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Note 5 - Business Combinations and Restructuring
 12 Months Ended
Sep. 27, 2025
Notes to Financial Statements  
Business Combination [Text Block]

(5) Business Combinations and Restructuring

 

Acquisitions have been accounted for as business purchases pursuant to FASB ASC Topic 805, Business Combinations (“ASC 805”).

 

Engineered Wire Products, Inc.

 

On October 21, 2024, we purchased substantially all of the assets, other than cash and accounts receivable, of EWP and certain related assets of LSG (the “EWP Acquisition”) for an adjusted purchase price of $67.0 million, which included a $1.5 million holdback. Subsequent to the acquisition date, purchase price adjustments totaling $0.8 million were applied to the holdback amount, reducing it to $0.7 million. The final holdback amount was settled during 2025.

 

EWP was a leading manufacturer of WWR products for use in nonresidential and residential construction. Under the terms of the EWP Acquisition, Insteel acquired EWP’s inventories, production equipment and production facilities located in Upper Sandusky, Ohio and Warren, Ohio. Insteel also acquired certain equipment from LSG located in Georgetown, South Carolina, but the Georgetown facility was excluded from the acquisition. EWP retained its accounts receivable and accounts payable. The EWP Acquisition was funded with cash on hand. The EWP Acquisition will expand our geographic footprint and is expected to strengthen our competitive position within the Midwest market.

 

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

 

(In thousands)

        

Assets acquired:

        

Inventories

   $ 12,066  

Other current assets

     171  

Property, plant and equipment

     16,708  

Intangible assets:

        

Customer relationships

     10,800  

Non-competition agreement

     900  

Trade name

     350  

Patent

     200  

Right-of-use assets

     459  

Total assets acquired

   $ 41,654  
         

Liabilities assumed:

        

Accrued expenses

   $ 89  

Current operating lease liabilities

     128  

Non-current operating lease liabilities

     331  

Total liabilities assumed

     548  

Net assets acquired

     41,106  

Adjusted purchase price

     67,030  

Goodwill

   $ 25,924  

 

In connection with the EWP Acquisition, we acquired certain intangible assets that will be amortized based on their estimated useful lives of 20.0 years for customer relationships, 4.0 years for a non-competition agreement, 1.0 year for a trade name and 7.0 years for a patent. Certain measurement period adjustments were recorded in the year ended September 27, 2025, due to the receipt of additional information regarding the facts and circumstances that existed as of the acquisition date, reducing the purchase price allocation to property, plant, and equipment and increasing goodwill by $1.3 million. This adjustment did not have a material impact on net earnings. Goodwill associated with the EWP 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.

 

Following the EWP Acquisition, net sales of the former EWP facilities in 2025 were approximately $59.3 million. The actual net sales specifically attributable to the EWP Acquisition, however, cannot be quantified due to our integration efforts which involved the reassignment of business between the former EWP facilities and our existing WWR facilities. As a result, we have determined that the presentation of EWP’s earnings is impracticable for 2025 due to the integration of EWP’s operations following the EWP Acquisition.

 

The following unaudited supplemental pro forma financial information reflects our combined results of operations had the EWP Acquisition occurred at the beginning of fiscal 2024. The pro forma information reflects certain adjustments related to the EWP Acquisition, including adjusted amortization and depreciation expense based on the fair values of the assets acquired and adjustments to interest income. The pro forma information does not reflect any potential operating efficiencies or cost savings that may result from the EWP 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 EWP Acquisition occurred at the beginning of fiscal 2024, 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  
   

September 27,

    

September 28,

  

(In thousands)

  

2025

    

2024

  

Net sales

   $ 652,912     $ 622,462  

Earnings before income taxes

     53,885       22,795  

Net earnings

     41,079       17,510  

 

Restructuring charges. In connection with the EWP Acquisition, we elected to consolidate our WWR operations through the closure of the Warren facility and through the redeployment of equipment to our other WWR production facilities. Production at the Warren facility ceased in November 2024, and its orders were distributed to our remaining WWR facilities. During 2025, we determined the carrying value of the Warren facility, which was classified as assets held for sale until it was sold in 2025, exceeded its fair value, less estimated costs to sell, and recorded an impairment loss of $0.5 million within restructuring charges on our consolidated statements of operations. Following is a summary of the restructuring activity during 2025:

 

(In thousands)

  

Employee

    

Equipment

    

Facility

    

Asset

         
   

Separation Costs

    

Relocation Costs

    

Closure Costs

    

Impairments

    

Total

  

2025

                                        

Restructuring charges, net

   $ 251     $ 340     $ 492     $ 895     $ 1,978  

Cash payments

     (251 )     (340 )     (468 )     -       (1,059 )

Non-cash charges

     -       -       -       (895 )     (895 )

Liability as of September 27, 2025

   $ -     $ -     $ 24     $ -     $ 24  

 

As of September 27, 2025, we recorded a liability of $24,000 for restructuring liabilities in accrued expenses on our consolidated balance sheet. We currently expect to incur approximately $0.1 million of additional restructuring charges for equipment relocation through the second fiscal quarter of 2026.

 

Acquisition costs. 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. During 2025, we recorded $279,000 of acquisition-related costs associated with the EWP Acquisition for accounting, legal and other professional fees.

 

O’Brien Wire Products of Texas, Inc.

 

On November 26, 2024, we purchased certain assets of OWP for a purchase price of $5.1 million (the “OWP Acquisition”). OWP was a manufacturer of WWR products for use in nonresidential and residential construction. Under the terms of the OWP Acquisition, Insteel acquired certain of OWP’s inventories and all of the production equipment. The OWP Acquisition was funded with cash on hand. The OWP Acquisition serves to strengthen our competitive position within the Texas market.

 

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

 

(In thousands)

        

Assets acquired:

        

Inventories

   $ 404  

Property, plant and equipment

     1,812  

Intangible assets:

        

Customer relationships

     785  

Non-competition agreement

     30  

Total assets acquired

   $ 3,031  
         

Liabilities assumed:

        

Total liabilities assumed

   $ -  

Net assets acquired

     3,031  

Purchase price

     5,116  

Goodwill

   $ 2,085  

 

In connection with the OWP Acquisition, we acquired certain intangible assets that will be amortized based on their estimated useful lives of 20.0 years for customer relationships and 5.0 years for a non-competition agreement. Certain measurement period adjustments were recorded during 2025, due to the receipt of additional information regarding the facts and circumstances that existed as of the acquisition date, reducing the purchase price allocation to property, plant, and equipment and increasing goodwill by $0.9 million. This adjustment did not have a material impact on net earnings. Goodwill, 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.

 

Following the OWP Acquisition, the net sales resulting from this acquisition were managed through our existing WWR facilities and cannot be quantified separately because of our integration efforts. Additionally, we are unable to prepare pro forma financial information due to the unavailability of certain historical financial data. Disclosing this information is considered impractical, and it would not significantly differ from the results presented in our consolidated financial statements for the years ended September 27, 2025, and September 28, 2024.

 

Restructuring charges. In connection with the OWP Acquisition, we elected to consolidate our WWR operations through the redeployment of OWP’s equipment and inventory to our other facilities. Following is a summary of the restructuring activity during 2025:

 

(In thousands)

  

Equipment

    

Facility

    

Asset

         
   

Relocation Costs

    

Closure Costs

    

Impairments

    

Total

  

2025

                                

Restructuring charges, net

   $ 31     $ 189     $ 106     $ 326  

Cash payments

     (31 )     (140 )     -       (171 )

Non-cash charges

     -       -       (106 )     (106 )

Liability as of September 27, 2025

   $ -     $ 49     $ -     $ 49  

 

As of September 27, 2025, we recorded a liability of $49,000 for restructuring liabilities in accrued expenses on our consolidated balance sheet. We currently expect to incur approximately $0.1 million of additional restructuring charges for equipment relocation through the second fiscal quarter of 2026.

 

Acquisition costs. During 2025, we recorded $46,000 of acquisition-related costs associated with the OWP Acquisition for accounting, legal and other professional fees.