10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934  

For the fiscal year ended September 29, 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 27030 (Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (336) 786-2141

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Common Stock (No Par Value) (Preferred Share Purchase Rights are attached to and trade with the Common Stock) Name of Each Exchange on Which Registered The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Securities registered pursuant to Section 12(g) of the Act:

Preferred Share Purchase Rights (attached to and trade with the Common Stock)

Title of Class

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [  ] No [X]

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 every Interactive Data File required to be submitted 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 such files). Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. (Check one):

Large accelerated filer [  ]	Accelerated filer [X]
Non-accelerated filer   [  ]	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 Act). Yes [  ] No [X]

As of March 31, 2018 (the last business day of the registrant’s most recently completed second quarter), the aggregate market value of the common stock held by non-affiliates of the registrant was $437,197,613 based upon the closing sale price as reported on the Nasdaq Global Select Market. As of October 25, 2018, there were 19,222,479 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s proxy statement to be delivered to shareholders in connection with the 2019 Annual Meeting of Shareholders are incorporated by reference as set forth in Part III hereof.

TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements		3
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	9
Item 2.	Properties	9
Item 3.	Legal Proceedings	9
Item 4.	Mine Safety Disclosures	9
Executive Officers of the Company		9
PART II
Item 5.	Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	10
Item 6.	Selected Financial Data	12
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 8.	Financial Statements and Supplementary Data	20
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
Item 9A.	Controls and Procedures	47
Item 9B.	Other Information	49
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	49
Item 11.	Executive Compensation	49
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	49
Item 13.	Certain Relationships and Related Transactions, and Director Independence	49
Item 14.	Principal Accounting Fees and Services	49
PART IV
Item 15.	Exhibits, Financial Statement Schedules	49
Item 16.	Form 10-K Summary	50
SIGNATURES		53

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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 in the “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this report. 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 the “Risk Factors” section of this report and are updated from time to time in our filings with the United States (“U.S.”) Securities and Exchange Commission (“SEC”).

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;

● 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 risks and uncertainties discussed herein under the caption “Risk Factors.”

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PART I

Item 1. Business

General

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 (“WWR”), including ESM, concrete pipe reinforcement (“CPR”) and standard welded wire reinforcement (“SWWR”). Our products are sold primarily to manufacturers of concrete products that are used in nonresidential construction. For fiscal 2018, we estimate that approximately 85% of our sales were related to nonresidential construction and 15% were related to residential construction.

Insteel is the parent holding company for two wholly-owned subsidiaries, Insteel Wire Products Company (“IWP”), an operating subsidiary, and Intercontinental Metals Corporation, an inactive subsidiary. We were incorporated in 1958 in the State of North Carolina.

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. Headquartered in Mount Airy, North Carolina, we operate ten manufacturing facilities that are all located in the U.S. in close proximity to our customers and raw material suppliers. Our growth strategy is focused on organic opportunities as well as acquisitions in existing or related markets that leverage our infrastructure and core competencies in the manufacture and marketing of concrete reinforcing products.

Products

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 WWR. Based on the criteria specified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, we have one reportable segment. Our net sales and long-lived assets by geographic region are discussed in Note 13 to our consolidated financial statements and incorporated herein by reference.

PC strand is a high strength, seven-wire strand that is used to impart compression forces into precast concrete elements and structures, which may be either pretensioned or posttensioned, providing reinforcement for bridges, parking decks, buildings and other concrete structures. Its high tensile strength allows for the casting of longer spans and thinner sections. Pretensioned or “prestressed” concrete elements or structures are primarily used in nonresidential construction while posttensioned concrete elements or structures are used in both nonresidential and residential construction. For fiscal years 2018, 2017 and 2016, PC strand sales represented 40%, 38% and 39%, respectively, of our net sales.

WWR is produced as either a standard or a specially engineered reinforcing product for use in nonresidential and residential construction. We produce a full range of WWR products, including ESM, CPR and SWWR. ESM is an engineered made-to-order product that is used as the primary reinforcement for concrete elements or structures, frequently serving as a lower cost reinforcing solution than hot-rolled rebar. CPR is an engineered made-to-order product that is used as the primary reinforcement in concrete pipe, box culverts and precast manholes for drainage and sewage systems, water treatment facilities and other related applications. SWWR is a secondary reinforcing product that is produced in standard styles for crack control applications in residential and light nonresidential construction, including driveways, sidewalks and various slab-on-grade applications. For fiscal years 2018, 2017 and 2016, WWR sales represented 60%, 62% and 61%, respectively, of our net sales.

Marketing and Distribution

We market our products through sales representatives who are our employees. Our outside sales representatives are trained on the technical applications for our products and sell multiple product lines in their respective territories. 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. The delivery method selected is dependent upon backhaul opportunities, comparative costs and customer service requirements.

Customers

We sell our products to a broad range of customers that includes manufacturers of concrete products, and to a lesser extent, distributors, rebar fabricators and contractors. In fiscal 2018, we estimate that approximately 70% of our net sales were to manufacturers of concrete products and 30% were to distributors, rebar fabricators and contractors. In many cases we are unable to identify the specific end use for our products as most of our customers sell products that are used for both nonresidential and residential construction, and the same products can be used for different end uses. We did not have any customers that represented 10% or more of our net sales in fiscal years 2018, 2017 and 2016. The loss of a single customer or a few customers would not have a material adverse effect on our business.

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Backlog 

Backlog for our business is minimal due to the relatively short lead times that are required by our customers. We believe that the majority of our firm orders as of the end of fiscal 2018 will be shipped during the first quarter of fiscal 2019.

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 overall economic conditions, although there can be significant differences between the relative strength of nonresidential and residential construction for extended periods.

Raw Materials 

The primary raw material used to manufacture our products is hot-rolled carbon steel wire rod, which we purchase from both domestic and foreign suppliers and can generally be characterized as a commodity product. We purchase several different grades and sizes of wire rod with varying specifications based on the diameter, chemistry, mechanical properties and metallurgical characteristics that are required for our products. High carbon grades of wire rod are required for the production of PC strand while low carbon grades are used to manufacture WWR.

Wire rod prices tend to fluctuate based on changes in scrap and other metallic prices for steel producers together with domestic and global market conditions. In most economic environments, domestic demand for wire rod exceeds domestic production capacity and imports of wire rod are necessary to satisfy the supply requirements of the U.S. market. Trade actions initiated by the U.S. government or domestic wire rod producers can significantly impact the pricing and availability of imported wire rod, which during fiscal years 2018 and 2017 represented approximately 14% and 27%, respectively, of our total wire rod purchases. We believe that our substantial wire rod requirements, desirable mix of sizes and grades, and strong financial condition represent a competitive advantage by making us a relatively more attractive customer to our suppliers.

Our ability to source wire rod from overseas suppliers is limited by domestic content requirements generally referred to as “Buy America” or “Buy American” laws that exist at both the federal and state levels. These laws generally prescribe a domestic “melt and cast” standard for purposes of compliance. Certain segments of the PC strand market and the majority of our CPR and ESM products are certified to customers to be in compliance with the domestic content regulations.

Selling prices for our products tend to be correlated with changes in wire rod prices. However, the timing and magnitude of the relative price changes varies depending upon market conditions and competitive factors. Ultimately the relative supply - demand balance in our markets and competitive dynamics determine whether our margins expand or contract during periods of rising or falling wire rod prices.

Competition

We are the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. Our markets are highly competitive based on price, quality and service. Some of our competitors, such as Nucor Corporation, Keystone Consolidated Industries, Inc. (“Keystone”), Oklahoma Steel and Wire, and Gerdau Long Products North America, are vertically integrated companies that produce both wire rod and concrete reinforcing products and offer multiple product lines over broad geographic areas. Other competitors are smaller independent companies that offer limited competition in certain markets. Our primary competitors for WWR products are Engineered Wire Products, Inc. (a subsidiary of Keystone), Wire Mesh Corporation, Concrete Reinforcements, Inc., National Wire Products, Davis Wire Corporation and Oklahoma Steel & Wire Co., Inc. Our primary competitors for PC strand are Sumiden Wire Products Corporation, Keystone and Wire Mesh Corporation. Import competition is also a significant factor in certain segments of the PC strand market, and, to a lesser extent, the SWWR market that are not subject to “Buy America” requirements.

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In response to irrationally-priced import competition from offshore PC strand suppliers, we have pursued trade cases when necessary as a means of ensuring that foreign producers were complying with the applicable trade laws and regulations. In 2003, we joined together with a coalition of domestic PC strand producers and filed petitions with the U.S. Department of Commerce (the “DOC”) alleging that imports of PC strand from Brazil, India, Korea, Mexico and Thailand were being “dumped” or sold in the U.S. at a price that was lower than fair value and had injured the domestic PC strand industry. The DOC ruled in our favor and imposed anti-dumping duties ranging from 12% up to 119%, which had the effect of limiting the participation of these countries in the domestic market. In 2010, we joined together with a coalition of domestic PC strand producers and filed petitions with the DOC alleging that imports of PC strand from China were being “dumped” or sold in the U.S. at a price that was lower than fair value and that subsidies were being provided to Chinese PC strand producers by the Chinese government, both of which had injured the domestic PC strand industry. The DOC ruled in our favor and imposed final countervailing duty margins ranging from 9% to 46% and anti-dumping margins ranging from 43% to 194%, which had the effect of limiting the continued participation of Chinese producers in the domestic market.

Quality and service expectations of customers have risen substantially over the years and are key factors that impact their selection of suppliers. Technology has become a critical competitive factor from the standpoint of manufacturing costs, quality and customer service capabilities. In view of our strong market positions, broad product offering and national footprint, technologically advanced manufacturing facilities, low-cost production capabilities, sophisticated information systems and financial strength and flexibility, we believe that we are well-positioned to compete favorably with other producers of our concrete reinforcing products.

Employees 

As of September 29, 2018, we had 810 employees, none of which were represented by labor unions. In the event of production disruptions, we believe that our contingency plans would enable us to continue serving our customers, although there can be no assurances that a work slowdown or stoppage would not adversely impact our operating costs and financial results.

Product Warranties

Our products are used in applications that are subject to inherent risks, including performance deficiencies, personal injury, property damage, environmental contamination or loss of production. We warrant our products to meet certain specifications. Although actual or claimed deficiencies from these specifications may give rise to claims, we do not maintain a reserve for warranties as the historical claims have been immaterial. We maintain product liability insurance coverage to minimize our exposure to such risks.

Environmental Matters

We believe that we are in compliance in all material respects with applicable environmental laws and regulations. We have experienced no material difficulties in complying with legislative or regulatory standards and believe that these standards have not materially impacted our financial position or results of operations. Although our future compliance with additional environmental requirements could necessitate capital outlays, we do not believe these expenditures would ultimately have a material adverse effect on our financial position or results of operations. We do not expect to incur material capital expenditures for environmental control facilities during fiscal 2019.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports, are available at no cost on our web site at https://insteelgcs.gcs-web.com/financial-information/sec-filings and the SEC’s web site at www.sec.gov as soon as reasonably practicable after we file these reports electronically with, or furnish them to, the SEC. The information available on our web site and the SEC’s web site is not incorporated into this report or any of our filings with the SEC.

Item 1A. Risk Factors

An investment in our common stock involves risks and uncertainties. You should carefully consider the following risk factors, in addition to the other information contained in this annual report on Form 10-K, before deciding whether an investment in our common stock is suitable for you. The risk factors described below are not the only ones we face. There may be other risks and uncertainties that are currently unknown to us or that we currently consider to be immaterial that could adversely affect our business, results of operations, financial condition and cash flows.

Our business is cyclical and can be negatively impacted by prolonged economic downturns or tightening in the financial markets that reduce the level of construction activity and demand for our products.

Demand for our products is cyclical in nature and sensitive to changes in the economy and in the financial markets. Our products are sold primarily to manufacturers of concrete products that are used for a broad range of nonresidential and residential construction applications. Demand for our products is driven by the level of construction activity, which tends to be correlated with conditions in the overall economy as well as other factors beyond our control. Tightening in the financial markets could adversely impact demand for our products by reducing the availability of financing to our customers and the construction industry as a whole and increasing the risk of payment defaults on our accounts receivable. Future prolonged periods of economic weakness or reduced availability of financing could have a material adverse impact on our business, results of operations, financial condition and cash flows.

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Our business can be negatively impacted by reductions in the amount and duration of government funding for infrastructure projects that reduce the level of construction activity and demand for our products.

Certain of our products are used in the construction of highways, bridges and other infrastructure projects that are funded by federal, state and local governments. Reductions in the amount of funding for such projects or the period for which it is provided could have a material adverse impact on our business, results of operations, financial condition and cash flows.

Our operations are subject to seasonal fluctuations that may impact our cash flows.

Our shipments are typically lower in the first and second fiscal quarters due to the unfavorable impact of winter weather on construction activity during these periods and customer plant shutdowns associated with holidays. As a result, our cash flows may fluctuate from quarter to quarter due to these seasonal factors.

Demand for our products is highly variable and difficult to forecast due to our minimal backlog and unanticipated changes that can occur in customer order patterns or inventory levels.

Demand for our products is highly variable. The short lead times for customer orders and minimal backlog that characterize our business make it difficult to forecast the future level of demand for our products. In some cases, unanticipated softening in demand can be exacerbated by inventory rebalancing measures pursued by our customers, which may cause significant fluctuations in our sales, profitability and cash flows.

Our financial results can be negatively impacted by the volatility in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod.

The primary raw material used to manufacture our products is hot-rolled carbon steel wire rod, which we purchase from both domestic and foreign suppliers. We do not use derivative commodity instruments to hedge our exposure to changes in the price of wire rod as such instruments are currently unavailable in the financial markets. Beginning in fiscal 2004, a tightening of supply in the rod market together with fluctuations in the raw material costs of rod producers resulted in increased price volatility which has continued through fiscal 2018. In response, wire rod producers have resorted to increasing the frequency of price adjustments, typically on a monthly basis as well as unilaterally changing the terms of prior commitments.

Although changes in our wire rod costs and selling prices tend to be correlated, we may be unable to fully recover increased rod costs during weaker market environments, 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.

Our financial results can also be significantly impacted if raw material supplies are inadequate to satisfy our purchasing requirements. In addition, trade actions by the U.S. government, such as the imposition of the steel tariffs imposed under Section 232 of the Trade Expansion Act, as amended, or domestic wire rod producers against other countries can significantly impact the availability and cost of imported wire rod. The imposition of tariffs, quotas or anti-dumping or countervailing duty margins by the U.S. government against exporting countries can have the effect of reducing or eliminating their competitiveness and participation in the domestic market, which is of increasing importance in view of the reductions in domestic wire rod production capacity that have occurred in recent years. If we were unable to obtain adequate and timely delivery of our raw material requirements, we may be unable to manufacture sufficient quantities of our products or operate our manufacturing facilities in an efficient manner, which could result in lost sales and higher operating costs.

Foreign competition could adversely impact our financial results.

Our PC strand business, and, to a lesser extent, our SWWR business are subject to offshore import competition on an ongoing basis. If we are unable to purchase raw materials and achieve manufacturing costs that are competitive with those of foreign producers, or if the margin and return requirements of foreign producers are substantially lower, our market share and profit margins could be negatively impacted. In response to irrationally-priced import competition from offshore PC strand suppliers, we have pursued trade cases when necessary as a means of ensuring that foreign producers were complying with the applicable trade laws and regulations. These trade cases have resulted in the imposition of duties which have had the effect of limiting the continued participation of certain countries in the domestic market. Trade law enforcement is critical to our ability to maintain our competitive position against foreign PC strand and SWWR producers that engage in unlawful trade practices.

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Our manufacturing facilities are subject to unexpected equipment failures, operational interruptions and casualty losses.

Our manufacturing facilities are subject to risks that may limit our ability to manufacture and sell our products, including unexpected equipment failures, operational interruptions and catastrophic losses due to other unanticipated events such as fires, explosions, accidents, adverse weather conditions and transportation interruptions. For example, during fiscal 2017, operations at our Texas and Florida plants were temporarily curtailed due to flooding and power outages related to hurricanes Harvey and Irma, and during fiscal 2018, a transformer outage and electrical fire at our Dayton, Texas plant resulted in a temporary interruption of operations. Any such equipment failures or events can subject us to material plant shutdowns, periods of reduced production or unexpected downtime. Furthermore, the resolution of certain operational interruptions may require significant capital expenditures. Although our insurance coverage could offset the losses or expenditures relating to some of these events, our results of operations and cash flows could be negatively impacted to the extent that such claims were not covered or only partially covered by our insurance.

We are increasingly dependent on information technology systems that are susceptible to certain risks, including cybersecurity breaches and data leaks, which could adversely impact our business.

Our increasing reliance on technology systems and infrastructure heightens our potential vulnerability to system failure and malfunction, breakdowns due to natural disasters, human error, unauthorized access, power loss and other unforeseen events. Data privacy breaches by employees and others with or without authorized access to our systems poses risks that sensitive data may be permanently lost or leaked to the public or other unauthorized persons. With the growing use and rapid evolution of technology, not limited to cloud-based computing and mobile devices, there are additional risks of unintentional data leaks. There is also the risk of the theft of confidential information, intentional vandalism, industrial espionage and a variety of cyber-attacks that could compromise our internal technology system and infrastructure or result in data leaks in-house or at our third-party providers and business partners. Failures of technology or related systems, or an improper release of confidential information, could adversely impact our business or subject us to unexpected liabilities.

Our financial results could be adversely impacted by the escalation of our operating costs.

Consistent with the experience of other employers, our medical and workers’ compensation costs have increased substantially in recent years and are expected to continue to rise. The Patient Protection and Affordable Care Act (“ACA”) will have a significant impact on employers, health care providers, insurers and others associated with the health care industry and increase our employee health care costs. This legislation requires certain large employers like us to offer health care benefits to full-time employees or face potential annual penalties. To avoid these penalties, employers must offer health benefits providing a minimum level of coverage and limit the amount that employees are charged for the coverage. The Administration and Congress are pursuing legislative and regulatory changes that modify, repeal, replace with new legislation or otherwise invalidate all or certain portions of the ACA. The Tax Cuts and Jobs Act of 2017 effectively eliminated certain provisions of the ACA, including the individual mandate beginning in 2019. It is uncertain whether the other reform proposals being considered by the Administration and Congress will be enacted and potentially alter the full-time employee healthcare coverage requirement and reporting obligations imposed on large employers like us. We cannot predict the ultimate content, timing, or effect of any healthcare reform legislation or the impact of potential legislation or related proposals and policies on our results. Any significant increases in the costs attributable to our self-insured health and workers’ compensation plans could adversely impact our business, results of operations, financial condition and cash flows.

In addition, increasing prices for freight, natural gas, electricity, fuel and consumables would adversely affect our manufacturing and distribution costs. For most of our business, we incur the transportation costs associated with the delivery of products to our customers. Although we have previously implemented numerous measures to offset the impact of increases in these costs, there can be no assurance that such actions will be effective. If we are unable to pass these additional costs through by raising our selling prices, our financial results could be adversely impacted.   

Our financial results could be adversely impacted by the impairment of goodwill.

Our balance sheet includes intangible assets, including goodwill and other separately identifiable assets related to prior acquisitions, and we may acquire additional intangible assets in connection with future acquisitions. We are required to review goodwill for impairment on an annual basis, or more frequently if certain indicators of permanent impairment arise such as, among other things, a decline in our stock price and market capitalization or a reduction in our projected operating results and cash flows. If our review indicates that goodwill has been impaired, the impaired portion would have to be written-off during that period which could have an adverse effect on our business and financial results.

Our capital resources may not be adequate to provide for our capital investment and maintenance expenditures if we were to experience a substantial downturn in our financial performance.

Our operations are capital intensive and require substantial recurring expenditures for the routine maintenance of our equipment and facilities. Although we expect to finance our business requirements through internally generated funds or from borrowings under our $100.0 million revolving credit facility, we cannot provide any assurances these resources will be sufficient to support our business. A material adverse change in our operations or financial condition could limit our ability to borrow funds under our credit facility, which could further adversely impact our liquidity and financial condition. Any significant future acquisitions could require additional financing from external sources that may not be available on favorable terms, which could adversely impact our growth, operations, financial condition and results of operations.

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Environmental compliance and remediation could result in substantially increased capital investments and operating costs.

Our business is subject to numerous federal, state and local laws and regulations pertaining to the protection of the environment that could require substantial increases in capital investments and operating costs. These laws and regulations, which are constantly evolving, are becoming increasingly stringent, and the ultimate impact of compliance is not always clearly known or determinable because regulations under some of these laws have not yet been promulgated or are undergoing revision.

Our stock price can be volatile, often in connection with matters beyond our control.

Equity markets in the U.S. have been increasingly volatile in recent years. During fiscal 2018, our common stock traded as high as $43.78 and as low as $24.51. There are numerous factors that could cause the price of our common stock to fluctuate significantly, including: variations in our financial results; changes in our business outlook and expectations for the construction industry; changes in market valuations of companies in our industry; and announcements by us, our competitors or industry participants that may be perceived to impact our financial results.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our corporate headquarters and IWP’s sales and administrative offices are located in Mount Airy, North Carolina. At September 29, 2018, we operated ten manufacturing facilities located in Dayton, Texas; Gallatin, Tennessee; Hazleton, Pennsylvania; Hickman, Kentucky; Houston, Texas; Jacksonville, Florida; Kingman, Arizona; Mount Airy, North Carolina; Sanderson, Florida; and St. Joseph, Missouri.

We own all of our real estate following the exercise of the purchase option on the previously leased Houston facility in October 2017. We believe that our properties are in good operating condition and that our machinery and equipment have been well maintained. We also believe that our manufacturing facilities are suitable for their intended purposes and have capacities adequate to satisfy the current and projected demand for our products.

Item 3. 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 cost to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures.

Not applicable.

Executive Officers of the Company

Our executive officers are as follows:

Name	Age	Position
H.O. Woltz III	62	President, Chief Executive Officer and Chairman of the Board
Michael C. Gazmarian	59	Vice President, Chief Financial Officer and Treasurer
James F. Petelle	68	Vice President - Administration and Secretary
Richard T. Wagner	59	Vice President and General Manager of IWP

H. O. Woltz III, 62, was elected Chief Executive Officer in 1991 and has been employed by us and our subsidiaries in various capacities since 1978. He was named President and Chief Operating Officer in 1989. He served as our Vice President from 1988 to 1989 and as President of Rappahannock Wire Company, formerly a subsidiary of our Company, from 1981 to 1989. Mr. Woltz has been a Director since 1986 and also serves as President of Insteel Wire Products Company. Mr. Woltz served as President of Florida Wire and Cable, Inc., formerly a subsidiary of our Company, until its merger with Insteel Wire Products Company in 2002. Mr. Woltz serves on the Executive Committee of our Board of Directors and was elected Chairman of the Board in 2009.

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Michael C. Gazmarian, 59, was elected Vice President, Chief Financial Officer and Treasurer in February 2007. He had previously served as Chief Financial Officer and Treasurer since 1994, the year he joined us. Before joining us, Mr. Gazmarian had been employed by Guardian Industries Corp., a privately-held manufacturer of glass, automotive and building products, since 1986, serving in various financial capacities.

James F. Petelle, 68, joined us in October 2006. He was elected Vice President and Assistant Secretary on November 14, 2006 and Vice President - Administration and Secretary on January 12, 2007. He was previously employed by Andrew Corporation, a publicly-held manufacturer of telecommunications infrastructure equipment, having served as Secretary from 1990 to May 2006, and Vice President - Law from 2000 to October 2006.

Richard T. Wagner, 59, joined us in 1992 and has served as Vice President and General Manager of the Concrete Reinforcing Products Business Unit of our subsidiary, Insteel Wire Products Company, since 1998. In February 2007, Mr. Wagner was appointed Vice President of the parent company, Insteel Industries, Inc. From 1977 until 1992, Mr. Wagner served in various positions with Florida Wire and Cable, Inc., a manufacturer of PC strand and galvanized strand products, which was later acquired by us in 2000.

The executive officers listed above were elected by our Board of Directors at its annual meeting held February 13, 2018 for a term that will expire at the next annual meeting or until their successors are elected and qualify. The next meeting at which officers will be elected is expected to be February 12, 2019.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

Our common stock is listed on the Nasdaq Global Select Market under the symbol “IIIN” and has been trading on Nasdaq since September 28, 2004. As of October 23, 2018, there were 550 shareholders of record. The following table summarizes the high and low sales prices as reported on the Nasdaq Global Select Market and the cash dividends per share declared in fiscal 2018 and 2017:

	Fiscal 2018						Fiscal 2017
	High		Low		Cash Dividends		High		Low		Cash Dividends
First Quarter	$	29.65	$	24.51	$	1.03	$	42.81	$	22.50	$	1.28
Second Quarter		34.32		27.00		0.03		39.20		32.22		0.03
Third Quarter		35.60		26.05		0.03		36.94		28.94		0.03
Fourth Quarter		43.78		32.75		0.03		34.00		23.20		0.03

In addition to our regular quarterly cash dividend of $0.03 per share, we declared special cash dividends of $1.00 per share in the first quarter of fiscal 2018 and $1.25 per share in the first quarter of fiscal 2017. While we intend to pay regular quarterly cash dividends for the foreseeable future, the declaration and payment of future dividends, if any, are discretionary and will be subject to determination by our Board of Directors after taking into account various factors, including general business conditions and our financial condition, operating results, cash requirements and expansion plans. See Note 7 to the consolidated financial statements for additional discussion with respect to restrictions on our ability to make dividend payments under the terms of our revolving credit facility.

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Stock Performance Graph 

The graph below compares the cumulative total shareholder return on our common stock with the cumulative total return of the Russell 2000 Index and the S&P Building Products Index for the five years ended September 29, 2018. The graph and table assume that $100 was invested on September 28, 2013 in our common stock and in each of the two indices and the reinvestment of all dividends. Cumulative total shareholder returns for our common stock, the Russell 2000 Index and the S&P Building Products Index are based on our fiscal year.

	Fiscal Year Ended
	September 28, 2013		September 27, 2014		October 3, 2015		October 1, 2016		September 30, 2017		September 29, 2018
Insteel Industries, Inc.	$	100.00	$	131.84	$	101.83	$	241.02	$	180.10	$	257.32
Russell 2000		100.00		103.93		105.23		121.50		146.70		169.06
S&P Building Products		100.00		114.90		139.13		180.47		189.61		172.16

Issuer Purchases of Equity Securities

Information regarding our share repurchase authorization is discussed in Note 18 to our consolidated financial statements and incorporated herein by reference.

Rights Agreement 

Information regarding our Rights Agreement is discussed in Note 16 to our consolidated financial statements and incorporated herein by reference.

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Item 6. Selected Financial Data.

Financial Highlights

(In thousands, except per share amounts)
 

	Year Ended
	(52 weeks)		(52 weeks)		(52 weeks)		(53 weeks)		(52 weeks)
	September 29,		September 30,		October 1,		October 3,		September 27,
	2018		2017		2016		2015		2014
Net sales	$	453,217	$	388,871	$	418,547	$	447,504	$	408,978
Net earnings		36,266		22,548		37,245		21,710		16,641
Net earnings per share (basic)		1.90		1.19		1.99		1.18		0.91
Net earnings per share (diluted)		1.88		1.17		1.95		1.15		0.89
Cash dividends declared		1.12		1.37		1.12		0.12		0.12
Total assets		329,534		283,073		292,892		260,239		256,795
Total debt		-		-		-		-		-
Shareholders’ equity		241,665		223,376		224,566		200,215		178,883

Our August 15, 2014 acquisition of substantially all the assets associated with the PC strand business of American Spring Wire Corporation (the “ASW Acquisition”) may materially affect the comparability of the information reflected in the selected financial data presented in this Item 6.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The matters discussed in this section include forward-looking statements that are subject to numerous risks. You should carefully read the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Form 10-K.

Overview

Our operations are entirely focused on the manufacture and marketing of concrete reinforcing products for the concrete construction industry. 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.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Our discussion and analysis of our financial condition and results of operations are based on these consolidated financial statements. The preparation of our consolidated 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.

The following critical accounting policies are both important to the depiction of our financial condition and results of operations and require judgments, assumptions and estimates.

Revenue recognition. We recognize revenue from product sales when products are shipped and risk of loss and title has passed to the customer. Sales taxes collected from customers are excluded from revenues and recorded on a net basis.

Concentration of credit risk. Financial instruments that subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Our cash is concentrated primarily at one financial institution, which at times exceeds federally insured limits. We are exposed to credit risk in the event of default by institutions in which our cash and cash equivalents are held and by customers to the extent of the amounts recorded for accounts receivable on the balance sheet. We invest excess cash primarily in money market funds, which are highly liquid securities that bear minimal risk.

Most of our accounts receivable are due from customers that are located in the U.S. and are generally not secured by collateral depending upon the creditworthiness of the account. We provide an allowance for doubtful accounts based upon our assessment of the credit risk of specific customers, historical trends and other information. There is no disproportionate concentration of credit risk.

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Allowance for doubtful accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the potential inability of our customers to make required payments on outstanding balances owed to us. Significant management judgments and estimates are used in establishing the allowances. These judgments and estimates consider such factors as the financial position, cash flows and payment history of our customers as well as current and expected business conditions. It is reasonably likely that actual collections will differ from our estimates, which may result in increases or decreases in the allowances. Adjustments to the allowances may also be required if there are significant changes in the financial condition of our customers.

Inventory valuation. We periodically evaluate the carrying value of our inventory. This evaluation includes assessing the adequacy of allowances for losses in the normal course of operations, providing for excess and obsolete inventory, and ensuring that inventory is valued at the lower of cost and estimated net realizable value. Our evaluation considers such factors as the cost of inventory, future demand, our historical experience and market conditions. In assessing the realization of inventory values, we are required to make judgments and estimates regarding future market conditions. Because of the subjective nature of these judgments and estimates, it is reasonably likely that actual outcomes will differ from our estimates. Adjustments to these reserves may be required if actual market conditions are substantially different than the assumptions underlying our estimates.

Long-lived assets. We review long-lived assets, which consist principally of property, plant and equipment and finite-lived intangibles, for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be fully recoverable. Recoverability of long-lived assets to be held and used is measured based on the future net undiscounted cash flows expected to be generated by the related asset or asset group. If it is determined that an impairment loss has been incurred, the impairment loss is recognized in the period in which it is incurred and is calculated based on the difference between the carrying value and the present value of estimated future net cash flows or comparable market values. Assets to be disposed of by sale are recorded at the lower of carrying value or fair value less selling cost when we have committed to a disposal plan, and are reported separately as assets held for sale on our balance sheet. Unforeseen events and changes in circumstances and market conditions could negatively affect the value of assets and result in an impairment charge.

Goodwill. Goodwill is tested annually for impairment and whenever events or circumstances change that would make it more likely than not that an impairment may have occurred. We perform our annual impairment analysis as of the first day of the fourth quarter each fiscal year, which involves comparing the current estimated fair value of the reporting unit to its recorded value, including goodwill.

We perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. It may be necessary to perform a quantitative analysis where a discounted cash flow model is used to determine the current estimated fair value of the reporting unit. Key assumptions used to determine the fair value of the reporting unit as part of our annual testing (and any required interim testing) include: (a) expected cash flows for the five-year period following the testing date; (b) an estimated terminal value using a terminal year growth rate based on the growth prospects of the reporting unit; (c) a discount rate based on our estimated after-tax weighted average cost of capital; and (d) a probability-weighted scenario approach by which varying cash flows are assigned to alternative scenarios based on their likelihood of occurrence. In developing these assumptions, we consider historical and anticipated future results, general economic and market conditions, the impact of planned business and operational strategies and all available information at the time the fair value of the reporting unit is estimated.

We monitor our operating results throughout the year to determine if events or changes in circumstances warrant any interim impairment testing. Otherwise, goodwill will be subject to the required annual impairment test during our fourth quarter. Changes in the judgments and estimates underlying our analysis of goodwill for possible impairment, including the expected future operating cash flows and discount rate, could reduce our estimated fair value in the future and result in an impairment of goodwill. There was no goodwill impairment loss recognized in fiscal 2018.

Self-insurance. We are self-insured for certain losses relating to medical and workers’ compensation claims. Self-insurance claims filed and claims incurred but not reported are accrued based upon our estimates of the discounted ultimate cost for uninsured claims incurred using actuarial assumptions followed by the insurance industry and historical experience. These estimates are subject to a high degree of variability based upon future inflation rates, litigation trends, changes in benefit levels and claim settlement patterns. Because of uncertainties related to these factors as well as the possibility of changes in the underlying facts and circumstances, future adjustments to these reserves may be required.

Litigation. We are involved in claims, lawsuits and other proceedings, which arise in the ordinary course of business. The eventual outcome of such matters and the potential losses that we may ultimately incur are subject to a high degree of uncertainty. We record expenses for litigation when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We estimate the probability of such losses based on the advice of legal counsel, the outcome of similar litigation, the status of the lawsuits and other factors. Due to the numerous factors that enter into these judgments and assumptions, it is reasonably likely that actual outcomes will differ from our estimates. We monitor our potential exposure to these contingencies on a regular basis and may adjust our estimates as additional information becomes available or as there are significant developments.

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Stock-based compensation. We account for stock-based compensation arrangements, including stock option grants and restricted stock units, in accordance with the provisions of ASC Topic 718, Compensation - Stock Compensation. Under these provisions, compensation cost is recognized based on the fair value of equity awards on the date of grant and amortized on a straight-line basis over the vesting period. We use the Monte Carlo valuation model to determine the fair value of stock options at the date of grant, which requires us to make assumptions for the expected term, volatility, dividend yield, risk-free interest rate and forfeiture rates. These assumptions are based on historical information and judgment regarding market factors and trends. If actual results differ from our assumptions and judgments used in estimating these factors, future adjustments to these estimates may be required.

Assumptions for employee benefit plan. We account for our supplemental employee retirement plans (each, a “SERP”) in accordance with ASC Topic 715, Compensation - Retirement Benefits. Under the provisions of ASC Topic 715, we recognize net periodic pension cost and value liabilities based on certain actuarial assumptions, principally the assumed discount rate.

The discount rate we utilize for determining net periodic pension cost and the related benefit obligation for the SERPs is based, in part, on current interest rates earned on long-term bonds that receive one of the two highest ratings assigned by recognized rating agencies. Our discount rate assumptions are adjusted as of each valuation date to reflect current interest rates on such long-term bonds. The discount rate is used to determine the actuarial present value of the benefit obligations as of the valuation date as well as the interest component of the net periodic pension cost for the following year. The discount rate for the SERPs was 4.00% for fiscal 2018 and 3.75% for fiscal years 2017 and 2016.

The assumed discount rate is reevaluated annually. Changes in this assumption can result in the recognition of a materially different pension cost over different periods and a materially different liability amount in our consolidated financial statements. A reduction in the assumed discount rate generally results in an actuarial loss, as the actuarially-determined present value of estimated future benefit payments will increase. Conversely, an increase in the assumed discount rate generally results in an actuarial gain.  However, any actuarial gains generated in future periods reduce the negative amortization effect of any cumulative unamortized actuarial losses, while any actuarial losses generated in future periods reduce the favorable amortization effect of any cumulative unamortized actuarial gains.

The projected benefit obligations and net periodic pension cost for the SERPs are based in part on expected increases in future compensation levels. Our assumption for the expected increase in future compensation levels is based upon our average historical experience and our intentions regarding future compensation increases, which generally approximates average long-term inflation rates.

We currently expect net periodic pension cost for fiscal 2019 to be $821,000 for the SERPs. Cash contributions to the SERPs during fiscal 2019 are expected to be $325,000.

 A 0.25% decrease in the assumed discount rate for our SERPs would have increased our projected and accumulated benefit obligations as of September 29, 2018 by approximately $281,000 and $228,000, respectively, and our expected net periodic pension cost for fiscal 2019 by approximately $33,000.

See Note 10 to our consolidated financial statements for the related accounting and disclosures surrounding our terminated pension plan, the Insteel Wire Products Company Retirement Income Plan for Hourly Employees, Wilmington, Delaware (the “Delaware Plan”).

Recent Accounting Pronouncements.

The nature and impact of recent accounting pronouncements is discussed in Note 3 to our consolidated financial statements and incorporated herein by reference.

14

Results of Operations

Statements of Operations – Selected Data

(Dollars in thousands)

	Year Ended
	September 29,						September 30,						October 1,
	2018			Change			2017			Change			2016
Net sales	$	453,217			16.5	%	$	388,871			(7.1	%)	$	418,547
Gross profit		70,807			18.4	%		59,781			(29.8	%)		85,188
Percentage of net sales		15.6	%					15.4	%					20.4	%
Selling, general and administrative expense	$	28,304			11.0	%	$	25,508			(2.2	%)	$	26,069
Percentage of net sales		6.2	%					6.6	%					6.2	%
Pension plan settlement loss	$	-			-		$	-			(100.0	%)	$	2,539
Restructuring charges, net		-			(100.0	%)		164			42.6	%		115
Other expense, net		274			417.0	%		53			(71.0	%)		183
Interest expense		114			(16.2	%)		136			(13.9	%)		158
Interest income		(515	)		107.7	%		(248	)		49.4	%		(166	)
Effective income tax rate		14.9	%					34.0	%					33.8	%
Net earnings	$	36,266			60.8	%	$	22,548			(39.5	%)	$	37,245

2018 Compared with 2017

Net Sales

Net sales increased 16.5% to $453.2 million in 2018 from $388.9 million in 2017, reflecting a 4.6% increase in shipments and an 11.5% 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. The increase in average selling prices was driven by price increases that were implemented in the current year to recover the escalation in raw material costs.

Gross Profit

Gross profit increased 18.4% to $70.8 million, or 15.6% of net sales, in 2018 from $59.8 million, or 15.4% of net sales, in 2017 primarily due to higher spreads between average selling prices and raw material costs ($6.2 million), higher shipments ($2.8 million) and lower manufacturing costs ($1.1 million). The increase in spreads was driven by higher average selling prices ($46.2 million) partially offset by higher raw material costs ($38.7 million) and freight expense ($1.3 million).

Selling, General and Administrative Expense

Selling, general and administrative expense (“SG&A expense”) increased 11.0% to $28.3 million, or 6.2% of net sales, in 2018 from $25.5 million, or 6.6% of net sales, in 2017 primarily due to higher compensation ($1.7 million) and employee benefit costs ($566,000) partially offset by a smaller increase in the cash surrender value of life insurance policies ($259,000). The increase in compensation expense was largely driven by additional staffing to support the growth of our ESM product line and higher incentive plan expense due to our improved financial results. The increase in employee benefit costs was primarily related to higher employee health insurance costs. The cash surrender value of life insurance policies increased $553,000 in 2018 compared with $812,000 in the prior year due to the changes in the value of the underlying investments.

Restructuring Charges, Net

Net restructuring charges of $164,000 were incurred in 2017 for equipment relocation costs related to the consolidation of our PC strand facilities.

Other Expense, Net

Other expense for 2018 was $274,000 compared with $53,000 in 2017 primarily due to losses on the disposition of property, plant and equipment.

15

Income Taxes

Our effective income tax rate for 2018 decreased to 14.9% from 34.0% in 2017. The effective rate for 2018 reflects a $3.3 million gain on the remeasurement of deferred tax assets and 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 rate decreased to 22.7% from 34.0% 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 increased to $36.3 million ($1.88 per diluted share) in 2018 from $22.5 million ($1.17 per diluted share) in 2017 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 higher SG&A expense.

2017 Compared with 2016

Net Sales

Net sales decreased 7.1% to $388.9 million in 2017 from $418.5 million in 2016 due to lower shipments as average selling prices were essentially unchanged. Shipments in 2017 were unfavorably impacted by adverse weather conditions during the second half of the year including the effect from hurricanes Harvey and Irma on our Texas and Florida facilities together with a reduction in new project activity and competitive pricing pressures.

Gross Profit

Gross profit decreased 29.8% to $59.8 million, or 15.4% of net sales, in 2017 from $85.2 million, or 20.4% of net sales, in 2016. The year-over-year decrease was primarily due to lower spreads between average selling prices and raw material costs ($16.8 million), the decrease in shipments ($6.4 million) and higher manufacturing costs ($3.4 million). The decrease in spreads was driven by higher raw material costs ($16.2 million) and freight expense ($0.7 million) partially offset by higher average selling prices ($0.1 million).

Selling, General and Administrative Expense

SG&A expense decreased 2.2% to $25.5 million, or 6.6% of net sales, in 2017 from $26.1 million, or 6.2% of net sales, in 2016 primarily due to lower compensation expense ($762,000) together with the relative year-over-year change in the cash surrender value of life insurance policies ($332,000), which was partially offset by higher bad debt ($186,000), travel ($163,000) and employee benefit expense ($160,000). The decrease in compensation expense was largely driven by lower incentive plan expense based on our weaker results in 2017. The cash surrender value of life insurance policies increased $812,000 in 2017 compared with $480,000 in 2016 due to the changes in the value of the underlying investments. The increase in bad debt expense was due to an adjustment in 2016 that reduced the allowance for doubtful accounts based on our favorable collections experience. The increase in employee benefit costs was primarily due to higher employee supplemental retirement plan expense.

Pension Plan Settlement Loss

A pension plan settlement loss of $2.5 million was incurred in 2016 related to the termination of the Delaware Plan.

Restructuring Charges, Net

Net restructuring charges of $164,000 were incurred in 2017 for equipment relocation costs related to the consolidation of our PC strand facilities. Net restructuring charges of $115,000 were incurred in 2016, which included equipment relocation costs ($186,000), facility closure costs ($89,000) and impairment charges related to the decommissioning of equipment ($20,000) partially offset by a gain on the sale of equipment previously associated with the Newnan, Georgia PC strand facility ($180,000).

Income Taxes

Our effective income tax rate for 2017 increased slightly to 34.0% from 33.8% in 2016 due to changes in permanent book versus tax differences.

Net Earnings

Net earnings decreased to $22.5 million ($1.17 per diluted share) in 2017 from $37.2 million ($1.95 per diluted share) in 2016 primarily due to the decrease in gross profit partially offset by lower SG&A expense and the pension plan settlement loss incurred in 2016.

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Liquidity and Capital Resources

Selected Financial Data

(Dollars in thousands)

	Year Ended
	September 29,			September 30,			October 1,
	2018			2017			2016
Net cash provided by operating activities	$	53,969		$	20,840		$	56,253
Net cash used for investing activities		(21,939	)		(20,880	)		(12,972	)
Net cash used for financing activities		(20,194	)		(26,728	)		(17,666	)
Cash and cash equivalents		43,941			32,105			58,873
Net working capital		123,489			117,873			126,704
Total debt		-			-			-
Percentage of total capital		-			-			-
Shareholders' equity	$	241,665		$	223,376		$	224,566
Percentage of total capital		100	%		100	%		100	%
Total capital (total debt + shareholders' equity)	$	241,665		$	223,376		$	224,566

Operating Activities

Operating activities provided $54.0 million of cash in 2018 primarily from net earnings adjusted for non-cash items and a reduction in the net working capital components of accounts receivable, inventories and accounts payable and accrued expenses. Net working capital provided $4.7 million of cash due to a $28.2 million increase in accounts payable and accrued expenses partially offset by a $12.3 million increase in inventories and an $11.2 million increase in accounts receivable. The increase in accounts payable and accrued expenses was primarily related to higher raw material purchases near the end of the period and, to a lesser extent, increases in accrued salaries, wages and related expenses. The increases in inventories and accounts receivable were due to the escalation in raw material costs and average selling prices during 2018.

Operating activities provided $20.8 million of cash in 2017 primarily from net earnings adjusted for non-cash items partially offset by an increase in the net working capital components of accounts receivable, inventories and accounts payable and accrued expenses. Net working capital used $15.5 million of cash due to an $11.9 million decrease in accounts payable and accrued expenses and a $10.7 million increase in inventories partially offset by a $7.1 million decrease in accounts receivable. The decrease in accounts payable and accrued expenses was primarily related to lower raw material purchases near the end of the period along with a decrease in accrued salaries, wages and related expenses. The increase in inventories was due to higher raw material costs and, to a lesser extent, quantities on-hand. The decrease in accounts receivable was primarily due to the lower sales in 2017.

Operating activities provided $56.3 million of cash in 2016 primarily from net earnings adjusted for non-cash items and a reduction in the net working capital components of accounts receivable, inventories and accounts payable and accrued expenses. Net working capital provided $3.2 million of cash due to a $9.0 million increase in accounts payable and accrued expenses partially offset by a $5.2 million increase in inventories and a $0.6 million increase in accounts receivable. The increases in accounts payable and accrued expenses and inventories were largely related to higher raw material purchases near the end of 2016. The increase in accounts receivable was primarily due to an increase in days sales outstanding partially offset by lower average selling prices.

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

Investing Activities

Investing activities used $21.9 million of cash in 2018 primarily due to $18.4 million of capital expenditures and $3.3 million for the acquisition of a business. The capital expenditures were 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. Investing activities used $20.9 million of cash in 2017 primarily due to $20.6 million of capital expenditures largely related to the expansion of the Houston, Texas PC strand facility and the addition of a new ESM production line at the St. Joseph, Missouri facility. Investing activities used $13.0 million of cash in 2016 primarily due to capital expenditures largely related to the expansion of the Houston facility. Our investing activities are largely discretionary, providing us with the ability to significantly curtail outlays should future business conditions warrant that such actions be taken.

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Financing Activities

Financing activities used $20.1 million of cash in 2018, $26.7 million in 2017 and $17.7 million in 2016. In 2018, $21.3 million of cash was used for dividend payments (including a special cash dividend of $19.0 million, or $1.00 per share, and regular cash dividends totaling $2.3 million), which was partially offset by $2.1 million of proceeds from the exercise of stock options. In 2017, $26.0 million of cash was used for dividend payments (including a special cash dividend of $23.7 million, or $1.25 per share, and regular cash dividends totaling $2.3 million). In 2016, $20.9 million of cash was used for dividend payments (including a special cash dividend of $18.6 million, or $1.00 per share, and regular cash dividends totaling $2.3 million), which was partially offset by $5.1 million of proceeds from the exercise of stock options.

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 September 29, 2018, no borrowings were outstanding on the Credit Facility, $98.2 million of borrowing capacity was available and outstanding letters of credit totaled $1.8 million (see Note 7 to the consolidated financial statements). As of September 30, 2017, there were no borrowings outstanding on the Credit Facility.

We believe that, in the absence of significant unanticipated cash demands, cash and cash equivalents, 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 also expect to have access to the amounts available under our 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 require additional short-term liquidity, we would evaluate the alternative sources of financing that were 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.

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 2018, we were successful in implementing price increases sufficient to recover the escalation in our raw material costs that occurred over the course of the year. In 2017, we were unable to fully recover the increase in our raw material costs due to the weakening in demand and competitive pricing pressures. During 2016, our raw material costs rose over most of the period, which we were generally able to recover through price increases. The timing and magnitude of any future increases in raw material costs and the impact on 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 defined 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.

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Contractual Obligations 

Our contractual obligations and commitments at September 29, 2018 are as follows:

Payments Due by Period

(In thousands)

			Less Than						More Than
Contractual obligations:	Total		1 Year		1 - 3 Years		3 – 5 Years		5 Years
Raw material purchase commitments(1)	$	75,116	$	75,116	$	-	$	-	$	-
Supplemental employee retirement plan obligations		19,904		325		523		1,107		17,949
Operating leases		1,799		1,034		728		37		-
Trade letters of credit		1,789		1,789		-		-		-
Commitment fee on unused portion of credit facility		615		368		247		-		-
Other unconditional purchase obligations(2)		9,565		9,565		-		-		-
Total	$	108,788	$	88,197	$	1,498	$	1,144	$	17,949

⁽¹⁾Non-cancelable purchase commitments for raw materials.

⁽²⁾Contractual commitments for capital expenditures.

Outlook

Looking ahead to 2019, we expect our financial results will be favorably impacted by continued growth in our construction end-markets. The infrastructure-related portion of our business should benefit from increased federal funding through the FAST Act and supplementary measures together with higher state and local spending in many of our markets supported by various initiatives such as fuel tax increases, bond issuances and other ballot measures. The leading indicators and industry forecasts for nonresidential construction remain positive, and the housing recovery is expected to continue driven by favorable employment and demographic trends.       

Business conditions are likely to remain challenging, however, in view of the escalation in our raw material costs resulting from the Administration’s Section 232 imported steel tariff program. Considering that the tariffs do not apply to imports of downstream products such as welded wire reinforcement and PC strand, we expect a surge in low-priced import competition that results in market share erosion and margin compression for domestic producers. We are engaged with the Administration and Congress to arrive at a solution that addresses the unsustainable competitive environment resulting from the tariff program.

We will continue to maintain our 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. 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.

The statements contained in this section are forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”.

Item 7A. 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.

19

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, quotas and other trade actions. Although changes in our wire rod costs and selling prices tend to be correlated, in weaker market environments, we may be unable to fully recover increased rod costs, 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 2018 shipments and average wire rod cost reflected in cost of sales, a 10% increase in the price of wire rod would have resulted in a $26.6 million decrease in our annual 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 September 29, 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 September 29, 2018. During 2018, a 10% increase or decrease in the value of the U.S. dollar relative to foreign currencies to which we are typically exposed would not have had a material impact on our financial position, results of operations or cash flows.

Item 8. Financial Statements and Supplementary Data.

(a)   Financial Statements

Consolidated Statements of Operations for the years ended September 29, 2018, September 30, 2017 and October 1, 2016	22
Consolidated Statements of Comprehensive Income for the years ended September 29, 2018, September 30, 2017 and October 1, 2016	23
Consolidated Balance Sheets as of September 29, 2018 and September 30, 2017	24
Consolidated Statements of Shareholders’ Equity for the years ended September 29, 2018, September 30, 2017 and October 1, 2016	25
Consolidated Statements of Cash Flows for the years ended September 29, 2018, September 30, 2017 and October 1, 2016	26
Notes to Consolidated Financial Statements	27
Report of Independent Registered Public Accounting Firm – Consolidated Financial Statements	45
Schedule II – Valuation and Qualifying Accounts for the years ended September 29, 2018, September 30, 2017 and October 1, 2016	46

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(b) Supplementary Data

Selected quarterly financial data for 2018 and 2017 is as follows:

Financial Information by Quarter (Unaudited)

(In thousands, except per share amounts)

	Quarter Ended
	December 30		March 31		June 30		September 29
2018
Operating results:
Net sales	$	97,741	$	107,417	$	126,688	$	121,371
Gross profit		11,661		15,416		24,186		19,544
Net earnings		8,111		5,879		12,868		9,408
Net earnings per share:
Basic		0.43		0.31		0.67		0.49
Diluted		0.42		0.31		0.67		0.49

	Quarter Ended
	December 31		April 1		July 1		September 30
2017
Operating results:
Net sales	$	93,888	$	101,159	$	96,938	$	96,886
Gross profit		13,010		18,294		16,676		11,801
Net earnings		4,460		7,420		6,869		3,799
Net earnings per share:
Basic		0.24		0.39		0.36		0.20
Diluted		0.23		0.39		0.36		0.20

21

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Year Ended
	September 29,			September 30,			October 1,
	2018			2017			2016
Net sales	$	453,217		$	388,871		$	418,547
Cost of sales		382,410			329,090			333,359
Gross profit		70,807			59,781			85,188
Selling, general and administrative expense		28,304			25,508			26,069
Pension plan settlement loss		-			-			2,539
Restructuring charges, net		-			164			115
Other expense, net		274			53			183
Interest expense		114			136			158
Interest income		(515	)		(248	)		(166	)
Earnings before income taxes		42,630			34,168			56,290
Income taxes		6,364			11,620			19,045
Net earnings	$	36,266		$	22,548		$	37,245
Net earnings per share:
Basic	$	1.90		$	1.19		$	1.99
Diluted		1.88			1.17			1.95
Cash dividends declared		1.12			1.37			1.12
Weighted average shares outstanding:
Basic		19,079			19,011			18,754
Diluted		19,277			19,217			19,055

See accompanying notes to consolidated financial statements.

22

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Year Ended
	September 29,		September 30,		October 1,
	2018		2017		2016
Net earnings	$	36,266	$	22,548	$	37,245
Pension plan settlement, net of income taxes of ($733)		-		-		1,197
Adjustment to defined benefit plan liability, net of income taxes of ($44), ($127) and $363		139		208		(592	)
Other comprehensive income		139		208		605
Comprehensive income	$	36,405	$	22,756	$	37,850

See accompanying notes to consolidated financial statements.

23

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

	September 29,			September 30,
	2018			2017
Assets:
Current assets:
Cash and cash equivalents	$	43,941		$	32,105
Accounts receivable, net		51,484			40,284
Inventories		94,157			81,853
Other current assets		5,895			5,949
Total current assets		195,477			160,191
Property, plant and equipment, net		106,148			98,670
Intangibles, net		9,703			7,913
Goodwill		8,293			6,965
Other assets		9,913			9,334
Total assets	$	329,534		$	283,073
Liabilities and shareholders’ equity:
Current liabilities:
Accounts payable	$	60,059		$	33,651
Accrued expenses		11,929			8,667
Total current liabilities		71,988			42,318
Other liabilities		15,881			17,379
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value
Authorized shares: 1,000
None issued		-			-
Common stock, $1 stated value
Authorized shares: 50,000
Issued and outstanding shares: 2018, 19,223; 2017, 19,041		19,223			19,041
Additional paid-in capital		72,852			69,817
Retained earnings		151,084			135,851
Accumulated other comprehensive loss		(1,494	)		(1,333	)
Total shareholders’ equity		241,665			223,376
Total liabilities and shareholders’ equity	$	329,534		$	283,073

See accompanying notes to consolidated financial statements.

24

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

											Accumulated
					Additional						Other			Total
	Common Stock				Paid-In			Retained			Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings			Income (Loss)(1)			Equity
Balance at October 3, 2015		18,466	$	18,466	$	60,967		$	122,928		$	(2,146	)	$	200,215
Net earnings									37,245						37,245
Other comprehensive income(1)												605			605
Stock options exercised		463		463		4,602									5,065
Vesting of restricted stock units		47		47		(47	)								-
Compensation expense associated with stock-based plans						2,439									2,439
Excess tax benefits from stock-based compensation						1,717									1,717
Restricted stock units and stock options surrendered for withholding taxes payable						(1,861	)								(1,861	)
Cash dividends declared									(20,859	)					(20,859	)
Balance at October 1, 2016		18,976		18,976		67,817			139,314			(1,541	)		224,566
Net earnings									22,548						22,548
Other comprehensive income(1)												208			208
Stock options exercised		26		26		81									107
Vesting of restricted stock units		39		39		(39	)								-
Compensation expense associated with stock-based plans						2,245									2,245
Excess tax benefits from stock-based compensation						537									537
Restricted stock units and stock options surrendered for withholding taxes payable						(824	)								(824	)
Cash dividends declared									(26,011	)					(26,011	)
Balance at September 30, 2017		19,041		19,041		69,817			135,851			(1,333	)		223,376
Net earnings									36,266						36,266
Other comprehensive income(1)												139			139
Stock options exercised		143		143		1,938									2,081
Vesting of restricted stock units		39		39		(39	)								-
Compensation expense associated with stock-based plans						2,078									2,078
Restricted stock units and stock options surrendered for withholding taxes payable						(942	)								(942	)
Adoption of ASU 2018-02 (Note 3)									300			(300	)		-
Cash dividends declared									(21,333	)					(21,333	)
Balance at September 29, 2018		19,223	$	19,223	$	72,852		$	151,084		$	(1,494	)	$	241,665

⁽¹⁾Activity within accumulated other comprehensive income (loss) is reported net of related income taxes: 2016 ($370), 2017 ($127) and 2018 ($44).

See accompanying notes to consolidated financial statements.

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INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended
	September 29,			September 30,			October 1,
	2018			2017			2016
Cash Flows From Operating Activities:
Net earnings	$	36,266		$	22,548		$	37,245
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		12,818			11,649			11,544
Amortization of capitalized financing costs		65			65			65
Stock-based compensation expense		2,078			2,245			2,439
Deferred income taxes		(2,807	)		2,503			536
Pension plan settlement loss, net of cash contributed		-			-			620
Asset impairment charges		-			-			20
Loss on sale and disposition of property, plant and equipment		381			64			61
Increase in cash surrender value of life insurance policies over premiums paid		(553	)		(812	)		(480	)
Net changes in assets and liabilities:
Accounts receivable, net		(11,200	)		7,105			(607	)
Inventories		(12,304	)		(10,667	)		(5,177	)
Accounts payable and accrued expenses		28,234			(11,930	)		9,009
Other changes		991			(1,930	)		978
Total adjustments		17,703			(1,708	)		19,008
Net cash provided by operating activities		53,969			20,840			56,253
Cash Flows From Investing Activities:
Capital expenditures		(18,449	)		(20,575	)		(12,977	)
Proceeds from surrender of life insurance policies		165			100			140
Increase in cash surrender value of life insurance policies		(355	)		(405	)		(375	)
Acquisition of business		(3,300	)		-			-
Proceeds from sale of assets held for sale		-			-			180
Proceeds from sale of property, plant and equipment		-			-			60
Net cash used for investing activities		(21,939	)		(20,880	)		(12,972	)
Cash Flows From Financing Activities:
Proceeds from long-term debt		372			404			328
Principal payments on long-term debt		(372	)		(404	)		(328	)
Cash dividends paid		(21,333	)		(26,011	)		(20,859	)
Cash received from exercise of stock options		2,081			107			5,065
Payment of employee tax withholdings related to net share transactions		(942	)		(824	)		(1,861	)
Financing costs		-			-			(11	)
Net cash used for financing activities		(20,194	)		(26,728	)		(17,666	)
Net increase (decrease) in cash and cash equivalents		11,836			(26,768	)		25,615
Cash and cash equivalents at beginning of period		32,105			58,873			33,258
Cash and cash equivalents at end of period	$	43,941		$	32,105		$	58,873
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Income taxes, net	$	7,777		$	9,300		$	19,184
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable		967			465			1,746
Restricted stock units and stock options surrendered for withholding taxes payable		942			824			1,861

See accompanying notes to consolidated financial statements.

26

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 29, 2018, SEPTEMBER 30, 2017 AND OCTOBER 1, 2016

(1) Description of Business

Insteel Industries, Inc. (“we,” “us,” “our,” “Insteel” or “the Company”) is the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. Insteel is the parent holding company for two wholly-owned subsidiaries, Insteel Wire Products Company (“IWP”), an operating subsidiary, and Intercontinental Metals Corporation, an inactive subsidiary. We manufacture and market prestressed concrete strand (“PC strand”) and welded wire reinforcement (“WWR”), including engineered structural mesh, concrete pipe reinforcement and standard welded wire reinforcement. Our products are primarily sold to manufacturers of concrete products and, to a lesser extent, distributors, rebar fabricators and contractors. We sell our products nationwide across the U.S. and, to a much lesser extent, into Canada, Mexico, and Central and South America.

We have evaluated all subsequent events that occurred after the balance sheet date through the time of filing this Annual Report on Form 10-K and concluded there were no events or transactions during this period that required additional recognition or disclosure in our financial statements.

(2) Summary of Significant Accounting Policies

Fiscal year. Our fiscal year is the 52 or 53 weeks ending on the Saturday closest to September 30. Fiscal years 2018, 2017 and 2016 were 52-week periods. All references to years relate to fiscal years rather than calendar years.     

Principles of consolidation. The consolidated financial statements include the accounts of Insteel and our subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S.” and such accounting principles, “GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There is no assurance that actual results will not differ from these estimates.

Cash equivalents. We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Concentration of credit risk. Financial instruments that subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Our cash is principally concentrated at one financial institution, which at times exceeds federally insured limits. We are exposed to credit risk in the event of default by institutions in which our cash and cash equivalents are held and by customers to the extent of the amounts recorded on the balance sheet. We invest excess cash primarily in money market funds, which are highly liquid securities.

The majority of our accounts receivable are due from customers that are located in the U.S. and are generally not secured by collateral depending upon the creditworthiness of the account. We provide an allowance for doubtful accounts based upon our assessment of the credit risk of specific customers, historical trends and other information. We write off accounts receivable when they become uncollectible. There is no disproportionate concentration of credit risk.

Stock-based compensation. We account for stock-based compensation in accordance with the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation, which requires stock-based compensation expense to be recognized in net earnings based on the fair value of the award on the date of the grant. We account for forfeitures as they occur. We determine the fair value of stock options issued by using a Monte Carlo valuation model at the grant date, which considers a range of assumptions including the expected term, volatility, dividend yield and risk-free interest rate.

Revenue recognition. We recognize revenue from product sales when products are shipped and risk of loss and title has passed to the customer. Sales taxes collected from customers are excluded from revenues and recorded on a net basis.

27

Shipping and handling costs. We include all of the outbound freight, shipping and handling costs associated with the shipment of products to customers in cost of sales. Any amounts paid by customers to us for shipping and handling are recorded in net sales on the consolidated statements of operations.     

Inventories. Inventories are valued at the lower of weighted average cost (which approximates computation on a first-in, first-out basis) and net realizable value. The valuation of inventory includes the costs for material, labor and manufacturing overhead.

Property, plant and equipment. Property, plant and equipment are recorded at cost or fair market value in the case of the assets acquired through acquisitions, or otherwise at reduced values to the extent there have been asset impairment write-downs. Expenditures for maintenance and repairs are charged directly to expense when incurred, while major improvements are capitalized. Depreciation is computed for financial reporting purposes principally by use of the straight-line method over the following estimated useful lives: machinery and equipment, 3 - 15 years; buildings, 10 - 30 years; and land improvements, 5 - 15 years. Depreciation expense was approximately $11.6 million in 2018, $10.5 million in 2017 and $10.4 million in 2016 and reflected in cost of sales and selling, general and administrative expense (“SG&A expense”) in the consolidated statements of operations. Capitalized software is amortized over the shorter of the estimated useful life or 5 years and reflected in SG&A expense in the consolidated statements of operations. No interest costs were capitalized in 2018, 2017 and 2016.

Goodwill. Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not amortized but is tested annually for impairment and whenever events or circumstances change that would make it more likely than not that an impairment may have occurred. We perform our annual impairment analysis as of the first day of the fourth quarter each year. The evaluation of impairment involves comparing the current estimated fair value of the reporting unit to its recorded value, including goodwill. We perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. It may be necessary to perform a quantitative analysis where a discounted cash flow model is used to determine the current estimated fair value of the reporting unit. Key assumptions used to determine the fair value of the reporting unit as part of our annual testing (and any required interim testing) include: (a) expected cash flows for the five-year period following the testing date; (b) an estimated terminal value using a terminal year growth rate based on the growth prospects of the reporting unit; (c) a discount rate based on our estimated after-tax weighted average cost of capital; and (d) a probability-weighted scenario approach by which varying cash flows are assigned to alternative scenarios based on their likelihood of occurrence. In developing these assumptions, we consider historical and anticipated future results, general economic and market conditions, the impact of planned business and operational strategies and all available information at the time the fair value of the reporting unit is estimated. Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity. Changes in assumptions and estimates may affect the fair value of goodwill and could result in impairment charges in future periods. Based on the results of our impairment analysis, no goodwill impairment losses were recognized in the consolidated statements of operations for 2018. Subsequent to the analysis, there have been no events or circumstances that indicate any potential impairment of goodwill.

Other assets. Other assets consist principally of capitalized financing costs related to our revolving credit facility and the cash surrender value of life insurance policies. Capitalized financing costs are amortized using the straight-line method, which approximates the effective interest method over the term of the related credit agreement, and reflected in interest expense in the consolidated statements of operations.      

Long-lived assets. Long-lived assets include property, plant and equipment and identifiable intangible assets with definite useful lives. Finite-lived intangible assets are amortized over their estimated useful lives. Our intangible assets consist of customer relationships, developed technology and know-how, non-competition agreements and a trade name, and are being amortized on a straight-line basis over their finite useful lives (see Note 6 to the consolidated financial statements). We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. When we determine that the carrying value of such assets may not be recoverable, we measure recoverability based on the undiscounted cash flows expected to be generated by the related asset or asset group. If it is determined that an impairment loss has occurred, the loss is recognized in the period in which it is incurred and is calculated as the difference between the carrying value and the present value of estimated future net cash flows or comparable market values.

There were no impairment losses in 2018 and 2017. During 2016, we recorded $20,000 of impairment charges related to long-lived assets resulting from the consolidation of our PC strand operations with the closure of the Newnan, Georgia facility (see Note 4 to the consolidated financial statements).

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Fair value of financial instruments. The carrying amounts for cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value because of their short maturities.

Income taxes. Income taxes are based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. We assess the need to establish a valuation allowance against deferred tax assets to the extent we no longer believe it is more likely than not that the tax assets will be fully realized.

Earnings per share. Basic earnings per share (“EPS”) are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock and other dilutive equity securities outstanding during the period. Securities that have the effect of increasing EPS are considered to be antidilutive and are not included in the computation of diluted EPS.

(3) Recent Accounting Pronouncements

Current Adoptions

In February 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-02 “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU No. 2018-02 provides for the reclassification of stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. ASU 2018-02 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. We elected to early adopt ASU 2018-02 during our fourth fiscal quarter. The amount of the stranded income tax effect was determined under the specific identification approach and derived from the deferred tax balance associated with our supplemental employee retirement plan. The adoption of the guidance resulted in the transfer of $0.3 million from accumulated other comprehensive loss to retained earnings, with no impact to total shareholders’ equity or net earnings.

In March 2016, the FASB issued 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 quarter. ASU No. 2016-09 requires that excess income tax benefits and deficiencies related to share-based payments be recognized within income tax expense as a discrete event in the period in which they occur, rather than within additional paid-in capital on our consolidated balance sheet on a prospective basis. There was no material impact from this provision on income tax expense in the current year. 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 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 $0.5 million and $1.7 million for 2017 and 2016, respectively.

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 quarter. The adoption of this update did not have a material effect on our consolidated financial statements.

Future Adoptions

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 January 2017, the FASB issued ASU No. 2017-04 “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. ASU No. 2017-04 will become effective for us in the first quarter of fiscal 2021. Early adoption is permitted. We are evaluating the impact that the adoption of this update will have on our consolidated financial statements.

29

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 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,” as subsequently amended, 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.

(4) Restructuring Charges

In 2014 we purchased substantially all of the assets associated with the PC strand business of American Spring Wire Corporation (“ASW Acquisition”). Subsequent to the ASW Acquisition, in 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 2017 and 2016:

	Asset						Severance and						Gain on Sale
(In thousands)	Impairment			Equipment			Other Employee			Facility			of Property
	Charges			Relocation Costs			Separation Costs			Closure Costs			and Equipment			Total
2017
Liability as of October 1, 2016	$	-		$	31		$	239		$	-		$	-		$	270
Restructuring charges		-			164			-			-			-			164
Cash payments		-			(195	)		(239	)		-			-			(434	)
Non-cash charges		-			-			-			-			-			-
Liability as of September 30, 2017	$	-		$	-		$	-		$	-		$	-		$	-
2016
Liability as of October 3, 2015	$	-		$	-		$	735		$	-		$	-		$	735
Restructuring charges (recoveries)		20			186			-			89			(180	)		115
Cash payments		-			(155	)		(496	)		(89	)		-			(740	)
Non-cash charges		(20	)		-			-			-			180			160
Liability as of October 1, 2016	$	-		$	31		$	239		$	-		$	-		$	270

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(5) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs used to measure fair value are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

As of September 29, 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)
Year ended September 29, 2018:
Current assets:
Cash equivalents	$	44,257	$	44,257	$	-
Other assets:
Cash surrender value of life insurance policies		9,769		-		9,769
Total	$	54,026	$	44,257	$	9,769
Year ended 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 September 29, 2018 and September 30, 2017, we had no nonfinancial assets that are required to be measured at fair value on a nonrecurring basis. The carrying amounts of accounts receivable, accounts payable and accrued expenses approximates fair value due to the short-term maturities of these financial instruments.

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(6) Intangible Assets

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

(In thousands)	Weighted- Average Useful Life (Years)		Gross		Accumulated Amortization			Net Book Value
Year ended September 29, 2018:
Customer relationships		16.9	$	9,070	$	(1,598	)	$	7,472
Developed technology and know-how		20.0		1,800		(371	)		1,429
Non-competition agreements		5.0		3,687		(2,994	)		693
Trade name		4.0		140		(31	)		109
			$	14,697	$	(4,994	)	$	9,703
Year ended September 30, 2017:
Customer relationships		20.0	$	6,500	$	(1,018	)	$	5,482
Developed technology and know-how		20.0		1,800		(283	)		1,517
Non-competition agreements		4.8		3,577		(2,663	)		914
			$	11,877	$	(3,964	)	$	7,913

Amortization expense for intangibles was $1.3 million in 2018 and $1.2 million in 2017 and 2016. Amortization expense for the next five years, assuming no change in the estimated useful lives of identified intangible assets, is $1.1 million in 2019, $924,000 in 2020, $809,000 in 2021, $770,000 in 2022 and $705,000 in 2023. We completed the acquisition of a business during 2018, and the effects of the purchase price allocation for this transaction on the accompanying consolidated financial statements are not material.

(7) Long-Term Debt

Revolving Credit Facility. We have a $100.0 million revolving credit facility (the “Credit Facility”) maturing May 13, 2020 that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. 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 September 29, 2018, no borrowings were outstanding on the Credit Facility, $98.2 million of borrowing capacity was available and outstanding letters of credit totaled $1.8 million. As of September 30, 2017, there were no borrowings outstanding on the Credit Facility.

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 September 29, 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 September 29, 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.

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Amortization of capitalized financing costs associated with the Credit Facility was $65,000 in 2018, 2017 and 2016. Accumulated amortization of capitalized financing costs was $4.7 million as of September 29, 2018 and $4.6 million as of September 30, 2017. We expect the amortization of capitalized financing costs to approximate the following amounts for the next five fiscal years:

Fiscal year	In thousands
2019	$	65
2020		41
2021		-
2022		-
2023		-

(8) Stock-Based Compensation

Under our equity incentive plan, employees and directors may be granted stock options, restricted stock, restricted stock units and performance awards. Effective February 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 September 29, 2018, there were 334,000 shares of our common stock available for future grants under the 2015 Plan, which is our only active equity incentive plan.

Stock option awards. Under our equity incentive plan, employees and directors may be granted options to purchase shares of common stock at the fair market value on the date of the grant. Options granted under the plan generally vest over three years and expire ten years from the date of the grant. Compensation expense associated with stock options was $906,000 in 2018, $1.0 million in 2017 and $988,000 in 2016. As of September 29, 2018, there was $262,000 of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of 1.66 years.

The fair value of each option award granted is estimated on the date of grant using a Monte Carlo valuation model. The weighted-average estimated fair values of stock options granted during 2018, 2017 and 2016 were $12.06, $11.08 and $9.92 per share, respectively, based on the following weighted-average assumptions:

	Year Ended
	September 29,			September 30,			October 1,
	2018			2017			2016
Expected term (in years)		4.79			5.14			5.45
Risk-free interest rate		2.71	%		1.98	%		1.30	%
Expected volatility		37.32	%		38.32	%		39.00	%
Expected dividend yield		0.37	%		0.37	%		0.48	%

The assumptions utilized in the Monte Carlo valuation model are evaluated and revised, as necessary, to reflect market conditions and actual historical experience. The expected term for options was based on the results of a Monte Carlo simulation model, using the model’s estimated fair value as an input to the Black-Scholes-Merton model, and then solving for the expected term. The risk-free interest rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was derived using a term structure based on historical volatility and the volatility implied by exchange-traded options on our common stock. The dividend yield was calculated based on our annual dividend as of the option grant date.

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The following table summarizes stock option activity:

				Exercise Price						Contractual		Aggregate
				Per Share						Term -		Intrinsic
	Options							Weighted		Weighted		Value
(Share amounts in thousands)	Outstanding			Range				Average		Average (in years)		(in thousands)
Outstanding at October 3, 2015		923			$7.55	-	$21.96	$	15.14
Granted		99			23.95	-	34.49		28.47
Exercised		(651	)		7.55	-	21.96		13.93			$	8,718
Outstanding at October 1, 2016		371			9.16	-	34.49		20.81
Granted		88			26.75	-	37.06		30.93
Exercised		(67	)		9.16	-	23.95		19.05				1,212
Outstanding at September 30, 2017		392			9.16	-	37.06		23.40
Granted		77			29.69	-	41.85		34.84
Exercised		(196	)		9.16	-	37.06		19.68				3,866
Forfeited		(9	)		23.95	-	37.06		29.88
Outstanding at September 29, 2018		264			10.23	-	41.85		29.25		7.64		1,845
Vested and anticipated to vest in the future at September 29, 2018		262							29.22		7.69		1,974
Exercisable at September 29, 2018		109							24.73		5.98		1,228

Stock option exercises include “net exercises” for which the optionee received shares of common stock equal to the intrinsic value of the options (fair market value of common stock on the date of exercise less exercise price) reduced by any applicable withholding taxes.

Restricted stock units. Restricted stock units (“RSUs”) granted under our equity incentive plan are valued based upon the fair market value on the date of the grant and provide for a dividend equivalent payment which is included in compensation expense. The vesting period for RSUs is generally one year from the date of the grant for RSUs granted to directors and three years from the date of the grant for RSUs granted to employees. RSUs do not have voting rights. RSU grants and compensation expense are as follows:

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Restricted stock unit grants:
Units		35		37		57
Market value	$	1,175	$	1,180	$	1,516
Compensation expense		1,172		1,238		1,451

As of September 29, 2018, there was $451,000 of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 1.74 years.

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The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, October 3, 2015		157		$	18.96
Granted		57			26.57
Forfeited		(2	)		23.95
Released		(67	)		17.95
Balance, October 1, 2016		145			22.35
Granted		37			31.95
Released		(54	)		20.43
Balance, September 30, 2017		128			25.92
Granted		35			33.52
Forfeited		(3	)		29.60
Released		(57	)		22.26
Balance, September 29, 2018		103			30.40

(9) Income Taxes

The components of the provision for income taxes are as follows:

	Year Ended
	September 29,			September 30,			October 1,
(Dollars in thousands)	2018			2017			2016
Current:
Federal	$	8,265		$	8,269		$	17,075
State		906			848			1,434
		9,171			9,117			18,509
Deferred:
Federal		(2,862	)		2,455			396
State		55			48			140
		(2,807	)		2,503			536
Income taxes	$	6,364		$	11,620		$	19,045
Effective income tax rate		14.9	%		34.0	%		33.8	%

The reconciliation between income taxes computed at the federal statutory rate and the provision for income taxes is as follows:

	Year Ended
(Dollars in thousands)	September 29, 2018					September 30, 2017					October 1, 2016
Provision for income taxes at federal statutory rate	$	10,444		24.5	%	$	11,959		35.0	%	$	19,701		35.0	%
Change in federal tax rate - Tax Cuts and Jobs Act		(3,307	)	(7.8	)		-		-			-		-
Qualified production activities deduction		(832	)	(2.0	)		(768	)	(2.2	)		(1,596	)	(2.8	)
Excess tax benefits of stock-based compensation		(634	)	(1.5	)		-		-			-		-
Valuation allowance		(18	)	(0.0	)		(29	)	(0.1	)		(213	)	(0.4	)
State income taxes, net of federal tax benefit		739		1.7			598		1.8			1,093		1.9
Other, net		(28	)	(0.0	)		(140	)	(0.5	)		60		0.1
Provision for income taxes	$	6,364		14.9	%	$	11,620		34.0	%	$	19,045		33.8	%

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The components of deferred tax assets and liabilities are as follows:

	September 29,			September 30,
(In thousands)	2018			2017
Deferred tax assets:
Defined benefit plans	$	2,302		$	3,556
Accrued expenses and asset reserves		1,939			3,069
Stock-based compensation		1,120			1,907
State net operating loss carryforwards and tax credits		233			284
Valuation allowance		(233	)		(251	)
Deferred tax assets		5,361			8,565
Deferred tax liabilities:
Plant and equipment		(9,490	)		(15,093	)
Prepaid insurance and other reserves		(1,211	)		(1,575	)
Deferred tax liabilities		(10,701	)		(16,668	)
Net deferred tax liability	$	(5,340	)	$	(8,103	)

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. Based on these rules, our federal statutory rate was 24.5% for fiscal 2018 and will be 21% for fiscal 2019 and beyond. Based on the provisions of the Act, we remeasured our deferred tax assets and 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 $3.3 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.

As of September 29, 2018, we recorded a deferred tax liability (net of valuation allowance) of $5.3 million in other liabilities on our consolidated balance sheet. As of September 30, 2017, we recorded a deferred tax liability (net of valuation allowance) of $8.1 million in other liabilities on our consolidated balance sheet. We have $6.6 million of state net operating loss carryforwards (“NOLs”) that begin to expire in 2019, but principally expire between 2019 and 2032. We have also recorded deferred tax assets of $16,000 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 September 29, 2018, we recorded a valuation allowance of $233,000 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. The $18,000 decrease in the valuation allowance during 2018 is primarily due to the expiration of state NOLs for which an allowance had been previously recorded.

As of September 29, 2018, we had no material, known tax exposures that required the establishment of contingency reserves for uncertain tax positions.

We classify interest and penalties related to unrecognized tax benefits as part of income tax expense. There were no interest and penalties related to unrecognized tax benefits incurred during 2018, 2017 and 2016.    

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.

(10) Employee Benefit Plans

Retirement plans. We had one defined benefit pension plan, the Insteel Wire Products Company Retirement Income Plan for Hourly Employees, Wilmington, Delaware (the “Delaware Plan”). The Delaware Plan provided benefits for eligible employees based primarily upon years of service and compensation levels. The Delaware Plan was frozen effective September 30, 2008 whereby participants no longer earned additional benefits.

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During 2016, we terminated the Delaware Plan and settled plan liabilities through either lump sum distributions to plan participants or annuity contracts purchased from a third-party insurance company that provided for the payment of vested benefits to those participants that did not elect the lump sum option. We made contributions totaling $1.9 million to the Delaware Plan during 2016.

As a result of the pension termination, unrecognized losses, which previously were recorded in accumulated other comprehensive loss on our consolidated balance sheets, were recognized as expense and a pension plan settlement loss of $2.5 million was recorded on our consolidated statements of operations for the year ended October 1, 2016.

The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized in our consolidated balance sheets for the Delaware Plan is as follows:

	Year Ended
	October 1,
(In thousands)	2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	3,463
Interest cost		147
Actuarial loss		324
Plan settlement		290
Distributions		(4,224	)
Benefit obligation at end of year	$	-
Change in plan assets:
Fair value of plan assets at beginning of year	$	2,201
Actual return on plan assets		104
Employer contributions		1,919
Plan settlement		(4,003	)
Distributions		(221	)
Fair value of plan assets at end of year	$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	-
Net amount recognized	$	-
Amounts recognized on the consolidated balance sheet:
Accrued benefit liability	$	-
Accumulated other comprehensive loss (net of tax)		-
Net amount recognized	$	-
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	-
Net amount recognized	$	-
Other changes in plan assets and benefit obligations recognized in other comprehensive loss:
Net loss	$	685
Amortization of net loss		(76	)
Settlement loss		(2,539	)
Total recognized in other comprehensive income loss	$	(1,930	)

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Net periodic pension cost for the Delaware Plan includes the following components:

	Year Ended
	October 1,
(In thousands)	2016
Interest cost	$	147
Expected return on plan assets		(175	)
Settlement loss recognized		2,539
Amortization of net loss		76
Net periodic pension cost	$	2,587

The assumed discount rate used for the valuation of the Delaware Plan was 3.75% as of October 1, 2016. In establishing the discount rate, we reviewed published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the Delaware Plan.

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 the Participant a supplemental retirement benefit for the 15-year period following the Participant’s retirement equal to 50% of the Participant’s highest average annual base salary for five consecutive years in the 10-year period preceding the Participant’s 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 the Participant’s supplemental retirement benefit will be reduced by 1/360th for each month short of 30 years that the Participant was employed by us.

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The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized for the SERPs in our consolidated balance sheets is as follows:

	Year Ended
	September 29,			September 30,			October 1,
(In thousands)	2018			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	9,389		$	9,159		$	7,821
Service cost		310			344			263
Interest cost		345			338			326
Actuarial loss (gain)		(33	)		(162	)		1,039
Distributions		(262	)		(290	)		(290	)
Benefit obligation at end of year	$	9,749		$	9,389		$	9,159
Change in plan assets:
Actual employer contributions	$	262		$	290		$	290
Actual distributions		(262	)		(290	)		(290	)
Plan assets at fair value at end of year	$	-		$	-		$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	(9,749	)	$	(9,389	)	$	(9,159	)
Net amount recognized	$	(9,749	)	$	(9,389	)	$	(9,159	)
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	1,966		$	2,149		$	2,485
Net amount recognized	$	1,966		$	2,149		$	2,485
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)	$	(33	)	$	(162	)	$	1,039
Amortization of net loss		(150	)		(174	)		(85	)
Total recognized in other comprehensive income (loss)	$	(183	)	$	(336	)	$	954

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

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Service cost	$	310	$	344	$	263
Interest cost		345		338		326
Amortization of net loss		150		174		85
Net periodic pension cost	$	805	$	856	$	674

The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic pension cost during 2019 is $140,000.   

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The assumptions used in the valuation of the SERPs are as follows:

	Measurement Date
	September 29,			September 30,			October 1,
	2018			2017			2016
Assumptions at year-end:
Discount rate		4.00	%		3.75	%		3.75	%
Rate of increase in compensation levels		3.00	%		3.00	%		3.00	%

The assumed discount rate is established as of our fiscal year-end measurement date. In establishing the discount rate, we review published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the SERPs. The SERPs expected rate of increase in compensation levels is based on the anticipated increases in annual compensation.

The projected benefit payments under the SERPs are as follows:

Fiscal year(s)	In thousands
2019	$	325
2020		278
2021		278
2022		553
2023		553
2024 - 2028		4,083

Retirement savings plan. In 1996, we adopted the Retirement Savings Plan of Insteel Industries, Inc. (the “Plan”) to provide retirement benefits and stock ownership for our employees. The Plan is an amendment and restatement of our Employee Stock Ownership Plan. As allowed under Sections 401(a) and 401(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary deductions for eligible employees.

The Plan allows for discretionary contributions to be made by us as determined by the Board of Directors, which are allocated among eligible participants based on their compensation relative to the total compensation of all participants. Employees are permitted to contribute up to 75% of their annual compensation to the Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Code. We match employee contributions up to 100% of the first 1% and 50% of the next 5% of eligible compensation that is contributed by employees. Our contributions to the Plan were $1.1 million in 2018 and 2017 and $1.0 million in 2016.

Voluntary Employee Beneficiary Associations (“VEBA”). We have a VEBA which allows both us and our employees to make contributions to pay for medical costs. Our contributions to the VEBA were $5.1 million in 2018, $5.6 million in 2017 and $5.4 million in 2016. We are primarily self-insured for our employee’s healthcare costs, carrying stop-loss insurance coverage for individual claims in excess of $175,000 per benefit plan year. Our self-insurance liabilities are based on the total estimated costs of claims filed and claims incurred but not reported, less amounts paid against such claims. We review current and historical claims data in developing our estimates.

(11) Commitments and Contingencies

Insurance recoveries. We maintain general liability, business interruption and replacement cost property insurance coverage on our facilities.

In August 2018, a transformer outage and electrical fire occurred at our Dayton, Texas manufacturing facility, which resulted in the temporary curtailment of operations. Alternative power arrangements for the facility were subsequently made, allowing for operations to continue until permanent repairs could be completed. We are in the process of preparing the supporting analysis for the insurance claim related to the business interruption and property damage resulting from the fire. During 2018, we received $183,000 of insurance proceeds related to the claim and recorded a $462,000 receivable for the anticipated insurance proceeds associated with the expenses incurred as of the end of the year. The insurance proceeds attributable to the additional expenses incurred were recorded in cost of sales ($645,000) on the consolidated statements of operations.

40

In August 2017, operations at our manufacturing facility located in Dayton, Texas were adversely affected by hurricane Harvey. We are in the process of finalizing the supporting analysis for insurance claims relating to the business interruption and property damage resulting from the storm. During 2018, we received $439,000 of insurance proceeds related to the claim and recorded a $52,000 receivable for the anticipated insurance proceeds associated with the expenses that were incurred and capital outlays required to replace property and equipment damaged in the storm. The insurance proceeds attributable to the additional expenses incurred were recorded in cost of sales ($439,000), SG&A expense ($26,000) and other income ($26,000) on the consolidated statements of operations.

We believe the coverage provided for under our insurance policies is sufficient to cover the losses incurred from these claims.  

Leases and purchase commitments. We lease a portion of our equipment under operating leases that expire at various dates through 2023. Additionally, we leased our facility in Houston, Texas through September 30, 2017 and subsequently exercised the $4.9 million purchase option under the lease in October 2017. Under most lease agreements, we pay insurance, taxes and maintenance. Rental expense for operating leases was $1.5 million in 2018 and $1.8 million in 2017 and 2016. As of September 29, 2018, minimum rental commitments under all non-cancelable leases with an initial term in excess of one year are payable as follows: 2019, $1.0 million; 2020 $543,000; 2021, $185,000; 2022, $22,000 and 2023 and beyond, $16,000.

As of September 29, 2018, we had $75.1 million in non-cancelable purchase commitments for raw material extending as long as approximately 100 days and $9.6 million of contractual commitments for the purchase of certain equipment that had not been fulfilled and are not reflected in the consolidated financial statements.

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.

Severance and change of control agreements. We have entered into severance agreements with our Chief Executive Officer and Chief Financial Officer that provide them with certain termination benefits in the event their employment with us is terminated without cause. The initial term of each agreement is two years and they automatically renew for successive one year terms unless we or the executive provide notice of termination as specified in the agreement. In the event of termination of the executive’s employment without cause, these agreements provide that they would receive termination benefits equal to one and one-half times their annual base salary in effect on the termination date and the continuation of health and welfare benefits for eighteen months. In addition, all of the executive’s stock options and restricted stock would vest immediately, and outplacement services would be provided.

We have also entered into change in control agreements with key members of management, including our executive officers, which specify the terms of separation in the event that termination of their employment followed a change in control. The initial term of each agreement is two years and they automatically renew for successive one year terms unless we or the executive provide notice of termination as specified in the agreement. The agreements do not provide assurances of continued employment or specify the terms of an executive’s termination should one occur in the absence of a change in control. The compensation payable under the terms of these agreements differs between the Chief Executive Officer and Chief Financial Officer, and the other covered executives. In the event of termination of the Chief Executive Officer or the Chief Financial Officer within two years of a change of control, they would receive severance benefits equal to two times base compensation, two times the average bonus for the prior three years and the continuation of health and welfare benefits for two years. In the event of such a termination of the other key members of management, including our other two executive officers, within two years of a change of control, they would receive severance benefits equal to one times base compensation, one times the average bonus for the prior three years and the continuation of health and welfare benefits for one year. In addition, for any covered executive that is terminated within two years of a change of control, all of their stock options and restricted stock would vest immediately, and outplacement services would be provided.

41

(12) Earnings Per Share

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

	Year Ended
	September 29,		September 30,		October 1,
(In thousands, except per share amounts)	2018		2017		2016
Net earnings	$	36,266	$	22,548	$	37,245
Basic weighted average shares outstanding		19,079		19,011		18,754
Dilutive effect of stock-based compensation		198		206		301
Diluted weighted average shares outstanding		19,277		19,217		19,055
Net earnings per share:
Basic	$	1.90	$	1.19	$	1.99
Diluted		1.88		1.17		1.95

Options and RSUs that were antidilutive and not included in the diluted EPS calculation amounted to 83,000 shares in 2018, 76,000 shares in 2017 and 51,000 shares in 2016.

(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 WWR. Based on the criteria specified in ASC Topic 280, Segment Reporting, we have one reportable segment.

Our net sales and long-lived assets (consisting of net property, plant and equipment, the cash surrender value of life insurance policies, goodwill and intangible assets) by geographic region are as follows:

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Net sales:
United States	$	451,418	$	387,199	$	416,391
Foreign		1,799		1,672		2,156
Total	$	453,217	$	388,871	$	418,547
Long-lived assets:
United States	$	133,913	$	122,574	$	112,130
Foreign		-		-		-
Total	$	133,913	$	122,574	$	112,130

Our net sales by product line are as follows:

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Net sales:
Welded wire reinforcement	$	273,658	$	239,522	$	256,801
Prestressed concrete strand		179,559		149,349		161,746
Total	$	453,217	$	388,871	$	418,547

There were no customers that accounted for 10% or more of our net sales in 2018, 2017 and 2016.

(14) Related Party Transactions

Sales to a company affiliated with one of our directors amounted to $699,000 in 2018, $622,000 in 2017 and $420,000 in 2016.

42

(15) Other Financial Data

Balance sheet information:

	September 29,			September 30,
(In thousands)	2018			2017
Accounts receivable, net:
Accounts receivable	$	51,779		$	40,485
Less allowance for doubtful accounts		(295	)		(201	)
Total	$	51,484		$	40,284
Inventories:
Raw materials	$	61,008		$	51,808
Work in process		4,779			2,637
Finished goods		28,370			27,408
Total	$	94,157		$	81,853
Other current assets:
Prepaid insurance	$	3,845		$	3,796
Income taxes receivable		-			925
Other		2,050			1,228
Total	$	5,895		$	5,949
Other assets:
Cash surrender value of life insurance policies	$	9,769		$	9,026
Capitalized financing costs, net		40			105
Other		104			203
Total	$	9,913		$	9,334
Property, plant and equipment, net:
Land and land improvements	$	14,438		$	12,177
Buildings		54,684			50,373
Machinery and equipment		160,068			153,484
Construction in progress		9,672			5,641
		238,862			221,675
Less accumulated depreciation		(132,714	)		(123,005	)
Total	$	106,148		$	98,670
Accrued expenses:
Salaries, wages and related expenses	$	6,775		$	5,520
Property taxes		1,585			1,384
Customer rebates		1,531			1,015
Sales allowance reserves		804			21
Income taxes		469			-
Workers' compensation		113			116
Other		652			611
Total	$	11,929		$	8,667
Other liabilities:
Deferred compensation	$	10,541		$	9,276
Deferred income taxes		5,340			8,103
Total	$	15,881		$	17,379

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(16) Rights Agreement

On April 26, 1999, our Board of Directors declared a dividend distribution of one right per share of our outstanding common stock as of May 17, 1999 pursuant to a Rights Agreement, dated as of April 27, 1999. The Rights Agreement also provides that one right will attach to each share of our common stock issued after May 17, 1999. On April 21, 2009, effective April 25, 2009, our Board of Directors amended the Rights Agreement to, among other changes, extend the final expiration date and adjust the purchase price payable upon exercise of a right.

The rights are not currently exercisable but trade with our common stock shares and become exercisable on the distribution date. The distribution date will occur upon the earliest of 10 business days following a public announcement that either a person or group of affiliated or associated persons (an “acquiring person”) has acquired, or obtained the right to acquire, beneficial ownership of 20% or more (after adjustment for certain derivative transactions) of the outstanding shares of common stock (the “stock acquisition date”), or of a tender offer or exchange offer that would, if consummated, result in an acquiring person beneficially owning 20% or more of such outstanding shares of common stock, subject to certain limitations.

Each right will entitle the holder, other than the acquiring person or group, to purchase one two-hundredths of a share (a “Unit”) of our Series A Junior Participating Preferred Stock (“Preferred Stock”) at a purchase price of $46 per Unit, subject to adjustment as described in the Rights Agreement (the “purchase price”). At the time specified, each holder of a right will have the right to receive in lieu of Preferred Stock, upon exercise and payment of the purchase price, common stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the purchase price or, at the discretion of the Board, upon exercise and without payment of the purchase price, common stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to the difference between the purchase price and the value of the consideration which a person exercising the right and paying the purchase price would receive. Rights that are or (under specified circumstances) were, beneficially owned by any acquiring person will be null and void. The purchase price payable and the number of Units of Preferred Stock or other securities or property issuable upon exercise of the rights are subject to adjustment from time to time. At any time after any person becomes an acquiring person, we may exchange all or part of the rights for shares of common stock at an exchange ratio of one share per right, as appropriately adjusted to reflect any stock dividend, stock split or similar transaction.

In addition, each rights holder, other than an acquiring person, upon exercise of rights will have the right to receive shares of the common stock of the acquiring corporation having a value equal to two times the purchase price for such holder’s rights if we engage in a merger or other business combination where we are not the surviving entity or where we are the surviving entity and all or part of our common stock is exchanged for the stock or other securities of the other company, or if 50% or more of our assets or earning power is sold or transferred.

The rights will expire on April 24, 2019, and may be redeemed by us at any time prior to the distribution date at a price of $0.005 per right.

(17) Product Warranties

Our products are used in applications which are subject to inherent risks including performance deficiencies, personal injury, property damage, environmental contamination or loss of production. We warrant our products to meet certain specifications, and actual or claimed deficiencies from these specifications may give rise to claims. We do not maintain a reserve for warranties as the historical claims have been immaterial. We maintain product liability insurance coverage to minimize our exposure to such risks.

(18) 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 September 29, 2018, there was $24.8 million remaining available for future share repurchases under this Authorization. There were no share repurchases during 2018, 2017 and 2016.

44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED FINANCIAL STATEMENTS

Board of Directors and Shareholders

Insteel Industries, Inc.:

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Insteel Industries, Inc. (a North Carolina corporation) and subsidiaries (the “Company”) as of September 29, 2018 and September 30, 2017, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended September 29, 2018, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 29, 2018 and September 30, 2017, and the results of its operations and its cash flows for each of the three years in the period ended September 29, 2018, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of September 29, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated October 26, 2018 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Grant Thornton LLP

We have served as the Company’s auditor since fiscal 2002.

Charlotte, North Carolina

October 26, 2018

45

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED SEPTEMBER 29, 2018, SEPTEMBER 30, 2017 AND OCTOBER 1, 2016

ALLOWANCE FOR DOUBTFUL ACCOUNTS

(In thousands)

	Year Ended
	September 29,			September 30,			October 1,
	2018			2017			2016
Balance, beginning of year	$	201		$	291		$	638
Amounts charged to earnings		100			(57	)		(244	)
Write-offs, net of recoveries		(6	)		(33	)		(103	)
Balance, end of year	$	295		$	201		$	291

46

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures 

We have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 29, 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 Commission’s rules and forms. Furthermore, we concluded that our disclosure controls and procedures were effective to ensure that such 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.

Management’s Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes: (1) maintaining records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets; (2) providing reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are made only in accordance with authorizations of management and directors; and (3) providing reasonable assurance that unauthorized acquisition, use or disposition of assets that could have a material effect on financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting can only provide reasonable assurance that a misstatement of financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control – Integrated Framework. Based on this assessment, our management concluded that our internal control over financial reporting was effective as of September 29, 2018. During the quarter ended September 29, 2018, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our independent registered public accounting firm has issued an audit report on the effectiveness of our internal control over financial reporting as of September 29, 2018, which appears below.

47

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Shareholders
Insteel Industries, Inc.:

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Insteel Industries, Inc. (a North Carolina corporation) and subsidiaries (the “Company”) as of September 29, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 29, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended September 29, 2018, and our report dated October 26, 2018 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Grant Thornton LLP

Charlotte, North Carolina

October 26, 2018

48

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information called for by this item and not presented herein appears under the captions “Item Number One: Election of Directors”, “Security Ownership of Directors and Executive Officers – Section 16(a) Beneficial Reporting Compliance” and “Corporate Governance Guidelines and Board Matters” in our Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein by reference. Information on executive officers appears under the caption “Executive Officers of the Company” in Part I of this report.

We have adopted a Code of Business Conduct that applies to all directors, officers and employees, which is available on our website at https://insteelgcs.gcs-web.com/corporate-governance/governance-documents. To the extent permissible under applicable law (the rules of the SEC or Nasdaq listing standards), we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting on our website any amendment or waiver to a provision of our Code of Business Conduct that requires disclosure under applicable law (the rules of the SEC or Nasdaq listing standards). Our website does not constitute part of this Annual Report on Form 10-K.

Item 11. Executive Compensation.

The information called for by this item appears under the captions “Executive Compensation”, “Compensation Committee Interlocks and Insider Participation” and “Director Compensation” in our Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information called for by this item appears under the captions “Security Ownership of Certain Beneficial Owners”, “Security Ownership of Directors and Executive Officers” and “Equity Compensation Plan Information” in our Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information called for by this item appears under the captions “Certain Relationships and Related Person Transactions” and “Corporate Governance Guidelines and Board Matters” in our Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

The information called for by this item appears under the caption “Item Number Three: Ratification of the Appointment of Grant Thornton LLP” in our Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements

The financial statements as set forth under Item 8 are filed as part of this report.

(a)(2) Financial Statement Schedules

Supplemental Schedule II - Valuation and Qualifying Accounts appears on page 46 of this report.

All other schedules have been omitted because they are either not required or not applicable.

49

(a)(3) Exhibits

The list of exhibits filed as part of this annual report is set forth on the Exhibit Index immediately preceding the signatures to this annual report and is incorporated herein by reference.

(b) Exhibits

See Exhibit Index on pages 51 and 52.

(c) Financial Statement Schedules

See Item 15(a)(2) above.

Item 16. Form 10-K Summary

None.

50

EXHIBIT INDEX

Exhibit Number	Description
2.1	Asset Purchase Agreement between Insteel Wire Products Company and American Spring Wire Corporation dated as of August 9, 2014 (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K filed on August 11, 2014).
3.1	Restated Articles of Incorporation for the Company (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 filed on May 2, 1985).
3.2	Articles of Amendment to the Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated May 3, 1988).
3.3	Articles of Amendment to the Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 1999 filed on May 14, 1999).
3.4	Articles of Amendment to the Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2010 filed on April 26, 2010).
3.5	Bylaws of the Company (as last amended December 19, 2016) (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed on January 19, 2017).
4.1	Rights Agreement dated April 27, 1999 by and between the Company and First Union National Bank, as Rights Agent (incorporated by reference to Exhibit 99.1 of the Company’s Registration Statement on Form 8-A filed on May 7, 1999).
4.2	Amendment No. 1 to the Rights Agreement dated as of April 25, 2009, between the Company and American Stock Transfer & Trust Company, LLC (as Successor Rights Agent to First Union National Bank) (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on April 27, 2009).
10.1	Second Amended and Restated Credit Agreement dated as of June 2, 2010, among Insteel Wire Products Company, as Borrower; Insteel Industries, Inc., as a Credit Party; Intercontinental Metals Corporation, as a Credit Party; and General Electric Capital Corporation, as Agent and Lender (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q filed on April 26, 2011).
10.2	First Amendment to Second Amended and Restated Credit Agreement dated as of February 6, 2012, among Insteel Wire Products Company, as Borrower; Insteel Industries, Inc. as a Credit Party; Intercontinental Metals Corporation, as a Credit Party; and General Electric Capital Corporation, as Agent and Lender (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 6, 2012).
10.3	Second Amendment to Second Amended and Restated Credit Agreement dated as of May 13, 2015, among Insteel Wire Products Company, as Borrower; Insteel Industries, Inc., as a Credit Party; Intercontinental Metals Corporation, as a Credit Party; and General Electric Capital Corporation, as Agent and Lender (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May 14, 2015).
10.4*	Form of Amended and Restated Change in Control Severance Agreements between the Company and each of H.O. Woltz III and Michael C. Gazmarian, respectively, each dated November 14, 2006; each agreement is substantially identical to the form in all material respects (incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 8-K filed on November 16, 2006).
10.5*	Form of Amended and Restated Severance Agreements with H.O. Woltz III and Michael C. Gazmarian dated November 14, 2006 (each agreement is substantially identical to the form in all material respects) (incorporated by reference to Exhibit 99.6 of the Company's Current Report on Form 8-K filed on November 16, 2006).
10.6*	Change in Control Severance Agreement between the Company and James F. Petelle dated November 14, 2006 (incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K filed on November 16, 2006).
10.7*	Amended and Restated Retirement Security Agreement by and between the Company and H.O. Woltz III dated September 19, 2007 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on September 21, 2007).
10.8*	Form of Retirement Security Agreement between the Company and each of Michael C. Gazmarian, James F. Petelle and Richard T. Wagner, respectively, dated September 19, 2007; each agreement is substantially identical to the form in all material respects (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed on September 21, 2007).

51

EXHIBIT INDEX

Exhibit Number	Description
10.9*	Letter of Employment between the Company and James F. Petelle, dated August 23, 2006 (incorporated by reference to Exhibit 99.7 of the Company’s Current Report on Form 8-K filed on November 16, 2006).
10.10*	Relocation Proposal between the Company and James F. Petelle, dated August 23, 2006 (incorporated by reference to Exhibit 10.20.1 of the Company's Annual Report on Form 10-K for the year ended October 3, 2009 filed on November 9, 2009).
10.11*	Addendum to Relocation Proposal between the Company and James F. Petelle, dated September 18, 2009 (incorporated by reference to Exhibit 10.20.2 of the Company's Annual Report on Form 10-K for the year ended October 3, 2009 filed on November 9, 2009).
10.12*	Amended and Restated Change in Control Severance Agreement between the Company and Richard T. Wagner dated November 14, 2006 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on February 15, 2007).
10.13*	2005 Equity Incentive Plan of Insteel Industries, Inc., as amended on November 8, 2011 (incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended October 1, 2011 filed on November 10, 2011).
10.14*	Summary of amendments to the Insteel Industries, Inc. Director Compensation Plan (incorporated by reference to exhibit 10.23 of the Company's Annual Report on Form 10-K for the fiscal year ended September 27, 2008 filed on November 18, 2008).
10.15*	Form of Notice of Grant of Restricted Stock Units and Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on January 23, 2009).
10.16*	Insteel Industries, Inc. Return on Capital Incentive Compensation Plan (as amended and restated effective August 12, 2008) (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on February 13, 2009).
10.17*	Form of Amendment to 2005 Equity Incentive Plan of Insteel Industries, Inc. dated August 20, 2013 (incorporated by reference to Exhibit 10.20 of the Company's Annual Report on Form 10-K filed on October 29, 2013).
10.18*	2015 Equity Incentive Plan of Insteel Industries, Inc. (incorporated by reference to Exhibit 99 filed with the Company’s Registration Statement on Form S-8, filed with the SEC on February 17, 2015 (File No. 333-202128)).
21.1	List of Subsidiaries of Insteel Industries, Inc. at September 29, 2018.
23.1	Consent of Independent Registered Public Accounting Firm.
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 our Annual Report on Form 10-K for the fiscal year ended September 29, 2018, filed on October 26, 2018, formatted in XBRL (eXtensible Business Reporting Language) includes: (i) the Consolidated Statements of Operations for the years ended September 29, 2018, September 30, 2017 and October 1, 2016, (ii) the Consolidated Statements of Comprehensive Income for the years ended September 29, 2018, September 30, 2017 and October 1, 2016, (iii) the Consolidated Balance Sheets as of September 29, 2018 and September 30, 2017, (iv) the Consolidated Statements of Cash Flows for the years ended September 29, 2018, September 30, 2017 and October 1, 2016, (v) the Consolidated Statements of Shareholders’ Equity as of September 29, 2018, September 30, 2017 and October 1, 2016 and (vi) the Notes to Consolidated Financial Statements.
*	Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
	Our SEC file number reference for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 1-09929.

52

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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: October 26, 2018	By:	/s/ Michael C. Gazmarian
		Michael C. Gazmarian
		Vice President, Chief Financial Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on October 26, 2018 below by the following persons on behalf of the registrant and in the capacities indicated:

Name and Signature	Position(s)
/s/ H. O. WOLTZ III      H. O. WOLTZ III	President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
/s/ MICHAEL C. GAZMARIAN      MICHAEL C. GAZMARIAN	Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
/s/ SCOT R. JAFROODI      SCOT R. JAFROODI	Chief Accounting Officer and Corporate Controller (Principal Accounting Officer)
/s/ ABNEY S. BOXLEY III      ABNEY S. BOXLEY III	Director
/s/ CHARLES B. NEWSOME      CHARLES B. NEWSOME	Director
/s/ W. ALLEN ROGERS II      W. ALLEN ROGERS II	Director
/s/ JON M. RUTH       JON M. RUTH	Director
/s/ JOSEPH A. RUTKOWSKI       JOSEPH A. RUTKOWSKI	Director
/s/ G. KENNEDY THOMPSON       G. KENNEDY THOMPSON	Director

53

EX-21.1

Exhibit 21.1

List of Subsidiaries of Insteel Industries, Inc.

The following is a list of our subsidiaries as of September 29, 2018, each of which is wholly-owned:

Name	State or Other Jurisdiction of Incorporation
Insteel Wire Products Company	North Carolina
Intercontinental Metals Corporation	North Carolina

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We have issued our reports dated October 26, 2018 with respect to the consolidated financial statements, schedule, and internal control over financial reporting included in the Annual Report of Insteel Industries, Inc. on Form 10-K for the year ended September 29, 2018. We consent to the incorporation by reference of said reports in the Registration Statements of Insteel Industries, Inc. on Forms S-8 (File No. 333-48011, File No. 333-30934, File No. 333-123325, File No. 333-179670 and File No. 333-202128).

/s/ Grant Thornton LLP

Charlotte, North Carolina

October 26, 2018

EX-31.1

Exhibit 31.1

Certification

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

1. I have reviewed this Annual Report on Form 10-K for the year ended September 29, 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: October 26, 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 Annual Report on Form 10-K for the year ended September 29, 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: October 26, 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 Annual Report on Form 10-K of Insteel Industries, Inc. (the “Company”) for the period ended September 29, 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

      October 26, 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 Annual Report on Form 10-K of Insteel Industries, Inc. (the “Company”) for the period ended September 29, 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 

      October 26, 2018

XML

Document And Entity Information - USD ($)	12 Months Ended
	Sep. 29, 2018	Oct. 25, 2018	Mar. 31, 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 Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding (in shares)		19,222,479
Entity Public Float			$ 437,197,613
Document Type	10-K
Document Period End Date	Sep. 29, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Shell Company	false

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Net sales	$ 453,217	$ 388,871	$ 418,547
Cost of sales	382,410	329,090	333,359
Gross profit	70,807	59,781	85,188
Selling, general and administrative expense	28,304	25,508	26,069
Pension plan settlement loss			2,539
Restructuring charges, net		164	115
Other expense, net	274	53	183
Interest expense	114	136	158
Interest income	(515)	(248)	(166)
Earnings before income taxes	42,630	34,168	56,290
Income taxes	6,364	11,620	19,045
Net earnings	$ 36,266	$ 22,548	$ 37,245
Net earnings per share:
Basic (in dollars per share)	$ 1.90	$ 1.19	$ 1.99
Diluted (in dollars per share)	1.88	1.17	1.95
Cash dividends declared (in dollars per share)	$ 1.12	$ 1.37	$ 1.12
Weighted average shares outstanding:
Basic (in shares)	19,079	19,011	18,754
Diluted (in shares)	19,277	19,217	19,055

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands		12 Months Ended
		Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Net earnings		$ 36,266	$ 22,548	$ 37,245
Pension plan settlement, net of income taxes of ($733)				1,197
Adjustment to defined benefit plan liability, net of income taxes of ($44), ($127) and $363		139	208	(592)
Other comprehensive income	[1]	139	208	605
Comprehensive income		$ 36,405	$ 22,756	$ 37,850

[1] Activity within accumulated other comprehensive income (loss) is reported net of related income taxes: 2016 $363, 2017 ($127) and 2018 ($44).

XML

Consolidated Statements of Comprehensive Income (Parentheticals) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Pension plan settlement, income taxes			$ (733)
Adjustment to defined benefit plan liabilitiy, income taxes	$ (44)	$ (127)	$ 363

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 29, 2018	Sep. 30, 2017
Assets:
Cash and cash equivalents	$ 43,941	$ 32,105
Accounts receivable, net	51,484	40,284
Inventories	94,157	81,853
Other current assets	5,895	5,949
Total current assets	195,477	160,191
Property, plant and equipment, net	106,148	98,670
Intangibles, net	9,703	7,913
Goodwill	8,293	6,965
Other assets	9,913	9,334
Total assets	329,534	283,073
Liabilities and shareholders’ equity:
Accounts payable	60,059	33,651
Accrued expenses	11,929	8,667
Total current liabilities	71,988	42,318
Other liabilities	15,881	17,379
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value authorized shares: 1,000 none issued
Common stock, $1 stated value authorized shares: 50,000 issued and outstanding shares: 2018, 19,223; 2017, 19,041	19,223	19,041
Additional paid-in capital	72,852	69,817
Retained earnings	151,084	135,851
Accumulated other comprehensive loss	(1,494)	(1,333)
Total shareholders’ equity	241,665	223,376
Total liabilities and shareholders’ equity	$ 329,534	$ 283,073

XML

Consolidated Balance Sheets (Parentheticals) - $ / shares shares in Thousands	Sep. 29, 2018	Sep. 30, 2017
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	1,000	1,000
Preferred stock, shares issued (in shares)	0	0
Common stock, stated value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	50,000	50,000
Common stock, shares issued (in shares)	19,223	19,041
Common stock, shares outstanding (in shares)	19,223	19,041

XML

Consolidated Statements of Shareholders' Equity - 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 Oct. 03, 2015		18,466
Balance at Oct. 03, 2015		$ 18,466	$ 60,967	$ 122,928	$ (2,146)	$ 200,215
Net earnings				37,245		37,245
Other comprehensive income(1)	[1]				605	605
Stock options exercised (in shares)		463
Stock options exercised		$ 463	4,602			5,065
Vesting of restricted stock units (in shares)		47
Vesting of restricted stock units		$ 47	(47)
Compensation expense associated with stock-based plans			2,439			2,439
Excess tax benefits from stock-based compensation			1,717			1,717
Restricted stock units and stock options surrendered for withholding taxes payable			(1,861)			(1,861)
Cash dividends declared				(20,859)		(20,859)
Balance (in shares) at Oct. 01, 2016		18,976
Balance at Oct. 01, 2016		$ 18,976	67,817	139,314	(1,541)	224,566
Net earnings				22,548		22,548
Other comprehensive income(1)	[1]				208	208
Stock options exercised (in shares)		26
Stock options exercised		$ 26	81			107
Vesting of restricted stock units (in shares)		39
Vesting of restricted stock units		$ 39	(39)
Compensation expense associated with stock-based plans			2,245			2,245
Excess tax benefits from stock-based compensation			537			537
Restricted stock units and stock options surrendered for withholding taxes payable			(824)			(824)
Cash dividends declared				(26,011)		(26,011)
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				36,266		36,266
Other comprehensive income(1)	[1]				139	139
Stock options exercised (in shares)		143
Stock options exercised		$ 143	1,938			2,081
Vesting of restricted stock units (in shares)		39
Vesting of restricted stock units		$ 39	(39)
Compensation expense associated with stock-based plans			2,078			2,078
Restricted stock units and stock options surrendered for withholding taxes payable			(942)			(942)
Cash dividends declared				(21,333)		(21,333)
Adoption of ASU 2018-02 (Note 3)				300	(300)
Balance (in shares) at Sep. 29, 2018		19,223
Balance at Sep. 29, 2018		$ 19,223	$ 72,852	$ 151,084	$ (1,494)	$ 241,665

[1] Activity within accumulated other comprehensive income (loss) is reported net of related income taxes: 2016 $363, 2017 ($127) and 2018 ($44).

XML

Consolidated Statements of Shareholders' Equity (Parentheticals) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Other comprehensive loss, related income taxes	$ (44)	$ (127)	$ 363

XML

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Cash Flows From Operating Activities:
Net earnings	$ 36,266,000	$ 22,548,000	$ 37,245,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	12,818,000	11,649,000	11,544,000
Amortization of capitalized financing costs	65,000	65,000	65,000
Stock-based compensation expense	2,078,000	2,245,000	2,439,000
Deferred income taxes	(2,807,000)	2,503,000	536,000
Pension plan settlement loss, net of cash contributed			620,000
Asset impairment charges	0	0	20,000
Loss on sale and disposition of property, plant and equipment	381,000	64,000	61,000
Increase in cash surrender value of life insurance policies over premiums paid	(553,000)	(812,000)	(480,000)
Net changes in assets and liabilities:
Accounts receivable, net	(11,200,000)	7,105,000	(607,000)
Inventories	(12,304,000)	(10,667,000)	(5,177,000)
Accounts payable and accrued expenses	28,234,000	(11,930,000)	9,009,000
Other changes	991,000	(1,930,000)	978,000
Total adjustments	17,703,000	(1,708,000)	19,008,000
Net cash provided by operating activities	53,969,000	20,840,000	56,253,000
Cash Flows From Investing Activities:
Capital expenditures	(18,449,000)	(20,575,000)	(12,977,000)
Proceeds from surrender of life insurance policies	165,000	100,000	140,000
Increase in cash surrender value of life insurance policies	(355,000)	(405,000)	(375,000)
Acquisition of business	(3,300,000)
Proceeds from sale of assets held for sale			180,000
Proceeds from sale of property, plant and equipment			60,000
Net cash used for investing activities	(21,939,000)	(20,880,000)	(12,972,000)
Cash Flows From Financing Activities:
Proceeds from long-term debt	372,000	404,000	328,000
Principal payments on long-term debt	(372,000)	(404,000)	(328,000)
Cash dividends paid	(21,333,000)	(26,011,000)	(20,859,000)
Cash received from exercise of stock options	2,081,000	107,000	5,065,000
Payment of employee tax withholdings related to net share transactions	(942,000)	(824,000)	(1,861,000)
Financing costs			(11,000)
Net cash used for financing activities	(20,194,000)	(26,728,000)	(17,666,000)
Net increase (decrease) in cash and cash equivalents	11,836,000	(26,768,000)	25,615,000
Cash and cash equivalents at beginning of period	32,105,000	58,873,000	33,258,000
Cash and cash equivalents at end of period	43,941,000	32,105,000	58,873,000
Supplemental Disclosures of Cash Flow Information:
Income taxes, net	7,777,000	9,300,000	19,184,000
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable	967,000	465,000	1,746,000
Restricted stock units and stock options surrendered for withholding taxes payable	$ 942,000	$ 824,000	$ 1,861,000

XML

Note 1 - Description of Business

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

(

1

) Description of Business

Insteel Industries, Inc. (“we,” “us,” “our,” “Insteel” or “the Company”) is the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications. Insteel is the parent holding company for

two

wholly-owned subsidiaries, Insteel Wire Products Company (“IWP”), an operating subsidiary, and Intercontinental Metals Corporation, an inactive subsidiary. We manufacture and market prestressed concrete strand (“PC strand”) and welded wire reinforcement (“WWR”), including engineered structural mesh, concrete pipe reinforcement and standard welded wire reinforcement. Our products are primarily sold to manufacturers of concrete products and, to a lesser extent, distributors, rebar fabricators and contractors. We sell our products nationwide across the U.S. and, to a much lesser extent, into Canada, Mexico, and Central and South America.

We have evaluated all subsequent events that occurred after the balance sheet date throughthe time of filing this Annual Report on Form

10

-K and concluded there were

no

events or transactions during this period that required additional recognition or disclosure in our financial statements.

XML

Note 2 - Summary of Significant Accounting Policies

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

(

2

) Summary of Significant Accounting Policies

Fiscal year.

Our fiscal year is the

52

or

53

weeks ending on the Saturday closest to

September 30.

Fiscal years

2018,

2017

and

2016

were

52

-week periods. All references to years relate to fiscal years rather than calendar years.     

Principles of consolidation

.

The consolidated financial statements include the accounts of Insteel and our subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of estimates.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S.” and such accounting principles, “GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There is

no

assurance that actual results will

not

differ from these estimates.

Cash equivalents

.

We consider all highly liquid investments purchased with original maturities of

three

months or less to be cash equivalents.

Concentration of

c

redit

r

isk

.

Financial instruments that subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Our cash is principally concentrated at

one

financial institution, which at times exceeds federally insured limits. We are exposed to credit risk in the event of default by institutions in which our cash and cash equivalents are held and by customers to the extent of the amounts recorded on the balance sheet. We invest excess cash primarily in money market funds, which are highly liquid securities.

The majority of our accounts receivable are due from customers that are located in the U.S. and are generally

not

secured by collateral depending upon the creditworthiness of the account. We provide an allowance for doubtful accounts based upon our assessment of the credit risk of specific customers, historical trends and other information. We write off accounts receivable when they become uncollectible. There is

no

disproportionate concentration of credit risk.

Stock-based compensation.

We account for stock-based compensation in accordance with the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic

718,

Compensation – Stock Compensation, which requires stock-based compensation expense to be recognized in net earnings based on the fair value of the award on the date of the grant. We account for forfeitures as they occur. We determine the fair value of stock options issued by using a Monte Carlo valuation model at the grant date, which considers a range of assumptions including the expected term, volatility, dividend yield and risk-free interest rate.

Revenue recognition

.

We recognize revenue from product sales when products are shipped and risk of loss and title has passed to the customer. Sales taxes collected from customers are excluded from revenues and recorded on a net basis.

Shipping and handling costs

.

We include all of the outbound freight, shipping and handling costs associated with the shipment of products to customers in cost of sales. Any amounts paid by customers to us for shipping and handling are recorded in net sales on the consolidated statements of operations.

Inventories

.

Inventories are valued at the lower of weighted average cost (which approximates computation on a

first

-in,

first

-out basis) and net realizable value. The valuation of inventory includes the costs for material, labor and manufacturing overhead.

Property, plant and equipment.

Property, plant and equipment are recorded at cost or fair market value in the case of the assets acquired through acquisitions, or otherwise at reduced values to the extent there have been asset impairment write-downs. Expenditures for maintenance and repairs are charged directly to expense when incurred, while major improvements are capitalized. Depreciation is computed for financial reporting purposes principally by use of the straight-line method over the following estimated useful lives: machinery and equipment,

3

-

15

years; buildings,

10

-

30

years; and land improvements,

5

-

15

years. Depreciation expense was approximately

$11.6

million in

2018,

$10.5

million in

2017

and

$10.4

million in

2016

and reflected in cost of sales and selling, general and administrative expense (“SG&A expense”) in the consolidated statements of operations. Capitalized software is amortized over the shorter of the estimated useful life or

5

years and reflected in SG&A expense in the consolidated statements of operations.

No

interest costs were capitalized in

2018,

2017

and

2016.

Goodwill

.

Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is

not

amortized but is tested annually for impairment and whenever events or circumstances change that would make it more likely than

not

that an impairment

may

have occurred. We perform our annual impairment analysis as of the

first

day of the

fourth

quarter each year. The evaluation of impairment involves comparing the current estimated fair value of the reporting unit to its recorded value, including goodwill. We perform a qualitative assessment to determine whether it is more likely than

not

that the fair value of the reporting unit is less than its carrying amount. It

may

be necessary to perform a quantitative analysis where a discounted cash flow model is used to determine the current estimated fair value of the reporting unit. Key assumptions used to determine the fair value of the reporting unit as part of our annual testing (and any required interim testing) include: (a) expected cash flows for the

five

-year period following the testing date; (b) an estimated terminal value using a terminal year growth rate based on the growth prospects of the reporting unit; (c) a discount rate based on our estimated after-tax weighted average cost of capital; and (d) a probability-weighted scenario approach by which varying cash flows are assigned to alternative scenarios based on their likelihood of occurrence. In developing these assumptions, we consider historical and anticipated future results, general economic and market conditions, the impact of planned business and operational strategies and all available information at the time the fair value of the reporting unit is estimated. Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity. Changes in assumptions and estimates

may

affect the fair value of goodwill and could result in impairment charges in future periods. Based on the results of our impairment analysis,

no

goodwill impairment losses were recognized in the consolidated statements of operations for

2018.

Subsequent to the analysis, there have been

no

events or circumstances that indicate any potential impairment of goodwill.

Other assets.

Other assets consist principally of capitalized financing costs related to our revolving credit facility and the cash surrender value of life insurance policies. Capitalized financing costs are amortized using the straight-line method, which approximates the effective interest method over the term of the related credit agreement, and reflected in interest expense in the consolidated statements of operations.

Long-lived assets

.

Long-lived assets include property, plant and equipment and identifiable intangible assets with definite useful lives. Finite-lived intangible assets are amortized over their estimated useful lives. Our intangible assets consist of customer relationships, developed technology and know-how, non-competition agreements and a trade name, and are being amortized on a straight-line basis over their finite useful lives (see Note

6

to the consolidated financial statements). We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value

may

not

be fully recoverable. When we determine that the carrying value of such assets

may

not

be recoverable, we measure recoverability based on the undiscounted cash flows expected to be generated by the related asset or asset group. If it is determined that an impairment loss has occurred, the loss is recognized in the period in which it is incurred and is calculated as the difference between the carrying value and the present value of estimated future net cash flows or comparable market values.

There were

no

impairment losses in

2018

and

2017.

During

2016,

we recorded

$20,000

of impairment charges related to long-lived assets resulting from the consolidation of our PC strand operations with the closure of the Newnan, Georgia facility (see Note

4

to the consolidated financial statements).

Fair value of financial instruments

.

The carrying amounts for cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value because of their short maturities.

Income taxes.

Income taxes are based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. We assess the need to establish a valuation allowance against deferred tax assets to the extent we

no

longer believe it is more likely than

not

that the tax assets will be fully realized.

Earnings per share.

Basic earnings per share (“EPS”) are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock and other dilutive equity securities outstanding during the period. Securities that have the effect of increasing EPS are considered to be antidilutive and are

not

included in the computation of diluted EPS.

XML

Note 3 - Recent Accounting Pronouncements

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

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

(

3

)

Recent Accounting Pronouncements

Current Adoptions

In

February 2018,

the FASB issued Accounting Standards Update (“ASU”)

No.

2018

-

02

“Income Statement - Reporting Comprehensive Income (Topic

220

): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU

No.

2018

-

02

provides for the reclassification of stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. ASU

2018

-

02

is effective for interim and annual periods beginning after

December 15, 2018,

with early adoption permitted. We elected to early adopt ASU

2018

-

02

during our

fourth

fiscal quarter. The amount of the stranded income tax effect was determined under the specific identification approach and derived from the deferred tax balance associated with our supplemental employee retirement plan. The adoption of the guidance resulted in the transfer of

$0.3

million from accumulated other comprehensive loss to retained earnings, with

no

impact to total shareholders’ equity or net earnings.

In

March 2016,

the FASB issued 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

quarter. ASU

No.

2016

-

09

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

no

material impact from this provision on income tax expense in the current year. 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 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 

$0.5

million and

$1.7

million for

2017

and

2016,

respectively.

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

quarter. The adoption of this update did

not

have a material effect on our consolidated financial statements.

Future Adoptions

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

January 2017,

the FASB issued ASU

No.

2017

-

04

“Intangibles—Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment,” which simplifies the accounting for goodwill impairments by eliminating step

2

from the goodwill impairment test. ASU

No.

2017

-

04

will become effective for us in the

first

quarter of fiscal

2021.

Early adoption is permitted. 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 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,” as subsequently amended, 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 4 - Restructuring Charges

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

(

4

)

Restructuring Charges

In

2014

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

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

2017

and

2016:

	Asset						Severance and						Gain on Sale
(In thousands)	Impairment			Equipment			Other Employee			Facility			of Property
	Charges			Relocation Costs			Separation Costs			Closure Costs			and Equipment			Total
2017
Liability as of October 1, 2016	$	-		$	31		$	239		$	-		$	-		$	270
Restructuring charges		-			164			-			-			-			164
Cash payments		-			(195	)		(239	)		-			-			(434	)
Non-cash charges		-			-			-			-			-			-
Liability as of September 30, 2017	$	-		$	-		$	-		$	-		$	-		$	-
2016
Liability as of October 3, 2015	$	-		$	-		$	735		$	-		$	-		$	735
Restructuring charges (recoveries)		20			186			-			89			(180	)		115
Cash payments		-			(155	)		(496	)		(89	)		-			(740	)
Non-cash charges		(20	)		-			-			-			180			160
Liability as of October 1, 2016	$	-		$	31		$	239		$	-		$	-		$	270

XML

Note 5 - Fair Value Measurements

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(

5

)

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a

three

-level fair value hierarchy that encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The

three

levels of inputs used to measure fair value are as follows:

Level

1

- Quoted prices in active markets for identical assets or liabilities.

Level

2

- Observable inputs other than quoted prices included in Level

1,

such as quoted prices for similar assets and liabilities in active markets.

Level

3

- Unobservable inputs that are supported by little or

no

market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

As of

September 29, 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)
Year ended September 29, 2018:
Current assets:
Cash equivalents	$	44,257	$	44,257	$	-
Other assets:
Cash surrender value of life insurance policies		9,769		-		9,769
Total	$	54,026	$	44,257	$	9,769
Year ended 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

September 29, 2018

and

September 30, 2017,

we had

no

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

XML

Note 6 - Intangible Assets

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

(

6

)

Intangible Assets

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

(In thousands)	Weighted- Average Useful Life (Years)		Gross		Accumulated Amortization			Net Book Value
Year ended September 29, 2018:
Customer relationships		16.9	$	9,070	$	(1,598	)	$	7,472
Developed technology and know-how		20.0		1,800		(371	)		1,429
Non-competition agreements		5.0		3,687		(2,994	)		693
Trade name		4.0		140		(31	)		109
			$	14,697	$	(4,994	)	$	9,703
Year ended September 30, 2017:
Customer relationships		20.0	$	6,500	$	(1,018	)	$	5,482
Developed technology and know-how		20.0		1,800		(283	)		1,517
Non-competition agreements		4.8		3,577		(2,663	)		914
			$	11,877	$	(3,964	)	$	7,913

Amortization expense for intangibles was

$1.3

million in

2018

and

$1.2

million in

2017

and

2016.

Amortization expense for the next

five

years, assuming

no

change in the estimated useful lives of identified intangible assets, is

$1.1

million in

2019,

$924,000

in

2020,

$809,000

in

2021,

$770,000

in

2022

and

$705,000

in

2023.

We completed the acquisition of a business during

2018,

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

not

material.

XML

Note 7 - Long-term Debt

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Long-term Debt [Text Block]

(

7

)

Long-Term Debt

Revolving Credit Facility.

We have a

$100.0

million revolving credit facility (the “Credit Facility”) maturing

May 13, 2020

that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. 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

September 29, 2018,

no

borrowings were outstanding on the Credit Facility,

$98.2

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

$1.8

million. As of

September 30, 2017,

there were

no

borrowings outstanding on the Credit Facility.

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

September 29, 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

September 29, 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

$65,000

in

2018,

2017

and

2016.

Accumulated amortization of capitalized financing costs was

$4.7

million as of

September 29, 2018

and

$4.6

million as of

September 30, 2017.

We expect the amortization of capitalized financing costs to approximate the following amounts for the next

five

fiscal years:

Fiscal year	In thousands
2019	$	65
2020		41
2021		-
2022		-
2023		-

XML

Note 8 - Stock-based Compensation

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

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

(

8

) Stock-Based Compensation

Under our equity incentive plan, employees and directors

may

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

February 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

September 29, 2018,

there were

334,000

shares of our common stock available for future grants under the

2015

Plan, which is our only active equity incentive plan.

Stock option awards

.

Under our equity incentive plan, employees and directors

may

be granted options to purchase shares of common stock at the fair market value on the date of the grant. Options granted under the plan generally vest over

three

years and expire

ten

years from the date of the grant. Compensation expense associated with stock options was

$906,000

in

2018,

$1.0

million in

2017

and

$988,000

in

2016.

As of

September 29, 2018,

there was

$262,000

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

1.66

years.

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

2018,

2017

and

2016

were

$12.06,

$11.08

and

$9.92

per share, respectively, based on the following weighted-average assumptions:

	Year Ended
	Septem ber 29 ,			Septem ber 30 ,			Octo ber 1 ,
	201 8			201 7			201 6
Expected term (in years)		4.79			5.14			5.45
Risk-free interest rate		2.71	%		1.98	%		1.30	%
Expected volatility		37.32	%		38.32	%		39.00	%
Expected dividend yield		0.37	%		0.37	%		0.48	%

The assumptions utilized in the Monte Carlo valuation model are evaluated and revised, as necessary, to reflect market conditions and actual historical experience. The expected term for options was based on the results of a Monte Carlo simulation model, using the model’s estimated fair value as an input to the Black-Scholes-Merton model, and then solving for the expected term. The risk-free interest rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was derived using a term structure based on historical volatility and the volatility implied by exchange-traded options on our common stock. The dividend yield was calculated based on our annual dividend as of the option grant date.

The following table summarizes stock option activity:

				Exercise Price						Contractual		Aggregate
				Per Share						Term -		Intrinsic
	Options							Weighted		Weighted		Value
(Share amounts in thousands)	Outstanding			Range				Average		Average (in years)		(in thousands)
Outstanding at October 3, 2015		923			$7.55	-	$21.96	$	15.14
Granted		99			23.95	-	34.49		28.47
Exercised		(651	)		7.55	-	21.96		13.93			$	8,718
Outstanding at October 1, 2016		371			9.16	-	34.49		20.81
Granted		88			26.75	-	37.06		30.93
Exercised		(67	)		9.16	-	23.95		19.05				1,212
Outstanding at September 30, 2017		392			9.16	-	37.06		23.40
Granted		77			29.69	-	41.85		34.84
Exercised		(196	)		9.16	-	37.06		19.68				3,866
Forfeited		(9	)		23.95	-	37.06		29.88
Outstanding at September 29, 2018		264			10.23	-	41.85		29.25		7.64		1,845
Vested and anticipated to vest in the future at September 29, 2018		262							29.22		7.69		1,974
Exercisable at September 29, 2018		109							24.73		5.98		1,228

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 plan are valued based upon the fair market value on the date of the grant and provide for a dividend equivalent payment which is included in compensation expense. The vesting period for RSUs is generally

one

year from the date of the grant for RSUs granted to directors and

three

years from the date of the grant for RSUs granted to employees. RSUs do

not

have voting rights. RSU grants and compensation expense are as follows:

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Restricted stock unit grants:
Units		35		37		57
Market value	$	1,175	$	1,180	$	1,516
Compensation expense		1,172		1,238		1,451

As of

September 29, 2018,

there was

$451,000

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

1.74

years.

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, October 3, 2015		157		$	18.96
Granted		57			26.57
Forfeited		(2	)		23.95
Released		(67	)		17.95
Balance, October 1, 2016		145			22.35
Granted		37			31.95
Released		(54	)		20.43
Balance, September 30, 2017		128			25.92
Granted		35			33.52
Forfeited		(3	)		29.60
Released		(57	)		22.26
Balance, September 29, 2018		103			30.40

XML

Note 9 - Income Taxes

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(

9

) Income Taxes

The components of the provision for income taxes are as follows:

	Year Ended
	September 29,			September 30,			October 1,
(Dollars in thousands)	2018			2017			2016
Current:
Federal	$	8,265		$	8,269		$	17,075
State		906			848			1,434
		9,171			9,117			18,509
Deferred:
Federal		(2,862	)		2,455			396
State		55			48			140
		(2,807	)		2,503			536
Income taxes	$	6,364		$	11,620		$	19,045
Effective income tax rate		14.9	%		34.0	%		33.8	%

The reconciliation between income taxes computed at the federal statutory rate and the provision for income taxes is as follows:

	Year Ended
(Dollars in thousands)	September 29, 2018					September 30, 2017					October 1, 2016
Provision for income taxes at federal statutory rate	$	10,444		24.5	%	$	11,959		35.0	%	$	19,701		35.0	%
Change in federal tax rate - Tax Cuts and Jobs Act		(3,307	)	(7.8	)		-		-			-		-
Qualified production activities deduction		(832	)	(2.0	)		(768	)	(2.2	)		(1,596	)	(2.8	)
Excess tax benefits of stock-based compensation		(634	)	(1.5	)		-		-			-		-
Valuation allowance		(18	)	(0.0	)		(29	)	(0.1	)		(213	)	(0.4	)
State income taxes, net of federal tax benefit		739		1.7			598		1.8			1,093		1.9
Other, net		(28	)	(0.0	)		(140	)	(0.5	)		60		0.1
Provision for income taxes	$	6,364		14.9	%	$	11,620		34.0	%	$	19,045		33.8	%

The components of deferred tax assets and liabilities are as follows:

	September 29,			September 30,
(In thousands)	2018			2017
Deferred tax assets:
Defined benefit plans	$	2,302		$	3,556
Accrued expenses and asset reserves		1,939			3,069
Stock-based compensation		1,120			1,907
State net operating loss carryforwards and tax credits		233			284
Valuation allowance		(233	)		(251	)
Deferred tax assets		5,361			8,565
Deferred tax liabilities:
Plant and equipment		(9,490	)		(15,093	)
Prepaid insurance and other reserves		(1,211	)		(1,575	)
Deferred tax liabilities		(10,701	)		(16,668	)
Net deferred tax liability	$	(5,340	)	$	(8,103	)

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. Based on these rules, our federal statutory rate was

24.5%

for fiscal

2018

and will be

21%

for fiscal

2019

and beyond. Based on the provisions of the Act, we remeasured our deferred tax assets and 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

$3.3

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.

As of

September 29, 2018,

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

$5.3

million in other liabilities on our consolidated balance sheet. As of

September 30, 2017,

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

$8.1

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

$6.6

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

2019,

but principally expire between

2019

and

2032.

We have also recorded deferred tax assets of

$16,000

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

September 29, 2018,

we recorded a valuation allowance of

$233,000

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.

The

$18,000

decrease in the valuation allowance during

2018

is primarily due to the expiration of state NOLs for which an allowance had been previously recorded.

As of

September 29, 2018,

we had

no

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

We classify interest and penalties related to unrecognized tax benefits as part of income tax expense. There were

no

interest and penalties related to unrecognized tax benefits incurred during

2018,

2017

and

2016.

    

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 10 - Employee Benefit Plans

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

(

1

0

) Employee Benefit Plans

Retirement plans

.

We had

one

defined benefit pension plan, the Insteel Wire Products Company Retirement Income Plan for Hourly Employees, Wilmington, Delaware (the “Delaware Plan”). The Delaware Plan provided benefits for eligible employees based primarily upon years of service and compensation levels. The Delaware Plan was frozen effective

September 30, 2008

whereby participants

no

longer earned additional benefits.

During

2016,

we terminated the Delaware Plan and settled plan liabilities through either lump sum distributions to plan participants or annuity contracts purchased from a

third

-party insurance company that provided for the payment of vested benefits to those participants that did

not

elect the lump sum option. We made contributions totaling

$1.9

million to the Delaware Plan during

2016.

As a result of the pension termination, unrecognized losses, which previously were recorded in accumulated other comprehensive loss on our consolidated balance sheets, were recognized as expense and a pension plan settlement loss of

$2.5

million was recorded on our consolidated statements of operations for the year ended

October 1, 2016.

The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized in our consolidated balance sheets for the Delaware Plan is as follows:

	Year Ended
	October 1,
(In thousands)	2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	3,463
Interest cost		147
Actuarial loss		324
Plan settlement		290
Distributions		(4,224	)
Benefit obligation at end of year	$	-
Change in plan assets:
Fair value of plan assets at beginning of year	$	2,201
Actual return on plan assets		104
Employer contributions		1,919
Plan settlement		(4,003	)
Distributions		(221	)
Fair value of plan assets at end of year	$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	-
Net amount recognized	$	-
Amounts recognized on the consolidated balance sheet:
Accrued benefit liability	$	-
Accumulated other comprehensive loss (net of tax)		-
Net amount recognized	$	-
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	-
Net amount recognized	$	-
Other changes in plan assets and benefit obligations recognized in other comprehensive loss:
Net loss	$	685
Amortization of net loss		(76	)
Settlement loss		(2,539	)
Total recognized in other comprehensive income loss	$	(1,930	)

Net periodic pension cost for the Delaware Plan includes the following components:

	Year Ended
	October 1,
(In thousands)	2016
Interest cost	$	147
Expected return on plan assets		(175	)
Settlement loss recognized		2,539
Amortization of net loss		76
Net periodic pension cost	$	2,587

The assumed discount rate used for the valuation of the Delaware Plan was

3.75%

as of

October 1, 2016.

In establishing the discount rate, we reviewed published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the Delaware Plan.

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 the Participant a supplemental retirement benefit for the

15

-year period following the Participant’s retirement equal to

50%

of the Participant’s highest average annual base salary for

five

consecutive years in the

10

-year period preceding the Participant’s 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 the Participant’s supplemental retirement benefit will be reduced by

1/360th

for each month short of

30

 years that the Participant was employed by us.

The reconciliation of the projected benefit obligation, plan assets, funded status and amounts recognized for the SERPs in our consolidated balance sheets is as follows:

	Year Ended
	September 29,			September 30,			October 1,
(In thousands)	2018			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	9,389		$	9,159		$	7,821
Service cost		310			344			263
Interest cost		345			338			326
Actuarial loss (gain)		(33	)		(162	)		1,039
Distributions		(262	)		(290	)		(290	)
Benefit obligation at end of year	$	9,749		$	9,389		$	9,159
Change in plan assets:
Actual employer contributions	$	262		$	290		$	290
Actual distributions		(262	)		(290	)		(290	)
Plan assets at fair value at end of year	$	-		$	-		$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	(9,749	)	$	(9,389	)	$	(9,159	)
Net amount recognized	$	(9,749	)	$	(9,389	)	$	(9,159	)
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	1,966		$	2,149		$	2,485
Net amount recognized	$	1,966		$	2,149		$	2,485
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)	$	(33	)	$	(162	)	$	1,039
Amortization of net loss		(150	)		(174	)		(85	)
Total recognized in other comprehensive income (loss)	$	(183	)	$	(336	)	$	954

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

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Service cost	$	310	$	344	$	263
Interest cost		345		338		326
Amortization of net loss		150		174		85
Net periodic pension cost	$	805	$	856	$	674

The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic pension cost during

2019

is

$140,000.

   

The assumptions used in the valuation of the SERPs are as follows:

	Measurement Date
	September 29,			September 30,			October 1,
	2018			2017			2016
Assumptions at year-end:
Discount rate		4.00	%		3.75	%		3.75	%
Rate of increase in compensation levels		3.00	%		3.00	%		3.00	%

The assumed discount rate is established as of our fiscal year-end measurement date. In establishing the discount rate, we review published market indices of high-quality debt securities, adjusted as appropriate for duration, and high-quality bond yield curves applicable to the expected benefit payments of the SERPs. The SERPs expected rate of increase in compensation levels is based on the anticipated increases in annual compensation.

The projected benefit payments under the SERPs are as follows:

Fiscal year(s)	In thousands
2019	$	325
2020		278
2021		278
2022		553
2023		553
2024 - 2028		4,083

Retirement savings plan.

In

1996,

we adopted the Retirement Savings Plan of Insteel Industries, Inc. (the “Plan”) to provide retirement benefits and stock ownership for our employees. The Plan is an amendment and restatement of our Employee Stock Ownership Plan. As allowed under Sections

401

(a) and

401

(k) of the Internal Revenue Code, the Plan provides for tax-deferred salary deductions for eligible employees.

The Plan allows for discretionary contributions to be made by us as determined by the Board of Directors, which are allocated among eligible participants based on their compensation relative to the total compensation of all participants

.

Employees are permitted to contribute up to

75%

of their annual compensation to the Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Code. We match employee contributions up to

100%

of the

first

1%

and

50%

of the next

5%

of eligible compensation that is contributed by employees. Our contributions to the Plan were

$1.1

million in

2018

and

2017

and

$1.0

million in

2016.

Voluntary Employee Beneficiary Associations (“

VEBA

”

)

. We have a VEBA which allows both us and our employees to make contributions to pay for medical costs. Our contributions to the VEBA were

$5.1

million in

2018,

$5.6

million in

2017

and

$5.4

million in

2016.

We are primarily self-insured for our employee’s healthcare costs, carrying stop-loss insurance coverage for individual claims in excess of

$175,000

per benefit plan year. Our self-insurance liabilities are based on the total estimated costs of claims filed and claims incurred but

not

reported, less amounts paid against such claims. We review current and historical claims data in developing our estimates.

XML

Note 11 - Commitments and Contingencies

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

(

1

1

) Commitments and Contingencies

Insurance recoveries.

We maintain general liability, business interruption and replacement cost property insurance coverage on our facilities.

In

August 2018,

a transformer outage and electrical fire occurred at our Dayton, Texas manufacturing facility, which resulted in the temporary curtailment of operations. Alternative power arrangements for the facility were subsequently made, allowing for operations to continue until permanent repairs could be completed. We are in the process of preparing the supporting analysis for the insurance claim related to the business interruption and property damage resulting from the fire. During

2018,

we received

$183,000

of insurance proceeds related to the claim and recorded a

$462,000

receivable for the anticipated insurance proceeds associated with the expenses incurred as of the end of the year. The insurance proceeds attributable to the additional expenses incurred were recorded in cost of sales (

$645,000

) on the consolidated statements of operations.

In

August 2017,

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

2018,

we received

$439,000

of insurance proceeds related to the claim and recorded a

$52,000

receivable for the anticipated insurance proceeds associated with the expenses that were incurred and capital outlays required to replace property and equipment damaged in the storm. The insurance proceeds attributable to the additional expenses incurred were recorded in cost of sales (

$439,000

), SG&A expense (

$26,000

) and other income (

$26,000

) on the consolidated statements of operations.

We believe the coverage provided for under our insurance policies is sufficient to cover the losses incurred from these claims.  

Leases

and

p

urchase

c

ommitments

.

We lease a portion of our equipment under operating leases that expire at various dates through

2023.

Additionally, we leased our facility in Houston, Texas through

September 30, 2017

and subsequently exercised the

$4.9

million purchase option under the lease in

October 2017.

Under most lease agreements, we pay insurance, taxes and maintenance. Rental expense for operating leases was

$1.5

million in

2018

and

$1.8

million in

2017

and

2016.

As of

September 29, 2018,

minimum rental commitments under all non-cancelable leases with an initial term in excess of

one

year are payable as follows:

2019,

$1.0

million;

2020

$543,000;

2021,

$185,000;

2022,

$22,000

and

2023

and beyond,

$16,000.

As of

September 29, 2018,

we had

$75.1

million in non-cancelable purchase commitments for raw material extending as long as approximately

100

days and

$9.6

million of contractual commitments for the purchase of certain equipment that had

not

been fulfilled and are

not

reflected in the consolidated financial statements.

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.

Seve

rance

and change of control

a

greements.

We have entered into severance agreements with our Chief Executive Officer and Chief Financial Officer that provide them with certain termination benefits in the event their employment with us is terminated without cause. The initial term of each agreement is

two

years and they automatically renew for successive

one

year terms unless we or the executive provide notice of termination as specified in the agreement. In the event of termination of the executive’s employment without cause, these agreements provide that they would receive termination benefits equal to

one

and

one

-half times their annual base salary in effect on the termination date and the continuation of health and welfare benefits for

eighteen

months. In addition, all of the executive’s stock options and restricted stock would vest immediately, and outplacement services would be provided.

We have also entered into change in control agreements with key members of management, including our executive officers, which specify the terms of separation in the event that termination of their employment followed a change in control. The initial term of each agreement is

two

years and they automatically renew for successive

one

year terms unless we or the executive provide notice of termination as specified in the agreement. The agreements do

not

provide assurances of continued employment or specify the terms of an executive’s termination should

one

occur in the absence of a change in control. The compensation payable under the terms of these agreements differs between the Chief Executive Officer and Chief Financial Officer, and the other covered executives. In the event of termination of the Chief Executive Officer or the Chief Financial Officer within

two

years of a change of control, they would receive severance benefits equal to

two

times base compensation,

two

times the average bonus for the prior

three

years and the continuation of health and welfare benefits for

two

years. In the event of such a termination of the other key members of management, including our other

two

executive officers, within

two

years of a change of control, they would receive severance benefits equal to

one

times base compensation,

one

times the average bonus for the prior

three

years and the continuation of health and welfare benefits for

one

year. In addition, for any covered executive that is terminated within

two

years of a change of control, all of their stock options and restricted stock would vest immediately, and outplacement services would be provided.

XML

Note 12 - Earnings Per Share

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

(

1

2

) Earnings

Per Share

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

	Year Ended
	September 29,		September 30,		October 1,
(In thousands, except per share amounts)	2018		2017		2016
Net earnings	$	36,266	$	22,548	$	37,245
Basic weighted average shares outstanding		19,079		19,011		18,754
Dilutive effect of stock-based compensation		198		206		301
Diluted weighted average shares outstanding		19,277		19,217		19,055
Net earnings per share:
Basic	$	1.90	$	1.19	$	1.99
Diluted		1.88		1.17		1.95

Options and RSUs that were antidilutive and

not

included in the diluted EPS calculation amounted to

83,000

shares in

2018,

76,000

shares in

2017

and

51,000

shares in

2016.

XML

Note 13 - Business Segment Information

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(

1

3

) 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 WWR. Based on the criteria specified in ASC Topic

280,

Segment Reporting

, we have

one

reportable segment.

Our net sales and long-lived assets (consisting of net property, plant and equipment, the cash surrender value of life insurance policies, goodwill and intangible assets) by geographic region are as follows:

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Net sales:
United States	$	451,418	$	387,199	$	416,391
Foreign		1,799		1,672		2,156
Total	$	453,217	$	388,871	$	418,547
Long-lived assets:
United States	$	133,913	$	122,574	$	112,130
Foreign		-		-		-
Total	$	133,913	$	122,574	$	112,130

Our net sales by product line are as follows:

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Net sales:
Welded wire reinforcement	$	273,658	$	239,522	$	256,801
Prestressed concrete strand		179,559		149,349		161,746
Total	$	453,217	$	388,871	$	418,547

There were

no

customers that accounted for

10%

or more of our net sales in

2018,

2017

and

2016.

XML

Note 14 - Related Party Transactions

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

(

1

4

) Related Party Transactions

Sales to a company affiliated with

one

of our directors amounted to

$699,000

in

2018,

$622,000

in

2017

and

$420,000

in

2016.

XML

Note 15 - Other Financial Data

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Other Financial Data [Text Block]

(

1

5

)

Other Financial Data

Balance sheet information:

	September 29,			September 30,
(In thousands)	2018			2017
Accounts receivable, net:
Accounts receivable	$	51,779		$	40,485
Less allowance for doubtful accounts		(295	)		(201	)
Total	$	51,484		$	40,284
Inventories:
Raw materials	$	61,008		$	51,808
Work in process		4,779			2,637
Finished goods		28,370			27,408
Total	$	94,157		$	81,853
Other current assets:
Prepaid insurance	$	3,845		$	3,796
Income taxes receivable		-			925
Other		2,050			1,228
Total	$	5,895		$	5,949
Other assets:
Cash surrender value of life insurance policies	$	9,769		$	9,026
Capitalized financing costs, net		40			105
Other		104			203
Total	$	9,913		$	9,334
Property, plant and equipment, net:
Land and land improvements	$	14,438		$	12,177
Buildings		54,684			50,373
Machinery and equipment		160,068			153,484
Construction in progress		9,672			5,641
		238,862			221,675
Less accumulated depreciation		(132,714	)		(123,005	)
Total	$	106,148		$	98,670
Accrued expenses:
Salaries, wages and related expenses	$	6,775		$	5,520
Property taxes		1,585			1,384
Customer rebates		1,531			1,015
Sales allowance reserves		804			21
Income taxes		469			-
Workers' compensation		113			116
Other		652			611
Total	$	11,929		$	8,667
Other liabilities:
Deferred compensation	$	10,541		$	9,276
Deferred income taxes		5,340			8,103
Total	$	15,881		$	17,379

XML

Note 16 - Rights Agreement

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Rights Agreement [Text Block]

(

1

6

)

Rights Agreement

On

April 26, 1999,

our Board of Directors declared a dividend distribution of

one

right per share of our outstanding common stock as of

May 17, 1999

pursuant to a Rights Agreement, dated as of

April 27, 1999.

The Rights Agreement also provides that

one

right will attach to each share of our common stock issued after

May 17, 1999. 

On

April 

21,

2009,

effective

April 25, 2009,

our Board of Directors amended the Rights Agreement to, among other changes, extend the final expiration date and adjust the purchase price payable upon exercise of a right.

The rights are

not

currently exercisable but trade with our common stock shares and become exercisable on the distribution date. The distribution date will occur upon the earliest of

10

business days following a public announcement that either a person or group of affiliated or associated persons (an “acquiring person”) has acquired, or obtained the right to acquire, beneficial ownership of

20%

or more (after adjustment for certain derivative transactions) of the outstanding shares of common stock (the “stock acquisition date”), or of a tender offer or exchange offer that would, if consummated, result in an acquiring person beneficially owning

20%

or more of such outstanding shares of common stock, subject to certain limitations.

Each right will entitle the holder, other than the acquiring person or group, to purchase

one two

-hundredths of a share (a “Unit”) of our Series A Junior Participating Preferred Stock (“Preferred Stock”) at a purchase price of

$46

per Unit, subject to adjustment as described in the Rights Agreement (the “purchase price”). At the time specified, each holder of a right will have the right to receive in lieu of Preferred Stock, upon exercise and payment of the purchase price, common stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to

two

times the purchase price or, at the discretion of the Board, upon exercise and without payment of the purchase price, common stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to the difference between the purchase price and the value of the consideration which a person exercising the right and paying the purchase price would receive. Rights that are or (under specified circumstances) were, beneficially owned by any acquiring person will be null and void. The purchase price payable and the number of Units of Preferred Stock or other securities or property issuable upon exercise of the rights are subject to adjustment from time to time. At any time after any person becomes an acquiring person, we

may

exchange all or part of the rights for shares of common stock at an exchange ratio of

one

share per right, as appropriately adjusted to reflect any stock dividend, stock split or similar transaction.

In addition, each rights holder, other than an acquiring person, upon exercise of rights will have the right to receive shares of the common stock of the acquiring corporation having a value equal to

two

times the purchase price for such holder’s rights if we engage in a merger or other business combination where we are

not

the surviving entity or where we are the surviving entity and all or part of our common stock is exchanged for the stock or other securities of the other company, or if

50%

or more of our assets or earning power is sold or transferred.

The rights will expire on

April 24, 2019,

and

may

be redeemed by us at any time prior to the distribution date at a price of

$0.005

per right.

XML

Note 17 - Product Warranties

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

(

1

7

)

Product Warranties

Our products are used in applications which are subject to inherent risks including performance deficiencies, personal injury, property damage, environmental contamination or loss of production. We warrant our products to meet certain specifications, and actual or claimed deficiencies from these specifications

may

give rise to claims. We do

not

maintain a reserve for warranties as the historical claims have been immaterial. We maintain product liability insurance coverage to minimize our exposure to such risks.

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Note 18 - Share Repurchases

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

(

1

8

) 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

September 29, 2018,

there was

$24.8

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

no

share repurchases during

2018,

2017

and

2016.

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Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

SEC Schedule, 12-09, Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED

SEPTEMBER 29, 2018,

SEPTEMBER 30, 2017

AND

OCTOB

ER

1,

2016

ALLOWANCE FOR DOUBTFUL ACCOUNTS

(In thousands)

	Year Ended
	September 29,			September 30,			October 1,
	2018			2017			2016
Balance, beginning of year	$	201		$	291		$	638
Amounts charged to earnings		100			(57	)		(244	)
Write-offs, net of recoveries		(6	)		(33	)		(103	)
Balance, end of year	$	295		$	201		$	291

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Significant Accounting Policies (Policies)

12 Months Ended

Sep. 29, 2018

Accounting Policies [Abstract]

Fiscal Period, Policy [Policy Text Block]

Fiscal year.

Our fiscal year is the

52

or

53

weeks ending on the Saturday closest to

September 30.

Fiscal years

2018,

2017

and

2016

were

52

-week periods. All references to years relate to fiscal years rather than calendar years.     

Consolidation, Policy [Policy Text Block]

Principles of consolidation

.

The consolidated financial statements include the accounts of Insteel and our subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of estimates.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S.” and such accounting principles, “GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There is

no

assurance that actual results will

not

differ from these estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash equivalents

.

We consider all highly liquid investments purchased with original maturities of

three

months or less to be cash equivalents.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of

c

redit

r

isk

.

Financial instruments that subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Our cash is principally concentrated at

one

financial institution, which at times exceeds federally insured limits. We are exposed to credit risk in the event of default by institutions in which our cash and cash equivalents are held and by customers to the extent of the amounts recorded on the balance sheet. We invest excess cash primarily in money market funds, which are highly liquid securities.

The majority of our accounts receivable are due from customers that are located in the U.S. and are generally

not

secured by collateral depending upon the creditworthiness of the account. We provide an allowance for doubtful accounts based upon our assessment of the credit risk of specific customers, historical trends and other information. We write off accounts receivable when they become uncollectible. There is

no

disproportionate concentration of credit risk.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-based compensation.

We account for stock-based compensation in accordance with the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic

718,

Compensation – Stock Compensation, which requires stock-based compensation expense to be recognized in net earnings based on the fair value of the award on the date of the grant. We account for forfeitures as they occur. We determine the fair value of stock options issued by using a Monte Carlo valuation model at the grant date, which considers a range of assumptions including the expected term, volatility, dividend yield and risk-free interest rate.

Revenue Recognition, Policy [Policy Text Block]

Revenue recognition

.

We recognize revenue from product sales when products are shipped and risk of loss and title has passed to the customer. Sales taxes collected from customers are excluded from revenues and recorded on a net basis.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and handling costs

.

We include all of the outbound freight, shipping and handling costs associated with the shipment of products to customers in cost of sales. Any amounts paid by customers to us for shipping and handling are recorded in net sales on the consolidated statements of operations.

Inventory, Policy [Policy Text Block]

Inventories

.

Inventories are valued at the lower of weighted average cost (which approximates computation on a

first

-in,

first

-out basis) and net realizable value. The valuation of inventory includes the costs for material, labor and manufacturing overhead.

Property, Plant and Equipment, Impairment [Policy Text Block]

Property, plant and equipment.

Property, plant and equipment are recorded at cost or fair market value in the case of the assets acquired through acquisitions, or otherwise at reduced values to the extent there have been asset impairment write-downs. Expenditures for maintenance and repairs are charged directly to expense when incurred, while major improvements are capitalized. Depreciation is computed for financial reporting purposes principally by use of the straight-line method over the following estimated useful lives: machinery and equipment,

3

-

15

years; buildings,

10

-

30

years; and land improvements,

5

-

15

years. Depreciation expense was approximately

$11.6

million in

2018,

$10.5

million in

2017

and

$10.4

million in

2016

and reflected in cost of sales and selling, general and administrative expense (“SG&A expense”) in the consolidated statements of operations. Capitalized software is amortized over the shorter of the estimated useful life or

5

years and reflected in SG&A expense in the consolidated statements of operations.

No

interest costs were capitalized in

2018,

2017

and

2016.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill

.

Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is

not

amortized but is tested annually for impairment and whenever events or circumstances change that would make it more likely than

not

that an impairment

may

have occurred. We perform our annual impairment analysis as of the

first

day of the

fourth

quarter each year. The evaluation of impairment involves comparing the current estimated fair value of the reporting unit to its recorded value, including goodwill. We perform a qualitative assessment to determine whether it is more likely than

not

that the fair value of the reporting unit is less than its carrying amount. It

may

be necessary to perform a quantitative analysis where a discounted cash flow model is used to determine the current estimated fair value of the reporting unit. Key assumptions used to determine the fair value of the reporting unit as part of our annual testing (and any required interim testing) include: (a) expected cash flows for the

five

-year period following the testing date; (b) an estimated terminal value using a terminal year growth rate based on the growth prospects of the reporting unit; (c) a discount rate based on our estimated after-tax weighted average cost of capital; and (d) a probability-weighted scenario approach by which varying cash flows are assigned to alternative scenarios based on their likelihood of occurrence. In developing these assumptions, we consider historical and anticipated future results, general economic and market conditions, the impact of planned business and operational strategies and all available information at the time the fair value of the reporting unit is estimated. Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity. Changes in assumptions and estimates

may

affect the fair value of goodwill and could result in impairment charges in future periods. Based on the results of our impairment analysis,

no

goodwill impairment losses were recognized in the consolidated statements of operations for

2018.

Subsequent to the analysis, there have been

no

events or circumstances that indicate any potential impairment of goodwill.

Other Assets [Policy Text Block]

Other assets.

Other assets consist principally of capitalized financing costs related to our revolving credit facility and the cash surrender value of life insurance policies. Capitalized financing costs are amortized using the straight-line method, which approximates the effective interest method over the term of the related credit agreement, and reflected in interest expense in the consolidated statements of operations.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Long-lived assets

.

Long-lived assets include property, plant and equipment and identifiable intangible assets with definite useful lives. Finite-lived intangible assets are amortized over their estimated useful lives. Our intangible assets consist of customer relationships, developed technology and know-how, non-competition agreements and a trade name, and are being amortized on a straight-line basis over their finite useful lives (see Note

6

to the consolidated financial statements). We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value

may

not

be fully recoverable. When we determine that the carrying value of such assets

may

not

be recoverable, we measure recoverability based on the undiscounted cash flows expected to be generated by the related asset or asset group. If it is determined that an impairment loss has occurred, the loss is recognized in the period in which it is incurred and is calculated as the difference between the carrying value and the present value of estimated future net cash flows or comparable market values.

There were

no

impairment losses in

2018

and

2017.

During

2016,

we recorded

$20,000

of impairment charges related to long-lived assets resulting from the consolidation of our PC strand operations with the closure of the Newnan, Georgia facility (see Note

4

to the consolidated financial statements).

Fair Value Measurement, Policy [Policy Text Block]

Fair value of financial instruments

.

The carrying amounts for cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value because of their short maturities.

Income Tax, Policy [Policy Text Block]

Income taxes.

Income taxes are based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. We assess the need to establish a valuation allowance against deferred tax assets to the extent we

no

longer believe it is more likely than

not

that the tax assets will be fully realized.

Earnings Per Share, Policy [Policy Text Block]

Earnings per share.

Basic earnings per share (“EPS”) are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS are computed by dividing earnings available to common shareholders by the weighted average number of shares of common stock and other dilutive equity securities outstanding during the period. Securities that have the effect of increasing EPS are considered to be antidilutive and are

not

included in the computation of diluted EPS.

XML

Note 4 - Restructuring Charges (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

Restructuring and Related Costs [Table Text Block]

	Asset						Severance and						Gain on Sale
(In thousands)	Impairment			Equipment			Other Employee			Facility			of Property
	Charges			Relocation Costs			Separation Costs			Closure Costs			and Equipment			Total
2017
Liability as of October 1, 2016	$	-		$	31		$	239		$	-		$	-		$	270
Restructuring charges		-			164			-			-			-			164
Cash payments		-			(195	)		(239	)		-			-			(434	)
Non-cash charges		-			-			-			-			-			-
Liability as of September 30, 2017	$	-		$	-		$	-		$	-		$	-		$	-
2016
Liability as of October 3, 2015	$	-		$	-		$	735		$	-		$	-		$	735
Restructuring charges (recoveries)		20			186			-			89			(180	)		115
Cash payments		-			(155	)		(496	)		(89	)		-			(740	)
Non-cash charges		(20	)		-			-			-			180			160
Liability as of October 1, 2016	$	-		$	31		$	239		$	-		$	-		$	270

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Note 5 - Fair Value Measurements (Tables)

12 Months Ended

Sep. 29, 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)
Year ended September 29, 2018:
Current assets:
Cash equivalents	$	44,257	$	44,257	$	-
Other assets:
Cash surrender value of life insurance policies		9,769		-		9,769
Total	$	54,026	$	44,257	$	9,769
Year ended 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 6 - Intangible Assets (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

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

(In thousands)	Weighted- Average Useful Life (Years)		Gross		Accumulated Amortization			Net Book Value
Year ended September 29, 2018:
Customer relationships		16.9	$	9,070	$	(1,598	)	$	7,472
Developed technology and know-how		20.0		1,800		(371	)		1,429
Non-competition agreements		5.0		3,687		(2,994	)		693
Trade name		4.0		140		(31	)		109
			$	14,697	$	(4,994	)	$	9,703
Year ended September 30, 2017:
Customer relationships		20.0	$	6,500	$	(1,018	)	$	5,482
Developed technology and know-how		20.0		1,800		(283	)		1,517
Non-competition agreements		4.8		3,577		(2,663	)		914
			$	11,877	$	(3,964	)	$	7,913

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Note 7 - Long-term Debt (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

Schedule of Amortization of Financing Costs for Debt [Table Text Block]

Fiscal year	In thousands
2019	$	65
2020		41
2021		-
2022		-
2023		-

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Note 8 - Stock-based Compensation (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

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

	Year Ended
	Septem ber 29 ,			Septem ber 30 ,			Octo ber 1 ,
	201 8			201 7			201 6
Expected term (in years)		4.79			5.14			5.45
Risk-free interest rate		2.71	%		1.98	%		1.30	%
Expected volatility		37.32	%		38.32	%		39.00	%
Expected dividend yield		0.37	%		0.37	%		0.48	%

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

				Exercise Price						Contractual		Aggregate
				Per Share						Term -		Intrinsic
	Options							Weighted		Weighted		Value
(Share amounts in thousands)	Outstanding			Range				Average		Average (in years)		(in thousands)
Outstanding at October 3, 2015		923			$7.55	-	$21.96	$	15.14
Granted		99			23.95	-	34.49		28.47
Exercised		(651	)		7.55	-	21.96		13.93			$	8,718
Outstanding at October 1, 2016		371			9.16	-	34.49		20.81
Granted		88			26.75	-	37.06		30.93
Exercised		(67	)		9.16	-	23.95		19.05				1,212
Outstanding at September 30, 2017		392			9.16	-	37.06		23.40
Granted		77			29.69	-	41.85		34.84
Exercised		(196	)		9.16	-	37.06		19.68				3,866
Forfeited		(9	)		23.95	-	37.06		29.88
Outstanding at September 29, 2018		264			10.23	-	41.85		29.25		7.64		1,845
Vested and anticipated to vest in the future at September 29, 2018		262							29.22		7.69		1,974
Exercisable at September 29, 2018		109							24.73		5.98		1,228

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, October 3, 2015		157		$	18.96
Granted		57			26.57
Forfeited		(2	)		23.95
Released		(67	)		17.95
Balance, October 1, 2016		145			22.35
Granted		37			31.95
Released		(54	)		20.43
Balance, September 30, 2017		128			25.92
Granted		35			33.52
Forfeited		(3	)		29.60
Released		(57	)		22.26
Balance, September 29, 2018		103			30.40

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]

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Restricted stock unit grants:
Units		35		37		57
Market value	$	1,175	$	1,180	$	1,516
Compensation expense		1,172		1,238		1,451

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Note 9 - Income Taxes (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Year Ended
	September 29,			September 30,			October 1,
(Dollars in thousands)	2018			2017			2016
Current:
Federal	$	8,265		$	8,269		$	17,075
State		906			848			1,434
		9,171			9,117			18,509
Deferred:
Federal		(2,862	)		2,455			396
State		55			48			140
		(2,807	)		2,503			536
Income taxes	$	6,364		$	11,620		$	19,045
Effective income tax rate		14.9	%		34.0	%		33.8	%

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Year Ended
(Dollars in thousands)	September 29, 2018					September 30, 2017					October 1, 2016
Provision for income taxes at federal statutory rate	$	10,444		24.5	%	$	11,959		35.0	%	$	19,701		35.0	%
Change in federal tax rate - Tax Cuts and Jobs Act		(3,307	)	(7.8	)		-		-			-		-
Qualified production activities deduction		(832	)	(2.0	)		(768	)	(2.2	)		(1,596	)	(2.8	)
Excess tax benefits of stock-based compensation		(634	)	(1.5	)		-		-			-		-
Valuation allowance		(18	)	(0.0	)		(29	)	(0.1	)		(213	)	(0.4	)
State income taxes, net of federal tax benefit		739		1.7			598		1.8			1,093		1.9
Other, net		(28	)	(0.0	)		(140	)	(0.5	)		60		0.1
Provision for income taxes	$	6,364		14.9	%	$	11,620		34.0	%	$	19,045		33.8	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	September 29,			September 30,
(In thousands)	2018			2017
Deferred tax assets:
Defined benefit plans	$	2,302		$	3,556
Accrued expenses and asset reserves		1,939			3,069
Stock-based compensation		1,120			1,907
State net operating loss carryforwards and tax credits		233			284
Valuation allowance		(233	)		(251	)
Deferred tax assets		5,361			8,565
Deferred tax liabilities:
Plant and equipment		(9,490	)		(15,093	)
Prepaid insurance and other reserves		(1,211	)		(1,575	)
Deferred tax liabilities		(10,701	)		(16,668	)
Net deferred tax liability	$	(5,340	)	$	(8,103	)

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Note 10 - Employee Benefit Plans (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Year Ended
	October 1,
(In thousands)	2016
Interest cost	$	147
Expected return on plan assets		(175	)
Settlement loss recognized		2,539
Amortization of net loss		76
Net periodic pension cost	$	2,587

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Service cost	$	310	$	344	$	263
Interest cost		345		338		326
Amortization of net loss		150		174		85
Net periodic pension cost	$	805	$	856	$	674

Schedule of Assumptions Used [Table Text Block]

	Measurement Date
	September 29,			September 30,			October 1,
	2018			2017			2016
Assumptions at year-end:
Discount rate		4.00	%		3.75	%		3.75	%
Rate of increase in compensation levels		3.00	%		3.00	%		3.00	%

Schedule of Expected Benefit Payments [Table Text Block]

Fiscal year(s)	In thousands
2019	$	325
2020		278
2021		278
2022		553
2023		553
2024 - 2028		4,083

Supplemental Employee Retirement Plan [Member]

Notes Tables

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

	Year Ended
	September 29,			September 30,			October 1,
(In thousands)	2018			2017			2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	9,389		$	9,159		$	7,821
Service cost		310			344			263
Interest cost		345			338			326
Actuarial loss (gain)		(33	)		(162	)		1,039
Distributions		(262	)		(290	)		(290	)
Benefit obligation at end of year	$	9,749		$	9,389		$	9,159
Change in plan assets:
Actual employer contributions	$	262		$	290		$	290
Actual distributions		(262	)		(290	)		(290	)
Plan assets at fair value at end of year	$	-		$	-		$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	(9,749	)	$	(9,389	)	$	(9,159	)
Net amount recognized	$	(9,749	)	$	(9,389	)	$	(9,159	)
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	1,966		$	2,149		$	2,485
Net amount recognized	$	1,966		$	2,149		$	2,485
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
Net loss (gain)	$	(33	)	$	(162	)	$	1,039
Amortization of net loss		(150	)		(174	)		(85	)
Total recognized in other comprehensive income (loss)	$	(183	)	$	(336	)	$	954

Pension Plan [Member]

Notes Tables

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

	Year Ended
	October 1,
(In thousands)	2016
Change in benefit obligation:
Benefit obligation at beginning of year	$	3,463
Interest cost		147
Actuarial loss		324
Plan settlement		290
Distributions		(4,224	)
Benefit obligation at end of year	$	-
Change in plan assets:
Fair value of plan assets at beginning of year	$	2,201
Actual return on plan assets		104
Employer contributions		1,919
Plan settlement		(4,003	)
Distributions		(221	)
Fair value of plan assets at end of year	$	-
Reconciliation of funded status to net amount recognized:
Funded status	$	-
Net amount recognized	$	-
Amounts recognized on the consolidated balance sheet:
Accrued benefit liability	$	-
Accumulated other comprehensive loss (net of tax)		-
Net amount recognized	$	-
Amounts recognized in accumulated other comprehensive loss:
Unrecognized net loss	$	-
Net amount recognized	$	-
Other changes in plan assets and benefit obligations recognized in other comprehensive loss:
Net loss	$	685
Amortization of net loss		(76	)
Settlement loss		(2,539	)
Total recognized in other comprehensive income loss	$	(1,930	)

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Note 12 - Earnings Per Share (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

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

	Year Ended
	September 29,		September 30,		October 1,
(In thousands, except per share amounts)	2018		2017		2016
Net earnings	$	36,266	$	22,548	$	37,245
Basic weighted average shares outstanding		19,079		19,011		18,754
Dilutive effect of stock-based compensation		198		206		301
Diluted weighted average shares outstanding		19,277		19,217		19,055
Net earnings per share:
Basic	$	1.90	$	1.19	$	1.99
Diluted		1.88		1.17		1.95

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Note 13 - Business Segment Information (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Net sales:
United States	$	451,418	$	387,199	$	416,391
Foreign		1,799		1,672		2,156
Total	$	453,217	$	388,871	$	418,547
Long-lived assets:
United States	$	133,913	$	122,574	$	112,130
Foreign		-		-		-
Total	$	133,913	$	122,574	$	112,130

Revenue from External Customers by Products and Services [Table Text Block]

	Year Ended
	September 29,		September 30,		October 1,
(In thousands)	2018		2017		2016
Net sales:
Welded wire reinforcement	$	273,658	$	239,522	$	256,801
Prestressed concrete strand		179,559		149,349		161,746
Total	$	453,217	$	388,871	$	418,547

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Note 15 - Other Financial Data (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

Condensed Balance Sheet [Table Text Block]

	September 29,			September 30,
(In thousands)	2018			2017
Accounts receivable, net:
Accounts receivable	$	51,779		$	40,485
Less allowance for doubtful accounts		(295	)		(201	)
Total	$	51,484		$	40,284
Inventories:
Raw materials	$	61,008		$	51,808
Work in process		4,779			2,637
Finished goods		28,370			27,408
Total	$	94,157		$	81,853
Other current assets:
Prepaid insurance	$	3,845		$	3,796
Income taxes receivable		-			925
Other		2,050			1,228
Total	$	5,895		$	5,949
Other assets:
Cash surrender value of life insurance policies	$	9,769		$	9,026
Capitalized financing costs, net		40			105
Other		104			203
Total	$	9,913		$	9,334
Property, plant and equipment, net:
Land and land improvements	$	14,438		$	12,177
Buildings		54,684			50,373
Machinery and equipment		160,068			153,484
Construction in progress		9,672			5,641
		238,862			221,675
Less accumulated depreciation		(132,714	)		(123,005	)
Total	$	106,148		$	98,670
Accrued expenses:
Salaries, wages and related expenses	$	6,775		$	5,520
Property taxes		1,585			1,384
Customer rebates		1,531			1,015
Sales allowance reserves		804			21
Income taxes		469			-
Workers' compensation		113			116
Other		652			611
Total	$	11,929		$	8,667
Other liabilities:
Deferred compensation	$	10,541		$	9,276
Deferred income taxes		5,340			8,103
Total	$	15,881		$	17,379

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Schedule II - Valuation and Qualifying Accounts (Tables)

12 Months Ended

Sep. 29, 2018

Notes Tables

Valuation Allowances and Reserves [Table Text Block]

	Year Ended
	September 29,			September 30,			October 1,
	2018			2017			2016
Balance, beginning of year	$	201		$	291		$	638
Amounts charged to earnings		100			(57	)		(244	)
Write-offs, net of recoveries		(6	)		(33	)		(103	)
Balance, end of year	$	295		$	201		$	291

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Note 2 - Summary of Significant Accounting Policies (Details Textual) - USD ($)	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Depreciation, Total	$ 11,600,000	$ 10,500,000	$ 10,400,000
Interest Costs Capitalized	0	0	0
Goodwill, Impairment Loss	0
Asset Impairment Charges, Total	$ 0	$ 0	20,000
Impairment of Long-Lived Assets Held-for-use			$ 20,000
Computer Software, Intangible Asset [Member]
Finite-Lived Intangible Asset, Useful Life	5 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	3 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	15 years
Building [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	10 years
Building [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	30 years
Land Improvements [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	5 years
Land Improvements [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	15 years

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Note 3 - Recent Accounting Pronouncements (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Accounting Standards Update 2016-09 [Member]
Excess Tax Benefit from Share-based Compensation, Operating Activities		$ 0.5	$ 1.7
Excess Tax Benefit from Share-based Compensation, Financing Activities		$ (0.5)	$ (1.7)
Retained Earnings [Member]
Tax Cuts and Jobs Act, Reclassification of Stranded Tax Effects from AOCI to Retained Earnings, Tax Effect	$ 0.3
AOCI Attributable to Parent [Member]
Tax Cuts and Jobs Act, Reclassification of Stranded Tax Effects from AOCI to Retained Earnings, Tax Effect	$ (0.3)

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Note 4 - Restructuring Charges - Summary of Restructuring Activities and Associated Costs (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Liability, beginning of period		$ 270	$ 735
Restructuring charges, net		164	115
Cash payments		(434)	(740)
Non-cash charges			160
Liability, end of period			270
Asset Impairment Charges [Member]
Liability, beginning of period
Restructuring charges, net			20
Cash payments
Non-cash charges			(20)
Liability, end of period
Equipment Relocation Costs [Member]
Liability, beginning of period		31
Restructuring charges, net		164	186
Cash payments		(195)	(155)
Non-cash charges
Liability, end of period			31
Employee Severance [Member]
Liability, beginning of period		239	735
Restructuring charges, net
Cash payments		(239)	(496)
Non-cash charges
Liability, end of period			239
Facility Closing [Member]
Liability, beginning of period
Restructuring charges, net			89
Cash payments			(89)
Non-cash charges
Liability, end of period
Gain on Sale of Property and Equipment [Member]
Liability, beginning of period
Restructuring charges, net			(180)
Cash payments
Non-cash charges			180
Liability, end of period

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Note 5 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	Sep. 29, 2018	Sep. 30, 2017
Non Financial [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets, Fair Value Disclosure	$ 0	$ 0

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Note 5 - Fair Value Measurements - Fair Value of Financial Assets (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Sep. 29, 2018	Sep. 30, 2017
Cash equivalents	$ 44,257	$ 31,659
Cash surrender value of life insurance policies	9,769	9,026
Total	54,026	40,685
Fair Value, Inputs, Level 1 [Member]
Cash equivalents	44,257	31,659
Cash surrender value of life insurance policies
Total	44,257	31,659
Fair Value, Inputs, Level 2 [Member]
Cash equivalents
Cash surrender value of life insurance policies	9,769	9,026
Total	$ 9,769	$ 9,026

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Note 6 - Intangible Assets (Details Textual) - USD ($)	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Amortization of Intangible Assets, Total	$ 1,300,000	$ 1,200,000	$ 1,200,000
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	1,100,000
Finite-Lived Intangible Assets, Amortization Expense, Year Two	924,000
Finite-Lived Intangible Assets, Amortization Expense, Year Three	809,000
Finite-Lived Intangible Assets, Amortization Expense, Year Four	770,000
Finite-Lived Intangible Assets, Amortization Expense, Year Five	$ 705,000

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Note 6 - Intangible Assets - Summary of Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017
Gross	$ 14,697	$ 11,877
Accumulated Amortization	(4,994)	(3,964)
Net Book Value	$ 9,703	$ 7,913
Customer Relationships [Member]
Weighted-Average Useful Life (Year)	16 years 328 days	20 years
Gross	$ 9,070	$ 6,500
Accumulated Amortization	(1,598)	(1,018)
Net Book Value	$ 7,472	$ 5,482
Technology-Based Intangible Assets [Member]
Weighted-Average Useful Life (Year)	20 years	20 years
Gross	$ 1,800	$ 1,800
Accumulated Amortization	(371)	(283)
Net Book Value	$ 1,429	$ 1,517
Noncompete Agreements [Member]
Weighted-Average Useful Life (Year)	5 years	4 years 292 days
Gross	$ 3,687	$ 3,577
Accumulated Amortization	(2,994)	(2,663)
Net Book Value	$ 693	$ 914
Trade Names [Member]
Weighted-Average Useful Life (Year)	4 years
Gross	$ 140
Accumulated Amortization	(31)
Net Book Value	$ 109

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Note 7 - Long-term Debt (Details Textual)	12 Months Ended
	Sep. 29, 2018 USD ($)	Sep. 30, 2017 USD ($)	Oct. 01, 2016 USD ($)
Amortization of Debt Issuance Costs	$ 65,000	$ 65,000	$ 65,000
Accumulated Amortization, Debt Issuance Costs	4,700,000	4,600,000
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	100,000,000
Long-term Line of Credit, Total	0	$ 0
Line of Credit Facility, Remaining Borrowing Capacity	98,200,000
Letters of Credit Outstanding, Amount	$ 1,800,000
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%
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%
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 7 - Long-term Debt - Amortization of Financing Costs (Details) $ in Thousands	Sep. 29, 2018 USD ($)
2019	$ 65
2020	41
2021
2022
2023

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Note 8 - Stock-based Compensation (Details Textual) - USD ($)	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016	Feb. 17, 2015
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 262,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 240 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 12.06	$ 11.08	$ 9.92
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
Allocated Share-based Compensation Expense, Total	$ 906,000	$ 1,000,000	$ 988,000
Restricted Stock Units (RSUs) [Member]
Allocated Share-based Compensation Expense, Total	$ 1,172,000	$ 1,238,000	$ 1,451,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 270 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 451,000
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	334,000

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Note 8 - Stock-based Compensation - Stock Option Valuation Assumptions (Details)	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Expected term (Year)	4 years 288 days	5 years 51 days	5 years 164 days
Risk-free interest rate	2.71%	1.98%	1.30%
Expected volatility	37.32%	38.32%	39.00%
Expected dividend yield	0.37%	0.37%	0.48%

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Note 8 - Stock-based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016	Oct. 03, 2015
Options outstanding, balance (in shares)	392	371	923
Weighted average exercise price per share, beginning balance (in dollars per share)	$ 23.40	$ 20.81	$ 15.14
Options outstanding, granted (in shares)	77	88	99
Exercise price per share, granted (in dollars per share)	$ 34.84	$ 30.93	$ 28.47
Options outstanding, exercised (in shares)	(196)	(67)	(651)
Exercise price per share, exercised (in dollars per share)	$ 19.68	$ 19.05	$ 13.93
Aggregate intrinsic value, exercised	$ 3,866	$ 1,212	$ 8,718
Options outstanding, forfeited (in shares)	(9)
Exercise price per share, forfeited (in dollars per share)	$ 29.88
Options outstanding, balance (in shares)	264	392	371	923
Weighted average exercise price per share, ending balance (in dollars per share)	$ 29.25	$ 23.40	$ 20.81	$ 15.14
Contractual term - weighted average, ending balance (Year)	7 years 233 days
Aggregate intrinsic value, ending balance	$ 1,845
Options outstanding, vested and anticipated to vest in future (in shares)	262
Weighted average exercise price per share, vested and anticipated to vest in future (in dollars per share)	$ 29.22
Contractual term - weighted average, vested and anticipated to vest in future (Year)	7 years 251 days
Aggregate intrinsic value, vested and anticipated to vest in future	$ 1,974
Options outstanding, exercisable (in shares)	109
Weighted average exercise price per share, exercisable (in dollars per share)	$ 24.73
Contractual term - weighted average, exercisable (Year)	5 years 357 days
Aggregate intrinsic value, exercisable	$ 1,228
Minimum [Member]
Exercise price per share, balance (in dollars per share)	$ 10.23	9.16	9.16	7.55
Exercise price per share, granted (in dollars per share)	29.69	26.75	23.95
Exercise price per share, exercised (in dollars per share)	9.16	9.16	7.55
Exercise price per share, forfeited (in dollars per share)	23.95
Maximum [Member]
Exercise price per share, balance (in dollars per share)	41.85	37.06	34.49	$ 21.96
Exercise price per share, granted (in dollars per share)	41.85	37.06	34.49
Exercise price per share, exercised (in dollars per share)	37.06	$ 23.95	$ 21.96
Exercise price per share, forfeited (in dollars per share)	$ 37.06

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Note 8 - Stock-based Compensation - RSU Grants and Compensation Expense (Details) - Restricted Stock Units (RSUs) [Member] - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Units (in shares)	35	37	57
Market value	$ 1,175	$ 1,180	$ 1,516
Compensation expense	$ 1,172	$ 1,238	$ 1,451

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Note 8 - Stock-based Compensation - RSU Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares shares in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Restricted stock units outstanding, beginning balance (in shares)	128	145	157
Weighted average grant date fair value, beginning balance (in dollars per share)	$ 25.92	$ 22.35	$ 18.96
Restricted stock units outstanding, granted (in shares)	35	37	57
Weighted average grant date fair value, granted (in dollars per share)	$ 33.52	$ 31.95	$ 26.57
Restricted stock units outstanding, forfeited (in shares)	(3)		(2)
Weighted average grant date fair value, forfeited (in dollars per share)	$ 29.60		$ 23.95
Restricted stock units outstanding, released (in shares)	(57)	(54)	(67)
Weighted average grant date fair value, released (in dollars per share)	$ 22.26	$ 20.43	$ 17.95
Restricted stock units outstanding, ending balance (in shares)	103	128	145
Weighted average grant date fair value, ending balance (in dollars per share)	$ 30.40	$ 25.92	$ 22.35

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Note 9 - Income Taxes (Details Textual) - USD ($)	12 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		24.50%	35.00%	35.00%
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		$ 3,300,000
Deferred Tax Liabilities, Net, Noncurrent		5,340,000	$ 8,103,000
Deferred Tax Assets, Tax Credit Carryforwards, Total		16,000
Deferred Tax Assets, Valuation Allowance, Total		233,000	251,000
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount		(18,000)
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense, Total		$ 0	0	$ 0
State and Local Jurisdiction [Member]
Operating Loss Carryforwards, Total			$ 6,600,000
State and Local Jurisdiction [Member] | Earliest Tax Year [Member]
Operating Loss Carryforwards Expiration Date 1		2019
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	21.00%

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Note 9 - Income Taxes - Components of Provision for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Federal	$ 8,265	$ 8,269	$ 17,075
State	906	848	1,434
Total current	9,171	9,117	18,509
Federal	(2,862)	2,455	396
State	55	48	140
Total deferred	(2,807)	2,503	536
Income taxes	$ 6,364	$ 11,620	$ 19,045
Effective income tax rate	14.90%	34.00%	33.80%

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Note 9 - Income Taxes - Income Tax Reconciliation (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Provision for income taxes at federal statutory rate	$ 10,444	$ 11,959	$ 19,701
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	24.50%	35.00%	35.00%
Change in federal tax rate - Tax Cuts and Jobs Act	$ (3,307)
Change in federal tax rate - Tax Cuts and Jobs Act	(7.80%)
Qualified production activities deduction	$ (832)	$ (768)	$ (1,596)
Qualified production activities deduction	(2.00%)	(2.20%)	(2.80%)
Excess tax benefits of stock-based compensation	$ (634)
Excess tax benefits of stock-based compensation	(1.50%)
Valuation allowance	$ (18)	$ (29)	$ (213)
Valuation allowance	0.00%	(0.10%)	(0.40%)
State income taxes, net of federal tax benefit	$ 739	$ 598	$ 1,093
State income taxes, net of federal tax benefit	1.70%	1.80%	1.90%
Other, net	$ (28)	$ (140)	$ 60
Other, net	0.00%	(0.50%)	0.10%
Provision for income taxes	$ 6,364	$ 11,620	$ 19,045
Provision for income taxes	14.90%	34.00%	33.80%

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Note 9 - Income Taxes - Deferred Tax Asset and Liability Components (Details) - USD ($)	Sep. 29, 2018	Sep. 30, 2017
Defined benefit plans	$ 2,302,000	$ 3,556,000
Accrued expenses and asset reserves	1,939,000	3,069,000
Stock-based compensation	1,120,000	1,907,000
State net operating loss carryforwards and tax credits	233,000	284,000
Valuation allowance	(233,000)	(251,000)
Deferred tax assets	5,361,000	8,565,000
Plant and equipment	(9,490,000)	(15,093,000)
Prepaid insurance and other reserves	(1,211,000)	(1,575,000)
Deferred tax liabilities	(10,701,000)	(16,668,000)
Net deferred tax liability	$ (5,340,000)	$ (8,103,000)

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Note 10 - Employee Benefit Plans (Details Textual) - USD ($)	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement			$ (2,539,000)
Pension Plan [Member]
Defined Benefit Plan, Plan Assets, Contributions by Employer			1,919,000
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement			$ (2,539,000)
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate	4.00%	3.75%	3.75%
Supplemental Employee Retirement Plan [Member]
Defined Benefit Plan, Plan Assets, Contributions by Employer	$ 262,000	$ 290,000	$ 290,000
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
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	$ 140,000
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
Retirement Savings Plan [Member]
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	75.00%
Defined Contribution Plan, Cost	$ 1,100,000	1,100,000	1,000,000
Retirement Savings Plan, First 1% of Employee Contribution [Member]
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	100.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	1.00%
Retirement Savings Plan, Next 5% of Employee Contribution [Member]
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	50.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	5.00%
VEBA [Member]
Defined Contribution Plan, Cost	$ 5,100,000	$ 5,600,000	$ 5,400,000
Healthcare Coverage Claims in Excess of	$ 175,000

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Note 10 - Employee Benefit Plans - Projected Benefit Obligation Reconciliation for Delaware Plan (Details) - Pension Plan [Member] $ in Thousands	12 Months Ended
	Oct. 01, 2016 USD ($)
Benefit obligation	$ 3,463
Interest cost	147
Actuarial (gain) loss	324
Plan settlement	290
Distributions	(4,224)
Benefit obligation
Fair value of plan assets	2,201
Actual return on plan assets	104
Defined Benefit Plan, Plan Assets, Contributions by Employer	1,919
Plan settlement	(4,003)
Distributions	(221)
Fair value of plan assets
Funded status
Net amount recognized
Accrued benefit liability
Accumulated other comprehensive loss (net of tax)
Net amount recognized
Unrecognized net loss
Net amount recognized
Net loss	685
Amortization of net loss	(76)
Settlement loss	(2,539)
Total recognized in other comprehensive income loss	$ (1,930)

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Note 10 - Employee Benefit Plans - Net Periodic Pension Costs and Related Components (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Pension plan settlement loss			$ 2,539
Pension Plan [Member]
Interest cost			147
Expected return on plan assets			(175)
Pension plan settlement loss			2,539
Amortization of net loss			76
Net periodic pension cost			2,587
Supplemental Employee Retirement Plan [Member]
Interest cost	345	338	326
Amortization of net loss	150	174	85
Net periodic pension cost	805	856	674
Service cost	$ 310	$ 344	$ 263

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Note 10 - Employee Benefit Plans - Projected Benefit Obligation Reconciliation for SERP (Details) - Supplemental Employee Retirement Plan [Member] - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Benefit obligation	$ 9,389	$ 9,159	$ 7,821
Service cost	310	344	263
Interest cost	345	338	326
Actuarial (gain) loss	(33)	(162)	1,039
Distributions	(262)	(290)	(290)
Benefit obligation	9,749	9,389	9,159
Defined Benefit Plan, Plan Assets, Contributions by Employer	262	290	290
Distributions	(262)	(290)	(290)
Fair value of plan assets
Funded status	(9,749)	(9,389)	(9,159)
Net amount recognized	(9,749)	(9,389)	(9,159)
Unrecognized net loss	1,966	2,149	2,485
Net amount recognized	1,966	2,149	2,485
Net loss	(33)	(162)	1,039
Amortization of net loss	(150)	(174)	(85)
Total recognized in other comprehensive income (loss)	$ (183)	$ (336)	$ 954

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Note 10 - Employee Benefit Plans - Plan Valuation Assumptions (Details) - Pension Plan [Member]	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate	4.00%	3.75%	3.75%
Rate of increase in compensation levels	3.00%	3.00%	3.00%

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Note 10 - Employee Benefit Plans - Projected Benefit Payments (Details) - Supplemental Employee Retirement Plan [Member] $ in Thousands	Sep. 29, 2018 USD ($)
2019	$ 325
2020	278
2021	278
2022	553
2023	553
2024-2028	$ 4,083

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Note 11 - Commitments and Contingencies (Details Textual)	12 Months Ended
	Sep. 29, 2018 USD ($)	Sep. 30, 2017 USD ($)	Oct. 01, 2016 USD ($)	Oct. 02, 2017 USD ($)
Operating Leases, Rent Expense, Total	$ 1,500,000	$ 1,800,000	$ 1,800,000
Operating Leases, Future Minimum Payments Due, Next Twelve Months	1,000,000
Operating Leases, Future Minimum Payments, Due in Two Years	543,000
Operating Leases, Future Minimum Payments, Due in Three Years	185,000
Operating Leases, Future Minimum Payments, Due in Four Years	22,000
Operating Leases, Future Minimum Payments, Due Thereafter	$ 16,000
Change in Control Agreement [Member]
Guarantee Obligations Term	2 years
Change in Control Agreement Renewal [Member]
Guarantee Obligations Term	1 year
Chief Executive Officer and Chief Financial Officer [Member] | Severance Agreement [Member]
Guarantee Obligations Term	2 years
Ratio of Severance Benefits to Base Compensation	1.5
Severance Benefits Continuation of Health and Welfare Benefits Term	1 year 180 days
Chief Executive Officer and Chief Financial Officer [Member] | Severance Agreement Renewal [Member]
Guarantee Obligations Term	1 year
Chief Executive Officer and Chief Financial Officer [Member] | Change in Control Agreement [Member]
Ratio of Severance Benefits to Base Compensation	2
Severance Benefits Continuation of Health and Welfare Benefits Term	2 years
Guarantor Obligations Triggering Event Term from Change in Control to Termination	2 years
Ratio of Severance Benefits to the Average Bonus for the Prior Three Years	2
Key Members of Management [Member] | Change in Control Agreement [Member]
Ratio of Severance Benefits to Base Compensation	1
Severance Benefits Continuation of Health and Welfare Benefits Term	1 year
Ratio of Severance Benefits to the Average Bonus for the Prior Three Years	1
Non-cancelable Purchase Commitment for Raw Material [Member]
Purchase Commitment, Remaining Minimum Amount Committed	$ 75,100,000
Non-cancelable Purchase Commitment Term	100 days
Purchase Commitment for Equipment [Member]
Purchase Commitment, Remaining Minimum Amount Committed	$ 9,600,000
Leased Facility in Houston, Texas [Member]
Lease Purchase Option Exercised				$ 4,900,000
Fire [Member]
Insurance Recoveries	183,000
Insurance Settlements Receivable	462,000
Fire [Member] | Cost of Sales [Member]
Insurance Recoveries	645,000
Storm [Member]
Insurance Recoveries	439,000
Insurance Settlements Receivable	52,000
Storm [Member] | Cost of Sales [Member]
Insurance Recoveries	439,000
Storm [Member] | Selling, General and Administrative Expenses [Member]
Insurance Recoveries	26,000
Storm [Member] | Other Income [Member]
Insurance Recoveries	$ 26,000

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Note 12 - Earnings Per Share (Details Textual) - shares	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	83,000	76,000	51,000

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Note 12 - Earnings Per Share - Basic and Diluted Earnings Per Share Attributable to Common Shareholders (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Net earnings	$ 36,266	$ 22,548	$ 37,245
Basic weighted average shares outstanding (in shares)	19,079	19,011	18,754
Dilutive effect of stock-based compensation (in shares)	198	206	301
Diluted weighted average shares outstanding (in shares)	19,277	19,217	19,055
Net earnings per share:
Basic (in dollars per share)	$ 1.90	$ 1.19	$ 1.99
Diluted (in dollars per share)	$ 1.88	$ 1.17	$ 1.95

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Note 13 - Business Segment Information (Details Textual)	12 Months Ended
	Sep. 29, 2018
Number of Reportable Segments	1

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Note 13 - Business Segment Information - Net Sales And Long-lived Assets By Geographic Region (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Revenue	$ 453,217	$ 388,871	$ 418,547
Long-term Assets	133,913	122,574	112,130
UNITED STATES
Revenue	451,418	387,199	416,391
Long-term Assets	133,913	122,574	112,130
Non-US [Member]
Revenue	1,799	1,672	2,156
Long-term Assets

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Note 13 - Business Segment Information - Net Sales By Product Line (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Revenue	$ 453,217	$ 388,871	$ 418,547
Welded Wire Reinforcement [Member]
Revenue	273,658	239,522	256,801
PC Strand [Member]
Revenue	$ 179,559	$ 149,349	$ 161,746

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Note 14 - Related Party Transactions (Details Textual) - USD ($)	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Revenue from Related Parties	$ 699,000	$ 622,000	$ 420,000

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Note 15 - Other Financial Data - Balance Sheet Information (Details) - USD ($) $ in Thousands	Sep. 29, 2018	Sep. 30, 2017
Accounts receivable, net:
Accounts receivable	$ 51,779	$ 40,485
Less allowance for doubtful accounts	(295)	(201)
Total	51,484	40,284
Inventories:
Raw materials	61,008	51,808
Work in process	4,779	2,637
Finished goods	28,370	27,408
Total	94,157	81,853
Other current assets:
Prepaid insurance	3,845	3,796
Income taxes receivable		925
Other	2,050	1,228
Total	5,895	5,949
Other assets:
Cash surrender value of life insurance policies	9,769	9,026
Capitalized financing costs, net	40	105
Other	104	203
Total	9,913	9,334
Property, plant and equipment, net:
Land and land improvements	14,438	12,177
Buildings	54,684	50,373
Machinery and equipment	160,068	153,484
Construction in progress	9,672	5,641
Property, plant and equipment, gross	238,862	221,675
Less accumulated depreciation	(132,714)	(123,005)
Total	106,148	98,670
Accrued expenses:
Salaries, wages and related expenses	6,775	5,520
Property taxes	1,585	1,384
Customer rebates	1,531	1,015
Sales allowance reserves	804	21
Income taxes	469
Workers' compensation	113	116
Other	652	611
Total	11,929	8,667
Other liabilities:
Deferred compensation	10,541	9,276
Deferred Tax Liabilities, Net, Noncurrent	5,340	8,103
Total	$ 15,881	$ 17,379

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Note 16 - Rights Agreement (Details Textual)			12 Months Ended
	May 17, 1999	Apr. 26, 1999 shares	Sep. 29, 2018 $ / shares
Dividend Distribution of Rights | shares		1
Rights Assigned to Common Stock Issued	1
Ownership Percentage to Trigger Rights Exercisable			20.00%
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 0.005
Portion of Company Sold Triggers Exercisability of Rights			50.00%
Series A Junior Participating Preferred Stock [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 46

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Note 18 - Share Repurchases (Details Textual) - USD ($) shares in Thousands, $ in Millions	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016	Nov. 18, 2008
Stock Repurchase Program, Authorized Amount				$ 25.0
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 24.8
Stock Repurchased During Period, Shares	0	0	0

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Schedule II - Valuation and Qualifying Accounts - Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Sep. 29, 2018	Sep. 30, 2017	Oct. 01, 2016
Balance, beginning of year	$ 201	$ 291	$ 638
Amounts charged to earnings	100	(57)	(244)
Write-offs, net of recoveries	(6)	(33)	(103)
Balance, end of year	$ 295	$ 201	$ 291