10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 2, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

Commission file number 1-9929

INSTEEL INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

North Carolina (State or other jurisdiction of incorporation or organization) 56-0674867 (I.R.S. Employer Identification No.)

1373 Boggs Drive, Mount Airy, North Carolina 27030

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (336) 786‑2141

Securities registered subject to Section 12(b) of the Exchange Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock (No Par Value)	IIIN	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of April 3, 2021 (the last business day of the registrant’s most recently completed second quarter), the aggregate market value of the common stock held by non-affiliates of the registrant was $491,142,483 based upon the closing sale price as reported on the New York Stock Exchange. As of October 27, 2021, there were 19,407,980 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s proxy statement to be delivered to shareholders in connection with the 2022 Annual Meeting of Shareholders are incorporated by reference as set forth in Part III hereof.

TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements		3
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	11
Item 2.	Properties	11
Item 3.	Legal Proceedings	11
Item 4.	Mine Safety Disclosures	11
Information About Our Executive Officers		11
PART II
Item 5.	Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	12
Item 6.	Reserved	13
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 8.	Financial Statements and Supplementary Data	20
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
Item 9A.	Controls and Procedures	47
Item 9B.	Other Information	49
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	49
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	49
Item 11.	Executive Compensation	49
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	49
Item 13.	Certain Relationships and Related Transactions, and Director Independence	49
Item 14.	Principal Accounting Fees and Services	49
PART IV
Item 15.	Exhibits, Financial Statement Schedules	49
Item 16.	Form 10-K Summary	50
SIGNATURES		52

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Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, particularly in the “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this report. When used in this report, the words “believes,” “anticipates,” “expects,” “estimates,” “appears,” “plans,” “intends,” “may,” “should,” “could” “outlook,” “continues,” “remains” and similar expressions are intended to identify forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they are subject to a number of risks and uncertainties and involve certain assumptions. Actual results may differ materially from those expressed in forward-looking statements, and we can provide no assurances that such plans, intentions or expectations will be implemented or achieved. Many of these risks and uncertainties are discussed in the “Risk Factors” section of this report and are updated from time to time in our filings with the United States (“U.S.”) Securities and Exchange Commission (“SEC”).

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only to the respective dates on which such statements are made, and we do not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as may be required by law.

It is not possible to anticipate and list all risks and uncertainties that may affect our business, future operations or financial performance; however, they include, but are not limited to, the following:

● the impact of COVID-19 on the economy, demand for our products and our operations, including the measures taken by governmental authorities to address it, which may precipitate or exacerbate other risks and/or uncertainties;

● general economic and competitive conditions in the markets in which we operate;

● changes in the spending levels for nonresidential and residential construction and the impact on demand for our products;

● changes in the amount and duration of transportation funding provided by federal, state and local governments and the impact on spending for infrastructure construction and demand for our products;

● the cyclical nature of the steel and building material industries;

● credit market conditions and the relative availability of financing for us, our customers and the construction industry as a whole;

● fluctuations in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod, from domestic and foreign suppliers;

● competitive pricing pressures and our ability to raise selling prices in order to recover increases in raw material or operating costs;

● changes in U.S. or foreign trade policy affecting imports or exports of steel wire rod or our products;

● unanticipated changes in customer demand, order patterns and inventory levels;

● the impact of fluctuations in demand and capacity utilization levels on our unit manufacturing costs;

● our ability to further develop the market for engineered structural mesh (“ESM”) and expand our shipments of ESM;

● legal, environmental, economic or regulatory developments that significantly impact our business or operating costs;

● unanticipated plant outages, equipment failures or labor difficulties; and

● the risks and uncertainties discussed herein under the caption “Risk Factors.” 

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PART I

Item 1. Business

General

Insteel Industries, Inc. (“we,” “us,” “our,” “the Company” or “Insteel”) is the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. We manufacture and market prestressed concrete strand (“PC strand”) and welded wire reinforcement (“WWR”), including ESM, concrete pipe reinforcement (“CPR”) and standard welded wire reinforcement (“SWWR”). Our products are sold mainly to manufacturers of concrete products that are used primarily in nonresidential construction. For fiscal 2021, we estimate that approximately 85% of our sales were related to nonresidential construction and 15% were related to residential construction.

Insteel is the parent holding company for two wholly-owned subsidiaries, Insteel Wire Products Company (“IWP”), an operating subsidiary, and Intercontinental Metals Corporation, an inactive subsidiary. We were incorporated in 1958 in the State of North Carolina.

Our business strategy is focused on: (1) achieving leadership positions in our markets; (2) operating as the lowest cost producer in our industry; and (3) pursuing growth opportunities within our core businesses that further our penetration of the markets we currently serve or expand our footprint. Headquartered in Mount Airy, North Carolina, we operate ten manufacturing facilities that are all located in the U.S. in close proximity to our customers and raw material suppliers. Our growth strategy is focused on organic opportunities as well as strategic acquisitions in existing or related markets that leverage our infrastructure and core competencies in the manufacture and marketing of concrete reinforcing products.

On March 16, 2020, we, through our wholly-owned subsidiary, IWP, purchased substantially all of the assets of Strand-Tech Manufacturing, Inc. (“STM”) for an adjusted purchase price of $19.4 million, which reflects certain post-closing adjustments (the “STM Acquisition”). STM was a leading manufacturer of PC strand for concrete construction applications. We acquired, among other assets, STM’s accounts receivable, inventories, production equipment and facility located in Summerville, South Carolina and assumed certain of its accounts payable and accrued liabilities. Subsequent to the acquisition, we elected to consolidate our PC strand operations with the closure of the Summerville facility.

Products

Our operations are entirely focused on the manufacture and marketing of steel wire reinforcing products for concrete construction applications. Our concrete reinforcing products consist of two product lines: PC strand and WWR. Based on the criteria specified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, we have one reportable segment.

PC strand is a high strength, seven-wire strand that is used to impart compression forces into precast concrete elements and structures, which may be either pretensioned or posttensioned, providing reinforcement for bridges, parking decks, buildings and other concrete structures. Its high tensile strength allows for the casting of longer spans and thinner sections. Pretensioned or “prestressed” concrete elements or structures are primarily used in nonresidential construction while posttensioned concrete elements or structures are used in both nonresidential and residential construction.

WWR is produced as either a standard or a specially engineered reinforcing product for use in nonresidential and residential construction. We produce a full range of WWR products, including ESM, CPR and SWWR. ESM is an engineered made-to-order product that is used as the primary reinforcement for concrete elements or structures, frequently serving as a lower cost reinforcing solution than hot-rolled rebar. CPR is an engineered made-to-order product that is used as the primary reinforcement in concrete pipe, box culverts and precast manholes for drainage and sewage systems, water treatment facilities and other related applications. SWWR is a secondary reinforcing product that is produced in standard styles for crack control applications in residential and light nonresidential construction, including driveways, sidewalks and various slab-on-grade applications.

See Note 15 for the disaggregation of our net sales by product line and geography.

Marketing and Distribution

We market our products through sales representatives who are our employees. Our outside sales representatives are trained on the technical applications for our products and sell multiple product lines in their respective territories. We sell our products nationwide across the U.S. and, to a much lesser extent, into Canada, Mexico, and Central and South America. Our products are shipped primarily by truck, using common or contract carriers. The delivery method selected is determined based on backhaul opportunities, comparative costs and customer service requirements.

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Customers

We sell our products to a broad range of customers that includes manufacturers of concrete products, and to a lesser extent, distributors, rebar fabricators and contractors. In fiscal 2021, we estimate that approximately 70% of our net sales were to manufacturers of concrete products and 30% were to distributors, rebar fabricators and contractors. In many cases we are unable to identify the specific end use for our products as most of our customers sell products that are used for both nonresidential and residential construction, and the same products can be used for different end uses. We did not have any customers that represented 10% or more of our net sales in fiscal years 2021, 2020 and 2019. The loss of a single customer or a few customers would not have a material adverse impact on our business.

Backlog

Backlog for our business is minimal due to the relatively short lead times that are required by our customers. We believe that the majority of our firm orders as of the end of fiscal 2021 will be shipped during the first quarter of fiscal 2022.

Seasonality and Cyclicality

Demand in our markets is both seasonal and cyclical, driven by the level of construction activity, but can also be impacted by fluctuations in the inventory positions of our customers. Shipments are seasonal, typically reaching their highest level when weather conditions are the most conducive to construction activity. As a result, assuming normal seasonal weather patterns, shipments and profitability are usually higher in the third and fourth quarters of the fiscal year and lower in the first and second quarters. Construction activity and demand for our products is cyclical based on overall economic conditions, although there can be significant differences between the relative strength of nonresidential and residential construction for extended periods.

Raw Materials

The primary raw material used to manufacture our products is hot-rolled carbon steel wire rod, which we purchase from both domestic and foreign suppliers and can generally be characterized as a commodity product. We purchase several different grades and sizes of wire rod with varying specifications based on the diameter, chemistry, mechanical properties and metallurgical characteristics that are required for our products. High carbon grades of wire rod are required for the production of PC strand while low carbon grades are used to manufacture WWR.

Wire rod prices tend to fluctuate based on changes in scrap and other metallic prices for steel producers together with domestic and global market conditions. In most economic environments, domestic demand for wire rod exceeds domestic production capacity and imports of wire rod are necessary to satisfy the supply requirements of the U.S. market. U.S. government trade policies and trade actions by domestic wire rod producers can significantly impact the pricing and availability of imported wire rod, which during fiscal years 2021 and 2020 represented approximately 16% and 7%, respectively, of our total wire rod purchases. We believe that our substantial wire rod requirements, desirable mix of sizes and grades, and strong financial condition represent a competitive advantage by making us a relatively more attractive customer to our suppliers.

Our ability to source wire rod from overseas suppliers is limited by domestic content requirements generally referred to as “Buy America” or “Buy American” laws that exist at both the federal and state levels. These laws generally prescribe a domestic “melt and cast” standard for purposes of compliance. Customers purchasing PC strand and WWR for certain applications require the Company to certify compliance with Buy America laws.

Selling prices for our products tend to be correlated with changes in wire rod prices. However, the timing and magnitude of the relative price changes varies depending upon market conditions and competitive factors. Ultimately the relative supply - demand balance in our markets and competitive dynamics determine whether our margins expand or contract during periods of rising or falling wire rod prices.

Competition

We are the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. Our markets are highly competitive based on price, quality and service. Some of our competitors, such as Nucor Corporation, Liberty Steel USA (“Liberty”) and Oklahoma Steel and Wire, are vertically integrated companies that produce both wire rod and concrete reinforcing products and offer multiple product lines over broad geographic areas. Other competitors are smaller independent companies that offer limited competition in certain markets. Our primary competitors for WWR products are Engineered Wire Products, Inc. (a subsidiary of Liberty), Wire Mesh Corporation, Concrete Reinforcements, Inc., National Wire Products, Davis Wire Corporation and Oklahoma Steel & Wire Co., Inc. Our primary competitors for PC strand are Sumiden Wire Products Corporation and Wire Mesh Corporation. Import competition is also a significant factor in certain segments of the PC strand and SWWR markets that are not subject to “Buy America” requirements.

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In response to illegally traded import competition from offshore PC strand suppliers, we have pursued trade cases, when necessary, as a means of ensuring that foreign producers were complying with the applicable trade laws and regulations. In 2003, we joined together with a coalition of domestic PC strand producers and filed petitions with the U.S. Department of Commerce (the “DOC”) alleging that imports of PC strand from Brazil, India, Korea, Mexico and Thailand were being “dumped” or sold in the U.S. at a price that was lower than fair value and had injured the domestic PC strand industry. The DOC ruled in our favor and imposed anti-dumping duties ranging from 12% up to 119%, which had the effect of limiting the participation of these countries in the domestic market. In 2010, we joined together with a coalition of domestic PC strand producers and filed petitions with the DOC alleging that imports of PC strand from China were being “dumped” or sold in the U.S. at a price that was lower than fair value and that subsidies were being provided to Chinese PC strand producers by the Chinese government, both of which had injured the domestic PC strand industry. The DOC ruled in our favor and imposed final countervailing duty margins ranging from 9% to 46% and anti-dumping margins ranging from 43% to 194%, which had the effect of limiting the continued participation of Chinese producers in the domestic market. In 2020, we joined two other domestic PC strand producers and filed anti-dumping petitions against Argentina, Columbia, Egypt, Indonesia, Italy, Malaysia, Netherlands, Saudi Arabia, South Africa, Spain, Taiwan, Tunisia, Turkey, Ukraine and the United Arab Emirates. In January 2021, with respect to 8 countries, and in April 2021, with respect to 7 countries, the DOC ruled in our favor and imposed anti-dumping duties ranging from 4% to 194%, which had the effect of limiting the participation of these countries in the domestic market. Additionally, in 2020, we and four other domestic producers of SWWR filed anti-dumping petitions against Mexico. In July 2021, the DOC ruled in our favor and imposed final countervailing duty margins ranging from 23% to 110%, which had the effect of limiting the continued participation of Mexican producers in the domestic market.

Quality and service expectations of customers have risen substantially over the years and are key factors that impact their selection of suppliers. Technology has become a critical competitive factor from the standpoint of manufacturing costs, quality and customer service capabilities. In view of our strong market positions, broad product offering and national footprint, technologically advanced manufacturing facilities, low-cost production capabilities, sophisticated information systems and financial strength and flexibility, we believe that we are well-positioned to compete favorably with other producers of our concrete reinforcing products.

Human Capital

We value all our employees and their important role in the long-term success of the company. Our culture is rooted in three core principles: safety, pay for performance and equal opportunity. As of October 2, 2021, we had 913 employees, none of which were represented by labor unions. In the event of production disruptions, we believe that our contingency plans would enable us to continue serving our customers, although there can be no assurances that a work slowdown or stoppage would not adversely impact our operating costs and financial results.

Safe Operations

Our employees are extensively trained in a formal process of risk reduction and hazard elimination and empowered with the authority to stop equipment or tasks until work can be safely accomplished. “Safe Operations with Zero Harm,” our internal safety philosophy, is a key part of our ongoing employee training and operations. Zero Harm is managing risk, so no injuries, illness, or negative impact is experienced by employees, community, customers, property, the environment and shareholders. We monitor our safety performance through a key range of leading and lagging measures of safety.

Leading Indicator Measures:	Lagging Indicator Measures:
●         Hazard management process training ●         Leadership engagement ●         Employee involvement	●         Rolling 12-month Incident Recordable Rate ●         Lost Time Rate ●         Severity Rate – Days Away, Restricted, and Transferred (DART)

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Equitable Compensation

Our production and skilled trades team members earn pay increases through our “Pay for Skills” program and share in productivity pay through our “Team Share” incentive program. Our salaried team members also have a compensation structure that rewards individual performance in addition to company performance. We believe a compensation structure, which rewards both individual initiative and team accomplishments, leads to higher levels of performance.

Equal Opportunity

Our business depends on talented individuals who bring diverse skills, experiences, and backgrounds. We believe in a collaborative workplace that is based on the fundamentals of dignity, respect, equality and opportunity for all and encourage transparency and access to leadership through our Open-Door Policy, Code of Business Conduct (including Whistleblower Hotline), Equal Opportunity Policy, Harassment Policy, and Mission and Values.

Our performance and succession development process includes all employees. We have many team members in key leadership roles who started in entry-level roles and have grown in their careers by partnering with us in their development plans. In addition, we are involved in many outreach programs in our communities to provide opportunities to diverse talent sources that may otherwise be overlooked or face barriers to equal opportunity.

Product Warranties

Our products are used in applications that are subject to inherent risks, including performance deficiencies, personal injury, property damage, environmental contamination or loss of production. We warrant our products to meet certain specifications. Although actual or claimed deficiencies from these specifications may give rise to claims, we do not maintain a reserve for warranties as the historical claims have been immaterial. We maintain product liability insurance coverage to minimize our exposure to such risks.

Environmental Matters

We believe that we are in compliance in all material respects with applicable environmental laws and regulations. We have experienced no material difficulties in complying with legislative or regulatory standards and believe that these standards have not materially impacted our financial position or results of operations. Although our future compliance with additional environmental requirements could necessitate capital outlays, we do not believe these expenditures would ultimately have a material adverse effect on our financial position or results of operations. We do not expect to incur material capital expenditures for environmental control facilities during fiscal 2022.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports, are available at no cost on our website at https://investors.insteel.com and the SEC’s website at www.sec.gov as soon as reasonably practicable after we file these reports with the SEC. The information available on our website and the SEC’s website is not incorporated into this report or any of our filings with the SEC.

Item 1A. Risk Factors

An investment in our common stock involves risks and uncertainties. You should carefully consider the following risk factors, in addition to the other information contained in this annual report on Form 10-K, before deciding whether an investment in our common stock is suitable for you. The risk factors described below are not the only ones we face. There may be other risks and uncertainties that are currently unknown to us or that we currently consider to be immaterial that could adversely affect our business, results of operations, financial condition and cash flows.

Industry Specific Risks

Our business is cyclical and can be negatively impacted by prolonged economic downturns or tightening in the financial markets that reduce the level of construction activity and demand for our products.

Demand for our products is cyclical in nature and sensitive to changes in the economy and in the financial markets. Our products are sold primarily to manufacturers of concrete products that are used for a broad range of nonresidential and residential construction applications. Demand for our products is driven by the level of construction activity, which tends to be correlated with conditions in the overall economy as well as other factors beyond our control. Tightening in the financial markets could adversely impact demand for our products by reducing the availability of financing to our customers and the construction industry as a whole and increasing the risk of payment defaults on our accounts receivable. Future prolonged periods of economic weakness or reduced availability of financing could have a material adverse impact on our business, results of operations, financial condition and cash flows.

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Our business can be negatively impacted by reductions in the amount and duration of government funding for infrastructure projects that reduce the level of construction activity and demand for our products.

Certain of our products are used in the construction of highways, bridges and other infrastructure projects that are funded by federal, state and local governments. Reductions in the amount of funding for such projects or the period for which it is provided could have a material adverse impact on our business, results of operations, financial condition and cash flows.

Foreign competition could adversely impact our financial results.

Certain of our PC strand and SWWR markets are subject to foreign import competition on an ongoing basis. If we are unable to purchase raw materials and achieve manufacturing costs that are competitive with those of foreign producers, or if the margin and return requirements of foreign producers are substantially lower, our market share and profit margins could be negatively impacted. In response to illegally traded import competition from offshore PC strand and SWWR suppliers, we have pursued trade cases, when necessary, as a means of ensuring that foreign producers were complying with the applicable trade laws and regulations. Such actions may be costly and may not be successful. Trade law enforcement is critical to our ability to maintain our competitive position against foreign PC strand and SWWR producers that engage in unlawful trade practices.

Our financial results can be negatively impacted by the volatility in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod.

The primary raw material used to manufacture our products is hot-rolled carbon steel wire rod, which we purchase from both domestic and foreign suppliers. We do not use derivative commodity instruments to hedge our exposure to changes in the price of wire rod as such instruments are currently unavailable in the financial markets. Prices for wire rod have become increasingly volatile in recent years driven by the higher degree of variability in raw material costs for rod producers, changes in trade policy and the tightening of domestic supply. In response, wire rod producers have resorted to increasing the frequency of price adjustments, typically on a monthly basis as well as unilaterally changing the terms of prior commitments.

Although changes in our wire rod costs and selling prices tend to be correlated, we may be unable to fully recover increased rod costs during weaker market environments, which would reduce our earnings and cash flows. Additionally, when raw material costs decline, our financial results would be negatively impacted if the selling prices for our products decrease to an even greater extent and if we are consuming higher cost material from inventory.

Our financial results can also be significantly impacted if raw material supplies are inadequate to satisfy our purchasing requirements. For example, U.S. government trade policies and trade actions by domestic wire rod producers against other countries can significantly impact the availability and cost of imported wire rod. The imposition of tariffs, quotas or anti-dumping or countervailing duty margins by the U.S. government against exporting countries can have the effect of reducing or eliminating their competitiveness and participation in the domestic market. If we were unable to obtain adequate and timely delivery of our raw material requirements, we may be unable to manufacture sufficient quantities of our products or operate our manufacturing facilities in an efficient manner, which could result in lost sales and higher operating costs. Because tight market conditions typically affect the entire industry, during past periods of short raw material supply, margins and profitability have been favorably impacted due to curtailed availability of PC strand and WWR that supported higher average selling prices. There is no assurance that future short supply conditions in raw material markets would result in similar outcomes, however.

Demand for our products is highly variable and difficult to forecast due to our minimal backlog and unanticipated changes that can occur in customer order patterns or inventory levels.

Demand for our products is highly variable. The short lead times for customer orders and minimal backlog that characterize our business make it difficult to forecast the future level of demand for our products. In some cases, unanticipated softening in demand can be exacerbated by inventory rebalancing measures pursued by our customers, which may cause significant fluctuations in our sales, profitability and cash flows.

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Operational Risks

Our manufacturing facilities are subject to unexpected equipment failures, operational interruptions and casualty losses.

Our manufacturing facilities are subject to risks that may limit our ability to manufacture and sell our products, including unexpected equipment failures, operational interruptions and catastrophic losses due to other unanticipated events such as fires, explosions, accidents, adverse weather conditions and transportation interruptions. Any such equipment failures or events can subject us to plant shutdowns and periods of reduced production or unexpected downtime. Furthermore, the resolution of certain operational interruptions may require significant capital expenditures. Although our insurance coverage could offset the losses or expenditures relating to some of these events, our results of operations and cash flows would be negatively impacted to the extent that such claims were not covered or only partially covered by our insurance.

Our financial results could be adversely impacted by the escalation of our operating costs.

Consistent with the experience of other employers, our labor, medical and workers’ compensation costs have increased substantially in recent years and are expected to continue to rise. If this trend continues, the cost of labor and to provide healthcare and other benefits to our employees could increase, adversely impacting profitability. As the labor market recovers from the effects of the COVID-19 pandemic, competition for employees has escalated which has increased costs associated with attracting and retaining employees. We cannot be certain that we will be able to maintain an adequately skilled labor force necessary to operate efficiently or that our labor costs will not increase as a result of a shortage in the availability of skilled employees. Changes to healthcare regulations involving the Patient Protection and Affordable Care Act may also increase the cost of providing such benefits to our employees. We cannot predict the ultimate content, timing, or effect of any healthcare reform legislation or the impact of potential legislation or related proposals and policies on our results. Any significant increases in the costs attributable to our self-insured health and workers’ compensation plans could adversely impact our business, results of operations, financial condition and cash flows.

In addition, increasing prices for freight, natural gas, electricity, fuel and consumables would adversely affect our manufacturing and distribution costs. For most of our business, we incur the transportation costs associated with the delivery of products to our customers. Although we have previously implemented numerous measures to offset the impact of increases in these costs, there can be no assurance that such actions will be effective. If we are unable to pass these additional costs through by raising our selling prices, our financial results could be adversely impacted.

Our business and operations are subject to risks related to climate change.

The long-term effects of global climate change could present both physical risks and transition risks (such as regulatory or technology changes), which are expected to be widespread and unpredictable. These changes could over time affect, for example, the availability and cost of raw materials, commodities and energy (including utilities), which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require. Additionally, we have facilities located in areas that may be impacted by the physical risks of climate change, and we face the risk of losses incurred as a result of physical damage to our facilities and inventory as well business interruption caused by such events. Furthermore, periods of extended inclement weather or associated flooding may inhibit construction activity utilizing our products and delay shipments of our products to customers. We also use natural gas, diesel fuel, gasoline and electricity in our operations, all of which could face increased regulation as a result of climate change or other environmental concerns. Additionally, we may face increased costs to respond to future water laws and regulations, and operations in areas with limited water availability may be impacted if droughts become more frequent or severe. Any such events could have a material adverse effect on our costs or results of operations.

Financing Risks

Our operations are subject to seasonal fluctuations that may impact our cash flows.

Our shipments are typically lower in the first and second fiscal quarters due to the unfavorable impact of winter weather on construction activity during these periods and customer plant shutdowns associated with holidays. As a result, our cash flows may fluctuate from quarter to quarter due to these seasonal factors.

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Our capital resources may not be adequate to provide for our capital investment and maintenance expenditures if we were to experience a substantial downturn in our financial performance.

Our operations are capital intensive and require substantial recurring expenditures for the routine maintenance of our equipment and facilities. Although we expect to finance our business requirements through internally generated funds or from borrowings under our $100.0 million revolving credit facility, we cannot provide any assurances these resources will be sufficient to support our business. A material adverse change in our operations or financial condition could limit our ability to borrow funds under our credit facility, which could further adversely impact our liquidity and financial condition. Any significant future acquisitions could require additional financing from external sources that may not be available on favorable terms, which could adversely impact our growth, operations, financial condition and results of operations.

Legal and Regulatory Risks

Changes in environmental compliance and remediation requirements could result in substantial increases in our capital investments and operating costs.

Our business is subject to numerous federal, state and local laws and regulations pertaining to the protection of the environment that could require substantial increases in capital investments and operating costs. These laws and regulations, which are constantly evolving, are becoming increasingly stringent, and the ultimate impact of compliance is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated or are undergoing revision.

General Risks

Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics, epidemics or other public health emergencies, such as the ongoing COVID-19 pandemic.

Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics, epidemics or other public health emergencies, such as the ongoing COVID-19 pandemic. Governments around the world have implemented stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, vaccination mandates and other measures. These measures, along with further voluntary measures by businesses and individuals, may impact our working conditions, productivity and operations, as well as those of our customers and suppliers. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

We are considered a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Although we have continued to operate our facilities to date consistent with federal guidelines and state and local orders, the ongoing COVID-19 pandemic and any preventive or protective actions taken by governmental authorities may have a material adverse effect on our operations, supply chain, customers and transportation networks, including business shutdowns or disruptions. The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of the outbreak, the emergence of additional virus variants, vaccination rates and the effectiveness of actions taken globally to contain or mitigate its effects. Even after the COVID-19 pandemic has subsided, we may experience material adverse impacts to our business due to any resulting economic recession. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and the potential effect on our financial position, results of operations, and cash flows. The situation remains dynamic and the ultimate duration and impact on our business are not known at this time.

Our stock price can be volatile, often in connection with matters beyond our control.

Equity markets in the U.S. have been increasingly volatile in recent years. During fiscal 2021, our common stock traded as high as $44.00 and as low as $18.83. There are numerous factors that could cause the price of our common stock to fluctuate significantly, including: variations in our financial results; changes in our business outlook and expectations for the construction industry; changes in market valuations of companies in our industry; and announcements by us, our competitors or industry participants that may be perceived to impact our financial results.

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We are increasingly dependent on information technology systems that are susceptible to certain risks, including cybersecurity breaches and data leaks, which could adversely impact our business.

Our increasing reliance on technology systems and infrastructure heightens our potential vulnerability to system failure and malfunction, breakdowns due to natural disasters, human error, unauthorized access, power loss and other unforeseen events. Data privacy breaches by employees and others with or without authorized access to our systems poses risks that sensitive data may be permanently lost or leaked to the public or other unauthorized persons. With the growing use and rapid evolution of technology, not limited to cloud-based computing and mobile devices, there are additional risks of unintentional data leaks. There is also the risk of the theft of confidential information, intentional vandalism, industrial espionage and a variety of cyber-attacks that could compromise our internal technology system and infrastructure or result in data leaks in-house or at our third-party providers and business partners. Failures of technology or related systems, or an improper release of confidential information, could adversely impact our business or subject us to unexpected liabilities.

Our financial results could be adversely impacted by the impairment of goodwill.

Our balance sheet includes intangible assets, including goodwill and other separately identifiable assets related to prior acquisitions, and we may acquire additional intangible assets in connection with future acquisitions. We are required to review goodwill for impairment on an annual basis, or more frequently if certain indicators of permanent impairment arise such as, among other things, a decline in our stock price and market capitalization or a reduction in our projected operating results and cash flows. If our review indicates that goodwill has been impaired, the impaired portion would have to be written-off during that period which could adversely impact our business and financial results.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our corporate headquarters and IWP’s sales and administrative offices are located in Mount Airy, North Carolina. As of October 2, 2021, we operated ten manufacturing facilities located in Dayton, Texas; Gallatin, Tennessee; Hazleton, Pennsylvania; Hickman, Kentucky; Houston, Texas; Jacksonville, Florida; Kingman, Arizona; Mount Airy, North Carolina; Sanderson, Florida; and St. Joseph, Missouri. Additionally, we are currently pursuing the sale of an idle facility located in Summerville, South Carolina.

We own all of our real estate. We believe that our properties are in good operating condition and that our machinery and equipment have been well maintained. We also believe that our manufacturing facilities are suitable for their intended purposes and have capacities adequate to satisfy the current and projected demand for our products.

Item 3. Legal Proceedings.

We are involved in lawsuits, claims, investigations and proceedings, including commercial, environmental and employment matters, which arise in the ordinary course of business. We do not anticipate that the ultimate cost to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures.

Not applicable.

Information About Our Executive Officers

Our executive officers are as follows:

Name	Age	Position
H. O. Woltz III	65	President, Chief Executive Officer and Chairman of the Board
Mark A. Carano	52	Senior Vice President, Chief Financial Officer and Treasurer
James F. Petelle	71	Vice President Administration, Secretary and Chief Legal Officer
Richard T. Wagner	62	Senior Vice President and Chief Opertating Officer
James R. York	63	Senior Vice President, Sourcing and Logistics

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H. O. Woltz III, 65, has served as Chief Executive Officer since 1991, as President since 1989 and has been employed by us and our subsidiaries in various capacities since 1978. He was named President and Chief Operating Officer in 1989. He served as our Vice President from 1988 to 1989 and as President of Rappahannock Wire Company, formerly a subsidiary of our Company, from 1981 to 1989. Mr. Woltz has been a Director since 1986 and also serves as President of Insteel Wire Products Company. Mr. Woltz served as President of Florida Wire and Cable, Inc., formerly a subsidiary of our Company, until its merger with Insteel Wire Products Company in 2002. Mr. Woltz has served as Chairman of the Board since 2009.

Mark A. Carano, 52, has served as Senior Vice President, Chief Financial Officer and Treasurer since October 2020 and as Vice President, Chief Financial Officer and Treasurer from May 2020 to October 2020. Prior to Insteel, Mr. Carano had been employed by Big River Steel, a privately-held manufacturer of steel products, having served as Chief Financial Officer since April 2019. Prior to Big River Steel, he served in various senior management finance roles with Babcock & Wilcox Enterprises from June 2013 to October 2018. Mr. Carano also has 14 years of combined investment banking experience with Bank of America, Merrill Lynch, Deutsche Bank and First Union Securities.

James F. Petelle, 71, has served as Vice President, Administration, Secretary and Chief Legal Officer since October 2020. He joined us in October 2006 and was elected Vice President and Assistant Secretary in November 2006 and Vice President, Administration and Secretary in January 2007. He was previously employed by Andrew Corporation, a publicly-held manufacturer of telecommunications infrastructure equipment, having served as Secretary from 1990 to May 2006, and Vice President - Law from 2000 to October 2006.

Richard T. Wagner, 62, joined us in 1992 and has served as Vice President and General Manager of the Concrete Reinforcing Products Business Unit of our subsidiary, Insteel Wire Products Company, since 1998. He was appointed Vice President of the parent company, Insteel Industries, Inc. in February 2007 and Senior Vice President and Chief Operating Officer in October 2020. From 1977 until 1992, Mr. Wagner served in various positions with Florida Wire and Cable, Inc., a manufacturer of PC strand and galvanized strand products, which was later acquired by us in 2000.

James R. York, 63, has served as Senior Vice President, Sourcing and Logistics since October 2020, and as Vice President, Sourcing and Logistics since joining us in 2018.  Prior to Insteel, he served in various senior management roles with Leggett & Platt, a publicly-held manufacturer of diversified engineered products, from 2002 to 2018, including Group President-Rod and Wire Products, Unit President-Wire Products and Unit President-Specialty Products.  Mr. York served in a range of leadership positions at Bekeart Corporation, a U.S. subsidiary of N.V. Bekeart A.S. of Belgium, from 1983 to 2002.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

Since March 17, 2021 our common stock has traded on the New York Stock Exchange (“NYSE”) under the symbol “IIIN”. Before March 17, 2021, our common stock traded on the Nasdaq Global Select Market. As of October 27, 2021, there were 508 shareholders of record.

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Stock Performance Graph

The graph below compares the cumulative total shareholder return on our common stock with the cumulative total return of the Russell 2000 Index and the S&P Building Products Index for the five years ended October 2, 2021. The graph and table assume that $100 was invested on October 1, 2016 in our common stock and in each of the two indices and the reinvestment of all dividends. Cumulative total shareholder returns for our common stock, the Russell 2000 Index and the S&P Building Products Index are based on our fiscal year.

	Fiscal Year Ended
	October 1, 2016		September 30, 2017		September 29, 2018		September 28, 2019		October 3, 2020		October 2, 2021
Insteel Industries, Inc.	$	100.00	$	74.73	$	106.77	$	61.97	$	57.11	$	125.63
Russell 2000		100.00		120.74		139.14		126.77		127.27		187.94
S&P Building Products		100.00		105.06		95.39		112.47		130.27		188.71

Issuer Purchases of Equity Securities

Information regarding our share repurchase authorization is discussed in Note 19 to our consolidated financial statements and incorporated herein by reference.

Item 6. Reserved.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The matters discussed in this section include forward-looking statements that are subject to numerous risks. You should carefully read the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Form 10-K.

Overview

Our operations are entirely focused on the manufacture and marketing of concrete reinforcing products for the concrete construction industry. Our business strategy is focused on: (1) achieving leadership positions in our markets; (2) operating as the lowest cost producer in our industry; and (3) pursuing growth opportunities within our core businesses that further our penetration of the markets we currently serve or expand our footprint.

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On March 16, 2020, we, through our wholly-owned subsidiary, IWP, purchased substantially all of the assets of STM for an adjusted purchase price of $19.4 million, which reflects certain post-closing adjustments. STM was a leading manufacturer of PC strand for concrete construction applications. We acquired, among other assets, STM’s accounts receivable, inventories, production equipment and facility located in Summerville, South Carolina and assumed certain of its accounts payable and accrued liabilities. Subsequent to the acquisition, we elected to consolidate our PC strand operations with the closure of the Summerville facility.

Impact of COVID-19

Despite the significant disruption in the U.S. and global economies, including supply chain challenges and labor market obstacles, COVID-19 has had a limited impact on our operations to date. We have implemented procedures to support the health and safety of our employees and we are following all U.S. Centers for Disease Control and Prevention guidelines. While the U.S. economy appears to be entering a recovery and operating conditions are improving, we continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and the potential effect on our financial position, results of operations, and cash flows. There are many uncertainties regarding the future and ultimate impact that COVID-19 will have on all aspects of our business. We will continue to assess and make adjustments as necessary.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. Our discussion and analysis of our financial condition and results of operations are based on these consolidated financial statements. The preparation of our consolidated financial statements requires the application of these accounting principles in addition to certain estimates and judgments based on current available information, actuarial estimates, historical results and other assumptions believed to be reasonable. These estimates, assumptions and judgments are affected by our application of accounting policies, which are discussed in Note 2, "Summary of Significant Accounting Policies", and elsewhere in the accompanying consolidated financial statements. Estimates are used for, but not limited to, determining the net carrying value of trade accounts receivable, inventories, recording self-insurance liabilities and other accrued liabilities. Estimates are also used in establishing opening balances in relation to purchase accounting. Actual results could differ from these estimates.

Accounting estimates are considered critical if both of the following conditions are met: (1) the nature of the estimates or assumptions is material because of the levels of subjectivity and judgment needed to account for matters that are highly uncertain and susceptible to change and (2) the effect of the estimates and assumptions is material to the financial statements.

We have reviewed our accounting estimates, and none were deemed to be considered critical for the accounting periods presented.

Recent Accounting Pronouncements.

The nature and impact of recent accounting pronouncements is discussed in Note 3 to our consolidated financial statements and incorporated herein by reference.

Results of Operations

The following discussion and analysis of our financial condition and results of operations is for the year ended October 2, 2021 compared with the year ended October 3, 2020. Discussions of our financial condition and results of operations for the year ended October 3, 2020 compared to September 28, 2019 that have been omitted under this item can be found in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended October 3, 2020, which was filed with the SEC on October 29, 2020.

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The table below presents a summary of our results of operations for fiscal 2021 and fiscal 2020.

Statements of Operations – Selected Data

(Dollars in thousands)

	Year Ended
	October 2,						October 3,
	2021			Change			2020
Net sales	$	590,601			25.0	%	$	472,618
Gross profit		121,548			117.9	%		55,787
Percentage of net sales		20.6	%					11.8	%
Selling, general and administrative expense	$	32,388			3.3	%	$	31,348
Percentage of net sales		5.5	%					6.6	%
Restructuring charges, net	$	2,868			69.2	%	$	1,695
Acquisition costs		-			(100.0	%)		195
Other expense (income), net		114		N/M				(1,254	)
Interest expense		96			(9.4	%)		106
Interest income		(21	)		(95.6	%)		(473	)
Effective income tax rate		22.6	%					21.4	%
Net earnings	$	66,610			250.4	%	$	19,009

"N/M"= Not meaningful

2021 Compared with 2020

Net Sales

Net sales increased 25.0% to $590.6 million in 2021 from $472.6 million in 2020, reflecting a 25.7% increase in selling prices partially offset by a 0.6% decrease in shipments. The increase in average selling prices was driven by price increases implemented in the current year primarily to recover the escalation in raw material costs together with strong demand for our products. Shipments for the prior year benefited from an extra week based on our fiscal calendar. On a pro forma basis adjusting the prior year to reflect the same 52-week period as 2021, the year-over-year shipment increase was 1.6%. The pro forma increase in shipments was primarily due to improved market conditions, the additional business provided by the STM Acquisition and strengthening demand for our products relative to the prior year, which offset the impact on shipments resulting from sustained tight supply conditions for raw materials. Shipments for both years were not materially impacted by the COVID-19 pandemic.

Gross Profit

Gross profit increased 117.9% to $121.5 million, or 20.6% of net sales, in 2021 from $55.8 million, or 11.8% of net sales, in 2020. The year-over-year increase was primarily due to higher spreads between average selling prices and raw material costs ($73.2 million) partially offset by higher manufacturing costs ($7.0 million) and a decrease in shipments ($436,000). The increase in spreads was driven by higher average selling prices ($122.2 million) partially offset by higher raw material costs ($46.7 million) and freight expense ($2.3 million).

Selling, General and Administrative Expense

Selling, general and administrative expense (“SG&A expense”) increased 3.3% to $32.4 million, or 5.5% of net sales, in 2021 from $31.3 million, or 6.6% of net sales, in 2020 primarily due to higher compensation ($3.5 million) and legal expense ($392,000) offset by the relative year-over-year changes in the cash surrender value of life insurance policies ($1.3 million) and lower earnout expense ($1.4 million). The increase in compensation expense was largely driven by higher incentive plan expense due to our improved financial results in the current year. The increase in legal expense was primarily related to costs associated with trade matters. The decrease in earnout expense was due to the revaluation of a contingent earnout liability in the prior year.

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Restructuring Charges, Net

Net restructuring charges of $2.9 million were incurred in 2021 compared with $1.7 million in the prior year. The net restructuring charges were related to the closure of the Summerville, South Carolina facility, which had been acquired through the STM Acquisition, and consolidation of our PC strand operations. Net restructuring charges in 2021 included asset impairment charges ($1.4 million), facility closure costs ($1.0 million), equipment relocation costs ($423,000) and employee separation costs ($13,000). The net restructuring charges incurred in the prior year were for facility closure costs ($806,000), equipment relocation costs ($482,000), impairment charges related to the decommissioning of equipment ($343,000) and employee separation costs ($182,000). These charges were partially offset by a $118,000 gain from the sale of equipment associated with the Summerville facility.

Acquisition Costs

Acquisition costs of $195,000 were incurred in 2020 for legal, accounting and other professional fees related to the STM Acquisition. There were no acquisition costs incurred in 2021.

Other Expense (Income), Net

Other expense was $114,000 for 2021 compared with other income of $1.3 million in 2020. Other income in the prior year was primarily related to a gain from the disposition of assets held for sale.

Income Taxes

Our effective income tax rate for 2021 increased to 22.6% from 21.4% in 2020 due to a discrete tax benefit recorded in the prior year in connection with the net operating loss carryback provisions of the Coronavirus Aid, Relief and Economic Security Act, which was enacted in March 2020.

Net Earnings

Net earnings increased to $66.6 million ($3.41 per diluted share) in 2021 from $19.0 million ($0.98 per diluted share) in 2020 primarily due to the increase in gross profit partially offset by higher SG&A expense and restructuring charges associated with the consolidation of our PC strand operations.

Liquidity and Capital Resources

Overview

Our sources of liquidity include cash and cash equivalents, cash generated by operating activities and borrowing availability provided under our $100.0 million revolving credit facility (the “Credit Facility”). Our principal capital requirements include funding working capital, capital expenditures, dividends and any share repurchases. As of October 2, 2021, our cash and cash equivalents totaled $89.9 million compared with $68.7 million as of October 3, 2020.

Selected Financial Data

(Dollars in thousands)

	Year Ended
	October 2,			October 3,
	2021			2020
Net cash provided by operating activities	$	69,878		$	56,224
Net cash used for investing activities		(17,805	)		(23,174	)
Net cash used for financing activities		(30,877	)		(2,543	)
Cash and cash equivalents		89,884			68,688
Net working capital		178,057			143,360
Total debt		-			-
Percentage of total capital		-			-
Shareholders' equity	$	302,038		$	264,803
Percentage of total capital		100	%		100	%
Total capital (total debt + shareholders' equity)	$	302,038		$	264,803

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Operating Activities

Operating activities provided $69.9 million of cash in 2021 primarily from net earnings adjusted for non-cash items partially offset by an increase in working capital. Working capital used $12.3 million of cash due to a $14.1 million increase in accounts receivable and a $10.1 million increase in inventories partially offset by an $11.9 million increase in accounts payable and accrued expenses. The increase in accounts receivable and inventories were due to the escalation in raw material costs and average selling prices during 2021. The increase in accounts payable and accrued expenses was primarily related to raw material purchases with higher unit costs near the end of the period and, to a lesser extent, increases in accrued salaries, wages and related expenses and income taxes.

Operating activities provided $56.2 million of cash in 2020 primarily from net earnings adjusted for non-cash items together with decrease in working capital. Working capital provided $19.4 million of cash due to a $20.2 million increase in accounts payable and accrued expenses and a $5.1 million decrease in inventories partially offset by a $5.8 million increase in accounts receivable. The increase in accounts payable and accrued expenses was primarily related to higher raw material purchases near the end of the year together with increases in accrued salaries, wages and related expenses, earnout liability and income taxes. The decrease in inventories was primarily driven by lower unit costs partially offset by higher raw material purchases. The increase in accounts receivable was primarily related to higher shipments partially offset by lower average selling prices.

We may elect to adjust our operating activities as there are changes in the conditions in our construction end-markets, which could materially impact our cash requirements. While a downturn in the level of construction activity affects sales to our customers, it generally reduces our working capital requirements.

Investing Activities

Investing activities used $17.8 million of cash in 2021 primarily due to capital expenditures ($17.5 million) and an increase in the cash surrender value of life insurance policies ($0.4 million). Investing activities used $23.2 million of cash in 2020 primarily due to the STM Acquisition ($18.4 million) and capital expenditures ($7.1 million) partially offset by the receipt of proceeds from the sale of assets held for sale ($2.2 million). Capital expenditures for both years focused on cost and productivity improvement initiatives in addition to recurring maintenance requirements. Capital expenditures are expected to total up to $25.0 million in 2022, which include expenditures primarily to advance the growth of our engineered structural mesh business and to support cost and productivity improvement initiatives as well as recurring maintenance requirements. Our investing activities are largely discretionary, providing us with the ability to significantly curtail outlays should future business conditions warrant that such actions be taken.

Financing Activities

Financing activities used $30.9 million of cash in 2021 and $2.5 million of cash in 2020. In 2021, $31.3 million of cash was used for dividend payments (including a special cash dividend of $29.0 million, or $1.50 per share, and regular cash dividends totaling $2.3 million), which was partially offset by $1.1 million of proceeds from the exercise of stock options. In 2020, $2.3 million of cash was used for dividend payments.

Cash Management

Our cash is principally concentrated at one financial institution, which at times exceeds federally insured limits. We invest excess cash primarily in money market funds, which are highly liquid securities that bear minimal risk.

Credit Facility

We have a Credit Facility that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. In May 2019, we entered into a new credit agreement, which amended and restated in its entirety the previous agreement pertaining to the revolving credit facility that had been in effect since June 2010. The new credit agreement, among other changes, extended the maturity date of the Credit Facility from May 13, 2020 to May 15, 2024 and provided for an accordion feature whereby its size may be increased by up to $50.0 million, subject to our lender’s approval. Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently $100.0 million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories. As of October 2, 2021, no borrowings were outstanding on the Credit Facility, $98.6 million of borrowing capacity was available and outstanding letters of credit totaled $1.4 million (see Note 8 to the consolidated financial statements). As of October 3, 2020, there were no borrowings outstanding on the Credit Facility.

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We believe that, in the absence of significant unanticipated cash demands, cash and cash equivalents, cash generated by operating activities and the borrowing availability provided under the Credit Facility will be sufficient to satisfy our expected requirements for working capital, capital expenditures, dividends and share repurchases, if any. We also expect to have access to the amounts available under our Credit Facility as required. However, should we experience future reductions in our operating cash flows due to weakening conditions in our construction end-markets and reduced demand from our customers, we may need to curtail capital and operating expenditures, delay or restrict share repurchases, cease dividend payments and/or realign our working capital requirements.

Should we determine, at any time, that we require additional short-term liquidity, we would evaluate the alternative sources of financing that were potentially available to provide such funding. There can be no assurance that any such financing, if pursued, would be obtained, or if obtained, would be adequate or on terms acceptable to us. However, we believe that our strong balance sheet, flexible capital structure and borrowing capacity available to us under our Credit Facility position us to meet our anticipated liquidity requirements for the foreseeable future.

Off-Balance Sheet Arrangements

We do not have any material transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons, as defined by Item 303(a)(4) of Regulation S-K of the SEC, that have or are reasonably likely to have a material current or future impact on our financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses.

Contractual Obligations

In addition to our discussion and analysis surrounding our liquidity and capital resources, our contractual obligations and commitments as of October 2, 2021, include:

● Raw Material Purchase Commitments – See Note 12, “Commitments and Contingencies,” within our consolidated financial statements for further details concerning our non-cancelable raw material purchase commitments.

● Supplemental Employee Retirement Plan Obligations – See Note 11, “Employee Benefit Plans,” within our consolidated financial statements for further detail of our obligations and the timing of expected future payments under our supplemental employee retirement plan.

● Operating Leases – See Note 13, “Leases,” within our consolidated financial statements for further detail of our obligations and the timing of expected future payments, including a five-year maturity schedule.

● Debt Obligations and Interest Payments - See Note 8, “Long-Term Debt,” within our consolidated financial statements for further detail of our debt and the timing of expected future principal and interest payments. As of October 2, 2021, there were no borrowings outstanding.

● Capital Expenditures – As of October 2, 2021, we had contractual commitments for capital expenditures of $3.6 million.

Impact of Inflation

We are subject to inflationary risks arising from fluctuations in the market prices for our primary raw material, hot-rolled carbon steel wire rod, and, to a much lesser extent, labor, freight, energy and other consumables that are used in our manufacturing processes. We have generally been able to adjust our selling prices to pass through increases in these costs or offset them through various cost reduction and productivity improvement initiatives. However, our ability to raise our selling prices depends on market conditions and competitive dynamics, and there may be periods during which we are unable to fully recover increases in our costs.

During 2021, we were successful in implementing price increases sufficient to recover the escalation in our raw material costs that occurred over the course of the year. In 2020, selling prices for our products declined in response to low-priced import competition, which negatively impacted our financial results. The timing and magnitude of any future increases in raw material costs and the impact on selling prices for our products is uncertain at this time.

Outlook

Looking ahead to fiscal 2022, we expect continued robust demand in our construction markets. The economic recovery along with sustained favorable forecasts from widely monitored leading market indicators in private non-residential construction and a resilient public construction market are supporting our optimism in the demand outlook. We also believe there is a possibility that Congress and the Administration will successfully negotiate an infrastructure investment plan that may benefit our markets, although the ultimate size and timing of any improvements are not possible to project.

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The supply shortage and escalating prices for steel wire rod, our primary raw material, remains a key concern. In addition, critically tight labor markets are expected to continue to negatively affect our operations. These challenges may impact our ability to meet fully our customer demand and result in plant operating inefficiencies and customer service delays. We expect to continue passing the rising costs through the supply chain, but we would anticipate margins returning to more normalized levels once the raw materials markets stabilize. Additionally, our markets and operations remain vulnerable to the lingering impact of COVID-19.

Regardless of the market dynamics, we continue to focus on those factors we control: closely managing and controlling our expenses; aligning our production schedules with demand in a proactive manner as there are changes in market conditions to minimize our operating costs; and pursuing further improvements in the productivity and effectiveness of all our manufacturing, selling and administrative activities. We also expect gradually increasing contributions from the substantial investments we have made in our facilities in the form of reduced operating costs and additional capacity to support future growth. Finally, we will continue to pursue acquisitions opportunistically in our existing businesses that expand our penetration of markets we currently serve or expand our footprint.

The statements contained in this section are forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Our cash flows and earnings are subject to fluctuations resulting from changes in commodity prices, interest rates and foreign exchange rates. We manage our exposure to these market risks through internally established policies and procedures and, when appropriate, through the use of derivative financial instruments. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe we can modify or adapt our hedging strategies as necessary.

Commodity Prices

We are subject to significant fluctuations in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod, which we purchase from both domestic and foreign suppliers. We negotiate quantities and pricing for both domestic and foreign wire rod purchases for varying periods (most recently monthly for domestic suppliers), depending upon market conditions, to manage our exposure to price fluctuations and to ensure adequate availability of material consistent with our requirements. We do not use derivative commodity instruments to hedge our exposure to changes in prices as such instruments are not currently available for wire rod. Our ability to acquire wire rod from foreign sources on favorable terms is impacted by fluctuations in strength of home markets, foreign currency exchange rates, foreign taxes, duties, tariffs, quotas and other trade actions. Although changes in our wire rod costs and selling prices tend to be correlated, in weaker market environments, we may be unable to fully recover increased wire rod costs, which would reduce our earnings and cash flows. Additionally, when raw material costs decline, our financial results may be negatively impacted if the selling prices for our products decrease to an even greater extent and if we are consuming higher cost material from inventory. Based on our 2021 shipments and average wire rod cost reflected in cost of sales, a 10% increase in the price of wire rod would have resulted in a $32.7 million decrease in our annual pre-tax earnings (assuming there was not a corresponding change in our selling prices).

Interest Rates

Although we did not have any balances outstanding on our Credit Facility as of October 2, 2021, future borrowings under the facility are subject to a variable rate of interest and are sensitive to changes in interest rates.

Foreign Exchange Exposure

We have not typically hedged foreign currency exposures related to transactions denominated in currencies other than U.S. dollars, as such transactions have not been material historically. We will occasionally hedge firm commitments for certain equipment purchases that are denominated in foreign currencies. The decision to hedge any such transactions is made by us on a case-by-case basis. There were no forward contracts outstanding as of October 2, 2021. During 2021, a 10% increase or decrease in the value of the U.S. dollar relative to foreign currencies to which we are typically exposed would not have had a material impact on our financial position, results of operations or cash flows.

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Item 8. Financial Statements and Supplementary Data.

Financial Statements

Consolidated Statements of Operations for the years ended October 2, 2021, October 3, 2020 and September 28, 2019	21
Consolidated Statements of Comprehensive Income for the years ended October 2, 2021, October 3, 2020 and September 28, 2019	22
Consolidated Balance Sheets as of October 2, 2021 and October 3, 2020	23
Consolidated Statements of Shareholders’ Equity for the years ended October 2, 2021, October 3, 2020 and September 28, 2019	24
Consolidated Statements of Cash Flows for the years ended October 2, 2021, October 3, 2020 and September 28, 2019	25
Notes to Consolidated Financial Statements	26
Report of Independent Registered Public Accounting Firm – Consolidated Financial Statements	45
Schedule II – Valuation and Qualifying Accounts for the years ended October 2, 2021, October 3, 2020 and September 28, 2019	46

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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Year Ended
	October 2,			October 3,			September 28,
	2021			2020			2019
Net sales	$	590,601		$	472,618		$	455,713
Cost of sales		469,053			416,831			425,652
Gross profit		121,548			55,787			30,061
Selling, general and administrative expense		32,388			31,348			24,504
Restructuring charges, net		2,868			1,695			-
Acquisition costs		-			195			-
Other expense (income), net		114			(1,254	)		(1,773	)
Interest expense		96			106			168
Interest income		(21	)		(473	)		(293	)
Earnings before income taxes		86,103			24,170			7,455
Income taxes		19,493			5,161			1,857
Net earnings	$	66,610		$	19,009		$	5,598
Net earnings per share:
Basic	$	3.44		$	0.99		$	0.29
Diluted		3.41			0.98			0.29
Cash dividends declared		1.62			0.12			0.12
Weighted average shares outstanding:
Basic		19,344			19,278			19,243
Diluted		19,534			19,383			19,340

See accompanying notes to consolidated financial statements.

21

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Year Ended
	October 2,			October 3,		September 28,
	2021			2020		2019
Net earnings	$	66,610		$	19,009	$	5,598
Adjustment to defined benefit plan liability, net of income taxes of $154, ($93) and $239, respectively		(486	)		292		(754	)
Other comprehensive (loss) income		(486	)		292		(754	)
Comprehensive income	$	66,124		$	19,301	$	4,844

See accompanying notes to consolidated financial statements.

22

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

	October 2,			October 3,
	2021			2020
Assets:
Current assets:
Cash and cash equivalents	$	89,884		$	68,688
Accounts receivable, net		67,917			53,817
Inventories		79,049			68,963
Other current assets		10,056			5,570
Total current assets		246,906			197,038
Property, plant and equipment, net		105,624			101,392
Intangibles, net		7,668			8,567
Goodwill		9,745			9,745
Other assets		20,767			21,160
Total assets	$	390,710		$	337,902
Liabilities and shareholders’ equity:
Current liabilities:
Accounts payable	$	49,443		$	38,961
Accrued expenses		19,406			14,717
Total current liabilities		68,849			53,678
Other liabilities		19,823			19,421
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value Authorized shares: 1,000 None issued		-			-
Common stock, $1 stated value Authorized shares: 50,000 Issued and outstanding shares: 2021, 19,408; 2020, 19,304		19,408			19,304
Additional paid-in capital		78,688			76,387
Retained earnings		206,384			171,068
Accumulated other comprehensive loss		(2,442	)		(1,956	)
Total shareholders’ equity		302,038			264,803
Total liabilities and shareholders’ equity	$	390,710		$	337,902

See accompanying notes to consolidated financial statements.

23

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

											Accumulated
					Additional						Other			Total
	Common Stock				Paid-In			Retained			Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings			Income (Loss)(1)			Equity
Balance at September 29, 2018		19,223	$	19,223	$	72,852		$	151,084		$	(1,494	)	$	241,665
Net earnings									5,598						5,598
Other comprehensive loss(1)												(754	)		(754	)
Vesting of restricted stock units		38		38		(38	)								-
Compensation expense associated with stock-based plans						2,057									2,057
Restricted stock units and stock options surrendered for withholding taxes payable						(239	)								(239	)
Cash dividends declared									(2,310	)					(2,310	)
Balance at September 28, 2019		19,261		19,261		74,632			154,372			(2,248	)		246,017
Net earnings									19,009						19,009
Other comprehensive income(1)												292			292
Vesting of restricted stock units		43		43		(43	)								-
Compensation expense associated with stock-based plans						2,028									2,028
Restricted stock units and stock options surrendered for withholding taxes payable						(230	)								(230	)
Cash dividends declared									(2,313	)					(2,313	)
Balance at October 3, 2020		19,304		19,304		76,387			171,068			(1,956	)		264,803
Net earnings									66,610						66,610
Other comprehensive loss(1)												(486	)		(486	)
Stock options exercised		74		74		1,008									1,082
Vesting of restricted stock units		30		30		(30	)								-
Compensation expense associated with stock-based plans						1,988									1,988
Restricted stock units and stock options surrendered for withholding taxes payable						(665	)								(665	)
Cash dividends declared									(31,294	)					(31,294	)
Balance at October 2, 2021		19,408	$	19,408	$	78,688		$	206,384		$	(2,442	)	$	302,038

(1)Activity within accumulated other comprehensive income (loss) is reported net of related income taxes: 2019 $239, 2020 ($93) and 2021 $154.

See accompanying notes to consolidated financial statements.

24

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended
	October 2,			October 3,			September 28,
	2021			2020			2019
Cash Flows From Operating Activities:
Net earnings	$	66,610		$	19,009		$	5,598
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		14,521			14,255			13,553
Amortization of capitalized financing costs		65			66			65
Stock-based compensation expense		1,988			2,028			2,057
Deferred income taxes		(118	)		(424	)		1,798
Asset impairment charges		1,415			343			-
Loss (gain) on sale and disposition of property, plant and equipment		125			(1,114	)		(1,688	)
Increase in cash surrender value of life insurance policies over premiums paid		(1,533	)		(243	)		(187	)
Gain from life insurance proceeds		-			(200	)		-
Net changes in assets and liabilities (net of assets and liabilities acquired):
Accounts receivable, net		(14,100	)		(5,806	)		7,302
Inventories		(10,086	)		5,060			23,306
Accounts payable and accrued expenses		11,891			20,159			(42,592	)
Other changes		(900	)		3,091			(2,604	)
Total adjustments		3,268			37,215			1,010
Net cash provided by operating activities		69,878			56,224			6,608
Cash Flows From Investing Activities:
Acquisition of business		-			(18,356	)		-
Capital expenditures		(17,500	)		(7,114	)		(10,512	)
Proceeds from property insurance		-			-			1,192
Proceeds from sale of property, plant and equipment		-			40			19
Proceeds from surrender of life insurance policies		32			260			67
Increase in cash surrender value of life insurance policies		(416	)		(390	)		(322	)
Proceeds from sale of assets held for sale		79			2,186			-
Proceeds from life insurance claims		-			200			-
Net cash used for investing activities		(17,805	)		(23,174	)		(9,556	)
Cash Flows From Financing Activities:
Proceeds from long-term debt		297			322			44,333
Principal payments on long-term debt		(297	)		(322	)		(44,333	)
Cash dividends paid		(31,294	)		(2,313	)		(2,310	)
Cash received from exercise of stock options		1,082			-			-
Payment of employee tax withholdings related to net share transactions		(665	)		(230	)		(239	)
Financing costs		-			-			(263	)
Net cash used for financing activities		(30,877	)		(2,543	)		(2,812	)
Net increase (decrease) in cash and cash equivalents		21,196			30,507			(5,760	)
Cash and cash equivalents at beginning of period		68,688			38,181			43,941
Cash and cash equivalents at end of period	$	89,884		$	68,688		$	38,181
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	-		$	-		$	49
Income taxes, net		16,799			1,919			1,743
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable		501			769			377
Restricted stock units and stock options surrendered for withholding taxes payable		665			230			239
Payable related to holdback for business acquired		-			1,000			-

See accompanying notes to consolidated financial statements.

25

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED OCTOBER 2, 2021, October 3, 2020 AND SEPTEMBER 28, 2019

(1) Description of Business

Insteel Industries, Inc. (“we,” “us,” “our,” “Insteel” or “the Company”) is the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. Insteel is the parent holding company for two wholly-owned subsidiaries, Insteel Wire Products Company (“IWP”), an operating subsidiary, and Intercontinental Metals Corporation, an inactive subsidiary. We manufacture and market prestressed concrete strand (“PC strand”) and welded wire reinforcement (“WWR”), including engineered structural mesh, concrete pipe reinforcement and standard welded wire reinforcement. Our products are primarily sold to manufacturers of concrete products and, to a lesser extent, distributors, rebar fabricators and contractors. We sell our products nationwide across the United States (“U.S.”) and, to a much lesser extent, into Canada, Mexico, and Central and South America.

On March 16, 2020, we, through our wholly-owned subsidiary, IWP, purchased substantially all of the assets of Strand-Tech Manufacturing, Inc. (“STM”) (see Note 5 to the consolidated financial statements).

We have evaluated all subsequent events that occurred after the balance sheet date through the time of filing this Annual Report on Form 10-K and concluded there were no events or transactions during this period that required additional recognition or disclosure in our consolidated financial statements.

(2) Summary of Significant Accounting Policies

Fiscal year. Our fiscal year is the 52 or 53 weeks ending on the Saturday closest to September 30. Fiscal years 2021 and 2019 were 52-week periods and fiscal year 2020 was a 53-week period. All references to years relate to fiscal years rather than calendar years.         

Principles of consolidation. The consolidated financial statements include the accounts of Insteel and our subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There is no assurance that actual results will not differ from these estimates.

Cash equivalents. We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Concentration of credit risk. Financial instruments that subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Our cash is principally concentrated at one financial institution, which at times exceeds federally insured limits. We are exposed to credit risk in the event of default by institutions in which our cash and cash equivalents are held and by customers to the extent of the amounts recorded on the balance sheet. We invest excess cash primarily in money market funds, which are highly liquid securities.

The majority of our accounts receivable are due from customers that are located in the U.S. and are generally not secured by collateral depending upon the creditworthiness of the account. We provide an allowance for credit losses based upon our assessment of the credit risk of specific customers, historical trends and other information. We write off accounts receivable when they become uncollectible. There is no disproportionate concentration of credit risk.

Stock-based compensation. We account for stock-based compensation in accordance with the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “Compensation – Stock Compensation”, which requires stock-based compensation expense to be recognized in net earnings based on the fair value of the award on the date of the grant. We account for forfeitures as they occur. We determine the fair value of stock options issued by using a Monte Carlo valuation model at the grant date, which considers a range of assumptions including the expected term, volatility, dividend yield and risk-free interest rate.

Employee benefit plan. We account for our supplemental retirement benefit agreements (each, a “SRBA”) in accordance with ASC Topic 715, “Compensation - Retirement Benefits”. Under the provisions of ASC Topic 715, we recognize net periodic pension cost and value liabilities based on certain actuarial assumptions, principally the assumed discount rate.

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The discount rate we utilize for determining net periodic pension cost and the related benefit obligation for the SRBAs is based, in part, on current interest rates earned on long-term bonds that receive one of the two highest ratings assigned by recognized rating agencies. Our discount rate assumptions are adjusted as of each valuation date to reflect current interest rates on such long-term bonds. The discount rate is used to determine the actuarial present value of the benefit obligations as of the valuation date as well as the interest component of the net periodic pension cost for the following year. We currently expect net periodic pension cost for 2022 to be $1.0 million for the SRBAs. Cash contributions to the SRBAs during 2022 are expected to be $576,000.

The assumed discount rate is reevaluated annually. A reduction in the assumed discount rate generally results in an actuarial loss, as the actuarially-determined present value of estimated future benefit payments will increase. Conversely, an increase in the assumed discount rate generally results in an actuarial gain. However, any actuarial gains generated in future periods reduce the negative amortization effect of any cumulative unamortized actuarial losses, while any actuarial losses generated in future periods reduce the favorable amortization effect of any cumulative unamortized actuarial gains.

The projected benefit obligations and net periodic pension cost for the SRBAs are based in part on expected increases in future compensation levels. Our assumption for the expected increase in future compensation levels is based upon our average historical experience and our intentions regarding future compensation increases, which generally approximates average long-term inflation rates. A 0.25% decrease in the assumed discount rate for our SRBAs would have increased our projected and accumulated benefit obligations as of October 2, 2021 by approximately $356,000 and $293,000, respectively, and our expected net periodic pension cost for 2022 by approximately $39,000.

Revenue recognition. We recognize revenues when obligations under the terms of a contract with our customers are satisfied, which generally occurs when products are shipped and control is transferred. Revenue is measured as the amount of consideration expected to be received in exchange for our products.

Inventories. Inventories are valued at the lower of weighted average cost (which approximates computation on a first-in, first-out basis) and net realizable value. The valuation of inventory includes the costs for material, labor and manufacturing overhead.

Property, plant and equipment. Property, plant and equipment are recorded at cost or fair market value in the case of the assets acquired through acquisitions, or otherwise at reduced values to the extent there have been asset impairment write-downs. Expenditures for maintenance and repairs are charged directly to expense when incurred, while major improvements are capitalized. Depreciation is computed for financial reporting purposes principally by use of the straight-line method over the following estimated useful lives: machinery and equipment, 3 - 15 years; buildings, 10 - 30 years; and land improvements, 5 - 15 years. Depreciation expense was approximately $13.6 million in 2021, $13.2 million in 2020 and $12.5 million in 2019 and reflected in cost of sales and selling, general and administrative expense (“SG&A expense”) in the consolidated statements of operations. Capitalized software is amortized over the shorter of the estimated useful life or 5 years and reflected in SG&A expense. No interest costs were capitalized in 2021, 2020 and 2019.

Goodwill. Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not amortized but is tested annually for impairment and whenever events or circumstances change that would make it more likely than not that an impairment may have occurred. We perform our annual impairment analysis as of the first day of the fourth quarter each year. The evaluation of impairment involves comparing the current estimated fair value of the reporting unit to its recorded value, including goodwill. We perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. It may be necessary to perform a quantitative analysis where a discounted cash flow model is used to determine the current estimated fair value of the reporting unit. Key assumptions used to determine the fair value of the reporting unit as part of our annual testing (and any required interim testing) include: (a) expected cash flows for the five-year period following the testing date; (b) an estimated terminal value using a terminal year growth rate based on the growth prospects of the reporting unit; (c) a discount rate based on our estimated after-tax weighted average cost of capital; and (d) a probability-weighted scenario approach by which varying cash flows are assigned to alternative scenarios based on their likelihood of occurrence. In developing these assumptions, we consider historical and anticipated future results, general economic and market conditions, the impact of planned business and operational strategies and all available information at the time the fair value of the reporting unit is estimated. Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity. Changes in assumptions and estimates may affect the fair value of goodwill and could result in impairment charges in future periods. Based on the results of our impairment analysis, no goodwill impairment losses were recognized in the consolidated statements of operations for 2021, 2020 and 2019. Subsequent to the analysis, there have been no events or circumstances that indicate any potential impairment of goodwill.

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Long-lived assets. Long-lived assets include property, plant and equipment and identifiable intangible assets with definite useful lives. Finite-lived intangible assets are amortized over their estimated useful lives. Our intangible assets consist of customer relationships, developed technology and know-how, non-competition agreements and trade names, and are being amortized on a straight-line basis over their finite useful lives (see Note 7 to the consolidated financial statements). We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. When we determine that the carrying value of such assets may not be recoverable, we measure recoverability based on the undiscounted cash flows expected to be generated by the related asset or asset group. If it is determined that an impairment loss has occurred, the loss is recognized in the period in which it is incurred and is calculated as the difference between the carrying value and the present value of estimated future net cash flows or comparable market values. Impairment charges of $1.4 and $0.3 million were recorded in 2021 and 2020, respectively, related to the impairment of long-lived assets resulting from the consolidation of our PC strand operations with the closure of our Summerville, South Carolina facility (see Note 5 to the consolidated financial statements). There were no impairment losses in 2019.

Fair value of financial instruments. The carrying amounts for cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value because of their short maturities.

Income taxes. Income taxes are based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. We assess the need to establish a valuation allowance against deferred tax assets to the extent we no longer believe it is more likely than not that the tax assets will be fully realized. We recognize uncertain tax positions when we have determined it is more likely than not that a tax position will be sustained upon examination. However, new information may become available, or applicable laws or regulations may change, thereby resulting in a favorable or unfavorable adjustment to amounts recorded.

Earnings per share. Basic earnings per share (“EPS”) are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock and other dilutive equity securities outstanding during the period. Securities that have the effect of increasing EPS are considered to be antidilutive and are not included in the computation of diluted EPS.

(3) Recent Accounting Pronouncements

Current Adoptions

In June 2016, the FASB issued Accounting Standard Update (“ASU”) No. 2016-13 “Credit Losses - Measurement of Credit Losses on Financial Instruments.” ASU No. 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables, by replacing the “incurred loss” approach with an “expected loss” model under which allowances will be recognized based on expected rather than incurred losses. ASU No. 2016-13 became effective for us in the first quarter of 2021. The adoption of this update did not have an impact on our consolidated financial statements. We estimate our allowance for doubtful accounts based upon several factors, including customer credit quality and historical write-off trends. The adoption of this guidance did not significantly impact our accounting policies or methods utilized to determine the allowance for doubtful accounts.

In January 2017, the FASB issued ASU No. 2017-04 “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. ASU No. 2017-04 became effective for us in the first quarter of 2021. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14 “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans”, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial and adds new, as well as clarifies certain other, disclosure requirements. ASU No. 2018-14 became effective for us in fiscal 2021. The adoption of this guidance did not have a material impact on our disclosures.

Future Adoptions

In December 2019, the FASB issued ASU No. 2019-12 "Simplifying the Accounting for Income Taxes (Topic 740)." ASU No. 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to provide for more consistent application. ASU No. 2019-12 will become effective for us in the first quarter of fiscal 2022. The adoption of this guidance will not have a material impact on our consolidated financial statements.

28

 

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides optional expedients and exceptions to account for contracts, hedging relationships and other transactions that reference LIBOR or another reference rate if certain criteria are met. ASU No. 2020-04 is effective March 12, 2020 through December 31, 2022. The adoption of this guidance will not have a material impact on our consolidated financial statements and disclosures.

(4) Revenue Recognition

We recognize revenues when performance obligations under the terms of a contract with our customers are satisfied, which generally occurs when products are shipped and control is transferred. We enter into contracts that pertain to products, which are accounted for as separate performance obligations and typically one year or less in duration. We do not exercise significant judgment in determining the timing for the satisfaction of performance obligations or the transaction price. Revenue is measured as the amount of consideration expected to be received in exchange for our products. We have elected to apply the practical expedient provided for in ASU No. 2014-09 and not disclose information regarding remaining performance obligations that have original expected durations of one year or less.

Variable consideration that may affect the total transaction price, including contractual discounts, rebates, returns and credits are included in net sales. Estimates for variable consideration are based on historical experience, anticipated performance and management's judgment and are updated as of each reporting date. Shipping and related expenses associated with outbound freight are accounted for as fulfillment costs and included in cost of sales. We do not have significant financing components.

Contract assets primarily relate to our rights to consideration for products that are delivered but not billed as of the reporting date and are reclassified to receivables when the customer is invoiced. Contract liabilities primarily relate to performance obligations that are to be satisfied in the future and arise when we bill the customer in advance of shipments. Contract costs are not significant and are recognized as incurred. Contract assets and liabilities were not material as of October 2, 2021 and October 3, 2020.

Accounts receivable includes amounts billed and currently due from customers stated at their net estimated realizable value. Customer payment terms are generally 30 days. We maintain an allowance for credit losses to provide for the estimated amount of receivables that will not be collected, which is based upon our assessment of customer creditworthiness, historical payment experience and the age of outstanding receivables. Past-due trade receivable balances are written off when our collection efforts have been unsuccessful.

See Note 15 for the disaggregation of our net sales by product line and geography.

(5) Business Combination

On March 16, 2020, we purchased substantially all of the assets of STM for an adjusted purchase price of $19.4 million, reflecting certain post-closing adjustments (the “STM Acquisition”), which included a $1.0 million holdback that was payable one year from the acquisition date.

STM was a leading manufacturer of PC strand for concrete construction applications. We acquired, among other assets, STM’s accounts receivable, inventories, production equipment and facility located in Summerville, South Carolina, and assumed certain of its accounts payable and accrued liabilities. The STM Acquisition serves to strengthen our competitive position as we contend with increased low-priced import competition.

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Following is a summary of the adjusted purchase price to the fair values of the assets acquired and liabilities assumed as of the acquisition date:

(In thousands)
Assets acquired:
Accounts receivable	$	3,829
Inventories		3,172
Other current assets		178
Property, plant and equipment		10,919
Intangibles		970
Total assets acquired	$	19,068
Liabilities assumed:
Accounts payable	$	852
Accrued expenses		312
Total liabilities assumed		1,164
Net assets acquired		17,904
Adjusted purchase price		19,356
Goodwill	$	1,452

In connection with the STM Acquisition, we acquired certain intangible assets including customer relationships, a trade name and non-competition agreement. Goodwill associated with the STM Acquisition, which is deductible for tax purposes, consists largely of the synergies we expect to realize through the integration of the acquired assets with our operations.

The STM Acquisition was accounted for as a business purchase pursuant to ASC Topic 805, “Business Combinations” (“ASC 805”). Under the provisions of ASC 805, acquisition and integration costs are recorded as expenses in the period in which such costs are incurred rather than included as components of consideration transferred.

Following the STM Acquisition, net sales of the STM facility in 2020 were approximately $3.0 million. The actual net sales specifically attributable to the STM Acquisition, however, cannot be quantified due to our integration efforts which involved the reassignment of business between the former STM facility and our existing PC strand facilities. As a result, we have determined that the presentation of STM’s earnings for 2020 is impractical due to the integration of STM’s operations following the STM Acquisition.

The following unaudited supplemental pro forma financial information reflects our combined results of operations had the STM Acquisition occurred at the beginning of 2019. The pro forma information reflects certain adjustments related to the STM Acquisition, including adjusted amortization and depreciation expense based on the fair values of the assets acquired. The pro forma information does not reflect any potential operating efficiencies or cost savings that may result from the STM Acquisition. Accordingly, this pro forma information is for illustrative purposes and is not intended to represent the actual results of operations of the combined company that would have been achieved had the STM Acquisition occurred at the beginning of 2019, nor is it intended to indicate future results of operations. The pro forma combined results of operations for the current and comparative prior year periods are as follows:

	Years Ended
	October 3,		September 28,
(In thousands)	2020		2019
Net sales	$	485,121	$	487,467
Earnings before income taxes		22,628		6,085
Net earnings		16,950		4,542

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Restructuring charges. In connection with the STM acquisition, we elected to consolidate our PC strand operations through the closure of the Summerville facility and the redeployment of its equipment to our other three PC strand production facilities located in Gallatin, Tennessee; Houston, Texas; and Sanderson, Florida. Operations at the Summerville facility ceased during the third quarter of 2020. Following is a summary of the restructuring activity during 2021 and 2020:

	Employee			Equipment			Facility						Loss (Gain)
(In thousands)	Separation			Relocation			Closure			Asset			on Sale of
	Costs			Costs			Costs			Impairments			Equipment			Total
2021
Liability as of October 3, 2020	$	-		$	20		$	151		$	-		$	-		$	171
Restructuring charges, net		13			423			1,017			1,415			-			2,868
Cash payments		(13	)		(443	)		(1,178	)		-			-			(1,634	)
Non-cash charges		-			-						(1,415	)		-			(1,415	)
Liability as of October 2, 2021	$	-		$	-		$	(10	)	$	-		$	-		$	(10	)
2020
Restructuring charges, net	$	182		$	482		$	806		$	343		$	(118	)	$	1,695
Cash payments		(182	)		(462	)		(655	)		-			-			(1,299	)
Non-cash charges		-			-			-			(343	)		118			(225	)
Liability as of October 3, 2020	$	-		$	20		$	151		$	-		$	-		$	171

During 2021, we determined the carrying value of the Summerville facility acquired in the STM Acquisition exceeded its fair value, less estimated costs to sell, and recorded an impairment of assets held for sale of $1.4 million within restructuring charges on our consolidated statements of operations for the year. As of October 2, 2021 and October 3, 2020, we recorded a liability of $10,000 and $171,000, respectively, for restructuring liabilities in accrued expenses on our consolidated balance sheet. We do not currently expect to incur any significant restructuring charges during 2022.

Acquisition costs. During 2020, we recorded $195,000 of acquisition-related costs associated with the STM Acquisition for accounting, legal and other professional fees.

(6) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs used to measure fair value are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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As of October 2, 2021 and October 3, 2020, we held financial assets that are required to be measured at fair value on a recurring basis, which are summarized below:

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of October 2, 2021:
Current assets:
Cash equivalents	$	86,395	$	86,395	$	-
Other assets:
Cash surrender value of life insurance policies		12,501		-		12,501
Total	$	98,896	$	86,395	$	12,501
As of October 3, 2020:
Current assets:
Cash equivalents	$	72,234	$	72,234	$	-
Other assets:
Cash surrender value of life insurance policies		10,584		-		10,584
Total	$	82,818	$	72,234	$	10,584

Cash equivalents, which include all highly liquid investments with original maturities of three months or less, are classified as Level 1 of the fair value hierarchy. The carrying amount of our cash equivalents, which consist of investments in money market funds, approximates fair value due to their short maturities. Cash surrender value of life insurance policies are classified as Level 2. The fair value of the life insurance policies was determined by the underwriting insurance company’s valuation models and represents the guaranteed value we would receive upon surrender of these policies as of the reporting date.

As of October 2, 2021 and October 3, 2020, we had no nonfinancial assets that are required to be measured at fair value on a nonrecurring basis other than the assets and liabilities that were acquired from STM at fair value in 2020 (see Note 5 to the consolidated financial statements). During 2021, we recognized $1.4 million of impairment charges related to the Summerville facility acquired in the STM Acquisition to reflect its fair value of $6.3 million as of October 2, 2021. The Summerville facility was classified as assets held for sale in other assets on our consolidated balance sheet as of October 2, 2021. The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these financial instruments.

(7) Intangible Assets

The primary components of our intangible assets and the related accumulated amortization are as follows:

(In thousands)	Weighted- Average Useful Life (Years)	Gross		Accumulated Amortization			Net Book Value
As of October 2, 2021:
Customer relationships	17.1	$	9,870	$	(3,482	)	$	6,388
Developed technology and know-how	20.0		1,800		(639	)		1,161
Non-competition agreements	5.0		400		(284	)		116
Trade name	2.7		250		(247	)		3
		$	12,320	$	(4,652	)	$	7,668
As of October 3, 2020:
Customer relationships	17.1	$	9,870	$	(2,837	)	$	7,033
Developed technology and know-how	20.0		1,800		(551	)		1,249
Non-competition agreements	5.0		1,860		(1,663	)		197
Trade name	2.7		250		(162	)		88
		$	13,780	$	(5,213	)	$	8,567

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Amortization expense for intangibles was $899,000 in 2021, $1.0 million in 2020 and $1.1 million in 2019. Amortization expense for the next five years is $822,000 in 2022, $757,000 in 2023, $751,000 in 2024, $744,000 in 2025 and $752,000 in 2026.

(8) Long-Term Debt

Revolving Credit Facility. We have a $100.0 million revolving credit facility (the “Credit Facility”) that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. In May 2019, we entered into a new credit agreement, which amended and restated in its entirety the previous agreement pertaining to the revolving credit facility that had been in effect since June 2010. The new credit agreement, among other changes, extended the maturity date of the Credit Facility from May 13, 2020 to May 15, 2024 and provided for an accordion feature whereby its size may be increased by up to $50.0 million, subject to our lender’s approval. Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently $100.0 million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories. As of October 2, 2021, no borrowings were outstanding on the Credit Facility, $98.6 million of borrowing capacity was available and outstanding letters of credit totaled $1.4 million. As of October 3, 2020, there were no borrowings outstanding on the Credit Facility.

Interest rates on the Credit Facility are based upon (1) an index rate that is established at the highest of the prime rate, 0.50% plus the federal funds rate or the LIBOR rate plus the excess of the then-applicable margin for LIBOR loans over the then-applicable margin for index rate loans, or (2) at our election, a LIBOR rate, plus in either case, an applicable interest rate margin. The applicable interest rate margins are adjusted on a quarterly basis based upon the amount of excess availability on the Credit Facility within the range of 0.25% to 0.50% for index rate loans and 1.25% to 1.50% for LIBOR loans. In addition, the applicable interest rate margins would be increased by 2.00% upon the occurrence of certain events of default provided for under the terms of the Credit Facility. Based on our excess availability as of October 2, 2021, the applicable interest rate margins on the Credit Facility were 0.25% for index rate loans and 1.25% for LIBOR loans.

Our ability to borrow available amounts under the Credit Facility will be restricted or eliminated in the event of certain covenant breaches, events of default or if we are unable to make certain representations and warranties provided for under the terms of the Credit Facility. We are required to maintain a fixed charge coverage ratio of not less than 1.0 at the end of each fiscal quarter for the twelve-month period then ended when the amount of liquidity on the Credit Facility is less than $10.0 million. In addition, the terms of the Credit Facility restrict our ability to, among other things: engage in certain business combinations or divestitures; make investments in or loans to third parties, unless certain conditions are met with respect to such investments or loans; pay cash dividends or repurchase shares of our stock subject to certain minimum borrowing availability requirements; incur or assume indebtedness; issue securities; enter into certain transactions with our affiliates; or permit liens to encumber our property and assets. The terms of the Credit Facility also provide that an event of default will occur upon the occurrence of, among other things: defaults or breaches under the loan documents, subject in certain cases to cure periods; defaults or breaches by us or any of our subsidiaries under any agreement resulting in the acceleration of amounts above certain thresholds or payment defaults above certain thresholds; certain events of bankruptcy or insolvency; certain entries of judgment against us or any of our subsidiaries, which are not covered by insurance; or a change of control. As of October 2, 2021, we were in compliance with all of the financial and negative covenants under the Credit Facility and there have not been any events of default.

Amortization of capitalized financing costs associated with the Credit Facility was $65,000 in 2021, $66,000 in 2020 and $65,000 in 2019. We expect the amortization of capitalized financing costs to approximate the following amounts for the next five fiscal years:

Fiscal year	In thousands
2022	$	65
2023		65
2024		41

(9) Stock-Based Compensation

Under our equity incentive plan, employees and directors may be granted stock options, restricted stock, restricted stock units and performance awards. Effective February 11, 2020, our shareholders approved an amendment to the 2015 Equity Incentive Plan of Insteel Industries, Inc. (the “2015 Plan”), which authorizes up to an additional 750,000 shares of our common stock for future grants under the plan and expires on February 17, 2025. As of October 2, 2021, there were 621,000 shares of our common stock available for future grants under the 2015 Plan, which is our only active equity incentive plan.

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Stock option awards. Under our equity incentive plan, employees and directors may be granted options to purchase shares of common stock at the fair market value on the date of the grant. Options granted under the plan generally vest over three years and expire ten years from the date of the grant. Compensation expense associated with stock options was $860,000 in 2021, $810,000 in 2020 and $889,000 in 2019. As of October 2, 2021, there was $497,000 of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of 1.65 years.

The fair value of each option award granted is estimated on the date of grant using a Monte Carlo valuation model. The weighted-average estimated fair values of stock options granted during 2021, 2020 and 2019 were $14.47, $8.05 and $7.15 per share, respectively, based on the following weighted-average assumptions:

	Year Ended
	October 2,			October 3,			September 28,
	2021			2020			2019
Expected term (in years)		4.87			4.81			4.59
Risk-free interest rate		0.68	%		0.95	%		2.03	%
Expected volatility		50.34	%		47.18	%		42.79	%
Expected dividend yield		0.42	%		0.59	%		0.56	%

The assumptions utilized in the Monte Carlo valuation model are evaluated and revised, as necessary, to reflect market conditions and actual historical experience. The expected term for options was based on the results of a Monte Carlo simulation model, using the model’s estimated fair value as an input to the Black-Scholes-Merton model, and then solving for the expected term. The risk-free interest rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was derived using a term structure based on historical volatility and the volatility implied by exchange-traded options on our common stock. The dividend yield was calculated based on our annual dividend as of the option grant date.

The following table summarizes stock option activity:

											Contractual
				Exercise Price							Term -	Aggregate
				Per Share							Weighted	Intrinsic
	Options								Weighted		Average	Value
(Share amounts in thousands)	Outstanding			Range					Average		(in years)	(in thousands)
Outstanding at September 29, 2018		264		$	10.23	-	$	41.85	$	29.25
Granted		129			18.25	-		21.57		19.74
Exercised		(5	)		18.05	-		26.75		23.95		$	21
Outstanding at September 28, 2019		388			10.23	-		41.85		26.16
Granted		121			19.86	-		22.09		21.08
Forfeited		(27	)		18.05	-		41.85		25.88
Outstanding at October 3, 2020		482			10.23	-		41.85		24.90
Granted		74			29.43	-		41.87		34.76
Exercised		(128	)		10.23	-		34.49		21.17			2,212
Outstanding at October 2, 2021		428			17.22	-		41.87		27.72	6.48		5,006
Vested and anticipated to vest in the future at October 2, 2021		416								27.70	6.41		4,867
Exercisable at October 2, 2021		246								28.75	4.74		2,604

Stock option exercises include “net exercises” for which the optionee received shares of common stock equal to the intrinsic value of the options (fair market value of common stock on the date of exercise less exercise price) reduced by any applicable withholding taxes.

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Restricted stock units. Restricted stock units (“RSUs”) granted under our equity incentive plan are valued based upon the fair market value on the date of the grant and provide for a dividend equivalent payment which is included in compensation expense. The vesting period for RSUs is generally one year from the date of the grant for RSUs granted to directors and three years from the date of the grant for RSUs granted to employees. RSUs do not have voting rights. RSU grants and compensation expense are as follows:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Restricted stock unit grants:
Units		43		68		61
Market value	$	1,430	$	1,444	$	1,225
Compensation expense		1,128		1,218		1,168

As of October 2, 2021, there was $748,000 of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 1.88 years.

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, September 29, 2018		103		$	30.40
Granted		61			20.18
Released		(49	)		27.64
Balance, September 28, 2019		115			26.16
Granted		68			21.29
Forfeited		(6	)		25.49
Released		(55	)		27.07
Balance, October 3, 2020		122			23.07
Granted		43			33.22
Released		(36	)		29.21
Balance, October 2, 2021		129			24.73

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(10) Income Taxes

The components of the provision for income taxes are as follows:

	Year Ended
	October 2,			October 3,			September 28,
(Dollars in thousands)	2021			2020			2019
Provision for income taxes:
Current:
Federal	$	17,904		$	5,056		$	(126	)
State		1,707			529			185
		19,611			5,585			59
Deferred:
Federal		(180	)		(288	)		1,649
State		62			(136	)		149
		(118	)		(424	)		1,798
Income taxes	$	19,493		$	5,161		$	1,857
Effective income tax rate		22.6	%		21.4	%		24.9	%

The reconciliation between income taxes computed at the federal statutory rate and the provision for income taxes is as follows:

	Year Ended
(Dollars in thousands)	October 2, 2021					October 3, 2020					September 28, 2019
Provision for income taxes at federal statutory rate	$	18,082		21.0	%	$	5,076		21.0	%	$	1,566		21.0	%
State income taxes, net of federal tax benefit		1,544		1.8			319		1.3			297		4.0
Stock-based compensation		(253	)	(0.3	)		128		0.5			90		1.2
Valuation allowance		(134	)	(0.2	)		(50	)	(0.2	)		24		0.3
Net operating loss carryback - CARES Act		-		-			(223	)	(0.9	)		-		-
Federal tax return true-up		-		-			-		-			(142	)	(1.9	)
Other, net		254		0.3			(89	)	(0.3	)		22		0.3
Provision for income taxes	$	19,493		22.6	%	$	5,161		21.4	%	$	1,857		24.9	%

The components of deferred tax assets and liabilities are as follows:

	October 2,			October 3,
(In thousands)	2021			2020
Deferred tax assets:
Defined benefit plans	$	2,921		$	2,727
Accrued expenses and asset reserves		2,280			1,885
Stock-based compensation		1,204			1,328
Operating lease liability		387			568
State net operating loss carryforwards and tax credits		54			92
Valuation allowance		(73	)		(207	)
Deferred tax assets		6,773			6,393
Deferred tax liabilities:
Plant and equipment		(10,901	)		(10,766	)
Prepaid insurance		(1,374	)		(1,217	)
Right of use assets		(385	)		(566	)
Goodwill		(409	)		(412	)
Deferred tax liabilities		(13,069	)		(12,961	)
Net deferred tax liability	$	(6,296	)	$	(6,568	)

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law. The CARES Act includes several changes impacting business, including, but not limited to, enhanced business interest deductibility, net operating loss ("NOL") carryback provisions, payroll tax deferral provisions and employee retention tax credits. We recorded a $223,000 tax benefit in 2020 resulting from the NOL carryback provisions of the CARES Act.

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As of October 2, 2021 and October 3, 2020, we recorded deferred tax liabilities (net of valuation allowances) of $6.3 million and $6.6 million, respectively, in other liabilities on our consolidated balance sheet. We have $2.1 million of state NOLs that begin to expire in 2031, but principally expire between 2031 and 2036.

The realization of our deferred tax assets is entirely dependent upon our ability to generate future taxable income in applicable jurisdictions. GAAP requires that we periodically assess the need to establish a reserve against our deferred tax assets to the extent we no longer believe it is more likely than not that they will be fully realized. As of October 2, 2021, we recorded a valuation allowance of $73,000 pertaining to various state NOLs that were not expected to be utilized. The valuation allowance is subject to periodic review and adjustment based on changes in facts and circumstances and would be reduced should we utilize the state NOLs and tax credits against which an allowance had previously been provided or determine that such utilization was more likely than not. The $134,000 decrease in the valuation allowance during 2021 is primarily due to the utilization of state NOLs for which an allowance had been recorded together with a reduction in state apportionment rates.

As of October 2, 2021, we had no material, known tax exposures that required the establishment of contingency reserves for uncertain tax positions.

We classify interest and penalties related to unrecognized tax benefits as part of income tax expense. There were no interest and penalties related to unrecognized tax benefits incurred during 2021, 2020 and 2019.

We file U.S. federal income tax returns as well as state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to 2016 remain subject to examination.          

(11) Employee Benefit Plans

Supplemental retirement benefit plan. We have SRBAs with certain of our key employees (each, a “Participant”). Under the SRBAs, if the Participant remains in continuous service with us for a period of at least 30 years, we will pay the Participant a supplemental retirement benefit for the 15-year period following the Participant’s retirement equal to 50% of the Participant’s highest average annual base salary for five consecutive years in the 10-year period preceding the Participant’s retirement. If the Participant retires prior to the later of age 65 or the completion of 30 years of continuous service with us, but has completed at least 10 years of continuous service, the amount of the Participant’s supplemental retirement benefit will be reduced by 1/360th for each month short of 30 years that the Participant was employed by us.

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The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized for the SRBAs in our consolidated balance sheets is as follows:

	Year Ended
	October 2,			October 3,			September 28,
(In thousands)	2021			2020			2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	11,610		$	11,278		$	9,749
Service cost		312			338			297
Interest cost		316			334			384
Actuarial loss (gain)		855			(91	)		1,133
Distributions		(205	)		(249	)		(285	)
Benefit obligation at end of year	$	12,888		$	11,610		$	11,278
Change in plan assets:
Actual employer contributions	$	205		$	249		$	285
Actual distributions		(205	)		(249	)		(285	)
Plan assets at fair value at end of year	$	-		$	-		$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	(12,888	)	$	(11,610	)	$	(11,278	)
Net amount recognized	$	(12,888	)	$	(11,610	)	$	(11,278	)
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	3,213		$	2,574		$	2,958
Net amount recognized	$	3,213		$	2,574		$	2,958
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)	$	855		$	(91	)	$	1,133
Amortization of net loss		(215	)		(294	)		(140	)
Total recognized in other comprehensive income (loss)	$	640		$	(385	)	$	993

In 2021, 2020 and 2019, the actuarial gain (loss) includes amounts resulting from changes in actuarial assumptions utilized to calculate our benefit plan obligation such as the discount rate, estimated future compensation levels and changes in plan participants.

The accumulated benefit obligation was $11.7 million and $10.8 million as of October 2, 2021 and October 3, 2020, respectively.

Net periodic pension cost for the SRBAs includes the following components:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Service cost	$	312	$	338	$	297
Interest cost		316		334		384
Amortization of net loss		215		294		140
Net periodic pension cost	$	843	$	966	$	821

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The assumptions used in the valuation of the SRBAs are as follows:

	Measurement Date
	October 2,			October 3,			September 28,
	2021			2020			2019
Assumptions at year-end:
Discount rate		2.75	%		2.75	%		3.00	%
Rate of increase in compensation levels		3.00	%		3.00	%		3.00	%

The assumed discount rate is established as of our fiscal year-end measurement date. In establishing the discount rate, we review published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the SRBAs. The SRBAs expected rate of increase in compensation levels is based on the anticipated increases in annual compensation.

The projected benefit payments under the SRBAs are as follows:

Fiscal year(s)	In thousands
2022	$	576
2023		542
2024		582
2025		893
2026		818
2027 - 2031		4,443

Retirement savings plan. In 1996, we adopted the Retirement Savings Plan of Insteel Industries, Inc. (the “Plan”) to provide retirement benefits and stock ownership for our employees. The Plan is an amendment and restatement of our Employee Stock Ownership Plan. As allowed under Sections 401(a) and 401(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary deductions for eligible employees.

The Plan allows for discretionary contributions to be made by us as determined by the Board of Directors, which are allocated among eligible participants based on their compensation relative to the total compensation of all participants. Employees are permitted to contribute up to 75% of their annual compensation to the Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Code. We match employee contributions up to 100% of the first 1% and 50% of the next 5% of eligible compensation that is contributed by employees. Our contributions to the Plan were $1.5 million in 2021, $1.3 million in 2020 and $1.2 million in 2019.

Voluntary Employee Beneficiary Associations (“VEBA”). We have a VEBA which allows both us and our employees to make contributions to pay for medical costs. Our contributions to the VEBA were $6.4 million in 2021, $6.0 million in 2020 and $5.8 million in 2019. We are primarily self-insured for our employee’s healthcare costs, carrying stop-loss insurance coverage for individual claims in excess of $175,000 per benefit plan year. Our self-insurance liabilities are based on the total estimated costs of claims filed and claims incurred but not reported, less amounts paid against such claims. We review current and historical claims data in developing our estimates.

(12) Commitments and Contingencies

Insurance recoveries. We maintain general liability, business interruption and replacement cost property insurance coverage on our facilities.

In August 2018, a transformer outage and electrical fire occurred at our Dayton, Texas manufacturing facility, which resulted in the temporary curtailment of operations. Alternative power arrangements for the facility were subsequently made that allowed operations to continue until permanent repairs were completed during the first quarter of 2019. We reached a final settlement on the property damage and business interruption claim with our insurance carrier in 2019 . During 2019, we received $2.2 million of insurance proceeds related to the claim that was partially applied against the beginning receivable balance of $462,000 with the remainder recorded in other income ($1.1 million), cost of sales ($645,000) and SG&A expense ($48,000) on the consolidated statements of operations.

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In August 2017, operations at our manufacturing facility located in Dayton, Texas were adversely affected by hurricane Harvey. We reached a final settlement on the property damage and business interruption claim with our insurance carrier in 2019. During 2019, we received $150,000 of proceeds related to this claim of which $98,000 was recorded in other income on the consolidated statements of operations.

The insurance proceeds attributable to the property and equipment damaged are reported in cash flows from investing activities and all other insurance proceeds received are reported in cash flows from operating activities on the consolidated statements of cash flows.

Purchase commitments. As of October 2, 2021, we had $125.3 million in non-cancelable purchase commitments for raw material extending as long as approximately 100 days and $3.6 million of contractual commitments for the purchase of certain equipment that had not been fulfilled and are not reflected in our consolidated financial statements.

Legal proceedings. We are involved in lawsuits, claims, investigations and proceedings, including commercial, environmental and employment matters, which arise in the ordinary course of business. We do not expect the ultimate outcome or cost to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows.

Severance and change of control agreements. We have entered into a severance agreement with our Chief Executive Officer that provides him with certain termination benefits in the event his employment with us is terminated without cause. The initial term of the agreement was two years and it automatically renews for successive one year terms unless we or our Chief Executive Officer provide notice of termination as specified in the agreement. In the event of termination of the Chief Executive Officer’s employment without cause, this agreement provides that he would receive termination benefits equal to one and one-half times his annual base salary in effect on the termination date and the continuation of health and welfare benefits for eighteen months. In addition, all of his stock options and restricted stock would vest immediately, and outplacement services would be provided.

We have also entered into change in control agreements with key members of management, including our executive officers, which specify the terms of separation in the event that termination of their employment followed a change in control. The initial term of each agreement is two years and they automatically renew for successive one year terms unless we or the executive provide notice of termination as specified in the agreement. The agreements do not provide assurances of continued employment or specify the terms of an executive’s termination should one occur in the absence of a change in control. The compensation payable under the terms of these agreements differs between the Chief Executive Officer and the other covered executives. In the event of termination of the Chief Executive Officer within two years of a change of control, he would receive severance benefits equal to two times base compensation, two times the average bonus for the prior three years and the continuation of health and welfare benefits for two years. In the event of such a termination of the other key members of management, including our other three executive officers, within two years of a change of control, they would receive severance benefits equal to one times base compensation, one times the average bonus for the prior three years and the continuation of health and welfare benefits for one year. In addition, for any covered executive that is terminated within two years of a change of control, all of their stock options and restricted stock would vest immediately, and outplacement services would be provided.

(13) Leases

We have operating leases for certain equipment, office space and vehicles. We determine whether an arrangement is a lease at its inception if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases with an initial term of twelve months or less are not recorded on our consolidated balance sheet. Lease expense for operating leases with original terms of more than twelve months was $1.4 million in 2021, $1.3 million in 2020 and $1.6 million in 2019.

Most of our leases include options to extend or terminate the leases which are exercised at our sole discretion. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate as of the commencement date in determining the present value of lease payments, which represents an estimate of the interest rate we would incur at the lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term.

Supplemental cash flow and non-cash information related to leases is as follows:

	Year Ended
(In thousands)	October 2, 2021		October 3, 2020
Cash paid for operating leases included in operating cash flows	$	1,413	$	1,301
Right-of-use assets obtained in exchange for new lease obligations		579		1,771

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Supplemental balance sheet information related to leases is as follows:

(In thousands)	October 2, 2021		October 3, 2020
Right-of-use assets:
Other assets	$	1,717	$	2,522
Lease liabilities:
Accrued expenses		1,030		1,230
Other liabilities		695		1,300
Total operating lease liabilities	$	1,725	$	2,530

The weighted average remaining lease terms and discount rates for operating leases are as follows:

	October 2, 2021			October 3, 2020
Weighted average lease term (in years)		1.8			2.3
Weighted average discount rate		4.1	%		4.4	%

Aggregate future operating lease payments as of October 2, 2021 are as follows:

(In thousands)
2022	$	1,075
2023		583
2024		129
2025		2
2026		-
Thereafter		-
Total future operating lease payments		1,789
Less: imputed interest		(64	)
Present value of lease liabilities	$	1,725

(14) Earnings Per Share

The computation of basic and diluted earnings per share attributable to common shareholders is as follows:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands, except per share amounts)	2021		2020		2019
Net earnings	$	66,610	$	19,009	$	5,598
Basic weighted average shares outstanding		19,344		19,278		19,243
Dilutive effect of stock-based compensation		190		105		97
Diluted weighted average shares outstanding		19,534		19,383		19,340
Net earnings per share:
Basic	$	3.44	$	0.99	$	0.29
Diluted		3.41		0.98		0.29

Options and RSUs that were antidilutive and not included in the diluted EPS calculation amounted to 142,000 shares in 2021, 369,000 shares in 2020 and 240,000 shares in 2019.

(15) Business Segment Information

Our operations are entirely focused on the manufacture and marketing of steel wire reinforcing products for concrete construction applications. Our concrete reinforcing products consist of two product lines: PC strand and WWR. Based on the criteria specified in ASC Topic 280, Segment Reporting, we have one reportable segment.

41

 

Our net sales by geographic region are as follows:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Net sales:
United States	$	583,458	$	470,420	$	454,373
Foreign		7,143		2,198		1,340
Total	$	590,601	$	472,618	$	455,713

Our sales by product line are as follows:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Net sales:
Welded wire reinforcement	$	358,334	$	294,129	$	290,423
Prestressed concrete strand		232,267		178,489		165,290
Total	$	590,601	$	472,618	$	455,713

There were no customers that accounted for 10% or more of our net sales in 2021, 2020 and 2019.

(16) Related Party Transactions

Sales to a company affiliated with one of our former directors amounted to $716,000 in 2019. There were no related party transactions in 2021 or 2020.

42

 

(17) Other Financial Data

Balance sheet information:

	October 2,			October 3,
(In thousands)	2021			2020
Accounts receivable, net:
Accounts receivable	$	68,274		$	54,108
Less allowance for credit losses		(357	)		(291	)
Total	$	67,917		$	53,817
Inventories:
Raw materials	$	50,459		$	31,553
Work in process		6,680			3,813
Finished goods		21,910			33,597
Total	$	79,049		$	68,963
Other current assets:
Prepaid insurance	$	5,169		$	4,096
Other		4,887			1,474
Total	$	10,056		$	5,570
Other assets:
Cash surrender value of life insurance policies	$	12,501		$	10,584
Assets held for sale		6,306			7,778
Right-of-use assets		1,717			2,522
Capitalized financing costs, net		106			170
Other		137			106
Total	$	20,767		$	21,160
Property, plant and equipment, net:
Land and land improvements	$	14,554		$	14,520
Buildings		53,182			52,462
Machinery and equipment		180,654			172,617
Construction in progress		10,191			3,978
		258,581			243,577
Less accumulated depreciation		(152,957	)		(142,185	)
Total	$	105,624		$	101,392
Accrued expenses:
Salaries, wages and related expenses	$	8,229		$	4,971
Income taxes		4,014			1,201
Customer rebates		2,354			1,581
Property taxes		1,575			1,726
Operating lease liabilities		1,030			1,230
Sales allowance reserves		991			-
State sales and use taxes		760			544
Holdback for business acquired		-			1,000
Other		453			2,464
Total	$	19,406		$	14,717
Other liabilities:
Deferred compensation	$	12,832		$	11,553
Deferred income taxes		6,296			6,568
Operating lease liabilities		695			1,300
Total	$	19,823		$	19,421

43

 

(18) Product Warranties

Our products are used in applications which are subject to inherent risks including performance deficiencies, personal injury, property damage, environmental contamination or loss of production. We warrant our products to meet certain specifications, and actual or claimed deficiencies from these specifications may give rise to claims. We do not maintain a reserve for warranties as the historical claims have been immaterial. We maintain product liability insurance coverage to minimize our exposure to such risks.

(19) Share Repurchases

On November 18, 2008, our Board of Directors approved a share repurchase authorization to buy back up to $25.0 million of our outstanding common stock (the “Authorization”). Under the Authorization, repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors. We are not obligated to acquire any particular amount of common stock and the program may be commenced or suspended at any time at our discretion without prior notice. The Authorization continues in effect until terminated by the Board of Directors. As of October 2, 2021, there was $24.8 million remaining available for future share repurchases under this Authorization. There were no share repurchases during 2021, 2020 or 2019.

44

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED FINANCIAL STATEMENTS

Board of Directors and Shareholders

Insteel Industries, Inc.:

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Insteel Industries, Inc. (a North Carolina corporation) and subsidiaries (the “Company”) as of October 2, 2021 and October 3, 2020, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended October 2, 2021, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 2, 2021 and October 3, 2020 and the results of its operations and its cash flows for each of the three years in the period ended of October 2, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of October 2, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated October 28, 2021 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined there are no critical audit matters.

/s/ Grant Thornton LLP

We have served as the Company’s auditor since fiscal 2002.

Charlotte, North Carolina

October 28, 2021

45

                           SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED OCTOBER 2, 2021, OCTOBER 3, 2020 AND SEPTEMBER 28, 2019

ALLOWANCE FOR CREDIT LOSSES

(In thousands)

	Year Ended
	October 2,			October 3,			September 28,
	2021			2020			2019
Balance, beginning of year	$	291		$	254		$	295
Amounts charged to earnings		80			65			(41	)
Write-offs, net of recoveries		(14	)		(28	)		-
Balance, end of year	$	357		$	291		$	254

46

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of October 2, 2021. This evaluation was conducted under the supervision and with the participation of management, including our principal executive officer and our principal financial officer. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Furthermore, we concluded that our disclosure controls and procedures were effective to ensure that such information is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes: (1) maintaining records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets; (2) providing reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are made only in accordance with authorizations of management and directors; and (3) providing reasonable assurance that unauthorized acquisition, use or disposition of assets that could have a material effect on financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting can only provide reasonable assurance that a misstatement of financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control – Integrated Framework. Based on this assessment, our management concluded that our internal control over financial reporting was effective as of October 2, 2021. During the quarter ended October 2, 2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our independent registered public accounting firm has issued an audit report on the effectiveness of our internal control over financial reporting as of October 2, 2021, which appears below.

47

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Shareholders
Insteel Industries, Inc.:

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Insteel Industries, Inc. (a North Carolina corporation) and subsidiaries (the “Company”) as of October 2, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 2, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended October 2, 2021, and our report dated October 28, 2021 expressed an unqualified on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Reports on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Grant Thornton LLP

Charlotte, North Carolina

October 28, 2021

48

Item 9B. Other Information.

None

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information called for by this item and not presented herein appears under the captions “Item Number One: Election of Directors”, “Security Ownership of Directors and Executive Officers – Delinquent Section 16(a) Reports” and “Corporate Governance Guidelines and Board Matters” in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated herein by reference. Information on executive officers appears under the caption “Information About Our Executive Officers” in Part I of this report.

We have adopted a Code of Business Conduct that applies to all directors, officers and employees, which is available on our website at https://investors.insteel.com. To the extent permissible under applicable law (the rules of the SEC or NYSE listing standards), we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting on our website any amendment or waiver to a provision of our Code of Business Conduct that requires disclosure under applicable law (the rules of the SEC or NYSE listing standards). Our website does not constitute part of this Annual Report on Form 10-K.

Item 11. Executive Compensation.

The information called for by this item appears under the captions “Executive Compensation”, “Compensation Committee Interlocks and Insider Participation” and “Director Compensation” in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information called for by this item appears under the captions “Security Ownership of Certain Beneficial Owners”, “Security Ownership of Directors and Executive Officers” and “Equity Compensation Plan Information” in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information called for by this item appears under the captions “Certain Relationships and Related Person Transactions” and “Corporate Governance Guidelines and Board Matters” in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

The information called for by this item appears under the caption “Item Number Three: Ratification of the Appointment of Grant Thornton LLP” in our Proxy Statement for the 2022 Annual Meeting of Shareholders and is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements

The financial statements as set forth under Item 8 are filed as part of this report.

(a)(2) Financial Statement Schedules

Supplemental Schedule II - Valuation and Qualifying Accounts appears on page 46 of this report.

All other schedules have been omitted because they are either not required or not applicable.

49

(a)(3) Exhibits

The list of exhibits filed as part of this annual report is set forth on the Exhibit Index immediately preceding the signatures to this annual report and is incorporated herein by reference.

(b) Exhibits

See Exhibit Index on pages 50 and 51.

(c) Financial Statement Schedules

See Item 15(a)(2) above.

Item 16. Form 10-K Summary

None.

EXHIBIT INDEX
Exhibit Number	Description
2.1	Asset Purchase Agreement between Insteel Wire Products Company and American Spring Wire Corporation dated as of August 9, 2014 (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K filed on August 11, 2014).
3.1	Restated Articles of Incorporation for the Company (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 filed on May 2, 1985).
3.2	Articles of Amendment to the Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated May 3, 1988).
3.3	Articles of Amendment to the Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 1999 filed on May 14, 1999).
3.4	Articles of Amendment to the Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2010 filed on April 26, 2010).
3.5	Bylaws of the Company (as last amended December 19, 2016) (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed on January 19, 2017).
4.1	Rights Agreement dated April 27, 1999 by and between the Company and First Union National Bank, as Rights Agent (incorporated by reference to Exhibit 99.1 of the Company’s Registration Statement on Form 8-A filed on May 7, 1999).
4.2	Amendment No. 1 to the Rights Agreement dated as of April 25, 2009, between the Company and American Stock Transfer & Trust Company, LLC (as Successor Rights Agent to First Union National Bank) (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on April 27, 2009).
4.3	Amendment No. 2 to the Rights Agreement, dated as of November 15, 2018, by and between the Company and American Stock Transfer & Trust Company, LLC (as Successor Rights Agent to First union National Bank) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on November 19, 2018).
4.4	Description of Securities (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K filed on October 25, 2019).
10.1	Second Amended and Restated Credit Agreement dated as of June 2, 2010, among Insteel Wire Products Company, as Borrower; Insteel Industries, Inc., as a Credit Party; Intercontinental Metals Corporation, as a Credit Party; and General Electric Capital Corporation, as Agent and Lender (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q filed on April 26, 2011).
10.2	First Amendment to Second Amended and Restated Credit Agreement dated as of February 6, 2012, among Insteel Wire Products Company, as Borrower; Insteel Industries, Inc. as a Credit Party; Intercontinental Metals Corporation, as a Credit Party; and General Electric Capital Corporation, as Agent and Lender (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 6, 2012).
10.3	Second Amendment to Second Amended and Restated Credit Agreement dated as of May 13, 2015, among Insteel Wire Products Company, as Borrower; Insteel Industries, Inc., as a Credit Party; Intercontinental Metals Corporation, as a Credit Party; and General Electric Capital Corporation, as Agent and Lender (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May 14, 2015).
10.4	Third Amended and Restated Credit Agreement dated as of May 15, 2019, among Insteel Wire Products Company, as Borrower; Insteel Industries, Inc., as a Credit Party; and Wells Fargo Bank, as Agent and Lender (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 16, 2019).
10.5	Guaranty and Second Amended and Restated Security Agreement dated as of May 15, 2019, among Insteel Industries, Inc., Insteel Wire Products Company, Intercontinental Metals Corporation, and Wells Fargo Bank, as administrative agent  (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed May 16, 2019).
10.6*	Form of Amended and Restated Change in Control Severance Agreements between the Company and each of H.O. Woltz III and Michael C. Gazmarian, respectively, each dated November 14, 2006; each agreement is substantially identical to the form in all material respects (incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K filed on November 16, 2006).
10.7*	Form of Amended and Restated Severance Agreements with H.O. Woltz III and Michael C. Gazmarian dated November 14, 2006 (each agreement is substantially identical to the form in all material respects) (incorporated by reference to Exhibit 99.6 of the Company's Current Report on Form 8-K filed on November 16, 2006).
10.8*	Change in Control Severance Agreement between the Company and James F. Petelle dated November 14, 2006 (incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K filed on November 16, 2006).
10.9*	Amended and Restated Retirement Security Agreement by and between the Company and H.O. Woltz III dated September 19, 2007 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on September 21, 2007).
10.10*	Form of Retirement Security Agreement between the Company and each of Michael C. Gazmarian, James F. Petelle and Richard T. Wagner, respectively, dated September 19, 2007; each agreement is substantially identical to the form in all material respects (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed on September 21, 2007).

50

EXHIBIT INDEX
Exhibit Number	Description
10.11*	Letter of Employment between the Company and James F. Petelle, dated August 23, 2006 (incorporated by reference to Exhibit 99.7 of the Company’s Current Report on Form 8-K filed on November 16, 2006).
10.12*	Amended and Restated Change in Control Severance Agreement between the Company and Richard T. Wagner dated November 14, 2006 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on February 15, 2007).
10.13*	2005 Equity Incentive Plan of Insteel Industries, Inc., as amended on November 8, 2011 (incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended October 1, 2011 filed on November 10, 2011).
10.14*	Summary of amendments to the Insteel Industries, Inc. Director Compensation Plan (incorporated by reference to exhibit 10.23 of the Company's Annual Report on Form 10-K for the fiscal year ended September 27, 2008 filed on November 18, 2008).
10.15*	Form of Notice of Grant of Restricted Stock Units and Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on January 23, 2009).
10.16*	Insteel Industries, Inc. Return on Capital Incentive Compensation Plan (as amended and restated effective August 12, 2008) (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on February 13, 2009).
10.17*	Form of Amendment to 2005 Equity Incentive Plan of Insteel Industries, Inc. dated August 20, 2013 (incorporated by reference to Exhibit 10.20 of the Company's Annual Report on Form 10-K filed on October 29, 2013).
10.18*	2015 Equity Incentive Plan of Insteel Industries, Inc. (incorporated by reference to Exhibit 99 filed with the Company’s Registration Statement on Form S-8, filed with the SEC on February 17, 2015 (File No. 333-202128)).
10.19*	Form of Restricted Stock Unit Agreement under the 2015 Equity Incentive Plan of Insteel Industries, Inc. (incorporated by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K filed on October 25, 2019).
10.20*	Form of Stock Option Agreement under the 2015 Equity Incentive Plan of Insteel Industries, Inc. (incorporated by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K filed on October 25, 2019).
10.21*	2019 Declaration of Amendment to 2015 Equity Incentive Plan of Insteel Industries, Inc. (incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 filed on February 28, 2020 (File No. 333-236744)).
10.22*	Offer Letter to Mark A. Carano (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 4, 2020).
10.23*	Change in Control Severance Agreement between Insteel Industries Inc. and Mark A. Carano, dated May 27, 2020 (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q filed on July 16, 2020).
10.24*	Insteel Industries Inc. Retirement Security Agreement between Insteel Industries Inc. and Mark A. Carano, dated May 27, 2020 (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q filed on July 16, 2020).
21.1	List of Subsidiaries of Insteel Industries, Inc. at October 2, 2021.
23.1	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from our Annual Report on Form 10-K for the fiscal year ended October 2, 2021, filed on October 28, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language) includes: (i) the Consolidated Statements of Operations for the years ended October 2, 2021, October 3, 2020 and September 28, 2019, (ii) the Consolidated Statements of Comprehensive Income for the years ended October 2, 2021, October 3, 2020 and September 28, 2019, (iii) the Consolidated Balance Sheets as of October 2, 2021 and October 3, 2020, (iv) the Consolidated Statements of Cash Flows for the years ended October 2, 2021, October 3, 2020 and September 28, 2019, (v) the Consolidated Statements of Shareholders’ Equity as of October 2, 2021, October 3, 2020 and September 28, 2019 and (vi) the Notes to Consolidated Financial Statements.
104	The cover page from our Annual Report on Form 10-K for the year ended October 2, 2021, filed October 28, 2021, formatted in iXBRL (included in Exhibit 101).
*	Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
	Our SEC file number reference for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 1-09929.

51

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		INSTEEL INDUSTRIES, INC.
		Registrant
Date: October 28, 2021	By:	/s/ Mark A. Carano
		Mark A. Carano
		Senior Vice President, Chief Financial Officer and      Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on October 28, 2021 below by the following persons on behalf of the registrant and in the capacities indicated:

Name and Signature	Position(s)
/s/ H. O. WOLTZ III      H. O. WOLTZ III	President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
/s/ MARK A. CARANO      MARK A. CARANO	Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
/s/ SCOT R. JAFROODI      SCOT R. JAFROODI	Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer)
/s/ ABNEY S. BOXLEY III      ABNEY S. BOXLEY III	Director
/s/ ANNE H. LLOYD      ANNE H. LLOYD	Director
/s/ W. ALLEN ROGERS II      W. ALLEN ROGERS II	Director
/s/ JON M. RUTH      JON M. RUTH	Director
/s/ JOSEPH A. RUTKOWSKI      JOSEPH A. RUTKOWSKI	Director
/s/ G. KENNEDY THOMPSON      G. KENNEDY THOMPSON	Director

52

EX-21.1

Exhibit 21.1

List of Subsidiaries of Insteel Industries, Inc.

The following is a list of our subsidiaries as of October 2, 2021, each of which is wholly-owned:

Name	State or Other Jurisdiction of Incorporation
Insteel Wire Products Company	North Carolina
Intercontinental Metals Corporation	North Carolina

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We have issued our reports dated October 28, 2021 with respect to the consolidated financial statements, schedule, and internal control over financial reporting included in the Annual Report of Insteel Industries, Inc. on Form 10-K for the year ended October 2, 2021. We consent to the incorporation by reference of said reports in the Registration Statements of Insteel Industries, Inc. on Forms S-8 (File No. 333-236744, File No. 333-48011, File No. 333-30934, File No. 333-123325, File No. 333-179670 and File No. 333-202128).

/s/ Grant Thornton LLP

Charlotte, North Carolina

October 28, 2021

EX-31.1

Exhibit 31.1

CERTIFICATION

I, H. O. Woltz III, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended October 2, 2021 of Insteel Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 28, 2021

/s/ H. O. Woltz III

H. O. Woltz III

President, Chief Executive Officer and Chairman of the Board

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mark A. Carano, certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended October 2, 2021 of Insteel Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 28, 2021

/s/ Mark A. Carano

Mark A. Carano

Senior Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Insteel Industries, Inc. (the “Company”) for the period ended October 2, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, H. O. Woltz III, President, Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)         the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)         the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ H. O. Woltz III

     H. O. Woltz III

     President, Chief Executive Officer and Chairman of the Board

     October 28, 2021

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Insteel Industries, Inc. (the “Company”) for the period ended October 2, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark A. Carano, Senior Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)         the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)         the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mark A. Carano

     Mark A. Carano

     Senior Vice President, Chief Financial Officer and Treasurer

     October 28, 2021

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Document And Entity Information - USD ($)	12 Months Ended
	Oct. 02, 2021	Oct. 27, 2021	Apr. 03, 2021
Document Information [Line Items]
Entity Central Index Key	0000764401
Entity Registrant Name	INSTEEL INDUSTRIES INC
Amendment Flag	false
Current Fiscal Year End Date	--10-02
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2021
Document Type	10-K
Document Annual Report	true
Document Period End Date	Oct. 02, 2021
Document Transition Report	false
Entity File Number	1-9929
Entity Incorporation, State or Country Code	NC
Entity Tax Identification Number	56-0674867
Entity Address, Address Line One	1373 Boggs Drive
Entity Address, City or Town	Mount Airy
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	27030
City Area Code	336
Local Phone Number	786‑2141
Title of 12(b) Security	Common Stock (No Par Value)
Trading Symbol	IIIN
Security Exchange Name	NYSE
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 491,142,483
Entity Common Stock, Shares Outstanding		19,407,980
ICFR Auditor Attestation Flag	true

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Net sales	$ 590,601	$ 472,618	$ 455,713
Cost of sales	469,053	416,831	425,652
Gross profit	121,548	55,787	30,061
Selling, general and administrative expense	32,388	31,348	24,504
Restructuring charges, net	2,868	1,695	0
Acquisition costs	0	195	0
Other expense (income), net	114	(1,254)	(1,773)
Interest expense	96	106	168
Interest income	(21)	(473)	(293)
Earnings before income taxes	86,103	24,170	7,455
Income taxes	19,493	5,161	1,857
Net earnings	$ 66,610	$ 19,009	$ 5,598
Net earnings per share:
Basic (in dollars per share)	$ 3.44	$ 0.99	$ 0.29
Diluted (in dollars per share)	3.41	0.98	0.29
Cash dividends declared (in dollars per share)	$ 1.62	$ 0.12	$ 0.12
Weighted average shares outstanding:
Basic (in shares)	19,344	19,278	19,243
Diluted (in shares)	19,534	19,383	19,340

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands		12 Months Ended
		Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Net earnings		$ 66,610	$ 19,009	$ 5,598
Adjustment to defined benefit plan liability, net of income taxes of $154, ($93) and $239, respectively		(486)	292	(754)
Other comprehensive (loss) income	[1]	(486)	292	(754)
Comprehensive income		$ 66,124	$ 19,301	$ 4,844

[1] Activity within accumulated other comprehensive income (loss) is reported net of related income taxes: 2019 $239, 2020 ($93)and 2021 $154.

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Consolidated Statements of Comprehensive Income (Parentheticals) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Adjustment to defined benefit plan liability, income taxes	$ 154	$ (93)	$ 239

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Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 02, 2021	Oct. 03, 2020
Assets:
Cash and cash equivalents	$ 89,884	$ 68,688
Accounts receivable, net	67,917	53,817
Inventories	79,049	68,963
Other current assets	10,056	5,570
Total current assets	246,906	197,038
Property, plant and equipment, net	105,624	101,392
Intangibles, net	7,668	8,567
Goodwill	9,745	9,745
Other assets	20,767	21,160
Total assets	390,710	337,902
Liabilities and shareholders’ equity:
Accounts payable	49,443	38,961
Accrued expenses	19,406	14,717
Total current liabilities	68,849	53,678
Other liabilities	19,823	19,421
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value Authorized shares: 1,000 None issued	0	0
Common stock, $1 stated value Authorized shares: 50,000 Issued and outstanding shares: 2021, 19,408; 2020, 19,304	19,408	19,304
Additional paid-in capital	78,688	76,387
Retained earnings	206,384	171,068
Accumulated other comprehensive loss	(2,442)	(1,956)
Total shareholders’ equity	302,038	264,803
Total liabilities and shareholders’ equity	$ 390,710	$ 337,902

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Consolidated Balance Sheets (Parentheticals) - $ / shares shares in Thousands	Oct. 02, 2021	Oct. 03, 2020
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	1,000	1,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	50,000	50,000
Common stock, shares issued (in shares)	19,408	19,304

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Consolidated Statements of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands		Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Sep. 29, 2018		19,223
Balance at Sep. 29, 2018		$ 19,223	$ 72,852	$ 151,084	$ (1,494)	$ 241,665
Net earnings				5,598		5,598
Other comprehensive (loss) income	[1]				(754)	(754)
Vesting of restricted stock units (in shares)		38
Vesting of restricted stock units		$ 38	(38)			0
Compensation expense associated with stock-based plans			2,057			2,057
Restricted stock units and stock options surrendered for withholding taxes payable			(239)			(239)
Cash dividends declared				(2,310)		$ (2,310)
Stock options exercised (in shares)						5
Balance (in shares) at Sep. 28, 2019		19,261
Balance at Sep. 28, 2019		$ 19,261	74,632	154,372	(2,248)	$ 246,017
Net earnings				19,009		19,009
Other comprehensive (loss) income	[1]				292	292
Vesting of restricted stock units (in shares)		43
Vesting of restricted stock units		$ 43	(43)			0
Compensation expense associated with stock-based plans			2,028			2,028
Restricted stock units and stock options surrendered for withholding taxes payable			(230)			(230)
Cash dividends declared				(2,313)		(2,313)
Balance (in shares) at Oct. 03, 2020		19,304
Balance at Oct. 03, 2020		$ 19,304	76,387	171,068	(1,956)	264,803
Net earnings				66,610		66,610
Other comprehensive (loss) income	[1]				(486)	(486)
Vesting of restricted stock units (in shares)		30
Vesting of restricted stock units		$ 30	(30)			0
Compensation expense associated with stock-based plans			1,988			1,988
Restricted stock units and stock options surrendered for withholding taxes payable			(665)			(665)
Cash dividends declared				(31,294)		$ (31,294)
Stock options exercised (in shares)		74				128
Stock options exercised		$ 74	1,008			$ 1,082
Balance (in shares) at Oct. 02, 2021		19,408
Balance at Oct. 02, 2021		$ 19,408	$ 78,688	$ 206,384	$ (2,442)	$ 302,038

[1] Activity within accumulated other comprehensive income (loss) is reported net of related income taxes: 2019 $239, 2020 ($93)and 2021 $154.

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Consolidated Statements of Shareholders' Equity (Parentheticals) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Other comprehensive (loss) income, related income taxes	$ 154	$ (93)	$ 239

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Cash Flows From Operating Activities:
Net earnings	$ 66,610,000	$ 19,009,000	$ 5,598,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	14,521,000	14,255,000	13,553,000
Amortization of capitalized financing costs	65,000	66,000	65,000
Stock-based compensation expense	1,988,000	2,028,000	2,057,000
Deferred income taxes	(118,000)	(424,000)	1,798,000
Asset impairment charges	1,415,000	343,000	0
Loss (gain) on sale and disposition of property, plant and equipment	125,000	(1,114,000)	(1,688,000)
Increase in cash surrender value of life insurance policies over premiums paid	(1,533,000)	(243,000)	(187,000)
Gain from life insurance proceeds	0	(200,000)	0
Net changes in assets and liabilities (net of assets and liabilities acquired):
Accounts receivable, net	(14,100,000)	(5,806,000)	7,302,000
Inventories	(10,086,000)	5,060,000	23,306,000
Accounts payable and accrued expenses	11,891,000	20,159,000	(42,592,000)
Other changes	(900,000)	3,091,000	(2,604,000)
Total adjustments	3,268,000	37,215,000	1,010,000
Net cash provided by operating activities	69,878,000	56,224,000	6,608,000
Cash Flows From Investing Activities:
Acquisition of business	0	(18,356,000)	0
Capital expenditures	(17,500,000)	(7,114,000)	(10,512,000)
Proceeds from property insurance	0	0	1,192,000
Proceeds from sale of property, plant and equipment	0	40,000	19,000
Proceeds from surrender of life insurance policies	32,000	260,000	67,000
Increase in cash surrender value of life insurance policies	(416,000)	(390,000)	(322,000)
Proceeds from sale of assets held for sale	79,000	2,186,000	0
Proceeds from life insurance claims	0	200,000	0
Net cash used for investing activities	(17,805,000)	(23,174,000)	(9,556,000)
Cash Flows From Financing Activities:
Proceeds from long-term debt	297,000	322,000	44,333,000
Principal payments on long-term debt	(297,000)	(322,000)	(44,333,000)
Cash dividends paid	(31,294,000)	(2,313,000)	(2,310,000)
Cash received from exercise of stock options	1,082,000	0	0
Payment of employee tax withholdings related to net share transactions	(665,000)	(230,000)	(239,000)
Financing costs	0	0	(263,000)
Net cash used for financing activities	(30,877,000)	(2,543,000)	(2,812,000)
Net increase (decrease) in cash and cash equivalents	21,196,000	30,507,000	(5,760,000)
Cash and cash equivalents at beginning of period	68,688,000	38,181,000	43,941,000
Cash and cash equivalents at end of period	89,884,000	68,688,000	38,181,000
Supplemental Disclosures of Cash Flow Information:
Interest	0	0	49,000
Income taxes, net	16,799,000	1,919,000	1,743,000
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable	501,000	769,000	377,000
Restricted stock units and stock options surrendered for withholding taxes payable	665,000	230,000	239,000
Payable related to holdback for business acquired	$ 0	$ 1,000,000	$ 0

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Note 1 - Description of Business

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

(1) Description of Business

Insteel Industries, Inc. (“we,” “us,” “our,” “Insteel” or “the Company”) is the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. Insteel is the parent holding company for two wholly-owned subsidiaries, Insteel Wire Products Company (“IWP”), an operating subsidiary, and Intercontinental Metals Corporation, an inactive subsidiary. We manufacture and market prestressed concrete strand (“PC strand”) and welded wire reinforcement (“WWR”), including engineered structural mesh, concrete pipe reinforcement and standard welded wire reinforcement. Our products are primarily sold to manufacturers of concrete products and, to a lesser extent, distributors, rebar fabricators and contractors. We sell our products nationwide across the United States (“U.S.”) and, to a much lesser extent, into Canada, Mexico, and Central and South America.

On March 16, 2020, we, through our wholly-owned subsidiary, IWP, purchased substantially all of the assets of Strand-Tech Manufacturing, Inc. (“STM”) (see Note 5 to the consolidated financial statements).

We have evaluated all subsequent events that occurred after the balance sheet date through the time of filing this Annual Report on Form 10-K and concluded there were no events or transactions during this period that required additional recognition or disclosure in our consolidated financial statements.

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Note 2 - Summary of Significant Accounting Policies

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Significant Accounting Policies [Text Block]

(2) Summary of Significant Accounting Policies

Fiscal year. Our fiscal year is the 52 or 53 weeks ending on the Saturday closest to September 30. Fiscal years 2021 and 2019 were 52-week periods and fiscal year 2020 was a 53-week period. All references to years relate to fiscal years rather than calendar years.         

Principles of consolidation. The consolidated financial statements include the accounts of Insteel and our subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There is no assurance that actual results will not differ from these estimates.

Cash equivalents. We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Concentration of credit risk. Financial instruments that subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Our cash is principally concentrated at one financial institution, which at times exceeds federally insured limits. We are exposed to credit risk in the event of default by institutions in which our cash and cash equivalents are held and by customers to the extent of the amounts recorded on the balance sheet. We invest excess cash primarily in money market funds, which are highly liquid securities.

The majority of our accounts receivable are due from customers that are located in the U.S. and are generally not secured by collateral depending upon the creditworthiness of the account. We provide an allowance for credit losses based upon our assessment of the credit risk of specific customers, historical trends and other information. We write off accounts receivable when they become uncollectible. There is no disproportionate concentration of credit risk.

Stock-based compensation. We account for stock-based compensation in accordance with the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “Compensation – Stock Compensation”, which requires stock-based compensation expense to be recognized in net earnings based on the fair value of the award on the date of the grant. We account for forfeitures as they occur. We determine the fair value of stock options issued by using a Monte Carlo valuation model at the grant date, which considers a range of assumptions including the expected term, volatility, dividend yield and risk-free interest rate.

Employee benefit plan. We account for our supplemental retirement benefit agreements (each, a “SRBA”) in accordance with ASC Topic 715, “Compensation - Retirement Benefits”. Under the provisions of ASC Topic 715, we recognize net periodic pension cost and value liabilities based on certain actuarial assumptions, principally the assumed discount rate.

The discount rate we utilize for determining net periodic pension cost and the related benefit obligation for the SRBAs is based, in part, on current interest rates earned on long-term bonds that receive one of the two highest ratings assigned by recognized rating agencies. Our discount rate assumptions are adjusted as of each valuation date to reflect current interest rates on such long-term bonds. The discount rate is used to determine the actuarial present value of the benefit obligations as of the valuation date as well as the interest component of the net periodic pension cost for the following year. We currently expect net periodic pension cost for 2022 to be $1.0 million for the SRBAs. Cash contributions to the SRBAs during 2022 are expected to be $576,000.

The assumed discount rate is reevaluated annually. A reduction in the assumed discount rate generally results in an actuarial loss, as the actuarially-determined present value of estimated future benefit payments will increase. Conversely, an increase in the assumed discount rate generally results in an actuarial gain. However, any actuarial gains generated in future periods reduce the negative amortization effect of any cumulative unamortized actuarial losses, while any actuarial losses generated in future periods reduce the favorable amortization effect of any cumulative unamortized actuarial gains.

The projected benefit obligations and net periodic pension cost for the SRBAs are based in part on expected increases in future compensation levels. Our assumption for the expected increase in future compensation levels is based upon our average historical experience and our intentions regarding future compensation increases, which generally approximates average long-term inflation rates. A 0.25% decrease in the assumed discount rate for our SRBAs would have increased our projected and accumulated benefit obligations as of October 2, 2021 by approximately $356,000 and $293,000, respectively, and our expected net periodic pension cost for 2022 by approximately $39,000.

Revenue recognition. We recognize revenues when obligations under the terms of a contract with our customers are satisfied, which generally occurs when products are shipped and control is transferred. Revenue is measured as the amount of consideration expected to be received in exchange for our products.

Inventories. Inventories are valued at the lower of weighted average cost (which approximates computation on a first-in, first-out basis) and net realizable value. The valuation of inventory includes the costs for material, labor and manufacturing overhead.

Property, plant and equipment. Property, plant and equipment are recorded at cost or fair market value in the case of the assets acquired through acquisitions, or otherwise at reduced values to the extent there have been asset impairment write-downs. Expenditures for maintenance and repairs are charged directly to expense when incurred, while major improvements are capitalized. Depreciation is computed for financial reporting purposes principally by use of the straight-line method over the following estimated useful lives: machinery and equipment, 3 - 15 years; buildings, 10 - 30 years; and land improvements, 5 - 15 years. Depreciation expense was approximately $13.6 million in 2021, $13.2 million in 2020 and $12.5 million in 2019 and reflected in cost of sales and selling, general and administrative expense (“SG&A expense”) in the consolidated statements of operations. Capitalized software is amortized over the shorter of the estimated useful life or 5 years and reflected in SG&A expense. No interest costs were capitalized in 2021, 2020 and 2019.

Goodwill. Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not amortized but is tested annually for impairment and whenever events or circumstances change that would make it more likely than not that an impairment may have occurred. We perform our annual impairment analysis as of the first day of the fourth quarter each year. The evaluation of impairment involves comparing the current estimated fair value of the reporting unit to its recorded value, including goodwill. We perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. It may be necessary to perform a quantitative analysis where a discounted cash flow model is used to determine the current estimated fair value of the reporting unit. Key assumptions used to determine the fair value of the reporting unit as part of our annual testing (and any required interim testing) include: (a) expected cash flows for the five-year period following the testing date; (b) an estimated terminal value using a terminal year growth rate based on the growth prospects of the reporting unit; (c) a discount rate based on our estimated after-tax weighted average cost of capital; and (d) a probability-weighted scenario approach by which varying cash flows are assigned to alternative scenarios based on their likelihood of occurrence. In developing these assumptions, we consider historical and anticipated future results, general economic and market conditions, the impact of planned business and operational strategies and all available information at the time the fair value of the reporting unit is estimated. Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity. Changes in assumptions and estimates may affect the fair value of goodwill and could result in impairment charges in future periods. Based on the results of our impairment analysis, no goodwill impairment losses were recognized in the consolidated statements of operations for 2021, 2020 and 2019. Subsequent to the analysis, there have been no events or circumstances that indicate any potential impairment of goodwill.

Long-lived assets. Long-lived assets include property, plant and equipment and identifiable intangible assets with definite useful lives. Finite-lived intangible assets are amortized over their estimated useful lives. Our intangible assets consist of customer relationships, developed technology and know-how, non-competition agreements and trade names, and are being amortized on a straight-line basis over their finite useful lives (see Note 7 to the consolidated financial statements). We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. When we determine that the carrying value of such assets may not be recoverable, we measure recoverability based on the undiscounted cash flows expected to be generated by the related asset or asset group. If it is determined that an impairment loss has occurred, the loss is recognized in the period in which it is incurred and is calculated as the difference between the carrying value and the present value of estimated future net cash flows or comparable market values. Impairment charges of $1.4 and $0.3 million were recorded in 2021 and 2020, respectively, related to the impairment of long-lived assets resulting from the consolidation of our PC strand operations with the closure of our Summerville, South Carolina facility (see Note 5 to the consolidated financial statements). There were no impairment losses in 2019.

Fair value of financial instruments. The carrying amounts for cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value because of their short maturities.

Income taxes. Income taxes are based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. We assess the need to establish a valuation allowance against deferred tax assets to the extent we no longer believe it is more likely than not that the tax assets will be fully realized. We recognize uncertain tax positions when we have determined it is more likely than not that a tax position will be sustained upon examination. However, new information may become available, or applicable laws or regulations may change, thereby resulting in a favorable or unfavorable adjustment to amounts recorded.

Earnings per share. Basic earnings per share (“EPS”) are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock and other dilutive equity securities outstanding during the period. Securities that have the effect of increasing EPS are considered to be antidilutive and are not included in the computation of diluted EPS.

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Note 3 - Recent Accounting Pronouncements

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Accounting Standards Update and Change in Accounting Principle [Text Block]

(3) Recent Accounting Pronouncements

Current Adoptions

In June 2016, the FASB issued Accounting Standard Update (“ASU”) No. 2016-13 “Credit Losses - Measurement of Credit Losses on Financial Instruments.” ASU No. 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables, by replacing the “incurred loss” approach with an “expected loss” model under which allowances will be recognized based on expected rather than incurred losses. ASU No. 2016-13 became effective for us in the first quarter of 2021. The adoption of this update did not have an impact on our consolidated financial statements. We estimate our allowance for doubtful accounts based upon several factors, including customer credit quality and historical write-off trends. The adoption of this guidance did not significantly impact our accounting policies or methods utilized to determine the allowance for doubtful accounts.

In January 2017, the FASB issued ASU No. 2017-04 “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. ASU No. 2017-04 became effective for us in the first quarter of 2021. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14 “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans”, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial and adds new, as well as clarifies certain other, disclosure requirements. ASU No. 2018-14 became effective for us in fiscal 2021. The adoption of this guidance did not have a material impact on our disclosures.

Future Adoptions

In December 2019, the FASB issued ASU No. 2019-12 "Simplifying the Accounting for Income Taxes (Topic 740)." ASU No. 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to provide for more consistent application. ASU No. 2019-12 will become effective for us in the first quarter of fiscal 2022. The adoption of this guidance will not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides optional expedients and exceptions to account for contracts, hedging relationships and other transactions that reference LIBOR or another reference rate if certain criteria are met. ASU No. 2020-04 is effective March 12, 2020 through December 31, 2022. The adoption of this guidance will not have a material impact on our consolidated financial statements and disclosures.

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Note 4 - Revenue Recognition

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

(4) Revenue Recognition

We recognize revenues when performance obligations under the terms of a contract with our customers are satisfied, which generally occurs when products are shipped and control is transferred. We enter into contracts that pertain to products, which are accounted for as separate performance obligations and typically one year or less in duration. We do not exercise significant judgment in determining the timing for the satisfaction of performance obligations or the transaction price. Revenue is measured as the amount of consideration expected to be received in exchange for our products. We have elected to apply the practical expedient provided for in ASU No. 2014-09 and not disclose information regarding remaining performance obligations that have original expected durations of one year or less.

Variable consideration that may affect the total transaction price, including contractual discounts, rebates, returns and credits are included in net sales. Estimates for variable consideration are based on historical experience, anticipated performance and management's judgment and are updated as of each reporting date. Shipping and related expenses associated with outbound freight are accounted for as fulfillment costs and included in cost of sales. We do not have significant financing components.

Contract assets primarily relate to our rights to consideration for products that are delivered but not billed as of the reporting date and are reclassified to receivables when the customer is invoiced. Contract liabilities primarily relate to performance obligations that are to be satisfied in the future and arise when we bill the customer in advance of shipments. Contract costs are not significant and are recognized as incurred. Contract assets and liabilities were not material as of October 2, 2021 and October 3, 2020.

Accounts receivable includes amounts billed and currently due from customers stated at their net estimated realizable value. Customer payment terms are generally 30 days. We maintain an allowance for credit losses to provide for the estimated amount of receivables that will not be collected, which is based upon our assessment of customer creditworthiness, historical payment experience and the age of outstanding receivables. Past-due trade receivable balances are written off when our collection efforts have been unsuccessful.

See Note 15 for the disaggregation of our net sales by product line and geography.

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Note 5 - Business Combination

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Business Combination Disclosure [Text Block]

(5) Business Combination

On March 16, 2020, we purchased substantially all of the assets of STM for an adjusted purchase price of $19.4 million, reflecting certain post-closing adjustments (the “STM Acquisition”), which included a $1.0 million holdback that was payable one year from the acquisition date.

STM was a leading manufacturer of PC strand for concrete construction applications. We acquired, among other assets, STM’s accounts receivable, inventories, production equipment and facility located in Summerville, South Carolina, and assumed certain of its accounts payable and accrued liabilities. The STM Acquisition serves to strengthen our competitive position as we contend with increased low-priced import competition.

Following is a summary of the adjusted purchase price to the fair values of the assets acquired and liabilities assumed as of the acquisition date:

(In thousands)
Assets acquired:
Accounts receivable	$	3,829
Inventories		3,172
Other current assets		178
Property, plant and equipment		10,919
Intangibles		970
Total assets acquired	$	19,068
Liabilities assumed:
Accounts payable	$	852
Accrued expenses		312
Total liabilities assumed		1,164
Net assets acquired		17,904
Adjusted purchase price		19,356
Goodwill	$	1,452

In connection with the STM Acquisition, we acquired certain intangible assets including customer relationships, a trade name and non-competition agreement. Goodwill associated with the STM Acquisition, which is deductible for tax purposes, consists largely of the synergies we expect to realize through the integration of the acquired assets with our operations.

The STM Acquisition was accounted for as a business purchase pursuant to ASC Topic 805, “Business Combinations” (“ASC 805”). Under the provisions of ASC 805, acquisition and integration costs are recorded as expenses in the period in which such costs are incurred rather than included as components of consideration transferred.

Following the STM Acquisition, net sales of the STM facility in 2020 were approximately $3.0 million. The actual net sales specifically attributable to the STM Acquisition, however, cannot be quantified due to our integration efforts which involved the reassignment of business between the former STM facility and our existing PC strand facilities. As a result, we have determined that the presentation of STM’s earnings for 2020 is impractical due to the integration of STM’s operations following the STM Acquisition.

The following unaudited supplemental pro forma financial information reflects our combined results of operations had the STM Acquisition occurred at the beginning of 2019. The pro forma information reflects certain adjustments related to the STM Acquisition, including adjusted amortization and depreciation expense based on the fair values of the assets acquired. The pro forma information does not reflect any potential operating efficiencies or cost savings that may result from the STM Acquisition. Accordingly, this pro forma information is for illustrative purposes and is not intended to represent the actual results of operations of the combined company that would have been achieved had the STM Acquisition occurred at the beginning of 2019, nor is it intended to indicate future results of operations. The pro forma combined results of operations for the current and comparative prior year periods are as follows:

	Years Ended
	October 3,		September 28,
(In thousands)	2020		2019
Net sales	$	485,121	$	487,467
Earnings before income taxes		22,628		6,085
Net earnings		16,950		4,542

Restructuring charges. In connection with the STM acquisition, we elected to consolidate our PC strand operations through the closure of the Summerville facility and the redeployment of its equipment to our other three PC strand production facilities located in Gallatin, Tennessee; Houston, Texas; and Sanderson, Florida. Operations at the Summerville facility ceased during the third quarter of 2020. Following is a summary of the restructuring activity during 2021 and 2020:

	Employee			Equipment			Facility						Loss (Gain)
(In thousands)	Separation			Relocation			Closure			Asset			on Sale of
	Costs			Costs			Costs			Impairments			Equipment			Total
2021
Liability as of October 3, 2020	$	-		$	20		$	151		$	-		$	-		$	171
Restructuring charges, net		13			423			1,017			1,415			-			2,868
Cash payments		(13	)		(443	)		(1,178	)		-			-			(1,634	)
Non-cash charges		-			-						(1,415	)		-			(1,415	)
Liability as of October 2, 2021	$	-		$	-		$	(10	)	$	-		$	-		$	(10	)
2020
Restructuring charges, net	$	182		$	482		$	806		$	343		$	(118	)	$	1,695
Cash payments		(182	)		(462	)		(655	)		-			-			(1,299	)
Non-cash charges		-			-			-			(343	)		118			(225	)
Liability as of October 3, 2020	$	-		$	20		$	151		$	-		$	-		$	171

During 2021, we determined the carrying value of the Summerville facility acquired in the STM Acquisition exceeded its fair value, less estimated costs to sell, and recorded an impairment of assets held for sale of $1.4 million within restructuring charges on our consolidated statements of operations for the year. As of October 2, 2021 and October 3, 2020, we recorded a liability of $10,000 and $171,000, respectively, for restructuring liabilities in accrued expenses on our consolidated balance sheet. We do not currently expect to incur any significant restructuring charges during 2022.

Acquisition costs. During 2020, we recorded $195,000 of acquisition-related costs associated with the STM Acquisition for accounting, legal and other professional fees.

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Note 6 - Fair Value Measurements

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(6) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs used to measure fair value are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

As of October 2, 2021 and October 3, 2020, we held financial assets that are required to be measured at fair value on a recurring basis, which are summarized below:

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of October 2, 2021:
Current assets:
Cash equivalents	$	86,395	$	86,395	$	-
Other assets:
Cash surrender value of life insurance policies		12,501		-		12,501
Total	$	98,896	$	86,395	$	12,501
As of October 3, 2020:
Current assets:
Cash equivalents	$	72,234	$	72,234	$	-
Other assets:
Cash surrender value of life insurance policies		10,584		-		10,584
Total	$	82,818	$	72,234	$	10,584

Cash equivalents, which include all highly liquid investments with original maturities of three months or less, are classified as Level 1 of the fair value hierarchy. The carrying amount of our cash equivalents, which consist of investments in money market funds, approximates fair value due to their short maturities. Cash surrender value of life insurance policies are classified as Level 2. The fair value of the life insurance policies was determined by the underwriting insurance company’s valuation models and represents the guaranteed value we would receive upon surrender of these policies as of the reporting date.

As of October 2, 2021 and October 3, 2020, we had no nonfinancial assets that are required to be measured at fair value on a nonrecurring basis other than the assets and liabilities that were acquired from STM at fair value in 2020 (see Note 5 to the consolidated financial statements). During 2021, we recognized $1.4 million of impairment charges related to the Summerville facility acquired in the STM Acquisition to reflect its fair value of $6.3 million as of October 2, 2021. The Summerville facility was classified as assets held for sale in other assets on our consolidated balance sheet as of October 2, 2021. The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these financial instruments.

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Note 7 - Intangible Assets

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

(7) Intangible Assets

The primary components of our intangible assets and the related accumulated amortization are as follows:

(In thousands)	Weighted- Average Useful Life (Years)	Gross		Accumulated Amortization			Net Book Value
As of October 2, 2021:
Customer relationships	17.1	$	9,870	$	(3,482	)	$	6,388
Developed technology and know-how	20.0		1,800		(639	)		1,161
Non-competition agreements	5.0		400		(284	)		116
Trade name	2.7		250		(247	)		3
		$	12,320	$	(4,652	)	$	7,668
As of October 3, 2020:
Customer relationships	17.1	$	9,870	$	(2,837	)	$	7,033
Developed technology and know-how	20.0		1,800		(551	)		1,249
Non-competition agreements	5.0		1,860		(1,663	)		197
Trade name	2.7		250		(162	)		88
		$	13,780	$	(5,213	)	$	8,567

Amortization expense for intangibles was $899,000 in 2021, $1.0 million in 2020 and $1.1 million in 2019. Amortization expense for the next five years is $822,000 in 2022, $757,000 in 2023, $751,000 in 2024, $744,000 in 2025 and $752,000 in 2026.

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Note 8 - Long-term Debt

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Long-term Debt [Text Block]

(8) Long-Term Debt

Revolving Credit Facility. We have a $100.0 million revolving credit facility (the “Credit Facility”) that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. In May 2019, we entered into a new credit agreement, which amended and restated in its entirety the previous agreement pertaining to the revolving credit facility that had been in effect since June 2010. The new credit agreement, among other changes, extended the maturity date of the Credit Facility from May 13, 2020 to May 15, 2024 and provided for an accordion feature whereby its size may be increased by up to $50.0 million, subject to our lender’s approval. Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently $100.0 million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories. As of October 2, 2021, no borrowings were outstanding on the Credit Facility, $98.6 million of borrowing capacity was available and outstanding letters of credit totaled $1.4 million. As of October 3, 2020, there were no borrowings outstanding on the Credit Facility.

Interest rates on the Credit Facility are based upon (1) an index rate that is established at the highest of the prime rate, 0.50% plus the federal funds rate or the LIBOR rate plus the excess of the then-applicable margin for LIBOR loans over the then-applicable margin for index rate loans, or (2) at our election, a LIBOR rate, plus in either case, an applicable interest rate margin. The applicable interest rate margins are adjusted on a quarterly basis based upon the amount of excess availability on the Credit Facility within the range of 0.25% to 0.50% for index rate loans and 1.25% to 1.50% for LIBOR loans. In addition, the applicable interest rate margins would be increased by 2.00% upon the occurrence of certain events of default provided for under the terms of the Credit Facility. Based on our excess availability as of October 2, 2021, the applicable interest rate margins on the Credit Facility were 0.25% for index rate loans and 1.25% for LIBOR loans.

Our ability to borrow available amounts under the Credit Facility will be restricted or eliminated in the event of certain covenant breaches, events of default or if we are unable to make certain representations and warranties provided for under the terms of the Credit Facility. We are required to maintain a fixed charge coverage ratio of not less than 1.0 at the end of each fiscal quarter for the twelve-month period then ended when the amount of liquidity on the Credit Facility is less than $10.0 million. In addition, the terms of the Credit Facility restrict our ability to, among other things: engage in certain business combinations or divestitures; make investments in or loans to third parties, unless certain conditions are met with respect to such investments or loans; pay cash dividends or repurchase shares of our stock subject to certain minimum borrowing availability requirements; incur or assume indebtedness; issue securities; enter into certain transactions with our affiliates; or permit liens to encumber our property and assets. The terms of the Credit Facility also provide that an event of default will occur upon the occurrence of, among other things: defaults or breaches under the loan documents, subject in certain cases to cure periods; defaults or breaches by us or any of our subsidiaries under any agreement resulting in the acceleration of amounts above certain thresholds or payment defaults above certain thresholds; certain events of bankruptcy or insolvency; certain entries of judgment against us or any of our subsidiaries, which are not covered by insurance; or a change of control. As of October 2, 2021, we were in compliance with all of the financial and negative covenants under the Credit Facility and there have not been any events of default.

Amortization of capitalized financing costs associated with the Credit Facility was $65,000 in 2021, $66,000 in 2020 and $65,000 in 2019. We expect the amortization of capitalized financing costs to approximate the following amounts for the next five fiscal years:

Fiscal year	In thousands
2022	$	65
2023		65
2024		41

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Note 9 - Stock-based Compensation

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

(9) Stock-Based Compensation

Under our equity incentive plan, employees and directors may be granted stock options, restricted stock, restricted stock units and performance awards. Effective February 11, 2020, our shareholders approved an amendment to the 2015 Equity Incentive Plan of Insteel Industries, Inc. (the “2015 Plan”), which authorizes up to an additional 750,000 shares of our common stock for future grants under the plan and expires on February 17, 2025. As of October 2, 2021, there were 621,000 shares of our common stock available for future grants under the 2015 Plan, which is our only active equity incentive plan.

Stock option awards. Under our equity incentive plan, employees and directors may be granted options to purchase shares of common stock at the fair market value on the date of the grant. Options granted under the plan generally vest over three years and expire ten years from the date of the grant. Compensation expense associated with stock options was $860,000 in 2021, $810,000 in 2020 and $889,000 in 2019. As of October 2, 2021, there was $497,000 of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of 1.65 years.

The fair value of each option award granted is estimated on the date of grant using a Monte Carlo valuation model. The weighted-average estimated fair values of stock options granted during 2021, 2020 and 2019 were $14.47, $8.05 and $7.15 per share, respectively, based on the following weighted-average assumptions:

	Year Ended
	October 2,			October 3,			September 28,
	2021			2020			2019
Expected term (in years)		4.87			4.81			4.59
Risk-free interest rate		0.68	%		0.95	%		2.03	%
Expected volatility		50.34	%		47.18	%		42.79	%
Expected dividend yield		0.42	%		0.59	%		0.56	%

The assumptions utilized in the Monte Carlo valuation model are evaluated and revised, as necessary, to reflect market conditions and actual historical experience. The expected term for options was based on the results of a Monte Carlo simulation model, using the model’s estimated fair value as an input to the Black-Scholes-Merton model, and then solving for the expected term. The risk-free interest rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was derived using a term structure based on historical volatility and the volatility implied by exchange-traded options on our common stock. The dividend yield was calculated based on our annual dividend as of the option grant date.

The following table summarizes stock option activity:

											Contractual
				Exercise Price							Term -	Aggregate
				Per Share							Weighted	Intrinsic
	Options								Weighted		Average	Value
(Share amounts in thousands)	Outstanding			Range					Average		(in years)	(in thousands)
Outstanding at September 29, 2018		264		$	10.23	-	$	41.85	$	29.25
Granted		129			18.25	-		21.57		19.74
Exercised		(5	)		18.05	-		26.75		23.95		$	21
Outstanding at September 28, 2019		388			10.23	-		41.85		26.16
Granted		121			19.86	-		22.09		21.08
Forfeited		(27	)		18.05	-		41.85		25.88
Outstanding at October 3, 2020		482			10.23	-		41.85		24.90
Granted		74			29.43	-		41.87		34.76
Exercised		(128	)		10.23	-		34.49		21.17			2,212
Outstanding at October 2, 2021		428			17.22	-		41.87		27.72	6.48		5,006
Vested and anticipated to vest in the future at October 2, 2021		416								27.70	6.41		4,867
Exercisable at October 2, 2021		246								28.75	4.74		2,604

Stock option exercises include “net exercises” for which the optionee received shares of common stock equal to the intrinsic value of the options (fair market value of common stock on the date of exercise less exercise price) reduced by any applicable withholding taxes.

Restricted stock units. Restricted stock units (“RSUs”) granted under our equity incentive plan are valued based upon the fair market value on the date of the grant and provide for a dividend equivalent payment which is included in compensation expense. The vesting period for RSUs is generally one year from the date of the grant for RSUs granted to directors and three years from the date of the grant for RSUs granted to employees. RSUs do not have voting rights. RSU grants and compensation expense are as follows:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Restricted stock unit grants:
Units		43		68		61
Market value	$	1,430	$	1,444	$	1,225
Compensation expense		1,128		1,218		1,168

As of October 2, 2021, there was $748,000 of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 1.88 years.

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, September 29, 2018		103		$	30.40
Granted		61			20.18
Released		(49	)		27.64
Balance, September 28, 2019		115			26.16
Granted		68			21.29
Forfeited		(6	)		25.49
Released		(55	)		27.07
Balance, October 3, 2020		122			23.07
Granted		43			33.22
Released		(36	)		29.21
Balance, October 2, 2021		129			24.73

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Note 10 - Income Taxes

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(10) Income Taxes

The components of the provision for income taxes are as follows:

	Year Ended
	October 2,			October 3,			September 28,
(Dollars in thousands)	2021			2020			2019
Provision for income taxes:
Current:
Federal	$	17,904		$	5,056		$	(126	)
State		1,707			529			185
		19,611			5,585			59
Deferred:
Federal		(180	)		(288	)		1,649
State		62			(136	)		149
		(118	)		(424	)		1,798
Income taxes	$	19,493		$	5,161		$	1,857
Effective income tax rate		22.6	%		21.4	%		24.9	%

The reconciliation between income taxes computed at the federal statutory rate and the provision for income taxes is as follows:

	Year Ended
(Dollars in thousands)	October 2, 2021					October 3, 2020					September 28, 2019
Provision for income taxes at federal statutory rate	$	18,082		21.0	%	$	5,076		21.0	%	$	1,566		21.0	%
State income taxes, net of federal tax benefit		1,544		1.8			319		1.3			297		4.0
Stock-based compensation		(253	)	(0.3	)		128		0.5			90		1.2
Valuation allowance		(134	)	(0.2	)		(50	)	(0.2	)		24		0.3
Net operating loss carryback - CARES Act		-		-			(223	)	(0.9	)		-		-
Federal tax return true-up		-		-			-		-			(142	)	(1.9	)
Other, net		254		0.3			(89	)	(0.3	)		22		0.3
Provision for income taxes	$	19,493		22.6	%	$	5,161		21.4	%	$	1,857		24.9	%

The components of deferred tax assets and liabilities are as follows:

	October 2,			October 3,
(In thousands)	2021			2020
Deferred tax assets:
Defined benefit plans	$	2,921		$	2,727
Accrued expenses and asset reserves		2,280			1,885
Stock-based compensation		1,204			1,328
Operating lease liability		387			568
State net operating loss carryforwards and tax credits		54			92
Valuation allowance		(73	)		(207	)
Deferred tax assets		6,773			6,393
Deferred tax liabilities:
Plant and equipment		(10,901	)		(10,766	)
Prepaid insurance		(1,374	)		(1,217	)
Right of use assets		(385	)		(566	)
Goodwill		(409	)		(412	)
Deferred tax liabilities		(13,069	)		(12,961	)
Net deferred tax liability	$	(6,296	)	$	(6,568	)

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law. The CARES Act includes several changes impacting business, including, but not limited to, enhanced business interest deductibility, net operating loss ("NOL") carryback provisions, payroll tax deferral provisions and employee retention tax credits. We recorded a $223,000 tax benefit in 2020 resulting from the NOL carryback provisions of the CARES Act.

As of October 2, 2021 and October 3, 2020, we recorded deferred tax liabilities (net of valuation allowances) of $6.3 million and $6.6 million, respectively, in other liabilities on our consolidated balance sheet. We have $2.1 million of state NOLs that begin to expire in 2031, but principally expire between 2031 and 2036.

The realization of our deferred tax assets is entirely dependent upon our ability to generate future taxable income in applicable jurisdictions. GAAP requires that we periodically assess the need to establish a reserve against our deferred tax assets to the extent we no longer believe it is more likely than not that they will be fully realized. As of October 2, 2021, we recorded a valuation allowance of $73,000 pertaining to various state NOLs that were not expected to be utilized. The valuation allowance is subject to periodic review and adjustment based on changes in facts and circumstances and would be reduced should we utilize the state NOLs and tax credits against which an allowance had previously been provided or determine that such utilization was more likely than not. The $134,000 decrease in the valuation allowance during 2021 is primarily due to the utilization of state NOLs for which an allowance had been recorded together with a reduction in state apportionment rates.

As of October 2, 2021, we had no material, known tax exposures that required the establishment of contingency reserves for uncertain tax positions.

We classify interest and penalties related to unrecognized tax benefits as part of income tax expense. There were no interest and penalties related to unrecognized tax benefits incurred during 2021, 2020 and 2019.

We file U.S. federal income tax returns as well as state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to 2016 remain subject to examination.          

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Note 11 - Employee Benefit Plans

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Retirement Benefits [Text Block]

(11) Employee Benefit Plans

Supplemental retirement benefit plan. We have SRBAs with certain of our key employees (each, a “Participant”). Under the SRBAs, if the Participant remains in continuous service with us for a period of at least 30 years, we will pay the Participant a supplemental retirement benefit for the 15-year period following the Participant’s retirement equal to 50% of the Participant’s highest average annual base salary for five consecutive years in the 10-year period preceding the Participant’s retirement. If the Participant retires prior to the later of age 65 or the completion of 30 years of continuous service with us, but has completed at least 10 years of continuous service, the amount of the Participant’s supplemental retirement benefit will be reduced by 1/360th for each month short of 30 years that the Participant was employed by us.

The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized for the SRBAs in our consolidated balance sheets is as follows:

	Year Ended
	October 2,			October 3,			September 28,
(In thousands)	2021			2020			2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	11,610		$	11,278		$	9,749
Service cost		312			338			297
Interest cost		316			334			384
Actuarial loss (gain)		855			(91	)		1,133
Distributions		(205	)		(249	)		(285	)
Benefit obligation at end of year	$	12,888		$	11,610		$	11,278
Change in plan assets:
Actual employer contributions	$	205		$	249		$	285
Actual distributions		(205	)		(249	)		(285	)
Plan assets at fair value at end of year	$	-		$	-		$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	(12,888	)	$	(11,610	)	$	(11,278	)
Net amount recognized	$	(12,888	)	$	(11,610	)	$	(11,278	)
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	3,213		$	2,574		$	2,958
Net amount recognized	$	3,213		$	2,574		$	2,958
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)	$	855		$	(91	)	$	1,133
Amortization of net loss		(215	)		(294	)		(140	)
Total recognized in other comprehensive income (loss)	$	640		$	(385	)	$	993

In 2021, 2020 and 2019, the actuarial gain (loss) includes amounts resulting from changes in actuarial assumptions utilized to calculate our benefit plan obligation such as the discount rate, estimated future compensation levels and changes in plan participants.

The accumulated benefit obligation was $11.7 million and $10.8 million as of October 2, 2021 and October 3, 2020, respectively.

Net periodic pension cost for the SRBAs includes the following components:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Service cost	$	312	$	338	$	297
Interest cost		316		334		384
Amortization of net loss		215		294		140
Net periodic pension cost	$	843	$	966	$	821

The assumptions used in the valuation of the SRBAs are as follows:

	Measurement Date
	October 2,			October 3,			September 28,
	2021			2020			2019
Assumptions at year-end:
Discount rate		2.75	%		2.75	%		3.00	%
Rate of increase in compensation levels		3.00	%		3.00	%		3.00	%

The assumed discount rate is established as of our fiscal year-end measurement date. In establishing the discount rate, we review published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the SRBAs. The SRBAs expected rate of increase in compensation levels is based on the anticipated increases in annual compensation.

The projected benefit payments under the SRBAs are as follows:

Fiscal year(s)	In thousands
2022	$	576
2023		542
2024		582
2025		893
2026		818
2027 - 2031		4,443

Retirement savings plan. In 1996, we adopted the Retirement Savings Plan of Insteel Industries, Inc. (the “Plan”) to provide retirement benefits and stock ownership for our employees. The Plan is an amendment and restatement of our Employee Stock Ownership Plan. As allowed under Sections 401(a) and 401(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary deductions for eligible employees.

The Plan allows for discretionary contributions to be made by us as determined by the Board of Directors, which are allocated among eligible participants based on their compensation relative to the total compensation of all participants. Employees are permitted to contribute up to 75% of their annual compensation to the Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Code. We match employee contributions up to 100% of the first 1% and 50% of the next 5% of eligible compensation that is contributed by employees. Our contributions to the Plan were $1.5 million in 2021, $1.3 million in 2020 and $1.2 million in 2019.

Voluntary Employee Beneficiary Associations (“VEBA”). We have a VEBA which allows both us and our employees to make contributions to pay for medical costs. Our contributions to the VEBA were $6.4 million in 2021, $6.0 million in 2020 and $5.8 million in 2019. We are primarily self-insured for our employee’s healthcare costs, carrying stop-loss insurance coverage for individual claims in excess of $175,000 per benefit plan year. Our self-insurance liabilities are based on the total estimated costs of claims filed and claims incurred but not reported, less amounts paid against such claims. We review current and historical claims data in developing our estimates.

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Note 12 - Commitments and Contingencies

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

(12) Commitments and Contingencies

Insurance recoveries. We maintain general liability, business interruption and replacement cost property insurance coverage on our facilities.

In August 2018, a transformer outage and electrical fire occurred at our Dayton, Texas manufacturing facility, which resulted in the temporary curtailment of operations. Alternative power arrangements for the facility were subsequently made that allowed operations to continue until permanent repairs were completed during the first quarter of 2019. We reached a final settlement on the property damage and business interruption claim with our insurance carrier in 2019 . During 2019, we received $2.2 million of insurance proceeds related to the claim that was partially applied against the beginning receivable balance of $462,000 with the remainder recorded in other income ($1.1 million), cost of sales ($645,000) and SG&A expense ($48,000) on the consolidated statements of operations.

In August 2017, operations at our manufacturing facility located in Dayton, Texas were adversely affected by hurricane Harvey. We reached a final settlement on the property damage and business interruption claim with our insurance carrier in 2019. During 2019, we received $150,000 of proceeds related to this claim of which $98,000 was recorded in other income on the consolidated statements of operations.

The insurance proceeds attributable to the property and equipment damaged are reported in cash flows from investing activities and all other insurance proceeds received are reported in cash flows from operating activities on the consolidated statements of cash flows.

Purchase commitments. As of October 2, 2021, we had $125.3 million in non-cancelable purchase commitments for raw material extending as long as approximately 100 days and $3.6 million of contractual commitments for the purchase of certain equipment that had not been fulfilled and are not reflected in our consolidated financial statements.

Legal proceedings. We are involved in lawsuits, claims, investigations and proceedings, including commercial, environmental and employment matters, which arise in the ordinary course of business. We do not expect the ultimate outcome or cost to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows.

Severance and change of control agreements. We have entered into a severance agreement with our Chief Executive Officer that provides him with certain termination benefits in the event his employment with us is terminated without cause. The initial term of the agreement was two years and it automatically renews for successive one year terms unless we or our Chief Executive Officer provide notice of termination as specified in the agreement. In the event of termination of the Chief Executive Officer’s employment without cause, this agreement provides that he would receive termination benefits equal to one and one-half times his annual base salary in effect on the termination date and the continuation of health and welfare benefits for eighteen months. In addition, all of his stock options and restricted stock would vest immediately, and outplacement services would be provided.

We have also entered into change in control agreements with key members of management, including our executive officers, which specify the terms of separation in the event that termination of their employment followed a change in control. The initial term of each agreement is two years and they automatically renew for successive one year terms unless we or the executive provide notice of termination as specified in the agreement. The agreements do not provide assurances of continued employment or specify the terms of an executive’s termination should one occur in the absence of a change in control. The compensation payable under the terms of these agreements differs between the Chief Executive Officer and the other covered executives. In the event of termination of the Chief Executive Officer within two years of a change of control, he would receive severance benefits equal to two times base compensation, two times the average bonus for the prior three years and the continuation of health and welfare benefits for two years. In the event of such a termination of the other key members of management, including our other three executive officers, within two years of a change of control, they would receive severance benefits equal to one times base compensation, one times the average bonus for the prior three years and the continuation of health and welfare benefits for one year. In addition, for any covered executive that is terminated within two years of a change of control, all of their stock options and restricted stock would vest immediately, and outplacement services would be provided.

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Note 13 - Leases

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

(13) Leases

We have operating leases for certain equipment, office space and vehicles. We determine whether an arrangement is a lease at its inception if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases with an initial term of twelve months or less are not recorded on our consolidated balance sheet. Lease expense for operating leases with original terms of more than twelve months was $1.4 million in 2021, $1.3 million in 2020 and $1.6 million in 2019.

Most of our leases include options to extend or terminate the leases which are exercised at our sole discretion. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate as of the commencement date in determining the present value of lease payments, which represents an estimate of the interest rate we would incur at the lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term.

Supplemental cash flow and non-cash information related to leases is as follows:

	Year Ended
(In thousands)	October 2, 2021		October 3, 2020
Cash paid for operating leases included in operating cash flows	$	1,413	$	1,301
Right-of-use assets obtained in exchange for new lease obligations		579		1,771

Supplemental balance sheet information related to leases is as follows:

(In thousands)	October 2, 2021		October 3, 2020
Right-of-use assets:
Other assets	$	1,717	$	2,522
Lease liabilities:
Accrued expenses		1,030		1,230
Other liabilities		695		1,300
Total operating lease liabilities	$	1,725	$	2,530

The weighted average remaining lease terms and discount rates for operating leases are as follows:

	October 2, 2021			October 3, 2020
Weighted average lease term (in years)		1.8			2.3
Weighted average discount rate		4.1	%		4.4	%

Aggregate future operating lease payments as of October 2, 2021 are as follows:

(In thousands)
2022	$	1,075
2023		583
2024		129
2025		2
2026		-
Thereafter		-
Total future operating lease payments		1,789
Less: imputed interest		(64	)
Present value of lease liabilities	$	1,725

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Note 14 - Earnings Per Share

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Earnings Per Share [Text Block]

(14) Earnings Per Share

The computation of basic and diluted earnings per share attributable to common shareholders is as follows:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands, except per share amounts)	2021		2020		2019
Net earnings	$	66,610	$	19,009	$	5,598
Basic weighted average shares outstanding		19,344		19,278		19,243
Dilutive effect of stock-based compensation		190		105		97
Diluted weighted average shares outstanding		19,534		19,383		19,340
Net earnings per share:
Basic	$	3.44	$	0.99	$	0.29
Diluted		3.41		0.98		0.29

Options and RSUs that were antidilutive and not included in the diluted EPS calculation amounted to 142,000 shares in 2021, 369,000 shares in 2020 and 240,000 shares in 2019.

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Note 15 - Business Segment Information

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(15) Business Segment Information

Our operations are entirely focused on the manufacture and marketing of steel wire reinforcing products for concrete construction applications. Our concrete reinforcing products consist of two product lines: PC strand and WWR. Based on the criteria specified in ASC Topic 280, Segment Reporting, we have one reportable segment.

Our net sales by geographic region are as follows:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Net sales:
United States	$	583,458	$	470,420	$	454,373
Foreign		7,143		2,198		1,340
Total	$	590,601	$	472,618	$	455,713

Our sales by product line are as follows:

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Net sales:
Welded wire reinforcement	$	358,334	$	294,129	$	290,423
Prestressed concrete strand		232,267		178,489		165,290
Total	$	590,601	$	472,618	$	455,713

There were no customers that accounted for 10% or more of our net sales in 2021, 2020 and 2019.

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Note 16 - Related Party Transactions

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

(16) Related Party Transactions

Sales to a company affiliated with one of our former directors amounted to $716,000 in 2019. There were no related party transactions in 2021 or 2020.

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Note 17 - Other Financial Data

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Other Financial Data [Text Block]

(17) Other Financial Data

Balance sheet information:

	October 2,			October 3,
(In thousands)	2021			2020
Accounts receivable, net:
Accounts receivable	$	68,274		$	54,108
Less allowance for credit losses		(357	)		(291	)
Total	$	67,917		$	53,817
Inventories:
Raw materials	$	50,459		$	31,553
Work in process		6,680			3,813
Finished goods		21,910			33,597
Total	$	79,049		$	68,963
Other current assets:
Prepaid insurance	$	5,169		$	4,096
Other		4,887			1,474
Total	$	10,056		$	5,570
Other assets:
Cash surrender value of life insurance policies	$	12,501		$	10,584
Assets held for sale		6,306			7,778
Right-of-use assets		1,717			2,522
Capitalized financing costs, net		106			170
Other		137			106
Total	$	20,767		$	21,160
Property, plant and equipment, net:
Land and land improvements	$	14,554		$	14,520
Buildings		53,182			52,462
Machinery and equipment		180,654			172,617
Construction in progress		10,191			3,978
		258,581			243,577
Less accumulated depreciation		(152,957	)		(142,185	)
Total	$	105,624		$	101,392
Accrued expenses:
Salaries, wages and related expenses	$	8,229		$	4,971
Income taxes		4,014			1,201
Customer rebates		2,354			1,581
Property taxes		1,575			1,726
Operating lease liabilities		1,030			1,230
Sales allowance reserves		991			-
State sales and use taxes		760			544
Holdback for business acquired		-			1,000
Other		453			2,464
Total	$	19,406		$	14,717
Other liabilities:
Deferred compensation	$	12,832		$	11,553
Deferred income taxes		6,296			6,568
Operating lease liabilities		695			1,300
Total	$	19,823		$	19,421

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Note 18 - Product Warranties

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

(18) Product Warranties

Our products are used in applications which are subject to inherent risks including performance deficiencies, personal injury, property damage, environmental contamination or loss of production. We warrant our products to meet certain specifications, and actual or claimed deficiencies from these specifications may give rise to claims. We do not maintain a reserve for warranties as the historical claims have been immaterial. We maintain product liability insurance coverage to minimize our exposure to such risks.

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Note 19 - Share Repurchases

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

(19) Share Repurchases

On November 18, 2008, our Board of Directors approved a share repurchase authorization to buy back up to $25.0 million of our outstanding common stock (the “Authorization”). Under the Authorization, repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors. We are not obligated to acquire any particular amount of common stock and the program may be commenced or suspended at any time at our discretion without prior notice. The Authorization continues in effect until terminated by the Board of Directors. As of October 2, 2021, there was $24.8 million remaining available for future share repurchases under this Authorization. There were no share repurchases during 2021, 2020 or 2019.

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Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

SEC Schedule, 12-09, Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]

                           SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED OCTOBER 2, 2021, OCTOBER 3, 2020 AND SEPTEMBER 28, 2019

ALLOWANCE FOR CREDIT LOSSES

(In thousands)

	Year Ended
	October 2,			October 3,			September 28,
	2021			2020			2019
Balance, beginning of year	$	291		$	254		$	295
Amounts charged to earnings		80			65			(41	)
Write-offs, net of recoveries		(14	)		(28	)		-
Balance, end of year	$	357		$	291		$	254

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Significant Accounting Policies (Policies)

12 Months Ended

Oct. 02, 2021

Accounting Policies [Abstract]

Fiscal Period, Policy [Policy Text Block]

Fiscal year. Our fiscal year is the 52 or 53 weeks ending on the Saturday closest to September 30. Fiscal years 2021 and 2019 were 52-week periods and fiscal year 2020 was a 53-week period. All references to years relate to fiscal years rather than calendar years.         

Consolidation, Policy [Policy Text Block]

Principles of consolidation. The consolidated financial statements include the accounts of Insteel and our subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There is no assurance that actual results will not differ from these estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash equivalents. We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of credit risk. Financial instruments that subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Our cash is principally concentrated at one financial institution, which at times exceeds federally insured limits. We are exposed to credit risk in the event of default by institutions in which our cash and cash equivalents are held and by customers to the extent of the amounts recorded on the balance sheet. We invest excess cash primarily in money market funds, which are highly liquid securities.

The majority of our accounts receivable are due from customers that are located in the U.S. and are generally not secured by collateral depending upon the creditworthiness of the account. We provide an allowance for credit losses based upon our assessment of the credit risk of specific customers, historical trends and other information. We write off accounts receivable when they become uncollectible. There is no disproportionate concentration of credit risk.

Share-based Payment Arrangement [Policy Text Block]

Stock-based compensation. We account for stock-based compensation in accordance with the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “Compensation – Stock Compensation”, which requires stock-based compensation expense to be recognized in net earnings based on the fair value of the award on the date of the grant. We account for forfeitures as they occur. We determine the fair value of stock options issued by using a Monte Carlo valuation model at the grant date, which considers a range of assumptions including the expected term, volatility, dividend yield and risk-free interest rate.

Pension and Other Postretirement Plans, Policy [Policy Text Block]

Employee benefit plan. We account for our supplemental retirement benefit agreements (each, a “SRBA”) in accordance with ASC Topic 715, “Compensation - Retirement Benefits”. Under the provisions of ASC Topic 715, we recognize net periodic pension cost and value liabilities based on certain actuarial assumptions, principally the assumed discount rate.

The discount rate we utilize for determining net periodic pension cost and the related benefit obligation for the SRBAs is based, in part, on current interest rates earned on long-term bonds that receive one of the two highest ratings assigned by recognized rating agencies. Our discount rate assumptions are adjusted as of each valuation date to reflect current interest rates on such long-term bonds. The discount rate is used to determine the actuarial present value of the benefit obligations as of the valuation date as well as the interest component of the net periodic pension cost for the following year. We currently expect net periodic pension cost for 2022 to be $1.0 million for the SRBAs. Cash contributions to the SRBAs during 2022 are expected to be $576,000.

The assumed discount rate is reevaluated annually. A reduction in the assumed discount rate generally results in an actuarial loss, as the actuarially-determined present value of estimated future benefit payments will increase. Conversely, an increase in the assumed discount rate generally results in an actuarial gain. However, any actuarial gains generated in future periods reduce the negative amortization effect of any cumulative unamortized actuarial losses, while any actuarial losses generated in future periods reduce the favorable amortization effect of any cumulative unamortized actuarial gains.

The projected benefit obligations and net periodic pension cost for the SRBAs are based in part on expected increases in future compensation levels. Our assumption for the expected increase in future compensation levels is based upon our average historical experience and our intentions regarding future compensation increases, which generally approximates average long-term inflation rates. A 0.25% decrease in the assumed discount rate for our SRBAs would have increased our projected and accumulated benefit obligations as of October 2, 2021 by approximately $356,000 and $293,000, respectively, and our expected net periodic pension cost for 2022 by approximately $39,000.

Revenue [Policy Text Block]

Revenue recognition. We recognize revenues when obligations under the terms of a contract with our customers are satisfied, which generally occurs when products are shipped and control is transferred. Revenue is measured as the amount of consideration expected to be received in exchange for our products.

Inventory, Policy [Policy Text Block]

Inventories. Inventories are valued at the lower of weighted average cost (which approximates computation on a first-in, first-out basis) and net realizable value. The valuation of inventory includes the costs for material, labor and manufacturing overhead.

Property, Plant and Equipment, Impairment [Policy Text Block]

Property, plant and equipment. Property, plant and equipment are recorded at cost or fair market value in the case of the assets acquired through acquisitions, or otherwise at reduced values to the extent there have been asset impairment write-downs. Expenditures for maintenance and repairs are charged directly to expense when incurred, while major improvements are capitalized. Depreciation is computed for financial reporting purposes principally by use of the straight-line method over the following estimated useful lives: machinery and equipment, 3 - 15 years; buildings, 10 - 30 years; and land improvements, 5 - 15 years. Depreciation expense was approximately $13.6 million in 2021, $13.2 million in 2020 and $12.5 million in 2019 and reflected in cost of sales and selling, general and administrative expense (“SG&A expense”) in the consolidated statements of operations. Capitalized software is amortized over the shorter of the estimated useful life or 5 years and reflected in SG&A expense. No interest costs were capitalized in 2021, 2020 and 2019.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill. Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not amortized but is tested annually for impairment and whenever events or circumstances change that would make it more likely than not that an impairment may have occurred. We perform our annual impairment analysis as of the first day of the fourth quarter each year. The evaluation of impairment involves comparing the current estimated fair value of the reporting unit to its recorded value, including goodwill. We perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. It may be necessary to perform a quantitative analysis where a discounted cash flow model is used to determine the current estimated fair value of the reporting unit. Key assumptions used to determine the fair value of the reporting unit as part of our annual testing (and any required interim testing) include: (a) expected cash flows for the five-year period following the testing date; (b) an estimated terminal value using a terminal year growth rate based on the growth prospects of the reporting unit; (c) a discount rate based on our estimated after-tax weighted average cost of capital; and (d) a probability-weighted scenario approach by which varying cash flows are assigned to alternative scenarios based on their likelihood of occurrence. In developing these assumptions, we consider historical and anticipated future results, general economic and market conditions, the impact of planned business and operational strategies and all available information at the time the fair value of the reporting unit is estimated. Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity. Changes in assumptions and estimates may affect the fair value of goodwill and could result in impairment charges in future periods. Based on the results of our impairment analysis, no goodwill impairment losses were recognized in the consolidated statements of operations for 2021, 2020 and 2019. Subsequent to the analysis, there have been no events or circumstances that indicate any potential impairment of goodwill.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Long-lived assets. Long-lived assets include property, plant and equipment and identifiable intangible assets with definite useful lives. Finite-lived intangible assets are amortized over their estimated useful lives. Our intangible assets consist of customer relationships, developed technology and know-how, non-competition agreements and trade names, and are being amortized on a straight-line basis over their finite useful lives (see Note 7 to the consolidated financial statements). We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. When we determine that the carrying value of such assets may not be recoverable, we measure recoverability based on the undiscounted cash flows expected to be generated by the related asset or asset group. If it is determined that an impairment loss has occurred, the loss is recognized in the period in which it is incurred and is calculated as the difference between the carrying value and the present value of estimated future net cash flows or comparable market values. Impairment charges of $1.4 and $0.3 million were recorded in 2021 and 2020, respectively, related to the impairment of long-lived assets resulting from the consolidation of our PC strand operations with the closure of our Summerville, South Carolina facility (see Note 5 to the consolidated financial statements). There were no impairment losses in 2019.

Fair Value Measurement, Policy [Policy Text Block]

Fair value of financial instruments. The carrying amounts for cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value because of their short maturities.

Income Tax, Policy [Policy Text Block]

Income taxes. Income taxes are based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. We assess the need to establish a valuation allowance against deferred tax assets to the extent we no longer believe it is more likely than not that the tax assets will be fully realized. We recognize uncertain tax positions when we have determined it is more likely than not that a tax position will be sustained upon examination. However, new information may become available, or applicable laws or regulations may change, thereby resulting in a favorable or unfavorable adjustment to amounts recorded.

Earnings Per Share, Policy [Policy Text Block]

Earnings per share. Basic earnings per share (“EPS”) are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock and other dilutive equity securities outstanding during the period. Securities that have the effect of increasing EPS are considered to be antidilutive and are not included in the computation of diluted EPS.

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Note 5 - Business Combination (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Business Acquisition, Pro Forma Information [Table Text Block]

	Years Ended
	October 3,		September 28,
(In thousands)	2020		2019
Net sales	$	485,121	$	487,467
Earnings before income taxes		22,628		6,085
Net earnings		16,950		4,542

Restructuring and Related Costs [Table Text Block]

	Employee			Equipment			Facility						Loss (Gain)
(In thousands)	Separation			Relocation			Closure			Asset			on Sale of
	Costs			Costs			Costs			Impairments			Equipment			Total
2021
Liability as of October 3, 2020	$	-		$	20		$	151		$	-		$	-		$	171
Restructuring charges, net		13			423			1,017			1,415			-			2,868
Cash payments		(13	)		(443	)		(1,178	)		-			-			(1,634	)
Non-cash charges		-			-						(1,415	)		-			(1,415	)
Liability as of October 2, 2021	$	-		$	-		$	(10	)	$	-		$	-		$	(10	)
2020
Restructuring charges, net	$	182		$	482		$	806		$	343		$	(118	)	$	1,695
Cash payments		(182	)		(462	)		(655	)		-			-			(1,299	)
Non-cash charges		-			-			-			(343	)		118			(225	)
Liability as of October 3, 2020	$	-		$	20		$	151		$	-		$	-		$	171

STM Acquisition [Member]

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

(In thousands)
Assets acquired:
Accounts receivable	$	3,829
Inventories		3,172
Other current assets		178
Property, plant and equipment		10,919
Intangibles		970
Total assets acquired	$	19,068
Liabilities assumed:
Accounts payable	$	852
Accrued expenses		312
Total liabilities assumed		1,164
Net assets acquired		17,904
Adjusted purchase price		19,356
Goodwill	$	1,452

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Note 6 - Fair Value Measurements (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of October 2, 2021:
Current assets:
Cash equivalents	$	86,395	$	86,395	$	-
Other assets:
Cash surrender value of life insurance policies		12,501		-		12,501
Total	$	98,896	$	86,395	$	12,501
As of October 3, 2020:
Current assets:
Cash equivalents	$	72,234	$	72,234	$	-
Other assets:
Cash surrender value of life insurance policies		10,584		-		10,584
Total	$	82,818	$	72,234	$	10,584

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Note 7 - Intangible Assets (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

(In thousands)	Weighted- Average Useful Life (Years)	Gross		Accumulated Amortization			Net Book Value
As of October 2, 2021:
Customer relationships	17.1	$	9,870	$	(3,482	)	$	6,388
Developed technology and know-how	20.0		1,800		(639	)		1,161
Non-competition agreements	5.0		400		(284	)		116
Trade name	2.7		250		(247	)		3
		$	12,320	$	(4,652	)	$	7,668
As of October 3, 2020:
Customer relationships	17.1	$	9,870	$	(2,837	)	$	7,033
Developed technology and know-how	20.0		1,800		(551	)		1,249
Non-competition agreements	5.0		1,860		(1,663	)		197
Trade name	2.7		250		(162	)		88
		$	13,780	$	(5,213	)	$	8,567

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Note 8 - Long-term Debt (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Schedule of Amortization of Financing Costs for Debt [Table Text Block]

Fiscal year	In thousands
2022	$	65
2023		65
2024		41

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Note 9 - Stock-based Compensation (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Year Ended
	October 2,			October 3,			September 28,
	2021			2020			2019
Expected term (in years)		4.87			4.81			4.59
Risk-free interest rate		0.68	%		0.95	%		2.03	%
Expected volatility		50.34	%		47.18	%		42.79	%
Expected dividend yield		0.42	%		0.59	%		0.56	%

Share-based Payment Arrangement, Option, Activity [Table Text Block]

											Contractual
				Exercise Price							Term -	Aggregate
				Per Share							Weighted	Intrinsic
	Options								Weighted		Average	Value
(Share amounts in thousands)	Outstanding			Range					Average		(in years)	(in thousands)
Outstanding at September 29, 2018		264		$	10.23	-	$	41.85	$	29.25
Granted		129			18.25	-		21.57		19.74
Exercised		(5	)		18.05	-		26.75		23.95		$	21
Outstanding at September 28, 2019		388			10.23	-		41.85		26.16
Granted		121			19.86	-		22.09		21.08
Forfeited		(27	)		18.05	-		41.85		25.88
Outstanding at October 3, 2020		482			10.23	-		41.85		24.90
Granted		74			29.43	-		41.87		34.76
Exercised		(128	)		10.23	-		34.49		21.17			2,212
Outstanding at October 2, 2021		428			17.22	-		41.87		27.72	6.48		5,006
Vested and anticipated to vest in the future at October 2, 2021		416								27.70	6.41		4,867
Exercisable at October 2, 2021		246								28.75	4.74		2,604

Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, September 29, 2018		103		$	30.40
Granted		61			20.18
Released		(49	)		27.64
Balance, September 28, 2019		115			26.16
Granted		68			21.29
Forfeited		(6	)		25.49
Released		(55	)		27.07
Balance, October 3, 2020		122			23.07
Granted		43			33.22
Released		(36	)		29.21
Balance, October 2, 2021		129			24.73

Restricted Stock Units (RSUs) [Member]

Notes Tables

Share-based Payment Arrangement, Cost by Plan [Table Text Block]

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Restricted stock unit grants:
Units		43		68		61
Market value	$	1,430	$	1,444	$	1,225
Compensation expense		1,128		1,218		1,168

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Note 10 - Income Taxes (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Year Ended
	October 2,			October 3,			September 28,
(Dollars in thousands)	2021			2020			2019
Provision for income taxes:
Current:
Federal	$	17,904		$	5,056		$	(126	)
State		1,707			529			185
		19,611			5,585			59
Deferred:
Federal		(180	)		(288	)		1,649
State		62			(136	)		149
		(118	)		(424	)		1,798
Income taxes	$	19,493		$	5,161		$	1,857
Effective income tax rate		22.6	%		21.4	%		24.9	%

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Year Ended
(Dollars in thousands)	October 2, 2021					October 3, 2020					September 28, 2019
Provision for income taxes at federal statutory rate	$	18,082		21.0	%	$	5,076		21.0	%	$	1,566		21.0	%
State income taxes, net of federal tax benefit		1,544		1.8			319		1.3			297		4.0
Stock-based compensation		(253	)	(0.3	)		128		0.5			90		1.2
Valuation allowance		(134	)	(0.2	)		(50	)	(0.2	)		24		0.3
Net operating loss carryback - CARES Act		-		-			(223	)	(0.9	)		-		-
Federal tax return true-up		-		-			-		-			(142	)	(1.9	)
Other, net		254		0.3			(89	)	(0.3	)		22		0.3
Provision for income taxes	$	19,493		22.6	%	$	5,161		21.4	%	$	1,857		24.9	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	October 2,			October 3,
(In thousands)	2021			2020
Deferred tax assets:
Defined benefit plans	$	2,921		$	2,727
Accrued expenses and asset reserves		2,280			1,885
Stock-based compensation		1,204			1,328
Operating lease liability		387			568
State net operating loss carryforwards and tax credits		54			92
Valuation allowance		(73	)		(207	)
Deferred tax assets		6,773			6,393
Deferred tax liabilities:
Plant and equipment		(10,901	)		(10,766	)
Prepaid insurance		(1,374	)		(1,217	)
Right of use assets		(385	)		(566	)
Goodwill		(409	)		(412	)
Deferred tax liabilities		(13,069	)		(12,961	)
Net deferred tax liability	$	(6,296	)	$	(6,568	)

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Note 11 - Employee Benefit Plans (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Service cost	$	312	$	338	$	297
Interest cost		316		334		384
Amortization of net loss		215		294		140
Net periodic pension cost	$	843	$	966	$	821

Defined Benefit Plan, Assumptions [Table Text Block]

	Measurement Date
	October 2,			October 3,			September 28,
	2021			2020			2019
Assumptions at year-end:
Discount rate		2.75	%		2.75	%		3.00	%
Rate of increase in compensation levels		3.00	%		3.00	%		3.00	%

Schedule of Expected Benefit Payments [Table Text Block]

Fiscal year(s)	In thousands
2022	$	576
2023		542
2024		582
2025		893
2026		818
2027 - 2031		4,443

Supplemental Employee Retirement Plan [Member]

Notes Tables

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

	Year Ended
	October 2,			October 3,			September 28,
(In thousands)	2021			2020			2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	11,610		$	11,278		$	9,749
Service cost		312			338			297
Interest cost		316			334			384
Actuarial loss (gain)		855			(91	)		1,133
Distributions		(205	)		(249	)		(285	)
Benefit obligation at end of year	$	12,888		$	11,610		$	11,278
Change in plan assets:
Actual employer contributions	$	205		$	249		$	285
Actual distributions		(205	)		(249	)		(285	)
Plan assets at fair value at end of year	$	-		$	-		$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	(12,888	)	$	(11,610	)	$	(11,278	)
Net amount recognized	$	(12,888	)	$	(11,610	)	$	(11,278	)
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	3,213		$	2,574		$	2,958
Net amount recognized	$	3,213		$	2,574		$	2,958
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)	$	855		$	(91	)	$	1,133
Amortization of net loss		(215	)		(294	)		(140	)
Total recognized in other comprehensive income (loss)	$	640		$	(385	)	$	993

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Note 13 - Leases (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Lease, Cost [Table Text Block]

	Year Ended
(In thousands)	October 2, 2021		October 3, 2020
Cash paid for operating leases included in operating cash flows	$	1,413	$	1,301
Right-of-use assets obtained in exchange for new lease obligations		579		1,771

	October 2, 2021			October 3, 2020
Weighted average lease term (in years)		1.8			2.3
Weighted average discount rate		4.1	%		4.4	%

Lessee, Operating Lease, Assets and Liabilities [Table Text Block]

(In thousands)	October 2, 2021		October 3, 2020
Right-of-use assets:
Other assets	$	1,717	$	2,522
Lease liabilities:
Accrued expenses		1,030		1,230
Other liabilities		695		1,300
Total operating lease liabilities	$	1,725	$	2,530

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

(In thousands)
2022	$	1,075
2023		583
2024		129
2025		2
2026		-
Thereafter		-
Total future operating lease payments		1,789
Less: imputed interest		(64	)
Present value of lease liabilities	$	1,725

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Note 14 - Earnings Per Share (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Year Ended
	October 2,		October 3,		September 28,
(In thousands, except per share amounts)	2021		2020		2019
Net earnings	$	66,610	$	19,009	$	5,598
Basic weighted average shares outstanding		19,344		19,278		19,243
Dilutive effect of stock-based compensation		190		105		97
Diluted weighted average shares outstanding		19,534		19,383		19,340
Net earnings per share:
Basic	$	3.44	$	0.99	$	0.29
Diluted		3.41		0.98		0.29

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Note 15 - Business Segment Information (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Revenue from External Customers by Geographic Areas [Table Text Block]

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Net sales:
United States	$	583,458	$	470,420	$	454,373
Foreign		7,143		2,198		1,340
Total	$	590,601	$	472,618	$	455,713

Revenue from External Customers by Products and Services [Table Text Block]

	Year Ended
	October 2,		October 3,		September 28,
(In thousands)	2021		2020		2019
Net sales:
Welded wire reinforcement	$	358,334	$	294,129	$	290,423
Prestressed concrete strand		232,267		178,489		165,290
Total	$	590,601	$	472,618	$	455,713

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Note 17 - Other Financial Data (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Other Financial Information, Balance Sheet [Table Text Block]

	October 2,			October 3,
(In thousands)	2021			2020
Accounts receivable, net:
Accounts receivable	$	68,274		$	54,108
Less allowance for credit losses		(357	)		(291	)
Total	$	67,917		$	53,817
Inventories:
Raw materials	$	50,459		$	31,553
Work in process		6,680			3,813
Finished goods		21,910			33,597
Total	$	79,049		$	68,963
Other current assets:
Prepaid insurance	$	5,169		$	4,096
Other		4,887			1,474
Total	$	10,056		$	5,570
Other assets:
Cash surrender value of life insurance policies	$	12,501		$	10,584
Assets held for sale		6,306			7,778
Right-of-use assets		1,717			2,522
Capitalized financing costs, net		106			170
Other		137			106
Total	$	20,767		$	21,160
Property, plant and equipment, net:
Land and land improvements	$	14,554		$	14,520
Buildings		53,182			52,462
Machinery and equipment		180,654			172,617
Construction in progress		10,191			3,978
		258,581			243,577
Less accumulated depreciation		(152,957	)		(142,185	)
Total	$	105,624		$	101,392
Accrued expenses:
Salaries, wages and related expenses	$	8,229		$	4,971
Income taxes		4,014			1,201
Customer rebates		2,354			1,581
Property taxes		1,575			1,726
Operating lease liabilities		1,030			1,230
Sales allowance reserves		991			-
State sales and use taxes		760			544
Holdback for business acquired		-			1,000
Other		453			2,464
Total	$	19,406		$	14,717
Other liabilities:
Deferred compensation	$	12,832		$	11,553
Deferred income taxes		6,296			6,568
Operating lease liabilities		695			1,300
Total	$	19,823		$	19,421

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Schedule II - Valuation and Qualifying Accounts (Tables)

12 Months Ended

Oct. 02, 2021

Notes Tables

Valuation Allowances and Reserves [Table Text Block]

	Year Ended
	October 2,			October 3,			September 28,
	2021			2020			2019
Balance, beginning of year	$	291		$	254		$	295
Amounts charged to earnings		80			65			(41	)
Write-offs, net of recoveries		(14	)		(28	)		-
Balance, end of year	$	357		$	291		$	254

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Note 2 - Summary of Significant Accounting Policies (Details Textual) - USD ($)	12 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Defined Benefit Plan, Expected Future Benefit Payment, Year One		$ 576,000
Depreciation, Total		13,600,000	$ 13,200,000	$ 12,500,000
Interest Costs Capitalized		0	0	0
Goodwill, Impairment Loss		0
Asset Impairment Charges, Total		$ 1,415,000	$ 343,000	$ 0
Computer Software, Intangible Asset [Member]
Finite-Lived Intangible Asset, Useful Life (Year)		5 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)		3 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)		15 years
Building [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)		10 years
Building [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)		30 years
Land Improvements [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)		5 years
Land Improvements [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)		15 years
Forecast [Member]
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Total	$ 1,000,000.0
Decrease in Assumed Discount Rate [Member]
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate			0.25%
Defined Benefit Plan, Increase of Pension Plan with Projected Benefit Obligation in Excess of Plan Assets, Plan Assets		$ 356,000
Defined Benefit Plan, Increase in Accumulated Benefit Obligation		293,000
Defined Benefit Plan, Increase in Expected Net Periodic Benefit Cost (Credit), Next Twelve Months		$ 39,000

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Note 5 - Business Combination (Details Textual) - USD ($)		12 Months Ended
	Mar. 16, 2020	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Restructuring Reserve, Ending Balance		$ 10,000	$ 171,000
Business Combination, Acquisition Related Costs		0	195,000	$ 0
Accrued Expenses [Member]
Restructuring Reserve, Ending Balance		10,000	171,000
Restructuring Charges [Member] | Summerville Facility Acquired in STM Acquisition [Member]
Impairment of Long-Lived Assets to be Disposed of		$ 1,400,000
STM Acquisition [Member]
Business Combination, Consideration Transferred, Total	$ 19,400,000
Business Combination, Consideration Transferred, Liabilities Incurred	$ 1,000,000.0
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual			3,000,000.0
Business Combination, Acquisition Related Costs			$ 195,000

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Note 5 - Business Combination - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Oct. 03, 2020	Mar. 16, 2020
Goodwill	$ 9,745	$ 9,745
STM Acquisition [Member]
Accounts receivable			$ 3,829
Inventories			3,172
Other current assets			178
Property, plant and equipment			10,919
Intangibles			970
Total assets acquired			19,068
Accounts payable			852
Accrued expenses			312
Total liabilities assumed			1,164
Net assets acquired			17,904
Adjusted purchase price			19,356
Goodwill			$ 1,452

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Note 5 - Business Combination - Pro Forma Results (Details) - STM Acquisition [Member] - USD ($) $ in Thousands	12 Months Ended
	Oct. 03, 2020	Sep. 28, 2019
Net sales	$ 485,121	$ 487,467
Earnings before income taxes	22,628	6,085
Net earnings	$ 16,950	$ 4,542

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Note 5 - Business Combination - Restructuring Activity (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Liability balance	$ 171
Restructuring charges, net	2,868	$ 1,695	$ 0
Cash payments	(1,634)	(1,299)
Non-cash charges	(1,415)	(225)
Liability balance	10	171
Employee Severance [Member]
Liability balance	0
Restructuring charges, net	13	182
Cash payments	(13)	(182)
Non-cash charges	0	0
Liability balance	(0)	0
Equipment Relocation [Member]
Liability balance	20
Restructuring charges, net	423	482
Cash payments	(443)	(462)
Non-cash charges	0	0
Liability balance	(0)	20
Facility Closing [Member]
Liability balance	151
Restructuring charges, net	1,017	806
Cash payments	(1,178)	(655)
Non-cash charges		0
Liability balance	10	151
Asset Impairments [Member]
Liability balance	0
Restructuring charges, net	1,415	343
Cash payments	0	0
Non-cash charges	(1,415)	(343)
Liability balance	(0)	0
Gain on Sale of Property and Equipment [Member]
Liability balance	0
Restructuring charges, net	0	(118)
Cash payments	0	0
Non-cash charges	0	118
Liability balance	$ (0)	$ 0

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Note 6 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020
Disposal Group, Including Discontinued Operation, Assets, Total	$ 6,306	$ 7,778
Summerville Facility Acquired in STM Acquisition [Member]
Disposal Group, Including Discontinued Operation, Assets, Total		6,300
Summerville Facility Acquired in STM Acquisition [Member] | Restructuring Charges [Member]
Impairment of Long-Lived Assets to be Disposed of	1,400
Non Financial [Member] | Fair Value, Nonrecurring [Member]
Assets, Fair Value Disclosure	$ 0	$ 0

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Note 6 - Fair Value Measurements - Fair Value of Financial Assets (Details) - Fair Value, Recurring [Member] - USD ($) $ in Thousands	Oct. 02, 2021	Oct. 03, 2020
Cash equivalents	$ 86,395	$ 72,234
Cash surrender value of life insurance policies	12,501	10,584
Total	98,896	82,818
Fair Value, Inputs, Level 1 [Member]
Cash equivalents	86,395	72,234
Cash surrender value of life insurance policies	0	0
Total	86,395	72,234
Fair Value, Inputs, Level 2 [Member]
Cash equivalents	0	0
Cash surrender value of life insurance policies	12,501	10,584
Total	$ 12,501	$ 10,584

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Note 7 - Intangible Assets (Details Textual) - USD ($)	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Amortization of Intangible Assets, Total	$ 899,000	$ 1,000,000.0	$ 1,100,000
Finite-Lived Intangible Asset, Expected Amortization, Year One	822,000
Finite-Lived Intangible Asset, Expected Amortization, Year Two	757,000
Finite-Lived Intangible Asset, Expected Amortization, Year Three	751,000
Finite-Lived Intangible Asset, Expected Amortization, Year Four	744,000
Finite-Lived Intangible Asset, Expected Amortization, Year Five	$ 752,000

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Note 7 - Intangible Assets - Summary of Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020
Gross	$ 12,320	$ 13,780
Accumulated Amortization	(4,652)	(5,213)
Net Book Value	$ 7,668	$ 8,567
Customer Relationships [Member]
Weighted-Average Useful Life (Year)	17 years 1 month 6 days	17 years 1 month 6 days
Gross	$ 9,870	$ 9,870
Accumulated Amortization	(3,482)	(2,837)
Net Book Value	$ 6,388	$ 7,033
Technology-Based Intangible Assets [Member]
Weighted-Average Useful Life (Year)	20 years	20 years
Gross	$ 1,800	$ 1,800
Accumulated Amortization	(639)	(551)
Net Book Value	$ 1,161	$ 1,249
Noncompete Agreements [Member]
Weighted-Average Useful Life (Year)	5 years	5 years
Gross	$ 400	$ 1,860
Accumulated Amortization	(284)	(1,663)
Net Book Value	$ 116	$ 197
Trade Names [Member]
Weighted-Average Useful Life (Year)	2 years 8 months 12 days	2 years 8 months 12 days
Gross	$ 250	$ 250
Accumulated Amortization	(247)	(162)
Net Book Value	$ 3	$ 88

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Note 8 - Long-term Debt (Details Textual) - USD ($)	1 Months Ended	12 Months Ended
	May 31, 2019	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Amortization of Debt Issuance Costs		$ 65,000	$ 66,000	$ 65,000
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		100,000,000.0
Line Of Credit Facility, Additional Borrowing Capacity	$ 50,000,000.0
Long-term Line of Credit, Total		0
Line of Credit Facility, Remaining Borrowing Capacity		98,600,000
Letters of Credit Outstanding, Amount		$ 1,400,000
Debt Instrument, Interest Rate, Increase (Decrease)		2.00%
Fixed Charge Coverage Ratio		1.0
Credit Facility, Liquidity Amount		$ 10,000,000.0
Revolving Credit Facility [Member] | Federal Funds Rate [Member]
Debt Instrument, Basis Spread on Variable Rate		0.50%
Revolving Credit Facility [Member] | Base Rate [Member]
Line of Credit Facility, Interest Rate at Period End		0.25%
Revolving Credit Facility [Member] | Base Rate [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate		0.25%
Revolving Credit Facility [Member] | Base Rate [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate		0.50%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility, Interest Rate at Period End		1.25%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate		1.25%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate		1.50%

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Note 8 - Long-term Debt - Amortization of Financing Costs (Details) $ in Thousands	Oct. 02, 2021 USD ($)
2022, Amortization	$ 65
2023, Amortization	65
2024, Amortization	$ 41

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Note 9 - Stock-based Compensation (Details Textual) - USD ($)		9 Months Ended	12 Months Ended
	Feb. 28, 2020	Jul. 03, 2021	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount			$ 497,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)			1 year 7 months 24 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)			$ 14.47	$ 8.05	$ 7.15
Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)			10 years
Share-based Payment Arrangement, Expense			$ 860,000	$ 810,000	$ 889,000
Restricted Stock Units (RSUs) [Member]
Share-based Payment Arrangement, Expense			$ 1,128,000	$ 1,218,000	$ 1,168,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)			1 year 10 months 17 days
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount			$ 748,000
Restricted Stock Units (RSUs) [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)		1 year
Restricted Stock Units (RSUs) [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)		3 years
The 2015 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized (in shares)	750,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)			621,000

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Note 9 - Stock-based Compensation - Stock Option Valuation Assumptions (Details) - Share-based Payment Arrangement, Option [Member]	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Expected term (Year)	4 years 10 months 13 days	4 years 9 months 21 days	4 years 7 months 2 days
Risk-free interest rate	0.68%	0.95%	2.03%
Expected volatility	50.34%	47.18%	42.79%
Expected dividend yield	0.42%	0.59%	0.56%

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Note 9 - Stock-based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019	Sep. 29, 2018
Options outstanding, balance (in shares)	482	388	264
Weighted average exercise price per share (in dollars per share)	$ 24.90	$ 26.16	$ 29.25
Options outstanding, granted (in shares)	74	121	129
Weighted average exercise price per share, granted (in dollars per share)	$ 34.76	$ 21.08	$ 19.74
Options outstanding, exercised (in shares)	(128)		(5)
Weighted average exercise price per share, exercised (in dollars per share)	$ 21.17		$ 23.95
Aggregate intrinsic value, exercised	$ 2,212		$ 21
Options outstanding, forfeited (in shares)		(27)
Weighted average exercise price per share, forfeited (in dollars per share)		$ 25.88
Options outstanding, balance (in shares)	428	482	388	264
Weighted average exercise price per share (in dollars per share)	$ 27.72	$ 24.90	$ 26.16	$ 29.25
Contractual term - weighted average, balance (Year)	6 years 5 months 23 days
Aggregate intrinsic value, outstanding	$ 5,006
Options outstanding, vested and anticipated to vest in future (in shares)	416
Weighted average exercise price per share, vested and anticipated to vest in futur (in dollars per share)	$ 27.70
Contractual term - weighted average, vested and anticipated to vest in future (Year)	6 years 4 months 28 days
Aggregate intrinsic value, vested and anticipated to vest in future	$ 4,867
Options outstanding, exercisable (in shares)	246
Weighted average exercise price per share, exercisable (in dollars per share)	$ 28.75
Contractual term - weighted average, exercisable (Year)	4 years 8 months 26 days
Aggregate intrinsic value, exercisable	$ 2,604
Minimum [Member]
Exercise price per share, balance, lower (in dollars per share)	$ 17.22	10.23	10.23	10.23
Exercise price per share, granted, lower (in dollars per share)	29.43	19.86	18.25
Exercise price per share, exercised, lower (in dollars per share)	10.23		18.05
Exercise price per share, forfeited, lower (in dollars per share)		18.05
Maximum [Member]
Exercise price per share, balance, upper (in dollars per share)	41.87	41.85	41.85	$ 41.85
Exercise price per share, granted, upper (in dollars per share)	41.87	22.09	21.57
Exercise price per share, exercised, upper (in dollars per share)	$ 34.49		$ 26.75
Exercise price per share, forfeited, upper (in dollars per share)		$ 41.85

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Note 9 - Stock-based Compensation - RSU Grants and Compensation Expense (Details) - Restricted Stock Units (RSUs) [Member] - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Units (in shares)	43	68	61
Market value	$ 1,430	$ 1,444	$ 1,225
Compensation expense	$ 1,128	$ 1,218	$ 1,168

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Note 9 - Stock-based Compensation - RSU Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares shares in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Restricted stock units outstanding, beginning balance (in shares)	122	115	103
Weighted average grant date fair value, beginning balance (in dollars per share)	$ 23.07	$ 26.16	$ 30.40
Units (in shares)	43	68	61
Weighted average grant date fair value, granted (in dollars per share)	$ 33.22	$ 21.29	$ 20.18
Restricted stock units outstanding, released (in shares)	(36)	(55)	(49)
Weighted average grant date fair value, released (in dollars per share)	$ 29.21	$ 27.07	$ 27.64
Restricted stock units outstanding, forfeited (in shares)		(6)
Weighted average grant date fair value, forfeited (in dollars per share)		$ 25.49
Restricted stock units outstanding, ending balance (in shares)	129	122	115
Weighted average grant date fair value, ending balance (in dollars per share)	$ 24.73	$ 23.07	$ 26.16

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Note 10 - Income Taxes (Details Textual) - USD ($)	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Income Tax Benefit Cares Act		$ 223,000
Deferred Tax Liabilities, Net, Total	$ 6,296,000	6,568,000
Deferred Tax Assets, Valuation Allowance, Total	73,000	207,000
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount	134,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense, Total	0	$ 0	$ 0
State and Local Jurisdiction [Member]
Operating Loss Carryforwards, Total	$ 2,100,000
State and Local Jurisdiction [Member] | Earliest Tax Year [Member]
Operating Loss Carryforwards Expiration Date 1	2031
State and Local Jurisdiction [Member] | Latest Tax Year [Member]
Operating Loss Carryforwards Expiration Date 1	2036

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Note 10 - Income Taxes - Components of Provision for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Federal	$ 17,904	$ 5,056	$ (126)
State	1,707	529	185
Total current	19,611	5,585	59
Federal	(180)	(288)	1,649
State	62	(136)	149
Total deferred	(118)	(424)	1,798
Provision for income taxes	$ 19,493	$ 5,161	$ 1,857
Effective income tax rate	22.60%	21.40%	24.90%

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Note 10 - Income Taxes - Income Tax Reconciliation (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Provision for income taxes at federal statutory rate	$ 18,082	$ 5,076	$ 1,566
Provision for income taxes at federal statutory rate, percentage	21.00%	21.00%	21.00%
State income taxes, net of federal tax benefit	$ 1,544	$ 319	$ 297
State income taxes, net of federal tax benefit, percentage	1.80%	1.30%	4.00%
Stock-based compensation	$ (253)	$ 128	$ 90
Stock-based compensation, percentage	(0.30%)	0.50%	1.20%
Valuation allowance	$ (134)	$ (50)	$ 24
Valuation allowance, percentage	(0.20%)	(0.20%)	0.30%
Net operating loss carryback - CARES Act	$ 0	$ (223)	$ 0
Net operating loss carryback - CARES Act, percentage	0.00%	(0.90%)	0.00%
Federal tax return true-up	$ 0	$ 0	$ (142)
Federal tax return true-up, percentage	0.00%	0.00%	(1.90%)
Other, net	$ 254	$ (89)	$ 22
Other, net, percentage	0.30%	(0.30%)	0.30%
Provision for income taxes	$ 19,493	$ 5,161	$ 1,857
Provision for income taxes, percentage	22.60%	21.40%	24.90%

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Note 10 - Income Taxes - Deferred Tax Asset and Liability Components (Details) - USD ($)	Oct. 02, 2021	Oct. 03, 2020
Defined benefit plans	$ 2,921,000	$ 2,727,000
Accrued expenses and asset reserves	2,280,000	1,885,000
Stock-based compensation	1,204,000	1,328,000
Operating lease liability	387,000	568,000
State net operating loss carryforwards and tax credits	54,000	92,000
Valuation allowance	(73,000)	(207,000)
Deferred tax assets	6,773,000	6,393,000
Plant and equipment	(10,901,000)	(10,766,000)
Prepaid insurance	(1,374,000)	(1,217,000)
Right of use assets	(385,000)	(566,000)
Goodwill	(409,000)	(412,000)
Deferred tax liabilities	(13,069,000)	(12,961,000)
Net deferred tax liability	$ (6,296,000)	$ (6,568,000)

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Note 11 - Employee Benefit Plans (Details Textual) - USD ($)	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Supplemental Employee Retirement Plan [Member]
Supplemental Retirement Benefit Period (Year)	15 years
Defined Benefit Plan Percent of Highest Average Salary Base	50.00%
Defined Benefit Plan Number of Years in Average Annual Base Salary (Year)	5 years
Defined Benefit Plan Number of Years Preceding Retirement for Average Annual Base Salary Calculation (Year)	10 years
Defined Benefit Plan, Accumulated Benefit Obligation	$ 11,700,000	$ 10,800,000
Supplemental Employee Retirement Plan [Member] | Minimum [Member]
Defined Benefit Plan Employment Term (Year)	30 years
Reduced SERP [Member]
Defined Benefit Plan Retirement Age	65
Defined Benefit Plan, Reduction for Each Month	0.0028%
Reduced SERP [Member] | Minimum [Member]
Defined Benefit Plan Employment Term (Year)	10 years
Retirement Savings Plan [Member]
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	75.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	50.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	5.00%
Defined Contribution Plan, Cost	$ 1,500,000	1,300,000	$ 1,200,000
Retirement Savings Plan, First 1% of Employee Contribution [Member]
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	100.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	1.00%
VEBA [Member]
Defined Contribution Plan, Cost	$ 6,400,000	$ 6,000,000.0	$ 5,800,000
Healthcare Coverage Claims in Excess of	$ 175,000

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Note 11 - Employee Benefit Plans - Projected Benefit Obligation Reconciliation for SERP (Details) - Supplemental Employee Retirement Plan [Member] - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Benefit obligation	$ 11,610	$ 11,278	$ 9,749
Service cost	312	338	297
Interest cost	316	334	384
Actuarial loss (gain)	855	(91)	1,133
Distributions	(205)	(249)	(285)
Benefit obligation	12,888	11,610	11,278
Actual employer contributions	205	249	285
Actual distributions	(205)	(249)	(285)
Fair value of plan assets	0	0	0
Funded status	(12,888)	(11,610)	(11,278)
Net amount recognized	(12,888)	(11,610)	(11,278)
Unrecognized net loss	3,213	2,574	2,958
Net amount recognized	3,213	2,574	2,958
Net loss (gain)	855	(91)	1,133
Amortization of net loss	(215)	(294)	(140)
Total recognized in other comprehensive income (loss)	$ 640	$ (385)	$ 993

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Note 11 - Employee Benefit Plans - Net Periodic Pension Costs and Related Components (Details) - Supplemental Employee Retirement Plan [Member] - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Service cost	$ 312	$ 338	$ 297
Interest cost	316	334	384
Amortization of net loss	215	294	140
Net periodic pension cost	$ 843	$ 966	$ 821

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Note 11 - Employee Benefit Plans - Plan Valuation Assumptions (Details) - Supplemental Employee Retirement Plan [Member]	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate	2.75%	2.75%	3.00%
Rate of increase in compensation levels	3.00%	3.00%	3.00%

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Note 11 - Employee Benefit Plans - Projected Benefit Payments (Details)	Oct. 02, 2021 USD ($)
Defined Benefit Plan, Expected Future Benefit Payment, Year One	$ 576,000
2023	542,000
2024	582,000
2025	893,000
2026	818,000
2027-2031	$ 4,443,000

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Note 12 - Commitments and Contingencies (Details Textual) - USD ($)	12 Months Ended
	Oct. 02, 2021	Sep. 28, 2019	Sep. 29, 2018
Non-cancelable Purchase Commitment for Raw Material [Member]
Purchase Commitment, Remaining Minimum Amount Committed	$ 125,300,000
Non-cancelable Purchase Commitment Term (Day)	100 days
Purchase Commitment for Equipment [Member]
Purchase Commitment, Remaining Minimum Amount Committed	$ 3,600,000
Fire [Member]
Insurance Recoveries		$ 2,200,000
Insurance Settlements Receivable			$ 462,000
Fire [Member] | Other Income [Member]
Insurance Recoveries		1,100,000
Fire [Member] | Cost of Sales [Member]
Insurance Recoveries		645,000
Fire [Member] | Selling, General and Administrative Expenses [Member]
Insurance Recoveries		48,000
Storm [Member]
Insurance Recoveries		150,000
Storm [Member] | Other Income [Member]
Insurance Recoveries		$ 98,000

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Note 13 - Leases (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Operating Lease, Expense	$ 1.4	$ 1.3	$ 1.6

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Note 13 - Leases - Supplement Cash Flow and Non-cash Information, Weighted Average Remaining Lease Term and Discount Rate Related to Lease (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020
Cash paid for operating leases included in operating cash flows	$ 1,413	$ 1,301
Right-of-use assets obtained in exchange for new lease obligations	$ 579	$ 1,771
Weighted average lease term (in years) (Year)	1 year 9 months 18 days	2 years 3 months 18 days
Weighted average discount rate	4.10%	4.40%

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Note 13 - Leases - Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Oct. 03, 2020
Other assets	$ 1,717	$ 2,522
Other Noncurrent Assets [Member]
Other assets	1,717	2,522
Accrued Expenses, Current [Member]
Accrued expenses	1,030	1,230
Other Noncurrent Liabilities [Member]
Other liabilities	695	1,300
Accrued Expenses Current and Other Noncurrent Liabilities [Member]
Total operating lease liabilities	$ 1,725	$ 2,530

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Note 13 - Leases - Aggregate Future Operating Lease Payments (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Oct. 03, 2020
2022	$ 1,075
2023	583
2024	129
2025	2
2026	0
Thereafter	0
Total future operating lease payments	1,789
Less: imputed interest	(64)
Accrued Expenses Current and Other Noncurrent Liabilities [Member]
Present value of lease liabilities	$ 1,725	$ 2,530

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Note 14 - Earnings Per Share (Details Textual) - shares	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	142,000	369,000	240,000

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Note 14 - Earnings Per Share - Basic and Diluted Earnings Per Share Attributable to Common Shareholders (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Net earnings	$ 66,610	$ 19,009	$ 5,598
Basic weighted average shares outstanding (in shares)	19,344	19,278	19,243
Dilutive effect of stock-based compensation (in shares)	190	105	97
Diluted weighted average shares outstanding (in shares)	19,534	19,383	19,340
Basic (in dollars per share)	$ 3.44	$ 0.99	$ 0.29
Diluted (in dollars per share)	$ 3.41	$ 0.98	$ 0.29

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Note 15 - Business Segment Information (Details Textual)	12 Months Ended
	Oct. 02, 2021
Number of Reportable Segments	1

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Note 15 - Business Segment Information - Net Sales And Long-lived Assets By Geographic Region (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Revenue	$ 590,601	$ 472,618	$ 455,713
UNITED STATES
Revenue	583,458	470,420	454,373
Non-US [Member]
Revenue	$ 7,143	$ 2,198	$ 1,340

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Note 15 - Business Segment Information - Net Sales By Product Line (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Revenue	$ 590,601	$ 472,618	$ 455,713
Welded Wire Reinforcement [Member]
Revenue	358,334	294,129	290,423
PC Strand [Member]
Revenue	$ 232,267	$ 178,489	$ 165,290

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Note 16 - Related Party Transactions (Details Textual) - USD ($)	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Revenue from Related Parties	$ 0	$ 0	$ 716,000

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Note 17 - Other Financial Data - Balance Sheet Information (Details) - USD ($) $ in Thousands	Oct. 02, 2021	Oct. 03, 2020
Accounts receivable	$ 68,274	$ 54,108
Less allowance for credit losses	(357)	(291)
Total	67,917	53,817
Raw materials	50,459	31,553
Work in process	6,680	3,813
Finished goods	21,910	33,597
Total	79,049	68,963
Prepaid insurance	5,169	4,096
Other	4,887	1,474
Total	10,056	5,570
Cash surrender value of life insurance policies	12,501	10,584
Disposal Group, Including Discontinued Operation, Assets, Total	6,306	7,778
Other assets	1,717	2,522
Capitalized financing costs, net	106	170
Other	137	106
Total	20,767	21,160
Land and land improvements	14,554	14,520
Buildings	53,182	52,462
Machinery and equipment	180,654	172,617
Construction in progress	10,191	3,978
Property, plant and equipment, gross	258,581	243,577
Less accumulated depreciation	(152,957)	(142,185)
Total	105,624	101,392
Salaries, wages and related expenses	8,229	4,971
Income taxes	4,014	1,201
Customer rebates	2,354	1,581
Property taxes	1,575	1,726
Sales allowance reserves	991	0
State sales and use taxes	760	544
Holdback for business acquired	0	1,000
Other	453	2,464
Total	19,406	14,717
Deferred compensation	12,832	11,553
Deferred Tax Liabilities, Net, Total	6,296	6,568
Total	19,823	19,421
Accrued Expenses, Current [Member]
Accrued expenses	1,030	1,230
Other Noncurrent Liabilities [Member]
Operating lease liabilities	$ 695	$ 1,300

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Note 19 - Share Repurchases (Details Textual) - USD ($) shares in Thousands, $ in Millions	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019	Nov. 18, 2008
Stock Repurchase Program, Authorized Amount				$ 25.0
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 24.8
Stock Repurchased During Period, Shares (in shares)	0	0	0

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Schedule II - Valuation and Qualifying Accounts - Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 02, 2021	Oct. 03, 2020	Sep. 28, 2019
Balance, beginning of year	$ 291	$ 254	$ 295
Amounts charged to earnings	80	65	(41)
Write-offs, net of recoveries	(14)	(28)	0
Balance, end of year	$ 357	$ 291	$ 254