clfd20230630

clfd20230630_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2023

☐ 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 0-16106

Clearfield, Inc.

(Exact name of Registrant as specified in its charter)

Minnesota	41-1347235
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7050 Winnetka Avenue North, Suite 100, Brooklyn Park, Minnesota 55428

(Address of principal executive offices and zip code)

(763) 476-6866

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	CLFD	The Nasdaq Stock Market

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

☒ Yes ☐ No

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

☒ Yes ☐ No

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

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

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

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

☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class:	Outstanding as of August 4, 2023
Common stock, par value $.01	15,261,809

CLEARFIELD, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	4
ITEM 1. FINANCIAL STATEMENTS	4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 4. CONTROLS AND PROCEDURES	30
PART II. OTHER INFORMATION	30
ITEM 1. LEGAL PROCEEDINGS	30
ITEM 1A. RISK FACTORS	31
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	31
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	31
ITEM 4. MINE SAFETY DISCLOSURES	31
ITEM 5. OTHER INFORMATION	31
ITEM 6. EXHIBITS	31
SIGNATURES	32

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLEARFIELD, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

	June 30, 2023 (Unaudited)			September 30, 2022
Assets
Current Assets
Cash and cash equivalents	$	31,385		$	16,650
Short-term investments		130,726			5,802
Accounts receivables, net		31,944			53,704
Inventories, net		105,003			82,208
Other current assets		4,084			1,758
Total current assets		303,142			160,122

Property, plant and equipment, net		21,318			18,229

Other Assets
Long-term investments		6,556			22,747
Goodwill		6,581			6,402
Intangible assets, net		6,344			6,376
Right-of-use lease assets		14,773			13,256
Deferred tax asset		998			1,414
Other		1,489			582
Total other assets		36,741			50,777
Total Assets	$	361,201		$	229,128

Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of lease liability	$	3,722		$	3,385
Debt		2,174			-
Accounts payable		11,641			24,118
Accrued compensation		7,319			13,619
Accrued expenses		3,335			6,181
Factoring liability		8,722			4,391
Total current liabilities		36,913			51,694

Other Liabilities
Long-term debt		-			18,666
Long-term portion of lease liability		11,572			10,412
Deferred tax liability		782			774
Total liabilities		49,267			81,546

Shareholders’ Equity
Preferred stock, $.01 par value; 500,000 shares; no shares issued or outstanding		-			-
Common stock, authorized 50,000,000, $.01 par value; 15,262,409 and 13,818,452 shares issued and outstanding as of June 30, 2023 and September 30, 2022, respectively		153			138
Additional paid-in capital		187,409			54,539
Accumulated other comprehensive loss		(268	)		(1,898	)
Retained earnings		124,640			94,803
Total shareholders’ equity		311,934			147,582
Total Liabilities and Shareholders’ Equity	$	361,201		$	229,128

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE DATA)

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2023			2022		2023			2022

Net sales	$	61,284		$	71,250	$	219,035		$	175,854

Cost of sales		42,210			41,943		145,750			100,411

Gross profit		19,074			29,307		73,285			75,443

Operating expenses
Selling, general and administrative		13,449			12,721		37,714			33,877
Income from operations		5,625			16,586		35,571			41,566

Net investment income		1,630			43		3,328			284
Interest expense		(195	)		-		(551	)		-

Income before income taxes		7,060			16,629		38,348			41,850

Income tax expense		1,842			3,884		8,511			9,480
Net income	$	5,218		$	12,745	$	29,837		$	32,370

Net income per share Basic	$	0.33		$	0.93	$	2.01		$	2.35
Net income per share Diluted	$	0.33		$	0.92	$	2.00		$	2.33

Weighted average shares outstanding:
Basic		15,254,341			13,772,269		14,880,666			13,760,950
Diluted		15,254,341			13,899,698		14,929,405			13,900,019

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2023			2022			2023		2022

Comprehensive Income:
Net income	$	5,218		$	12,745		$	29,837	$	32,370
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on available-for-sale investments		15			(235	)		352		(960	)
Unrealized gain (loss) on foreign currency translation		(49	)		-			1,278		-
Total other comprehensive income (loss)		(34	)		(235	)		1,630		(960	)

Total comprehensive income	$	5,184		$	12,510		$	31,467	$	31,410

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(IN THOUSANDS)

For the three months ended June 30, 2023									Accumulated other
	Common Stock					Additional			comprehensive			Retained		Total share-
	Shares			Amount		paid-in capital			loss			earnings		holders’ equity
Balance at March 31, 2023		15,255		$	153	$	186,058		$	(234	)	$	119,422	$	305,399
Stock-based compensation expense		-			-		1,059			-			-		1,059
Issuance of common stock under equity compensation plans, net		(1	)		-		-			-			-		-
Exercise of stock options, net of shares exchanged for payment		1			-		(20	)		-			-		(20	)
Employee stock purchase plan		8			-		312			-			-		312
Other comprehensive loss		-			-		-			(34	)		-		(34	)
Net income		-			-		-			-			5,218		5,218
Balance at June 30, 2023		15,263		$	153	$	187,409		$	(268	)	$	124,640	$	311,934

For the three months ended June 30, 2022									Accumulated other
	Common Stock					Additional			comprehensive			Retained		Total share-
	Shares			Amount		paid-in capital			loss			earnings		holders’ equity
Balance at March 31, 2022		13,773		$	138	$	58,949		$	(725	)	$	65,067	$	123,429
Stock-based compensation expense		-			-		638			-			-		638
Issuance of common stock under equity compensation plans, net		(3	)		-		-			-			-		-
Issuance of common stock under employee stock purchase plan		6			-		294			-			-		294
Exercise of stock options, net of shares exchanged for payment		2			-		(97	)		-			-		(97	)
Other comprehensive loss		-			-		-			(235	)		-		(235	)
Net income		-			-		-			-			12,745		12,745
Balance at June 30, 2022		13,778		$	138	$	59,784		$	(960	)	$	77,812	$	136,774

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(IN THOUSANDS)

For the nine months ended June 30, 2023									Accumulated other
	Common Stock					Additional			comprehensive			Retained		Total share-
	Shares			Amount		paid-in capital			loss			earnings		holders’ equity
Balance as of September 30, 2022		13,819		$	138	$	54,539		$	(1,898	)	$	94,803	$	147,582
Stock-based compensation expense		-			-		2,504			-			-		2,504
Issuance of common stock under equity compensation plans, net		50			-		954			-			-		954
Issuance of common stock under employee stock purchase plan		13			1		611			-			-		612
Exercise of stock options, net of shares exchanged for payment		11			-		(493	)		-			-		(493	)
Repurchase of shares for payment of withholding taxes for stock grants		(10	)		-		(954	)		-			-		(954	)
Issuance of common stock, net		1,380			14		130,248			-			-		130,262
Other comprehensive income		-			-		-			1,630			-		1,630
Net income		-			-		-			-			29,837		29,837
Balance at June 30, 2023		15,263		$	153	$	187,409		$	(268	)	$	124,640	$	311,934

For the nine months ended June 30, 2022									Accumulated other
	Common Stock					Additional			comprehensive			Retained		Total share-
	Shares			Amount		paid-in capital			loss			earnings		holders’ equity
Balance as of September 30, 2021		13,732		$	137	$	58,246		$	-		$	45,442	$	103,825
Stock-based compensation expense		-			-		1,647			-			-		1,647
Issuance of common stock under equity compensation plans, net		27			1		-			-			-		1
Issuance of common stock under employee stock purchase plan		13			-		544			-			-		544
Exercise of stock options, net of shares exchanged for payment		10			-		(379	)		-			-		(379	)
Repurchase of shares for payment of withholding taxes for vested restricted stock grants		(4	)		-		(274	)		-			-		(274	)
Other comprehensive loss		-			-		-			(960	)		-		(960	)
Net income		-			-		-			-			32,370		32,370
Balance at June 30, 2022		13,778		$	138	$	59,784		$	(960	)	$	77,812	$	136,774

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

	Nine Months			Nine Months
	Ended			Ended
	June 30,			June 30,
	2023			2022
Cash flows from operating activities
Net income	$	29,837		$	32,370
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		4,411			2,205
Amortization of discount on investments		(2,429	)		(31	)
Stock-based compensation		2,504			1,647
Changes in operating assets and liabilities, net of acquired amounts:
Accounts receivable, net		24,519			(12,156	)
Inventories, net		(21,510	)		(41,816	)
Other assets		(3,525	)		(185	)
Accounts payable and accrued expenses		(20,326	)		8,677
Net cash provided by (used in) operating activities		13,481			(9,289	)

Cash flows from investing activities
Purchases of property, plant and equipment, and intangible assets		(6,529	)		(6,764	)
Purchases of investments		(210,923	)		(248	)
Proceeds from sales and maturities of investments		105,077			17,386
Net cash provided by (used in) investing activities		(112,375	)		10,374

Cash flows from financing activities
Repayment of long-term debt		(16,700	)		-
Proceeds from issuance of common stock under employee stock purchase plan		612			544
Repurchase of shares for payment of withholding taxes for stock grants		(954	)		(274	)
Withholding related to exercise of stock options		(493	)		(379	)
Issuance of stock under equity compensation plans		954			-
Net proceeds from issuance of common stock		130,262			-
Net cash provided by (used in) financing activities		113,681			(109	)

Effect of exchange rates on cash		(52	)		-
Increase in cash and cash equivalents		14,735			976
Cash and cash equivalents, beginning of year		16,650			13,216
Cash and cash equivalents, end of period	$	31,385		$	14,194

Supplemental disclosures for cash flow information
Cash paid for income taxes	$	12,589		$	9,913
Cash paid for interest expense	$	360		$	-
Non-cash financing activities
Cashless exercise of stock options	$	566		$	276

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Unless the context otherwise requires, for purposes of this Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” the “Company,” and “Clearfield,” refer to Clearfield, Inc. and subsidiaries.

Basis of Presentation

The accompanying (a) consolidated balance sheet as of September 30, 2022, which has been derived from audited financial statements, and (b) unaudited interim consolidated financial statements as of and for the three and nine months ended June 30, 2023 have been prepared by Clearfield in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations, and cash flows of the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of results to be expected for the full year or for any other interim period, due to variability in customer purchasing patterns, seasonality and other factors. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2022.

In preparation of the Company’s consolidated financial statements, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses during the reporting periods. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

SEC Form 10-Q filed by Clearfield Inc.