Note 4. Inventories


September 30, 2011	Processed		Unprocessed		Total
(In thousands)	(Unaudited)
Coffee	$	25,823	$	17,139	$	42,962
Tea and culinary products		25,705		4,415		30,120
Coffee brewing equipment		4,288		6,038		10,326

	$	55,816	$	27,592	$	83,408


June 30, 2011	Processed		Unprocessed		Total
(In thousands)
Coffee	$	22,464	$	17,220	$	39,684
Tea and culinary products		25,469		4,100		29,569
Coffee brewing equipment		3,930		6,576		10,506

	$	51,863	$	27,896	$	79,759

The Company anticipates that certain inventory quantities will be reduced as of June 30, 2012 and expects the reduction to result in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the estimated current year cost in fiscal 2012. The expected effect of this liquidation for fiscal year 2012 is $6.8 million of which the Company recorded $1.7 million in the fiscal quarter ended September 30, 2011 reducing net loss for the quarter by $1.7 million.

Inventories are valued at the lower of cost or market. Costs of coffee, tea and culinary products are determined on the last in, first out (LIFO) basis. Costs of coffee brewing equipment manufactured are accounted for on the first in, first out (FIFO) basis. 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. 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.

At times the Company enters into specialized hedging transactions to purchase future coffee contracts to enable the Company to lock in green coffee prices within a pre-established range. For the three months ended September 30, 2011, the Company recorded $1.2 million in net unrealized losses related to hedging transactions. From time to time the Company may hold a mix of futures contracts and options to help hedge against volatility in green coffee prices. Gains and losses on these derivative instruments are realized immediately in “Other, net.