Financial Instruments and Risk Management

12 Months Ended

Sep. 24, 2011

Financial Instruments and Risk Management [Abstract]

Financial Instruments and Risk Management

10. Financial Instruments and Risk Management

Cash and Cash Equivalents.  The fair value of cash and cash equivalents is not materially different from their carrying amount because of the short-term maturity of these instruments.

Derivative Instruments and Hedging Activities.  The Partnership measures the fair value of its exchange-traded options and futures contracts using Level 1 inputs, the fair value of its interest rate swaps using Level 2 inputs and the fair value of its over-the-counter options contracts using Level 3 inputs.  The Partnership's over-the-counter options contracts are valued based on an internal option model.  The inputs utilized in the model are based on publicly available information as well as broker quotes.

The following summarizes the fair value of the Partnership's derivative instruments and their location in the consolidated balance sheet as of September 24, 2011 and September 25, 2010, respectively:

	As of September 24, 2011			As of September 25, 2010
Asset Derivatives	Location	Fair Value		Location	Fair Value
Derivatives not designated as hedging instruments:
Commodity options	Other current assets	$	3,710	Other current assets	$	2,601
	Other assets		612	Other assets		-
Commodity futures	Other current assets		1,132	Other current assets		22
		$	5,454		$	2,623

Liability Derivatives	Location	Fair Value		Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Other current liabilities	$	2,662	Other current liabilities	$	2,740
	Other liabilities		1,934	Other liabilities		3,561
		$	4,596		$	6,301
Derivatives not designated as hedging instruments:
Commodity options	Other current liabilities	$	2,407	Other current liabilities	$	641
	Other liabilities		69	Other liabilities		-
Commodity futures	Other current liabilities		-	Other current liabilities		1,838
		$	2,476		$	2,479

The following summarizes the reconciliation of the beginning and ending balances of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs:

	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Fiscal 2011						Fiscal 2010
	Assets			Liabilities			Assets			Liabilities
Beginning balance of over-the-counter options	$	1,509		$	30		$	1,675		$	844
Beginning balance realized during the period		(1,509	)		(30	)		(1,434	)		(844	)
Change in the fair value of beginning balance		-			-			(241	)		-
Contracts purchased during the period		1,780			118			1,509			30
Ending balance of over-the-counter options	$	1,780		$	118		$	1,509		$	30

As of September 24, 2011, the Partnership's outstanding commodity-related derivatives were scheduled to mature during the following 15 months, and have a weighted average maturity of approximately 4 months.  As of September 25, 2010, the Partnership's outstanding commodity-related derivatives were scheduled to mature during fiscal 2011, and had a weighted average maturity of approximately 3 months.

The effect of the Partnership's derivative instruments on the consolidated statement of operations for fiscal 2011, 2010 and 2009 are as follows:

	Amount of Gains (Losses) Recognized in OCI (Effective Portion)			Gains (Losses) Reclassified from Accumulated OCI into Income (Effective Portion)
Derivatives in Cash Flow Hedging Relationships:				Location	Amount
Fiscal 2011
Interest rate swap	$	(1,177	)	Interest expense	$	(2,881	)
Fiscal 2010
Interest rate swap	$	(5,706	)	Interest expense	$	(3,597	)
Fiscal 2009
Interest rate swap	$	(4,079	)	Interest expense	$	(3,088	)

Derivatives Not Designated as Hedging Instruments:	Location of Gains (Losses) Recognized in Income	Amount of Unrealized Gains (Losses) Recognized in Income
Fiscal 2011
Options	Cost of products sold	$	(1,517	)
Futures	Cost of products sold		2,948
		$	1,431
Fiscal 2010
Options	Cost of products sold	$	(1,275	)
Futures	Cost of products sold		(4,125	)
		$	(5,400	)
Fiscal 2009
Options	Cost of products sold	$	(589	)
Futures	Cost of products sold		2,302
		$	1,713

Credit Risk.  The Partnership's principal customers are residential and commercial end users of propane and fuel oil and refined fuels served by approximately 300 locations in 30 states.  No single customer accounted for more than 10% of revenues during fiscal 2011, 2010 or 2009 and no concentration of receivables exists as of September 24, 2011 or September 25, 2010.  During fiscal 2011, 2010 and 2009, three suppliers provided approximately 37%, 38% and 40%, respectively, of the Partnership's total propane supply. The Partnership believes that, if supplies from any of these three suppliers were interrupted, it would be able to secure adequate propane supplies from other sources without a material disruption of its operations.

Exchange-traded futures and options contracts are traded on and guaranteed by the New York Mercantile Exchange (the “NYMEX”) and as a result, have minimal credit risk.  Futures contracts traded with brokers of the NYMEX require daily cash settlements in margin accounts.  The Partnership is subject to credit risk with over-the-counter option contracts entered into with various third parties to the extent the counterparties do not perform.  The Partnership evaluates the financial condition of each counterparty with which it conducts business and establishes credit limits to reduce exposure to credit risk based on non-performance.  The Partnership does not require collateral to support the contracts.

Bank Debt and Senior Notes.  The fair value of the Revolving Credit Facility approximates the carrying value since the interest rates are adjusted quarterly to reflect market conditions.  Based upon quoted market prices, the fair value of the Partnership's 2020 Senior Notes was $248,500 as of September 24, 2011.