024 |  | $ | 7,777 |  |  | $ | (10,551 | ) |  | $ | (2,774 | ) |  | $ | — |  |  | $ | — |  |  | $ | (2,774 | )
Fair asset value of derivative instruments |  | $ | 17,815 |  |  | $ | (7,155 | ) |  | $ | 10,660 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,660 |
Long-term derivative assets included in deferred charges and other assets, net |  |  | 567 |  |  |  | (452 | ) |  |  | 115 |  |  |  | — |  |  |  | — |  |  |  | 115 |
Fair liability value of derivative instruments |  |  | 76 |  |  |  | (194 | ) |  |  | (118 | ) |  |  | — |  |  |  | — |  |  |  | (118 | )
Long-term derivative liabilities included in other long-term liabilities, net |  |  | 212 |  |  |  | (227 | ) |  |  | (15 | ) |  |  | — |  |  |  | — |  |  |  | (15 | )
Total at September 30, 2023 |  | $ | 18,670 |  |  | $ | (8,028 | ) |  | $ | 10,642 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,642 |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |
The Effect of Derivative Instruments on the Statement of Operations |  |  |  |  |  |  |
|  |  |  | Amount of (Gain) or Loss Recognized |  |  | 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 |  | Three Months Ended June 30, 2024 |  |  | Three Months Ended June 30, 2023 |  |  | Nine Months Ended June 30, 2024 |  |  | Nine Months Ended June 30, 2023 |
Commodity contracts |  | Cost of product (a) |  | $ | 2,323 |  |  | $ | 5,566 |  |  | $ | 20,432 |  |  | $ | 10,578 |
Commodity contracts |  | Cost of installations and service (a) |  | $ | (133 | ) |  | $ | (24 | ) |  | $ | (174 | ) |  | $ | 55 |
Commodity contracts |  | Delivery and branch expenses (a) |  | $ | (20 | ) |  | $ | 273 |  |  | $ | (929 | ) |  | $ | 422 |
Commodity contracts |  | (Increase) / decrease in the fair value of derivative instruments (b) |  | $ | 984 |  |  | $ | (1,036 | ) |  | $ | 8,262 |  |  | $ | 19,622 |
(a) Represents realized closed positions and includes the cost of options as they expire. (b) Represents the change in value of unrealized open positions and expired options.

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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/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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