Derivative Financial Instruments (Notes)

3 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Instruments

Derivative Instruments Held

Coffee-Related Derivative Instruments

The Company is exposed to commodity price risk associated with its PTF green coffee purchase contracts, which are described further in Note 1. The Company utilizes futures contracts and options to manage exposure to the variability in expected future cash flows from forecasted purchases of green coffee attributable to commodity price risk, in some instances, as much as 18 months prior to the actual delivery date. Certain of these coffee-related derivative instruments utilized for risk management purposes have been designated as cash flow hedges, while other coffee-related derivative instruments have not been designated as cash flow hedges or do not qualify for hedge accounting despite hedging the Company's future cash flows on an economic basis.

At September 30, 2013, approximately 90% of the Company's outstanding coffee-related derivative instruments, representing 47.9 million pounds of forecasted green coffee purchases, were designated as cash flow hedges. At September 30, 2012 no coffee-related derivative instruments were designated as accounting hedges.

For the three months ended September 30, 2013, the Company recorded coffee-related net derivative losses in OCI in the amount of $3.1 million. No coffee-related net derivative gains or losses were recorded in OCI for the three months ended September 30, 2012.

Interest Rate Swap

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 interest rate swap is not designated as an accounting hedge.

Effect of Derivative Instruments on the Financial Statements

Balance Sheet

Fair values of derivative instruments on the consolidated balance sheets (in thousands):

	Derivatives Designated as Cash Flow Hedges				Derivatives Not Designated as Accounting Hedges
	September 30,		June 30,		September 30,		June 30,
	2013		2013		2013		2013
	(Unaudited)				(Unaudited)
Financial Statement Location:
Short-term investments:
Coffee-related derivatives	$	—	$	—	$	—	$	4
Short-term derivative liability:
Coffee futures	$	8,718	$	9,331	$	632	$	565
Other current liabilities:
Interest rate swap	$	—	$	—	$	32	$	25
Long-term derivative liability:
Coffee futures	$	687	$	1,129	$	—	$	—

Statement of Operations

For the three months ended September 30, 2013, the Company recognized $0.5 million in losses on coffee-related derivative instruments designated as cash flow hedges for ineffectiveness and 10% of the total coffee-related derivative instruments were excluded from the effectiveness assessment since they were not designated as cash flow hedges. Cash flow hedge contracts outstanding as of September 30, 2013 will expire within 26 months.

The following table presents pretax net gains and losses for the Company's coffee-related derivative instruments designated as cash flow hedges, as recognized in "Cost of goods sold," "Accumulated other comprehensive income" ("AOCI") and "Other, net" (in thousands):

(Unaudited)	Three Months Ended September 30,
	2013			2012		Financial Statement Classification
Net losses recognized in earnings (effective portion)	$	(2,219	)	$	—	Cost of goods sold
Net losses recognized in other comprehensive income (loss) (effective portion)	$	(3,125	)	$	—	AOCI
Net losses recognized in earnings (ineffective portion)	$	(507	)	$	—	Other, net

For the three months ended September 30, 2013, there were no gains or losses recognized in income as a result of excluding amounts from the assessment of hedge effectiveness or as a result of reclassifications to earnings following the discontinuance of any cash flow hedges.

Gains and losses on derivatives not designated as accounting hedges are included in "Other, net" in the Company's consolidated statements of operations and in "Net losses (gains) on derivatives and investments" in the Company's consolidated statements of cash flow.

Net gains and losses recorded in "Other, net" are as follows:

(In thousands)	Three Months Ended September 30,
	2013			2012
	(Unaudited)
Net (losses) gains from coffee-related derivatives	$	(848	)	$	703
Net (losses) gains from investments	(694		)	99
Net losses from interest rate swap	(7		)	—
Net (losses) gains on derivatives and investments	(1,549		)	802
Net gains from sales of assets	123			3,213
Other gains, net	643			930
Other, net	$	(783	)	$	4,945

Offsetting of Derivative Assets and Liabilities

The Company has agreements in place that allow for the financial right of offset for derivative assets and liabilities at settlement or in the event of default under the agreements. Additionally, the Company maintains accounts with its brokers to facilitate financial derivative transactions in support of its risk management activities. Based on the value of the Company’s positions in these accounts and the associated margin requirements, the Company may be required to deposit cash into these broker accounts.

The following tables present the Company’s net exposure from its offsetting derivative asset and liability positions, as well as cash margins on deposit with each of its counterparties as of the reporting dates indicated:

Counterparty A		Gross Amount Reported on Balance Sheet		Netting Adjustments			Cash Collateral Posted (Received)		Net Exposure
At September 30, 2013 (Unaudited)	Derivative Assets	$	—	$	—		$	—	$	—
	Derivative Liabilities	$	10,037	$	—		$	6,260	$	3,777
At June 30, 2013	Derivative Assets	$	4	$	(4	)	$	—	$	—
	Derivative Liabilities	$	11,025	$	(4	)	$	8,084	$	2,937

Counterparty B		Gross Amount Reported on Balance Sheet		Netting Adjustments		Cash Collateral Posted (Received)		Net Exposure
At September 30, 2013 (Unaudited)	Derivative Assets	$	—	$	—	$	—	$	—
	Derivative Liabilities	$	32	$	—	$	—	$	32
At June 30, 2013	Derivative Assets	$	—	$	—	$	—	$	—
	Derivative Liabilities	$	25	$	—	$	—	$	25

Credit-Risk-Related Features

The Company does not have any credit-risk-related contingent features that would require it, in certain circumstances, to post additional collateral in support of its net derivative liability positions. The Company had $6.3 million and $8.1 million, respectively, in restricted cash representing cash held on deposit in margin accounts for coffee-related derivative instruments at September 30, 2013 and June 30, 2013 (see Note 5). Changes in commodity prices and the number of coffee-related derivative instruments held could have a significant impact on cash deposit requirements under the Company's broker and counterparty agreements.

Cash Flow Hedges

Changes in the fair value of the Company's coffee-related derivative instruments designated as cash flow hedges, to the extent effective, are deferred in AOCI and reclassified into earnings in the same period or periods in which the hedged forecasted purchases affect earnings, or when it is probable that the hedged forecasted transaction will not occur by the end of the originally specified time period. Based on recorded values at September 30, 2013, $8.2 million of net losses are expected to be reclassified into earnings within the next twelve months. These recorded values are based on market prices of the commodities as of September 30, 2013. Due to the volatile nature of commodity prices, actual gains or losses realized within the next twelve months will likely differ from these values. These gains or losses are expected to substantially offset net losses or gains that will be realized in earnings from previous unfavorable or favorable market movements associated with underlying hedged transactions.