10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2018

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission File No: 0-11740

MESA LABORATORIES, INC.

(Exact name of registrant as specified in its charter)

Colorado	84-0872291
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification number)
12100 West Sixth Avenue
Lakewood, Colorado	80228
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 987-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐     No ☒

Indicate the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date:

There were 3,868,491 shares of the Issuer’s common stock, no par value, outstanding as of January 25, 2019.

Table of Contents

Part I. Financial Information		1
	Item 1. Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive (Loss) Income	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Notes to Condensed Consolidated Financial Statements	7
	Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.  Quantitative and Qualitative Disclosures about Market Risk	24
	Item 4.  Controls and Procedures	24
Part II. Other Information		25
	Item 1.  Legal Proceedings	25
	Item 1A.  Risk factors	25
	Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	25
	Item 6.  Exhibits	26
	Signatures	27
	Exhibit 31.1 Certifications Pursuant to Rule 13a-14(a)
	Exhibit 31.2 Certifications Pursuant to Rule 13a-14(a)
	Exhibit 32.1 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350
	Exhibit 32.2 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350

Part I. Financial Information

Item 1. Financial Statements

Mesa Laboratories, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share amounts)

	December 31,			March 31,
	2018			2018
ASSETS
Current assets:
Cash and cash equivalents	$	5,729		$	5,469
Accounts receivable, less allowances of $128 and $179, respectively		13,254			14,302
Inventories, net		7,606			9,228
Prepaid income taxes		4,476			273
Prepaid expenses and other		1,496			782
Assets held for sale		--			1,934
Total current assets		32,561			31,988
Property, plant and equipment, net		22,997			23,593
Deferred taxes		118			127
Intangibles, net		38,336			42,850
Goodwill		64,148			65,543
Total assets	$	158,160		$	164,101
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,426		$	2,380
Accrued salaries and payroll taxes		6,077			4,284
Current portion of long-term debt		2,000			1,625
Unearned revenues		3,728			3,921
Current portion of contingent consideration		45			709
Income taxes payable		--			1,008
Estimated legal liability		3,300			--
Other accrued expenses		3,207			3,363
Total current liabilities		20,783			17,290
Deferred income taxes		2,457			2,621
Long-term debt, net of debt issuance costs and current portion		27,213			44,635
Other long-term liabilities		114			194
Total liabilities		50,567			64,740
Stockholders’ equity:
Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 3,859,327 and 3,801,439 shares, respectively		36,528			30,516
Retained earnings		72,520			68,281
Accumulated other comprehensive (loss) income		(1,455	)		564
Total stockholders’ equity		107,593			99,361
Total liabilities and stockholders’ equity	$	158,160		$	164,101

See accompanying notes to condensed consolidated financial statements.

Page 1

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

	Three Months Ended December 31,					Nine Months Ended December 31,
	2018		2017			2018		2017
Revenues	$	26,682	$	23,671		$	76,689	$	69,298
Cost of revenues		11,048		10,990			31,387		30,713
Gross profit		15,634		12,681			45,302		38,585
Operating expenses:
Selling		2,054		1,942			5,748		6,909
General and administrative		7,731		6,256			22,824		19,525
Research and development		860		752			2,539		2,790
Impairment loss on goodwill and long-lived assets		3,669		13,819			3,669		13,819
Estimated legal settlement		--		--			3,300		--
Total operating expenses		14,314		22,769			38,080		43,043
Operating income (loss)		1,320		(10,088	)		7,222		(4,458	)
Other expense, net		372		438			568		1,659
Earnings (loss) before income taxes		948		(10,526	)		6,654		(6,117	)
Income tax expense		90		560			572		1,099
Net income (loss)	$	858	$	(11,086	)	$	6,082	$	(7,216	)
Earnings (loss) per share:
Basic	$	0.22	$	(2.93	)	$	1.58	$	(1.92	)
Diluted		0.21		(2.93	)		1.51		(1.92	)
Weighted-average common shares outstanding:
Basic		3,855		3,781			3,840		3,765
Diluted		4,045		3,781			4,037		3,765

See accompanying notes to condensed consolidated financial statements.

Page 2

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(unaudited)

(in thousands)

	Three Months Ended December 31,						Nine Months Ended December 31,
	2018			2017			2018			2017
Net income	$	858		$	(11,086	)	$	6,082		$	(7,216	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		(658	)		181			(2,019	)		1,880
Comprehensive (loss) income	$	200		$	(10,905	)	$	4,063		$	(5,336	)

See accompanying notes to condensed consolidated financial statements.

Page 3

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Nine Months Ended December 31,
	2018			2017
				(as adjusted (A))
Cash flows from operating activities:
Net income	$	6,082		$	(7,216	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,162			6,981
Stock-based compensation		2,424			1,423
Impairment loss on goodwill and long-lived assets		3,669			13,819
Change in inventory reserve		49			2,120
Gain on disposition of assets		(288	)		(116	)
Deferred taxes		--			(1,077	)
Foreign currency adjustments		--			(255	)
Adjustment to contingent consideration		(32	)		300
Other		135			83
Cash provided by changes in operating assets and liabilities:
Accounts receivable, net		893			2,621
Inventories, net		1,302			1,414
Prepaid expenses and other current assets		(4,611	)		(1,687	)
Accounts payable		311			(139	)
Accrued liabilities and taxes payable		3,375			(1,751	)
Unearned revenues		(179	)		(442	)
Net cash provided by operating activities		20,292			16,078
Cash flows from investing activities:
Acquisitions		(4,840	)		(15,433	)
Proceeds from sale of assets		2,222			1,133
Purchases of property, plant and equipment		(1,207	)		(2,540	)
Net cash used in investing activities		(3,825	)		(16,840	)
Cash flows from financing activities:
Proceeds from the issuance of debt		2,000			11,000
Payments on debt		(19,125	)		(9,750	)
Contingent consideration		(677	)		(905	)
Dividends		(1,843	)		(1,807	)
Proceeds from the exercise of stock options		3,588			2,346
Net cash (used in) provided by financing activities		(16,057	)		884
Effect of exchange rate changes on cash and cash equivalents		(150	)		(99	)
Net increase in cash and cash equivalents		260			23
Cash and cash equivalents at the beginning of the period		5,469			5,820
Cash and cash equivalents at the end of the period	$	5,729		$	5,843
Cash paid for:
Income taxes paid	$	5,634		$	4,191
Interest paid		1,293			1,477

^(A)  – Contingent consideration is classified as a financing activity pursuant to ASU 2016-15.

See accompanying notes to condensed consolidated financial statements.

Page 4

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, except per share data)

	Common Stock
	Number of Shares		Amount		Retained Earnings			AOCI*			Total
March 31, 2018		3,801,439	$	30,516	$	68,281		$	564		$	99,361
Common stock issued for conversion of stock options net of 1,620 shares returned as payment		46,586		3,043		--			--			3,043
Dividends paid, $0.16 per share		--		--		(610	)		--			(610	)
Stock-based compensation		--		739		--			--			739
Foreign currency translation		--		--		--			(1,312	)		(1,312	)
Net income		--		--		4,230			--			4,230
June 30, 2018		3,848,025		34,298		71,901			(748	)		105,451
Common stock issued for conversion of stock options net of 477 shares returned as payment		4,722		133		--			--			133
Dividends paid, $0.16 per share		--		--		(616	)		--			(616	)
Stock-based compensation		--		990		--			--			990
Foreign currency translation		--		--		--			(49	)		(49	)
Net income		--		--		994			--			994
September 30, 2018		3,852,747		35,421		72,279			(797	)		106,903
Common stock issued to employees under compensation plans, net of 485 shares returned as payment		6,580		412		--			--			412
Dividends paid, $0.16 per share		--		--		(617	)		--			(617	)
Stock-based compensation		--		695		--			--			695
Foreign currency translation		--		--		--			(658	)		(658	)
Net income		--		--		858			--			858
December 31, 2018		3,859,327	$	36,528	$	72,520		$	(1,455	)	$	107,593

*Accumulated Other Comprehensive Income (Loss).

See accompanying notes to condensed consolidated financial statements.

Page 5

Mesa Laboratories, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, except per share data)

	Common Stock
	Number of Shares		Amount		Retained Earnings			AOCI*			Total
March 31, 2017		3,734,704	$	25,925	$	73,656		$	(1,760	)	$	97,821
Common stock issued for conversion of stock options net of 3,795 shares returned as payment		23,471		963		--			--			963
Dividends paid, $0.16 per share		--		--		(601	)		--			(601	)
Stock-based compensation		--		540		--			--			540
Foreign Currency Translation		--		--		--			751			751
Net income		--		--		1,517			--			1,517
June 30, 2017		3,758,175		27,428		74,572			(1,009	)		100,991
Common stock issued for conversion of stock options net of 1,541 shares returned as payment		21,542		1,101		--			--			1,101
Dividends paid, $0.16 per share		--		--		(600	)		--			(600	)
Stock-based compensation		--		445		--			--			445
Foreign Currency Translation		--		--		--			948			948
Net income		--		--		2,353			--			2,353
September 30, 2017		3,779,717		28,974		76,325			(61	)		105,238
Common stock issued to employees under compensation plans, net of 304 shares returned as payment		2,089		282		--			--			282
Dividends paid, $0.16 per share		--		--		(606	)		--			(606	)
Stock-based compensation		--		438		--			--			438
Foreign Currency Translation		--		--		--			181			181
Net income		--		--		(11,086	)		--			(11,086	)
December 31, 2017		3,781,806	$	29,694	$	64,633		$	120		$	94,447

*Accumulated Other Comprehensive Income (Loss).

See accompanying notes to condensed consolidated financial statements.

Page 6

Mesa Laboratories, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(dollar amounts in thousands, unless otherwise specified)

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business

In this quarterly report on Form 10-Q, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries is collectively referred to as “we,” “us,” “our,” the “Company” or “Mesa.”

We pursue a strategy of focusing primarily on quality control products and services which are sold into niche markets that are driven by regulatory requirements. We prefer markets in which we can establish a strong presence and achieve high gross margins. We are organized into four divisions across nine physical locations. Our Sterilization and Disinfection Control Division manufactures and sells biological, cleaning, and chemical indicators. Biological, cleaning, and chemical indicators are used to assess the effectiveness of sterilization and disinfection processes in the hospital, dental, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the dental industry. Our Instruments Division designs, manufactures, and markets quality control instruments and disposable products utilized in the healthcare, pharmaceutical, food and beverage, medical device, industrial hygiene, and environmental air sampling industries. Our Cold Chain Monitoring Division designs, develops, and markets systems which are used to monitor various environmental parameters such as temperature, humidity, and differential pressure to ensure that critical storage and processing conditions are maintained in hospitals, pharmaceutical and medical device manufacturers, blood banks, pharmacies, and laboratory environments. Our Cold Chain Packaging Division provides packaging development consulting services and thermal packaging products such as coolers, boxes, insulation materials, and phase-change products to control temperature during the customer’s transport of their own products.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such unaudited information includes all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations. The results of operations for the interim periods are not necessarily indicative of results that may be achieved for the entire year. The financial statements and related notes do not include all information and footnotes required by U.S. GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in our annual report on Form 10-K for the year ended March 31, 2018.

Fair Value Measurements

As of December 31, 2018 and March 31, 2018, our financial instruments were categorized as Level 1 (inputs are quoted prices in active markets) and include cash, accounts receivable, accounts payable, accrued liabilities and short-term and long-term debt. With the exception of long-term debt, the carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. Our debt has a variable interest rate, so the carrying amount approximates fair value because interest rates on these instruments approximate the interest rate on debt with similar terms available to us.

Acquisitions

During the three months ended December 31, 2018, we completed the purchase of Point Six Wireless, LLC. We made an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of acquired assets and assumed liabilities. We obtained the information to make the allocation during due diligence and through the use of other information available to us. In the months after closing, we will obtain additional information about the assets and liabilities acquired, including asset appraisals, and we will refine the estimates of the fair value to more accurately allocate the purchase price.

Page 7

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The pronouncement requires lessees to recognize a liability for lease obligations, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to present financial statement users with the ability to assess the amount, timing, and uncertainty of cash flows arising from leases. We have initiated our plan for the adoption and implementation of this new accounting standard, including assessing our lease arrangements, evaluating practical expedients, and making necessary changes to our accounting policies, processes, and internal controls over financial reporting. We expect to adopt the standard using the optional transition method, which will allow us to apply the standard as of the effective date, therefore we will not apply changes to comparative periods presented in our financial statements. We are still assessing the expected impact of the standard on our consolidated balance sheets, but it will not significantly impact our consolidated statements of operations and cash flows.

Recently Adopted Accounting Pronouncements

In August 2018, the Securities and Exchange Commission issued Release No. 33-10532 that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting is the inclusion of the annual disclosure requirement of changes in stockholders’ equity in Rule 3-04 of Regulation S-X to interim periods. We adopted this new rule beginning the quarter ended December 31, 2018 and have included our Consolidated Statements of Stockholders' Equity with this quarterly filing on Form 10-Q.

During the nine months ended December 31, 2018, we elected to early-adopt ASU 2018-15 Intangibles – Goodwill and Other Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”) on a prospective basis. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs of other internal-use software arrangements. Accordingly, we capitalized $206 of costs incurred during the nine months ended December 31, 2018 to implement a hosted enterprise resource planning system to our European subsidiaries. The related asset is held in prepaid expenses and other on the condensed consolidated balance sheets, and we began amortizing the expense to general and administrative costs on our condensed consolidated statements of operations on a straight-line basis over the contractual term of the arrangement.

Effective April 1, 2018, we adopted ASU 2014-09 Revenue from Contracts with Customers (Topic 606) and all related amendments (referred to collectively hereinafter as “ASU 606”) to all contracts on a modified retrospective basis. ASU 606 requires an entity to recognize revenue for the transfer of goods or services equal to the amount it expects to be entitled to receive for the goods and services. The adoption did not have a material impact on our condensed consolidated balance sheets, statements of operations, or cash flows. The primary impact of adoption was the enhancement of disclosures to provide additional clarity regarding how revenue is earned and recognized, and to show revenues at a more disaggregated level, included in Note 2. “Revenue Recognition.”

In March 2018, the FASB issued ASU 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. We adopted the ASU immediately upon release. The amendments in the update provide guidance on when to record and disclose provisional amounts for certain income tax effects of the Tax Cuts and Jobs Act ("TCJA"). The amendments also require any provisional amounts or subsequent adjustments to be included in net income from continuing operations. Additionally, this ASU discusses required disclosures that an entity must make with regard to the TCJA. As of the three months ended December 31, 2018, we have completed our analysis of the TCJA’s income tax effects. the Refer to Note 8. “Income Taxes” for additional information on the TCJA.

The TCJA created a new requirement that global intangible low taxed income earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFC’s U.S. shareholder. Under U.S. GAAP, we are allowed to make an accounting policy choice of how GILTI taxes are treated. We have elected to treat taxes due on future U.S. inclusions in taxable income related to GILTI as current period expenses when incurred (“the period cost method”).

Note 2. Revenue Recognition

We design, manufacture, market, sell, and maintain quality control instruments and software, consumables, and services driven primarily by the regulatory requirements of niche markets. Our consumables, such as biological indicator test strips and packaging materials, are typically used on a standalone basis; however, some, such as calibration solutions, are also critical to the ongoing use of our instruments. Hardware and software sales, such as medical meters, wireless sensor systems, and data loggers are generally driven by our acquisition of new customers, growth of existing customers, or customer replacement of existing equipment. Hardware sales may be offered with perpetual or annual software licenses, which in some cases are required for the hardware to function. We generally generate service revenues from three categories: 1) discrete installation of our hardware and software, 2) discrete but recurring calibration and maintenance of our hardware or 3) contracted and recurring testing and maintenance services and software license subscriptions. We evaluate our revenues internally both by product line as well as by timing of revenue generation and nature of goods and services provided. Typically, discrete revenue is recognized at the shipping point or upon completion of the service, while contracted revenue is recognized over a period of time reflective of the performance obligation period in the applicable contract.

Page 8

Substantially all of our revenues and related receivables are generated from contracts with customers that are 12 months or less in duration. For both discrete and contracted revenue, evidence of an arrangement is typically in the form of a formal contract and/or purchase order. Prices are fixed at the time of the order and no price protections or variables are offered. Collectability is reasonably assured through our customer credit and review process, and payment is typically due within 60 days or less. Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. We elected to adopt the practical expedient that allows us to expense commission costs as incurred.

Our performance obligations related to the sale of instruments and consumables generally consist of the promise to sell tangible goods to distributors or end users. Ownership of these goods is typically transferred at time of shipment, at which point we have satisfied our performance obligation and we recognize revenue.

Our performance obligations related to services may include testing, installation, and/or maintenance of our products, either on-site at our customers’ facilities or in our own calibration laboratories. Performance obligations arise from service contracts when discrete services are contracted in advance and performed at a future time, often at the time of the customer’s choosing. In this case, the performance obligation is satisfied, and revenue is recognized, upon the customer’s acceptance of the completion of the specified work. Alternatively, service revenue may be recognized for contracted services or maintenance provided continually over a period of time, and our performance obligations are satisfied by completing any service that is contractually required, if applicable, or simply by the passage of time if no services are required or requested. For contracted services, revenue is recognized on a straight-line basis over the life of the service contract, which is a faithful depiction of these annual service contracts, which may or may not be invoked.

The following tables present disaggregated revenues for the three and nine months ended December 31, 2018 and December 31, 2017, respectively:

	Three Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	9,853	$	834	$	151	$	1,868	$	12,706
Hardware and Software		110		6,417		1,980		49		8,556
Services		372		2,090		534		135		3,131
Contracted Revenues
Services		1,210		--		1,079		--		2,289
Total Revenues	$	11,545	$	9,341	$	3,744	$	2,052	$	26,682

	Three Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	8,872	$	754	$	36	$	1,345	$	11,007
Hardware and Software		280		5,724		1,332		3		7,339
Services		244		1,704		489		244		2,681
Contracted Revenues
Services		1,234		--		1,410		--		2,644
Total Revenues	$	10,630	$	8,182	$	3,267	$	1,592	$	23,671

Page 9

	Nine Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	29,478	$	2,272	$	351	$	5,139	$	37,240
Hardware and Software		487		18,039		4,951		105		23,582
Services		884		6,465		1,507		277		9,133
Contracted Revenues
Services		3,626		--		3,108		--		6,734
Total Revenues	$	34,475	$	26,776	$	9,917	$	5,521	$	76,689

	Nine Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	25,810	$	2,314	$	107	$	3,861	$	32,092
Hardware and Software		647		16,811		3,800		72		21,330
Services		772		5,643		1,283		464		8,162
Contracted Revenues
Services		3,569		--		4,145		--		7,714
Total Revenues	$	30,798	$	24,768	$	9,335	$	4,397	$	69,298

Contract Balances

Our contracts have varying payment terms and conditions. Some customers prepay for services, resulting in unearned revenues or customer deposits, called contract liabilities, which are included within other accrued expenses and unearned revenues in the accompanying condensed consolidated balance sheets. Contract assets would exist when sales are recorded (i.e. the control of the goods or services has been transferred to the customer), but customer payment is contingent on a future event besides the passage of time (such as satisfaction of additional performance obligations). We do not have any contract assets. Unbilled receivables, which are not classified as contract assets, represent arrangements in which sales have been recorded prior to billing and right to payment is unconditional.

A summary of contract liabilities is as follows:

Contract liabilities balance as of March 31, 2018	$	4,147
Prior year liabilities recognized in revenues during the nine months ended December 31, 2018		(3,504	)
Contract liabilities added during the nine months ended December 31, 2018, net of revenues recognized		3,631
Contract liabilities balance as of December 31, 2018	$	4,274

Note 3. Impairment Loss on Goodwill and Long-Lived Assets

During the nine months ended December 31, 2018, we performed an impairment analysis on our Cold Chain Packaging reporting segment as the segment’s financial results continued to fall short of expectations. Specifically, rising commodity costs used in the segment’s principal product have increased over the past nine months, eroding the gross profit margin of the segment. We determined that the long-lived assets and goodwill associated with our Cold Chain Packaging reporting segment were impaired and we recognized non-cash impairment charge of $1,028 on goodwill and $2,641 on long-lived assets, in impairment loss on goodwill and long-lived assets on the accompanying condensed consolidated statements of operations. The remaining goodwill and intangible assets associated with this segment are $300 and $809, respectively as of December 31, 2018. The fair value of the impaired assets was determined using Level 3 inputs (unobservable inputs) based on a discounted cash flow method.   

Page 10

Note 4. Inventories

Inventories consist of the following:

	December 31, 2018			March 31, 2018
Raw materials	$	7,485		$	9,059
Work-in-process		379			380
Finished goods		3,154			3,152
Less: reserve		(3,412	)		(3,363	)
Inventories, net	$	7,606		$	9,228

Note 5. Facility Relocation

In August 2016, we announced that we planned to shut down both our Omaha and Traverse City manufacturing facilities and relocate those operations to the new Bozeman building. The move of those two facilities, along with the current Bozeman operations, began in March 2017 and was completed as of June 30, 2018. The total cost of the relocation was $1,584 (which is comprised primarily of facility moving expenses, retention bonuses for existing personnel and payroll costs for duplicative personnel during the transition period) and these costs pertain to the Sterilization and Disinfection Control Division.

Facility relocation amounts accrued and paid for the nine months ended December 30, 2018 are as follows:

Balance at March 31, 2018	408
Facility Relocation Expense	17
Cash payments	(425	)
Balance at December 31, 2018	-

We completed the sale of our old Bozeman facility during the nine months ended December 31, 2018, for $2,222 (net of commissions) resulting in a gain of $288, which is recorded in other (income) expense, net on our condensed consolidated statements of operations.

Note 6. Long-Term Debt

Long-term debt consists of the following:

	December 31, 2018			March 31, 2018
Line of credit (3.813%, as of December 31, 2018)	$	12,000		$	28,000
Term loan (3.875% as of December 31, 2018)		17,500			18,625
Less: discount		(287	)		(365	)
Less: current portion		(2,000	)		(1,625	)
Long-term portion	$	27,213		$	44,635

On March 1, 2017, we entered into a five-year agreement (the “Credit Facility”) for an $80,000 revolving line of credit (“Line of Credit”), a $20,000 term loan (“Term Loan”) and up to $2,500 of letters of credit with a banking syndicate of four banks. In addition, the Credit Facility provides a post-closing accordion feature which allows for the Company to request to increase the Line of Credit or Term Loan up to an additional $100,000.

Line of Credit and Term Loan indebtedness bears interest at either: (1) LIBOR, as defined in the agreement, plus an applicable margin ranging from 1.50% to 2.50%; or (2) the alternate base rate (“ABR”), which is the greater of JPMorgan’s prime rate or the federal funds effective rate or the overnight bank funding rate plus 0.5%. We elect the interest rate with each borrowing under the line of credit. In addition, there is an unused line fee of 0.15% to 0.35%. Letter of credit fees are based on the applicable LIBOR rate.

Page 11

The Credit Facility is secured by all of our assets and requires us to maintain a ratio of funded debt to our trailing four quarters of EBIDTA (the “Leverage Ratio”), as defined in the agreement, of less than 3.0 to 1.0, provided that, we may once during the term of the Credit Facility, in connection with a Permitted Acquisition for which the aggregate consideration paid or to be paid in respect thereof equals or exceeds $20,000, elect to increase the maximum Leverage Ratio permitted hereunder to (i) 3.50 to 1.00 for a period of four consecutive fiscal quarters commencing with the fiscal quarter in which such Permitted Acquisition occurs (the “Initial Holiday Period”) and (ii) 3.25 to 1.00 for the period of four consecutive fiscal quarters immediately following the Initial Holiday Period. The Credit Facility also requires us to maintain a minimum fixed charge coverage ratio of less than 1.25 to 1.0. We were in compliance with all debt covenants as of December 31, 2018.

As of December 31, 2018, future contractual maturities of debt are as follows:

For the year ending March 31,
2019	$	500
2020		2,125
2021		2,625
2022		24,250
Total	$	29,500

Subsequent to December 2018, we made a $3,000 payment under our line of credit.

Note 7. Stock-Based Compensation

During the nine months ended December 31, 2018, we granted restricted stock units (“RSUs”) on 17,458 shares of our common stock to eligible employees. The weighted average grant date fair value of the RSUs was $154.91 per share. The RSUs generally vest in equal installments on the anniversary of the grant date over a period of five years. During the nine months ended December 31, 2018, 2,000 RSUs vested, and 1,445 RSUs were forfeited or cancelled.

During the nine months ended December 31, 2018, we awarded 11,385 performance share units (“PSUs”) that are subject to both service and performance conditions to eligible employees. The PSUs had a grant date fair value of $192.99 per share and vest both based on our achievement of specific performance criteria for the three-year period from April 1, 2018 through March 31, 2021, as well as continued service through June 15, 2021. The quantity of shares that will be issued upon vesting will range from 0 percent to 400 percent of the targeted number of shares; if the defined minimum targets are not met, then no shares will vest. During the nine months ended December 31, 2018, 1,050 PSUs were forfeited.

During the nine months ended December 31, 2018, we granted non-qualified stock options (“NQSOs”) on 25,544 shares of common stock to eligible employees. The weighted-average grant date fair value of the NQSOs was $53.93 per share with a weighted average exercise price of $144.65 per share based on the closing price of the common stock on the date of grant. The NQSOs generally vest in equal installments on the anniversary of the grant date over a period of five years.

Amounts recognized in the condensed consolidated financial statements related to stock-based compensation are as follows:

	Three Months Ended December 31,					Nine Months Ended December 31,
	2018			2017		2018			2017
Stock-based compensation expense	$	695		$	438	$	2,424		$	1,423
Amount of income tax (benefit) expense recognized in earnings		(160	)		99		(1,018	)		(893	)
Stock-based compensation, net of tax	$	535		$	537	$	1,406		$	530
Benefit to earnings per share
Basic	$	0.14		$	0.14	$	0.37		$	0.14
Diluted		0.13			0.14		0.35			0.14

Stock-based compensation expense is included in cost of revenues, selling, general and administrative, and research and development expense in the accompanying condensed consolidated statements of operations.

Page 12

The following is a summary of stock option and non-vested stock award activity for the nine months ended December 31, 2018 (shares in thousands):

	Stock Options					Non-Vested Stock Awards
	Number of Shares			Weighted- Average Exercise Price per Share		Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at March 31, 2018		458		$	86.38		9		$	125.68
Awards granted		26			144.65		29			169.94
Awards forfeited or expired		(36	)		98.91		(3	)		171.51
Awards exercised or vested		(58	)		69.75		(2	)		163.47
Outstanding as of December 31, 2018		390		$	91.58		33		$	128.04
Exercisable at December 31, 2018		151

We issue shares in connection with stock-based compensation pursuant to the Mesa Laboratories, Inc. 2014 Equity Plan (the “2014 Equity Plan”). For the purposes of counting the shares remaining as available under the 2014 Incentive Plan, each share issuable pursuant to outstanding full value awards, such as RSUs and PSUs, counts as five shares issued, whereas each share underlying a stock option counts as one share issued. Under the 2014 Equity Plan, 1,100,000 shares of common stock have been authorized and reserved for eligible participants, of which 611,504 shares were available for future grants as of December 31, 2018.

Note 8. Income Taxes

For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income. Each quarter, our estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. Additionally, the tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, impairments of non-deductible goodwill, excess benefits from stock-based compensation, and changes in tax reserves resulting from the finalization of tax audits or reviews are examples of significant unusual or infrequently occurring items that are recognized as discrete items in the interim period in which the event occurs. There is a potential for volatility of the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, settlement with taxing authorities, and foreign currency fluctuations.

On December 22, 2017, the Tax Cuts and Jobs Act ("TCJA") was enacted in the U.S., making significant changes to U.S. tax law. The TCJA reduces the U.S. federal corporate income tax rate from 34 percent to 21 percent, requires companies to pay a one-time transition tax on certain un-remitted earnings of foreign subsidiaries that were previously tax deferred, generally eliminates U.S. federal income tax on dividends from foreign subsidiaries, creates new taxes on certain foreign-sourced earnings, repeals the Section 199 deduction, and imposes limitations on executive compensation under Section 162(m).

We have completed our analysis of the TCJA’s income tax effects. In total, the TCJA resulted in a net tax expense of $43. The final effect of the TCJA’s one-time transition tax was a tax liability of $322. During the nine months ended December 31, 2018, we re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. The amount recorded related to the re-measurement of our deferred tax balance was a benefit of $279.

Our effective income tax rate was 9.5 percent and (5.3) percent for the three months ended December 31, 2018 and December 31, 2017, respectively; and 8.6 percent and (18.0) percent for the nine months ended December 31, 2018 and December 31, 2017, respectively. The effective tax rate for the three and nine months ended December 31, 2018 differed from the statutory federal rate of 21 percent primarily due to the impact of the state income taxes, share-based payment awards for employees, and the foreign rate differential.

Since we are subject to audit by various taxing authorities, it is reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months. However, we do not expect the change, if any, to have a material effect on our financial condition or results of operations within the next 12 months.

Page 13

Note 9. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share (“diluted EPS”) is computed similarly to basic earnings per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Potentially dilutive securities include common shares related to stock options and non-vested stock awards (collectively “stock awards”). Stock awards are excluded from the calculation of diluted EPS in the event that they are subject to performance conditions or are antidilutive.

The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share (shares in thousands):

	Three Months Ended December 31,					Nine Months Ended December 31,
	2018		2017			2018		2017
Net income (loss) available for shareholders	$	858	$	(11,086	)	$	6,082	$	(7,216	)
Weighted average outstanding shares of common stock		3,855		3,781			3,840		3,765
Dilutive effect of stock options		180		--			182		--
Dilutive effect of non-vested shares		10		--			15		--
Fully diluted shares		4,045		3,781			4,037		3,765
Basic	$	0.22	$	(2.93	)	$	1.58	$	(1.92	)
Diluted	$	0.21	$	(2.93	)	$	1.51	$	(1.92	)

The following stock awards were excluded from the calculation of diluted EPS:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2018		2017		2018		2017
Stock awards that were anti-dilutive		1		501		23		501
Stock awards subject to performance conditions		10		-		9		-
Total stock awards excluded from diluted EPS		11		501		32		501

Note 10. Commitments and Contingencies

In February 2018, Dr. James L. Orrington II filed a purported civil class action in the United States District Court for the Northern District of Illinois, Eastern Division, alleging that we sent unsolicited advertisements to telephone facsimile machines. The complaint includes counts alleging violations of the Telephone Consumer Protection Act (“TCPA”), the Illinois Consumer Fraud Act, Conversion, Nuisance, and Trespass to Chattels.  The plaintiff seeks monetary damages, injunctive relief, and attorneys’ fees. Additionally, in June 2018, Rowan Family Dentistry, Inc. filed a purported class action complaint in the United States District Court for the District of Colorado making substantially the same claims as Dr. James L. Orrington II and seeking substantially the same relief. During the nine months ended December 31, 2018, we recorded an expense of $3,300 as an estimate of our potential loss associated with the matter. The expense is recorded as estimated legal settlement on our condensed consolidated statements of operations and a corresponding liability is included as estimated legal liability on our condensed consolidated balance sheets. In January 2019, we received preliminary court approval of a class action settlement with Dr. James L. Orrington II in the amount of $3,300. We will continue to vigorously defend the aforementioned cases and while we believe that the liability recorded as of December 31, 2018 approximates the amount that we will ultimately pay, it is possible that we will be subject to liabilities greater or less than the current amount accrued.

Page 14

Note 11. Segment Information

We have four reporting segments: Sterilization and Disinfection Control, Instruments, Cold Chain Monitoring, and Cold Chain Packaging. The following tables set forth our segment information:

	Three Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Revenues (1)	$	11,545	$	9,341	$	3,744	$	2,052	$	26,682
Gross profit	$	7,876	$	5,922	$	1,575	$	261	$	15,634
Reconciling items (2)										(14,686	)
Earnings before income taxes									$	948

	Three Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring			Cold Chain Packaging		Total
Revenues (1)	$	10,630	$	8,182	$	3,267		$	1,592	$	23,671
Gross profit	$	7,134	$	5,150	$	(43	)	$	440	$	12,681
Reconciling items (2)											(23,207	)
Earnings before income taxes										$	(10,526	)

	Nine Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Revenues (1)	$	34,475	$	26,776	$	9,917	$	5,521	$	76,689
Gross profit	$	23,660	$	16,909	$	4,203	$	530	$	45,302
Reconciling items (2)										(38,648	)
Earnings before income taxes									$	6,654

Page 15

	Nine Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Revenues (1)	$	30,798	$	24,768	$	9,335	$	4,397	$	69,298
Gross profit	$	20,676	$	15,021	$	2,044	$	844	$	38,585
Reconciling items (2)										(44,702	)
Earnings before income taxes									$	(6,117	)

⁽¹⁾ Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.

⁽²⁾ Reconciling items include selling, general and administrative, research and development, impairment loss on goodwill and long-lived assets, estimated legal settlement, and other expenses

	December 31, 2018		March 31, 2018
Total assets
Sterilization and Disinfection Control	$	76,983	$	83,452
Instruments		29,332		33,479
Cold Chain Monitoring		34,749		30,796
Cold Chain Packaging		2,722		7,091
Corporate and administrative		14,374		9,283
Total	$	158,160	$	164,101

As of December 31, 2018, all long-lived assets are located in the United States except for $5,952, $2,471 and $15,130 which are associated with our French, Canadian, and German subsidiaries, respectively.

Revenues from external customers are attributed to individual countries based upon locations to which the product is shipped or exported, as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2018		2017		2018		2017
United States	$	17,003	$	14,221	$	49,167	$	41,664
Foreign		9,679		9,450		27,522		27,634
Total	$	26,682	$	23,671	$	76,689	$	69,298

No foreign country exceeds 10 percent of total revenues.

Note 12. Subsequent Event

In January 2018, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on March 15, 2019, to shareholders of record at the close of business on February 28, 2019.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This report contains information that may constitute "forward-looking statements.” Generally, the words “will,” “estimate,” "believe," "expect," "anticipate," "intend," "project," and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events, or developments that we expect or anticipate will occur in the future — including statements relating to revenues growth and statements expressing general views about future operating results — are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to those described in Part II, "Item 1A. Risk Factors" and elsewhere in this report and in our Annual Report on Form 10-K for the year ended March 31, 2018, and those described from time to time in our subsequent reports filed with the Securities and Exchange Commission.

General Discussion

We pursue a strategy of focusing primarily on quality control products and services, which are sold into niche markets that are driven by regulatory requirements. We prefer markets in which we can establish a strong presence and achieve high gross margins. We are organized into four divisions across nine physical locations. Our Sterilization and Disinfection Control Division (“SDC” Division) manufactures and sells biological, cleaning, and chemical indicators. Biological, cleaning, and chemical indicators are used to assess the effectiveness of sterilization and disinfection processes in the hospital, dental, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the dental industry. Our Instruments Division designs, manufactures, and markets quality control instruments and disposable products utilized in the healthcare, pharmaceutical, food and beverage, medical device, industrial hygiene, and environmental air sampling industries. Our Cold Chain Monitoring Division designs, develops, and markets systems which are used to monitor various environmental parameters such as temperature, humidity, and differential pressure to ensure that critical storage and processing conditions are maintained in hospitals, pharmaceutical and medical device manufacturers, blood banks, pharmacies, and laboratory environments. Our Cold Chain Packaging Division provides packaging development consulting services and thermal packaging products such as coolers, boxes, insulation materials, and phase-change products to control temperature during the customer’s transport of their own products.

Our revenues come from three main sources – hardware and software, consumables, and services. Product sales (hardware, software, and consumables) are dependent on several factors, including general economic conditions, both domestic and international, customer capital spending trends, competition, introduction of new products and acquisitions. Sterilization and disinfection control products and most products in our Cold Chain Packaging Division are disposable and are used on a routine basis, thus product sales are less sensitive to general economic conditions. Instrument products and cold chain monitoring products and systems have a longer life, and their purchase by our customers is somewhat discretionary, so sales are more sensitive to general economic conditions. Cold chain monitoring and instruments products may be sold in conjunction with a perpetual or subscription-based software license, which may be required for the related hardware to function. Service demand is driven by our customers’ quality control and regulatory environments, which require periodic repair and recalibration or certification of our instrument products and cold chain monitoring systems. We typically evaluate costs and pricing annually. Our policy is to price our products competitively and, where possible, we pass along cost increases in order to maintain our margins.

Gross profit is affected by our product mix, manufacturing efficiencies, and price competition. Historically, as we have integrated our acquisitions and taken advantage of manufacturing efficiencies, our gross margin percentages for some products have improved. There are, however, differences in gross margin percentages between product lines, and ultimately the mix of sales will continue to impact our overall gross margin.

During the nine months ended December 31, 2018, we completed a business combination (the “Point Six Wireless Acquisition”) whereby we acquired substantially all of the assets (other than current assets) and certain liabilities of Point Six Wireless, LLC’s continuous monitoring business.

Page 17

General Trends

Our strategic objectives include growth both organically and through further acquisitions. During the nine months ended December 31, 2018, we continued to build our infrastructure to prepare for future growth, including completing the relocation and sale of the old Bozeman manufacturing facility, moving those operations into the new Bozeman building, the addition of key personnel to our operations, sales and marketing, and research and development teams, and the continued rollout of phase three of our ERP implementation project (European operations), which was completed as of December 31, 2018.

The markets for sterilization and disinfection control products remain strong, as the disposable nature of these products makes them less sensitive to general economic conditions. The worldwide market for sterilization and disinfection control products is growing as more countries focus on verifying the effectiveness of sterilization and disinfection processes.

Demand for our instruments products and cold chain services and monitoring systems remains solid and we strive to continue to grow revenues going forward. In general, our instruments products and cold chain monitoring systems are more impacted by general economic conditions than our sterilization and disinfection control and cold chain packaging products. As a result, uncertainty about global economic conditions may cause businesses to postpone spending in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values. Worldwide and regional economic conditions could also reduce the demand for our products and services, as our customers reduce or delay capital equipment and other types of purchases.

We are working on several research and development projects that, if completed, may result in enhanced or new products for both existing customers and new markets. We are hopeful that we will have enhanced or new products and services available for sale in the coming year.

Overall revenues increased 13 percent and 11 percent for the three and nine months ended December 31, 2018. Organic revenues growth by reporting segment was as follows:

	Three Months Ended			Nine Months Ended
	December 31, 2018			December 31, 2018
Sterilization and Disinfection Control		6	%		1	%
Instruments		14	%		8	%
Cold Chain Monitoring		14	%		6	%
Cold Chain Packaging		29	%		26	%
Total Company		11	%		6	%

During the three months ended December 31, 2018, we performed a financial analysis of the Cold Chain Packaging Division, which revealed that gross profits for the segment continue to decline, primarily due to rising commodity costs. As a result, we performed an impairment test on the reporting segment, and recognized non-cash impairment charges of $1,028 on goodwill and $2,641 on long-lived assets, in impairment loss on goodwill and long-lived assets on the accompanying condensed consolidated statements of operations.

Page 18

Results of Operations

(Dollars in thousands)

The following table sets forth, for the periods indicated, condensed consolidated statements of operations data. The table and the discussion below should be read in conjunction with the accompanying condensed consolidated financial statements and the notes thereto appearing elsewhere in this report:

	Three Months Ended December 31,									Percent
	2018			2017			Change			Change
Revenues	$	26,682		$	23,671		$	3,011			13	%
Cost of revenues		11,048			10,990			58			1	%
Gross profit	$	15,634		$	12,681		$	2,953			23	%
Gross profit margin		59	%		54	%		5	%
Operating expenses:
Selling	$	2,054		$	1,942		$	112			6	%
General and administrative		7,731			6,256			1,475			24	%
Research and development		860			752			108			14	%
Impairment loss on goodwill and long-lived assets		3,669			13,819			(10,150	)		(73	%)
	$	14,314		$	22,769		$	(8,455	)		(37	%)
Operating income (loss)	$	1,320		$	(10,088	)	$	11,408			113	%
Net income (loss)	$	858		$	(11,086	)	$	11,944			108	%
Net income (loss) margin		3	%		(47	%)		50	%

	Nine Months Ended December 31,									Percent
	2018			2017			Change			Change
Revenues	$	76,689		$	69,298		$	7,391			11	%
Cost of revenues		31,387			30,713			674			2	%
Gross profit	$	45,302		$	38,585		$	6,717			17	%
Gross profit margin		59	%		56	%		3	%
Operating expenses:
Selling	$	5,748		$	6,909		$	(1,161	)		(17	%)
General and administrative		22,824			19,525			3,299			17	%
Research and development		2,539			2,790			(251	)		(9	%)
Impairment loss on goodwill and long-lived assets		3,669			13,819			(10,150	)		(73	%)
Estimated legal settlement		3,300			--			3,300			N/A
	$	38,080		$	43,043		$	(4,963	)		(12	%)
Operating income (loss)	$	7,222		$	(4,458	)	$	11,680			262	%
Net income (loss)	$	6,082		$	(7,216	)	$	13,298			184	%
Net income (loss) margin		8	%		(10	%)		18	%

Page 19

Revenues

The following tables summarize our revenues by source:

	Three Months Ended December 31,						Percent
	2018		2017		Change		Change
Sterilization and Disinfection Control	$	11,545	$	10,630	$	915		9	%
Instruments		9,341		8,182		1,159		14	%
Cold Chain Monitoring		3,744		3,267		477		15	%
Cold Chain Packaging		2,052		1,592		460		29	%
Total	$	26,682	$	23,671	$	3,011		13	%

	Nine Months Ended December 31,						Percent
	2018		2017		Change		Change
Sterilization and Disinfection Control	$	34,475	$	30,798	$	3,677		12	%
Instruments		26,776		24,768		2,008		8	%
Cold Chain Monitoring		9,917		9,335		582		6	%
Cold Chain Packaging		5,521		4,397		1,124		26	%
Total	$	76,689	$	69,298	$	7,391		11	%

Three and nine months ended December 31, 2018 versus December 31, 2017

Sterilization and Disinfection Control revenues for the three months ended December 31, 2018 increased nine percent, primarily as a result of six percent organic revenues growth, and to a lesser extent, the acquisition of BAG Health Care GmbH Hygiene Monitoring (“BAG”) during fiscal year 2018. Sterilization and Disinfection Control revenues increased 12 percent for the nine months ended December 31, 2018, primarily as a result of the acquisitions of BAG, SIMICON GmbH, and Hucker & Hucker GmbH during fiscal year 2018.

Instruments revenues for the three and nine months ended December 31, 2018 increased 14 percent and eight percent, respectively, primarily due to the timing of orders and modest price increases. Instrument revenues for the three months ended December 31, 2017 were impacted by a slower than expected adoption of an updated medical product and the discontinuation of its predecessor product. However, the adoption rate of the product has increased over the past calendar year.

Cold Chain Monitoring revenues increased 15 percent and six percent for the three and nine months ended December 31, 2018, respectively, primarily as a result of organic revenues growth. Revenues in this division fluctuate quarter over quarter due to the timing of performance obligations and the nature and timing of orders and installations within any given quarter.

Cold Chain Packaging revenues increased 29 percent and 26 percent for the three and nine months ended December 31, 2018, respectively, as a result of the normalization in the order rate of the division’s largest customer.  

Page 20

Gross Profit 

The following summarizes our gross profit by segment:

	Three Months Ended December 31,									Percent
	2018			2017			Change			Change
Sterilization and Disinfection Control	$	7,876		$	7,134		$	742			10	%
Gross profit margin		68	%		67	%		1	%
Instruments		5,922			5,150			772			15	%
Gross profit margin		63	%		63	%		--	%
Cold Chain Monitoring		1,575			(43	)		1,618			3,763	%
Gross profit margin		42	%		(1	%)		43	%
Cold Chain Packaging		261			440			(179	)		(41	%)
Gross profit margin		13	%		28	%		(15	%)
Total gross profit	$	15,634		$	12,681		$	2,953			23	%
Gross profit margin		59	%		54	%		5	%

	Nine Months Ended December 31,									Percent
	2018			2017			Change			Change
Sterilization and Disinfection Control	$	23,660		$	20,676		$	2,984			14	%
Gross profit margin		69	%		67	%		2	%
Instruments		16,909			15,021			1,888			13	%
Gross profit margin		63	%		61	%		2	%
Cold Chain Monitoring		4,203			2,044			2,159			106	%
Gross profit margin		42	%		22	%		20	%
Cold Chain Packaging		530			844			(314	)		(37	%)
Gross profit margin		10	%		19	%		(9	%)
Total gross profit	$	45,302		$	38,585		$	6,717			17	%
Gross profit margin		59	%		56	%		3	%

Three and nine months ended December 31, 2018 versus December 31, 2017

Sterilization and Disinfection Control gross profit margin percentage increased for both the three and nine months ended December 31, 2018 primarily as a result of $150 and $503 of moving expenses related to the Bozeman facility that were incurred during the three and nine months ended December 31, 2017, respectively. Excluding the impact of the moving expenses, gross margin percentage for both periods was essentially flat as compared to the prior year.

Instruments gross margin percentage was flat during the three months ended December 31, 2018, primarily due to product and service mix, offset by volume-based efficiencies associated with an increase in revenues. Instruments gross margin percentage increased during the nine months ended December 31, 2018 due primarily to favorable product and service mix, as well as a $163 increase in inventory reserve recorded in the nine months ended December 31, 2017 as a result of the decision to discontinue the sale of certain instruments products.

Page 21

Cold Chain Monitoring gross profit margin percentage increased during the three months ended December 31, 2018 primarily due to $1,700 of inventory reserve expense recorded in the three months ended December 31, 2017; excluding the impact of the reserve in the comparable period, gross margin percentage decreased as a result of timing of orders and unfavorable product mix variations. Cold Chain Monitoring gross profit margin percentage increased during the nine months ended December 31, 2018, primarily due to $1,916 of inventory reserve expense recorded in the nine months ended December 31, 2017. Excluding the impact of the inventory reserve charge in the comparable period, gross profit margin percentage was flat as compared to the nine months ended December 31, 2017.

Cold Chain Packaging gross profit margin decreased during the three and nine months ended December 31, 2018 primarily as a result of significantly higher commodities costs than in previous periods, and to a lesser extent, sales volumes related to a large customer contract containing lower-than-standard contractual pricing. We are currently implementing a commercial initiative to pass some of our increasing commodities costs on to our customers. Even if we are successful with this initiative, we expect that our Cold Chain Packaging gross profit margin percentage will continue to be substantially lower than the historical results of our other segments due to the nature of these products. See General Trends for additional discussion.

Operating Expenses

Operating expenses for the three and nine months ended December 31, 2018 decreased in total as compared to the prior year as follows:

Selling

Three and nine months ended December 31, 2018 versus December 31, 2017

Selling expense is driven primarily by labor costs, including salaries and commissions; accordingly, it may vary with sales levels. Selling expense increased six percent for the three months ended December 31, 2018 and decreased 17 percent for the nine months ended December 31, 2018, primarily due to timing of the reduction and replacement of selling personnel. As a percentage of revenues, selling expense was eight percent and seven percent for the three and nine months ended December 31, 2018, respectively, as compared to eight percent and ten percent for the three and nine months ended December 31, 2017, respectively. We plan to continue to strategically reinvest in sales and marketing resources in an effort to further increase organic revenues growth.

General and Administrative

Three and nine months ended December 31, 2018 versus December 31, 2017

Labor costs, including non-cash stock-based compensation, and amortization of intangible assets drive the substantial majority of general and administrative expense. General and administrative expenses increased $1,475 during the three months ended December 31, 2018, due primarily to increased incentive-based compensation as a result of the Company’s financial performance and higher salary expense. General and administrative costs increased $3,299 during the nine months ended December 31, 2018, due primarily to increased incentive-based compensation as a result of the Company’s financial performance and increases in non-cash stock-based compensation expense. We expect to incrementally increase our headcount in the future as we continue to invest in future organic revenues growth.

Research and Development

Three and nine months ended December 31, 2018 versus December 31, 2017

Research and development expense is predominantly comprised of labor costs and third-party consultants. Research and development expenses for the three months ended December 31, 2018 increased 14 percent and for the nine months ended December 31, 2018, decreased nine percent, due to streamlining the necessary engineers, materials, and supplies required to support existing businesses in the prior year. During the three months ended December 31, 2018, we began to make incremental investments in research and development to enhance existing products.

Impairment Loss on Goodwill and Long-Lived Assets

Three and nine months ended December 31, 2018 versus December 31, 2017

During the three and nine months ended December 31, 2018, we recorded impairment expense of $3,669 related to goodwill and long-lived assets associated with our Cold Chain Packaging Division. During the three and nine months ended December 31, 2017, we recorded impairment expense of $13,819 related to goodwill associated with our Cold Chain Packaging Division. See General Trends above for additional discussion.

Page 22

Estimated Legal Settlement

Three and nine months ended December 31, 2018 versus December 31, 2017

During the nine months ended December 31, 2018, we recorded a $3,300 estimated legal settlement expense; see Note 10. “Commitments and Contingencies” within Item 1. Financial Statements.

Other Expense

Other expense for the three months ended December 31, 2018 is composed primarily of interest expense associated with our Credit Facility. During the nine months ended December 31, 2018, other expense is composed of interest expense associated with our credit facility, offset by a $288 gain recorded on the sale of our Bozeman facility; see Note 5. “Facility Relocation” within Item 1. Financial Statements for more information.

Net Income

Our income tax rate varies based upon many factors but in general, we anticipate that on a go-forward basis, our effective tax rate will be approximately 26 percent, plus or minus the impact of excess tax benefits and deficiencies associated with share-based payment awards to employees; see Note 8. “Income Taxes” within Item 1. Financial Statements for additional discussion. The excess tax benefits and deficiencies associated with share-based payment awards to our employees have caused and, in the future, may cause large fluctuations in our realized effective tax rate based on timing, volume, and nature of stock options exercised under our share-based payment program. Net income for the nine months ended December 31, 2018 varied with the changes in revenues, gross profit, and operating expenses (which includes $5,418 and $2,424 of non-cash amortization of intangible assets and stock-based compensation, respectively). Net income for the nine months ended December 31, 2018 was also significantly impacted by a $3,669 impairment loss on goodwill and long-lived assets (see Note 3. “Impairment Loss on Goodwill and Long-Lived Assets” within Item 1. Financial Statements.

Liquidity and Capital Resources

Our sources of liquidity include cash generated from operations, working capital, capacity under our Credit Facility, and potential equity and debt offerings. We believe that cash generated from these sources will be sufficient to meet our short-term and long-term needs. Our more significant uses of resources have historically included long-term capital equipment expenditures, payment of debt obligations, quarterly dividends to shareholders, and acquisitions. Working capital is the amount by which current assets exceed current liabilities. We had working capital of $11,778 and $14,698 at December 31, 2018 and March 31, 2018, respectively.

Given our cash flow projections and unused capacity on our line of credit that is available until March 1, 2022, our liquidity is strong and is expected to meet our ongoing cash and debt service requirements for our general business needs. Interest-bearing debt of $29,500 and $46,625 was outstanding at December 31, 2018 and March 31, 2018, respectively. The Term Loan requires 20 quarterly principal payments, which began on March 31, 2017, in the amount of $250,000 (increasing by $125,000 each year up to $750,000 in the fifth year). The remaining balance of principal and accrued interest are due on March 1, 2022. We were in compliance with all loan agreements at December 31, 2018 and for all prior years presented and have met all debt payment obligations.

Subsequent to December 2018, we made a $3,000 payment under our line of credit.

As of June 30, 2018, our previously-announced move of our Omaha, Traverse City, and old Bozeman manufacturing facilities to our new facility in Bozeman, Montana was complete. We also completed the sale of our old Bozeman facility during the nine months ended December 31, 2018, which resulted in a gain of $288.

We have recorded an estimated litigation accrual of $3,300, which we expect to pay over the next twelve months; see Note 10. “Commitments and Contingencies” within Item 1. Financial Statements.

We routinely evaluate opportunities for strategic acquisitions. Future material acquisitions may require that we obtain additional capital, assume third party debt or incur other long-term obligations. We believe that we have the option to utilize both equity and debt instruments as vehicles for the long-term financing of our investment activities and acquisitions. At December 31, 2018, we had $68,000 on unused capacity under our line of credit, subject to covenant restrictions. In addition, in June 2018, the SEC declared effective our Universal Shelf Registration Statement which allows us to sell, in one or more public offerings, common stock or warrants, or any combination of such securities for proceeds in an aggregate amount of up to $300,000. The terms of any offering, including the type of securities involved, would be established at the time of sale.

Page 23

Dividends

We have paid regular quarterly dividends since 2003. We declared and paid dividends of $0.16 per share for the three months ended June 30, 2018, September 30, 2018, and December 31, 2018 as well as each quarter for the year ending March 31, 2018.

In January 2019, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on March 15, 2019, to shareholders of record at the close of business on February 28, 2019.

Cash Flows

Our cash flows from operating, investing, and financing activities were as follows (in thousands):

	Nine Months Ended December 31,
	2018			2017
Net cash provided by operating activities	$	20,292		$	16,078
Net cash used in investing activities		(3,825	)		(16,840	)
Net cash (used in) provided by financing activities		(16,057	)		884

At December 31, 2018, we had contractual obligations for open purchase orders of approximately $3,823 for routine purchases of supplies and inventory, which are payable in less than one year.

Critical Accounting Estimates

Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters. These estimates are based on historical experience and various other factors that we believe to be appropriate under the circumstance. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended March 31, 2018 in the Critical Accounting Policies and Estimates section of “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.”

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have no derivative instruments and minimal exposure to commodity market risks. A portion of our operations consist of activities outside of the U.S. and we have currency risk on the transactions in other currencies and translation adjustments resulting from the conversion of our international financial results into the U.S. dollar. However, a substantial majority of our operations and investment activities are transacted in U.S. dollars and therefore our foreign currency risk is not material at this date.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our internal control over financial reporting as of December 31, 2018 based on the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on that evaluation, our management concluded that our internal control over financial reporting was effective at December 31, 2018.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended December 31, 2018 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Page 24

Part II. Other Information

Item 1. Legal Proceedings

See Note 10. “Commitments and Contingencies” within Item 1. “Financial Statements.” for information regarding any legal proceedings in which we may be involved.

Item 1A. Risk factors

We are affected by risks specific to us as well as factors that affect all businesses operating in a global market.  The significant factors known to us that could materially adversely affect our business, financial condition, or operating results are described in our Annual Report on Form 10-K for the year ended March 31, 2018, under the heading “Part I – Item 1A. Risk Factors.”  There have been no material changes to those risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 7, 2005, our Board of Directors adopted a share repurchase plan which allows for the repurchase of up to 300,000 of our common shares, of which 162,486 have been purchased to date. This plan will continue until the maximum is reached or the plan is terminated by further action of the Board of Directors. We have made no repurchases of our common stock in the current or any of the last three fiscal years.

Page 25

Item 6. Exhibits

Exhibit No.	Description of Exhibit
3.1	Articles of Incorporation and Amendments to Articles of Incorporation (incorporated by reference from exhibit 3.1 to Mesa Laboratories, Inc.’s report on Form 10-Q filed on July 31, 2018 (Commission File Number: 000-11740))
10.1	Credit agreement dated as of March 1, 2017 between Mesa Laboratories, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders referred to therein (incorporated by reference from Exhibit 10.1 to Mesa Laboratories, Inc.’s report on Form 8-K filed on March 2, 2017 (Commission File Number: 000-11740)).
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from the quarterly report on Form 10-Q of Mesa Laboratories, Inc. for the quarter ended December 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Stockholders’ Equity, and (vi) Notes to the Condensed Consolidated Financial Statements.

Page 26

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 thereunto duly authorized.

MESA LABORATORIES, INC.

(Registrant)

DATED: February 4, 2019	BY:	/s/ Gary M. Owens. Gary M. Owens Chief Executive Officer
DATED: February 4, 2019	BY:	/s/ John V. Sakys John V. Sakys Chief Financial Officer

                        
Page 27 

EX-31.1

Exhibit 31.1 Certifications Pursuant to Rule 13a-14(a)

I, Gary M. Owens, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mesa Laboratories, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 4, 2019   /s/ Gary M. Owens Gary M. Owens Chief Executive Officer

EX-31.2

Exhibit 31.2 Certifications Pursuant to Rule 13a-14(a)

I, John V. Sakys, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mesa Laboratories, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 4, 2019  /s/ John V. Sakys John V. Sakys Chief Financial Officer

EX-32.1

Exhibit 32.1 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350

In connection with the Quarterly Report of Mesa Laboratories, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary M. Owens, Chief Executive Officer of the Company, certify, pursuant to Rule 13a-14(b) and 18 U.S.C. § 1350, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 4, 2019  /s/ Gary M. Owens Gary M. Owens Chief Executive Officer

EX-32.2

Exhibit 32.2 Certifications Pursuant to Rule 13a-14(b) and 18 U.S.C Section 1350

In connection with the Quarterly Report of Mesa Laboratories, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John V. Sakys, Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) and 18 U.S.C. § 1350, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 4, 2019  /s/ John V. Sakys John V. Sakys Chief Financial Officer

XML

Document And Entity Information - shares	9 Months Ended
	Dec. 31, 2018	Jan. 25, 2019
Document Information [Line Items]
Entity Registrant Name	MESA LABORATORIES INC /CO
Entity Central Index Key	0000724004
Trading Symbol	mlab
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		3,868,491
Document Type	10-Q
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Dec. 31, 2018	Mar. 31, 2018
ASSETS
Cash and cash equivalents	$ 5,729	$ 5,469
Accounts receivable, less allowances of $128 and $179, respectively	13,254	14,302
Inventories, net	7,606	9,228
Prepaid income taxes	4,476	273
Prepaid expenses and other	1,496	782
Assets held for sale		1,934
Total current assets	32,561	31,988
Property, plant and equipment, net	22,997	23,593
Deferred taxes	118	127
Intangibles, net	38,336	42,850
Goodwill	64,148	65,543
Total assets	158,160	164,101
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	2,426	2,380
Accrued salaries and payroll taxes	6,077	4,284
Current portion of long-term debt	2,000	1,625
Unearned revenues	3,728	3,921
Current portion of contingent consideration	45	709
Income taxes payable		1,008
Estimated legal liability	3,300
Other accrued expenses	3,207	3,363
Total current liabilities	20,783	17,290
Deferred income taxes	2,457	2,621
Long-term debt, net of debt issuance costs and current portion	27,213	44,635
Other long-term liabilities	114	194
Total liabilities	50,567	64,740
Stockholders’ equity:
Common stock, no par value; authorized 25,000,000 shares; issued and outstanding, 3,859,327 and 3,801,439 shares, respectively	36,528	30,516
Retained earnings	72,520	68,281
Accumulated other comprehensive (loss) income	(1,455)	564
Total stockholders’ equity	107,593	99,361
Total liabilities and stockholders’ equity	$ 158,160	$ 164,101

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ / shares in Thousands, $ in Thousands	Dec. 31, 2018	Mar. 31, 2018
Allowance for doubtful accounts receivable	$ 128	$ 179
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	25,000,000	25,000,000
Common stock, shares issued (in shares)	3,859,327	3,801,439
Common stock, shares outstanding (in shares)	3,859,327	3,801,439

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		9 Months Ended
		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Revenues	[1]	$ 26,682	$ 23,671	$ 76,689	$ 69,298
Cost of revenues		11,048	10,990	31,387	30,713
Gross profit		15,634	12,681	45,302	38,585
Operating expenses:
Selling		2,054	1,942	5,748	6,909
General and administrative		7,731	6,256	22,824	19,525
Research and development		860	752	2,539	2,790
Impairment loss on goodwill and long-lived assets		3,669	13,819	3,669	13,819	[2]
Estimated legal settlement				3,300
Total operating expenses		14,314	22,769	38,080	43,043
Operating income (loss)		1,320	(10,088)	7,222	(4,458)
Other expense, net		372	438	568	1,659
Earnings (loss) before income taxes		948	(10,526)	6,654	(6,117)
Income tax expense		90	560	572	1,099
Net income (loss)		$ 858	$ (11,086)	$ 6,082	$ (7,216)	[2]
Earnings (loss) per share:
Basic (in dollars per share)		$ 0.22	$ (2.93)	$ 1.58	$ (1.92)
Diluted (in dollars per share)		$ 0.21	$ (2.93)	$ 1.51	$ (1.92)
Weighted-average common shares outstanding:
Basic (in shares)		3,855	3,781	3,840	3,765
Diluted (in shares)		4,045	3,781	4,037	3,765

[1] Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.

[2] -Contingent consideration is classified as a financing activity pursuant to ASU 2016-15.

XML

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Net income	$ 858	$ (11,086)	$ 6,082	$ (7,216)	[1]
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(658)	181	(2,019)	1,880
Comprehensive (loss) income	$ 200	$ (10,905)	$ 4,063	$ (5,336)

[1] -Contingent consideration is classified as a financing activity pursuant to ASU 2016-15.

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	[1]
Cash flows from operating activities:
Net income	$ 6,082	$ (7,216)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,162	6,981
Stock-based compensation	2,424	1,423
Impairment loss on goodwill and long-lived assets	3,669	13,819
Change in inventory reserve	49	2,120
Gain on disposition of assets	(288)	(116)
Deferred taxes		(1,077)
Foreign currency adjustments		(255)
Adjustment to contingent consideration	(32)	300
Other	135	83
Cash provided by changes in operating assets and liabilities:
Accounts receivable, net	893	2,621
Inventories, net	1,302	1,414
Prepaid expenses and other current assets	(4,611)	(1,687)
Accounts payable	311	(139)
Accrued liabilities and taxes payable	3,375	(1,751)
Unearned revenues	(179)	(442)
Net cash provided by operating activities	20,292	16,078
Cash flows from investing activities:
Acquisitions	(4,840)	(15,433)
Proceeds from sale of assets	2,222	1,133
Purchases of property, plant and equipment	(1,207)	(2,540)
Net cash used in investing activities	(3,825)	(16,840)
Cash flows from financing activities:
Proceeds from the issuance of debt	2,000	11,000
Payments on debt	(19,125)	(9,750)
Contingent consideration	(677)	(905)
Dividends	(1,843)	(1,807)
Proceeds from the exercise of stock options	3,588	2,346
Net cash (used in) provided by financing activities	(16,057)	884
Effect of exchange rate changes on cash and cash equivalents	(150)	(99)
Net increase in cash and cash equivalents	260	23
Cash and cash equivalents at the beginning of the period	5,469	5,820
Cash and cash equivalents at the end of the period	5,729	5,843
Cash paid for:
Income taxes paid	5,634	4,191
Interest paid	$ 1,293	$ 1,477

[1] -Contingent consideration is classified as a financing activity pursuant to ASU 2016-15.

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands		Common Stock [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	[1]	Total
Balance (in shares) at Mar. 31, 2017		3,734,704
Balance at Mar. 31, 2017		$ 25,925	$ 73,656	$ (1,760)		$ 97,821
Common stock issued for conversion of stock options net (in shares)		23,471
Common stock issued for conversion of stock options net		$ 963				963
Dividends paid, $0.16 per share			(601)			(601)
Stock-based compensation		540				540
Foreign currency translation adjustments				751		751
Net income			1,517			1,517
Balance (in shares) at Jun. 30, 2017		3,758,175
Balance at Jun. 30, 2017		$ 27,428	74,572	(1,009)		100,991
Balance (in shares) at Mar. 31, 2017		3,734,704
Balance at Mar. 31, 2017		$ 25,925	73,656	(1,760)		97,821
Foreign currency translation adjustments						1,880
Net income	[2]					(7,216)
Balance (in shares) at Dec. 31, 2017		3,781,806
Balance at Dec. 31, 2017		$ 29,694	64,633	120		94,447
Balance (in shares) at Jun. 30, 2017		3,758,175
Balance at Jun. 30, 2017		$ 27,428	74,572	(1,009)		100,991
Common stock issued for conversion of stock options net (in shares)		21,542
Common stock issued for conversion of stock options net		$ 1,101				1,101
Dividends paid, $0.16 per share			(600)			(600)
Stock-based compensation		445				445
Foreign currency translation adjustments				948		948
Net income			2,353			2,353
Balance (in shares) at Sep. 30, 2017		3,779,717
Balance at Sep. 30, 2017		$ 28,974	76,325	(61)		105,238
Common stock issued for conversion of stock options net (in shares)		2,089
Common stock issued for conversion of stock options net		$ 282				282
Dividends paid, $0.16 per share			(606)			(606)
Stock-based compensation		438				438
Foreign currency translation adjustments				181		181
Net income			(11,086)			(11,086)
Balance (in shares) at Dec. 31, 2017		3,781,806
Balance at Dec. 31, 2017		$ 29,694	64,633	120		$ 94,447
Balance (in shares) at Mar. 31, 2018		3,801,439				3,801,439
Balance at Mar. 31, 2018		$ 30,516	68,281	564		$ 99,361
Common stock issued for conversion of stock options net (in shares)		46,586
Common stock issued for conversion of stock options net		$ 3,043				3,043
Dividends paid, $0.16 per share			(610)			(610)
Stock-based compensation		739				739
Foreign currency translation adjustments				(1,312)		(1,312)
Net income			4,230			4,230
Balance (in shares) at Jun. 30, 2018		3,848,025
Balance at Jun. 30, 2018		$ 34,298	71,901	(748)		$ 105,451
Balance (in shares) at Mar. 31, 2018		3,801,439				3,801,439
Balance at Mar. 31, 2018		$ 30,516	68,281	564		$ 99,361
Common stock issued for conversion of stock options net (in shares)						58,000
Foreign currency translation adjustments						$ (2,019)
Net income						$ 6,082
Balance (in shares) at Dec. 31, 2018		3,859,327				3,859,327
Balance at Dec. 31, 2018		$ 36,528	72,520	(1,455)		$ 107,593
Balance (in shares) at Jun. 30, 2018		3,848,025
Balance at Jun. 30, 2018		$ 34,298	71,901	(748)		105,451
Common stock issued for conversion of stock options net (in shares)		4,722
Common stock issued for conversion of stock options net		$ 133				133
Dividends paid, $0.16 per share			(616)			(616)
Stock-based compensation		990				990
Foreign currency translation adjustments				(49)		(49)
Net income			994			994
Balance (in shares) at Sep. 30, 2018		3,852,747
Balance at Sep. 30, 2018		$ 35,421	72,279	(797)		106,903
Common stock issued for conversion of stock options net (in shares)		6,580
Common stock issued for conversion of stock options net		$ 412				412
Dividends paid, $0.16 per share			(617)			(617)
Stock-based compensation		695				695
Foreign currency translation adjustments				(658)		(658)
Net income			858			$ 858
Balance (in shares) at Dec. 31, 2018		3,859,327				3,859,327
Balance at Dec. 31, 2018		$ 36,528	$ 72,520	$ (1,455)		$ 107,593

[1] Accumulated Other Comprehensive Income (Loss).

[2] -Contingent consideration is classified as a financing activity pursuant to ASU 2016-15.

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares shares in Thousands	3 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017
Common Stock [Member]
Common stock, shares returned as payment (in shares)	485	477	1,620	304	1,541	3,795
Retained Earnings [Member]
Dividends paid, per share (in dollars per share)	$ 0.16	$ 0.16	$ 0.16	$ 0.16	$ 0.16	$ 0.16

XML

Note 1 - Description of Business and Summary of Significant Accounting Policies

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

Note

1

.

Description of Business and

Summary of

Significant

Accounting Policies

Description of Business

In this quarterly report on Form

10

-Q, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries is collectively referred to as “we,” “us,” “our,” the “Company” or “Mesa.”

We pursue a strategy of focusing primarily on quality control products and services which are sold into niche markets that are driven by regulatory requirements. We prefer markets in which we can establish a strong presence and achieve high gross margins. We are organized into

four

divisions across

nine

physical locations. Our Sterilization and Disinfection Control Division manufactures and sells biological, cleaning, and chemical indicators. Biological, cleaning, and chemical indicators are used to assess the effectiveness of sterilization and disinfection processes in the hospital, dental, medical device, and pharmaceutical industries. The division also provides testing and laboratory services, mainly to the dental industry. Our Instruments Division designs, manufactures, and markets quality control instruments and disposable products utilized in the healthcare, pharmaceutical, food and beverage, medical device, industrial hygiene, and environmental air sampling industries. Our Cold Chain Monitoring Division designs, develops, and markets systems which are used to monitor various environmental parameters such as temperature, humidity, and differential pressure to ensure that critical storage and processing conditions are maintained in hospitals, pharmaceutical and medical device manufacturers, blood banks, pharmacies, and laboratory environments. Our Cold Chain Packaging Division provides packaging development consulting services and thermal packaging products such as coolers, boxes, insulation materials, and phase-change products to control temperature during the customer’s transport of their own products.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such unaudited information includes all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations. The results of operations for the interim periods are

not

necessarily indicative of results that

may

be achieved for the entire year. The financial statements and related notes do

not

include all information and footnotes required by U.S. GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in our annual report on Form

10

-K for the year ended

March 31, 2018.

Fair Value Measurements

As of

December 31, 2018

and

March 31, 2018,

our financial instruments were categorized as Level

1

(inputs are quoted prices in active markets) and include cash, accounts receivable, accounts payable, accrued liabilities and short-term and long-term debt. With the exception of long-term debt, the carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. Our debt has a variable interest rate, so the carrying amount approximates fair value because interest rates on these instruments approximate the interest rate on debt with similar terms available to us.

Acquisitions

During the

three

months ended

December 31, 2018,

we completed the purchase of Point Six Wireless, LLC. We made an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of acquired assets and assumed liabilities. We obtained the information to make the allocation during due diligence and through the use of other information available to us. In the months after closing, we will obtain additional information about the assets and liabilities acquired, including asset appraisals, and we will refine the estimates of the fair value to more accurately allocate the purchase price.

Recently Issued Accounting Pronouncements

In

February 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016

-

02,

 

Leases

(Topic

842

)

. The pronouncement requires lessees to recognize a liability for lease obligations, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for all leases with terms greater than

12

months. The guidance also requires qualitative and quantitative disclosures designed to present financial statement users with the ability to assess the amount, timing, and uncertainty of cash flows arising from leases. We have initiated our plan for the adoption and implementation of this new accounting standard, including assessing our lease arrangements, evaluating practical expedients, and making necessary changes to our accounting policies, processes, and internal controls over financial reporting. We expect to adopt the standard using the optional transition method, which will allow us to apply the standard as of the effective date, therefore we will

not

apply changes to comparative periods presented in our financial statements. We are still assessing the expected impact of the standard on our consolidated balance sheets, but it will

not

significantly impact our consolidated statements of operations and cash flows.

Recently

Adopted

Accounting Pronouncements

In

August 2018,

the Securities and Exchange Commission issued Release

No.

33

-

10532

that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting is the inclusion of the annual disclosure requirement of changes in stockholders’ equity in Rule

3

-

04

of Regulation S-

X

to interim periods. We adopted this new rule beginning the quarter ended

December 31, 2018

and have included our Consolidated Statements of Stockholders' Equity with this quarterly filing on Form

10

-Q.

During the

nine

months ended

December 31, 2018,

we elected to early-adopt ASU

2018

-

15

Intangibles – Goodwill and Other Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

(“ASU

2018

-

15”

) on a prospective basis. ASU

2018

-

15

aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs of other internal-use software arrangements. Accordingly, we capitalized

$206

of costs incurred during the

nine

months ended

December 31, 2018

to implement a hosted enterprise resource planning system to our European subsidiaries. The related asset is held in prepaid expenses and other on the condensed consolidated balance sheets, and we began amortizing the expense to general and administrative costs on our condensed consolidated statements of operations on a straight-line basis over the contractual term of the arrangement.

Effective

April 1, 2018,

we adopted ASU

2014

-

09

Revenue from Contracts with Customers (Topic

606

)

and all related amendments (referred to collectively hereinafter as “ASU

606”

) to all contracts on a modified retrospective basis. ASU

606

requires an entity to recognize revenue for the transfer of goods or services equal to the amount it expects to be entitled to receive for the goods and services. The adoption did

not

have a material impact on our condensed consolidated balance sheets, statements of operations, or cash flows. The primary impact of adoption was the enhancement of disclosures to provide additional clarity regarding how revenue is earned and recognized, and to show revenues at a more disaggregated level, included in Note

2.

“Revenue Recognition.”

In

March 2018,

the FASB issued ASU

2018

-

05,

 Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin

No.

118.

 We adopted the ASU immediately upon release. The amendments in the update provide guidance on when to record and disclose provisional amounts for certain income tax effects of the Tax Cuts and Jobs Act ("TCJA"). The amendments also require any provisional amounts or subsequent adjustments to be included in net income from continuing operations. Additionally, this ASU discusses required disclosures that an entity must make with regard to the TCJA. As of the

three

months ended

December 31, 2018,

we have completed our analysis of the TCJA’s income tax effects. the Refer to Note 

8.

“Income Taxes” for additional information on the TCJA.

The TCJA created a new requirement that global intangible low taxed income earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFC’s U.S. shareholder. Under U.S. GAAP, we are allowed to make an accounting policy choice of how GILTI taxes are treated. We have elected to treat taxes due on future U.S. inclusions in taxable income related to GILTI as current period expenses when incurred (“the period cost method”).

XML

Note 2 - Revenue Recognition

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note

2.

Revenue Recognition

We design, manufacture, market, sell, and maintain quality control instruments and software, consumables, and services driven primarily by the regulatory requirements of niche markets. Our consumables, such as biological indicator test strips and packaging materials, are typically used on a standalone basis; however, some, such as calibration solutions, are also critical to the ongoing use of our instruments. Hardware and software sales, such as medical meters, wireless sensor systems, and data loggers are generally driven by our acquisition of new customers, growth of existing customers, or customer replacement of existing equipment. Hardware sales

may

be offered with perpetual or annual software licenses, which in some cases are required for the hardware to function. We generally generate service revenues from

three

categories:

1

) discrete installation of our hardware and software,

2

) discrete but recurring calibration and maintenance of our hardware or

3

) contracted and recurring testing and maintenance services and software license subscriptions. We evaluate our revenues internally both by product line as well as by timing of revenue generation and nature of goods and services provided. Typically, discrete revenue is recognized at the shipping point or upon completion of the service, while contracted revenue is recognized over a period of time reflective of the performance obligation period in the applicable contract.

Substantially all of our revenues and related receivables are generated from contracts with customers that are

12

months or less in duration. For both discrete and contracted revenue, evidence of an arrangement is typically in the form of a formal contract and/or purchase order. Prices are fixed at the time of the order and

no

price protections or variables are offered. Collectability is reasonably assured through our customer credit and review process, and payment is typically due within

60

days or less. Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. We elected to adopt the practical expedient that allows us to expense commission costs as incurred.

Our performance obligations related to the sale of instruments and consumables generally consist of the promise to sell tangible goods to distributors or end users. Ownership of these goods is typically transferred at time of shipment, at which point we have satisfied our performance obligation and we recognize revenue.

Our performance obligations related to services

may

include testing, installation, and/or maintenance of our products, either on-site at our customers’ facilities or in our own calibration laboratories. Performance obligations arise from service contracts when discrete services are contracted in advance and performed at a future time, often at the time of the customer’s choosing. In this case, the performance obligation is satisfied, and revenue is recognized, upon the customer’s acceptance of the completion of the specified work. Alternatively, service revenue

may

be recognized for contracted services or maintenance provided continually over a period of time, and our performance obligations are satisfied by completing any service that is contractually required, if applicable, or simply by the passage of time if

no

services are required or requested. For contracted services, revenue is recognized on a straight-line basis over the life of the service contract, which is a faithful depiction of these annual service contracts, which

may

or

may

not

be invoked.

The following tables present disaggregated revenues for the

three

and

nine

months ended

December 31, 2018

and

December 31, 2017,

respectively:

	Three Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	9,853	$	834	$	151	$	1,868	$	12,706
Hardware and Software		110		6,417		1,980		49		8,556
Services		372		2,090		534		135		3,131
Contracted Revenues
Services		1,210		--		1,079		--		2,289
Total Revenues	$	11,545	$	9,341	$	3,744	$	2,052	$	26,682

	Three Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	8,872	$	754	$	36	$	1,345	$	11,007
Hardware and Software		280		5,724		1,332		3		7,339
Services		244		1,704		489		244		2,681
Contracted Revenues
Services		1,234		--		1,410		--		2,644
Total Revenues	$	10,630	$	8,182	$	3,267	$	1,592	$	23,671

	Nine Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	29,478	$	2,272	$	351	$	5,139	$	37,240
Hardware and Software		487		18,039		4,951		105		23,582
Services		884		6,465		1,507		277		9,133
Contracted Revenues
Services		3,626		--		3,108		--		6,734
Total Revenues	$	34,475	$	26,776	$	9,917	$	5,521	$	76,689

	Nine Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	25,810	$	2,314	$	107	$	3,861	$	32,092
Hardware and Software		647		16,811		3,800		72		21,330
Services		772		5,643		1,283		464		8,162
Contracted Revenues
Services		3,569		--		4,145		--		7,714
Total Revenues	$	30,798	$	24,768	$	9,335	$	4,397	$	69,298

Contract Balances

Our contracts have varying payment terms and conditions. Some customers prepay for services, resulting in unearned revenues or customer deposits, called contract liabilities, which are included within other accrued expenses and unearned revenues in the accompanying condensed consolidated balance sheets. Contract assets would exist when sales are recorded (i.e. the control of the goods or services has been transferred to the customer), but customer payment is contingent on a future event besides the passage of time (such as satisfaction of additional performance obligations). We do

not

have any contract assets. Unbilled receivables, which are

not

classified as contract assets, represent arrangements in which sales have been recorded prior to billing and right to payment is unconditional.

A summary of contract liabilities is as follows:

Contract liabilities balance as of March 31, 2018	$	4,147
Prior year liabilities recognized in revenues during the nine months ended December 31, 2018		(3,504	)
Contract liabilities added during the nine months ended December 31, 2018, net of revenues recognized		3,631
Contract liabilities balance as of December 31, 2018	$	4,274

XML

Note 3 - Impairment Loss on Goodwill and Long-lived Assets

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note

3.

Impairment

Loss on

Goodwill and Long-Lived Assets

During the 

nine

 months ended 

December 31, 2018,

we performed an impairment analysis on our Cold Chain Packaging reporting segment as the segment’s financial results continued to fall short of expectations. Specifically, rising commodity costs used in the segment’s principal product have increased over the past

nine

months, eroding the gross profit margin of the segment. We determined that the long-lived assets and goodwill associated with our Cold Chain Packaging reporting segment were impaired and we recognized non-cash impairment charge of

$1,028

on goodwill and

$2,641

on long-lived assets, in impairment loss on goodwill and long-lived assets on the accompanying condensed consolidated statements of operations. The remaining goodwill and intangible assets associated with this segment are 

$300

 and 

$809,

 respectively as of 

December 31, 2018.

The fair value of the impaired assets was determined using Level

3

inputs (unobservable inputs) based on a discounted cash flow method.  

XML

Note 4 - Inventories

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note

4

.

Inventories

Inventories consist of the following:

	December 31, 2018			March 31, 2018
Raw materials	$	7,485		$	9,059
Work-in-process		379			380
Finished goods		3,154			3,152
Less: reserve		(3,412	)		(3,363	)
Inventories, net	$	7,606		$	9,228

XML

Note 5 - Facility Relocation

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

Note

5

.

Facility Relocation

In

August 2016,

we announced that we planned to shut down both our Omaha and Traverse City manufacturing facilities and relocate those operations to the new Bozeman building. The move of those

two

facilities, along with the current Bozeman operations, began in

March 2017

and was completed as of

June 30, 2018.

The total cost of the relocation was

$1,584

(which is comprised primarily of facility moving expenses, retention bonuses for existing personnel and payroll costs for duplicative personnel during the transition period) and these costs pertain to the Sterilization and Disinfection Control Division.

Facility relocation amounts accrued and paid for the

nine

months ended

December 30, 2018

are as follows:

Balance at March 31, 2018	408
Facility Relocation Expense	17
Cash payments	(425	)
Balance at December 31, 2018	-

We completed the sale of our old Bozeman facility during the

nine

months ended

December 31, 2018,

for

$2,222

(net of commissions) resulting in a gain of

$288,

which is recorded in other (income) expense, net on our condensed consolidated statements of operations.

XML

Note 6 - Long-term Debt

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

6

.

Long-T

erm Debt

Long-term debt consists of the following:

	December 31, 2018			March 31, 2018
Line of credit (3.813%, as of December 31, 2018)	$	12,000		$	28,000
Term loan (3.875% as of December 31, 2018)		17,500			18,625
Less: discount		(287	)		(365	)
Less: current portion		(2,000	)		(1,625	)
Long-term portion	$	27,213		$	44,635

On

March 1, 2017,

we entered into a

five

-year agreement (the “Credit Facility”) for an

$80,000

revolving line of credit (“Line of Credit”), a

$20,000

term loan (“Term Loan”) and up to

$2,500

of letters of credit with a banking syndicate of

four

banks. In addition, the Credit Facility provides a post-closing accordion feature which allows for the Company to request to increase the Line of Credit or Term Loan up to an additional

$100,000.

Line of Credit and Term Loan indebtedness bears interest at either: (

1

) LIBOR, as defined in the agreement, plus an applicable margin ranging from

1.50%

to

2.50%;

or (

2

) the alternate base rate (“ABR”), which is the greater of JPMorgan’s prime rate or the federal funds effective rate or the overnight bank funding rate plus

0.5%.

We elect the interest rate with each borrowing under the line of credit. In addition, there is an unused line fee of

0.15%

to

0.35%.

Letter of credit fees are based on the applicable LIBOR rate.

The Credit Facility is secured by all of our assets and requires us to maintain a ratio of funded debt to our trailing

four

quarters of EBIDTA (the “Leverage Ratio”), as defined in the agreement, of less than

3.0

to

1.0,

provided that, we

may

once during the term of the Credit Facility, in connection with a Permitted Acquisition for which the aggregate consideration paid or to be paid in respect thereof equals or exceeds

$20,000,

elect to increase the maximum Leverage Ratio permitted hereunder to (i) 

3.50

to

1.00

for a period of

four

consecutive fiscal quarters commencing with the fiscal quarter in which such Permitted Acquisition occurs (the “Initial Holiday Period”) and (ii) 

3.25

to

1.00

for the period of

four

consecutive fiscal quarters immediately following the Initial Holiday Period. The Credit Facility also requires us to maintain a minimum fixed charge coverage ratio of less than

1.25

to

1.0.

We were in compliance with all debt covenants as of

December 31, 2018.

As of

December 31, 2018,

future contractual maturities of debt are as follows:

For the year ending March 31,
2019	$	500
2020		2,125
2021		2,625
2022		24,250
Total	$	29,500

Subsequent to

December 2018,

we made a

$3,000

payment under our line of credit.

XML

Note 7 - Stock-based Compensation

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note

7

.

Stock-B

ased Compensation

During the

nine

months ended

December 31, 2018,

we granted restricted stock units (“RSUs”) on

17,458

shares of our common stock to eligible employees. The weighted average grant date fair value of the RSUs was

$154.91

per share. The RSUs generally vest in equal installments on the anniversary of the grant date over a period of

five

years. During the

nine

months ended

December 31, 2018,

2,000

RSUs vested, and

1,445

RSUs were forfeited or cancelled.

During the

nine

months ended

December 31, 2018,

we awarded

11,385

performance share units (“PSUs”) that are subject to both service and performance conditions to eligible employees. The PSUs had a grant date fair value of

$192.99

per share and vest both based on our achievement of specific performance criteria for the

three

-year period from

April 1, 2018

through

March 31, 2021,

as well as continued service through

June 15, 2021.

The quantity of shares that will be issued upon vesting will range from

0

percent to

400

percent of the targeted number of shares; if the defined minimum targets are

not

met, then

no

shares will vest. During the

nine

months ended

December 31, 2018,

1,050

PSUs were forfeited.

During the

nine

months ended

December 31, 2018,

we granted non-qualified stock options (“NQSOs”) on

25,544

shares of common stock to eligible employees. The weighted-average grant date fair value of the NQSOs was

$53.93

per share with a weighted average exercise price of

$144.65

per share based on the closing price of the common stock on the date of grant. The NQSOs generally vest in equal installments on the anniversary of the grant date over a period of

five

years.

Amounts recognized in the condensed consolidated financial statements related to stock-based compensation are as follows:

	Three Months Ended December 31,					Nine Months Ended December 31,
	2018			2017		2018			2017
Stock-based compensation expense	$	695		$	438	$	2,424		$	1,423
Amount of income tax (benefit) expense recognized in earnings		(160	)		99		(1,018	)		(893	)
Stock-based compensation, net of tax	$	535		$	537	$	1,406		$	530
Benefit to earnings per share
Basic	$	0.14		$	0.14	$	0.37		$	0.14
Diluted		0.13			0.14		0.35			0.14

Stock-based compensation expense is included in cost of revenues, selling, general and administrative, and research and development expense in the accompanying condensed consolidated statements of operations.

The following is a summary of stock option and non-vested stock award activity for the

nine

months ended

December 31, 2018 (

shares in thousands):

	Stock Options					Non-Vested Stock Awards
	Number of Shares			Weighted- Average Exercise Price per Share		Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at March 31, 2018		458		$	86.38		9		$	125.68
Awards granted		26			144.65		29			169.94
Awards forfeited or expired		(36	)		98.91		(3	)		171.51
Awards exercised or vested		(58	)		69.75		(2	)		163.47
Outstanding as of December 31, 2018		390		$	91.58		33		$	128.04
Exercisable at December 31, 2018		151

We issue shares in connection with stock-based compensation pursuant to the Mesa Laboratories, Inc.

2014

Equity Plan (the

“2014

Equity Plan”). For the purposes of counting the shares remaining as available under the

2014

Incentive Plan, each share issuable pursuant to outstanding full value awards, such as RSUs and PSUs, counts as

five

shares issued, whereas each share underlying a stock option counts as

one

share issued. Under the

2014

Equity Plan,

1,100,000

shares of common stock have been authorized and reserved for eligible participants, of which

611,504

shares were available for future grants as of

December 31, 2018.

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Note 8 - Income Taxes

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

8

.

Income Taxes

For interim income tax reporting, we estimate our annual effective tax rate and apply this effective tax rate to our year-to-date pre-tax income. Each quarter, our estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. Additionally, the tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, impairments of non-deductible goodwill, excess benefits from stock-based compensation, and changes in tax reserves resulting from the finalization of tax audits or reviews are examples of significant unusual or infrequently occurring items that are recognized as discrete items in the interim period in which the event occurs. There is a potential for volatility of the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which it relates, changes in tax laws and foreign tax holidays, settlement with taxing authorities, and foreign currency fluctuations.

On

December 22, 2017,

the Tax Cuts and Jobs Act ("TCJA") was enacted in the U.S., making significant changes to U.S. tax law. The TCJA reduces the U.S. federal corporate income tax rate from

34

percent to

21

percent, requires companies to pay a

one

-time transition tax on certain un-remitted earnings of foreign subsidiaries that were previously tax deferred, generally eliminates U.S. federal income tax on dividends from foreign subsidiaries, creates new taxes on certain foreign-sourced earnings, repeals the Section

199

deduction, and imposes limitations on executive compensation under Section

162

(m).

We have completed our analysis of the TCJA’s income tax effects. In total, the TCJA resulted in a net tax expense of

$43.

The final effect of the TCJA’s

one

-time transition tax was a tax liability of

$322.

During the

nine

months ended

December 31, 2018,

we re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. The amount recorded related to the re-measurement of our deferred tax balance was a benefit of

$279.

Our effective income tax rate was

9.5

percent and (

5.3

) percent for the

three

months ended

December 31, 2018

and

December 31, 2017,

respectively; and

8.6

percent and (

18.0

) percent for the

nine

months ended

December 31, 2018

and

December 31, 2017,

respectively. The effective tax rate for the

three

and

nine

months ended

December 31, 2018

differed from the statutory federal rate of

21

percent primarily due to the impact of the state income taxes, share-based payment awards for employees, and the foreign rate differential.

Since we are subject to audit by various taxing authorities, it is reasonably possible that the amount of unrecognized tax benefits will change during the next

12

months. However, we do

not

expect the change, if any, to have a material effect on our financial condition or results of operations within the next

12

months.

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Note 9 - Earnings Per Share

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

9

.

Earnings

Per

Share

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share (“diluted EPS”) is computed similarly to basic earnings per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. Potentially dilutive securities include common shares related to stock options and non-vested stock awards (collectively “stock awards”). Stock awards are excluded from the calculation of diluted EPS in the event that they are subject to performance conditions or are antidilutive.

The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share (shares in thousands):

	Three Months Ended December 31,					Nine Months Ended December 31,
	2018		2017			2018		2017
Net income (loss) available for shareholders	$	858	$	(11,086	)	$	6,082	$	(7,216	)
Weighted average outstanding shares of common stock		3,855		3,781			3,840		3,765
Dilutive effect of stock options		180		--			182		--
Dilutive effect of non-vested shares		10		--			15		--
Fully diluted shares		4,045		3,781			4,037		3,765
Basic	$	0.22	$	(2.93	)	$	1.58	$	(1.92	)
Diluted	$	0.21	$	(2.93	)	$	1.51	$	(1.92	)

The following stock awards were excluded from the calculation of diluted EPS:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2018		2017		2018		2017
Stock awards that were anti-dilutive		1		501		23		501
Stock awards subject to performance conditions		10		-		9		-
Total stock awards excluded from diluted EPS		11		501		32		501

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Note 10 - Commitments and Contingencies

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

10

.

Commitments and

Contingencies

In

February 2018,

Dr. James L. Orrington II filed a purported civil class action in the United States District Court for the Northern District of Illinois, Eastern Division, alleging that we sent unsolicited advertisements to telephone facsimile machines. The complaint includes counts alleging violations of the Telephone Consumer Protection Act (“TCPA”), the Illinois Consumer Fraud Act, Conversion, Nuisance, and Trespass to Chattels.The plaintiff seeks monetary damages, injunctive relief, and attorneys’ fees. Additionally, in

June 2018,

Rowan Family Dentistry, Inc. filed a purported class action complaint in the United States District Court for the District of Colorado making substantially the same claims as Dr. James L. Orrington II and seeking substantially the same relief. During the

nine

months ended

December 31, 2018,

we recorded an expense of

$3,300

as an estimate of our potential loss associated with the matter. The expense is recorded as estimated legal settlement on our condensed consolidated statements of operations and a corresponding liability is included as estimated legal liability on our condensed consolidated balance sheets. In

January 2019,

we received preliminary court approval of a class action settlement with Dr. James L. Orrington II in the amount of

$3,300

.

We will continue to vigorously defend the aforementioned cases and while we believe that the liability recorded as of

December 31, 2018

approximates the amount that we will ultimately pay, it is possible that we will be subject to liabilities greater or less than the current amount accrued.

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Note 11 - Segment Information

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

1

1

.

S

egment Information

We have

four

reporting segments: Sterilization and Disinfection Control, Instruments, Cold Chain Monitoring, and Cold Chain Packaging. The following tables set forth our segment information:

	Three Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Revenues (1)	$	11,545	$	9,341	$	3,744	$	2,052	$	26,682
Gross profit	$	7,876	$	5,922	$	1,575	$	261	$	15,634
Reconciling items ( 2 )										(14,686	)
Earnings before income taxes									$	948

	Three Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring			Cold Chain Packaging		Total
Revenues (1)	$	10,630	$	8,182	$	3,267		$	1,592	$	23,671
Gross profit	$	7,134	$	5,150	$	(43	)	$	440	$	12,681
Reconciling items ( 2 )											(23,207	)
Earnings before income taxes										$	(10,526	)

	Nine Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Revenues (1)	$	34,475	$	26,776	$	9,917	$	5,521	$	76,689
Gross profit	$	23,660	$	16,909	$	4,203	$	530	$	45,302
Reconciling items ( 2 )										(38,648	)
Earnings before income taxes									$	6,654

	Nine Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Revenues (1)	$	30,798	$	24,768	$	9,335	$	4,397	$	69,298
Gross profit	$	20,676	$	15,021	$	2,044	$	844	$	38,585
Reconciling items ( 2 )										(44,702	)
Earnings before income taxes									$	(6,117	)

( 1 ) Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.

( 2 ) Reconciling items include selling, general and administrative, research and development, impairment loss on goodwill and long-lived assets, estimated legal settlement, and other expenses

	December 31, 2018		March 31, 2018
Total assets
Sterilization and Disinfection Control	$	76,983	$	83,452
Instruments		29,332		33,479
Cold Chain Monitoring		34,749		30,796
Cold Chain Packaging		2,722		7,091
Corporate and administrative		14,374		9,283
Total	$	158,160	$	164,101

As of

December 31, 2018,

all long-lived assets are located in the United States except for

$5,952,

$2,471

and

$15,130

which are associated with our French, Canadian, and German subsidiaries, respectively.

Revenues from external customers are attributed to individual countries based upon locations to which the product is shipped or exported, as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2018		2017		2018		2017
United States	$	17,003	$	14,221	$	49,167	$	41,664
Foreign		9,679		9,450		27,522		27,634
Total	$	26,682	$	23,671	$	76,689	$	69,298

No

foreign country exceeds

10

percent of total revenues.

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Note 12 - Subsequent Event

9 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

Note

1

2

.

Subsequent Event

In

January 2018,

we announced that our Board of Directors declared a quarterly cash dividend of

$0.16

per share of common stock, payable on

March 15, 2019

,

to shareholders of record at the close of business on

February 28, 2019

.

XML

Significant Accounting Policies (Policies)

9 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such unaudited information includes all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations. The results of operations for the interim periods are

not

necessarily indicative of results that

may

be achieved for the entire year. The financial statements and related notes do

not

include all information and footnotes required by U.S. GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in our annual report on Form

10

-K for the year ended

March 31, 2018.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

As of

December 31, 2018

and

March 31, 2018,

our financial instruments were categorized as Level

1

(inputs are quoted prices in active markets) and include cash, accounts receivable, accounts payable, accrued liabilities and short-term and long-term debt. With the exception of long-term debt, the carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. Our debt has a variable interest rate, so the carrying amount approximates fair value because interest rates on these instruments approximate the interest rate on debt with similar terms available to us.

Business Combinations Policy [Policy Text Block]

Acquisitions

During the

three

months ended

December 31, 2018,

we completed the purchase of Point Six Wireless, LLC. We made an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of acquired assets and assumed liabilities. We obtained the information to make the allocation during due diligence and through the use of other information available to us. In the months after closing, we will obtain additional information about the assets and liabilities acquired, including asset appraisals, and we will refine the estimates of the fair value to more accurately allocate the purchase price.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements

In

February 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016

-

02,

 

Leases

(Topic

842

)

. The pronouncement requires lessees to recognize a liability for lease obligations, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for all leases with terms greater than

12

months. The guidance also requires qualitative and quantitative disclosures designed to present financial statement users with the ability to assess the amount, timing, and uncertainty of cash flows arising from leases. We have initiated our plan for the adoption and implementation of this new accounting standard, including assessing our lease arrangements, evaluating practical expedients, and making necessary changes to our accounting policies, processes, and internal controls over financial reporting. We expect to adopt the standard using the optional transition method, which will allow us to apply the standard as of the effective date, therefore we will

not

apply changes to comparative periods presented in our financial statements. We are still assessing the expected impact of the standard on our consolidated balance sheets, but it will

not

significantly impact our consolidated statements of operations and cash flows.

Recently

Adopted

Accounting Pronouncements

In

August 2018,

the Securities and Exchange Commission issued Release

No.

33

-

10532

that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting is the inclusion of the annual disclosure requirement of changes in stockholders’ equity in Rule

3

-

04

of Regulation S-

X

to interim periods. We adopted this new rule beginning the quarter ended

December 31, 2018

and have included our Consolidated Statements of Stockholders' Equity with this quarterly filing on Form

10

-Q.

During the

nine

months ended

December 31, 2018,

we elected to early-adopt ASU

2018

-

15

Intangibles – Goodwill and Other Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

(“ASU

2018

-

15”

) on a prospective basis. ASU

2018

-

15

aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs of other internal-use software arrangements. Accordingly, we capitalized

$206

of costs incurred during the

nine

months ended

December 31, 2018

to implement a hosted enterprise resource planning system to our European subsidiaries. The related asset is held in prepaid expenses and other on the condensed consolidated balance sheets, and we began amortizing the expense to general and administrative costs on our condensed consolidated statements of operations on a straight-line basis over the contractual term of the arrangement.

Effective

April 1, 2018,

we adopted ASU

2014

-

09

Revenue from Contracts with Customers (Topic

606

)

and all related amendments (referred to collectively hereinafter as “ASU

606”

) to all contracts on a modified retrospective basis. ASU

606

requires an entity to recognize revenue for the transfer of goods or services equal to the amount it expects to be entitled to receive for the goods and services. The adoption did

not

have a material impact on our condensed consolidated balance sheets, statements of operations, or cash flows. The primary impact of adoption was the enhancement of disclosures to provide additional clarity regarding how revenue is earned and recognized, and to show revenues at a more disaggregated level, included in Note

2.

“Revenue Recognition.”

In

March 2018,

the FASB issued ASU

2018

-

05,

 Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin

No.

118.

 We adopted the ASU immediately upon release. The amendments in the update provide guidance on when to record and disclose provisional amounts for certain income tax effects of the Tax Cuts and Jobs Act ("TCJA"). The amendments also require any provisional amounts or subsequent adjustments to be included in net income from continuing operations. Additionally, this ASU discusses required disclosures that an entity must make with regard to the TCJA. As of the

three

months ended

December 31, 2018,

we have completed our analysis of the TCJA’s income tax effects. the Refer to Note 

8.

“Income Taxes” for additional information on the TCJA.

The TCJA created a new requirement that global intangible low taxed income earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFC’s U.S. shareholder. Under U.S. GAAP, we are allowed to make an accounting policy choice of how GILTI taxes are treated. We have elected to treat taxes due on future U.S. inclusions in taxable income related to GILTI as current period expenses when incurred (“the period cost method”).

XML

Note 2 - Revenue Recognition (Tables)

9 Months Ended

Dec. 31, 2018

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	9,853	$	834	$	151	$	1,868	$	12,706
Hardware and Software		110		6,417		1,980		49		8,556
Services		372		2,090		534		135		3,131
Contracted Revenues
Services		1,210		--		1,079		--		2,289
Total Revenues	$	11,545	$	9,341	$	3,744	$	2,052	$	26,682

	Three Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	8,872	$	754	$	36	$	1,345	$	11,007
Hardware and Software		280		5,724		1,332		3		7,339
Services		244		1,704		489		244		2,681
Contracted Revenues
Services		1,234		--		1,410		--		2,644
Total Revenues	$	10,630	$	8,182	$	3,267	$	1,592	$	23,671

	Nine Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	29,478	$	2,272	$	351	$	5,139	$	37,240
Hardware and Software		487		18,039		4,951		105		23,582
Services		884		6,465		1,507		277		9,133
Contracted Revenues
Services		3,626		--		3,108		--		6,734
Total Revenues	$	34,475	$	26,776	$	9,917	$	5,521	$	76,689

	Nine Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete Revenues
Consumables	$	25,810	$	2,314	$	107	$	3,861	$	32,092
Hardware and Software		647		16,811		3,800		72		21,330
Services		772		5,643		1,283		464		8,162
Contracted Revenues
Services		3,569		--		4,145		--		7,714
Total Revenues	$	30,798	$	24,768	$	9,335	$	4,397	$	69,298

Contract with Customer, Asset and Liability [Table Text Block]

Contract liabilities balance as of March 31, 2018	$	4,147
Prior year liabilities recognized in revenues during the nine months ended December 31, 2018		(3,504	)
Contract liabilities added during the nine months ended December 31, 2018, net of revenues recognized		3,631
Contract liabilities balance as of December 31, 2018	$	4,274

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Note 4 - Inventories (Tables)

9 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	December 31, 2018			March 31, 2018
Raw materials	$	7,485		$	9,059
Work-in-process		379			380
Finished goods		3,154			3,152
Less: reserve		(3,412	)		(3,363	)
Inventories, net	$	7,606		$	9,228

XML

Note 5 - Facility Relocation (Tables)

9 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Restructuring Reserve by Type of Cost [Table Text Block]

Balance at March 31, 2018	408
Facility Relocation Expense	17
Cash payments	(425	)
Balance at December 31, 2018	-

XML

Note 6 - Long-term Debt (Tables)

9 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Debt [Table Text Block]

	December 31, 2018			March 31, 2018
Line of credit (3.813%, as of December 31, 2018)	$	12,000		$	28,000
Term loan (3.875% as of December 31, 2018)		17,500			18,625
Less: discount		(287	)		(365	)
Less: current portion		(2,000	)		(1,625	)
Long-term portion	$	27,213		$	44,635

Schedule of Maturities of Long-term Debt [Table Text Block]

For the year ending March 31,
2019	$	500
2020		2,125
2021		2,625
2022		24,250
Total	$	29,500

XML

Note 7 - Stock-based Compensation (Tables)

9 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended December 31,					Nine Months Ended December 31,
	2018			2017		2018			2017
Stock-based compensation expense	$	695		$	438	$	2,424		$	1,423
Amount of income tax (benefit) expense recognized in earnings		(160	)		99		(1,018	)		(893	)
Stock-based compensation, net of tax	$	535		$	537	$	1,406		$	530
Benefit to earnings per share
Basic	$	0.14		$	0.14	$	0.37		$	0.14
Diluted		0.13			0.14		0.35			0.14

Share-based Compensation, Activity [Table Text Block]

	Stock Options					Non-Vested Stock Awards
	Number of Shares			Weighted- Average Exercise Price per Share		Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at March 31, 2018		458		$	86.38		9		$	125.68
Awards granted		26			144.65		29			169.94
Awards forfeited or expired		(36	)		98.91		(3	)		171.51
Awards exercised or vested		(58	)		69.75		(2	)		163.47
Outstanding as of December 31, 2018		390		$	91.58		33		$	128.04
Exercisable at December 31, 2018		151

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Note 9 - Earnings Per Share (Tables)

9 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended December 31,					Nine Months Ended December 31,
	2018		2017			2018		2017
Net income (loss) available for shareholders	$	858	$	(11,086	)	$	6,082	$	(7,216	)
Weighted average outstanding shares of common stock		3,855		3,781			3,840		3,765
Dilutive effect of stock options		180		--			182		--
Dilutive effect of non-vested shares		10		--			15		--
Fully diluted shares		4,045		3,781			4,037		3,765
Basic	$	0.22	$	(2.93	)	$	1.58	$	(1.92	)
Diluted	$	0.21	$	(2.93	)	$	1.51	$	(1.92	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months Ended December 31,				Nine Months Ended December 31,
	2018		2017		2018		2017
Stock awards that were anti-dilutive		1		501		23		501
Stock awards subject to performance conditions		10		-		9		-
Total stock awards excluded from diluted EPS		11		501		32		501

XML

Note 11 - Segment Information (Tables)

9 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Revenues (1)	$	11,545	$	9,341	$	3,744	$	2,052	$	26,682
Gross profit	$	7,876	$	5,922	$	1,575	$	261	$	15,634
Reconciling items ( 2 )										(14,686	)
Earnings before income taxes									$	948

	Three Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring			Cold Chain Packaging		Total
Revenues (1)	$	10,630	$	8,182	$	3,267		$	1,592	$	23,671
Gross profit	$	7,134	$	5,150	$	(43	)	$	440	$	12,681
Reconciling items ( 2 )											(23,207	)
Earnings before income taxes										$	(10,526	)

	Nine Months Ended December 31, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Revenues (1)	$	34,475	$	26,776	$	9,917	$	5,521	$	76,689
Gross profit	$	23,660	$	16,909	$	4,203	$	530	$	45,302
Reconciling items ( 2 )										(38,648	)
Earnings before income taxes									$	6,654

	Nine Months Ended December 31, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Revenues (1)	$	30,798	$	24,768	$	9,335	$	4,397	$	69,298
Gross profit	$	20,676	$	15,021	$	2,044	$	844	$	38,585
Reconciling items ( 2 )										(44,702	)
Earnings before income taxes									$	(6,117	)

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	December 31, 2018		March 31, 2018
Total assets
Sterilization and Disinfection Control	$	76,983	$	83,452
Instruments		29,332		33,479
Cold Chain Monitoring		34,749		30,796
Cold Chain Packaging		2,722		7,091
Corporate and administrative		14,374		9,283
Total	$	158,160	$	164,101

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

	Three Months Ended December 31,				Nine Months Ended December 31,
	2018		2017		2018		2017
United States	$	17,003	$	14,221	$	49,167	$	41,664
Foreign		9,679		9,450		27,522		27,634
Total	$	26,682	$	23,671	$	76,689	$	69,298

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Note 1 - Description of Business and Summary of Significant Accounting Policies (Details Textual) $ in Thousands	9 Months Ended
	Dec. 31, 2018 USD ($)
Number of Operating Segments	4
Enterprise Resource Planning System Implementation Costs [Member]
Capitalized Contract Cost, Gross	$ 206

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Note 2 - Revenue Recognition (Details Textual) $ in Thousands	Dec. 31, 2018 USD ($)
Contract with Customer, Asset, Net, Total	$ 0

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Note 2 - Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Revenues	[1]	$ 26,682	$ 23,671	$ 76,689	$ 69,298
Consumables [Member] | Transferred at Point in Time [Member]
Revenues		12,706	11,007	37,240	32,092
Hardware and Software [Member] | Transferred at Point in Time [Member]
Revenues		8,556	7,339	23,582	21,330
Service [Member] | Transferred at Point in Time [Member]
Revenues		3,131	2,681	9,133	8,162
Service [Member] | Transferred over Time [Member]
Revenues		2,289	2,644	6,734	7,714
Sterilzation and Disinfection Control [Member]
Revenues	[1]	11,545	10,630	34,475	30,798
Sterilzation and Disinfection Control [Member] | Consumables [Member] | Transferred at Point in Time [Member]
Revenues		9,853	8,872	29,478	25,810
Sterilzation and Disinfection Control [Member] | Hardware and Software [Member] | Transferred at Point in Time [Member]
Revenues		110	280	487	647
Sterilzation and Disinfection Control [Member] | Service [Member] | Transferred at Point in Time [Member]
Revenues		372	244	884	772
Sterilzation and Disinfection Control [Member] | Service [Member] | Transferred over Time [Member]
Revenues		1,210	1,234	3,626	3,569
Instruments [Member]
Revenues	[1]	9,341	8,182	26,776	24,768
Instruments [Member] | Consumables [Member] | Transferred at Point in Time [Member]
Revenues		834	754	2,272	2,314
Instruments [Member] | Hardware and Software [Member] | Transferred at Point in Time [Member]
Revenues		6,417	5,724	18,039	16,811
Instruments [Member] | Service [Member] | Transferred at Point in Time [Member]
Revenues		2,090	1,704	6,465	5,643
Instruments [Member] | Service [Member] | Transferred over Time [Member]
Revenues
Cold Chain Monitoring [Member]
Revenues	[1]	3,744	3,267	9,917	9,335
Cold Chain Monitoring [Member] | Consumables [Member] | Transferred at Point in Time [Member]
Revenues		151	36	351	107
Cold Chain Monitoring [Member] | Hardware and Software [Member] | Transferred at Point in Time [Member]
Revenues		1,980	1,332	4,951	3,800
Cold Chain Monitoring [Member] | Service [Member] | Transferred at Point in Time [Member]
Revenues		534	489	1,507	1,283
Cold Chain Monitoring [Member] | Service [Member] | Transferred over Time [Member]
Revenues		1,079	1,410	3,108	4,145
Cold Chain Packaging [Member]
Revenues	[1]	2,052	1,592	5,521	4,397
Cold Chain Packaging [Member] | Consumables [Member] | Transferred at Point in Time [Member]
Revenues		1,868	1,345	5,139	3,861
Cold Chain Packaging [Member] | Hardware and Software [Member] | Transferred at Point in Time [Member]
Revenues		49	3	105	72
Cold Chain Packaging [Member] | Service [Member] | Transferred at Point in Time [Member]
Revenues		135	244	277	464
Cold Chain Packaging [Member] | Service [Member] | Transferred over Time [Member]
Revenues

[1] Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.

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Note 2 - Revenue Recognition - Contract Liabilities (Details) $ in Thousands	9 Months Ended
	Dec. 31, 2018 USD ($)
Contract liabilities balance as of March 31, 2018	$ 4,147
Prior year liabilities recognized in revenues during the nine months ended December 31, 2018	(3,504)
Contract liabilities added during the nine months ended December 31, 2018, net of revenues recognized	3,631
Contract liabilities balance as of December 31, 2018	$ 4,274

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Note 3 - Impairment Loss on Goodwill and Long-lived Assets (Details Textual) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2018	Mar. 31, 2018
Goodwill, Ending Balance	$ 64,148	$ 65,543
Intangible Assets, Net (Excluding Goodwill), Total	38,336	$ 42,850
Cold Chain Packaging [Member]
Goodwill, Ending Balance	300
Intangible Assets, Net (Excluding Goodwill), Total	809
Impairment of Long-Lived Assets and Goodwill [Member]
Goodwill, Impairment Loss	1,028
Impairment of Long-Lived Assets Held-for-use	$ 2,641

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Note 4 - Inventories - Summary of Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Mar. 31, 2018
Raw materials	$ 7,485	$ 9,059
Work-in-process	379	380
Finished goods	3,154	3,152
Less: reserve	(3,412)	(3,363)
Inventories, net	$ 7,606	$ 9,228

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Note 5 - Facility Relocation (Details Textual) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2018	Aug. 31, 2016
Bozeman [Member]
Proceeds from Sale of Productive Assets, Total	$ 2,222
Bozeman [Member] | Other Nonoperating Income (Expense) [Member]
Gain (Loss) on Disposition of Assets for Financial Service Operations, Total	$ 288
Relocation of Omaha and Traverse City Biological Indicator Manufacturing Facilities [Member]
Restructuring and Related Cost, Expected Cost, Total		$ 1,584

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Note 5 - Facility Relocation - Facility Relocation Costs (Details) - Relocation of Omaha and Traverse City Biological Indicator Manufacturing Facilities [Member] $ in Thousands	9 Months Ended
	Dec. 31, 2018 USD ($)
Balance at March 31, 2018	$ 408
Facility Relocation Expense	17
Cash payments	(425)
Balance at December 31, 2018

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Note 6 - Long-term Debt (Details Textual) $ in Millions		1 Months Ended
	Mar. 01, 2017 USD ($)	Feb. 03, 2019 USD ($)
Credit Facility [Member]
Debt Instrument Convenant, Maximum Leverage Ration, During the Initial Holiday Period	3.5
Debt Instrument Covenant, Maximum Leverage Ratio, Immediately Following the Initial Holiday Period	3.25
Debt Instrument Covenant, Fixed Charge Coverage Ratio	1.25
Credit Facility [Member] | Subsequent Event [Member]
Repayments of Long-term Lines of Credit		$ 3.0
Credit Facility [Member] | After March 31, 2016 [Member]
Debt Instrument Covenant, Ratio of Funded Debt to Consolidated EBITDA	3
Credit Facility [Member] | Term Loan [Member]
Long-term Debt, Gross	$ 20.0
Line of Credit [Member]
Long-term Debt, Gross	$ 20.0
Line of Credit [Member] | Debt Instrument, Variable Rate Base CBFR Using One Month LIBOR [Member]
Debt Instrument, Basis Spread on Variable Rate Used to Calculate Commercial Bank Floating Rate	0.50%
Line of Credit [Member] | Minimum [Member]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.15%
Line of Credit [Member] | Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	1.50%
Line of Credit [Member] | Maximum [Member]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.35%
Line of Credit [Member] | Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	2.50%
Line of Credit [Member] | Credit Facility [Member]
Debt Instrument, Term	5 years
Line of Credit Facility, Maximum Borrowing Capacity	$ 80.0
Line of Credit Facility, Additional Maximum Borrowing Capacity	100.0
Letter of Credit [Member] | Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 2.5

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Note 6 - Long-term Debt - Components of Long-term Debt (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Mar. 31, 2018
Long-term debt	$ 29,500
Less: discount	(287)	$ (365)
Less: current portion	(2,000)	(1,625)
Long-term portion	27,213	44,635
Line of Credit [Member]
Long-term debt	12,000	28,000
Term Loan [Member]
Long-term debt	$ 17,500	$ 18,625

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Note 6 - Long-term Debt - Components of Long-term Debt (Details) (Parentheticals)	Dec. 31, 2018
Line of Credit [Member]
Line of credit, interest rate at end of period	3.813%
Term Loan [Member]
Term loan, interest rate at end of period	3.875%

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Note 6 - Long-term Debt - Future Contractual Maturities of Debt (Details) $ in Thousands	Dec. 31, 2018 USD ($)
2019	$ 500
2020	2,125
2021	2,625
2022	24,250
Total	$ 29,500

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Note 7 - Stock-based Compensation (Details Textual)	9 Months Ended
	Dec. 31, 2018 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	29,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares	$ 169.94
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	2,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	3,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	25,544
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares	$ 53.93
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares	$ 144.65
Equity Plan 2014 [Member]
Common Stock, Capital Shares Reserved for Future Issuance	1,100,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	611,504
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	17,458
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares	$ 154.91
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	2,000
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	11,385
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares	$ 192.99
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	1,050
Performance Shares [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	1,445
Share-based Compensation Arrangement by Share-based Payment Award Number of Shares Issued Upon Vesting, Percentage	400.00%
Performance Shares [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award Number of Shares Issued Upon Vesting, Percentage	0.00%
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years

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Note 7 - Stock-based Compensation - Allocation of Share-based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Stock-based compensation expense	$ 695	$ 438	$ 2,424	$ 1,423
Amount of income tax (benefit) expense recognized in earnings	(160)	99	(1,018)	(893)
Stock-based compensation, net of tax	$ 535	$ 537	$ 1,406	$ 530
Basic (in dollars per share)	$ 0.14	$ 0.14	$ 0.37	$ 0.14
Diluted (in dollars per share)	$ 0.13	$ 0.14	$ 0.35	$ 0.14

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Note 7 - Stock-based Compensation - Stock Option and Non-vested Stock Award Activity (Details) - $ / shares	9 Months Ended
	Dec. 31, 2018
Options outstanding (in shares)	458,000
Options outstanding, weighted average exercise price (in dollars per share)	$ 86.38
Non-vested stock awards outstanding (in shares)	9,000
Non-vested stock awards outstanding, weighted average grant date fair value (in dollars per share)	$ 125.68
Options granted (in shares)	25,544
Options granted, weighted average exercise price (in dollars per share)	$ 144.65
Non-vested stock awards granted (in shares)	29,000
Non-vested stock awards granted, weighted average grant date fair value (in dollars per share)	$ 169.94
Options forfeited or expired (in shares)	(36,000)
Options forfeited or expired, weighted average exercise price (in dollars per share)	$ 98.91
Non-vested stock awards forfeited (in shares)	(3,000)
Non-vested stock awards forfeited, weighted average grant date fair value (in dollars per share)	$ 171.51
Options exercised (in shares)	(58,000)
Options exercised, weighted average exercise price (in dollars per share)	$ 69.75
Non-vested stock awards vested (in shares)	(2,000)
Non-vested stock awards vested, weighted average grant date fair value (in dollars per share)	$ 163.47
Options outstanding (in shares)	390,000
Options outstanding, weighted average exercise price (in dollars per share)	$ 91.58
Non-vested stock awards outstanding (in shares)	33,000
Non-vested stock awards outstanding, weighted average grant date fair value (in dollars per share)	$ 128.04
Options exercisable (in shares)	151,000

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Note 8 - Income Taxes (Details Textual) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended		12 Months Ended
	Dec. 22, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Mar. 31, 2019
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	34.00%
Tax Adjustments, Settlements, and Unusual Provisions				$ (43)
Taxes Payable, Total		$ 322		322
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability				$ (279)
Effective Income Tax Rate Reconciliation, Percent, Total		9.50%	(5.30%)	8.60%	(18.00%)
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent						21.00%

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Note 9 - Earnings Per Share - Computation of Net Income Per Share, Basic & Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2018	Dec. 31, 2017
Net income (loss) available for shareholders	$ 858	$ 994	$ 4,230	$ (11,086)	$ 2,353	$ 1,517	$ 6,082	$ (7,216)	[1]
Basic (in shares)	3,855			3,781			3,840	3,765
Dilutive effect of stock options (in shares)	180						182
Dilutive effect of non-vested shares (in shares)	10						15
Fully diluted shares (in shares)	4,045			3,781			4,037	3,765
Basic (in dollars per share)	$ 0.22			$ (2.93)			$ 1.58	$ (1.92)
Diluted (in dollars per share)	$ 0.21			$ (2.93)			$ 1.51	$ (1.92)

[1] -Contingent consideration is classified as a financing activity pursuant to ASU 2016-15.

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Note 9 - Earnings Per Share - Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares shares in Thousands	6 Months Ended		9 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Stock awards excluded from diluted EPS (in shares)	11	501	32	501
Stock Awards that were Antidilutive [Member]
Stock awards excluded from diluted EPS (in shares)	1	501	23	501
Stock Awards Subject to Performance Conditions [Member]
Stock awards excluded from diluted EPS (in shares)	10		9

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Note 10 - Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Litigation Settlement, Expense			$ 3,300
Class Action In United States District Court [Member]
Litigation Settlement, Expense			$ 3,300

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Note 11 - Segment Information (Details Textual) $ in Thousands	9 Months Ended
	Dec. 31, 2018 USD ($)
Number of Reportable Segments	4
FRANCE
Long-Lived Assets	$ 5,952
CANADA
Long-Lived Assets	2,471
GERMANY
Long-Lived Assets	$ 15,130

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Note 11 - Segment Information - Operating Segment Information (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Revenues	[1]	$ 26,682	$ 23,671	$ 76,689	$ 69,298
Gross profit		15,634	12,681	45,302	38,585
Reconciling items	[2]	(14,686)	(23,207)	(38,648)	(44,702)
Earnings before income taxes		948	(10,526)	6,654	(6,117)
Sterilzation and Disinfection Control [Member]
Revenues	[1]	11,545	10,630	34,475	30,798
Gross profit		7,876	7,134	23,660	20,676
Reconciling items	[2]
Earnings before income taxes
Instruments [Member]
Revenues	[1]	9,341	8,182	26,776	24,768
Gross profit		5,922	5,150	16,909	15,021
Reconciling items	[2]
Earnings before income taxes
Cold Chain Monitoring [Member]
Revenues	[1]	3,744	3,267	9,917	9,335
Gross profit		1,575	(43)	4,203	2,044
Reconciling items	[2]
Earnings before income taxes
Cold Chain Packaging [Member]
Revenues	[1]	2,052	1,592	5,521	4,397
Gross profit		261	440	530	844
Reconciling items	[2]
Earnings before income taxes

[1] Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.

[2] Reconciling items include selling, general and administrative, research and development, impairment loss on goodwill and long-lived assets, estimated legal settlement, and other expenses.

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Note 11 - Segment Information - Operating Segment Asset Reconciliation (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Mar. 31, 2018
Assets	$ 158,160	$ 164,101
Corporate, Non-Segment [Member]
Assets	14,374	9,283
Sterilzation and Disinfection Control [Member] | Operating Segments [Member]
Assets	76,983	83,452
Instruments [Member] | Operating Segments [Member]
Assets	29,332	33,479
Cold Chain Monitoring [Member] | Operating Segments [Member]
Assets	34,749	30,796
Cold Chain Packaging [Member] | Operating Segments [Member]
Assets	$ 2,722	$ 7,091

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Note 11 - Segment Information - Revenues From External Customers (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Revenues	[1]	$ 26,682	$ 23,671	$ 76,689	$ 69,298
UNITED STATES
Revenues		17,003	14,221	49,167	41,664
Non-US [Member]
Revenues		$ 9,679	$ 9,450	$ 27,522	$ 27,634

[1] Intersegment revenues are not significant and are eliminated to arrive at consolidated totals.

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Note 12 - Subsequent Event (Details Textual) - Subsequent Event [Member]	1 Months Ended
	Jan. 31, 2019 $ / shares
Common Stock, Dividends, Per Share, Declared	$ 0.16
Dividends Payable, Date to be Paid	Mar. 15, 2019
Dividends Payable, Date of Record	Feb. 28, 2019