H.O. Woltz III - President and Chief Executive Officer Michael C. Gazmarian - Vice President, Chief Financial Officer, Treasurer

Robert Kelly - Sidoti & Co. Timothy Hayes - Davenport & Co. Matthew Wicker -

Welcome to the Insteel Industries third quarter earnings conference call. (Operator Instructions) At this time I would like to turn the conference over to H.O. Woltz III, President and CEO. H.O. Woltz III: Good morning and thank you for your interest in Insteel and welcome to our third quarter 2008 conference call which will be conducted by Mike Gazmarian, our Vice President, CFO, and Treasurer, and me. Before we begin, let me remind you that some of the comments made in our presentation are considered to be forward-looking statements. Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those projected. These risk factors are described in our periodic filings with the SEC. During our third quarter, we continued to face weak conditions in certain of our markets which reduced shipments and resulted in curtailed operating schedules at most of our facilities. Raw material costs rose at unprecedented rates during the quarter and all indications point to a further escalation to the fourth quarter although the magnitude of the increases appears to be moderating somewhat. The company’s results were favorably impacted by the implementation of price increases sufficient to recover the higher replacement costs for our raw materials, together with the consumption of lower cost material from inventory under first-in and first-out accounting. Overall, we are pleased with the quarterly results and particularly encouraged that operating cash flow remained positive despite the significant increase in networking capital that was driven by the escalation in raw material costs and selling prices. I am going to turn the call over to Mike to comment on our financial results for the quarter and the macro environment and then I will pick it back up to discuss our business outlook. Michael C. Gazmarian: As we reported in this morning's press release, despite the continuation of soaring raw material costs and soft demand in certain of our markets, Insteel posted solid financial results for the third quarter end of June 28th. Earnings from continuing operations increased to $16.9 million from $8.3 million a year ago with diluted earnings per share rising to $0.97 from $0.46. Net sales for the quarter rose 32.1% from a year ago as a 37.6% increase in average selling prices driven by the escalation in raw materials costs and tightening supply more than offset the 4.0% reduction in shipment. Shipments fluctuated through the quarter as costumers adjust to their purchasing in response to the price increases and the managed inventories to desired levels. PC strand sales to post tensioners remained to minimal levels due to irrationally priced Chinese import competitions and on-going weakness in housing related demands. On the sequential basis, average selling prices for the quarter were up 31.7% as a result of the price increases that were implemented while shipment rose 2.6% from the second quarter which was weaker than the usual seasonal increase between these periods. Gross profit for the quarter increased to $30.9 million from $17.4 million a year ago and grows margins rose to 29.6 % from 22% due to higher spreads between average selling prices and raw material costs which more than offset the reduction in shipments and higher unit conversion cost. Most of our facilities operated on reduced schedules during the quarter with capacity utilization levels ranging from around 65% for PC strand operation to about 70% for our welded wire reinforcement facilities. SG&A expense was up $0.3 million for the quarter rising to $4.5 million from $4.2 million a year ago due to higher bad debt expense largely associated with the increases in receivables and our general reserve and higher stock base compensation expense. Interest expense which primarily consists of non-cash amortization that capitalized financing cost was essentially flat compared with last year while interest income rose due to higher average cash balances in the current year. Our overall effective income tax rate for the quarter including the discounts components was relatively flat at 35.7% versus 36.1% in the prior year. Moving to the cash flow statement and balance sheet, the sharp escalation in raw material costs and selling prices resulted in significant increases in our working capital investments, in inventory and accounts receivables with the network and capital components of accounts receivable, inventory, accounts payable and accrued expenses consuming $17.3 million of cash during the quarter. Inventories at the end of Q3 were up $17.7 million or 32% from the March quarter which is primarily driven by a 29.7% increase in average unit values with units of 1.8%. As compared to the beginning of the year inventories were up $25.6 million at 54% with unit values rising 43% and units increasing 7.7%. Our quarter in inventory position represented a little over three months of shipments based on our forecasted run rate and we are favorably positioned in terms of the carrying value of inventory relevant to its replacement cost. However, assuming that price increases for wire rod and our products moderate in the fourth quarter, which would appear as they will, we expect margins to narrow from the Q3 levels as a reduced increases in selling prices are matched against the higher increases in raw material costs that were incurred over the previous few months and begin to be reflected in cost to sales under FIFO accounting. Accounts receivable rose $12.2 million during the quarter which essentially mirrored the percentage increase in average selling prices with day sales outstanding remaining relatively stable. Despite the substantial increase in our working capital requirement, operating activities of continuing operations still managed to provide $2.6 million of cash for the quarter. Largely due to the increase in earnings which was primarily used to fund $2.2 million of capital expenditures and pay $0.5 million of dividends leaving us debt-free at the end of the quarter with $17.5 million of cash. Total additions of property, plant and equipment for the quarter including the accounts payable related to PP&E reflected at the bottom of the cash flow statement for $1.9 million compared to $5.1 million last year. Capital expenditures through the first nine months of the year total $8.7 million and are currently expected to come in at $10 million for fiscal 2008 with the bulk of the outlays related to the upgrades at our Florida PC strand facility which were essentially completed during the quarter. Although we opted not to repurchase any shares during the quarter to the first nine months of the year, total outlays per share repurchases were $8.7 million for 906,000 shares which represented about 5% of shares outstanding as of the beginning of the year. As of the end of the quarter, we had $18.8 million remaining in our current repurchase authorization which runs through December 5th, 2008. Moving to the macro indicators for our market, we are seeing increasing signs of weakness in the near-term outlook for non-residential construction. In May, the architecture billings index dropped to 43.4 from 45.5 in April, marking a fourth consecutive month that it has fallen. Inquiries for new projects also declined, falling at 46.5 in May from 53.9 in April. Yesterday, the American Institute of Architects announced the results of the semi-annual consensus construction forecast for non-residential construction which represents the surveys of six of the nation’s leading construction forecasters. On an overall basis, non-residential construction was forecasted to decrease 1.2% adjusted for inflation in 2008 and 6.7% in 2009. The steepest declines were anticipated for the commercial construction sector particularly retail office and hotel construction. Institutional construction was projected to remain relatively stable with its two largest categories, healthcare and education, potentially offsetting some of the decreases in other categories. I should mention that for most construction categories, the firm’s estimates vary across a wide range which speaks to the difficulty of forecasting in the current environment. Finally, another recent report indicated that at last count, at least 29 States faced or are facing an estimated $48 billion in combined budget shortfalls for fiscal 2009 largely due to the drop off in tax revenues which could have negative implications for the funding of infrastructure projects. Since a vast majority of States are restricted from operating at a deficit, these budget gaps are likely to spur more movement towards public-private partnerships and other alternative financing approaches to address the growing needs that exist. I will now turn it back over to H. H.O. Woltz III: During the quarter, we essentially completed the upgrading of our Florida PC Strand facility which entailed the installation of new wire drawing and stranding equipment together with the reconfiguration of the operation. This project represents the last component of our two-year capital investment program under which we have added two new engineered structural mesh production lines. Modernized and expanded our standard welded wire reinforcing manufacturing capabilities and reconfigured and expanded our PC Strand facilities. All of these projects are expected to generate dual benefits, enabling us to achieve further operating cost reductions and providing additional capacity to satisfy future growth and demand. Although the weaker market environment will limit our ability to fully ramp-up our new capacity in the near term, we are beginning to realize a portion of the expected returns on these investments through their favorable impact on labor productivity and increased sales of engineered structural mesh. Looking ahead to 2009, we expect to incur three to five million of routine base level CapEx with total outlays coming in at a higher level that reflects other cost reduction, infrastructure or expansion initiatives that we are still in the process of evaluating. We will provide an updated estimate during our fourth quarter earnings conference call. Moving to market conditions, as Mike commented earlier, non-residential construction is expected to soften later in the year and into 2009, which could have an unfavorable impact on demand for our products. The most severe weakening, as expected in the commercial construction sector due to protracted downturn in housing, the continuation of turmoil in the credit markets and the potential for weakening in the economy in addition to budgetary constraints that Mike alluded to earlier at the State level together with the looming insolvency of the Federal Highway Trust Fund that negatively impact funding for infrastructure projects. The otherwise concerning outlook for infrastructure spending is alleviated somewhat by the remarkable growth of private infrastructure investment and public private partnerships that are beginning to have a meaningful impact on infrastructure development. We believe this an encouraging trend and one that will gain momentum as politician’s weigh the magnitude of our infrastructure deficiencies and funding alternatives against the risk of continuing to ignore substandard bridges, roads, airports and other infrastructure components. Turning to PC strand imports, those of you who have followed the company in recent years are aware of our on-going concerns about PC strand imports from China, which represent over 90% of total strand imports entering the US. Unfortunately there is no positive news to report on this matter. Through the first five months of the year, Chinese imports have risen over 12% from last year despite declining demand in the US and the average unit values of Chinese imports for the month of May remained at levels that were lower than the world market price for hot road wire rod, our primary raw material. It is apparent that the Chinese have implemented pre-taxation policies and other means, a strategy of promoting exports of higher value downstream products and we are convinced that these policies are inconsistent with their World Trade Organization obligations. Our industry trade group continues to evaluate various alternatives to address their irresponsible market tactics. As their actions have become more egregious our commitment to identify strategies to obtain redress has intensified. While there are no apparent quick resolutions for these issues we are determined to pursue every alternative available to restore reasonable conditions of competition in the PC strand market. Moving to developments within our raw material markets, the cost pressures we reference during the 2nd quarter conference call continue although the monthly price increases for wire rod appear to have moderated from the triple digit levels that we experienced late in the 2nd quarter and during the 3rd quarter. The primary driver of the extraordinary pricing power possessed by our suppliers is the higher world market price for wire rod that persists despite the significant run-off that has occurred in the US market. The US has been a net importer of wire rod for decades and will continue to be for the foreseeable future. As long as purchasers, like Insteel are faced with higher prices for imported material, our domestic suppliers will be able to continue ratcheting their prices off. Having resolved ourselves for the near-term to the lack of competitively priced alternative sources of supply, we planned to continue passing these higher costs through in our markets although the anticipated softening in demand can make it more challenging to do so. At the same time the prospects for insufficient supplies of domestic rod, together with the significant premium paid for imports that are required to round out the sourcing plans for most domestic rod consumers impose harsh economic realities which we continue to promote discipline in our markets. In response to these challenges we planned to continue focusing on the operational fundamentals of our business. Closely managing and in controlling our expenses and pro-actively aligning our production schedules with market demand to minimize our cash operating costs and we will pursue further improvements in the productivity and effectiveness of all of our manufacturing, selling and administrated activities. This concludes our prepared remarks and will now take your question. Rufus, would you please explain the procedure for asking questions?

(Operator Instructions) Your first question comes Robert Kelly - Sidoti & Co. Robert Kelly - Sidoti & Co.: First off, the volume declined 4% year-over-year. In the past you had given us your non-risk pure play product growth versus residential units. Would you provide that again please? H. O. Woltz III: We had powered out at couple of our product lines that were more closely correlated with non-residential shipments of PC strand, pre-stressed [ph] and ESM shipments. Those are a little over 6% from the prior year and then when you rolled up shipments of concrete pipe reinforcement and standard welded wire enforcement which were more closely related to the housing sector, those are down by about 13% from a year ago. Robert Kelly - Sidoti & Co.: So the trend for the non-risk pure play is sell it a little bit, is this the concrete pipe, the stuff that goes in the housing is that improving a little bit or…? H. O. Woltz III: I would not say it’s improving but it is not getting worst any longer either. Robert Kelly - Sidoti & Co.: Okay, somewhat stabilizing, okay. H. O. Woltz III: We are at the bottom Robert Kelly - Sidoti & Co.: The intra quarter, price increase, with the FIFO Convention. Can you give us any help with what the current spread would be? Is it more in line with your 2Q results or 1Q, just a little more help as to what we are actually looking at when…? H. O. Woltz III: Well, the situation is highly fluid, as you can imagine this with the movement in both rod costs and our selling prices. There are indications that we will see additional increases in rod costs and we plan on raising our selling prices as well during the current quarter so that favorable dynamics should continue but at the same time, with the size of those increases declining from the previous quarter, that would imply that our margins with come down some. We are somewhat hesitant to throw out a number as far as the impact of the FIFO inventory. It is subject to misinterpretation in lieu of how fluid the environment is, with our selling price changing and fluctuating by such large amounts on a regular basis. To get a clear picture you also have to pro-form our selling prices to reflect the corresponding increases and we really don’t want to set a precedent but by providing any guidance for normalized price margins but suffice to say that up to this point our accumulative price increases have exceeded the accumulative increases in wire rod costs. Robert Kelly - Sidoti & Co.: Suit to say that you’re, by the time you have 4Q you meant actually the up a little bit on the rod costs or the next round of rod costs catches up to you? Is that what you think about it? H. O. Woltz III: We are seeing monthly increases and I think Mike’s point was that where in late 2nd quarter and early 3rd quarter we saw increases that were well in excess of a hundred dollars per ton to the extent that those increases moderate going forward which we expect, then the gap there or it has that impact on spreads. Robert Kelly - Sidoti & Co.: What I am trying to get a sense of, is the cumulative price increase, that you have announced, has that risen step for step with the raw material price increase or you are somewhat ahead of that because the raw materials are not 100% of your cost. H. O. Woltz III: We are ahead of it. Keeping in mind that while raw material costs is the most obvious increase in cost that we are experiencing; we have huge networking capital additions. All of our energy and transportation costs are also rising. I would say, that while our accumulative price increases exceed the accumulative rod price increases, to do otherwise would be backing out because of all the other cost increases that we are incurring. Robert Kelly - Sidoti & Co.: As far as your exposure to the commercial market where the pain seems to be expected for ’09. Do you have any idea what your exposure there for office and retail? Some of the areas that are supposed to be considerably weaker, than say institutional or industrial that are looking at mid-single digit declines. H. O. Woltz III: It’s really difficult to clarify that precisely due to the nature of those application that tend not to be as intensive users as some of the infrastructure related work but I don’t know that we could really use specific percentage. Robert Kelly - Sidoti & Co.: Some of the points you made on federal highway spending and your expectations for a budgetary constrains maybe hurting infrastructure. Are these things that you are seeing now or you expect or you see as a risk that could come to fruition on ‘09 or is this something that you felt already? H. O. Woltz III: It’s a risk that we foresee from what we read and from the data that we collect, at the same time I would tell you that I’m specifically familiar with a lot of customers who are actively bidding and see a lot of work coming out so it is the prospect for these things more than the reality of them at this point.

Your next question comes from Matthew Wicker

You mentioned a reduced utilization for the facilities during the quarter, how does that compare to the prior quarter or year ago quarter? H. O. Woltz III: We are on about the same volume track that we have been on for the last couple of quarters. I would not say there is any significant change. For the year ago quarter, I really cannot speak to that, I do not have the information in front of me.

On current price and full utilization, where would you estimate to be your full revenue capacity? H. O. Woltz III: I do not know, we don’t want to throw out a number on that and it had to be some assumption, that it gets more complicated that certain of our other facilities from a mixed standpoints. I don’t know if we want to throw in a number for that.

You mentioned a little bit about the ongoing import situation, do you have any update on the effort to secure tariff on Chinese imports? H. O. Woltz III: Well, we are really in the process of just evaluating the options that are traditional. Dumping and countervailing cases probably not in the cards but to the extent that the Chinese are really not honoring their WTO obligations, there could be other approaches for us to take. So I did not mean to imply that there is anything pending in the near-term that would help us resolve this, only that we are taking a much more detailed look at what the options might be.

Okay. Michael C. Gazmarian: : Just moving back to your previous question on revenue potential when we are fully tapped out , you could ball park that just based on those utilization percentages that we indicated.

: Yes alright, and I got that Mike, I was just implying exactly what you were getting out in terms of, with the mixed shift, and everything else. Michael C. Gazmarian: Yes.

Elaborating on the Chinese thing, any sense as to when the orders that came in this quarter were booked and whether or not a weak dollar environment and higher freight cost might effectively create a tariff going forward. H. O. Woltz III: :

Okay great. That is helpful. And finally, I just want to reiterate Bob’s last question, in reference to the anticipated slowing that you are seeing, and you are basing it largely at the AVI and the architectural forecasts. You are saying that you have not seen any specific weakness yourself. H. O. Woltz III: I think we are hearing anecdotal evidence and we read forecasts and data that is published industry-wide but it is not a case of where the reality for us at this point.

Your next question comes from Chris Haberland - Davenport & Co. Timothy Hayes - Davenport & Co.: Did have a couple though, you mentioned that you are passing through the increases in wire rod prices, and maybe passing on a little bit more than the increase, so far this year. But what about more recently, let us say, the increases in June, maybe the increases in July, are you now just matching those increases or still staying ahead of them? How are you doing on the pricing side there? H. O. Woltz III: We are staying ahead of them. Timothy Hayes - Davenport & Co.: Alright so passing a little bit more than the wire rod increases? H. O. Woltz III: That is correct. Timothy Hayes - Davenport & Co.: And in terms of your outlook for wire rod imports, say by year-end or as we get into 2009, do you see any pick up from these almost scarce levels? H. O. Woltz III: It is a good question, and I think it is really going to be driven by demand in the rest of the world and the value of the dollar. The level of construction activity elsewhere in the world, particularly the Middle East is remarkably hot. I think that most producers in the USA have export opportunities if they would really like to take advantage of them. So my sense is that we are going to see a continued tight environment, at least through the rest of 2008. These things, when they change, sometimes change fast, but I am not sensing at this point that the conditions that would drive that change are really mounting. Timothy Hayes - Davenport & Co.: And regarding the mills, I remain surprised that their utilization rates are not much higher and that these prices are so high domestically, add to that export opportunities. Why aren’t the mills running more like 90% to 95% capacity, higher than what they seem to be doing, not just for all products but specifically for wire rod products? H. O. Woltz III: I think there is a reluctance to upset what is a very desirable condition for the mills right now. I know that there are some mills that are attempting to increase their output incrementally. That some of them are having hiring problems in actually bringing the work force together that would result in the extra operating hours, but I just do not sense that there is a great desire to work harder and make less money. I think they are pretty happy with the situation that exists.

Your next question comes from Robert Kelly - Sidoti & Co. Robert Kelly - Sidoti & Co.: On the wire rod market as you see it, is the product basically still on allocation? Is there any opportunity for you to buy ahead of the price increases? H. O. Woltz III: It is on allocation, Bob and one thing I should have mentioned in response to the previous question is that there have been some relatively serious, unplanned production outages in, at least a couple of mills recently, that have taken the mills down for, in one case a week, one case two weeks. So this is not an unusual situation either, seems to happen every summer, but it is unplanned. So that has served to just exacerbate the tightness in the market, but, yes, we are clearly still on allocation and I do not see that situation changing in the near-term. Robert Kelly - Sidoti & Co.: And then as far as your markets in your distribution channel, is there the same amount of tightness? Are your customers are able to hedge, buy and pull demand forward ahead of your announced price increases? H. O. Woltz III: We saw a lot of that when we were announcing increases of the triple digit magnitude. I think there is a certain amount of fatigue that may have settled over the market where your typical $80 or $90 per ton price increases generating less fear than it did some months ago and therefore generating less hedge buying. And it also varies within product line and in terms of how tight things are. Robert Kelly - Sidoti & Co.: So certain product lines are tight, based on the pricing but not necessarily your entire product line. H. O. Woltz III: That is correct, yes Robert Kelly - Sidoti & Co.: ,: : H. O. Woltz III: Yes there is, as we have stated on a number of occasions that our foremost objective is to keep the company position to execute on growth initiatives that come our way or that we are able to develop. At the same time, we recognize that the balance sheet probably should not stay in its current condition indefinitely, so we are evaluating all of the appropriate uses of cash.

We have no further questions. H. O. Woltz III: We appreciate your interest in the company and encourage any follow up questions that you have.