##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended October 3, 2009
 OR
 o
    
    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.
  North Carolina
    
    56-0674867(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1373 Boggs Drive, Mount Airy, North Carolina 27030
 (336) 786-2141
 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock (No Par Value) (Preferred Share Purchase
    
    The NASDAQ Stock Market LLCRights are attached to and trade with the Common Stock)
    
    (NASDAQ Global Select Market)
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:   Preferred Share Purchase Rights (attached to and trade with the Common Stock)
 o þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    7Item 1B. Unresolved Staff Comments
    
    
    10Item 2. Properties
    
    
    10Item 3. Legal Proceedings
    
    
    10Item 4. Submission of Matters to a Vote of Security Holders
    
    
    11PART IIItem 5. Market for the Registrants Common Equity, Related Shareholder Matters and Issuer Purchases
of Equity Securities
    
    
    11Item 6. Selected Financial Data
    
    
    12Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 8. Financial Statements and Supplementary Data
    
    
    22Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    51Item 9A. Controls and Procedures
    
    
    51Item 9B. Other Information
    
    
    53PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    53Item 11. Executive Compensation
    
    
    53Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    53Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    53Item 14. Principal Accounting Fees and Services
    
    
    54PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    54SIGNATURES
    
    
    55EXHIBIT INDEX
    
    
    56EX-10.20.1EX-10.20.2EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  2




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PART I
 Cautionary Note Regarding Forward-Looking Statements
    
    
    general economic and competitive conditions in the markets in which we operate;
 
    
    credit market conditions and the impact of the measures that have been taken by the
federal government on the relative availability of financing for us, our customers and the
construction industry as a whole;
 
    
    the timing and magnitude of the impact of the additional federal infrastructure-related
funding provided for under the American Recovery and Reinvestment Act;
 
    
    the anticipated reduction in spending for nonresidential construction, particularly
commercial construction, and the impact on demand for our concrete reinforcing products;
 
    
    the severity and duration of the downturn in residential construction activity and the
impact on those portions of our business that are correlated with the housing sector;
 
    
    the cyclical nature of the steel and building material industries;
 
    
    fluctuations in the cost and availability of our primary raw material, hot-rolled steel
wire rod, from domestic and foreign suppliers;
 
    
    our ability to raise selling prices in order to recover increases in wire rod costs;
 
    
    changes in United States (U.S.) or foreign trade policy affecting imports or exports
of steel wire rod or our products, including the outcome of the trade cases that have been
filed by domestic producers of prestressed concrete strand (PC strand) regarding imports
of PC strand from China;
 
    
    unanticipated changes in customer demand, order patterns or inventory levels;
 
    
    the impact of weak demand and reduced 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;
 
    
    the actual net proceeds realized and closure costs incurred in connection with our exit
from the industrial wire business;
 
    
    legal, environmental or regulatory developments that significantly impact our operating
costs;
 
    
    unanticipated plant outages, equipment failures or labor difficulties;
 
    
    continued escalation in certain of our operating costs; and
 
    
    the risks discussed herein under the caption Risk Factors.
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Item 1. Business
 General
     Internet Access to Company Information
 http://investor.insteel.com/sec.cfm www.sec.gov
 Products
  PC strand
 WWR
 Marketing and Distribution
  4




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Customers
  Product Warranties
  Seasonality and Cyclicality
  Raw Materials
      5




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.
  Competition
   Employees
  Financial Information
  6




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Environmental Matters
  Executive Officers of the Company
  Name
    
    Age
    
    PositionH.O. Woltz III
    
    
    53
    
    
    President, Chief Executive Officer and Chairman of the BoardMichael C. Gazmarian
    
    
    50
    
    
    Vice President, Chief Financial Officer and TreasurerJames F. Petelle
    
    
    59
    
    
    Vice President  Administration and SecretaryRichard T. Wagner
    
    
    50
    
    
    Vice President and General Manager of IWP
   ,
   
 Item 1A. Risk Factors
  Our business is cyclical and can be negatively impacted by prolonged economic downturns or
tightening in the credit markets that reduce the level of construction activity and demand for our
products.
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Demand for our products is highly variable and difficult to forecast due to our minimal backlog and
the unanticipated changes that can occur in customer order patterns or inventory levels.
  Our customers may be adversely affected by the continued negative macroeconomic conditions and
tightening in the credit markets.
  Although the additional federal infrastructure-related funding provided for under the American
Recovery and Reinvestment Act (ARRA) is expected to have a favorable impact on demand for our
products, the timing and magnitude of the impact are uncertain.
  Our financial results can be negatively impacted by the volatility in the cost and availability of
our primary raw material, hot-rolled carbon steel wire rod.
    8




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Foreign competition could adversely impact our financial results.
     Our manufacturing facilities are subject to unexpected equipment failures, operational
interruptions and casualty losses.
  Our financial results could be adversely impacted by the continued escalation in certain of our
operating costs.
  Our capital resources may not be adequate to provide for our capital investment and maintenance
expenditures if we were to
 9




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experience a substantial downturn in our financial performance.
  Environmental compliance and remediation could result in substantially increased capital
investments and operating costs.
  Our production and earnings could be reduced by strikes or work stoppages by our unionized
employees.
  Our stock price can be volatile, often in connection with matters beyond our control.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
   
 Item 3. Legal Proceedings.
  10




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Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity
Securities.
  Fiscal 2009
    
    Fiscal 2008Cash
    
    
    
    
    
    
    
    
    
    CashHigh
    
    Low
    
    Dividends
    
    High
    
    Low
    
    DividendsFirst Quarter
    
    $
    14.72
    
    
    $
    7.00
    
    
    $
    0.03
    
    
    $
    16.35
    
    
    $
    10.00
    
    
    $
    0.03Second Quarter
    
    
    12.47
    
    
    
    4.76
    
    
    
    0.03
    
    
    
    12.45
    
    
    
    7.36
    
    
    
    0.03Third Quarter
    
    
    9.26
    
    
    
    6.24
    
    
    
    0.03
    
    
    
    19.14
    
    
    
    9.96
    
    
    
    0.03Fourth Quarter
    
    
    12.58
    
    
    
    7.53
    
    
    
    0.03
    
    
    
    20.17
    
    
    
    13.77
    
    
    
    0.53
  11




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Total Number ofShares Purchased as
    
    Maximum Number (or ApproximatePart of Publicly
    
    Dollar Value) of Shares That May YetTotal Number of
    
    Average Price
    
    Announced Plan or
    
    Be Purchased Under the Plan or(In thousands except per share amounts)
    
    Shares Purchased
    
    Paid per Share
    
    Program
    
    ProgramJune 28, 2009 - August 1, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    24,991
    (1)August 2, 2009 - August 29, 2009 (2)
    
    
    1,377
    
    
    $
    11.40
    
    
    
    1,377
    
    
    
    24,976
    (1)August 30, 2009 - October 3, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,976
    (1)1,377
    
    
    
    
    
    
    
    1,377
 
 (1)
    
    Under the $25.0 million share repurchase authorization announced on November 18, 2008
which continues in effect until terminated by the Board of Directors.(2)
    
    Represents 1,377 shares surrendered by employees to satisfy tax withholding obligations
upon the vesting of restricted stock awards.   
 Item 6. Selected Financial Data.
 Financial Highlights
(In thousands, except per share amounts)
 Year Ended(53 weeks)
    
    (52 weeks)
    
    (52 weeks)
    
    (52 weeks)
    
    (52 weeks)October 3,
    
    September 27,
    
    September 29,
    
    September 30,
    
    October 1,2009
    
    2008
    
    2007
    
    2006
    
    2005Net sales
    
    $
    230,236
    
    
    $
    353,862
    
    
    $
    297,806
    
    
    $
    329,507
    
    
    $
    309,320Earnings (loss) from continuing
operations
    
    
    (20,940
    )
    
    
    43,717
    
    
    
    24,284
    
    
    
    34,377
    
    
    
    24,499Net earnings (loss)
    
    
    (22,086
    )
    
    
    43,752
    
    
    
    24,162
    
    
    
    33,040
    
    
    
    25,045Earnings (loss) per share from
continuing operations (basic)
    
    
    (1.20
    )
    
    
    2.49
    
    
    
    1.34
    
    
    
    1.88
    
    
    
    1.31Earnings (loss) per share from
continuing operations (diluted)
    
    
    (1.20
    )
    
    
    2.47
    
    
    
    1.33
    
    
    
    1.86
    
    
    
    1.29Net earnings (loss) per share (basic)
    
    
    (1.27
    )
    
    
    2.49
    
    
    
    1.33
    
    
    
    1.80
    
    
    
    1.34Net earnings (loss) per share (diluted)
    
    
    (1.27
    )
    
    
    2.47
    
    
    
    1.32
    
    
    
    1.79
    
    
    
    1.32Cash dividends declared
    
    
    0.12
    
    
    
    0.62
    
    
    
    0.12
    
    
    
    0.12
    
    
    
    0.06Total assets
    
    
    182,117
    
    
    
    228,220
    
    
    
    173,529
    
    
    
    166,596
    
    
    
    138,276Total long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,860Shareholders equity
    
    
    147,070
    
    
    
    169,847
    
    
    
    143,850
    
    
    
    122,438
    
    
    
    97,036
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Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 The matters discussed in this section include forward-looking statements that are subject to
numerous risks. You should carefully read the Cautionary Note Regarding Forward-Looking
Statements and Risk Factors in this Form 10-K.
 Overview
  Critical Accounting Policies
   Revenue recognition.
 Concentration of credit risk.
  Allowance for doubtful accounts.
 Inventory valuation.
 13




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Self-insurance.
 Litigation .
 Assumptions for employee benefit plans.
      14




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Recent Accounting Pronouncements
 Current Adoptions
   Future Adoptions
   15




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Results of Operations
 Statements of Operations  Selected Data
(Dollars in thousands)
 Year EndedOctober 3,
    
    
    
    
    
    September 27,
    
    
    
    
    
    September 29,
    
    
    
    
    
    September 30,2009
    
    Change
    
    2008
    
    Change
    
    2007
    
    Change
    
    2006Net sales
    
    $
    230,236
    
    
    
    (34.9
    %)
    
    $
    353,862
    
    
    
    18.8
    %
    
    $
    297,806
    
    
    
    (9.6
    %)
    
    $
    329,507Gross profit (loss)
    
    
    (15,093
    )
    
    
    (117.4
    %)
    
    
    86,755
    
    
    
    54.8
    %
    
    
    56,061
    
    
    
    (20.9
    %)
    
    
    70,871Percentage of net sales
    
    
    (6.6
    %)
    
    
    
    
    
    
    24.5
    %
    
    
    
    
    
    
    18.8
    %
    
    
    
    
    
    
    21.5
    %Selling, general and administrative expense
    
    $
    17,243
    
    
    
    (7.4
    %)
    
    $
    18,623
    
    
    
    5.9
    %
    
    $
    17,583
    
    
    
    3.5
    %
    
    $
    16,996Percentage of net sales
    
    
    7.5
    %
    
    
    
    
    
    
    5.3
    %
    
    
    
    
    
    
    5.9
    %
    
    
    
    
    
    
    5.2
    %Other expense (income), net
    
    
    (135
    )
    
    
    N/M
    
    
    
    85
    
    
    
    N/M
    
    
    
    4
    
    
    
    N/M
    
    
    
    (446
    )Interest expense
    
    
    641
    
    
    
    7.9
    %
    
    
    594
    
    
    
    0.3
    %
    
    
    592
    
    
    
    (11.5
    %)
    
    
    669Interest income
    
    
    (144
    )
    
    
    (80.0
    %)
    
    
    (721
    )
    
    
    73.7
    %
    
    
    (415
    )
    
    
    62.7
    %
    
    
    (255
    )Effective income tax rate
    
    
    36.0
    %
    
    
    
    
    
    
    35.9
    %
    
    
    
    
    
    
    36.6
    %
    
    
    
    
    
    
    36.2
    %Earnings (loss) from continuing operations
    
    $
    (20,940
    )
    
    
    (147.9
    %)
    
    $
    43,717
    
    
    
    80.0
    %
    
    $
    24,284
    
    
    
    (29.4
    %)
    
    $
    34,377Earnings (loss) from discontinued operations
    
    
    (1,146
    )
    
    
    N/M
    
    
    
    35
    
    
    
    N/M
    
    
    
    (122
    )
    
    
    N/M
    
    
    
    (1,337
    )Net earnings (loss)
    
    
    (22,086
    )
    
    
    (150.5
    %)
    
    
    43,752
    
    
    
    81.1
    %
    
    
    24,162
    
    
    
    (26.9
    %)
    
    
    33,040
 
 N/M = not meaningful 2009 Compared with 2008
 Net Sales
  Gross Profit (Loss)
  16




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Selling, General and Administrative Expense
  Interest Expense
  Interest Income
  Income Taxes
  Earnings (Loss) From Continuing Operations
  Earnings (Loss) From Discontinued Operations
  Net Earnings (Loss)
  2008 Compared with 2007
 Net Sales
  17




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Gross Profit
  Selling, General and Administrative Expense
  Interest Expense
  Interest Income
  Income Taxes
  Earnings From Continuing Operations
  Earnings (Loss) From Discontinued Operations
  Net Earnings
  18




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Liquidity and Capital Resources
 Selected Financial Data
(Dollars in thousands)
 Year EndedOctober 3,
    
    September 27,
    
    September 29,2009
    
    2008
    
    2007Net cash provided by operating activities of continuing operations
    
    $
    22,092
    
    
    $
    36,808
    
    
    $
    17,065Net cash used for investing activities of continuing operations
    
    
    (2,166
    )
    
    
    (8,249
    )
    
    
    (17,062
    )Net cash used for financing activities of continuing operations
    
    
    (11,347
    )
    
    
    (10,710
    )
    
    
    (1,842
    )Net cash provided by (used for) operating activities of discontinued operations
    
    
    30
    
    
    
    (59
    )
    
    
    (147
    )Working capital
    
    
    82,252
    
    
    
    97,566
    
    
    
    70,697Total long-term debt
    
    
    
    
    
    
    
    
    
    
    Percentage of total capital
    
    
    
    
    
    
    
    
    
    
    Shareholders equity
    
    $
    147,070
    
    
    $
    169,847
    
    
    $
    143,850Percentage of total capital
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Total capital (total long-term debt + shareholders equity)
    
    $
    147,070
    
    
    $
    169,847
    
    
    $
    143,850
 Cash Flow Analysis
    19




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Credit
Facility
    Impact of Inflation
  Off-Balance Sheet Arrangements
  Contractual Obligations
  20




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Payments Due by Period
(In thousands)
 Less Than
    
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    
    1 Year
    
    
    1 - 3 Years
    
    
    3 - 5 Years
    
    
    5 YearsContractual obligations:Raw material purchase commitments(1)
    
    $
    28,389
    
    
    $
    28,389
    
    
    $
    
    
    
    $
    
    
    
    $
    Supplemental employee retirement plan obligations
    
    
    19,260
    
    
    
    155
    
    
    
    487
    
    
    
    487
    
    
    
    18,131Pension benefit obligations
    
    
    7,391
    
    
    
    399
    
    
    
    494
    
    
    
    469
    
    
    
    6,029Operating leases
    
    
    1,595
    
    
    
    615
    
    
    
    508
    
    
    
    69
    
    
    
    403Trade letters of credit
    
    
    1,118
    
    
    
    1,118
    
    
    
    
    
    
    
    
    
    
    
    Other unconditional purchase obligations(2)
    
    
    298
    
    
    
    298
    
    
    
    
    
    
    
    
    
    
    
    Commitment fee on unused portion of credit facility
    
    
    197
    
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    58,248
    
    
    $
    31,171
    
    
    $
    1,489
    
    
    $
    1,025
    
    
    $
    24,563
 
 (1)
    
    Non-cancelable fixed price purchase commitments for raw materials.(2)
    
    Contractual commitments for capital expenditures. Outlook
    
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  Commodity Prices
  21




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Interest Rates
  Foreign Exchange Exposure
  
 Item 8. Financial Statements and Supplementary Data.
 (a) Financial Statements
 Consolidated Statements of Operations for the years ended October 3, 2009, September 27, 2008 and September 29, 2007
    
    
    24Consolidated Balance Sheets as of October 3, 2009 and September 27, 2008
    
    
    25Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) for the years ended October 3, 2009, September 27, 2008 and September 29, 2007
    
    
    26Consolidated Statements of Cash Flows for the years ended October 3, 2009, September 27, 2008 and September 29, 2007
    
    
    27Notes to Consolidated Financial Statements
    
    
    28Report of Independent Registered Public Accounting Firm  Consolidated Financial Statements
    
    
    49Schedule II  Valuation and Qualifying Accounts for the years ended October 3, 2009, September 27, 2008 and September 29, 2007
    
    
    50Report of Independent Registered Public Accounting Firm  Internal Control Over Financial Reporting
    
    
    52
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(b) Supplementary Data
  Financial Information by Quarter (Unaudited)
(In thousands, except for per share and price data)
 Quarter EndedDecember 27
    
    March 28
    
    June 27
    
    October 32009Operating ResultsNet sales
    
    $
    61,799
    
    
    $
    50,404
    
    
    $
    56,963
    
    
    $
    61,070Gross profit (loss)
    
    
    (4,276
    )
    
    
    (21,040
    )
    
    
    1,176
    
    
    
    9,047Earnings (loss) from continuing operations
    
    
    (5,599
    )
    
    
    (16,382
    )
    
    
    (1,737
    )
    
    
    2,778Loss from discontinued operations
    
    
    (36
    )
    
    
    (13
    )
    
    
    (12
    )
    
    
    (1,085
    )Net earnings (loss)
    
    
    (5,635
    )
    
    
    (16,395
    )
    
    
    (1,749
    )
    
    
    1,693Per share data:Basic:Earnings (loss) from continuing operations
    
    
    (0.33
    )
    
    
    (0.94
    )
    
    
    (0.10
    )
    
    
    0.16Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.06
    )Net earnings (loss)
    
    
    (0.33
    )
    
    
    (0.94
    )
    
    
    (0.10
    )
    
    
    0.10Diluted:Earnings (loss) from continuing operations
    
    
    (0.33
    )
    
    
    (0.94
    )
    
    
    (0.10
    )
    
    
    0.16Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.06
    )Net earnings (loss)
    
    
    (0.33
    )
    
    
    (0.94
    )
    
    
    (0.10
    )
    
    
    0.10Quarter EndedDecember 29
    
    March 29
    
    June 28
    
    September 272008Operating ResultsNet sales
    
    $
    65,980
    
    
    $
    77,260
    
    
    $
    104,332
    
    
    $
    106,290Gross profit
    
    
    10,620
    
    
    
    15,787
    
    
    
    30,885
    
    
    
    29,463Earnings from continuing operations
    
    
    4,231
    
    
    
    6,892
    
    
    
    16,948
    
    
    
    15,646Earnings (loss) from discontinued operations
    
    
    (7
    )
    
    
    26
    
    
    
    (21
    )
    
    
    37Net earnings
    
    
    4,224
    
    
    
    6,918
    
    
    
    16,927
    
    
    
    15,683Per share data:Basic:Earnings from continuing operations
    
    
    0.23
    
    
    
    0.40
    
    
    
    0.98
    
    
    
    0.90Earnings (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings
    
    
    0.23
    
    
    
    0.40
    
    
    
    0.98
    
    
    
    0.90Diluted:Earnings from continuing operations
    
    
    0.23
    
    
    
    0.39
    
    
    
    0.97
    
    
    
    0.89Earnings (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings
    
    
    0.23
    
    
    
    0.39
    
    
    
    0.97
    
    
    
    0.89
 23




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##### Table of Contents



INSTEEL INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share amounts)
 Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,2009
    
    
    2008
    
    
    2007Net sales
    
    $
    230,236
    
    
    $
    353,862
    
    
    $
    297,806Cost of sales
    
    
    219,388
    
    
    
    267,107
    
    
    
    241,745Inventory write-downs
    
    
    25,941
    
    
    
    
    
    
    
    Gross profit (loss)
    
    
    (15,093
    )
    
    
    86,755
    
    
    
    56,061Selling, general and administrative expense
    
    
    17,243
    
    
    
    18,623
    
    
    
    17,583Other expense (income), net
    
    
    (135
    )
    
    
    85
    
    
    
    4Interest expense
    
    
    641
    
    
    
    594
    
    
    
    592Interest income
    
    
    (144
    )
    
    
    (721
    )
    
    
    (415
    )Earnings (loss) from continuing operations before
income taxes
    
    
    (32,698
    )
    
    
    68,174
    
    
    
    38,297Income taxes
    
    
    (11,758
    )
    
    
    24,457
    
    
    
    14,013Earnings (loss) from continuing operations
    
    
    (20,940
    )
    
    
    43,717
    
    
    
    24,284Earnings (loss) from discontinued operations net of
of income taxes of ($729),
 $23 and ($77)
    
    
    (1,146
    )
    
    
    35
    
    
    
    (122
    )Net earnings (loss)
    
    $
    (22,086
    )
    
    $
    43,752
    
    
    $
    24,162Per share amounts:Basic:Earnings (loss) from continuing operations
    
    $
    (1.20
    )
    
    $
    2.49
    
    
    $
    1.34Earnings (loss) from discontinued operations
    
    
    (0.07
    )
    
    
    
    
    
    
    (0.01
    )Net earnings (loss)
    
    $
    (1.27
    )
    
    $
    2.49
    
    
    $
    1.33Diluted:Earnings (loss) from continuing operations
    
    $
    (1.20
    )
    
    $
    2.47
    
    
    $
    1.33Earnings (loss) from discontinued operations
    
    
    (0.07
    )
    
    
    
    
    
    
    (0.01
    )Net earnings (loss)
    
    $
    (1.27
    )
    
    $
    2.47
    
    
    $
    1.32Cash dividends declared
    
    $
    0.12
    
    
    $
    0.62
    
    
    $
    0.12Weighted shares outstanding:Basic
    
    
    17,380
    
    
    
    17,547
    
    
    
    18,142Diluted
    
    
    17,380
    
    
    
    17,712
    
    
    
    18,314
 See accompanying notes to consolidated financial statements.
 24




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##### Table of Contents



INSTEEL INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
(In thousands, except for per share amounts)
 October 3,
    
    
    September 27,2009
    
    
    2008Assets:Current assets:Cash and cash equivalents
    
    $
    35,102
    
    
    $
    26,493Accounts receivable, net
    
    
    21,283
    
    
    
    49,581Inventories
    
    
    38,542
    
    
    
    71,220Prepaid expenses and other
    
    
    16,724
    
    
    
    3,122Total current assets
    
    
    111,651
    
    
    
    150,416Property, plant and equipment, net
    
    
    64,204
    
    
    
    69,105Other assets
    
    
    4,382
    
    
    
    5,064Non-current assets of discontinued operations
    
    
    1,880
    
    
    
    3,635Total assets
    
    $
    182,117
    
    
    $
    228,220Liabilities and shareholders equity:Current liabilities:Accounts payable
    
    $
    23,965
    
    
    $
    23,581Accrued expenses
    
    
    5,215
    
    
    
    29,081Current liabilities of discontinued operations
    
    
    219
    
    
    
    188Total current liabilities
    
    
    29,399
    
    
    
    52,850Other liabilities
    
    
    5,465
    
    
    
    5,306Long-term liabilities of discontinued operations
    
    
    183
    
    
    
    217Commitments and contingenciesShareholders equity:Preferred stock, no par valueAuthorized shares: 1,000None issued
    
    
    
    
    
    
    Common stock, $1 stated valueAuthorized shares: 20,000Issued and outstanding shares: 2009, 17,525; 2008, 17,507
    
    
    17,525
    
    
    
    17,507Additional paid-in capital
    
    
    43,774
    
    
    
    41,746Retained earnings
    
    
    88,291
    
    
    
    112,479Accumulated other comprehensive loss
    
    
    (2,520
    )
    
    
    (1,885
    )Total shareholders equity
    
    
    147,070
    
    
    
    169,847Total liabilities and shareholders equity
    
    $
    182,117
    
    
    $
    228,220
 See accompanying notes to consolidated financial statements.
 25




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##### Table of Contents



INSTEEL INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE (LOSS) INCOME
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    (Loss) Income(1)
    
    
    EquityBalance at September 30, 2006
    
    
    18,213
    
    
    $
    18,213
    
    
    $
    46,343
    
    
    $
    57,882
    
    
    $
    
    
    
    $
    122,438Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,162
    
    
    
    
    
    
    
    24,162Recognition of additional pension
plan liability(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Adjustment to adopt certain provisions of
ASC Topic 715
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,110
    )
    
    
    (2,110
    )Comprehensive income(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,043Stock options exercised
    
    
    23
    
    
    
    23
    
    
    
    139
    
    
    
    
    
    
    
    
    
    
    
    162Restricted stock granted
    
    
    67
    
    
    
    67
    
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    Restricted stock shares from dividend
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12Compensation expense associated with
stock-based plans
    
    
    
    
    
    
    
    
    
    
    1,258
    
    
    
    
    
    
    
    
    
    
    
    1,258Excess tax benefits from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    
    
    
    
    122Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,185
    )
    
    
    
    
    
    
    (2,185
    )Balance at September 29, 2007
    
    
    18,303
    
    
    $
    18,303
    
    
    $
    47,807
    
    
    $
    79,859
    
    
    $
    (2,119
    )
    
    $
    143,850Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,752
    
    
    
    
    
    
    
    43,752Adjustment to defined benefit
plan liability(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    234Comprehensive income(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,986Stock options exercised
    
    
    24
    
    
    
    24
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    120Restricted stock granted
    
    
    93
    
    
    
    93
    
    
    
    (93
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense associated with
stock-based plans
    
    
    
    
    
    
    
    
    
    
    1,759
    
    
    
    
    
    
    
    
    
    
    
    1,759Adjustment to adopt certain provisions of
ASC Topic 740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (256
    )
    
    
    
    
    
    
    (256
    )Excess tax benefits from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    31Repurchases of common stock
    
    
    (906
    )
    
    
    (906
    )
    
    
    (7,785
    )
    
    
    
    
    
    
    
    
    
    
    (8,691
    )Restricted stock surrendered for
withholding taxes payable
    
    
    (7
    )
    
    
    (7
    )
    
    
    (69
    )
    
    
    
    
    
    
    
    
    
    
    (76
    )Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,876
    )
    
    
    
    
    
    
    (10,876
    )Balance at September 27, 2008
    
    
    17,507
    
    
    $
    17,507
    
    
    $
    41,746
    
    
    $
    112,479
    
    
    $
    (1,885
    )
    
    $
    169,847Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,086
    )
    
    
    
    
    
    
    (22,086
    )Adjustment to defined benefit
plan liability(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (635
    )
    
    
    (635
    )Comprehensive loss(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,721
    )Stock options exercised
    
    
    20
    
    
    
    20
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    66Compensation expense associated with
stock-based plans
    
    
    
    
    
    
    
    
    
    
    2,036
    
    
    
    
    
    
    
    
    
    
    
    2,036Excess tax deficiencies from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (32
    )Restricted stock surrendered for
withholding taxes payable
    
    
    (2
    )
    
    
    (2
    )
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    (24
    )Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,102
    )
    
    
    
    
    
    
    (2,102
    )Balance at October 3, 2009
    
    
    17,525
    
    
    $
    17,525
    
    
    $
    43,774
    
    
    $
    88,291
    
    
    $
    (2,520
    )
    
    $
    147,070
 
 (1)
    
    Activity within accumulated other comprehensive income (loss) is reported net
of related income taxes: 2007 $1,299, 2008 ($143), 2009 $389. See accompanying notes to consolidated financial statements.
 26




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##### Table of Contents



INSTEEL INDUSTRIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
 Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,2009
    
    
    2008
    
    
    2007Cash Flows From Operating Activities:Net earnings (loss)
    
    $
    (22,086
    )
    
    $
    43,752
    
    
    $
    24,162Loss (earnings) from discontinued operations
    
    
    1,146
    
    
    
    (35
    )
    
    
    122Earnings (loss) from continuing operations
    
    
    (20,940
    )
    
    
    43,717
    
    
    
    24,284Adjustments to reconcile earnings (loss) from continuing operations to net cash
provided by operating activities of continuing operations:Depreciation and amortization
    
    
    7,377
    
    
    
    7,271
    
    
    
    5,711Amortization of capitalized financing costs
    
    
    508
    
    
    
    498
    
    
    
    498Stock-based compensation expense
    
    
    2,036
    
    
    
    1,759
    
    
    
    1,258Excess tax deficiencies (benefits) from stock-based compensation
    
    
    32
    
    
    
    (31
    )
    
    
    (122
    )Inventory write-downs
    
    
    25,941
    
    
    
    
    
    
    
    Loss on sale of property, plant and equipment
    
    
    24
    
    
    
    289
    
    
    
    301Deferred income taxes
    
    
    997
    
    
    
    484
    
    
    
    2,003Gain from life insurance proceeds
    
    
    
    
    
    
    (661
    )
    
    
    Increase in cash surrender value of life insurance over premiums paid
    
    
    
    
    
    
    
    
    
    
    (277
    )Net changes in assets and liabilities:Accounts receivable, net
    
    
    28,298
    
    
    
    (15,063
    )
    
    
    3,001Inventories
    
    
    6,737
    
    
    
    (23,819
    )
    
    
    (604
    )Accounts payable and accrued expenses
    
    
    (14,761
    )
    
    
    18,699
    
    
    
    (17,019
    )Other changes
    
    
    (14,157
    )
    
    
    3,665
    
    
    
    (1,969
    )Total adjustments
    
    
    43,032
    
    
    
    (6,909
    )
    
    
    (7,219
    )Net cash provided by operating activities  continuing operations
    
    
    22,092
    
    
    
    36,808
    
    
    
    17,065Net cash provided by (used for) operating activities  discontinued operations
    
    
    30
    
    
    
    (59
    )
    
    
    (147
    )Net cash provided by operating activities
    
    
    22,122
    
    
    
    36,749
    
    
    
    16,918Cash Flows From Investing Activities:Capital expenditures
    
    
    (2,377
    )
    
    
    (9,456
    )
    
    
    (17,013
    )Proceeds from sale of assets held for sale
    
    
    
    
    
    
    
    
    
    
    590Proceeds from sale of property, plant and equipment
    
    
    13
    
    
    
    116
    
    
    
    Proceeds from surrender of life insurance policies
    
    
    413
    
    
    
    170
    
    
    
    Increase in cash surrender value of life insurance policies
    
    
    (215
    )
    
    
    (190
    )
    
    
    (639
    )Proceeds from life insurance claims
    
    
    
    
    
    
    1,111
    
    
    
    Net cash used for investing activities  continuing operations
    
    
    (2,166
    )
    
    
    (8,249
    )
    
    
    (17,062
    )Net cash used for investing activities
    
    
    (2,166
    )
    
    
    (8,249
    )
    
    
    (17,062
    )Cash Flows From Financing Activities:Proceeds from long-term debt
    
    
    22,920
    
    
    
    951
    
    
    
    16,999Principal payments on long-term debt
    
    
    (22,920
    )
    
    
    (951
    )
    
    
    (16,999
    )Cash received from exercise of stock options
    
    
    66
    
    
    
    120
    
    
    
    162Excess tax benefits (deficiencies) from stock-based compensation
    
    
    (32
    )
    
    
    31
    
    
    
    122Repurchases of common stock
    
    
    
    
    
    
    (8,691
    )
    
    
    Cash dividends paid
    
    
    (11,381
    )
    
    
    (2,141
    )
    
    
    (2,176
    )Other
    
    
    
    
    
    
    (29
    )
    
    
    50Net cash used for financing activities  continuing operations
    
    
    (11,347
    )
    
    
    (10,710
    )
    
    
    (1,842
    )Net cash used for financing activities
    
    
    (11,347
    )
    
    
    (10,710
    )
    
    
    (1,842
    )Net increase (decrease) in cash and cash equivalents
    
    
    8,609
    
    
    
    17,790
    
    
    
    (1,986
    )Cash and cash equivalents at beginning of period
    
    
    26,493
    
    
    
    8,703
    
    
    
    10,689Cash and cash equivalents at end of period
    
    $
    35,102
    
    
    $
    26,493
    
    
    $
    8,703Supplemental Disclosures of Cash Flow Information:Cash paid during the period for:Interest
    
    $
    133
    
    
    $
    95
    
    
    $
    93Income taxes
    
    
    11,454
    
    
    
    11,563
    
    
    
    16,785Non-cash financing activity:Purchases of property, plant and equipment in accounts payable
    
    
    136
    
    
    
    178
    
    
    
    937Issuance of restricted stock
    
    
    
    
    
    
    1,185
    
    
    
    1,215Declaration of cash dividends to be paid
    
    
    
    
    
    
    9,279
    
    
    
    544Restricted stock surrendered for withholding taxes payable
    
    
    24
    
    
    
    76
    
    
    
    
 See accompanying notes to consolidated financial statements.
 27




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##### Table of Contents



INSTEEL INDUSTRIES, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 3, 2009, SEPTEMBER 27, 2008 AND SEPTEMBER 29, 2007
 (1) Description of Business
    (2) Summary of Significant Accounting Policies
 Fiscal year.
 Principles of consolidation
 Use of estimates.
 Cash equivalents
 Concentration of credit risk.
  Stock-based compensation.
 28




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Revenue recognition .
 Shipping and handling costs .
 Inventories .
 Property, plant and equipment.
 Other assets.
 Long-lived assets .
 Fair value of financial instruments.
 Income taxes.
 Earnings per share.
 29




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (3) Recent Accounting Pronouncements
 Current Adoptions
   Future Adoptions
     (4) Fair Value Measurements
  30




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      Quoted Pricesin Active
    
    
    ObservableMarkets
    
    
    Inputs(In thousands)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)Current assets:Cash equivalents
    
    $
    35,391
    
    
    $
    35,391
    
    
    $
    Other assets:Cash surrender value of life insurance policies
    
    
    3,739
    
    
    
    
    
    
    
    3,739Total
    
    $
    39,130
    
    
    $
    35,391
    
    
    $
    3,739
   (5) Credit
Facility
   31




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Financial Covenants
  Negative Covenants
  Events of Default
   Fiscal year
    
    In thousands2010
    
    $
    3362011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    
 (6) Stock-Based Compensation
  32




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Stock option awards .
 Year EndedOctober 3,
    
    September 27,
    
    September 29,(In thousands)
    
    2009
    
    2008
    
    2007Stock options:Compensation expense
    
    $
    937
    
    
    $
    898
    
    
    $
    513Excess tax deficiencies (benefits)
    
    
    32
    
    
    
    (31
    )
    
    
    (122
    )
   Year EndedOctober 3,
    
    September 27,
    
    September 29,2009
    
    2008
    
    2007Expected term (in years)
    
    
    4.92
    
    
    
    4.03
    
    
    
    3.16Risk-free interest rate
    
    
    2.64
    %
    
    
    2.65
    %
    
    
    4.70
    %Expected volatility
    
    
    74.53
    %
    
    
    66.62
    %
    
    
    65.84
    %Expected dividend yield
    
    
    1.31
    %
    
    
    1.01
    %
    
    
    0.65
    %
   Exercise Price




    Contractual
    
    AggregatePer Share



    Term -
    
    IntrinsicOptions
    
    
    
    
    Weighted
    
    Weighted
    
    Value(Share amounts in thousands)
    
    Outstanding
    
    Range
    Average
    
    Average
    
    (in thousands)Outstanding at September 30, 2006
    
    
    282
    
    
    
    $0.18  $20.26
    
    
    $
    7.37Granted
    
    
    79
    
    
    
    17.11  20.27
    
    
    
    18.54Exercised
    
    
    (23
    )
    
    
    4.56  15.64
    
    
    
    7.12
    
    
    
    
    
    
    $
    228Forfeited
    
    
    (2
    )
    
    
    20.26  20.26
    
    
    
    20.26Outstanding at September 29, 2007
    
    
    336
    
    
    
    0.18  20.27
    
    
    
    9.95Granted
    
    
    219
    
    
    
    11.15  16.69
    
    
    
    12.37Exercised
    
    
    (24
    )
    
    
    3.19  9.12
    
    
    
    4.96
    
    
    
    
    
    
    
    148Outstanding at September 27, 2008
    
    
    531
    
    
    
    0.18  20.27
    
    
    
    11.17Granted
    
    
    171
    
    
    
    7.55  11.60
    
    
    
    9.27Exercised
    
    
    (20
    )
    
    
    3.28  3.28
    
    
    
    3.28
    
    
    
    
    
    
    
    120Forfeited
    
    
    (9
    )
    
    
    15.64  20.27
    
    
    
    18.07Outstanding at October 3, 2009
    
    
    673
    
    
    
    0.18  20.27
    
    
    
    10.83
    
    
    7.43 years
    
    
    1,575Vested and
anticipated to vest in future at October 3, 2009
    
    
    657
    
    
    
    
    
    
    
    10.81
    
    
    7.40 years
    
    
    1,554Exercisable at October 3, 2009
    
    
    331
    
    
    
    
    
    
    
    10.38
    
    
    5.85 years
    
    
    1,114
 33




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Restricted Stock Awards.
 Year EndedOctober 3,
    
    September 27,
    
    September 29,(In thousands)
    
    2009
    
    2008
    
    2007Restricted stock grants:Shares
    
    
    
    
    
    
    93
    
    
    
    67Market value
    
    $
    
    
    
    $
    1,185
    
    
    $
    1,215Amortization expense
    
    
    756
    
    
    
    861
    
    
    
    745
    Restricted
    
    Weighted AverageStock Awards
    
    Grant Date(Share amounts in thousands)
    
    Outstanding
    
    Fair ValueBalance, September 30, 2006
    
    
    103
    
    
    $
    12.27Granted
    
    
    67
    
    
    
    18.18Released
    
    
    (28
    )
    
    
    12.51Balance, September 29, 2007
    
    
    142
    
    
    
    15.00Granted
    
    
    93
    
    
    
    12.77Released
    
    
    (70
    )
    
    
    11.68Balance, September 27, 2008
    
    
    165
    
    
    
    15.16Granted
    
    
    
    
    
    
    Released
    
    
    (50
    )
    
    
    14.40Balance, October 3, 2009
    
    
    115
    
    
    
    15.50
 Restricted stock units.
 Year EndedOctober 3,
    
    September 27,
    
    September 29,(In thousands)
    
    2009
    
    2008
    
    2007Restricted stock unit grants:Units
    
    
    136
    
    
    
    
    
    
    
    Market value
    
    $
    1,185
    
    
    $
    
    
    
    $
    Amortization expense
    
    
    343
    
    
    
    
    
    
    
    
  34




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  WeightedRestricted
    
    AverageStock Units
    
    Grant Date(Unit amounts in thousands)
    
    Outstanding
    
    Fair ValueBalance, September 30, 2006
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    Released
    
    
    
    
    
    
    Balance, September 29, 2007
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    Released
    
    
    
    
    
    
    Balance, September 27, 2008
    
    
    
    
    
    
    Granted
    
    
    136
    
    
    
    8.71Released
    
    
    
    
    
    
    Balance, October 3, 2009
    
    
    136
    
    
    
    8.71
 (7) Income Taxes
  Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Provision for income taxes:Current:Federal
    
    $
    (12,708
    )
    
    $
    21,720
    
    
    $
    10,801State
    
    
    (47
    )
    
    
    2,253
    
    
    
    1,209(12,755
    )
    
    
    23,973
    
    
    
    12,010Deferred:Federal
    
    
    1,686
    
    
    
    440
    
    
    
    1,821State
    
    
    (689
    )
    
    
    44
    
    
    
    182997
    
    
    
    484
    
    
    
    2,003Income taxes
    
    $
    (11,758
    )
    
    $
    24,457
    
    
    $
    14,013Effective income tax rate
    
    
    36.0
    %
    
    
    35.9
    %
    
    
    36.6
    %
  Year Ended(Dollars in thousands)
    
    October 3, 2009
    
    
    September 27, 2008
    
    
    September 29, 2007Provision for income taxes at federal
statutory rate
    
    $
    (11,444
    )
    
    
    35.0
    %
    
    $
    23,861
    
    
    
    35.0
    %
    
    $
    13,403
    
    
    
    35.0
    %State income taxes, net of federal tax benefit
    
    
    (479
    )
    
    
    1.5
    
    
    
    1,886
    
    
    
    2.8
    
    
    
    904
    
    
    
    2.4Qualified production activities deduction
    
    
    
    
    
    
    
    
    
    
    (1,322
    )
    
    
    (1.9
    )
    
    
    (374
    )
    
    
    (1.0
    )Stock option expense benefit
    
    
    203
    
    
    
    (0.6
    )
    
    
    240
    
    
    
    0.3
    
    
    
    126
    
    
    
    0.3Revisions to estimates based on filing of
final tax return
    
    
    33
    
    
    
    (0.1
    )
    
    
    293
    
    
    
    0.4
    
    
    
    (32
    )
    
    
    (0.1
    )Other, net
    
    
    (71
    )
    
    
    0.2
    
    
    
    (501
    )
    
    
    (0.7
    )
    
    
    (14
    )
    
    
    (0.0
    )Provision for income taxes
    
    $
    (11,758
    )
    
    
    36.0
    %
    
    $
    24,457
    
    
    
    35.9
    %
    
    $
    14,013
    
    
    
    36.6
    %
 35




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  October 3,
    
    
    September 27,(In thousands)
    
    2009
    
    
    2008Deferred tax assets:Accrued expenses, asset reserves and state tax credits
    
    $
    3,048
    
    
    $
    3,524State net operating loss carryforwards
    
    
    1,419
    
    
    
    602Goodwill, amortizable for tax purposes
    
    
    1,690
    
    
    
    2,004Defined benefit plans
    
    
    1,545
    
    
    
    1,156Stock-based compensation
    
    
    465
    
    
    
    328Valuation allowance
    
    
    (602
    )
    
    
    (602
    )Gross deferred tax assets
    
    
    7,565
    
    
    
    7,012Deferred tax liabilities:Plant and equipment
    
    
    (5,161
    )
    
    
    (4,489
    )Other reserves
    
    
    (361
    )
    
    
    (445
    )Gross deferred tax liabilities
    
    
    (5,522
    )
    
    
    (4,934
    )Net deferred tax asset
    
    $
    2,043
    
    
    $
    2,078
      (Dollars in thousands)Balance at September 27, 2008
    
    $
    48Increase in tax positions of prior years
    
    
    Reductions for tax positions of prior years
    
    
    Lapse of statute of limitations
    
    
    (48
    )Balance at October 3, 2009
    
    $
    
  36




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   (8) Discontinued Operations
     Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Earnings (loss) before income taxes
    
    $
    (1,875
    )
    
    $
    58
    
    
    $
    (199
    )Income taxes
    
    
    729
    
    
    
    (23
    )
    
    
    77Net earnings (loss)
    
    $
    (1,146
    )
    
    $
    35
    
    
    $
    (122
    )
  October 3,
    
    
    September 27,(In thousands)
    
    2009
    
    
    2008Assets:Other assets
    
    $
    1,880
    
    
    $
    3,635Total assets
    
    $
    1,880
    
    
    $
    3,635Liabilities:Current liabilities:Accounts payable
    
    $
    2
    
    
    $
    1Accrued expenses
    
    
    217
    
    
    
    187Total current liabilities
    
    
    219
    
    
    
    188Other liabilities
    
    
    183
    
    
    
    217Total liabilities
    
    $
    402
    
    
    $
    405
  37




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (9) Employee Benefit Plans
  Retirement plans . .
  38




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    4,377
    
    
    $
    4,435
    
    
    $
    4,527Service cost
    
    
    
    
    
    
    65
    
    
    
    78Interest cost
    
    
    250
    
    
    
    257
    
    
    
    269Actuarial loss (gain)
    
    
    150
    
    
    
    (171
    )
    
    
    203Distributions
    
    
    (488
    )
    
    
    (209
    )
    
    
    (642
    )Benefit obligation at end of year
    
    $
    4,289
    
    
    $
    4,377
    
    
    $
    4,435Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    3,764
    
    
    $
    4,421
    
    
    $
    4,527Actual return on plan assets
    
    
    (223
    )
    
    
    (448
    )
    
    
    536Distributions
    
    
    (488
    )
    
    
    (209
    )
    
    
    (642
    )Fair value of plan assets at end of year
    
    $
    3,053
    
    
    $
    3,764
    
    
    $
    4,421Reconciliation of funded status to net amount recognized:Funded status
    
    $
    (1,236
    )
    
    $
    (613
    )
    
    $
    (14
    )Net amount recognized
    
    $
    (1,236
    )
    
    $
    (613
    )
    
    $
    (14
    )Amounts recognized in the consolidated balance sheet:Accrued benefit liability
    
    $
    (1,236
    )
    
    $
    (613
    )
    
    $
    (14
    )Accumulated other comprehensive loss (net of tax)
    
    
    1,336
    
    
    
    1,091
    
    
    
    827Net amount recognized
    
    $
    100
    
    
    $
    478
    
    
    $
    813Amounts recognized in accumulated other
comprehensive loss:Unrecognized net loss
    
    $
    2,155
    
    
    $
    1,759
    
    
    $
    1,333Unrecognized prior service cost
    
    
    
    
    
    
    
    
    
    
    1Net amount recognized
    
    $
    2,155
    
    
    $
    1,759
    
    
    $
    1,334Other changes in plan assets and benefit obligations
recognized in other comprehensive income (loss):Net loss (gain)
    
    $
    396
    
    
    $
    426
    
    
    $
    (143
    )Amortization of prior service cost
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Total
recognized in other comprehensive income (loss)
    
    $
    396
    
    
    $
    425
    
    
    $
    (144
    )
  Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Service cost
    
    $
    
    
    
    $
    65
    
    
    $
    78Interest cost
    
    
    250
    
    
    
    257
    
    
    
    269Expected return on plan assets
    
    
    (262
    )
    
    
    (325
    )
    
    
    (324
    )Amortization of prior service cost
    
    
    
    
    
    
    1
    
    
    
    1Recognized net actuarial loss
    
    
    113
    
    
    
    67
    
    
    
    134Net periodic pension cost
    
    $
    101
    
    
    $
    65
    
    
    $
    158
   39




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Measurement DateOctober 3,
    
    September 27,
    
    September 29,2009
    
    2008
    
    2007Assumptions at year-end:Discount rate
    
    
    5.50
    %
    
    
    7.00
    %
    
    
    6.50
    %Rate of increase in compensation levels
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AExpected long-term rate of return on assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    8.00
    %
  Fiscal year(s)
    
    In thousands2010
    
    $
    3992011
    
    
    2972012
    
    
    1972013
    
    
    2682014
    
    
    2012015 - 2019
    
    
    1,474
  Supplemental employee retirement plan.
  40




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    4,121
    
    
    $
    4,192
    
    
    $
    3,868Service cost
    
    
    123
    
    
    
    155
    
    
    
    163Interest cost
    
    
    279
    
    
    
    266
    
    
    
    230Actuarial loss (gain)
    
    
    855
    
    
    
    (352
    )
    
    
    11Distributions
    
    
    (160
    )
    
    
    (140
    )
    
    
    (80
    )Benefit obligation at end of year
    
    $
    5,218
    
    
    $
    4,121
    
    
    $
    4,192Change in plan assets:Actual employer contributions
    
    $
    160
    
    
    $
    140
    
    
    $
    80Actual distributions
    
    
    (160
    )
    
    
    (140
    )
    
    
    (80
    )Plan assets at fair value at end of year
    
    $
    
    
    
    $
    
    
    
    $
    Reconciliation of funded status to net amount recognized:Funded status
    
    $
    (5,218
    )
    
    $
    (4,121
    )
    
    $
    (4,192
    )Net amount recognized
    
    $
    (5,218
    )
    
    $
    (4,121
    )
    
    $
    (4,192
    )Amounts recognized in accumulated other
comprehensive loss:Unrecognized net loss
    
    $
    1,002
    
    
    $
    147
    
    
    $
    Unrecognized prior service cost
    
    
    908
    
    
    
    1,135
    
    
    
    2,083Net amount recognized
    
    $
    1,910
    
    
    $
    1,282
    
    
    $
    2,083Other changes in plan assets and benefit obligations
recognized in other comprehensive income (loss):Net loss (gain)
    
    $
    855
    
    
    $
    (363
    )
    
    $
    1Prior service costs
    
    
    (227
    )
    
    
    (438
    )
    
    
    (227
    )Total
recognized in other comprehensive income (loss)
    
    $
    628
    
    
    $
    (801
    )
    
    $
    (226
    )
  Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Service cost
    
    $
    123
    
    
    $
    154
    
    
    $
    163Interest cost
    
    
    278
    
    
    
    266
    
    
    
    230Prior service cost
    
    
    227
    
    
    
    227
    
    
    
    227Recognized net actuarial loss
    
    
    
    
    
    
    12
    
    
    
    10Net periodic pension cost
    
    $
    628
    
    
    $
    659
    
    
    $
    630
   Measurement DateOctober 3,
    
    September 27,
    
    September 29,2009
    
    2008
    
    2007Assumptions at year-end:Discount rate
    
    
    5.50
    %
    
    
    7.00
    %
    
    
    6.25
    %Rate of increase in compensation levels
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    3.00
    %
 41




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Fiscal year(s)
    
    (In thousands)2010
    
    $
    1552011
    
    
    2442012
    
    
    2442013
    
    
    2442014
    
    
    2442015 - 2019
    
    
    1,486
  Retirement savings plan.
 .
 Voluntary Employee Beneficiary Associations (VEBA)
 (10) Commitments and Contingencies
 Leases and purchase commitments
  Legal proceedings
 42




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Severance and change of control agreements.
  43




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##### Table of Contents



(11) Earnings Per Share
  Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,(In thousands, except for per share amounts)
    
    2009
    
    
    2008
    
    
    2007Earnings (loss) from continuing operations
    
    $
    (20,940
    )
    
    $
    43,717
    
    
    $
    24,284Earnings (loss) from discontinued operations
    
    
    (1,146
    )
    
    
    35
    
    
    
    (122
    )Net earnings (loss)
    
    $
    (22,086
    )
    
    $
    43,752
    
    
    $
    24,162Weighted average shares outstanding:Weighted average shares outstanding (basic)
    
    
    17,380
    
    
    
    17,547
    
    
    
    18,142Dilutive effect of stock-based compensation
    
    
    
    
    
    
    165
    
    
    
    172Weighted average shares outstanding (diluted)
    
    
    17,380
    
    
    
    17,712
    
    
    
    18,314Per share (basic):Earnings (loss) from continuing operations
    
    $
    (1.20
    )
    
    $
    2.49
    
    
    $
    1.34Earnings (loss) from discontinued operations
    
    
    (0.07
    )
    
    
    
    
    
    
    (0.01
    )Net earnings (loss)
    
    $
    (1.27
    )
    
    $
    2.49
    
    
    $
    1.33Per share (diluted):Earnings (loss) from continuing operations
    
    $
    (1.20
    )
    
    $
    2.47
    
    
    $
    1.33Earnings (loss) from discontinued operations
    
    
    (0.07
    )
    
    
    
    
    
    
    (0.01
    )Net earnings (loss)
    
    $
    (1.27
    )
    
    $
    2.47
    
    
    $
    1.32
  (12) Business Segment Information
   Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Net sales:United States
    
    $
    225,286
    
    
    $
    337,801
    
    
    $
    287,202Foreign
    
    
    4,950
    
    
    
    16,061
    
    
    
    10,604Total
    
    $
    230,236
    
    
    $
    353,862
    
    
    $
    297,806Long-lived assets:United States
    
    $
    67,943
    
    
    $
    73,043
    
    
    $
    71,514Foreign
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    67,943
    
    
    $
    73,043
    
    
    $
    71,514
 44




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Net sales:Welded wire reinforcement
    
    $
    122,942
    
    
    $
    193,307
    
    
    $
    167,896PC strand
    
    
    107,294
    
    
    
    160,555
    
    
    
    129,910Total
    
    $
    230,236
    
    
    $
    353,862
    
    
    $
    297,806
  (13) Related Party Transactions
  (14) Comprehensive Loss
  October 3,
    
    
    September 27,
    
    
    September 29,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Adjustment to defined benefit plan liability
    
    $
    (2,520
    )
    
    $
    (1,885
    )
    
    $
    (2,119
    )Total accumulated other comprehensive loss
    
    $
    (2,520
    )
    
    $
    (1,885
    )
    
    $
    (2,119
    )
 45




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (15) Other Financial Data
  October 3,
    
    
    September 27,(In thousands)
    
    2009
    
    
    2008Accounts receivable, net:Accounts receivable
    
    $
    22,340
    
    
    $
    50,487Less allowance for doubtful accounts
    
    
    (1,057
    )
    
    
    (906
    )Total
    
    $
    21,283
    
    
    $
    49,581Inventories:Raw materials
    
    $
    17,649
    
    
    $
    30,793Work in process
    
    
    1,780
    
    
    
    3,161Finished goods
    
    
    19,113
    
    
    
    37,266Total
    
    $
    38,542
    
    
    $
    71,220Prepaid expenses and other:Income taxes receivable
    
    $
    13,049
    
    
    $
    Current deferred tax asset
    
    
    1,668
    
    
    
    2,513Capitalized financing costs, net
    
    
    336
    
    
    
    Other
    
    
    1,671
    
    
    
    609Total
    
    $
    16,724
    
    
    $
    3,122Other assets:Cash
surrender value of life insurance policies
    
    $
    3,739
    
    
    $
    3,938Non-current deferred tax assets
    
    
    375
    
    
    
    Capitalized financing costs, net
    
    
    
    
    
    
    844Other
    
    
    268
    
    
    
    282Total
    
    $
    4,382
    
    
    $
    5,064Property, plant and equipment, net:Land and land improvements
    
    $
    5,571
    
    
    $
    5,631Buildings
    
    
    32,437
    
    
    
    31,819Machinery and equipment
    
    
    96,411
    
    
    
    96,638Construction in progress
    
    
    695
    
    
    
    2,195135,114
    
    
    
    136,283Less accumulated depreciation
    
    
    (70,910
    )
    
    
    (67,178
    )Total
    
    $
    64,204
    
    
    $
    69,105Accrued expenses:Pension plan
    
    $
    1,236
    
    
    $
    613Salaries, wages and related expenses
    
    
    1,228
    
    
    
    4,128Property taxes
    
    
    1,023
    
    
    
    794Customer rebates
    
    
    752
    
    
    
    840Workers compensation
    
    
    378
    
    
    
    673Sales allowance reserves
    
    
    236
    
    
    
    1,493Cash dividends
    
    
    
    
    
    
    9,279Income taxes
    
    
    
    
    
    
    10,861Other
    
    
    362
    
    
    
    400Total
    
    $
    5,215
    
    
    $
    29,081Other liabilities:Deferred compensation
    
    $
    5,465
    
    
    $
    4,476Deferred income taxes
    
    
    
    
    
    
    435Deferred revenues
    
    
    
    
    
    
    395Total
    
    $
    5,465
    
    
    $
    5,306
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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (16) Rights Agreement
      (17) Product Warranties
  (18) Share Repurchases
  47




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  48




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED FINANCIAL STATEMENTS
 
      Internal ControlIntegrated
Framework
  
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##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED OCTOBER 3, 2009, SEPTEMBER 27, 2008 and SEPTEMBER 29, 2007
 ALLOWANCE FOR DOUBTFUL ACCOUNTS
(In thousands)
 Year EndedOctober 3,
    
    
    September 27,
    
    
    September 29,2009
    
    
    2008
    
    
    2007Balance, beginning of year
    
    $
    906
    
    
    $
    610
    
    
    $
    664Amounts charged to earnings
    
    
    457
    
    
    
    595
    
    
    
    (34
    )Write-offs, net of recoveries
    
    
    (306
    )
    
    
    (299
    )
    
    
    (20
    )Balance, end of year
    
    $
    1,057
    
    
    $
    906
    
    
    $
    610
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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting.
    51




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
INTERNAL CONTROL OVER FINANCIAL REPORTING
 
 Internal
ControlIntegrated Framework Managements Report on Internal Control over Financial Reporting
    Internal ControlIntegrated Framework
   
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##### Table of Contents



Item 9B. Other Information.
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
  http://investor.insteel.com/documents.com
 
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
  Equity Compensation Plan Information
October 3, 2009
(In thousands, except exercise price amount)
 (c)Number of Securities(a)
    
    
    (b)
    
    
    Remaining Available forNumber of Securities to be
    
    
    Weighted-Average Exercise
    
    
    Future Issuance UnderIssued Upon Exercise of
    
    
    Price of Outstanding
    
    
    Equity Compensation PlansOutstanding Options,
    
    
    Options, Warrants and
    
    
    (Excluding SecuritiesPlan Category
    
    Warrants and Rights
    
    
    Rights
    
    
    Reflected in Column (a))Equity compensation
plans approved by
security holders
    
    
    673
    
    
    $
    10.83
    
    
    
    739

(1)
 
 (1)
    
    In addition to being available for future issuance upon the exercise of stock options
that may be granted after October 3, 2009, the securities shown are available for future issuance
in the form of restricted stock, restricted stock units and other stock-based awards made under our
2005 Equity Incentive Plan, as amended.We do not have any equity compensation plans that have not been approved by
shareholders.  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  53




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##### Table of Contents



Item 14. Principal Accounting Fees and Services.
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 (a)(1) Financial Statements
  (a)(2) Financial Statement Schedules
   (a)(3) Exhibits
  (b) Exhibits
  (c) Financial Statement Schedules
  54




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##### Table of Contents



SIGNATURES
  INSTEEL INDUSTRIES, INC.

Registrant
 Date: November 9, 2009
    By:
    /s/ Michael C. GazmarianMichael C. GazmarianVice President, Chief Financial Officer
and Treasurer  Name and Signature
    
    Position(s)/s/ H. O. WOLTZ III

     H. O. WOLTZ III
    
    President, Chief Executive Officer and Chairman of the
Board 
(Principal Executive Officer)/s/ MICHAEL C. GAZMARIAN

     MICHAEL C. GAZMARIAN
    
    Vice President, Chief Financial Officer and Treasurer 

(Principal Financial Officer)/s/ SCOT R. JAFROODI

     SCOT R. JAFROODI
    
    Chief Accounting Officer and Corporate Controller 
(Principal
Accounting Officer)/s/ LOUIS E. HANNEN

     LOUIS E. HANNEN
    
    Director/s/ CHARLES B. NEWSOME

     CHARLES B. NEWSOME
    
    Director/s/ GARY L. PECHOTA

     GARY L. PECHOTA
    
    Director/s/ W. ALLEN ROGERS II

     W. ALLEN ROGERS II
    
    Director/s/ WILLIAM J. SHIELDS

     WILLIAM J. SHIELDS
    
    Director/s/ C. RICHARD VAUGHN

     C. RICHARD VAUGHN
    
    Director/s/ HOWARD O. WOLTZ, JR.

     HOWARD O. WOLTZ, JR.
    
    Director
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##### Table of Contents



EXHIBIT
INDEX
to
Annual Report on Form 10-K of Insteel Industries, Inc. for Year Ended October 3, 2009
 ExhibitNumber
    
    Description3.1
    
    Restated Articles of Incorporation for the Company (incorporated by reference to Exhibit 3.1 of
the Companys Form S-1 filed on May 2, 1985).3.2
    
    Articles of Amendment to the restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 of the Companys Current Report on Form 8-K dated May 3, 1988).3.3
    
    Articles of Amendment to the restated articles of incorporation of the Company (incorporated by
reference to Exhibit 3.1 of the Companys Quarterly Report on Form 10-Q for the quarter ended
April 3, 1999).3.4
    
    Bylaws of the Company (as last amended April 21, 2009) (incorporated by reference to Exhibit 3.1
of the Companys Current Report on Form 8-K filed on April 27, 2009).4.1
    
    Rights Agreement dated April 27, 1999 by and between the Company and First Union National Bank, as
Rights Agent (incorporated by reference to Exhibit 99.1 of the Companys Registration Statement on
Form 8-A filed on May 7, 1999).4.2
    
    Amendment No. 1 to the Rights Agreement dated as of April 25, 2009, between the Company and
American Stock Transfer & Trust Company, LLC (as Successor Rights Agent to First Union National
Bank) (incorporated by reference to Exhibit 4.2 of the Companys Current Report on Form 8-K filed
on April 27, 2009).10.4
    
    Amended and Restated Credit Agreement dated January 12, 2006 among Insteel Wire Products Company,
as Borrower; the Company, as a Credit Party; Intercontinental Metals Corporation, as a Credit
Party; and General Electric Capital Corporation, as Agent and Lender (incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K filed on January 13, 2006).10.5*
    
    1994 Employee Stock Option Plan of Insteel Industries, Inc. (as amended and restated effective
February 1, 2000) (incorporated by reference to Exhibit 99 of the Companys Registration Statement
filed on Form S-8 on February 23, 2000).10.9*
    
    1994 Director Stock Option Plan of the Company (as Amended and Restated Effective as of April 28,
1998) (incorporated by reference to Exhibit 10.12 of the Companys Annual Report on Form 10-K for
the year ended October 3, 1998 filed on December 3, 1998).10.11*
    
    Insteel Industries, Inc. Return on Capital Incentive Compensation Plan (as amended effective
September 18, 2007) (incorporated by reference to Exhibit 10.1 of the Companys Current Report on
Form 8-K filed on September 21, 2007).10.12*
    
    Form of Amended and Restated Change in Control Severance Agreements between the Company and each
of H.O. Woltz III and Michael C. Gazmarian, respectively, each dated November 14, 2006; each
agreement is substantially identical to the form in all material respects (incorporated by
reference to Exhibit 99.1 of the Companys Current Report on Form 8-K filed on November 16, 2006).10.13*
    
    Form of Amended and Restated Severance Agreements with H.O. Woltz III and Michael C. Gazmarian
dated November 14, 2006 (each agreement is substantially identical to the form in all material
respects) (incorporated by reference to Exhibit 99.6 of the Companys Current Report on Form 8-K
filed on November 16, 2006).10.14*
    
    Change in Control Severance Agreement between the Company and James F. Petelle dated November 14,
2006 (incorporated by reference to Exhibit 99.3 of the Companys Current Report on Form 8-K filed
on November 16, 2006).10.15*
    
    Insteel Industries, Inc. Director Compensation Plan (incorporated by reference to Exhibit 10.30 of
the Companys Annual Report on Form 10-K for the year ended September 30, 1997 filed on December
10, 1997).10.16*
    
    Amended and Restated Retirement Security Agreement by and between the Company and H.O. Woltz III
dated September 19, 2007 (incorporated by reference to Exhibit 10.2 of the Companys Current
Report on Form 8-K filed on September 21, 2007).10.17*
    
    Form of Retirement Security Agreement between the Company and each of Michael C. Gazmarian, James
F. Petelle and Richard T. Wagner, respectively, dated September 19, 2007; each agreement is
substantially identical to the form in all material respects (incorporated by reference to Exhibit
10.3 of the Companys Current Report on Form 8-K filed on September 21, 2007).10.20*
    
    Letter of Employment between the Company and James F. Petelle, dated August 23, 2006 (incorporated
by reference to Exhibit 99.7 of the Companys Current Report on Form 8-K filed on November 16,
2006).10.20.1*
    
    Relocation Proposal between the Company and James F. Petelle, dated August 23, 2006.10.20.2*
    
    Addendum to Relocation Proposal between the Company and James F. Petelle, dated September 18, 2009.10.21*
    
    Amended and Restated Change in Control Severance Agreement between the Company and Richard T.
Wagner dated November 14, 2006 (incorporated by reference to Exhibit 99.1 of the Companys Current
Report on Form 8-K filed on February 15, 2007).10.22*
    
    2005 Equity Incentive Plan of Insteel Industries, Inc. as most recently amended on August 12, 2008
(incorporated by reference to Exhibit 10.22 of the Companys Annual Report on Form 10-K for the
fiscal year ended September 27, 2008 filed on November 18, 2008).10.23*
    
    Summary of amendments to the Insteel Industries, Inc. Director Compensation Plan (incorporated by
reference to Exhibit 10.23 of the Companys Annual Report on Form 10-K for the fiscal year ended
September 27, 2008 filed on November 18, 2008).10.24*
    
    Form of Notice of Grant of Restricted Stock Units and Restricted Stock Unit Agreement
(incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K filed on
January 23, 2009).10.25*
    
    Insteel Industries, Inc. Return on Capital Incentive Compensation Plan (as amended and restated
effective August 12, 2008) (incorporated by reference to Exhibit 10.1 of the Companys Current
Report on Form 8-K filed on February 13, 2009).
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##### Table of Contents



EXHIBIT
INDEX
to
Annual Report on Form 10-K of Insteel Industries, Inc. for Year Ended October 3, 2009
 ExhibitNumber
    

Description21.1
    
    List of Subsidiaries of Insteel Industries, Inc. at October 3, 2009.23.1
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification of the Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Management contracts or compensation plans or arrangements in which directors or executive officers are
eligible to participate.  57