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Share-Based Compensation | 12 Months Ended
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Jun. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Share-Based Compensation | Share-based Compensation On December 5, 2013, the Company’s stockholders approved the Farmer Bros. Co. Amended and Restated 2007 Long-Term Incentive Plan (the “Amended Equity Plan”). The Amended Equity Plan is an amendment and restatement of, and successor to, the Farmer Bros. Co. 2007 Omnibus Plan (the “Omnibus Plan”). The principal change to the Amended Equity Plan was to limit awards under the plan to performance-based stock options and to restricted stock under limited circumstances. Stock Options The share-based compensation expense recognized in the Company’s consolidated statements of operations is based on awards ultimately expected to vest. Compensation expense is recognized on a straight-line basis over the service period based on the estimated fair value of the stock options. The Company estimates the fair value of option awards using the Black-Scholes option valuation model, which requires management to make certain assumptions for estimating the fair value of stock options at the date of grant. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimates, in management’s opinion the existing models may not necessarily provide a reliable single measure of the fair value of the Company’s stock options. Although the fair value of stock options is determined using an option valuation model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. Non-qualified stock options with time-based vesting (“NQOs”) In fiscal 2015, the Company granted 25,703 shares issuable upon the exercise of NQOs with a weighted average exercise price of $23.91 per share to eligible employees under the Amended Equity Plan which vest ratably over a three-year period. Following are the weighted average assumptions used in the Black-Scholes valuation model for NQOs granted during the fiscal years ended June 30, 2015, 2014 and 2013:
|  | Year Ended June 30,
|  | 2015 |  | 2014 |  | 2013
Weighted average fair value of NQOs |  | $ | 10.38 |  |  | $ | 9.17 |  |  | $ | 5.69 |
Risk-free interest rate |  | 1.5 | % |  | 1.7 | % |  | 0.9 | %
Dividend yield |  | — | % |  | — | % |  | — | %
Average expected term |  | 5.1 years |  |  | 6 years |  |  | 6 years |
Expected stock price volatility |  | 47.9 | % |  | 50.4 | % |  | 49.5 | %
The Company’s assumption regarding expected stock price volatility is based on the historical volatility of the Company’s stock price. The risk-free interest rate is based on U.S. Treasury zero-coupon issues at the date of grant with a remaining term equal to the expected life of the stock options. The average expected term is based on the midpoint between the vesting date and the end of the contractual term of the award. Currently, management estimates an annual forfeiture rate of 4.8% based on actual forfeiture experience. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The following table summarizes NQO activity for the three most recent fiscal years:
Outstanding NQOs: |  | Number of NQOs |  | Weighted Average Exercise Price ($) |  | Weighted Average Grant Date Fair Value ($) |  | Weighted Average Remaining Life (Years) |  | Aggregate Intrinsic Value ($ in thousands)
Outstanding at June 30, 2012 |  | 667,235 |  |  | 12.84 |  | 4.78 |  | 4.8 |  | 143 |
Granted |  | 192,892 |  |  | 12.12 |  | 5.69 |  | 6.5 |  | 374 |
Exercised |  | (117,482 | ) |  | 10.24 |  | 5.23 |  | — |  | 336 |
Cancelled/Forfeited |  | (185,218 | ) |  | 13.83 |  | 5.92 |  | — |  | — |
Outstanding at June 30, 2013 |  | 557,427 |  |  | 12.81 |  | 5.44 |  | 5.1 |  | 1,620 |
Granted |  | 1,927 |  |  | 18.68 |  | 9.17 |  | 6.4 |  | — |
Exercised |  | (112,964 | ) |  | 13.10 |  | 5.81 |  | — |  | 895 |
Cancelled/Forfeited |  | (33,936 | ) |  | 16.63 |  | 6.13 |  | — |  | — |
Outstanding at June 30, 2014 |  | 412,454 |  |  | 12.44 |  | 5.30 |  | 4.4 |  | 3,782 |
Granted |  | 25,703 |  |  | 23.91 |  | 10.38 |  | 6.8 |  | —
Exercised |  | (95,723 | ) |  | 16.17 |  | 5.86 |  | — |  | 747 |
Cancelled/Forfeited |  | (13,134 | ) |  | 11.26 |  | 5.00 |  | — |  | —
Outstanding at June 30, 2015 |  | 329,300 |  |  | 12.30 |  | 5.54 |  | 3.9 |  | 3,700 |
Vested and exercisable, June 30, 2015 |  | 249,105 |  |  | 11.13 |  | 5.00 |  | 3.5 |  | 3,082 |
Vested and expected to vest, June 30, 2015 |  | 326,723 |  |  | 12.22 |  | 5.51 |  | 3.9 |  | 3,684 |
The aggregate intrinsic values outstanding at the end of each fiscal period in the table above represent the total pretax intrinsic value, based on the Company’s closing stock price of $23.50 at June 30, 2015, $21.61 at June 30, 2014 and $14.06 at June 28, 2013, representing the last trading day of the respective fiscal years, which would have been received by NQO holders had all award holders exercised their NQOs that were in-the-money as of those dates. The aggregate intrinsic value of stock option exercises in each fiscal period above represents the difference between the exercise price and the value of the Company’s common stock at the time of exercise. NQOs outstanding that are expected to vest are net of estimated forfeitures. Total fair value of NQOs vested during fiscal 2015, 2014 and 2013 was $0.5 million, $0.7 million and $1.0 million, respectively. The Company received $1.5 million in proceeds from exercises of vested NQOs in each of fiscal 2015 and 2014, respectively, and $1.2 million in fiscal 2013.
Nonvested NQOs: |  | Number of NQOs |  | Weighted Average Exercise Price ($) |  | Weighted Average Grant Date Fair Value ($) |  | Weighted Average Remaining Life (Years)
Outstanding at June 30, 2012 |  | 343,239 |  |  | 10.76 |  | 4.20 |  | 6.3
Granted |  | 192,892 |  |  | 12.12 |  | 5.69 |  | 6.5
Vested |  | (188,909 | ) |  | 11.56 |  | 5.33 |  | —
Forfeited |  | (31,561 | ) |  | 13.82 |  | 5.92 |  | —
Outstanding at June 30, 2013 |  | 315,661 |  |  | 10.80 |  | 5.12 |  | 6.1
Granted |  | 1,927 |  |  | 18.68 |  | 9.17 |  | 6.4
Vested |  | (133,957 | ) |  | 11.02 |  | 5.21 |  | —
Forfeited |  | (15,833 | ) |  | 11.48 |  | 5.49 |  | —
Outstanding at June 30, 2014 |  | 167,798 |  |  | 10.65 |  | 5.06 |  | 5.3
Granted |  | 25,703 |  |  | 23.91 |  | 10.38 |  | 6.8
Vested |  | (101,172 | ) |  | 9.87 |  | 4.72 |  | —
Forfeited |  | (12,134 | ) |  | 10.31 |  | 4.91 |  | —
Outstanding at June 30, 2015 |  | 80,195 |  |  | 15.94 |  | 7.21 |  | 5.2
As of June 30, 2015, 2014 and 2013, there was $0.4 million, $0.7 million and $1.3 million, respectively, of unrecognized compensation cost related to NQOs. Total compensation expense for NQOs was $0.4 million, $0.6 million and $0.9 million in fiscal 2015, 2014 and 2013, respectively. Non-qualified stock options with performance-based and time-based vesting (“PNQs”) In the fiscal year ended June 30, 2015, the Company granted 121,024 shares issuable upon the exercise of PNQs with an exercise price of $23.44 per share to eligible employees under the Amended Equity Plan. These PNQs vest over a three-year period with one-third of the total number of shares subject to each such PNQ becoming exercisable each year on the anniversary of the grant date, commencing on February 9, 2016, based on the Company’s achievement of modified net income targets for fiscal years within the performance period as approved by the Compensation Committee, subject to catch-up vesting of previously unvested shares in a subsequent year within the three year period in which a cumulative modified net income target as approved by the Compensation Committee is achieved, in each case, subject to the participant’s employment by the Company or service on the Board of Directors of the Company on the applicable vesting date and the acceleration provisions contained in the Amended Equity Plan and the applicable award agreement. In the fiscal year ended June 30, 2014, the Company granted a total of 112,442 shares issuable upon the exercise of PNQs with a weighted average exercise price of $21.27 per share to eligible employees under the Amended Equity Plan. These PNQs vest over a three-year period with one-third of the total number of shares subject to each such PNQ vesting on the first anniversary of the grant date based on the Company’s achievement of a modified net income target for the first fiscal year of the performance period as approved by the Compensation Committee, and the remaining two-thirds of the total number of shares subject to each PNQ vesting on the third anniversary of the grant date based on the Company’s achievement of a cumulative modified net income target for all three years during the performance period as approved by the Compensation Committee, in each case, subject to the participant’s employment by the Company or service on the Board of Directors of the Company on the applicable vesting date. No PNQs were granted prior to fiscal 2014. Following are the assumptions used in the Black-Scholes valuation model for PNQs granted during the fiscal years ended June 30, 2015 and 2014:
|  | Year Ended June 30,
|  | 2015 |  | 2014
Weighted average fair value of PNQs |  | $ | 10.16 |  |  | $ | 10.49 |
Risk-free interest rate |  | 1.5 | % |  | 1.8 | %
Dividend yield |  | — | % |  | — | %
Average expected term |  | 5 years |  |  | 6 years |
Expected stock price volatility |  | 47.9 | % |  | 50.5 | %
The following table summarizes PNQ activity in fiscal 2015 and 2014:
Outstanding PNQs: |  | Number of PNQs |  | Weighted Average Exercise Price ($) |  | Weighted Average Grant Date Fair Value ($) |  | Weighted Average Remaining Life (Years) |  | Aggregate Intrinsic Value ($ in thousands)
Outstanding at June 30, 2013 |  | — |  |  | — |  | — |  | — |  | — |
Granted |  | 112,442 |  |  | 21.27 |  | 10.49 |  | 6.5 |  | — |
Cancelled/Forfeited |  | — |  |  | — |  | — |  | — |  | — |
Outstanding at June 30, 2014 |  | 112,442 |  |  | 21.27 |  | 10.49 |  | 6.5 |  | 38 |
Granted |  | 121,024 |  |  | 23.44 |  | 10.16 |  | 6.6 |  | — |
Cancelled/Forfeited |  | (9,399 | ) |  | 21.33 |  | 10.52 |  | — |  | — |
Outstanding at June 30, 2015 |  | 224,067 |  |  | 22.44 |  | 10.31 |  | 6.0 |  | 237 |
Vested and exercisable, June 30, 2015 |  | 34,959 |  |  | 21.27 |  | 10.49 |  | 5.0 |  | 78 |
Vested and expected to vest, June 30, 2015 |  | 204,669 |  |  | 22.40 |  | 10.32 |  | 6.0 |  | 226 |
The aggregate intrinsic values outstanding at the end of each fiscal period in the table above represent the total pretax intrinsic values, based on the Company’s closing stock price of $23.50 at June 30, 2015 and $21.61 at June 30, 2014 representing the last trading day of the respective fiscal years, which would have been received by PNQ holders had all award holders exercised their PNQs that were in-the-money as of those dates. PNQs outstanding that are expected to vest are net of estimated forfeitures. Total fair value of PNQs vested during the fiscal year ended June 30, 2015 was $0.4 million. No PNQs vested during the fiscal year ended June 30, 2014, and no PNQs were exercised during the fiscal years ended June 30, 2015 and 2014. As of June 30, 2015, the Company met the performance target for the first year of the fiscal 2014 awards and expects that it will achieve the cumulative performance targets set forth in the PNQ agreements for the fiscal 2014 awards and the performance targets set forth in the PNQ agreements for the fiscal 2015 awards. In the fiscal years ended June 30, 2015 and 2014, the Company recognized $0.5 million and $0.3 million, respectively, in compensation expense for PNQs and as of June 30, 2015 and 2014, there was approximately $1.5 million and $0.9 million, respectively, of unrecognized compensation cost related to PNQs.
Nonvested PNQs: |  | Number of PNQs |  | Weighted Average Exercise Price ($) |  | Weighted Average Grant Date Fair Value ($) |  | Weighted Average Remaining Life (Years)
Outstanding at June 30, 2014 |  | 112,442 |  |  | 21.27 |  |  | 10.49 |  |  | 6.5 |
Granted |  | 121,024 |  |  | 23.44 |  |  | 10.16 |  |  | 6.6 |
Vested |  | (34,959 | ) |  | 21.27 |  |  | 10.49 |  |  | — |
Forfeited |  | (9,399 | ) |  | 21.33 |  |  | 10.52 |  |  | — |
Outstanding at June 30, 2015 |  | 189,108 |  |  | $ | 22.66 |  |  | $ | 10.28 |  |  | 6.2 |
Restricted Stock During fiscal 2015, 2014 and 2013 the Company granted a total of 13,256 shares, 9,200 shares and 51,177 shares of restricted stock under the Amended Equity Plan, respectively, with a weighted average grant date fair value of $23.64, $20.48 and $11.67 per share, respectively, to eligible employees and directors. Shares of restricted stock generally vest at the end of three years for eligible employees. Shares of restricted stock generally vest ratably over a period of three years for directors. During the fiscal year ended June 30, 2015, 53,402 shares of restricted stock vested, of which 4,297 shares were withheld to meet the employees’ minimum statutory tax withholding and retired. Compensation expense is recognized on a straight-line basis over the service period based on the estimated fair value of the restricted stock. Compensation expense recognized in general and administrative expenses was $0.3 million, $0.5 million, and $0.6 million, for the fiscal years ended June 30, 2015, 2014 and 2013, respectively. As of June 30, 2015, 2014 and 2013, there was approximately $0.5 million, $0.6 million and $1.0 million, respectively, of unrecognized compensation cost related to restricted stock. The following table summarizes restricted stock activity for the three most recent fiscal years:
Outstanding and Nonvested Restricted Stock Awards: |  | Shares Awarded |  | Weighted Average Grant Date Fair Value ($) |  | Weighted Average Remaining Life (Years) |  | Aggregate Intrinsic Value ($ in thousands)
Outstanding June 30, 2012 |  | 175,947 |  |  | 10.16 |  |  | 1.9 |  | 1,401 |
Granted |  | 51,177 |  |  | 11.67 |  |  | — |  | 597 |
Exercised/Released |  | (64,668 | ) |  | 11.27 |  |  | — |  | 832 |
Cancelled/Forfeited |  | (23,096 | ) |  | 12.21 |  |  | — |  | — |
Outstanding at June 30, 2013 |  | 139,360 |  |  | 9.87 |  |  | 1.9 |  | 1,959 |
Granted |  | 9,200 |  |  | 20.48 |  |  | — |  | 188 |
Exercised/Released |  | (38,212 | ) |  | 11.59 |  |  | — |  | 820 |
Cancelled/Forfeited |  | (14,136 | ) |  | 9.38 |  |  | — |  | — |
Outstanding at June 30, 2014 |  | 96,212 |  |  | 10.27 |  |  | 1.5 |  | 2,079 |
Granted |  | 13,256 |  |  | 23.64 |  |  | — |  | 313 |
Exercised/Released |  | (53,402 | ) |  | 8.43 |  |  | — |  | 1,377 |
Cancelled/Forfeited(1) |  | (8,984 | ) |  | 8.36 |  |  | — |  | — |
Outstanding at June 30, 2015 |  | 47,082 |  |  | 16.48 |  |  | 1.2 |  | 1,106 |
Expected to vest, June 30, 2015 |  | 44,936 |  |  | 16.32 |  |  | 1.2 |  | 1,056 |
(1) Includes 4,297 shares that were withheld to meet the employees' minimum statutory tax withholding and retired. The aggregate intrinsic values of shares outstanding at the end of each fiscal period in the table above represent the total pretax intrinsic values, based on the Company’s closing stock price of $23.50 at June 30, 2015, $21.61 at June 30, 2014 and $14.06 at June 28, 2013, representing the last trading day of the respective fiscal years. Restricted stock that is expected to vest is net of estimated forfeitures.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51659978&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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