Financial Analysis

(3) Business Combinations Acquisitions have been accounted for as business purchases pursuant to FASB Accounting Standards Codification (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 welded wire reinforcement (WWR) products for use in nonresidential and residential construction. Under the terms of the EWP Acquisition, Insteel acquired EWPs 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 expanded our geographic footprint and strengthened 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 …

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(15) Contingencies 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.

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(7) 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, 2025, the shareholders of the Company approved the 2025 Equity Incentive Plan of Insteel Industries Inc. (the 2025 Plan), which authorizes the issuance of up to 800,000 shares of our common stock, plus any shares remaining available for grant under the 2015 Equity Incentive Plan of Insteel Industries Inc. (as amended, the 2015 Plan) as of the effective date of the 2025 Plan and any shares subject to an award granted under the 2015 Plan which are forfeited, cancelled, terminated, lapsed or expired without the issuance of shares. The 2025 Plan expires on February 10, 2035. As of June 27, 2026, there were 821,000 shares of our common stock available for future grants under the 2025 Plan, which is our only active equity incentive plan. Stock option awards . Under the 2025 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 2025 Plan generally vest over three years and expire ten years from the date of the grant. Compensation expense associated with stock options was $141,000 and $131,000 for the three-month periods ended June 27, 2026, and June 28, 2025, respectively, and $847,000 and $828,000 for the nine-month periods ended June 27, 2026, and June 28, 2025, respectiv …

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(5) 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 June 27, 2026, and September 27, 2025, 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 June 27, 2026: Current assets: Cash equivalents $ 22,483 $ 22,483 $ - Other assets: Cash surrender value of life insurance policies 14,865 - 14,865 Total $ 37,348 $ 22,483 $ 14,865 As of Septembe …

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(8) Income Taxes Effective income tax rate . Our effective income tax rate was 22.3% for the nine-month period ended June 27, 2026, compared with 23.4% for the nine-month period ended June 28, 2025. The effective income tax rates for both periods were based upon the estimated rate applicable for the entire fiscal year adjusted to reflect any significant or discrete items related specifically to interim periods. The decrease in the effective rate for the nine-month period ended June 27, 2026, is primarily attributed to a decrease in the valuation allowance for deferred tax assets that are expected to be utilized and the calculation of state deferred tax balances. Deferred income taxes. As of June 27, 2026, and September 27, 2025, we recorded a deferred tax liability (net of valuation allowance) of $11.0 million and $11.1 million, respectively, in other liabilities on our consolidated balance sheets. We have $4.9 million of state net operating loss carryforwards that effectively expire in 2031 due to state tax rate reductions. 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 June 27, 2026, and September 27, 2025, we recorded a valuation allowance of $3,000 and $112,000, respectiv …

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(10) 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 March 2023, we amended our credit agreement to extend the maturity date of the Credit Facility from May 15, 2024, to March 15, 2028, and replaced the London Inter-Bank Offered Rate with the Secured Overnight Financing Rate (SOFR). The Credit Facility provides for an accordion feature whereby its size may be increased by up to $50.0 million, subject to our lenders 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 June 27, 2026, no borrowings were outstanding on the Credit Facility, $98.7 million of borrowing capacity was available and outstanding letters of credit totaled $1.3 million. 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 SOFR rate plus 1.00% or (2) at our election, a SOFR rate including a credit adjustment of 0.10% 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 …

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(9) Employee Benefit Plans Supplemental retirement benefit plan. We have Supplemental Retirement Benefit Agreements (each, a SRBA) with certain of our 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 Participants retirement equal to 50% of the Participants highest average annual base salary for five consecutive years in the 10-year period preceding the Participants retirement. If the Participant retires prior to the completion of 30 years of continuous service with us but has attained age 55 and completed at least 10 years of continuous service, the amount of the Participants supplemental retirement benefit will be reduced by 1/360 th for each month short of 30 years that the Participant was employed by us. Net periodic pension cost for the SRBAs consists of the following components included in selling, general and administrative expense (SG&A expense): Three Months Ended Nine Months Ended June 27, June 28, June 27, June 28, (In thousands) 2026 2025 2026 2025 Interest cost $ 162 $ 151 $ 486 $ 453 Service cost 65 69 195 207 Net periodic pension cost $ 227 $ 220 $ 681 $ 660 …

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(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 are 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 present revenue net of amounts collected from customers for sales tax. 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 costs are not significant and are recognized as incurred. 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 …

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(14) 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: prestressed concrete strand and welded wire reinforcement. Based on the criteria specified in ASC Topic 280, Segment Reporting , we have one reportable segment. The Company's chief operating decision maker (CODM) is the Chief Executive Officer . The CODM assesses performance and allocates resources based on consolidated net earnings. This measure of profitability is utilized to assess growth opportunities, including those through organic growth initiatives, capital expenditures and acquisitions; manage and control expenses and efficiency within our operations; and evaluate shareholder return strategies, including dividend payments and repurchases of common stock. Significant expenses include cost of sales and SG&A expense which are each presented on the Companys consolidated statement of operations. The measure of segment assets is reported on the consolidated balance sheet as total assets, which are located in the U.S. Our net sales by product line are as follows: Three Months Ended Nine Months Ended June 27, June 28, June 27, June 28, (In thousands) 2026 2025 2026 2025 Net sales: Welded wire reinforcement $ 123,744 $ 117,691 $ 338,595 $ 300,165 Prestressed concrete strand 73,915 62,195 191,641 170,097 Total $ 197,659 $ 179,886 $ 530 …

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(12) 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 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. The Company repurchased $1.9 million or 75,000 shares and $224,000 or 6,402 shares of its common stock during the three-month periods ended June 27, 2026, and June 28, 2025, respectively, and $2.7 million or 98,905 shares and $2.0 million or 67,793 shares of its common stock during the nine-month periods ended June 27, 2026, and June 28, 2025, respectively. As of June 27, 2026, there was $14.4 million remaining available for future share repurchases under this Authorization. …

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