Inventories

The Company's inventories consisted of the following:



	Processed		Unprocessed		Total
September 30, 2012 (Unaudited)	(In thousands)
Coffee	$	15,825	$	14,607	$	30,432
Tea and culinary products	24,621		4,580		29,201
Coffee brewing equipment	5,066		5,225		10,291
	$	45,512	$	24,412	$	69,924

	Processed		Unprocessed		Total
June 30, 2012	(In thousands)
Coffee	$	15,485	$	11,836	$	27,321
Tea and culinary products	24,502		4,817		29,319
Coffee brewing equipment	3,977		5,364		9,341
	$	43,964	$	22,017	$	65,981

Inventories are valued at the lower of cost or market. The Company accounts for coffee, tea and culinary products on the last in, first out ("LIFO") basis and coffee brewing equipment manufactured on the first in, first out ("FIFO") basis. The Company regularly evaluates these inventories to determine whether market conditions are correctly reflected in the recorded carrying value. At the end of each quarter, the Company records the expected beneficial effect of the liquidation of LIFO inventory quantities, if any, and records the actual impact at fiscal year-end. An actual valuation of inventory under the LIFO method is made only at the end of each fiscal year based on the inventory levels and costs at that time. If inventory quantities decline at the end of the fiscal year compared to the beginning of the fiscal year, the reduction results in the liquidation of LIFO inventory quantities carried at the cost prevailing in prior years. This LIFO inventory liquidation may result in a decrease or increase in cost of goods sold depending on whether the cost prevailing in prior years was lower or higher, respectively, than the current year cost. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected fiscal year-end inventory levels and costs. Because these estimates are subject to many forces beyond management's control, interim results are subject to the final fiscal year-end LIFO inventory valuation. The Company anticipates its inventory levels at June 30, 2013 to be same as of June 30, 2012 and, therefore, did not record an adjustment to cost of goods sold for the three months ended September 30, 2012. In the three months ended September 30, 2011, the Company recorded $1.7 million in expected beneficial effect of LIFO inventory liquidation and reduced net loss for the three months ended September 30, 2011 by $1.7 million.

The Company routinely enters into specialized hedging transactions to purchase future coffee contracts to enable it to lock in green coffee prices within a pre-established range, and holds a mix of futures contracts and options to help hedge against volatility in green coffee prices. None of these hedging transactions, futures contracts or options is designated as an accounting hedge. Gains and losses on these derivative instruments are realized immediately in “Other, net” in the consolidated statements of operations.

For the three months ended September 30, 2012 and 2011, the Company recorded $0.4 million and $(1.0) million, respectively, in coffee-related net realized derivative gains (losses). For the three months ended September 30, 2012 and 2011, the Company recorded $1.1 million and $(2.7) million, respectively, in coffee-related net unrealized derivative gains (losses).