Clearfield, Inc. Accelerates Momentum in Third Quarter of FY 09

Revenue Gains and Gross Profit Improvement

Result in Increase in Operating Income Over Prior Year Period


   --  Net Sales:                $7.2M in third quarter of FY 2009 Up 16% from
                                 previous year period

   --  Gross Profit:             $2.7M in third quarter of FY 2009 Up 27% from
                                 previous year period

   --  Gross Margin:             37.4% in third quarter of FY 2009 Up from 34.2%
                                 in previous year period

   --  Income from Operations:   $542K in third quarter of FY 2009 Up 158% from
                                 previous year period

   --  Net income per share:     $0.05 for third quarter of FY 2009 Up from $.02
                                 in previous year period

Clearfield, Inc. (NASDAQ: CLFD) today announced results for the third fiscal quarter of 2009 which ended June 30, 2009. Revenue for the current quarter was $7,160,000 in comparison to $6,165,000 for the third quarter of 2008, an increase of 16 percent. Gross profit for the third quarter of 2009 was $2,684,000 in comparison to $2,108,000 for the prior year period, an increase of 27 percent. The Company reported net income of $587,000 or $.05 per share for the third quarter of 2009 compared to $249,000 or $.02 per share for the prior year period.

For the three quarters of fiscal 2009 ending June 30, 2009, net sales increased 12% to $18,326,000. Operating income improved to $880,000, an increase of 212% over the previous year. Net income improved to $936,000 or $.08 per share, an increase of 23% from the previous year.

Third Quarter Fiscal 2009 Results

Net sales totaled $7,160,000 for the third quarter of fiscal 2009, compared to $6,165,000 for the third quarter of fiscal 2008 and $5,233,000 for the second quarter of fiscal 2009. The significant increase was the result of strong acceptance of the FieldSmart(TM) product line throughout independent telephone market. Revenue was heavily influenced by sales to a single distributor in the eastern region of the U.S.

Third quarter margins improved more than three percentage points to 37.4%, up from 34.2% in the same quarter of last year and up from 34.7% in the previous quarter of this fiscal year. This improvement was the result of increasing volume as well as product mix weighted toward the FieldSmart architecture. Manufacturing efficiencies and sourcing strategies continue to bear fruit as evidenced by the lower cost of goods.

Operating expenses were $2,142,000, compared to $1,898,000 in the same quarter 2008, an increase of 13% and up from $1,690,000 in the previous quarter of this fiscal year. Increased expenses include an investment in engineering personnel and development resources aimed at continued and rapid product introductions throughout the rest of this fiscal year and into 2010. Additional expenses were also recorded in Selling, General & Administrative due to increased performance-based compensation programs consistent with the company compensation policy.

Operating income improved to $542,000, an increase of 158% over the previous year.

Net income improved to $587,000, an increase of 136% from the previous year. The company recognized a one-time gain of $43,000 due to a default on the lease by the party currently renting the company's excess manufacturing plant in Aberdeen, S.D. In prior quarters, the Company had generated rental income from this facility.

Impact of Net Operating Loss Carry Forwards

The Company through outside experts completed a study relating to its net operating loss carryforwards and determined that there is no limitation on their use.

Moving forward, the Company's results of operations may be impacted by the effect of certain accounting matters, including the annual evaluation of goodwill for impairment and annual review of the valuation allowance recorded against its deferred tax assets consisting primarily of net operating loss carryforwards.

Comments on Operations

"Clearfield's FieldSmart(TM) product offering is the only fiber management platform in the industry that is built on a consistent architecture for the inside plant, outside plant and access networks," explains Cheryl Beranek, president & CEO of Clearfield. "Our strong performance this quarter is evidence that our target customer groups are recognizing the cost savings potential of our architecture."

"Economic factors continue to hamper our growth, as many projects are slow or are remaining in a pilot stage," continued Beranek. "The summer build season is a positive influence, but questions surrounding the American Recovery and Reinvestment Act continue to have a delay-effect on our market. We remain optimistic, but also realistic as program funding will not be readily available to our clients until late this year or early in 2010."

"We remain committed to profitable growth within our industry as this quarter's 4% increase in shareholder equity demonstrates," concluded Beranek.



                 Three Months Ended                    Nine Months Ended

                 June 30,                              June 30,

                     2009               2008               2009               2008

Revenues         $   7,160,039      $   6,165,379      $   18,325,930     $   16,305,312

Cost of sales        4,475,573          4,057,560          11,809,104         10,982,458

Gross profit         2,684,466          2,107,819          6,516,826          5,322,854


general and          2,142,074          1,897,625          5,637,002          5,041,336

Income from          542,392            210,194            879,824            281,518

Other income

Interest             34,764             49,920             83,758             217,011

Interest             (1,260     )       (2,530     )       (4,751     )       (8,502     )

Other income         48,243             13,681             75,818             43,082

                     81,747             61,071             154,825            251,591

Income before        624,139            271,265            1,034,649          533,109
income taxes

Income tax           37,119             22,371             99,093             70,948

Net income
from                 587,020            248,894            935,556            462,161

Net income
from                 -                  -                  -                  342,390

Net loss on
disposal of
                     -                  -                  -                  (44,951    )

Total income
from                 -                  -                  -                  297,439

Net income       $   587,020        $   248,894        $   935,556        $   759,600

Net income per

Continuing         $ .05              $ .02              $ .08              $ .04

Discontinued       $ .00              $ .00              $ .00              $ .02

Basic and          $ .05              $ .02              $ .08              $ .06

average shares

Basic                11,938,131         11,872,331         11,938,131         11,872,331

Diluted              11,945,419         11,872,331         12,945,419         11,872,331

                                             June 30, 2009    September 30, 2008


Current Assets

Cash and cash equivalents                  $ 3,769,843      $ 4,333,709

Short-term investments                       2,457,663        -

Accounts receivable, net                     3,075,809        2,533,447

Inventories                                  1,547,788        2,088,769

Other current assets                         160,063          115,344

Total current assets                         11,011,166       9,071,269

Property, plant and equipment, net           1,352,372        1,604,202

Other Assets

Long-term investments                        2,566,000        3,143,941

Goodwill                                     2,570,511        2,570,511

Other                                        176,368          176,368

Notes receivable                             402,562          432,846

Total other assets                           5,715,441        6,323,666

Total Assets                               $ 18,078,979     $ 16,999,137

Liabilities and Shareholders' Equity

Current Liabilities

Current maturities of long-term debt       $ 49,106         $ 62,126

Accounts payable                             1,712,155        1,849,633

Accrued compensation                         1,042,590        903,276

Accrued expenses                             73,037           301,859

Total current liabilities                    2,876,888        3,116,894

Long-term debt, net of current maturities    -                33,081

Deferred rent                                89,817           89,641

Deferred income taxes                        233,897          166,904

Total Liabilities                            3,200,602        3,406,520

Shareholders' Equity

Undesignated shares, 4,999,500 authorized
shares;                                      -                -

no shares issued and outstanding

Preferred stock, $.01 par value; 500
shares;                                      -                -

no shares outstanding

Common stock, authorized 50,000,000, $ .01
par value;

11,938,131 shares issued and outstanding     119,381          119,381
at June 30, 2009

and September 30, 2008

Additional paid-in capital                   52,252,423       52,166,219

Accumulated deficit                          (37,493,427)     (38,428,983)

Accumulated other comprehensive loss         -                (264,000)

Total shareholders' equity                   14,878,377       13,592,617

Total Liabilities and Shareholders' Equity $ 18,078,979     $ 16,999,137

About Clearfield

Clearfield, Inc. (Nasdaq: CLFD) designs and manufactures the WaveSmart platform of powered optical signal products, including the WaveSmart PowerNode 1550 EDFA, and the FieldSmart Fiber Management Platform, which includes its latest generation FieldSmart Fiber Distribution System (FDS), FieldSmart Fiber Scalability Center (FSC) and FieldSmart Fiber Delivery Point (FDP) series. The FDS, FSC and FDP product lines support a wide range of panel configurations, densities, connectors and adapter options, and are offered alongside an assortment of passive optical components. Clearfield provides a complete line of fiber and copper assemblies for inside plant, outside plant and access networks.

Statements regarding Clearfield's anticipated performance are forward-looking and therefore involve risks and uncertainties, including but not limited to: the effect of the significant downturn in the U.S. economy on Clearfield's customers; the impact of the American Recovery and Reinvestment Act or any other legislation on customer demand and purchasing patterns; cyclical selling cycles; need to introduce new products and effectively compete against competitive products; dependence on third-party manufacturers; limited experience in manufacturing, reliance on key customers; rapid changes in technology; the negative effect of product defects; the need to protect its intellectual property; the impact on its financial results or stock price of its ability to use its deferred tax asset, consisting primarily of net operating loss carryforwards, to offset future taxable income; the valuation of its goodwill and the effect of its stock price, among other factors, on the evaluation of goodwill; and other factors set forth in Clearfield's filings with the Securities and Exchange Commission.

    Source: Clearfield, Inc.