10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 29, 2019

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

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

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock (No Par Value)	IIIN	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

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

Yes [X] No [  ]

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

Yes [X] No [  ]

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

Large accelerated filer [  ]	Accelerated filer [X]
Non-accelerated filer [  ]	Smaller reporting company [  ] Emerging growth company [  ]

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

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

Yes [  ] No [X]

The number of shares outstanding of the registrant’s common stock as of July 17, 2019 was 19,251,607.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Unaudited Financial Statements
	Consolidated Statements of Operations and Comprehensive Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Consolidated Statements of Shareholders' Equity	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 6.	Exhibits	23
SIGNATURES		24

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 29,			June 30,			June 29,			June 30,
	2019			2018			2019			2018
Net sales	$	126,252		$	126,688		$	342,310		$	331,846
Cost of sales		118,016			102,502			316,077			280,583
Gross profit		8,236			24,186			26,233			51,263
Selling, general and administrative expense		5,516			7,541			18,606			20,779
Other expense (income), net		(23	)		(32	)		(1,823	)		153
Interest expense		62			23			137			74
Interest income		(9	)		(150	)		(176	)		(279	)
Earnings before income taxes		2,690			16,804			9,489			30,536
Income taxes		500			3,936			2,124			3,678
Net earnings	$	2,190		$	12,868		$	7,365		$	26,858
Net earnings per share:
Basic	$	0.11		$	0.67		$	0.38		$	1.41
Diluted		0.11			0.67			0.38			1.40
Weighted average shares outstanding:
Basic		19,252			19,070			19,239			19,054
Diluted		19,334			19,274			19,336			19,252
Cash dividends declared per share	$	0.03		$	0.03		$	0.09		$	1.09
Comprehensive income	$	2,190		$	12,868		$	7,365		$	26,858

See accompanying notes to consolidated financial statements.

3

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

	(Unaudited)
	June 29,			September 29,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	7,449		$	43,941
Accounts receivable, net		50,743			51,484
Inventories		104,624			94,157
Other current assets		6,911			5,895
Total current assets		169,727			195,477
Property, plant and equipment, net		107,331			106,148
Intangibles, net		8,884			9,703
Goodwill		8,293			8,293
Other assets		10,560			9,913
Total assets	$	304,795		$	329,534
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	31,311		$	60,059
Accrued expenses		6,396			11,929
Total current liabilities		37,707			71,988
Other liabilities		18,764			15,881
Commitments and contingencies
Shareholders' equity:
Common stock		19,252			19,223
Additional paid-in capital		73,849			72,852
Retained earnings		156,717			151,084
Accumulated other comprehensive loss		(1,494	)		(1,494	)
Total shareholders' equity		248,324			241,665
Total liabilities and shareholders' equity	$	304,795		$	329,534

See accompanying notes to consolidated financial statements.

4

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	June 29,			June 30,
	2019			2018
Cash Flows From Operating Activities:
Net earnings	$	7,365		$	26,858
Adjustments to reconcile net earnings to net cash provided by (used for) operating activities:
Depreciation and amortization		10,084			9,578
Amortization of capitalized financing costs		48			48
Stock-based compensation expense		1,201			1,241
Deferred income taxes		2,193			(2,321	)
Loss (gain) on sale and disposition of property, plant and equipment		(1,760	)		270
Increase in cash surrender value of life insurance policies over premiums paid		(204	)		(428	)
Net changes in assets and liabilities (net of assets and liabilities acquired):
Accounts receivable, net		741			(15,548	)
Inventories		(10,467	)		27,102
Accounts payable and accrued expenses		(33,640	)		3,011
Other changes		(1,500	)		24
Total adjustments		(33,304	)		22,977
Net cash provided by (used for) operating activities		(25,939	)		49,835
Cash Flows From Investing Activities:
Capital expenditures		(9,380	)		(12,481	)
Proceeds from property insurance		1,192			-
Increase in cash surrender value of life insurance policies		(305	)		(291	)
Proceeds from surrender of life insurance policies		67			152
Proceeds from sale of property, plant and equipment		17			-
Acquisition of business		-			(3,300	)
Net cash used for investing activities		(8,409	)		(15,920	)
Cash Flows From Financing Activities:
Proceeds from long-term debt		44,239			290
Principal payments on long-term debt		(44,239	)		(290	)
Cash dividends paid		(1,732	)		(20,756	)
Cash received from exercise of stock options		-			242
Financing costs		(237	)		-
Payment of employee tax withholdings related to net share transactions		(175	)		(274	)
Net cash used for financing activities		(2,144	)		(20,788	)
Net increase (decrease) in cash and cash equivalents		(36,492	)		13,127
Cash and cash equivalents at beginning of period		43,941			32,105
Cash and cash equivalents at end of period	$	7,449		$	45,232
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	49		$	-
Income taxes, net		1,759			3,553
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable		518			499
Restricted stock units and stock options surrendered for withholding taxes payable		175			274

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
For the nine months ended June 29, 2019
Balance at September 29, 2018		19,223	$	19,223	$	72,852		$	151,084		$	(1,494	)	$	241,665
Net earnings									4,126						4,126
Compensation expense associated with stock-based plans						174									174
Restricted stock units and stock options surrendered for withholding taxes payable						(7	)								(7	)
Cash dividends declared									(576	)					(576	)
Balance at December 29, 2018		19,223		19,223		73,019			154,634			(1,494	)		245,382
Net earnings									1,049						1,049
Vesting of restricted stock units		29		29		(29	)								-
Compensation expense associated with stock-based plans						845									845
Restricted stock units and stock options surrendered for withholding taxes payable						(168	)								(168	)
Cash dividends declared									(578	)					(578	)
Balance at March 30, 2019		19,252		19,252		73,667			155,105			(1,494	)		246,530
Net earnings									2,190						2,190
Compensation expense associated with stock-based plans						182									182
Cash dividends declared									(578	)					(578	)
Balance at June 29, 2019		19,252	$	19,252	$	73,849		$	156,717		$	(1,494	)	$	248,324
For the nine months ended June 30, 2018
Balance at September 30, 2017		19,041	$	19,041	$	69,817		$	135,851		$	(1,333	)	$	223,376
Net earnings									8,111						8,111
Compensation expense associated with stock-based plans						235									235
Cash dividends declared									(19,612	)					(19,612	)
Balance at December 30, 2017		19,041		19,041		70,052			124,350			(1,333	)		212,110
Net earnings									5,879						5,879
Stock options exercised, net		2		2		(2	)								-
Vesting of restricted stock units		20		20		(20	)								-
Compensation expense associated with stock-based plans						838									838
Restricted stock units and stock options surrendered for withholding taxes payable						(210	)								(210	)
Cash dividends declared									(572	)					(572	)
Balance at March 31, 2018		19,063		19,063		70,658			129,657			(1,333	)		218,045
Net earnings									12,868						12,868
Stock options exercised, net		22		22		220									242
Compensation expense associated with stock-based plans						168									168
Restricted stock units and stock options surrendered for withholding taxes payable						(64	)								(64	)
Cash dividends declared									(572	)					(572	)
Balance at June 30, 2018		19,085	$	19,085	$	70,982		$	141,953		$	(1,333	)	$	230,687

See accompanying notes to consolidated financial statements.

6

INSTEEL INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Insteel Industries, Inc. (“we,” “us,” “our,” “the Company” or “Insteel”) have been prepared pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures made are adequate to make the information not misleading. The September 29, 2018 consolidated balance sheet was derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should therefore be read in conjunction with the consolidated financial statements and notes for the fiscal year ended September 29, 2018 included in our Annual Report on Form 10-K filed with the SEC on October 26, 2018.

The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that we consider necessary for a fair presentation of results for these interim periods. The results of operations for the nine-month period ended June 29, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending September 28, 2019 or future periods.

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

(2) Recent Accounting Pronouncements

Current Adoptions

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 became effective for us in the first quarter and were adopted retrospectively. The adoption of this update did not impact our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers,” as subsequently amended, which supersedes 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. We adopted ASU 2014-09 during the first quarter using the modified retrospective method. The adoption of this update did not significantly change our policies for recognizing revenue nor materially impact our consolidated financial statements (see Note 3).

Future Adoptions

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

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

7

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. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendment has the same effective date and transition requirements as ASU No. 2016-02. We are evaluating the impact that the adoption of these updates will have on our consolidated financial statements.

(3) Revenue Recognition

We recognize revenues when obligations under the terms of a contract with our customers are satisfied, which generally occurs when products are shipped and control is transferred. We enter into contracts that pertain to products, which are accounted for as separate performance obligations and typically one year or less in duration. We do not exercise significant judgment in determining the timing for the satisfaction of performance obligations or the transaction price. Revenue is measured as the amount of consideration expected to be received in exchange for our products. We have elected to apply the practical expedient provided for in ASU No. 2014-09 and not disclose information regarding remaining performance obligations that have original expected durations of one year or less.

Variable consideration that may affect the total transaction price, including contractual discounts, rebates, returns and credits are included in net sales. Estimates for variable consideration are based on historical experience, anticipated performance and management's judgment and are updated as of each reporting date. Shipping and related expenses associated with outbound freight are accounted for as fulfillment costs and included in cost of sales. We do not have significant financing components.

The following table disaggregates our net sales by product line:

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands)	2019		2018		2019		2018
Welded wire reinforcement	$	80,007	$	76,756	$	215,226	$	198,453
Prestressed concrete strand		46,245		49,932		127,084		133,393
Total	$	126,252	$	126,688	$	342,310	$	331,846

The following table disaggregates our net sales by geography based on the shipping addresses of our customers:

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands)	2019		2018		2019		2018
United States	$	125,929	$	126,299	$	341,169	$	330,513
Foreign		323		389		1,141		1,333
Total	$	126,252	$	126,688	$	342,310	$	331,846

Contract assets primarily relate to our rights to consideration for products that are delivered but not billed as of the reporting date and are reclassified to receivables when the customer is invoiced. Contract liabilities primarily relate to performance obligations that are to be satisfied in the future and arise when we bill the customer in advance of shipments. Contract costs are not significant and are recognized as incurred. Contract assets and liabilities were not material as of June 29, 2019.

Accounts receivable includes amounts billed and currently due from customers stated at their net estimated realizable value. Customer payment terms are generally 30 days. We maintain an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected, which is based upon our assessment of customer creditworthiness, historical payment experience and the age of outstanding receivables. Past-due trade receivable balances are written off when our collection efforts have been unsuccessful.

8

(4) Fair Value Measurements

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

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

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

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

As of June 29, 2019 and September 29, 2018, we held financial assets that are required to be measured at fair value on a recurring basis, which are summarized below:

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of June 29, 2019:
Current assets:
Cash equivalents	$	6,275	$	6,275	$	-
Other assets:
Cash surrender value of life insurance policies		10,211		-		10,211
Total	$	16,486	$	6,275	$	10,211
As of September 29, 2018:
Current assets:
Cash equivalents	$	44,257	$	44,257	$	-
Other assets:
Cash surrender value of life insurance policies		9,769		-		9,769
Total	$	54,026	$	44,257	$	9,769

Cash equivalents, which include all highly liquid investments with original maturities of three months or less, are classified as Level 1 of the fair value hierarchy. The carrying amount of our cash equivalents, which consist of investments in money market funds, approximates fair value due to their short maturities. Cash surrender value of life insurance policies are classified as Level 2. The fair value of the life insurance policies was determined by the underwriting insurance company’s valuation models and represents the guaranteed value we would receive upon surrender of these policies as of the reporting date.

As of June 29, 2019 and September 29, 2018, 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 approximates fair value due to the short-term maturities of these financial instruments.

9

(5) Intangible Assets

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

(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value
As of June 29, 2019:
Customer relationships	$	9,070	$	(2,054	)	$	7,016
Developed technology and know-how		1,800		(438	)		1,362
Non-competition agreements		1,800		(1,376	)		424
Trade name		140		(58	)		82
	$	12,810	$	(3,926	)	$	8,884
As of September 29, 2018:
Customer relationships	$	9,070	$	(1,598	)	$	7,472
Developed technology and know-how		1,800		(371	)		1,429
Non-competition agreements		3,687		(2,994	)		693
Trade name		140		(31	)		109
	$	14,697	$	(4,994	)	$	9,703

Amortization expense for intangibles was $273,000 and $299,000 for the three-month periods ended June 29, 2019 and June 30, 2018, respectively, and $819,000 and $987,000 for the nine-month periods ended June 29, 2019 and June 30, 2018, respectively. We completed the acquisition of a business during the nine-month period ended June 30, 2018, and the effects of the purchase price allocation for this transaction on the accompanying consolidated financial statements were not material.

(6) Stock-Based Compensation

Under our equity incentive plan, employees and directors may be granted stock options, restricted stock, restricted stock units and performance awards. Effective February 17, 2015, our shareholders approved the 2015 Equity Incentive Plan of Insteel Industries, Inc. (the “2015 Plan”), which authorizes up to 900,000 shares of our common stock for future grants under the plan. The 2015 Plan, which expires on February 17, 2025, replaces the 2005 Equity Incentive Plan of Insteel Industries, Inc., which expired on February 15, 2015.  As of June 29, 2019, there were 241,000 shares of our common stock available for future grants under the 2015 Plan, which is our only active equity incentive plan.                                                   

Stock option awards. Under our equity incentive plan, employees and directors may be granted options to purchase shares of common stock at the fair market value on the date of the grant. Options granted under these plans generally vest over three years and expire ten years from the date of the grant. Compensation expense associated with stock options was $58,000 and $51,000 for the three-month periods ended June 29, 2019 and June 30, 2018, respectively, and $496,000 and $522,000 for the nine-month periods ended June 29, 2019 and June 30, 2018, respectively. As of June 29, 2019, there was $214,000 of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of 1.55 years.

The fair value of each option award granted is estimated on the date of grant using a Monte Carlo valuation model. The estimated fair values of stock options granted during the nine-month periods ended June 29, 2019 and June 30, 2018 was $7.96 and $10.46 per share, respectively, based on the following assumptions:

	Nine Months Ended
	June 29,			June 30,
	2019			2018
Risk-free interest rate		3.84	%		2.72	%
Dividend yield		0.50	%		0.40	%
Expected volatility		43.08	%		37.74	%
Expected term (in years)		4.56			4.89

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

10

The following table summarizes stock option activity:

										Contractual		Aggregate
	Options			Exercise Price Per Share						Term - Weighted		Intrinsic
	Outstanding							Weighted		Average		Value
	(in thousands)			Range				Average		(in years)		(in thousands)
Outstanding at September 29, 2018		264			$10.23	-	$41.85	$	29.25
Granted		58			21.57	-	21.57		21.57
Exercised		(5	)		18.05	-	26.75		23.95			$	21
Outstanding at June 29, 2019		317			10.23	-	41.85		27.93		7.59		200
Vested and anticipated to vest in the future at June 29, 2019		313							27.91		7.57		200
Exercisable at June 29, 2019		145							26.05		6.14		200

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. Compensation expense associated with RSUs was $124,000 and $117,000 for the three-month periods ended June 29, 2019 and June 30, 2018, respectively, and $705,000 and $719,000 for the nine-month periods ended June 29, 2019 and June 30, 2018, respectively. The market value of RSUs granted during the nine-month periods ended June 29, 2019 and June 30, 2018 was $763,000 and $712,000, respectively.

As of June 29, 2019, there was $486,000 of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 1.47 years.

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, September 29, 2018		103		$	30.40
Granted		35			21.57
Released		(36	)		25.28
Balance, June 29, 2019		102			29.16

(7) Income Taxes

Effective income tax rate. Our effective income tax rate was 22.4% for the nine-month period ended June 29, 2019 compared with 12.0% for the nine-month period ended June 30, 2018. The effective income tax rates for both periods were based upon the estimated rate applicable for the entire fiscal year adjusted to reflect any significant items related specifically to interim periods. On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted, which, among other changes, reduced the federal statutory corporate tax rate from 35% to 21% effective January 1, 2018. Based on the provisions of the Act, we remeasured our deferred tax assets and liabilities and adjusted our estimated annual federal income tax rate to incorporate the lower corporate tax rate into our first quarter tax provision for the prior year which resulted in a $3.7 million reduction of income tax expense. Since our fiscal year ends on the Saturday closest to September 30 rather than the calendar year, we are subject to IRS rules relating to transitional income tax rates. As a result, our federal statutory rate was 24.5% for fiscal 2018 and is 21% for fiscal 2019 and beyond.

11

Deferred income taxes. As of June 29, 2019, we recorded a deferred tax liability (net of valuation allowance) of $7.5 million in other liabilities on our consolidated balance sheet. We have $2.1 million of state net operating loss carryforwards (“NOLs”) that begin to expire in 2022, but principally expire between 2022 and 2031. We have also recorded gross deferred tax assets of $16,000 for various state tax credits that begin to expire in 2019, but principally expire between 2019 and 2020.

The realization of our deferred tax assets is entirely dependent upon our ability to generate future taxable income in applicable jurisdictions. GAAP requires that we periodically assess the need to establish a reserve against our deferred tax assets to the extent we no longer believe it is more likely than not that they will be fully realized. As of June 29, 2019 and September 29, 2018, we recorded a valuation allowance of $265,000 and $233,000, respectively, pertaining to various state NOLs and tax credits that were not expected to be utilized. The valuation allowance is subject to periodic review and adjustment based on changes in facts and circumstances and would be reduced should we utilize the state NOLs and tax credits against which an allowance had previously been provided or determine that such utilization was more likely than not.

Uncertainty in income taxes. As of June 29, 2019, we had no material, known tax exposures that required the establishment of contingency reserves for uncertain tax positions.

We file U.S. federal, state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to 2014 remain subject to examination.

(8) Employee Benefit Plans

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

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

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands)	2019		2018		2019		2018
Interest cost	$	96	$	86	$	288	$	258
Service cost		74		70		222		209
Recognized net actuarial loss		35		38		105		114
Net periodic pension cost	$	205	$	194	$	615	$	581

(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 2019, we entered into a new credit agreement, which amended and restated in its entirety the previous agreement pertaining to the revolving credit facility that had been in effect since June 2010. The new credit agreement, among other changes, extended the maturity date of the Credit Facility from May 13, 2020 to May 15, 2024 and provided for an incremental feature whereby its size may be increased by up to $50.0 million, subject to our lender’s approval. Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently $100.0 million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories. As of June 29, 2019, no borrowings were outstanding on the Credit Facility, $98.4 million of borrowing capacity was available and outstanding letters of credit totaled $1.6 million.

12

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 0.50% for index rate loans and 1.25% to 1.50% for LIBOR loans. In addition, the applicable interest rate margins would be increased by 2.00% upon the occurrence of certain events of default provided for under the terms of the Credit Facility. Based on our excess availability as of June 29, 2019, 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 1.0 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 $10.0 million. In addition, the terms of the Credit Facility restrict our ability to, among other things: engage in certain business combinations or divestitures; make investments in or loans to third parties, unless certain conditions are met with respect to such investments or loans; pay cash dividends or repurchase shares of our stock subject to certain minimum borrowing availability requirements; incur or assume indebtedness; issue securities; enter into certain transactions with our affiliates; or permit liens to encumber our property and assets. The terms of the Credit Facility also provide that an event of default will occur upon the occurrence of, among other things: defaults or breaches under the loan documents, subject in certain cases to cure periods; defaults or breaches by us or any of our subsidiaries under any agreement resulting in the acceleration of amounts above certain thresholds or payment defaults above certain thresholds; certain events of bankruptcy or insolvency; certain entries of judgment against us or any of our subsidiaries, which are not covered by insurance; or a change of control. As of June 29, 2019, 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 June 29, 2019 and June 30, 2018, and $48,000 for the nine-month periods ended June 29, 2019 and June 30, 2018.

(10) Earnings Per Share

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

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands, except per share amounts)	2019		2018		2019		2018
Net earnings	$	2,190	$	12,868	$	7,365	$	26,858
Basic weighted average shares outstanding		19,252		19,070		19,239		19,054
Dilutive effect of stock-based compensation		82		204		97		198
Diluted weighted average shares outstanding		19,334		19,274		19,336		19,252
Net earnings per share:
Basic	$	0.11	$	0.67	$	0.38	$	1.41
Diluted	$	0.11	$	0.67	$	0.38	$	1.40

Options and RSUs that were antidilutive and not included in the dilutive earnings per share calculation amounted to 276,000 and 97,000 shares for the three-month periods ended June 29, 2019 and June 30, 2018, respectively. Options and RSUs that were antidilutive and not included in the dilutive earnings per share calculation amounted to 221,000 and 98,000 shares for the nine-month periods ended June 29, 2019 and June 30, 2018, respectively.

(11) Share Repurchases

On November 18, 2008, our Board of Directors approved a share repurchase authorization to buy back up to $25.0 million of our outstanding common stock (the “Authorization”). Under the Authorization, repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors. We are not obligated to acquire any common stock and the program may be commenced or suspended at any time at our discretion without prior notice. The Authorization continues in effect until terminated by the Board of Directors. As of June 29, 2019, there was $24.8 million remaining available for future share repurchases under this Authorization. There were no share repurchases during the three- and nine-month periods ended June 29, 2019 and June 30, 2018.

13

(12) Other Financial Data

Balance sheet information:

	June 29,			September 29,
(In thousands)	2019			2018
Accounts receivable, net:
Accounts receivable	$	51,024		$	51,779
Less allowance for doubtful accounts		(281	)		(295	)
Total	$	50,743		$	51,484
Inventories:
Raw materials	$	52,279		$	61,008
Work in process		5,953			4,779
Finished goods		46,392			28,370
Total	$	104,624		$	94,157
Other current assets:
Prepaid insurance	$	4,210		$	3,845
Income tax receivable		1,359			-
Other		1,342			2,050
Total	$	6,911		$	5,895
Other assets:
Cash surrender value of life insurance policies	$	10,211		$	9,769
Capitalized financing costs, net		235			40
Other		114			104
Total	$	10,560		$	9,913
Property, plant and equipment, net:
Land and land improvements	$	14,512		$	14,438
Buildings		56,370			54,684
Machinery and equipment		165,824			160,068
Construction in progress		5,196			9,672
		241,902			238,862
Less accumulated depreciation		(134,571	)		(132,714	)
Total	$	107,331		$	106,148
Accrued expenses:
Salaries, wages and related expenses	$	1,950		$	6,775
Property taxes		1,227			1,585
Customer rebates		1,188			1,531
Sales allowance reserves		1,028			804
Workers' compensation		112			113
Income taxes		-			469
Other		891			652
Total	$	6,396		$	11,929
Other liabilities:
Deferred compensation	$	11,231		$	10,541
Deferred income taxes		7,533			5,340
Total	$	18,764		$	15,881

14

(13) Business Segment Information

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

(14) Contingencies

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

In August 2018, a transformer outage and electrical fire occurred at our Dayton, Texas manufacturing facility, which resulted in the temporary curtailment of operations. Alternative power arrangements for the facility were subsequently made, allowing for operations to continue until permanent repairs were completed during the first quarter. We reached a final settlement on the property damage and business interruption claim with our insurance carrier in the current quarter. During the three months ended June 29, 2019, we received $486,000 of insurance proceeds related to the claim that was recorded in cost of sales ($339,000), other income ($144,000) and selling, general and administrative expense (“SG&A expense”) ($3,000) on the consolidated statements of operations and comprehensive income. During the nine-month period ended June 29, 2019, we received $2.2 million of insurance proceeds related to the claim that was partially applied against the September 29, 2018 receivable of $462,000 with the remainder recorded in other income ($1.1 million), cost of sales ($645,000) and SG&A expense ($48,000) on the consolidated statements of operations and comprehensive income. The insurance proceeds attributable to the property and equipment damaged are reported in cash flows from investing activities and all other insurance proceeds received are reported in cash flows from operating activities on the consolidated statements of cash flows.

In August 2017, operations at our manufacturing facility located in Dayton, Texas were adversely affected by hurricane Harvey. We reached a final settlement on the property damage and business interruption claim with our insurance carrier in the first quarter of this year. During the nine-month period ended June 29, 2019, we received $150,000 of proceeds related to this claim of which $98,000 was recorded in other income on the consolidated statements of operations and comprehensive income. During the three-month period ended June 30, 2018, we recorded a $52,000 receivable for anticipated insurance proceeds related to the costs that were incurred during the period resulting from the storm, which were recorded in SG&A expense ($5,000) and other income ($47,000) on the consolidated statements of operations and comprehensive income. During the nine-month period ended June 30, 2018, we received $439,000 of insurance proceeds related to the expenses that were incurred and business interruption losses resulting from the storm, which were recorded in cost of sales ($418,000), SG&A expense ($26,000) and other income ($47,000) on the consolidated statements of operations and comprehensive income.

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

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

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, particularly under the caption “Outlook” below. When used in this report, the words “believes,” “anticipates,” “expects,” “estimates,” “appears,” “plans,” “intends,” “may,” “should,” “could” and similar expressions are intended to identify forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they are subject to a number of risks and uncertainties, and we can provide no assurances that such plans, intentions or expectations will be implemented or achieved. Many of these risks and uncertainties are discussed in detail, and where appropriate, updated in our filings with the United States (“U.S.”) Securities and Exchange Commission (“SEC”), in particular in our Annual Report on Form 10-K for the fiscal year ended September 29, 2018 (our “2018 Annual Report”). You should carefully review these risks and uncertainties.

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

15

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

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

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

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

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

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

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

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

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

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

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

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

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

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

● the “Risk Factors” discussed in our 2018 Annual Report and in other filings made by us with the SEC.

Overview

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

16

Results of Operations

Statements of Operations – Selected Data

(Dollars in thousands)

	Three Months Ended									Nine Months Ended
	June 29,						June 30,			June 29,						June 30,
	2019			Change			2018			2019			Change			2018
Net sales	$	126,252			(0.3%	)	$	126,688		$	342,310			3.2	%	$	331,846
Gross profit		8,236			(65.9%	)		24,186			26,233			(48.8%	)		51,263
Percentage of net sales		6.5	%					19.1	%		7.7	%					15.4	%
Selling, general and administrative expense	$	5,516			(26.9%	)	$	7,541		$	18,606			(10.5%	)	$	20,779
Percentage of net sales		4.4	%					6.0	%		5.4	%					6.3	%
Other expense (income), net	$	(23	)		(28.1%	)	$	(32	)	$	(1,823	)	N/M			$	153
Interest expense		62			169.6	%		23			137			85.1	%		74
Interest income		(9	)		(94.0%	)		(150	)		(176	)		(36.9%	)		(279	)
Effective income tax rate		18.6	%					23.4	%		22.4	%					12.0	%
Net earnings	$	2,190			(83.0%	)	$	12,868		$	7,365			(72.6%	)	$	26,858

"N/M" = not meaningful

Third Quarter of Fiscal 2019 Compared to Third Quarter of Fiscal 2018

Net Sales

Net sales for the third quarter of 2019 was essentially unchanged at $126.3 million compared to $126.7 million in the prior year quarter, reflecting a 3.9% decrease in shipments partially offset by a 3.7% increase in average selling prices. Shipments for the current year quarter were unfavorably impacted by an increase in low-priced import competition spurred by the Section 232 tariff on imported steel together with the unusually wet weather across many of our markets. The increase in average selling prices was driven by price increases that were implemented over the course of the prior year to recover the escalation in raw material costs.

Gross Profit

Gross profit for the third quarter of 2019 decreased 65.9% to $8.2 million, or 6.5% of net sales, from $24.2 million, or 19.1% of net sales, in the prior year quarter due to lower spreads between average selling prices and raw material costs ($13.7 million), higher manufacturing costs ($1.1 million) and the reduction in shipments ($0.9 million). The decrease in spreads was driven by higher raw material costs ($18.5 million) partially offset by higher average selling prices ($4.6 million) and lower freight expense ($254,000).

Selling, General and Administrative Expense

Selling, general and administrative expense (“SG&A expense”) for the third quarter of 2019 decreased 26.9% to $5.5 million, or 4.4% of net sales, from $7.5 million, or 6.0% of net sales in the prior year quarter primarily due to lower compensation expense ($2.1 million). The decrease in compensation expense was largely driven by lower incentive plan expense based on our weaker results in the current year quarter.

Income Taxes

Our effective tax rate for the third quarter of 2019 decreased to 18.6% from 23.4% for the prior year quarter due to changes in book versus tax differences.

Net Earnings

Net earnings for the third quarter of 2019 decreased to $2.2 million ($0.11 per share) from $12.9 million ($0.67 per share) in the prior year quarter primarily due to the decrease in gross profit partially offset by the decrease in SG&A expense.

17

First Nine Months of Fiscal 2019 Compared to First Nine Months of Fiscal 2018

Net Sales

Net sales for the first nine months of 2019 increased 3.2% to $342.3 million from $331.8 million in the same year-ago period, reflecting a 16.4% increase in average selling prices partially offset by an 11.4% decrease in shipments. The increase in average selling prices was driven by price increases that were implemented over the course of the prior year to recover the escalation in raw material costs. Shipments for the current year period were unfavorably impacted by an increase in low-priced import competition spurred by the Section 232 tariff on imported steel together with the unusually wet weather across many of our markets.

Gross Profit

Gross profit for the first nine months of 2019 decreased 48.8% to $26.2 million, or 7.7% of net sales, from $51.3 million, or 15.4% of net sales, in the same year-ago period due to lower spreads between average selling prices and raw material costs ($12.4 million), higher manufacturing costs ($6.0 million) and the reduction in shipments ($5.9 million). The decrease in spreads was driven by higher raw material costs ($60.0 million) and freight expense ($262,000) partially offset by higher average selling prices ($47.8 million).

Selling, General and Administrative Expense

SG&A expense for the first nine months of 2019 decreased 10.5% to $18.6 million, or 5.4% of net sales, from $20.8 million, or 6.3% of net sales, in the same year-ago period primarily due to lower compensation expense ($3.0 million), partially offset by the relative year-over-year changes in the cash surrender value of life insurance policies ($224,000). The decrease in compensation expense was largely driven by lower incentive plan expense based on our weaker results in the current year period. The cash surrender value of life insurance policies increased $204,000 in the current year period compared with $428,000 in the prior year period due to the changes in the value of the underlying investments.

 Other Expense (Income)

Other income was $1.8 million for the first nine months of 2019 compared with other expense of $153,000 in the same year ago period. Other income for the current year period was primarily related to gains from property insurance proceeds ($1.2 million) and the disposition of property, plant and equipment ($568,000). Other expense for the prior year period was primarily related to losses on the disposition of property, plant and equipment.

Income Taxes

Our effective tax rate for the first nine months of 2019 increased to 22.4% from 12.0% for the same year ago period. The prior year rate benefited from a $3.7 million gain on the remeasurement of deferred tax liabilities related to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act in December 2017. Excluding the deferred tax gain, our effective tax rate decreased to 22.4% from 24.0% in the prior year period reflecting the reduction in the federal statutory rate to 21% from 35% for all of fiscal 2019.

Net Earnings

Net earnings for the first nine months of 2019 decreased to $7.4 million ($0.38 per share) from $26.9 million ($1.40 per diluted share) in the same year-ago period primarily due to the decrease in gross profit and the prior year income tax benefit related to enactment of the Tax Cuts and Jobs Act partially offset by the decrease in SG&A expense and increase in other income.

18

Liquidity and Capital Resources

Selected Financial Data

(Dollars in thousands)

	Nine Months Ended
	June 29,			June 30,
	2019			2018
Net cash provided by (used for) operating activities	$	(25,939	)	$	49,835
Net cash used for investing activities		(8,409	)		(15,920	)
Net cash used for financing activities		(2,144	)		(20,788	)
Net working capital		132,020			116,453
Total debt		-			-
Percentage of total capital		-			-
Shareholders' equity	$	248,324		$	230,687
Percentage of total capital		100.0	%		100.0	%
Total capital (total debt + shareholders' equity)	$	248,324		$	230,687

Operating Activities

Operating activities used $25.9 million of cash during the first nine months of 2019 primarily from a net increase in the working capital components of accounts receivable, inventories, and accounts payable and accrued expenses partially offset by net earnings adjusted for non-cash items. Net working capital used $43.4 million of cash due to a $33.6 million decrease in accounts payable and accrued expenses and a $10.5 million increase in inventories partially offset by a $0.7 million decrease in accounts receivable. The decrease in accounts payable and accrued expenses was largely due to payments related to higher raw material purchases that were made near the end of the prior year, and, to a lesser extent, the payment of accrued incentive compensation for the prior year. The increase in inventories was primarily driven by the reduction in shipments and higher unit costs during the period. The decrease in accounts receivable was primarily due to improved collections and lower days sales outstanding.

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

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 $8.4 million of cash during the first nine months of 2019 compared to $15.9 million during the same period last year primarily due to the acquisition of a business in the prior year ($3.3 million), lower capital expenditures ($3.1 million) and the receipt of insurance proceeds in the current year related to an insurance claim ($1.2 million). Capital expenditures decreased to $9.4 million from $12.5 million in the prior year period and are expected to total up to $15.0 million for fiscal 2019 primarily focused on cost and productivity improvement initiatives in addition to recurring maintenance requirements.

Our investing activities are largely discretionary, providing us with the ability to significantly curtail outlays should business conditions warrant that such actions be taken.

19

Financing Activities

Financing activities used $2.1 million of cash during the first nine months of 2019 compared to $20.8 million during the same period last year primarily due to lower cash dividend payments ($19.0 million). Cash dividends used $1.7 million of cash during the current year compared with $20.8 million in the prior year period, which included a special dividend totaling $19.0 million, or $1.00 per share.

Cash Management

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

Credit Facility

We have a $100.0 million revolving credit facility (the “Credit Facility”) that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. In May 2019, we entered into a new credit agreement, which amended and restated in its entirety the previous agreement pertaining to the revolving credit facility that had been in effect since June 2010. The new credit agreement, among other changes, extended the maturity date of the Credit Facility from May 13, 2020 to May 15, 2024 and provided for an incremental feature whereby its size may be increased by up to $50.0 million, subject to our lender’s approval. Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently $100.0 million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories. As of June 29, 2019, no borrowings were outstanding on the Credit Facility, $98.4 million of borrowing capacity was available and outstanding letters of credit totaled $1.6 million (see Note 9 to the consolidated financial statements).

We believe that, in the absence of significant unanticipated funding requirements, 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, cease dividend payments, delay or restrict share repurchases and/or realign our working capital requirements.

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

Seasonality and Cyclicality

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

20

Impact of Inflation

We are subject to inflationary risks arising from fluctuations in the market prices for our primary raw material, hot-rolled carbon steel wire rod, and, to a much lesser extent, freight, energy and other consumables that are used in our manufacturing processes. We have generally been able to adjust our selling prices to pass through increases in these costs or offset them through various cost reduction and productivity improvement initiatives. However, our ability to raise our selling prices depends on market conditions and competitive dynamics, and there may be periods during which we are unable to fully recover increases in our costs. During the first nine months of fiscal 2019, the year-over-year escalation in our raw material costs exceeded the increase in our selling prices due to competitive pricing pressures. The timing and magnitude of any future increases in our raw material costs and the selling prices for our products is uncertain at this time.   

Off-Balance Sheet Arrangements

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

Contractual Obligations

There have been no material changes in our contractual obligations and commitments as disclosed in our 2018 Annual Report other than those which occur in the ordinary course of business.

Critical Accounting Policies 

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information. The preparation of our financial statements requires the application of these accounting principles in addition to certain estimates and judgments based on current available information, actuarial estimates, historical results and other assumptions believed to be reasonable. Actual results could differ from these estimates. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” included in our 2018 Annual Report for further information regarding our critical accounting policies and estimates. As of June 29, 2019, there were no changes in the nature of our critical accounting policies or the application of those policies from those reported in our 2018 Annual Report other than Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers”.

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 including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.

Outlook

Looking ahead to the remainder of 2019, we expect our financial results will be favorably impacted by the continued growth in our construction end-markets and the weather-related deferral of business from earlier in the year. The infrastructure-related portion of our business should benefit from higher state and local spending in many of our markets supported by various initiatives such as fuel tax increases, bond issuances and other ballot measures together with increased federal funding through the FAST Act and supplementary measures. The leading indicators and industry forecasts for nonresidential construction indicate that growth rates are likely to moderate, but remain positive.

We expect business conditions will remain challenging, however, in view of the disparity between raw material costs in the U.S. versus global markets resulting from the Section 232 tariffs on imported steel which has placed domestic producers at a significant cost disadvantage relative to offshore competitors. We will 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 our manufacturing, selling and administrative activities. We also expect gradually increasing contributions from the substantial investments we have made in our facilities in the form of reduced operating costs and additional capacity to support future growth (see “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”). In addition, we will continue to pursue further acquisitions in our existing businesses that expand our penetration of markets we currently serve or expand our footprint.

21

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, 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, quotas and other trade actions. Although changes in our wire rod costs and selling prices tend to be correlated, in weaker market environments, we may be unable to fully recover increased wire rod costs through higher selling prices, which would reduce our earnings and cash flows. Additionally, when raw material costs decline, our financial results may be negatively impacted if the selling prices for our products decrease to an even greater extent and if we are consuming higher cost material from inventory. Based on our shipments and average wire rod cost reflected in cost of sales for the first nine months of 2019, a 10% increase in the price of wire rod would have resulted in a $23.2 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 June 29, 2019, future borrowings under the facility are subject to a variable rate of interest and are sensitive to changes in interest rates.

Foreign Exchange Exposure

We have not typically hedged foreign currency exposures related to transactions denominated in currencies other than U.S. dollars, as such transactions have not been material historically. We will occasionally hedge firm commitments for certain equipment purchases that are denominated in foreign currencies. The decision to hedge any such transactions is made by us on a case-by-case basis. There were no forward contracts outstanding as of June 29, 2019.

Item 4. Controls and Procedures

We have conducted an evaluation of the effectiveness of our disclosure controls and procedures as of June 29, 2019. This evaluation was conducted under the supervision and with the participation of management, including our principal executive officer and our principal financial officer. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Further, they concluded that our disclosure controls and procedures were effective to ensure that information is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during the quarter ended June 29, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

22

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

During the quarter ended June 29, 2019, there were no material changes from the risk factors set forth under Part I, Item 1A., “Risk Factors” in our 2018 Annual Report. You should carefully consider these factors in addition to the other information set forth in this report which could materially affect our business, financial condition or future results. The risks and uncertainties described in this report and in our 2018 Annual Report, as well as other reports and statements that we file with the SEC, are not the only risks and uncertainties facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, results of operations or cash flows.

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

On November 18, 2008, our Board of Directors approved a share repurchase authorization to buy back up to $25.0 million of our outstanding common stock (the “Authorization”). Repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors. We are not obligated to acquire any common stock and may commence or suspend the program at any time at our discretion without prior notice. The Authorization continues in effect until terminated by our Board of Directors. As of June 29, 2019, there was $24.8 million remaining available for future share repurchases under the Authorization. There were no share repurchases during the three- and nine-month periods ended June 29, 2019 and June 30, 2018.

Item 6. Exhibits

10.1	Third Amended and Restated Credit Agreement dated as of May 15, 2019, among Insteel Wire Products Company, as Borrower; Insteel Industries, Inc., as a Credit Party; and Wells Fargo Bank, as Agent and Lender (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on May 16, 2019).
10.2	Guaranty and Second Amended and Restated Security Agreement dated as of May 15, 2019, among Insteel Industries, Inc., Insteel Wire Products Company, Intercontinental Metals Corporation and Wells Fargo Bank, as administrative agent (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed May 16, 2019).
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from the Quarterly Report on Form 10-Q of Insteel Industries, Inc. for the quarter ended June 29, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended June 29, 2019 and June 30, 2018, (ii) the Consolidated Balance Sheets as of June 29, 2019 and September 29, 2018, (iii) the Consolidated Statements of Cash Flows for the nine months ended June 29, 2019 and June 30, 2018, (iv) the Consolidated Statements of Shareholders’ Equity for the nine months ended June 29, 2019 and June 30, 2018, and (v) the Notes to Consolidated Financial Statements.

23

SIGNATURES

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

INSTEEL INDUSTRIES, INC.

Registrant

Date: July 18, 2019	By:	/s/ Michael C. Gazmarian
		Michael C. Gazmarian
		Vice President, Chief Financial Officer and Treasurer
		(Duly Authorized Officer and Principal Financial Officer)

24

EX-31.1

Exhibit 31.1

Certification

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

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 29, 2019 of Insteel Industries, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: July 18, 2019

/s/ H. O. Woltz III

     H. O. Woltz III

 President, Chief Executive Officer and Chairman of the Board

EX-31.2

Exhibit 31.2

Certification

I, Michael C. Gazmarian, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 29, 2019 of Insteel Industries, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: July 18, 2019

/s/ Michael C. Gazmarian

 Michael C. Gazmarian

Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

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

In connection with the Quarterly Report on Form 10-Q of Insteel Industries, Inc. (the “Company”) for the period ended June 29, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, H. O. Woltz III, President, Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

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

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

/s/ H.O. Woltz III

     H.O. Woltz III

 President, Chief Executive Officer and Chairman of the Board

 July 18, 2019

EX-32.2

Exhibit 32.2

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

In connection with the Quarterly Report on Form 10-Q of Insteel Industries, Inc. (the “Company”) for the period ended June 29, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael C. Gazmarian, Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

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

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

/s/ Michael C. Gazmarian

     Michael C. Gazmarian

 Vice President, Chief Financial Officer and Treasurer 

 July 18, 2019

XML

Document And Entity Information - shares	9 Months Ended
	Jun. 29, 2019	Jul. 17, 2019
Document Information [Line Items]
Entity Registrant Name	INSTEEL INDUSTRIES INC
Entity Central Index Key	0000764401
Trading Symbol	iiin
Current Fiscal Year End Date	--09-28
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding (in shares)		19,251,607
Document Type	10-Q
Document Period End Date	Jun. 29, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Shell Company	false

XML

Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Net sales	$ 126,252	$ 126,688	$ 342,310	$ 331,846
Cost of sales	118,016	102,502	316,077	280,583
Gross profit	8,236	24,186	26,233	51,263
Selling, general and administrative expense	5,516	7,541	18,606	20,779
Other expense (income), net	(23)	(32)	(1,823)	153
Interest expense	62	23	137	74
Interest income	(9)	(150)	(176)	(279)
Earnings before income taxes	2,690	16,804	9,489	30,536
Income taxes	500	3,936	2,124	3,678
Net earnings	$ 2,190	$ 12,868	$ 7,365	$ 26,858
Net earnings per share:
Basic (in dollars per share)	$ 0.11	$ 0.67	$ 0.38	$ 1.41
Diluted (in dollars per share)	$ 0.11	$ 0.67	$ 0.38	$ 1.40
Weighted average shares outstanding:
Basic (in shares)	19,252	19,070	19,239	19,054
Diluted (in shares)	19,334	19,274	19,336	19,252
Cash dividends declared per share (in dollars per share)	$ 0.03	$ 0.03	$ 0.09	$ 1.09
Comprehensive income	$ 2,190	$ 12,868	$ 7,365	$ 26,858

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 29, 2019	Sep. 29, 2018
Assets
Cash and cash equivalents	$ 7,449	$ 43,941
Accounts receivable, net	50,743	51,484
Inventories	104,624	94,157
Other current assets	6,911	5,895
Total current assets	169,727	195,477
Property, plant and equipment, net	107,331	106,148
Intangibles, net	8,884	9,703
Goodwill	8,293	8,293
Other assets	10,560	9,913
Total assets	304,795	329,534
Liabilities and shareholders' equity
Accounts payable	31,311	60,059
Accrued expenses	6,396	11,929
Total current liabilities	37,707	71,988
Long-term debt
Other liabilities	18,764	15,881
Commitments and contingencies
Shareholders' equity:
Common stock	19,252	19,223
Additional paid-in capital	73,849	72,852
Retained earnings	156,717	151,084
Accumulated other comprehensive loss	(1,494)	(1,494)
Total shareholders' equity	248,324	241,665
Total liabilities and shareholders' equity	$ 304,795	$ 329,534

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
Cash Flows From Operating Activities:
Net earnings	$ 7,365,000	$ 26,858,000
Adjustments to reconcile net earnings to net cash provided by (used for) operating activities:
Depreciation and amortization	10,084,000	9,578,000
Amortization of capitalized financing costs	48,000	48,000
Stock-based compensation expense	1,201,000	1,241,000
Deferred income taxes	2,193,000	(2,321,000)
Loss (gain) on sale and disposition of property, plant and equipment	(1,760,000)	270,000
Increase in cash surrender value of life insurance policies over premiums paid	(204,000)	(428,000)
Net changes in assets and liabilities (net of assets and liabilities acquired):
Accounts receivable, net	741,000	(15,548,000)
Inventories	(10,467,000)	27,102,000
Accounts payable and accrued expenses	(33,640,000)	3,011,000
Other changes	(1,500,000)	24,000
Total adjustments	(33,304,000)	22,977,000
Net cash provided by (used for) operating activities	(25,939,000)	49,835,000
Cash Flows From Investing Activities:
Capital expenditures	(9,380,000)	(12,481,000)
Proceeds from property insurance	1,192,000
Increase in cash surrender value of life insurance policies	(305,000)	(291,000)
Proceeds from surrender of life insurance policies	67,000	152,000
Proceeds from sale of property, plant and equipment	17,000
Acquisition of business		(3,300,000)
Net cash used for investing activities	(8,409,000)	(15,920,000)
Cash Flows From Financing Activities:
Proceeds from long-term debt	44,239,000	290,000
Principal payments on long-term debt	(44,239,000)	(290,000)
Cash dividends paid	(1,732,000)	(20,756,000)
Cash received from exercise of stock options		242,000
Financing costs	(237,000)
Payment of employee tax withholdings related to net share transactions	(175,000)	(274,000)
Net cash used for financing activities	(2,144,000)	(20,788,000)
Net increase (decrease) in cash and cash equivalents	(36,492,000)	13,127,000
Cash and cash equivalents at beginning of period	43,941,000	32,105,000
Cash and cash equivalents at end of period	7,449,000	45,232,000
Supplemental Disclosures of Cash Flow Information:
Interest	49,000
Income taxes, net	1,759,000	3,553,000
Non-cash investing and financing activities:
Purchases of property, plant and equipment in accounts payable	518,000	499,000
Restricted stock units and stock options surrendered for withholding taxes payable	$ 175,000	$ 274,000

XML

Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Sep. 30, 2017	19,041
Balance at Sep. 30, 2017	$ 19,041	$ 69,817	$ 135,851	$ (1,333)	$ 223,376
Net earnings			8,111		8,111
Compensation expense associated with stock-based plans		235			235
Cash dividends declared			(19,612)		(19,612)
Balance (in shares) at Dec. 30, 2017	19,041
Balance at Dec. 30, 2017	$ 19,041	70,052	124,350	(1,333)	212,110
Balance (in shares) at Sep. 30, 2017	19,041
Balance at Sep. 30, 2017	$ 19,041	69,817	135,851	(1,333)	223,376
Net earnings					26,858
Balance (in shares) at Jun. 30, 2018	19,085
Balance at Jun. 30, 2018	$ 19,085	70,982	141,953	(1,333)	230,687
Balance (in shares) at Dec. 30, 2017	19,041
Balance at Dec. 30, 2017	$ 19,041	70,052	124,350	(1,333)	212,110
Net earnings			5,879		5,879
Compensation expense associated with stock-based plans		838			838
Restricted stock units and stock options surrendered for withholding taxes payable		(210)			(210)
Cash dividends declared			(572)		(572)
Vesting of restricted stock units (in shares)	20
Vesting of restricted stock units	$ 20	(20)
Stock options exercised, net (in shares)	2
Stock options exercised, net	$ 2	(2)
Balance (in shares) at Mar. 31, 2018	19,063
Balance at Mar. 31, 2018	$ 19,063	70,658	129,657	(1,333)	218,045
Net earnings			12,868		12,868
Compensation expense associated with stock-based plans		168			168
Restricted stock units and stock options surrendered for withholding taxes payable		(64)			(64)
Cash dividends declared			(572)		(572)
Stock options exercised, net (in shares)	22
Stock options exercised, net	$ 22	220			242
Balance (in shares) at Jun. 30, 2018	19,085
Balance at Jun. 30, 2018	$ 19,085	70,982	141,953	(1,333)	230,687
Balance (in shares) at Sep. 29, 2018	19,223
Balance at Sep. 29, 2018	$ 19,223	72,852	151,084	(1,494)	241,665
Net earnings			4,126		4,126
Compensation expense associated with stock-based plans		174			174
Restricted stock units and stock options surrendered for withholding taxes payable		(7)			(7)
Cash dividends declared			(576)		(576)
Balance (in shares) at Dec. 29, 2018	19,223
Balance at Dec. 29, 2018	$ 19,223	73,019	154,634	(1,494)	245,382
Balance (in shares) at Sep. 29, 2018	19,223
Balance at Sep. 29, 2018	$ 19,223	72,852	151,084	(1,494)	241,665
Net earnings					7,365
Balance (in shares) at Jun. 29, 2019	19,252
Balance at Jun. 29, 2019	$ 19,252	73,849	156,717	(1,494)	248,324
Balance (in shares) at Dec. 29, 2018	19,223
Balance at Dec. 29, 2018	$ 19,223	73,019	154,634	(1,494)	245,382
Net earnings			1,049		1,049
Compensation expense associated with stock-based plans		845			845
Restricted stock units and stock options surrendered for withholding taxes payable		(168)			(168)
Cash dividends declared			(578)		(578)
Vesting of restricted stock units (in shares)	29
Vesting of restricted stock units	$ 29	(29)
Balance (in shares) at Mar. 30, 2019	19,252
Balance at Mar. 30, 2019	$ 19,252	73,667	155,105	(1,494)	246,530
Net earnings			2,190		2,190
Compensation expense associated with stock-based plans		182			182
Cash dividends declared			(578)		(578)
Balance (in shares) at Jun. 29, 2019	19,252
Balance at Jun. 29, 2019	$ 19,252	$ 73,849	$ 156,717	$ (1,494)	$ 248,324

XML

Note 1 - Basis of Presentation

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

(

1

) Basis of Presentation

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

10

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

not

misleading. The

September 29, 2018

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

not

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

September 29, 2018

included in our Annual Report on Form

10

-K filed with the SEC on

October 26, 2018.

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

nine

-month period ended

June 29, 2019

are

not

necessarily indicative of the results that

may

be expected for the fiscal year ending

September 28, 2019

or future periods.

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

10

-Q and concluded there are

no

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

.

XML

Note 2 - Recent Accounting Pronouncements

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

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

(

2

) Recent Accounting Pronouncements

Current Adoptions

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

became effective for us in the

first

quarter and were adopted retrospectively. The adoption of this update did

not

impact our consolidated financial statements.

In

May 2014,

the FASB issued ASU

No.

2014

-

09

“Revenue from Contracts with Customers,” as subsequently amended, which supersedes 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. We adopted ASU

2014

-

09

during the

first

quarter using the modified retrospective method. The adoption of this update did

not

significantly change our policies for recognizing revenue nor materially impact our consolidated financial statements (see Note

3

).

Future Adoptions

In

May 2017,

the FASB issued ASU

No.

2017

-

09

“Compensation – Stock Compensation (Topic

718

): Scope of Modification Accounting.” ASU

No.

2017

-

09

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

No.

2017

-

09

will become effective for us in the

first

quarter of fiscal

2020.

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

In

January 2017,

the FASB issued ASU

No.

2017

-

04

“Intangibles – Goodwill and Other (Topic

350

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

2

from the goodwill impairment test. ASU

No.

2017

-

04

will become effective for us in the

first

quarter of fiscal

2021

and early adoption is permitted. We are evaluating the impact that the adoption of this update will have 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.

In

July 2018,

the FASB issued ASU

No.

2018

-

11,

“Leases (Topic

842

): Targeted Improvements,” which provides an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendment has the same effective date and transition requirements as ASU

No.

2016

-

02.

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

XML

Note 3 - Revenue Recognition

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

(

3

) Revenue Recognition

We recognize revenues when obligations under the terms of a contract with our customers are satisfied, which generally occurs when products are shipped and control is transferred. We enter into contracts that pertain to products, which are accounted for as separate performance obligations and typically

one

year or less in duration. We do

not

exercise significant judgment in determining the timing for the satisfaction of performance obligations or the transaction price. Revenue is measured as the amount of consideration expected to be received in exchange for our products. We have elected to apply the practical expedient provided for in ASU

No.

2014

-

09

and

not

disclose information regarding remaining performance obligations that have original expected durations of

one

year or less.

Variable consideration that

may

affect the total transaction price, including contractual discounts, rebates, returns and credits are included in net sales. Estimates for variable consideration are based on historical experience, anticipated performance and management's judgment and are updated as of each reporting date. Shipping and related expenses associated with outbound freight are accounted for as fulfillment costs and included in cost of sales. We do

not

have significant financing components.

The following table disaggregates our net sales by product line:

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands)	2019		2018		2019		2018
Welded wire reinforcement	$	80,007	$	76,756	$	215,226	$	198,453
Prestressed concrete strand		46,245		49,932		127,084		133,393
Total	$	126,252	$	126,688	$	342,310	$	331,846

The following table disaggregates our net sales by geography based on the shipping addresses of our customers:

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands)	2019		2018		2019		2018
United States	$	125,929	$	126,299	$	341,169	$	330,513
Foreign		323		389		1,141		1,333
Total	$	126,252	$	126,688	$	342,310	$	331,846

Contract assets primarily relate to our rights to consideration for products that are delivered but

not

billed as of the reporting date and are reclassified to receivables when the customer is invoiced. Contract liabilities primarily relate to performance obligations that are to be satisfied in the future and arise when we bill the customer in advance of shipments. Contract costs are

not

significant and are recognized as incurred. Contract assets and liabilities were

not

material as of

June 

29,

2019.

Accounts receivable includes amounts billed and currently due from customers stated at their net estimated realizable value. Customer payment terms are generally

30

days. We maintain an allowance for doubtful accounts to provide for the estimated amount of receivables that will

not

be collected, which is based upon our assessment of customer creditworthiness, historical payment experience and the age of outstanding receivables. Past-due trade receivable balances are written off when our collection efforts have been unsuccessful.

XML

Note 4 - Fair Value Measurements

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(

4

) Fair Value Measurements

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

three

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

three

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

Level

1

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

Level

2

- Observable inputs other than quoted prices included in Level

1,

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

Level

3

- Unobservable inputs that are supported by little or

no

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

As of

June 29, 2019

and

September 29, 2018,

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

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of June 29, 2019:
Current assets:
Cash equivalents	$	6,275	$	6,275	$	-
Other assets:
Cash surrender value of life insurance policies		10,211		-		10,211
Total	$	16,486	$	6,275	$	10,211
As of September 29, 2018:
Current assets:
Cash equivalents	$	44,257	$	44,257	$	-
Other assets:
Cash surrender value of life insurance policies		9,769		-		9,769
Total	$	54,026	$	44,257	$	9,769

Cash equivalents, which include all highly liquid investments with original maturities of

three

months or less, are classified as Level

1

of the fair value hierarchy. The carrying amount of our cash equivalents, which consist of investments in money market funds, approximates fair value due to their short maturities. Cash surrender value of life insurance policies are classified as Level

2.

The fair value of the life insurance policies was determined by the underwriting insurance company’s valuation models and represents the guaranteed value we would receive upon surrender of these policies as of the reporting date.

As of

June 29, 2019

and

September 29, 2018,

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 approximates fair value due to the short-term maturities of these financial instruments.

XML

Note 5 - Intangible Assets

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

(

5

) Intangible Assets

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

(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value
As of June 29, 2019:
Customer relationships	$	9,070	$	(2,054	)	$	7,016
Developed technology and know-how		1,800		(438	)		1,362
Non-competition agreements		1,800		(1,376	)		424
Trade name		140		(58	)		82
	$	12,810	$	(3,926	)	$	8,884
As of September 29, 2018:
Customer relationships	$	9,070	$	(1,598	)	$	7,472
Developed technology and know-how		1,800		(371	)		1,429
Non-competition agreements		3,687		(2,994	)		693
Trade name		140		(31	)		109
	$	14,697	$	(4,994	)	$	9,703

Amortization expense for intangibles was

$273,000

and

$299,000

for the

three

-month periods ended

June 29, 2019

and

June 30, 2018,

respectively, and

$819,000

and

$987,000

for the

nine

-month periods ended

June 29, 2019

and

June 30, 2018,

respectively. We completed the acquisition of a business during the

nine

-month period ended

June 30, 2018,

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

not

material.

XML

Note 6 - Stock-based Compensation

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

(

6

) Stock-Based Compensation

Under our equity incentive plan, employees and directors

may

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

February 17, 2015,

our shareholders approved the

2015

Equity Incentive Plan of Insteel Industries, Inc. (the

“2015

Plan”), which authorizes up to

900,000

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

2015

Plan, which expires on

February 17, 2025,

replaces the

2005

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

February 15, 2015. 

As of

June 29, 2019,

there were

241,000

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 plan, employees and directors

may

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

three

years and expire

ten

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

$58,000

and

$51,000

for the

three

-month periods ended

June 29, 2019

and

June 30, 2018,

respectively, and

$496,000

and

$522,000

for the

nine

-month periods ended

June 29, 2019

and

June 30, 2018,

respectively. As of

June 29, 2019,

there was

$214,000

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

1.55

years.

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

nine

-month periods ended

June 29, 2019

and

June 30, 2018

was

$7.96

and

$10.46

per share, respectively, based on the following assumptions:

	Nine Months Ended
	June 29,			June 30,
	2019			2018
Risk-free interest rate		3.84	%		2.72	%
Dividend yield		0.50	%		0.40	%
Expected volatility		43.08	%		37.74	%
Expected term (in years)		4.56			4.89

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

The following table summarizes stock option activity:

										Contractual		Aggregate
	Options			Exercise Price Per Share						Term - Weighted		Intrinsic
	Outstanding							Weighted		Average		Value
	(in thousands)			Range				Average		(in years)		(in thousands)
Outstanding at September 29, 2018		264			$10.23	-	$41.85	$	29.25
Granted		58			21.57	-	21.57		21.57
Exercised		(5	)		18.05	-	26.75		23.95			$	21
Outstanding at June 29, 2019		317			10.23	-	41.85		27.93		7.59		200
Vested and anticipated to vest in the future at June 29, 2019		313							27.91		7.57		200
Exercisable at June 29, 2019		145							26.05		6.14		200

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. Compensation expense associated with RSUs was

$124,000

and

$117,000

for the

three

-month periods ended

June 29, 2019

and

June 30, 2018,

respectively, and

$705,000

and

$719,000

for the

nine

-month periods ended

June 29, 2019

and

June 30, 2018,

respectively. The market value of RSUs granted during the

nine

-month periods ended

June 29, 2019

and

June 30, 2018

was

$763,000

and

$712,000,

respectively.

As of

June 29, 2019,

there was

$486,000

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

1.47

years.

The following table summarizes RSU activity:

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, September 29, 2018		103		$	30.40
Granted		35			21.57
Released		(36	)		25.28
Balance, June 29, 2019		102			29.16

XML

Note 7 - Income Taxes

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(

7

) Income Taxes

Effective income tax rate

.

Our effective income tax rate was

22.4%

for the

nine

-month period ended

June 29, 2019

compared with

12.0%

for the

nine

-month period ended

June 30, 2018.

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

December 22, 2017,

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

35%

to

21%

effective

January 1, 2018.

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

first

quarter tax provision for the prior year which resulted in a

$3.7

million reduction of income tax expense. Since our fiscal year ends on the Saturday closest to

September 30

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

24.5%

for fiscal

2018

and is

21%

for fiscal

2019

and beyond.

Deferred income taxes.

As of

June 29, 2019,

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

$7.5

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

$2.1

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

2022,

but principally expire between

2022

and

2031.

We have also recorded gross deferred tax assets of

$16,000

for various state tax credits that begin to expire in

2019,

but principally expire between

2019

and

2020.

The realization of our deferred tax assets is entirely dependent upon our ability to generate future taxable income in applicable jurisdictions. GAAP requires that we periodically assess the need to establish a reserve against our deferred tax assets to the extent we

no

longer believe it is more likely than

not

that they will be fully realized. As of

June 29, 2019

and

September 29, 2018,

we recorded a valuation allowance of

$265,000

and

$233,000,

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

not

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

not.

Uncertainty in income taxes

.

As of

June 29, 2019,

we had

no

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

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

2014

remain subject to examination.

XML

Note 8 - Employee Benefit Plans

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

(

8

) Employee Benefit Plans

Supplemental employee retirement plan

.

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

30

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

15

-year period following the Participant’s retirement equal to

50%

of the Participant’s highest average annual base salary for

five

consecutive years in the

10

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

65

or the completion of

30

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

10

years of continuous service, the amount of the Participant’s supplemental retirement benefit will be reduced by

1/360th

for each month short of

30

 years that the Participant was employed by us.

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

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands)	2019		2018		2019		2018
Interest cost	$	96	$	86	$	288	$	258
Service cost		74		70		222		209
Recognized net actuarial loss		35		38		105		114
Net periodic pension cost	$	205	$	194	$	615	$	581

XML

Note 9 - Long-term Debt

9 Months Ended

Jun. 29, 2019

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 2019,

we entered into a new credit agreement, which amended and restated in its entirety the previous agreement pertaining to the revolving credit facility that had been in effect since

June 2010.

The new credit agreement, among other changes, extended the maturity date of the Credit Facility from

May 13, 2020

to

May 15, 2024

and provided for an incremental feature whereby its size

may

be increased by up to

$50.0

million, subject to our lender’s approval. Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently

$100.0

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

June 29, 2019,

no

borrowings were outstanding on the Credit Facility,

$98.4

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

$1.6

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

0.50%

for index rate loans and

1.25%

to

1.50%

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

2.00%

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

June 29, 2019,

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

1.0

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

$10.0

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

third

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

not

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

June 29, 2019,

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

June 29, 2019

and

June 30, 2018,

and

$

48,000

for the

nine

-month periods ended

June 29, 2019

and

June 30, 2018.

XML

Note 10 - Earnings Per Share

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

(

1

0

)

Earnings

Per Share

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

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands, except per share amounts)	2019		2018		2019		2018
Net earnings	$	2,190	$	12,868	$	7,365	$	26,858
Basic weighted average shares outstanding		19,252		19,070		19,239		19,054
Dilutive effect of stock-based compensation		82		204		97		198
Diluted weighted average shares outstanding		19,334		19,274		19,336		19,252
Net earnings per share:
Basic	$	0.11	$	0.67	$	0.38	$	1.41
Diluted	$	0.11	$	0.67	$	0.38	$	1.40

Options and RSUs that were antidilutive and

not

included in the dilutive earnings per share calculation amounted to

276,000

and

97,000

shares for the

three

-month periods ended

June 29, 2019

and

June 30, 2018,

respectively. Options and RSUs that were antidilutive and

not

included in the dilutive earnings per share calculation amounted to

221,000

and

98,000

shares for the

nine

-month periods ended

June 29, 2019

and

June 30, 2018,

respectively.

XML

Note 11 - Share Repurchases

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

(

1

1

) S

hare

Repurchase

s

On

November 

18,

2008,

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

$25.0

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

may

be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors. We are

not

obligated to acquire any common stock and the program

may

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

June 29, 2019,

there was

$24.8

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

no

share repurchases during the

three

- and

nine

-month periods ended

June 29, 2019

and

June 30, 2018.

XML

Note 12 - Other Financial Data

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Other Financial Data [Text Block]

(

12

) Other Financial Data

Balance sheet information:

	June 29,			September 29,
(In thousands)	2019			2018
Accounts receivable, net:
Accounts receivable	$	51,024		$	51,779
Less allowance for doubtful accounts		(281	)		(295	)
Total	$	50,743		$	51,484
Inventories:
Raw materials	$	52,279		$	61,008
Work in process		5,953			4,779
Finished goods		46,392			28,370
Total	$	104,624		$	94,157
Other current assets:
Prepaid insurance	$	4,210		$	3,845
Income tax receivable		1,359			-
Other		1,342			2,050
Total	$	6,911		$	5,895
Other assets:
Cash surrender value of life insurance policies	$	10,211		$	9,769
Capitalized financing costs, net		235			40
Other		114			104
Total	$	10,560		$	9,913
Property, plant and equipment, net:
Land and land improvements	$	14,512		$	14,438
Buildings		56,370			54,684
Machinery and equipment		165,824			160,068
Construction in progress		5,196			9,672
		241,902			238,862
Less accumulated depreciation		(134,571	)		(132,714	)
Total	$	107,331		$	106,148
Accrued expenses:
Salaries, wages and related expenses	$	1,950		$	6,775
Property taxes		1,227			1,585
Customer rebates		1,188			1,531
Sales allowance reserves		1,028			804
Workers' compensation		112			113
Income taxes		-			469
Other		891			652
Total	$	6,396		$	11,929
Other liabilities:
Deferred compensation	$	11,231		$	10,541
Deferred income taxes		7,533			5,340
Total	$	18,764		$	15,881

XML

Note 13 - Business Segment Information

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(

13

) Business Segment Information

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

two

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

280,

Segment Reporting

, we have

one

reportable segment.

XML

Note 14 - Contingencies

9 Months Ended

Jun. 29, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

(

14

) Contingencies

Insurance recoveries.

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

In

August 2018,

a transformer outage and electrical fire occurred at our Dayton, Texas manufacturing facility, which resulted in the temporary curtailment of operations. Alternative power arrangements for the facility were subsequently made, allowing for operations to continue until permanent repairs were completed during the

first

quarter. We reached a final settlement on the property damage and business interruption claim with our insurance carrier in the current quarter. During the

three

months ended

June 29, 2019,

we received

$486,000

of insurance proceeds related to the claim that was recorded in cost of sales (

$339,000

), other income (

$144,000

) and selling, general and administrative expense (“SG&A expense”) (

$3,000

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

nine

-month period ended

June 29, 2019,

we received

$2.2

million of insurance proceeds related to the claim that was partially applied against the

September 29, 2018

receivable of

$462,000

with the remainder recorded in other income (

$1.1

million), cost of sales (

$645,000

) and SG&A expense (

$48,000

) on the consolidated statements of operations and comprehensive income. The insurance proceeds attributable to the property and equipment damaged are reported in cash flows from investing activities and all other insurance proceeds received are reported in cash flows from operating activities on the consolidated statements of cash flows.

In

August 2017,

operations at our manufacturing facility located in Dayton, Texas were adversely affected by hurricane Harvey. We reached a final settlement on the property damage and business interruption claim with our insurance carrier in the

first

quarter of this year. During the

nine

-month period ended

June 29, 2019,

we received

$150,000

of proceeds related to this claim of which

$98,000

was recorded in other income on the consolidated statements of operations and comprehensive income. During the

three

-month period ended

June 30, 2018,

we recorded a

$52,000

receivable for anticipated insurance proceeds related to the costs that were incurred during the period resulting from the storm, which were recorded in SG&A expense (

$5,000

) and other income (

$47,000

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

nine

-month period ended

June 30, 2018,

we received

$439,000

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

$418,000

), SG&A expense (

$26,000

) and other income (

$47,000

) on the consolidated statements of operations and comprehensive income.

Legal proceedings

.

We are involved in lawsuits, claims, investigations and proceedings, including commercial, environmental and employment matters, which arise in the ordinary course of business. We do

not

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

XML

Note 3 - Revenue Recognition (Tables)

9 Months Ended

Jun. 29, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands)	2019		2018		2019		2018
Welded wire reinforcement	$	80,007	$	76,756	$	215,226	$	198,453
Prestressed concrete strand		46,245		49,932		127,084		133,393
Total	$	126,252	$	126,688	$	342,310	$	331,846

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands)	2019		2018		2019		2018
United States	$	125,929	$	126,299	$	341,169	$	330,513
Foreign		323		389		1,141		1,333
Total	$	126,252	$	126,688	$	342,310	$	331,846

XML

Note 4 - Fair Value Measurements (Tables)

9 Months Ended

Jun. 29, 2019

Notes Tables

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

(In thousands)	Total		Quoted Prices in Active Markets (Level 1)		Observable Inputs (Level 2)
As of June 29, 2019:
Current assets:
Cash equivalents	$	6,275	$	6,275	$	-
Other assets:
Cash surrender value of life insurance policies		10,211		-		10,211
Total	$	16,486	$	6,275	$	10,211
As of September 29, 2018:
Current assets:
Cash equivalents	$	44,257	$	44,257	$	-
Other assets:
Cash surrender value of life insurance policies		9,769		-		9,769
Total	$	54,026	$	44,257	$	9,769

XML

Note 5 - Intangible Assets (Tables)

9 Months Ended

Jun. 29, 2019

Notes Tables

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

(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value
As of June 29, 2019:
Customer relationships	$	9,070	$	(2,054	)	$	7,016
Developed technology and know-how		1,800		(438	)		1,362
Non-competition agreements		1,800		(1,376	)		424
Trade name		140		(58	)		82
	$	12,810	$	(3,926	)	$	8,884
As of September 29, 2018:
Customer relationships	$	9,070	$	(1,598	)	$	7,472
Developed technology and know-how		1,800		(371	)		1,429
Non-competition agreements		3,687		(2,994	)		693
Trade name		140		(31	)		109
	$	14,697	$	(4,994	)	$	9,703

XML

Note 6 - Stock-based Compensation (Tables)

9 Months Ended

Jun. 29, 2019

Notes Tables

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

	Nine Months Ended
	June 29,			June 30,
	2019			2018
Risk-free interest rate		3.84	%		2.72	%
Dividend yield		0.50	%		0.40	%
Expected volatility		43.08	%		37.74	%
Expected term (in years)		4.56			4.89

Share-based Payment Arrangement, Option, Activity [Table Text Block]

										Contractual		Aggregate
	Options			Exercise Price Per Share						Term - Weighted		Intrinsic
	Outstanding							Weighted		Average		Value
	(in thousands)			Range				Average		(in years)		(in thousands)
Outstanding at September 29, 2018		264			$10.23	-	$41.85	$	29.25
Granted		58			21.57	-	21.57		21.57
Exercised		(5	)		18.05	-	26.75		23.95			$	21
Outstanding at June 29, 2019		317			10.23	-	41.85		27.93		7.59		200
Vested and anticipated to vest in the future at June 29, 2019		313							27.91		7.57		200
Exercisable at June 29, 2019		145							26.05		6.14		200

Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

				Weighted
	Restricted			Average
	Stock Units			Grant Date
(Unit amounts in thousands)	Outstanding			Fair Value
Balance, September 29, 2018		103		$	30.40
Granted		35			21.57
Released		(36	)		25.28
Balance, June 29, 2019		102			29.16

XML

Note 8 - Employee Benefit Plans (Tables)

9 Months Ended

Jun. 29, 2019

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands)	2019		2018		2019		2018
Interest cost	$	96	$	86	$	288	$	258
Service cost		74		70		222		209
Recognized net actuarial loss		35		38		105		114
Net periodic pension cost	$	205	$	194	$	615	$	581

XML

Note 10 - Earnings Per Share (Tables)

9 Months Ended

Jun. 29, 2019

Notes Tables

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

	Three Months Ended				Nine Months Ended
	June 29,		June 30,		June 29,		June 30,
(In thousands, except per share amounts)	2019		2018		2019		2018
Net earnings	$	2,190	$	12,868	$	7,365	$	26,858
Basic weighted average shares outstanding		19,252		19,070		19,239		19,054
Dilutive effect of stock-based compensation		82		204		97		198
Diluted weighted average shares outstanding		19,334		19,274		19,336		19,252
Net earnings per share:
Basic	$	0.11	$	0.67	$	0.38	$	1.41
Diluted	$	0.11	$	0.67	$	0.38	$	1.40

XML

Note 12 - Other Financial Data (Tables)

9 Months Ended

Jun. 29, 2019

Notes Tables

Condensed Balance Sheet [Table Text Block]

	June 29,			September 29,
(In thousands)	2019			2018
Accounts receivable, net:
Accounts receivable	$	51,024		$	51,779
Less allowance for doubtful accounts		(281	)		(295	)
Total	$	50,743		$	51,484
Inventories:
Raw materials	$	52,279		$	61,008
Work in process		5,953			4,779
Finished goods		46,392			28,370
Total	$	104,624		$	94,157
Other current assets:
Prepaid insurance	$	4,210		$	3,845
Income tax receivable		1,359			-
Other		1,342			2,050
Total	$	6,911		$	5,895
Other assets:
Cash surrender value of life insurance policies	$	10,211		$	9,769
Capitalized financing costs, net		235			40
Other		114			104
Total	$	10,560		$	9,913
Property, plant and equipment, net:
Land and land improvements	$	14,512		$	14,438
Buildings		56,370			54,684
Machinery and equipment		165,824			160,068
Construction in progress		5,196			9,672
		241,902			238,862
Less accumulated depreciation		(134,571	)		(132,714	)
Total	$	107,331		$	106,148
Accrued expenses:
Salaries, wages and related expenses	$	1,950		$	6,775
Property taxes		1,227			1,585
Customer rebates		1,188			1,531
Sales allowance reserves		1,028			804
Workers' compensation		112			113
Income taxes		-			469
Other		891			652
Total	$	6,396		$	11,929
Other liabilities:
Deferred compensation	$	11,231		$	10,541
Deferred income taxes		7,533			5,340
Total	$	18,764		$	15,881

XML

Note 3 - Revenue Recognition - Disaggregation of Net Sales by Product Line (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Revenue	$ 126,252	$ 126,688	$ 342,310	$ 331,846
UNITED STATES
Revenue	125,929	126,299	341,169	330,513
Non-US [Member]
Revenue	323	389	1,141	1,333
Welded Wire Reinforcement [Member]
Revenue	80,007	76,756	215,226	198,453
Prestressed Concrete Strand [Member]
Revenue	$ 46,245	$ 49,932	$ 127,084	$ 133,393

XML

Note 4 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	Jun. 29, 2019	Sep. 29, 2018
Non Financial [Member] | Fair Value, Nonrecurring [Member]
Assets, Fair Value Disclosure	$ 0	$ 0

XML

Note 4 - Fair Value Measurements - Fair Value of Financial Assets (Details) - Fair Value, Recurring [Member] - USD ($) $ in Thousands	Jun. 29, 2019	Sep. 29, 2018
Cash equivalents	$ 6,275	$ 44,257
Cash surrender value of life insurance policies	10,211	9,769
Total	16,486	54,026
Fair Value, Inputs, Level 1 [Member]
Cash equivalents	6,275	44,257
Cash surrender value of life insurance policies
Total	6,275	44,257
Fair Value, Inputs, Level 2 [Member]
Cash equivalents
Cash surrender value of life insurance policies	10,211	9,769
Total	$ 10,211	$ 9,769

XML

Note 5 - Intangible Assets (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Amortization of Intangible Assets, Total	$ 273,000	$ 299,000	$ 819,000	$ 987,000

XML

Note 5 - Intangible Assets - Summary of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 29, 2019	Sep. 29, 2018
Gross	$ 12,810	$ 14,697
Accumulated Amortization	(3,926)	(4,994)
Net Book Value	8,884	9,703
Customer Relationships [Member]
Gross	9,070	9,070
Accumulated Amortization	(2,054)	(1,598)
Net Book Value	7,016	7,472
Technology-Based Intangible Assets [Member]
Gross	1,800	1,800
Accumulated Amortization	(438)	(371)
Net Book Value	1,362	1,429
Noncompete Agreements [Member]
Gross	1,800	3,687
Accumulated Amortization	(1,376)	(2,994)
Net Book Value	424	693
Trade Names [Member]
Gross	140	140
Accumulated Amortization	(58)	(31)
Net Book Value	$ 82	$ 109

XML

Note 6 - Stock-based Compensation (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018	Feb. 17, 2015
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount	$ 214,000		$ 214,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition			1 year 200 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value			$ 7.96	$ 10.46
Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years
Share-based Payment Arrangement, Expense	58,000	$ 51,000	$ 496,000	$ 522,000
Restricted Stock Units (RSUs) [Member]
Share-based Payment Arrangement, Expense	124,000	$ 117,000	$ 705,000	719,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition			1 year 171 days
Shares Granted, Value, Share-based Payment Arrangement, after Forfeiture, Total			$ 763,000	$ 712,000
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount	$ 486,000		$ 486,000
Restricted Stock Units (RSUs) [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			1 year
Restricted Stock Units (RSUs) [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
The 2015 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized					900,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	241,000		241,000

XML

Note 6 - Stock-based Compensation - Stock Option Valuation Assumptions (Details) - Share-based Payment Arrangement, Option [Member]	9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
Risk-free interest rate	3.84%	2.72%
Dividend yield	0.50%	0.40%
Expected volatility	43.08%	37.74%
Expected term (Year)	4 years 204 days	4 years 324 days

XML

Note 6 - Stock-based Compensation - Stock Option Activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Jun. 29, 2019 USD ($) $ / shares shares
Options outstanding, balance (in shares) | shares	264
Weighted average exercise price per share, (in dollars per share)	$ 29.25
Options outstanding, granted (in shares) | shares	58
Weighted average exercise price per share, granted (in dollars per share)	$ 21.57
Options outstanding, exercised (in shares) | shares	(5)
Weighted average exercise price per share, exercised (in dollars per share)	$ 23.95
Exercised | $	$ 21
Options outstanding, balance (in shares) | shares	317
Weighted average exercise price per share (in dollars per share)	$ 27.93
Contractual term - weighted average, balance (Year)	7 years 215 days
Aggregate intrinsic value, balance | $	$ 200
Options outstanding, vested and anticipated to vest in future (in shares) | shares	313
Weighted average exercise price per share, vested and anticipated to vest in future (in dollars per share)	$ 27.91
Contractual term - weighted average, vested and anticipated to vest in future (Year)	7 years 208 days
Aggregate intrinsic value, vested and anticipated to vest in future | $	$ 200
Options outstanding, exercisable (in shares) | shares	145
Weighted average exercise price per share, exercisable (in dollars per share)	$ 26.05
Contractual term - weighted average, exercisable (Year)	6 years 51 days
Aggregate intrinsic value, exercisable | $	$ 200
Minimum [Member]
Exercise price per share, balance, lower (in dollars per share)	$ 10.23
Exercise price per share, granted, lower (in dollars per share)	21.57
Exercise price per share, exercised, lower (in dollars per share)	18.05
Maximum [Member]
Exercise price per share, balance, upper (in dollars per share)	41.85
Exercise price per share, granted, upper (in dollars per share)	21.57
Exercise price per share, exercised, upper (in dollars per share)	$ 26.75

XML

Note 6 - Stock-based Compensation - RSU Activity (Details) - Restricted Stock Units (RSUs) [Member] shares in Thousands	9 Months Ended
	Jun. 29, 2019 $ / shares shares
Restricted stock units outstanding, balance (in shares) | shares	103
Weighted average grant date fair value, balance (in dollars per share) | $ / shares	$ 30.40
Restricted stock units outstanding, granted (in shares) | shares	35
Weighted average grant date fair value, granted (in dollars per share) | $ / shares	$ 21.57
Restricted stock units outstanding, released (in shares) | shares	(36)
Weighted average grant date fair value, released (in dollars per share) | $ / shares	$ 25.28
Restricted stock units outstanding, balance (in shares) | shares	102
Weighted average grant date fair value, balance (in dollars per share) | $ / shares	$ 29.16

XML

Note 7 - Income Taxes (Details Textual) - USD ($)	3 Months Ended	9 Months Ended		12 Months Ended
	Dec. 29, 2018	Jun. 29, 2019	Jun. 30, 2018	Sep. 29, 2018
Effective Income Tax Rate Reconciliation, Percent, Total		22.40%	12.00%
Tax Cuts and Jobs Act, Change in Tax Rate, Deferred Tax Liability, Income Tax Benefit	$ 3,700,000
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent				24.50%
Deferred Tax Liabilities, Net, Noncurrent		$ 7,533,000		$ 5,340,000
Deferred Tax Assets, Tax Credit Carryforwards, Total		16,000
Deferred Tax Assets, Valuation Allowance, Total		265,000		$ 233,000
State and Local Jurisdiction [Member]
Operating Loss Carryforwards, Total		$ 2,100,000
State and Local Jurisdiction [Member] | Earliest Tax Year [Member]
Operating Loss Carryforwards Expiration Date 1		2022
Tax Credit Carryforward, Expiration Date 1		2019
State and Local Jurisdiction [Member] | Latest Tax Year [Member]
Operating Loss Carryforwards Expiration Date 1		2031
Tax Credit Carryforward, Expiration Date 1		2020

XML

Note 8 - Employee Benefit Plans (Details Textual)	9 Months Ended
	Jun. 29, 2019
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
Supplemental Employee Retirement Plan [Member] | Maximum [Member]
Defined Benefit Plan Employment Term	30 years
Reduced SERP [Member]
Defined Benefit Plan Retirement Age	65
Defined Benefit Plan, Reduction for Each Month	0.0028%
Reduced SERP [Member] | Minimum [Member]
Defined Benefit Plan Employment Term	10 years

XML

Note 8 - Employee Benefit Plans - Net Periodic Pension Costs and Related Components (Details) - Supplemental Employee Retirement Plan [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Interest cost	$ 96	$ 86	$ 288	$ 258
Service cost	74	70	222	209
Recognized net actuarial loss	35	38	105	114
Net periodic pension cost	$ 205	$ 194	$ 615	$ 581

XML

Note 9 - Long-term Debt (Details Textual)	1 Months Ended	3 Months Ended		9 Months Ended
	May 31, 2019 USD ($)	Jun. 29, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 29, 2019 USD ($)	Jun. 30, 2018 USD ($)	Mar. 30, 2019 USD ($)
Amortization of Debt Issuance Costs		$ 16,000	$ 16,000	$ 48,000	$ 48,000
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		100,000,000		100,000,000
Line Of Credit Facility, Additional Borrowing Capacity	$ 50,000,000
Line of Credit Facility, Remaining Borrowing Capacity		98,400,000		98,400,000		$ 100,000,000
Long-term Line of Credit, Total		0		0
Letters of Credit Outstanding, Amount		$ 1,600,000		$ 1,600,000
Debt Instrument, Interest Rate, Increase (Decrease)				2.00%
Fixed Charge Coverage Ratio				1
Credit Facility, Liquidity Amount				$ 10,000,000
Revolving Credit Facility [Member] | Fed Funds Effective Rate Overnight Index Swap Rate [Member]
Debt Instrument, Basis Spread on Variable Rate				0.50%
Revolving Credit Facility [Member] | Base Rate [Member]
Line of Credit Facility, Interest Rate at Period End		0.25%		0.25%
Revolving Credit Facility [Member] | Base Rate [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate				0.25%
Revolving Credit Facility [Member] | Base Rate [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate				0.50%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility, Interest Rate at Period End		1.25%		1.25%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate				1.25%
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate				1.50%

XML

Note 10 - Earnings Per Share (Details Textual) - shares	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	276,000	97,000	221,000	98,000

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						9 Months Ended
	Jun. 29, 2019	Mar. 30, 2019	Dec. 29, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 30, 2017	Jun. 29, 2019	Jun. 30, 2018
Net earnings	$ 2,190	$ 1,049	$ 4,126	$ 12,868	$ 5,879	$ 8,111	$ 7,365	$ 26,858
Basic weighted average shares outstanding (in shares)	19,252			19,070			19,239	19,054
Dilutive effect of stock-based compensation (in shares)	82			204			97	198
Diluted weighted average shares outstanding (in shares)	19,334			19,274			19,336	19,252
Basic (in dollars per share)	$ 0.11			$ 0.67			$ 0.38	$ 1.41
Diluted (in dollars per share)	$ 0.11			$ 0.67			$ 0.38	$ 1.40

XML

Note 11 - Share Repurchases (Details Textual) - USD ($) shares in Thousands, $ in Millions	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018	Nov. 18, 2008
Stock Repurchase Program, Authorized Amount					$ 25.0
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 24.8		$ 24.8
Stock Repurchased During Period, Shares	0	0	0	0

XML

Note 12 - Other Financial Data - Balance Sheet Information (Details) - USD ($) $ in Thousands	Jun. 29, 2019	Sep. 29, 2018
Accounts receivable	$ 51,024	$ 51,779
Less allowance for doubtful accounts	(281)	(295)
Total	50,743	51,484
Raw materials	52,279	61,008
Work in process	5,953	4,779
Finished goods	46,392	28,370
Total	104,624	94,157
Prepaid insurance	4,210	3,845
Income tax receivable	1,359
Other	1,342	2,050
Total	6,911	5,895
Cash surrender value of life insurance policies	10,211	9,769
Capitalized financing costs, net	235	40
Other	114	104
Total	10,560	9,913
Land and land improvements	14,512	14,438
Buildings	56,370	54,684
Machinery and equipment	165,824	160,068
Construction in progress	5,196	9,672
Property, plant and equipment, gross	241,902	238,862
Less accumulated depreciation	(134,571)	(132,714)
Total	107,331	106,148
Salaries, wages and related expenses	1,950	6,775
Property taxes	1,227	1,585
Customer rebates	1,188	1,531
Sales allowance reserves	1,028	804
Workers' compensation	112	113
Income taxes		469
Other	891	652
Total	6,396	11,929
Deferred compensation	11,231	10,541
Deferred Tax Liabilities, Net, Noncurrent	7,533	5,340
Total	$ 18,764	$ 15,881

XML

Note 13 - Business Segment Information (Details Textual)	9 Months Ended
	Jun. 29, 2019
Number of Reportable Segments	1

XML

Note 14 - Contingencies (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018	Sep. 29, 2018
Fire [Member]
Insurance Recoveries	$ 486,000		$ 2,200,000
Insurance Settlements Receivable					$ 462,000
Fire [Member] | Cost of Sales [Member]
Insurance Recoveries	339,000		645,000
Fire [Member] | Other Income [Member]
Insurance Recoveries	144,000		1,100,000
Fire [Member] | Selling, General and Administrative Expenses [Member]
Insurance Recoveries	$ 3,000		48,000
Storm [Member]
Insurance Recoveries			150,000	$ 439,000
Increase (Decrease) in Insurance Settlements Receivable		$ 52,000
Storm [Member] | Cost of Sales [Member]
Insurance Recoveries				418,000
Storm [Member] | Other Income [Member]
Insurance Recoveries		47,000	$ 98,000	47,000
Storm [Member] | Selling, General and Administrative Expenses [Member]
Insurance Recoveries		$ 5,000		$ 26,000