Fair Value of Financial Instruments

6 Months Ended

Sep. 30, 2011

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Note 11 — Fair Value of Financial Instruments

Our cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities (excluding derivative instruments) are carried at amounts which reasonably approximate their fair value due to their short-term nature.  The carrying amounts of our variable-rate debt obligations reasonably approximate their fair value due to their variable interest rates on substantially all of the debt and there have been no changes in conditions from the inception of the credit facility indicating that our credit terms were not market terms.

The following table presents the estimated fair value measurements of our assets and liabilities carried at fair value in our condensed consolidated financial statements at the dates indicated:

		September 30, 2011				March 31, 2011
Item	Recorded As	Level 1		Level 2		Level 1		Level 2
		(in thousands)
Assets:
Commodity derivatives	Prepaid Expenses	$	—	$	4	$	—	$	783
Product exchanges	Product Exchanges	—		668		—		427
Liabilities:
Product exchanges	Product Exchanges	—		10,142		—		1,045
Interest rate derivatives	Accrued Expenses	—		237		—		293
Commodity derivatives	Accrued Expenses	—		97		—		—

We have an interest rate swap agreement to hedge the risk of interest rate fluctuations on our long term debt.  This agreement converts a portion of our revolving credit facility floating rate debt into fixed rate debt on a notional amount of $8.5 million and ends on June 30, 2013.  The notional amounts of derivative instruments do not represent actual amounts exchanged between the parties, but instead represent amounts on which the contracts are based.  The floating interest rate payments under this swap are based on three-month LIBOR rates.  We do not account for this agreement as a hedge.

The following table sets forth our open commodity derivative contract positions at September 30, 2011 and March 31, 2011.  We do not account for these derivatives as hedges.

				Total	Type
				Notional	(P) = Purchase	Price Per
Underlying Contracts	Period			Units	(S) = Sale	Gallon
As of September 30, 2011 -
OPIS Conway (Propane)	May 2011		Mar 2012	9,000 BBL	Swap (P)	$	1.43500
OPIS Conway (Propane)	May 2011		June 2012	60,000 BBL	Swap (S)	$	1.26000
OPIS Conway (Propane)	May 2011		Dec 2012	75,000 BBL	Swap (P)	$	1.30000
OPIS Conway (Propane)	June 2011		Mar 2012	33,000 BBL	Swap (P)	$	1.43875
OPIS Conway (Propane)	June 2011		Sept 2011	30,000 BBL	Swap (S)	$	1.42000
OPIS Conway (Propane)	June 2011		Apr 2012	100,000 BBL	Swap (S)	$	1.28000
OPIS Conway (Propane)	June 2011		Dec 2012	100,000 BBL	Swap (P)	$	1.32250
OPIS Conway (Propane)	June 2011		Mar 2012	15,000 BBL	Swap (P)	$	1.36250
OPIS Conway (Propane)	June 2011		Mar 2012	6,000 BBL	Swap (S)	$	1.47000
OPIS Conway (Propane)	Sept 2011		Mar 2012	38,000 BBL	Swap (P)	$	1.43500
OPIS Conway (Normal Butane)	Aug 2011		Sept 2011	5,000 BBL	Swap (S)	$	1.63000
OPIS Mt. Belvieu (Propane)	Mar 2011		Sept 2011	15,000 BBL	Swap (S)	$	1.43000
OPIS Mt. Belvieu (Propane)	May 2011		Nov 2012	5,000 BBL	Swap (P)	$	1.35500
OPIS Mt. Belvieu (Propane)	Sept 2011		Dec 2011	24,000 BBL	Swap (S)	$	1.56000
OPIS Mt. Belvieu (Propane)	Sept 2011		Feb 2012	20,000 BBL	Swap (P)	$	1.62000
OPIS Mt. Belvieu (Propane)	June 2010		Dec 2011	4,000 BBL	Swap (P)	$	0.98000
Conway - WIL (Propane)	Dec 2011		Dec 2011	11,905 BBL	Physical Cap (P)	$	1.53000
Janesville - MAP (Propane)	June 2011		Dec 2011	11,905 BBL	Physical Cap (S)	$	1.62780
As of March 31, 2011 -
OPIS Conway (Propane)	Nov 2010	-	Apr 2011	25,000 BBL	Swap (S)	1.10500
OPIS Conway (Propane)	Nov 2010	-	Oct 2011	90,000 BBL	Swap (P)	1.13500
OPIS Conway (Propane)	Dec 2010	-	June 2011	30,000 BBL	Swap (S)	1.12500
OPIS Conway (Propane)	Jan 2011	-	June 2011	75,000 BBL	Swap (S)	1.15000
OPIS Conway (Propane)	Jan 2011	-	Dec 2011	75,000 BBL	Swap (P)	1.20500
OPIS Conway (Propane)	Jan 2011	-	Dec 2011	225,000 BBL	Swap (P)	1.21375
OPIS Conway (Propane)	Feb 2011	-	June 2011	225,000 BBL	Swap (S)	1.16000
OPIS Mt. Belvieu (Propane)	Mar 2011	-	Sept 2011	45,000 BBL	Swap (S)	1.43000
OPIS Mt. Belvieu (Propane)	June 2010	-	Dec 2011	4,000 BBL	Swap (P)	0.98000

We recorded the following net gains (losses) from our commodity and interest rate derivatives during the periods indicated:

	Three Months Ended September 30,					Six Months Ended September 30,
	2011			2010		2011			2010
	(in thousands)
Commodity contracts -
Unrealized gain (loss)	$	1,384		$	317	$	(862	)	$	(200	)
Realized gain (loss)	(890		)	141		1,327			426
Interest rate swaps	(9		)	—		(287		)	—
Total	$	485		$	458	$	178		$	226

The commodity contract gains and losses are included in cost of sales of our wholesale supply and marketing segment in the consolidated statements of operations.  The gain or loss on the interest rate contracts is recorded in interest expense.

Credit Risk

We maintain credit policies with regard to our counterparties on the derivative financial instruments that we believe minimize our overall credit risk, including an evaluation of potential counterparties’ financial condition (including credit ratings), collateral requirements under certain circumstances and the use of standardized agreements, which allow for netting of positive and negative exposure associated with a single counterparty.

Our counterparties consist primarily of financial institutions and major energy companies.  This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions.  Based on our policies, exposures, credit and other reserves, we do not anticipate a material adverse effect on our financial position or results of operations as a result of counterparty performance.

For financial instruments, failure of a counterparty to perform on a contract could result in our inability to realize amounts that have been recorded on our consolidated statements of financial position and recognized in our net income.