SEC Company Response from FARMER BROTHERS CO (FARM) (CIK 0000034563) (FARM) — Apr 10, 2014
FARMER BROTHERS CO (FARM) (CIK 0000034563)
Date: April 10, 2014 · CIK: 0000034563 · Accession: 0000034563-14-000011
AI Filing Summary & Sentiment
File numbers found in text: 001-34249
Referenced dates: March 27, 2014
Letter
VIA EDGAR Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, NE Washington, D.C. 20549 Farmer Bros. Co. Form 10-K for the Fiscal Year ended June 30, 2013 Filed October 9, 2013 File No. 001-34249
Re:
Dear Mr. Hiller:
We submit this letter in response to comments received from the Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated March 27, 2014 with respect to the Annual Report of Farmer Bros. Co., a Delaware corporation (“Farmer Bros.,” the “Company,” “we” or “our”), on Form 10-K for the fiscal year ended June 30, 2013 filed with the Commission on October 9, 2013 (the “2013 Form 10-K”).
Based on our review of the Staff’s comment letter, and as further described herein, we believe that our 2013 Form 10-K is materially accurate, and therefore believe that no amendment to our existing filing is necessary. Instead, as indicated in our responses below, we hereby propose to make appropriate clarifications or modifications to our disclosures in future filings with the Commission.
We have included each of the Staff’s comments or requests for information in bold italic text to facilitate review of our responses.
Form 10-K for the Fiscal Year ended June 30, 2013
Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 20
Results of Operations, page 27
1.
We note you have disclosures on pages 28 and 30 referencing the increase in revenues that you report for both 2013 and 2012. However, these do not indicate the extent to which increases in revenue are attributable to changes in prices, changes in volumes sold, or to the introduction of new products or services, as would be required to comply with Item 303(a)(3)(iii) of Regulation S-K. Please disclose this required information.
Company Response: The Company acknowledges the Staff’s comment and the requirements of Item 303(a)(3)(iii) of Regulation S-K.
In addition to the disclosures on pages 28 and 30 referenced by the Staff, we note the additional disclosures on pages 27 and 29 under the heading “Overview” wherein we discuss the fluctuations in
Farmer Brothers • 20333 S. Normandie Avenue, Torrance, CA 90502 •Toll Free: (800) 735-2878 • FarmerBros.com
Mr. Karl Hiller
Farmer Bros. Co.
April 10, 2014
Page 2
green coffee commodity market prices, the primary raw material used in our products as noted on page 2, in each of the respective periods. We also note that the disclosure on page 28 includes a discussion of the primary drivers of the increase in net sales in fiscal 2013 - increases in sales of our coffee and tea products; and the disclosure on page 30 includes a discussion of the primary drivers of net sales in fiscal 2012 - increases in list prices implemented in the second half of fiscal 2011. The Company will address the Staff’s comment in future filings with the Commission by adding a discussion of units sold and average unit price in relation to changes in net sales. Set forth below is an example of such a disclosure based on the results for the fiscal year ended June 30, 2013:
MD&A – Operations
Net sales increased 2.9% in fiscal 2013 as compared to fiscal 2012 primarily due to an increase in
unit sales of 13.7%, offset in part by a decrease in average unit price of 9.5% in fiscal 2013 as compared to fiscal 2012. The increase in unit sales was primarily due to the increase in unit sales of coffee. The decrease in average unit price was primarily due to a decrease in coffee price.
2.
We note that you identify risk factors pertaining to the price and availability of green coffee on pages 5 and 6, and have begun accounting for derivatives utilized to manage some of this risk as hedges, while increasing the length of the future periods covered by these instruments, as described on page 27. We also note that while you discuss change in the cost of green coffee and indicate increases in revenue may be attributable to changes in volumes sold on page 28, you have not disclosed the volumes of any of commodities purchased, processed or sold during any of the periods covered by your report, nor your manufacturing and processing capacities or the extent to which your facilities are utilized.
We believe that more comprehensive disclosure is necessary to comply with Item 303 of Regulation S-K. The guidance in FRC §501.12.b.1 (including footnote 5), emphasizes the importance of disclosing key indicators of financial condition and performance, including non-financial variables such as units or volume produced and sold and manufacturing plant capacity and utilization. A principal objective of MD&A is to provide context or a frame of reference that allows readers to understand the effects of material changes, events, trends and uncertainties on the quality and potential variability of earnings and cash flows. The guidance in FRC §501.12.b.3 emphasizes the importance of addressing the indicative value of your reported financial information in these respects. Please expand your disclosure to include relevant information about the volumes of commodities that are correlated with your sales each period, the extent to which you have limited risk to future variations in price with derivatives and other contracts, also addressing capacities and the extent of utilization.
Company Response: The Company acknowledges the Staff’s comment, the requirements of Item 303 of Regulation S-K, and the guidance set forth in FRC Section 501.12.b.
As disclosed in our risk factors pertaining to exposure to commodity cost fluctuations, we are exposed to cost fluctuations in coffee, milk, spices, natural gas and gasoline, of which coffee is the only commodity for which we routinely purchase exchange-traded coffee derivative instruments to limit our risk to future variations in price. We do not purchase any derivative instruments to hedge cost fluctuations of any commodities other than coffee.
Farmer Brothers • 20333 S. Normandie Avenue, Torrance, CA 90502 •Toll Free: (800) 735-2878 • FarmerBros.com
Mr. Karl Hiller
Farmer Bros. Co.
April 10, 2014
Page 3
With respect to the Staff’s comment regarding disclosure of the Company’s utilization of commodities and the extent to which the Company has limited risk to future variations in commodity prices with derivatives and other contracts, we note the disclosure on page 29 regarding the increase in the number of our coffee-related derivative contracts as of June 30, 2013 covering 49.6 million pounds of green coffee compared to 18.2 million pounds of green coffee covered as of June 30, 2012. We also note that beginning with our filing with the Commission on Form 10-Q for the quarter ended September 30, 2013, in the notes to our consolidated financial statements we have disclosed the percentage of outstanding coffee-related derivative instruments, and the number of pounds of forecasted green coffee purchases represented thereby, that were designated as cash flow hedges as of the end of the relevant periods. In future filings with the Commission, the Company will add this disclosure in the MD&A. In addition, to further address the Staff’s comment, in future filings with the Commission we will supplement the disclosure by providing additional information regarding our hedging program in the first paragraph under the heading “Derivative Instruments” on page 21 (and similar disclosure) to read as follows (new text is underscored and deleted text is shown as strikethrough):
Derivative Instruments
We routinely purchase exchange-traded coffee derivative instrumentscontracts to enable us to fixlock in green coffee prices within a pre-established range, and we hold a mix of futures contracts and options to help hedge against the volatility in green coffee prices. Our current policy is to employ these types of derivatives to fix the price of at least 3 months of our projected purchases in order to give us time to adjust our selling prices to the extent possible in light of market conditions and customer arrangements.
In future filings with the Commission, we will also clarify our disclosure regarding the amount of future purchase commitments as discussed below in response to Staff Comment 4.
With respect to the Staff’s comment regarding our plant capacity and utilization, we note the disclosure on page 14 under Item 2 that we believe our plants, distribution centers and branch warehouses will continue to provide adequate capacity for the foreseeable future. We also note the filing of a complete list of properties operated by Farmer Bros. as Exhibit 99.1. We have also included disclosure of our expected capital expenditures in the MD&A under the heading “Liquidity and Capital Resources—Liquidity” on page 27, including expenditures for building and facility improvements. In the past, when capital expenditures for additional coffee roasters or production equipment were material, we have quantified the amount of such expenditures in our filings with the Commission. For example, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2010, we disclosed the following:
Of the total capital expenditures in fiscal 2010 of approximately $28.5 million, $21.7 million was for machinery and equipment including $6.8 million in expenditures for the roasters and production equipment, including machinery and equipment for the DSD Coffee Business, and $1.0 million was for vehicles.
To further address the Staff’s comment, in future filings with the Commission we will provide additional disclosure of the utilization percentage of our manufacturing capacity similar to the following for fiscal 2013:
Farmer Brothers • 20333 S. Normandie Avenue, Torrance, CA 90502 •Toll Free: (800) 735-2878 • FarmerBros.com
Mr. Karl Hiller
Farmer Bros. Co.
April 10, 2014
Page 4
The Company’s utilization percentage of its manufacturing capacity varies with the types of products processed in its manufacturing facilities. As of June 30, 2013 the Company’s average utilization of its manufacturing capacity ranged from 60% to 70%.
3.
You have disclosure in the last paragraph on page 27, referencing losses recognized for derivatives that are not accounted for as hedges, and stating that such losses "...are expected to be offset by future derivative gains as the coffee market changes, recovered through operating income as a result of the lower cost of goods assigned to the related coffee, or recovered from customers for whom contracts were purchased for their accounts."
We believe that you should have a reasonable basis for the expectations that you disclose. Tell us how you are able to support your view on each point pertaining to the offset or recovery of loss recognized on your derivatives, and the key assumptions that you have made in formulating this view. For example, explain how your knowledge of commodity futures at the time of making this disclosure correlates with your derivative positions at the time, address the elasticity of product prices relative to costs of the commodities, and describe your arrangements with customers that would require them to endure losses on derivatives you hold on their behalf. Please supplement your explanation on these various points with the details necessary to understand all salient aspects of your arrangements to purchase commodity contracts on behalf of customers.
Also clarify the extent to which these arrangements have been utilized during each period, and the effects of accounting for these instruments in your financial statements. If any of these contracts are also part of your hedge accounting, please explain your basis.
Company Response: The Company acknowledges the Staff’s comment. The disclosure in the last paragraph on page 27 identified by the Staff was intended to explain that a decrease in coffee prices from the date that a coffee-related derivative is executed results in unrealized and realized losses on such coffee-related derivatives. This statement was further meant to clarify that the effects of mark-to-market accounting result in volatility in the Company’s consolidated statements of operations. The unrealized losses could become unrealized gains if coffee prices increase before the derivative expiration. In addition, the Company intended to convey that the associated decrease in coffee prices results in a lower price paid for current coffee inventory purchases, further resulting in lower cost of goods sold. A more detailed explanation follows.
If a coffee-related derivative instrument is not designated for hedge accounting, it is accounted for on a mark-to-market basis. The following example demonstrates what can result in such a case, with the three potential outcomes noted in the disclosure on page 27 identified by the Staff above where current period losses are: (i) offset by future derivative gains; (ii) recovered through operating income as a result of the lower cost of goods assigned to the related coffee; or (iii) recovered from customers for whom contracts were purchased for their accounts.
Example: Assume that, in period 1, the Company enters into a futures contract to purchase 100,000 lbs. of coffee at $1.80 per lb., which is the “C” Market price at the time of entering into the contract. The contract is a standard exchange-traded futures contract. The contract settles in 5 months, which is during period 2 in this example, and the contract is not designated as an accounting hedge.
Farmer Brothers • 20333 S. Normandie Avenue, Torrance, CA 90502 •Toll Free: (800) 735-2878 • FarmerBros.com
Mr. Karl Hiller
Farmer Bros. Co.
April 10, 2014
Page 5
•
At the end of period 1, the “C” Market price of coffee is $1.40 per lb. The Company records a loss of $40,000 in “Other income (loss)” during period 1.
•
In period 2, the contract is applied to an incoming purchase order, and coffee is received by the Company. One of the following three outcomes will occur:
(i)
If the “C” Market price moves back to $1.80 per lb. before the contract is applied to the incoming order, then a $40,000 gain in “Other income (loss)” will be recognized and the coffee will be recorded in “Cost of goods sold” at the original contracted price of $1.80 per lb.
(ii)
If the “C” Market price does not move, then the coffee will be received at $1.40 per lb. and “Cost of goods sold” will be $40,000 less than the original contracted price of $1.80 per lb.
(iii)
As is customary in the coffee industry, customers for whom the Company entered into the futures contract at $1.80 per lb. will generally buy the coffee that they ordered or will assume the responsibility for settling the contracts if they do not ultimately buy that coffee.
The Company proposes to remove the sentence identified by the Staff above (and any similar discussion) from future filings in order to avoid potential confusion.
Contractual Obligations, page 32
4.
Please expand your disclosure to clarify the extent to which the purchase commitments listed in your table exclude commitments under your various contracts to acquire commodities, including contracts that you consider to be for normal purchases and contracts that are accounted for as derivatives. Please quantify your exposure under any such arrangements and explain the features that you believe appropriately distinguish them from those reflected in your table.
Company Response: The Company acknowledges the Staff’s comment. The contracts in the table represent the Company’s purchase obligations under contracts that qualify as normal purchases including green coffee purchase commitments for which the price has been fixed as of the end of the period and do not include coffee-related derivatives. The Company will address the Staff’s comment in future filings with the Commission by addin
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CORRESP 1 filename1.htm Responseto03272014SECLetter April 10, 2014 VIA EDGAR Mr. Karl Hiller Branch Chief Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, NE Washington, D.C. 20549 Re: Farmer Bros. Co. Form 10-K for the Fiscal Year ended June 30, 2013 Filed October 9, 2013 File No. 001-34249 Dear Mr. Hiller: We submit this letter in response to comments received from the Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated March 27, 2014 with respect to the Annual Report of Farmer Bros. Co., a Delaware corporation (“Farmer Bros.,” the “Company,” “we” or “our”), on Form 10-K for the fiscal year ended June 30, 2013 filed with the Commission on October 9, 2013 (the “2013 Form 10-K”). Based on our review of the Staff’s comment letter, and as further described herein, we believe that our 2013 Form 10-K is materially accurate, and therefore believe that no amendment to our existing filing is necessary. Instead, as indicated in our responses below, we hereby propose to make appropriate clarifications or modifications to our disclosures in future filings with the Commission. We have included each of the Staff’s comments or requests for information in bold italic text to facilitate review of our responses. Form 10-K for the Fiscal Year ended June 30, 2013 Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 20 Results of Operations, page 27 1. We note you have disclosures on pages 28 and 30 referencing the increase in revenues that you report for both 2013 and 2012. However, these do not indicate the extent to which increases in revenue are attributable to changes in prices, changes in volumes sold, or to the introduction of new products or services, as would be required to comply with Item 303(a)(3)(iii) of Regulation S-K. Please disclose this required information. Company Response: The Company acknowledges the Staff’s comment and the requirements of Item 303(a)(3)(iii) of Regulation S-K. In addition to the disclosures on pages 28 and 30 referenced by the Staff, we note the additional disclosures on pages 27 and 29 under the heading “Overview” wherein we discuss the fluctuations in Farmer Brothers • 20333 S. Normandie Avenue, Torrance, CA 90502 •Toll Free: (800) 735-2878 • FarmerBros.com Mr. Karl Hiller Farmer Bros. Co. April 10, 2014 Page 2 green coffee commodity market prices, the primary raw material used in our products as noted on page 2, in each of the respective periods. We also note that the disclosure on page 28 includes a discussion of the primary drivers of the increase in net sales in fiscal 2013 - increases in sales of our coffee and tea products; and the disclosure on page 30 includes a discussion of the primary drivers of net sales in fiscal 2012 - increases in list prices implemented in the second half of fiscal 2011. The Company will address the Staff’s comment in future filings with the Commission by adding a discussion of units sold and average unit price in relation to changes in net sales. Set forth below is an example of such a disclosure based on the results for the fiscal year ended June 30, 2013: MD&A – Operations Net sales increased 2.9% in fiscal 2013 as compared to fiscal 2012 primarily due to an increase in unit sales of 13.7%, offset in part by a decrease in average unit price of 9.5% in fiscal 2013 as compared to fiscal 2012. The increase in unit sales was primarily due to the increase in unit sales of coffee. The decrease in average unit price was primarily due to a decrease in coffee price. 2. We note that you identify risk factors pertaining to the price and availability of green coffee on pages 5 and 6, and have begun accounting for derivatives utilized to manage some of this risk as hedges, while increasing the length of the future periods covered by these instruments, as described on page 27. We also note that while you discuss change in the cost of green coffee and indicate increases in revenue may be attributable to changes in volumes sold on page 28, you have not disclosed the volumes of any of commodities purchased, processed or sold during any of the periods covered by your report, nor your manufacturing and processing capacities or the extent to which your facilities are utilized. We believe that more comprehensive disclosure is necessary to comply with Item 303 of Regulation S-K. The guidance in FRC §501.12.b.1 (including footnote 5), emphasizes the importance of disclosing key indicators of financial condition and performance, including non-financial variables such as units or volume produced and sold and manufacturing plant capacity and utilization. A principal objective of MD&A is to provide context or a frame of reference that allows readers to understand the effects of material changes, events, trends and uncertainties on the quality and potential variability of earnings and cash flows. The guidance in FRC §501.12.b.3 emphasizes the importance of addressing the indicative value of your reported financial information in these respects. Please expand your disclosure to include relevant information about the volumes of commodities that are correlated with your sales each period, the extent to which you have limited risk to future variations in price with derivatives and other contracts, also addressing capacities and the extent of utilization. Company Response: The Company acknowledges the Staff’s comment, the requirements of Item 303 of Regulation S-K, and the guidance set forth in FRC Section 501.12.b. As disclosed in our risk factors pertaining to exposure to commodity cost fluctuations, we are exposed to cost fluctuations in coffee, milk, spices, natural gas and gasoline, of which coffee is the only commodity for which we routinely purchase exchange-traded coffee derivative instruments to limit our risk to future variations in price. We do not purchase any derivative instruments to hedge cost fluctuations of any commodities other than coffee. Farmer Brothers • 20333 S. Normandie Avenue, Torrance, CA 90502 •Toll Free: (800) 735-2878 • FarmerBros.com Mr. Karl Hiller Farmer Bros. Co. April 10, 2014 Page 3 With respect to the Staff’s comment regarding disclosure of the Company’s utilization of commodities and the extent to which the Company has limited risk to future variations in commodity prices with derivatives and other contracts, we note the disclosure on page 29 regarding the increase in the number of our coffee-related derivative contracts as of June 30, 2013 covering 49.6 million pounds of green coffee compared to 18.2 million pounds of green coffee covered as of June 30, 2012. We also note that beginning with our filing with the Commission on Form 10-Q for the quarter ended September 30, 2013, in the notes to our consolidated financial statements we have disclosed the percentage of outstanding coffee-related derivative instruments, and the number of pounds of forecasted green coffee purchases represented thereby, that were designated as cash flow hedges as of the end of the relevant periods. In future filings with the Commission, the Company will add this disclosure in the MD&A. In addition, to further address the Staff’s comment, in future filings with the Commission we will supplement the disclosure by providing additional information regarding our hedging program in the first paragraph under the heading “Derivative Instruments” on page 21 (and similar disclosure) to read as follows (new text is underscored and deleted text is shown as strikethrough): Derivative Instruments We routinely purchase exchange-traded coffee derivative instrumentscontracts to enable us to fixlock in green coffee prices within a pre-established range, and we hold a mix of futures contracts and options to help hedge against the volatility in green coffee prices. Our current policy is to employ these types of derivatives to fix the price of at least 3 months of our projected purchases in order to give us time to adjust our selling prices to the extent possible in light of market conditions and customer arrangements. In future filings with the Commission, we will also clarify our disclosure regarding the amount of future purchase commitments as discussed below in response to Staff Comment 4. With respect to the Staff’s comment regarding our plant capacity and utilization, we note the disclosure on page 14 under Item 2 that we believe our plants, distribution centers and branch warehouses will continue to provide adequate capacity for the foreseeable future. We also note the filing of a complete list of properties operated by Farmer Bros. as Exhibit 99.1. We have also included disclosure of our expected capital expenditures in the MD&A under the heading “Liquidity and Capital Resources—Liquidity” on page 27, including expenditures for building and facility improvements. In the past, when capital expenditures for additional coffee roasters or production equipment were material, we have quantified the amount of such expenditures in our filings with the Commission. For example, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2010, we disclosed the following: Of the total capital expenditures in fiscal 2010 of approximately $28.5 million, $21.7 million was for machinery and equipment including $6.8 million in expenditures for the roasters and production equipment, including machinery and equipment for the DSD Coffee Business, and $1.0 million was for vehicles. To further address the Staff’s comment, in future filings with the Commission we will provide additional disclosure of the utilization percentage of our manufacturing capacity similar to the following for fiscal 2013: Farmer Brothers • 20333 S. Normandie Avenue, Torrance, CA 90502 •Toll Free: (800) 735-2878 • FarmerBros.com Mr. Karl Hiller Farmer Bros. Co. April 10, 2014 Page 4 The Company’s utilization percentage of its manufacturing capacity varies with the types of products processed in its manufacturing facilities. As of June 30, 2013 the Company’s average utilization of its manufacturing capacity ranged from 60% to 70%. 3. You have disclosure in the last paragraph on page 27, referencing losses recognized for derivatives that are not accounted for as hedges, and stating that such losses "...are expected to be offset by future derivative gains as the coffee market changes, recovered through operating income as a result of the lower cost of goods assigned to the related coffee, or recovered from customers for whom contracts were purchased for their accounts." We believe that you should have a reasonable basis for the expectations that you disclose. Tell us how you are able to support your view on each point pertaining to the offset or recovery of loss recognized on your derivatives, and the key assumptions that you have made in formulating this view. For example, explain how your knowledge of commodity futures at the time of making this disclosure correlates with your derivative positions at the time, address the elasticity of product prices relative to costs of the commodities, and describe your arrangements with customers that would require them to endure losses on derivatives you hold on their behalf. Please supplement your explanation on these various points with the details necessary to understand all salient aspects of your arrangements to purchase commodity contracts on behalf of customers. Also clarify the extent to which these arrangements have been utilized during each period, and the effects of accounting for these instruments in your financial statements. If any of these contracts are also part of your hedge accounting, please explain your basis. Company Response: The Company acknowledges the Staff’s comment. The disclosure in the last paragraph on page 27 identified by the Staff was intended to explain that a decrease in coffee prices from the date that a coffee-related derivative is executed results in unrealized and realized losses on such coffee-related derivatives. This statement was further meant to clarify that the effects of mark-to-market accounting result in volatility in the Company’s consolidated statements of operations. The unrealized losses could become unrealized gains if coffee prices increase before the derivative expiration. In addition, the Company intended to convey that the associated decrease in coffee prices results in a lower price paid for current coffee inventory purchases, further resulting in lower cost of goods sold. A more detailed explanation follows. If a coffee-related derivative instrument is not designated for hedge accounting, it is accounted for on a mark-to-market basis. The following example demonstrates what can result in such a case, with the three potential outcomes noted in the disclosure on page 27 identified by the Staff above where current period losses are: (i) offset by future derivative gains; (ii) recovered through operating income as a result of the lower cost of goods assigned to the related coffee; or (iii) recovered from customers for whom contracts were purchased for their accounts. Example: Assume that, in period 1, the Company enters into a futures contract to purchase 100,000 lbs. of coffee at $1.80 per lb., which is the “C” Market price at the time of entering into the contract. The contract is a standard exchange-traded futures contract. The contract settles in 5 months, which is during period 2 in this example, and the contract is not designated as an accounting hedge. Farmer Brothers • 20333 S. Normandie Avenue, Torrance, CA 90502 •Toll Free: (800) 735-2878 • FarmerBros.com Mr. Karl Hiller Farmer Bros. Co. April 10, 2014 Page 5 • At the end of period 1, the “C” Market price of coffee is $1.40 per lb. The Company records a loss of $40,000 in “Other income (loss)” during period 1. • In period 2, the contract is applied to an incoming purchase order, and coffee is received by the Company. One of the following three outcomes will occur: (i) If the “C” Market price moves back to $1.80 per lb. before the contract is applied to the incoming order, then a $40,000 gain in “Other income (loss)” will be recognized and the coffee will be recorded in “Cost of goods sold” at the original contracted price of $1.80 per lb. (ii) If the “C” Market price does not move, then the coffee will be received at $1.40 per lb. and “Cost of goods sold” will be $40,000 less than the original contracted price of $1.80 per lb. (iii) As is customary in the coffee industry, customers for whom the Company entered into the futures contract at $1.80 per lb. will generally buy the coffee that they ordered or will assume the responsibility for settling the contracts if they do not ultimately buy that coffee. The Company proposes to remove the sentence identified by the Staff above (and any similar discussion) from future filings in order to avoid potential confusion. Contractual Obligations, page 32 4. Please expand your disclosure to clarify the extent to which the purchase commitments listed in your table exclude commitments under your various contracts to acquire commodities, including contracts that you consider to be for normal purchases and contracts that are accounted for as derivatives. Please quantify your exposure under any such arrangements and explain the features that you believe appropriately distinguish them from those reflected in your table. Company Response: The Company acknowledges the Staff’s comment. The contracts in the table represent the Company’s purchase obligations under contracts that qualify as normal purchases including green coffee purchase commitments for which the price has been fixed as of the end of the period and do not include coffee-related derivatives. The Company will address the Staff’s comment in future filings with the Commission by addin