10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 1-9929

Insteel Industries, Inc.

(Exact name of registrant as specified in its charter)

North Carolina (State or other jurisdiction of incorporation or organization)	56-0674867 (I.R.S. Employer Identification No.)
1373 Boggs Drive, Mount Airy, North Carolina (Address of principal executive offices)	27030 (Zip Code)

Registrant’s telephone number, including area code: (336) 786-2141

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

  Yes [X]   No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [X]
Non-accelerated filer   [  ] (Do not check if a smaller reporting company)	Smaller reporting company [  ] Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

The number of shares outstanding of the registrant’s common stock as of July 18, 2018 was 19,085,438.

TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1.	Unaudited Financial Statements
	Consolidated Statements of Operations and Comprehensive Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Consolidated Statements of Shareholders' Equity	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 6.	Exhibits	22
SIGNATURES		23

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,			July 1,			June 30,			July 1,
	2018			2017			2018			2017
Net sales	$	126,688		$	96,938		$	331,846		$	291,985
Cost of sales		102,502			80,262			280,583			244,005
Gross profit		24,186			16,676			51,263			47,980
Selling, general and administrative expense		7,541			6,216			20,779			19,535
Restructuring charges, net		-			60			-			133
Other expense (income), net		(32	)		50			153			50
Interest expense		23			34			74			103
Interest income		(150	)		(75	)		(279	)		(175	)
Earnings before income taxes		16,804			10,391			30,536			28,334
Income taxes		3,936			3,522			3,678			9,585
Net earnings	$	12,868		$	6,869		$	26,858		$	18,749
Net earnings per share:
Basic	$	0.67		$	0.36		$	1.41		$	0.99
Diluted		0.67			0.36			1.40			0.98
Weighted average shares outstanding:
Basic		19,070			19,025			19,054			19,003
Diluted		19,274			19,225			19,252			19,219
Cash dividends declared per share	$	0.03		$	0.03		$	1.09		$	1.34
Comprehensive income	$	12,868		$	6,869		$	26,858		$	18,749

See accompanying notes to consolidated financial statements.

3

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

	(Unaudited)
	June 30,			September 30,
	2018			2017
Assets
Current assets:
Cash and cash equivalents	$	45,232		$	32,105
Accounts receivable, net		55,832			40,284
Inventories		54,751			81,853
Other current assets		5,075			5,949
Total current assets		160,890			160,191
Property, plant and equipment, net		102,789			98,670
Intangibles, net		9,976			7,913
Goodwill		8,293			6,965
Other assets		9,778			9,334
Total assets	$	291,726		$	283,073
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	34,420		$	33,651
Accrued expenses		10,017			8,667
Total current liabilities		44,437			42,318
Other liabilities		16,602			17,379
Commitments and contingencies
Shareholders' equity:
Common stock		19,085			19,041
Additional paid-in capital		70,982			69,817
Retained earnings		141,953			135,851
Accumulated other comprehensive loss		(1,333	)		(1,333	)
Total shareholders' equity		230,687			223,376
Total liabilities and shareholders' equity	$	291,726		$	283,073

See accompanying notes to consolidated financial statements.

4

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	June 30,			July 1,
	2018			2017
Cash Flows From Operating Activities:
Net earnings	$	26,858		$	18,749
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		9,578			8,576
Amortization of capitalized financing costs		48			48
Stock-based compensation expense		1,241			1,343
Deferred income taxes		(2,321	)		2,705
Loss on sale and disposition of property, plant and equipment		270			49
Increase in cash surrender value of life insurance policies over premiums paid		(428	)		(568	)
Net changes in assets and liabilities (net of assets and liabilities acquired):
Accounts receivable, net		(15,548	)		5,082
Inventories		27,102			(12,496	)
Accounts payable and accrued expenses		3,011			290
Other changes		24			(1,739	)
Total adjustments		22,977			3,290
Net cash provided by operating activities		49,835			22,039
Cash Flows From Investing Activities:
Capital expenditures		(12,481	)		(16,855	)
Acquisition of business		(3,300	)		-
Proceeds from surrender of life insurance policies		152			100
Increase in cash surrender value of life insurance policies		(291	)		(330	)
Net cash used for investing activities		(15,920	)		(17,085	)
Cash Flows From Financing Activities:
Proceeds from long-term debt		290			322
Principal payments on long-term debt		(290	)		(322	)
Cash dividends paid		(20,756	)		(25,440	)
Cash received from exercise of stock options		242			107
Payment of employee tax withholdings related to net share transactions		(274	)		(646	)
Net cash used for financing activities		(20,788	)		(25,979	)
Net increase (decrease) in cash and cash equivalents		13,127			(21,025	)
Cash and cash equivalents at beginning of period		32,105			58,873
Cash and cash equivalents at end of period	$	45,232		$	37,848
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Income taxes, net	$	3,553		$	6,796
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable		499			2,092
Restricted stock units and stock options surrendered for withholding taxes payable		274			646

See accompanying notes to consolidated financial statements.

5

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)

											Accumulated
					Additional						Other			Total
	Common Stock				Paid-In			Retained			Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings			Loss			Equity
Balance at September 30, 2017		19,041	$	19,041	$	69,817		$	135,851		$	(1,333	)	$	223,376
Net earnings									26,858						26,858
Stock options exercised, net		24		24		218									242
Vesting of restricted stock units		20		20		(20	)								-
Compensation expense associated with stock-based plans						1,241									1,241
Restricted stock units and stock options surrendered for withholding taxes payable						(274	)								(274	)
Cash dividends declared									(20,756	)					(20,756	)
Balance at June 30, 2018		19,085	$	19,085	$	70,982		$	141,953		$	(1,333	)	$	230,687

See accompanying notes to consolidated financial statements.

6

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Insteel Industries, Inc. (“we,” “us,” “our,” “the Company” or “Insteel”) have been prepared pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures made are adequate to make the information not misleading. The September 30, 2017 consolidated balance sheet was derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should therefore be read in conjunction with the consolidated financial statements and notes for the fiscal year ended September 30, 2017 included in our Annual Report on Form 10-K filed with the SEC on October 27, 2017.

The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that we consider necessary for a fair presentation of results for these interim periods. The results of operations for the nine-month period ended June 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending September 29, 2018 or future periods.

We have evaluated subsequent events through the time of filing this Quarterly Report on Form 10-Q and concluded there are no significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the consolidated financial statements.

(2) Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which is intended to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted this update during our first fiscal quarter. One provision within ASU No. 2016-09 requires the recognition of excess income tax benefits and deficiencies related to share-based payments within income tax expense as a discrete event in the period in which they occur, rather than within additional paid-in capital on a prospective basis. There was no material impact from this provision on income tax expense in the current quarter or nine-month period. The impact of this provision on our future results of operations is difficult to predict as it will depend in part on the market prices for the shares of our common stock on the dates that there are taxable events related to the share-based awards. In connection with another provision within ASU No. 2016-09, we have elected to account for forfeitures of share-based awards as an estimate of the number of awards that are expected to vest, which is consistent with our accounting policy prior to adoption. We also adopted the provisions related to changes on the consolidated statements of cash flows on a retrospective basis. As a result, we no longer classify excess income tax benefits as a financing activity, which increased net cash provided by operating activities and reduced net cash provided by financing activities by $488,000 for the nine months ended July 1, 2017.

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows companies to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings in their consolidated financial statements. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years with early adoption permitted. We are evaluating the impact that the adoption of this update will have on our consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11 “Simplifying the Measurement of Inventory,” which requires that an entity measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. We adopted ASU No. 2015-11 during our first fiscal quarter. The adoption of this update did not have a material effect on our consolidated financial statements.

7

In May 2017, the FASB issued ASU No. 2017-09 “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.” ASU No. 2017-09 was issued to clarify and reduce both (i) diversity in practice and (ii) cost and complexity when applying its guidance to changes in the terms and conditions of a share-based payment award. ASU No. 2017-09 will become effective for us in the first quarter of fiscal 2020. We are evaluating the impact that the adoption of this update will have on our consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15 “Statement of Cash Flows Topic 230: Classification of Certain Cash Receipts and Cash Payments.” ASU No. 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows with the objective of reducing existing differences in the presentation of these items. The amendments in ASU No. 2016-15 are to be adopted retrospectively and will become effective for us in the first quarter of fiscal 2019. We do not expect the adoption of this update will have a material effect on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02 “Leases,” which will replace the guidance in Accounting Standards Codification (“ASC”) Topic 840. ASU No. 2016-02 was issued to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset. ASU No. 2016-02 will become effective for us in the first quarter of fiscal 2020. We are evaluating the impact that the adoption of this update will have on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers,” which will supersede nearly all existing revenue recognition guidance under GAAP. ASU No. 2014-09 provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption and will become effective for us in the first quarter of fiscal 2019. We have substantially completed our evaluation of the impact this update will have on our consolidated financial statements and plan on using the modified retrospective method upon adoption. We have not identified any material changes in the timing of revenue recognition that will result from the adoption of this guidance, but expect it will have a material impact on the disclosures required in our notes to the consolidated financial statements.

(3) Restructuring Charges

In fiscal 2014, we purchased substantially all of the assets associated with the prestressed concrete strand (“PC strand”) business of American Spring Wire Corporation (the “ASW Acquisition”). Subsequent to the ASW Acquisition, in fiscal 2014, we incurred employee separation costs for staffing reductions associated with the acquisition. In February 2015, we elected to consolidate our PC strand operations with the closure of the Newnan, Georgia facility that had been acquired through the ASW Acquisition, which was completed in March 2015.

Following is a summary of the restructuring activities and associated costs that were incurred during the prior year three- and nine-month periods ended July 1, 2017:

				Severance and
(In thousands)	Equipment			Other Employee
	Relocation Costs			Separation Costs			Total
Liability as of October 1, 2016	$	31		$	239		$	270
Restructuring charges		48			-			48
Cash payments		(79	)		(74	)		(153	)
Liability as of December 31, 2016		-			165			165
Restructuring charges		25			-			25
Cash payments		(25	)		(68	)		(93	)
Liability as of April 1, 2017	$	-		$	97		$	97
Restructuring charges		60			-			60
Cash payments		(60	)		(79	)		(139	)
Liability as of July 1, 2017	$	-		$	18		$	18

We do not expect to incur any additional restructuring charges related to the consolidation of our PC strand operations.

8

(4) 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 30, 2018 and September 30, 2017, 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 30, 2018:
Current assets:
Cash equivalents	$	45,187	$	45,187	$	-
Other assets:
Cash surrender value of life insurance policies		9,593		-		9,593
Total	$	54,780	$	45,187	$	9,593
As of September 30, 2017:
Current assets:
Cash equivalents	$	31,659	$	31,659	$	-
Other assets:
Cash surrender value of life insurance policies		9,026		-		9,026
Total	$	40,685	$	31,659	$	9,026

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 June 30, 2018 and September 30, 2017, we had no nonfinancial assets that were required to be measured at fair value on a nonrecurring basis. The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these financial instruments.

9

(5) Intangible Assets

The primary components of our intangible assets and the related accumulated amortization are as follows:

(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value
As of June 30, 2018:
Customer relationships	$	9,070	$	(1,445	)	$	7,625
Developed technology and know-how		1,800		(349	)		1,451
Non-competition agreements		3,687		(2,904	)		783
Trade name		140		(23	)		117
	$	14,697	$	(4,721	)	$	9,976
As of September 30, 2017:
Customer relationships	$	6,500	$	(1,018	)	$	5,482
Developed technology and know-how		1,800		(283	)		1,517
Non-competition agreements		3,577		(2,663	)		914
	$	11,877	$	(3,964	)	$	7,913

Amortization expense for intangibles was $299,000 and $289,000 for the three-month periods ended June 30, 2018 and July 1, 2017, respectively, and $987,000 and $868,000 for the nine-month periods ended June 30, 2018 and July 1, 2017, respectively. We completed the acquisition of a business during the nine-month period ended June 30, 2018, and the effects of the purchase price allocation for this transaction on the accompanying unaudited interim consolidated financial statements are not material.

(6) Stock-Based Compensation

Under our equity incentive plans, employees and directors may be granted stock options, restricted stock, restricted stock units and performance awards. Effective February 17, 2015, our shareholders approved the 2015 Equity Incentive Plan of Insteel Industries, Inc. (the “2015 Plan”), which authorizes up to 900,000 shares of our common stock for future grants under the plan. The 2015 Plan, which expires on February 17, 2025, replaces the 2005 Equity Incentive Plan of Insteel Industries, Inc., which expired on February 15, 2015. As of June 30, 2018, there were 378,000 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 plans, 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 is as follows:

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2018		2017		2018		2017
Compensation expense	$	51	$	78	$	522	$	585

As of June 30, 2018, there was $185,000 of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of 1.51 years.

The fair value of each option award granted is estimated on the date of grant using a Monte Carlo valuation model. The estimated fair values of stock options granted during the nine-month periods ended June 30, 2018 and July 1, 2017 was $10.46 and $13.66 per share, respectively, based on the following assumptions:

	Nine Months Ended
	June 30,			July 1,
	2018			2017
Risk-free interest rate		2.72	%		2.03	%
Dividend yield		0.40	%		0.33	%
Expected volatility		37.74	%		38.79	%
Expected term (in years)		4.89			5.12

10

The assumptions utilized in the Monte Carlo valuation model are evaluated and revised, as necessary, to reflect market conditions and actual historical experience. 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 dividend yield was calculated based on our annual dividend as of the option grant date. 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 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 following table summarizes stock option activity:

											Contractual	Aggregate
	Options			Exercise Price Per Share							Term - Weighted	Intrinsic
	Outstanding								Weighted		Average	Value
	(in thousands)			Range					Average		(in years)	(in thousands)
Outstanding at September 30, 2017		392		$	9.16	-	$	37.06	$	23.40
Granted		44			29.69	-		29.69		29.69
Exercised		(42	)		9.16	-		23.95		17.81
Forfeited		(9	)		23.95	-		37.06		29.88
Outstanding at June 30, 2018		385			10.23	-		37.06		24.59	7.38	$	3,565
Vested and anticipated to vest in the future at June 30, 2018		383								24.56	7.38		3,548
Exercisable at June 30, 2018		201								21.04	6.24		2,540

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 plans 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:

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2018		2017		2018		2017
Restricted stock unit grants:
Units		-		-		24		19
Market value	$	-	$	-	$	712	$	690
Compensation expense		117		132		719		758

As of June 30, 2018, there was $443,000 of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 1.42 years.

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, September 30, 2017		128		$	25.92
Granted		24			29.69
Released		(26	)		25.04
Forfeited		(4	)		29.60
Balance, June 30, 2018		122			26.74

11

(7) Income Taxes

Effective income tax rate. Our effective income tax rate was 12.0% for the nine-month period ended June 30, 2018 compared with 33.8% for the nine-month period ended July 1, 2017. 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 items related specifically to interim periods. On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted, which, among other changes, reduced the federal statutory corporate tax rate from 35% to 21% effective January 1, 2018. Since our fiscal year ends on the Saturday closest to September 30 rather than the calendar year, we are subject to IRS rules relating to transitional income tax rates. As a result, we will be subject to a federal statutory rate of 24.5% for fiscal 2018 and 21% for fiscal 2019 and beyond. Based on the provisions of the Act, we remeasured our deferred tax liabilities and adjusted our estimated annual federal income tax rate to incorporate the lower corporate tax rate into our tax provision during our first fiscal quarter which resulted in a $3.7 million reduction of income tax expense. We are still in process of evaluating the income tax effect of the Act on the executive compensation limitations that will be effective for our fiscal year 2019.

Deferred income taxes. As of June 30, 2018, we recorded a deferred tax liability (net of valuation allowance) of $5.8 million in other liabilities on our consolidated balance sheet. We have $7.4 million of state net operating loss carryforwards (“NOLs”) that begin to expire in 2018, but principally expire between 2018 and 2032. We have also recorded gross deferred tax assets of $72,000 for various state tax credits that begin to expire in 2019, but principally expire between 2019 and 2020.

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 30, 2018 and September 30, 2017, we recorded a valuation allowance of $254,000 and $251,000, respectively, pertaining to various state NOLs and tax credits that were not expected to be utilized. The valuation allowance is subject to periodic review and adjustment based on changes in facts and circumstances and would be reduced should we utilize the state NOLs and tax credits against which an allowance had previously been provided or determine that such utilization was more likely than not.

Uncertainty in income taxes. As of June 30, 2018, we had no material, known tax exposures that require the establishment of contingency reserves for uncertain tax positions.

We file U.S. federal income tax returns as well as state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to 2013 remain subject to examination.

(8) Employee Benefit Plans

Supplemental employee retirement plan. We have Retirement Security Agreements (each, a “SERP”) with certain of our employees (each, a “Participant”). Under the SERPs, if the Participant remains in continuous service with us for a period of at least 30 years, we will pay them a supplemental retirement benefit for the 15-year period following their retirement equal to 50% of their highest average annual base salary for five consecutive years in the 10-year period preceding their retirement. If the Participant retires prior to the later of age 65 or the completion of 30 years of continuous service with us, but has completed at least 10 years of continuous service, the amount of their supplemental retirement benefit will be reduced by 1/360th for each month short of 30 years that they were employed by us.

Net periodic pension cost for the SERPs includes the following components:

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2018		2017		2018		2017
Interest cost	$	86	$	86		258		258
Service cost		70		84		209		254
Recognized net actuarial loss		38		44		114		130
Net periodic pension cost	$	194	$	214	$	581	$	642

(9) 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 May 2015, we amended the Credit Facility to, among other changes, extend its maturity date from June 2, 2016 to May 13, 2020. 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 30, 2018, no borrowings were outstanding on the Credit Facility, $82.5 million of borrowing capacity was available and outstanding letters of credit totaled $1.8 million.

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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 LIBOR rate plus the excess of the then-applicable margin for LIBOR loans over the then-applicable margin for index rate loans, or (2) at our election, a LIBOR rate, 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 on the Credit Facility within the range of 0.25% to 0.75% for index rate loans and 1.25% to 1.75% for LIBOR loans. In addition, the applicable interest rate margins would be increased by 2.00% upon the occurrence of certain events of default provided for under the terms of the Credit Facility. Based on our excess availability as of June 30, 2018, the applicable interest rate margins on the Credit Facility were 0.25% for index rate loans and 1.25% for LIBOR loans.

Our ability to borrow available amounts under the Credit Facility will be restricted or eliminated in the event of certain covenant breaches, events of default or if we are unable to make certain representations and warranties provided for under the terms of the Credit Facility. We are required to maintain a fixed charge coverage ratio of not less than 1.10 at the end of each fiscal quarter for the twelve-month period then ended when the amount of liquidity on the Credit Facility is less than $12.5 million. In addition, the terms of the Credit Facility restrict our ability to, among other things: engage in certain business combinations or divestitures; make investments in or loans to third parties, unless certain conditions are met with respect to such investments or loans; pay cash dividends or repurchase shares of our stock subject to certain minimum borrowing availability requirements; incur or assume indebtedness; issue securities; enter into certain transactions with our affiliates; or permit liens to encumber our property and assets. The terms of the Credit Facility also provide that an event of default will occur upon the occurrence of, among other things: defaults or breaches under the loan documents, subject in certain cases to cure periods; defaults or breaches by us or any of our subsidiaries under any agreement resulting in the acceleration of amounts above certain thresholds or payment defaults above certain thresholds; certain events of bankruptcy or insolvency; certain entries of judgment against us or any of our subsidiaries, which are not covered by insurance; or a change of control. As of June 30, 2018, we were in compliance with all of the financial and negative covenants under the Credit Facility and there have not been any events of default.

Amortization of capitalized financing costs associated with the Credit Facility was $16,000 for each of the three-month periods ended June 30, 2018 and July 1, 2017, and $48,000 for each of the nine-month periods ended June 30, 2018 and July 1, 2017.

(10) Earnings Per Share

The computation of basic and diluted earnings per share attributable to common shareholders is as follows:

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands, except per share amounts)	2018		2017		2018		2017
Net earnings	$	12,868	$	6,869	$	26,858	$	18,749
Basic weighted average shares outstanding		19,070		19,025		19,054		19,003
Dilutive effect of stock-based compensation		204		200		198		216
Diluted weighted average shares outstanding		19,274		19,225		19,252		19,219
Net earnings per share:
Basic	$	0.67	$	0.36	$	1.41	$	0.99
Diluted	$	0.67	$	0.36	$	1.40	$	0.98

Options that were antidilutive and not included in the dilutive earnings per share calculation amounted to 97,000 and 78,000 shares for the three-month periods ended June 30, 2018 and July 1, 2017, respectively, and 98,000 and 57,000 shares for the nine-month periods ended June 30, 2018 and July 1, 2017, respectively.

(11) 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 particular amount of 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. As of June 30, 2018, there was $24.8 million remaining available for future share repurchases under this Authorization. There were no share repurchases during the three- and nine-month periods ended June 30, 2018 and July 1, 2017.

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(12) Other Financial Data

Balance sheet information:

	June 30,			September 30,
(In thousands)	2018			2017
Accounts receivable, net:
Accounts receivable	$	56,130		$	40,485
Less allowance for doubtful accounts		(298	)		(201	)
Total	$	55,832		$	40,284
Inventories:
Raw materials	$	28,120		$	51,808
Work in process		4,519			2,637
Finished goods		22,112			27,408
Total	$	54,751		$	81,853
Other current assets:
Prepaid insurance	$	3,620		$	3,796
Income tax receivable		-			925
Other		1,455			1,228
Total	$	5,075		$	5,949
Other assets:
Cash surrender value of life insurance policies	$	9,593		$	9,026
Capitalized financing costs, net		57			105
Other		128			203
Total	$	9,778		$	9,334
Property, plant and equipment, net:
Land and land improvements	$	14,421		$	12,177
Buildings		54,333			50,373
Machinery and equipment		159,423			153,484
Construction in progress		5,122			5,641
		233,299			221,675
Less accumulated depreciation		(130,510	)		(123,005	)
Total	$	102,789		$	98,670
Accrued expenses:
Salaries, wages and related expenses	$	5,321		$	5,520
Income taxes		1,520			-
Customer rebates		1,321			1,015
Property taxes		1,033			1,384
Workers' compensation		115			116
Other		707			632
Total	$	10,017		$	8,667
Other liabilities:
Deferred compensation	$	10,820		$	9,276
Deferred income taxes		5,782			8,103
Total	$	16,602		$	17,379

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(13) 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: PC strand and welded wire reinforcement. Based on the criteria specified in ASC Topic 280, Segment Reporting, we have one reportable segment.

(14) Contingencies

Insurance recoveries. In August 2017, operations at our manufacturing facility located in Dayton, Texas were adversely affected by hurricane Harvey. We are in the process of completing repairs and finalizing the insurance claim relating to the business interruption and property damage resulting from the storm.

We maintain general liability, business interruption and replacement cost property insurance coverage on our facilities that was sufficient to cover the losses incurred from the storm. During the three-month period ended June 30, 2018, we recorded a $52,000 receivable for anticipated insurance proceeds related to the costs that were incurred during the period resulting from the storm, which were recorded in selling, general and administrative expense (“SG&A expense”) ($5,000) and other income ($47,000) on the consolidated statement of operations and comprehensive income. During the nine-month period ended June 30, 2018, we received $439,000 of insurance proceeds related to the expenses that were incurred and business interruption losses resulting from the storm, which were recorded in cost of sales ($418,000), SG&A expense ($26,000) and other income ($47,000) on the consolidated statement of operations and comprehensive income.

Legal proceedings. 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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, particularly under the caption “Outlook” below. When used in this report, the words “believes,” “anticipates,” “expects,” “estimates,” “appears,” “plans,” “intends,” “may,” “should,” “could” and similar expressions are intended to identify forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they are subject to a number of risks and uncertainties, and we can provide no assurances that such plans, intentions or expectations will be implemented or achieved. Many of these risks and uncertainties are discussed in detail, and where appropriate, updated in our filings with the United States (“U.S.”) Securities and Exchange Commission (“SEC”), in particular in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017 (our “2017 Annual Report”). You should carefully review these risks and uncertainties.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only to the respective dates on which such statements are made and we do not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as may be required by law.

It is not possible to anticipate and list all risks and uncertainties that may affect our future operations or financial performance; however, they include, but are not limited to, the following:

● general economic and competitive conditions in the markets in which we operate;

● changes in the spending levels for nonresidential and residential construction and the impact on demand for our products;

● changes in the amount and duration of transportation funding provided by federal, state and local governments and the impact on spending for infrastructure construction and demand for our products;

● the cyclical nature of the steel and building material industries;

● credit market conditions and the relative availability of financing for us, our customers and the construction industry as a whole;

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● fluctuations in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod, from domestic and foreign suppliers;

● competitive pricing pressures and our ability to raise selling prices in order to recover increases in raw material or operating costs;

● changes in U.S. or foreign trade policy affecting imports or exports of steel wire rod or our products;

● unanticipated changes in customer demand, order patterns and inventory levels;

● the impact of fluctuations in demand and capacity utilization levels on our unit manufacturing costs;

● our ability to further develop the market for engineered structural mesh (“ESM”) and expand our shipments of ESM;

● legal, environmental, economic or regulatory developments that significantly impact our operating costs;

● unanticipated plant outages, equipment failures or labor difficulties; and

● the “Risk Factors” discussed in our 2017 Annual Report and in other filings made by us with the SEC.

Overview

Insteel Industries, Inc. (“we”, “us”, “our”, “the Company” or “Insteel”) is the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. We manufacture and market prestressed concrete strand (“PC strand”) and welded wire reinforcement, including ESM, concrete pipe reinforcement and standard welded wire reinforcement. Our products are sold primarily to manufacturers of concrete products that are used in nonresidential construction. We market our products through sales representatives who are our employees. We sell our products nationwide across the U.S. and, to a much lesser extent, into Canada, Mexico, and Central and South America, delivering them primarily by truck, using common or contract carriers. Our business strategy is focused on: (1) achieving leadership positions in our markets; (2) operating as the lowest cost producer in our industry; and (3) pursuing growth opportunities within our core businesses that further our penetration of the markets we currently serve or expand our footprint.

Results of Operations

Statements of Operations – Selected Data

(Dollars in thousands)

	Three Months Ended									Nine Months Ended
	June 30,						July 1,			June 30,						July 1,
	2018			Change			2017			2018			Change			2017
Net sales	$	126,688			30.7	%	$	96,938		$	331,846			13.7	%	$	291,985
Gross profit		24,186			45.0	%		16,676			51,263			6.8	%		47,980
Percentage of net sales		19.1	%					17.2	%		15.4	%					16.4	%
Selling, general and administrative expense	$	7,541			21.3	%	$	6,216		$	20,779			6.4	%	$	19,535
Percentage of net sales		6.0	%					6.4	%		6.3	%					6.7	%
Restructuring charges, net	$	-			(100.0	%)	$	60		$	-			(100.0	%)	$	133
Other (income) expense, net		(32	)	N/M				50			153		N/M				50
Interest expense		23			(32.4	%)		34			74			(28.2	%)		103
Interest income		(150	)		100.0	%		(75	)		(279	)		59.4	%		(175	)
Effective income tax rate		23.4	%					33.9	%		12.0	%					33.8	%
Net earnings	$	12,868			87.3	%	$	6,869		$	26,858			43.3	%	$	18,749

"N/M" = not meaningful

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Third Quarter of Fiscal 2018 Compared to Third Quarter of Fiscal 2017

Net Sales

Net sales for the third quarter of 2018 increased 30.7% to $126.7 million from $96.9 million in the prior year quarter, reflecting a 16.5% increase in shipments and a 12.1% increase in average selling prices. The increase in shipments was primarily due to improved market conditions and strengthening demand for our products relative to the prior year quarter. The increase in average selling prices was driven by additional price increases that were implemented in the current quarter to recover the continued escalation in raw material costs.

Gross Profit

Gross profit for the third quarter of 2018 increased 45.0% to $24.2 million, or 19.1% of net sales, from $16.7 million, or 17.2% of net sales, in the prior year quarter due to higher spreads between average selling prices and raw material costs ($3.7 million), higher shipments ($2.9 million) and lower manufacturing costs ($0.4 million). The increase in spreads was driven by higher average selling prices ($13.8 million), which exceeded the increases in raw material costs ($9.5 million) and freight expense ($0.6 million).

Selling, General and Administrative Expense

Selling, general and administrative expense (“SG&A expense”) for the third quarter of 2018 increased 21.3% to $7.5 million, or 6.0% of net sales, from $6.2 million, or 6.4% of net sales in the prior year quarter primarily due to higher compensation expense ($1.3 million). The increase in compensation expense was largely related to higher incentive plan costs driven by our improved results in the current year.

Restructuring Charges, Net

Net restructuring charges of $60,000 were incurred in the third quarter of 2017 for equipment relocation costs related to the consolidation of our PC strand facilities. We did not incur any restructuring charges during the third quarter of 2018.

Income Taxes

Our effective tax rate for the third quarter of 2018 decreased to 23.4% from 33.9% for the prior year quarter largely due to the reduction in the federal statutory tax rate to 21% from 35% enacted under the Tax Cuts and Jobs Act in December 2017.

Net Earnings

Net earnings for the third quarter of 2018 increased to $12.9 million ($0.67 per share) from $6.9 million ($0.36 per share) in the prior year quarter primarily due to the increase in gross profit partially offset by the increase in SG&A expense.

First Nine Months of Fiscal 2018 Compared to First Nine Months of Fiscal 2017

Net Sales

Net sales for the first nine months of 2018 increased 13.7% to $331.8 million from $292.0 million in the same year-ago period, reflecting a 6.6% increase in both shipments and average selling prices. The increase in shipments was primarily due to improved market conditions and strengthening demand for our products relative to the prior year period. The increase in average selling prices was driven by price increases that were implemented to recover the escalation in raw material costs.

Gross Profit

Gross profit for the first nine months of 2018 increased 6.8% to $51.3 million, or 15.4% of net sales, from $48.0 million, or 16.4% of net sales, in the same year-ago period primarily due to higher shipments ($3.3 million) and lower manufacturing costs ($2.0 million) partially offset by lower spreads between average selling prices and raw material costs ($3.3 million). The reduction in spreads was driven by higher raw material costs ($22.9 million) and freight expense ($0.8 million), which exceeded the increase in average selling prices ($20.4 million).

Selling, General and Administrative Expense

SG&A expense for the first nine months of 2018 increased 6.4% to $20.8 million, or 6.3% of net sales, from $19.5 million, or 6.7% of net sales, in the same year-ago period primarily due to higher compensation expense ($0.6 million) and employee benefit costs ($0.4 million) together with the relative changes in the cash surrender value of life insurance policies ($0.2 million). The increase in compensation expense was largely driven by additional staffing to support the growth of our ESM business. The increase in employee benefit expense was primarily related to higher employee health insurance costs in the current year period. The cash surrender value of life insurance policies increased $0.4 million in the current year period compared with $0.6 million in the prior year period due to the changes in the value of the underlying investments.

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 Restructuring Charges, Net

Net restructuring charges of $133,000 were incurred in the first nine months of 2017 for equipment relocation costs related to the consolidation of our PC strand facilities. We did not incur any restructuring charges during the first nine months of 2018.

Income Taxes

Our effective tax rate for the first nine months of 2018 decreased to 12.0% from 33.8% for the same year-ago period. The current year rate benefited from a $3.7 million gain on the remeasurement of deferred tax liabilities related to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act in December 2017. Excluding the deferred tax gain, our effective tax rate decreased to 24.0% from 33.8% in the prior year period reflecting the reduction in the federal statutory rate to 21% from 35% for three quarters of fiscal 2018.

Net Earnings

Net earnings for the first nine months of 2018 increased to $26.9 million ($1.40 per diluted share) from $18.7 million ($0.98 per diluted share) in the same year-ago period primarily due to the increase in gross profit together with the deferred tax gain and reduction in our effective tax rate related to the enactment of the Tax Cuts and Jobs Act, partially offset by the increase in SG&A expense.

Liquidity and Capital Resources

Selected Financial Data

(Dollars in thousands)

	Nine Months Ended
	June 30,			July 1,
	2018			2017
Net cash provided by operating activities	$	49,835		$	22,039
Net cash used for investing activities		(15,920	)		(17,085	)
Net cash used for financing activities		(20,788	)		(25,979	)
Net working capital		116,453			113,334
Total debt		-			-
Percentage of total capital		-			-
Shareholders' equity	$	230,687		$	219,167
Percentage of total capital		100.0	%		100.0	%
Total capital (total debt + shareholders' equity)	$	230,687		$	219,167

Operating Activities

Operating activities provided $49.8 million of cash during the first nine months of 2018 primarily from net earnings adjusted for non-cash items together with a net decrease in the working capital components of accounts receivable, inventories, and accounts payable and accrued expenses. Net working capital provided $14.6 million of cash due to a $27.1 million decrease in inventories and a $3.0 million increase in accounts payable and accrued expenses, partially offset by a $15.5 million increase in accounts receivable. The decrease in inventories was primarily related to lower purchases and the tightening in the supply of raw materials together with the higher sales during the period. The increase in accounts payable and accrued expenses was primarily due to an increase in accrued income taxes related to the timing of estimated tax payments. The increase in accounts receivable resulted from the higher shipments and average selling prices during the period.

Operating activities provided $22.0 million of cash during the first nine months of 2017 primarily from net earnings adjusted for non-cash items partially offset by a net increase in the working capital components of accounts receivable, inventories, and accounts payable and accrued expenses. Net working capital used $7.1 million of cash due to a $12.5 million increase in inventories partially offset by a $5.1 million decrease in accounts receivable and a $0.3 million increase in accounts payable and accrued expenses. The increase in inventories was primarily due to higher raw material purchases and, to a lesser extent, higher average raw material costs. The decrease in accounts receivable was primarily related to lower sales during the period. The increase in accounts payable and accrued expenses was principally due to higher raw material purchases near the end of the period partially offset by lower accrued salaries, wages and related expenses.

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We may elect to adjust our operating activities as there are changes in our construction end-markets, which could materially impact our cash requirements. While a downturn in the level of construction activity adversely affects sales to our customers, it generally reduces our working capital requirements.

Investing Activities

Investing activities used $15.9 million of cash during the first nine months of 2018 compared to $17.1 million during the same period last year primarily due to lower capital expenditures partially offset by the acquisition of a business in the current year. Capital expenditures decreased to $12.5 million from $16.9 million in the prior year period and are expected to total up to $21.0 million for fiscal 2018 largely related to additional investments in ESM manufacturing capabilities, the purchase of the leased Houston facility and further upgrades of production technology and information systems. Our investing activities are largely discretionary, providing us with the ability to significantly curtail outlays should business conditions warrant that such actions be taken.

Financing Activities

Financing activities used $20.8 million of cash during the first nine months of 2018 while using $26.0 million during the same period last year primarily due to a lower special cash dividend payment in the current year period. During the first nine months of 2018, we paid cash dividends totaling $20.8 million, including a special cash dividend of $19.0 million, or $1.00 per share. During the prior year period, we paid cash dividends totaling $25.4 million, including a special cash dividend of $23.7 million, or $1.25 per share.

Cash Management

Our cash is principally concentrated at one financial institution, which at times exceeds federally insured limits. We invest excess cash primarily in money market funds, which are highly liquid securities that bear minimal risk.

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 May 2015, we amended the Credit Facility to, among other changes, extend its maturity date from June 2, 2016 to May 13, 2020. 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 30, 2018, no borrowings were outstanding on the Credit Facility, $82.5 million of borrowing capacity was available and outstanding letters of credit totaled $1.8 million.

We believe that, in the absence of significant unanticipated cash demands, cash and cash equivalents, net cash generated by operating activities and the borrowing availability provided under the Credit Facility will be sufficient to satisfy our expected requirements for working capital, capital expenditures, dividends and share repurchases, if any. We expect to have access to the amounts available under the Credit Facility as required. However, should we experience future reductions in our operating cash flows due to weakening conditions in our construction end-markets and reduced demand from our customers, we may need to curtail capital and operating expenditures, delay or restrict share repurchases, cease dividend payments and/or realign our working capital requirements.

Should we determine, at any time, that we required additional short-term liquidity, we would evaluate the alternative sources of financing that would be potentially available to provide such funding. There can be no assurance that any such financing, if pursued, would be obtained, or if obtained, would be adequate or on terms acceptable to us. However, we believe that our strong balance sheet, flexible capital structure and borrowing capacity available to us under our Credit Facility position us to meet our anticipated liquidity requirements for the foreseeable future, including the next 12 months.

Seasonality and Cyclicality

Demand in our markets is both seasonal and cyclical, driven by the level of construction activity, but can also be impacted by fluctuations in the inventory positions of our customers. From a seasonal standpoint, shipments typically reach their highest level of the year when weather conditions are the most conducive to construction activity. As a result, assuming normal seasonal weather patterns, shipments and profitability are usually higher in the third and fourth quarters of the fiscal year and lower in the first and second quarters. From a cyclical standpoint, construction activity and demand for our products is generally correlated with general economic conditions, although there can be significant differences between the relative strength of nonresidential and residential construction for extended periods.

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Impact of Inflation

We are subject to inflationary risks arising from fluctuations in the market prices for our primary raw material, hot-rolled carbon steel wire rod, and, to a much lesser extent, freight, energy and other consumables that are used in our manufacturing processes. We have generally been able to adjust our selling prices to pass through increases in these costs or offset them through various cost reduction and productivity improvement initiatives. However, our ability to raise our selling prices depends on market conditions and competitive dynamics, and there may be periods during which we are unable to fully recover increases in our costs. During the first half of fiscal 2018, the year-over-year escalation in our raw material costs exceeded the increase in our selling prices due to competitive pricing pressures. During the third quarter of fiscal 2018, we implemented additional price increases that were sufficient to recover these higher costs. The timing and magnitude of any future increases in our raw material costs and the selling prices for our products is uncertain at this time.

Off-Balance Sheet Arrangements

We do not have any material transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons, as described by Item 303(a)(4) of Regulation S-K of the SEC, that have or are reasonably likely to have a material current or future impact on our financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses.

Contractual Obligations

There have been no material changes in our contractual obligations and commitments as disclosed in our 2017 Annual Report other than those which occur in the ordinary course of business.

Critical Accounting Policies 

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information. The preparation of our financial statements requires the application of these accounting principles in addition to certain estimates and judgments based on current available information, actuarial estimates, historical results and other assumptions believed to be reasonable. Actual results could differ from these estimates. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” included in our 2017 Annual Report for further information regarding our critical accounting policies and estimates. As of June 30, 2018, there were no changes in the nature of our critical accounting policies or the application of those policies from those reported in our 2017 Annual Report.

Recent Accounting Pronouncements

Refer to Note 2 of the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report for recently adopted and issued accounting pronouncements since the filing of our 2017 Annual Report, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.

Outlook

Looking ahead to the remainder of 2018, we expect our financial results will be favorably impacted by the continued growth in our construction end-markets. Customer sentiment remains positive and we believe the infrastructure-related portion of our business will benefit from the passage of the federal omnibus spending bill and higher state and local funding in many of our markets. The leading indicators and industry forecasts for nonresidential construction remain positive as well with the potential for additional growth resulting from the new tax law.

We expect business conditions will remain challenging, however, in view of the escalation in our raw material costs resulting from the Section 232 tariffs on imported steel and the duties that have been imposed against certain countries in response to the recent trade cases initiated by domestic wire rod producers. We will pursue additional price increases, when appropriate, to recover these additional costs and continue to focus on the operational fundamentals of our business: closely managing and controlling our expenses; aligning our production schedules with demand in a proactive manner as there are changes in market conditions to minimize our cash operating costs; and pursuing further improvements in the productivity and effectiveness of all of our manufacturing, selling and administrative activities. We also expect gradually increasing contributions from the substantial investments we have made in our facilities in the form of reduced operating costs and additional capacity to support future growth (see “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”). In addition, we will continue to pursue further acquisitions in our existing businesses that expand our penetration of markets we currently serve or expand our footprint.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our cash flows and earnings are subject to fluctuations resulting from changes in commodity prices, interest rates and foreign exchange rates. We manage our exposure to these market risks through internally established policies and procedures and, when appropriate, through the use of derivative financial instruments. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe we can modify or adapt our hedging strategies as necessary.

Commodity Prices

We are subject to significant fluctuations in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod, which we purchase from both domestic and foreign suppliers. We negotiate quantities and pricing for both domestic and foreign wire rod purchases for varying periods (most recently monthly for domestic suppliers), depending upon market conditions, to manage our exposure to price fluctuations and to ensure adequate availability of material consistent with our requirements. We do not use derivative commodity instruments to hedge our exposure to changes in prices as such instruments are not currently available for wire rod. Our ability to acquire wire rod from foreign sources on favorable terms is impacted by fluctuations in foreign currency exchange rates, foreign taxes, duties, tariffs and other trade actions. Although changes in wire rod costs and our selling prices tend to be correlated, in weaker market environments, we may be unable to fully recover increased rod costs through higher selling prices, which would reduce our earnings and cash flows. Additionally, when raw material costs decline, our financial results may be negatively impacted if the selling prices for our products decrease to an even greater extent and if we are consuming higher cost material from inventory. Based on our shipments and average wire rod cost reflected in cost of sales for the first nine months of 2018, a 10% increase in the price of wire rod would have resulted in a $19.4 million decrease in our pre-tax earnings (assuming there was not a corresponding change in our selling prices).

Interest Rates 

Although we did not have any balances outstanding on our Credit Facility as of June 30, 2018, future borrowings under the facility are subject to a variable rate of interest and are sensitive to changes in interest rates.

Foreign Exchange Exposure

We have not typically hedged foreign currency exposures related to transactions denominated in currencies other than U.S. dollars, as such transactions have not been material historically. We will occasionally hedge firm commitments for certain equipment purchases that are denominated in foreign currencies. The decision to hedge any such transactions is made by us on a case-by-case basis. There were no forward contracts outstanding as of June 30, 2018.

Item 4. Controls and Procedures

We have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2018. This evaluation was conducted under the supervision and with the participation of management, including our principal executive officer and our principal financial officer. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Further, they concluded that our disclosure controls and procedures were effective to ensure that information is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

21

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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 anticipate that the ultimate costs to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

During the quarter ended June 30, 2018, there were no material changes from the risk factors set forth under Part I, Item 1A., “Risk Factors” in our 2017 Annual Report. You should carefully consider these factors in addition to the other information set forth in this report which could materially affect our business, financial condition or future results. The risks and uncertainties described in this report and in our 2017 Annual Report, as well as other reports and statements that we file with the SEC, are not the only risks and uncertainties facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, results of operations or cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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”). 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 particular amount of common stock and may commence or suspend the program at any time at our discretion without prior notice. The Authorization continues in effect until terminated by our Board of Directors. As of June 30, 2018, there was $24.8 million remaining available for future share repurchases under the Authorization. There were no share repurchases during the three- and nine-month periods ended June 30, 2018 and July 1, 2017.

Item 6. Exhibits

31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from the Quarterly Report on Form 10-Q of Insteel Industries, Inc. for the quarter ended June 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended June 30, 2018 and July 1, 2017, (ii) the Consolidated Balance Sheets as of June 30, 2018 and September 30, 2017, (iii) the Consolidated Statements of Cash Flows for the nine months ended June 30, 2018 and July 1, 2017, (iv) the Consolidated Statements of Shareholders’ Equity as of June 30, 2018 and September 30, 2017, and (v) the Notes to Consolidated Financial Statements.

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INSTEEL INDUSTRIES, INC.

Registrant

Date: July 19, 2018	By:	/s/ Michael C. Gazmarian
		Michael C. Gazmarian
		Vice President, Chief Financial Officer and Treasurer
		(Duly Authorized Officer and Principal Financial Officer)

23

EX-31.1

Exhibit 31.1

Certification

I, H.O. Woltz III, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 of Insteel Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 19, 2018

/s/ H. O. Woltz III

     H. O. Woltz III

     President, Chief Executive Officer and Chairman of the Board

EX-31.2

Exhibit 31.2

Certification

I, Michael C. Gazmarian, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 of Insteel Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 19, 2018

/s/ Michael C. Gazmarian

    Michael C. Gazmarian

   Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Insteel Industries, Inc. (the “Company”) for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, H. O. Woltz III, President, Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)     the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)     the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ H.O. Woltz III

     H.O. Woltz III

     President, Chief Executive Officer and Chairman of the Board

     July 19, 2018

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Insteel Industries, Inc. (the “Company”) for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael C. Gazmarian, Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)     the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)     the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael C. Gazmarian

     Michael C. Gazmarian

     Vice President, Chief Financial Officer and Treasurer 

     July 19, 2018

XML

Document And Entity Information - shares	9 Months Ended
	Jun. 30, 2018	Jul. 18, 2018
Document Information [Line Items]
Entity Registrant Name	INSTEEL INDUSTRIES INC
Entity Central Index Key	0000764401
Trading Symbol	iiin
Current Fiscal Year End Date	--09-29
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		19,085,438
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Jun. 30, 2018	Jul. 01, 2017
Net sales	$ 126,688	$ 96,938	$ 331,846	$ 291,985
Cost of sales	102,502	80,262	280,583	244,005
Gross profit	24,186	16,676	51,263	47,980
Selling, general and administrative expense	7,541	6,216	20,779	19,535
Restructuring charges		60		133
Other expense (income), net	(32)	50	153	50
Interest expense	23	34	74	103
Interest income	(150)	(75)	(279)	(175)
Earnings before income taxes	16,804	10,391	30,536	28,334
Income taxes	3,936	3,522	3,678	9,585
Net earnings	$ 12,868	$ 6,869	$ 26,858	$ 18,749
Net earnings per share:
Basic (in dollars per share)	$ 0.67	$ 0.36	$ 1.41	$ 0.99
Diluted (in dollars per share)	$ 0.67	$ 0.36	$ 1.40	$ 0.98
Weighted average shares outstanding:
Basic (in shares)	19,070	19,025	19,054	19,003
Diluted (in shares)	19,274	19,225	19,252	19,219
Cash dividends declared per share (in dollars per share)	$ 0.03	$ 0.03	$ 1.09	$ 1.34
Comprehensive income	$ 12,868	$ 6,869	$ 26,858	$ 18,749

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2018	Sep. 30, 2017
Assets
Cash and cash equivalents	$ 45,232	$ 32,105
Accounts receivable, net	55,832	40,284
Inventories	54,751	81,853
Other current assets	5,075	5,949
Total current assets	160,890	160,191
Property, plant and equipment, net	102,789	98,670
Intangibles, net	9,976	7,913
Goodwill	8,293	6,965
Other assets	9,778	9,334
Total assets	291,726	283,073
Liabilities and shareholders' equity
Accounts payable	34,420	33,651
Accrued expenses	10,017	8,667
Total current liabilities	44,437	42,318
Other liabilities	16,602	17,379
Commitments and contingencies
Shareholders' equity:
Common stock	19,085	19,041
Additional paid-in capital	70,982	69,817
Retained earnings	141,953	135,851
Accumulated other comprehensive loss	(1,333)	(1,333)
Total shareholders' equity	230,687	223,376
Total liabilities and shareholders' equity	$ 291,726	$ 283,073

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017
Cash Flows From Operating Activities:
Net earnings	$ 26,858,000	$ 18,749,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	9,578,000	8,576,000
Amortization of capitalized financing costs	48,000	48,000
Stock-based compensation expense	1,241,000	1,343,000
Deferred income taxes	(2,321,000)	2,705,000
Loss on sale and disposition of property, plant and equipment	270,000	49,000
Increase in cash surrender value of life insurance policies over premiums paid	(428,000)	(568,000)
Net changes in assets and liabilities (net of assets and liabilities acquired):
Accounts receivable, net	(15,548,000)	5,082,000
Inventories	27,102,000	(12,496,000)
Accounts payable and accrued expenses	3,011,000	290,000
Other changes	24,000	(1,739,000)
Total adjustments	22,977,000	3,290,000
Net cash provided by operating activities	49,835,000	22,039,000
Cash Flows From Investing Activities:
Capital expenditures	(12,481,000)	(16,855,000)
Acquisition of business	(3,300,000)
Proceeds from surrender of life insurance policies	152,000	100,000
Increase in cash surrender value of life insurance policies	(291,000)	(330,000)
Net cash used for investing activities	(15,920,000)	(17,085,000)
Cash Flows From Financing Activities:
Proceeds from long-term debt	290,000	322,000
Principal payments on long-term debt	(290,000)	(322,000)
Cash dividends paid	(20,756,000)	(25,440,000)
Cash received from exercise of stock options	242,000	107,000
Payment of employee tax withholdings related to net share transactions	(274,000)	(646,000)
Net cash used for financing activities	(20,788,000)	(25,979,000)
Net increase (decrease) in cash and cash equivalents	13,127,000	(21,025,000)
Cash and cash equivalents at beginning of period	32,105,000	58,873,000
Cash and cash equivalents at end of period	45,232,000	37,848,000
Supplemental Disclosures of Cash Flow Information:
Income taxes, net	3,553,000	6,796,000
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable	499,000	2,092,000
Restricted stock units and stock options surrendered for withholding taxes payable	$ 274,000	$ 646,000

XML

Consolidated Statements of Shareholders' Equity (Unaudited) - 9 months ended Jun. 30, 2018 - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Sep. 30, 2017	19,041
Balance at Sep. 30, 2017	$ 19,041	$ 69,817	$ 135,851	$ (1,333)	$ 223,376
Net earnings			26,858		26,858
Stock options exercised, net (in shares)	24
Stock options exercised, net	$ 24	218			242
Vesting of restricted stock units (in shares)	20
Vesting of restricted stock units	$ 20	(20)
Compensation expense associated with stock-based plans		1,241			1,241
Restricted stock units and stock options surrendered for withholding taxes payable		(274)			(274)
Cash dividends declared			(20,756)		(20,756)
Balance (in shares) at Jun. 30, 2018	19,085
Balance at Jun. 30, 2018	$ 19,085	$ 70,982	$ 141,953	$ (1,333)	$ 230,687

XML

Note 1 - Basis of Presentation

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

(

1

) Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Insteel Industries, Inc. (“we,” “us,” “our,” “the Company” or “Insteel”) have been prepared pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”) for quarterly reports on Form

10

-Q. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures made are adequate to make the information

not

misleading. The

September 30, 2017

consolidated balance sheet was derived from the audited consolidated financial statements at that date, but does

not

include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should therefore be read in conjunction with the consolidated financial statements and notes for the fiscal year ended

September 30, 2017

included in our Annual Report on Form

10

-K filed with the SEC on

October 27, 2017.

The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that we consider necessary for a fair presentation of results for these interim periods. The results of operations for the

nine

-month period ended

June 30, 2018

are

not

necessarily indicative of the results that

may

be expected for the fiscal year ending

September 29, 2018

or future periods.

We haveevaluated subsequent events through the time of filing this Quarterly Report on Form

10

-Q and concluded there are

no

significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the consolidated financial statements

.

XML

Note 2 - Recent Accounting Pronouncements

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

(

2

) Recent Accounting Pronouncements

In

March 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2016

-

09,

"Compensation - Stock Compensation (Topic

718

): Improvements to Employee Share-Based Payment Accounting," which is intended to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted this update during our

first

fiscal quarter. One provision within ASU

No.

2016

-

09

requires the recognition of excess income tax benefits and deficiencies related to share-based payments within income tax expense as a discrete event in the period in which they occur, rather than within additional paid-in capital on a prospective basis. There was

no

material impact from this provision on income tax expense in the current quarter or

nine

-month period. The impact of this provision on our future results of operations is difficult to predict as it will depend in part on the market prices for the shares of our common stock on the dates that there are taxable events related to the share-based awards. In connection with another provision within ASU

No.

2016

-

09,

we have elected to account for forfeitures of share-based awards as an estimate of the number of awards that are expected to vest, which is consistent with our accounting policy prior to adoption. We also adopted the provisions related to changes on the consolidated statements of cash flows on a retrospective basis. As a result, we

no

longer classify excess income tax benefits as a financing activity, which increased net cash provided by operating activities and reduced net cash provided by financing activities by 

$488,000

 for the

nine

months ended

July 1, 2017.

In

February 2018,

the FASB issued ASU

2018

-

02,

“Income Statement – Reporting Comprehensive Income (Topic

220

): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,”which allows companies to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings in their consolidated financial statements. This guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years with early adoption permitted. We are evaluating the impact that the adoption of this update will have on our consolidated financial statements.

In

July 2015,

the FASB issued ASU

No.

2015

-

11

“Simplifying the Measurement of Inventory,” which requires that an entity measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. We adopted ASU

No.

2015

-

11

during our

first

fiscal quarter. The adoption of this update did

not

have a material effect on our consolidated financial statements.

In

May 2017,

the FASB issued ASU

No.

2017

-

09

“Compensation – Stock Compensation (Topic

718

): Scope of Modification Accounting.” ASU

No.

2017

-

09

was issued to clarify and reduce both (i) diversity in practice and (ii) cost and complexity when applying its guidance to changes in the terms and conditions of a share-based payment award. ASU

No.

2017

-

09

will become effective for us in the

first

quarter of fiscal

2020.

We are evaluating the impact that the adoption of this update will have on our consolidated financial statements.

In

August 2016,

the FASB issued ASU

No.

2016

-

15

“Statement of Cash Flows Topic

230:

Classification of Certain Cash Receipts and Cash Payments.” ASU

No.

2016

-

15

addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows with the objective of reducing existing differences in the presentation of these items. The amendments in ASU

No.

2016

-

15

are to be adopted retrospectively and will become effective for us in the

first

quarter of fiscal

2019.

We do

not

expect the adoption of this update will have a material effect on our consolidated financial statements.

In

February 2016,

the FASB issued ASU

No.

2016

-

02

“Leases,” which will replace the guidance in Accounting Standards Codification (“ASC”) Topic

840.

ASU

No.

2016

-

02

was issued to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of

12

months) on the balance sheet as a lease liability and a right-of-use asset. ASU

No.

2016

-

02

will become effective for us in the

first

quarter of fiscal

2020.

We are evaluating the impact that the adoption of this update will have on our consolidated financial statements.

In

May 2014,

the FASB issued ASU

No.

2014

-

09

“Revenue from Contracts with Customers,” which will supersede nearly all existing revenue recognition guidance under GAAP. ASU

No.

2014

-

09

provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU

No.

2014

-

09

allows for either full retrospective or modified retrospective adoption and will become effective for us in the

first

quarter of fiscal

2019.

We have substantially completed our evaluation of the impact this update will have on our consolidated financial statements and plan on using the modified retrospective method upon adoption. We have

not

identified any material changes in the timing of revenue recognition that will result from the adoption of this guidance, but expect it will have a material impact on the disclosures required in our notes to the consolidated financial statements.

XML

Note 3 - Restructuring Charges

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

(

3

) Restructuring Charges

In fiscal

2014,

we purchased substantially all of the assets associated with the prestressed concrete strand (“PC strand”) business of American Spring Wire Corporation (the “ASW Acquisition”). Subsequent to the ASW Acquisition, in fiscal

2014,

we incurred employee separation costs for staffing reductions associated with the acquisition. In

February 2015,

we elected to consolidate our PC strand operations with the closure of the Newnan, Georgia facility that had been acquired through the ASW Acquisition, which was completed in

March 2015.

Following is a summary of the restructuring activities and associated costs that were incurred during the prior year

three

- and

nine

-month periods ended

July 1, 2017:

				Severance and
(In thousands)	Equipment			Other Employee
	Relocation Costs			Separation Costs			Total
Liability as of October 1, 2016	$	31		$	239		$	270
Restructuring charges		48			-			48
Cash payments		(79	)		(74	)		(153	)
Liability as of December 31, 2016		-			165			165
Restructuring charges		25			-			25
Cash payments		(25	)		(68	)		(93	)
Liability as of April 1, 2017	$	-		$	97		$	97
Restructuring charges		60			-			60
Cash payments		(60	)		(79	)		(139	)
Liability as of July 1, 2017	$	-		$	18		$	18

We do

not

expect to incur any additional restructuring charges related to the consolidation of our PC strand operations.

XML

Note 4 - Fair Value Measurements

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(

4

) 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 30, 2018

and

September 30, 2017,

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 30, 2018:
Current assets:
Cash equivalents	$	45,187	$	45,187	$	-
Other assets:
Cash surrender value of life insurance policies		9,593		-		9,593
Total	$	54,780	$	45,187	$	9,593
As of September 30, 2017:
Current assets:
Cash equivalents	$	31,659	$	31,659	$	-
Other assets:
Cash surrender value of life insurance policies		9,026		-		9,026
Total	$	40,685	$	31,659	$	9,026

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

June 30, 2018

and

September 30, 2017,

we had

no

nonfinancial assets that were required to be measured at fair value on a nonrecurring basis. The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these financial instruments.

XML

Note 5 - Intangible Assets

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

(

5

) Intangible Assets

The primary components of our intangible assets and the related accumulated amortization are as follows:

(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value
As of June 30, 2018:
Customer relationships	$	9,070	$	(1,445	)	$	7,625
Developed technology and know-how		1,800		(349	)		1,451
Non-competition agreements		3,687		(2,904	)		783
Trade name		140		(23	)		117
	$	14,697	$	(4,721	)	$	9,976
As of September 30, 2017:
Customer relationships	$	6,500	$	(1,018	)	$	5,482
Developed technology and know-how		1,800		(283	)		1,517
Non-competition agreements		3,577		(2,663	)		914
	$	11,877	$	(3,964	)	$	7,913

Amortization expense for intangibles was

$299,000

and

$289,000

for the

three

-month periods ended

June 30, 2018

and

July 1, 2017,

respectively, and

$987,000

and

$868,000

for the

nine

-month periods ended

June 30, 2018

and

July 1, 2017,

respectively. We completed the acquisition of a business during the

nine

-month period ended

June 30, 2018,

and the effects of the purchase price allocation for this transaction on the accompanying unaudited interim consolidated financial statements are

not

material.

XML

Note 6 - Stock-based Compensation

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

(

6

) Stock-Based Compensation

Under our equity incentive plans, employees and directors

may

be granted stock options, restricted stock, restricted stock units and performance awards. Effective

February 17, 2015,

our shareholders approved the

2015

Equity Incentive Plan of Insteel Industries, Inc. (the

“2015

Plan”), which authorizes up to

900,000

shares of our common stock for future grants under the plan. The

2015

Plan, which expires on

February 17, 2025,

replaces the

2005

Equity Incentive Plan of Insteel Industries, Inc., which expired on

February 15, 2015.

As of

June 30, 2018,

there were

378,000

shares of our common stock available for future grants under the

2015

Plan, which is our only active equity incentive plan.

Stock

o

ption

awards

.

Under our equity incentive plans, 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 is as follows:

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2018		2017		2018		2017
Compensation expense	$	51	$	78	$	522	$	585

As of

June 30, 2018,

there was

$185,000

of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of

1.51

years.

The fair value of each option award granted is estimated on the date of grant using a Monte Carlo valuation model. The estimated fair values of stock options granted during the

nine

-month periods ended

June 30, 2018

and

July 1, 2017

was

$10.46

and

$13.66

per share, respectively, based on the following assumptions:

	Nine Months Ended
	June 30,			July 1,
	2018			2017
Risk-free interest rate		2.72	%		2.03	%
Dividend yield		0.40	%		0.33	%
Expected volatility		37.74	%		38.79	%
Expected term (in years)		4.89			5.12

The assumptions utilized in the Monte Carlo valuation model are evaluated and revised, as necessary, to reflect market conditions and actual historical experience. 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 dividend yield was calculated based on our annual dividend as of the option grant date. 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 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 following table summarizes stock option activity:

											Contractual	Aggregate
	Options			Exercise Price Per Share							Term - Weighted	Intrinsic
	Outstanding								Weighted		Average	Value
	(in thousands)			Range					Average		(in years)	(in thousands)
Outstanding at September 30, 2017		392		$	9.16	-	$	37.06	$	23.40
Granted		44			29.69	-		29.69		29.69
Exercised		(42	)		9.16	-		23.95		17.81
Forfeited		(9	)		23.95	-		37.06		29.88
Outstanding at June 30, 2018		385			10.23	-		37.06		24.59	7.38	$	3,565
Vested and anticipated to vest in the future at June 30, 2018		383								24.56	7.38		3,548
Exercisable at June 30, 2018		201								21.04	6.24		2,540

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 uni

t

s.

Restricted stock units (“RSUs”) granted under our equity incentive plans 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:

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2018		2017		2018		2017
Restricted stock unit grants:
Units		-		-		24		19
Market value	$	-	$	-	$	712	$	690
Compensation expense		117		132		719		758

As of

June 30, 2018,

there was

$443,000

of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of

1.42

years.

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, September 30, 2017		128		$	25.92
Granted		24			29.69
Released		(26	)		25.04
Forfeited		(4	)		29.60
Balance, June 30, 2018		122			26.74

XML

Note 7 - Income Taxes

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(

7

) Income Taxes

Effective income tax rate

.

Our effective income tax rate was

12.0%

for the

nine

-month period ended

June 30, 2018

compared with

33.8%

for the

nine

-month period ended

July 1, 2017.

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 items related specifically to interim periods. On

December 22, 2017,

the Tax Cuts and Jobs Act (the “Act”) was enacted, which, among other changes, reduced the federal statutory corporate tax rate from

35%

to

21%

effective

January 1, 2018.

Since our fiscal year ends on the Saturday closest to

September 30

rather than the calendar year, we are subject to IRS rules relating to transitional income tax rates. As a result, we will be subject to a federal statutory rate of

24.5%

for fiscal

2018

and

21%

for fiscal

2019

and beyond. Based on the provisions of the Act, we remeasured our deferred tax liabilities and adjusted our estimated annual federal income tax rate to incorporate the lower corporate tax rate into our tax provision during our

first

fiscal quarter which resulted in a

$3.7

million reduction of income tax expense. We are still in process of evaluating the income tax effect of the Act on the executive compensation limitations that will be effective for our fiscal year

2019.

Deferred income taxes.

As of

June 30, 2018,

we recorded a deferred tax liability (net of valuation allowance) of

$5.8

million in other liabilities on our consolidated balance sheet. We have

$7.4

million of state net operating loss carryforwards (“NOLs”) that begin to expire in

2018,

but principally expire between

2018

and

2032.

We have also recorded gross deferred tax assets of

$72,000

for various state tax credits that begin to expire in

2019,

but principally expire between

2019

and

2020.

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 30, 2018

and

September 30, 2017,

we recorded a valuation allowance of

$254,000

and

$251,000,

respectively, pertaining to various state NOLs and tax credits that were

not

expected to be utilized. The valuation allowance is subject to periodic review and adjustment based on changes in facts and circumstances and would be reduced should we utilize the state NOLs and tax credits against which an allowance had previously been provided or determine that such utilization was more likely than

not.

Uncertainty in income taxes

.

As of

June 30, 2018,

we had

no

material, known tax exposures that require the establishment of contingency reserves for uncertain tax positions.

We file U.S. federal income tax returns as well as state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to

2013

remain subject to examination.

XML

Note 8 - Employee Benefit Plans

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

(

8

) Employee Benefit Plans

Supplemental employee retirement plan

.

We have Retirement Security Agreements (each, a “SERP”) with certain of our employees (each, a “Participant”). Under the SERPs, if the Participant remains in continuous service with us for a period of at least

30

 years, we will pay them a supplemental retirement benefit for the

15

-year period following their retirement equal to

50%

of their highest average annual base salary for

five

consecutive years in the

10

-year period preceding their retirement. If the Participant retires prior to the later of age

65

or the completion of

30

 years of continuous service with us, but has completed at least

10

years of continuous service, the amount of their supplemental retirement benefit will be reduced by

1/360th

for each month short of

30

 years that they were employed by us.

Net periodic pension cost for the SERPs includes the following components:

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2018		2017		2018		2017
Interest cost	$	86	$	86		258		258
Service cost		70		84		209		254
Recognized net actuarial loss		38		44		114		130
Net periodic pension cost	$	194	$	214	$	581	$	642

XML

Note 9 - Long-term Debt

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Long-term Debt [Text Block]

(

9

) 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

May 2015,

we amended the Credit Facility to, among other changes, extend its maturity date from

June 2, 2016

to

May 13, 2020.

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 30, 2018,

no

borrowings were outstanding on the Credit Facility,

$82.5

million of borrowing capacity was available and outstanding letters of credit totaled

$1.8

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 LIBOR rate plus the excess of the then-applicable margin for LIBOR loans over the then-applicable margin for index rate loans, or (

2

) at our election, a LIBOR rate, 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 on the Credit Facility within the range of

0.25%

to

0.75%

for index rate loans and

1.25%

to

1.75%

for LIBOR loans. In addition, the applicable interest rate margins would be increased by

2.00%

upon the occurrence of certain events of default provided for under the terms of the Credit Facility. Based on our excess availability as of

June 30, 2018,

the applicable interest rate margins on the Credit Facility were

0.25%

for index rate loans and

1.25%

for LIBOR loans.

Our ability to borrow available amounts under the Credit Facility will be restricted or eliminated in the event of certain covenant breaches, events of default or if we are unable to make certain representations and warranties provided for under the terms of the Credit Facility. We are required to maintain a fixed charge coverage ratio of

not

less than

1.10

at the end of each fiscal quarter for the

twelve

-month period then ended when the amount of liquidity on the Credit Facility is less than

$12.5

million. In addition, the terms of the Credit Facility restrict our ability to, among other things: engage in certain business combinations or divestitures; make investments in or loans to

third

parties, unless certain conditions are met with respect to such investments or loans; pay cash dividends or repurchase shares of our stock subject to certain minimum borrowing availability requirements; incur or assume indebtedness; issue securities; enter into certain transactions with our affiliates; or permit liens to encumber our property and assets. The terms of the Credit Facility also provide that an event of default will occur upon the occurrence of, among other things: defaults or breaches under the loan documents, subject in certain cases to cure periods; defaults or breaches by us or any of our subsidiaries under any agreement resulting in the acceleration of amounts above certain thresholds or payment defaults above certain thresholds; certain events of bankruptcy or insolvency; certain entries of judgment against us or any of our subsidiaries, which are

not

covered by insurance; or a change of control. As of

June 30, 2018,

we were in compliance with all of the financial and negative covenants under the Credit Facility and there have

not

been any events of default.

Amortization of capitalized financing costs associated with the Credit Facility was

$16,000

for each of the

three

-month periods ended

June 30, 2018

and

July 1, 2017,

and

$48,000

for each of the

nine

-month periods ended

June 30, 2018

and

July 1, 2017.

XML

Note 10 - Earnings Per Share

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

(

1

0

)

Earnings

Per Share

The computation of basic and diluted earnings per share attributable to common shareholders is as follows:

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands, except per share amounts)	2018		2017		2018		2017
Net earnings	$	12,868	$	6,869	$	26,858	$	18,749
Basic weighted average shares outstanding		19,070		19,025		19,054		19,003
Dilutive effect of stock-based compensation		204		200		198		216
Diluted weighted average shares outstanding		19,274		19,225		19,252		19,219
Net earnings per share:
Basic	$	0.67	$	0.36	$	1.41	$	0.99
Diluted	$	0.67	$	0.36	$	1.40	$	0.98

Options that were antidilutive and

not

included in the dilutive earnings per share calculation amounted to

97,000

and

78,000

shares for the

three

-month periods ended

June 30, 2018

and

July 1, 2017,

respectively, and

98,000

and

57,000

shares for the

nine

-month periods ended

June 30, 2018

and

July 1, 2017,

respectively.

XML

Note 11 - Share Repurchases

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

(

1

1

) S

hare

Repurchase

s

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 particular amount of 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. As of

June 30, 2018,

there was

$24.8

million remaining available for future share repurchases under this Authorization. There were

no

share repurchases during the

three

- and

nine

-month periods ended

June 30, 2018

and

July 1, 2017.

XML

Note 12 - Other Financial Data

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Other Financial Data [Text Block]

(

1

2

)

Other Financial Data

Balance sheet information:

	June 30,			September 30,
(In thousands)	2018			2017
Accounts receivable, net:
Accounts receivable	$	56,130		$	40,485
Less allowance for doubtful accounts		(298	)		(201	)
Total	$	55,832		$	40,284
Inventories:
Raw materials	$	28,120		$	51,808
Work in process		4,519			2,637
Finished goods		22,112			27,408
Total	$	54,751		$	81,853
Other current assets:
Prepaid insurance	$	3,620		$	3,796
Income tax receivable		-			925
Other		1,455			1,228
Total	$	5,075		$	5,949
Other assets:
Cash surrender value of life insurance policies	$	9,593		$	9,026
Capitalized financing costs, net		57			105
Other		128			203
Total	$	9,778		$	9,334
Property, plant and equipment, net:
Land and land improvements	$	14,421		$	12,177
Buildings		54,333			50,373
Machinery and equipment		159,423			153,484
Construction in progress		5,122			5,641
		233,299			221,675
Less accumulated depreciation		(130,510	)		(123,005	)
Total	$	102,789		$	98,670
Accrued expenses:
Salaries, wages and related expenses	$	5,321		$	5,520
Income taxes		1,520			-
Customer rebates		1,321			1,015
Property taxes		1,033			1,384
Workers' compensation		115			116
Other		707			632
Total	$	10,017		$	8,667
Other liabilities:
Deferred compensation	$	10,820		$	9,276
Deferred income taxes		5,782			8,103
Total	$	16,602		$	17,379

XML

Note 13 - Business Segment Information

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(

13

) 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: PC strand and welded wire reinforcement. Based on the criteria specified in ASC Topic

280,

Segment Reporting

, we have

one

reportable segment.

XML

Note 14 - Contingencies

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

(

14

) Contingencies

Insurance recoveries.

In

August 2017,

operations at our manufacturing facility located in Dayton, Texas were adversely affected by hurricane Harvey. We are in the process of completing repairs and finalizing the insurance claim relating to the business interruption and property damage resulting from the storm.

We maintain general liability, business interruption and replacement cost property insurance coverage on our facilities that was sufficient to cover the losses incurred from the storm. During the

three

-month period ended

June 30, 2018,

we recorded a

$52,000

receivable for anticipated insurance proceeds related to the costs that were incurred during the period resulting from the storm, which were recorded in selling, general and administrative expense (“SG&A expense”) (

$5,000

) and other income (

$47,000

) on the consolidated statement of operations and comprehensive income. During the

nine

-month period ended

June 30, 2018,

we received

$439,000

of insurance proceeds related to the expenses that were incurred and business interruption losses resulting from the storm, which were recorded in cost of sales (

$418,000

), SG&A expense (

$26,000

) and other income (

$47,000

) on the consolidated statement of operations and comprehensive income.

Legal proceedings

.

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.

XML

Note 3 - Restructuring Charges (Tables)

9 Months Ended

Jun. 30, 2018

Notes Tables

Restructuring and Related Costs [Table Text Block]

				Severance and
(In thousands)	Equipment			Other Employee
	Relocation Costs			Separation Costs			Total
Liability as of October 1, 2016	$	31		$	239		$	270
Restructuring charges		48			-			48
Cash payments		(79	)		(74	)		(153	)
Liability as of December 31, 2016		-			165			165
Restructuring charges		25			-			25
Cash payments		(25	)		(68	)		(93	)
Liability as of April 1, 2017	$	-		$	97		$	97
Restructuring charges		60			-			60
Cash payments		(60	)		(79	)		(139	)
Liability as of July 1, 2017	$	-		$	18		$	18

XML

Note 4 - Fair Value Measurements (Tables)

9 Months Ended

Jun. 30, 2018

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of June 30, 2018:
Current assets:
Cash equivalents	$	45,187	$	45,187	$	-
Other assets:
Cash surrender value of life insurance policies		9,593		-		9,593
Total	$	54,780	$	45,187	$	9,593
As of September 30, 2017:
Current assets:
Cash equivalents	$	31,659	$	31,659	$	-
Other assets:
Cash surrender value of life insurance policies		9,026		-		9,026
Total	$	40,685	$	31,659	$	9,026

XML

Note 5 - Intangible Assets (Tables)

9 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value
As of June 30, 2018:
Customer relationships	$	9,070	$	(1,445	)	$	7,625
Developed technology and know-how		1,800		(349	)		1,451
Non-competition agreements		3,687		(2,904	)		783
Trade name		140		(23	)		117
	$	14,697	$	(4,721	)	$	9,976
As of September 30, 2017:
Customer relationships	$	6,500	$	(1,018	)	$	5,482
Developed technology and know-how		1,800		(283	)		1,517
Non-competition agreements		3,577		(2,663	)		914
	$	11,877	$	(3,964	)	$	7,913

XML

Note 6 - Stock-based Compensation (Tables)

9 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Nine Months Ended
	June 30,			July 1,
	2018			2017
Risk-free interest rate		2.72	%		2.03	%
Dividend yield		0.40	%		0.33	%
Expected volatility		37.74	%		38.79	%
Expected term (in years)		4.89			5.12

Share-based Compensation, Stock Options, Activity [Table Text Block]

											Contractual	Aggregate
	Options			Exercise Price Per Share							Term - Weighted	Intrinsic
	Outstanding								Weighted		Average	Value
	(in thousands)			Range					Average		(in years)	(in thousands)
Outstanding at September 30, 2017		392		$	9.16	-	$	37.06	$	23.40
Granted		44			29.69	-		29.69		29.69
Exercised		(42	)		9.16	-		23.95		17.81
Forfeited		(9	)		23.95	-		37.06		29.88
Outstanding at June 30, 2018		385			10.23	-		37.06		24.59	7.38	$	3,565
Vested and anticipated to vest in the future at June 30, 2018		383								24.56	7.38		3,548
Exercisable at June 30, 2018		201								21.04	6.24		2,540

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, September 30, 2017		128		$	25.92
Granted		24			29.69
Released		(26	)		25.04
Forfeited		(4	)		29.60
Balance, June 30, 2018		122			26.74

Restricted Stock Units (RSUs) [Member]

Notes Tables

Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block]

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2018		2017		2018		2017
Restricted stock unit grants:
Units		-		-		24		19
Market value	$	-	$	-	$	712	$	690
Compensation expense		117		132		719		758

Employee Stock Option [Member]

Notes Tables

Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block]

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2018		2017		2018		2017
Compensation expense	$	51	$	78	$	522	$	585

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Note 8 - Employee Benefit Plans (Tables)

9 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2018		2017		2018		2017
Interest cost	$	86	$	86		258		258
Service cost		70		84		209		254
Recognized net actuarial loss		38		44		114		130
Net periodic pension cost	$	194	$	214	$	581	$	642

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Note 10 - Earnings Per Share (Tables)

9 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended				Nine Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands, except per share amounts)	2018		2017		2018		2017
Net earnings	$	12,868	$	6,869	$	26,858	$	18,749
Basic weighted average shares outstanding		19,070		19,025		19,054		19,003
Dilutive effect of stock-based compensation		204		200		198		216
Diluted weighted average shares outstanding		19,274		19,225		19,252		19,219
Net earnings per share:
Basic	$	0.67	$	0.36	$	1.41	$	0.99
Diluted	$	0.67	$	0.36	$	1.40	$	0.98

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Note 12 - Other Financial Data (Tables)

9 Months Ended

Jun. 30, 2018

Notes Tables

Condensed Balance Sheet [Table Text Block]

	June 30,			September 30,
(In thousands)	2018			2017
Accounts receivable, net:
Accounts receivable	$	56,130		$	40,485
Less allowance for doubtful accounts		(298	)		(201	)
Total	$	55,832		$	40,284
Inventories:
Raw materials	$	28,120		$	51,808
Work in process		4,519			2,637
Finished goods		22,112			27,408
Total	$	54,751		$	81,853
Other current assets:
Prepaid insurance	$	3,620		$	3,796
Income tax receivable		-			925
Other		1,455			1,228
Total	$	5,075		$	5,949
Other assets:
Cash surrender value of life insurance policies	$	9,593		$	9,026
Capitalized financing costs, net		57			105
Other		128			203
Total	$	9,778		$	9,334
Property, plant and equipment, net:
Land and land improvements	$	14,421		$	12,177
Buildings		54,333			50,373
Machinery and equipment		159,423			153,484
Construction in progress		5,122			5,641
		233,299			221,675
Less accumulated depreciation		(130,510	)		(123,005	)
Total	$	102,789		$	98,670
Accrued expenses:
Salaries, wages and related expenses	$	5,321		$	5,520
Income taxes		1,520			-
Customer rebates		1,321			1,015
Property taxes		1,033			1,384
Workers' compensation		115			116
Other		707			632
Total	$	10,017		$	8,667
Other liabilities:
Deferred compensation	$	10,820		$	9,276
Deferred income taxes		5,782			8,103
Total	$	16,602		$	17,379

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Note 2 - Recent Accounting Pronouncements (Details Textual) - Accounting Standards Update 2016-09 [Member]	9 Months Ended
	Jul. 01, 2017 USD ($)
Excess Tax Benefit from Share-based Compensation, Operating Activities	$ 488,000
Excess Tax Benefit from Share-based Compensation, Financing Activities	$ 488,000

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Note 3 - Restructuring Charges - Summary of Restructuring Activities and Associated Costs (Details) - USD ($) $ in Thousands	3 Months Ended				9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Apr. 01, 2017	Dec. 31, 2016	Jun. 30, 2018	Jul. 01, 2017
Liability, beginning of period		$ 97	$ 165	$ 270		$ 270
Restructuring charges		60	25	48		133
Cash payments		(139)	(93)	(153)
Liability, end of period		18	97	165		18
Equipment Relocation Costs [Member]
Liability, beginning of period				31		31
Restructuring charges		60	25	48
Cash payments		(60)	(25)	(79)
Liability, end of period
Employee Severance [Member]
Liability, beginning of period		97	165	239		239
Restructuring charges
Cash payments		(79)	(68)	(74)
Liability, end of period		$ 18	$ 97	$ 165		$ 18

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Note 4 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2018	Sep. 30, 2017
Non Financial [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets, Fair Value Disclosure	$ 0	$ 0

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Note 4 - Fair Value Measurements - Fair Value of Financial Assets (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Sep. 30, 2017
Cash equivalents	$ 45,187	$ 31,659
Cash surrender value of life insurance policies	9,593	9,026
Total	54,780	40,685
Fair Value, Inputs, Level 1 [Member]
Cash equivalents	45,187	31,659
Cash surrender value of life insurance policies
Total	45,187	31,659
Fair Value, Inputs, Level 2 [Member]
Cash equivalents
Cash surrender value of life insurance policies	9,593	9,026
Total	$ 9,593	$ 9,026

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Note 5 - Intangible Assets (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Jun. 30, 2018	Jul. 01, 2017
Amortization of Intangible Assets, Total	$ 299,000	$ 289,000	$ 987,000	$ 868,000

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Note 5 - Intangible Assets - Summary of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Sep. 30, 2017
Gross Amount	$ 14,697	$ 11,877
Accumulated Amortization	(4,721)	(3,964)
Net Book Value	9,976	7,913
Customer Relationships [Member]
Gross Amount	9,070	6,500
Accumulated Amortization	(1,445)	(1,018)
Net Book Value	7,625	5,482
Technology-Based Intangible Assets [Member]
Gross Amount	1,800	1,800
Accumulated Amortization	(349)	(283)
Net Book Value	1,451	1,517
Noncompete Agreements [Member]
Gross Amount	3,687	3,577
Accumulated Amortization	(2,904)	(2,663)
Net Book Value	783	$ 914
Trade Names [Member]
Gross Amount	140
Accumulated Amortization	(23)
Net Book Value	$ 117

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Note 6 - Stock-based Compensation (Details Textual) - USD ($)	9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Feb. 17, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 10.46	$ 13.66
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 185,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 186 days
Restricted Stock Units (RSUs) [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 153 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 443,000
Restricted Stock Units (RSUs) [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Restricted Stock Units (RSUs) [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
The 2015 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			900,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	378,000

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Note 6 - Stock-based Compensation - Stock Option Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Jun. 30, 2018	Jul. 01, 2017
Employee Stock Option [Member]
Compensation expense	$ 51	$ 78	$ 522	$ 585

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Note 6 - Stock-based Compensation - Stock Option Valuation Assumptions (Details)	9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017
Risk-free interest rate	2.72%	2.03%
Dividend yield	0.40%	0.33%
Expected volatility	37.74%	38.79%
Expected term (Year)	4 years 324 days	5 years 43 days

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Note 6 - Stock-based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended	12 Months Ended
	Jun. 30, 2018	Sep. 30, 2017	Sep. 30, 2017
Options outstanding, beginning balance (in shares)	392
Weighted average exercise price per share, beginning balance (in dollars per share)	$ 23.40
Options outstanding, granted (in shares)	44
Exercise price per share, granted (in dollars per share)	$ 29.69
Options outstanding, exercised (in shares)	(42)
Exercise price per share, exercised (in dollars per share)	$ 17.81
Options outstanding, forfeited (in shares)	(9)
Exercise price per share, forfeited (in dollars per share)	$ 29.88
Options outstanding, ending balance (in shares)	385	392	392
Weighted average exercise price per share, ending balance (in dollars per share)	$ 24.59	$ 23.40	$ 23.40
Contractual term - weighted average, ending balance (Year)	7 years 138 days
Aggregate intrinsic value, ending balance	$ 3,565
Options outstanding, vested and anticipated to vest in future (in shares)	383
Weighted average exercise price per share, vested and anticipated to vest in future (in dollars per share)	$ 24.56
Contractual term - weighted average, vested and anticipated to vest in future (Year)	7 years 138 days
Aggregate intrinsic value, vested and anticipated to vest in future	$ 3,548
Options outstanding, exercisable (in shares)	201
Weighted average exercise price per share, exercisable (in dollars per share)	$ 21.04
Contractual term - weighted average, exercisable (Year)	6 years 87 days
Aggregate intrinsic value, exercisable	$ 2,540
Minimum [Member]
Exercise price per share, beginning balance (in dollars per share)	$ 10.23	$ 9.16
Exercise price per share, granted (in dollars per share)	29.69
Exercise price per share, exercised (in dollars per share)	9.16
Exercise price per share, forfeited (in dollars per share)	23.95
Maximum [Member]
Exercise price per share, ending balance (in dollars per share)	37.06		$ 37.06
Exercise price per share, granted (in dollars per share)	29.69
Exercise price per share, exercised (in dollars per share)	23.95
Exercise price per share, forfeited (in dollars per share)	$ 37.06

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Note 6 - Stock-based Compensation - RSU Grants and Compensation Expense (Details) - Restricted Stock Units (RSUs) [Member] - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Jun. 30, 2018	Jul. 01, 2017
Units (in shares)			24	19
Market value			$ 712	$ 690
Compensation expense	$ 117	$ 132	$ 719	$ 758

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Note 6 - Stock-based Compensation - RSU Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares shares in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Jun. 30, 2018	Jul. 01, 2017
Restricted stock units outstanding, beginning balance (in shares)			128
Weighted average grant date fair value, beginning balance (in dollars per share)			$ 25.92
Restricted stock units outstanding, granted (in shares)			24	19
Weighted average grant date fair value, granted (in dollars per share)			$ 29.69
Restricted stock units outstanding, released (in shares)			(26)
Weighted average grant date fair value, released (in dollars per share)			$ 25.04
Restricted stock units outstanding, forfeited (in shares)			(4)
Weighted average grant date fair value, forfeited (in dollars per share)			$ 29.60
Restricted stock units outstanding, ending balance (in shares)	122		122
Weighted average grant date fair value, ending balance (in dollars per share)	$ 26.74		$ 26.74

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Note 7 - Income Taxes (Details Textual) - USD ($)	3 Months Ended	9 Months Ended		12 Months Ended
	Dec. 30, 2017	Jun. 30, 2018	Jul. 01, 2017	Sep. 29, 2018	Sep. 30, 2017
Effective Income Tax Rate Reconciliation, Percent, Total		12.00%	33.80%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		21.00%			35.00%
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability	$ 3,700,000
Deferred Tax Liabilities, Net, Noncurrent		$ 5,782,000			$ 8,103,000
Deferred Tax Assets, Operating Loss Carryforwards, State and Local		7,400,000
Deferred Tax Assets, Valuation Allowance, Total		254,000			$ 251,000
State and Local Jurisdiction [Member]
Deferred Tax Assets, Tax Credit Carryforwards, Total		$ 72,000
State and Local Jurisdiction [Member] | Earliest Tax Year [Member]
Operating Loss Carryforwards Expiration Date 1		2018
Tax Credit Carryforward, Expiration Date 1		2019
State and Local Jurisdiction [Member] | Latest Tax Year [Member]
Operating Loss Carryforwards Expiration Date 1		2032
Tax Credit Carryforward, Expiration Date 1		2020
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent				24.50%

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Note 8 - Employee Benefit Plans (Details Textual)	9 Months Ended
	Jun. 30, 2018
Supplemental Employee Retirement Plan [Member]
Defined Benefit Plan Employment Term	30 years
Supplemental Retirement Benefit Period	15 years
Defined Benefit Plan Percent of Highest Average Salary Base	50.00%
Defined Benefit Plan Number of Years in Average Annual Base Salary	5 years
Defined Benefit Plan Number of Years Preceding Retirement for Average Annual Base Salary Calculation	10 years
Reduced SERP [Member]
Defined Benefit Plan Retirement Age	65
Defined Benefit Plan, Reduction for Each Month	0.0028%
Reduced SERP [Member] | Minimum [Member]
Defined Benefit Plan Employment Term	10 years

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Note 8 - Employee Benefit Plans - Net Periodic Pension Costs and Related Components (Details) - Supplemental Employee Retirement Plan [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Jun. 30, 2018	Jul. 01, 2017
Interest cost	$ 86	$ 86	$ 258	$ 258
Service cost	70	84	209	254
Recognized net actuarial loss	38	44	114	130
Net periodic pension cost	$ 194	$ 214	$ 581	$ 642

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Note 9 - Long-term Debt (Details Textual)	3 Months Ended		9 Months Ended
	Jun. 30, 2018 USD ($)	Jul. 01, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jul. 01, 2017 USD ($)
Letters of Credit Outstanding, Amount	$ 1,800,000		$ 1,800,000
Amortization of Debt Issuance Costs	16,000	$ 16,000	48,000	$ 48,000
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	100,000,000		100,000,000
Line of Credit Facility, Remaining Borrowing Capacity	100,000,000		100,000,000
Long-term Line of Credit, Total	0		0
Line of Credit Facility, Current Borrowing Capacity	$ 82,500,000		$ 82,500,000
Debt Instrument, Interest Rate, Increase (Decrease)			2.00%
Fixed Charge Coverage Ratio			1.1
Credit Facility, Liquidity Amount			$ 12,500,000
Revolving Credit Facility [Member] | Federal Funds Effective Swap Rate [Member]
Debt Instrument, Basis Spread on Variable Rate			0.50%
Revolving Credit Facility [Member] | Base Rate [Member]
Line of Credit Facility, Interest Rate at Period End	0.25%		0.25%
Revolving Credit Facility [Member] | Base Rate [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate			0.25%
Revolving Credit Facility [Member] | Base Rate [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate			0.75%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility, Interest Rate at Period End	1.25%		1.25%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate			1.25%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate			1.75%

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Note 10 - Earnings Per Share (Details Textual) - shares	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Jun. 30, 2018	Jul. 01, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	97,000	78,000	98,000	57,000

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Note 10 - Earnings Per Share - Basic and Diluted Earnings Per Share Attributable to Common Shareholders (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Jun. 30, 2018	Jul. 01, 2017
Net earnings	$ 12,868	$ 6,869	$ 26,858	$ 18,749
Basic weighted average shares outstanding (in shares)	19,070	19,025	19,054	19,003
Dilutive effect of stock-based compensation (in shares)	204	200	198	216
Diluted weighted average shares outstanding (in shares)	19,274	19,225	19,252	19,219
Net earnings per share:
Basic (in dollars per share)	$ 0.67	$ 0.36	$ 1.41	$ 0.99
Diluted (in dollars per share)	$ 0.67	$ 0.36	$ 1.40	$ 0.98

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Note 11 - Share Repurchases (Details Textual) - USD ($) shares in Thousands, $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jul. 01, 2017	Jun. 30, 2018	Jul. 01, 2017	Nov. 18, 2008
Stock Repurchase Program, Authorized Amount					$ 25.0
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 24.8		$ 24.8
Stock Repurchased During Period, Shares	0	0	0	0

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Note 12 - Other Financial Data - Balance Sheet Information (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Sep. 30, 2017
Accounts receivable	$ 56,130	$ 40,485
Less allowance for doubtful accounts	(298)	(201)
Total	55,832	40,284
Raw materials	28,120	51,808
Work in process	4,519	2,637
Finished goods	22,112	27,408
Total	54,751	81,853
Prepaid insurance	3,620	3,796
Income tax receivable		925
Other	1,455	1,228
Total	5,075	5,949
Cash surrender value of life insurance policies	9,593	9,026
Capitalized financing costs, net	57	105
Other	128	203
Total	9,778	9,334
Land and land improvements	14,421	12,177
Buildings	54,333	50,373
Machinery and equipment	159,423	153,484
Construction in progress	5,122	5,641
Property, plant and equipment, gross	233,299	221,675
Less accumulated depreciation	(130,510)	(123,005)
Total	102,789	98,670
Salaries, wages and related expenses	5,321	5,520
Income taxes	1,520
Customer rebates	1,321	1,015
Property taxes	1,033	1,384
Workers' compensation	115	116
Other	707	632
Total	10,017	8,667
Deferred compensation	10,820	9,276
Deferred Tax Liabilities, Net, Noncurrent	5,782	8,103
Total	$ 16,602	$ 17,379

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Note 13 - Business Segment Information (Details Textual)	9 Months Ended
	Jun. 30, 2018
Number of Reportable Segments	1

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Note 14 - Contingencies (Details Textual)	3 Months Ended	9 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)
Insurance Settlements Receivable	$ 52,000	$ 52,000
Proceeds from Insurance Settlement, Operating Activities		439,000
Selling, General and Administrative Expenses [Member]
Insurance Recoveries	5,000	26,000
Other Income [Member]
Insurance Recoveries	$ 47,000	47,000
Cost of Sales [Member]
Insurance Recoveries		$ 418,000