v3.26.1
Derivatives and Hedging-Disclosures and Fair Value Measurements
 9 Months Ended
Jun. 30, 2026
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, 2026, to hedge a substantial majority of the purchase price associated with heating oil gallons anticipated to be sold to our price-protected customers, the Company held the following derivative instruments that settle in future months to match anticipated sales: 3.7 million gallons of swap contracts, 2.6 million gallons of call options, 1.7 million gallons of put options, and 31.1 million net gallons of synthetic call options. To hedge its physical inventory on hand, inventory in transit and basis risk, the Company, as of June 30, 2026, held 1.2 million gallons of swap contracts and 8.4 million gallons of short future contracts that settle in future months. To hedge our internal fuel usage and other activities for fiscal 2026 and 2027, the Company held 5.2 million gallons of swap contracts that settle in future months.

As of June 30, 2025, to hedge a substantial majority of the purchase price associated with heating oil gallons anticipated to be sold to our price-protected customers, the Company held the following derivative instruments that settle in future months to match anticipated sales: 8.6 million gallons of swap contracts, 3.3 million gallons of call options, 3.7 million gallons of put options, and 36.0 million net gallons of synthetic call options. To hedge its physical inventory on hand, inventory in transit and basis risk, the Company, as of June 30, 2025, held 0.7 million gallons of swap contracts and 6.5 million gallons of short future contracts that settle in future months. To hedge our internal fuel usage and other activities for fiscal 2025 and 2026, the Company held 7.7 million gallons of swap contracts that settle in future months.

As of June 30, 2026, the Company has interest rate swap agreements in order to mitigate exposure to market risk associated with variable rate interest on $71.9 million, or 41%, of our 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, 2026, the fair value of the swap contracts was $0.1 million. As of September 30, 2025, the notional value of the swap contracts was $74.5 million and the fair value of the swap contracts was $(0.6) 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., Citizens Bank, N.A., JPMorgan Chase Bank, N.A., Swiss Re Corporate Solutions Global Markets, Inc. 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, 2026, we did not have any cash posted as collateral with counterparties. Positions with counterparties who are also parties to our credit agreement are collateralized under that facility. As of June 30, 2026, we did not have hedge positions or payable amounts 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 is calculated by our counter-parties and is 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 non-recurring 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, 2026

 

Commodity contracts

 

Fair asset value of derivative instruments

 

$

17,892

 

 

$

—

 

 

$

17,892

 

Commodity contracts

 

Long-term derivative assets included in the deferred charges and other assets, net and other long-term liabilities, net balances

 

 

719

 

 

 

—

 

 

 

719

 

Commodity contract assets at June 30, 2026

 

$

18,611

 

 

$

—

 

 

$

18,611

 

Liability Derivatives at June 30, 2026

 

Commodity contracts

 

Fair asset value of derivative instruments

 

$

(7,073

)

 

$

—

 

 

$

(7,073

)

Commodity contracts

 

Long-term derivative assets included in the deferred charges and other assets, net and other long-term liabilities, net balances

 

 

(564

)

 

 

—

 

 

 

(564

)

Commodity contract liabilities at June 30, 2026

 

$

(7,637

)

 

$

—

 

 

$

(7,637

)

Asset Derivatives at September 30, 2025

 

Commodity contracts

 

Fair asset and liability value of derivative instruments

 

$

7,561

 

 

$

—

 

 

$

7,561

 

Commodity contracts

 

Long-term derivative assets included in the deferred charges and other assets, net

 

 

755

 

 

 

—

 

 

 

755

 

Commodity contract assets September 30, 2025

 

$

8,316

 

 

$

—

 

 

$

8,316

 

Liability Derivatives at September 30, 2025

 

Commodity contracts

 

Fair asset and liability value of derivative instruments

 

$

(8,169

)

 

$

—

 

 

$

(8,169

)

Commodity contracts

 

Long-term derivative assets included in the deferred charges and other assets, net

 

 

(653

)

 

 

—

 

 

 

(653

)

Commodity contract liabilities September 30, 2025

 

$

(8,822

)

 

$

—

 

 

$

(8,822

)

 

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

 

Fair asset value of derivative instruments

 

$

17,892

 

 

$

(7,073

)

 

$

10,819

 

 

$

—

 

 

$

—

 

 

$

10,819

 

Long-term derivative assets included in deferred charges and other assets, net

 

 

695

 

 

 

(536

)

 

 

159

 

 

 

—

 

 

 

—

 

 

 

159

 

Long-term derivative liabilities included in other long-term liabilities, net

 

 

24

 

 

 

(28

)

 

 

(4

)

 

 

 

 

 

 

 

 

(4

)

Total at June 30, 2026

 

$

18,611

 

 

$

(7,637

)

 

$

10,974

 

 

$

—

 

 

$

—

 

 

$

10,974

 

Fair asset value of derivative instruments

 

$

3,630

 

 

$

(2,840

)

 

$

790

 

 

$

—

 

 

$

—

 

 

$

790

 

Long-term derivative assets included in deferred charges and other assets, net

 

 

755

 

 

 

(653

)

 

 

102

 

 

 

—

 

 

 

—

 

 

 

102

 

Fair liability value of derivative instruments

 

 

3,931

 

 

 

(5,329

)

 

 

(1,398

)

 

 

—

 

 

 

—

 

 

 

(1,398

)

Total at September 30, 2025

 

$

8,316

 

 

$

(8,822

)

 

$

(506

)

 

$

—

 

 

$

—

 

 

$

(506

)

 

(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,
2026

 

Three Months Ended June 30,
2025

 

Nine Months Ended June 30,
2026

 

Nine Months Ended June 30,
2025

 

Commodity contracts

 

Cost of product (a)

 

$

(4,425

)

$

2,248

 

$

(1,388

)

$

16,002

 

Commodity contracts

 

Cost of installations and service (a)

 

$

(474

)

$

40

 

$

(581

)

$

171

 

Commodity contracts

 

Delivery and branch expenses (a)

 

$

(478

)

$

234

 

$

(2,558

)

$

890

 

Commodity contracts

 

(Increase) / decrease in the fair
 value of derivative instruments (b)

 

$

8,019

 

$

(603

)

$

(13,398

)

$

(11,962

)

 

(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.