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Note 9 - Stock-based Compensation | 12 Months Ended
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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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