<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No.___)
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
INSTEEL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its charter)
- --------------------------------------------------------------------------------
(Name of person(s) Filing Proxy Statement if other than the Registrant)
<TABLE>
<S> <C>
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
</TABLE>
(1) Title of class of securities to which transaction applies:_____
(2) Aggregate number of securities to which transaction applies:_____
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:_____
(4) Proposed maximum aggregate value of transaction:_____
(5) Total fee paid:_____
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:_____
(2) Form, Schedule or Registration Statement No.:_____
(3) Filing Party:_____
(4) Date Filed:_____
<PAGE> 2
INSTEEL INDUSTRIES, INC.
1373 Boggs Drive
Mount Airy, North Carolina 27030
_________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
February 4, 1997
_________________
The Annual Meeting of Shareholders of Insteel Industries, Inc., will
be held on Tuesday, February 4, 1997, at 10:00 A.M., at the Insteel Industries,
Inc., Corporate Office, 1373 Boggs Drive, Mount Airy, North Carolina, for the
following purposes:
1. To elect three directors of the Company for a three-year term as set
forth in the accompanying Proxy Statement.
2. To transact such other business as may be brought before the meeting.
Shareholders of record at the close of business on December 2, 1996,
are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Gary D. Kniskern
Secretary
Mount Airy, North Carolina
December 18, 1996
IF YOU DO NOT INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE AND RETURN
THE ACCOMPANYING PROXY PROMPTLY, SO THAT YOUR SHARES OF COMMON STOCK MAY BE
REPRESENTED AND VOTED AT THE MEETING. A RETURN ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE.
<PAGE> 3
INSTEEL INDUSTRIES, INC.
1373 Boggs Drive
Mount Airy, North Carolina 27030
___________________
PROXY STATEMENT
___________________
This Proxy Statement is first being sent to shareholders on or about
December 18, 1996, in connection with the solicitation of Proxies for use at
the Annual Meeting of Shareholders of Insteel Industries, Inc. (the "Company"),
to be held on Tuesday, February 4, 1997, and at any adjournment thereof.
Unless authorization is withheld, the accompanying Proxy will be voted
in favor of the three nominees named below to serve as directors of the
Company. The nominees are presently serving as directors of the Company.
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of directors, as
determined from time to time by the Board of Directors, shall be not less than
nine nor more than fifteen. The Board of Directors has fixed the number of
directors at ten. The Bylaws further provide that directors shall be divided
into three classes serving staggered three-year terms, with each class to be as
nearly equal in numbers as possible.
The Board of Directors has nominated the persons named below to serve
a three-year term expiring at the 2000 Annual Meeting of Shareholders or until
their successors are elected and qualify. Other directors will continue in
office as indicated.
It is not contemplated that any of the nominees will be unable or
unwilling for good cause to serve; but, if that should occur, it is the
intention of the agents named in the Proxy to vote for such other person or
persons to the office of director as the Board of Directors may recommend.
-1-
<PAGE> 4
NOMINEES TO SERVE UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 2000:
H.O. Woltz III, 40, a son of Howard O. Woltz, Jr., and a nephew of John
E. Woltz, has been employed by the Company and its subsidiaries in various
capacities since 1978, and has been a director of the Company since 1986. From
1981 until August 1989, he served as President of Rappahannock Wire Company, a
subsidiary of the Company. He served as Vice President of the Company from
September 1988 to August 1989, when he was elected President and Chief
Operating Officer. He was elected Chief Executive Officer in February 1991.
Mr. Woltz also serves as President of Insteel Wire Products Company, the
Company's operating subsidiary.
Frances H. Johnson, 76, has been a director of the Company since 1982.
She and members of her family have been investors in and have served as
directors of the Company and its predecessors since 1958. She and members of
her family own and manage Johnson Concrete Company, Salisbury, North Carolina
(a manufacturer of concrete block and pipe), of which she is President;
Carolina Stalite Company (a manufacturer of expanded slate), of which she is
managing partner; and B.V. Hedrick Gravel & Sand Co. (a producer of gravel,
sand and crushed stone), of which she is a director.
Charles B. Newsome, 59, has been a director of the Company since 1982.
He is Executive Vice President and General Manager of Johnson Concrete Company
and General Manager of Carolina Stalite Company, with which he has been
affiliated for more than 20 years. Mr. Newsome serves on the Audit Committee
of the Company's Board of Directors.
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING OF SHAREHOLDERS IN 1999:
John E. Woltz, 70, a brother of Howard 0. Woltz, Jr., has been a
director of the Company since 1958. Mr. Woltz served as Director (1950-1988),
Chairman of the Board (1975-1988), President (1958-1984) and Chief Executive
Officer (1984-1988) of Quality Mills, Inc., which, until its acquisition on
December 6, 1988, by Russell Corporation, was a publicly held corporation
engaged in the business of manufacturing and marketing knit wearing apparel and
fabrics. He is currently retired. Mr. Woltz serves on the Executive
Compensation Committee of the Company's Board of Directors.
W. Allen Rogers, II, 50, has been a director of the Company since 1986.
Mr. Rogers has been a Managing Director of KPMG BayMark Capital LLC, an
investment banking firm, since August 1995. Prior to August 1995, Mr. Rogers
served as a Senior Vice President of Interstate/Johnson Lane Corporation
(1986-1995), and a director of Interstate/Johnson Lane Corporation and managing
director of that firm's corporate finance department (1990-1995).
Joseph D. Noell, III, 56, has been a director of the Company since
1991, and he currently serves as President of the Insteel Wire Products
Division of Insteel Wire Products Company, the Company's operating subsidiary.
Mr. Noell began his employment with the Company as Vice-President-Commercial of
Rappahannock Wire Company and, from 1989 to
-2-
<PAGE> 5
1993 as president of that subsidiary. From 1991 to 1993 he also served as
president of two other subsidiaries both of which merged in 1993 with
Rappahannock Wire to become Insteel Wire Products Company.
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING OF SHAREHOLDERS IN 1998:
Howard O. Woltz, Jr., 71, has been employed by the Company and its
predecessors in various capacities for more than 35 years and has been a
director and Chairman of the Board since 1958 and was President from 1958 to
1968 and from 1974 to 1989. A licensed attorney, Mr. Woltz also served as a
Vice President (1950-1988), General Counsel (1951-1988) and a director
(1951-1988) of Quality Mills, Inc., which, until its acquisition on December 6,
1988, by Russell Corporation, was a publicly held corporation engaged in the
business of manufacturing and marketing knit wearing apparel and fabrics.
Thomas J. Cumby, 69, was employed by the Company and its predecessors in
various capacities for 27 years and was Executive Vice President of the Company
in charge of the Precast Division from 1975 until March of 1988 when the
Precast Division was sold. He has been a director of the Company since 1974.
Mr. Cumby remained in Mount Airy, N.C., with the precast operation that became
Exposaic Industries, Inc. of North Carolina. He currently is an independent
architectural concrete consultant.
C. Richard Vaughn, 57, a director of the Company since 1991, has
been employed since 1967 by John S. Clark Company, Inc., a general building
contracting company. Mr. Vaughn served as Vice President of John S. Clark from
1967-1970, President from 1970-1988 and Chairman of the Board and CEO from
1988 to the present. He also is Chairman of Riverside Building Supply, Inc.
Mr. Vaughn serves as Chairman of the Executive Compensation Committee of the
Company's Board of Directors.
Louis E. Hannen, 58, served Wheat, First Securities, Inc., in Richmond,
Virginia, in various capacities from 1975 until his retirement in December of
1993 at which time he was Senior Vice President. Mr. Hannen had 30 years of
experience in the securities analysis and research field starting with the U.S.
Securities and Exchange Commission in 1963. Mr. Hannen then worked for Craigie
and Company in Richmond (1965-1970) and Legg Mason in Baltimore (1970-1975)
before joining Wheat, First Securities. Mr. Hannen serves as Chairman of the
Audit Committee of the Company's Board of Directors.
-3-
<PAGE> 6
PRINCIPAL SHAREHOLDERS
As of December 2, 1996, to the knowledge of management, the only
persons owning beneficially more than five percent (5%) of the Company's
Common Stock, its only class of voting security, are as follows:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership (1) Class
- ------------------------------------------------ ------------------------ --------------
<S> <C> <C>
Howard O. Woltz, Jr. 710,429 (2) (3) 8.4%
819 Greenhill Road
Mount Airy, NC
Frances H. Johnson 682,470 (4) 8.1%
1235 West Henderson Street
Salisbury, NC
John E. Woltz 644,407 (2) (5) 7.6%
815 Greenhill Road
Mount Airy, NC
Johnson Concrete Company 620,263 (4) 7.4%
P.O. Box 1037
Salisbury, NC
Franklin Advisors 635,400 (6) 7.4%
777 Mariners Island Boulevard
San Mateo, CA
</TABLE>
_____________________________________
(1) Except as otherwise indicated, each shareholder has sole voting and
sole investment power with respect to the shares beneficially owned by
such shareholder. The numbers shown include shares obtainable within
60 days of December 2, 1996, upon the exercise of stock options.
(2) The shares shown as being beneficially owned by John E. Woltz and
Howard 0. Woltz, Jr., include 145,845 shares (1.7%) held by two
trusts of which they and a bank are trustees. The trustees share
voting and investment power with respect to such shares.
(3) Includes 111,748 shares owned by the wife of Howard 0. Woltz, Jr.,
beneficial ownership of which is disclaimed.
(4) Johnson Concrete Company owns of record 620,263 shares of the Company's
Common Stock. These shares are beneficially owned by Frances H.
Johnson, who is President of Johnson Concrete Company, and as such, has
voting and dispositive power over the shares of the Company's Common
Stock owned of record by such company. Johnson Concrete Company is
owned by Mrs. Johnson and her four children.
(5) Includes 7,751 shares owned by the wife of John E. Woltz, beneficial
ownership of which is disclaimed.
(6) Updated as of November 26, 1996 with information provided by the named
beneficial owner.
-4-
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
As of December 2, 1996, directors, nominees for director and executive
officers of the Company beneficially own shares of the Company's Common Stock
as follows:
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Percent of
Name of Individual or Group Ownership (1) Class
- ----------------------------------------------- ------------------------------- -----------
<S> <C> <C>
Thomas J. Cumby 24,316 Less than
1%
Louis E. Hannen 19,781 Less than
1%
Frances H. Johnson See "Principal
Shareholders."
Charles B. Newsome 45,654 Less than
1%
Joseph D. Noell, III 50,315 Less than
1%
W. Allen Rogers, II 15,330 Less than
1%
C. Richard Vaughn 30,611 Less than
1%
Howard 0. Woltz, Jr. See "Principal
Shareholders."
H. 0. Woltz III 227,792 2.7%
John E. Woltz See "Principal
Shareholders."
Gary D. Kniskern 19,841 Less than
1%
Michael C. Gazmarian 18,017 Less than
1%
All directors, nominees for director and executive 2,464,964 28.7%
officers of the Company as a group (a total of 12
persons)
</TABLE>
_____________________________________
(1) Except as otherwise indicated, each director, nominee for director and
executive officer has sole voting and sole investment power with
respect to the shares beneficially owned by such shareholder. The
numbers shown include shares obtainable within 60 days of December 2,
1996, upon the exercise of stock options.
-5-
<PAGE> 8
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Executive Compensation Committee of the Board of Directors (the
"Committee") administers the Company's executive compensation program and works
with management in developing and implementing new programs as well as making
appropriate changes to existing programs. The Company's existing executive
compensation program is comprised of the following elements:
1. Base salaries
2. Annual incentive plan
3. Long-term incentive plan (stock options)
Base Salaries
During 1993, the Committee engaged a compensation consulting firm to
study the relationships of the Company's executive base salaries to comparable
companies and to broadbased survey information. The Committee concluded that
executive base salaries should be set at approximately 64% of the median market
level as indicated by the published survey data studied. The Committee made
this recommendation to encourage performance and to maintain competitive
compensation. The Committee believes this program will allow the Company to
retain key executives and to compete effectively for executive management
expertise.
For the calendar year 1996, the Committee recommended and the Board of
Directors approved salary adjustments to the executive officers as follows: at
the request of Howard 0. Woltz, Jr., Chairman of the Board, his salary was
reduced to $120,000; H. 0. Woltz, III, President and CEO, no change; Gary D.
Kniskern, Vice President- Administration and Secretary, increase to $108,500;
Michael C. Gazmarian, CFO and Treasurer, no change. The Committee also
recommended and the Board approved a plan to change the base salary year for
executive officers from a calendar year to a fiscal year basis. This plan will
be effective with the 1997 fiscal year.
Annual Incentive Compensation
The Company has in effect an annual bonus plan under which executive
officers receive a percentage of their salary as a cash bonus after return on
equity exceeds 10%. An executive officer may receive up to a maximum of 50% of
base compensation if return on beginning equity is 25% or greater. Based on
return on beginning equity for fiscal 1995, no executive bonuses were paid out.
Based on return on beginning equity for fiscal 1996, no executive bonuses will
be paid under this plan.
-6-
<PAGE> 9
Long-term Incentive Plan (Stock Options)
At the Annual Meeting of Shareholders, February 7, 1995, shareholders
approved the 1994 Employee Stock Option Plan of Insteel Industries, Inc. At
the annual director's meeting, the Committee recommended and the Board of
Directors approved a plan for top level management personnel, which includes
executive officers, to issue regular grants of stock options, whereby executive
officers would receive stock options with market value of $50,000 annually in
semi-annual installments in February and August. During 1996, executive
officers each received option grants totaling 7,079 shares of the Company's
Common Stock.
The Committee believes that the executive compensation program should be
weighted heavily toward performance-based awards, with conservative base
salaries. The Company believes its return on equity bonus plan and its
incentive stock option plan fulfill this objective.
Specifics of 1996 CEO Compensation
During 1996, the compensation of the Chief Executive Officer, H. 0.
Woltz III, consisted of the following:
Base salary of $204,080.
In 1996, Mr. Woltz received no payment from the annual incentive
plan as return on equity did not reach the minimum requirement for the
plan.
Mr. Woltz received a grant of stock options for 7,079 shares of the
Company's Common Stock during fiscal 1996.
Policy with Respect to the $1 Million Deductible Limit
During 1993, Section 162(m) was added to the Internal Revenue Code (the
"Code") that generally limits amounts that can be deducted for compensation paid
to executives to $1 million, unless certain requirements are met. No executive
receives compensation in excess of $1 million; and therefore, there are no
compensation amounts that are nondeductible at present. The Committee will
monitor the applicability of this section of Code to the Company's compensation
program.
Executive Compensation Committee
C. Richard Vaughn
John E. Woltz
-7-
<PAGE> 10
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee is comprised of C. Richard Vaughn,
Chairman, and John E. Woltz. C. Richard Vaughn is Chairman of the Board of
John S. Clark Company, Inc. ("Clark"), a general building contractor located in
Mount Airy, North Carolina, and doing business throughout the southeastern
United States. During fiscal 1996, Clark completed construction of a new
manufacturing facility for the Company in Andrews, South Carolina, for
production of collated fasteners. Also during fiscal 1996, Clark began
construction of an addition to the manufacturing facility located in
Fredericksburg, Virginia to allow the plant to manufacture tire bead wire.
Payments made to Clark during fiscal 1996 amounted to $1,342,000. In the past
Clark has built manufacturing facilities and offices for the Company as well as
several additions and renovations.
SUMMARY COMPENSATION TABLE
The table below provides information regarding the cash compensation
paid by the Company for services in all capacities during the years ended
September 30, 1996, 1995 and 1994 to all executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
==========================================================================================================================
All Other
Long-Term Compensation
Annual Compensation (Split-Dollar Life
Compensation Awards Insurance, ESOP,
--------------------------------------- Supplemental
Securities Retirement, Group
Name and Fiscal Bonus Underlying Term Life
Principal Position Year Salary($) ($) Options (#) Insurance)($)(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Howard 0. Woltz, Jr. 1996 130,172 - 7,079 3,834
Chairman of the Board ---------------------------------------------------------------------------
1995 164,080 - 6,508 3,451
---------------------------------------------------------------------------
1994 163,400 - 12,000 2,660
- --------------------------------------------------------------------------------------------------------------------------
H. 0. Woltz III 1996 204,080 - 7,079 243
President and Chief Executive ---------------------------------------------------------------------------
Officer 1995 204,080 - 6,508 225
---------------------------------------------------------------------------
1994 203,400 - 12,000 3,533
- --------------------------------------------------------------------------------------------------------------------------
Gary D. Kniskern 1996 107,900 - 7,079 504
Vice President-Administration and ---------------------------------------------------------------------------
Secretary 1995 106,080 - 6,508 481
---------------------------------------------------------------------------
1994 105,400 - 12,000 2,381
- --------------------------------------------------------------------------------------------------------------------------
Michael C. Gazmarian 1996 95,000 - 7,079 207
Chief Financial Officer and ---------------------------------------------------------------------------
Treasurer 1995 87,083 - 6,508 198
---------------------------------------------------------------------------
1994 - - 20,000 -
==========================================================================================================================
</TABLE>
(1) Represents the current dollar value of the benefit to the executive
officer of the remainder of the premium paid by the Company during the
fiscal year under its Split Dollar Life Insurance Plan.
-8-
<PAGE> 11
STOCK OPTION GRANTS
The table below provides information regarding stock options granted
to executive officers of the Company during fiscal 1996:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
==============================================================================================================================
Individual Grants Potential Realizable Value at
- -------------------------------------------------------------------------------------- Assumed Annual Rates of Stock
Number of Percent of Price Appreciation for Option
Securities Total Options Term
Underlying Granted to Exercise or ------------------------------------
Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/Share) Date 5 % ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Howard 0. Woltz, Jr. 3,571 4.5% $7.00 02/13/06 $15,720 $39,839
---------------------------------------------------------------------------------------------------------
3,508 4.4% $7.13 08/06/06 $15,719 $39,835
- ------------------------------------------------------------------------------------------------------------------------------
H. 0. Woltz III 3,571 4.5% $7.00 02/13/06 $15,720 $39,839
---------------------------------------------------------------------------------------------------------
3,508 4.4% $7.13 08/06/06 $15,719 $39,835
- ------------------------------------------------------------------------------------------------------------------------------
Gary D. Kniskern 3,571 4.5% $7.00 02/13/06 $15,720 $39,839
---------------------------------------------------------------------------------------------------------
3,508 4.4% $7.13 08/06/06 $15,719 $39,835
- ------------------------------------------------------------------------------------------------------------------------------
Michael C. Gazmarian 3,571 4.5% $7.00 02/13/06 $15,720 $39,839
---------------------------------------------------------------------------------------------------------
3,508 4.4% $7.13 08/06/06 $15,719 $39,835
==============================================================================================================================
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
The table below provides information regarding stock options exercised
during fiscal 1996 and the value of options outstanding at September 30, 1996,
for all executive officers of the Company:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
====================================================================================================================================
Shares Number of Securities
Acquired Underlying Unexercised Options Value of Unexercised in-the-Money
on Value at Fiscal Year-End (#) Options at Fiscal Year-End($)
Exercise Realized --------------------------------- ------------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Howard 0. Woltz, Jr. - - 11,217 14,370 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
H. 0. Woltz III 6,854 $8,391 11,217 14,370 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Gary D. Kniskern - - 11,217 14,370 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Michael C. Gazmarian - - 16,017 17,570 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE> 12
PENSION PLAN
The Company has a pension plan for all of its employees. Upon an
employee's retirement at age 65 (or, at the employee's option, up to 10 years
earlier with a minimum of 15 years of service), the plan provides for annual
retirement benefits equal to 0.6 % of the participant's final average
compensation for each year of creditable service, plus 0.55% of the
participant's final average compensation in excess of current year's covered
compensation for each year of creditable service not to exceed 35 years. Final
average compensation is the five highest consecutive plan years within the last
10 plan years during which the participant worked as an employee. Bonus income
is excluded. Retirement benefits are paid in monthly installments, using one of
several forms of annuity at the employee's election. Lump sum or other forms of
payment may be made with the consent of the Benefits Committee administering the
plan, subject to restrictions specified in the plan. Messrs. Kniskern,
Gazmarian and H. 0. Woltz III are members of the Benefits Committee.
The following table presents estimated annual benefits payable from the
plan upon normal or delayed retirement to persons in specified remuneration and
years of credited service classifications. The amounts shown assume the current
maximum social security benefit and that an election has been made for benefits
to be payable for the employee's life only.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
Remuneration($) 15 20 25 30 35
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
125,000 19,292 25,722 32,153 38,583 45,014
- --------------------------------------------------------------------------------------------------
150,000 23,604 31,472 39,340 47,208 55,076
- --------------------------------------------------------------------------------------------------
175,000 23,604 31,472 39,340 47,208 55,076
- --------------------------------------------------------------------------------------------------
200,000 23,604 31,472 39,340 47,208 55,076
- --------------------------------------------------------------------------------------------------
225,000 23,604 31,472 39,340 47,208 55,076
- --------------------------------------------------------------------------------------------------
250,000 23,604 31,472 39,340 47,208 55,076
</TABLE>
(A) Compensation covered by the plan
Annual compensation used in the determination of the benefits in the
above Pension Plan Table is limited to $150,000. This is the amount
approved by the Secretary of the Treasury for 1996.
<TABLE>
<S> <C> <C> <C>
(B) Credited for years of service: Howard 0. Woltz, Jr. 35 years
H. 0. Woltz III 17 years
Gary D. Kniskern 16 years
</TABLE>
(C) Benefits are computed as a straight-life annuity. Benefits are equal to
0.6% of compensation for each year of creditable service, plus 0.55%
of compensation in excess of the current year's covered compensation for
each year of creditable service not to exceed 35 years. The current
year's covered compensation amount is derived from the Covered
Compensation Table and is
-10-
<PAGE> 13
updated each year for increases in the Social Security taxable wage
base. The amount used in calculating the benefits in the Pension
Plan Table above is $27,528. This assumes a participant born in 1931
who is retiring at age 65 in 1996.
RETIREMENT SAVING PLAN
The Board of Directors adopted, effective May 1, 1996, the Retirement
Savings Plan of Insteel Industries, Inc. The Retirement Savings Plan is an
amendment and restatement of the Employee Stock Ownership Plan of Insteel
Industries, Inc., which was adopted effective October 1, 1988. The plan is a
stock bonus plan which allows pre-tax employee contributions and is intended to
be qualified within the meaning of Sections 401(a) and 401(k) of the Internal
Revenue Code.
The plan has two purposes. The first purpose of the plan is to allow
participating employees to defer up to ten percent of their compensation before
income taxes. The second purpose of the plan is to enable participating
employees to acquire a stock ownership interest in the Company, thereby
permitting such employees to share in the growth and prosperity of the Company
and providing such employees with an opportunity to accumulate capital for their
future economic security. All full-time employees of the Company are eligible
to participate, and participation commences on the April 1 or October 1
following the employee's completion of at least 90 days of service with the
Company.
Contributions to the plan are made by employee salary reduction and by
the Company, as determined by the Board of Directors. During fiscal 1996, the
Company made contributions totaling $85,010. In August 1990, the Board of
Directors authorized the Company to lend the plan $500,000 to purchase Company
stock which, according to the plan, is held in a suspense account and allocated
to the participants as the loan is repaid.
The assets of the plan are held in a trust created under the plan.
Effective as of May 1, 1996, the trustee is Marshall & Ilsley Trust Company.
Prior to May 1, 1996, the trustees were H. 0. Woltz III, Gary D. Kniskern and
Michael C. Gazmarian. Employee contributions are invested by the Trustee in
several mutual fund options as directed by the employee-participant. The
trustee will invest Company contributions primarily in Company stock through the
repayment of the ESOP loan, but it may select other investments as well.
Purchases of Company stock can be made from the Company, in the open market or
in private transactions, but the price paid cannot exceed the fair market value
thereof on the purchase date.
As of September 30 of each year, the assets of the trust are valued, and
the portion thereof released from suspense is allocated to the accounts of plan
participants employed at that date. Such allocation is made on the percentage
basis that a participant's benefit compensation bears to the benefit
compensation of all participants for the year. Allocations thus made, both
shares of Company stock and other investments, become immediately vested in
participants' accounts for payment upon retirement or death or, in some cases,
upon disability.
Benefits are paid in a lump sum cash payment, unless a participant or
his or her beneficiary elects a delayed payment permitted in certain instances
or unless a participant elects in writing to receive the entire benefit in
Company stock. The benefit amount is determined by the value of trust assets
following retirement, death or disability or other termination of employment.
-11-
<PAGE> 14
Unallocated shares of Company stock and allocated shares not voted by
the participants are voted by the Trustee. The Trustees may buy or sell shares
owned by the trust, and the additional shares acquired as well as the proceeds
of shares sold are allocated to participants' accounts as of each September 30.
As of September 30, 1996, the trust owned 121,977 shares of the Company's
stock. The beneficial ownership of Company stock shown elsewhere in this proxy
statement does not include shares allocated to the following accounts: H. O.
Woltz III (406 shares) and Gary D. Kniskern (297 shares). Howard O. Woltz,
Jr., having reached the mandatory distribution age of 70 1/2, received his
allocated shares. Michael C. Gazmarian was not eligible for a benefit when the
last allocation was made.
The Board of Directors may amend or terminate the plan at any time,
but accounts of participants would remain fully vested if the plan should be
terminated. Day-to-day administration of the plan is the responsibility of the
Company's Benefits Committee, the members of which are H.O. Woltz III, Gary D.
Kniskern and Michael C. Gazmarian.
SUPPLEMENTAL RETIREMENT PLAN
In December of 1984, the Company established a supplemental retirement
plan for key employees selected by the Board of Directors, including the
executive officers identified in the summary compensation table above that were
employed at that time. Under the plan, participants (or, in the event of
death, their designated beneficiaries) are entitled to cash benefits upon
retirement at age 65, payable annually for 15 years. The benefits were fixed
at adoption of the plan based on the value of life insurance policies purchased
and calculated as of each participant's 65th birthday. Benefits are payable
only if the participant is still an employee of the Company at age 65 or upon
his death. Benefit payments will be reimbursed to the Company out of proceeds
of the policy at the participant's death. Assuming retirement at age 65, the
persons named in the table above would receive the following annual retirement
benefits under the plan for 15 years: Howard 0. Woltz, Jr. ($8,802), H. 0.
Woltz III ($221,523) and Gary D. Kniskern ($42,455).
BONUS PLAN
Under the bonus plan in effect for fiscal 1996, 10% of the subsidiary
company's net profit before taxes was set aside for bonus plan payments.
Within the subsidiary, the bonus pool was divided proportionally, based on base
compensation, between manufacturing and sales/administrative personnel. The
sales/administrative pool was distributed to each participant based on
compensation. The manufacturing pool is further subdivided to each plant
location based on contribution to gross profit and distributed to participants
in each plant pool based on compensation.
Company staff employees participate in the bonus plan receiving a
percentage of their compensation as determined by a portion of the subsidiary
company's overall profit-sharing percentage.
Corporate officers do not participate in the bonus plan until return
on equity reaches a minimum of 10%. At 10% return on equity, corporate
officers each receive an amount equal to 12% of their respective annual
compensation. This increases on a graduated basis to a maximum of 50% of
annual compensation when return on equity reaches 25%. No amounts were
distributed under the plan for
-12-
<PAGE> 15
fiscal 1996 to executive officers of the Company as reflected in the Summary
Compensation Table above.
Distributions are made in December of each year. In order to
participate, employees must be employed continuously from the first day of the
plan year through the distribution date. Continuing internal changes in the
Company's organization have made changes in the bonus plan necessary.
EMPLOYEE STOCK OPTION PLANS
On January 22, 1985, the Board of Directors and shareholders of the
Company approved and adopted the 1985 Insteel Industries, Inc. Employee
Incentive Stock Option Plan for the benefit of key employees of the Company.
The plan was amended in 1990 to increase the total number of shares covered by
the plan to 684,905, after making adjustments incident to the 10% stock dividend
paid during 1993.
No options of Common Stock were granted under this plan during fiscal
1996. As of December 2, 1996, there are options outstanding covering 183,423
shares of Common Stock at an average exercise price of $10.1493 per share. By
action taken by the Board of Directors on September 23, 1994, no further options
may be granted under the plan, but options previously granted will remain until
they are exercised or expire. The stock option plan has been registered with
the Securities and Exchange Commission.
On February 7, 1995, shareholders approved and adopted the 1994 Employee
Stock Option Plan of Insteel Industries, Inc. for the benefit of key management
employees of the Company. Under the plan, 750,000 shares of Common Stock have
been reserved for issuance upon the exercise of options granted under the plan.
Options to purchase 80,080 shares of Common Stock were granted during fiscal
1996. As of December 2, 1996, there are options to purchase 161,316 shares
outstanding at an average exercise price of $7.4616 per share. Benefits that may
be granted under the plan to persons who are executive officers or directors of
the Company cannot be ascertained in advance. The plan has been registered with
the Securities and Exchange Commission.
DIRECTOR STOCK OPTION PLANS
On August 21, 1990, the Board of Directors of the Company, subject to
shareholder approval, approved and adopted the 1990 Director Stock Option Plan
of Insteel Industries, Inc. for the benefit of non-employee directors of the
Company. Shareholders approved the plan at the Annual Meeting of Shareholders
held on February 5, 1991. The total number of shares covered by the plan
increased to 133,100 after making adjustments incident to the 10% stock
dividend paid during 1993.
As of December 2, 1996, there are options outstanding covering 53,300
shares of Common Stock at an average exercise price of $9.9722 per share. The
options are exercisable over five years in increments of 20% per year, beginning
with the date of grant. Optionees, are John E. Woltz, Thomas J. Cumby, Frances
H. Johnson, Charles B. Newsome, W. Allen Rogers (each with 6,665 shares
exercisable at an exercise price of $10.4375 per share) and C. Richard Vaughn
(19,975 shares exercisable at an average exercise price of $9.3159 per share).
During fiscal 1995, John E. Woltz, Frances H. Johnson, Charles B. Newsome and
W. Allen Rogers each surrendered options to purchase
-13-
<PAGE> 16
13,310 shares of Common Stock at an exercise price of $6.0105 and received
3,151 shares of Common Stock and cash as payment of an amount equal to the
difference between the option price and the fair market value of the shares
subject to the option on the date of surrender. By action taken by the Board of
Directors on September 23, 1994, no further options may be granted under the
plan, but options previously granted will remain until they are exercised or
expire. The stock option plan has been registered with the Securities and
Exchange Commission.
On February 7, 1995, shareholders approved and adopted the 1994
Director Stock Option Plan of Insteel Industries, Inc. for the benefit of
nonemployee directors of the Company. Under the plan, 200,000 shares of Common
Stock have been reserved for issuance upon the exercise of options granted
under the plan. The plan provides that, following the close of business of the
Company on the date of each annual meeting of shareholders, beginning in 1995,
each nonemployee director will receive an option to purchase 2,000 shares of
the Company's Common Stock exercisable at the fair market value of the Common
Stock on the date of grant. During fiscal 1996, options to purchase 2,000
shares at an exercise price of $7.00 were granted to each outside director of
the Company. Under the plan, each nonemployee director, will receive options
to purchase 2,000 shares of the Company's Common Stock at the close of business
on February 4, 1997. The options will be exercisable at the per share fair
market value of the Common Stock on that date. The plan has been registered
with the Securities and Exchange Commission. The nonemployee directors
anticipated to be eligible under the plan and the benefits to be received are
as follows:
<TABLE>
<CAPTION>
Dollar Value Number of
Name ($)(1) Shares
- ----------------------------------------------- ---------------- ------------
<S> <C> <C>
Thomas J. Cumby $16,000 2,000
Louis E. Hannen 16,000 2,000
Frances H. Johnson 16,000 2,000
Charles B. Newsome 16,000 2,000
W. Allen Rogers, II 16,000 2,000
C. Richard Vaughn 16,000 2,000
John E. Woltz 16,000 2,000
---------------- ------------
$112,000 14,000
</TABLE>
(1) Based on the closing price of the Company's Common Stock on December
4, 1996.
On February 7, 1995, the Board of Directors of the Company adopted a
non-qualified stock option plan for the benefit of Louis E. Hannen, a newly
elected director. Under the plan, Mr. Hannen was granted an option to purchase
19,965 shares of the Company's Common Stock at the exercise price of $7.875.
The options vest 20% per year beginning February 7, 1995, and the options
expire February 7, 2005. The plan is not registered with the Securities and
Exchange Commission.
REMUNERATION OF DIRECTORS
Each of the Company's outside directors receives an annual director's
fee of $4,800 plus reimbursement of expenses incurred as a director. Directors
who are also employees receive no such
-14-
<PAGE> 17
fees. Members of the Audit and Executive Compensation Committees receive a fee
of $300 for each meeting of the Committee. Non-employee directors are eligible
to receive stock options under the Director Stock Option Plan.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
C. Richard Vaughn, a director, is Chairman of the Board of John
S. Clark Company, Inc. ("Clark"), a general building contractor located in
Mount Airy, North Carolina, and doing business throughout the southeastern
United States. During fiscal 1996, Clark completed construction of a new
manufacturing facility for the Company in Andrews, South Carolina for
production of collated nails. Also during fiscal 1996, Clark began
construction of an addition to the manufacturing facility located in
Fredericksburg, Virginia to allow the plant to manufacture tire bead wire.
Payments made to Clark during fiscal 1996 amounted to $1,434,000. In the past
Clark has built manufacturing facilities and offices for the Company as well as
several additions and renovations.
W. Allen Rogers, II, a director, is Managing Director of KPMG
BayMark Capital LLC ("BayMark"). BayMark served as an agent for the Company in
discussions with a possible acquisition candidate. Mr. Rogers previously was
Senior Vice President of Interstate/Johnson Lane Corporation, a stock brokerage
and investment banking company that served as one of two standby purchasers in
connection with the redemption of the Company's debentures in December, 1992.
Management believes that amounts paid by the Company in connection
with the transactions described above are reasonable and no less favorable to
the Company than would have been paid pursuant to arms' length transactions
with unaffiliated parties. Transactions in the future between the Company and
its officers, directors, principal shareholders, or affiliates of any of them,
will be on terms no less favorable to the Company than could be obtained from
unaffiliated parties.
-15-
<PAGE> 18
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return
on the Company's Common Stock, based on the market price of the Common Stock
and assuming reinvestment of dividends, with the cumulative total return of
companies on the Standard & Poor's 500 Index and the Standard & Poor's
Manufacturing (Diversified Industrial) Index. The indices are included for
comparison purposes only and do not necessarily reflect management's opinion
that these indices are appropriate measures of the relative performance of the
Company's Common Stock. The graph is not intended to forecast or be indicative
of the future performance of the Company's Common Stock.
The performance graph shall not be deemed incorporated by reference in
any filing made under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under
such Acts.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG INSTEEL INDUSTRIES, INC., THE S & P 500 INDEX
AND THE S & P MANUFACTURING (DIVERSIFIED) INDEX
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------------------
9/91 9/92 9/93 9/94 9/95 9/96
<S> <C> <C> <C> <C> <C> <C>
INSTEEL INDS INC. III 100 151 161 150 132 125
S & P 500 1500 100 111 125 130 169 203
S & P MANUFACTURING (DIVERSIFIED) IMNV 100 105 125 138 184 237
</TABLE>
* $100 INVESTED ON 9/30/91 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
-16-
<PAGE> 19
CORPORATE GOVERNANCE
The Company's Board of Directors held five meetings during fiscal
1996. All directors attended at least 75% of the meetings of the Board of
Directors and of all committees on which they serve.
The Company's Board of Directors does not have a nominating committee.
The full Board of Directors performs the functions that a nominating committee
might provide.
There is an Executive Committee comprised of Howard O. Woltz, Jr.
(Chairman), H.O. Woltz III and Joseph D. Noell, III. The Executive Committee,
which did not meet during fiscal 1996, may exercise generally the power and
authority of the Board of Directors during intervals between meetings of the
Board of Directors.
There is an Audit Committee, comprised of Louis E. Hannen (Chairman)
and Charles B. Newsome. The Audit Committee, which met twice during fiscal
1996, recommends to the Board of Directors the selection of independent
auditors and approves the nature and scope of services performed by such
auditors and reviews the range of fees for such services. This Committee
confers with the independent auditors to review the results of the audit and to
review the adequacy of the Company's internal auditing, accounting and
financial controls. The Committee also assists the Board of Directors with
respect to the corporate reporting practices of the Company.
There is an Executive Compensation Committee comprised of C. Richard
Vaughn (Chairman) and John E. Woltz. See "Executive Compensation - Executive
Compensation Committee Report," above. The Executive Compensation Committee
met twice during fiscal 1996.
INDEPENDENT AUDITORS
During fiscal 1995, the Board of Directors appointed KPMG Peat Marwick
LLP, Charlotte, North Carolina to replace Deloitte & Touche LLP as the
Company's independent auditors. The appointment followed a search and proposal
procedure resulting in a recommendation by the Audit Committee to appoint KPMG
Peat Marwick LLP to the position. Management was aware of no direct financial
interest or any material indirect financial interest existing between the
Company and its auditors.
During fiscal 1996, after consideration of issues relating to the
possibility that the Company's independent accountants, KPMG Peat Marwick,
might be determined not to be independent with respect to the Company and
having due regard for the Company's need to have independent accountants to
report on its financial statements, the Audit Committee of the Board of
Directors has recommended that the Company dismiss KPMG Peat Marwick as the
Company's independent accountants for the fiscal year ending September 30,
1996. The Audit Committee recommended that Arthur Andersen LLP be appointed to
serve as the Company's independent accountants for the fiscal year ending
September 30, 1996 and the Board concurred with the recommendation.
-17-
<PAGE> 20
The Company's independent auditors are selected annually by the Board
of Directors upon recommendation of the Audit Committee. A representative from
Arthur Andersen LLP is expected to be present at the Annual Meeting of
Shareholders with the opportunity to make a statement if he desires to do so
and to answer any questions that concern the firm's work for the Company.
GENERAL
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of the Company, and the entire cost of such solicitation will be
borne by the Company. In addition to solicitation by mail, arrangements will
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy material to their principals, and the Company will reimburse them
for their reasonable expenses in so doing.
The Board of Directors has fixed December 2, 1996, as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. On December 2, 1996, there were 8,435,461 outstanding shares
of Common Stock of the Company, each entitled to one vote. According to the
laws of North Carolina, under which the Company is incorporated, shareholders
do not have cumulative voting rights in connection with the election of
directors as long as the Company has securities registered under the Securities
Exchange Act of 1934 at the record date for determining shareholders eligible
to vote at the meeting. Directors are elected by a plurality of the votes cast
by the shares entitled to vote in the election at a meeting at which a quorum
is present. With regard to the election of directors, votes may be cast in
favor or withheld. Votes that are withheld will be excluded entirely from the
vote and will have no effect, although they will be counted for purposes of
establishing the presence of a quorum. Under the rules of the New York Stock
Exchange, Inc., brokers who hold shares in street name for customers have
authority to vote on certain items when they have not received instructions
from beneficial owners. Brokers that do not receive instructions are entitled
to vote on the election of directors.
Where a choice is specified on any Proxy as to the vote on any matter
to come before the meeting, the Proxy will be voted in accordance with such
specification. If no specification is made but the Proxy is properly signed,
the shares represented thereby will be voted in favor of each proposal. Such
proxies, whether submitted by shareholders of record or by brokers holding
shares in street name for their customers ("broker non-votes"), will be voted
in favor of nominees for directors. Broker non-votes will not be counted
either way in voting on other matters (where direction of beneficial owners is
required) and, therefore, will have the effect of negative votes.
Any shareholder submitting the accompanying Proxy has the right to
revoke it by submitting a later dated proxy or by notifying the Secretary of
the Company in writing at any time prior to the voting of the Proxy. A Proxy
is suspended if the person giving the Proxy attends the meeting and elects to
vote in person.
Management is not aware that any matters, other than the matters
specified above, will be presented for action at the meeting, but, if any other
matters do properly come before the meeting, the persons named as agents in the
Proxy will vote upon such matters in accordance with their best judgment.
-18-
<PAGE> 21
DEADLINE FOR SHAREHOLDERS' PROPOSALS
Any shareholder desiring to present a proposal for action at the
Company's 1998 Annual Meeting must deliver the proposal to the Company at its
principal executive offices no later than September 30, 1997.
By Order of the Board of Directors
Gary D. Kniskern
Secretary
Mount Airy, North Carolina
December 18, 1996
-19-
<PAGE> 22
APPENDIX A
PROXY
INSTEEL INDUSTRIES, INC.
1373 Boggs Drive - Mount Airy, North Carolina 27030
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
February 4, 1997
Howard O. Woltz, Jr., H.O. Woltz III and Joseph D. Noell, III, and each of
them, are appointed as agents of the undersigned to vote as proxies for the
undersigned at the Annual Meeting of Shareholders to be held on Tuesday,
February 4, 1997, and at any adjuournment thereof, as follows:
(1) ELECTION OF THREE DIRECTORS
/ / VOTE FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees
listed below
Nominees: H.O. Woltz III, Frances H. Johnson, Charles B. Newsome
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME
(2) To vote, in the discretion of said agents, upon such other business as
may properly come before the meeting.
PLEASE SIGN AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE. SEE OTHER SIDE.
(continued and to be signed on reverse side)
________________________________________________________________________________
(continued from other side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO CHOICE IS INDICATED ABOVE WITH
RESPECT TO ANY MATTER WHERE A BALLOT IS PROVIDED, THE PROXY WILL BE VOTED FOR
SUCH MATTER.
Dated_____________________ ___________________________________
___________________________________
___________________________________
SIGNATURES
NOTE: Please date and sign exactly as
the name appears hereon. If stock is
registered in more than one name, each
holder should sign.
IMPORTANT! PLEASE SIGN, DATE AND RETURN PROPERLY.
