INSTEEL INDUSTRIES INC Fair Value Disclosure

(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 September 27, 2025 and September 28, 2024, 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 September 27, 2025:
Current assets:
Cash equivalents		$	38,396			$	38,396			$	-
Other assets:
Cash surrender value of life insurance policies			13,552				-				13,552
Total		$	51,948			$	38,396			$	13,552
As of September 28, 2024:
Current assets:
Cash equivalents		$	111,146			$	111,146			$	-
Other assets:
Cash surrender value of life insurance policies			12,610				-				12,610
Total		$	123,756			$	111,146			$	12,610

 

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 September 27, 2025 and September 28, 2024, 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 EWP and OWP at fair value in 2025 (see Note 5 to the consolidated financial statements). The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these financial instruments.