clfd20241231

clfd20241231_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

For the quarterly period ended December 31, 2024

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

☒ Yes ☐ 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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Non-accelerated filer ☐

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 January 31, 2025
Common stock, par value $.01	14,131,537

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	23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
ITEM 4. CONTROLS AND PROCEDURES	29
PART II. OTHER INFORMATION	29
ITEM 1. LEGAL PROCEEDINGS	29
ITEM 1A. RISK FACTORS	29
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	29
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	29
ITEM 4. MINE SAFETY DISCLOSURES	30
ITEM 5. OTHER INFORMATION	30
ITEM 6. EXHIBITS	30
SIGNATURES

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLEARFIELD, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
	December 31, 2024 (Unaudited)			September 30, 2024
Assets
Current Assets
Cash and cash equivalents	$	30,453		$	16,167
Short-term investments		82,561			114,825
Accounts receivables, net		14,064			21,309
Inventories, net		59,224			66,766
Other current assets		11,609			10,528
Total current assets		197,911			229,595

Property, plant and equipment, net		23,717			23,953

Other Assets
Long-term investments		41,916			24,505
Goodwill		6,493			6,627
Intangible assets, net		6,103			6,343
Right-of-use lease assets		18,276			15,797
Deferred tax asset		6,622			6,135
Other		2,192			2,320
Total other assets		81,602			61,727
Total Assets	$	303,230		$	315,275

Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of lease liability	$	3,651		$	3,357
Accounts payable		4,325			6,720
Accrued compensation		5,400			6,977
Accrued expenses		2,562			4,378
Factoring liability		2,790			2,920
Total current liabilities		18,728			24,352

Other Liabilities
Long-term debt, net of current maturities		2,072			2,228
Long-term portion of lease liability		14,995			12,771
Deferred tax liability		-			161
Total liabilities		35,795			39,512

Shareholders’ Equity
Preferred stock, $.01 par value; 500,000 shares; no shares issued or outstanding		-			-
Common stock, authorized 50,000,000, $.01 par value; 14,131,537 and 14,229,107 shares issued and outstanding as of December 31, 2024 and September 30, 2024, respectively		141			142
Additional paid-in capital		154,254			159,579
Accumulated other comprehensive (loss) income		(17	)		1,079
Retained earnings		113,057			114,963
Total shareholders’ equity		267,435			275,763
Total Liabilities and Shareholders’ Equity	$	303,230		$	315,275

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
	Three Months Ended			Three Months Ended
	December 31,			December 31,
	2024			2023

Net sales	$	35,476		$	34,230

Cost of sales		27,294			29,533

Gross profit		8,182			4,697

Operating expenses
Selling, general and administrative		12,158			12,859
Loss from operations		(3,976	)		(8,162	)

Net investment income		1,744			2,069
Interest expense		(100	)		(126	)

Loss before income taxes		(2,332	)		(6,219	)

Income tax benefit		(426	)		(951	)
Net loss	$	(1,906	)	$	(5,268	)

Net loss per share Basic	$	(0.13	)	$	(0.35	)
Net loss per share Diluted	$	(0.13	)	$	(0.35	)

Weighted average shares outstanding:
Basic		14,213,025			15,212,945
Diluted		14,213,025			15,212,945

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
(IN THOUSANDS)
	Three Months Ended			Three Months Ended
	December 31,			December 31,
	2024			2023

Comprehensive (loss) income:
Net loss	$	(1,906	)	$	(5,268	)
Other comprehensive (loss) income, net of tax
Unrealized (loss) gain on available-for-sale investments		(125	)		291
Unrealized (loss) gain on foreign currency translation		(971	)		729
Total other comprehensive (loss) income		(1,096	)		1,020

Total comprehensive loss	$	(3,002	)	$	(4,248	)

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For three months ended December 31, 2024										Accumulated other
	Common Stock						Additional			comprehensive			Retained			Total share-
	Shares			Amount			paid-in capital			income (loss)			earnings			holders’ equity
Balance as of September 30, 2024		14,229		$	142		$	159,579		$	1,079		$	114,963		$	275,763
Stock based compensation expense		-			-			1,139			-			-			1,139
Issuance of common stock under employee stock purchase plan		11			-			301			-			-			301
Issuance of common stock under equity compensation plans, net		105			1			(1	)		-			-			-
Repurchase of shares for payment of withholding taxes for vested restricted stock grants		(17	)		-			(491	)		-			-			(491	)
Repurchase of common stock		(196	)		(2	)		(6,273	)		-			-			(6,275	)
Other comprehensive loss		-			-			-			(1,096	)		-			(1,096	)
Net loss		-			-			-			-			(1,906	)		(1,906	)
Balance at December 31, 2024		14,132		$	141		$	154,254		$	(17	)	$	113,057		$	267,435

For three months ended December 31, 2023										Accumulated other
	Common Stock						Additional			comprehensive			Retained			Total share-
	Shares			Amount			paid-in capital			income (loss)			earnings			holders’ equity
Balance as of September 30, 2023		15,254		$	153		$	188,218		$	(544	)	$	127,336		$	315,163
Stock-based compensation expense		-			-			1,271			-			-			1,271
Issuance of common stock under employee stock purchase plan		10			-			250			-			-			250
Issuance of common stock under equity compensation plans, net		120			-			-			-			-			-
Repurchase of shares for payment of withholding taxes for vested restricted stock grants		(9	)		-			(236	)		-			-			(236	)
Repurchase of common stock		(436	)		(4	)		(12,181	)		-			-			(12,185	)
Adoption of new accounting pronouncement		-			-			-			-			80			80
Other comprehensive income		-			-			-			1,020			-			1,020
Net loss		-			-			-			-			(5,268	)		(5,268	)
Balance at December 31, 2023		14,939		$	149		$	177,322		$	476		$	122,148		$	300,095

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CLEARFIELD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
	Three Months Ended			Three Months Ended
	December 31,			December 31,
	2024			2023
Cash flows from operating activities
Net loss	$	(1,906	)	$	(5,268	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		1,838			1,651
Amortization of discount on investments		(766	)		(1,160	)
Deferred taxes		(544	)		(320	)
Stock-based compensation		1,139			1,271
Changes in operating assets and liabilities, net of acquired amounts:
Accounts receivable		6,873			11,750
Inventories, net		6,871			4,169
Other assets		(1,027	)		815
Accounts payable and accrued expenses		(5,328	)		(2,108	)
Net cash provided by operating activities		7,150			10,800

Cash flows from investing activities
Purchases of property, plant and equipment and intangible assets		(2,069	)		(2,412	)
Purchases of investments		(39,015	)		(47,748	)
Proceeds from sales and maturities of investments		54,476			51,068
Net cash provided by investing activities		13,392			908

Cash flows from financing activities
Proceeds from issuance of common stock under employee stock purchase plan		301			250
Repurchase of shares for payment of withholding taxes for vested restricted stock grants		(491	)		(236	)
Net borrowings and repayments of factoring liability		77			(2,972	)
Repurchase of common stock		(6,275	)		(12,184	)
Net cash used in financing activities		(6,388	)		(15,142	)

Effect of exchange rates on cash		132			91
Increase (decrease) in cash and cash equivalents		14,286			(3,343	)
Cash and cash equivalents, beginning of year		16,167			37,827
Cash and cash equivalents, end of year	$	30,453		$	34,484

Supplemental disclosures for cash flow information
Cash paid during the year for income taxes	$	405		$	61
Cash paid for interest	$	58		$	86
Right of use assets obtained through lease liabilities	$	3,663		$	-
Non-cash financing activities
Cashless exercise of stock options	$	9		$	-

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED 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) condensed consolidated balance sheet as of September 30, 2024, which has been derived from audited financial statements, and (b) unaudited interim condensed consolidated financial statements as of and for the three months ended December 31, 2024 have been prepared by the Company 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 condensed 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 condensed 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, 2024.

In preparation of the Company’s condensed 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.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Clearfield, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

New Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 is intended to enhance financial reporting by requiring incremental disclosures for significant segment expenses on an annual and interim basis by public entities required to report segment information in accordance with Accounting Standards Codification Topic 280. The amendments in ASU 2023-07 are to be applied retrospectively to all periods presented in the financial statements and early adoption is permitted. This standard will be applicable to the Company for the 2025 annual period and quarterly periods thereafter. The Company is evaluating its disclosure approach for ASU 2023-07 and anticipates adopting the standard for the year ended September 30, 2025, and filings thereafter.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance is expected to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information by requiring 1) consistent categories and greater disaggregation of information in the rate reconciliation and 2) income taxes paid disaggregated by jurisdiction. The guidance is effective on a prospective basis, although retrospective application and early adoption is permitted. The Company is evaluating its disclosure approach for ASU 2023-09 and anticipates adopting the standard for the annual period starting October 1, 2025.

The FASB issued ASU No. 2024-03, (Subtopic 220-4012): Disaggregation of Income Statement Expenses. The ASU No. 2024-03 addresses the disaggregation of income statement expenses under that aims to provide more detailed information about the types of expenses included in commonly presented expense captions, such as cost of sales, selling, general, and administrative expenses (SG&A), and research and development. The ASU 2024-04 can be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating its disclosure approach for ASU 2024-03 and anticipates adopting the standard for the annual period starting October 1, 2027.

Correction of Prior Period Error

As disclosed in Note 1 to Company’s 2024 Form 10-K, the Company identified a prior period error in the presentation of its Consolidated Statement of Cash Flows. Management determined its presentation of the net borrowings and repayments of factoring receivables was incorrectly presented within the ‘Accounts payable and accrued expenses’ line within operating activities as opposed to being presented within financing activities. As corrected in the Condensed Consolidated Statements of Cash Flows, Accounts payable and accrued expenses and Net cash provided by operating activities are each increased by $2,972,000 for the three months ended December 31, 2023, and Net borrowings and repayments of factoring liability and Net cash used in financing activities are each increased by $2,972,000 for the three months ended December 31, 2023. This correction had no impact on the previously reported condensed consolidated balance sheets, condensed consolidated statements of earnings, condensed consolidated statement of comprehensive income, or condensed consolidated statements of shareholders’ equity. The Company also will correct previously reported financial information for such immaterial errors in future filings, as applicable.

Note 2. Net Loss Per Share

Basic net loss per common share (“EPS”) is computed by dividing net loss by the weighted average number of common shares outstanding for the reporting period. Diluted EPS equals net loss divided by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock equivalents, such as stock options, when dilutive.

The following is a reconciliation of the numerator and denominator of the net loss per common share computations for the three months ended December 31, 2024, and 2023:

	Three Months Ended December 31,
(In thousands, except for share data)	2024			2023
Net loss	$	(1,906	)	$	(5,268	)
Weighted average common shares		14,213,025			15,212,945
Dilutive potential common shares		-			-
Weighted average dilutive common shares outstanding		14,213,025			15,212,945
Net loss per common share:
Basic	$	(0.13	)	$	(0.35	)
Diluted	$	(0.13	)	$	(0.35	)

For the three months ended December 31, 2024, 404,836 stock options and 76,121 performance stock units were not included in the computation of diluted net income per share because the effect would have been anti-dilutive. For the three months ended December 31, 2023, 363,692 stock options and 47,745 performance stock units were not included in the computation of diluted net income per share because the effect would have been anti-dilutive.

Note 3. Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The following table presents the Company’s cash and cash equivalents balances:

SEC Form 10-Q filed by Clearfield Inc.