Annual report pursuant to Section 13 and 15(d)

Note 6 - Leases

v3.20.2
Note 6 - Leases
12 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]
NOTE
6
- LEASES
 
Clearfield leases a
71,000
square foot facility at
7050
Winnetka Avenue North, Brooklyn Park, Minnesota consisting of our corporate offices, manufacturing and warehouse space. The lease term is
ten
years and
two
months and commenced on
January 1, 2015. 
On
June 30, 2019,
the Company amended its lease to add
14,000
square feet to this facility, with the lease term for the additional space coterminous with the original lease. Upon proper notice and payment of a termination fee of approximately
$249,000,
the Company has a
one
-time option to terminate the lease effective as of the last day of the
eighth
year of the term after the Company commenced paying base rent. The renewal and termination options have
not
been included within the lease term because it is
not
reasonably certain that we will exercise either option.
The Company's indirect lease for a
46,000
square foot manufacturing facility in Tijuana, Mexico, expired on
July 31, 2020
and was continued as an indirect lease on a month-to-month basis until we entered into a new indirect lease for this facility subsequent to the
2020
fiscal year end. Refer to Note
7
- Subsequent Events for further detail.
 
On
February 12, 2020,
the Company entered into an indirect lease arrangement for an additional
52,000
square foot manufacturing facility in Tijuana, Mexico. The lease term is approximately
42
months and commenced on
February 12, 2020.
The lease contains written options to renew for
two
additional consecutive periods of
three
years each.
 
Right-of-use lease assets and lease liabilities are recognized as of the commencement date based on the present value of the remaining lease payments over the lease term which includes renewal periods we are reasonably certain to exercise. Our leases do
not
contain any material residual value guarantees or material restrictive covenants. As of
September 30, 2020,
we do
not
have material lease commitments that have
not
commenced.
 
Operating lease expense included within cost of sales and selling, general and administrative expense was as follows for the year ended
September 30, 2020:
 
Operating lease expense under ASC842, Leases, within:     Year ended September 30, 2020  
Cost of sales   $
904,638
 
Selling, general and administrative    
221,507
 
Total lease expense   $
1,126,145
 
  
Future maturities of lease liabilities were as follows as of
September 30, 2020:
 
      Operating
Leases
 
FY2021   $
752,423
 
FY2022        
FY2023    
744,963
 
FY2024    
516,725
 
FY2025    
217,552
 
Thereafter    
-
 
Total lease payments   $
3,004,465
 
Less: Interest    
(209,538
)
Present value of lease liabilities   $
2,794,927
 
         
 
 
The weighted average term and weighted average discount rate for our leases as of
September 30, 2020
were
3.99
years and
3.48%,
respectively. For the year ended
September 30, 2020,
the operating cash outflows from our leases were
$812,107.
 
Rent expense for our operating leases as accounted for under ASC
840,
Leases
, included within cost of sales and selling, general and administrative expense was as follows for the year ended
September 30, 2019.
 
Operating lease expense under ASC840, Leases, within:     Year ended September 30, 2019  
Cost of sales   $
678,652
 
Selling, general and administrative    
219,216
 
Total lease expense   $
897,868
 
 
As previously disclosed in the Notes to the Financial Statements in our
2019
Annual Report on Form
10
-K, prior to the adoption of ASU
2016
-
02,
 
Leases (Topic
842
)
, the future minimum payments required under lease agreements were as follows:
 
    As of September 30, 2019
FY2020   $
643,040
 
FY2021    
479,213
 
FY2022    
491,397
 
FY2023    
503,895
 
FY2024    
516,720
 
Thereafter    
217,551
 
Total minimum lease payments   $
2,851,816