10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended December 31, 2016

OR

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

For the Transition Period From ________ to ________

Commission File Number: 1-9929

Insteel Industries, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

Yes [X] No [ ]

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

Yes [X] No [ ]

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

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

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

Yes [ ] No [X]

The number of shares outstanding of the registrant’s common stock as of January 18, 2017 was 18,985,236.

PART I – FINANCIAL INFORMATION
Item 1.	Unaudited Financial Statements
	Consolidated Statements of Operations and Comprehensive Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Consolidated Statements of Shareholders' Equity	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6.	Exhibits	21
SIGNATURES		22
EXHIBIT INDEX		23

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	December 31,			January 2,
	2016			2016
Net sales	$	93,888		$	92,391
Cost of sales		80,878			75,968
Gross profit		13,010			16,423
Selling, general and administrative expense		6,264			6,335
Restructuring charges (recoveries), net		48			(75	)
Other income, net		(10	)		(114	)
Interest expense		34			41
Interest income		(52	)		(18	)
Earnings before income taxes		6,726			10,254
Income taxes		2,266			3,546
Net earnings	$	4,460		$	6,708
Net earnings per share:
Basic	$	0.23		$	0.36
Diluted		0.23			0.36
Weighted average shares outstanding:
Basic		18,980			18,525
Diluted		19,209			18,883
Cash dividends declared per share	$	1.28		$	1.03
Comprehensive income	$	4,460		$	6,708

See accompanying notes to consolidated financial statements.

3

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

	(Unaudited)
	December 31,			October 1,
	2016			2016
Assets
Current assets:
Cash and cash equivalents	$	57,020		$	58,873
Accounts receivable, net		44,155			47,389
Inventories		61,590			71,186
Other current assets		3,258			3,039
Total current assets		166,023			180,487
Property, plant and equipment, net		92,332			88,193
Intangibles, net		8,774			9,063
Goodwill		6,965			6,965
Other assets		8,463			8,184
Total assets	$	282,557		$	292,892
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	29,001		$	42,759
Accrued expenses		8,394			11,024
Dividends payable		24,298			-
Total current liabilities		61,693			53,783
Other liabilities		15,888			14,543
Commitments and contingencies
Shareholders' equity:
Common stock		18,985			18,976
Additional paid-in capital		68,056			67,817
Retained earnings		119,476			139,314
Accumulated other comprehensive loss		(1,541	)		(1,541	)
Total shareholders' equity		204,976			224,566
Total liabilities and shareholders' equity	$	282,557		$	292,892

See accompanying notes to consolidated financial statements.

4

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	December 31,			January 2,
	2016			2016
Cash Flows From Operating Activities:
Net earnings	$	4,460		$	6,708
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		3,018			2,742
Amortization of capitalized financing costs		16			16
Stock-based compensation expense		257			229
Deferred income taxes		1,187			1,215
Excess tax benefits from stock-based compensation		(100	)		(253	)
Loss (gain) on sale and disposition of property, plant and equipment		36			(239	)
Increase in cash surrender value of life insurance policies over premiums paid		(73	)		-
Net changes in assets and liabilities:
Accounts receivable, net		3,234			6,414
Inventories		9,596			(3,056	)
Accounts payable and accrued expenses		(17,412	)		(2,659	)
Other changes		(425	)		1,274
Total adjustments		(666	)		5,683
Net cash provided by operating activities		3,794			12,391
Cash Flows From Investing Activities:
Capital expenditures		(5,417	)		(941	)
Proceeds from sale of assets held for sale		-			180
Proceeds from sale of property, plant and equipment		-			60
Proceeds from surrender of life insurance policies		-			40
Increase in cash surrender value of life insurance policies		(221	)		(212	)
Net cash used for investing activities		(5,638	)		(873	)
Cash Flows From Financing Activities:
Proceeds from long-term debt		97			65
Principal payments on long-term debt		(97	)		(65	)
Cash dividends paid		-			(559	)
Cash received from exercise of stock options		35			1,492
Excess tax benefits from stock-based compensation		100			253
Payment of employee tax withholdings related to net share transactions		(144	)		(332	)
Financing costs		-			(11	)
Net cash provided by (used for) financing activities		(9	)		843
Net increase (decrease) in cash and cash equivalents		(1,853	)		12,361
Cash and cash equivalents at beginning of period		58,873			33,258
Cash and cash equivalents at end of period	$	57,020		$	45,619
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Income taxes, net	$	44		$	2,194
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable		1,487			479
Declaration of cash dividends to be paid		24,298			18,600
Restricted stock units and stock options surrendered for withholding taxes payable		144			332

See accompanying notes to consolidated financial statements.

5

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)

											Accumulated
					Additional						Other			Total
	Common Stock				Paid-In			Retained			Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings			Loss			Equity
Balance at October 1, 2016		18,976	$	18,976	$	67,817		$	139,314		$	(1,541	)	$	224,566
Net earnings									4,460						4,460
Stock options exercised, net		7		7		28									35
Vesting of restricted stock units		2		2		(2	)								-
Compensation expense associated with stock-based plans						257									257
Excess tax benefits from stock-based compensation						100									100
Restricted stock units and stock options surrendered for withholding taxes payable						(144	)								(144	)
Cash dividends declared									(24,298	)					(24,298	)
Balance at December 31, 2016		18,985	$	18,985	$	68,056		$	119,476		$	(1,541	)	$	204,976

See accompanying notes to consolidated financial statements.

6

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Insteel Industries, Inc. (“we,” “us,” “our,” “the Company” or “Insteel”) have been prepared pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. The October 1, 2016 consolidated balance sheet was derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should therefore be read in conjunction with the consolidated financial statements and notes for the fiscal year ended October 1, 2016 included in our Annual Report on Form 10-K filed with the SEC.

The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that we consider necessary for a fair presentation of results for these interim periods. The results of operations for the three-month period ended December 31, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2017 or future periods.

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

(2) Recent Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. The adoption of this update is not expected to have a material impact on our consolidated financial statements.

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. ASU No. 2016-09 will become effective for us in the first quarter of fiscal 2018. We are evaluating the future effects of the adoption of this update on our consolidated financial statements.

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

In July 2015, the FASB issued ASU No. 2015-11 “Simplifying the Measurement of Inventory,” which requires that an entity measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. ASU No. 2015-11 will become effective for us in the first quarter of fiscal 2018. We do not expect the adoption of this update will have a material effect on our consolidated financial statements.

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

7

(3) Restructuring Charges

On August 15, 2014, we purchased substantially all of the assets associated with the prestressed concrete strand (“PC strand”) business of American Spring Wire Corporation (“ASW”) for a final adjusted purchase price of $33.5 million, net of post-closing adjustments of $480,000 (the “ASW Acquisition”). ASW manufactured PC strand at facilities located in Houston, Texas and Newnan, Georgia.

Subsequent to the ASW Acquisition, in fiscal 2014, we incurred employee separation costs for staffing reductions associated with the acquisition. In February 2015, we elected to consolidate our PC strand operations with the closure of the Newnan facility, which was completed in March 2015.

Following is a summary of the restructuring activities and associated costs that were incurred during the three-month periods ended December 31, 2016 and January 2, 2016:

				Severance and
	Equipment			Other Employee			Facility			Gain on Sale
(In thousands)	Relocation Costs			Separation Costs			Closure Costs			of Equipment			Total
2017
Liability as of October 1, 2016	$	31		$	239		$	-		$	-		$	270
Restructuring charges		48			-			-			-			48
Cash payments		(79	)		(74	)		-			-			(153	)
Liability as of December 31, 2016	$	-		$	165		$	-		$	-		$	165
2016
Liability as of October 3, 2015	$	-		$	735		$	-		$	-		$	735
Restructuring charges (recoveries)		75			-			30			(180	)		(75	)
Cash receipts (payments)		(75	)		(72	)		(30	)		180			3
Liability as of January 2, 2016	$	-		$	663		$	-		$	-		$	663

As of December 31, 2016, we recorded restructuring liabilities amounting to $0.2 million in accrued expenses on our consolidated balance sheet. As of October 1, 2016, we recorded restructuring liabilities amounting to $0.3 million on our consolidated balance sheet, including $0.1 million in accounts payable and $0.2 million in accrued expenses. We do not currently expect to incur any significant restructuring charges during the remainder of fiscal 2017.

(4) Fair Value Measurements

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

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

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

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

8

As of December 31, 2016 and October 1, 2016, we held financial assets that are required to be measured at fair value on a recurring basis, which are summarized below:

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of December 31, 2016:
Current assets:
Cash equivalents	$	58,643	$	58,643	$	-
Other assets:
Cash surrender value of life insurance policies		8,203		-		8,203
Total	$	66,846	$	58,643	$	8,203
As of October 1, 2016:
Current assets:
Cash equivalents	$	58,846	$	58,846	$	-
Other assets:
Cash surrender value of life insurance policies		7,909		-		7,909
Total	$	66,755	$	58,846	$	7,909

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 December 31, 2016 and October 1, 2016, we had no nonfinancial assets that were required to be measured at fair value on a nonrecurring basis. The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these financial instruments.

(5) Intangible Assets

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

(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value
As of December 31, 2016:
Customer relationships	$	6,500	$	(775	)	$	5,725
Developed technology and know-how		1,800		(214	)		1,586
Non-competition agreements		3,577		(2,114	)		1,463
	$	11,877	$	(3,103	)	$	8,774
As of October 1, 2016:
Customer relationships	$	6,500	$	(693	)	$	5,807
Developed technology and know-how		1,800		(192	)		1,608
Non-competition agreements		3,577		(1,929	)		1,648
	$	11,877	$	(2,814	)	$	9,063

Amortization expense for intangibles was $289,000 for the three-month periods ended December 31, 2016 and January 2, 2016.

(6) Stock-Based Compensation

Under our equity incentive plans, employees and directors may be granted stock options, restricted stock, restricted stock units and performance awards. Effective February 17, 2015, our shareholders approved the 2015 Equity Incentive Plan of Insteel Industries, Inc. (the “2015 Plan”), which authorizes up to 900,000 shares of our common stock for future grants under the plan. The 2015 Plan, which expires on February 17, 2025, replaces the 2005 Equity Incentive Plan of Insteel Industries, Inc., which expired on February 15, 2015. As of December 31, 2016, there were 558,000 shares of our common stock available for future grants under the 2015 Plan, which is our only active equity incentive plan.

9

Stock option awards. Under our equity incentive plans, employees and directors may be granted options to purchase shares of common stock at the fair market value on the date of the grant. Options granted under these plans generally vest over three years and expire ten years from the date of the grant. Compensation expense associated with stock options is as follows:

	Three Months Ended
	December 31,		January 2,
(In thousands)	2016		2016
Compensation expense	$	96	$	83

As of December 31, 2016, there was $259,000 of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of 1.44 years.

The following table summarizes stock option activity:

									Contractual		Aggregate
	Options			Exercise Price Per Share					Term - Weighted		Intrinsic
	Outstanding						Weighted		Average		Value
	(in thousands)			Range			Average		(in years)		(in thousands)
Outstanding at October 1, 2016		371		$9.16	-	$34.49	$	20.81
Exercised		(22	)	13.06	-	20.50		18.74			$	368
Outstanding at December 31, 2016		349		9.16	-	34.49		20.94		7.78		5,128
Vested and anticipated to vest in the future at December 31, 2016		343						20.91		7.76		5,057
Exercisable at December 31, 2016		120						15.98		6.19		2,369

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

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

	Three Months Ended
	December 31,		January 2,
(In thousands)	2016		2016
Compensation expense	$	161	$	146

As of December 31, 2016, there was $442,000 of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 1.79 years.

10

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, October 1, 2016		145		$	22.35
Released		(2	)		23.95
Balance, December 31, 2016		143			22.32

(7) Income Taxes

Effective income tax rate. Our effective income tax rate was 33.7% for the three-month period ended December 31, 2016 compared with 34.6% for the three-month period ended January 2, 2016. The effective income tax rates for both periods were based upon the estimated rate applicable for the entire fiscal year adjusted to reflect any significant items related specifically to interim periods.

Deferred income taxes. In November 2015, the FASB issued ASU No. 2015-17 “Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes” to simplify the presentation of deferred income taxes. Under this update, all deferred tax assets and liabilities, along with any related valuation allowance, are required to be classified as noncurrent on the balance sheet. Effective January 2, 2016, we early adopted ASU No. 2015-17 on a prospective basis, which resulted in the reclassification of our current deferred tax asset as a non-current deferred tax liability on our consolidated balance sheet. No prior periods were retrospectively adjusted.

As of December 31, 2016, we recorded a deferred tax liability (net of valuation allowance) of $6.7 million in other liabilities on our consolidated balance sheet. We have $7.5 million of state net operating loss carryforwards (“NOLs”) that begin to expire in 2017, but principally expire between 2017 and 2031. We have also recorded $87,000 of gross deferred tax assets for various state tax credits that begin to expire in 2018, but principally expire between 2018 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 December 31, 2016 and October 1, 2016, we recorded a valuation allowance of $280,000 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.

Uncertainty in income taxes. As of December 31, 2016, we had no material, known tax exposures that require the establishment of contingency reserves for uncertain tax positions.

We file U.S. federal income tax returns as well as state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to 2011 remain subject to examination.

(8) 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 the second quarter of fiscal 2016, we notified plan participants of our intent to terminate the Delaware Plan effective May 1, 2016. During September 2016, the Delaware Plan 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. As of October 1, 2016, there were no remaining plan assets.

11

Net periodic pension cost for the Delaware Plan in the prior year included the following components:

	Three Months Ended
	January 2,
	2016
Interest cost	$	37
Expected return on plan assets		(44	)
Recognized net actuarial loss		19
Net periodic pension cost	$	12

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

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

	Three Months Ended
	December 31,		January 2,
(In thousands)	2016		2016
Service cost	$	86	$	66
Interest cost		85		81
Recognized net actuarial loss		43		21
Net periodic pension cost	$	214	$	168

(9) Long-Term Debt

Revolving Credit Facility. We have a $100.0 million revolving credit facility (the “Credit Facility”) that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. In May 2015, we amended the Credit Facility to, among other changes, extend its maturity date from June 2, 2016 to May 13, 2020. Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently $100.0 million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories. As of December 31, 2016, no borrowings were outstanding on the Credit Facility, $73.6 million of borrowing capacity was available and outstanding letters of credit totaled $1.8 million.

Interest rates on the Credit Facility are based upon (1) an index rate that is established at the highest of the prime rate, 0.50% plus the federal funds rate or the LIBOR rate plus the excess of the then-applicable margin for LIBOR loans over the then-applicable margin for index rate loans, or (2) at our election, a LIBOR rate, plus in either case, an applicable interest rate margin. The applicable interest rate margins are adjusted on a quarterly basis based upon the amount of excess availability on the Credit Facility within the range of 0.25% to 0.75% for index rate loans and 1.25% to 1.75% for LIBOR loans. In addition, the applicable interest rate margins would be increased by 2.00% upon the occurrence of certain events of default provided for under the terms of the Credit Facility. Based on our excess availability as of December 31, 2016, 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 December 31, 2016, 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 $16,000 for the three-month periods ended December 31, 2016 and January 2, 2016. Accumulated amortization of capitalized financing costs was $4.5 million as of December 31, 2016 and October 1, 2016.

(10) Earnings Per Share

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

	Three Months Ended
	December 31,		January 2,
(In thousands, except per share amounts)	2016		2016
Net earnings available to common shareholders	$	4,460	$	6,708
Basic weighted average shares outstanding		18,980		18,525
Dilutive effect of stock-based compensation		229		358
Diluted weighted average shares outstanding		19,209		18,883
Net earnings per share:
Basic	$	0.23	$	0.36
Diluted	$	0.23	$	0.36

Options representing 42,000 and 86,000 shares for the three-month periods ended December 31, 2016 and January 2, 2016, respectively, were antidilutive and not included in the diluted earnings per share calculation.

(11) Share Repurchases

On November 18, 2008, our Board of Directors approved a share repurchase authorization to buy back up to $25.0 million of our outstanding common stock (the “Authorization”). Under the Authorization, repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors. We are not obligated to acquire any particular amount of common stock and the program may be commenced or suspended at any time at our discretion without prior notice. The Authorization continues in effect until terminated by the Board of Directors. As of December 31, 2016, there was $24.8 million remaining available for future share repurchases under this authorization. No repurchases of common stock were made during the three-month periods ended December 31, 2016 and January 2, 2016.

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(12) Other Financial Data

Balance sheet information:

	December 31,			October 1,
(In thousands)	2016			2016
Accounts receivable, net:
Accounts receivable	$	44,445		$	47,680
Less allowance for doubtful accounts		(290	)		(291	)
Total	$	44,155		$	47,389
Inventories:
Raw materials	$	37,021		$	45,032
Work in process		2,828			2,788
Finished goods		21,741			23,366
Total	$	61,590		$	71,186
Other current assets:
Prepaid insurance	$	2,260		$	1,805
Other		998			1,234
Total	$	3,258		$	3,039
Other assets:
Cash surrender value of life insurance policies	$	8,203		$	7,909
Capitalized financing costs, net		154			170
Other		106			105
Total	$	8,463		$	8,184
Property, plant and equipment, net:
Land and land improvements	$	9,715		$	9,619
Buildings		43,739			43,739
Machinery and equipment		143,947			143,789
Construction in progress		16,272			11,318
		213,673			208,465
Less accumulated depreciation		(121,341	)		(120,272	)
Total	$	92,332		$	88,193
Accrued expenses:
Salaries, wages and related expenses	$	2,583		$	6,619
Customer rebates		1,804			1,296
Property taxes		1,266			1,328
Sales allowance reserves		1,104			577
Income taxes		731			-
Restructuring liabilities		165			239
Workers' compensation		124			127
Other		617			838
Total	$	8,394		$	11,024
Other liabilities:
Deferred compensation	$	9,223		$	9,071
Deferred income taxes		6,659			5,472
Other		6			-
Total	$	15,888		$	14,543

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(13) Business Segment Information

Our operations are entirely focused on the manufacture and marketing of steel wire reinforcing products for concrete construction applications. Our concrete reinforcing products consist of two product lines: PC strand and welded wire reinforcement. Based on the criteria specified in ASC Topic 280, Segment Reporting, we have one reportable segment.

(14) Contingencies

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

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

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, particularly under the caption “Outlook” below. When used in this report, the words “believes,” “anticipates,” “expects,” “estimates,” “appears,” “plans,” “intends,” “may,” “should,” “could” and similar expressions are intended to identify forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they are subject to a number of risks and uncertainties, and we can provide no assurances that such plans, intentions or expectations will be implemented or achieved. Many of these risks and uncertainties are discussed in detail, and where appropriate, updated in our filings with the United States (“U.S.”) Securities and Exchange Commission (“SEC”), in particular in our Annual Report on Form 10-K for the year ended October 1, 2016. You should carefully review these risks and uncertainties.

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

It is not possible to anticipate and list all risks and uncertainties that may affect our future operations or financial performance; however, they would 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;

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

● the “Risk Factors” discussed in our Annual Report on Form 10-K for the year ended October 1, 2016 and in other filings made by us with the SEC.

Overview

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

Results of Operations

Statements of Operations – Selected Data

(Dollars in thousands)

	Three Months Ended
	December 31,						January 2,
	2016			Change			2016
Net sales	$	93,888			1.6	%	$	92,391
Gross profit		13,010			(20.8%	)		16,423
Percentage of net sales		13.9	%					17.8	%
Selling, general and administrative expense	$	6,264			(1.1%	)	$	6,335
Percentage of net sales		6.7	%					6.9	%
Restructuring charges (recoveries), net	$	48			N/M		$	(75	)
Other income, net		(10	)		(91.2%	)		(114	)
Interest expense		34			(17.1%	)		41
Interest income		(52	)		N/M			(18	)
Effective income tax rate		33.7	%					34.6	%
Net earnings	$	4,460			(33.5%	)	$	6,708

"N/M" = not meaningful

First Quarter of Fiscal 2017 Compared to First Quarter of Fiscal 2016

Net Sales

Net sales for the first quarter of 2017 increased 1.6% to $93.9 million from $92.4 million in the prior year quarter as an 8.5% increase in shipments was partially offset by a 6.4% decrease in average selling prices. The increase in shipments was primarily due to improved market conditions and increased demand for our products relative to the prior year quarter. The decrease in average selling prices was driven by competitive pricing pressures.

Gross Profit

Gross profit for the first quarter of 2017 decreased 20.8% to $13.0 million, or 13.9% of net sales, from $16.4 million, or 17.8% of net sales, in the prior year quarter. The year-over-year decrease was primarily due to lower spreads between average selling prices and raw material costs ($4.5 million), which were partially offset by the increase in shipments ($1.5 million). The decrease in spreads was driven by lower average selling prices ($6.4 million) and higher freight expense ($0.3 million) partially offset by lower raw material costs ($2.2 million).

Selling, General and Administrative Expense

Selling, general and administrative expense for the first quarter of 2017 remained relatively flat at $6.3 million, or 6.7% of net sales, compared to 6.9% of net sales in the prior year quarter as higher employee benefit costs ($0.4 million) were offset by lower compensation expense ($0.4 million). The increase in employee benefit costs was primarily related to higher employee health insurance expense in the current year quarter. The decrease in compensation expense was largely driven by lower incentive plan expense.

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Restructuring Charges, Net

Net restructuring charges of $48,000 were incurred in the first quarter of 2017 for equipment relocation costs related to the consolidation of our PC strand facilities. Net restructuring recoveries of $75,000 were incurred in the first quarter of 2016 reflecting a gain on the sale of equipment previously associated with the Newnan, Georgia PC strand facility ($180,000) partially offset by equipment relocation ($75,000) and facility closure costs ($30,000).

Income Taxes

Our effective income tax rate for the first quarter of 2017 decreased to 33.7% from 34.6% for the prior year quarter due to changes in permanent book versus tax differences.

Net Earnings

Net earnings for the first quarter of 2017 decreased to $4.5 million ($0.23 per share) from $6.7 million ($0.36 per share) in the prior year quarter primarily due to the decrease in gross profit.

Liquidity and Capital Resources

Selected Financial Data

(Dollars in thousands)

	Three Months Ended
	December 31,			January 2,
	2016			2016
Net cash provided by operating activities	$	3,794		$	12,391
Net cash used for investing activities		(5,638	)		(873	)
Net cash (used for) provided by financing activities		(9	)		843
Net working capital		104,330			95,499
Total debt		-			-
Percentage of total capital		-			-
Shareholders' equity	$	204,976		$	189,406
Percentage of total capital		100.0	%		100.0	%
Total capital (total debt + shareholders' equity)	$	204,976		$	189,406

Operating Activities

Operating activities provided $3.8 million of cash during the first quarter of 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 $4.6 million of cash due to a $17.4 million decrease in accounts payable and accrued expenses partially offset by a $9.6 million decrease in inventories and a $3.2 million decrease in accounts receivable. The decrease in accounts payable and accrued expenses was principally due to lower raw material purchases during the quarter together with the payment of accrued incentive compensation for the prior year. The decrease in inventories was largely due to lower raw material purchases during the quarter. The decrease in accounts receivable was primarily related to the seasonal downturn in sales and lower selling prices.

Operating activities provided $12.4 million of cash during the first quarter of 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 $0.7 million of cash due to a $6.4 million decrease in accounts receivable partially offset by a $3.0 million increase in inventories and a $2.7 million decrease in accounts payable and accrued expenses. The decrease in accounts receivable was primarily related to the seasonal downturn in sales and lower selling prices. The increase in inventory was largely due to the seasonal downturn in sales and a higher proportion of import purchases during the quarter. The decrease in accounts payable and accrued expenses was principally due to the payment of accrued incentive compensation for the prior year.

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

Investing Activities

Investing activities used $5.6 million of cash during the first quarter of 2017 compared to $0.9 million in the prior year quarter. Capital expenditures increased to $5.4 million from $0.9 million in the prior year quarter and are expected to increase to up to $25.0 million for fiscal 2017 largely related to the expansion of the Houston, Texas PC strand facility, additional investments in ESM manufacturing capabilities and further upgrades of production technology and information systems. Our investing activities are largely discretionary, providing us with the ability to significantly curtail outlays should business conditions warrant that such actions be taken.

Financing Activities

Financing activities used a nominal amount of cash during the first quarter of 2017 while providing $0.8 million of cash during the prior year quarter. Stock option exercises provided $1.5 million of cash during the prior year quarter, which were partially offset by the payment of $0.6 million of cash dividends. In November 2016, we declared a special cash dividend totaling $23.7 million, or $1.25 per share, in addition to our regular quarterly cash dividend of $0.6 million, or $0.03 per share, which were paid in the second quarter of fiscal 2017.

Cash Management

Our cash is concentrated primarily 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 December 31, 2016, no borrowings were outstanding on the Credit Facility, $73.6 million of borrowing capacity was available and outstanding letters of credit totaled $1.8 million.

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

Should we determine, at any time, that we required additional short-term liquidity, we would evaluate the alternative sources of financing that 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, including the next 12 months.

Seasonality and Cyclicality

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

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Impact of Inflation

We are subject to inflationary risks arising from fluctuations in the market prices for our primary raw material, hot-rolled carbon steel wire rod, and, to a much lesser extent, freight, energy and other consumables that are used in our manufacturing processes. We have generally been able to adjust our selling prices to pass through increases in these costs or offset them through various cost reduction and productivity improvement initiatives. However, our ability to raise our selling prices depends on market conditions and competitive dynamics, and there may be periods during which we are unable to fully recover increases in our costs. Inflation did not have a material impact on our sales or earnings during the first fiscal quarter of 2017. The timing and magnitude of any future increases in the prices for wire rod 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.

Contractual Obligations

There have been no material changes in our contractual obligations and commitments as disclosed in our Annual Report on Form 10-K as of October 1, 2016 other than those which occur in the ordinary course of business.

Critical Accounting Policies

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information. The preparation of our financial statements requires the application of these accounting principles in addition to certain estimates and judgments based on current available information, actuarial estimates, historical results and other assumptions believed to be reasonable. Actual results could differ from these estimates. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” included in our Annual Report on Form 10-K for the year ended October 1, 2016 for further information regarding our critical accounting policies and estimates. As of December 31, 2016, there were no changes in the nature of our critical accounting policies or the application of those policies from those reported in our Annual Report on Form 10-K for the year ended October 1, 2016.

Recent Accounting Pronouncements 

Refer to Note 2 of the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report for recently adopted and issued accounting pronouncements since the filing of our Form 10-K for the year ended October 1, 2016, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.

Outlook

As we look ahead to the remainder of 2017, we expect favorable conditions in our construction end-markets which should support higher shipment volumes and operating levels, and reduced unit conversion costs at our facilities. Customer sentiment remains positive and the most recent macro indicators reflect continued growth in nonresidential construction. We also expect the infrastructure-related portion of our business will benefit to a great extent from the federal funding provided for under the FAST Act.

We continue to focus on the operational fundamentals of our business: closely managing and controlling our expenses; aligning our production schedules with demand in a proactive manner as there are changes in market conditions to minimize our cash operating costs; and pursuing further improvements in the productivity and effectiveness of all of our manufacturing, selling and administrative activities. We expect that our financial results will be favorably impacted by the realization of additional operating synergies associated with the ASW Acquisition and the related reconfiguration of our PC strand operations following the anticipated completion of the expansion of our Houston plant during the second quarter of fiscal 2017. As market conditions improve, we also expect gradually increasing contributions from the substantial investments we have made in our facilities in the form of reduced operating costs and additional capacity to support future growth (see “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”). In addition, we will continue to pursue further acquisitions in our existing businesses that expand our penetration of markets we currently serve or expand our footprint.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Commodity Prices

We are subject to significant fluctuations in the cost and availability of our primary raw material, hot-rolled carbon steel wire rod, which we purchase from both domestic and foreign suppliers. We negotiate quantities and pricing for both domestic and foreign wire rod purchases for varying periods (most recently monthly for domestic suppliers), depending upon market conditions, to manage our exposure to price fluctuations and to ensure adequate availability of material consistent with our requirements. We do not use derivative commodity instruments to hedge our exposure to changes in prices as such instruments are not currently available for wire rod. Our ability to acquire wire rod from foreign sources on favorable terms is impacted by fluctuations in foreign currency exchange rates, foreign taxes, duties, tariffs and other trade actions. Although changes in wire rod costs and our selling prices tend to be correlated, in weaker market environments, we may be unable to fully recover increased rod costs through higher selling prices, which would reduce our earnings and cash flows. Additionally, when raw material costs decline, our financial results may be negatively impacted if the selling prices for our products decrease to an even greater extent and if we are consuming higher cost material from inventory. Based on our shipments and average wire rod cost reflected in cost of sales for the first quarter of 2017, a 10% increase in the price of wire rod would have resulted in a $5.2 million decrease in our pre-tax earnings (assuming there was not a corresponding change in our selling prices).

Interest Rates 

Although we did not have any balances outstanding on our Credit Facility as of December 31, 2016, 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 December 31, 2016.

Item 4. Controls and Procedures

We have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2016. 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 (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Further, we concluded that our disclosure controls and procedures were effective to ensure that information is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in lawsuits, claims, investigations and proceedings, including commercial, environmental and employment matters, which arise in the ordinary course of business. We do not anticipate that the ultimate costs to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

During the quarter ended December 31, 2016, there were no material changes from the risk factors set forth under Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 1, 2016. You should carefully consider these factors in addition to the other information set forth in this report which could materially affect our business, financial condition or future results. The risks and uncertainties described in this report and in our Annual Report on Form 10-K for the year ended October 1, 2016, as well as other reports and statements that we file with the SEC, are not the only risks and uncertainties facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, results of operations or cash flows.

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

On November 18, 2008, our Board of Directors approved a share repurchase authorization to buy back up to $25.0 million of our outstanding common stock (the “Authorization”). Repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors. We are not obligated to acquire any particular amount of common stock and may commence or suspend the program at any time at our discretion without prior notice. The Authorization continues in effect until terminated by our Board of Directors. As of December 31, 2016, there was $24.8 million remaining available for future share repurchases under the Authorization. There were no share repurchases during the three-month periods ended December 31, 2016 and January 2, 2016.

Item 6. Exhibits

3.1	Bylaws of the Company (as last amended December 19, 2016)
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from the Quarterly Report on Form 10-Q of Insteel Industries, Inc. for the quarter ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations and Comprehensive Income for the three months ended December 31, 2016 and January 2, 2016, (ii) the Consolidated Balance Sheets as of December 31, 2016 and October 1, 2016, (iii) the Consolidated Statements of Cash Flows for the three months ended December 31, 2016 and January 2, 2016, (iv) the Consolidated Statements of Shareholders’ Equity as of December 31, 2016 and October 1, 2016, and (v) the Notes to Consolidated Financial Statements.

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SIGNATURES

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

INSTEEL INDUSTRIES, INC.

Registrant

Date: January 19, 2017	By:	/s/ Michael C. Gazmarian
		Michael C. Gazmarian
		Vice President, Chief Financial Officer and Treasurer
		(Duly Authorized Officer and Principal Financial Officer)

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EXHIBIT INDEX

Exhibit Number	Description
3.1	Bylaws of the Company (as last amended December 19, 2016)
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from the Quarterly Report on Form 10-Q of Insteel Industries, Inc. for the quarter ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations and Comprehensive Income for the three months ended December 31, 2016 and January 2, 2016, (ii) the Consolidated Balance Sheets as of December 31, 2016 and October 1, 2016, (iii) the Consolidated Statements of Cash Flows for the three months ended December 31, 2016 and January 2, 2016, (iv) the Consolidated Statements of Shareholders’ Equity as of December 31, 2016 and October 1, 2016, and (v) the Notes to Consolidated Financial Statements.

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EX-3.1

Exhibit 3.1

BYLAWS

OF

INSTEEL INDUSTRIES, INC.

Effective August 21, 1990
As last amended December 19, 2016

TABLE OF CONTENTS TO BYLAWS
OF INSTEEL INDUSTRIES, INC.

		Page
ARTICLE 1- OFFICES
Section 1.	Principal and Registered Office	1
Section 2.	Other Offices	1
ARTICLE 2- MEETINGS OF SHAREHOLDERS		1
Section 1.	Place of Meeting	1
Section 2.	Annual Meeting	1
Section 3.	Substitute Annual Meeting	1
Section 4.	Special Meetings	1
Section 5.	Notice of Meetings	1
Section 6.	Quorum	2
Section 7.	Shareholders’ List	2
Section 8.	Voting of Shares	2
Section 9.	Inspectors of Election.	3
Section 10.	Action Without Meeting	3
Section 11.	Action to Be Taken at Annual or Special Meetings of Shareholders	3
ARTICLE 3- BOARD OF DIRECTORS		6
Section 1.	General Powers	6
Section 2.	Number, Term and Qualification	6
Section 3.	Removal	6
Section 4.	Vacancies	6
Section 5.	Compensation	6
ARTICLE 4- MEETINGS OF DIRECTORS		6
Section 1.	Annual and Regular Meetings	6
Section 2.	Special Meetings	7
Section 3.	Notice of Meetings	7
Section 4.	Quorum	7
Section 5.	Manner of Acting	7
Section 6.	Presumption of Assent	7
Section 7.	Action Without Meeting	7
Section 8.	Meeting by Communications Device	8
ARTICLE 5- COMMITTEES		8
Section 1.	Election and Powers	8
Section 2.	Removal; Vacancies	8
Section 3.	Meetings	8
Section 4.	Minutes	9
ARTICLE 6- OFFICERS		9
Section 1.	Titles	9

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Section 2.	Election; Appointment	9
Section 3.	Removal	9
Section 4.	Vacancies	9
Section 5.	Compensation	9
Section 6.	Chairman and Vice Chairman of the Board of Directors	9
Section 7.	Chief Executive Officer	9
Section 8.	President	9
Section 9.	Vice Presidents	10
Section 10.	Secretary	10
Section 11.	Assistant Secretaries	10
Section 12.	Treasurer	10
Section 13.	Assistant Treasurers	11
Section 14.	Controller and Assistant Controllers	11
Section 15.	Voting Upon Stocks	11
ARTICLE 7- CAPITAL STOCK		11
Section 1.	Certificates	11
Section 2.	Transfer of Shares	11
Section 3.	Transfer Agent and Registrar	12
Section 4.	Regulations	12
Section 5.	Fixing Record Date	12
Section 6.	Lost Certificates	12
ARTICLE 8- INDEMNIFICATION OP DIRECTORS AND OFFICERS		12
Section 1.	Indemnification Provisions	12
Section 2.	Definitions	13
Section 3.	Settlements	13
Section 4.	Litigation Expense Advances.	13
Section 5.	Approval of Indemnification Payments	13
Section 6.	Suits by Claimant	14
Section 7.	Consideration; Personal Representatives and Other Remedies	14
Section 8.	Scope of Indemnification Rights	14
ARTICLE 9- GENERAL PROVISIONS		14
Section 1.	Dividends and Other Distributions	14
Section 2.	Seal	14
Section 3.	Waiver of Notice	14
Section 4.	Checks	14
Section 5.	Fiscal Year	14
Section 6.	Amendments	15
Section 7.	Applicability of Antitakeover Statutes	15

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BYLAWS QF

INSTEEL INDUSTRIES. INC.

ARTICLE 1- OFFICES 

Section 1. Principal and Registered Office. The principal office of the corporation shall be located at 1373 Boggs Drive, Mount Airy, North Carolina, which shall also be the registered office of the corporation.

Section 2. Other Offices. The corporation may have offices at such other places, either within or without the State of North Carolina, as the board of directors may from time to time determine.

ARTICLE 2- MEETINGS OF SHAREHOLDERS 

Section 1. Place of Meeting. Meetings of shareholders shall be held at the principal office of the corporation, or at such other place, either within or without the State of North Carolina, as shall be designated in the notice of the meeting.

Section 2. Annual Meeting. The annual meeting of shareholders shall be held at such time and on such day (except a Saturday, Sunday or legal holiday) during the month of February in each year as the directors shall from time to time determine for the purpose of electing directors of the corporation and the transaction of such other business as may be properly brought before the meeting.

Section 3. Substitute Annual Meeting. If the annual meeting is not held on the day designated by these bylaws, a substitute annual meeting may be called in accordance with Section 4 of this Article. A meeting so called shall be designated and treated for all purposes as the annual meeting.

Section 4. Special Meetings. Special meetings of the shareholders may be called at any time by the resident or the board of directors.

Section 5. Notice of Meetings. At least 10 and no more than 60 days prior to any annual or special meeting of shareholders, the corporation shall notify shareholders of the date, time and place of the meeting and, in the case of a special or substitute annual meeting or where otherwise required by law, shall briefly describe the purpose or purposes of the meeting. Only business within the purpose or purposes described in the notice may be taken at a special meeting. Unless otherwise required by the articles of incorporation or by law (for example, in the event of a meeting to consider the adoption of a plan of merger or share exchange, a sale of assets other than in the ordinary course of business or a voluntary dissolution), the corporation shall be required to give notice only to shareholders entitled to vote at the meeting. If an annual or special shareholders’ meeting is adjourned to a different date, time or place, notice thereof need not be given if the new date, time or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is fixed pursuant to Article 7, Section 5 hereof, notice of the adjourned meeting shall be given to persons who are shareholders as of the new record date. It shall be the primary responsibility of the secretary to give the notice, but notice may be given by or at the direction of the president or other person or persons calling the meeting. If mailed, such notice shall be deemed to be effective when deposited in the United States mail with postage thereon prepaid, correctly addressed to the shareholder’s address shown in the corporation’s current record of shareholders.

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Section 6. Quorum. A majority of the votes entitled to be cast by a voting group on a matter, represented in person or by proxy at a meeting of shareholders, shall constitute a quorum for that voting group for any action on that matter, unless quorum requirements are otherwise fixed by a court of competent jurisdiction acting pursuant to Section 55-7-03 of the General Statutes of North Carolina. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and any adjournment thereof, unless a new record date is or must be set for the adjournment. Action may be taken by a voting group at any meeting at which a quorum of that voting group is represented, regardless of whether action is taken at that meeting by any other voting group. In the absence of a quorum at the opening of any meeting of shareholders, such meeting may be adjourned from time to time by a vote of the majority of the shares voting on the motion to adjourn.

Section 7. Shareholders’ List. After a record date is fixed for a meeting, the secretary of the corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of the shareholders’ meeting. Such list shall be arranged by voting group (and within each voting group by class or series of shares) and shall show the address of and number of shares held by each shareholder. The shareholders’ list shall be made available for inspection by any shareholder beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation’s principal office or at such other place identified in the meeting notice in the city where the meeting will be held. The corporation shall make the shareholders’ list available at the meeting, and any shareholder or his agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment.

Section 8. Voting of Shares. Except as otherwise provided by the articles of incorporation or by law, each outstanding share of voting capital stock of the corporation shall be entitled to one vote on each matter submitted to a vote at a meeting of the shareholders. Unless otherwise provided in the articles of incorporation, cumulative voting for directors shall not be allowed. Action on a matter by a voting group for which a quorum is present is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the vote of a greater number is required by law or by the articles of incorporation. Voting on all matters shall be by voice vote or by a show of hands, unless the holders of one-tenth of the shares represented at the meeting shall demand a ballot vote on a particular matter. Absent special circumstances, the shares of the corporation are not entitled to vote if they are owned, directly or indirectly, by a second corporation, domestic or foreign, and the corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation, except that this provision shall not limit the power of the corporation to vote shares held by it in a fiduciary capacity.

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Section 9. Inspectors of Election.

(a)     Appointment of inspectors of election. In advance of any meeting of shareholders, the board of directors may appoint any persons, other than nominees for office, as inspectors of election to act at such meeting or any adjournment thereof. If inspectors of election are not so appointed, the chairman of any such meeting may, and on the request of any shareholder or his proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors in advance of the meeting, or at the meeting by the person acting as chairman.

(b)     Duties of inspectors. The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity, and effect of proxies, receive votes, ballots, or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine the result, and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical.

(c)     Vote of inspectors. If there are three inspectors of election the decision, act, or certificate of a majority is effective in all respects as the decision, act, or certificate of all.

(d)     Report of inspectors. On request of the chairman of the meeting or of any shareholder or his proxy the inspectors shall make a report in writing of any challenge or question or matter determined by them and execute a certificate of any fact found by them. Any report or certificate made by them is prima facie evidence of the facts stated therein.

Section 10. Action Without Meeting. Any action which the share-holders could take at a meeting may be taken without a meeting if one or more written consents, setting forth the action taken, shall be signed, before or after such action, by all the shareholders who would be entitled to vote upon the action at a meeting. The consent shall be delivered to the corporation for inclusion in the minutes or filing with the corporate records. The corporation must give its nonvoting shareholders written notice of the proposed action at least 10 days before the action is taken, which notice must contain or be accompanied by the same material that would have been required by law to be sent to nonvoting shareholders in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.

Section 11. Action to Be Taken at Annual or Special Meetings of Shareholders. Business to be conducted at meetings of shareholders shall be limited to (a) business properly specified in the notice of meeting given as provided in Article 2, Section 5 hereof; (b) business otherwise properly brought before the meeting by or at the direction of the board of directors; and (c) business (which may include nominations for director if in accordance with the procedures established herein) otherwise properly brought before the meeting by a holder of voting securities entitled to vote at the meeting in compliance with the procedures set forth in this Section 11. In addition to any other applicable requirements, including, but not limited to, requirements established pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations adopted thereunder, no business may be brought before an annual or special meeting by a holder of voting securities pursuant to (c) above, unless the shareholder has given timely, accurate and complete notice in writing to the secretary of the corporation as required by this Section 11. In the case of an annual meeting, to be timely, notice must be delivered to, or mailed to and received by, the secretary of the corporation at the principal offices of the corporation not less than 90 days prior to the anniversary of the mailing date for the prior year’s annual meeting proxy statement. In the case of a special meeting, to be timely, notice must be delivered to, or mailed to and received by, the secretary of the corporation at the principal offices of the corporation not less than 90 days prior to the date of the special meeting; provided, however, that if less than 100 days’ notice or prior public disclosure of the meeting is given or made by the corporation, notice will be timely if received not later than the close of business on the tenth day following the day on which such notice or public disclosure of the meeting was given or made. Neither the postponement or adjournment of an annual meeting, nor the prior public disclosure of such postponement or adjournment, shall commence a new time period for the giving of a shareholder’s notice pursuant to (c) above. For purposes of this Section 11, “prior public disclosure” shall mean disclosure (i) in a press release either transmitted to the principal securities exchange on which shares of the corporation’s common stock are traded or reported by a recognized news service or (ii) in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to the Exchange Act.

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In addition to any requirements imposed by applicable law (including, but not limited to, Section 14(a) of the Exchange Act and the rules and regulations adopted thereunder), notice of the business to be brought before an annual or special meeting pursuant to (c) above shall set forth the following as to each matter the holder of voting securities proposes to bring before the meeting: (i) a brief description of the business desired to be brought before the meeting and the reasons for bringing such business before the meeting; (ii) the name and address, as they appear on the corporation’s books, of each holder of voting securities proposing such business and each Shareholder Associated Person (as defined below); (iii) the classes and number of shares or other securities of the corporation that are owned of record or beneficially by such holder; and by each Shareholder Associated Person; (iv) any material interest of such holder and each Shareholder Associated Person in such business other than such person’s interest as a shareholder of the corporation (including any anticipated benefit to the shareholder or Shareholder Associated Person therefrom); (v) to the extent known by the shareholder giving the notice, the name and address of any other shareholder supporting the proposal on the date of such shareholder’s notice; and (vi) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such shareholder or Shareholder Associated Person with respect to any share of the corporation, or any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of the corporation) has been made, the effect or intent of which is to mitigate loss to or manage risk of stock price changes for, or to increase the voting power of, such shareholder or Shareholder Associated Person with respect to any share of the corporation.

Nominations for election to the board of directors may be made pursuant to (c) above by a holder of securities entitled to vote for the election of directors if written notice of the nomination of such person(s) shall have been delivered to the secretary of the corporation in accordance with the provisions of this Article 2, Section 11 and such notice shall set forth the information required herein with respect to matters to be brought by a shareholder, as well as (i) the name and address of the person(s) to be nominated by the shareholder; (ii) a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person(s) specified in the notice; (iii) a description of all arrangements or understandings between the shareholder (and any Shareholder Associated Person) and each nominee and any other person(s) (naming such person(s)) pursuant to which the nomination(s) are to be made by the shareholder; (iv) such other information regarding each such nominee as would be required to be included in a proxy statement filed pursuant to Section 14(a) of the Exchange Act and the rules and regulations adopted thereunder if the nominee had been nominated by the board of directors or a committee thereof; and (v) the written consent of each nominee to be nominated and to serve as a director of the corporation if so elected.

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If information submitted pursuant to this Article 2, Section 11, by any shareholder proposing any proposal for other business at the annual meeting shall be inaccurate to a material extent, such information may be deemed not to have been provided in accordance with this Article 2, Section 11. Upon written request by the secretary of the corporation or the Board of Directors, any shareholder proposing any proposal for other business at a meeting of the shareholders shall provide, within five business days of delivery of such request (or such other period as may be specified in such request), (1) written verification, satisfactory, in the discretion of the Board of Directors or any authorized officer of the corporation, to demonstrate the accuracy of any information submitted by the shareholder pursuant to this Article 2, Section 11, or (2) a written update of any information previously submitted by the shareholder pursuant to this Article 2, Section 11 as of an earlier date. If a shareholder fails to provide such written verification or written update within such period, the information as to which written verification or a written update was requested may be deemed not to have been provided in accordance with this Article 2, Section 11.

For purposes of this Article 2, Section 11, "Shareholder Associated Person" of any shareholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such shareholder, (ii) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such shareholder, and (iii) any person controlling, controlled by or under common control with such Shareholder Associated Person.

Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual or special meeting except in accordance with the provisions set forth in this Section 11. If the chairman of the meeting determines that any business was not properly submitted, the chairman shall so declare to the meeting, and to the extent permitted by law, any such business not properly submitted shall not be transacted at the meeting. All judgments made by the chairman of the meeting as to submission of proposals shall be final and binding unless determined by a court of competent jurisdiction to have clearly been made in bad faith.

(Article 2, Section 11 was adopted by the Board of Directors effective April 26, 1999. and amended by the Board of Directors on April 21, 2009)

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ARTICLE 3- BOARD OF DIRECTORS 

Section 1. General Powers. The business and affairs of the corporation shall be managed under the direction of the board of directors except as otherwise provided by the articles of incorporation or by a valid shareholders’ agreement.

Section 2. Number, Term and Qualification. The number of directors constituting the board of directors shall be not less than five nor more than ten, the precise number to be determined from time to time by resolution of the board of directors. The directors shall be divided into three classes, as nearly equal in number as may be, to serve in the first instance for terms of one, two and three years, respectively, and until their successors shall be elected and shall qualify, and thereafter the successors in each class of directors shall be elected to serve for terms of three years and until their successors shall be elected and shall qualify. In the event of any increase or decrease in the number of directors, the additional or eliminated directorships shall be so classified or chosen that all classes of directors shall remain or become equal in number, as nearly as may be. In the event of the death, resignation, retirement, removal or disqualification of a director during his elected term of office, his successor shall be elected to serve only until the expiration of the term of his predecessor. Directors need not be residents of the State of North Carolina or shareholders of the corporation unless the articles of incorporation so provide. This Section 2, although adopted by a vote of the corporation’s shareholders, may be amended or repealed by the corporation’s Board of Directors without a shareholder vote.

Section 3. Removal. Directors may be removed from office with or without cause (unless the articles of incorporation provide that directors may be removed only for cause) provided the notice of the shareholders’ meeting at which such action is to be taken states that a purpose of the meeting is removal of the director and the number of votes cast to remove the director exceeds the number of votes cast not to remove him.

Section 4. Vacancies. Except as otherwise provided in the articles of incorporation, a vacancy occurring in the board of directors, including, without limitation, a vacancy resulting from an increase in the number of directors or from the failure by the shareholders to elect the full authorized number of directors, may be filled by a majority of the remaining directors or by the sole director remaining in office. The shareholders may elect a director at any time to fill a vacancy not filled by the directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office.

Section 5. Compensation. The directors shall not receive compensation for their services as such, except that by resolution of the board of directors, the directors may be paid fees, which may include but are not restricted to fees for attendance at meetings of the board or of a committee, and they may be reimbursed for expenses of attendance. Any director may serve the corporation in any other capacity and receive compensation therefor.

ARTICLE 4- MEETINGS OF DIRECTORS 

Section 1. Annual and Regular Meetings. The annual meeting of the board of directors shall be held immediately following the annual meeting of the shareholders. The board of directors may by resolution provide for the holding of regular meetings of the board on specified dates and at specified times. Notice of regular meetings held at the principal office of the corporation and at the usual scheduled time shall not be required. If any date for which a regular meeting is scheduled shall be a legal holiday, the meeting shall be held on a date designated in the notice of the meeting, if any, during either the same week in which the regularly scheduled date falls or during the preceding or following week. Regular meetings of the board shall be held at the principal office of the corporation or at such other place as may be designated in the notice of the meeting.

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Section 2. Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president or any two directors. Such meetings may be held at the time and place designated in the notice of the meeting.

Section 3. Notice of Meetings. Unless the articles of incorporation provide otherwise, the annual and regular meetings of the board of directors may be held without notice of the date, time, place or purpose of the meeting. The secretary or other person or persons calling a special meeting shall give notice by any usual means of communication to be sent at least two days before the meeting if notice is sent by means of telephone, telecopy or personal delivery and at least five days before the meeting if notice is sent by mail. A director’s attendance at, or participation in, a meeting for which notice is required shall constitute a waiver of notice, unless the director at the beginning of the meeting (or promptly upon arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

Section 4. Quorum. Except as otherwise provided in the articles of incorporation, a majority of the directors in office shall constitute a quorum for the transaction of business at a meeting of the board of directors.

Section 5. Manner of Acting. Except as otherwise provided in the articles of incorporation, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors.

Section 6. Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken is deemed to have assented to the action taken unless he objects at the beginning of the meeting (or promptly upon arrival) to holding, or transacting business at, the meeting, or unless his dissent or abstention is entered in the minutes of the meeting or unless he shall file written notice of his dissent or abstention to such action with the presiding officer of the meeting before its adjournment or with the corporation immediately after adjournment of the meeting. The right of dissent or abstention shall not apply to a director who voted in favor of such action.

Section 7. Action Without Meeting. Unless otherwise provided in the articles of incorporation, action required or permitted to be taken at a meeting of the board of directors may be taken without a meeting if the action is taken by all members of the board. The action must be evidenced by one or more written consents signed by each director before or after such action, describing the action taken, and included in the minutes or filed with the corporate records. Action taken without a meeting is effective when the last director signs the consent, unless the consent specifies a different effective date.

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Section 8. Meeting by Communications Device. Unless otherwise provided in the articles of incorporation, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

ARTICLE 5- COMMITTEES 

Section 1. Election and Powers. Unless otherwise provided by the articles of incorporation, a majority of the board of directors may create one or more committees and appoint two or more directors to serve at the pleasure of the board on each such committee. To the extent specified by the board of directors or in the articles of incorporation, each committee shall have and may exercise the powers of the board in the management of the business and affairs of the corporation, except that no committee shall have authority to do the following:

(a)     Authorize distributions.

(b)     Approve or propose to shareholders action required to be approved by shareholders.

(c)     Fill vacancies on the board of directors or on any of its committees.

(d)     Amend the articles of incorporation.

(e)     Adopt, amend or repeal the bylaws.

(f)     Approve a plan of merger not requiring shareholder approval.

(g)     Authorize or approve the reacquisition of shares, except according to a formula or method prescribed by the board of directors.

(h)     Authorize or approve the issuance, sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the board of directors may authorize the executive committee (or a senior executive officer of the corporation) to do so within limits specifically prescribed by the board of directors.

Section 2. Removal; Vacancies. Any member of a committee may be removed at any time with or without cause, and vacancies in the membership of a committee by means of death, resignation, disqualification or removal shall be filled by a majority of the whole board of directors.

Section 3. Meetings. The provisions of Article 4 governing meetings of the board of directors, action without meeting, notice, waiver of notice and quorum and voting requirements shall apply to the committees of the board and its members.

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Section 4. Minutes. Each committee shall keep minutes of its proceedings and shall report thereon to the board of directors at or before the next meeting of the board.

ARTICLE 6- OFFICERS 

Section 1. Titles. The officers of the corporation shall be a president, a vice president, a secretary and a treasurer and may include a chairman and vice chairman of the board of directors, a chief executive officer, an executive vice president, one or more additional vice presidents, a controller, one or more assistant secretaries, one or more assistant treasurers, one or more assistant controllers, and such other officers as shall be deemed necessary. The officers shall have the authority and perform the duties as set forth herein or as from time to time may be prescribed by the board of directors or by the president (to the extent that the president is authorized by the board of directors to prescribe the authority and duties of officers). Any two or more offices may be held by the same individual, but no officer may act in more than one capacity where action of two or more officers is required.

Section 2. Election; Appointment. The officers of the corporation shall be elected from time to time by the board of directors or appointed from time to time by the president (to the extent that the president is authorized by the board to appoint officers).

Section 3. Removal. Any officer may be removed by the board at any time with or without cause whenever in its judgment the best interests of the corporation will be served, but removal shall not itself affect the officer’s contract rights, if any, with the corporation.

Section 4. Vacancies. Vacancies among the officers may be filled and new offices may be created and filled by the board of directors, or by the president (to the extent authorized by the board).

Section 5. Compensation. The compensation of the officers shall be fixed by the board of directors.

Section 6. Chairman and Vice Chairman of the Board of Directors. The chairman of the board of directors, if such officer is elected, shall preside at meetings of the board of directors and shareholders and shall have such other authority and perform such other duties as the board of directors shall designate. The vice chairman, if elected, shall preside at meetings of the board and shareholders in the absence of the chairman and shall have such other authority and perform such other duties as the board of directors shall designate.

Section 7. Chief Executive Officer. The chief executive officer shall be the principal executive officer of the corporation and, subject to the control of the board of directors, shall, in general, supervise and control all of the business and affairs of the corporation. He shall have such other authority and perform such other duties as the board of directors shall designate.

Section 8. President. The president shall be the principal operating officer of the corporation and shall be in general charge of the affairs of the corporation in the ordinary course of its business. Subject to the direction of the chief executive officer, the president may perform such acts, not inconsistent with applicable law or the provisions of these bylaws, as may be performed by the president of a corporation and may sign and execute all authorized notes, bonds, contracts and other obligations in the name of the corporation. The president shall have such other powers and perform such other duties as the board of directors shall designate or as may be provided by applicable law or elsewhere in these bylaws.

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Section 9. Vice Presidents. In the absence or inability to act of both the chief executive officer and the president, the executive vice president, if such officer is elected or appointed, shall exercise the powers of the president during that officer’s absence or inability to act. In default of the chief executive officer and both the president and the executive vice president, any other vice president may exercise the powers of the president. Any action taken by a vice president in the performance of the duties of the president shall be presumptive evidence of the absence or inability to act of the president at the time the action was taken. The vice presidents shall have such other powers and perform such other duties as may be assigned by the board of directors or by the president (to the extent that the president is authorized by the board of directors to prescribe the authority and duties of other officers).

Section 10. Secretary. The secretary shall keep accurate records of the acts and proceedings of all meetings of shareholders and of the board of directors and shall give all notices required by law and by these bylaws. The secretary shall have general charge of the corporate books and records and shall have the responsibility and authority to maintain and authenticate such books and records. The secretary shall have general charge of the corporate seal and shall affix the corporate seal to any lawfully executed instrument requiring it. The secretary shall have general charge of the stock transfer books of the corporation and shall keep at the principal office of the corporation a record of shareholders, showing the name and address of each shareholder and the number and class of the shares held by each. The secretary shall sign such instruments as may require the signature of the secretary, and in general shall perform the duties incident to the office of secretary and such other duties as may be assigned from time to time by the board of directors or the president (to the extent that the president is authorized by the board of directors to prescribe the authority and duties of other officers).

Section 11. Assistant Secretaries. Each assistant secretary, if such officer is elected, shall have such powers and perform such duties as may be assigned by the board of directors or the president (if authorized by the board of directors to prescribe the authority and duties of other officers), and the assistant secretaries shall exercise the powers of the secretary during that officer’s absence or inability to act.

Section 12. Treasurer. The treasurer shall have custody of all funds and securities belonging to the corporation and shall receive, deposit or disburse the same under the direction of the board of directors. The treasurer shall keep full and accurate accounts of the finances of the corporation, which may be consolidated or combined statements of the corporation and one or more of its subsidiaries as appropriate, that include a balance sheet as of the end of the fiscal year, an income statement for that year, and a statement of cash flows for the year unless that information appears elsewhere in the financial statements. If financial statements are prepared for the corporation on the basis of generally accepted accounting principles, the annual financial statements must also be prepared on that basis. The corporation shall mail the annual financial statements, or a written notice of their availability, to each shareholder within 120 days of the close of each fiscal year. The treasurer shall in general perform all duties incident to the office and such other duties as may be assigned from time to time by the board of directors or the president (to the extent that the president is authorized by the board of directors to prescribe the authority and duties of other officers).

10

Section 13. Assistant Treasurers. Each assistant treasurer, if such officer is elected, shall have such powers and perform such duties as may be assigned by the board of directors or the president (to the extent that the president is authorized by the board of directors to prescribe the authority and duties of other officers), and the assistant treasurers shall exercise the powers of the treasurer during that officer’s absence or inability to act.

Section 14. Controller and Assistant Controllers. The controller, if such officer is elected, shall have charge of the accounting affairs of the corporation and shall have such other powers and perform such other duties as the board of directors or the president (to the extent that the president is authorized by the board of directors to prescribe the authority and duties of other officers) shall designate. Each assistant controller shall have such powers and perform such duties as may be assigned by the board of directors or the president (to the extent that the president is authorized by the board of directors to prescribe the authority and duties of other officers), and the assistant controllers shall exercise the powers of the controller during that officer’s absence or inability to act.

Section 15. Voting Upon Stocks. Unless otherwise ordered by the board of directors, the president shall have full power and authority in behalf of the corporation to attend, act and vote at meetings of the shareholders of any corporation in which this corporation may hold stock, and at such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such stock and which, as the owner, the corporation might have possessed and exercised if present. The board of directors may by resolution from time to time confer such power and authority upon any other person or persons.

ARTICLE 7- CAPITAL STOCK 

Section 1. Certificates. Shares of the capital stock of the corporation may be certificated or without certificate. The name and address of the persons to whom shares of capital stock of the corporation are issued, with the number of shares and date of issue, shall be entered on the stock transfer records of the corporation. Certificates for shares of the capital stock of the corporation shall be in such form not inconsistent with the articles of incorporation of the corporation as shall be approved by the board of directors. Each certificate shall be signed (either manually or by facsimile) by (a) the president or any vice president and by the secretary, assistant secretary, treasurer or assistant treasurer or (b) any two officers designated by the board of directors. Each certificate may be sealed with the seal of the corporation or a facsimile thereof. Within a reasonable time after the issuance or transfer of shares without certificates, the corporation shall send, or cause to be sent, to the shareholder a written statement including the information required by law to be set forth on certificates for shares of capital stock.

Section 2. Transfer of Shares. Transfer of certificated shares shall be made on the stock transfer records of the corporation, and transfers shall be made only upon surrender of the certificate for the shares sought to be transferred by the recordholder or by a duly authorized agent, transferee or legal representative. All certificates surrendered for transfer or reissue shall be cancelled before new certificates for the shares or shares without certificate shall be issued. Shares without certificate shall be transferable on the stock transfer records of the corporation upon proper instruction from the holder of such shares.

11

Section 3. Transfer Agent and Registrar. The board of directors may appoint one or more transfer agents and one or more registrars of transfers and may require all stock certificates to be signed or countersigned by the transfer agent and registered by the registrar of transfers.

Section 4. Regulations. The board of directors may make rules and regulations as it deems expedient concerning the issue, transfer and registration of shares of capital stock of the corporation.

Section 5. Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the board of directors may fix in advance a date as the record date for the determination of shareholders. The record date shall be not more than 70 days before the meeting or action requiring a determination of shareholders. A determination of shareholders entitled to notice of or to vote at a shareholders’ meeting shall be effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. If no record date is fixed for the determination of shareholders, the record date shall be the day the notice of the meeting is mailed or the day the action requiring a determination of shareholders is taken. If no record date is fixed for action without a meeting, the record date for determining shareholders entitled to take action without a meeting shall be the date the first shareholder signs consent to the action taken.

Section 6. Lost Certificates. The board of directors must authorize the issuance of a new certificate or share without certificate in place of a certificate claimed to have been lost, destroyed or wrongfully taken, upon receipt of (a) an affidavit from the person explaining the loss, destruction or wrongful taking, and (b) a bond from the claimant in a sum as the corporation may reasonably direct to indemnify the corporation against loss from any claim with respect to the certificate claimed to have been lost, destroyed or wrongfully taken. The board of directors may, in its discretion, waive the affidavit and bond and authorize the issuance of a new certificate or share without certificate in place of a certificate claimed to have been lost, destroyed or wrongfully taken.

ARTICLE 8- INDEMNIFICATION OP DIRECTORS AND OFFICERS 

Section 1. Indemnification Provisions. Any person who at any time serves or has served as a director or officer of the corporation or of any wholly owned subsidiary of the corporation, or in such capacity at the request of the corporation for any other foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or as a trustee or administrator under any employee benefit plan of the corporation or of any wholly owned subsidiary thereof (a “Claimant”), shall have the right to be indemnified and held harmless by the corporation to the fullest extent from time to time permitted by law against all liabilities and litigation expenses (as hereinafter defined) in the event a claim shall be made or threatened against that person in, or that person is made or threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether or not brought by or on behalf of the corporation, including all appeals therefrom (a “proceeding”), arising out of that person’s status as such or that person’s activities in any such capacity; provided, that such indemnification shall not be effective with respect to (a) that portion of any liabilities or litigation expenses with respect to which the Claimant is entitled to receive payment under any insurance policy or (b) any liabilities or litigation expenses incurred on account of any of the Claimant’s activities which were at the time taken known or believed by the Claimant to be clearly in conflict with the best interests of the corporation.

12

Section 2. Definitions. As used in this Article, (a) “liabilities” shall include, without limitation, (1) payments in satisfaction of any judgment, money decree, excise tax, fine or penalty for which Claimant had become liable in any proceeding and (2) payments in settlement of any such proceeding subject, however, to Section 3 of this Article 8; (b) “litigation expenses” shall include, without limitation, (1) reasonable costs and expenses and attorneys’ fees and expenses actually incurred by the Claimant in connection with any proceeding and (2) reasonable costs and expenses and attorneys’ fees and expenses in connection with the enforcement of rights to the indemnification granted hereby or by applicable law, if such enforcement is successful in whole or in part; and (c) “disinterested directors” shall mean directors who are not party to the proceeding in question.

Section 3. Settlements. The corporation shall not be liable to indemnify the Claimant for any amounts paid in settlement of any proceeding effected without the corporation’s written consent. The corporation will not unreasonably withhold its consent to any proposed settlement.

Section 4. Litigation Expense Advances.

(a)     Except as provided in subsection (b) below, any litigation expenses shall be advanced to any Claimant within 30 days of receipt by the secretary of the corporation of a demand therefor, together with an undertaking by or on behalf of the Claimant to repay to the corporation such amount unless it is ultimately determined that Claimant is entitled to be indemnified by the corporation against such expenses. The secretary shall promptly forward notice of the demand and undertaking immediately to all directors of the corporation.

(b)     Within 10 days after mailing of notice to the directors pursuant to subsection (a) above, any disinterested director may, if desired, call a meeting of all disinterested directors to review the reasonableness of the expenses so requested. No advance shall be made if a majority of the disinterested directors affirmatively determines that the item of expense is unreasonable in amount; but if the disinterested directors determine that a portion, of the expense item is reasonable, the corporation shall advance such portion.

Section 5. Approval of Indemnification Payments. Except as provided in Section 4 of this Article, the board of directors of the corporation shall take all such action as may be necessary and appropriate to authorize the corporation to pay the indemnification required by Section 1 of this Article, including, without limitation, making a good faith evaluation of the manner in which the Claimant acted and of the reasonable amount of indemnity due the Claimant. In taking any such action, any Claimant who is a director of the corporation shall not be entitled to vote on any matter concerning such Claimant’s right to indemnification.

13

Section 6. Suits by Claimant. No Claimant shall be entitled to bring suit against the corporation to enforce his rights under this Article until sixty days after a written claim has been received by the corporation, together with any undertaking to repay as required by Section 4 of this Article. It shall be a defense to any such action that the Claimant’s liabilities or litigation expenses were incurred on account of activities described in clause (b) of Section 1, but the burden of proving this defense shall be on the corporation. Neither the failure of the corporation to have made a determination prior to the commencement of the action to the effect that indemnification of the Claimant is proper in the circumstances, nor an actual determination by the corporation that the Claimant had not met the standard of conduct described in clause (b) of Section 1, shall be a defense to the action or create a presumption that the Claimant has not met the applicable standard of conduct.

Section 7. Consideration; Personal Representatives and Other Remedies. Any person who during such time as this Article or corresponding provisions of predecessor bylaws is or has been in effect serves or has served in any of the aforesaid capacities for or on behalf of the corporation shall be deemed to be doing so or to have done so in reliance upon, and as consideration for, the right of indemnification provided herein or therein. The right of indemnification provided herein or therein shall inure to the benefit of the legal representatives of any person who qualifies or would qualify as a Claimant hereunder, and the right shall not be exclusive of any other rights to which the person or legal representative may be entitled apart from this Article.

Section 8. Scope of Indemnification Rights. The rights granted herein shall not be limited by the provisions of Section 55-8-51 of the General Statutes of North Carolina or any successor statute.

ARTICLE 9- GENERAL PROVISIONS 

Section 1. Dividends and Other Distributions. The board of directors may from time to time declare and the corporation may pay dividends or make other distributions with respect to its outstanding shares in the manner and upon the terms and conditions provided by law.

Section 2. Seal. The seal of the corporation shall be any form approved from time to time or at any time by the board of directors.

Section 3. Waiver of Notice. Whenever notice is required to be given to a shareholder, director or other person under the provisions of these bylaws, the articles of incorporation or applicable law, a waiver in writing signed by the person or persons entitled to the notice, whether before or after the date and time stated in the notice, and delivered to the corporation shall be equivalent to giving the notice.

Section 4. Checks. All checks, drafts or orders for the payment of money shall be signed by the officer or officers or other individuals that the board of directors may from time to time designate.

Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by the board of directors.

14

Section 6. Amendments. Unless otherwise provided in the articles of incorporation or a bylaw adopted by the shareholders or by law, these bylaws may be amended or repealed by the board of directors, except that a bylaw adopted, amended or repealed by the shareholders may not be readopted, amended or repealed by the board of directors if neither the articles of incorporation nor a bylaw adopted by the shareholders authorizes the board of directors to adopt, amend or repeal that particular bylaw or the bylaws generally. These bylaws may be amended or repealed by the shareholders even though the bylaws may also be amended or repealed by the board of directors. A bylaw that fixes a greater quorum or voting requirement for the board of directors may be amended or repealed (a) if originally adopted by the shareholders, only by the shareholders, unless such bylaw as originally adopted by the shareholders provides that such bylaw may be amended or repealed by the board of directors or (b) if originally adopted by the board of directors, either by the shareholders or by the board of directors. A bylaw that fixes a greater quorum or voting requirement may not be adopted by the board of directors by a vote less than a majority of the directors then in office and may not itself be amended by a quorum or vote of the directors less than the quorum or vote prescribed in such bylaw or prescribed by the shareholders.

Section 7. Applicability of Antitakeover Statutes. The provisions of Article 9 and Article 9A of the North Carolina Business Corporation Act shall not be applicable to the corporation.

THIS IS TO CERTIFY that the above bylaws of Insteel Industries, Inc., were adopted by the board of directors of the corporation by action taken at a meeting held on August 21, 1990, as amended:

● by the shareholders of the corporation as to Article 3, Section 2, on February 5, 1991,

● by the board of directors of the corporation as to Article 2, Section 11 on April 26, 1999,

● by the board of directors of the corporation as to Article 3, Section 2 on October 24, 2005,

● by the board of directors as to Article 7, Sections 1, 2 and 6 on September 18, 2007,

● by the board of directors as to Article 2, Section 11 on April 21, 2009,

● by the board of directors as to Article 3, Section 2 on February 8, 2011, and

● by the board of directors as to Article 3, Section 2 on December 19,2016.

This 19^th day of December, 2016.

Secretary

15

EX-31.1

Exhibit 31.1

Certification

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

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended December 31, 2016 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: January 19, 2017

/s/ H. O. Woltz III

H. O. Woltz III

President, Chief Executive Officer and Chairman of the Board

EX-31.2

Exhibit 31.2

Certification

I, Michael C. Gazmarian, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended December 31, 2016 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: January 19, 2017

/s/ Michael C. Gazmarian

Michael C. Gazmarian

Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

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

In connection with the Quarterly Report on Form 10-Q of Insteel Industries, Inc. (the “Company”) for the period ended December 31, 2016 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

January 19, 2017

EX-32.2

Exhibit 32.2

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

In connection with the Quarterly Report on Form 10-Q of Insteel Industries, Inc. (the “Company”) for the period ended December 31, 2016 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

January 19, 2017

XML

Document And Entity Information - shares	3 Months Ended
	Dec. 31, 2016	Jan. 18, 2017
Document Information [Line Items]
Entity Registrant Name	INSTEEL INDUSTRIES INC
Entity Central Index Key	0000764401
Trading Symbol	iiin
Current Fiscal Year End Date	--10-01
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		18,985,236
Document Type	10-Q
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016
Net sales	$ 93,888	$ 92,391
Cost of sales	80,878	75,968
Gross profit	13,010	16,423
Selling, general and administrative expense	6,264	6,335
Restructuring charges (recoveries), net	48	(75)
Other income, net	(10)	(114)
Interest expense	34	41
Interest income	(52)	(18)
Earnings before income taxes	6,726	10,254
Income taxes	2,266	3,546
Net earnings	$ 4,460	$ 6,708
Net earnings per share:
Basic (in dollars per share)	$ 0.23	$ 0.36
Diluted (in dollars per share)	$ 0.23	$ 0.36
Weighted average shares outstanding:
Basic (in shares)	18,980	18,525
Diluted (in shares)	19,209	18,883
Cash dividends declared per share (in dollars per share)	$ 1.28	$ 1.03
Comprehensive income	$ 4,460	$ 6,708

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Dec. 31, 2016	Oct. 01, 2016
Assets
Cash and cash equivalents	$ 57,020	$ 58,873
Accounts receivable, net	44,155	47,389
Inventories	61,590	71,186
Other current assets	3,258	3,039
Total current assets	166,023	180,487
Property, plant and equipment, net	92,332	88,193
Intangibles, net	8,774	9,063
Goodwill	6,965	6,965
Other assets	8,463	8,184
Total assets	282,557	292,892
Liabilities and shareholders' equity
Accounts payable	29,001	42,759
Accrued expenses	8,394	11,024
Dividends payable	24,298
Total current liabilities	61,693	53,783
Other liabilities	15,888	14,543
Commitments and contingencies
Shareholders' equity:
Common stock	18,985	18,976
Additional paid-in capital	68,056	67,817
Retained earnings	119,476	139,314
Accumulated other comprehensive loss	(1,541)	(1,541)
Total shareholders' equity	204,976	224,566
Total liabilities and shareholders' equity	$ 282,557	$ 292,892

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016
Cash Flows From Operating Activities:
Net earnings	$ 4,460,000	$ 6,708,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	3,018,000	2,742,000
Amortization of capitalized financing costs	16,000	16,000
Stock-based compensation expense	257,000	229,000
Deferred income taxes	1,187,000	1,215,000
Excess tax benefits from stock-based compensation	(100,000)	(253,000)
Loss (gain) on sale and disposition of property, plant and equipment	36,000	(239,000)
Increase in cash surrender value of life insurance policies over premiums paid	(73,000)
Net changes in assets and liabilities:
Accounts receivable, net	3,234,000	6,414,000
Inventories	9,596,000	(3,056,000)
Accounts payable and accrued expenses	(17,412,000)	(2,659,000)
Other changes	(425,000)	1,274,000
Total adjustments	(666,000)	5,683,000
Net cash provided by operating activities	3,794,000	12,391,000
Cash Flows From Investing Activities:
Capital expenditures	(5,417,000)	(941,000)
Proceeds from sale of assets held for sale		180,000
Proceeds from sale of property, plant and equipment		60,000
Proceeds from surrender of life insurance policies		40,000
Increase in cash surrender value of life insurance policies	(221,000)	(212,000)
Net cash used for investing activities	(5,638,000)	(873,000)
Cash Flows From Financing Activities:
Proceeds from long-term debt	97,000	65,000
Principal payments on long-term debt	(97,000)	(65,000)
Cash dividends paid		(559,000)
Cash received from exercise of stock options	35,000	1,492,000
Excess tax benefits from stock-based compensation	100,000	253,000
Payment of employee tax withholdings related to net share transactions	(144,000)	(332,000)
Financing costs		(11,000)
Net cash provided by (used for) financing activities	(9,000)	843,000
Net increase (decrease) in cash and cash equivalents	(1,853,000)	12,361,000
Cash and cash equivalents at beginning of period	58,873,000	33,258,000
Cash and cash equivalents at end of period	57,020,000	45,619,000
Supplemental Disclosures of Cash Flow Information:
Income taxes, net	44,000	2,194,000
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable	1,487,000	479,000
Declaration of cash dividends to be paid	24,298,000	18,600,000
Restricted stock units and stock options surrendered for withholding taxes payable	$ 144,000	$ 332,000

XML

Consolidated Statements of Shareholders' Equity (Unaudited) - 3 months ended Dec. 31, 2016 - 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. 01, 2016	18,976
Balance at Oct. 01, 2016	$ 18,976	$ 67,817	$ 139,314	$ (1,541)	$ 224,566
Net earnings			4,460		$ 4,460
Stock options exercised, net (in shares)	7				22
Stock options exercised, net	$ 7	28			$ 35
Vesting of restricted stock units (in shares)	2
Vesting of restricted stock units	$ 2	(2)
Compensation expense associated with stock-based plans		257			257
Excess tax benefits from stock-based compensation		100			100
Restricted stock units and stock options surrendered for withholding taxes payable		(144)			(144)
Cash dividends declared			(24,298)		(24,298)
Balance (in shares) at Dec. 31, 2016	18,985
Balance at Dec. 31, 2016	$ 18,985	$ 68,056	$ 119,476	$ (1,541)	$ 204,976

XML

Note 1 - Basis of Presentation

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

(1)

Basis of Presentation

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

10

- Q. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. The

October

1,

2016

consolidated balance sheet was derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should therefore be read in conjunction with the consolidated financial statements and notes for the fiscal year ended

October

1,

2016

included in our Annual Report on Form

10

- K filed with the SEC.

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

three

- month period ended

December

31,

2016

are not necessarily indicative of the results that

may

be expected for the fiscal year ending

September

30,

2017

or future periods.

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

10

- Q and concluded that there are no significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the consolidated financial statements

.

XML

Note 2 - Recent Accounting Pronouncements

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

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

(2)

Recent Accounting Pronouncements

In

August

2016,

the Financial Accounting Standards Board (“

FASB”) issued Accounting Standards Update (“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.

The adoption of this update is not expected to have a material impact on our consolidated financial statements.

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.   ASU No.

2016

-

09

will become effective for us in the

first

quarter of fiscal

2018.

  We are evaluating the future effects of the adoption of this update on our consolidated financial statements.

In

February

2016,

the FASB issued ASU No.

2016

-

02

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

840.

ASU No.

2016

-

02

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

12

months) on the balance sheet as a lease liability and a right - of - use asset. ASU No.

2016

-

02

will become effective for us in the

first

quarter of fiscal

2020.

We are evaluating the potential effects of the adoption of this update on our consolidated financial statements.

In

July

2015,

the FASB issued ASU No.

2015

-

11

“Simplifying the Measurement of Inventory,” which requires that an entity measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. ASU No.

2015

-

11

will become effective for us in the

first

quarter of fiscal

2018.

We do not expect the adoption of this update will have a material effect on our consolidated financial statements.

In

May

2014,

the FASB issued ASU No.

2014

-

09

“Revenue from Contracts with Customers,” which will supersede nearly all existing revenue recognition guidance under GAAP. ASU No.

2014

-

09

provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU No.

2014

-

09

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

first

quarter of fiscal

2019.

We are continuing to evaluate the potential effects of the adoption of this update on our consolidated financial statements and have not yet selected a transition method.

XML

Note 3 - Restructuring Charges

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Restructuring Charges and Acquisition Costs [Text Block]

(3)

Restructuring Charges

On

August

15,

2014,

we purchased substantially all of the assets associated with the prestressed concrete strand (“PC strand”) business of American Spring Wire Corporation (“ASW”) for a final adjusted purchase price of

$33.5

million, net of post - closing adjustments of

$480,000

(the “ASW Acquisition”). ASW manufactured PC strand at facilities located in Houston, Texas and Newnan, Georgia.

Subsequent to the ASW Acquisition, in fiscal

2014,

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

February

2015,

we elected to consolidate our PC strand operations with the closure of the Newnan facility, which was completed in

March

2015.

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

three

- month periods ended

December

31,

2016

and

January

2,

2016:

				Severance and
	Equipment			Other Employee			Facility			Gain on Sale
(In thousands)	Relocation Costs			Separation Costs			Closure Costs			of Equipment			Total
2017
Liability as of October 1, 2016	$	31		$	239		$	-		$	-		$	270
Restructuring charges		48			-			-			-			48
Cash payments		(79	)		(74	)		-			-			(153	)
Liability as of December 31, 2016	$	-		$	165		$	-		$	-		$	165
2016
Liability as of October 3, 2015	$	-		$	735		$	-		$	-		$	735
Restructuring charges (recoveries)		75			-			30			(180	)		(75	)
Cash receipts (payments)		(75	)		(72	)		(30	)		180			3
Liability as of January 2, 2016	$	-		$	663		$	-		$	-		$	663

As of

December

31,

2016,

we recorded restructuring liabilities amounting to

$0.2

million in accrued expenses on our consolidated balance sheet. As of

October

1,

2016,

we recorded restructuring liabilities amounting to

$0.3

million on our consolidated balance sheet, including

$0.1

million in accounts payable and

$0.2

million in accrued expenses. We do not currently expect to incur any significant restructuring charges during the remainder of fiscal

2017.

XML

Note 4 - Fair Value Measurements

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(4)

Fair Value Measurements

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

three

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

three

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

Level

1

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

Level

2

- Observable inputs other than quoted prices included in Level

1,

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

Level

3

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

As of

December

31,

2016

and

October

1,

2016,

we held financial assets that are required to be measured at fair value on a recurring basis, which are summarized below:

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of December 31, 2016:
Current assets:
Cash equivalents	$	58,643	$	58,643	$	-
Other assets:
Cash surrender value of life insurance policies		8,203		-		8,203
Total	$	66,846	$	58,643	$	8,203
As of October 1, 2016:
Current assets:
Cash equivalents	$	58,846	$	58,846	$	-
Other assets:
Cash surrender value of life insurance policies		7,909		-		7,909
Total	$	66,755	$	58,846	$	7,909

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

December

31,

2016

and

October

1,

2016,

we had

no

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

XML

Note 5 - Intangible Assets

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

(5)

Intangible Assets

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

(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value
As of December 31, 2016:
Customer relationships	$	6,500	$	(775	)	$	5,725
Developed technology and know-how		1,800		(214	)		1,586
Non-competition agreements		3,577		(2,114	)		1,463
	$	11,877	$	(3,103	)	$	8,774
As of October 1, 2016:
Customer relationships	$	6,500	$	(693	)	$	5,807
Developed technology and know-how		1,800		(192	)		1,608
Non-competition agreements		3,577		(1,929	)		1,648
	$	11,877	$	(2,814	)	$	9,063

Amortization expense for intangibles was

$

289,000

for the

three

- month periods ended

December

31,

2016

and

January

2,

2016.

XML

Note 6 - Stock-based Compensation

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

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

(6)

Stock - Based Compensation

Under our equity incentive plans, employees and directors

may

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

February

17,

2015,

our shareholders approved the

2015

Equity Incentive Plan of Insteel Industries, Inc. (the

“2015

Plan”), which authorizes up to

900,000

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

2015

Plan, which expires on

February

17,

2025,

replaces the

2005

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

February

15,

2015.

As of

December

31,

2016,

there were

558,000

shares of our common stock available for future grants under the

2015

Plan, which is our only active equity incentive plan.

Stock

o

ption

awards

.

Under our equity incentive plans, employees and directors

may

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

three

years and expire

ten

years from the date of the grant. Compensation expense associated with stock options is as follows:

	Three Months Ended
	December 31,		January 2,
(In thousands)	2016		2016
Compensation expense	$	96	$	83

As of

December

31,

2016,

there was

$259,000

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

1.44

years.

The following table summarizes stock option activity:

									Contractual		Aggregate
	Options			Exercise Price Per Share					Term - Weighted		Intrinsic
	Outstanding						Weighted		Average		Value
	(in thousands)			Range			Average		(in years)		(in thousands)
Outstanding at October 1, 2016		371		$9.16	-	$34.49	$	20.81
Exercised		(22	)	13.06	-	20.50		18.74			$	368
Outstanding at December 31, 2016		349		9.16	-	34.49		20.94		7.78		5,128
Vested and anticipated to vest in the future at December 31, 2016		343						20.91		7.76		5,057
Exercisable at December 31, 2016		120						15.98		6.19		2,369

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

Restricted stock uni

t

s.

Restricted stock units (“RSUs”) granted under our equity incentive plans are valued based upon the fair market value on the date of the grant and provide for a dividend equivalent payment which is included in compensation expense. The vesting period for RSUs is generally

one

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

three

years from the date of the grant for RSUs granted to employees. RSUs do not have voting rights. RSU compensation expense is as follows:

	Three Months Ended
	December 31,		January 2,
(In thousands)	2016		2016
Compensation expense	$	161	$	146

As of

December

31,

2016,

there was

$442,000

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

1.79

years.

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, October 1, 2016		145		$	22.35
Released		(2	)		23.95
Balance, December 31, 2016		143			22.32

XML

Note 7 - Income Taxes

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(7)

Income Taxes

Effective income tax rate

.

Our effective income tax rate was

33.7%

for the

three

- month period ended

December

31,

2016

compared with

34.6%

for the

three

- month period ended

January

2,

2016.

The effective income tax rates for both periods were based upon the estimated rate applicable for the entire fiscal year adjusted to reflect any significant items related specifically to interim periods.

Deferred income taxes.

In

November

2015,

the FASB issued ASU No.

2015

-

17

“Income Taxes (Topic

740)

- Balance Sheet Classification of Deferred Taxes” to simplify the presentation of deferred income taxes. Under this update, all deferred tax assets and liabilities, along with any related valuation allowance, are required to be classified as noncurrent on the balance sheet. Effective

January

2,

2016,

we early adopted ASU No.

2015

-

17

on a prospective basis, which resulted in the reclassification of our current deferred tax asset as a non - current deferred tax liability on our consolidated balance sheet. No prior periods were retrospectively adjusted.

As of

December

31,

2016,

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

$6.7

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

$7.5

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

2017,

but principally expire between

2017

and

2031.

We have also recorded

$87,000

of gross deferred tax assets for various state tax credits that begin to expire in

2018,

but principally expire between

2018

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

December

31,

2016

and

October

1,

2016,

we recorded a valuation allowance of

$

280,000

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.

Uncertainty in income taxes

.

As of

December

31,

2016,

we had no material, known tax exposures that require the establishment of contingency reserves for uncertain tax positions.

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

2011

remain subject to examination.

XML

Note 8 - Employee Benefit Plans

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

(8)

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 the

second

quarter of fiscal

2016,

we notified plan participants of our intent to terminate the Delaware Plan effective

May

1,

2016.

During

September

2016,

the Delaware Plan 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. As of

October

1,

2016,

there were no remaining plan assets.

Net periodic pension cost for the Delaware Plan in the prior year included the following components:

	Three Months Ended
	January 2,
	2016
Interest cost	$	37
Expected return on plan assets		(44	)
Recognized net actuarial loss		19
Net periodic pension cost	$	12

Supplemental employee retirement plan

.

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

30

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

15

- year period following their retirement equal to

50%

of their highest average annual base salary for

five

consecutive years in the

10

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

65

or the completion of

30

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

10

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

1/360th

for each month short of

30

  years that they were employed by us.

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

	Three Months Ended
	December 31,		January 2,
(In thousands)	2016		2016
Service cost	$	86	$	66
Interest cost		85		81
Recognized net actuarial loss		43		21
Net periodic pension cost	$	214	$	168

XML

Note 9 - Long-term Debt

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Long-term Debt [Text Block]

(9)

Long - Term Debt

Revolving Credit Facility.

We have a

$100.0

million revolving credit facility (the “Credit Facility”) that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. In

May

2015,

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

June

2,

2016

to

May

13,

2020.

Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently

$100.0

million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories. As of

December

31,

2016,

no

borrowings were outstanding on the Credit Facility,

$73.6

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

$1.8

million.

Interest rates on the Credit Facility are based upon

(1)

an index rate that is established at the highest of the prime rate,

0.50%

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

(2)

at our election, a LIBOR rate, plus in either case, an applicable interest rate margin. The applicable interest rate margins are adjusted on a quarterly basis based upon the amount of excess availability on the Credit Facility within the range of

0.25%

to

0.75%

for index rate loans and

1.25%

to

1.75%

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

2.00%

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

December

31,

2016,

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

December

31,

2016,

we were in compliance with all of the financial and negative covenants under the Credit Facility and there have not been any events of default.

Amortization of capitalized financing costs associated with the Credit Facility was

$

16,000

for the

three

- month periods ended

December

31,

2016

and

January

2,

2016.

Accumulated amortization of capitalized financing costs was

$

4.5

million as of

December

31,

2016

and

October

1,

2016.

XML

Note 10 - Earnings Per Share

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

(

10

)

Earnings

Per Share

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

	Three Months Ended
	December 31,		January 2,
(In thousands, except per share amounts)	2016		2016
Net earnings available to common shareholders	$	4,460	$	6,708
Basic weighted average shares outstanding		18,980		18,525
Dilutive effect of stock-based compensation		229		358
Diluted weighted average shares outstanding		19,209		18,883
Net earnings per share:
Basic	$	0.23	$	0.36
Diluted	$	0.23	$	0.36

Options representing

42,000

and

86,000

shares for the

three

- month periods ended

December

31,

2016

and

January

2,

2016,

respectively, were antidilutive and not included in the diluted earnings per share calculation.

XML

Note 11 - Share Repurchases

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

(

11

) Share Repurchases

On

November

 

18,

2008,

our Board of Directors approved a share repurchase authorization to buy back up to

$25.0

  million of our outstanding common stock (the “Authorization”). Under the Authorization, repurchases

may

be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors. We are not obligated to acquire any particular amount of common stock and the program

may

be commenced or suspended at any time at our discretion without prior notice. The Authorization continues in effect until terminated by the Board of Directors. As of

December

31,

2016,

there was

$24.8

million remaining available for future share repurchases under this authorization.

No

repurchases of common stock were made during the

three

- month periods ended

December

31,

2016

and

January

2,

2016.

XML

Note 12 - Other Financial Data

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Other Financial Data [Text Block]

(12

)

Other Financial Data

Balance sheet information:

	December 31,			October 1,
(In thousands)	2016			2016
Accounts receivable, net:
Accounts receivable	$	44,445		$	47,680
Less allowance for doubtful accounts		(290	)		(291	)
Total	$	44,155		$	47,389
Inventories:
Raw materials	$	37,021		$	45,032
Work in process		2,828			2,788
Finished goods		21,741			23,366
Total	$	61,590		$	71,186
Other current assets:
Prepaid insurance	$	2,260		$	1,805
Other		998			1,234
Total	$	3,258		$	3,039
Other assets:
Cash surrender value of life insurance policies	$	8,203		$	7,909
Capitalized financing costs, net		154			170
Other		106			105
Total	$	8,463		$	8,184
Property, plant and equipment, net:
Land and land improvements	$	9,715		$	9,619
Buildings		43,739			43,739
Machinery and equipment		143,947			143,789
Construction in progress		16,272			11,318
		213,673			208,465
Less accumulated depreciation		(121,341	)		(120,272	)
Total	$	92,332		$	88,193
Accrued expenses:
Salaries, wages and related expenses	$	2,583		$	6,619
Customer rebates		1,804			1,296
Property taxes		1,266			1,328
Sales allowance reserves		1,104			577
Income taxes		731			-
Restructuring liabilities		165			239
Workers' compensation		124			127
Other		617			838
Total	$	8,394		$	11,024
Other liabilities:
Deferred compensation	$	9,223		$	9,071
Deferred income taxes		6,659			5,472
Other		6			-
Total	$	15,888		$	14,543

XML

Note 13 - Business Segment Information

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(13)

Business Segment Information

Our operations are entirely focused on the manufacture and marketing of steel wire reinforcing products for concrete construction applications. Our concrete reinforcing products consist of

two

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

280,

Segment Reporting

, we have

one

reportable segment.

XML

Note 14 - Contingencies

3 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

(14)

Contingencies

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

XML

Note 3 - Restructuring Charges (Tables)

3 Months Ended

Dec. 31, 2016

Notes Tables

Restructuring and Related Costs [Table Text Block]

				Severance and
	Equipment			Other Employee			Facility			Gain on Sale
(In thousands)	Relocation Costs			Separation Costs			Closure Costs			of Equipment			Total
2017
Liability as of October 1, 2016	$	31		$	239		$	-		$	-		$	270
Restructuring charges		48			-			-			-			48
Cash payments		(79	)		(74	)		-			-			(153	)
Liability as of December 31, 2016	$	-		$	165		$	-		$	-		$	165
2016
Liability as of October 3, 2015	$	-		$	735		$	-		$	-		$	735
Restructuring charges (recoveries)		75			-			30			(180	)		(75	)
Cash receipts (payments)		(75	)		(72	)		(30	)		180			3
Liability as of January 2, 2016	$	-		$	663		$	-		$	-		$	663

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Note 4 - Fair Value Measurements (Tables)

3 Months Ended

Dec. 31, 2016

Notes Tables

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

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of December 31, 2016:
Current assets:
Cash equivalents	$	58,643	$	58,643	$	-
Other assets:
Cash surrender value of life insurance policies		8,203		-		8,203
Total	$	66,846	$	58,643	$	8,203
As of October 1, 2016:
Current assets:
Cash equivalents	$	58,846	$	58,846	$	-
Other assets:
Cash surrender value of life insurance policies		7,909		-		7,909
Total	$	66,755	$	58,846	$	7,909

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Note 5 - Intangible Assets (Tables)

3 Months Ended

Dec. 31, 2016

Notes Tables

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

(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value
As of December 31, 2016:
Customer relationships	$	6,500	$	(775	)	$	5,725
Developed technology and know-how		1,800		(214	)		1,586
Non-competition agreements		3,577		(2,114	)		1,463
	$	11,877	$	(3,103	)	$	8,774
As of October 1, 2016:
Customer relationships	$	6,500	$	(693	)	$	5,807
Developed technology and know-how		1,800		(192	)		1,608
Non-competition agreements		3,577		(1,929	)		1,648
	$	11,877	$	(2,814	)	$	9,063

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Note 6 - Stock-based Compensation (Tables)

3 Months Ended

Dec. 31, 2016

Notes Tables

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

	Three Months Ended
	December 31,		January 2,
(In thousands)	2016		2016
Compensation expense	$	96	$	83

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

									Contractual		Aggregate
	Options			Exercise Price Per Share					Term - Weighted		Intrinsic
	Outstanding						Weighted		Average		Value
	(in thousands)			Range			Average		(in years)		(in thousands)
Outstanding at October 1, 2016		371		$9.16	-	$34.49	$	20.81
Exercised		(22	)	13.06	-	20.50		18.74			$	368
Outstanding at December 31, 2016		349		9.16	-	34.49		20.94		7.78		5,128
Vested and anticipated to vest in the future at December 31, 2016		343						20.91		7.76		5,057
Exercisable at December 31, 2016		120						15.98		6.19		2,369

Schedule of RSU Grants and Compensation Expense [Table Text Block]

	Three Months Ended
	December 31,		January 2,
(In thousands)	2016		2016
Compensation expense	$	161	$	146

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 1, 2016		145		$	22.35
Released		(2	)		23.95
Balance, December 31, 2016		143			22.32

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Note 8 - Employee Benefit Plans (Tables)

3 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Three Months Ended
	January 2,
	2016
Interest cost	$	37
Expected return on plan assets		(44	)
Recognized net actuarial loss		19
Net periodic pension cost	$	12

	Three Months Ended
	December 31,		January 2,
(In thousands)	2016		2016
Service cost	$	86	$	66
Interest cost		85		81
Recognized net actuarial loss		43		21
Net periodic pension cost	$	214	$	168

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Note 10 - Earnings Per Share (Tables)

3 Months Ended

Dec. 31, 2016

Notes Tables

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

	Three Months Ended
	December 31,		January 2,
(In thousands, except per share amounts)	2016		2016
Net earnings available to common shareholders	$	4,460	$	6,708
Basic weighted average shares outstanding		18,980		18,525
Dilutive effect of stock-based compensation		229		358
Diluted weighted average shares outstanding		19,209		18,883
Net earnings per share:
Basic	$	0.23	$	0.36
Diluted	$	0.23	$	0.36

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Note 12 - Other Financial Data (Tables)

3 Months Ended

Dec. 31, 2016

Notes Tables

Condensed Balance Sheet [Table Text Block]

	December 31,			October 1,
(In thousands)	2016			2016
Accounts receivable, net:
Accounts receivable	$	44,445		$	47,680
Less allowance for doubtful accounts		(290	)		(291	)
Total	$	44,155		$	47,389
Inventories:
Raw materials	$	37,021		$	45,032
Work in process		2,828			2,788
Finished goods		21,741			23,366
Total	$	61,590		$	71,186
Other current assets:
Prepaid insurance	$	2,260		$	1,805
Other		998			1,234
Total	$	3,258		$	3,039
Other assets:
Cash surrender value of life insurance policies	$	8,203		$	7,909
Capitalized financing costs, net		154			170
Other		106			105
Total	$	8,463		$	8,184
Property, plant and equipment, net:
Land and land improvements	$	9,715		$	9,619
Buildings		43,739			43,739
Machinery and equipment		143,947			143,789
Construction in progress		16,272			11,318
		213,673			208,465
Less accumulated depreciation		(121,341	)		(120,272	)
Total	$	92,332		$	88,193
Accrued expenses:
Salaries, wages and related expenses	$	2,583		$	6,619
Customer rebates		1,804			1,296
Property taxes		1,266			1,328
Sales allowance reserves		1,104			577
Income taxes		731			-
Restructuring liabilities		165			239
Workers' compensation		124			127
Other		617			838
Total	$	8,394		$	11,024
Other liabilities:
Deferred compensation	$	9,223		$	9,071
Deferred income taxes		6,659			5,472
Other		6			-
Total	$	15,888		$	14,543

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Note 3 - Restructuring Charges (Details Textual) - USD ($)	Aug. 15, 2014	Dec. 31, 2016	Oct. 01, 2016
Restructuring Reserve, Current		$ 165,000	$ 239,000
Accounts Payable, Current		29,001,000	42,759,000
Accrued Liabilities, Current		8,394,000	11,024,000
ASW Acquisition [Member]
Business Combination, Consideration Transferred	$ 33,500,000
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustment, Consideration Transferred	$ 480,000
Restructuring Reserve, Current		$ 200,000	300,000
Accounts Payable, Current			100,000
Accrued Liabilities, Current			$ 200,000

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Note 3 - Restructuring Charges - Summaries of the Restructuring Activities and Associated Costs Incurred (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016
Liability	$ 270	$ 735
Restructuring charges	48
Cash payments	(153)
Liability	165	663
Restructuring charges (recoveries), net	48	(75)
Cash receipts (payments)		3
Equipment Relocation Costs [Member]
Liability	31
Restructuring charges	48
Cash payments	(79)
Liability
Restructuring charges (recoveries), net		75
Cash receipts (payments)		(75)
Employee Severance [Member]
Liability	239	735
Restructuring charges
Cash payments	(74)
Liability	165	663
Restructuring charges (recoveries), net
Cash receipts (payments)		(72)
Facility Closing [Member]
Liability
Restructuring charges
Cash payments
Liability
Restructuring charges (recoveries), net		30
Cash receipts (payments)		(30)
Gain on Sale of Property and Equipment [Member]
Liability
Restructuring charges
Cash payments
Liability
Restructuring charges (recoveries), net		(180)
Cash receipts (payments)		$ 180

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Note 4 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2016	Oct. 01, 2016
Non Financial [Member]
Assets, Fair Value Disclosure, Nonrecurring	$ 0	$ 0

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Note 4 - Fair Value Measurements - Fair Value of Financial Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Oct. 01, 2016
Cash equivalents	$ 58,643	$ 58,846
Cash surrender value of life insurance policies	8,203	7,909
Total	66,846	66,755
Fair Value, Inputs, Level 1 [Member]
Cash equivalents	58,643	58,846
Total	58,643	58,846
Fair Value, Inputs, Level 2 [Member]
Cash surrender value of life insurance policies	8,203	7,909
Total	$ 8,203	$ 7,909

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Note 5 - Intangible Assets (Details Textual) - USD ($)	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016
Amortization of Intangible Assets	$ 289,000	$ 289,000

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Note 5 - Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Oct. 01, 2016
Gross Amount	$ 11,877	$ 11,877
Accumulated Amortization	(3,103)	(2,814)
Net Book Value	8,774	9,063
Customer Relationships [Member]
Gross Amount	6,500	6,500
Accumulated Amortization	(775)	(693)
Net Book Value	5,725	5,807
Technology-Based Intangible Assets [Member]
Gross Amount	1,800	1,800
Accumulated Amortization	(214)	(192)
Net Book Value	1,586	1,608
Noncompete Agreements [Member]
Gross Amount	3,577	3,577
Accumulated Amortization	(2,114)	(1,929)
Net Book Value	$ 1,463	$ 1,648

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Note 6 - Stock-based Compensation (Details Textual) - USD ($)	3 Months Ended
	Dec. 31, 2016	Feb. 17, 2015
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	558,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Employee Stock Option [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 259,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 160 days
Restricted Stock Units (RSUs) [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 288 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 442,000
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

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Note 6 - Stock-based Compensation - Compensation Expense and Excess Tax Benefits Associated With Stock Options (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016
Employee Stock Option [Member]
Compensation expense	$ 96	$ 83

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Note 6 - Stock-based Compensation - Stock Option Activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2016 USD ($) $ / shares shares
Options outstanding, beginning balance (in shares) | shares	371
Exercise price per share, beginning balance (in dollars per share)	$ 20.81
Aggregate intrinsic value, beginning balance | $
Options outstanding, exercised (in shares) | shares	(22)
Exercise price per share, exercised (in dollars per share)	$ 18.74
Aggregate intrinsic value, exercised | $	$ 368
Options outstanding, ending balance (in shares) | shares	349
Exercise price per share, ending balance (in dollars per share)	$ 20.94
Contractual term - weighted average, ending balance (Year)	7 years 284 days
Aggregate intrinsic value, ending balance | $	$ 5,128
Options outstanding, vested and anticipated to vest in the future (in shares) | shares	343
Weighted average, vested and anticipated to vest in future (in dollars per share)	$ 20.91
Contractual term - weighted average, vested and anticipated to vest in future (Year)	7 years 277 days
Aggregate intrinsic value, vested and anticipated to vest in future | $	$ 5,057
Options outstanding, exercisable (in shares) | shares	120
Weighted average, exercisable (in dollars per share)	$ 15.98
Contractual term - weighted average, exercisable (Year)	6 years 69 days
Aggregate intrinsic value, exercisable | $	$ 2,369
Minimum [Member]
Exercise price per share, beginning balance (in dollars per share)	$ 9.16
Exercise price per share, exercised (in dollars per share)	13.06
Exercise price per share, ending balance (in dollars per share)	9.16
Maximum [Member]
Exercise price per share, beginning balance (in dollars per share)	34.49
Exercise price per share, exercised (in dollars per share)	20.50
Exercise price per share, ending balance (in dollars per share)	$ 34.49

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Note 6 - Stock-based Compensation - RSU Grants and Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016
Restricted Stock Units (RSUs) [Member]
Compensation expense	$ 161	$ 146

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Note 6 - Stock-based Compensation - Restricted Stock and Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) [Member] shares in Thousands	3 Months Ended
	Dec. 31, 2016 $ / shares shares
Restricted stock units outstanding, beginning balance (in shares) | shares	145
Weighted average grant date fair value, beginning balance (in dollars per share) | $ / shares	$ 22.35
Restricted stock units outstanding, released (in shares) | shares	(2)
Weighted average grant date fair value, released (in dollars per share) | $ / shares	$ 23.95
Restricted stock units outstanding, ending balance (in shares) | shares	143
Weighted average grant date fair value, ending balance (in dollars per share) | $ / shares	$ 22.32

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Note 7 - Income Taxes (Details Textual) - USD ($)	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016	Oct. 01, 2016
Effective Income Tax Rate Reconciliation, Percent	33.70%	34.60%
Deferred Tax Liabilities, Net, Noncurrent	$ 6,659,000		$ 5,472,000
Operating Loss Carryforwards	7,500,000
Deferred Tax Assets, Valuation Allowance	280,000		$ 280,000
State and Local Jurisdiction [Member]
Deferred Tax Assets, Tax Credit Carryforwards	$ 87,000
State and Local Jurisdiction [Member] | Earliest Tax Year [Member]
Operating Loss Carryforwards Expiration Date 1	2017
Tax Credit Carryforward, Expiration Date 1	2018
State and Local Jurisdiction [Member] | Latest Tax Year [Member]
Operating Loss Carryforwards Expiration Date 1	2031
Tax Credit Carryforward, Expiration Date 1	2020

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Note 8 - Employee Benefit Plans (Details Textual)	3 Months Ended
	Dec. 31, 2016
Supplemental Employee Retirement Plan [Member]
Supplemental Retirement Benefit Period	15 years
Defined Benefit Plan Percent of Highest Average Salary Base	50.00%
Defined Benefit Plan Number of Years in Average Annual Base Salary	5 years
Defined Benefit Plan Number of Years Preceding Retirement for Average Annual Base Salary Calculation	10 years
Reduced SERP [Member]
Defined Benefit Plan Retirement Age	65
Defined Benefit Plan, Reduction for Each Month	0.0028%
Minimum [Member] | Supplemental Employee Retirement Plan [Member]
Defined Benefit Plan Employment Term	30 years
Minimum [Member] | Reduced SERP [Member]
Defined Benefit Plan Employment Term	10 years

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Note 8 - Employee Benefit Plans - Net Periodic Pension Costs and Related Components (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016
Pension Plan [Member]
Interest cost		$ 37
Expected return on plan assets		(44)
Recognized net actuarial loss		19
Net periodic pension cost		12
Supplemental Employee Retirement Plan [Member]
Interest cost	$ 85	81
Recognized net actuarial loss	43	21
Net periodic pension cost	214	168
Service cost	$ 86	$ 66

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Note 9 - Long-term Debt (Details Textual)	3 Months Ended
	Dec. 31, 2016 USD ($)	Jan. 02, 2016 USD ($)	Oct. 01, 2016 USD ($)	Feb. 06, 2012 USD ($)
Amortization of Debt Issuance Costs	$ 16,000	$ 16,000
Accumulated Amortization, Debt Issuance Costs	4,500,000		$ 4,500,000
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity				$ 100,000,000
Line of Credit Facility, Current Borrowing Capacity	100,000,000
Long-term Line of Credit	0
Line of Credit Facility, Remaining Borrowing Capacity	$ 73,600,000
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%
Revolving Credit Facility [Member] | Letter of Credit [Member]
Long-term Line of Credit	$ 1,800,000

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Note 10 - Earnings Per Share (Details Textual) - shares	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	42,000	86,000

XML

Note 10 - Earnings Per Share - Basic and Diluted Earnings Per Share Attributable to Common Shareholders (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2016	Jan. 02, 2016
Net earnings	$ 4,460	$ 6,708
Basic weighted average shares outstanding (in shares)	18,980	18,525
Dilutive effect of stock-based compensation (in shares)	229	358
Diluted weighted average shares outstanding (in shares)	19,209	18,883
Basic (in dollars per share)	$ 0.23	$ 0.36
Diluted (in dollars per share)	$ 0.23	$ 0.36

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Note 11 - Share Repurchases (Details Textual) - USD ($) shares in Thousands, $ in Millions	3 Months Ended
	Dec. 31, 2016	Jan. 02, 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

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Note 12 - Other Financial Data - Balance Sheet Information (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Oct. 01, 2016
Accounts receivable, net:
Accounts receivable	$ 44,445	$ 47,680
Less allowance for doubtful accounts	(290)	(291)
Total	44,155	47,389
Inventories:
Raw materials	37,021	45,032
Work in process	2,828	2,788
Finished goods	21,741	23,366
Total	61,590	71,186
Other current assets:
Prepaid insurance	2,260	1,805
Other	998	1,234
Total	3,258	3,039
Other assets:
Cash surrender value of life insurance policies	8,203	7,909
Capitalized financing costs, net	154	170
Other	106	105
Total	8,463	8,184
Property, plant and equipment, net:
Land and land improvements	9,715	9,619
Buildings	43,739	43,739
Machinery and equipment	143,947	143,789
Construction in progress	16,272	11,318
Property, plant and equipment, gross	213,673	208,465
Less accumulated depreciation	(121,341)	(120,272)
Total	92,332	88,193
Accrued expenses:
Salaries, wages and related expenses	2,583	6,619
Customer rebates	1,804	1,296
Property taxes	1,266	1,328
Sales allowance reserves	1,104	577
Income taxes	731
Restructuring Reserve, Current	165	239
Workers' compensation	124	127
Other	617	838
Total	8,394	11,024
Other liabilities:
Deferred compensation	9,223	9,071
Deferred Tax Liabilities, Net, Noncurrent	6,659	5,472
Other	6
Total	$ 15,888	$ 14,543

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Note 13 - Business Segment Information (Details Textual)	3 Months Ended
	Dec. 31, 2016
Number of Reportable Segments	1