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Note 11 - Stock Transactions and Stock-based Compensation
 12 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]
Note
11
.
Stock
Transactions and Stock-Based Compensation
 
In
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
no
repurchases of our shares of common stock under this plan during the years ended
March 31, 2020
,
2019
, and
2018
. As of
March 31, 2020
, 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.
 
Public Offering of Common Stock 

On
August 12, 2019,
we completed the sale and issuance of a total of
431,250
shares of our common stock, which includes our underwriters' exercise in full of an option to purchase up to an additional
56,250
shares. The offering price to the public was
$210.00
per share. The total proceeds we received from the offering, net of underwriting discounts and commissions and other offering expenses we paid was
$84,995.
 
Stock-Based Compensation
Pursuant to the Mesa Laboratories, Inc.
2014
Equity Plan, we grant stock options, RSUs and PSUs to employees and non-employee directors. We issue new 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 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
499,548
shares were available for future grants as of
March 31, 2020
.
 
Stock-based compensation expense recognized in the Consolidated Financial Statements was as follows:
 
   
Year Ended March 31,
  
   
2020
    
2019
    
2018
  
Stock-based compensation expense (A)
   $
5,525
     $
4,212
     $
1,672
  
Amount of income tax (benefit) recognized in earnings
    
(1,576
 )    
(2,370
 )    
(1,194
 )
Stock-based compensation expense, net of tax
   $
3,949
     $
1,842
     $
478
  
 
(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
 
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: 
 
   
2020
    
2019
    
2018
  
Risk-free interest rate
    
1.80
%
    
2.63
%
    
1.88
%
Expected life (years)
    
4.33
      
5.00
      
5.52
  
Expected dividend yield
    
0.13
%
    
0.45
%
    
0.54
%
Volatility
    
36.52
%
    
35.96
%
    
32.92
%
Weighted-average Black-Scholes fair value per share at date of grant
   $
66.02
     $
54.02
     $
39.06
  
 
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 assumption is based on our anticipated cash dividend payouts. 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.
 
Stock option activity under The
2006
Equity Compensation plan and The
2014
Equity Plan was as of
March 31, 2020,
and changes for the year then ended is presented below (shares and dollars in thousands, except per-share data):
 
   
Stock Options
  
   
Shares Subject to Options
    
Weighted- Average Exercise Price per Share
    
Weighted-Average Remaining Contractual Life (Years)
    
Aggregate Intrinsic Value
  
Outstanding at March 31, 2019
    
354
     $
94.04
      
3.8
      
48,301
  
Awards granted
    
29
      
206.35
      
 
      
 
  
Awards forfeited or expired
    
(36
 )    
100.18
      
 
      
 
  
Awards exercised or distributed
    
(61
 )    
79.81
      
 
      
 
  
Outstanding as of March 31, 2020
    
286
     $
107.72
      
3.1
     $
33,927
  
Exercisable as of March 31, 2020
    
121
     $
88.77
      
2.7
     $
16,583
  
Vested and expected to vest, March 31, 2020
    
278
     $
107.32
      
3.1
     $
33,031
  
 
The total intrinsic value of stock options exercised during the years ended
March 31, 2020
, 
2019
and
2018
was
$9,574,
$10,895,
and
$6,309,
respectively. Unrecognized stock-based compensation expense for stock options as of
March 31, 2020
was
$4,285
 and is expected to be recognized over a weighted average period of
2.8
 years. The total fair value of options vested was
$1,912,
 
$2,400,
and
$1,927
 during the years ended
March 31, 2020
,
2019
, and
2018
, respectively. The weighted-average grant date fair value of awards granted during the years ended
March 31, 2019
and
March 31, 2018
was
$144.96
and
$123.13,
respectively.
 
Time-Based Restricted Stock Units (RSUs)
RSU activity under The
2014
Equity Plan was as follows (shares and dollars in thousands, except per-share data):
 
   
Time-Based Restricted Stock Units
  
   
Number of Shares
    
Weighted- Average Grant Date Fair Value per Share
    
Weighted- average Remaining Contractual Life (Years)
    
Aggregate Intrinsic Value
  
Nonvested at March 31, 2019
    
21
     $
146.92
      
2.1
     $
4,773
  
Awards granted
    
16
      
213.31
      
 
      
 
  
Awards forfeited or expired
    
(3
 )    
161.58
      
 
      
 
  
Awards distributed
    
(6
 )    
160.87
      
 
      
 
  
Nonvested as of March 31, 2020
    
28
     $
180.15
      
1.7
     $
6,258
  
 
There were
26
 RSUs with a weighted average grant date fair value per share of 
$180.85
that were expected to vest as of
March 31, 2020
. For the years ended 
March 31, 2019
and
2018
, the weighted average fair value per RSU granted was
$157.14
 and
$136.26,
respectively. Unrecognized stock-based compensation expense for RSUs that we have determined are probable of vesting was
$3,654
 as of
March 31, 2020
. The total fair value of RSUs vested was
$959,
$460,
and
$123
 during the years ended
March 31, 2020
,
2019
, and
2018
.
 
Performance-Based Restricted Stock Units (PSUs)
PSU activity under The
2014
Equity Plan was as follows (shares and dollars in thousands, except per-share data):
 
   
Performance-Based Restricted Stock Units
  
   
Number of Shares
    
Weighted- Average Grant Date Fair Value per Share
    
Weighted- average Remaining Contractual Life (Years)
    
Aggregate Intrinsic Value
  
Nonvested at March 31, 2019
    
10
     $
192.99
      
2.2
     $
2,382
  
Awards granted
    
13
      
215.47
      
 
      
 
  
Awards forfeited or expired
    
(1
 )    
217.00
      
 
      
 
  
Awards distributed
    
--
      
-
      
 
      
 
  
Nonvested as of March 31, 2020
    
22
     $
204.68
      
1.6
     $
4,903
  
 
Since our PSU agreements allow for participants to vest in more than the targeted number of shares in the agreement and
one
of our awards is currently performing better than target, we expect a total of
40
shares with a weighted average fair value per share of
$195.25
 to vest. For the year ended
March 31, 2019,
the average fair value per PSU granted was
$192.99.
Unrecognized stock-based compensation expense for PSUs that we have determined probable of vesting was
$4,455
as of
March 31, 2020,
and is expected to be recognized over a weighted average period of
1.6
years.
No
PSUs have been distributed during the years ended
March 31, 2020,
March 31, 2019,
and
March 31, 2018. 
 
During the year ended
March 31, 2020,
we awarded PSUs to key employees of GPT that are subject to both service and performance conditions ("GPT PSUs"). The GPT PSUs had a grant date fair value of
$240.52
 per share and vest based on continued service, completion of certain compliance requirements related to the acquisition; and achievement of specific financial performance targets for the period from
January 1, 2020
through
March 31, 2021.
The quantity of shares that will be issued upon vesting will range from
0%
to
150%
of the targeted number of shares; if financial performance is less than
90%
of targets, then
no
shares will vest. As of
March 31, 2020,
we estimate that
no
shares will vest as a result of lower than expected sales growth in our Biopharmaceutical Development division caused by social and economic impacts of the COVID-
19
pandemic; all compensation costs related to these shares has been reversed during the
three
months ended
March 31, 2020. 
 
During the
three
months ended
June 30, 2019,
we awarded PSUs that are subject to both service and performance conditions to eligible employees. The PSUs had a grant date fair value of
$202.00
per share and vest based on our achievement of specific performance criteria for the
three
-year period from
April 1, 2019
through
March 31, 2022
and on a pro-rata basis after
12
months of continued service through
June 15, 2022.
The quantity of shares that will be issued upon vesting will range from
0%
to
200%
of the targeted number of shares; if the defined minimum targets are
not
met, then
no
shares will vest.  During the year ended
March 31, 2019, 
we awarded
11
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 on a pro-rata basis after
12
months of continued service through
June 15, 2021.
The quantity of shares that will be issued upon vesting will range from
0%
to
400%
of the targeted number of shares; if the defined minimum targets are
not
met, then
no
shares will vest. 
 
During the
three
months ended
December 31, 2019,
we adjusted our estimate of performance share units expected to vest, based on results achieved and expected to be achieved, including the impact of the GPT Acquisition, and recorded a cumulative effect catch up as a result of our analysis at that time. However, as a result of the impacts of the COVID-
19
pandemic discussed in further detail in Item
7.
"Management's Discussion and Analysis," we expect some decline in sales growth as compared to our previous estimates, and as a result, we adjusted our estimate of performance shares expected to vest downward from the estimate made during the
third
quarter of our fiscal year, although it remains higher than target for the awards issued during the year ended
March 31, 2019. 
The net result of the cumulative effect adjustments taken during the year ended
March 31, 2020
was an incremental 
$472
 (
$359
 net of tax as well as
$0.08
 per basic and diluted share), which is recorded in general and administrative and selling costs on our Consolidated Statements of Operations. As a result of our new estimate of performance share units expected to vest, we expect expense associated with our currently outstanding PSUs that are expected to vest to be approximately
$375
 per quarter.