Clearfield(CLFD) - 2021 Q1 - Quarterly Report

Part I Financial Statements The company's financial statements for Q1 2021 demonstrate significant year-over-year growth in sales and net income, supported by a strong balance sheet and positive operating cash flow Condensed Balance Sheets Balance Sheet Summary (as of December 31, 2020) | Account | Dec 31, 2020 (Unaudited) ($) | Sep 30, 2020 ($) | | :--- | :--- | :--- | | Total Current Assets | $52,211,429 | $52,522,809 | | Total Assets | $96,187,684 | $95,297,430 | | Total Current Liabilities | $7,768,856 | $10,414,809 | | Total Liabilities | $10,076,246 | $12,544,152 | | Total Shareholders' Equity | $86,111,438 | $82,753,278 | - From September 30, 2020, to December 31, 2020, total assets slightly increased, while total liabilities decreased by approximately $2.5 million, leading to a $3.4 million increase in total shareholders' equity[13] Condensed Statements of Earnings Statement of Earnings (Three Months Ended December 31) | Metric | 2020 ($) | 2019 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $27,092,147 | $19,377,991 | +40% | | Gross Profit | $11,369,245 | $7,727,535 | +47% | | Income from Operations | $3,713,708 | $400,915 | +826% | | Net Income | $3,163,439 | $501,158 | +531% | | Diluted EPS | $0.23 | $0.04 | +475% | Condensed Statements of Cash Flows Cash Flow Summary (Three Months Ended December 31) | Activity | 2020 ($) | 2019 ($) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $2,716,659 | ($99,831) | | Net cash provided by investing activities | $79,117 | $438,531 | | Net cash (used in) provided by financing activities | ($94,336) | $166,429 | | Increase in cash and cash equivalents | $2,701,440 | $505,129 | | Cash and cash equivalents, end of period | $19,151,076 | $10,586,850 | Notes to Financial Statements Notes highlight that 98% of revenue is from U.S. Broadband Service Providers, with significant customer concentration and new lease agreements for manufacturing facilities in Tijuana, Mexico - Broadband service providers comprised 98% of net sales for the three months ended December 31, 2020, an increase from 94% in the prior-year period[48] - Two distributors accounted for 19% (Customer A) and 12% (Customer B) of net sales for the three months ended December 31, 2020[52] - The company entered into a new three-year lease for its original manufacturing facility in Tijuana, Mexico, and also leases an additional 52,000 square foot facility in the same city[62][63] Management's Discussion and Analysis (MD&A) Management attributes 40% year-over-year revenue growth to increased demand from broadband customers, with gross margin improving due to product mix and efficiencies, while maintaining a strong liquidity position Overview - Clearfield designs, manufactures, and distributes fiber optic management products for communications networks, serving Broadband Service Providers in the U.S. and international markets[70] - In response to COVID-19, the company's operations are classified as critical infrastructure, implementing safety measures, remote work, and increased safety stock to mitigate supply chain risks[72][73] Results of Operations Q1 2021 vs Q1 2020 Performance | Metric | Q1 2021 ($) | Q1 2020 ($) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $27.1M | $19.4M | +40% | | Gross Profit | $11.4M | $7.7M | +47% | | Gross Margin | 42.0% | 39.9% | +2.1 p.p. | | Operating Income | $3.7M | $0.4M | +826% | - The $7.7 million year-over-year increase in net sales was primarily driven by an $8.2 million increase from Community Broadband Service Providers and a $0.7 million increase from MSO customers[77] - The increase in gross profit margin resulted primarily from a favorable product mix and cost reduction efforts, including increased utilization of Mexico manufacturing plants and supply chain efficiencies[79] - Selling, general and administrative (SG&A) expenses increased by 4% ($0.3 million), mainly due to higher performance-based compensation, partially offset by a $373,000 decrease in travel expenses due to COVID-19[80] Liquidity and Capital Resources - As of December 31, 2020, the company maintained a strong liquidity position with $54.4 million in cash, cash equivalents, and investments, with no long-term debt[86] - Net cash provided by operating activities was $2.7 million for the quarter, a significant improvement from a $0.1 million use of cash in the prior-year period, driven by higher net income and favorable working capital changes[89][90] Quantitative and Qualitative Disclosures about Market Risk The company determined this section is not applicable for the current reporting period - The company reports no applicable quantitative and qualitative disclosures regarding market risk[99] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[101] - No material changes to internal control over financial reporting occurred during the quarter ended December 31, 2020[102] Part II Legal Proceedings The company reports no pending legal proceedings expected to have a material adverse effect on its financial position or operations - No pending legal proceedings against the company are expected to have a material adverse effect[103] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the company's most recent Annual Report on Form 10-K[104] Issuer Purchases of Equity Securities During the quarter, the company repurchased 469 shares at an average price of $23.34 per share for tax payments related to restricted stock vesting, not under a public plan Share Repurchases (Q1 2021) | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | October 2020 | 0 | N/A | | November 2020 | 469 | $23.34 | | December 2020 | 0 | N/A | - The 469 shares repurchased during the quarter were for tax payments upon vesting of restricted stock issued to employees[107] Other Disclosures (Items 3, 4, 5, 6) The company reported no defaults on senior securities, no mine safety disclosures, and no other material information under Item 5, with a list of exhibits provided - The company reports 'None' for Defaults Upon Senior Securities (Item 3) and 'Not applicable' for Mine Safety Disclosures (Item 4) and Other Information (Item 5)[108][109][110]