Company: SPH
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0000950170-25-015135
Chunk: 82

Company: SUBURBAN PROPANE PARTNERS LP
Filing Date: 2025-02-06
Form: 10-Q
Item: Part I, Item 2
Chunk 82
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 for and are designated as normal purchase or normal sale contracts.  Such contracts are exempted from fair value accounting and are accounted for at the time product is purchased or sold under the related contract.

Under our hedging and risk management strategies, we enter into a combination of exchange-traded futures and options contracts and, in certain instances, over-the-counter options and swap contracts (collectively, “derivative instruments”) to manage the price risk associated with physical product and with future purchases of the commodities used in our operations, principally propane and fuel oil, as well as to help ensure the availability of product during periods of high demand.  In addition, we sell propane, fuel oil, natural gas and electricity to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts.  We do not use derivative instruments for speculative or trading purposes.  Futures and swap contracts require that we sell or acquire propane or fuel oil at a fixed price for delivery at fixed future dates.  An option contract allows, but does not require, its holder to buy or sell propane or fuel oil at a specified price during a specified time period.  However, the writer of an option contract must fulfill the obligation of the option contract, should the holder choose to exercise the option.  At expiration, the contracts are settled by the delivery of the product to the respective party or are settled by the payment of a net amount equal to the difference between the then market price and the fixed contract price or option exercise price.  To the extent that we utilize derivative instruments to manage exposure to commodity price risk and commodity prices move adversely in relation to the contracts, we could suffer losses on those derivative instruments when settled.  Conversely, if prices move favorably, we could realize gains.  Under our hedging and risk management strategy, realized gains or losses on derivative instruments will typically offset losses or gains on the physical inventory once the product is sold to customers at market prices, or delivered to customers as it pertains to fixed price contracts.

Futures are traded with brokers of the NYMEX and require daily cash settlements in margin accounts.  Forward contracts are generally settled at the expiration of the contract term by physical delivery, and swap and options contracts are generally settled at expiration through a net settlement mechanism.  Market risks associated with our derivative instruments are monitored daily for compliance with our Hedging and Risk Management Policy which includes volume limits for open positions. Open inventory positions are reviewed and managed daily as