Investments and Derivative Instruments

9 Months Ended

Mar. 31, 2013

Investments, Fair Value and Derivatives [Abstract]

Investments and Derivative Instruments

Investments and Derivative Instruments

The Company purchases various derivative instruments as investments or to create economic hedges of its interest rate risk and commodity price risk. At March 31, 2013 and 2012, derivative instruments were not designated as accounting hedges as defined by ASC 815, “Derivatives and Hedging.” The fair value of derivative instruments is based upon broker quotes. The Company records unrealized gains and losses on trading securities and changes in the market value of certain coffee contracts meeting the definition of derivatives in "Other, net" in the consolidated statements of operations.

The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

• Level 1—Valuation is based upon quoted prices for identical instruments traded in active markets.

• Level 2—Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

• Level 3—Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Assets and liabilities measured and recorded at fair value on a recurring basis were as follows (in thousands): 

As of March 31, 2013 (Unaudited)	Total		Level 1		Level 2		Level 3
Preferred stock(1)	$	20,769	$	16,454	$	4,315	$	—
Derivative liabilities(2)	$	5,930	$	—	$	5,930	$	—
Derivative liabilities—interest rate swap(2)	$	35	$	—	$	35	$	—
As of June 30, 2012	Total		Level 1		Level 2		Level 3
Preferred stock(1)	$	19,395	$	14,078	$	5,317	$	—
Futures, options and other derivative assets(1)	$	1,626	$	—	$	1,626	$	—
Derivative liabilities(3)	$	410	$	—	$	410	$	—

____________________

(1) Included in "Short-term investments" on the consolidated balance sheets.

(2) Included in "Other current liabilities" on the consolidated balance sheet.

(3) Included in "Accounts Payable" on the consolidated balance sheet.

There were no significant transfers of securities between Level 1 and Level 2 in each of the periods presented.

Effective December 1, 2012, the Company entered into an interest rate swap transaction utilizing a notional amount of $10.0 million and a maturity date of March 1, 2015. The Company entered into the swap transaction to effectively fix the future interest rate during the applicable period on a portion of its borrowings under the revolving credit facility. The swap transaction is intended to manage the Company's interest rate risk related to its revolving credit facility and requires the Company to pay a fixed rate of 0.48% per annum in exchange for a variable interest rate based on 1-month USD LIBOR-BBA.

The Company values its interest rate swap using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

Valuation of the interest rate swap transaction is based on proprietary curves that take into account both Level 1 and Level 2 inputs. The fair value of the interest rate swap is determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves). These forward curves are market-based, utilizing observable market data. Discount curves for present value purposes are constructed using rates representing estimated costs of funding swap positions for early terminations based on an appropriate observable discount rate.

Gains and losses, both realized and unrealized, on derivatives and investments, are included in "Other, net" in the consolidated statements of operations and in "Net losses on derivatives and investments" in the consolidated statements of cash flows. Net realized and unrealized gains and losses on derivatives and investments are as follows:

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2013			2012			2013			2012
(In thousands)	(Unaudited)						(Unaudited)
Coffee-related derivatives:
Unrealized gains (losses), net	$	5		$	(1,532	)	$	(5,507	)	$	(2,551	)
Realized losses, net	(2,923		)	(1,786		)	(4,567		)	(4,925		)
Net realized and unrealized coffee-related derivative losses	(2,918		)	(3,318		)	(10,074		)	(7,476		)
Net realized and unrealized gains from investments	636			436			794			2,345
Net unrealized gains (losses) from interest rate swap	4			—			(35		)	—
Net losses on derivatives and investments	(2,278		)	(2,882		)	(9,315		)	(5,131		)
Net gains on sales of assets	1,185			499			4,388			1,161
Other gains, net	329			552			1,452			1,512
Other, net	$	(764	)	$	(1,831	)	$	(3,475	)	$	(2,458	)

Preferred stock investments as of March 31, 2013 consisted of securities with a fair value of $18.2 million in an unrealized gain position and securities with a fair value of $2.6 million in an unrealized loss position. Preferred stock investments as of June 30, 2012 consisted of securities with a fair value of $16.5 million in an unrealized gain position and securities with a fair value of $2.9 million in an unrealized loss position.

The following tables show gross unrealized losses (although such losses have been recognized in the consolidated statements of operations) and fair values for those investments that were in an unrealized loss position as of March 31, 2013 and June 30, 2012, aggregated by the length of time those investments have been in a continuous loss position: 

	March 31, 2013 (Unaudited)
	Less than 12 Months					12 Months and Greater					Total
(In thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Preferred stock	$	1,100	$	(10	)	$	1,463	$	(53	)	$	2,563	$	(63	)
	June 30, 2012
	Less than 12 Months					12 Months and Greater					Total
(In thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Preferred stock	$	1,750	$	(16	)	$	1,141	$	(24	)	$	2,891	$	(40	)