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Note 6 - Leases | 12 Months Ended
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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 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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