Form 8-K Clearfield, Inc. For: Nov 10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of Report: November 10, 2015
(Date of earliest event reported)
CLEARFIELD, INC.
(Exact Name of Registrant as Specified in Charter)
Minnesota
(State or Other Jurisdiction of Incorporation)
| 0-16106 | 41-1347235 |
| (Commission File No.) | (IRS Employer Identification No.) |
7050 Winnetka Avenue North, Suite 100, Brooklyn Park, MN 55428
(Address of Principal Executive Offices)(Zip Code)
(763) 476-6866
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Items under Sections 1, 3, 4, 6 and 7 are not applicable and therefore omitted.
| Item 2.02 | Results of Operations and Financial Condition. |
On November 12, 2015, Clearfield, Inc. (the “Company”) issued a press release announcing the results of its fourth quarter and fiscal year ended September 30, 2015. A copy of that press release is furnished hereto as Exhibit 99.1 and is hereby incorporated by reference.
In the November 12, 2015 earnings release, the Company directs readers to a page of its website to access an investor communication entitled “Fiscal Q4 and Full Year 2015 FieldReport,” which is furnished hereto as Exhibit 99.2. The Fiscal Q4 and Full Year 2015 FieldReport consists of a slide presentation and a related embedded audio recording of remarks by Cheryl P. Beranek, the Company’s President and Chief Executive Officer, and Daniel R. Herzog, the Company’s Chief Financial Officer, discussing the fourth quarter and year ended September 30, 2015 results, as well as the business and prospects of the Company.
| Item 5.02 | Departure Of Directors Or Certain Officers; Election Of Directors; Appointment Of Certain Officers; Compensatory Arrangements Of Certain Officers. |
FY 2015 Cash Bonus Program
On November 20, 2014, the Compensation Committee (the “Committee”) of the Board of Directors of the Company approved a cash bonus program for fiscal year 2015 (the “2015 Bonus Program”). The current executive officers (the “Executives”) that participated in the 2015 Bonus Program are: Cheryl P. Beranek, Chief Executive Officer; John P. Hill, Chief Operating Officer; and Daniel R. Herzog, Chief Financial Officer.
The performance goal under the 2015 Bonus Program for the Executives consisted of the Company's net income for fiscal year 2015 from continuing operations, excluding taxes, interest income or expense, and any bonus amounts (“FY15 ICO”).
On November 10, 2015, the Compensation Committee determined the bonus pool amounts available under the 2015 Bonus Program based upon FY2015 ICO, which met the amount set by the Compensation Committee. Amounts from the bonus pool created by the 2015 Bonus Program were allocated by the Company's management among eligible non-executive officer employees. On November 10, 2015, the Compensation Committee approved the following payouts to the Executives from the amounts remaining in the bonus pool: Ms. Beranek, $250,000; Mr. Hill, $250,000 and Mr. Herzog $56,462.
| Item 8.01 | Other Events. |
As described above, the Company made the Fiscal Q4 and Full Year 2015 FieldReport, furnished hereto as Exhibit 99.2, available on its website on November 12, 2015. The Company is not including the information on its website as a part of, or incorporating it by reference into, this Current Report on Form 8-K.
| Item 9.01 | Financial Statements and Exhibits. |
| (c) | The following exhibit is being furnished herewith: |
| 99.1 | Press release dated November 12, 2015 |
| 99.2 | Fiscal Q4 and Full Year 2015 FieldReport – Presentation dated November 12, 2015 and Transcript of Remarks of Cheryl P. Beranek, President and Chief Executive Officer, and Daniel Herzog, Chief Financial Officer, of Clearfield, Inc. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CLEARFIELD, INC. | |||
| By: | /s/ Cheryl P. Beranek | ||
| Dated: November 12, 2015 | Cheryl P. Beranek, Chief Executive Officer | ||
EXHIBIT 99.1
Clearfield Reports Fiscal Fourth Quarter and Full Year 2015 Results
MINNEAPOLIS, Nov. 12, 2015 (GLOBE NEWSWIRE) -- Clearfield, Inc. (NASDAQ: CLFD), the specialist in fiber management and connectivity platforms for communications providers, reported results for the fiscal fourth quarter and year ended September 30, 2015.
| Fiscal Q4 2015 Financial Summary | ||||
| (in millions except per share data and percentages) | Q4 2015 | vs. Q4 2014 | Change | Change (%) |
| Revenue | $ 15.8 | $ 14.3 | $ 1.5 | 10% |
| Gross Profit | $ 6.6 | $ 5.9 | $ 0.7 | 11% |
| Gross Margin | 41.7% | 41.2% | 0.5% | 1% |
| Pre-Tax Income | $ 2.1 | $ 1.7 | $ 0.4 | 21% |
| Income Tax Expense | $ 0.7 | $ 0.6 | $ 0.1 | 5% |
| Net Income | $ 1.4 | $ 1.0 | $ 0.4 | 31% |
| Net Income per Diluted Share | $ 0.10 | $ 0.08 | $ 0.02 | 25% |
| Fiscal 2015 Financial Summary | ||||
| (in millions except per share data and percentages) | 2015 | vs. 2014 | Change | Change (%) |
| Revenue | $ 60.3 | $ 58.0 | $ 2.3 | 4% |
| Gross Profit | $ 24.9 | $ 24.6 | $ 0.3 | 1% |
| Gross Margin | 41.2% | 42.4% | -1.2% | -3% |
| Pre-Tax Income | $ 7.2 | $ 8.6 | $ (1.4) | -17% |
| Income Tax Expense | $ 2.5 | $ 3.2 | $ (0.7) | -22% |
| Net Income | $ 4.7 | $ 5.4 | $ (0.7) | -14% |
| Net Income per Diluted Share | $ 0.34 | $ 0.40 | $ (0.06) | -15% |
Fiscal Q4 2015 Financial Results
Revenue for the fourth quarter 2015 increased 10% to $15.8 million from $14.3 million in the same year-ago quarter. The improvement was primarily due to increased deployments by the Company's incumbent local exchange carriers (ILEC) and competitive local exchange carrier (CLEC) customers. The revenue increase was partially offset by temporary project delays due to currency fluctuations impacting customers outside of the U.S., extended procurement times, and electoral timelines in government-owned enterprises outside of the U.S.
Gross profit increased 11% to $6.6 million (41.7% of revenue) from $5.9 million (41.2% of revenue) in the fourth quarter of 2014.
Operating expenses were $4.6 million, an increase of 8% compared to $4.2 million in the same year-ago quarter.
Pre-tax income increased 21% to $2.1 million from $1.7 million in the fourth quarter of 2014.
Net income increased 31% to $1.4 million or $0.10 per diluted share from $1.0 million or $0.08 per diluted share in the same year-ago quarter.
At September 30, 2015, cash, cash equivalents and investments totaled $34.3 million, as compared to $33.1 million at September 30, 2014. The company had no debt at quarter end.
Order backlog (defined as purchase orders received but not fulfilled) at September 30, 2015 decreased 5% to $3.5 million from $3.7 million as of June 30, 2015, and increased 6% from $3.3 million compared to September 30, 2014.
Fiscal 2015 Financial Results
Revenue increased 4% to a record $60.3 million from $58.0 million in fiscal 2014. The improvement was due to increased deployments by the Company's ILEC customers, as well as expanded sales channels. Offsetting the revenue increase was a decrease in international sales, as well as lower sales related to a slowdown in ongoing builds of a CLEC customer.
Gross profit was a record $24.9 million (41.2% of revenue) in fiscal 2015, an increase of 1% from $24.6 million (42.4% of revenue) in fiscal 2014. The increase in gross profit was the result of a higher percentage of sales associated with optical component technologies, which generally have higher margins.
Operating expenses increased 11% to $17.8 million from $16.1 million in fiscal 2014. The increase was due to the hiring of additional personnel to support sales and operational expansion.
Pre-tax income totaled $7.2 million compared to $8.6 million in fiscal 2014.
Net income totaled $4.7 million or $0.34 per diluted share, a decrease of 14% from $5.4 million or $0.40 per diluted share in fiscal 2014. The decrease was primarily due to increasing investments in selling, general and administrative expenses.
Management Commentary
"In fiscal 2015, we achieved another year of record revenues," said Clearfield CEO Cheri Beranek. "This growth was driven largely by our success in capturing greater market share in the ILEC space, as well as our ability to upsell and cross-sell to existing customers.
"While our CLEC business was down for the year, two-thirds of our CLEC revenue was derived from activity in the second half of fiscal 2015. This was due to an inventory position by the customer in the first half of the year, as well as permitting and 'right-of-way' challenges that have plagued CLEC deployment. However, our strong revenue achievement in the second half represented 100% growth in this customer segment compared to the second half of fiscal 2014. The improvement demonstrates that the 'log jam' of business has cleared up, giving us confidence that our CLEC business is back on track and positioned for growth in fiscal 2016.
"Our financial performance also reflects the strong reputation we have developed within the Tier 3 community for our intuitive and cost-efficient product solutions. As we begin the new fiscal year, we are working to leverage our proven solutions and specialized expertise to win the business of larger Tier 1 and Tier 2 broadband service providers. To ensure the success of this initiative in fiscal 2016 and beyond, we are continuing in our initiative to make calculated, strategic investments. This will include expanding and enhancing our sales force, increasing our international presence, and appointing a chief marketing executive.
"Overall, these efforts will require us to be nimble and forward-looking, keeping our eye on the big picture and the multi-billion dollar industry opportunity ahead. We anticipate achieving greater market share and accelerating revenue growth over the next twenty-four months, with growth in operating income at a pace consistent with but not outpacing revenue. While we are confident in our long-term growth, the cap-ex delays announced by service providers for the latter part of calendar year could affect our 2016 revenue. Based on our current outlook and pipeline, we expect our topline to grow by more than 10% in fiscal 2016, up from 4% in 2015. Then beginning in fiscal 2017, we see the execution of these key initiatives positioning Clearfield to regain our compounded annual growth rate for accelerated revenue growth of more than 15%."
FieldReport
Clearfield issued its FieldReport for fiscal Q4 and full year 2015, which is available in the investor relations section of the Company's website or by clicking here. Comprised of presentation slides with audio and video, the report provides additional insight into the Company's financial and operational performance.
About Clearfield, Inc.
Clearfield, Inc. (NASDAQ: CLFD) designs, manufactures and distributes fiber optic management products for the communications networks of leading ILECS, CLECs, MSO/cable TV companies and mobile broadband providers. The company helps service providers solve the Fiber Puzzle, which is how to reduce high costs associated with deploying, managing, protecting and scaling a fiber optic network to deliver the mobile, residential and business services customers want. Based on the patented Clearview™ Cassette, the Clearfield's unique single-architected, modular fiber management platform is designed to lower the cost of broadband deployment and maintenance by consolidating, protecting and distributing incoming and outgoing fiber circuits and enabling its customers to scale their operations as their subscriber revenues increase. Headquartered in Minneapolis, MN, Clearfield deploys more than a million fiber ports each year. For more information, visit www.clearfieldconnection.com.
Cautionary Statement Regarding Forward-Looking Information
Forward-looking statements contained herein and in the FieldReport are made pursuant to the safe harbor provisions of the Private Litigation Reform Act of 1995. Words such as "may," "will," "expect," "believe," "anticipate," "estimate," "outlook," or "continue" or comparable terminology are intended to identify forward-looking statements. Such forward looking statements include, for example, statements about the Company's future revenue and operating performance, growth of the FTTH market, effectiveness of the Company's sales and marketing strategies and organization, utilization of manufacturing capacity, and the development and marketing of products. These statements are based upon the Company's current expectations and judgments about future developments in the Company's business. Certain important factors could have a material impact on the Company's performance, including, without limitation: our results of operations could be adversely affected now that the stimulus funds of the American Recovery and Reinvestment Act are fully allocated and projections are nearing completion; National Broadband Plan's transitioning from the USF to the CAF program may cause our customers and prospective customers to delay or reduce purchases; a significant percentage of our sales in the last two fiscal years have been made to a small number of customers, and the loss of these major customers would adversely affect us; intense competition in our industry may result in price reductions, lower gross profits and loss of market share; our results of operations could be adversely affected by economic conditions and the effects of these conditions on our customers' businesses; our operating results may fluctuate significantly from quarter to quarter, which may make budgeting for expenses difficult and may negatively affect the market price of our common stock; to compete effectively, we must continually improve existing products and introduce new products that achieve market acceptance; we may face circumstances in the future that will result in impairment charges, including, but not limited to, significant goodwill impairment charges; we rely on single-source suppliers, which could cause delays, increases in costs or prevent us from completing customer orders, all of which could materially harm our business; our success depends upon adequate protection of our patent and intellectual property rights; further consolidation among our customers may result in the loss of some customers and may reduce sales during the pendency of business combinations and related integration activities; we are dependent on key personnel; product defects or the failure of our products to meet specifications could cause us to lose customers and sales or to incur unexpected expenses; and we face risks associated with expanding our sales outside of the United States; and other factors set forth in Clearfield's Annual Report on Form 10-K for the year ended September 30, 2014 as well as other filings with the Securities and Exchange Commission. The Company undertakes no obligation to update these statements to reflect actual events.
| CLEARFIELD, INC. | ||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||
| UNAUDITED | ||||
| Three Months Ended | Twelve Months Ended | |||
| September 30 | September 30 | |||
| 2015 | 2014 | 2015 | 2014 | |
| Revenues | $15,770,602 | $14,320,881 | $60,323,917 | $58,045,292 |
| Cost of sales | 9,195,340 | 8,423,776 | 35,455,964 | 33,446,526 |
| Gross profit | 6,575,262 | 5,897,105 | 24,867,953 | 24,598,766 |
| Operating expenses | ||||
| Selling, general and administrative | 4,555,533 | 4,225,453 | 17,816,598 | 16,080,640 |
| Income from operations | 2,019,729 | 1,671,652 | 7,051,355 | 8,518,126 |
| Interest income | 30,583 | 25,706 | 105,891 | 95,703 |
| Income before income taxes | 2,050,312 | 1,697,358 | 7,157,246 | 8,613,829 |
| Income tax expense | 679,238 | 647,978 | 2,475,238 | 3,180,978 |
| Net income | $1,371,074 | $1,049,380 | $4,682,008 | $5,432,851 |
| Net income per share: | ||||
| Basic | $0.10 | $0.08 | $0.35 | $0.42 |
| Diluted | $0.10 | $0.08 | $0.34 | $0.40 |
| Weighted average shares outstanding: | ||||
| Basic | 13,249,793 | 13,180,589 | 13,216,010 | 12,916,273 |
| Diluted | 13,606,462 | 13,695,290 | 13,587,532 | 13,601,594 |
| CLEARFIELD, INC. | ||
| CONDENSED BALANCED SHEETS | ||
| UNAUDITED | ||
|
September 30, 2015 |
September 30, 2014 |
|
| Assets | ||
| Current Assets | ||
| Cash and cash equivalents | $18,071,210 | $18,191,493 |
| Short-term investments | 7,925,000 | 6,632,000 |
| Accounts receivable, net | 6,010,900 | 5,027,856 |
| Inventories | 7,182,854 | 5,390,342 |
| Other current assets | 1,563,665 | 2,792,692 |
| Total current assets | 40,753,629 | 38,034,383 |
| Property, plant and equipment, net | 5,689,673 | 2,462,250 |
| Other Assets | ||
| Long-term investments | 8,290,000 | 8,302,000 |
| Goodwill | 2,570,511 | 2,570,511 |
| Deferred taxes – long-term | -- | 156,622 |
| Other | 323,804 | 322,132 |
| Total other assets | 11,184,315 | 11,351,265 |
| Total Assets | $57,627,617 | $51,847,898 |
| Liabilities and Shareholders' Equity | ||
| Current Liabilities | ||
| Accounts payable | $2,357,791 | $2,104,526 |
| Accrued compensation | 2,598,661 | 2,749,080 |
| Accrued expenses | 80,803 | 247,658 |
| Total current liabilities | 5,037,255 | 5,101,264 |
| Other Liabilities | ||
| Deferred taxes – long-term | 1,082,887 | -- |
| Deferred rent | 228,345 | -- |
| Total other liabilities | 1,311,232 | -- |
| Total Liabilities | 6,348,487 | 5,101,264 |
|
Commitment and contingencies |
|
|
|
Shareholders' Equity |
||
| Common stock | 137,057 | 137,430 |
| Additional paid-in capital | 55,887,850 | 56,036,989 |
| Accumulated deficit | (4,745,777) | (9,427,785) |
| Total Shareholders' Equity | 51,279,130 | 46,746,634 |
| Total Liabilities and Shareholders' Equity | $57,627,617 | $51,847,898 |
| CLEARFIELD, INC. | ||
| CONDENSED STATEMENT OF CASH FLOWS | ||
| UNAUDITED | ||
|
Year Ended September 30, |
Year Ended September 30, |
|
| 2015 | 2014 | |
| Cash flows from operating activities: | ||
| Net income | $4,682,008 | $5,432,851 |
| Adjustments to reconcile net income to cash provided by operating activities: | ||
| Depreciation and amortization | 1,216,083 | 699,869 |
| Deferred income taxes | 2,342,045 | 3,019,626 |
| Loss on disposal of assets | 23,196 | 12,809 |
| Stock-based compensation expense | 1,074,727 | 794,865 |
| Changes in operating assets and liabilities: | ||
| Accounts receivable, net | (983,044) | 2,809,687 |
| Inventories | (1,792,512) | 236,422 |
| Other current assets | 121,381 | (243,339) |
| Accounts payable and accrued expenses | 164,336 | (1,234,039) |
| Net cash provided by operating activities | 6,848,220 | 11,528,751 |
| Cash flows from investing activities: | ||
| Purchases of property and equipment | (4,518,782) | (1,418,461) |
| Purchase of investments | (10,374,000) | (8,899,000) |
| Proceeds from sale of property and equipment | 79,936 | 40,908 |
| Patent additions | (24,418) | (36,544) |
| Sale of investments | 9,093,000 | 6,727,000 |
| Net cash used in investing activities | (5,744,264) | (3,586,097) |
| Cash flows from financing activities: | ||
| Repurchase of common stock | (849,157) | -- |
| Proceeds from issuance of common stock under employee stock purchase plan | 211,459 | 185,584 |
| Proceeds from issuance of common stock | 43,106 | 646,453 |
| Excess tax benefit from exercise of stock options | 9,660 | 8,474 |
| Tax withholding related to vesting of restricted stock grants and exercise of stock options | (639,307) | (399,629) |
| Net cash (used in) provided by financing activities | (1,224,239) | 440,882 |
| (Decrease) increase in cash and cash equivalents | (120,283) | 8,383,536 |
| Cash and cash equivalents at beginning of year | 18,191,493 | 9,807,957 |
| Cash and cash equivalents at end of year | $18,071,210 | $18,191,493 |
| Supplemental cash flow information | ||
| Cash paid during the year for income taxes | $50,850 | $361,284 |
| Non-cash financing activities | ||
| Cashless exercise of stock options | $207,738 | $297,883 |
CONTACT: Investor Relations Contact:
Matt Glover and Najim Mostamand
Liolios Group, Inc.
949-574-3860
[email protected]
EXHIBIT 99.2
