Note

Stock

Transactions and Stock-Based Compensation

November 2005,

our Board of Directors approved a program to repurchase up to

300,000

shares of our outstanding common stock. Under the program, shares of common stock

may

be purchased from time to time in the open market at prevailing prices or in negotiated transactions off the market. Shares of common stock purchased will be cancelled and repurchases of shares of common stock will be funded through existing cash reserves. There were

repurchases of our shares of common stock under this plan during the years ended

March 31, 2019,

2018,

and

2017.

As of

March 31, 2019,

we have purchased

162,486

shares under this plan.

Under applicable law, Colorado corporations are

not

permitted to retain treasury stock. The price paid for repurchased shares is allocated between common stock and retained earnings, based on management’s estimate of the original sales price of the underlying shares.

Pursuant to the Mesa Laboratories, Inc.

2014

Equity Plan, we grant stock options, restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) to employees and non-employee directors. We issue shares of common stock upon the exercise of stock options and the vesting of RSUs and PSUs. Shares issued pursuant to awards granted prior to The

2014

Equity Plan were issued subject to previous stock plans, and some vested and unvested awards are still outstanding under previous plans. For the purposes of counting the shares remaining as available under The

2014

Equity 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

Plan,

1,100,000

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

613,893

shares were available for future grants as of

March 31, 2019.

Stock-based compensation expense recognized in the Consolidated Financial Statements was as follows:

	Year Ended March 31,
	2019			2018			2017
Stock-based compensation expense (A)	$	4,212		$	1,672		$	1,411
Amount of income tax (benefit) expense recognized in earnings		(2,370	)		(1,194	)		(1,737	)
Stock-based compensation expense (benefit), net of tax	$	1,842		$	478		$	(326	)

(A) During the year ended

March 31, 2019,

we implemented a new full-administration equity compensation platform, and as a result, changed the methodology used to account for estimated forfeitures from a static method to a dynamic method. This change resulted in a

one

-time cumulative increase in expense of

$945,

recognized during the year ended

March 31, 2019.

Stock Options

Stock option activity under The

2006

Equity Compensation plan and The

2014

Equity Plan was as follows (shares and dollars in thousands, except per-share data):

	Shares Subject to Options			Weighted Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding, April 1, 2018		458		$	86.38		4.5	$	28,445
Awards granted		26			144.96
Awards forfeited or expired		(38	)		99.00
Awards exercised		(92	)		67.84
Outstanding, March 31, 2019		354			94.04		3.8		48,301
Exercisable, March 31, 2019		121			78.30		3.5		18,374
Vested and expected to vest, March 31, 2019		331			93.29		3.8		45,463

The total intrinsic value of stock options exercised during the years ended

March

31,

2019,

2018

and

2017

was

$10,895,

$6,309,

and

$7,574,

respectively. Unrecognized stock-based compensation expense for stock options as of

March

31,

2019

was

$5,661

and is expected to be recognized over a weighted average period of

3.3

years. The total fair value of options vested was

$2,400,

$1,927

and

$1,432

during the years ended

March 31, 2019,

2018,

and

2017,

respectively.

The weighted average assumptions utilized in the Black-Scholes option-pricing model to estimate the fair value of stock option awards granted each year were as follows:

	2019			2018			2017
Risk-free interest rate		2.63	%		1.88	%		1.56	%
Expected life (years)		5.00			5.52			5.47
Expected dividend yield		0.45	%		0.54	%		0.64	%
Volatility		35.96	%		32.92	%		32.34	%
Weighted-average Black-Scholes fair value per share at date of grant	$	54.02		$	39.06		$	31.27

The expected life of options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules, and expectations of future employee behavior. Expected stock price volatility is based on historical volatility of our own stock price over the period of time commensurate with the expected life of the award. The risk-free rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. The dividend yield is calculated based upon the dividend payments made during the prior

four

quarters as a percent of the average stock price for that period. The amounts shown above for the estimated fair value per option granted are before the estimated effect of forfeitures, which reduces the amount of expense recorded in our Consolidated Statements of Operations. We base forfeiture rates on company-specific historical experience of similar awards for similar subsets of our employee population.

Restricted Stock Units (RSUs)

RSU activity under The

2014

Equity Plan was as follows (shares and dollars in thousands, except per-share data):

	Number of Shares			Weighted- Average Grant Date Fair Value per Share		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at March 31, 2018		8		$	126.03		4.5		982
Awards granted		29			171.13
Awards forfeited or expired		(3	)		168.24
Awards vested		(3	)		149.44
Outstanding as of March 31, 2019		31		$	162.23		2.1		7,155

There were

RSUs with a weighted average grant date fair value per share of

$163.93

that were vested and expected to vest as of

March

31,

2019.

For the years ended

March 31, 2018

and

2017,

the weighted average fair value per RSU granted was

$136.26

and

$122.98.

Unrecognized stock-based compensation expense for RSUs that we have determined are probable of vesting was

$4,018

as of

March

31,

2019

and is expected to be recognized over a weighted average period of

2.1

years. The total fair value of RSUs vested was

$460,

$123,

and

during the years ended

March 31, 2019,

2018,

and

2017.

As of

March 31, 2019,

of the outstanding RSUs were subject to performance and service conditions and are considered performance share units (PSUs). During the year ended

March 31, 2019,

we awarded PSUs with a grant date fair value of

$192.99

per share. The awards 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

400%

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

not

met, then

shares will vest. During the year ended

March 31, 2019,

1,050

PSUs were forfeited.