Note 6 - Stock-based Compensation

6 Months Ended

Apr. 01, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(6) 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 28, 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 April 1, 2023, there were 500,000 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 these plans generally vest over three years and expire ten years from the date of the grant. Compensation expense associated with stock options was $439,000 and $374,000 for the three-month periods ended April 1, 2023, and April 2, 2022, respectively, and $475,000 and $480,000 for the six-month periods ended April 1, 2023 and April 2, 2022, respectively. As of April 1, 2023, there was $650,000 of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of 2.03 years.

The following table summarizes stock option activity:

						Contractual		Aggregate
	Options			Weighted		Term - Weighted		Intrinsic
	Outstanding			Average		Average		Value
	(in thousands)			Exercise Price		(in years)		(in thousands)
Outstanding at October 1, 2022		365		$	30.00
Granted		49			30.27
Forfeited		(19	)		33.22
Exercised		(5	)		19.86			$	46
Outstanding at April 1, 2023		390			30.00		7.33		938
Vested and anticipated to vest in the future at April 1, 2023		382			29.94		7.29		936
Exercisable at April 1, 2023		231			28.42		6.16		811

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. Compensation expense associated with RSUs was $544,000 and $455,000 for the three-month periods ended April 1, 2023, and April 2, 2022, respectively, and $638,000 and $622,000 for the six-month periods ended April 1, 2023 and April 2, 2022, respectively.

As of April 1, 2023, there was $1.2 million of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 1.56 years.

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, October 1, 2022		120		$	29.88
Granted		36			30.27
Forfeited		(10	)		30.36
Released		(31	)		27.06
Balance, April 1, 2023		115			30.72